Corpay, Inc.

Greetings and welcome to the CorPay 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Eglesleiter, Investor Relations. Thank you, Jim. You may begin.

Good afternoon, and thank you for joining us today for our earnings call to discuss the 2024 results, both fourth quarter and full year. 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 include our earnings release and supplement, which can be found under the investor relations section of our website at corpay.com. Throughout this call now, we will be covering several non-GAAP financial metrics, including revenues, net income, net income prediluted 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, so may be different 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, expected macro environment, 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 also 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 in Form 8K and in our annual report in Form 10K. These documents are also 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 thanks for joining our Q4 2024 earnings call. Upfront here, I'll plan to cover four subjects. First, provide my take on Q4 results. Second, I'll hit the highlights for full year 2024. Third, I'll share our 2025 guidance along with the major priorities for the year. And then lastly, I'll provide a bit of an M&A update. Okay, let me begin with our Q4 results. We reported Q4 revenue of $1.34 billion. That's up 10%. And cash EPS of $5.36. That's up 21%. Overall, the results really in line with our expectation. Each of our core businesses pretty much coming in as planned with accelerating revenue. The macro turned unfavorable during Q4, compressing our print revenue by about $20 million, but fortunately a favorable tax rate effectively offset the unfavorable FX, really landing us back at our expected Q4 EPS print. Kind of the same thing on the revenue front. We did pick up some unplanned GPS acquisition revenue in the quarter, but that was offset by some delayed gift card shipments. Organic revenue growth accelerating quite nicely in Q4, coming in at 12% overall. Inside it had our corporate payments, line of business, finishing at 26% organic revenue growth. Quite importantly, the trends improved significantly in the quarter. Same-store sales finished positive, up 1%. That compares to minus 3% in Q4 last year. Sales growth, crazy good, accelerated to 36%. Really impressive. that did include some elephant sales in the quarter. And retention remained steady at 92%. So look, the wrap on the quarter, the underlying businesses really spot on. Our expectations, the environment both giveth and taketh, and kind of zeroing out in the quarter. And then importantly, our revenue growth, same-store sales and sales or new bookings trends improving really quite materially in the quarter. Okay, let me make the turn and call out a few highlights for full year 2024. I characterize it overall as really quite successful. Cash EPS of $19 was up over $2 on a print basis. and up 16% versus last year, excluding Russia. We did rebrand and simplify the company, now Corpay, the corporate payments company. We scaled our corporate payments line of business, adding two acquisitions. Again, sales growth for the full year, over 20%. We managed credit losses to extremely low levels, lower than 2023. We progressed our vehicle payments add-on idea, seeing real success with that in Brazil. We have hired a world-class USA sales leadership team to take us forward. And we have begun the slow turn of our two problem children businesses back into positive territory. So all in all, we think a pretty good performance. Okay, let me transition to our 2025 guidance along with our major priorities for the year. So today we're providing full year 2025 guidance at the midpoint of 4.4 billion in revenue and $21 of cash EPS. So both of those numbers up 11%. The guidance reflects... pretty strong underlying business fundamentals. So within the guide, we anticipate organic revenue growth at the midpoint of 11%. That's up a bit from our view 90 days ago. We're planning a full year overall sales or new bookings growth of 20% here in 2025. And we're planning macro neutral growth a cash EPS growth of 17%, which is in line with our midterm earnings target. Unfortunately, we are outlooking a very unfavorable macro at the moment, a combination of weak international currencies along with a much higher tax rate. So taken together, we expect... our print revenue to be compressed by over $100 million, and our cash EPS to be compressed by about $1.20. Obviously, FX and SOFR forward curves can change, but we're using the January forecasts that are out there. Tom will provide some additional details on the guidance math along with specific Q1 guidance when we get to his prepared remarks. In terms of priorities, we have four major priorities here in 2025 with an emphasis on expanding our corporate payments business. So first priority, our portfolio. We'll continue to simplify our portfolio. We'll go deeper versus wider. We will look to shed some additional non-core assets and we'll look to add more corporate payment assets. So already quite active on this front. Second, USA Sales. We are planning a step change improvement in USA Sales production this year. We plan to invest more in the Corpay brand, scale our field and Zoom sales teams, and progress our dedicated cross-sell team. Third, on the payables front, we'll take our payables business upmarket to the enterprise segment. That's in addition to our core middle market focus. We have secured our first big enterprise win, so quite exciting. Additionally, we're going to expand our payables business into Europe this year and launch our Corpay Complete Payables product in the UK. We do have lots of UK assets to help us get going there. And then finally, the priority and cross-border will expand our MCA or multi-currency account product. That holds multiple currencies for our clients as deposits, really making it easier for clients to expand the countries that they participate in. This could be really a game changer to help us compete with banks on the cross-border front. So all in all, a pretty exciting set of initiatives planned this year. Okay, last up, let me run through just a brief M&A update. So first, our two 2024 corporate payment acquisitions, Paymerang and GPS, well underway integrating both of those businesses into our tech environments, and executing on our synergy plans. We're still on track to deliver 50 cents of cash EPS accretion from these two deals here in 2025. A second gringo, it's our second Brazil mobile payments acquisition. We announced that on Monday. So this acquisition, along with last year's Zappay acquisition, gives us entry into a pretty big Brazil payments TAM. It's, in fact, about three times larger than our toll TAM in quite early days in terms of its digital penetration. So taken together, these couple of deals will add 5 million active monthly digital users all of whom become potential buyers for our vehicle payment solutions, including toll, parking, insurance, and even fueling. Lastly, we do have a pretty active pipeline of corporate payment acquisitions opportunities here in front of us. The goal, obviously, to increase our corporate payment mix, which could lead to revenue acceleration. So in conclusion today, again, Q4, again, kind of finishing in line with expectations, although revenue and profit growth accelerating quite nicely. 2024, we think quite successful. We grew profits, but importantly, we did simplify and better position the company for the midterm. Our 2025 macro neutral guidance, calls for 11% organic revenue growth, 17% cash EPS growth, both of those consistent with our midterm targets, although we do expect, again, our print results to be negatively impacted by macro headwinds. Finally, we do expect some upside in 2025 from our capital allocation and corporate development activities as we work our way through the year. So with that, let me turn the call back over to Tom. He'll provide some additional details on the quarter and on our 2025 guidance. Tom?

