Corpay, Inc.

Good afternoon, and thank you for joining us today for our earnings call to discuss third quarter 2025 results. With me today are Ron Clark, our chairman and CEO, and Peter Walker, our CFO. Our earnings release and supplemental materials for the quarter are available on the investor relations section of corepay.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call, along with a reconciliation of those measures to the nearest applicable GAAP measures. Our remarks today will include forward-looking statements about expected operating and financial results, strategic initiatives, acquisitions and synergies, and potential divestitures, among other matters. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Some of those risks are mentioned in today's press release on Form 8K and can also be found in our annual report on Form 10K. These documents are available on our website and at sec.gov. Now I'll turn the call over to Ron Clark, our chairman and CEO. Ron?

Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining our Q3 2025 earnings call. Up front here, I'll plan to cover three subjects. So first, provide my view on Q3 results, our Q4 outlook, and an early 2026 preview. Second, I want to spotlight our corporate payments business and emphasize really the sheer size of that opportunity. And then lastly, I'll provide a progress report on our recent M&A and stablecoin activities. Okay, let me begin with our Q3 results, which were really quite good across the board. We reported both revenue and cash EPS growth of 14%. In the quarter, our overall organic revenue growth finished up 11%. Particularly pleased there that higher volume and higher spend is driving the organic growth so durable. Inside of the overall organic revenue growth, our vehicle payment segment grew 10%. And inside of that, our U.S. vehicle payment segment accelerated to 5%. So delighted, obviously, to see our vehicle segment back to 10% organic growth. Our corporate payment segment grew 17% in the quarter, and that's inclusive of a point of flow compression. Q3 trends continuing, you know, quite strong. Retention improved slightly to 92.4%. Our sales or new bookings grew 24% in the quarter. Happy with that. And our same-store sales remained essentially flat. Our lodging business remained weak in Q3. It was mostly impacted by lower emergency or one-time revenues. Fortunately, the attrition in the business improved. So from minus eight last year to minus five this quarter. And the client base softness improved from minus two to plus two this quarter. So for sure, the business is stabilizing. Now we just need to sell more. So look, in summary, very pleased. With a quarter, it's clean. All of the businesses finished in line or better than our expectation. And our two biggest businesses, vehicle and corporate payments, representing 80% of the company, both growing double digits organically. Okay, let me make the turn to our Q4 outlook, which we're revising up. with today's Q4 guidance. So we're now outlooking Q4 revenue of $1.235 billion and cash EPS of $590 at the midpoint. Both of those numbers help by the alpha acquisition that closed October 31st along with our strong Q3. We are expecting Q4 organic revenue growth of approximately 10%. We are maintaining our vehicle segment organic growth at 10% in Q4 and expecting our corporate payment segment to finish approximately mid-teens. That's inclusive of a 3% float revenue headwind. We have had an early peak at October's revenue, and that's incorporated here in our Q4 guide. So assuming we achieve this Q4 outlook, our full year 2025 will finish above $4.5 billion in revenue. That'll be up 14% and above $21 in cash EPS, which is higher than our initial profit guide back in February. It'll also mean that four of the last five years, our organic revenue growth will be 10% or higher, so pretty durable. Okay, now on to our 2026 fiscal year setup. Headline here is we really like what we see. Macro, the current macro setting up quite favorably for next year, better FX rates and lower interest rates. still outlooking organic revenue growth in the 9% to 11% range, expecting incremental accretion of at least 75 cents from the combined alpha and AVID deals. We're also expecting incremental margin expansion as a result of some AI productivity and vendor rationalization initiatives. So, Look, all of this is to say that we're expecting strong earnings growth next year. All right, let me make the turn to our corporate payments business and speak to why we're so excited about the future. So we do have four solutions that make up our corporate payments segment. We're out looking over $2 billion in revenue next year, and that representing about 40% of the company. What we're hoping to do here is just reinforce really the sheer size of this corporate payments opportunity along with the advantage positions that we bring to the space. So our first solution is called Core Pay One Spend Management, about a $250 million business where we provide kind of modern day commercial cards that compete with the likes of Amex, Ramp, Rex, Divi, et cetera. So our advantage here lies in the ability to monetize or digitize more client spend than others, really related to the pretty developed B2B virtual card and fuel networks that we attach to the offering. Second, we've got about a $400 million mid-market AP automation and payment business where we help clients pay some or all of their invoices. We're a leader in this middle market space, have a number of exclusive ERP relationships, along with the option to acquire Avid, another $500 million mid-market business over the coming years. Third solution is our cross-border solution. a business that provides risk management and mass payment solutions. We originate clients there here in the U.S., U.K., continental Europe, and even Asia, outlooking about $1.2 billion in revenue next year. Largest non-bank in the world in this cross-border space. and we do boast the most experienced set of sales and service specialists. Last up, our newest solution in corporate payments is our global bank account solution and our multi-currency account solution, outlooking about a $200 million business next year, where these global bank accounts help institutional investors asset managers, think PE firms, and corporates set up new foreign bank accounts in record time, currently holding about $3 billion in deposits there. So look, the point here is that we've got pretty strong positions in each of these four corporate payment solutions areas, spend management, AP automation, across border risk management and global bank accounts, you know, each of which have just an incredible global opportunity and upside. So we've set our sights on making this a, you know, a really big business, you know, think $10 billion, think 5X from where we are. So I'm quite excited about it. Okay, let me make the transition to progress on the M&A front. We have closed the AVID mid-market AP automation investment. We did that on October 15th. We're busy working with TPG and AVID management to craft a more profitable plan. We've laid out a series of actions, we think, to materially improve AVID's profitability and their sales productivity. We have closed Alpha, which is the European cross-border business, on October 31st. Super excited about this transaction. And as I mentioned, the global bank account product, fast-growing, really a new opportunity for us. So we are in the final stages of developing the 26 plan, the synergies, but fully expect... that business to be quite accretive to us in 2026. We expect to close the MasterCard investment into our cross-border business on or around December 1st. The reminder there is that we would bring our cross-border solutions to MasterCard's bank clients or FI clients. We do have a pipeline building and hope to convert some new accounts there in Q1. We are in the market with two divestitures hoping to fetch up to $1.5 billion. We expect to have a pretty good idea if these divestitures will transact when we speak again in 90 days. And not surprisingly, we are continuing to look at some additional, some new corporate payment acquisitions that we're engaged with. So lots going on on the M&A front. Okay, lastly, my last subject, stable coins and our progress there since last time. So we have contracted with some partners, including Circle, to provision the coin, the rails, and the digital wallet to enable us basically to add this new stable coin peer-to-peer payment system to our business. So we're really chasing the stablecoin opportunity on three fronts. So first is to enable our largest domestic and cross-border merchants or beneficiaries to receive payouts in their stablecoin wallets so that they can receive a payment 24-7. We've got a super large set, hundreds of billions of payment flows already moving to these beneficiaries. So we like the idea of giving them another place to put funds. Second is our idea to add digital wallets to our existing alpha bank account clients and Corpay multi-currency account clients so that they can hold both stable coins and fiat dollars together. to transfer basically back and forth between their fiat accounts and stablecoin wallets. And then the third idea, basically, third opportunity is to really directly serve large, you know, new crypto clients. We have one, Bank Frick, that hold very large crypto balances today but have the need to return liquidity to a U.S. bank account of an investor. So we'll leverage the fiat rails and compliance infrastructure that we have to serve these kind of clients. So look, the existing assets that we have, we think, create a lot of leverage for us to participate in this stablecoin system. So look, in conclusion today, we printed a clean Q3 beat. We've revised up our Q4 and full year 2025 guidance. We do see an attractive 2026 setup. We're super excited about the long-term prospects for our corporate payments, business and solutions, you know, the opportunity to make that really big. We have completed a meaningful acquisition and investment this year that we think positioned the company well over the midterms. and progressing our stable coin entry to capitalize really on this new rail. So with that, let me turn the call back over to Peter to share some more details on the quarter. Peter?

