Corpay, Inc.

Good day, everyone, and welcome to today's Corpe Second 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 and 2. Please note, this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Jim Ecclesetter, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today for our second quarter 2024 earnings call. With me today are Ron Clark, our Chairman and CEO, and Tom Panther, our CFO. Following their 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 on our website at corpay.com. Throughout this call, we will be covering several non-GAAP financial metrics, including revenues, net income, and net income per diluted share, all on an adjusted basis. We will also be covering organic revenue growth. This metric neutralizes the impact of year-over-year changes in FX 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. None of these measures are calculated in accordance with GAAP and may be calculated differently than at other companies. Reconciliations of the historical non-gap to the most directly comparable gap information can be found in today's press release and on our website. 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. 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. These documents are available on our website and at SEC.gov. So now I'll turn the call over to Ron Clark, our Chairman and CEO. Ron?

Okay, Jim. Thanks. Good afternoon, everyone, and welcome to our Q2 2024 earnings call. Up front here, I'll plan to cover three subjects. First, provide my take on Q2 results along with an update on our problem children. Second, I'll share updated 2024 full-year guidance, including an up-close look at our expected Q4 exit. And then lastly, I'll speak to our portfolio and our commitment to deeper versus wider. Okay, let me begin with our Q2 results. We reported Q2 revenue of $976 million, up 7%, excluding Russia, and cash EPS of $455, up 14%, excluding Russia. Results really right in line with our expectations, both revenue and earnings finishing on the high side of our guidance range. Most importantly here, the trends in Q2 improving. Overall retention improved to nearly 92%. That's up 100 basis points from last year. Same store sales improved to flat in the quarter. That's up 2% sequentially. And sales or new bookings strong, up 21%. Particular strength in our corporate payments business, sales there up 28%. So clearly a noticeable improvement in all three of our key business trends. Organic revenue growth for the quarter, 6%, but clearly a tale of two cities. Our corporate payments business, Brazil business, and international fleet business, performed exceptionally well, while our lodging in North America fleet businesses, not as good, presented a drag on growth. So taken together, averaging out to 6% overall. So let me update you on the two problem children. So first, North America fleet performed really in line in Q2 against expectations. but still a drag on growth. We've now mostly lapped the infamous micro pivot and the implications there around late fee revenue and bad debt. Real progress, though, happening in the business on a few fronts. Retention is better, 150 basis points better, in fact, than Q2 last year. Softness improving, 100 basis points better sequentially, and sales growing. In the quarter, 80% of all of our digital sales, now five card and plus size accounts. So a significant pivot in new business there. A third of our field sales now being booked to our new Corp A1 business. fuel card, business card, and virtual card in one, and 25% of our SMB trucking sales now on our new Comdata Connect card that has no credit exposure. Additionally, we signed some important new accounts, GasBuddy and AT&T, which are now coming online. So look, the evidence is building that there's demand for our new products and that this larger prospect segment sales can be grown. So that's happening. So on the back of these trends, we're outlooking North America fleet to grow revenue organically in Q4 and get back in the plus column. Okay, over to lodging, our second problem child. Lodging finished a bit weaker. in Q2 than we expected, mostly the result of lower flight cancellations and fewer homeowner insurance claims. Progress, though, happening on the lodging front. The first IT there, much better. Uptime and search response time now exceeding our SLAs. Big improvement in client softness and client retention in the business. Our new differentiated pricing now in place, increasing our yields where we've lowered room rates, if you will, to bigger accounts and increased pricing to walk-in travelers. And then lastly, sales and lodging growing up 36% in Q2. Again, evidence to us that there's demand for the solutions. So again, the progress that we're seeing, we do expect the lodging business to turn positive organic growth in Q4. So hopefully, as we execute for this year, problem children no more. So the wrap on the quarter, again, no real surprises in Q2. Results kind of right on expectation. Trens same store sales, new sales and retention trends significantly improved across the board and our two problem children progressing on a path to growing again. Okay, let me make the turn to our 2024 full year guidance. So today we're reiterating the full year 2024 guidance at the midpoint that we provided in May. So as a reminder, $4 billion in revenue and cash EPS of $19. For sure, some changes, some puts and takes in this guide. We're out looking weaker FX here in the second half than we were 90 days ago. and a bit weaker second half lodging revenue. That's offset by Paymerang revenue and some expected synergies that we'll capture there, along with some expense management actions that we're putting in place to maintain profitability. I do want to put a special emphasis on our Q4 guide, which you can see in our earnings supplement. We're out looking accelerated double digit print and organic revenue growth and $21 of run rate cash EPS heading into 2025. Additionally, we are expecting to capture some meaningful synergies from our Paymerang and GPS corporate payments acquisitions next year, likely in the 50 cents accretion ballpark. So look, the main message to take away here is that CorePay is headed to a better place. We're leaving behind some challenges, the rusher divestiture, Fed hikes, the fleet pivot, lodging softness, even the strategic review, and heading to a place with accelerating performance, driven by problem children improvement, lower interest rates, higher sales, and fewer shares. Our expected arrival to the better place is Q4. Okay, last up, let me transition to an update on our portfolio, which again calls for a deeper, not wider company, squarely focused on three segments. We're well underway with our integration and synergy planning, for our Paymerang and GPS acquisitions. Initial thinking there calls for conversion and shuttering of the acquired IT systems, a significant streamlining of back office operations and G&A, and really a leveraging of our broader product line to increase revenues in both businesses. We expect these two deals to add about 15%. to our corporate payments business revenue next year, and with corporate payments overall representing about 40% of the overall company. We're also progressing a couple small vehicle-related divestitures, totaling approximately 400 million of after-tax proceeds. We anticipate using any proceeds from these divestitures to buy back CPAY stock to minimize dilution heading into next year. Lastly, we are working a couple interesting deals in the pipeline where we'd maintain our target leverage and frankly have the liquidity to pull the trigger if in fact the deals survive diligence. So in conclusion then today, Q2, again, finishing in line, but don't miss improving the base, new sales, and retention, maintaining our full year 24 guide at $4 billion in revenue and $19 in cash EPS, tracking to a better place with accelerating revenue and an EPS run rate of $21 exiting Q4, and ongoing simplification of the company, doubling down on corporate payments, and aggressively working the synergies of our two newest deals. So with that, let me turn the call back over to Tom to provide some additional detail on the quarter.