FleetCor Technologies Inc. (NYSE: FLT) Q1 2020 Earnings Call Transcript

FleetCor Technologies Inc. (FLT) Q1 2020 earnings call dated May 07, 2020

Corporate Participants:

James Eglseder — Investor Relations

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Eric Dey — Chief Financial Officer

Analysts:

Tien-Tsin Huang — JPMorgan — Analyst

Ryan Cary — Bank of America — Analyst

Sanjay Sakhrani — KBW — Analyst

Trevor Williams — Jefferies — Analyst

Steven Wald — Morgan Stanley — Analyst

Pete Christiansen — Citi — Analyst

Ramsey El-Assal — Barclays — Analyst

David Togut — Evercore ISI — Analyst

Presentation:

Operator

Greetings, and welcome to the FLEETCOR Technologies First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Jim Eglseder, Head of Investor Relations for FLEETCOR Technologies. Thank you. You may begin.

James Eglseder — Investor Relations

Good afternoon, everyone, and thank you for joining us today for our first quarter 2020 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Eric Dey, our CFO. Following comments from both Ron and Eric, the operator will announce your opportunity to get into the queue for Q&A session. It is only then that the queue will open for questions. Please note, our earnings release and supplement can be found under the Investor Relations section of our website, fleetcor.com. Throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and adjusted net income per diluted share. This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information at other companies. Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appear in today’s press release and on our website as previously described. Now before we begin our formal remarks, I need to remind everybody that part of our discussion today will include forward-looking statements. This includes forward-looking statements about new products and fee initiatives and expectations regarding business development and acquisitions. They are not guarantees of future performance, and therefore, you should not put undue reliance upon them. These results are subject to numerous risks and uncertainties, which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today’s press release on Form 8-K and on our annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at www.sec.gov.

With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Good afternoon, everyone, and thanks for joining our first quarter earnings call. I plan to cover four subjects at the opening here: first, I’ll comment on COVID and our response to the crisis; second, I’ll share my perspective on Q1 results; third, I’ll speak to the trends that we’re seeing in our businesses in April; and lastly, I’ll cover our framework for resetting priorities in the company. Okay. Let me begin with some remarks about the COVID situation and what we’re doing in response. So like many companies, we’ve taken a number of actions over the last couple of months. Safety. So, first, to ensure the safety of our 8,000-plus worldwide employees, we quickly transitioned the majority of our employees to work from home. I’d say that we’re working our way through the new work from home model, trying to establish a new cadence for running the company, more teleconferences, more Zoom, more general employee communications, really we’re looking at people’s priorities. Second thing, we focused on business continuity to assure our systems and payment products continue to work through this period. I’m pleased to report that in Q1, we delivered the highest system uptime and fewest client incidents in quite some time. So good news there. Third, we focused on and shored up our liquidity. We consolidated cash.

We raised a bridge loan and we’ve taken our liquidity to about $1.5 billion. And lastly, credit. We’ve tightened credit lines and payment terms. We’ve shut down inactive lines, reduced unused line capacity, selectively reduced payment terms for distressed clients or industries, and we’ve repurposed staff to step up our collections intensity. So in this initial response phase, we’ve had some success managing the situation and learning how to operate within it. Okay. Let me shift gears and talk a bit about our Q1 results. So we reported Q1 revenue of $661 million, up 6% and cash EPS of $3, up 12%. Our Q1 revenue finished about $10 million lower than our expectations as our businesses began to contract in the second half of March when the shelter-in-place orders took effect. January revenue grew 8%, February revenue, 8% and our March revenue, 3%, leading to overall print revenue growth of 6% for the quarter. In terms of organic revenue growth or what we call like-for-like revenue growth, Q1 finished at 5% overall. Inside of that, fuel coming in at 2%, corporate pay, quite good at 20%, toll at 10% and lodging at 5%. All of our businesses were impacted by the sudden volume declines in late March, bringing our growth rates for the quarter below target.

Despite the softer slightly softer revenue in the quarter, our profits actually came in at the high end of our expectations, helped there by a lower tax rate and fewer outstanding shares. Our operating trends in Q1 also affected by COVID. Our same-store sales declined 2%, again related predominantly to the late March softening. Our new sales grew 2% versus last year. Again, the market began to get distracted in late March. But thankfully, our client retention remains stable at 91%. So look, given everything, a pretty good financial print for Q1. A good start in January and February helped us hold on to the Q1 performance. Okay. Let me make a turn to the trends we’re seeing in April and run through each of our businesses and the COVID impact on each. So first up is fuel. So here in North America, our fuel volumes are 20% to 25% behind last year in April. Our trucking business holding up a bit better than our local. Because many of our North America fuel businesses are essential services, it looks like our volume declines are leveling off. Our North America fuel revenue will be helped quite a bit by spreads in April as the fuel margins remain very wide. In our international fuel card business, volume, weaker than it is here. Business is down 25% to 50% depending on the particular market, mostly because the Europe shutdown was earlier than here in the U.S., and also because in the U.K., in particular, there’s a greater proportion of white collar cardholders who have been more impacted by shelter-in-place orders.