Thanks, Ron, and good afternoon, everyone. Let's start with highlights of the quarter. Q3 revenue was $1.172 billion, overperforming the midpoint of our guidance range. Print revenue grew 14% year-over-year, driven by 11% organic revenue growth. Q3 adjusted EPS of $5.70 per share overperformed the midpoint of our range and grew 14% year-over-year due to strong top line performance and solid expense management. Adjusted EPS grew 17% year-over-year on a constant macro basis. The headline for the quarter is mid-teens top and bottom line growth. Excellent organic growth with 10% vehicle payments organic growth driven by our U.S. vehicle payments business returning to mid-single digit organic growth. Continued strong retention, all while maintaining strong margins. We've also produced significant sales growth this year that will fuel our business over the balance of 2025 and into 2026. Now turning to our segment performance and the underlying drivers of our organic revenue growth. Corporate payments delivered 17% organic growth for the quarter, despite 100 basis points dragged from float revenue compression due to lower interest rates. Overall, the performance was driven by growth in spend volumes, which increased 57% on a reported basis and up 38% organically. Spend volume was just over $68 billion in Q3, which puts us on pace to be north of $250 billion annually on a run rate basis. Corporate payments revenue per spend volume decreased year over year due to new payables and cross-border enterprise clients. The payables business continues to perform, driven by strong execution on Paymerang synergies and solid progress implementing and ramping new full AP customers. We continue to be optimistic about the future of the business and are laser-focused on customer acquisition. Cross-border continued to deliver strong sales in Q3. Both new client acquisition and recurring client transaction activity was robust, as our scale, technology, and talent advantages continue to power share gains from legacy financial players. Vehicle payments organic revenue increased to 10% this quarter. You can see in the financial supplement, there is a good trend line of improving organic revenue growth in this segment. Now returning to our target run rate of 10% organic revenue growth. Also, it's important to point out that our vehicle payment segment is made up of three approximately equal size revenue businesses in different geographies. These geographies are the US, Brazil, and Europe. U.S. vehicle payments organic revenue growth improved 500 basis points sequentially to 5%, reflecting the return to sustainable mid-single-digit organic growth we've been expecting. This was driven by improved sales production, higher approval rates, and stronger retention. Brazil and Europe vehicle payments continued to perform well. In Brazil, the combination of 6% tag growth, growth in our extended network, including our new car debt offering, is driving the strong results. International vehicle payments continue to deliver consistent results driven by strong sales and performance across the UK, Europe, and ANZ. As expected, lodging organic revenue was down 5% for the quarter, inclusive of a 400 basis point drag from lower emergency revenue year over year in our FEMA business. We feel good about the progress we've made to position this business for the future, but the recovery has not yet shown through in a meaningful way. The business is now stabilized and we are hyper-focused on improving sales in the lodging business. The other segment was up 23% as the gift business generated significant year-over-year growth from pent-up demand due to new regulations to upgrade gift card packaging to reduce fraud. In summary, we delivered 11% organic growth in Q3 at the high end of our target range, driven by continued strong corporate payments organic growth and double-digit vehicle payments organic growth. These two segments make up over 80% of our revenues. Now, looking further down the income statement. Operating expenses of $649 million represent a 16% increase versus Q3 of last year. driven primarily by acquisitions and divestitures and related ad backs, FX, and a true-up of a 2024 disposition. Excluding these impacts, operating expenses increased 8%. Bad debt expense declined 1% from last year to $28 million, or four basis points of spend, so credit remains well-controlled. Our adjusted EBITDA margin was 57.7%, essentially flat with the prior year. Our adjusted effective tax rate for the quarter was 26.6%. The increase in the rate was driven by Pillar 2 and a change in the mix of earnings. On to the balance sheet. We ended the quarter in excellent shape with liquidity of $3.5 billion and a leverage ratio of 2.4 times. Today, we closed upsized debt facilities that enhance our capital structure. increasing our revolving credit facility by $1 billion, resulting in a total facility of $2.775 billion and a new $900 million seven-year term loan B. Our term loan B and revolving credit facility continue to price at some of the tightest credit spreads amongst BB Plus corporates, which reflects our strong balance sheet and significant cash flow generation. We use proceeds from these facilities to close our alpha acquisition and our investment in Abbott Exchange. We have a plan to de-lever and expect to end 2025 at approximately 2.8 times leverage. We purchased approximately 600,000 shares in the quarter for $192 million, leaving us with approximately $1 billion authorized for share repurchases. We will continue to pursue near-term M&A opportunities and we'll also buy back shares when it makes sense while maintaining leverage within our target range. So now some updates and details on our Q4 and full year outlooks. We're increasing our full year 2025 revenue guidance to 4.515 billion at midpoint representing print growth of 14% driven by our third quarter beat the continued benefit of improved foreign currency exchange rates, and the inclusion of our recently closed acquisition. We are also increasing our adjusted EPS guidance to $21.24 per share at the midpoint, representing growth of 12% as a result of our Q3B continued expense discipline and recently closed acquisition and investments. For the fourth quarter, we expect print revenue of $1.235 billion at the midpoint, representing growth of 19%, and adjusted EPS of $5.90 per share at the midpoint, representing growth of 10%. We've provided additional details regarding our rest of year and Q4 outlook in our press release and earnings supplement. This concludes our prepared remarks, operator. Please open the line for questions.

