Corpay, Inc.

Hello and welcome to the Fleet Core Technologies, Inc. fourth quarter 2023 earnings conference call. All participants will be in 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 star then one on your telephone keypad. To withdraw from the question queue, please press star then two. I would now like to hand the call over to Jim Egglesetter, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2023 earnings call. With me today are Ron Clark, our Chairman and CEO, and Tom Panther, our 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 on our website at fleetcore.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 and divestitures or scope changes closed during the two years being compared. We will also be covering non-GAAP financial metrics, including revenues, net income, and net income productivity 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 discussions 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. Now, the 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 filed with the Securities and Exchange Commission. These documents are available on our website and at sec.gov. So with that out of the way, I will turn the call over to Ron Clark, our Chairman and CEO.

Ron? Okay, Jim, thanks. Good afternoon, everyone, and thanks for joining our Q4 2023 earnings call. Up front here, I'll plan to cover four subjects. First, provide my take on both Q4 and full year 2023 results. Second, I'll share our 2024 priorities and guidance. Third, give you a bit of an update on the status of our strategic review. And then lastly, highlight a few pretty exciting new products that we've recently launched. Okay, let me begin with our Q4 results, which frankly were a bit mixed. We reported revenue of $937 million, up 6%. Cash EPS of $444, up 10%. and EBITDA of approximately $500 million, up 11%. Q4 revenue did finish a bit weaker than we outlooked 90 days ago, but fortunately our earnings flow through was quite a bit better than expected. That was helped mainly by credit losses finishing at about half the level of last year. The revenue weakness in the quarter showed up in a few areas, First, gift cards. So we had some delays in gift card shipments that have been pushed here into Q1. In lodging, we had a pretty soft distressed passenger vertical in the quarter, mostly because airline cancellations were at a record low level. North America fleet late fees, pretty light. That, again, is a continuation of exiting a lot of micro accounts that we started about a year ago when we tightened credit terms. You know, again, fortunately, the late fee reduction was essentially washed away by the improvement in credit losses. And then the last year is our corporate payments or payables business with a channel partner business finishing even softer. than we had outlooked. Fortunately there, we think it's bottomed out. So these kind of weak spots, soft spots are either timing related, weather related, or have kind of reached the end, have kind of bottomed out as we head into our 2024 guide. So hopefully not surprising us again. The organic revenue growth in Q4, 7% overall, again, impacted by the soft spots I just called out. The vehicle payments organic revenue growth, 5% for the quarter. Corporate payments revenue growth, 15%, but 20% if you exclude the partner channel. Trends in Q4, also a bit mixed. Retention quite good, improved slightly to 92%. Sales grew 12% overall with a terrific performance in corporate payments. Sales there up over 40%. And what we call same-store sales finished 3% down. Again, we saw the weakness in the workforce lodging and the airline lodging business and a bit in the U.K., Okay, let me make the turn to our full year 2023 results, which reached record levels. 2023 revenue of $3.8 billion, up 10%. EBITDA of approximately $2 billion, up 13%. And cash EPS of $60.92, up 5%. Trends for full year 2023, quite good. Sales for the full year up 20% overall. And again, inside of that, corporate payment sales up about 50%. We did sell 100,000 new B2B clients in 2023. In terms of organic revenue growth, full year 10%. So that makes three consecutive years of 10% plus organic revenue growth. And again, retention stable at 92%. Additionally, we did advance a number of important strategic initiatives in the year. Progressed EV and our understanding of the relative economics of EV versus ICE. So promising results there. We did clean up our Russia and FTC issues. We did introduce this transformation idea for our fleet business, envisioning it really as a broader vehicle payments-related business. We did close a couple of important acquisitions, one in cross-border, which we fully have integrated, and one in parking, really to jumpstart our consumer vehicle payments initiative. So look, all in all, a pretty successful year. Okay, let me make the transition to our 2024 guidance and start out by outlining our major objectives for the year. So a few things. First, as always, to deliver financial performance that's consistent with our midterm objectives. Second, we hope to deepen our position in corporate payments through some new acquisitions in that space. Third, we hope to build out our vehicle a payments business with proof of successful cross-selling and accelerate revenue growth throughout the year. And then lastly, to succeed with some new product launches and confirm market acceptance for them. So on to our 2024 financial guide. So revenue at the midpoint of $4.8 billion. that's up 9% on a print basis or 11% excluding