Good day, everyone, and welcome to the Corpay Update Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded. I'll be standing by if you should need any assistance. It is now my pleasure to turn the program over to Jim Eglseder, Investor Relations.
Good afternoon, and thank you for joining us today to discuss the Alpha Group acquisition. With me are Ron Clarke, our Chairman and CEO; Peter Walker, our new CFO; and Mark Frey, Group President of our Cross-Border business. Following the prepared comments, the operator will announce the queue will open for the Q&A session. Today's press release, a deal supplement, and a copy of our prepared remarks can all be found under the Investor Relations sections on our website at corpay.com. It's important to understand that our comments may include forward-looking statements which reflect the information we have currently. All statements about our outlook, expected macro environment, new products, and expectations regarding the acquisition and acquisition synergies 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.
The expected results are subject to numerous uncertainties and risks which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release. Now, with that out of the way, I'll turn the call over to Ron Clarke, our Chairman and CEO. Ron?
Okay, Jim, thanks. Hello, everyone, and thanks for joining our Alpha acquisition call. Delighted to announce that we've signed definitive documents to acquire Alpha. It's a super- successful European B2B cross-border company. We have known the company for quite some time and are really excited about the prospect of being in business together. Up front here, I'll describe the Alpha Group a bit more, lay out the transaction details along with the rationale for the deal. Mark Frey, our Group President in charge of the Cross-Border business, is with me today. He'll run through how Alpha will fit into our overall Cross-Border business, along with the progress we're making in the digital currency stablecoin space. Okay, let me begin with the Alpha description. Alpha is a publicly traded B2B cross-border business, predominantly serving U.K. and European customers. They serve two pretty distinct customer segments or types of clients.
First, corporate accounts, think end businesses, along with institutional asset managers, think PE firms. Their core products are FX, mainly spot and forwards, along with alternative bank accounts. Alpha's been on a real tear the last three or four years, tripling revenue from 2021 to 2024. Super impressive growth. We also believe Alpha's forward prospects are quite good. They're well underway, expanding in new geographic markets throughout Europe and making heavy investments in sales headcount that's just now beginning to produce new sales. Lastly, the company's got a really terrific group of people, super energized to win. All right, let me make the transition to the transaction details along with our rationale for the deal. We offered GBp 4,250 per share. That's equivalent to roughly a $2.2 billion USD enterprise value. A pretty big deal for us.
We plan to finance the deal through a combination of cash, debt, improved bank margin arrangements, and non-core divestitures. We're expecting the pro forma leverage in the range of 2.3-2.9, really depending on the success of our divestiture efforts. Expecting the deal to close sometime in Q4. That's post-shareholder and regulatory approvals. Lots of reasons, five reasons specifically, to do this deal. First, Alpha's a terrific business, high-performing business in its own right, and it's right in our wheelhouse. Second, it will accelerate our entry into this investment manager, asset manager segment, which we view as a super- attractive category. Third, Alpha gives us a couple of new solutions, this alternative bank account product and bank account consolidation software. Both of these we intend to cross-sell to our corporate accounts and FI clients. Fourth, we expect the deal to be highly accretive, at least $0.50 accretive in 2026.
Lastly, this transaction will push our corporate payments revenue north of $2 billion next year in 2026 and represent over 40% of the overall company. Look, lots of reasons to like this deal. Let me turn the call over now to Mark Frey. He'll speak to how Alpha will fit into the Cross-Border business. Along with our progress in the digital currency and stablecoin space. Mark.
Thanks, Ron. At the top, I'd just like to reiterate my own excitement about this deal. We think that Alpha is a great fit for the Cross-Border business in terms of its high-quality team, track record of sales success, and the two really key pieces of banking technology they've developed that we plan to incorporate into our tech stack going forward. We really like the overall attractiveness of the market segments they serve, particularly their private markets, institutional funds vertical. We see this as materially accelerating a segment that we've already been focused on. In terms of fit with Cross-Border, we really like how Alpha strengthens our presence in the U.K. and Europe and opens new markets for us that are highly attractive in Germany, Malta, and the Netherlands that we feel we can grow significantly.