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter and the full year. It was a very good quarter with all of our businesses exhibiting strong organic revenue growth. For the quarter, organic revenue grew 12%, a smidge under our guide due to gift card shipments falling a bit short of our expectations. From a housekeeping perspective, the net benefit from our December acquisition and divestiture activity was offset by a slight shortfall in gift. Our print revenue of $1,034,000,000 was impacted by approximately $20 million of negative macro compared to our November guide, primarily FX, resulting from the stronger dollar post the U.S. presidential election. Normalizing for macro, revenue would have been $1,055,000,000, which is in line with our guide. Digging deeper into our revenue results, during the quarter, we were encouraged to see our same-store sales turn 1% positive compared to a 3% drag in Q4-23. Looking down the P&L, we overcame the stiff macro headwind through strong expense management and a lower tax rate, contributing to the $5.36 per share in cash EPS that we're reporting. Cash EPS increased 21% versus last year. Looking at the full year, organic revenue grew 8% and cash EPS grew 12%. Excluding our Russia business, which we sold in 2023, cash EPS increased 16% despite $65 million of negative revenue macro in 2024. These strong year-over-year results are further reinforced by the healthy, consistent, sequential quarterly growth in revenue, EBITDA, adjusted EBITDA margin, and cash EPS throughout 2024, which positions us well entering 2025. Continuing with our performance highlights, new sales during the quarter and full year were exceptional, increasing 36% in Q4 and 22% for the year. For the quarter, corporate payments and vehicle payments sales increased almost 40%, and for the year, these two segments grew sales a little over 20%. There is no better testament to the quality and value of our products than to be able to consistently generate sales to new customers. To sum it up, 2024 was a great year as we were able to generate strong top and bottom line growth, increase margins, and significantly grow sales. Turning to our segment performance and the underlying drivers of our revenue growth, corporate payments revenue was up 26% during the quarter and increased 20% for the year. As expected, some one-time deal-related synergies contributed four points of growth to the quarter. During the quarter, our direct business grew 28%, excluding the one-time synergy, led by growth in full AP. Our full suite of high quality payment solutions continue to sell extremely well with sales up 29% this quarter. I want to take a minute to highlight that we won the full AP business of a large global enterprise client that was already using our vehicle payment solutions. This is a terrific example of capturing the overlap in our customer base. In addition, up to now, our focus has been selling our full AP solutions to middle market customers. but the addition of this enterprise customer has the potential to unlock additional TAM for us in the enterprise segment. Lastly, the business's KPI fundamentals remain solid, with spend volumes increasing 22% in the quarter and card penetration remaining stable. Cross-border revenue is up 20% for the quarter and the year, which was led by sales growing 43% for the quarter and 33% for the year. We closed the GPS transaction in December, and we continue full steam ahead with those integration plans. The cross-border space continues to attract more investor attention, and we clearly have a great position in this massive global marketplace. We compete almost exclusively with banks, which control 90-plus percent of all international payment flows. We primarily focus on the global middle market, where we have better technology, superior sales and customer service, and a proprietary network that allows us to have a very high win rate. We continue to develop new products for our clients and open up new geographies to capture more of the large addressable market. Turning to vehicle payments, organic revenue increased 8% during the quarter, which is a four-point improvement from Q3, and for the year, revenue grew 5%. In Brazil, for the quarter, toll tax increased 9% year-over-year, with more than a third of our customer revenue coming from our extended network. Insurance revenue is up over 130%, and we sold nearly 300,000 insurance policies in Q4 alone. We also recently announced signing definitive agreements to acquire Gringo, which is our second deal in the car debt segment. Gringo's super app and national network help consumer and business drivers pay for vehicle taxes, registration, and tickets. The car debt segment is three times the size of the toll market and significantly less penetrated, so it gives us enormous runway to grow. The acquisition is expected to close early Q2 and allows us to efficiently use our cash in Brazil in a leverage-neutral manner. We continue to develop and grow our vehicle payment strategy in Brazil by selling more tags and providing use cases related to vehicles, all delivered via a comprehensive app. Our strategies and execution are working as evidenced by organic revenue growing 20% for the quarter and 18% for the year. Our brand, sales coverage, and value-added products enable the business to be a meaningful driver of total vehicle payments growth going forward. In international vehicle payments, revenue grew 12% for the quarter and 11% for the year. This business has been a consistent performer despite some pockets of recent economic softness in Europe. Our consistent strong sales, array of products and channels, and geographic diversification drives these consistent results. In the U.S., our digital and field sales efforts are improving as we continue to see growth in applications, approvals, and starts. During the quarter, sales increased over 60%, which includes significantly expanding our service offering with a large corporate customer. We've now lapped the drag from lower late fees, allowing these new sales to flow through into revenue. Lodging organic revenue for the quarter improved to 1% compared to down 5% in Q3. This quarter benefited from an improvement in same-store sales in our workforce business, a trend we expect to continue throughout 2025. During the quarter, room nights increased 23%, led by the workforce business which was particularly active in response to Hurricanes Helene and Milton. Certainly a significant topic of interest is the impact to our business from the California wildfires that began in early January. We are supporting the FEMA activation in our workforce business and the needs of displaced policyholders through our insurance business. In January alone, we provided approximately 42,000 rooms to emergency workers and displaced homeowners. It's too soon to estimate the impact this catastrophe may have on 2025's results. However, we are focused on making sure our network is able to support the recovery efforts, and we extend our support to all of those impacted by this tragic event. In