Let me get started. Our next speaker is Peter Walker, CFO of Corpay. Peter has a strong background in financial leadership, having previously served as CFO at Innerstructure Holdings at Jackson Hewitt. Thank you for joining us, Peter.
Yeah, great.
Appreciate it. This is your first conference with us, so we're honored. It has been about four months since you started as CFO. Maybe you could talk about your preliminary takeaways from the seat and what you think might be thinking of affecting a better outcome for the company.
Yeah, yeah, great, great question, because I've been thinking about it myself, reflecting on four months that's gone by like this, right?
Quick.
Probably three big takeaways. I think one was my hypothesis coming into this role in this company, obviously, was high growth in terms of 9%-11% organic growth and the businesses they were in, et cetera. But I had not dunked my head in the water deep enough to know truly what the opportunity is. I think one of the biggest things in my takeaways right now is the corporate payment space that we really pivoted to a couple of years ago. The opportunity there is just so large for us. There is so much untapped TAM for us in both the payable space and the Cross-Border space. We have obviously been spending a lot of time in terms of M&A related to that, between the AvidXchange investment we made on October 15 and then the Alpha Group transaction we closed on the 31st.
I'd just say I'm probably more enthusiastic than ever about just the durability of our strategy and the business model.
That's great. Obviously, the stock has been beaten up a decent amount recently, although it's had a nice run the last couple of days, so we'll take it, right? What do you think the market is missing on the business? What do you think you need to do to bridge the views going forward?
Yeah, so I always focus on what can I control and what can I not control. Maybe in the space of what can I not control, unfortunately, we're just in a bad neighborhood right now. I mean, the payment space is a pretty tough space to be in. What we've been told often is great house, bad neighborhood, not really what you want to hear. Hopefully with time that changes. What we're focused on is the best we can do in terms of performing within that. What I would say there is I believe we're exiting the year with a stronger business than we even went into the year with, right? We've shown to the market that our U.S. vehicle payments, which is only about a $700 million business of $4.5 billion, can deliver mid-single-digit growth.
We have also shown the durability of high teens organic growth in corporate payments. We have executed on a large acquisition and investment. I think that is the exciting part as we look forward to 2026 and really enthusiastic about what is ahead of us there.
Yeah, on the conference call last week, you guys talked about each of the core segments that make up the key businesses of Corpay, right? Maybe you could just sort of rehash that buildup of how they come together to drive double-digit top-line growth.
Yeah, happy to. If you think about our two largest segments being Vehicle payments and Corporate payments, it makes up over 80% of our revenue today. Those are the places that we want to operate in. If we double-click into corporate payments, corporate payments from an organic perspective is a consistent high teens grower. We expect that to continue at that pace. That business is really split between two businesses, both of those really offering services to the office of the CFO. There is a cross-sell opportunity there. That is the Payables business, which is about 40% of the revenue in corporate payments. Then there is the Cross-Border business, which is about 60%. That is what makes up Corporate payments.
If we move over to Vehicle payments, something we shared on the call just, wow, that was just a week or two ago, was there's really three businesses within vehicle payments. Those businesses sit in different geographies. Those businesses are all about the same size in revenue. So call them around $700 million businesses. One of those is our U.S. business, which is growing mid-single digits. The other is our international business, mostly Europe, growing at, call it high- singles, low- doubles. The other business is in Brazil, which is growing at, call it high teens. That International Vehicle payments business and the Brazil business, the results have been very consistent there. In the U.S. Vehicle payments business, obviously pretty big transformation in that business. We've returned that to mid-single digits, which we're quite pleased with.
Obviously, inside of corporate payments, there's a lot happening over the next couple of years. That can, at minimum, sustain the really strong growth that we've seen, if not accelerate it. Maybe you could talk about how you're planning for all these different initiatives in the segment?
Yeah, so on the call, we talked about how to think about the corporate payments in 2026 and really thinking about that business within four overall offerings, right? We have a spend management business. It's about $250 million. There really is about our ability to monetize spend for our clients. Corpay One is what you've heard us refer to as a product offering within that business. Really high valuations in that space and a nicely growing business. The other business that we talked about was our full AP business, which is AP outsourcing, basically. That's about a $400 million business today. That is a very similar business to Avid Xchange, which we recently took a one-third investment in with the option to buy. Avid's business is actually larger than our business.