As Ron mentioned, roughly two-thirds of Alpha's revenue comes from the private markets, institutional funds vertical. We really like this segment based on the huge TAM and the fact that it continues to grow much faster than the broader economy. The credit profile of this segment is also highly attractive, and we see the private markets vertical as a significant driver of sales and top-line revenue growth for us over the mid-term. What's most exciting in terms of combining these businesses is how we can extend Alpha's existing customer relationships with global funds and fund administrators into North America and APAC. Given our existing licensing footprint and significant sales resource in these regions, we believe we can achieve material sales acceleration over the mid-term. Okay, shifting gears a bit in terms of our broader strategy.
In March of this year, Ron announced a minority investment and partnership deal with Mastercard focused on our FI business. We're now implementing this partnership and are moving into execution mode. The other new segment that we've been working on is our digital currency client segment focused on stablecoins, crypto, and the use of blockchain networks. We've seen this customer segment take off in the past couple of months, given some significant developments with our own product capabilities and some big net new client wins. Now, it's worth keeping in mind that every stablecoin provider, crypto exchange, and digital wallet firm is still heavily reliant on fiat currency payments via traditional rails and FX liquidity to support their business. We've been very focused on building the bridge, if you will, between the worlds of traditional rails and blockchain.
We see tremendous growth in this segment by leveraging our capabilities to provide on-ramp and off-ramp services across the sector, working with many of the leading names in the space. We're also aiming to leverage blockchain networks more extensively across our own business. We've been using blockchain to make third-party payments for our clients to the emerging market world and are actively growing this channel. We're now aiming to provide our customers with the ability to send and receive stablecoins as part of our core service, something that's in development now and will likely go live across our platform in the fourth quarter. Finally, we're aiming to connect our multi-currency account product with companion digital wallets capable of holding, sending, and receiving stablecoins as well. We expect to go live with this capability in the fourth quarter of this year.
As a reminder, we essentially do three things today across our four customer segments. One, we provide FX spot liquidity and payments. Two, we provide currency risk management services. Three, we provide access to transactional multi-currency bank accounts. Going forward, our vision is to be able to provide these capabilities both through the traditional fiat world via our proprietary networks as well as in the digital blockchain world as well. Alpha represents an exciting opportunity to accelerate the revenue growth of our corporate and institutional segments over the mid-term, and we couldn't be more excited. Operator, we'll now open it up for a few questions.
Thank you. At this time, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw yourself from the queue, you may press star two. We'll take our first question from Ramsey El-Assal of Barclays. Your line is open.
Thank you so much for taking my questions this morning. Ron, you mentioned a couple of new products that the deal is giving you: alternative bank accounts, I think, and bank account consolidation software. Can you just give us a little more color in terms of what those are?
I'll make it a few, Mark.
Yeah, thanks, Ramsey. It's Mark here. The two really interesting capabilities that come with Alpha are, one, their ability to provide a virtual account product ultimately and a multi-currency account product to both corporate and institutional customers. It becomes effectively a transactional bank account. The second key thing that they have is basically a TMS platform with multiple capabilities. What we're really excited about is the ability to track in real-time account balances and transaction activity across all financial institutions or all bank accounts ultimately for an entity, whether it be a corporate or an institutional client that has customer—sorry—bank relationships at multiple different entities. It's really a way to get a single view into the cash position of an entire financial organization.
Hey, Ramsey, it's Ron. The big idea here is the regional banks can't do it. Right? If you're here in Atlanta, you can't easily open a bank in Europe or Australia. The idea of us being able to do that super duper fast and have one account that holds multiple currencies in it, dollars, sterling, Aussie dollars, etc., it's just a massive advantage. Not only is it super interesting for this PE asset manager vertical, but Mark can sell it back to our corporate clients. It's really an add-on to the existing business we have as much as it is to get at this new institutional segment. It's a super advantaged idea that's hard for the banks to replicate.
I see. I see. Just a quick follow-up on the divestitures that is one of the potential funding levers for the deal. Any additional color about what those are or the likelihood that you'll be able to find a strategic buyer, perhaps?
Yeah. Likelihood, I do not want to name them because I do not want to depress Ramsey, our people in the company, but they are for sure businesses we would call non-core. Really in our vehicle, they are in our broader vehicle segment. Our estimate for the couple of things that we are taking to market is about $1 billion combined for the couple of businesses. I would say they are good businesses. In other words, the difference between us trying to sell that gift business every year since we bought it and these is they are good businesses. They are just not as related or as core. They will sell. I think we will hopefully get a price that we can accept. It is a completely different deal than the last go-around.