Thank you. And at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. Once again, to ask a question, please press the star and 1 on your telephone keypad. We'll take our first question from John Davis with Raymond James. Please go ahead. Your line is open.

Hey, good afternoon, guys. Peter, maybe just first on corporate payments, organic growth. I think you guys said mid-teens. Despite an incremental float headwind, obviously you have a very tough comp from the year-ago quarter. So maybe just talk about the drivers that give you confidence in that organic growth outlook for the fourth quarter, specifically in corporate payments.

John, appreciate the question. So maybe we'll just break it down into the components because what Ron shared in his script was obviously with the alpha acquisition. So if we look at the core corporate payments business, we're expecting that to be, call it, you know, 16-ish percent with a drag of 100 basis point from float. So, you know, about a 17% growth rate there in the core business. That does compare to last year, which was 26%, which was obviously kind of had a double impact. We had a one-timer in there of about 400 basis points, and we were growing off of a really weak Q4 23. So hopefully that gives some context in terms of kind of the core business. When we think about alpha, alpha is organic. So, obviously, the business is very dependent on float from the bank account business. And then on a consolidated basis, that gets us to the mid-teens that Ron spoke about with a 3% float headwind. So, call that without the headwind, you know, 18%-ish.

Hey, John, it's Ron.

Remember, we've also seen October.

Fair enough. Fair enough. All right. So, I'll continue on the guidance slide. here, you know, Ron, as you think about next year, you know, you guys have consistently said 10% organic. You've got your guide into that next year. There's a little bit of a choppy macro backdrop. You saw some nice acceleration in North America fleet in the quarter. Um, obviously corporate payments is strong. Maybe just talk about what gives you confidence and what, if any, um, of that organic growth outlook next year. comes from synergies from Paymerang and some other of the prior corporate payments deal that now will flow through to organic growth.

Yeah, I think, John, it's just run rate, right? We've got the trends. We see what we're adding in new business. We see what the losses are running. And so I think our confidence of having the vehicle business high single digits to 10 and the corporate payments business, call it mid-teens, inclusive of the flow headwinds that we're super comfortable. And even the other category, which historically was a bit problematic, we're outlooking that thing to be a kind of 10% plus. So the wild card, I guess, is lodging, which we think will edge over into positive territory. So I think what we're seeing, I mean, look at the corner that we just printed, and look what we're given for Q4. So I think we're just we're seeing it and really not calling for anything super different than what we're kind of running at. So pretty confident.

Okay. Appreciate it. Thanks, guys.

Thank you. We will move next with Sanjay Sarkrani with KBW. Please go ahead. Your line is open.

Thank you. Maybe just to follow on some of the questions asked before, obviously next year is setting up pretty strong. You've got this MasterCard investment, and then some of the pipeline that's building associated with that partnership, the synergies from Alpha. Could you just talk, Ron, a little bit of how you're figuring for that in that preliminary outlook?

What do you mean, Sanjay, how we're figuring it?

How much of that is driving sort of the preliminary view on revenue growth for next year?

Yeah, I'd say not a lot. I think it says report that we were hoping that MasterCard thing could add, you know, a point or two, that FI channel to our cross-border business, which is already kind of a mid-high team's number. The synergies, again, the alpha businesses call it, you know, circa 300 million-ish synergies. you know, in U.S. and has got a bit of a flow headwind. So I'd say, again, you know, half a point maybe from that. So the majority really of the outlook is around just the core set of businesses. I do think we're going to get profit leverage, though, separate from revenue, from alpha, from the macro, right, that we're seeing, and from some of this cost efficiency, some of the AI work that we've done. So I do see us getting, you know, some incremental profit leverage next year kind of above normal levels.

