Yeah, let's kick it off. I'm delighted to have Corpay CFO with me, Tom Panther. So thank you for making the trip out to Arizona, Tom.
Yeah, glad to be here. Love Arizona.
Great. Just to kick things off, you guys had a handful of press releases come out yesterday. One on an acquisition, one on disposition, and then one on news.
One on me. Yeah. We like to, like, make news all in one big splash, right? So we did announce a couple of things yesterday. So let's unpack each one of those. So first, the acquisition of GPS. That was well telegraphed. We announced that back in June. It was going through a series of regulatory approvals, which we were actually fortunate to get done in 2024. Originally we had kind of anticipated that it would take all of 2024 to get it done, but we were able to move some of those along and get those completed, and so we were able to close on that transaction. We're excited about adding the GPS colleagues to the Corpay cross-border organization, and integration work is already well underway.
So we will be able to hit the ground running and have them, you know, fully in our numbers for 2025. A lot of their business migrated to us by the end of the second quarter. So we can talk a little bit more about that business when we get into the corporate payment section. Then the other transaction that we closed on yesterday just happened to be kind of a paired transaction. It worked out that way. It really wasn't by design, but we had been offered by PDI Technologies to buy our merchant solutions business. You may scratch your head and say, "What the heck is a merchant solutions business?" It's basically POS hardware at truck stops. So probably few of you frequent around the side of the truck stop and go where the truckers pump.
But if you did, you'd see some rather complicated POS systems that are there for truckers to pump when they're refueling. And we've owned that since our acquisition of Comdata back in 2014. It really hasn't been something that's been core to our business at all. We've never really kind of been part of hardware. And so we're able to sell that at what we thought was a good price for how we view the business. Then lastly, my tough decision, I'll underscore to kind of make a professional and personal pivot out of public company life and move to become the CFO of the National Christian Foundation, which is also headquartered in Atlanta, where I've lived my entire professional career. And really kind of came out of the blue.
I didn't anticipate it. It was something that I wasn't looking for. Kind of just had a little bit of an introductory conversation, and then it led to more conversations after that. And really found it to be a unique opportunity for me. Why? Not only is it headquartered in Atlanta, it's part of a Christian organization, which is important to me. It's still in financial services. You probably aren't aware of what they do, but they're basically have $7 billion of money under management and a donor-advised fund. You may be familiar with donor-advised funds in terms of providing donors the ability to make tax-deductible contributions and then gift out of that fund as they're ready. And so that's the core product of the organization.
And so it just provided me the opportunity to kind of step back and say, "Wow, that's kind of a unique opportunity. It allows me to do something." All I've known for 33 years is public company life. And if I've got another good 10 years of work in me, I reflected back and thought, "Well, maybe it would be interesting to take my skills and experience and apply it in a not-for-profit, more mission-service, significant impact-oriented, type environment." So I'm excited about it, and look forward to what the opportunity holds. At the same time, it's tough to leave the Corpay organization. I mean, I feel good about the company and where it stands today and where it's heading tomorrow.
That made it all the harder of a decision for me to leave because I've really enjoyed working with Ron and the people within the organization.
Well, congratulations.
Yeah.
I'm sure.
It's a long transition. We've got three or four months to go. We wanted to be responsible and cognizant of all of the in-flight stuff that I'm involved in, and so we'll do this over an extended period.
Well, you've certainly packed in a lot during your time at Corpay. You got like four or five acquisitions and.
Yeah, strategic review and all that. But that is Corpay. That's just who they are. They're a fast-paced organization that have high goals and achieve them and accomplish a lot in short periods of time. And so it's been an exciting run.
Well, congrats again. All right. Just kind of pivoting back to, I mean, the one part of the press release yesterday, you guys reiterated the Q4 guide for organic revenue and for earnings. But maybe we could just drill in a little bit on the segments, just kind of are the trends in line for what you were calling for, like in the back of the presentation, like lodging, low singles, vehicle payments.
Yeah.
Positives.
Everything from a fundamental perspective is in line with our expectations. Obviously, we know October. We have a decent sense for November and just get a sense of overall business trends. What are spend volumes, transaction levels, room nights, things like that looking like, and all of that looks to be in line with what we would anticipate. We, you know, wanted to make it clear, particularly in light of my announcement that those trends are consistent with expectations. If there is a headwind, and hence the reference to organic revenue and earnings is, as you know, the dollar has strengthened significantly since the election, and the interest rate environment curve is the longer-term curve is steeper than 30, 45 days ago.
