Corpay, Inc.

Good afternoon and welcome to the Fleet Core Technologies, Inc. Fourth Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one. Please note that this event is being recorded. I would now like to turn the conference over to Jim Egglesetter, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2022 earnings call. With me today are Ron Clark, our chairman and CEO, and Alyssa Vickery, our interim CFO. Following the prepared comments, the operator will announce that the queue will open for the Q&A session. It is only then that you can get in line for questions. Please note, our earnings release and supplement can be found under the investor relations section of our website at fleecore.com. Now, throughout this call, we will be covering organic revenue growth. And as a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices, and fuel spreads. It also includes pro forma results for acquisitions closed during the two years being compared. We will also be covering non-GAAP financial metrics, including revenues, net income, and net income per dilute share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than that at other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website. 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 today. All statements about our outlook, new products, and 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 undertake no 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 Exchange Commission. These documents are available on our website and at sec.gov. So 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 appreciate you joining our Q4 2022 earnings call. At the top here, I'll plan to cover four subjects. So first, I'll provide my take on our Q4 results. Second, I'll recap our full year 2022 performance. Third, I'll share our initial 2023 guidance. And then lastly, I'll update you on a few of the key priorities that we're working. Okay, let me make the turn to our Q4 results, which exceeded the top end of our guidance range, so better than we expected. We reported revenue of $884 million. That's up 10%. And cash EPS of $404. That's up 9%. Our cash EPS was helped. in the quarter by our Brazil Tax Happy, which did lower our Q4 overall tax rate. Organic revenue growth coming in at 7% overall. Inside of that, our corporate payments business, super good, growing 20% in the quarter. Against the prior year, our Q4 organic revenue growth was negatively impacted by by about 20 to 25 million of one-time revenues sitting in Q4 of 21. So that reduced organic revenue growth by about 2 to 3% in Q4. We do expect Q1 2023 organic growth to return to the 9 to 10% range. Cash EPS in the quarter pressured by both higher bad debts and significantly higher interest expense. And as a result of the rising delinquencies we're seeing in our U.S. fuel business, we did make the decision in Q4 to slow what we call our new micro digital sales, so our very smallest accounts. We also began tightening terms of our existing SMB accounts. Both of those things really a cautionary move to try to control bad debt expense here in 2023. Fortunately, our credit risk is really narrowly concentrated in what we call these very small micro accounts and also in our newest vintages, you know, think 12 to 24 months. So really impacts a pretty small portion of our overall business. Turning to the trends, fundamentals in the quarter, quite good. Same stores finished plus two for the quarter. Retention remaining steady at 92%. And sales grew 19% in the quarter despite our decision to, again, to slow the micro sales and fuel. So, look, all in all, you know, a bit better finish than we had expected. and continuing strong trends helping us here as we roll into 23. Okay, let me turn to our full year 2022 performance, along with the progress that we made to better position the company for the midterm. So for the full year 2022, we reported revenue of $3.4 billion. That's up 21%. and up almost $600 million over 2021. Cash EPS is $16.10. That's up 22% versus prior year, and a full $0.85 ahead of our initial 2022 guidance. Full-year organic revenue growth of 13%. Full-year sales or new bookings growth of 21%. And we closed five capability acquisitions if you include the GRG deal on January 1. So really good, really outstanding performance against the primary objectives that we set. So in addition to the financial goals, we really did advance pretty meaningfully our beyond strategy in 22. in which we extend either or both the product set of the business or the customer segment that we serve. This is helpful, obviously, because it grows the TAM and obviously better positions the business for long-term growth. So just a few of our beyond highlights for 2022. So in global fleet, Significant progress on our EV capabilities. We acquired a European public charging network. We've got mapping and payment applications. We've got at-home charging software, and we've integrated all that to our ICE fueling solution. So great progress there. In corporate payments, we added an AP automation software front end. to our full AP payment execution business, which is the company's fastest growing business, so super delighted with that. In lodging, we've gone beyond our workforce, core workforce business to two new verticals, the airline vertical and the insurance vertical, each of those reaching almost $100 million in revenue in 22. And then finally in Brazil, we keep expanding our TAG fueling solution. We've gone to even more accepting sites now and more users. And I think exiting Q4 reached about 10 million annualized transactions. So look, the combo in 22 of really good financial performance and what I'd call significant strategic progress. So we're quite pleased. All right, let me shift gears and make the turn to our 2023 outlook. We've worked hard to build a plan to meet our most important objectives in what is a challenging environment. So here is our 2023 guidance at the midpoint. So revenue of $3,825,000,000, that would be up 12% or approximately $400,000,000. EBITDA of $2.25 billion. That reflects up 15% or up about $260 million. And then cash EPS of $17 at the midpoint. That would reflect up 6%. We're certainly outlooking a pretty unfavorable macro environment this year with a smidge lower fuel price and significantly higher interest rate. So those two things are expected to reduce our 2023 cash EPS by about $1.75, implying we'd be giving a 1875 cash EPS guide in kind of an apples-to-apples environment. Our 2023 plan does set out a number of pretty important objectives to deliver organic growth 10% plus, to grow new sales 15% plus, and to diet or control our operating expenses with a plan to expand margins about 150 basis points for the full year and 200 basis points exiting 2023. Major assumptions underlying our 2023 guidance are first, that our 2022 acquisitions will add about 2% to 3% to our 2023 print revenue growth. This 23 guidance does include Russia and will until we have certainty of the divestiture. Guidance assumes that we can manage bad debt equal to the 2022 level, although we do think it will be more elevated in the first half than the second half. And then finally, we have not assumed a U.S. or global recession, but rather built our 23 plan in volumes really just based on what we can see and projected from there. Our confidence in this 23 planner outlook is bolstered by a few things. First, we've now seen our 22 finish good, better than we thought. We closed the global reach cross-border deal, so that's in our numbers. We've made expense cuts already, so those are behind us. we're seeing some recent improvement, slight, but improvement in both fuel price and FX trends. We just recently implemented two interest rate swaps that will lower our 2023 interest expense at obviously fixed rates. And then lastly, we've qualified for Brazil Tax Happy that will slightly lower our 2023 consolidated tax rate a bit better than our earlier expectations. Okay, let me transition to my last subject, which is an update on some of our important priorities. So Russia, let me start out with Russia. So making good progress on the sale of our Russia business. We've had lots of interest, a number of parties that have bid for the asset, and we've recently moved a select group of buyers potential buyers into the diligence phase. Timing is probably somewhere late Q2. And at this point, our plan would be to use the Russia sale proceeds to buy back FLT stock. If we did that with kind of a mid-year close, we're looking at about 30 to 35 cents of in-year cash EPS dilution. Okay, let me turn next to the FTC matter, appears to be finally in the home stretch. We're at a point now where we do expect the court to issue an order, likely here sometime in Q1, detailing incremental processes and disclosures that we'll need to implement. So obviously once clear, we'll move quickly to implement those things, although we will We will require some time. I mean, just as a reminder, the disclosure enhancements and process changes that we have voluntarily made over the last few years have not had a material impact on our financial performance, nor do we believe that this court order will have a material impact on our financial performance going forward. So last up, EV, again, you know, really good progress on that initiative. So in the UK, we're now in market with what we call our three-in-one EV solution for commercial fleet clients. So in this case, it includes a UK public EV charging network, at-home charging software, and of course, traditional ICE fueling, all of those integrated into one. And I think we've got about 1,000 of our UK commercial fleet clients using the solution. So doing well there. Additionally, we're in the market in continental Europe with an EV solution really for new customer segments, so beyond commercial fleet. So the new segments would include EV car manufacturers, charge point operators, you know, even EV drivers. And fortunately, we are seeing adoption by all three of those customer segments, which for us is clearly all incremental to our fleet payment business. So, look, the goal, again, is to be a big, a major player in this EV transition. And I do want to report, you know, we are officially out of the blocks. Okay, so in closing, again, we finished. 2022, pretty well. Again, positive sales and retention trends. That obviously helps the setup for this year. 22 full-year financial performance, you know, super good. 21% and 22% top and bottom line, you know, way ahead of the initial guide. Again, we've advanced last year a number of important beyond ideas. That supports the future growth of the company. Our outlook for 23, we think positive. Outlooking double-digit revenue expectations, you know, improving operating margins and EBITDA, although our absolute profits for sure will be weighed down by the interest rate spike. We do expect to clear our Russia and FTC overhang here in the first half. At the same time, we're going to continue to stake out our position in the new EV world. Again, big opportunity for us. And lastly, our midterm objectives remain intact. We want to grow cash EPS in the 15% to 20% range once we lap the 2023 interest expense headwinds. So with that, let me turn the call back over to Alyssa to provide a bit more detail on the quarter. Alyssa?