Generally, we expect both North America and international fuel revenue in April to be a bit better than the volumes, and that’s because fuel revenues or fees, some of them are fixed in nature, think card fees, which tends to have revenue be a bit better than volume. Okay, next up, corporate pay. So in corporate pay, our virtual card volumes off about 20% in April versus prior year. Again, we’re expecting probably volumes to level off there as lots of our client AP is fixed. Some good news with our full service, full AP automation and outsourcing business, which we expect to be up in April. The remote capability, the ability to process AP outside of the office, it’s resonating. And our cross-border business continuing to hold up and grow a bit in April, mostly due to the ongoing currency volatility. We did take a extraordinary loss credit loss in the cross-border business, which Eric will cover in some detail in his remarks. Turning to our lodging business. We expect our core workforce business to be down about 25% versus prior year in April. Our rail, truckers, construction workers continue to need rooms even in this environment. And just as a reminder, most of our workforce lodging travelers drive to their hotels. They don’t fly to their hotels. Our new Travelliance airline or crew lodging business will be way down in April, somewhere in the 75%-plus range as airlines canceled most of their flights, fortunately, a much, much smaller part of our lodging business. Brazil.

Brazil toll, a bright spot for us. So despite toll transactions being down in April, we expect toll revenue to be roughly flat or even slightly up, and that’s primarily because toll revenues are subscription-based. Lastly, our gift card business expected to be down about 50% in April as many of our brick-and-mortar retail clients are temporarily closed, moving much of the activity in that business to digital redemption. So a few conclusions here. Our April volume and revenue impacts vary quite a bit by business. So some of our business not impacted much, some impacted in the down 25% range and some impacted down to the 50% or 50%-plus range. Fortunately, the businesses most affected, most impacted by COVID represent a smaller proportion of our overall business. We do expect April revenue to come in 20% to 25% behind the prior year. We do expect volumes to begin to flatten. We see it sequentially as we look through April. And because many of our cardholders are essential workers, first responders, health care workers, truckers, rail, construction, they keep right on doing what they do. Also important, most of our volume decline thus far is client softness, not client loss. So good news that it could come back on the other side. And lastly, we’re a 50% EBITDA business so we can continue to make money and generate cash even at these distressed levels of volume. Okay, let me transition over now to the company’s priorities and how we’re framing things. So we’ve basically looked at a reset here of priorities based on the changing environment. So Phase one, the response phase, which I outlined earlier.

We’ve taken again four actions already: safety, business continuity, liquidity and credit. Initially, had to respond to the situation, and again, I think we’ve had decent success and report we’re well underway here. Phase two, the shutdown phase, the place we’re at now, where volumes are down and all of us are learning new behaviors. The priorities in this phase are expenses. So we’re working to get our expenses down and better aligned to current volumes. We’re cutting where we can, where it makes sense, but protecting, particularly the selling system and technology capabilities that we’ll need when we come out the other side. Selling, we’re changing modifying how we sell, targeting different prospects, surge industries, moving almost exclusively to digital contact, repositioning our message. So lots of work to progress selling. Projects. We’re reevaluating our project work, pushing projects that we can control and it makes sense while delaying other projects that rely on others to a different day. And then lastly, we look forward to a future, to a phase where businesses begin to reopen and things begin to recover. So message here is we’ll be ready. In that phase, the recovery phase, we’ll plan to chase acquisitions that maybe, just maybe weren’t there before. We also may get some benefit from COVID’s new behaviors that we can take advantage of on the other side.

So for example, the emphasis on touchless transactions, think electronic tolls versus cash, think distressed passenger mobile applications versus visiting gate agents, think payroll cards versus paper, payroll checks. And then even remote working, think about our AP automation and outsourcing service to pay bills when you’re outside of the office. So the hope is that we may be better positioned in some of our businesses when we get to the recovery side. So look, in closing, we’ve never been in a place like this before. We’re continuing to operate the business and to serve our essential clients, many of which continue to work through the crisis. We’re in process of replanning things, our priorities, our expense levels, our project plans, our sales and go-to-market approaches, in an effort to make the best of the situation. And like you, we’re hopeful that the gradual reopening will bring our clients back and that our business will return to at least some sense of normal as we progress through the year. But I can tell you, we will be ready.

So with that, let me turn the call back over to Eric to provide some additional details on the quarter. Eric?

