Corpay, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Fleet Core Technologies Incorporated second quarter 2023 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, August 8th, 2023. I would now like to turn the conference over to Jim Egglesetter. investor relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our second quarter 2023 earnings call. With me today are Ron Clark, our chairman and CEO, and Tom Panther, our CFO. Following their prepared remarks, 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 the supplement can be found under the investor relations section on our website at fleacore.com. Now, throughout this call, we will be covering organic revenue growth. 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 annum per share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than 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 also need to remind everyone that part of our discussion today may include forward-looking statements. These statements reflect the best information we have as 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. The expected results are subject to numerous uncertainties and risks which could cause actual results to differ materially from what we expect today. Some of those risks are mentioned in today's press release on Form 8K and in our annual report on Form 10K filed with the Securities and Exchange Commission. These documents are available both on our website and at scc.gov. Now, with that out of the way, I will turn the call over to Ron Clark, our chairman and CEO. Ron?

Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining us today. Up front here, I'll plan to cover four subjects. First, provide my take on our Q2 results. Second, I'll share our updated 2023 guidance. Third, update you on a few key priorities that we're working. And then lastly, discuss the status of our strategic review. Okay, let me begin with our Q2 results, which finished better than our expectations. We reported revenue of 948 million and cash EPS of 419, both of those up sequentially. Our Q2 EBITDA almost touched 500 million, which is an all-time record for us. Both our print revenue growth and organic revenue growth came in at 10% for the quarter. The reason is Q2 print revenue helped by acquisition revenue and hurt by lower fuel prices, so effectively a wash. The components of our overall 10% organic revenue growth were fleet, stepping up 6% for the quarter, helped a lot there by our international markets, particularly Mexico and Australia, both of those up over 20% for the quarter. Also, our EV revenue increased increased 45% year-over-year. Brazil grew 15% in Q2. Continued strength in our core toll line. Tag volume there up 7%, helped by our new bank partnerships. Also increasing demand for our new vehicle insurance add-ons. Lodging up 14%, led by our airline vertical. That results from a number of new airline implementations, along with the growing usage of our auto rebooking feature for distressed passengers. And finally, corporate payments up 22%. That was led by our direct payables business. That was up over 30% in the quarter. Also, our cross-border business doing great. record levels of new sales and new accounts. Turning to the trends or fundamentals in the quarter, also quite good. Sales grew 20% in Q2. Inside of that number of corporate payment sales up 80% versus last year, which reflects strong demand for that product line. Our North America fuel sales remained pretty soft in the quarter. That reflects the pivot we made away from micro SMB accounts last fall in an effort to control bad debt. Retention good remained steady at 91%, and that's despite a set of aggressive credit policies that we changed. And same-store sales finishing flat, really a mix of pockets of both strength and weakness. weakness we saw in our lodging managed accounts business, and strength really in the stability, improving stability in our North American trucking business. So look, all in all, a bit better Q2 than we had expected. A really terrific start to the first half. Year-to-date revenues, sales, and earnings all coming in ahead of plans. Okay, let me shift gears and share our outlook for rest of year 2023. First off, we're calling for the second half macro to be roughly neutral to our recent three plus nine view, albeit with some puts and takes, specifically expecting better FX, but lower fuel prices. We're revising full year 2023 guidance, including Russia, of revenue of $3,848,000 at the midpoint and cash EPS of $1,722 at the midpoint. This updated guide reflects the flow through of our $8 million Q2 revenue beat and $0.07 cash EPS beat, so leaving the second half prior guide intact. And although the business is running ahead of our internal expectations for the first half, there is considerable sequential revenue growth still baked into our second half forecast. The revised second half guide implies print revenue growth of about 12% and organic revenue growth of about 10%, pretty consistent with the first half. Finally, the guide implies an attractive Q4 exit with revenue growth expected to be 14% and reach $1 billion in quarterly revenue for the first time, so pretty exciting. We do expect cash EPS growth of 16% in the exit as we begin to lap interest