Are we good to go? Yep. Okay. All right. Good morning, everybody. We'll get right into it. Thanks for being here. I guess we'll call it the Second Annual Jefferies Fintech Conference that we're going to kick off with Corpay and Peter Walker, CFO . Excited to have you here with us, Peter. Maybe just to jump right in. So you joined, I think, two months ago. We were just talking about.
That's right.
Maybe just high level, what stood out or surprised you so far in your time thus far?
Yeah. Maybe two things I just share, you know, why did I join Corpay? Really, two reasons, I would say, overall that I joined. One is our customer is the CFO or the Office of the CFO. I've been CFOing for about 20 years. It's really cool to be, you know, sitting in the seat of CFO of a company, and I'm the end customer. Right? It really allows me to look at the products and the markets and understand it in a unique way. Second reason that really excited me is the opportunity to work for Ron Clarke, you know, incredibly visionary CEO, and just the opportunity to learn from him. That's what brought me in. In terms of what's shown up for me, I'd say as an upside as I've come in the business, really two things.
One thing is in our payables business, I didn't realize quite the opportunity that we have to cross-sell corporate payables into our fleet card customers. Quite a bit of an opportunity for us to do that and really expand the wallet share with our fleet card customers with our corporate payables products. That's a pretty exciting upside for us, and I think we're on, you know, kind of the beginning of that journey. The other thing is the cross-border business.
I mean, I understood the business from the outside, but getting in the business and really just seeing what our competitive advantages are, how we've been able to grow that business, the partnership we signed up with Mastercard, which is opening up a new customer segment for us, and then the acquisition of Alpha, a new customer segment as well, which I know we'll talk about in a little bit more detail.
Okay. Perfect. Yeah. I mean, we will get to all of those, but maybe we just get through the near-term trends. About a month removed from the 2Q print, any update on how things are trending so far in Q3? We have the embedded assumption for U.S. vehicle growth to get up to the mid-single digits from slightly positive in 2Q if that's still on track. There had been a call out, last quarter at least on the North America portion of cross-border, seeing some pressure from tariffs, just how that's looked over the last couple of months.
In terms of Q3 results, we're trending right in line with where we expect it to be, based on what we shared on the Q2 call.
Okay.
In vehicle payments, and I know we're going to talk about it in a little bit more detail. You know, we're really pleased with the mid-single digit growth that we shared for the back half of the year, and we're on track with that. When we look at our cross-border business, I would say that North America continues to be a little bit of a headwind for us. That being said, the international markets have been a nice offset. Cross-border is kind of tracking exactly where we thought it would be.
Okay. Perfect. Getting to vehicle fleet, it's been a journey over the past couple of years. You've had the mix shift away from micro fleets, getting the up market sales motion ramp back up, and you're finally getting that U.S. vehicle growth back up to the mid-single digits based on how you're guiding for the back half. Sounds like you're trending in line with that. Maybe just talk through the main drivers of where you've seen that acceleration come from across retention, new sales. You have a couple big wins that are layering on.
Yeah. Happy to. It has taken time to rebuild the sales engine, the sales force, and the customer targeting, and we're thrilled to be in the spot that we're in. Just a reminder that we're focused on fleets with 10 or 20 vehicles or greater, where the previous strategy was really a micro strategy focused on fleets with five vehicles or less. As we're going into the back half of the year and expecting mid-single digit growth, we're really seeing that coming from two spots. First is retention. As we shared on the Q2 call, it's up about 150 basis points over Q2 of last year, and it's just a little bit north of the company average. We're really pleased with where we are on retention, and we see that holding.
The other place where we've seen positivity is on the sales force side and production, and that is now large enough to grow over the large base that we have. We've got retention going for us, sales going for us, and then to a lesser degree, because we're going to see benefit in this year and next year, but we did share on the call that we had two enterprise clients, GasBuddy and Amazon, that we won. That's a little bit of a tailwind in there as well.
Okay. That all sounds good. Within vehicle, Brazil has been a really strong organic grower over the past couple of quarters, been growing over 20%. Tag growth has been consistent, growing roughly 7%. If you could just remind us what the revenue split looks like today between toll and then the extended network across parking, insurance, the other verticals, and then what the major contributors have been in keeping the Brazil growth kind of well above the underlying tag growth.