Eric Dey — Chief Financial Officer

Thank you, Ron. I’ll be going through my regular remarks for the first quarter results as quickly as I can to allow for some additional discussion about the second quarter expectations and your Q&A. For the first quarter of 2020, we reported revenue of $661.1 million, up 6% compared to $621.8 million in the first quarter of 2019. GAAP net income decreased 15% to $147.1 million from $172.1 million. And GAAP net income per diluted share decreased 14% to $1.67 from $1.93 in the first quarter of 2019. Included in the first quarter 2020 results was the impact of a $90.1 million or $0.74 per diluted share onetime loss related to a customer receivable in our foreign currency trading business. Due to the extraordinary impact of the COVID-19 pandemic, our Cambridge business experienced a very large one-off bad debt loss in the first quarter, resulting from a large client in the agricultural commodity space entering voluntary liquidation. The details are in the earnings supplement, so I won’t go through all of them again here. I’d remind you that approximately 30% of our Cambridge revenue comes from hedging, whereas approximately 70% comes from making international payments.

I’d also note that Cambridge does not take FX risk. Our books and/or position are covered by back-to-back offsetting transactions with banks. This is a credit loss due to a customer’s bankruptcy and inability to cover their AP margin calls. While we do believe there is a chance of some recovery through the liquidation process, we have determined it appropriate to take a provision for the full bad debt loss of $90 million on the customer due to uncertainty of any future recovery. We view this as truly a one-off event as this business has experienced less than 1.5% bad debt loss as a percentage of revenue for as far back as we have data, including periods prior to our acquisition of Cambridge in the third quarter of 2017. Please see our earnings supplement for a detailed overview of this onetime loss. Also included in the first quarter of 2019 was the impact of a $15.7 million or $0.17 per diluted share impairment charge related to our minority investment in a telematics business. Excluding the impact of the onetime customer loss and impairment charge, net income increased 13%, and net income per diluted share increased 15% in the first quarter of 2020 versus the first quarter of 2019. Non-GAAP financial metrics that we will be discussing, our adjusted net income and adjusted net income per diluted share and the reconciliation to GAAP numbers is provided in Exhibit one of our press release.

Adjusted net income for the first quarter of 2020 increased 11% to $264.5 million compared to $238.4 million in the same period last year. And adjusted net income per diluted share increased 12% to $3 compared to $2.67 in adjusted net income per diluted share in the first quarter of 2019. First quarter of 2020 results reflect a negative year-over-year impact from the macroeconomic environment of approximately $6 million in revenue. The negative macro was driven mostly by lower foreign exchange rates, specifically the Brazilian real and U.K. pound when compared with the first quarter of 2019. We believe FX negatively impacted revenue by approximately $21 million. Fuel prices were down slightly year-over-year for the full quarter. And although we cannot precisely calculate the impact of these changes, we believe it was mostly neutral to the quarter. And finally, fuel spreads had about a $15 million favorable impact in the quarter. Now moving down the income statement. Excluding the impact of the onetime loss in our foreign currency trading business, total operating expenses were up 10% for the first quarter of 2020 to $370.1 million compared with $337.6 million in the first quarter of 2019. The increase was primarily due to acquisitions and bad debt expense.

As a percentage of total revenues, operating expenses, excluding the onetime loss, were approximately 56% compared to 54.3% in the first quarter of 2019. Excluding the impact of a onetime customer loss, bad debt expense in the first quarter of 2020 was $27.7 million or nine basis points compared to $22.2 million or eight basis points in the first quarter of 2019. Included in the first quarter was a reserve of $10 million associated with expected additional credit losses around the world due to the impact of COVID-19. Depreciation and amortization expense decreased 4% to $64.5 million in the first quarter of 2020 from $67.4 million in the first quarter of 2019. The decrease was primarily due to the impact of foreign exchange rates. Interest expense decreased 9% to $35.7 million compared to $39.1 million in the first quarter of 2019. The decrease in interest expense was due primarily to decreases in LIBOR related to the unhedged portion of our debt, partially offset by the impact of additional borrowing for share buybacks. Our effective tax rate for the first quarter of 2020 was 14.6% compared to 24.9% for the first quarter of 2019. Excluding the onetime customer loss and the impact of the impairment charge in the first quarter of 2019, our effective tax rate was 18.9% for the first quarter of 2020 compared to 23.3% in the first quarter of 2019.

The decrease in the effective tax rate was due primarily to additional compensation expense booked for tax purposes on stock option exercises. Now turning to the balance sheet. We ended the quarter with $1,552,000,000 in total cash. Approximately $482 million is restricted and consists primarily of customer deposits. We also have approximately $352 million of undrawn availability on our revolver and closed on a $250 million bridge loan in April in order to maximize the company’s liquidity. So in total, we believe we have adequate liquidity to weather the COVID storm. As of March 31, 2020, we had $4,323,000,000 outstanding on our credit facilities and $819 million borrowed in our securitization facility. We purchased approximately two million shares in the first quarter for $530 million at an average price of $263. We have approximately $326 million in repurchase capacity remaining under our current authorization. As of March 31, 2020, our leverage ratio was 2.75 times EBITDA, which is well below our covenant level of four times EBITDA as calculated under our credit agreement. Finally, we spent approximately $18 million on capex during the first quarter of 2020. Now turning to the outlook for the second quarter and balance of the year. First, I want to remind everyone that although our businesses are very resilient, our businesses have all been impacted by COVID-19, some more than others. As a reminder, our business models are primarily recurring revenue in nature.