Got it. Thank you very much.
Thank you. We'll take our next question from Dave Koning of Baird. Your line is open.
Yeah. Hey, guys. Thank you. Congrats. And I guess, first of all, the revenue growth is very good from the last few years, and the margin is very high. Are those sustainable type numbers? Meaning maybe how is 2025 revenue growth trending, and is 60% margins sustainable?
Yes and yes, Dave. The forecast for revenue we have has the core FX business in the high teens to 20%. Again, I think the number year to date, I do not know if they have published it, but it is way, way north of that. Super good. If anything, I would say the operating leverage is just sitting there. They built up this new institutional segment really like three, four years ago. They started on it. They put a ton of cost, Dave, into that, into the back office and stuff to get that thing lifted up. I think their operating leverage without us is good. Obviously with us, right, through the combination of tech and compliance and back office stuff, there will be huge margin improvement.
Gotcha. Maybe just a quick follow-up. The price seems incredibly attractive to you. Is there something about them operating it that was becoming more difficult, meaning that they kind of felt like they had to sell at this price? In your case, do you do something that makes it dramatically better just given the consolidation into the Corpay platform?
Look, I'll beg a little bit. I think it's forgetting how for shareholders. This is an all-world thing. When we met them and started talking, the price, I'm sure it's in the document somewhere, but my recollection was in the mid to high $20s per share, and we offered something with a $40 handle. It's a super good premium, is what I'd say, and it's money they would get now. In your second part, of course, right, we look at every transaction in terms of what it will be with us more than what the trailing numbers look like. I care, but not that much. Yes, the thing will be super accretive and, as I said, better margin profile going forward. This is the classic win-win. I think it's super good for those shareholders, and I think it'll be super good for our shareholders.
Great. Thank you.
Thank you. We'll take our next question from Tien-Tsin Huang of JP Morgan. Your line is open. Tien-Tsin , you may want to check your mute switch. Your line is open. Tien-Tsin Wang.
Good call. I did check it, and I muted it. Hope you can hear me. Just trying to think this through a little bit. Tell me if I'm wrong. I always try and think about parallels or analogies to understand complex stuff. Is this similar to a virtual card situation where you're spinning out a virtual bank account to facilitate, I don't know, more trust or going beyond just the transactional relationship with some of your corporates and your partners to spin out more of these cross-border transactions? I'm just trying to think about the best analogy on why you're extending here and ultimately what new fee pools you're generating or who you're taking away from to do it. Do you follow my question?
Yeah. [crosstalk] it's Ron here, Tien-Tsin . I'm not positive on bond, but let me try a little bit and Mark can jump in. The first thing is they are a bit related, right? They offer kind of standard FX solution stuff like we do, like spot payments and hedging products. And this bank account thing kind of goes with it. Let's say they went to a big PE fund and said, "Hey, you're buying something in Germany. You got to set up a special entity there, right, to buy the thing and stuff. Hey, we can set the bank account up there in Germany in euros tomorrow for you." And hey, guess what? We do hedging. You're going to sign and close. You want to lock the thing in. There is a relatedness to having the two products, is the first thing.
For both the corporate clients, like I said, where we're doing the FX stuff and not the bank account stuff in this new segment. The second one, which I said a bit earlier, I think when Ramsey asked the question, is it's against banks, your question, "Hey, where's the money come from?" The winner here, Tien-Tsin , is like McDonald's versus Burger King of it's hard for McDonald's to turn into flame royal because they got 100,000 restaurants with stainless steel grills. I feel the same way with the banks we're competing with, in Mark's case, all these tier two banks here in Europe and in Asia. They're no good at getting bank accounts up in geographies that they're not in. As the company starts to grow up a little bit and expand, they have to kind of bumble through correspondent banks and compliance and all this stuff.
It takes, I don't know, four-six months to get a bank account set up. This company, and what we were trying to do before we found them, is spin this new multi-currency account up like the next day so the guy could have a bank account that has U.S. dollars and, in this case, euros in it, right? Move money between them easily because they're in the same platform and stuff. It's a super advantaged offering against the current core bank that they have providing it. This company gets account fees. Obviously, they hold deposits and stuff. It's a different revenue stream for us than kind of spread, right? Wholesale to retail is kind of what the FX business is. This is kind of a fee-based type of business. They've made a super successful business out of it and have a great position in this institutional asset manager space.