Thanks, Ron. First, the financial details. As mentioned, we posted 10% growth in revenue in the quarter, driven by 7% organic growth, or $57 million, which I'll delve into in a moment. The remaining percentages came from 20 million of macro tailwinds and 4 million from acquisitions made over the past year. Organic revenue growth was negatively affected by the impact of one-off items not expected to repeat from the fourth quarter of 2021, including breakage, backlogged card orders, accounting true-ups in the normal course, and acquisition accruals. We expect 2023 organic revenue growth to meet our double-digit targets. Corporate payments average revenue growth was 20%, driven by continued strong new sales across both direct and cross-border. Specifically, our direct corporate payments business grew 27% and continues to demonstrate very robust growth. Cross-border was up 24%, another very good quarter, as new sales remained strong. Activity levels were robust across nearly all geographies, and we completed the full tech integration of AFEX into our cross-border platforms. Lodging continued to perform well, up 14%. While we've largely lapped the airline COVID recovery benefit, the airline business was still up 38% in the quarter. The suite of services we've bought into this business substantially enlarges the TAM and durability of our lodging growth profile over the medium term. Fuel was up organically 2%, with growth in international fuel largely offset by softness in our U.S. micro-SMB customer segment. And by micro, we mean companies with less than five vehicles, so the smallest of the small. The economic cost of higher fuel prices, inflation, and in the case of micro-SMB trucking, lower spot rates, have negatively affected their ability to manage expenses, including their fuel bills, which has resulted in higher bad debt. We've also seen some negative mix shift among that micro trucking segment as higher margin independent trucking volume is moving to lower margin volume as those drivers move to the larger contract carriers. This micro segment generated more than 75% of our U.S. fuel bad debt losses in both the fourth quarter and full year 2022, fully filling the brunt of these economic headwinds. Given the higher loss rates of the micro client segment that we are experiencing, We have significantly tightened credit approval standards in a purposely targeted and narrow way in order to get ahead of any further stress in this micro segment. The result was a drag on organic fuel growth in the quarter. We are taking a balanced approach to new customer demand gen activities, prioritizing customer segments and industries that are healthier to drive fuel growth in 2023, all while limiting our bad debt exposure. We will continue to feel the residual effect of tighter credit and higher losses in that micro segment in the first half of 2023, but would expect to clear this overhang and return to normalized fuel growth rates in the back half of the year. This will likely cause 2023 fuel organic growth to be at the low end of our normal range. Tolls was up 6% compared with last year, as the impact of strong new sales was masked by almost $5 million of non-recurring revenue in the fourth quarter of last year. Toll sales were strong in the current quarter, recovering from softer sales mid-year and helping offset some of the prior year one-time benefit impact. We expect tolls to return to its low to mid-teens growth rate in 2023. We've made great progress building out the Beyond Toll network and now have over 5,400 Beyond Toll locations, including 2,200 fueling stations, 2,300 parking lots, 750 drive-thrus, and 150 car washes that accept our tag. As an additional service to our customers, we are a reseller of insurance from other companies to our more than 6 million tag holders in Brazil, for whom we have negotiated preferential pricing. This insurance offering is growing quite fast. We sold more than 58,000 insurance policies in the quarter. We also signed up Santander as a toll distribution partner, which is the fifth largest bank in the country. All in all, we're very bullish on the outlook for our Brazil business. Gift organic growth in Q4 was down 11% over prior year Q4, as the card orders that pulled forward in the last two quarters and in Q4 prior year did not repeat. Due to the lumpy nature of card orders between quarters, it is best to look at full-year gift organic growth, which was 11%, as the newer online card sales programs and the B2B program have improved the growth of that business. Looking further down the income statement, Operating expenses of $514 million represented an increase over prior Q4, primarily due to recent acquisitions, higher bad debt, and volume-related increases. We did recognize $5 million in expense associated with reductions to staffing levels and the termination of office-based leases as we adjusted our expense base for the current challenging environment. We will continue to manage our expenses with a very close eye on our outlook. Bad debt expense was $41 million, or nine basis points. consistent with the third quarter 2022 level. I've already talked about what we're doing to manage this, but suffice it to say, we're very focused on it. Moving below the line, interest expense was $74 million for the quarter, up 168% over the prior Q4, and $165 million for the full year, up 45%. These increases were driven by higher reference rates on our floating rate debt, as well as incremental borrowings for share repurchases and acquisitions. Our effective tax rate for the quarter was 24.2% versus 25.6% last year and lower than our guidance. The primary driver was the impact of a pandemic related tax benefit election in Brazil realized for 2022 in the quarter. Now turning to the balance sheet. We ended the quarter with over 1.4 billion in unrestricted cash and approximately 600 million available on our revolver. There was 5.7 billion outstanding on our credit facilities and we had $1.3 billion borrowed on our securitization facility. As a reminder, earlier in the year, we upsized and extended our credit facility by approximately $500 million and extended the maturity through June 2027 at quite attractive rates. As of December 30th, our leverage ratio was 2.8 times trailing 12-month adjusted EBTA, as calculated in accordance with our credit agreement. Our capital allocation was once again balanced in 2022. In the quarter, we repurchased roughly 600,000 shares at an average price of $188 per share. In total, we repurchased about 6.2 million shares during 2022 for $1.4 billion. Our guidance for share count for 2023 is 5 million shares lower than what we guided to a year ago. In total, we've bought back 11.7 million shares over the last two years. We still have over 1.2 billion authorized for future repurchases. In 2022, we spent $217 million on acquisitions and minority investments, excluding Global Reach on January 1, 2023, solidifying our positions in EV, corporate payments, and lodging. Now let me share some thoughts on our Q1 outlook and our full-year assumptions. Looking ahead, we're expecting Q1 2023 revenue to be between $875 million and $890 million, and adjusted net income per share to be between $3.55 and $3.75. This is largely due to revenue seasonality, where certain businesses such as fuel, lodging, and tolls tend to have lighter first quarters due to weather and holidays. As such, the first quarter tends to be the lowest in terms of both revenue and profit for our company. We have a bit of a preview for the first few weeks of the year, and we are tracking to the guidance we are providing. Of note for the full year 2023, We anticipate managing bad debt flat to the 2022 levels, expecting it will be higher in the first half of the year and then improve into the second half. We expect 2023 net interest expense to be between $312 million and $332 million based on the forward curve as of February 1st, 2023, which implies reference rates will peak sometime during the third quarter of 2023. As we disclosed in the earnings release, and you can see on slides 21 and 22 of our supplement, we entered into a series of interest rate swap agreements to fix rates on approximately $1.5 billion of our floating rate debt. These swaps will provide some relief on our 2023 rate and help limit the downside risk from further rising interest rates. The inverted forward rate curve enabled us to reduce 2023 interest expense by locking in lower future rates over a three-year period. With these new swaps, along with our previous outstanding swaps, we now have fixed interest rates on a total of 2 billion of our variable rate debt for most of 2023. Last week, we also entered into a Euro cross currency swap to benefit from the lower Euro interest rates with an implied interest savings of 1.96% on 500 million of notional debt. With these various swaps, we have now managed interest rate and FX risk on 2.5 billion, or 47% of our debt, excluding the securitization. We believe these actions will help mitigate the risk associated with continued increasing interest rates in 2023. We estimate these swaps to reduce interest expense by approximately $35 million in 2023. And finally, our tax rate in 2023 is expected to be slightly higher, between 26 and 27%, as the continued benefit from the Brazil tax holiday is more than offset by higher tax rates in the UK. as the UK statutory tax rate increases from 19% to 25% in April of 2023. The rest of our assumptions can be found in our press release and supplement. As I complete my prepared remarks, I would like to extend our gratitude to our more than 10,000 employees around the world who helped us deliver such a strong finish to a great year and who will be the driving force to an even greater height throughout 23. Thank you for your interest in our company, and now, operator, we'd like to open the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we will pause momentarily for the first question. And our first question today will come from Sanjay Sakharani with KBW. Please go ahead.

Thank you. Ron, you talked a little bit about this rising delinquencies among the micro SMEs. I'm just curious, was that fairly contained inside of fuel or the fleet business, or were there any other weakness among the SMEs? And I'm just curious if you think that this might be a leading indicator of more things to come if you go upmarket. I know you guys haven't assumed any additional macro pressures and such.

Yeah, it's a good question, Sanjay. Yes, is the short answer. The fuel business, and really the U.S. fuel business, because the terms and the way we collect money and bill internationally is fundamentally different. The terms, we pull all the money, et cetera. So, yeah, the only place that we've seen the micro, and again, we're talking super-duper small, mostly one- and two-card accounts, and super-duper new on the books, again, a year or two, that portion of the overall sell is about 75% of the credit losses. So although the credit losses from that group are sizable, the amount of business from that group is not super sizable. So yeah, that's the only place we're seeing it. And in fact, when we study the cohorts that are a bit larger or more mature, longer on the books, It's super rateable with the trailing, you know, 12 to 24 months. So it's super-duper pocketed for some reason.

And you don't think it's a leading indicator or anything, like historically?

Yeah, I mean, look, you guys guessed as good as mine. We've been talking about, you know, macro and recession for six months now, and we study and look everywhere, and we just don't see it. We don't see it in volumes. We don't see it in sales. this is the one place where it showed up and it started, I don't know, call it maybe six months ago, kind of September, October, we saw the delinquency start to step up. So my personal view is that these are quasi-consumer businesses, and as the funds ran out and as the savings got depleted, there's just more pressure on these kind of businesses than others. And so which is what student body write. When we saw that, we said, okay, you know, you guys always ask me, hey, you grow corporate payments faster, so we giddy up and go and moved sales dollars and implementation dollars away from our tiny fuel business over there until we see how that plays out.

Okay, great. Just one quick follow-up for Alyssa on, you know, some of these impacts that happened to the growth rate in the fourth quarter. As I look across the different segments, you know, there's been a lot of variability in the growth rate. I'm just curious, did that affect multiple lines, those items, those one-off items?

It did. So we saw a decent amount in our toll business as well as a little bit in our fuel business. Those two. Okay. Great. Thank you. And I would just add, you know, this is all normal course of business stuff. It just seemed to be a collection.

Yeah, I do want to point out, Sanjay, it's Ron again, that, you know, we view it kind of as more of a bump than a trend. I did try to call out, you know, in the opening, basically, that we're out looking this quarter, we're sitting in the thing back at 9 or 10.

So really, in our minds, it's a comp issue, not a run rate issue. Got it. All right. Thank you so much. Good job.

And our next question will come from Bob Napoli with William Blair. Please go ahead. Thank you. Good afternoon.

Appreciate the question. So, I mean, you're, Ron, the corporate payments business, you know, very strong. Within that, you talked about AP being strong. Maybe just a little more cover on what the stronger areas are. were in the quarter, and did you see any deceleration, significant deceleration in any areas? You know, a lot of focus on the SMB market.

Yeah, hey Bob, it's always good to hear you and hear you're doing well. So, you know, we posted 20% organic for the quarter for the category, and that's probably our number for 23. You haven't asked me yet, but I'd say inside of our overall 10%, we're out looking really about 20 now, so more than high teams. So really inside of it, everything did well except the channel of partner thing. You know, we've said it before that some of the partners that have known us four or five years moved some volume to other people to get different rates. So that business has been flat or going backwards, which means the direct businesses are growing probably 25%. I think the full AP where we have every modality is the fastest growing. I think that particular line of business is probably up 40% to 50% in the quarter. Now we've stuck some software on the front end, so even our lead volume is up. I'd say the whole business is doing well. Again, the cross-border sales were rocking. I'm looking at the page in front of me. They were up 60%. the sales in Q4. We've obviously just eaten or the process of eating another piece of business which deepens us in the geography. And so I'd say other than the partner thing, it's firing literally on all cylinders.

Thank you. Then your investments in EV, I appreciate the continued forward-looking moves there, if you would. Can you give any more color? We get this question a lot. I'm sure everybody else does. The economics, as you have more experience, especially in Europe, I guess, can you give any color on the economics of EV versus gas and your confidence in that?

Another super good question.

The best place for us to look, really kind of the only place to look for us is the UK. We've got a big commercial fleet business there, and they've been out of the blocks pretty early. So we've got, I think, about 1,200, when I looked, active clients that use both our traditional fueling and some amount of EV. I think the average is about 15% penetration of the EV among those accounts. What I know for sure is that the enterprise, the bigger accounts, the economics are super favorable to us as they move to EV. The reason is probably pretty obvious that you get less fees generally from big accounts, right, that bid and negotiate, but they need these new EV things, and so the ability to get fees from enterprise customers. So in a report that I looked at, a sample of, I don't know, 10 or 20 accounts, it's up something like 50%. our revenues among the enterprise. I'm guessing that that probably won't be exactly the same story with a super small account. So what we'll agree to do, I told our guys, is come back probably in 90 days and report. I'll provide some actual data on this question because it's the million dollar question, right, for the commercial fleet businesses as the stuff comes across. You know, are we indifferent based in the economics? I'd say early on it looks like yes. We are, but more to follow.

Are EVs growing rapidly?

You know, not really. I mean, again, the new sales are obviously right. The mix of every 100 new vehicles, the percent EV is growing. But the base, as you know, like in the United States, I think there's, I don't know, 300 million registered vehicles, and the new car sales are 18 million a year. So half of them. or EV, it's 9 on 300, so it's super hard, Bob, to move the base, is what I'd say. Which is, again, the other things you know is the EV adoption is happening more in consumer and lighter vehicles, right, versus like 18-wheelers, which is the other motivation for us to chase these, you know, EV car manufacturers and EV consumers, because there's going to be way more of those in the coming years, and they're going to be heavy trucks on EV.

Thank you. And our next question will come from Darren Peller with Wolf Research. Please go ahead.

Hey, guys.

Thanks. Ron, can we go back to the corporate payment segment for a minute again, just because there's obviously been a lot of data points in the industry around SMBs having some challenges and B2B activity being a little bit more, you know, having decelerated. You don't seem like you're seeing that as much, so maybe a little color on what you are seeing in the marketplace. And then more importantly, just medium to long term, you know, that's obviously an area that we've talked a lot about in terms of convergence of some of the assets to really offer a more holistic solution on the account payable side and combine that with payments, you know, whether it's invoice pay and some of the other assets you've acquired and How has that been progressing? Just maybe a little update there as well.