We have a very broad customer base and diversified businesses across industries and geographies. Second, we are suspending our full year guidance. There is simply too much uncertainty regarding the resumption of business activity around the world to accurately predict our volumes could be in the second quarter and rest of the year. Some revenue trending data for the first quarter in April are as follows. Revenues in January and February were tracking at or ahead of our expectations before the impact of COVID-19 in March. Through the first two months of the year, revenue was approximately 8% and 8% ahead of prior year, respectively. In March, our volumes were impacted mid-month. And as a result, March revenue was only up approximately 3% versus prior year. And for the quarter, revenue was 6% ahead of prior year. Our expectations are for volumes to hit their respective floors in April and begin to recover gradually as the world starts to reopen. April revenue is expected to be down approximately 20% versus prior year. We expect that the second quarter will be the lowest in terms of volume and revenue. And as the economy starts to recover, volumes should build throughout the year, resulting in higher revenue and earnings per share in the third and fourth quarters.

With that said, operator, we’ll open it up for questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] We’ll now take a question from Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang — JPMorgan — Analyst

Hi, good afternoon and thanks. I’ll start by just asking on the expense outlook here and what you can control. What are you thinking about levers on the cost side that you might do here to protect the bottom line from some of the macro pressures you called out?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Tien-Tsin, it’s Ron. I’d say we’re probably a target of about 5%. And it would be on volume-related things, things that flex versus selling system or tech things. We’ll probably also clip the capital plan a bit. But in our business, you can’t save your way to profitability, our profits turn on revenues, and so we’re going to be quite careful to not over-dial that.

Tien-Tsin Huang — JPMorgan — Analyst

Yes, I expect that. And then you mentioned M&A. With the world-changing valuation, maybe opens up the opportunities set a little bit, just your appetite, Ron, to do deals here. Are we in a wait and see move mode? Or are you willing to pull the trigger on some deals?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

I’m telling you, Tien-Tsin, I’d say never we think I think this is a game-changer. You’ve heard our complaints ongoing the last few years about people in the space driving up prices and seller expectations and free money and stuff. I think lots of companies heard or companies that have assets we’re interested in, heard, I think there’ll be some impact obviously to valuations. I think people that compete with us for deals will have more and more problems on the credit side. So I’d say to you, probably as high. That’s a really long time. We’re spending lots of time, but what I’ll call kind of new deal thinking. There’s five or six assets that we’ve coveted for some period of time that I personally think may have some chance of opening. So I would say high.

Tien-Tsin Huang — JPMorgan — Analyst

Got it. Thank you.

Operator

We’ll now take our next question from Ryan Cary with Bank of America.

Ryan Cary — Bank of America — Analyst

Hi guys. Appreciate you taking my question. And I hope you’re well. Just following up a little bit on Tien-Tsin’s question. It sounds like your cost saves are more on the volume variable side rather than the investment side. So are you still planning on the step-up in sales and IT expenses you discussed last quarter? And I think you called out expectations from incremental IT spend in the $200-plus million-ish range in 2020. Is that still on track?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes, Ryan, it’s Ron. So that’s right. We built sales plans to try to grow sales production, call it, circa 15%. We kind of grow sales expense, a little slower, call it, 10%, 12%. So yes, we built the plan to do that. Some of it takes care of itself, right? If people don’t reach the production goals, you get some of that money back in the form of lower commissions. I’d also say we pulled back on some kinds of marketing and lead gen obviously, all the physical trade shows and stuff like that. But with that said, I think we’re being super cautious on the headcount side. It takes a long time to build really good field group and a really good telesales group. And so I think we’re quite reluctant to reduce that and honestly not to even kind of refill or replace as we move through the year. So we’re clearly trying to play the long game on selling.

Ryan Cary — Bank of America — Analyst

Got it. And can you talk about some of the trends you saw in the toll business in the quarter? I was a little surprised the organic growth slowed to 10%. Was there anything particular worth calling out? And anything you say about growth of new urban toll users in the quarter?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes. So first of all, I’d call it it’s a really good result in this second half of March to still pencil that thing out of 10%. We’re quite happy with it. But the reason it’s not close to the mid-teens would be a couple of things. First, the transactions did soften and we did get paid a bit on spend, particularly on the B2B side there. So the COVID clipped a couple of points at the end. And then the other thing is the guy that leads that, they pushed to offer some free tags to build our tag volume at the end of the year to compete with the banks. And so we have we’ll be rolling off kind of in the next month or two. We probably have another couple of percent of what I’ll call free tags sitting in our Q1 results. So those would be kind of the two nicks on the number.

