Jagtar Narula: And then on the nontravel side, I would say, as I mentioned earlier, we saw really good results out of our direct investments. So we did get good volume growth overall. A lot of that volume growth was in the partner channel and that’s just our partner is performing well. But we had started making investments in the direct business late ’22 accelerating into ’23. And so we expected to start to see the impact of that as we got through ’23. And so in the fourth quarter, we did what we expected would start to see impact. And the rate is a little higher or a bit higher on the direct channel. So that drove, like I said, half the revenue benefit in the fourth quarter on the nontravel side. So it’s an area that we continue to invest in, we continue to watch, and we continue to be excited about.
Operator: Our next question comes from the line of Dave Koning with Baird.
Dave Koning: On the Mobility segment guidance, the high end of the range, I guess, two questions. First of all, how do you kind of see that through the year? I assume Q1 starts a little lower. And then secondly, gallons and transactions have been pretty flat the last few quarters. Is that what’s going to accelerate or is it something else around yield or account fees, or finance revenue?
Jagtar Narula: So let me — first to thte question about how they go through the year. So you’re absolutely right. We expect that to accelerate over the course of the year. I’d say there’s a few things driving the Mobility segment. The first is the acquisition of Payzer, and I think Melissa mentioned this earlier, that adds about 2 points of the growth. right? If you back off of Payzer, there’s a couple of things that we saw in ’23 that we think we start to lap in ’24. So the first thing we saw was lower late fees that was roughly 3%-ish drag on ’23 revenue in the Mobility segment, and that was the result of the new — the tighter credit that we had in 2023. Obviously, as I said in my prepared remarks, we think that was decision because the credit benefit outweighed the drag in late fees.
But as we get through ’24, we’re not further tightening credit policy, so we’ll start to lap that and that won’t be a drag. That also same thing also impacted gallons in 2023, because we were tightening credit for certain customers, combined with weakness in the OTR segment. We saw some low gallon volume growth in 2023. Again, that’s something we will start to lap those items in ’24. Hence, our assumption of acceleration in ’24 on both gallons and revenue.
Dave Koning: And then secondly, it looks like there’s no buybacks in the guidance just based on how you kind of guided Q1 and then full year being higher. What’s the plan for use of cash this year? I mean, is it just to pay down debt given the higher rates now without the swaps?
Melissa Smith: So our intention is to use the cash both for acquisitions and for share buyback. And obviously, like we’ve been buying back stock. We bought back 1.7 million shares last year. And so we have like a strong emphasis, and we believe that our stock is still at a good value and we’ll continue to place emphasis there. That being said, we will also, at the same time, look at pipelines for M&A transactions and evaluate that as another use of capital.
Dave Koning: Well, it’s great to see it’s not in guidance. It’s kind of an upside driver.
Operator: Our next question comes from the line of Trevor Williams with Jefferies.
Trevor Williams: I wanted to ask on benefits. Melissa, maybe if you could revisit the longer term growth algorithm in the 15% to 20% targets you guys had laid out earlier in 2023. And account growth has slowed the last couple of quarters. I’m curious if you think high single digit account growth is kind of the right normalized level that we should be thinking about going forward? And just if that’s the case, how we bridge from that to the 15%-plus longer term target?
Melissa Smith: If you look at Devenir’s last report, they’ve got long term HSA growth at 10%. So still in the double digits. I think that there are also cycles for that. And what we found going through this most recent open enrollment season is we had more non decisions than we did the year before, which was like a really strong sales cycle. And so I think they’re going to have anomalies within each of the sales cycles. But over the long term, we do feel good about our ability to grow accounts. And then on top of that, what we’re seeing now, which we think will continue, is that the custodial asset base will outpace the growth of the accounts. And that is a meaningful shift. As we’ve added that capability, the revenue per account has gone up pretty significantly.
And so the ability to create a new source of revenue that is a multiplier effect to the base of our portfolio. And then on top of that, we are continuing to cross sell into that customer base, the products that we’ve added, which are our COBRA product, our benefit registration product, the most recently, the Ascensus capability. And so when you aggregate all those pieces and then the expectations that healthcare costs are going to go up and so that spend balances are going to increase, meaning the actual purchase volume will also be higher than accounts. Those were what drove our expectations of the long term growth rates of this segment, which is something that we’ll keep talking about in the course of the year. And obviously, we’re guiding below that in 2024 based on what we’re seeing right now.
We do feel very good [Multiple Speakers] our growth rates, though, competitively that we are winning our fair share in the marketplace.
Trevor Williams: And for Jagtar, the payment processing rate in fuel for the year that was up about 14 basis points, and you’ve referenced the last couple of quarters the benefit that you’ve gotten from the escalators tied to interest rates. Could you give us a sense just for how much of a tailwind the interest rate escalators were for the year? And with what you’re expecting in terms of interest rates for 2024? Just how much of that tailwind you would expect to reverse this year?