We were running down that road, but they were out ahead of us. It's going to be super helpful to us.
Yeah. You explain it well, and you'll own more of the cross-border. I suppose, ecosystem. One quick follow-up, if you don't mind. With Mastercard, how important is Mastercard in helping make this as strong as you think it could be, Ron?
That's a super good follow-up, Tien-Tsin , which I forgot to say. First of all, we are progressing with those guys. Dave, I think you asked this question 90 days ago, "Hey, great, Ron, did this deal?" They're frigging all in. We've been on calls. I've been on calls with their top people. They're hiring people, Mark's in meetings. The first thing I want to say is it wasn't just a press release. People are working to actually produce business. The second one I forgot to say is, yes, this product is like an all-world thing for that FI idea, right?
If MasterCard introduces us to one of their clients and, hey, we say to them, "We're here to help you guys with kind of cross-border stuff," the problem that I just stated, that they're not super good at helping their existing client open the bank in Germany, we go, "Hey, we can wholesale this to you where you can look like a champ with your mid-market client and not lose them to one of the big tier one guys." We think it's way—and I think MasterCard, maybe you asked someone to do earnings—I think it's a way additive solution, Tien-Tsin , for our combined sales call, if you will, on MasterCard's banking clients.
That's great. Real interesting. Thank you for the update.
Thanks for joining.
We'll take our next question from Sanjay Sakhrani of KBW. Your line is open.
Thank you. Good morning. Just to the line of questioning earlier on some of the synergies and such, Ron, could you just talk about sort of what's factored into the $0.50 you mentioned for next year? It seems like there's a lot of complementary and supplemental type products that could be driven off of this. Does it accelerate the growth rate of corporate payments revenues? Thanks.
Yeah. Great question. We do think that we can continue to accelerate the growth of Alpha. They have been very successful at selling their product in the European geography, in particular, U.K. and across Europe. What we're really excited about is to take that product and those relationships that have global needs and to be able to sell them into North America and APAC, given our licensing footprint and our sales resources that we have. That is one of the primary drivers, but we really think that we can accelerate what has already been a high-growth segment.
Exactly.
Let me say it even more baby-like. This company is in this institutional segment really only in Europe because they do not have the license to do this thing we have talked about here or in Asia. We do. Immediately we go to Bain Capital and to the CFO and say, "Hey, you have been using this Alpha guys for your European funds. Hey, what about your U.S. and Asia funds?" That is synergy number one. Also, we have a bunch of other solutions around options and other kinds of mass payments. They have very few kind of mass payments. We think going back to the client base with some of our products and then expanding this license is a way, way bigger than normal revenue synergy. Of course, we have a ton of cost synergy as we combine the back office and tech, but I would say there is more revenue synergy than most of these deals that we have done.
How much of that is in the $0.50?
I'm trying to be a little conservative here. Lots of people listening and stuff. What I want to just reiterate is at least my comment to you. We only do deals that are accretive. Underline the word at least $0.50, and we'll obviously back you guys when we close.
Appreciate it. Just one question for Mark. Just obviously, stablecoins are being discussed as a major disruptive threat, right, for incumbent payment companies. You guys are obviously getting involved in it. I'm just curious sort of what your view is. I mean, Mark, you talked about on-ramp, off-ramp for partners. Are those partners that are competing with you? How do you view that whole landscape and how you guys fit in and what your difference is? Thanks.
I think the first thing is this is already a high-growth segment for us where we can onboard customers. We can provide on-ramp, off-ramp solutions where we can move money for them in fiat form, but also in digital form as well. We have already been leveraging blockchain networks to move money to the emerging market worlds and make payments in a number of geographies around the world. We are going to continue to lean into that. We will also expand our ability to send and receive and allow our customers to store value in stablecoin as well. We see that as complementary to the existing service, not just for our customers that are native in that digital space, but for our corporate customers as well.
As the world begins to transition to stablecoin, we think that we will stand in a position where we will be the natural fit for these corporate customers to begin to leverage these products and capabilities. We are already standing up that technology. We have already built the partnerships. We are expanding our rails and connectivity all the time. This is something that we are leaning into significantly.