And so that's just something we'll have to deal with when we get to the end of the quarter. But the fundamental business remains, you know, in line with what we would anticipate. So still expect a really good fourth quarter and get off the pattern of 6% growth that we've seen over the last three quarters from a revenue perspective. And we'd anticipate, you know, being in that 12%-13% organic range.
Got it. Great to hear. So one of the key topics on the last earnings call was the reorganized U.S. sales force and the.
Yeah.
New chief revenue officer you guys brought in from Paychex. So it seems like a pretty important initiative for the company. So maybe we start there.
Yeah. Well, sales has always been kind of core to Corpay and also critical to just the overall achievement of the growth algorithm that we have achieved over the last couple of decades in terms of just how important sales are. And so by putting somebody in charge who's a sales purebred, a guy whose entire 27 years has been in nothing but sales, he knows sales discipline, sales cadences. He’s very much focused on how to manage and drive the kinds of activities that we're looking for. Mike, Mike comes with that experience. And I can already tell from the conversations that we have and some early observations, you know, how he's bringing that kind of input equals output disciplines into the U.S. sales organization.
So I think it gives us somebody who wakes up every day focused on sales. That's not to say the group presidents don't still have some level of accountability towards sales and still don't have some certain level of interest in sales because so goes sales, so goes their business. But it's additive. It's supplemental. It's, as I said, putting kind of that purebred on top of what we were already doing. I think it'll be something that'll be good for the US business, both the fleet side, the lodging side, and the corporate payment side. I mentioned all three of those because one of the things that we had identified some time ago, even preceded when I first came to the organization, is this whole notion around a lot of our customers overlap today.
Yet they don't hold multiple products. Over 40%-50% of our existing customers could be multi-product users, and only about 10% of them are multi-product users today. So I think there's a real opportunity for us to harvest some cross-sell opportunities. But frankly, we just kind of haven't had the structures or the programs in the company to be able to do that in a deliberate fashion. So what this will allow us to also do is bring some emphasis around cross-sell and the relatedness of those businesses. So Mike's in the early days of standing up some of those capabilities. But it's something that has been discussed for some time and finally pulled the trigger on it.
Got it. We'll be excited to follow that.
Yeah.
So just one, the topic of sales. I mean, the corporate payment segment, you know, continues to put up very strong sales numbers year after year. I think you guys are at like year to date in the high 20s range. So, I mean, where does the high 20s come from? It's such a big number.
Yeah. Well, one, I think it speaks to a couple of things. One, just the size of the addressable market. When we do our market analysis, whether it's on the cross-border, international cross-border side, or on the more domestic payable side, the market's just massive. And our level of penetration is tiny. It's just small, and I don't mean that in the ways of the criticism. I'd say it is an opportunity because you've got, you know, a significant amount of underpenetrated market that frankly today is using cross-border or payable products that tend to be more antiquated, products, generally sometimes provided through bank products or, you know, non-modern type solutions. And so I think one of the reasons why the sales have been so successful is just because the market opportunity is so large.
But we also put, you know, advantage products against that market opportunity. We want them to have a lot of market opportunity but not necessarily have, you know, products that people find advantage. But we do. We have over the last several years kind of knitted together through some acquisitions a suite of products that customers find very attractive, very value-added. They bring both efficiency as well as economics to them when they adopt them. And so I think that makes the sales cycle even, you know, more effective. And then finally, people. A lot of the sales within the corporate payments business, it's a people-based sales model. It's not a digital model or anything, you know, like that because it's much more of a relationship-based business. And so the people that we put up against that, they're experienced people.
They've had more time and tenure with the organization. We continue to add more people to the organization on the sales side. And last year, about this time when we were working on the 2024 budget, we made a concerted effort of, "Let's put more sales and marketing dollars up against the corporate payment opportunity," and it's paid off. And so I think we see that trend continuing. We'll have some even additional success with Paymerang and GPS added to the organization. So we see 2025 looking a lot like 2024.
That's great to hear. I think you were just touching on these points a little bit, but, a common question that we've been getting lately is just, you know, what are the moats of the corporate payments business and, like, how does it continue to compound in, like, the high teens? So maybe we could just, like, recap those briefly.