If we do decide to execute on that acquisition, we'll grow that business twofold through that M&A deal. The next piece of the business is the Cross-Border business itself, which is really focused on foreign currency exchange, whether that's a spot exchange or a longer-term contract. That is about $1.2 billion. The last piece of the business, which is really emerging for us, I would say, in terms of size, but we're super excited about it, is the global bank account business. We in legacy Corpay had the multi-currency account business. With Alpha, that we just recently closed on, they have the global bank account business. Combined, that represents about $4 billion in deposits that we now have in that bank account business, with the majority of that, about $3 billion, coming over from Alpha.
We think that we know we are advantaged in our ability to open global bank accounts, given kind of some secret sauce we have around KYC and using AI capabilities, et cetera. Hopefully that frames out what we think is going to be, call it north of a $2 billion business in 2026. I think that we're really advantaged in these businesses to maintain that type of double-digit organic growth going forward.
You talked about Alpha a little bit in the global bank account business. Maybe you could just talk about the revenue profile of Alpha and how it impacts the corporate payments revenue growth profile going forward.
Yeah, sure. So we shared on the call that for the fourth quarter, we expect corporate payments in totality to come in in the teens. Ex-float, we would expect that to be in the high teens. If you look at the Corpay business on its own, kind of similar results. If you look at the Alpha business, call it 13%-14% without float, but 31% with float. There is definitely a much larger float component of that business than our traditional Cross-Border business. As we look into 2026, we obviously do see some float headwinds, call it somewhere around 100 basis points on the overall company of float headwinds from the combined Cross-Border business and from the corporate payables business. We are really focused, obviously, on increasing spend in our payments business and increasing bank account balances so that obviously larger balances even though rates are lower.
Got it. You have guided to at least $0.75 accretion from Alpha and the Avid deals combined. Maybe you could just talk about the sources of Alpha synergies and how much will come from cost savings versus revenue synergies, cross-selling Corpay's products into the Alpha client base. Maybe you could just break all of that down.
Yeah, sure. I spent five hours yesterday on the phone with the Alpha team, the CEO, the Head of Strategy, Head of HR there over in London. We're going through that process right now. We firmly believe when we buy a quality asset like Alpha, one of the most important things to do is sit down with the management team, go through our deal hypothesis where we see synergies, where they see opportunities, and then meld those together. I would say we did not want to get over our skis on the Q3 call. That is why we shared, hey, we expect at least $0.75 of cash EPS accretion in 2026, but generally said, give us some time to work through our budgeting process and really vet these synergies with the Alpha group. I would say more to come on that.
I would say we do expect significant revenue synergies, right? As we've mentioned in the past, Alpha only has licenses within the U.K. and Europe. We've got licenses in the U.S. and Asia-Pacific, right? Being able to take their current client base and just expand them to those countries alone has a significant revenue synergy that goes along with it.
What's the timeline to get to a good place? I guess it would take a little while, I would think, just because there's a lot to do. I'm just curious, how should we think about that?
It's interesting because we are already getting calls from our current clients and from Alpha's clients about doing business on the other's platform, right? Like, oh, some of our clients are calling us going, wow, we love that global bank account offering. Can we get that tomorrow? I'd say what we're focused on is how do we create a short-term structure where we can service our clients, give them what we need, generate the revenue we want to from the business sooner than maybe we even had planned, and then in the background having, hey, what's our ultimate plan in terms of integration of how we're going to run the businesses together? I'd say high level, the way to think about it is within the corporate clients that we serve in Cross-Border. We've done several acquisitions in our past. We've always integrated those acquisitions to one platform.
That would be the expectation here with Alpha as well. What's unique about Alpha is they have this private capital markets business, which is basically where they're serving a lot of private equity money, et cetera. This is where their bank accounts sit. They have a unique advantage system there around KYC, around the bank accounts, et cetera. We will continue to use their system for that going forward with some benefits from our multi-currency account.
Got it. Okay. It would seem to me like there's a lot of leverage between the vehicle and corporate payments business. Where do you think the biggest opportunities are for synergies?
Yeah, so we think the biggest opportunity is taking our fleet card customers, right, who currently have a fleet card and moving them to a multi-use card, right? Really moving up market to not only are we going to help you manage your fleet expenses, but let us help you manage your corporate expenses, right? We are obviously always focused on within the Cross-Border business and within the payables business, we are selling into the office of the CFO at some level, right? Once we get a foot within that door, how do we bring the rest of our product suite along with us?
Got it. Maybe a little double-clicking on the Vehicle business. The organic growth has been accelerating, but same-store sales has been sort of flat for quite some time. I'm just curious when we could see some kind of inflection in same-store sales. It just seems like it's been hard to come.