Got it. Okay. And then, Peter, could you just drill down just a little bit more on that breakdown that you had? So if I think about the fourth quarter revenue outlook. How much does alpha specifically add to that? And then on that 75 cents of upside for next year, how much of it is alpha versus avid? Thank you.

Yeah, so on the revenue outlook for Q4 25, Alpha is adding about $55 million of revenue in the fourth quarter. And in terms of the 75 cents, we've not given that breakout, but we obviously previously shared that Alpha would be 50 cents. So, you know, you can kind of, you know, take those two and give that some thought in terms of your split there.

Okay. Thank you.

Thank you. Our next question comes from Tianxin Huang with J.B. Morgan. Please go ahead.

Hey, good afternoon. Good to talk to everyone. Just wanted to ask on Twenty-six, again, just thinking about the segments and the growth and how growth might be different than what we saw in 25 at a high level. Any interesting call-outs there? You've got the new sales performance up 20-plus percent. Retention is a little bit better. I know the deals are getting layered in, but just at a high level, how is 26 going to be different than 25?

Any changes? That's Ron. It's good to hear your voice. I'd say it's really more the same, right, than different. I think what's different is a little bit happier on the vehicle, right, that thing accelerated faster. Second half, or will we think to 10 from whatever it was, you know, 8 and 9 in the first half. So we think that's going to kind of carry through. So we think that'll do a little bit better. Lodging, again, a wild card call that thing a push. The other category may be a tag lighter but still positive kind of double digit. So really the question is where in the teens will the corporate payment business inclusive of the float land? So that would be, I'd say, what could cause the thing to be, you know, a little bit better. But more of the same real attention to the 25 numbers, I'd say, next year.

I know. Thank you for that. My quick follow-up, just thinking about you have a lot on your plate, thinking about, again, the acquisitions, divestitures. I'm sure there are other deals in the pipe as well. Just thinking about it, Ron, does it feel tougher to sort of re- regenerate some of the sales performance that you've seen. Just curious where you see opportunity versus risk going into the end of the year here and going into next year.

Yeah, I mean, I think the sales performance tension is quite good. The preliminary plan that we're building is, you know, way increasing. You know, we hired someone new to start to build up some new channels, like the Zoom channel has been super small. You know, we're building that up. The Gen channel for kind of mid-size is working. So I see us pouring, you know, a bunch more money, some of it from the expense side, savings that that we're getting and and sales will be up well over 20 percent you know this year in 2025 we got a bunch of elephants right that helped this year so i think bullish on it i think the the way upside for us is really in capital allocation if people keep trading our stock at this level um and we sell these companies we are going to be you know buying stock back, which obviously at this kind of a price would be pretty incremental. We have this MasterCard money coming in. So we have some sources of, you know, incremental capital, again, above kind of normal levels that could help us next year. So I'm pretty bullish on the profit side really for next year. Perfect. Thank you, Ron.

Thank you. Our next question comes from Andrew Jeffrey with William Blair. Please go ahead.

Hey, good afternoon, everybody. Appreciate you taking the question. Pretty exciting times in corporate payments, obviously. Ron, I'm intrigued by the stablecoin commentary because I know there's been a lot of discussion in the market, both sort of pro and con. I wonder if you could just sort of frame up for me Will you think the long-term opportunity is in that business? It sounds like initially it's going to be infrastructure, so on-ramp, off-ramp. Over time, does the circle agreement sort of create the opportunity for cross-border stablecoin movement? It sounds like maybe you're doing that a little bit today in the FX business, but I'm thinking like cross-border B2B payments. And what do you think the timeframe on something like that is, assuming that's a business in which you have your eye at this point?

Yeah, we tried to lay out Andrew in the supplement. I think, Jim, it was page 18 or something. But to me, Andrew, the Sablecoin thing is kind of a two-part thing. So one is kind of the new players, right, that have big crypto balances, you know, like Circle, Ripple, this bank that I mentioned, Bank Break, where we can be helpful to them effectively. They're both providers of capabilities to us. but potentially, you know, clients of ours, right, again, that need to route, you know, dollars back, right, in USD to investors. So that's opportunity one is just to be a provider, you know, back to some of these guys that have big balances. But to me, the fascinating one will be, We've got a big business, right? We pay hundreds of billions to the U.S. merchants, both in our domestic business and our cross-border business. You know, they're huge beneficiaries of payouts of ours. And so to me, the fascinating question is, what will the take rate be? So if we go to those biggest... you know concentrated beneficiaries and say to them hey we'll enable you with a stable coin wallet do you want us to basically have funds come in there if they're off cycle or not and then you can toggle it back and forth between you know your traditional bank accounts or we have a big bank account business i think we said 7 000 bank accounts with 3 billion in deposits same thing when we tell those institutional clients we're attaching a stablecoin wallet, will they use it? And so I think we'll learn a lot there because we have flows and we have deposits, unlike people who are trying to get into this business. And so I think we're going to get a super early read of the interest on both sides, right, the deposit side and this payout side. We're just readying those things and then seeing if the beneficiaries and the clients we have used them on.

Okay, so it sounds like you'll sort of build the infrastructure and wait to see how the market evolves. Would that be the right way to – to think about it.