Russia. EBITDA of $2.2 billion, that's up 11% or 14% excluding Russia. And finally, cash EPS at the midpoint of 1940, up 15% print and up 18% excluding Russia. So let me just say that again, planning 24 profits, cash EPS growth of 18% this year, excluding Russia. We are expecting good earnings flow through to EPS. One, you know, revenue will grow faster throughout the year than expense, so that operating leverage will help. And we do expect fewer shares, better FX, and a slightly lower tax rate. In terms of revenue and organic growth, We're obviously helped by our Q4 exit rate and the sales from last year growing here into 2024. We are expecting higher sales levels here in 2024, which will add to revenue. And then we do have a number of cross-sell initiatives planned into our client base this year. So in the fleet business, selling business cards, EV, parking, breakdown services back into the fleet clients. And in Brazil, the toll business selling insurance, parking, fuel back into the toll base. Tom, in a bit, will provide some more specifics on the 2024 guide and how it rolls out across the year. We also plan to mark the next chapter of the company with the rebranding of Fleet Corps to Corpay, and that's scheduled for March. Okay, let me make the turn to our strategic review. So just as a reminder, we did initiate a formal strategic review of our portfolio last spring and initially focused on the question of whether separating our fleet business from our corporate payments business could unlock value for shareholders. We have run a pretty rigorous process over the last 11 months with a lot of help, particularly from Goldman Sachs. We fielded numerous inbounds, looked at lots of alternatives, and explored some combinations with Dan's partners. I got to say the review process was quite helpful for us in exploring really some new structures for the company and spotlighted the value creation potential of transitioning really our fleet business into a broader vehicle payments business that will serve both businesses and consumers. So that's a super high priority for us. So look, we're announcing really the conclusion today of the review process, at least for the time being. We've determined that keeping our fleet business and corporate payments together is the best way forward. Obviously, we remain open to reconsidering various options to unlock value down the road, but right now, squarely focused on repositioning the vehicle payments business. Okay, my last subject up front here is on new products. We've released four new products into the marketplace this year, each with really terrific potential. So first, what we call our Corp A1 business card, fuel card, and virtual card in one. That's targeted to fuel-based businesses where the solution includes a business card for the owner, fuel cards for the fuel drivers, and even replaces paper checks with virtual cards. That's all in one account and all in one UI, so pretty exciting. Second product we call the Comdata Connect Card. It's targeted to small trucking companies, so it connects the Comdata truck stop fuel discounts and reporting to the trucking company's existing business credit card. So trucking firms here would really get the best of both worlds. They continue to get the credit and rewards from their existing business card, but combine that with the fuel discounts and reporting of a truck stop card. Look, this also helps us in terms of the credit challenge with small trucking companies. So hopefully we can bring on lots of small trucking firms without the credit risk. Third up is a product that we call Corpay Complete. It's our newest corporate payments product targeted to mid-sized businesses. And again, this is really a platform build. So we've combined what we call walk-around solutions, business cards and fuel cards, really with a central kind of AP automation solution, again, packaged all in one platform, all in one mobile app. So really, we think kind of the modern way really for businesses to manage their all around business expenses and spend less. And lastly, in lodging, we have a new product called CLC Choice. So it's really a workforce lodging solution for employers who want really a more friendly and flexible employee travel solution. with the idea of being more choice for travelers. So in this case, travelers could choose virtually any hotel, any room type, and even keep rewards points from their favorite hotel brand. So we think the choice solution will complement, you know, really our current control solution and widen the market opportunity there. So look, we're super excited about these New products have been in the kitchen for quite a while and hopeful that this new set of products will accelerate revenue, you know, 1% to 2% over time. Okay, so look, in conclusion today, 2023, really a record year, record revenue, record earnings, organic revenue growth for the full year up 10%, sales super good up 20%, a stable retention at 92%, made some good moves to position the company better for the midterm, EV progress, and our new go-forward vehicle payment strategy. 2024, we're planning profits or cash EPS up 18%, excluding Russia, and that's on really an assumption of flat interest expense, launching a set of new products that we have high hopes for, and then beginning really the next chapter for the company as we move to rebrand the company to CorePay in March. So with that, let me turn the call back over to Tom to provide some additional detail on the quarter. Tom?