Yeah, so we view, so the model that we have is we believe we're growing the business based on new client acquisitions. We measure same-store sales success as kind of being ± 1. In the current form, right, I mean, our view is we're being successful at same-store sales. Where we see the growth is adding new clients to the portfolio. As we shared on the earnings call, sales growth for the company grew 24% year- over- year. We are seeing some really good success in sales. That's a lot of what is driving USVP's performance.
Got it. Okay. Maybe we shift gears to lodging. Obviously, it's been quite choppy in that business. And there's a bunch of headwinds. Maybe you could just talk about sort of the process to get an inflection in that business.
Yeah, so disclosure that we added this quarter because we thought it was really beneficial is lodging is down 5% year- over- year organically. If we remove the emergency volume related to the FEMA contract, it is down 1% year- over- year. The business itself, right, take emergency off the table because we know there is volatility to that, is basically flat. I would say that we feel strong about where we have repositioned the business, invested in the technology of the business. Our focus here has got to be on growing sales. That has got to be the code that we crack in the business going forward. That is where we are focused. I have received a lot of questions in terms of, are you going to divest the business? What are you guys going to do? Et cetera.
One thing that I've been focused on is I went back and looked at what's been the organic growth performance of the business, right? As recently as 2023, that business was growing at a 20% organic growth rate. It has really been the last couple of years that we've had this slowdown. Again, there was a series of issues on our side, which we've corrected at this point. I think our view is we would like to continue focused on the business and turn the business around. After that happens, whether we make a decision if this fits the overall portfolio or it doesn't, given our focus on corporate payments and Vehicle payments, kind of TBD.
Got it. I want to get to the topic of significant discussion, which is stablecoins.
Stablecoin, whatever.
You got to love stablecoins. It's one that I think a lot of people talk about just because part of your corporate payments business sort of is in the intersection of where people believe there's perceived disruption, which is Cross-Border payments. Maybe you could just talk a little bit about how you see the business positioned relative to the stablecoin discussion?
Yeah, so we did announce, for lack of a better way of framing it, our stablecoin strategy on our last earnings call. I think it was really well received by everybody. Maybe just give a little bit of background of what we shared there, right? We've been investing in the space for about 18 months. Mark Frey, who runs our Cross-Border business and has really been doing this his whole life, is a really big advocate of stablecoins and how we believe that it can be a competitive advantage for us. We think we're actually uniquely positioned to use it as a competitive advantage. Given that, one, we move billions of dollars today to merchants, right? Stablecoins is another rail that we can use to move money to merchants. It can make those funds available 24 by 7.
We think that's the use case within the merchant space. Within our global bank account product, we're going to add stablecoin accounts to all of our global bank accounts. Again, it would give the opportunity for those clients to move money 24/7 and not be restricted within banking hours. Let me come back to that because it was an interesting kind of data point as we were proving that concept yesterday with Alpha now that we're in open conversations. The third piece is there's an underserved crypto market where they need assistance with on-ramping and off-ramping, which is really the foreign currency exchange portion of their business, which is the main product we sell within Cross-Border, right?
Starting there, that is the biggest revenue opportunity in front of us is bringing on clients like Bank of Frick and other clients in the crypto industry and providing our current services to those accounts. Obviously, a lot of investment has gone into compliance related to that. The crypto world is becoming a lot more legitimized. As we all know, there's still some kind of dark and shadowy parts of that world. We need to make sure that we have strong compliance against it.
To go back to the use case of stablecoins in our global bank account, what we heard yesterday from the leader of the global bank account business out of Alpha is that for their clients, the most stressful time, no shocker here, in their process is when they're closing a deal and they need funds that need to flow from all over the country, right? They're using us as the bank account for the country that they're making the investment in and that the banking hours are restricted and the funds can't flow after 5:00 P.M. or on weekends. The initial hypothesis there is that we're going to have a lot of excitement from our private capital market clients in terms of offering stablecoin because it gives them the opportunity, obviously, to close on these assets outside of banking hours.
Got it. When we think about sort of the utility and the price differential, those are two big things that come up quite a bit. How would you compare them to what you guys provide today?
Yeah, so I think there is maybe a misperception that the stablecoin rail is going to provide the foreign currency exchange. That is not the case. When you convert from US stablecoin to a FIAT currency, you still need to have an exchange happen. That is the service that we provide. By the way, that is a tech-enabled service, but that is still a service. Yesterday, I spent the day in our US headquarters for Cross-Border here in New York, and I got to watch the trading desk work their day, right? What we are providing is a service to call it middle market businesses, either the CFO or somebody in the CFO suite, treasurer, et cetera, to advise them on these transactions, right?