Yeah. Hey, Darren. It's a good question. So the good news for us is that our corporate payments business is a middle market business. So our average, you know, account there would look like $200 million to $300 million in revenue for the client. So, you know, a decent, you know, size company, you know, credit worthy kind of company. So I'd say 95% of our corporate payment business is what we all would call a middle market client. So the SMB move that we made, whatever, a year and a half ago was really trying to be upside, us trying to extend kind of down market. So given what's going on with some of our friends in this, maybe we're lucky we haven't made as much progress there. So that's the headline. We're seeing nothing. Volumes are up. Spend is up. As you can see in the numbers, the revenue is, again, if you kick out the partner piece, it's compounding at 25%. And we're outlooking that same kind of number on the direct business here in 23. On your second question, which is also a super good one, is we've got all the stuff now. I feel like it's making a Thanksgiving dinner. There's 8 million ingredients to go out and get. And all of a sudden, someday there's a plate and there's the six items on the plate. We're kind of, I don't want to say done, but close to done. We've got all the stuff. We've got smart cards. We've got front-end AP automation software. We pay every modality. We've got a global international payment capability. We've got networks. So we kind of have the stuff, Darren, to offer the whole package now to these middle market clients. And we're getting more and more of the clients to buy both. our smart cards and our AP stuff because we're in the CFO office. And as you know, we moved the branding so it makes more sense now. One company is coming in with a full line. So I would say that it's the marketing challenge in front of us. We've got the stuff to have an integrated pack. And now between the brand and educating sales guys and the market, I think we're going to sell way more of the package stuff as we move forward here.

Okay. Okay. Timing-wise, Ron, and then I actually do have a quick follow-up for Alyssa, if that's okay, on the revenue growth rate. Maybe I'll just throw it in now, which is when we look at the cadence on revenue growth trends, I know there's some seasonality to it, but, you know, again, you're coming off of this 7% rate. Obviously, there were those one-time items that you called out last year's quarter. Just to make sure, there's no – Do you see any other kind of impediments to that growth rate this year beyond macro in terms of one-time items that we have to grow over or anything else, or is that, do you see that being pretty clean for a macro adjusted basis?

Yeah, I mean, I would expect that short of the macro adjustments we make always for organic revenue growth, which neutralizes those items, that we wouldn't expect anything meaningful. Other than as we've perhaps called out in the same quarter prior year, so I would encourage you to look back at those notes, but No, I mean, I think that we, other than as we've spoken to the micro SMB customer segment in our fuel business, I think that's going to be the only item to speak of.

Yeah, the guide, Darren, today, it's Veronica, and the guide is, you know, 10 and 12, right? We're guiding kind of 10% organic at the midpoint and add a couple of points for the role of the acquisitions of the print at 12. Yep. That's what we're sitting here telling you. That's what we're chasing. That's the number.

Understood. Thanks, guys.

Good to talk to you.

And our next question will come from Tinjin Huang with JP Morgan. Please go ahead.

Thank you so much. Good to chat. I wanted to ask on the margin outlook. I think you mentioned up 150 bps, Ron. So I think 90 days ago you previewed 200 to 300 bps. So I'm curious what's changed in the Last 90 days, is it more about investing or changes in thinking around cost, things like that, or mix?

Yeah, good question, Tingen. So, yeah, the plan that we've landed is, I guess, 150 full year in Q4, 200. And the short answer is, we, I just decided to spend more money on the acquired businesses. So if you look at our core OpEx, so kick out all the 22 acquisitions we did, it's below 5%. I think it's literally 3% or 4%. But the pile of acquisitions, we're spending another, I don't know, $70 or $80 million incremental year over year. And so a bunch of those are diluted things. They're EV things. They're, you know, one-time things to integrate like global reach, their sales investments and stuff. And so that was the call. The call was really to make sure that we gave enough oxygen to these sets of new assets that we just got so that we can get a return on them. And since we could kind of make all the numbers work, you know, we start with the design. We start with, you know, what's the goal and then work our way around it. So I felt like we kind of, you know, made the number we want, kind of 10 and 12 on the top, you know, sales in the high teens, kind of where we guided to, even DA growth of 15%, so growing obviously, you know, operating earnings faster. So it kind of fit into the envelope, so we made the call to do it.

Gotcha. No, I trust that's the right investment to make. Then just as my quick follow-up, then on your appetite to do deals, I know I always ask you this, Ron, but just from a deals perspective, how does the pipeline look? I know you have a lot going on. You're spending more on acquired assets, including in EVs. Is there more to do? in the short run, or could we see a little bit of a pause from a deal-making standpoint?

Yeah, you certainly know us well. We are never without some kind of pipeline. So, yeah, we had deals. I'd say there's kind of, in my mind, a little bit of good and bad on the deal front. I think the good is I really am seeing some reset on the valuation side, right? Prices have been down longer. I think people that were waiting, you know, have waited longer. They're not seeing the bids. People aren't hitting the, you know, the bids they're looking for, the apps they're looking for. The bad is obviously the cost of capital. So it raises, you know, your confidence in your thesis, right, to pull the trigger to make sure we're generating the right kind of returns. So I'd say there's, you know, a little bit of tension between those. So better maybe valuation outlook but a bit higher cost of capital. But look, we've always, as you know, not been a financial buyer of things where we just buy it and absorb it. We've always had some view of how to double profit. So again, we have things in the pipeline that we like, that we think we can make returns on, and if we can, we will. We'll pull Twitter on it. I'd say we're probably, back to capital allocation, less excited about buybacks sitting here again given the cost of capital, the increase in at least short term, maybe longer term is okay, but short term isn't quite as attractive. Indeed, levering, frankly, is a bit crazy more attractive given the spreads are wider between deposit rates and borrowing rates. So I'd say that some of these changes is affecting a bit how we're thinking about, what's it, $1.3 billion, Alyssa? $1.3 billion is the planned attention. So I'd say my first and foremost is all these deals that we can then go make returns on.

Okay.

It's clear.

Grateful for your thoughts.

And our next question will come from Ramsey LSL with Barclays. Please go ahead.

Thanks so much for taking my question. I wanted to follow up on your response to Darren's question earlier about having all the ingredients in place within corporate payments to kind of realize that sort of power. My question is actually broader across the entire enterprise and maybe all the segments within the segments. Are you now kind of organizationally, technologically well-positioned for cross-selling, or are there still initiatives and capabilities and linkages that need to be made in order to kind of unlock the synergy potential in the broader enterprise?

Hey, Ramsey, it's Ron.

It's a super, super good question. I'd say we're out ahead on the synergy and relatedness in corporate payments. And the primary reason is it's a middle market business. So whenever you go to a client that's got 200, you know, 200 to 300 million in revenue, it has more needs, right? It does more things. Obviously, it's got a lot of AP, right? If it's got 200 to 300 million in revenue, it's obviously got a lot of employees probably running around, you know, in vehicles. And so you'll see us selling fleet cars, for example, to our corporate payment clients. And Fuel runs 10% to 12% of all the spend volume among our middle market corporate payment clients, which I guess wouldn't be shocking. So in that area, I would say for sure, there will be a broad package of services that will all be sold into the same client. As you move into the SMB thing, I think we're going to move organizationally towards a more integrated model, like you're saying, because the tech, I think, frankly, is ahead of our org. And so we're looking at starting to consolidate the vehicle-related purchases. So if you're sitting in a car and you buy... fuel, or you recharge on EB, or you pay for a toll, or you go into a parking spot, whatever, all of those, even 92% of our lodging clients drive a company vehicle, you know, the tree cutting truck to the actual hotel. So we're in the business mostly of vehicles, company vehicles running around and us helping make the payments. And so that's a way more super-related than what we've talked about before, as though they're discrete things. And so you'll see us start to move organizationally more to looking at that set of solutions as vehicle-related payments, and then the corporate payments, again, as a thing for the middle market.

That was super helpful. It makes a ton of sense. A quick follow-up from me. I think on the 2023 budget, you were able to call out in the course of the call a segment-specific expectation for corporate payments. And I think Alyssa mentioned something for tolls and fuel. Would you mind rounding that out and just giving us your expectations for lodging and if applicable gifts for the year, just for sort of modeling purposes?

Yeah, sure. So, again, at the midpoint it would be 10 overall. So fleet kind of mid-single but weaker first half. strong or second half. Lodging in Brazil, mid-teens, maybe a smidge below 15, a smidge above. And corporate payments, even with the channel in it, I'm going to give a number, probably 20, you know, maybe north of 20 and obviously way north of 20 if you kick out the channel. So that's the mix that rounds to 10. And again, you guys have heard this before, you know, we're super thoughtful on the design. When we saw the super micro segment weekend, we just literally reallocated. We just said, okay, I'm going to pour in terms of marketing and sales investment more into the middle market. You know, that Darren brought up earlier that has, you know, not many, certainly not as many macro kind of risks and basically just kind of, you know, tread water a little bit until we see more about how this, you know, micro and SMB segment plays out this year. So we're kind of de-risking the plan a bit, I tell you.

Fantastic. Thanks, Ron. Appreciate it.

And our next question will come from Shareek Sumar with Evercore ISI. Please go ahead.

Hey, thanks a lot for taking my question. I have a question on the 2023 outlook. especially on the share count, it says $75 million for the full year. Does that assume any sort of buybacks throughout the year or it does not? And if it does not, then would there be more upside to the EPS, assuming that you accelerate the buyback throughout the year?

Hey, Sherika. It's Alyssa. That's a good question. On share count, I'll first say in our guidance, we never include the impact of potential buybacks because we see it similar to a capital allocation decision, like an acquisition or a divestiture. We're going to hold those decisions until they make sense. And so we do not build that into guidance. And then I guess in terms of the share count as we run in, the number you see that we presented in our assumptions is consistent with what we expect for the rest of the year.

And what we printed for Q3 and Q4, correct?

And fairly aligned with where you saw us coming out of Q3 and what you can now see in the Q4 number.

Yes, Sheree, it's Ron. Our default is always just de-levering, right? We plan to generate $1.3 billion of free cash flow, and our models assume that we just, you know, reduce debt, you know, as we run through the year. And then to the extent that we take money to do a buyback in Q2, we'll update the guidance to reflect that different use of capital.

Thank you so much.

And our next question will come from Jeff Cantwell with Wells Fargo. Please go ahead.

Hey, thanks, and congrats on the results.

Ron, this is a follow-up on Darren's question earlier. In your prepared remarks, you said that in 2022 you added an AP automation software front end to your whole AP execution business, and we all know what that is, what you've been doing there. So my question is, what does that mean – that your execution there on the front end going forward would impact others that you've been partnering with over the years in any way? Does that mean that you're trying to capture those volumes on the front end? Can you just help us understand the strategy there and how to think about that going forward? Thanks.

Jeff, I'm not positive on picking up the question. Can you just rephrase it for me?

Yeah, so we've been, you know, watching what you did with Roger and Corte, and we know that you have Comdata as well. So we're trying to figure out if there's some, you know, competitive angle to what you're doing on the front end as you start to bring that into, you know, the picture with how you're going to market with SMBs.

Okay. Yeah, there's clearly a competitive angle.

I think, you know, historically... standalone AP automation software companies sold AP automation software. Knock, knock. I've got software that simplifies your processes, automates approvals, digitizes stuff so you don't lose it. Hey, that's what we do. And then knock, knock. A bank said, hi, I can help you actually execute electronic payments for you or cross-border payments. And so, you know, the idea we've been at a long time is, well, let's do both, which we've connected them already, obviously. So, hey, knock, knock, we can help you, you know, make the process work better in your company and save you time and reduce risk. And B, we'll pay, you know, all the different ways, every modality. We'll execute it all. You don't need to call your bank or FX specialist or your, printing company to print out paper checks will do the whole thing. So we think that it's a huge advantage to have that package to provide more value to clients. It seemingly early on generates more leads because historically people have been interested in both sides of that thing. And I think we're not the biggest. We've got to be one of the biggest non-bank you know, full AP payers already. So I think it is a pretty big advantage for us going forward.