summary, we're super pleased with the performance of our business in 2024. Earlier in the year, we called out our problem children. lodging, and vehicle payments, and those businesses are continuing to improve. Meanwhile, our corporate payments, cross-border Brazil, and international vehicle payments businesses performed exceptionally well, which demonstrates our durable earnings growth and cash flow generation. Now, looking further down the income statement, fourth quarter operating expenses of $546 million increased 6% versus Q4 of last year. There were a handful of unusual items recognized in the quarter that essentially met out against each other that I'll quickly tick through. First, during the quarter, we recognized $120 million pre-tax gain on the sale of our merchant solutions business. Second, in connection with our annual goodwill impairment analysis as required under GAAP, we recorded a $90 million non-cash impairment charge related to the pay card business, which is part of the other segment. Third, we recognized $11 million in deal termination fees And finally, we recorded a $10 million one-time stock comp charge. Note that the after-tax impacts of all of these unusual items are excluded from cash EPS. In addition to these unusual items, this year's acquisition and divestitures added approximately $30 million of net new operating expenses in the quarter. Excluding the unusual items in the M&A activity and after normalizing for the lower FX rates, Operating expenses increased approximately 5% versus Q4 of last year. The increase was driven by higher transaction and sales activities to drive future growth. Bad debt expense was flat versus last year at $22 million, or four basis points of spend. Adjusted EBITDA margin in the quarter was 55.2%, up 100 basis points compared to Q4 2023. On a full year basis, adjusted EBITDA margin increased 120 basis points, excluding our rush of business. Despite the adverse macro environment, we were able to generate significant positive operating leverage driven by solid revenue growth, disciplined expense management, and synergies realized from acquisitions. Interest expense this quarter increased 3% year over year due to higher balances related to capital deployed during the year, partially offset by lower interest rates. Our reported effective tax rate for the quarter was 36.4%. The effective tax rate is approximately 15% higher due to the aforementioned goodwill impairment and sale of our merchant solutions business, as well as a non-cash discrete tax provision related to a prior tax plan strategy. Normalizing for these items, our effective tax rate for the quarter was 21% versus 23% in Q4 of last year, with the decline driven primarily by stock option exercises and tax planning strategies. Now, turning to the balance sheet. We ended 2024 with a balance sheet in excellent shape and a leverage ratio of 2.75 times, which is flat sequentially despite the acquisition of GPS in December. In January, we expanded our securitization facility to $1.8 billion and extended the maturity by three years with slightly better pricing. We are also in the process of raising another $500 million of term loan B debt, which we are structuring to be interest expense and leverage neutral by using the proceeds to pay down the revolver. Our capital allocation in 2024 was once again balanced, and we deployed $2.6 billion during the year, which is comprised of $1.3 billion for the repurchase of 4.2 million shares and $1.3 billion related to acquisitions, improving our position in payables, cross-border, and Brazil. Looking forward into 2025, our first priority remains M&A, and the M&A pipeline is robust. We'll look to acquire businesses that deepen our position in our three core operating segments, with a particular focus on corporate payments. We have nearly $1.3 billion authorized for share repurchases, which provides ample capacity to repurchase shares. Now, let me share some additional information on our 2025 full year and Q1 outlook. We established the fuel FX and interest rate macro assumptions based on the respective forward curves when previewing our 2025 earnings on our November earnings call. The January forward curves have significantly worsened since that call. Specifically, fuel prices are approximately 8% lower, interest rates are approximately 25% higher, and the U.S. dollar is significantly higher, as evidenced by the Brazil FX rate being 10% lower. To help gauge the magnitude of these recent moves, If the macro ends up being consistent with the October forward curves, annual revenue would increase $136 million and cash EPS would increase $1.19 per share. While the current lower macro assumptions may be transient as markets adjust to the policies of incoming government administrations in the U.S. and internationally, we maintained our process for estimating the macro by using the January forward curves. Our outlook in 2025 projects both print and organic revenue growth of 10 to 12%. We're estimating cash EPS to also grow 10 to 12%, which is $21 per share at the midpoint. Normalizing both revenue and cash EPS for the macro headwind I just described, we'd be at our November preview. So to sum it up, the only thing that has changed since our last call is that the macro has gotten significantly worse. But on a positive note, our confidence around our core business performance has increased, which is why we're maintaining our initial financial estimates, excluding the macro. Below EBITDA, we're expecting net interest expense to be between $350 million and $380 million, the tax rate to be between 25.5% and 26.5%, and weighted average shares to be flat year over year. Related to capital allocation, Our forecast assumes that approximately $1.5 billion of free cash flow is used to pay down debt, which provides some earnings upside opportunities should we deploy capital for M&A or buybacks. From a segment perspective, we're expecting the following revenue growth rates, corporate payments, high 20s, print, and high teens, organic, vehicle payments, low single digits, print, and high single digits, organic, lodging, low single digits print, and organic. Related to the first quarter, we expect print revenue to grow 7% to 9%, organic revenue to grow 8% to 10%, and cash EPS to increase 9% to 11%. On a constant year-over-year macro basis, revenue is growing 13% and cash EPS is increasing 17% at the midpoint compared to the first quarter of last year. We're projecting revenue growth to increase in the remaining quarters as we execute our business plans and lap the higher FX rates from the first half of last year. In addition, first quarter revenue growth is impacted by a tough comp related to last year's gift revenue. I'll also note that the volatility in FX rates so far this year creates some uncertainty regarding the ultimate macro for the quarter. We've provided additional details regarding our full year and first quarter outlook. in our press release and earnings supplement. So now, operator, we'd like to open the lines for questions. Thank you.