Ryan Cary — Bank of America — Analyst

And anything you can say about the growth of new urban tolls in the quarter or just trends that you’re seeing?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Can you say you broke up a bit, Ryan?

Ryan Cary — Bank of America — Analyst

I apologize. Just anything around the new urban tag toll users in the quarter or any metrics around usage there.

Eric Dey — Chief Financial Officer

In terms of urban sales usage?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Urban tags. Yes. I don’t have that handy. I mean, it’s down. I think we targeted some kind of number, call it, 40,000 to 50,000 a quarter. I’ll have to get back to you, I don’t have any handy.

Ryan Cary — Bank of America — Analyst

Great, thanks for taking my questions.

Operator

We’ll now take our next question from Sanjay Sakhrani with KBW.

Sanjay Sakhrani — KBW — Analyst

Thanks, I appreciate all the disclosures and I’m glad you guys are well. I guess the first question is on the comments on the second quarter being the weakest. Ron, you mentioned you have some defensive mix of businesses inside of your business. Can you just talk about how much of the volume is from these defensive areas versus the more cyclical stuff? And what gives you the confidence that we’re going to inflect in the second quarter?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes. I mean, I think the confidence comes from the sequential analysis, right? So we have a bit more texture than we set out. We’ve got daily reports. And I think from what we put in the supplement, it appears to us that virtually all of our businesses are planing, bottoming, if you will, at this point. And we’ve got another week, I think, of learning. We just had a big review yesterday. So I think what you guys haven’t seen anything, we’re starting to actually to see a few of the business tick up a tiny bit. So the comment is our best guess is we’re bottoming. And that we, Eric and I, think probably that May and June will be a smidge better than what we set in April. I quoted April around 20%-ish off of the prior year. So if, in fact, the tick up is happening, then clearly, Q3, if the world reopens, will be better. So our best guess is Q2 will be the worst.

Sanjay Sakhrani — KBW — Analyst

Okay. And you also mentioned, Ron, like that the health of the portfolio is pretty strong, given the defensive mix. Can you just talk about how do you feel about the general health? I mean, do you feel that certain areas of your portfolio might be at risk if there’s a prolonged economic downturn?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes. I mean I think we tried, Sanjay, with that chart to get into the haves and the have-nots. So I think like every business that you guys follow, some are affected none, some and a lot. And I think that’s the same thing inside the FLEETCOR portfolio. And so we have businesses on that page that we think of the weakest and probably would have the longest trough. So for example, again, that page, is clients that we called out our…

Eric Dey — Chief Financial Officer

It’s Page 10, Sanjay, in the earnings supplement.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

So the couple, Sanjay, that would be, I think, the softest, the longest would be the recent lodging airline acquisition we did that fundamentally relies on the planes flying and crew flying. So that thing’s off, I don’t know, 75% and it would be off for a while. And then the gift card business, to the extent that brick-and-mortar retail stays closed for some of those go BK, some of those go out of business, I’d say those couple of businesses, I think, will be weakest. But the other ones, I think if we’ve got one message today, again is, the impact is softness. So it’s a fuel card client with 10 drivers driving 2/3 of what they used to drive versus these five, three or four a set. And so the ability for the thing to kind of come back, if the clients kind of come back, we come back. And so I’d say the rest of the businesses, obviously, we’ve got a few that are in the green, that are kind of happy days. And then we’ve got the rest that are kind of sitting there, waiting for the clients to get healthy again. So I think other than a couple that I call out and I’d say have a longer curve to kind of come back a couple the couple I called out, I think the rest should be on their way back because of the essential service nature of our workforce.

Sanjay Sakhrani — KBW — Analyst

Great, thank you guys.

Operator

We’ll now take our next question from Trevor Williams with Jefferies.

Trevor Williams — Jefferies — Analyst

Hi, thanks. Good afternoon, guys. On corporate payments, I wanted to ask more on the sales side that Ron, you alluded to in your prepared remarks. Just with most people working remotely now, I’m wondering how that’s impacted the selling process in that business. Because my assumption, and please correct me if I’m wrong, is that these are fairly long sales cycles and implementation periods. So as we think about you guys prebooking a lot of next year’s revenue growth in the prior year, just how much of that we should be expecting to come from new customers signed in 2020? Just and what the progress looks like there.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes, Trevor. You’re totally right on current year. I think we’ve called out before that in the corporate pay business, particularly in the core virtual card business, most of the revenue from new accounts was sold the prior year, call it somewhere, 80% to 90%. So the revenue in 2020 is driven off of sales contracted but not implemented from 2019. So on your second question, I’d say we’re still finding our way, right? So this thing surprised all of us in March. We have a marketing and sales plan and closing plan and it got changed, right? You can’t have trade shows and we’re not visiting large accounts like we used to. So I’d say there’s been a repositioning of how to sell, what marketing to do, how to contact people. And I’d say, if anything, the receptivity seems high, like people have taken the call, taken the appointments. What I think is still unclear is can we close, right? We’ll call it 30 days into this and some of these people have more time on their hands or they’re just being kinder in these times, but the contact rates are kind of okay. So I’d say probably in 60 days, we’ll have a fix on whether sales can kind of be where we thought, just done in a different way or whether sales are going to be softer. I’d say we just don’t know yet.

