Corpay, Inc.

Greetings. Welcome to Fleet Core Technologies, Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jim Egglesetter, Head of Investor Relations. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us today for our second quarter 2021 earnings call. With me today are Ron Clark, our chairman and CEO, and Charles Freund, our CFO. Following the prepared comments, the operator will announce that a queue will open for the Q&A session. It is only then that you can get in the line for questions. Please note that our earnings release and supplement can be found on the investor relations section of our website at fleecore.com. Now, throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income, and adjusted net income for 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 information to the most directly comparable GAAP information appears in today's press release and on our website as previously described. I do need to remind everyone that part of our discussion today may include forward-looking statements. These statements reflect the best information we have of today. All statements about our recovery, outlook, new products and acquisitions, Expectations regarding business development and future acquisitions are based on that information. They are not guarantees of future performance, and you should not put undue reliance upon them. We do not undertake any obligation to update any of these statements. These expected results are subject to numerous uncertainties and risks, 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 8K and in our annual report on Form 10K, both filed with the Securities and Exchange Commission. These documents are available on our website and at sec.gov. Now with that out of the way, I will turn the call over to Ron Clark, our Chairman and CEO. Ron?

Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining our Q2 earnings call. Up front here, I'll plan to cover three subjects. First, I'll share my perspective on our Q2 results along with the rest of your outlook. Second, I'll provide an update on our two newest acquisitions. And then lastly, I'll talk about our fuel car business, including our latest view on EV, along with a couple innovative developments underway in that business. Okay, let me turn to our Q2 results. So very pleased to report outstanding Q2 financial results, meaningfully above our internal expectations. We report a Q2 revenue of $667 million. That's up 27%. And cash EPS of $315, up 38%. Both our Q2 21 revenue and cash EPS exceeded our Q2 19 results. So finally moving past our pre-pandemic baselines. Organic revenue growth came in at 23% for the quarter. Our full AP outsourcing platform segment up 53% versus Q2 last year. The trends in the quarter are really quite good. Our same store sales metric improved to plus 18%, so hardness of 18%. many of the sectors in our client base recovering. Retention record level, we reached nearly 94%, an all-time high since we've been reporting the metric. And interestingly, our global fuel card business reached 92% retention, also an all-time high. Credit losses remain very good, running at historic levels. and sales outstanding in the quarter, finishing up almost two times last year's Q2 and up 6% against 2019. Okay, let me transition to our view of the rest of the year. So today we're raising guidance to $2,765,000,000 at the midpoint for full year revenue. raising cash EPS at the midpoint to 1290. That's driven by our Q2 beat, the Apex close, and really the momentum that we have running into the second half. I do want to remind everyone, we had previously guided to a pretty substantial second half sequential step up already. As a reminder, cash EPS guidance up nearly 60 cents from the start of the year So we opened the year at 1230, today 1290. So obviously better than we outlooked. The second half guidance implies a few things. So first, the revenue growth will run about 20% ahead of last year and high single digits really above the second half 2019 baseline. So we are expecting the business to reach all-time highs again in both revenues and profits. Our Q4 EPS profit guidance implies nearly a $14 annualized cash EPS exit rate. Okay, let me transition out on an update on our recent acquisitions. So as a reminder, we closed AFEX. That's the add-on cross-border deal on June 1st. And then last week, we signed definitive documents to acquire ALE, which is a lodging provided to the insurance vertical. So let me start with ALE. Really a highly complimentary add-on to our existing lodging business. And that company brings a whole set of specialized capabilities designed just to serve the insurance vertical. So we've got a pretty interesting synergy plan for that business and expect accelerated revenue and profit growth next year. We're also well underway on our AFEX integration. We've already exited about 10 million of run rate payroll expense. We've implemented one unified cross-border management organization, and we've designed an IT consolidation plan to move to a single system. that will significantly reduce run rate IT and operations