Yeah, yeah. I mean, if you think of what's happening, like it's kind of third-tier world, you know, driving a lot of the thing, right? There's not a ton of activity kind of in the G20 space where all of our bulk is. So I think we're going to be there. We're adding this set of capabilities, particularly the wallets. We have these flows, and we're going to make our clients, you know, aware of them and see what the take rate is to see whether there's, you know, utilization or not. But we're excited that there probably will be. I personally think this off-cycle piece, Andrew, is the magic there. Being able to basically take funds when the banking system is closed, I think, might be the most interesting piece. But I guess we'll see. The main thing I want to say is we're not afraid. I mean, I think some people think, like, we're afraid. We're not afraid. We think it's a fascinating incremental rail. We're going to offer it, and we hope that our clients are going to take some advantage of it. Yeah, I suspect they will.

I suspect you're right. And if I could ask one more, maybe, Peter, the yield on these big enterprise clients, I guess, I mean, if investors ask, Can you kind of frame up how you're thinking about that business? I imagine it's high incremental margin and you like the volume. Is there anything you'd add to that when we think about sort of the yield on those big customers versus the core business?

Hey, Andrew, it's Ron. I'll take that one. I think it's quite wide, right, as you said, in our cross-border business. historically we'd be in the, call it average of 50 to 60 basis points, kind of keep on conversion work. We have some of these gigantic, super large transactions that could be single-digit basis points, so, you know, one-sixth, one-seventh of the line average and stuff. And we often do it in concert with the normal business, with those big accounts. So we might have a big account where we're doing, you know, some set of ongoing kind of mass payments at a decent kind of rate, and then, hey, they call us for some kind of significant one-off kind of transaction. So it's oftentimes done that way, where the account calls us for some other kind of use. And to your point, although it's a way different rate, it's a gigantic trade, and we're happy to kind of take it, to your point, from a profit perspective, It's quite high, the absolute dollars of the profit, because, you know, it's one big transaction. There's not a lot of work. We're really calling out mostly so people don't think that the core or normalized rate in that business is moving at all. It's really going nowhere if you look at it without this handful of accounts.

Okay. Yeah, that's helpful, Collar. Appreciate it. Thanks.

Thank you. Thank you. Our next question comes from Darren Peller with Wolf Research. Please go ahead.

Hey, thanks, guys. Ron, can you just give us a quick update on the progress and any details you can provide about the interest level and some of the divestitures you were looking to make over the next, you know, several quarters or so?

Yeah, hey, Darren. I'd say mostly it's early days, kind of the books are out, you know, the fireside. Chats have started. We've obviously had some call-ins on the businesses. So I'd say it'd be premature to say we know a lot. The one thing I would say is these are decent businesses. These are a couple businesses that are in our international vehicle segment. that are growing, both of them grow kind of 10%-ish, so they're decent businesses and they're profitable. So they will sell. The question is, are we going to like the price? So unlike the gift thing that I know you weathered through with us, you know, however many times we try that, these will transact. The question is whether we're going to like the price enough. But we will know. We've got, you know, a process set up where first bids are due in the next few weeks here. So by the time we talk again, we'll have a clear answer for you.

All right. That's good to hear and helpful. Thank you. I guess my quick follow-up would be on U.S. fleet growth. I think we saw 5%, you mentioned. And just touch a little bit more on the sustainability of that, just because it obviously is good to see. I'm curious what's driving it and then, you know, your conviction around it going forward.

That's a super good question. I think the main thing is the structure of that business has changed a lot, kind of since the pivot. So call our vehicle segment here a $2 billion business annually, kind of a third in the U.S., a third in Europe, and a third in Brazil, ballpark. So let's just use, you know, $700 million as a ballpark number. The retention in that business now has gotten to the company's line average. So historically, when it was a micro business, you know, losses were super high. So think now if you were modeling this with me. Hey, I got a $700 million business printing in 2025, and our line average is call it 92-93, so the loss rate is 7%. So you lose seven on 700, you lose 50. We actually are planning the same store sales that are improving. They're going to go positive in that business next year. So you're into a way lower risk profile now. We don't need to sell very much or add too many initiatives to get the thing to work. Whereas before, we had the bottom of the bucket, the loss rates were, you know, almost double that at some point. And the same store sales were, you know, two and three points negative. So that's the main headline for everybody is the assignment to grow it now is just infinitely easier than it was a couple years ago.

It's way easier to get a number. Right. Great. Thank you. Got it.

Thank you. Our next question comes from Nate Svensson with Deutsche Bank. Please go ahead. Your line is open.

Hey, guys. Nice results. I did want to ask on AVID, now that that's closed, and nice to hear that it's contributing, you know, at least some portion of the 75-cent accretion next year. I guess first, just any update on the work being done at AVID to help improve their margin profile and growth and kind of the role that core pay is playing there. And then I guess more specifically, since the deal closed, any way to quantify the impact from AVID volumes may be coming on. I think a competitor may have called out a loss, but wondering if you can size the impact there, maybe in terms of volumes.

Well, the first thing I got to say, Nate, is thank you. That was a good opener. Hey, nice results. We kind of appreciate that. On your first question of what are we doing, I feel like the relationship is super good. We've obviously, I've known Mike who runs the place for quite a while and a bunch of his management team, and we liked, which is why we did the deal, the TPG guys. So the first thing I'd say is, The three groups, you know, us, the AVA guys and TPG guys have been kind of on this together, point one. Point two is it's super clear, like the handful of things to do to dramatically improve profit performance there is clear. And Mike has already pulled the trigger by the time we're on this call, getting rid of a bunch of costs already. So I'd say that we're aligned on it. We will get the profits way up, which is why we're comfortable with some accretion next year. The million-dollar question is really the growth rate. Can we, can Mike get that business close to the kind of parity with what we do, kind of a mid-teens or mid-teens plus kind of grower? So I say, Nate, that that's mostly what we're focused on now is what can they do on the on the buyer sales side and on the monetization side to get the revenue acceleration. And as I said, if we get that, if that company gets that, we will buy the balance of the business and consolidate it.