Great. Thank you.
Thank you. We'll take our next question from Trevor Williams of Jefferies. Your line is open.
Great. Thanks very much. I'll just follow up on stablecoins. Mark, maybe if you could just give us a sense for what your conversations have been like to date with the existing corporate customers, the level of inbound demand, if any, that you're seeing from them for stablecoins. With some of the infrastructure providers you're working with, like BBNK was one you had in the deck, just what specifically you're working with them on and if you've got a pipeline for more partnerships like that, if we should expect to see that kind of trickle out over the rest of the year as well. Thanks.
Yeah. Thanks. I'd say for corporate customers, they're not necessarily looking for stablecoins. What they're looking to do is move money as cost-effectively, as efficiently as possible. They view us as the trusted partner that's always helped them do that. We're leveraging stablecoin and digital payments as just another means by which to deliver that same value proposition to improve the access to 24/7 payments, to be able to process around the clock effectively, and to drive unit cost processing significantly lower, which is beneficial in terms of our bottom line. In terms of the conversations with partners, I'd say every door that we've opened has been a very willing partner, very excited to have a conversation with us and/or expand existing relationships materially.
We're continuing to lean into our existing strategy, which has been to leverage blockchains, make payments to the emerging market worlds, to move our own liquidity from a treasury perspective, to try and find efficiencies there, and to continue to build customer solutions, both leveraging stablecoin but blockchain networks more generally to move money for our customers in third-party payments. I think the reaction that we've had from our partners has been very positive. We continue to, I'd say, move very, very quickly in terms of progressing some of these relationships and standing up new technologies and services for our customers. We did say at the top that we are planning to roll out a number of services still this year. We see this as being a driver of growth for us in the near term as well.
Hey, Trevor, it's Ron. I know this is a hot topic and stuff, but I want to make sure everyone's clear. Our point of view is that this thing is kind of complementary and actually helpful, not disruptive, bad. We wouldn't be buying this company. I just want to start with that, that obviously we people sitting here have studied it and are in the space, and we think it's complementary. The reason is that we view it really just as a subset of the cross-border game, right? It's a new set of currencies and a new rail. We've already got a couple of rails. We've already added this rail. We obviously move lots of currencies. We'll move these currencies. I think the headline here is we're just all in.
We're just going to, to the extent that there's use cases like third-world countries where this kind of currency would be interesting, we're just all in. The headline to take away is kind of we're not afraid, which is why we're going into this space. Whether you're afraid is a different thing, but I want you to be clear that we're not afraid.
Okay. No, I appreciate all that. Thank you, guys.
Thank you. We'll take our next question from Nate Svensson of Deutsche Bank. Your line is open.
Hi, guys. Congrats on the acquisition. I'll ask kind of both of mine upfront. Beyond the new product capabilities that this brings, I think the entry into new verticals and the help with the international expansion efforts are both pretty attractive about this. I wanted to ask about those. With regards to the private markets and institutional fund clients, I think you mentioned TAM, above-average growth rates, and an attractive credit profile, but maybe hoping for a little more color on the opportunity you see in these new verticals and kind of what it opens up for the existing corporate payments business. On the international expansion, I think you answered in Sanjay's question some of the efforts to take Alpha's business into new geographies. Maybe the flip or reverse of that question is they have the strong presence in the U.K., Europe, etc. What's going to be the strategy once Alpha's in the fold to drive cross-sell and new client wins again within that existing corporate payments business?
Great questions, Nate. I'll try to address all of them at once. I think the real idea here, and I think the benefit that we bring to this conversation is with some of these existing conversations that Alpha has been having with the institutional customers, the balance sheet strength that Corpay brings to the equation of the Fortune 1000 S&P 500 companies certainly helps an awful lot in terms of managing their counterparty relationships and the way they think of Alpha traditionally as a correspondent banking services provider, let's say. I think that the feedback that we've heard from the market has been very positive about Corpay stepping into that space, both with existing customers. This is a space that we know. We're already in this space, and we've had a good amount of success over the last 18 months of selling into this institutional vertical.