rates from last year. Okay, let me make the turn and share our progress against a few important priorities. So first, EV. We're continuing to progress our EV efforts along with our understanding of how the energy transition may in fact affect our business. If you would, look at pages 12 through 14 in our earnings supplement. So on the economics front, EV vehicles, at least among our commercial mixed fleet clients, continues to be very favorable. EV vehicles there are generating more revenue per vehicle than a comparable ICE vehicle. We've seen this positive trend now over the last 10 quarters, so really super good news there. Second, EV is beginning to grow. EV revenue in Q2 up 45% versus the prior year, and the number of UK EV commercial accounts nearly tripled in Q2 versus prior year. Okay, second up is our fleet board refreshment initiative. We added three new directors to the fleet board here in calendar 2023. and have had two long-tenured directors retire. This move has strengthened both our audit and tech committee oversight and greatly enhanced our diversity. So last up in terms of updates is our North America fleet sales pivot. You may recall we were selling a lot of super small micro-accounts digitally last year and made the decision to move digital sales upmarket to bigger company prospects. So some progress there. Again, we essentially stopped onboarding new super small one and two card sized companies about nine months ago. And although this reduces our overall North America fleet sales, we do expect the second half fleet credit losses to decrease about 30% to 35% sequentially, first half versus second half. Good news, we are increasing the number of new fuel apps that have more than five cards. That's from modifying our digital advertising bidding engine, so that's working. We do expect to be on the other side of this digital sales transition as we exit 23 and thus better positioned to accelerate fuel card sales next year. Okay, last up is the status of our strategic review in which we're reevaluating the portfolio of our company with the idea of potentially separating one or more of our businesses. As you can imagine, we've been quite busy with this review, along with our overall value creation plan. So first on overhangs, on the FTC front, we have closed the FTC injunctive relief chapter. You may recall we received the court order. We're implementing the remaining disclosure request there and expect to be in compliance by the end of this month. We do believe that our North America fuel business exceeds the very best industry marketing and disclosure practices. Russia, we have now received all necessary government approvals to close the Russia sale. We are working through some final closing mechanics and hopeful that that deal will close later this month. Tom will speak to the expected financial impact of the Russia sale here in just a minute. Second, non-core assets. We are progressing the potential sale of a couple non-core assets. We're well underway in exploring the sale of our prepaid businesses. We're also in discussions regarding a few small divestitures that are within our vehicle line of business. Third, fleet reinvention. We're pretty aggressively working to reposition our global fleet business. The goal is to create really an exciting future for fleet that promises sustainable and durable growth. We think we're out in front here in EV and actually expect EV to accelerate growth in that business. We're continuing to broaden our set of vehicle-related payment solutions, so solutions beyond fuel. And we do believe that re-rating our biggest business and biggest earnings contributor is really the number one driver of the company's overall value creation. So lastly, the topic of separation. We are exploring, with the help of Goldman Sachs, the idea of separating one or more of our businesses to further unlock value. Our path initially is to look simply at separating or spinning off one of our major businesses into a separate company. So the considerations or assumptions here are around forward pro forma multiples, you know, what would the standalone company trade at, tax impacts, the synergies of the separation, opportunities for future M&A, really a whole host of things. The second path is to potentially combine one of our three major businesses with a dance partner. That would be a pure play company that provides very similar solutions to one of our three big businesses. So we are actively involved in exploring a few dance partner combinations and evaluating attractiveness of that path. As promised on our last call, we expect to complete our work on each of these four initiatives before year end, and for sure we'll share our conclusions with you then. Okay, so look, in closing today, I do want to reiterate that we are pleased with Q2 and our first half performance, our financials and KPIs ahead of our initial expectations. We are flowing through our Q2 beat and raising full year 2023 guidance. We are progressing a few of our key priorities, again, particularly on the EV front. and we are actively exploring several portfolio moves in an effort to re-rate our multiple. So with that, let me turn the call back over to Tom to provide some additional detail on the quarter.