The idea that that service and all the capabilities and investment that we have in terms of conversion of FX is going to be replaced by the stablecoin, that's not the main use case of the stablecoin. The main use case of the stablecoin is it is a new rail to move money electronically. By the way, we move money electronically today, right, on our own proprietary networks or on SWIFT. It's not like people are rolling around barrels of cash, right? It's just a new electronic method. Is there a price differential on the rail piece between stablecoin, our proprietary networks, and SWIFT? Sure, you could ± cents here and there. Overall, that makes up about 5% or less of our revenues being the rails. We do not see that as being disruptive to the business.
Again, we're excited about stablecoin because we think we're going to be able to offer our customers some real value on it based on the chain that it provides and the 24/7 availability.
Just one last one on that. How quickly do you think you guys utilize stablecoins and have it up and running in a significant way?
Yeah, interesting. We have a roadmap set. Our view is for sure we'll be done by 2026 with everything we want to do. Right now, we're in a process of really looking at where do we think the most demand is going to be from clients and then uber-focused on that, right? If the first opportunity for us is with crypto clients who need exchange capabilities, which is the case, that's where we're investing first. We're still rationalizing this, but my guess is the next place we'll go to is a global bank account business because we think there's a true use case here for the private capital markets. When I look at the merchant opportunity, nobody's calling me today and going, "Hey, Peter, I need some stablecoin.
Can you hook me up for my price, for my payment?" That is not there yet, but we want to be prepared when it comes. What I would say is we are probably a year out from getting it all done, but it is not going to be a big bang theory. We are going to release capabilities related to the biggest opportunities first.
Okay, very clear. Okay, maybe we move to capital priorities because I think Ron spoke about the possible divestitures that are out there. Then there's the Mastercard investment that's coming and then obviously normal cash flow generation. Could you just talk about how you intend to sort of work through all of those different priorities that you have and inflows and outflows?
Yeah, happy to. I mean, a big focus of mine since joining has just been all around our debt and liquidity and cash management, et cetera. We were pleased to share on the earnings call that we increased the revolver by about $1 billion. The great thing about that is that's sustainable, right? As we think about running the business going forward, we did a TLB that helped get the deal done. The other thing that we did is increased our securitization facility and we actually used U.K. receivables. If I think about liquidity kind of coming between now and year-end, I've got about $300 million coming in from Mastercard. I've got $300 million that now became available through this U.K. securitization effort. I've got Alpha cash that's coming on my books. I've got cash generation.
We're actually generating quite a bit of cash between now and year-end. That's what gets us to kind of a 2.8 leverage ratio by the end of the year. Something I've been socializing with investors since earnings is, "Hey, we think that our stock is just incredibly undervalued and that buying back right now makes the most sense with our capital." What I've been talking to investors about is, "Hey, if it's not 2.8, if it's 3, are you guys comfortable, right?" Really just hearing the voice of the investor about their view. I would say that 10 out of 10 investors have come back and agreed that the stock is incredibly undervalued and that's where we should be focused from a capital allocation perspective.
Got it. Maybe you could talk a little bit about the divestitures and sort of where, obviously they're in vehicle, it sounds like, but just timing and how you see that sort of working its way through into the financial statement.
Yeah, so we're in market with two businesses that roll up into our IVP business. Both of those businesses are strong performing businesses. I'd say they're like core businesses, but they're not core plus. If we ended up not selling them, I'd still very happily be an owner of both of these businesses. As we think about this rotation, right, the Alpha investment, the potential additional investment or full acquisition of Avid, et cetera, it's just a reshifting of our capital. Right now we're in the market. Books are out on both of those acquisitions. We're receiving a lot of positive feedback. I think it really all comes down to price and is price going to be attractive enough given the value of the asset. I don't want to rule anything out.
I'd be surprised if we've got something announced before the end of the year, but potentially something maybe kind of early Q1. Just given capital markets, my guess would be the smaller asset would go faster than the larger one because the more money you spend, the more diligence you want to do. We'll see. I think that it would be a nice free-up of another $1.5 billion in capital to deploy other ways. One of those could be buybacks as well as additional M&A.
When we think about the trade-offs of losing that revenue stream of the strong businesses versus the liquidity that you get, the trade-off is still net positive in terms of the financial impact?
Yeah, so great question. If we sell these businesses alone, right, they would be dilutive to our cash EPS, which nobody wants to have happen, right? The use of those proceeds is incredibly important to guard against that. I would tell you that some level of stock buyback is required in order to neutralize that impact.