Thank you. We will now be conducting a question and answer session. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question comes to the line of Tianxin Huang with J.P. Morgan. Please proceed.

Hey, thanks a lot. And, uh, I'll say up front, Tom, all the best on the transition to your next role here. On my questions, it sounds like not a lot of surprise organically, really just gift, a little bit of a push out if I heard that correctly. But across the segments in 2025, it looks like you're looking for a nice acceleration in vehicle payments to the high single digits from the mid single digits in 24. So what's driving that? How much visibility do you have? I know sales has been Good, but just hoping you could break that down for us a little bit. Thanks.

Hey, James and Ron, good to hear your voice. Yeah, you got it right. The guys assume high single digits, and it's really two things. One, Brazil is still super strong, and two, we kind of turned the corner on the USDA program, so that's gotten a spin better, so it inches up over last year.

Okay, good. Good to know. And then really quickly on Gringo, interesting deal. It triples your TAM, as you said. What more can you tell us about the financial profile of this business? I think you talked about a 30% grower on the release, but any other details you can share here?

Yeah, it's a decent size if you combine it, attention, which we will with the thing called BAPE from last year. Together, the revenue will be a little over 10% of Brazil in total, obviously growing, you know, much faster. So that's point one. Point two, the exciting thing is both the growth rate and the early days. I think it's the 5%, 7% penetration rate of people digitally basically updating registrations and paying for fines. So the runway, it's super early innings. So the size of it, the early innings, you know, two of the decent businesses, if you will, trying to do the thing. And then the last one is there's 5 million active users per month. So the ability to kind of show them the rest of our stuff is super exciting to us. So it's a But we think a big upside to Brazil.

Yeah, that sounds like a good fit.

Thanks for taking my question. Thank you. Our next question comes from the line of Sanjay Sakrani with KBW. Please proceed.

Thank you. Maybe just to follow up on Tinge's line of questioning, appreciate like the macro is sort of weighing against the results, but maybe we could just talk about what could drive the upside from here. You know, I know you guys mentioned buyback, M&A, but is Gringo in the guide now for 2025? And just any contributions from some of these priorities or initiatives that you mentioned, Ron?

Yes, Sanjay. Hey, so no is the answer to Green, though. It's not closed, so it's not in the numbers yet. So I think you're right. I think the upside here would either be the macro pivots, again, like it did in the last 60 days, for your second point of capital allocation. So the guy we have assumed is really just paying down debt, which we ultimately won't do that. So I'd say those would be the three things, adding Ringo, the macro pivoting back a bit our way, and us using capital to buy earnings or stock.

Yeah, and one thing I'd also add, we've been conservative on the same-store sales assumptions and kind of just assuming that it's flat.

So when the reading is why the dollar is so high and inflation is sticky, it's because the economy has been strong. So that's also something that if we saw same-store sales in those individuals, of upside as well.

Right. And then just to follow up, maybe on corporate payments, I know, Ron, you talked about there's still some work to be done in terms of pruning. Maybe we could talk about where that might occur, how that could impact the business. And then these initiatives seem really exciting, especially the multi-currency account product. I'm just curious, when does it fully scale to a run rate that's material? Thank you.

Yeah, on the pruning question, not shockingly, it would be small or non-core assets that don't fit in corporate payments. So I don't want to call them out, Sanjay, but we have two or three assets that we're looking at that may go. Yeah, and the second thing is the priorities of things that we're on are super exciting. We're live with that. MCA, multi-currency account product. We've got it across a bunch of currencies and stuff now, and we're selling it. So I think as we get through this year and the exit, it could be a big deal, not only in terms of revenue acceleration, right, because we'll learn flow on the deposit, but, again, I think it could attract, you know, different kinds of clients. So, for example, like institutional clients, right, that invest large amounts of money and run operating funds, for example, internationally. So not only is it good to maybe go back to our base collectively, but I think it opens up some related segments that we haven't done well with so far. So pretty exciting.