Got it. Okay, great. And just one of the – just on Bob's question earlier, you know, on EV, and, you know, I guess the question is just the framework for you is, you know, you're a $16 billion market cap company and you're generating the original $3.8 billion in annual revenues coming here. So can you just remind us, can you cite that revenue opportunity for us to maybe call it, you know, two, three, five years out? We're all just trying to figure out this substitution effect and, you know, incremental revenue impacts, et cetera, et cetera. So how would you frame that as we think about our models? Thanks.

Yeah, that's another super good question. So first off, it's obviously a long time out. But the first thing I'd say is, you know, on the defensive side, so on the commercial fleet side, the opportunity is the size of our whole business, right? If you went 40 years into the future and we've got a, what, a $1.5 billion revenue global fleet business, the hope is if we replaced the business 50 years from the day everything was EV, we'd have a $1.5 billion business plus however we've grown between now and then. But for us, I think the bigger opportunity that's nearer in is this consumer lighter vehicle thing that we're going to get to through the EV car makers and through the new gas station operators that are called charge point operators. So the big part of our strategy that we're spending money on is going offensive and chasing two new segments that aren't any part of our business today. that we think are going to show up sooner because the vehicles work better, right? The light vehicles. So that's, I mean, again, it's just a function of adoption. That's a massive, obviously, right? It's every vehicle that's not a commercial fleet, you're into there in terms of the TAM. So it's a massive, massive business. And I think I've said repeatedly, our strategy in the thing is to be the network guy. You know, our company is built on proprietary networks that have unique data that we pick up and then the volume that we have that creates better economics and our idea is the same. We're going to put together EV acceptance networks where we collect data that's interesting to clients like what kind of chargers are there? Is the charger open now if I drive there? And we think that providing that in some simple way is going to be super interesting and we've got five or ten already big EV car makers using our software and our network to try to reduce, you know, charge anxiety, right, of new buyers. So it's massive. The question is just when, how long, right, before either side, either the commercial side or the consumer side, you know, gets big.

Okay, great. That's super helpful. Thanks so much, and congrats again.

Thank you.

Cool. Hey, Pete, can you hear us?

Hello?

Yeah, Pete, we can hear you.

Oh, okay. Sorry about that. I didn't hear the intro. Thanks for the question. I appreciate that cleanup here. I just want to dig into the fuel card business a little bit. Given some of the pockets, the weakness that you've called out on the credit side, Ron, are you going to sell any differently in 23? How are you augmenting your sales strategy there? And then as a follow-up, on the partner side of the fuel card business, just wondering if you could share any color on RFP activity or if there's any major contract renewals coming up, any help would be great there. Thanks.

You got it, pal. So on the first part of the question, hey, what are we doing for selling in 2023, the answer is yes. There will be some different things. So the first thing we've done, which we're about 90 days into, is we're repointing our digital machine and algorithm to larger accounts. So the guy that runs our digital sales business tweaked the models effectively to point at what I would call larger and more credit-worthy accounts. So you'll see that for sure. Our sales size of new accounts will go up starting here in Q1 versus Q4. So that point one will modify the targeting of our digital engines. And then number two is I've moved dollars. We've reallocated dollars to the corporate payments business. So it just said, okay, I'm not going to grow sales investment or sales as much in a space that has potentially more macro risk. We're going to earmark it at least here in 2023 into the middle market that we have, you know, there's more stability, if you will, in the macro. So those are really the two things we're doing selling-wise, and again, it's pretty small. It's a pile of bad debt, this micro, super-duper new thing, but it's not big, per se, right, against the total business, right, the total revenue. So anyway, that's a set point. On the second one, there's not much. I'd say it's pretty quiet. Us and the other people that play the game have a lot of long-term contracts, both here and in Europe, so there's really nothing on the radar I'd say significant that we're looking at in 2023. Thank you, Donald.

And our next question will come from Nick Cremo with Credit Suite.

Please go ahead. Hey, good afternoon. Thanks for taking my question. I just wanted to touch back on the fuel segment first. How did the same store sales come in across the various parts of that business in the quarter? And just looking to 2023, what parts of the fuel business gives you confidence this segment can re-accelerate in the back half, given the deceleration we've seen in the last few quarters? Thanks.

Yeah, so, hey, Nick, it's Alyssa. It's a good question. Make sure I got all your questions. I think you're asking how does same-store sales look and how are we outlooking?

No, how would you get to the re-acceleration? Oh, re-acceleration.

So, yeah, so... For same-store sales, I would say we always say that same-store sales short of a massive easy comp is usually in the minus one to plus one range. And I would say that we did see it soften just a little bit more than that in the fourth quarter to minus two. But as we look into reacceleration, it really is just retweaking the engine as we head into 23, repointing that digital engine to higher credit quality customers and then just refocusing the entire sales engine across the board to target those healthier customer bases and segments.

Let me make sure, Nick, you're clear that we pull this trigger. We're super conscious that the health of these super-duper small accounts was deteriorating, so we said, okay, let's stop selling to them, so stop, and then repoint the thing, and then second, because their delinquency was up, it creates more involuntary attrition, so it creates volume, softness, too. So basically both of those things happen, right? We're not going to keep the spigot open. We're tightening terms if you look, you know, shaky. And so we did it to make sure that a small little tiny part of our business didn't turn into a bigger problem. So we went right with our eyes wide open doing this thing. And so the answer is we've been for 90 days repointing the thing to bigger fuel accounts and then moving money to the mid-market. So we're happy. There's nothing wrong. We're not worried about the thing. Again, our plan is to have more of it in the second half. I think if it's 5%, it'll be 2 and 7 or something, like first half, second half. But I want you to hear it. We made the decisions to do both of these things, precautionary, reasons and not get run over later.

Understood. Thanks for all the incremental help.

You got it.

And our next question will come from Andrew Jeffrey with True Security.

Please go ahead. Hey, guys. Thanks for taking the question. This is Julian on for Andrew. So I have a quick modeling one and then kind of more general one. So is the lodging business like normalized growth rate, how we think about that, like high teens to 20%? Is that the right way to think about that?

Yeah, 15 to 20.

Longer? 15 to 20. 15 to 20? Okay, got it. Thank you very much. And then, you know, I know you said you're off the block on EV. Obviously, airline did really well this quarter, 38% up. Is there anything there kind of maybe, I know that you had an in-house prior option, Any updates there? Like, is that something in the pipeline in terms of deals that you're seeing? Like, are you looking to expand there? Kind of elaborate on that a little bit.

Yeah, just really a couple comments, I think, on the airline growth. So one of it is just, you know, continued recovery, right? The airline was super down, so I think there's still some, you know, quote, long-tail COVID recovery. And still, technically, sitting here today, we still don't have Asia back. There's still more to come if the Asia, you know, volume picks back up. But I think the new things that we've done, you know, we bought a company a year ago that's really working. Like I mentioned, we, you know, won a couple of accounts that we had where we put this app in to speed, you know, to stress people right to their hotels instead of queuing up at the lines. Well, now we've added, sold the first contract, which you'll see in the forward numbers, for basically rebooking simultaneously with the lodging. So your plane gets canceled, you know, here in Atlanta tonight. First you've got to find a place to sleep, and then you've got to figure out how to go. Well, let's say you're on, you know, Air Canada, and it doesn't have any flights or any flights available. Our tech basically looks... and books you on other airlines, literally as you're walking off the plane, you're getting a hotel and getting rebooked. So the customer sat that the airlines are getting from having less unhappy people when they get off a plane, I think this is going to become table things. That a couple airlines see the couple that are picking this thing from us early, that this thing, we could literally run the table on this. So this is an example of bringing kind of some tech to kind of an old-fashioned problem, and it's working.

Got it. Thank you. I never speak one more, and could you talk maybe a little bit about your digital marketing, how that's coming along, maybe any recent examples of success there?

Yeah, I mean, other than the micro thing, I think the answer is it's representing the Obviously, in every business, a larger and larger piece, for example, lodging, which we just talked about, I think it's up now about 15% of the sales in that line of business. It was probably 5% two or three years ago. It's taking a way bigger chunk of the marketing leads. We used to do old-fashioned trade shows for middle markets and things like that. So I'd say that not only are digital sales that we close on compounding a good rate, but I think the lead sources from digital are also way up. Again, a lot of this is the world, right? We're just chasing along with the world, making sure that we're in the right places.

Got it.

Thank you very much. And our next question will come from Trevor Williams with Jeffrey. Please go ahead.

Great. Thanks. Good afternoon. I guess with Global Reach now closed, just wanted to see if you could give us an update on the revenue mix within corporate payments between FX, cross-border, virtual card, full AP, and then within the 20% growth outlook for the year. Just any sense for which of those buckets you expect to be the primary contributors. I know this is a really good FX year with elevated currency vol. So just kind of how you're thinking of the moving pieces within the segment for 23. Thanks.

Yeah, Trevor, this is Jim. I mean, the best way to think about it, you know, is that cross-border is probably going to be closer to 65%. You know, we'll call it 25% direct and then 10% channel. 64? Yeah. So all-in, cross-border, 60. Domestic corporate payments, 40. So they're going to move around a little bit.

I mean, your question is a good one, Trevor, in terms of the growth thing, having, you know, markets that are pacing interest rate moves differently, right? Like Brazil got out super early, and then I guess we, the U.S., got out, and now Europe is chasing. So having different timing and differential in the rates obviously creates FX volatility. So that obviously is helpful running here into the beginning of 23. Okay. But all the pieces are working, right? To get to an aggregate number, we're giving you, hey, look, we're looking just a year from today at 20% revenue growth organic plus office of the print would be way higher because we're adding this deal. Clearly, most everything, Trevor, has to be working. I'm telling you that the channel, which is a pretty small piece, less than 10% probably, is going backwards. So everything else has got to be somewhere in the low to mid-20s to get the entire thing to be 20%. So I don't want to sound too cocky on it, but it's like all working. We're just selling a lot. Retention is super great, you know, in those sets of businesses. Obviously, spend is growing in the middle market, right, as smaller companies fall. There are obviously bigger companies, like in trucking and other areas, are picking it up. So I think the message to you guys is, and our product line is better and more complete, I just think that this business is kind of coming into – it's really coming into its own now for us. And it's big finally, right? It's going to surpass a billion dollars, and it was – I don't know what it was, but a billion dollars a few years ago. So it's become a sizable thing now for the company.

Yeah, that's great. And just one more on corporate pay. Corporate pay won, I think, last year. Any update you can give us there? I think last year you were talking – about taking more of a measured approach with some of the migrations, but just any update on progress there or just overall strategic thinking on your plan for it over the next couple of years and the cross-sell opportunity. Thanks.

Yeah, so that one is really still a work in process because the core business is middle market. You know, say this is an ACOR, but this is a pretty small part, and so When we took a swing and miss at the cross sell, I did. We did not a super smart thing. We've really said, okay, how do we get the product to be right for the seam? And how do we get the distribution to be right for the seam? So what we've concluded is we are not going to chase super duper small accounts that don't have much AP that are at the very bottom. And so we're really kind of retooling the product and distribution to be up market a bit, so still below middle market, but kind of off of the floor. And particularly given, you know, what we're seeing and hearing in the marketplace, that seems like the right call to have not rushed into, like, you know, super micro kind of AP accounts. So we'll report more. I'd say it hasn't been our highest priority since we did the swing and the miss, you know, on the cross sell, but we are continuing to work it.

Okay, got it. Thank you.