Yep, makes sense. Appreciate the detail. I do want to ask on the gift card business and other, I know there's some lumpiness and there was some regulatory changes that may have shifted demand from certain parts of the year to others. So I think it would be helpful just to kind of like walk through the changes in that business, where the pull – how much the pull forward was. And then I think you said kind of returning to double-digit growth. So just making sure your confidence and your visibility in getting back to double-digit growth in a business that can be lumpy historically, that would be helpful.

Yeah, that's a super good question. So – One of the world's worst businesses, right, some number of years ago, three, four years ago, and now a good business, a growing business, both this year and next. So kind of what's going on. It's really three things, Nate. So one is this fraud packaging thing. So a couple of states have said, hey, we're sick of people going in and stealing these gift cards and coming back in and goofing up consumers that buy it and find out there's no money. They paid for the card and there's no money on the card. So look, you suppliers are going to stop that. You're going to create packaging that doesn't allow people to do that. So that packaging has been created. And we've recycled some of that new packaging among some of our clients. So it created a bit of a lift, maybe, I don't know, five points, three to five points this year above normal kind of card fulfillment as people kind of re-inventory with this fraud protection stuff. But the two other things are we're just selling more. Like I don't know if other folks that do this business have gotten sleepy or whatever, but we are way winning more new accounts and onboarding those. I'm telling you, like five, six new accounts this year, another at least four or five that were close to closing now that will come online next year. So way more new business the last couple of years. And then lastly, these new add-ons that I think I've spoken of, like, hey, we'll help, you know, a gift card client sell cards. So we went into the business of helping manage, you know, their website and do the fulfillment so we get paid not only for administering their gift cards but actually helping them, you know, sell the cards. We also figured out a way to stick the cards, these proprietary cards, into the wallet so they serve as like a marketing tool. Same for people where you stick your Dick's Sporting Goods card, you know, in your wallet and you see it every time you go to your wallet. So we're getting paid more money from our clients for, like, doing additional things. So when you put those two or three things together, it's just like, it's just turned into, like, it's a good business. And our confidence that it will be double digit again in 26, I'd say, is pretty high.

Thanks, Ron. I guess just to clarify that three to five point uplift you mentioned above normal card fulfillment, is that a pull for it for 26 or is there a change in inventories or am I thinking about that the wrong way?

No, I would say it's the incremental 2025 growth. Like if they hadn't had this thing, I'd say the full year 25 gift card might be two, three points lower than what we'll print. I don't think it'll have much different impact on, you know, we know everything about the legislation and stuff, so we built that into the guide already for 26. It's mostly these two new things that are creating the lift to get the thing into double digits.

Super helpful. Thanks, Ron.

Thank you. We will move next with Mihir Bhatia with Bank of America. Please go ahead.

Good afternoon. Thank you for taking my question. And let me also add nice results here. Maybe to just, I want to go back to the monetization rate discussion a little bit in the corporate payment segment. I guess just trying to understand, was there anything unusual in 3Q in terms of the number of large transactions or onboarding some of these enterprise accounts? What I'm really trying to understand is should we expect the monetization to increase back, like the monetization rate to bounce back up in 4Q, or have you unlocked something where you're just going to be doing more of these volumes and then sign some of these big enterprise accounts? So it's more of a volume story than a monetization story.

Yeah, I would say don't read that as abnormal. We probably will do a bit more of this. The reason we want to break it out is to make sure people are clear that when you take away these super large accounts and these super large transactions that the, quote, normal book of business is still pricing basically in the same kind of range. And I say the same thing on the domestic payables business. If anything, that thing may inch up again next year as we offer some incremental ways. We've increased kind of pay for ACH via an acquisition. We're introducing a debit card as a way to get paid versus just a virtual card. So I would say that, if anything, the monetization rate sands these big one-time things will probably inch up a bit in 26th.

Got it. That is helpful. Thank you. And then maybe just thinking about 26 broadly, you know, you've laid out some pretty interesting upside or optionality, you know, in corporate payments, whether it's from the MasterCard of just selling more. And then similarly on U.S. vehicle payments, you were talking about, you know, the turnaround being there and being the sales increasing. Lodging, it sounds like a stabilized and likely heading better. So I guess I'm asking, where's the risk and could that 9 to 11 growth actually look closer to 11 to 13 or something like that?

I think that's a super great follow-up. I guess the headline, the first comment is, We just have a better business today. Like I just don't want people on the call to miss that sitting here in whatever November, like the business is just better. The two biggest businesses are growing and working and stuff. And so that would be the number one thing. Across the areas, I'd say, again, the thing that probably has a chance to be better, that would cause our number to get better if we got there, would be in the corporate payment space. A bunch of these things that you called out, like the MasterCard thing, are new. We haven't actually booked a single sale yet, although we have a good pipeline. So I'd say the goal of this call, since we're still early days, is to not get over our skis, to kind of give you guys a number of what we're seeing, what the business is running at, and provide some assurance we think we can get that number. and then come back in 90 days when we've finished our work and be a bit more precise. But I think the main thing is we've gotten to the second half acceleration that we said we would, despite the skeptics, and we like that, and we just don't want people to miss the step-off. You know, when we give you 570 and 590, you're good at math. That's higher than 21. So I say it all the time. In recurring businesses, if your exit rate is a lot better than your entry rate, you already have part of the next year bait. It's really in your exit rate. So, yeah, I'd say our confidence of the business performance is pretty good.