Great. Thank you.

Thank you. Our next question comes from the line of Andrew Smith with Citi Global Markets. Please proceed.

Hey, Ron. Hey, Tom. Thanks for having me on the call here. Great to see the new sales momentum. I was wondering if you're seeing any benefit from some of the sales changes you've made, the reorg, the rebranding, obviously hiring a CRO. Those things are relatively recent, but has there been any benefit there, or is it sort of existing business momentum that's driving things and more to come? I know you mentioned doubling down the U.S. It seems additive, but just curious on these sales initiatives. Thanks so much.

Hey, that's a good question. I'd like to give credit, but I would say no. I would say still early days. The contribution so far from our new guy has really been the team and staffing. He's already brought across, you know, three or four, I think, kind of pros that manage kind of Zoom sales and Teal and RevOps and stuff. So kudos really to upgrading, I think, our staff. The big acceleration, the 36% number, actually was kind of, you know, normally we target kind of 20. The budget problem for the court was 20. We actually had three elephant sales that happened in Q4 that you can tell were quite significant. You know, one of them I called out of my script was in the payables. We contracted, we signed our first enterprise payables account, which was a pretty big deal and sale. And I was kidding before we got on to tell people that that single new account will have spend equal to the size of our entire Tamarang business that we paid $400 or $500 million for. So some of the elephants that we got in the portal were quite big.

No, that's great to hear. Maybe I could double-click on that, the tables enterprise win. To go after that enterprise TAM, are there product adjustments or go-to-market motions that need to be updated? Maybe walk us through if there are things that need to happen to access that TAM, because I know sometimes capabilities can differ between different size clients. I'm just curious there.

Thanks a lot. That's a good question, too. It's kind of a two-part answer on the The product or platform side, no, we're kind of okay. The product and capability, we have a warm sign for enterprise. On the go-to-market, the market motion, yes. We're going to rely on some kind of big partners, things like SIs or some big consulting firms to walk us into kind of the senior management of some of those enterprise accounts. which is how we basically got this initial one contracted. So, yeah, we've got a couple of relationships that are making introductions now into these super-duper big accounts and us coming in saying that we've got a solution ready to go.

Got it. Thanks so much, Ron.

Thank you. Our next question comes from the line of Andrew Jeffrey with William Blair. Please proceed.

Hi. Good afternoon, guys. Appreciate you taking the question. Ron, a couple questions actually on corporate payments. First of all, can you talk a little bit about sort of your view of Corpay's right to win among enterprise customers? I understand the deal he signed this quarter was with an existing customer. And sort of just from a go-to-market perspective, competitive, you mentioned banks, and an economic standpoint. Can you frame up for us what, you know, further wins and or investments in that business might mean for the long-term growth trajectory of corporate payments, top and bottom line?

Yeah, it's also a good question. I mean, the TAM, you know, is crazy to size, right? When I quote for you that this single new enterprise contract has a spend profile equal to, you know, a business that took 20 years to build and has, I think, 1,500 customers. So, you know, a handful of these, you know, super giant enterprise accounts are, you know, would be crazy. The win thing really comes from, I think, a couple things that were advantages. One, again, is the tech, right, that we built. really an advantaged way to pay all these different modalities. And then second is really, again, the virtual card network that monetizes, that creates money, right, for both sides here. And so we're just way ahead because we've been at it a long time in terms of the size and the quality of that network. And we can basically promise, if you will, these new prospects that we can monetize more of their spend than other people can. And so when you've got tech that works and you've got an economic advantage, and then lastly, remember, we have dedicated people just selling this. Our banks are focused, as you know, on lending and treasury and stuff. And so having, you know, grown-up senior people that can go in and articulate, you know, why us, I'd say, would be the third place. So a big advantage, yeah.

Okay. Look forward to learning more about that. And then, Could you give us an update, and I apologize if I missed it, Tommy has said it, as to what portion of the full-stack AP business is card attached today, and maybe talk about plans to monetize ACH, and maybe those plans are even more pronounced now as you move up the market in enterprise customers, just thinking about longer term how that business monetizes even better than it is today. Okay.

Andrew, if we caught the question break, we've got to skip down a little bit.

I think you're asking about what's the penetration level within the full AP, the card penetration level within full AP?

Yeah, exactly.

It stays consistent right around that 10%, 11%. Okay. That's an average with a high degree of variability. Averages can sometimes be dangerous when there's a fair amount of variability. There's some customers that it's 2-3x that, and then there's other customers that are smaller than that. It just depends on the nature of their AP and how it aligns with our merchant network. But on average, it's right around that 10-11% range and has stayed steady.

And just from a monetization standpoint, and we could talk about this offline too if it's more appropriate, just trying to understand how you monetize better going forward, you know, around non-card in particular.

Yeah, I mean, the good news on that one is there's a model, right, of getting paid, right, for ACH or ACH+, where we share, you know, more data or actually move money more quickly. And same on the subscription side, our products. um it's pretty good now that we've had for a couple years we call it core pay complete um and so having software that actually is helpful particularly in the front end right of automating the process like getting you know approve approvals and digitizing invoices you don't get lost a lot of that um workflow value, basically, we don't get paid for it. So we're testing our way into getting paid more for both of those things. Both of those things obviously have value to clients, and we've historically done very well with penetrating, so we've got plenty of money, but I think you'll see us do more of that.