And we've reached the allotted time for questions today, so we'd like to thank you for attending today's presentation. This will conclude the question and answer session. You may now disconnect your lines at this time. Thank you. Thank you. Thank you. Thank you. Thank you. you Good afternoon and welcome to the Fleet Core Technologies, Inc. fourth quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one. Please note that this event is being recorded. I would now like to turn the conference over to Jim Eglesetter, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2022 earnings call. With me today are Ron Clark, our chairman and CEO, and Alyssa Vickery, our interim CFO. Following the prepared comments, the operator will announce that the queue will open for the Q&A session. It is only then that you can get in line for questions. Please note, our earnings release and supplement can be found under the investor relations section of our website at fleecore.com. Now, throughout this call, we will be covering organic revenue growth. And as a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices, and fuel spreads. It also includes pro forma results for acquisitions closed during the two years being compared. We will also be covering non-GAAP financial metrics, including revenues, net income, and net income per dilute share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than that at other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website. 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 outlook, new products, and 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 undertake no 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 Exchange Commission. These documents are available on our website and at sec.gov. So 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 appreciate you joining our Q4 2022 earnings call. At the top here, I'll plan to cover four subjects. So first, I'll provide my take on our Q4 results. Second, I'll recap our full year 2022 performance. Third, I'll share our initial 2023 guidance. And then lastly, I'll update you on a few of the key priorities that we're working. Okay, let me make the turn to our Q4 results, which exceeded the top end of our guidance range, so better than we expected. We reported revenue of $884 million. That's up 10%. And cash EPS of $404. That's up 9%. Our cash EPS was helped. in the quarter by our Brazil Tax Happy, which did lower our Q4 overall tax rate. Organic revenue growth coming in at 7% overall. Inside of that, our corporate payments business, super good, growing 20% in the quarter. Against the prior year, our Q4 organic revenue growth was negatively impacted by about, I don't know, 20 to 25 million of one-time revenues sitting in Q4 of 21. So that reduced organic revenue growth by about 2 to 3% in Q4. We do expect Q1 2023 organic growth to return to the 9 to 10% range. Cash EPS in the quarter pressured by both higher bad debts and significantly higher interest expense and as a result of the rising delinquencies we're seeing in our US fuel business, we did make the decision in Q4 to slow what we call our new micro digital sales, so our very smallest account. We also began tightening terms of our existing SMB account. Both of those things really a cautionary move to try to control bad debt expense here in 2023. Fortunately, our credit risk is really narrowly concentrated in what we call these very small micro-accounts and also in our newest vintages, you know, think 12 to 24 months. So really impacts a pretty small portion of our overall business. Turning to the trends, fundamentals in the quarter, quite good. Same stores finished plus two for the quarter. Retention remaining steady at 92% and sales grew 19% in the quarter despite our decision to, again, to slow the micro sales and fuel. So, look, all in all, you know, a bit better finish than we had expected and continuing strong trends helping us here as we roll into 23. Okay, let me turn to our full year 2022 performance along with the progress that we made to better position the company for the midterms. So for the full year 2022, we reported revenue of 3.4 billion, that's up 21%, and up almost 600 million over 2021. Cash EPS is 1610, that's up 22% versus prior year, and a full 85 cents ahead of our initial 2022 guidance. Full-year organic revenue growth of 13%. Full-year sales or new bookings growth of 21%. And we closed five capability acquisitions if you include the GRG deal on January 1. So really good, really outstanding performance against the primary objectives that we set. So in addition to the financial goals, we really did advance pretty meaningfully our beyond strategy in 22, in which we extend either or both the product set of the business or the customer segment that we serve. This is helpful, obviously, because it grows the TAM and obviously better positions the business for long-term growth. So just a few of our beyond highlights for 2022. So in global fleet, significant progress on our EV capabilities. We acquired a European public charging network. We've got mapping and payment applications. We've got at-home charging software. And we've integrated all that to our ICE fueling solution. So great progress there. In corporate payments, we added an AP automation software front end. to our full AP payment execution business, which is the company's fastest growing business, so super delighted with that. In lodging, we've gone beyond our workforce, core workforce business to two new verticals, the airline vertical and the insurance vertical, each of those reaching almost $100 million in revenue in 22. And then finally in Brazil, we keep expanding our TAG fueling solution. We've gone to even more accepting sites now and more users. And I think exiting Q4 reached about 10 million annualized transactions. So look, the combo in 22 of really good financial performance and what I'd call significant strategic progress. So we're quite pleased. All right, let me shift gears and make the turn to our 2023 outlook. We've worked hard to build a plan to meet our most important objectives in what is a challenging environment. So here is our 2023 guidance at the midpoint. So revenue of $3,825,000,000, that would be up 12% or approximately $400,000,000. EBITDA of $2.25 billion. That reflects up 15% or up about $260 million. And then cash EPS of $17 at the midpoint. That would reflect up 6%. We're certainly outlooking a pretty unfavorable macro environment this year with a smidge lower fuel price and significantly higher interest rate. So those two things are expected to reduce our 2023 cash EPS by about $1.75, implying we'd be giving an 1875 cash EPS guide in kind of an apples-to-apples environment. Our 2023 plan does set out a number of pretty important objectives to deliver organic growth, 10% plus, to grow new sales, 15% plus, and to diet or control our operating expenses with a plan to expand margins about 150 basis points for the full year and 200 basis points exiting 2023. Major assumptions underlying our 2023 guidance are first, that our 2022 acquisitions will add about 2% to 3% to our 2023 print revenue growth. This 23 guidance does include Russia and will until we have certainty of the divestiture. Guidance assumes that we can manage bad debt equal to the 2022 level, although we do think it will be more elevated in the first half and the second half. And then finally, we have not assumed a U.S. or global recession, but rather built our 23 plan in volumes really just based on what we can see and projected from there. Our confidence in this 23 planner outlook is bolstered by a few things. First, we've now seen our 22 finish good, better than we thought. We closed the global reach cross-border deal, so that's in our numbers. We've made expense cuts already, so those are behind us. we're seeing some recent improvement, slight, but improvement in both fuel price and FX trends. We just recently implemented two interest rate swaps that will lower our 2023 interest expense and obviously fix rates. And then lastly, we qualified for Brazil Tax Happy that will slightly lower our 2023 consolidated tax rates a bit better than our earlier expectations. Okay, let me transition to my last subject, which is an update on some of our important priorities. So Russia, let me start out with Russia. So making good progress on the sale of our Russia business. We've had lots of interest, a number of parties that have bid for the asset, and we've recently moved a select group of buyers potential buyers into the diligence phase. Timing is probably somewhere late Q2 and at this point our plan would be to use the Russia sale proceeds to buy back FLT stock. If we did that with kind of a mid-year close, we're looking at about 30 to 35 cents of in-year cash EPS dilution. Okay, let me turn next to the FTC matter, appears to be finally in the home stretch. We're at a point now where we do expect the court to issue an order, likely here sometime in Q1, detailing incremental processes and disclosures that we'll need to implement. So obviously once clear, we'll move quickly to implement those things, although we will We will require some time. I mean, just as a reminder, the disclosure enhancements and process changes that we have voluntarily made over the last few years have not had a material impact on our financial performance, nor do we believe that this court order will have a material impact on our financial performance going forward. So last up, EV, again, you know, really good progress on that initiative. So in the UK, we're now in market with what we call our three-in-one EV solution for commercial fleet clients. So in this case, it includes a UK public EV charging network, at-home charging software, and of course, traditional ICE fueling, all of those integrated into one. And I think we've got about 1,000 of our UK commercial fleet clients using the solution. So doing well there. Additionally, we're in the market in continental Europe with an EV solution really for new customer segments, so beyond commercial fleet. So the new segments would include EV car manufacturers, charge point operators, you know, even EV drivers. And fortunately, we are seeing adoption by all three of those customer segments, which for us is clearly all incremental to our fleet payment business. So, look, the goal, again, is to be a big, a major player in this EV transition. And I do want to report, you know, we are officially out of the blocks. Okay, so in closing, again, we finished today. 2022, pretty well. Again, positive sales and retention trends. That obviously helps the setup for this year. 22 full-year financial performance, you know, super good. 21% and 22% top and bottom line, you know, way ahead of the initial guide. Again, we've advanced last year a number of important beyond ideas. That supports the future growth of the company. Our outlook for 23, we think positive. Outlooking double-digit revenue expectations, you know, improving operating margins in EBITDA, although our absolute profits for sure will be weighed down by the interest rate spike. We do expect to clear our Russia and FTC overhang here in the first half. At the same time, we're going to continue to stake out our position in the new EV world. Again, big opportunity for us. And lastly, our midterm objectives remain intact. We want to grow cash EPS in the 15% to 20% range once we lap the 2023 interest expense headwinds. So with that, let me turn the call back over to Alyssa to provide a bit more detail on the quarter. Alyssa?

