Get started. Good morning. My name is John Davis. I lead the FinTech equity research effort here at Ray J. We're excited to have CPAY CFO Peter Walker with us this morning. We're just going to do a fireside chat. We'll leave some time for questions at the end. But first off, Peter, thanks for joining us.
Yeah, great to be here on a cold morning in New York City.
Yes, it is quite cold. Maybe we'll just start quarter-to-date macro trends. Anything that you've seen or observed post the call a month ago or so, I would love to get just an update quarter-to-date.
Yeah, sure. So quarter to date is tracking exactly where we expect to be from the guidance we set early November. We are going to focus on 2026 right now. And as it stands, 2026 from a macro perspective is setting up pretty favorable. So obviously, the expectations of interest rates coming down here in the U.S. and FX is favorable as we speak. So that's some good tailwinds going into 2026.
OK, and I wanted to dive in a little bit in vehicle payments and specifically North America fleet. Obviously, that's been a challenge. The macro backdrop there has been bouncing along the bottom for a while now. You saw some nice acceleration in the third quarter to mid-single digits. I think you expect that to continue in the fourth quarter. Maybe touch on what drove that acceleration and then any other macro comments on North America fleet specifically.
Yeah, happy to. I mean, one thing I always like to do is give some context because I think for a lot of people who followed the company for a long time, they're really tied into North America fleet. And while it's an important business for us, just the context of it's about a $700 million business and a $4.5 billion company, right? So while important, it's not the driver. I just see us often get compared to WEX and others and write-ups. And it's just a portion of our business. That being said, we've really been focused on the turnaround in that business. And so we were pleased to see that mid-single digit organic growth in Q3, as we expected, is what we printed. We expect that to continue in Q4. And that's our expectation for 2026. So pleased with where that business turnaround has resulted.
OK. And maybe shifting to corporate payments, which obviously has been a big focus. Mid-teen grower, fantastic 2025. Maybe we'll start a little bit on the fourth quarter. I think you have a much tougher comp. You talked about incremental float headwinds. Maybe talk a little bit about what the expectations for the fourth quarter, how you get to that kind of mid-teen plus growth rate despite a 900 basis points tougher comp. Because that's the number one question I get from investors right now is fourth quarter, everything seems fine. But corporate payments, the math and the spreadsheet looks tough. But Ron was very emphatic on the call that he felt really strongly about that. So maybe just talk a little bit about the tailwinds and what's driving that growth.
Yeah. I mean, our cross-border business continues to perform really well, as you guys have seen in the past, typically delivering high teens growth, sometimes north of 20% growth. So cross-border business expected to perform well in Q4. The corporate payables business can deliver mid-teens to high teens, also delivering strong in Q4. So when you put that together, the number and we're bringing Alpha on board. So we've got two months of Alpha in there. So what we shared is we expect 15% organic growth in Q4. And that includes a headwind of 300 basis points from float. So again, our expectations is that we were going to deliver a pretty strong Q4. I think there were some concerns out there from investors because of the comp issues that you spoke about. Obviously, we've got more insight into it just because we're in the business.
OK. And maybe we'll take a second and zoom out on the corporate payments business, given it's been such a focus from an M&A perspective. Lots of moving pieces. You've got Avid. You've got Alpha. And just remind us, what's cross-border? What's the payables business, the growth rates, and what does it all look like as we sit here approaching 2026? I think corporate payments means a lot to a lot of different people. You have competitors that have very different corporate payments businesses. And so just would love to maybe zoom out for a second and just kind of talk about the pieces and maybe remind the audience how large that business is as a total of all of CPAY.
Yeah, yeah, happy to. So as we talked about, next year, we expect the business to be over $2 billion. Next year, we are going to reconfigure our reporting within corporate payments so that it's easier for investors and everybody to understand. Based on the disclosure that we have today, I think you should think about the cross-border business, really three primary products in cross-border. One is the multi-currency bank accounts that we have. The other is payment processes on an FX basis. And then the last is risk management contracts related to those FX or international payments. So that is the cross-border business. So it's really helping clients with their payments cross-border. And then when we move into the corporate payables business, I think of it really two major pieces. One is our full AP business, which is think of it as AP outsourcing.
Then the other business is our spend management business, which is virtual card business and multi-card business. So that's the way you should think about it today. As we've talked about, kind of business growing in the mid-teens.
So as we break down that mid-teens growth, if I recall, last time, I think Ron talked about it, you were talking high teens to low 20s in the cross-border business. And then the payables business grows a little bit slower. You have the full AP growing faster than the indirect channel, which is, I think, now de minimis. But is that the right way to think about just the relative growth rates of how we get to that mid- to high-teens consolidated corporate payments growth, the FX cross-border business, and then the payables in color there?
That's right, and then maybe we jump next to the acquisitions or investments that you were talking about, right? So we purchased Alpha this year, which is a cross-border business based out of the UK, a similar cross-border business in terms of assisting clients with FX payments. But what Alpha has that is a much larger business than ours and unique to ours is they have a private capital markets business where they are providing global bank accounts to private capital market clients, and they have about $3 billion of cash funds related to those private market accounts, so we think that this is a really great growth opportunity for us. We know we have the ability now with Alpha to open up global bank account in literally days, so it's a huge competitive advantage over, call it, regional and local players.