Thank you. Appreciate it.

Thank you. Our next question comes from the line of Darren Teller with Wolf Research. Please proceed.

Hey, guys. Thanks. Maybe just on the – I want to follow up with another question on the corporate gaming side for a minute just because he's such a big contributor. Number one, I mean, I know he was asked about divestitures before, but in terms of having the right mix of assets, you know, Ron, number one, are you where you want to be? And then number two, maybe just give us a little more granularity on what you expect the building blocks to this strong growth rate to be for the year. When you think of whether it's, you know, the AP businesses or the cross-border businesses or the T&E, et cetera, help us understand a little more of a sort of sub-segment level expectation and where you see yourself winning most in that segment. I think we can start there.

Yeah. Hey, Darren. So kind of on the two-part question, Part A, the mix of assets. I think I said, you know, that we're kind of there. Let's say the one thing that we called out today is this MCA, this multi-currency account product and cross-border. I mean, simplistically, that business has been a disbursement business, right? We move client funds, right, to beneficiaries. So this idea of effectively, you know, depositing and holding, you know, in the native currency deposits is an advantage, makes it a better product, right, for clients. You don't have to go to Germany and open up some local bank account. We can just hold the currency for you, right, in the market that you're in. So I think that that would be kind of the only significant product ad that we're looking for. On the outlook of the business, again, we had a crazy good Q4. We're guiding that thing again to high teams, approaching 20% again here in 2025. I'd say both businesses are in that neighborhood. It's not like... One of them is Carrie, the others I said they're pretty similar in terms of the growth rate. And the great news in the thing is it's not hard to model for us. We sold a lot of the business already back in, you know, 24. It's going to get implemented in 25. And so, you know, the visibility that we have in the forward roadmap is pretty good. And then D, the retention rate, as you know, in that business, are a bit above our 92% line average. They're probably in the 95% kind of retention rate. So, look, it's a pretty predictable business. And I think I said this to you privately, like, there's just so many prospects. Like, you know, we've got a $600 million US payable business with 5,000 mid-market clients. There's 250,000 in our sales prospect database. The opportunity to make the business two, three, four times bigger, that's what we're chasing.

There's nothing in the screening or divestiture category that's in the corporate payment space.

I think Maybe Sandra also had similar questions. We just wanted to make sure there was no confusion there. The comments were on the data and the paragraphs were outside of the same.

Makes sense. All right. And just my quick follow-up would just be on margins for a minute. When considering just the U.S. sales effort and the build-out and the investments, I mean, is there any implication about limiting margin expansion? Maybe just give us a little color on what you're expecting for either the margins over the next year or two if you can as you build that in.

Let me start and then Tom can jump on. So we're kind of planning a relatively flat in 25 on a print basis. And a little bit of that is the macro compression, right? The currency taking 100 billion, you know, revenue low kind of presses things. Two is we're absorbing two pretty big acquisitions that have lower, certainly lower than our line average, which means our core business outside of those is actually coming a little bit better. And then third, we just decided to spend a bit more money on sales and marketing to try to make sure we can get the growth, we can get the sales. which we're planning to be up another 20% this year. So we just felt that it was the best balance. I mean, if you humor me, Darren, and go to a macro neutral where the world is the same in 25 to 24, you know, the print that we're sharing is 13 to 17. 13 and 17. So it does get lost a little bit with this wave of crummy macro, but kind of underneath it, the headline is the business is performing and outlooking to perform pretty well. I think the only thing I would add to that is what we see is a quarterly acceleration of the margin. Some of that is as we last some of the negative macro that Ron referred to, it's also as we start to harvest some of the synergies from the two acquisitions, particularly GPS, in late 2024. And as we also see some acceleration as lodging and vehicle payments start to get further into the black.

So all of those things kind of give us accelerating margins of 2025 based on our projection.

Very helpful. Thanks, guys. Appreciate it.

Thank you. Our next question comes from David Conan with Baird. Please proceed.

Yeah. Hey, guys. First of all, just a question on the lodging business. I was just looking at yields. The last seven quarters, the yields have kind of been in the $13 to $15 per room night. And this quarter was $11.40. And I'm sure it has to do with the mix. But maybe describe that a little bit and then how you kind of see the mix in the yield into 2025. Okay.

Dave, you hit it.

I mentioned in my prepared remarks in terms of the impact of Hurricane Feline and Milton, that draws a fair amount of what we call FEMA activation business, which has been a very low spread for us. And so that's what drove the overall yield down. We'll see a little bit of yield compression as we now support the California wildfires. The hurricane support has actually declined quite a bit here in January, but that's being replaced and then some by the California wildfire support, both within the FEMA activation as well as within the insurance business. The insurance business has a bit higher pay grade, and so the overall impact may not be as high. There wasn't as much insurance business associated with the hurricanes as more of the FEMA piece. It's mixed, as you said. I think going forward, once that normalizes out, I think you see it back to the line average of what you saw in the first three quarters of 2024.

Yeah. Okay, thanks. And just a quick follow-up. I know you mentioned some kind of one-off benefits in corporate that helped to drive the 26%, but maybe bridge kind of from 26% Q4 down to high teens the next few quarters.