That is obviously things you're looking at when you're thinking about purchase price.
That's it.
Got it. Okay, perfect. I want to talk a little bit about Gift. We saw pretty strong performance there. It's been a while. No, I'm joking. It just goes up and down quite a bit. It's quite volatile, right? I'm just curious sort of what drove the strong performance. Is it sustainable? Can we get a little bit more visibility into the trends?
Yeah, so I think a couple of things to highlight here. One is Gift had a good year in 2024. Gift is going to have another good year in 2025. Is it lumpy by quarter and does that drive me crazy? Yes, nobody likes that. I would say the business on an annual basis is performing well and has done so for the last two years. We expect it to do the same in 2026. If I think about the team that's running the business, right, it was kind of a step-up management team that moved in that opportunity a couple of years ago. They're killing it. One of the most interesting things that they've done is they've repositioned portions of the business where they're actually helping our gift card clients with sales.
They're using the gift card as a leader to get people back in the store. For example, let's just use Dick's Sporting Goods because it sits across the street from our office. If you have a Dick's gift card, right, there's the ability to put it on your digital wallet. We have the ability to send a push notification to say, "Sanjay, you forgot. You got $150 at Dick's. You should go buy this weekend. They're having a sale, 20% off." Dick's loves these kinds of things, right? We've really, and there's a couple of other products that we've introduced. What's driving the revenue is sustainable. We've added these additional products. The other thing that I would say is our sales funnel, and it's really the who's who of retailers that we don't already have, is really full.
It's a really good business. It's interesting. I think the question goes back to, okay, you feel good about it annually, but it's lumpy quarterly. As you know, we get measured on quarterly performance. What do you guys do? I'd say it's not at the top of our list of something to address in the short term because we feel good about the performance and how it's positioned. I'd say our bigger focus probably would be focused on lodging and getting that where it needs to be.
Yeah, that's fair. I guess just along those same lines, I know Ron has talked about, well, that business doesn't necessarily fit as a function of the whole. It's a great strong performer, but you kind of focused on those two core businesses. Any thoughts on if the appetite has increased for someone to want to buy that business?
To buy the Gift business?
The Gift business.
Yeah, I would say that, I mean, definitely given the performance, it's a much more attractive asset. Yeah, it is a, of all of our businesses, I mean, it still delivers a great margin, right? I mean, when you're delivering almost 60% EBITDA margins, right? I would say that it's below the line average from an EBITDA margin perspective. If we did sell the business, it would be less of an uphill battle from an accretion issue. That being said, I want to be very careful what I say at these conferences because I spoke about lodging at a last conference and then an industry rag the next day picked it up that we were selling lodging. We are not in the market of selling lodging or Gift, but we are always looking at our portfolio of businesses and looking to optimize.
Of course, of course. Got it. Maybe one more for me and then I'll see if the audience has any questions. Vehicle has now, like the US Vehicle business has come back into mid-single digits growth. It seems like you had done some restructuring in that business to sort of align the sales in a better way. Maybe you could just talk about the success there and if you feel like that's a sustainable improvement and that we can even see improvement from here.
Yeah, so before my time, so I have a lot of historians like Jim in the business to remind me of what happened in the past, right? There was a big shift in that kind of COVID and post-COVID into what we would call micro- vehicle payments business in the US, right? We obviously faced a pretty big credit issue as a result of that. As we all know, S&B clients are also long-term lifetime value is not very valuable of those clients. There was a recognition that we really needed to flip the business and really go up market. By that, I do not mean enterprise, right? I mean, we are talking about fleets of 10 to 15 cars at a minimum and then going up there.
The business has really been going through this rotation, I would say, of shedding the S&B business and moving into a larger vehicle size, once some enterprise clients as well along the way, which has been nice. You're really seeing that getting proven through the numbers, right? What's great about moving up market is retention is up. Retention in the business for the quarter was higher than the line average. We've put in AI-driven credit models. We're able to provide more approvals in the space and have lower credit losses than we've had in the past. We've got the sales function working in terms of driving the business. I'd just say we're in a really solid footing in that business. My expectation is we'll continue to deliver what we've delivered in mid-single digits. There are aspirations to get the business beyond that.
I would say at this point, we're not committing to those aspirations, but we've got a really strong leader running the business and focused on the future of it.
Great. I figure I'll open up to the audience if there's any questions from the audience. No? Okay. I think that we're good. We've gotten through all the questions. This is great. Thank you so much, Peter. Appreciate it.