And so that's a big reason that we bought Alpha. And then our multi-currency account will look to manage those two things together. But the MCA account was really focused more on corporates. So that deal closed. Pretty excited about that deal and the growth rate on that business. Then if we move to Avid, think of Avid as a full AP, very similar to our U.S. payables business, slightly bigger than our U.S. payables business. We actually did not buy the whole company. Instead, we partnered with TPG. And we took one-third investment. We didn't buy it right away because we really need to improve the top-line growth and the bottom-line performance of the business before we'd be comfortable owning the asset.
OK. And speaking of deals closing, Mastercard partnership closed yesterday. So $300 million or a 3% stake. But maybe talk a little bit about why that partnership's important. You've called out, I think, 200-300 basis points tailwind to the cross-border business in 2026. So maybe talk a little bit about that deal and what gives you confidence in that incremental growth tailwind next year.
Yeah, so when we look at the cross-border business kind of pre-Mastercard, pre-Alpha, we were primarily into the corporate segment, so very interested in expanding that. Today, we're now in four segments, so we're in corporates. We're in financial institutions with the Mastercard partnership. We're in private capital markets with Alpha. And with our latest stablecoin announcement, we're in the digital market as well. So now we've got four customers to sell to within cross-border. And there's just a huge TAM here, right? So it's great that we're in those segments. Excited to share with you this morning, Mastercard, we actually signed our first client with Mastercard under the partnership yesterday. So you guys are the first to hear it today. So Eastern European bank that we signed up. So obviously, we've been working with Mastercard to fill the pipeline. And pleased to see first client coming on board.
Obviously, hope to share more of that with you over the next year. We did share one to three basis points uplift in cross-border potentially in 2026 from the partnership. And we'll give a little bit more insight to that when we share our guidance for next year.
OK, great. And then maybe last corporate payments topic, everyone's favorite, stablecoins. You guys recently announced a partnership with Circle. I think a lot of people really are struggling to kind of understand both the opportunity and the risk from stablecoins. So we'd just love to get your perspective on the cross-border business and how you guys think about Circle partnership and the broader stablecoin opportunity.
Yeah, absolutely. So in our last earnings call, if you go back to that earnings deck, there's actually a page on stablecoins, and what we laid out is what is our strategy in more context so people could follow us, so what I'd say is we think we're uniquely positioned to take advantage of this new rail that's being introduced, right? We've got significant payment flows when you look in our AP business that we have today. We've got a large global bank account set of clients that we can leverage, and we're also the provider of choice to many of the crypto providers where they're looking for offboarding from stablecoin into USD with their clients when they need conversion, so what we shared is that we're pursuing three opportunities related to stablecoin.
So the first one is serving these large crypto clients and helping them with the conversion when they take the stablecoin into USD. The second one is in our domestic and cross-border business with our merchants. We're going to open up stablecoin wallets. We think the use case here is the 24/7 settlement, right? So if I'm a large merchant in the United States, I'm limited of when I can get paid by banking hours, as we all know. What stablecoin would introduce is a 24/7 settlement. So we're going to add stablecoin wallet accounts to those merchants. We're going to start off with a pilot, obviously, and see how much interest we get there. But we think that's kind of where the puck is going. And then lastly, in our global bank account business, we're also going to add stablecoin wallets.
What we think the use case is here, and obviously, we're going to test it. We're pretty excited about it. In the Private Capital Markets space, the biggest event that they have with us with a Global Bank Account is when they actually purchase the asset, right? So think of a private equity firm purchasing an asset in Germany and needing to open up a bank account to do that. The kind of nail-biting part of the process for them with that is dealing with all the funds settlement when they're purchasing the asset and they're limited to banking hours. So we think this might have a real upside with those PCM clients where they can settle with Stablecoin outside of banking hours and get the deal done. So I'd say we're pretty excited about what Stablecoin could potentially do. Adoption right now is not high for us.
That being said, we want to be there and be prepared should adoption start to increase.
OK. No, that's great. And then I did want to spend just 30 seconds on the lodging business. I think that's something that used to be a really nice grower, has been more challenged recently. I think Ron on the last call mentioned that if it wasn't going to turn around, he'd be open to potentially selling that business. But maybe just talk a little bit about what the challenges have been and what you guys need to do to get that back on the right growth trajectory.
Yeah, yeah, great question. I mean, as you know, I've been in my role for about five months. So I'm stepping into lodging performing the way it is performing today. And as you would expect a CFO, my first thing was like, oh, hey, pull me the performance for lodging for the last five or six years. Let me take a look. Why are we in this business, right? And I think it's important to note, just a couple of years ago, this was a high double-digit growing business. So this has been a really strong performer for us. There were a couple of missteps in terms of the business. We feel like we've gotten through, let's say, those major items. And what we're really focused on now is sales. We need to produce more sales in the business. And so we're investing in that.
