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.