Understood. Thank you.

Thank you. Our next question comes from Raina Kumar with Oppenheimer. Please go ahead.

Hi, this is Abigail. I'm for Raina. So just a quick question about corporate payments kind of going off of the team for tonight. So the accounts payables represents a major TAM for corporate payments, particularly with the investment in AVID. Could you talk a little bit more about the progress you're making in convincing companies to switch from older accounts payable methods like such as paper checks, et cetera. And then what are some of like your biggest roadblocks that the sales force is facing to unlock more of this, Tam? And then how do you guys like convince the companies to make that switch?

Yeah, hey, Abigail, it's Ron. That's a pretty good question. I guess this offering of going to, you know, a mid-sized company that's got a lot of AP, it's literally a proposal that's too good to be true. You know, you show up, knock, knock, meet the CFO, the head of AP, and you tell him, hey, look, I can digitize and de-risk paying your AP and give you money back. So when you finish saying that, I think people look at you and like, what do you mean? We're like, what do you mean, what do we mean? We can take over all the invoicing you have. We've got way more scale to do it. We've got ways to de-risk the electronic transfer things. And because we can monetize some of it, we can actually give you money back. So the pitch is super compelling. It's the inertia, I'd say, of getting in. So the close rate, the win rate, is super high. If you can meet the CFO and the head of AP and tell them that we've got thousands of clients that we do this for and it's pretty easy and you get money back and you transfer risk to us, it's a really super compelling pitch. The question is, can you get the meeting? Can you get people to make time to listen to it? That would be the question mark. And I think the more common, I worked, you know, at ADP before starting this company, and everybody knows about payroll outsourcing, and I think less people know about, you know, AP automation and workflow and payment, you know, AP outsourcing. So I think as the category and the referenceability keeps getting, you know, wider, that it'll get easier. The world will be clearer that this is a logical thing that, to do with non-payroll expense, right, which is almost half of a business's expense, right, payroll half and then this. So that's the bet that we have, that as the clock keeps turning, more and more companies will become aware of the service.

Got it. Perfect. Thank you.

Thank you. We will move next with James Fawcett with Morgan Stanley. Please go ahead.

Hey, good afternoon, guys. Thanks for all the time today. Ron, I want to follow up on questions around these stablecoins. Really appreciate all the work you guys are doing to build an infrastructure there. You made interesting comments about where you may see some utility. Just wondering if you can give a more specific example. I think you mentioned you thought maybe there'd be some interest in things like after hours or weekend type transfers, etc. But have you seen any specific cases where you thought, hey, that makes a lot of sense or at least you could imagine the kinds of transactions that you may be looking at?

Yeah, James, it's a good question. I'd say it's Pretty quiet. I'd say that most of the activity is with the crypto, you know, digital assets, you know, guys themselves, right? That people like us going to Circle and Ripple to get some capabilities and then suggesting that they could be clients of ours. I'd say that's what's real today. We're actually getting paid doing work here in November. So on the other ones, I'd say in terms of our flows and our deposits, I think There's not a lot of people standing up and shouting. I think as we make them more aware of what this, you know, after-hours utility case is, then we'll see would be my comment back. But I wouldn't say, again, among the major countries and major markets, which is where our flows are, that we are hearing tons of people jumping up and down on it yet. But we're not waiting. We're just going to put the stuff in place and tell people about it and see if they find utility there.

Got it. And maybe I just, once again, just following up on that one point is that you mentioned the G20 and not seeing a lot of activity there. Can you just talk about like why that might be or what would change that? Because I have heard that from others saying, hey, this is going to be more of an artifact for emerging market currencies, et cetera. But I guess I'd love to hear from your perspective, like if that's a permanent thing or just requires time and development.

Yeah, I mean, I do think if you look at the current business, I think that that is what's driving it, that the ability in these third world, you know, emerging countries, I think is where the volume is. And I think the rest of the volume is really just crypto, like, you know, Bitcoin and stuff like that. And I was helping those guys return money in USD to investors. So I think the stable coin among big businesses in these major markets is still just early days where they're trying to figure out what is the use case. it's beneficial. It's not like the current system is broken, right? And it doesn't work like we move, you know, hundreds of billions of dollars. So I think it's more just time for, I think when I talk to people, they don't even understand what this is, James, literally. Like when I go through, hey, this is what the thing is. So that's what I say is there's more people writing and talking about it, I think, than using it. And so I'd say just give it some time and We're gonna tell clients about it and deposit holders about it, and we'll report back of what their interest is. But the main message I'm trying to give is we're getting ready, and we're gonna try to get our clients, beneficiaries, and deposit holders ready, and then we'll report back of whether they're gonna transact or not.

Great perspective and stance there. Appreciate it, Ron.

Thank you.

Our next question comes from Trevor Williams with Jefferies. Please go ahead.

Great. Thanks very much. I wanted to ask another on 26. So within the 9% to 11% organic growth, Ron, it sounded like not much different than what we're seeing this year, or at least in the second half. For corporate payments, can you be more specific on what you're assuming for the fully loaded growth rate there and Within that, how you're thinking about the puts and takes between float and then the revenue synergies from alpha, if we can think about those two potentially netting each other out in fiscal 26? Thanks.