Yeah, David, hey, it's Ron. So it's really two things. Think of that as kind of a normalized high team 20% business. The two happies in the 26th was a big kind of one-time synergy that we negotiated, and the second was the channel. The comp and the prior year and the infamous channel business that was always a detractor turned quite positive. I think we said that we are going to turn the channel business, and, in fact, we did. So those two things accounted for the vast majority of the list above 20%.

Gotcha. Thanks, guys.

Thank you. Our next question comes from Ramzi El-Assad with Barclays. Please proceed.

Hi, guys. Thanks for taking my question this evening. I wanted to also ask about lodging, which is recovering nicely. The 25 expectations are still below the longer-term segment kind of growth profile and trend. I'm just wondering if we should expect that lodging business to revert over time back up to the normalized historical growth rate? Or has there anything changed in that business in terms of mix or growth algorithm which might cause it to grow slower than historical precedent?

Yeah. Hey, Ramsey, that is a good question. So the first thing is just How did the lodging business kind of get bad? So let me just start there. It got bad basically via same store sales. we had a swath of clients basically kind of use us a lot less. And so it took that volume and revenue out and stuff. And second, what it did is it drew a bunch of our sales people effectively to, you know, to run over and try to resell and help those clients and stuff. And so anyway, that's the problem today. The recovery in both Q4 and our guide is the same store sales had basically flattened. It was kind of minus 10% in Q4 of 23, and it's gotten basically back to flat in Q4 of 24. So as we thought, as I had hoped, it was transient. with a swath of clients. And so now we're back into, okay, let's, you know, student body, right, let's get the salespeople back getting new clients and building volume at the top of the pile. So that's the assignment. So assuming we don't have another fire drill for same-store sales and the salespeople can take this very useful, valuable offer we have out, we would expect acceleration as we run through And I said it before, it may be the single best offer we have in the company, like for these workforce people. It's just a killer offer of stay anywhere in the hotels they want to stay, get 25% off the lowest available price. Don't worry about how your people pay for it. We'll handle the employee, the traveler paying to give it back to you. We'll report on it, reconcile it all. Like, it's an incredible service, unique service that's less than free to companies. And so I continue to believe if we can go tell, you know, new businesses that they'll take the service.

Super helpful. Thanks, Ron. Follow-up from me on the expanding payable business into Europe. Similar question as one before about moving into enterprise with corporate payments. What do you need to do there? I know you've got assets in Europe. Do you have to hire? Do you have to build that technology? Can you cross-sell to existing customers? Just a little more color on the build-out to get that product overseas. Thanks.

Another really good question. This is super exciting. We're trying to take One of our go forward businesses and get it beyond the USA. And so logically for us, the UK and Europe is a place to go because we have assets there. So the good news is the new cloud tech, front end tech that we created for payables works already. It works. We actually have some clients already on the platform in the UK. So the major piece of product work we're doing is we're connecting that to our cross-border product because we want, I want to make sure we can offer, you know, disbursements that are obviously, you know, cross-border as well as in-country because way higher percent of businesses there, right, move money across borders. And so that's kind of the product, is take a product we have that works and attach really our cross-border to it. So the real assignment is to go to market. So we're going to use a combination of our clients and some of our people there and stand up a team of specialists to go take this product, just like we do here in the U.S., to the clients there. So I'd say by the turn, Ramsey, this summer, we'll have some feedback on whether we can make a business go, a payables business go in the U.K. like we have here in the U.S.

Thanks so much, and best of luck to you, Tom. Nice working with you.

Thanks, Ramsey.

Thank you. Our next question comes from Nate Sevenson with Deutsche Bank. Please proceed.

Hey, guys. Thanks for squeezing me in here. A few questions on lodging. So I figured I'd ask about the other problem child, so North American Fleet. I know the last quarter we talked about that business returning to positive growth this year. And Ron, I think earlier on the call you mentioned that U.S. vehicle payments has started to turn the corner. I guess the other thing that stood out was that U.S. sales number in vehicle payments, which I think was 60% in 4Q. But I guess just taking that all together, hoping for an update on your thoughts and visibility on that business as we sit here in February for the rest of the year.

Hey, Nate. Thanks for bringing up the second problem child. Yeah, look, the good news is we're kind of done with the drama, you know, that we took you guys through from two years ago and the wall was made. So that's fortunately all behind us. And so the assignment at this point is simple. It's just make sales. The products work well. The clients are happy. We have improving retention in the business. The credit's in control. So it's as simple as, okay, we're at this baseline. And so the guide that we have, if you look at it quarterly, sequentially, has that business ticking up. I think, I love it in front of me, it's exiting at 5% or 6% in Q4 of this year, 25. And so the single question to ask is just, okay, Ron, how are you adding sales and starts as you run through the quarters. And the answer is if we do, which is why I hired a guy that knows how to make sales to oversee this, if we do, that business will recover because we'll have dramatically more sales than losses. And so the good news is the assignment is like simple, straightforward, clear. Now we need to just go execute it.

Got it. That's very helpful. I know there was a question earlier about Gringo. I think that's an interesting acquisition. So I don't want to ask about that again, but maybe I can use that topic to segue maybe into a broader update on the consumer vehicle opportunity that we've talked about. Obviously, you've got a ton of things going on in the business these days, but still think that consumer vehicle opportunity is an exciting one. So maybe an update on how things are going in the U.K. with pay-by-phone and maybe what the roadmap for that sort of new business opportunity looks like from here for expansion of the U.K. and the U.S.? ?