Yeah, spot on that Brazil has been, you know, a high teens grower for us, if not in excess of that on some quarters. A really strong business. When we think about the revenue there, about 40% of the revenue is now coming from the extended network, the additional products that we offer, insurance, parking, etcetera. About 60% is coming from the monthly tag subscription business. It really is, you know, a mixed shift where we're having a lot of success with those additional products. In addition, we've shared, right, that we did two acquisitions in the debt financing space in Brazil, and those are also adding to the growth rate here.
Okay. No, that's helpful. Just to tie together for the total vehicle segment, you're assuming 10% growth for vehicle in the second half. We talked about the mid-single digit growth in fleet. That implies something like high single, high teens growth in Brazil. Is that a fair way if we think of the two components of vehicle, is that a fair way to think about what the normalized growth of the segment should be going forward? If we think about 2026, there's the BP deconversion. You guys have put out an 8K just putting some framework around the sizing of that. Any other puts and takes we should be mindful of as we think about the go-forward growth rate of vehicle?
Yeah. Maybe I'll expand on that a little bit. Vehicle payments for 2025, revenue will be north of $2 billion. There's really three legs to the stool. When you think about those three legs of the stool, let's just say they're each 1/3 . Let's make it easy math. If we kind of go back through, the areas you were focused on, U.S. VP, we see at 5% in the back half. International VP, we see at 10% in the back half. Brazil, we see high teens in the back half. If you kind of do the math on that, that's what delivers 10% organic growth in the back half. We believe that's sustainable going into 2026.
Okay.
You did mention the VP sale, you know, that will come off the books in 2026. It's a really end-of-year event for us. You know, similar to when we buy things, when we sell things, that will also come out of organic growth. It won't be a punishing factor there. It was a relatively small book of business for us. Again, we just didn't want to compete given the economics that, you know, were offered by the company that picked it up.
Got it. It sounds like 10% of what we're seeing in the second half is a fair way of thinking about kind of the normalized growth rate.
For vehicle payments, yeah, that's correct.
Okay. Great. We'll shift to corporate payments, which has been a great story for you guys over the last few years, growing right around 20%. You're guiding the high teens growth for this year. Let's start with the cross-border business. You guys are the largest non-bank FX provider in the market. You've been growing significantly faster than the overall cross-border B2B market, taking share from the banks. If you could just frame on what's driving the shift away from the banks and at the macro level, how you guys view yourselves as being positioned relative to the other non-bank providers, and then talk about the runway for growth, which, I mean, sounds like at least in our opening, that's one of the things that's kind of stood out to you at least initially in your ramp up.
Yeah. For sure. Our view on corporate payables is that it'll grow, you know, high teens. We've beat that some quarters and been pleased with it. If we take a double click into the cross-border business, I think the first place to start is really where we focus. We're really focused on those middle market companies, call it $500 million of annual revenue. When you think about the banks, right, the large banks who are competing for that business, they're really not competing for that business. They're not interested in it just because of their scale, and they wanna serve larger clients. When you think about the regional banks, they just don't have the capabilities that we have in the cross-border business. We do think that we're very uniquely positioned here, and that's why you're seeing the growth that you are, and we're having so much success in sales.
We think about the people that we have in the business, the technology we have, and then the geographic reach of the proprietary network we have. That's really been the winning formula for us. There are some other competitors in the space, but again, they're not able to operate with the same differentiation we are. Potentially, we pick some of those up in a roll-up strategy as we've done over the last couple of years to grow the business.
Okay. That's a good segue into the Alpha acquisition. You've announced the acquisition of Alpha. It's a $2.2 billion deal set to close in Q4 of this year. The deal gets you into the institutional investment space, which is a vertical, at least right now, you guys don't have a ton of exposure to. Maybe just talk about the main appeal of getting into that market, and then why Alpha particularly is so well positioned in that vertical.