Yeah, Trevor, I'd say it's just the two earlier days, which is why we're kind of given a bit of a wide range, like we're maybe halfway through the alpha, you know, 2026 plan. I'm actually going there with our group, you know, next week to continue to work the thing and how hard we're going to press the synergies. We did mention the MasterCard thing, right? Again, we'll know more in 90 days as those appointments, the pipeline converts. We'll have a better view of whether that starts starting to convert. So I'd say that We're kind of staying a bit broad with it. Obviously, we want to see what the interest rate curves are, what happens there right in the next 90 days with the employment woes, you know, cause that thing to keep coming down. So, look, we're confident that that segment is going to grow, and I think it's a function of what we're going to invest. If we get more money out of some of this AI stuff, we may put more – and marketing spend into the business. So I just ask you to be patient and we'll kind of give you the details of those three or four pieces when we talk next time.

Okay, fair enough. And then to piggyback on alpha and the accretion, at least within the initial 50 cents when you'd announced the deal, it had seemed like there was a fair amount of conservatism embedded in that number. So maybe just within the accretion that you're baking in within the 75 cents in total with Avid, can you give us some more specifics on what the obvious easy early synergies are from alpha and then maybe beyond that what you at least today what you feel confident in being able to realize eventually but maybe you don't have it in the numbers at least initially that'd be helpful thanks yeah i would say what we've given the number in early days were highly i would say we're highly confident that we can we can get at least that number and so i'd say a couple things one that

In this case, in the alpha case, we have both kinds of synergies. We have both revenue synergies and expense synergies. In some of the other businesses, we've had more on the cost side. And then second, I'd say that half or more of the synergies are just They're free to us. They're just super easy to get. Like we have contracts where we, you know, we get better rates on holding deposits than they do. Or they have accounts that use their product as geographies that they're not licensed in, but we are. Obviously, they have a public company cost structure that will be gone and stuff. So I'd say that You know, half or more, Trevor, of the first cut of the synergies are just sitting on the T for us, which enable us to pay the price. And the purpose of the next 90 days is really to work the other half, to really see, you know, where can we take that number. And by the time we talk again, we'll have an answer for you. But it'll be quite a creative.

All right. Thanks very much.

Thank you. Our next question comes from Dave Quaning with Baird. Please go ahead. Your line is open.

Yeah. Hey, guys. Thanks. Good job. Capital return question, really getting back kind of to the last question, is the 75 cents, is that fully self-funding, meaning the profits are fully covering the interest expense of what you're borrowing and you can use all your cash flow to to do capital return over the next year. Just want to make sure I understand how the accretion was looked at.

Yes. Yes. The answer is yes.

Good. And then just a quick follow-up. Go ahead.

I just want to make sure you're going yes. Just the way you said it, the answer is yes.

Okay. I'm glad we're on the same page. Quick follow-up. Interest expense Q4, $115 million, $120 million, something in that range. up just a tick next year per quarter just because we'll have a full quarter of the borrowing since you're into the quarter already when you bought alpha. But is that the way to think about it, using a little higher than 115 to 120 per quarter?

Peter, you got that one?

Yes. I think it's a fair way to think about it.

Okay. Good. Thanks, guys. Nice job.

Appreciate it.

Thank you. And we will move next with Ken Suchowski with Autonomous Research. Please go ahead.

Hey, guys. Thanks for taking the questions here. Maybe just on U.S. vehicle, the acceleration there, I think you called out higher approval rates as one of the drivers. Can you just comment on what you're seeing in terms of new acquisition and where that's coming from? It sounds like you're comfortable with the credit trends that you're seeing if you're approving more customers there. Thank you.

Yeah, hey, Ken, it's Ron. That's right. The growth of that business, as I said, starts really with a complete change in the retention and same-store sales setup, which, again, makes it much easier to grow. Look, on the sales side, we have a bunch of elephants that we booked that created the second half acceleration. We've obviously got some more in the pipeline. I think the focus, the pivot that we made from the micro-digital world is just better credit quality. And so as we've kind of retweaked our models and we look at our losses and what our receivables look like, We're approving just higher amounts. So what we're selling, we're basically getting more into the revenue line. We also have some other kind of rate initiatives around the merchant side. We have these big proprietary networks, including Cardlock. So our tech now enables us to move some of the volume that was on kind of lower interchange rails to higher rates. So we'll basically get some merchant rate enhancement by having some of our volume flow to different areas. So we've got a lot of things working. The base is just more solid. We've made some big sales. The approval rate credit quality is better on the new accounts. We're moving volume to higher interchange, things like this. There's three or four things that are making the thing work, and we think it's durable in the next year. No, that's great.

And then maybe just on... Sorry, go ahead. No, it was you, Ken.

No, you're breaking up a little.

Oh, sorry. Sorry about that. Just on the margins for next year, I mean, lots of moving parts with acquisitions and efficiencies. Just how are you thinking about margins? I think I saw the comment on expecting incremental margin expansion from some initiatives.

Yeah, as we mentioned, we've got some AI initiatives that are paying off well, some vendor rationalization initiatives, et cetera. So we do think there will be incremental margin improvement next year, and we'll get more details on that when we get together in 90 days.

Hey, Kenneth, Ron, I also think it's a function of what we decide to invest. I think I tell you guys a big part of our growth planning is what we agree to spend in sales and marketing. So to Peter's point, that's going to be one of the calls we make is how much do we deliver in profitability in 26 and can we productively spend a bit more in some of the businesses to giddy up and go into the forward year. So that's another question. call that we'll make. So I don't want to get again out over the skis. We may decide to spend some of that if we think we can get a good return on it.

Yeah. Great. Makes sense. Thanks, Ed.

Thank you.

This does conclude our Q&A session as well as the Corp A third quarter 2025 earnings conference call. Thank you for your participation and you may disconnect at any time.