That's a good follow-up. So I think it's probably pretty consistent with what we reported 90 days ago, which is Brazil is just doing crazy great. Like if you look at our budget for 25 in Brazil, half of the revenue growth, so if you took the growth from 24 to 25 in Brazil in revenue, is from non-toll growth. So even though we're planning 9% tag or toll volume growth, the driver of that thing being high teams, half now of that frigging growth is non kind of core product toll. It's the other product. So then when you add these assets that effectively double the number of users, customers that can use the full suite of stuff, I'd say, My report would be it's better, dramatically better than we thought it could go. kind of that the UK I say it's still slow and super early days the tech bill you know took us longer and simplistically if you think about it what we needed to do there was take the pay by phone two million digital users and get that app connected to the various networks so like the fuel network the ED network etc the maintenance network registration network so we spent an awful lot of time in the kitchen making the product work so that when we went out to the pay by phone users we actually had a product that actually did a bunch of stuff and so not not a ton to report on the market side so I'd say same thing give us call it till the term this summer and we'll have a better fix of whether you know there's a take Again, we have great results in one place. It makes us believe we could get them in the second place, but we don't have them yet. And maybe one add-on on Gringo that I thought of after Ron had answered that initial question.

The question about price was an ask, but we're going to disclose that in our 10-Ks. We might as well just kind of comment on it here. We paid around $140 million USD, which is a little less than four times forward revenue. which we think is pretty attractive, but it was all in Brazilian, essentially almost all in Brazilian currency, which we had in markets. It was a really efficient way, particularly with the currency depressed, for us to use that cash down there rather than bring it back and it gets evaporated on us just because of the decline in overall FX rates.

From that standpoint, it was something that we thought was pretty attractive, not only just the business purpose and strategy that Ron described, but also the price of the transaction and the efficient use of our free cash flow down there.

Thanks so much, guys. Best of luck, Tom. We'll miss you.

Thank you. Our next question comes from Andrew Bowe with Wells Fargo. Please proceed.

Hey, guys. Thanks for taking the question. I know that you've called out and you've made very clear the macro impacts of the EPS number, but maybe if we can kind of just separate fuel and FX rates, things like business activity, confidence amongst your client base, bookings, how would you characterize what you're seeing today and what you saw in the fourth quarter? Because there's various data points that suggest Optimism is picking up, and I'm just wondering how that could kind of translate to your outlook.

Yeah, hey, Andrew, so we get at that and think about that through the the trends that we call out, so I don't want you or others to miss that the best news in Q4 was really the improving trends sequentially, right? That organic revenue, you know, got backed up, right, to 12%, that same-store sales and health of our clients turned positive, right, at plus 1%. Sales growth and sales production was record. We've never sold as much in a quarter as we sold in Q4. And retention stayed. So that's the math of the business. Like this isn't a very complicated business. If you sell a lot and you keep a lot and your clients stay healthy, you grow. And so the headline to you guys is that that's what's spilling into running here into 2025. which allows us, we took our organic growth consolidated to 11 at the midpoint because we think we've got decent visibility into those trends. Effectively, the macro, like how the rei or the pound converts is kind of, in some ways, for us, it's just an afterthought. We look at what the numbers are, and we run the conversion. So you put that together with just the amount of sales that we have in 24, of which we get more than half of the benefit from those in 2025. you've got half of your growth effectively already there, kind of already happening, exiting and filling into 25. So, look, things could happen, but I'd say our confidence in the basic businesses is pretty high. Yeah, one of the things, Andrew, just be careful, when we talk about macro and negative macro, it's a very narrow definition of macro.

We're not talking about the broader economy in terms of what we're seeing in terms of spend volume and card activity and things like that. It's really our definition of the macro that we normalize for, and if you dig into it even further, it's FX, and if you double-click into that, it's the Brazilian currency.

It's down 9% year over year. It's not a spillover in terms of business activity that we're seeing out there.

It's really just a function of some very kind of unique and isolated things in terms of how we're defining the macro.

Of course, and I'm aiming to kind of separate the two. And just one housekeeping note, the M&A contributions you're calling out in 25, 131 million in the bridge – If we look back at the deck when we did our M&A call in the summer, I know that you're pointing to $200 million of revenues for GPS and Paymering. Obviously, I think Paymering had roughly $25 million, I think we were calling out for $24 million. Just trying to make sure if that $200 million kind of pie-in-the-sky goal is still the right number for those two assets.

It is, and I wouldn't say it would be pie in the sky. I'd say it's the number we're going to get. So that is the, Andrew, is the gross number. So if you look at the print this year for those two businesses, they will print over $200 million in revenue. The net against that is we dispose of a business, a merchant, digit business, And we got the benefit of six months of pay meringue in 24. So really, it's the net number, right? You could call it 200 minus the two things I just named. You know, basically takes the thing down to wherever you said, 130.

All right, great. Good luck, Tom. Thank you. Thank you.

Thank you. That concludes the allotted time for questions. I would like to turn the floor back over to Jim for closing remarks.

Yeah, hey, guys. Thanks for your interest. There were still some questioners who we didn't get to given the timing, but you know where to find us. Let me know what you need. I'll be around tonight. Thanks, guys.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.