Thanks, Ron. First, the financial details. As mentioned, we posted 10% growth in revenue in the quarter, driven by 7% organic growth, or $57 million, which I'll delve into in a moment. The remaining percentages came from 20 million of macro tailwinds and 4 million from acquisitions made over the past year. Organic revenue growth was negatively affected by the impact of one-off items not expected to repeat from the fourth quarter of 2021, including breakage, backlogged card orders, accounting true-ups in the normal course, and acquisition accruals. We expect 2023 organic revenue growth to meet our double-digit targets. Corporate payments average revenue growth was 20%, driven by continued strong new sales across both direct and cross-border. Specifically, our direct corporate payments business grew 27% and continues to demonstrate very robust growth. Cross-border was up 24%, another very good quarter, as new sales remained strong. Activity levels were robust across nearly all geographies, and we completed the full tech integration of AFEX into our cross-border platforms. Lodging continued to perform well, up 14%. While we've largely lapped the airline COVID recovery benefit, the airline business was still up 38% in the quarter. The suite of services we've bought into this business substantially enlarges the TAM and durability of our lodging growth profile over the medium term. Fuel was up organically 2%, with growth in international fuel largely offset by softness in our U.S. micro-SMB customer segment. And by micro, we mean companies with less than five vehicles, so the smallest of the small. The economic cost of higher fuel prices, inflation, and in the case of micro-SMB trucking, lower spot rates, have negatively affected their ability to manage expenses, including their fuel bills, which has resulted in higher bad debt. We've also seen some negative mix shift among that micro trucking segment as higher margin independent trucking volume is moving to lower margin volume as those drivers move to the larger contract carriers. This micro segment generated more than 75% of our U.S. fuel bad debt losses in both the fourth quarter and full year 2022, fully filling the brunt of these economic headwinds. Given the higher loss rates of the micro client segment that we are experiencing, We have significantly tightened credit approval standards in a purposefully targeted and narrow way in order to get ahead of any further stress in this micro segment. The result was a drag on organic fuel growth in the quarter. We are taking a balanced approach to new customer demand gen activities, prioritizing customer segments and industries that are healthier to drive fuel growth in 2023, all while limiting our bad debt exposure. We will continue to feel the residual effect of tighter credit and higher losses in that micro segment in the first half of 2023, but would expect to clear this overhang and return to normalized fuel growth rates in the back half of the year. This will likely cause 2023 fuel organic growth to be at the low end of our normal range. Tolls was up 6% compared with last year, as the impact of strong new sales was masked by almost $5 million of non-recurring revenue in the fourth quarter of last year. Toll sales were strong in the current quarter, recovering from softer sales mid-year and helping offset some of the prior year one-time benefit impact. We expect tolls to return to its low to mid-teens growth rate in 2023. We've made great progress building out the Beyond Toll network and now have over 5,400 Beyond Toll locations, including 2,200 fueling stations, 2,300 parking lots, 750 drive-thrus, and 150 car washes that accept our tag. As an additional service to our customers, we are a reseller of insurance from other companies to our more than 6 million tag holders in Brazil, for whom we have negotiated preferential pricing. This insurance offering is growing quite fast. We sold more than 58,000 insurance policies in the quarter. We also signed up Santander as a toll distribution partner, which is the fifth largest bank in the country. All in all, we're very bullish on the outlook for our Brazil business. Gift organic growth in Q4 was down 11% over prior year Q4, as the card orders that pulled forward in the last two quarters and in Q4 prior year did not repeat. Due to the lumpy nature of card orders between quarters, it is best to look at full-year gift organic growth, which was 11%, as the newer online card sales programs and the B2B program have improved the growth of that business. Looking further down the income statement, Operating expenses of $514 million represented an increase over prior Q4, primarily due to recent acquisitions, higher bad debt, and volume-related increases. We did recognize $5 million in expense associated with reductions to staffing levels and the termination of office-based leases as we adjusted our expense base for the current challenging environment. We will continue to manage our expenses with a very close eye on our outlook. Bad debt expense was $41 million, or nine basis points. consistent with the third quarter 2022 level. I've already talked about what we're doing to manage this, but suffice it to say, we're very focused on it. Moving below the line, interest expense was $74 million for the quarter, up 168% over the prior Q4, and $165 million for the full year, up 45%. These increases were driven by higher reference rates on our floating rate debt, as well as incremental borrowings for share repurchases and acquisitions. Our effective tax rate for the quarter was 24.2% versus 25.6% last year and lower than our guidance. The primary driver was the impact of a pandemic-related tax benefit election in Brazil realized for 2022 in the quarter. Now turning to the balance sheet. We ended the quarter with over $1.4 billion in unrestricted cash and approximately $600 million available on our revolver. There was $5.7 billion outstanding on our credit facilities and we had $1.3 billion borrowed on our securitization facility. As a reminder, earlier in the year, we upsized and extended our credit facility by approximately $500 million and extended the maturity through June 2027 at quite attractive rates. As of December 30th, our leverage ratio was 2.8 times trailing 12-month adjusted EBTA, as calculated in accordance with our credit agreement. Our capital allocation was once again balanced in 2022. In the quarter, we repurchased roughly 600,000 shares at an average price of $188 per share. In total, we repurchased about 6.2 million shares during 2022 for $1.4 billion. Our guidance for share count for 2023 is 5 million shares lower than what we guided to a year ago. In total, we've bought back 11.7 million shares over the last two years. We still have over 1.2 billion authorized for future repurchases. In 2022, we spent $217 million on acquisitions and minority investments, excluding Global Reach on January 1, 2023, solidifying our positions in EV, corporate payments, and lodging. Now let me share some thoughts on our Q1 outlook and our full-year assumptions. Looking ahead, we're expecting Q1 2023 revenue to be between $875 million and $890 million, and adjusted net income per share to be between $3.55 and $3.75. This is largely due to revenue seasonality, where certain businesses such as fuel, lodging, and tolls tend to have lighter first quarters due to weather and holidays. As such, the first quarter tends to be the lowest in terms of both revenue and profit for our company. We have a bit of a preview for the first few weeks of the year, and we are tracking to the guidance we are providing. Of note for the full year 2023, We anticipate managing bad debt flat to the 2022 levels, expecting it will be higher in the first half of the year and then improve into the second half. We expect 2023 net interest expense to be between $312 million and $332 million based on the forward curve as of February 1st, 2023, which implies reference rates will peak sometime during the third quarter of 2023. As we disclosed in the earnings release, and you can see on slides 21 and 22 of our supplement, we entered into a series of interest rate swap agreements to fix rates on approximately $1.5 billion of our floating rate debt. These swaps will provide some relief on our 2023 rate and help limit the downside risk from further rising interest rates. The inverted forward rate curve enabled us to reduce 2023 interest expense by locking in lower future rates over a three-year period. With these new swaps, along with our previous outstanding swaps, We now have fixed interest rates on a total of 2 billion of our variable rate debt for most of 2023. Last week, we also entered into a Euro cross currency swap to benefit from the lower Euro interest rates with an implied interest savings of 1.96% on 500 million of notional debt. With these various swaps, we have now managed interest rate and FX risk on 2.5 billion, or 47% of our debt, excluding the securitization. We believe these actions will help mitigate the risk associated with continued increasing interest rates in 2023 we estimate these swaps to reduce interest expense by approximately $35 million in 2023. And finally, our tax rate in 2023 is expected to be slightly higher between 26 and 27% as the continued benefit from the Brazil tax holiday is more than offset by higher tax rates in the UK. as the UK statutory tax rate increases from 19% to 25% in April of 2023. The rest of our assumptions can be found in our press release and supplement. As I complete my prepared remarks, I would like to extend our gratitude to our more than 10,000 employees around the world who helped us deliver such a strong finish to a great year and who will be the driving force to an even greater height throughout 23. Thank you for your interest in our company, and now, operator, we'd like to open the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we will pause momentarily for the first question. And our first question today will come from Sanjay Sakharani with KBW. Please go ahead.

Thank you. Ron, you talked a little bit about this rising delinquencies among the micro SMEs. I'm just curious, was that fairly contained inside of fuel or the fleet business, or were there any other weakness among the SMEs? And I'm just curious if you think that this might be a leading indicator of more things to come if you go upmarket. I know you guys haven't assumed any additional macro pressures and such.

Yeah, it's a good question, Sanjay. Yes, is the short answer, the fuel business, and really the U.S. fuel business because the terms and the way we collect money and bill internationally is fundamentally different. The terms, we pull all the money, et cetera. So, yeah, the only place that we've seen the micro, and again, we're talking super-duper small, mostly one- and two-card accounts, and super-duper new on the books, again, a year or two, that portion of the overall sale is about 75% of the credit losses. So although the credit losses from that group are sizable, the amount of business from that group is not super sizable. So yeah, that's the only place we're seeing it. And in fact, when we study the cohorts that are a bit larger or more mature, longer on the books, It's super rateable with the trailing, you know, 12 to 24 months. So it's super-duper pocketed for some reason.

And you don't think it's a leading indicator or anything, like historically?

Yeah, I mean, look, you guys get this as good as mine. We've been talking about, you know, macro and recession for six months now, and we study and look everywhere, and we just don't see it. We don't see it in volumes. We don't see it in sales. this is the one place where it showed up and it started, I don't know, call it maybe six months ago, kind of September, October, we saw the delinquency start to step up. So my personal view is that these are quasi-consumer businesses and as the funds ran out and as the savings got depleted, there's just more pressure on these kind of businesses than others. And so which is what student body write. When we saw that, we said, okay, you know, you guys always ask me, hey, you grow corporate payments faster, so we giddy up and go and moved sales dollars and implementation dollars away from our tiny fuel business over there until we see how that plays out.

Okay, great. Just one quick follow-up for Alyssa on, you know, some of these impacts that happened to the growth rate in the fourth quarter. As I look across the different segments, you know, there's been a lot of variability in the growth rate. I'm just curious, did that affect multiple lines, those items, those one-off items?

It did. So we saw a decent amount in our toll business as well as a little bit in our fuel business. Those two. Okay. Great. Thank you. And I would just add, you know, this is all normal course of business stuff. It just seemed to be a collection.

Yeah, I do want to point out, Sanjay, it's Ron again, that, you know, we view it kind of as more of a bump than a trend. I did try to call out, you know, in the opening, basically, that we're out looking this quarter, we're sitting in the thing back at 9 or 10.

So really, in our minds, it's a comp issue, not a run rate issue. Got it. All right. Thank you so much. Good job.

And our next question will come from Bob Napoli with William Blair. Please go ahead. Thank you. Good afternoon.

Appreciate the question. So, I mean, you're, Ron, the corporate payments business, you know, very strong. Within that, you talked about AP being strong. Maybe just a little more cover on what the stronger areas are. were in the quarter, and did you see any deceleration, significant deceleration in any areas? You know, a lot of focus on the SMB market.

Yeah, hey Bob, it's good to hear you and hear you're doing well. So, you know, we posted 20% organic for the quarter for the category, and that's probably our number for 23. You haven't asked me yet, but I'd say inside of our overall 10%, we're out looking really about 20 now, so more than high teams. So really inside of it, everything did well except the channel of partner thing. You know, we've said it before that some of the partners that have no other four or five years move some volume to other people to get different rates. So that business has been flat or going backwards, which means the direct businesses are growing probably 25%. and I think the full AP where we have every modality is the fastest growing. I think that particular line of business is probably up 40% to 50% in the quarter, and now we've stuck some software on the front end, so even our lead volume is up. So I'd say the whole business is doing well. Again, the cross-border sales were rocking. I'm looking at the page in front of me. They were up 60%. the sales in Q4. We've obviously just eaten or are in the process of eating another piece of business which deepens us in the geography. And so I'd say other than the partner thing, it's firing literally on all cylinders.

Thank you. Then your investments in EV, I appreciate the continued forward-looking moves there, if you would. Can you give any more color? We get this question a lot. I'm sure everybody else does. The economics, as you have more experience, especially in Europe, I guess, can you give any color on the economics of EV versus gas and your confidence in that?

Another super good question.

The best place for us to look, really kind of the only place to look for us is the UK. We've got a big commercial fleet business there, and they've been out of the blocks pretty early. So we've got, I think, about 1,200, when I looked, active clients that use both our traditional fueling and some amount of EV. I think the average is about 15% penetration of the EV among those accounts. What I know for sure is that the enterprise, the bigger accounts, the economics are super favorable to us as they move to EV. The reason is probably pretty obvious that you get less fees generally from big accounts, right, that bid and negotiate. But they need these new EV things. And so the ability to get fees from enterprise customers. So in a report that I looked at, a sample of, I don't know, 10 or 20 accounts, it's up something like 50%. our revenues among the enterprise. I'm guessing that that probably won't be exactly the same story with a super small account. So what we'll agree to do, I told our guys, is come back probably in 90 days and report. I'll provide some actual data on this question because it's the million-dollar question, right, for the commercial fleet businesses as the stuff comes across. You know, are we indifferent based in the economics? I'd say early on it looks like yes. We are, but more to follow.

Are EVs growing rapidly?

You know, not really. I mean, again, the new sales are obviously right. The mix of every 100 new vehicles, the percent EV is growing. But the base, as you know, like in the United States, I think there's, I don't know, 300 million registered vehicles, and the new car sales are 18 million a year. So half of them. or EV it's 9 on 300 so it's super hard Bob to move the base is what I'd say which is again the other things you know is the EV adoption is happening more in consumer and lighter vehicles right versus like 18 wheelers which is the other motivation for us to chase these you know EV car manufacturers and EV consumers because there's going to be way more of those in the coming years, and they're going to be heavy trucks on EV.

Thank you.

And our next question will come from Darren Peller with Wolf Research. Please go ahead.

Hey, guys.

Thanks. Ron, can we go back to the corporate payment segment for a minute again, just because there's obviously been a lot of data points in the industry around SMBs having some challenges and B2B activity being a little bit more, you know, having decelerated. You don't seem like you're seeing that as much, so maybe a little color on what you are seeing in the marketplace. And then more importantly, just medium to long term, you know, that's obviously an area that we've talked a lot about in terms of convergence of some of the assets to really offer a more holistic solution on the account payable side and combine that with payments, you know, whether it's invoice pay and some of the other assets you've acquired and How has that been progressing? Just maybe a little update there as well.