Yeah. Happy to. Today, you know, about 90% of our business in cross-border is in the corporate segment, which we love that segment and continue to grow there. What we've done this year is, as I mentioned, really added three other segments. Let's take a dive into Alpha and talk about what that's brought to us. You know, this is a business that's been built over a relatively short period of time and had fantastic growth. Really, one of the key drivers here is their virtual bank account that can be opened in a day or two across Europe. When we did, you know, voice of the customer calls prior to the acquisition, this is something that we heard was uniquely differentiated to Alpha in the market, and really nobody else could offer this. That's really exciting, and they're offering it to the institutional investor client base.
It allows us to pick up this capability they have in Europe and to pick up this client base. What we're even more excited about is they're not operating today in North America or Asia-Pacific where we have operations. If we think about, you know, some revenue synergies right off the bat here, that's a pretty big opportunity for us. When I think about kind of the activities over the year, just to kind of recap that, corporate is where most of our revenue is today. We announced a partnership with Mastercard, which is opening us up to financial institutions. Think of that as white labeling our cross-border products to regional banks. Then we look at Alpha, the institutional investors, and we also look at the digital currency space, which we've now signed up several partners, which we'll talk about in a little bit further detail.
Going from one segment to four segments, again, pretty exciting growth for this business.
Okay. We're going to tick through each of those next. The synergies from Alpha, you've talked about at least $0.50 in year one. It's been framed as a fairly conservative starting point. Correct me if I'm wrong on that. It also sounds like it's probably more heavily weighted to revenue synergies than some of the prior deals we've seen you do in cross-border. What do you view as the biggest couple of buckets of synergies? As we think of the at least $0.50 framework, what's embedded at least in that initial outlook?
Yeah. I think that's a fair recap of where we are. Our hope is on the Q3 call, let's see timing on closing. After we close, we'll be able to give a little bit more detail, but just kind of high level where we are today. The revenue synergy opportunity here is pretty significant, as I said, taking this very successful product to clients that Alpha already has in the EU and going to those same clients in the U.S. and APAC. We see lots of opportunity there. I'd say on the expense side, there are synergies. That being said, Alpha has some unique software in this space and has a system developed to serve the institutional investment segment. We're going to keep that in place.
Okay. You touched on the partnership with Mastercard. That is in motion to help you get in front of more traditional FIs, at least. You talked about what you're going to be enabling for regional banks. Between that, and maybe if there's anything else that you wanted to expand on, do you think is worth calling out in relation to the partnership, maybe how it's going so far, any early reads. Between that and the Alpha synergies, should we think of in 2026 that these help you sustain the high teens level of growth that you're talking about for corporate payments this year, or if those two things have the potential to maybe accelerate off of that high teens level in 2026?
Yeah. Maybe I'll just take a moment on the Mastercard partnership. In my couple months that I've been here, I've had the opportunity to have a seat at the table with Ron and the individual from Mastercard who's leading this, who is an executive C-suite member of Mastercard. I'd say I've just been really impressed with the go-to-market strategy that we've been able to develop with Mastercard in order to really bring our products into financial institutions. This is most likely a Corpay product or a white label product, but what we're seeing through this is significant interest. I think we're excited about that. In terms of 2026, we're about two weeks into the budget process. I think it's a little bit early for us to say expectations for 2026, but my thought is we'll probably have some comments on that in the Q3 call.
I do think what we're seeing in cross-border is really reinforcing the durability of our high teens growth. This is growing actually to be a really large business for us with the acquisition of Alpha and the partnerships with Mastercard and what we're seeing in the digital currency space. There's no shortage of opportunity, and we are operating at scale. All really exciting things and kind of expect us to come back Q3, Q4 with more thoughts on 2026.
Okay, we'll get kind of that, as you've done in years past, kind of a preview at least of 2026, you think that's fair for us to expect.
Yeah, that's fair.
Okay, we have to ask about stablecoins. We're talking about cross-border.
Yeah, it wouldn't be a conference if we didn't talk about stablecoins.
Maybe we start, and I want to separate between maybe we do these two parts as separate questions. To start, we do what you guys are already involved with and how you are already leveraging blockchain. You've announced a handful of partnerships with several stablecoin infrastructure providers like Circle and BVNK. What those partnerships enable, or entail. Maybe we start there, and then anything else you think is worth pointing out on how you're already leveraging blockchain on the back end.