Sure. Yeah. I mean, so I think one, again, the sales. The sales, if you just kind of think of our simple kind of, you know, model of what's same-store sales doing, what's retention doing, and what's new sales doing. Same-store sales in this business generally is a little flat to up. We benefit from other companies, spend increasing. Maybe we get a little more card penetration on the payable side, or we get a little bit more share of wallet on the cross-border side as we continue to add value, but it's not a huge component of the growth. Retention in the business is quite good, above the line average, so if the line average is just south of 93%, this business would call it, you know, 95%-96%. They're sticky customers in terms of them sticking with us.
So you don't really get 96% because it doesn't go to 100% because you're always going to have some level of fallout, so you really kind of get there with the ability to just continue to sell, and when you sell at the levels that we're selling, call it 20% kind of sales and a little bit of potential attrition that leaks away, then you're left with a business that's growing in the high teens, and so that's just something that you know, we have a pretty good line of sight into that based on kind of the not only the models, but you know, the business practices that we have in place.
Got it. So, just moving to the GPS acquisition specifically, maybe you could just kind of recap, you know, for the audience what attracted you to that business and if, you know, if you still see it growing like 20%-ish next year?
Yeah. It's right down the fairway of what we do. GPS is just like our broader cross-border business in terms of providing both payment solutions in foreign currencies as well as a little bit of hedging capabilities. But they're based in Salt Lake City, more U.S.-oriented versus, you know, our business is probably, we call it 35% U.S.-oriented. This business is probably 75% U.S.-oriented. So it builds in a little bit more of a U.S. presence and a little more upmarket. The cross-border business already plays pretty much in the middle market. Some of these are large corporate-type customers. So, it allows us to work with some chunkier customers that have a bit more size associated with it. But I think the so there, it's just right down the middle.
They do bring a little bit of capability, a few products that we don't have that are more on the fringe, but nothing meaningful. It's more of a scale play than it is a product play. And I think from a synergies perspective, we see that there'll be good opportunities to kind of leverage our balance sheet, which, you know, they didn't have as much of a balance sheet capability in terms of access to capital markets and things like that, to be able to provide maybe more sophisticated hedging solutions to their customer base. And remember, their customer base are already kind of enterprise large corporate customers. So they probably have the wherewithal to handle this.
But up to now, at least through the GPS solutions, you know, if they're hedging, they're using short tenor type solutions and maybe a little bit more basic type solutions, whereas we'll be able to bring kind of the full capability on the hedging side, which I think will bring some useful synergies. Plus we'll just leverage the extensive banking relationships that we have to be able to, you know, extract a few more economics from the transactions than what they necessarily would have been able to extract.
Got it. Well, that makes sense. And I mean, that business already has like pretty attractive margins, like in the 40% range. I know you guys are calling for like $0.50 accretion between GPS and Paymerang next year, but maybe just like high level where the $0.50 comes from.
Yeah. So one, it's just the fact that both of those businesses are growing at the level that they were growing and continue to grow. And then on top of that, you have the synergies that I mentioned in terms of a revenue perspective. From a Paymerang perspective, the acquisition that we closed on July 1 in the payables space, we've already kind of gotten most of those actions underway to garner most of those synergies, starting here in the fourth quarter. Some will run right into next year. But I think we feel like we've got a really good line of sight into achieving those synergies.
And then also just in terms of overall EPS, in terms of the approximate 50% number that we quoted, there'll also be some natural expense savings that we'll be able to achieve in terms of, you know, duplication of certain roles and tech stacks and things like that. So feel pretty good about what we see there and having owned Paymerang for now, a little over five months, that process is well underway on both the revenue and the expense side. And as I said earlier, GPS is already underway as well.
Well, great to hear. The performance of the corporate payments business has certainly been a bright spot and very impressive, so just pivoting to the North American fleet business, I know that you guys have had, you know, a few initiatives kind of going into 2024 and maybe like attrition was a little higher than expected, maybe sales coming in a little later because they tend to come into the numbers pretty quick. But, you know, where has that business been underperforming your expectations this year? It's on the margin, and where do you see it improving next year?
Yeah. Yeah. And, and just to focus out a little bit for the benefit of others, the, the area that's been a little bit soft on us is what we call is kind of our local fleet business. So it's businesses that, that don't haul things for a living, like you'd think a, a, an 18-wheeler. They're businesses that drive around delivering goods and services all day, and they have to use company vehicles to, to do that. And, and it's that business that from a sales standpoint got, a, a bit of a hiccup last year because we tightened the credit model significantly. When we were coming out of COVID, we were seeing through the digital channel a lot of micro, clients, kind of come onto the platform, really. Maybe some of it was fraud, some of it was just bad credit.