Yeah. Hey, Darren. It's a good question. So the good news for us is that our corporate payments business is a middle market business. So our average, you know, account there would look like $200 million to $300 million in revenue for the client. So, you know, a decent, you know, size company, you know, credit-worthy kind of company. So I'd say 95% of our corporate payment business is what we all would call a middle market client. So the SMB move that we made, whatever, a year and a half ago, was really trying to be upside, us trying to extend kind of down market. So given what's going on with some of our friends in SMB, maybe we're lucky we haven't made as much progress there. So that's the headline. We're seeing nothing. Volumes are up. Spend is up. As you can see in the numbers, the revenue is, again, if you kick out the partner piece, it's compounding at 25%. And we're outlooking that same kind of number on the direct business, you know, here in 23. On your second question, which is also a super good one, is we've got all the stuff now. I feel like it's, you know, making a Thanksgiving dinner. There's 8 million ingredients to go out and get. And then all of a sudden, someday there's a plate and there's, you know, the six items on the plate. We're kind of, I don't want to say done, but close to done. We've got all the stuff. We've got smart cards. We've got front-end AP automation software. We pay every modality. We've got a global, you know, international payment capability. We've got networks. So we kind of have the stuff, Darren, to offer the whole package now to these middle market clients. And we're getting more and more of the clients to buy both. our smart cards and our AP stuff because we're in the CFO office. And as you know, we moved the branding so it makes more sense now. One company is coming in with a full line. So I would say that it's the marketing challenge in front of us. We've got the stuff to have an integrated pack. And now between the brand and educating sales guys and the market, I think we're going to sell way more of the package stuff as we move forward here.

Okay. Okay. Timing-wise, Ron, and then just – I actually do have a quick follow-up for Alyssa, if that's okay, on the revenue growth rate. Maybe I'll just throw it in now, which is when we look at the cadence on revenue growth trends, I know there's some seasonality to it. But, you know, again, you're coming off of this 7% rate. Obviously, there were those one-time items that you called out last year's quarter. Just to make sure, there's no – Do you see any other kind of impediments to that growth rate this year beyond macro in terms of one-time items that we have to grow over or anything else, or is that, do you see that being pretty clean for a macro adjusted basis?

Yeah, I mean, I would expect that short of the macro adjustments we make always for organic revenue growth, which neutralizes those items, that we wouldn't expect anything meaningful. Other than as we've perhaps called out in the same quarter prior year, so I would encourage you to look back at those notes, but No, I mean, I think that we, other than as we've spoken to the micro SMB customer segment in our fuel business, I think that's going to be the only item to speak of.

Yeah, the guide, Darren, today, it's Veronica, and the guide is, you know, 10 and 12, right? We're guiding kind of 10% organic at the midpoint and add a couple of points for the role of the acquisitions of the print at 12. Yep. That's what we're sitting there telling you. That's what we're chasing. That's the number.

Understood. Thanks, guys.

Good to talk to you.

And our next question will come from Tinjin Huang with JP Morgan. Please go ahead.

Thank you so much. Good to chat. I wanted to ask on the margin outlook. I think you mentioned up 150 bps, Ron, so I think 90 days ago you previewed 200 to 300 bps, so I'm curious what's changed in the Last 90 days, is it more about investing or changes in thinking around cost, things like that, or mix?

Yeah, good question, Tingen. So, yeah, the plan that we've landed is, I guess, 150 full year in Q4, 200. And the short answer is we, I just decided to spend more money on the acquired businesses. So if you look at our core off X, so kick out all the 22 acquisitions we did, it's below 5%. I think it's literally 3% or 4%. But the pile of acquisitions, we're spending another, I don't know, $70 or $80 million incremental year over year. And so a bunch of those are diluted things. They're EV things. They're one-time things to integrate like global reach, their sales investments and stuff. And so that was the call. The call was really to make sure that we gave enough oxygen to these sets of new assets that we just got so that we can get a return on them. And since we could kind of make all the numbers work, you know, we start with the design. We start with, you know, what's the goal and then work our way around it. So I felt like we kind of, you know, made the number we want, kind of 10 and 12 on the top, you know, sales in the high teens, Profit kind of where we guided to, even DA growth of 15%, so growing obviously, you know, operating earnings faster. So it kind of fit into the envelope, so we made the call to do it.

Gotcha. No, I trust that's the right investment to make. Then just as my quick follow-up, then on your appetite to do deals, I know I always ask you this, Ron, but just from a deals perspective, how does the pipeline look? I know you have a lot going on. You're spending more on acquired assets, including in EVs. Is there more to do? in the short run, or could we see a little bit of a pause from a deal-making standpoint?

Yeah, you certainly know us well. We are never without some kind of pipeline. So, yeah, we had deals. I'd say there's kind of, in my mind, a little bit of good and bad on the deal front. I think the good is I really am seeing some reset on the valuation side, right? Prices have been down longer. I think people that were waiting, you know, have waited longer. They're not seeing the bids. People aren't hitting the, you know, the bids they're looking for, the apps they're looking for. The bad is obviously the cost of capital. So it raises, you know, your confidence in your thesis, right, to pull the trigger to make sure we're generating the right kind of returns. So I'd say there's, you know, a little bit of tension between those. So better maybe valuation outlook but a bit higher cost of capital. But look, we've always, as you know, not been a financial buyer of things where we just buy it and absorb it. We've always had some view of how to double profit. So again, we have things in the pipeline that we like, that we think we can make returns on, and if we can, we will. We'll pull Twitter on it. I think we're probably, back to capital allocation, less excited about buybacks sitting here again given the you know the cost of capital the increasingly short-term maybe longer terms okay but short-term isn't quite as attractive and de-levering frankly is a bit crazy more attractive you know given the spreads are wider right between deposit rates and borrowing rates so I'd say that the kind of some of these changes is affecting a bit how we're thinking about what's a 1.3 billion Melissa $1.3 billion is the planned attention. So I'd say my first and foremost is all these deals that we can then go make returns on.

Okay. It's clear.

Grateful for your thoughts.

And our next question will come from Ramsey LSL with Barclays. Please go ahead.

Thanks so much for taking my question. I wanted to follow up on your response to Darren's question earlier about having all the ingredients in place within corporate payments to kind of realize that sort of power. My question is actually broader across the entire enterprise and maybe all the segments within the segments. Are you now kind of organizationally, technologically well-positioned for cross-selling, or are there still initiatives and capabilities and linkages that need to be made in order to kind of unlock the synergy potential in the broader enterprise?

Hey, Ramsey, it's Ron. It's a super, super good question. I'd say we're out ahead on the synergy and relatedness in corporate payments. And the primary reason is it's a middle market business. So whenever you go to a client that's got 200, you know, 200 to 300 million in revenue, it has more needs, right? It does more things. Obviously, it's got a lot of AP, right? If it's got 200 to 300 million in revenue, It's obviously got a lot of employees probably running around in vehicles. And so you'll see us selling fleet cars, for example, to our corporate payment clients. And Fuel runs 10% to 12% of all the spend volume among our middle market corporate payment clients, which I guess wouldn't be shocking. So in that area, I would say for sure, there will be a broad package of services that will all be sold into the same client. As you move into the SMB thing, I think we're going to move organizationally towards a more integrated model, like you're saying, because the tech, I think, frankly, is ahead of our org. And so we're looking at starting to consolidate the vehicle-related purchases. So if you're sitting in a car and you buy... fuel, or you recharge on EB, or you pay for a toll, or you go into a parking spot, whatever, all of those, even 92% of our lodging clients drive a company vehicle, you know, the tree cutting truck to the actual hotel. So we're in the business mostly of vehicles, company vehicles running around and us helping make the payments. And so that's a way more super-related things than what we've talked about before as though they're discrete things. And so you'll see us start to move organizationally more to looking at that set of solutions as vehicle, you know, related payments and then the corporate payments again as a thing for the middle market.

That was super helpful. It makes a ton of sense. A quick follow up from me. I think on the 2023 guidance, you were able to call out in the course of the call a segment-specific expectation for corporate payments. And I think Alyssa mentioned something for tolls and fuel. Would you mind rounding that out and just giving us your expectations for lodging and if applicable gifts for the year, just for sort of modeling purposes?

Yeah, sure. So, again, at the midpoint, it would be 10 overall. So fleet kind of mid-single but weaker first half. strong or second half. Lodging in Brazil, mid-teens, maybe a smidge below 15, a smidge above. And corporate payments, even with the channel in it, I'm going to give it probably 20, you know, maybe north of 20 and obviously way north of 20 if you kick out the channel. So that's the mix that rounds to 10. And again, you guys have heard this before, you know, we're super thoughtful on the design. When we saw the super micro segment weekend, we just literally reallocated. We just said, okay, I'm going to pour in terms of marketing and sales investment more into the middle market. You know, that Darren brought up earlier that has, you know, not many, certainly not as many macro kind of risks and basically just kind of, you know, tread water a little bit until we see more about how this, you know, micro and SMB segment plays out this year. So we're kind of de-risking the plan a bit, I tell you.

Fantastic. Thanks, Ron. Appreciate it.

And our next question will come from Shareek Sumar with Evercore ISI. Please go ahead.

Hey, thanks a lot for taking my question. I have a question on the 2023 outlook. especially on the share count, it says $75 million for the full year. Does that assume any sort of buybacks throughout the year, or it does not? And if it does not, then would there be more upside to the EPS, assuming that you accelerate the buyback throughout the year?

Hey, Sherika. It's Alyssa. That's a good question. On share count, I'll first say in our guidance we never include the impact of potential buybacks because we see it similar to a capital allocation decision, like an acquisition or a divestiture. We're going to hold those decisions until they make sense. And so we do not build that into guidance. And then I guess in terms of the share count as we run in, the number you see that we presented in our assumptions is consistent with what we expect for the rest of the year.

And what we printed for Q3 and Q4, correct? Yes.

And fairly aligned with where you saw us coming out of Q3 and what you can now see in the Q4 number.

Yes, Sheree, it's Ron. Our default is always just de-levering, right? We plan to generate $1.3 billion of free cash flow, and our models assume that we just reduce debt as we run through the year. And then to the extent that we take money to do a buyback in Q2, we'll update the guidance to reflect that different use of capital.

Thank you so much.

And our next question will come from Jeff Cantwell with Wells Fargo. Please go ahead.

Hey, thanks, and congrats on the results.

Ron, this is a follow-up on Darren's question earlier. In your prepared remarks, you said that in 2022, you added an AP automation software front end to your whole AP execution business, and we all know what that is, what you've been doing there. So my question is, what does that mean that your execution there on the front end going forward would impact others that you've been partnering with over the years in any way? Does that mean that you're trying to capture those volumes on the front end? Can you just help us understand the strategy there and how to think about that going forward? Thanks.

Jeff, I'm not positive on picking up the question. Can you just rephrase it for me?

Yeah, so we've been, you know, watching what you did with Roger and Corte, and we know that you have com data as well. So we're trying to figure out if there's some, you know, competitive angle to what you're doing on the front end as you start to bring that into, you know, the picture with how you're going to market with SMBs.

Okay. Yeah, there's clearly a competitive angle. I think, you know, historically...

standalone AP automation software companies sold AP automation software. Knock, knock. I've got software that simplifies your processes, automates approvals, digitizes stuff so you don't lose it. Hey, that's what we do. And then knock, knock, a bank said, hi, I can help you actually execute electronic payments for you or cross-border payments. And so you know, the idea we've been at a long time is, well, let's do both, which we've connected them already, obviously. So, hey, knock, knock, we can help you, you know, make the process work better in your company and save you time and reduce risk, and B, we'll pay, you know, all the different ways, every modality, we'll execute it all, you don't need to call your bank or FX specialist or your, you know, printing company to print out paper checks, we'll do the whole thing. So we think that It's a huge advantage to have that package to provide, you know, more value to clients. It seemingly early on generates more leads because historically people have been interested, you know, in both sides of that thing. And I think, you know, we're not the biggest. We've got to be one of the biggest non-bank, you know, full AP payers already. So I think it is a pretty big advantage for us going forward.