Yeah. We've been focused on this for 12- 18 months in terms of developing our capabilities. There's obviously been a lot of uptick in interest in this in the market over the last, call it, six months. We're really excited by the opportunity this presents. We see the blockchain as just another method in terms of which currencies move across. We think about our own proprietary networks, we think about SWIFT, and we think about blockchain all really similar. What we bring to this is the opportunity to onramp and offramp and to create the foreign currency exchange. Those are things that the current providers within the space are not providing. That's what we've been doing in our partnerships, bringing those pieces to the table.
We think about our role as really taking the traditional world, the current state, and bringing in the digital currency world into that and bringing those two together. We're really excited about the opportunity. I'd say it's early days. We are executing across the blockchain today, but the volumes really aren't there yet. I think our view is probably the best use case for this, if it does pick up popularity, is the fact that it's a 24/7 settlement period. As everybody knows today, you're restricted to banking hours in terms of settling these transactions. We do think that if this picks up in popularity, that would be probably the most interesting use case for people.
Okay. To expand on that, maybe articulate kind of why you guys think longer term stablecoins or any kind of blockchain-related technology, why that would be more complementary to the business rather than being a potential source of disintermediation.
Yeah. If you think about the fees that we earn from the rails, they are a very small percentage of our overall revenue. Right? If, again, you're using SWIFT.
For the actual movement of money.
For the actual movement of money, right? Less than 5% today of our revenue is tied to that. You know, it's pretty low cost on our own proprietary network. It's potentially free, using the blockchain and stablecoins. That's not a big impact to our business. Where we really generate revenue within cross-border is on the FX, whether that is spot or whether those are options. That is very much a service product as well today, right? When you think about our target customer being the middle market, $500 million in revenue, whether it's a CFO or the treasurer that we're working with, they're really looking at us as the trusted partner to advise them on what are their best needs in this. That's where the value is created, and that's where the revenue is.
Okay. Yep, that all makes sense. We'll go to lodging next.
Yes.
Maybe we could go back to the payables portion and corporate payments just because we do have some time. For lodging, we've been kind of waiting for a rebound for a handful of quarters now. I think at least within the revision that you made to the full year organic guide, the 10% now for the full year, you're embedding lodging to get a little bit worse from where it was relative to 2Q. Maybe we just parse out the main areas of softness that have persisted over the last couple of years and then what's being embedded over the next couple of quarters.
Yeah. Absolutely spot on. Our view was that lodging would, you know, improve in the back half, and now we're expecting it to go a little bit more negative than what it was in Q2. There are really two primary issues here. One is, you know, we are dependent on emergency and weather events. That drives a lot of the volume in lodging, and it's just been a slower year, you know, thankfully. Right? In terms of emergencies, etc. We generate quite a bit of revenue off of servicing those customers and have a great product to do it very quickly. We plan for that, and it's just come in less volumes than we thought. That's obviously potentially subject to change because nobody controls it. That's kind of half of what's going on.
I'd say the other half of the issue is just the sales volume is not where we need it to be. We did bring in a new Chief Revenue Officer within the last year. He really had two mandates. One was U.S. VP. Check. W e feel really good about where that is. The second one was lodging. This is a big focus of his. In addition to that, we brought on a new sales leader of lodging. We're investing in the business. We think we've got a great offering. It's just really getting that sales momentum. Those are the two primary reasons why the back half is lower than we originally hoped it to be.
Relative to the second quarter growth rate, the assumptions that you have in the second half, is that just some embedded conservatism assuming continued softness, or is there anything else specific to the second half that we should be mindful of?
If we think about last year, right, you had a lot of events, emergency events in the back half.
Okay.
Of the year, right? I think it's kind of tempering expectations there and also having a view of, you know, sales are not where we need them to be. That being said, I mean, we think this is a great business. We've obviously got to get sales where they need to be to prove that out. If the business doesn't make it to be, you know, at least a mid-single digit or up to 10% growth business, we'll definitely look to divest the business.