This just allows us to go a whole lot faster. I think in terms of what we're really excited about, and we touched on it, is these existing relationships that Alpha has in the U.K. and Europe and the Channel Islands and Luxembourg and many specific geographic markets. Those funds, those institutional customers, and those funded mins have global needs. To be able to take that same service offering and now extend it to not just the U.S. and Singapore, but throughout our APAC region where we have licenses to Canada as well, we see as being a real significant driver for the institutional vertical. I think the other thing that we really like is this is capability that we can then cross-sell into our corporate customers everywhere. The beauty of our platform is that we have one technology stack, one set of operational processes.
With each acquisition that we've done, we've consolidated the capabilities and embedded them all within that same platform. The strategy here in the end will be the same. What that allows us to do then is by the time we get that done, that integration work that we go super fast on, we have one product that we can sell to all of our customers everywhere in the world. It allows us to go super fast. It allows us to drive down unit costs of serve. It allows us to improve operational processes and really have a high-performing, mature business in that regard.
Thanks, Mark. Appreciate this detailed answer to a detailed question. Thanks.
We'll take our next question from Darrin Peller of Wolfe Research. Your line is open.
Thanks, guys. Congrats on this deal, Ron a nd team. Just maybe understanding the timing of the revenue synergy potential because it does sound like a pretty good opportunity, especially bringing it to the U.S. customer base that you guys have approval to actually sell into on these products. And what investments need to be made to actually make that happen? I understand there's definitely operating leverage and cost synergies, but on the other side of that, just talk about what you really have to do on the ground. To get it done, if you don't mind, and timing around it. Just what kind of timing we can expect?
Darrin, hey, it's Ron. It's a great question. I said not much is why it's attractive. To me, when you think about revenue synergies, they're always best when they come from existing clients, right? It's way more profitable, and to your point, way faster when you can take the company's existing clients and do more things for existing clients. So I think that's the headline is they have, I think it's something like 2,000 of these funds. I mean, I know it sounds like a crazy number, and obviously a lot of small- and mid-sized versus KKR. It's like 2,000, not like 20. You sit there and you're like, so you got 2,000 existing asset manager clients they work in Europe for. You sit there and you're like, we have the licenses in the places, and Mark's got tons of people on the ground, obviously here in the U.S. and in Asia.
You sit there and you're like, yes, will we add a few high blue-suited guys to go into those 2,000 accounts for probably a specialist? Yes, but we'll also send coverage, right, of the people that Mark's got. Do not miss the second point there. The balance sheet is a big deal. We did a bunch of interviews, of course, in this space to get comfortable that these clients, this category loves Alpha. The one noise thing was just the, hey, the stability, let's not put all our eggs there or whatever. Having us as kind of their backstop, it's a big deal, I think, to have that thing happen fast. The answer is we do not have to do much. The existing client piece of this, I think we're going to do pretty fast.
The other thing I'd offer as well, Darrin, is we've done this a number of times before as well. We've got great experience in terms of the way that we integrate these businesses, the way that we stand up the technology, the way that we bolt in the capability into our core platform, and we go super fast. We've got a playbook where we've done this very successfully before and then accelerated growth afterwards. We're going to do the exact same thing here.
Okay. Very helpful. Just a quick follow-up, guys, is just on float income for a minute. I mean, I think it's over a few % of total revenues pre-deal. Just what portion of corporate payments and maybe overall revenues is going to be driven by float income now? Just maybe help us understand how you think about that and managing the risk around that, if any. Thanks, guys.
Yeah. It'll be a small number. Probably mid-single digit. Darrin, when we combine it, in some ways, I think about it as a borrower is just the ultimate hedge for us, right? Hey, we've been higher for longer. In terms of interest rates, we borrow a lot of money. That's kind of how we think about it. We're happy to have it. It's obviously not the big part of our overall revenue stream. Call it mid-single digit number.
Thanks, Ron. All right, guys. Congrats on that.
Hey, we didn't say enough, pal. You were on me. Hey, 40% next year. Write that down, would you? That's where we're headed. Corporate payments. Here we go.
We got it.
Thanks for your encouragement, pal. I mean it. Appreciate it.
Thanks, Ron.
We'll take our next question from Mihir Bhatia of Bank of America. Your line is open.