Trevor Williams — Jefferies — Analyst

Okay. No, that’s really helpful. And then just on credit, Eric, I appreciate your comments in your prepared remarks. But was just hoping to get some more color on how credits trended in April, maybe month-to-date, whether that’s either delinquencies or actual losses starting to come through more in earnest, just as we think about where we may need to expect losses to flex up to as we work through the trough in Q2? And then just wondering if you’ve seen any change in payment patterns after the PPP loans hit, and especially with some of the smaller fleet customers?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Trevor, it’s Ron. Let me take the first part and then I’ll let Eric comment on the second part. I would say it’s the most surprising thing to us so far, and surprising in a good way. So when this thing hit, you can imagine, we did student body right to work on credit and liquidity collections. And so we’ve got a monitoring system that looks at trip worthy, how range people going delinquent and then roll rates aging. And so I’d say that it’s up, so we have benchmarked in all of our businesses. I’d say it’s up but it’s not up in any kind of meaningful way. So too early to call that, “Hey, we’ve gotten through this between the stimulus money and stock. Hey, we’re going to kind of be okay.” But if you said to me now, how did it look? Sand this phoenix thing, it looks pretty good. And the last point on it is, we actually get a benefit from the lower volumes and the lower fuel prices. The fact that spend and effectively AR new in our balances are dropping, obviously, it makes the collections assignment smaller and the credit risk smaller. So I’d say on this, this one sand, the phoenix thing, so far, so good.

Eric Dey — Chief Financial Officer

Yes. And Trevor, just to add to that, this is Eric. Obviously, we’re we take a look at the aging very closely and we track it week-to-week, obviously exactly what the progress is in some of these aging buckets. And Ron indicated, he we have been surprised that it really hasn’t changed a whole lot. We’ve seen a little bit of tick up in some of the aging buckets, particularly in the fuel category in the U.S., particularly in the SMB category, so it’s a little worse. And we’ve seen a little bit of tick up in Brazil as well, kind of a little worse. But again, nothing dramatic and nothing kind of to the magnitude that we thought it was going to be. We look at our AR balances a lot. And if you look at our AR balance at the end of the year, we had about $2.6 billion in AR, which moved to about two points I don’t know, $2.1 billion, kind of at the end of March. And then at the end of April, we’re down to about $1.8 billion. So the risk profile of the remaining AR is also getting better just because of the sheer amount of the outstanding AR that we have. So all in all, I think we’re in pretty good shape. I think we were pretty conservative to take a bit of the reserve that we did at the end of the first quarter and we’re keeping a close eye on it. And we’ve changed a lot of practices, and we’d do some things, have done some things to collect some of our money sooner. So I think we’re off to an okay place.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

And let me just add, Trevor, one thing. We don’t compete on terms like we compete with banks and other people. So we had a quality for a long time in this company to compete on products and on the tech and on the convenience of the product. And so we have tons of daily, daily, tons of short terms weekly. In Europe, we have half of our book, I think, is insured. So we carve through, we have tons internationally on direct debit collect where we basically pull the money. And so in those cases, you’ve got trip rates in the 2% range, very, very small kinds of delinquency. So when we studied our old book again intently a month ago when this started, I think we feel pretty good structurally of how we’ve got the thing set up.

Trevor Williams — Jefferies — Analyst

It’s really helpful. Thank you, guys, I appreciate the color.

Operator

We’ll now take our next question from Steven Wald with Morgan Stanley.

Steven Wald — Morgan Stanley — Analyst

Thanks for taking my question and good evening. Maybe just on a high level, starting with corporate payments. Ron, you talked about never been higher in terms of watching for opportunities in the M&A side here. But if we start in corporate payments, and maybe you could expand this out to some of the other areas. Could you maybe talk about as you’re looking at opportunities or as you’re looking at your own offering today and watching the experience of this downturn and disruptions and what you can solve for, what sort of changed or if it has changed at all, in terms of where you want to be in the landscape of the corporate payments B2B opportunity since we caught up three months ago? And maybe if you could expand it out to the other areas. Are there any areas that you serve across your offerings that you maybe feel less inclined to be actively or expanding?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

No. It’s a good question. I mean in the context of COVID and sheltering and the trends that we might expect over the next year or two, this payables or corporate payments business is a great place. And the reason is that lots of AP, lots of the spend is fixed, think leases or IT contracts and stuff. And so bills have to get paid or services get turned off. And so I’d say, if anything, we like this corporate pay business for five years, and we’ve built a bunch of stuff and added to it and invested it. I’d say if anything, we like it even more. I think it’s probably a little bit more defensive going forward versus the kind of the mobility stuff. Maybe mobility stays depressed a bit, whereas kind of AP stays where it is. So I’d say I’d think, if anything, it probably elevates that segment even a notch higher for us.

