Corpay, Inc.

Hello, everyone, and welcome to today's Corpay Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press the star and 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Jim Eglseder. Please go ahead.

Good afternoon, and thank you for joining us today for our earnings call to discuss the second quarter 2026 results. With me today are Ron Clark, our chairman and CEO, and Peter Walker, our CFO. Our earnings release and supplemental materials for the quarter are available on the investor relations section of CorpA.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call along with the reconciliation of those measures to the most applicable GAAP measures. Our remarks today will include forward-looking statements about expected operating and financial results, strategic initiatives, acquisitions, and divestitures, among other matters. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Some of those risks are mentioned in today's press release and on Form 8K and can also be found in our annual report on Form 10K. These documents are all available on our website and at sec.gov. So now I'll turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay, Jim, thanks. Hello, everyone, and thanks for joining today's call. Up front here, I'll plan to cover three subjects. First, provide my take on Q2 results. Second, share our updated guidance for 2026. And then lastly, I'll speak to our future and where we're headed. Okay, let me begin with our Q2 results, which were very, very good. We reported revenue of $1.34 billion. That's up 21%, coming in $45 million above our expectations. Q2 Macro, super favorable to us. It contributed about $30 million more than our expectations, meaning about $15 million of the beat was just underlying performance. We reported cash EPS of $7 on the button. That's up 36%, setting an all-time company earnings record, so it feels good. Our two biggest corporate payments deals, the Alpha Acquisition and the Avid Investment, contributed 39 cents of cash EPS accretion in the quarter, spot on our target. Q2 Fundamentals, very solid. Overall organic revenue growth, 10%. That was led by our corporate payment segment at 16%, and our vehicle payment segment at 8%. So taken together, our two biggest segments delivered 12% organic growth. Operating trends also very good in the quarter. Retention remaining steady at 93%. Year-over-year sales or new bookings, terrific, growing 30%. And same-store sales in the plus column, plus 1%. These trends are super helpful and bode well for continued performance here in the second half. So all in all, really an outstanding quarter, an outstanding first half, really against both our expectations and maybe more importantly against the prior year. All right, let me make the turn to our 2026 outlook. We're raising full-year revenue guidance to $5.3 billion at the midpoint. The bridge as follows. First, we'll flow through our Q2 $45 million revenue beat. Second, we'll increase full-year revenue guidance another $15 million based on expected better macro and business fundamentals. will net out $40 million related to our expected ethics divestiture, and there we're assuming a September 1 close. We will continue to outlook 10% organic revenue growth in the second half with our corporate payment segment expected to maintain a mid-teens plus organic growth and our lodging segment set to accelerate to mid-single digits. On the earnings side, we're raising full year 2026 cash EPS to $27.35 at the midpoint. That's up a ways from our $26 initial guide at the start of the year. The rest of year EPS bridge goes like this. We'll flow through our Q2 cash EPS beat of 45 cents. will raise the rest of year cash EPS another 20 cents and will hold the EPICS divestiture EPS impact neutral as we plan to use the deal proceeds to repurchase CPay shares. Look, this higher full year 2026 guidance implies good things. 17% full year revenue growth. 28% full-year cash EPS growth. Cash EPS for 26 up about $6 from 2025. Cash EPS exit rate in Q4 exiting over $29. Full-year cash ETA approximately $3 billion and $1.8 billion of free... for a year free cash flow, which is approximately a 7% yield. The drivers, really, of this 26 performance are a combo of a few things. Obviously, a very favorable macro environment for us, particularly the first half, the two big accretive corporate payments deals, and mostly just strong underlying fundamental operating performance. So, look, Taken together, we've got a lot of confidence in the outlook. Okay, so last up today, I do want to share our thoughts on the future, the road ahead for the company. We did post an updated investor presentation today to our website. It lays out our direction along with our growth algorithm. And I do want to say we've really never felt clearer about the way forward or even more excited about the prospects of the company. So we're really in a great spot. So let's start out with the portfolio. We have said repeatedly that our plan is to create a simpler company with fewer bigger businesses. You should expect to see us divest more subscale businesses like today's EPICS announcements. and really double down in three primary areas. So first, spend management, which is our card and AP businesses. We'll do more there. We'll head towards the procurement space more. We'll expand wider geographically. We will make that a bigger business. In vehicle, we'll stay invested in our largest and most advantaged fleet businesses. and we'll also embed fleet into our spend management platform so that our spend management platform can serve the unique needs of fleet intensive companies and their drivers. There's actually a slide, I think it's the last slide in our supplement that lays out our progress there where we're selling our spend platform to both fleet intensive businesses and traditional businesses. So take a look. Last area to double down would be cross-border. Obviously plan to do more there. We're in the process of adding new real-time private blockchain rails. Also investing to build out our global banking and deposit offering. Both of these things we think gain changers for middle market companies. So the portfolio repositioning gives us a $600 billion revenue, Tam, for a $5 billion company today. So look, it certainly gives us the potential to at least 10 times this company to say $50 billion over time. So the second direction for us is to go left, which means we plan to help our clients with their indirect expense decision-making before they approve payments. So we'll help support decisions like the selection of vendors, the pricing of vendors, the terms they have with vendors, the renewal decisions they need to make with vendors, and we'll deliver a set of things to be helpful there. We'll provide some benchmarking data, will provide spend insights. We'll even guide clients on how to negotiate renewals to a better outcome. So, look, we really do aspire to bring more value and go left better helping our clients with the expense management assignment. So, finally, let me turn to our midterm growth algorithm. It remains unchanged. As a reminder, we target 10% plus organic revenue growth, low teens, PBT growth, and over 20% cash EPS growth. The model works, you know, first again, because there's a large opportunity for us to sell into. We do have proven retention and sales capabilities. and we generate a material amount of free cash flow yield. We do expect to have approximately $15 billion of available capital over the forecast period. That's via a combo of our annual free cash flow plus higher debt capacity as our earnings grow. So this capital is what creates EPS acceleration. as we'll either buy back half of CPAY or alternatively we'll buy the earnings of other corporate payment companies based on the relative returns there. So look, in conclusion today, we are obviously delighted with the Q2 performance. We're confident in our raised second half guide. Again, Thanks Ron, and good afternoon everyone. We delivered another outstanding quarter.