Hi. Good morning. Thank you for taking my questions and congratulations on getting the deal announced and done. I wanted to just go back to the discussion about alternative bank accounts for a second. Just trying to understand a couple of things about these accounts. H ow are these different than the multi-currency accounts you offer? Maybe just talk about why Alpha was particularly well-penetrated with investment funds. Is there something about these accounts and the use case that leads to them being more attractive for investment funds? Or is there an opportunity to sell these accounts to your corporate customers too? I guess what I'm trying to understand is, was that Alpha just that was their sales strategy and where they were gaining momentum, or was it more that's just where these accounts will be used? Thank you.
Yeah, Mahir, great question. It's Mark here. I'd say it is the same core technology ultimately that sits on our platform today in terms of the underlying capability. What Alpha has done, which has been particularly attractive, has married both a specialized selling force to go after this institutional vertical, but they've also built some purpose-built front-end in terms of the user interface that works really well in this sector and provides specific features and benefits that these customers do not typically have access to in terms of a traditional banking platform. It's really purpose-built and custom-fit for those market needs. We believe it's very portable to other geographies so that we can take this exact same platform and go sell it in other markets and provide that same differentiated user experience.
Let me just add because you asked a good question. Let me just follow up. You said, "Hey, why. Is this bank account, alternative bank account thing good in this asset manager thing?" Let me just answer that. The main reason is they create more new accounts, right? An investment company creates a bunch of entities, right, as they do transactions. They need new accounts. Unlike Ron Clarke Industries sitting in Atlanta has a bank account with somebody, I'm not adding bank accounts all the time and stuff, but these guys are constantly setting up new entities with new bank accounts. It's a super, and they're in crazy sets of geographies. They do it all over the place, right? Wherever they're investing in a company or in real estate or something. What I'd say is the segment on its own is prone to tons of new bank account openings and stuff. It was super right for these guys. Super smart.
The super differentiated capability as well, in addition to the front-end, is the platform just allows the speed at which those accounts can be set up in a whole host of different geographies. It's the platform, the ability to execute with precision and speed that is highly prized by this customer segment.
Okay. Understood. Thank you. Thanks for taking my question.
Got it.
Thank you. Once again, to ask a question, that is star one on your telephone keypad. We'll move next to James Faucette of Morgan Stanley. Your line is open.
Hi guys. It's Michael on for James. Thanks for taking our question. Ron, you alluded to the fact that not much has to be done on the ground to execute on the revenue synergies, but how should we be thinking about the integration left that's required to integrate Alpha's core banking tech into your cross-border engine? For my second question, just on the ramp in Alpha's margins from 2023 to 2024, I know there's a bit of a difference just in terms of their underlying PBT margin and their statutory margins, but was that driven by treasury income? If so, how did you get comfortable thinking about through the cycle margins at Alpha if we enter a little bit of a rate-cutting cycle here? Thanks.
Good questions, Michael. I think the way to think about the tech side, the time and the cost is in two parts. One, again, they are kind of in two businesses, right? They are in a corporate FX business, which is primarily what we have, and then they are in this institutional asset manager kind of business. In the first one, we will combine the tech. This will look like all the deals we have done over the last three or four years. We will basically board that tech platform and just move those corporate accounts effectively onto our platform, compliance and back office. That will happen certainly within the first 12 months. Just as a reminder, the GPS deal, which we announced, what, in December 1st we closed?
It is shuttered. That platform that we bought, whatever we are in here, July, is completely closed. I would say that is part one. The second one, I would say, Michael, is a little longer. We really like this product and the front-end stuff that they have made. What we are going to do there is probably keep and enhance their kind of institutional front-end tech for a long time and combine it really into the back end, the settlement engine part of our tech. That will be kind of an ongoing thing. I think of it as really kind of a pretty big enhancement of our core platform. That is the tech story. On the margin thing, you got it. They got a lot of help from deposits, float income, which carries, you will call it 100% PBT. We obviously see that and study it. I would say that honestly, on a standalone basis, sans that, they have not been super great with operating leverage.
Given the revenue has gone up 3x in the company. The main reason I would say is one is they are small. It is kind of a subscale company. Two is they have gone crazy investing in sales and marketing, which has helped fuel the growth, which for us is now a huge benefit because they have got a bunch of these people onboarded, trained, and all that stuff over the last, call it 6 to 12 months, that have not turned the corner into producing. You carry all that cost in the margin profile without the benefit. The answer is we understand it. The margin profile will get much better first on their own because they will produce more without adding cost, and then second, because of us obviously crushing some of the cost structure as we consolidate it.