Got it. Okay, great. And just on Bob's question earlier, you know, on EV, and, you know, I guess the question is, just to frame it for you, is, you know, you're a $16 billion market cap company and you're generating over, you know, $3.8 billion in annual revenue that's coming here. So can you just remind us, can you cite that revenue opportunity for us in EV, call it, you know, two, three, five years out? We're all We're all just trying to figure out this substitution effect and, you know, incremental revenue impacts, et cetera, et cetera. So how would you frame that as we think about our models? Thanks.

Yeah, that's another super good question. So first off, it's obviously a long time out. But the first thing I'd say is, you know, on the defensive side, so on the commercial fleet side, the opportunity is the size of our whole business. Right, if you went 40 years into the future and we've got a, what, a $1.5 billion revenue global fleet business, the hope is if we replaced the business 50 years from today, everything was EV, we'd have a $1.5 billion business plus however we've grown between now and then. But for us, I think the bigger opportunity that's nearer in is this consumer lighter vehicle thing that we're going to get to through the EV car makers. and through the new gas station operators that are called, you know, charge point operators. So the big part of our strategy that we're spending money on is going offensive and chasing two new segments that aren't any part of our business today that we think are going to show up sooner because the vehicles work better, right, the light vehicles. So that's, I mean... Again, it's just a function of adoption. That's a massive, obviously, right? It's every vehicle that's not a commercial fleet, you're into there in terms of the TAM. So it's a massive, massive business. And I think I've said repeatedly, our strategy in the thing is to be the network guy. You know, our company is built on proprietary networks that have unique data that we pick up and then volume that we have that creates better economics. And our idea is the same. We're going to put together EV acceptance networks where we collect data that's interesting to clients, like what kind of chargers are there? Is the charger open now if I drive there? And we think that providing that in some simple way is going to be super interesting. And we've got five or ten already big EV car makers using our software and our network to try to reduce, you know, charge anxiety, right, of new buyers. So it's massive. The question is just when, how long, right, before either side, either the commercial side or the consumer side, you know, gets big.

Okay, great. That's super helpful. Thanks so much, and congrats again.

Thank you.

Cool. Hey, Pete, can you hear us?

Hello?

Yeah, Pete, we can hear you. Oh, okay. Sorry about that. I didn't hear the intro. Thanks for the question. I appreciate that cleanup here. I just want to dig into the field card business a little bit. Given some of the pockets, the weakness that you've called out on the credit side, Ron, are you going to sell? any differently in 23? How are you augmenting your sales strategy there? And then as a follow-up, on the partner side of the fuel card business, just wondering if you could share any color on RFP activity or if there's any major contract renewals coming up. Any help would be great there. Thanks.

You got it, pal. So on the first part of the question, hey, what are we doing for selling? In 2023, the answer is yes. There will be some different things. So the first thing we've done, which we're about 90 days into, is we're repointing our digital machine and algorithm to larger accounts. So the guy that runs our digital sales business tweaked the models effectively to point at what I would call larger and more credit-worthy accounts So you'll see that for sure our sales size of new accounts will go up starting here in Q1 versus Q4. So that point one will modify the targeting of our digital engine. And then number two is I've moved dollars. We've reallocated dollars to the corporate payments business. So it just said, okay, I'm not going to grow sales investment or sales as much in a space that has potentially more macro risk. We're going to earmark it at least here in 2023 into the middle market that we have, you know, there's more stability, if you will, in the macro. So those are really the two things we're doing selling-wise. And again, it's pretty small. It's a pile of bad debt, this micro super-duper new thing, but it's not big. per se, right, against the total business, right, the total revenue. So anyway, that's a set point. On the second one, there's not much. I'd say it's pretty quiet. Us and the other people that play the game have a lot of long-term contracts, both here and in Europe, so there's really nothing on the radar, I'd say, significant that we're looking at in 2023. Thank you, gentlemen.

And our next question will come from Nick Cremo with Credit Suite. Please go ahead.

Hey, good afternoon. Thanks for taking my question. I just wanted to touch back on the fuel segment first. How did the same store sales come in across the various parts of that business in the quarter? And just looking to 2023, what parts of the fuel business gives you confidence the segment can reaccelerate in the back half given the deceleration we've seen in the last few quarters? Thanks.

Yeah, so hey Nick, it's Alyssa. It's a good question. Make sure I got all your questions. I think you're asking how does same-store sales look and how are we outlooking?

No, how would you get to the reacceleration? Oh, reacceleration.

So yeah, so for same-store sales, I would say, you know, we always say that same-store sales short of a massive easy comp is usually in the minus one to plus one range. And I would say that And we did see it soften just a little bit more than that in the fourth quarter to minus two. But as we look into reacceleration, it really is just retweaking the engine as we head into 23, repointing that digital engine to higher credit quality customers, and then just refocusing the entire sales engine across the board to target those healthier customer bases and segments.

Yeah, let me make sure, Nick, you're clear that, you know, we pull this trigger. Like, we're super conscious that the health of these super-duper small accounts was deteriorating, so we said, okay, let's stop selling to them. So stop, and then repoint the thing. And then second, because their delinquency was up, it creates more involuntary attrition, so it creates volume softness, too. So basically, both of those things happen, right? You We're not going to keep the spigot open. We're tightening terms if you look, you know, shaky. And so we did it to make sure that a small little tiny part of our business didn't turn into a bigger problem. So we went right with our eyes wide open doing this thing. And so the answer is we've been for 90 days repointing. the thing to bigger fuel accounts, and then moving money to the mid-market. So we're happy. There's nothing wrong. We're not worried about the thing. Again, our plan is to have more of it in the second half. I think if it's 5%, it'll be 2% and 7% or something, like first half, second half. But I want you to hear it. We made the decisions to do both of these things for cautionary reasons and not get run over later.

Understood. Thanks for all the incremental help.

You got it. And our next question will come from Andrew Jeffrey with True Security.

Please go ahead. Hey, guys. Thanks for taking the question. This is Julian on for Andrew. So I have a quick modeling one and then kind of more general one. So is the lodging business, like, normalized growth rate, how we think about that, like high teens to 20%? Is that correct?

The right way to think about that? 15 to 20. Longer?

15 to 20. 15 to 20? Okay, got it. Thank you very much. And then, you know, I know you said you're off the block on EV. Obviously, airline did really well this quarter, 38% up. Is there anything there, kind of maybe, I know that you had an in-house prior option. Any updates there? Like, is that something in the pipeline in terms of deals that you're seeing? Like, are you looking to expand there? Kind of, elaborate on that a little bit.

Yeah, just really a couple comments, I think, on the airline growth. So one of it is just, you know, continued recovery, right? The airline was super down, so I think there's still some, you know, quote, long-tail COVID recovery. And still, sitting here today, we still don't have Asia back. There's still more to come if the Asia, you know, volume picks back up. But I think the The new things that we've done here, we bought a company a year ago that's really working. Like I mentioned, we won a couple of accounts that we had where we put this app in to speed distressed people right to their hotels instead of queuing up at the line. Well, now we've added, sold the first contract, which you'll see in the forward numbers, for basically... rebooking simultaneously with the lodging. So your plane gets canceled, you know, here in Atlanta tonight. First you got to find a place to sleep and then you got to figure out how to go. Well, let's say you're on, you know, Air Canada and it doesn't have any flights or any flights available. Our tech basically looks and books you on other airlines literally as you're walking off the plane. you're getting a hotel and getting rebooked. So the customer sat that the airlines are getting from having less unhappy people when they get off a plane, I think this is going to become table things, that a couple airlines see the couple that are picking this thing from us early, that this thing, we could literally run the table on this. So this is an example of bringing kind of some tech to kind of an old-fashioned way problem and it's working.

Got it. Thank you. Could you talk maybe a little bit about your digital marketing, how that's coming along, maybe any recent examples of success there?

Yeah, I mean, other than the micro thing, I think the answer is it's representing, obviously in every business, a larger and larger piece. For example, lodging, which we just talked about, I think it's up now about 15% of the sales in that line of business. It was probably 5% two or three years ago. It's taking a way bigger chunk of the marketing leads. We used to do old-fashioned trade shows for middle markets and things like that. So I'd say that not only are digital sales that we close on compounding a good rate, but I think the lead sources from digital are also way up. Again, a lot of this is the world, right? We're just chasing along with the world, making sure that we're in the right places.

Got it. Thank you very much. And our next question will come from Trevor Williams with Jeffrey. Please go ahead.

Great. Thanks. Good afternoon. I guess with Global Reach now closed, just wanted to see if you could give us an update on the revenue mix. within corporate payments between FX, cross-border, virtual card, full AP, and then within the 20% growth outlook for the year. Just any sense for which of those buckets you expect to be the primary contributors. I know this is a really good FX year with elevated currency vol. So just kind of how you're thinking of the moving pieces within the segment for 23. Thanks.

Yeah, Trevor, this is Jim. I mean, the best way to think about it, you know, is that cross-border is probably going to be closer to 65%. You know, we call it 25% direct and then 10% channel. 60-40? Yeah. So all in, cross-border, 60. Domestic corporate payments, 40. So they're going to move around a little bit.

I mean, your question is a good one, Trevor. In terms of the growth thing, having, you know, markets that are pacing interest rate moves differently. right, like Brazil got out super early, and then I guess we, the U.S., got out, and now Europe is chasing. So having, you know, different timing and differential in the rates obviously, you know, creates FX volatility. So that obviously is helpful running here into the beginning of 23. Okay. But all of these are working, right? To get to an aggregate number, we're giving you, hey, look, we're looking, you know, a year from today at 20%. revenue growth organic, plus obviously the print would be way higher because we're adding this deal. Clearly, most everything, Trevor, has to be working. I'm telling you that the channel, which is a pretty small piece, less than 10% probably, is going backwards. So everything else has got to be somewhere in the low to mid-20s to get the entire thing to be 20%. So I don't want to sound too cocky on it, but it's like all working. We're just selling a lot. Retention is super great, you know, in those sets of businesses. Obviously, spend is growing in the middle market, right? As smaller companies fall, there are obviously bigger companies, like in trucking and other areas, are picking it up. So I think the message to you guys is, and our product line is better and more complete, I just think that this business is kind of coming into, really coming into its own now for us. And it's big, finally, right? It's a It's going to surpass a billion dollars, and it was – I don't know what it was, but a billion dollars a few years ago. So it's become a sizable thing now for the company.

Yeah, that's great. And just one more on corporate pay. Corporate pay won, I think, last year. Any update you can give us there? I think last year you were talking – about taking more of a measured approach with some of the migrations, but just any update on progress there or just overall strategic thinking on your plan for it over the next couple of years and the cross-sell opportunity. Thanks.

Yeah, so that one is really still a work in process because the core business is middle market.

You know, say this is an ACOR, but this is a pretty small part, and so When we took a swing and miss at the cross sell, I did. We did not a super smart thing. We've really said, okay, how do we get the product to be right for the seam? And how do we get the distribution to be right for the seam? So what we've concluded is we are not going to chase super duper small accounts that don't have much AP that are at the very bottom. And so we're really kind of retooling the product and distribution to be up market a bit, so still below middle market, but kind of off of the floor. And particularly given, you know, what we're seeing and hearing in the marketplace, that seems like the right call to have not rushed into, like, you know, super micro kind of AP accounts. So we'll report more. I'd say that's about our highest priority since we did the swing and the miss, you know, on the cross sell, but we are continuing to work it.

Okay, got it. Thank you.

And we've reached the allotted time for questions today, so we'd like to thank you for attending today's presentation. This will conclude the question and answer session. You may now disconnect your lines at this time.