Okay. Interesting. Maybe if we could go back to corporate payments. Sorry, I did shift to go off script a little bit.
Yeah.
To go back to your opening comment, you did reference the opportunity you think is there to cross-sell direct payables into the existing fleet customer base. I'm just maybe if you could expand on that and kind of what that sales motion would look like, when that could potentially become a more impactful driver.
Yeah. I'd say we're kind of in the early stages of that process in terms of, obviously having a CRO that's sitting over all of the sales functions is extremely helpful for this, right? As opposed to each of the businesses running their own sales functions just focused on their products. I'd say, one, structurally, we've got the right structure in place to do this. Second, we're in the market with a product, really testing this out. I'd say early stages, more to come, but definitely we think there's upside there.
Okay. Interesting. Cadence-wise, we've talked a little bit about each of the different segments, but if we put it all together, just so folks are thinking about 3Q and 4Q kind of right from a total consolidated organic growth standpoint, I think you guys had mentioned 3Q organic growth should be a little bit higher than 4Q, just as you'll be lapping some of the revenue synergies you had tied to payment within corporate payments, but still growing just over 10% for the second half. Making sure we have the cadence there, right? If we put all of that together, the second half growth rate, that 10%+ , that's still a fair way of thinking of the stepping off point for 2026.
Yes, agreed. I'd say.
I know there's a lot in that.
Yeah. Happy to unpack it. Q3, what we shared was 10%- 11% organic growth in total. Q4, we said 9%-1 0% organic growth in total. When we look at Q4, especially in the corporate payables business, as you mentioned, we've really got two things going on. Last year, the growth rate was 26%. A huge part of that was driven by one-time payment synergies. If you take that out of the growth rate, you're down at 22%. We were also lapping over a pretty easy comp from the fourth quarter of 2023. That's why you're seeing just this dip in Q4 in terms of organic in total and corporate payments. There's nothing systemic in the business that should assume this is the run rate.
We'll talk more about 2026 on the Q3 call, but our expectation is that in 2026, this business continues to grow, the corporate payables business in the high teens as it has.
For Q4, I think the comment had been that you would expect about a three to four point deceleration in the fourth quarter relative to Q3, just to account for payment. It sounds like, you know, some easy comps that were helping the Q4 growth. Right? Is that a fair way of thinking about at least third quarter, fourth quarter cadence for.
In corporate payables, yeah.
Yeah.
You're spot on.
Okay, second half growth is probably a more accurate picture of what you feel like the go-forward, and we'll get more color on the Q3 call, not taking the Q4 implied growth rate just because there are some specific headwinds that you have within corporate payments.
Yes. Absolutely.
Okay, maybe if we could.
Maybe just the other comment too, right? Just to kind of, you know, I always like to hover up, right, and think about the big picture, right? I mean, from an organic revenue growth perspective, we've achieved 10% or greater for four out of the last five years. As we think about the sustainability and recurring nature of our business, we've been able to deliver on that commitment. We'll deliver on it again this year, and we think that's a good, you know, starting point as we look into 2026.
Yeah, that's helpful. Any update on the divestitures that you guys have talked about publicly, at least within the vehicle segment? I know that had been kind of talked about as one of the potential funding sources for the Alpha deal. I know you guys haven't commented specifically on the assets, but just anything more you can give us on what the progress has looked like there.
Yeah, it's interesting. What I would say is these are core businesses. They're not core core businesses, right?
Yeah.
When we think about reallocation of capital, you know, exiting these businesses, if we can get the right price, is pretty attractive for us because, you know, it funds Alpha and then it creates dry powder for additional acquisitions. That being said, we've been very thoughtful about not giving too many details about the business because obviously it would disadvantage us in the marketplace when selling the businesses. What I'd say is these are strong performing businesses. We'll see what the market comes back to us in terms of pricing, and we're only going to execute on these divestitures, you know, if it makes sense from a return perspective.
Okay. All right. I think that's a good place to wrap it up. Peter, thanks for being here.
Yeah, appreciate it.
Yeah, no, appreciate it. Thanks.
Thanks.
All right.