We tightened it significantly. The lack of sales last year kind of pours into our ability to grow at the level of the opportunity this year. But we've pivoted all that and tuned credit models and started to diversify our go-to-market strategy beyond just digital to back to some level of field resources and outbound resources, kind of back to where we were 2017 and prior. You know, obviously, I think we hit an inflection point. I can say that. It's all about the pace and steepness of the inflection point from here. Being a finance person, I always wanted it to be, you know, faster and steeper. But at the same time, what is encouraging is that where we've spent money, we're seeing returns.
I'd like to get more returns. I'd like for the growth number to be higher. I'd like for the absolute number to be higher. But we're at least seeing, you know, at the right level of progress. And so I think that business can return back to, you know, a mid to low single-digit grower in 2025. We'll also lap some of the overhang from elevated late fees starting this quarter, where we will have lapped it. We recorded a lot of late fees when these customers were quitting us because obviously they were quitting us because they weren't paying us. But in some ways that was just kind of, you know, revenue that we ended up writing off and elevated bad debt.
And so I think a lot of that has lapped as we cleansed the client base and are back to a more normalized number. So that drag will go away. And now with a year under our belt where we've actually seen some positive sales growth off of a weak number last year, we should see, you know, the level of revenue growth return. And I think you mentioned, Nick, that we do have, you know, a handful of initiatives around, you know, product enhancements, price optimization. And one of the things that people may not realize about this business is you kind of get paid on both sides, get paid twice on one transaction. What do I mean by that in terms of both sides?
Many times the customer is paying you for doing some type of a fueling type transaction, but we're also earning economics from the merchant. One of the reasons why the business can have such high margins is around getting paid by both the customer in certain ways and getting paid by the merchant in certain ways. We're always looking for ways to optimize that pricing and make sure that we're competitively priced and things like that. That's something that we'll continue to focus on.
Got it. And then just kind of maybe looking a little longer term kind of beyond 2025, do you guys still see this business kind of getting to the low double digits?
I'd say when I say low double digits, that would be total vehicle payments.
Right. Yeah. Total vehicle payments.
Right. Yeah. Not necessarily North American fleet. Total vehicle payments, high singles, low doubles. I think that's predicated around some of the consumer vehicle payments initiative that we launched last year, adding, let's call it an incremental couple hundred million of revenue over the next three or four years. I think that's where you get to. Now that business becomes a 10% grower if you can get the U.S. business to low to mid singles. The international business continues to grow low doubles, and the Brazil business continues to grow mid teens. Then you layer on top of that just kind of icing on the cake of being able to get incremental business from consumers by giving them access to our proprietary networks, something that we do exceptionally well in Brazil and are starting to do already in the U.K.
You're now turning that into something that has, you know, even more growth potential.
Got it. You know, PayByPhone's definitely been an exciting one. And I know that you guys have added a few more products into that business over the year, and I think a few last quarter as well. Maybe touch on those.
Yeah. That'd be great. So yeah. So, PayByPhone, some of you may use their app, but depending on what markets you're in, they are international, but they have plenty of markets here in the U.S., also U.K. and Europe. And so we bought that in September of last year. It really wasn't to get into parking. It was really to get a customer, a consumer base, that was of some size and scale. It came with about 6.5 million customers. Think of it split two, two and two across those three geographies that I just mentioned. And be able to use our networks of fueling, EV, insurance, service and repair, think garages, oil changes, tire changes, etc. We have all of these networks already.
And so the idea was to take the PayByPhone app and connect our networks into that app so that when somebody's on their app and they're looking to, you know, park, they also get a notification of, "Hey, when's your next oil change due? You can go to this garage that's only 10 mi away from you, and you can get 20% off your next oil change," or contents insurance. You just parked in an area that's kind of high traffic urban area, maybe known for break-ins. Click here, and for another couple of Sterling on your parking charge will insure your contents in your car such that if you get broken into, we've got it insured. Oh, by the way, here's our network of gas stations across the U.K. And here's the prices associated with all those gas stations.
You know, feel free to go. Oh, by the way, you charge your vehicle. Here are all the charge point operators across our universal network of EV stations. Here's where you can go to find a rapid charger, charging station. So it's the same idea that we have in Brazil where people can go to one app and find all kinds of solutions associated with maintaining their vehicle, and we found that it was quite successful in Brazil, but it took some time. But from a technology perspective, over the course of the year, we've actually been quite quick in our movement towards all of those things that I just described in terms of those different use cases have now been integrated into the PayByPhone app so that those consumers can start seeing the accessibility of these other networks.