Steven Wald — Morgan Stanley — Analyst

Understood. Maybe just in terms of a quick follow-up. I was looking to your slide, I think slide eight, you guys talked about the corporate payments growth bouncing back to 20%. But I think you also disclosed that you pulled the payroll card segment out of there, and that was the area that you called out last quarter with a sort of trouble from the prior from last year’s disruption to services. What was the growth looking like ex those adjustments? I don’t know if you restated that in the prior quarters or not.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Eric, do you know?

Eric Dey — Chief Financial Officer

Yes. I’m looking for that. I don’t know if we did a schedule. Yes. I know, Trevor, again, is the payroll card business was in the circa 30% down in volume for April, so if you stuck it on that chart to track the rest of the business, it would have brought it down some. And I think the 20% number is a revenue number. I don’t have the payroll target revenue. But my guess, it’s probably off in the 30% range.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Steven, I’ll get back to you with what it was in the first quarter.

Steven Wald — Morgan Stanley — Analyst

Okay, great. Thank you.

Operator

We’ll now take our next question from Pete Christiansen with Citi.

Pete Christiansen — Citi — Analyst

Thank you guys, good to hear from you. And thanks for the great conduct, fantastic job there. Ron, I was wondering I know FLEETCOR is a completely different company 10-plus years ago, but at least from the small fleet side, I was just wondering if you could share some of the experiences that you had back in the last downturn in terms of, I guess, attrition and perhaps credit on the small fleet side, if you thought it would just that would be helpful.

Eric Dey — Chief Financial Officer

Yes, this is Eric. If you look back to 2008 and ’09, I mean, to your point, we are a completely different company today than we were back in 2008 and ’09. But I’ll comment a little bit on the fuel business, which is mostly what we had back then. So when we were into that downturn, we did see volumes soften pretty significantly. So we saw same-store sales softness kind of in the mid-single digits, so it was pretty high. Bad debt, it kind of squeaked up a little bit. We kind of ran I don’t remember the exact numbers, but probably the mid- to high teens from a basis point standpoint in bad debt back then. And it escalated to probably in the 40, 45 basis point range at its peak in 2008 and ’09. So volumes down kind of in the high single digits, bad debt still kind of doubled in the fuel card segment. That’s the kind of the business that we have then.

Pete Christiansen — Citi — Analyst

Right. That’s helpful. And then as I look at the gift card business, there’s been a couple of high-profile retailers filing lately. Can you walk us through what happens if you have a partner that does that? Are there changes in like breakage or availability of funds? Anything of that would be helpful.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes, Pete, it’s Ron. So mostly in our gift business, we don’t take much credit risk because we don’t really move money, right? We’re really an accounting system, if you will, for retailers and a program manager. So the one place where there’s credit risk in that is in card shipments. So if you’re at Macy’s or Sporting Goods and we you give us a card order, and we go to the cardmaker and take the stock and make it for you, put the Macy’s logo on it and then send it to you, that would be the one place, right? If we ship it to you, whatever, March 15 so that so you have to pay us on March 31 and you don’t. And so the good news on that is our guy that runs that business have chased all that stuff pretty hard when this thing hit. So right now, we have very, very little exposure, fortunately. And I put him on notice that we’re not doing many of those kind of things again. We’re going to do a lot of card shipments to challenged retailers, at least not short term. So I’d say we’re probably in a pretty good place there.

Pete Christiansen — Citi — Analyst

Right. Thanks Ron.

Operator

We’ll take our next question from Ramsey El-Assal with Barclays.

Ramsey El-Assal — Barclays — Analyst

Hi guys, and thanks for taking my questions. Ron, if you look across the business today, given everything that’s going on, are you reassessing or thinking through where you’ll invest in the future? Are there is this crisis kind of teaching any lessons in terms of changing priorities that you might have in terms of business investment? That could be product line, that could be geography. I know it’s a very broad question. But do you feel sort of like it’s just trying to hunker down with what we have today, and it will come out on the other end relatively intact? Or are there some more longer-term changes that you might kind of contemplate in terms of where you place your bets in the marketplace?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