expense. So look, both of these acquisitions, classic fleet wheelhouse deals. We paid reasonable prices. They're extensions of our existing business, so we know them well, and both have very rich synergy opportunities. We're expecting the businesses to grow about 20%. on the top on a pro forma basis next year and together deliver incremental cash EPS in 2022 in the 50 to 70 cent range. So big upside. So obviously we are quite enthusiastic about the transactions. All right, let me shift gears now and talk a bit about our fuel card business, which we continue to love and which we think has a bright future. So I'll talk a bit about EV, the latest and greatest, and then talk about innovation and specifically two new things that we're doing to improve the growth prospects of our fuel card business. So starting out with EV... I mentioned last time we're really embracing EV as an opportunity and in no way see it putting an end to our fuel card business. Employers are going to need to reimburse employees for recharging electric vehicles, much like they reimburse employees for refueling combustion engines. And I think you may find that it costs more to operate EV than people think. We also think there'll be some new economics and that we've got an opportunity to achieve very similar economics from EV measuring and reimbursing as we do from combustion engines. We've included a couple of EV exhibits in our Q2 earning supplement. You'll see some comparisons of spend where the cost of public charging is about 70% of fossil fuel charging. And then because there's more attractive MDR rates, we believe that we can achieve pretty interesting revenue there as well. In a nutshell, we expect the at-home software subscription fees to be pretty significant and augment a number of the other fees that we get in the revenue mix. We are outlooking the commercial transition to EV to be slow, particularly here in the U.S., giving us ample time to build out our public charging network and implement recharging at home. We expect mixed fleets to be how things start out, so our incumbent position should give us quite an advantage in consolidating activity and data for our clients. So look, in conclusion, we're outlooking EV to really just be a different way to serve commercial fleets, but one in which we think can still be attractive. All right, let me leave EV and cut over to the couple of innovations that we're working in the fuel card business. So first is digital, and particularly digital selling, which now in Q2 has reached about 60%. of all our new fuel card sales globally coming to us digitally. So lots of improvements in our digital selling capabilities. We've got automated keyword bidding now. We've redesigned our websites to maximize sales conversion. And we're beginning investments at the top of the funnel in the form of digital TV, radio, Facebook advertising. which is driving about 50% more visitors to our websites, so obviously leading to incremental sales. The last innovation I'd like to touch on is our effort to transform our fuel card UI, which is used by over 100,000 clients, really into a broader payment platform. So we're combining our newest cloud-based SMB bill pay platform with our fuel card UI so that clients go on to pay us the fuel card bill that they'd have the option then of paying additional vendors with the same software platform. So this idea is really aimed at accelerating the number of active bill pay clients we can add to our platform And again, beginning the transformation of the fuel card business into a corporate payments business. So we'll keep you updated there as we go. So look, in closing, three thoughts for you. So one on 21, again, we're pleased with Q2, particularly the record retention and record sales levels. And again, our second half outlook, calls for new all-time highs again in revenue and profits. Second, on the fuel car business, again, we think the prospects are bright for the business. We do have a plan to monetize EV adoption by providing some new services and particularly measuring and reimbursing at-home recharging We've got an opportunity to keep stepping up digital sales and digital advertising at the top of the funnel. We think we can drive incremental visitors and incremental sales. And we're launching a bill pay cross-sell opportunity to our fuel card clients, again, by turning our existing fuel UI into a broader payment platform. And lastly, although early, we're quite encouraged by our 2022 setup. Our second half guidance calls for nearly $7 in cash EPS for the second half or approximately $14 annualized. Again, forecasting record sales for the full year, which will flow revenue into next year. We'll roll off a billion in interest rate hedges in January. That'll free up about 20 cents of incremental cash EPS. And lastly, our two newest acquisitions, hoping to contribute in the 50 to 70 cent range of incremental cash EPS. So look, taking together a lot to like about our 2022 setup. So with that, let me turn the call back over to Chuck. He'll provide some additional details on the quarter. Chuck.