And not only is that an ease of use, but we'll also give them discount. And we hope that it starts to take traction and generate some incremental revenue for us.
That'll be an interesting one to continue to follow. We only have a few minutes left here, so I think it's important to just touch on the lodging business. You know, you guys have had a really strong 2022 and 2023 in that business. I think maybe creating some tough comps in 2024 and maybe some headwinds associated with IT conversion, but on the workforce lodging side. But maybe just kind of walk through your thinking for the low single-digit outlook in 2025 and kind of across the three pieces of the business.
Yeah. I think when you break the business down, a lot of the, call it over 50%, 60%, probably 70% of the business is performing, generally in line with expectations, the airline business, the insurance business, and portions of the workforce business, but the SMB, workforce business, where we're helping employers send generally kind of blue-collar workers out into the field, to do labor, type work, that's just hit a little bit of a soft patch back starting a little over a year ago. It seems to, over the course of this year, have remedied itself, where that level of soft patch, the system latency issue that you talked about has long been resolved.
And it's now just a matter of kind of either getting some of those customers to come back and using us to the full scale or continuing to add new customers onto the platform, which the sales team is actively doing. We still feel good about the business. We've sometimes, you know, referenced it as a problem child. It's probably still a little bit in detention, but it's still something that we feel has a product set that is very unique. It allows employers to search, book, limit the type of room that employees are staying in, manage their spending while they're at the hotel so they can't just go down to the hotel and spend a bunch of money at the bar in the restaurant.
and then get paid, you know, through our payment rails, get a centralized statement at the end of the month. It's just got so many advantages to it. It's kind of an end-to-end solution. The other products out there, if you were just kind of using your Bonvoy app, well, your Bonvoy app doesn't allow you to do all of those kinds of things. And so I think we still feel like it's a second-to-none kind of option. But we need to, particularly related to that SMB subsegment of the business, get that back to the level that it was before.
Okay. Got it. So in 2025, it's more or less like that portion of the business kind of still kind of building back up and maybe kind of back closer to double digits in 2026, depending on that, on that part.
I think that's fair.
Got it. We got a few minutes left here. You know, capital allocation is always, you know, an important question for Corpay, given how active you guys are. It would just be great to kind of hear how you're looking at capital allocation in 2025. You can kind of get your hands full with, you know, integrating GPS, but how is it looking between buybacks and M&A?
We're not only a spend management company, we also like to spend money. This year we spent $1 billion in buying Paymerang and GPS, and we spent a little under $900 million in buying CPAY in terms of shares. So we spent almost $2 billion this year in acquiring companies. One of the things that I think is one of the most misunderstood elements of our financials is just how much free cash flow this business throws off. You wake up and you know coming into the year that you're going to have, you know, $1.4 billion- $1.5 billion of free cash flow coming your way. Now, not all of it comes immediately into the U.S. in one coffer where, you know, you can deal with.
Sometimes it's sitting in Brazil and sometimes it's in Mexico or the U.K. or Europe or Australia, but it's still there and there are ways to get your hands on it and deploy it in advantaged ways. So that amount of free cash flow is one huge advantage, and then we have access to the debt capital markets, as a BB+ rated organization, and so that just gives us the opportunity to spend money, which we enjoy doing in responsible strategic ways. M&A is always kind of port number one in terms of where we would like to deploy that capital. Yes, we want to get the integration of Paymerang and GPS well under our belt and make sure that we can put the stake in the ground that those were successful, but the M&A team doesn't stand still.
And so they're constantly kind of beating the bushes and priming the pumps through their own networks and the networks of banks that they have relationships with to identify targets. And so that's what they do all day. And would expect them to continue to do that. Corporate payments, I would say, is the primary segment that we continue to focus on, but it's not the only segment that we're focusing on. We'll continue to look to buy back our own stock. But you know, depending on where interest rates are, where the stock price is, what the M&A pipeline looks like, it's not a formula. It's more of a judgment call supported by math in terms of you know how we ultimately deploy it.
But all three of those levers, I would expect all three of those levers to varying degrees, to be, you know, factored into our execution next year.
Got it. Thanks a lot for covering a lot of ground in the 30 minutes, Tom. You know, best of luck moving forward.
Thank you for your interest.