Corpay, Inc.

Good day, everyone, and welcome to today's CorePay First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note this call is being recorded. I'll be standing by if you should need any assistance. It is now my pleasure to turn the call over to Jim Edwister. Please go ahead, sir.

Good afternoon, and thank you for joining us today for our first quarter 2024 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. Today's documents, including our earnings release and supplement, can be found under the investor relations section of our website at corepay.com. Throughout this call, we will be covering organic growth. As a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates fuel prices, and spreads, and it also includes performer results for acquisitions and divestitures or scope changes closed during the two years being compared. We will also be covering other non-GAAP financial metrics, including revenues, net income, and net income per diluted 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 websites. It's important to understand that part of our discussion today may include forward-looking statements. These statements reflect the best information we have of today, and 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 obligations to update any of these statements. These expected results are subject to numerous risks and uncertainties, 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. These documents are available on our website and at sec.gov. 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 welcome to our Q1 2024 earnings call, our first as Corpay, the corporate payments company. So up front here, I'll plan to cover three subjects. First, provide my take on Q1 results and share our updated 2024 guidance. Second, I'll cover conclusions from our recent three-year strategy off-site regarding the way forward for the company. And then lastly, I'll highlight a couple developments since we last spoke. Okay, let me begin with our Q1 results, which finished really right in line with our expectations. We reported revenue of $935 million. That's up 8%, excluding Russia. And cash EPS of $410. That's up 14%, excluding Russia. Overall organic revenue growth, 6% for the quarter, although against a pretty tough comp. Pleased with our corporate payments business. Revenue growth there up 17% overall, but up 21% if you exclude the channel partners. Trends in Q1, quite good. Retention, overall retention remains stable at 91%. Sales or new bookings up 11% year over year. And same store sales, soft, negative 2% for the quarter, driven primarily by lodging, although same-store sales did improve one point sequentially from minus 3 to minus 2 this quarter. For sure, we're dealing with a couple problem children here in Q1. Our North America vehicle business, as you'll recall, making the pivot away from low-quality vehicles micro accounts to SMB accounts. We are increasing the sales ramp there with incremental digital and a new kind of upmarket field sales channel to drive the pivot, but taking a bit longer than expected. But I do want to say we are for sure making progress. Our workforce lodging business continuing to experience continued softness. That's from a combo of macro weakness and a couple of areas there, along with issues in converting to a new IT system. Fortunately, we've now converted the majority of the client base across to the new IT system, and we've introduced a brand new employee-friendly solution we call Choice, hoping these enhancements will harden the base. Good news, the early look at April volume in lodging does suggest that the softness is stabilizing. We're outlooking both the North America vehicle business and the workforce lodging business to return to positive organic growth in Q4. So look, in summary for the quarter, no real surprises and numbers coming in really on expectation. All right, let me make the turn to our updated 2024 full year guidance. Really two major differences today in our outlook for the year versus 90 days ago. So first, FX has moved against us and interest rates look to be holding higher for longer. So both of these macro factors, unfortunately, will depress our print rest of the year. Additionally, as I said, we're expecting our lodging client softness to hang around longer, thereby reducing our full-year lodging revenue forecast. On the good news front, we do have greater visibility now around our high-performing businesses corporate payments, international vehicle, and Brazil, and their ability to over-deliver rest of the year. So as a result of these updated assumptions, we're reducing our full-year 2024 revenue guide at the midpoint from $4.8 billion to $4 billion, so down $80 million. That consists of $40 million of lower FX translation and then second, $40 million of incremental lodging revenue softness. We're also reducing full-year 24 cash EPS at the midpoint from 1940 to 19. This is 100% the result of the macro. We do plan to absorb the profit impact from the $40 million lodging revenue divot through a combination of expense reductions currency swaps, and some tax planning. So despite the bit softer full-year outlook, we're still expecting a very strong Q4 exit with organic revenue there well above 10% and cash EPS above $5. Okay, moving on, let me shift gears and share some of our conclusions from our recent midterm Strategy off-site, that's where we lay out plans for the next three years. So first off, in terms of objectives, we aspire to be a top quartile growth company within the S&P 500. We're committed to 10% plus organic revenue growth and 15% plus earnings growth. And that's a pretty small club. Second, deeper, not wider growth. We've concluded to go deeper in each of our three core segments, vehicle, corporate payments, and lodging, and not to expand into new segments, at least for now. Our research across the three core segments confirms that we've got plenty of TAM and plenty of sales expansion opportunity in each major business, such that we can achieve our growth objectives without going wider. Third, in terms of acquisition strategy, our focus will be on corporate payments and consumer vehicle businesses think pay by phone. We're going to focus on wheelhouse or accretive deals rather than capability deals that we've executed recently. And then lastly, from the off-site, in each of our major businesses, we plan to sell what we call a flagship product. most of the time, so that more and more of our scale will be built on a single product in each line of business. And then over time, we'd convert existing clients off of other products onto the flagship product. This will result in a narrower set of SKUs over time. So look, we believe that that this more focused way forward will result in a much easier company to manage and grow. Okay, lastly, let me make the turn to talk about two recent developments. First, our brand and ticker change. We did make our overall company brand change to Corpay, the corporate payments company in March, at the same time changing the ticker symbol to CPAY. We are planning to use the Corpay brand as a go-to-market brand here in the U.S. We already go-to-market as Corpay in our corporate payments business. We've now launched a Corpay One universal fleet card and business card in our vehicle payment segment, and we're soon to relaunch CLC as Corpay lodging. So in this case, we'll have one single core pay, go-to-market brand across payables, lodging, and vehicle. So sure to help us on the cross-selling front. Second, acquisitions. We've been pretty active on the acquisition front. We did announce earlier this year that we closed the majority investment in Zappay. That's a vehicle payments business in Brazil. with 3 million monthly active users. You might recall the idea there is to add Zappay's vehicle registration renewals and payments of vehicle tickets or fines to our overall Brazil consumer vehicle bundle. The business is doing great. Zappay revenue grew over 50% in Q1. We did announce earlier today signing Paymerang. That's a full AP corporate payments company, runs about $50 million in annual revenue. We like the deal. It'll strengthen our corporate payments, AP automation business, and four new verticals. We're expecting the deal to close here in Q2, pending regulatory approval. and expect it to be accretive to both revenue growth and EPS growth next year. We see lots of synergies to chase. Okay, so in conclusion, Q1 out of the blocks, kind of per our expectations. Rest of year outlook, unfortunately, a bit of a mixed bag. Now expecting unfavorable macro and lodging softness for longer. offset by strong performance in corporate payments, international vehicle, and Brazil. We have refined our three-year growth plan. It calls for a narrower, simpler company that we can manage and compound that's got plenty of growth potential. So we like the way forward. Finally, we're excited about these latest acquisitions, Zappay and Paymerang, along with the active pipeline in front of us. We expect these wheelhouse deals to be accretive to 2025 revenue and earnings growth. So, with that, let me turn the call back over to Tom to provide some additional detail on the quarter. Tom?