Thanks, Ron. Very helpful.
Got it.
We'll take our next question from Ken Suchoski of Autonomous Research. Your line is open.
Hey, good morning, Ron and Mark. Thanks for taking the question. I wanted to ask one on stablecoins. When you guys look across the space, can you talk about where you are seeing stablecoins being adopted in cross-border B2B payments? I think I heard some adoption in EM countries, paths to EM countries. Is it really for lower cost, or is it sort of 24/7 settlement? I mean, what's driving the adoption today, and where are you seeing that?
I think the primary use cases, Ken, and thanks for the question, that we're seeing adopted is access to emerging markets. Getting access to dollars in particular in the southern hemisphere and markets where there is not as much liquidity. I think we also see it in terms of some higher risk segments that do not necessarily have great access to transactional banking services and correspondent banking. These are fintechs and other firms that are looking to move money. And move money efficiently. I think the other thing that we see is corporate treasurers beginning to look at how they can move money outside of traditional banking hours. The ability to move dollars ubiquitously, 24/7, on the weekends and outside of the Fed clearing cycle. The same thing for other currencies as well. We are beginning to see some corporate adoption. I would say it is probably pretty limited, to be perfectly frank. Where we are starting to see it a little bit more is in the native crypto space and digital space, as well as fintechs.
Hey, Ken, it is Ron. I think it is a good question and important point. Let me just add the following. We hear the fallacy of, "Wow, these new digital currencies with blockchain, wow, they will be super efficient. Costs are going to be super low. Wow, wow, wow, wow. That seems unbelievable." The fallacy in the thing is, if you look at the transaction economics in the B2B cross-border business, call it our average transaction, what, $120, $150, and the cost today of the proprietary network for Tran?
$2, $3. Yeah.
Call it $2, $3, Ken. Let's say the blockchain is free, o r a penny or $0.05.
The headline is, "We'd love to use it. We are using it. It's a third rail, but it's a yawn in terms of the economic redimensioning of the space." This entry of this thing is not going to win on the basis of economics. It is going to be won on the basis of speed or being open 24/7. What you said, we see it as playing a role in certain use cases, again, being a subset of the game. Just in terms of that, we want to be super clear. The economics of the rail are a fraction of what the transaction revenue is in this business.
That makes a lot of sense, Ron. I guess maybe. I guess to, yeah, I was trying to think about that. I mean, is it one of these things? Maybe you could go into that, I guess, as you think about parts of the cross-border business. I mean, are there parts that are just less sensitive to cost? I mean, I think about that hedging business that you have. I mean, it sounds like more of a service, sort of a touchpoint business where you're actually advising and helping clients make decisions on these things. I mean, it sounds like that's going to be very insulated.
Yeah, let me just stop you there.
That's a super good point, Ken. Let me just stop you. You should broadcast that. Let's say we have a $1 billion cross-border business, B2B, don't hurt your head. Half of it's what you just said. It's got nothing to do with this thing. It's smart people helping manage currency and writing contracts that help the client, right, where the human is doing the thing. And so don't miss that point. It's a super good conclusion by you.
Yeah, totally. Okay, great. And then just, I guess, my follow-up just on the, I mean, a lot of discussion on the cross-sell and the efficiencies you can get. Just in terms of thinking through the synergy numbers on the revenue and cost side, I mean, any way to think about those as it relates to this deal?
Yeah, we've been counseled kind of not to go into it. I'll just say the word that they'll be large. Would be my headline to you. And larger, again, on the revenue side than historic deals that we've done.
Okay, great. All right, thanks so much.
You got it. Thanks for joining us.
If you would like to ask a question, that is star one now on your telephone keypad. One moment while we queue. It appears that we have no further questions at this time. I'd be happy to return the call to Jim Eglseder for any closing remarks.
Hey, everybody, that's a wrap. Appreciate you jumping on in such short notice and stuff, and if we didn't share our excitement or anything, I just want to reiterate it that we feel like this is one of our best. Anyway, appreciate the time. Corpay out.
Thank you. This does conclude today's Corpay update call. You may now disconnect your line. Everyone, have a great day.