No. That’s a really good question, Ramsey. I’d say, yes, I think like all of us on this call, we’re processing what the future could be, what will the world look like in three months, six months. But for sure, I think there’ll be changes. On the portfolio side, I’d say we’re super happy with the kind of the four categories that we’ve got, the three employee card things, fuel, lodging and toll and then obviously, we like the payable things. So there’s nothing in the four businesses where we go, “Oh, oh, I feel like I’m going to like those less.” As I said in some of my comments. I think some of those categories will actually be helped by this thing. My sense is that a lot of our changes are going to be on the functional side. And what I mean by that is our constructs and our policies around like credit. Our approach is around selling. Our approach is around part time, full time. I think we’re going through all kinds of thinking now if this world stays this way or there’s some things we’ve learned in this world that we might stick with even if the world goes back to the way it was, I think there’s going to be a lot of I’d say, it’s still early. If you ask me that question again in 90 days, I think we’ll have a better answer. But for sure, there will be a bunch of stuff we do different, for sure.

Ramsey El-Assal — Barclays — Analyst

Okay. And I was wondering also, and forgive me if I missed this before, but could you parse out a little bit of the same-store sales performance? Just in terms of sometimes you can give us incremental color on underlying verticals within some of your businesses on the same-store sales side.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes. Eric there is a lot but I’ll tell that obviously, the 2% drop was kind of all right, the last two weeks. So that means that dropped like a rock, obviously, given the April data that we’ve shown you. So I want to just prepare people that softness is what’s taking our volume down. So you’re going to hear a much different number in Q2. But you want to…

Eric Dey — Chief Financial Officer

Yes. I mean, just to give you a little color, Ramsey. What we saw was, as you can imagine, Ron indicated a lot of the softness that we saw happen in the last two, three weeks off the month of March. But fuel was a little bit soft, probably came in 3%, 4% soft overall, and lodging overall was a bit soft. But don’t forget, that includes the TA business as well, that was kind of in the 4% to 5% range. That was offset by strength that we saw in our corporate payments business, which was actually up and also strengthen our Brazil business, which was also up a little bit because of the clients that we have there and the additional products that we’ve added. So it’s a bit of a mixed bag, but the softness was kind of where you would think it would be and the strength that kind of where you thought it would be as well.

Ramsey El-Assal — Barclays — Analyst

That’s terrific. Thanks so much guys.

Operator

And we’ll take our next question from David Togut with Evercore ISI.

David Togut — Evercore ISI — Analyst

Thank you and thanks for squeezing me in. I appreciate it. Ron, the high customer revenue retention historically of 91% to 92% has been a strength of the business. You closed the first quarter at 90.7%. As you look into Q2, which you’ve called as the likely trough, can you maintain customer revenue retention in the 90% to 92% range?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

David, it’s a good question. I’d say we don’t know. I think it’s going to be a function a bit of the help of clients honestly in what the casualty rate is and the BK rate among our client base. And so a lot of the retention aggregate number is a function of mix. We have businesses that have very different kinds of retention rates based on size, enterprise versus small and then even type of business like payables growth, the spend growth of clients. So I don’t know the answer. I guess it will probably be lower because we’ll likely have more casualties in our client base where the businesses go out of business, which is already represent and then credit. So again, if you simplistically said, “Hey, we lose 9% or 10% of our revenue per year.” 1/3 or 1/2 of that is the business getting back, the business getting weak, the business closing, the business not having the creditworthiness to be a client. So yes, my guess is that’s probably going to go up some in the quarter. Now again, once you get to that base, we get through this thing, that there’s nothing structural that concerns me that would take us lower.

David Togut — Evercore ISI — Analyst

I see. Understood. Just as a quick final question, and I apologize if you addressed this earlier, but looking at capital allocation priorities. You bought back $530 million of stock in the first quarter so you’re very active. You have $326 million left on the repurchase authorization. Will you be deploying cash towards share repurchases in this environment, possibly looking more at acquisitions? Do seller expectations come down? Or will you be more in the mode of husbanding capital?

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

Yes. Dan, another good question. I’ll let Eric comment too. But I’d say we’re in a preserve mode. We are I told the Board, or agreed with the Board, we are in a precaution. We want the maximum liquidity. We want a company that got all kinds of cushion until we see the other side of this and see the heartbeat on the other side. So we will not be buying back shares over the next quarter or two. On the other side, I think, on the deals side, like I said, if there’s something unique that comes out of this, we might pull the trigger a little bit sooner than later. But I’d say we’re probably in a bit of a whole pattern for a while.

David Togut — Evercore ISI — Analyst

Understood, thanks and stay safe and healthy.

Ronald F. Clarke — President, Chief Executive Officer and Chairman of the Board of Directors

You too.

Operator

And there are no further telephone questions at this time. I’d like to turn the conference back over to our presenters for any additional or closing remarks..

James Eglseder — Investor Relations

Guys, thanks for being on the call. Let us know if you have any additional questions, if you need anything else. Have a good night.

Operator

[Operator Closing Remarks]