So that is our current focus. And we are optimistic that if we focus on the sales effort, that we can return lodging back to the level of growth that we've seen in the past, at least double-digit. Lodging is about a $500 million business for us. So put it in perspective, a $4.5 billion organization. I want to be careful when I say about selling the lodging business because my first investor event, somebody asked me this question. And then the next day, one of the trade magazines picked up, oh, Corpay is selling the lodging business. Peter said it at an IR conference. It's absolutely not what I said. So I just want to be clear that we are committed to the business right now. We're investing in the business for growth.
Should that not realize over a certain time period, of course, we're going to step back and say, hey, how do we think about this from a capital allocation perspective?
OK, and then just maybe rounding up from the segment perspective, gift had a nice year. You had a tailwind from a lot of retailers having to reprint or reissue cards. Maybe just talk about that in the context of the gift business broadly and kind of how we should think about that growth on a more normalized basis.
Yeah, great question. So there's a relatively new leader in the GIF business. Been there for a couple of years. I think he's done some really nice things. That business actually performed pretty well in 2024, performed well in 2025, and as we're setting up 2026, expected to perform well. What the kind of key strategic thing that he did in that business is he focused more on how could he help the retailer generate sales using the GIF programs. There are several initiatives and products that he now sells. One of those is working with a digital wallet where if you have, say, a gift card at Dick's and you've registered in your digital wallet, we'll pop you a reminder of, hey, you got $50 to go spend at Dick's on a Saturday, right?
So we're bringing customers into the store with these products and really kind of changing what the business is. So what I would say is it feels like a nice turnaround, feels sustainable. What's always a struggle with this business is on an annual basis, good performer. Quarter to quarter, it's volatile because we're all dependent on kind of when ships happen and when orders happen. So I don't know that we'll ever be able to get out of that piece of the business. But I would say the business is much more attractive than it was several years ago.
OK. No, that's great. Maybe we'll turn to the preliminary '26 outlook that you guys laid out on the third quarter call, calling for roughly 10% top-line growth. I think that's very encouraging given some of the trends, like in lodging, that continue to be a drag on the business, but maybe if we just zoom out, how should we think about the different pieces of that 10% growth? Anything to call out, whether by segment or otherwise, that we should make sure and keep in mind as we think about that 10% for the full year?
Yeah. So you know I think the way that I always think about it is over 80% of the business is in corporate payments and vehicle payments, with obviously corporate payments being a larger percentage, and as we look at those two businesses specifically, right, our view in corporate payments will continue to deliver high to mid-teens growth. In vehicle payments, we'll deliver, call it, double-digit growth, so that's how I would think about the major drivers by segment.
OK. And then I think you guys stopped short of kind of a lot of EPS commentary. I think last year, Ron gave kind of an EPS run rate. You guys stayed away from that. But the one thing he did give was a 75% contribution from Alpha and Avid. But as we think about EPS, is there anything that we need to keep in mind, whether obviously lower rates are going to help on the interest income or, sorry, the interest expense, but then you do have a float headwind in the corporate payments business. But just anything else we should keep in mind when we're thinking about earnings for 2026?
No. I mean, we were very thoughtful in terms of we didn't want to get out over our skis with EPS. Obviously, FX can give it, and FX can take it away. And that kind of hit us last year. So we wanted to be thoughtful about giving the sell side enough that you guys could put together their models. Where I look at kind of where we sit today, right, consensus is about $5.2 billion for next year, give or take, probably in the ballpark. And then when I look at adjusted EPS, it's like $24.90, right? So maybe a hair above where we'd want to be. But I think we're in the ballpark with both of those.
OK. No, that's great. And then.
Subject to change as doing all of our beautiful planning. So that is not a guide. That is just an indication of where you guys are sitting today and where we are.
OK. And maybe just turning to the balance sheet, you guys have been obviously pretty active with Mastercard and AvidXchange and Alpha Group. About 2.8 times or so into the year. How do you guys think about buybacks versus incremental M&A? Do you need time to digest the recent acquisitions? And then Ron also talked about a couple of deals or divestitures that could be out there. It could be as much as $1.5 billion. So just how should we think about capital allocation as we go into 2026?
Yeah, yeah, great question. So post our Q3 earnings call, obviously had a bunch of meetings with investors. And something I wanted to make sure I was aligned with them is, hey, if we go to 3x at the end of the year because I'm going to lean in hard to buybacks because the stock is just incredibly undervalued right now, are you aligned with that? And I got almost high fives from investors in terms of, hey, are you going to make investment in the company you know that you have full confidence in, or are you going to use that money for M&A? So I would say the buybacks are very attractive in the current moment because we're so undervalued.
That being said, we're never going to lock ourselves out of M&A because as you guys know, in this market, there's always kind of interesting things coming to market. But I would say you should probably expect a heavier foot on buybacks in the back half of the year and going into next year. But we'll give a little bit more detail on 2026 on the call.
No, perfect. We've got just a couple of minutes here left. Any questions in the audience? All right. Well, as we wrap up, Peter here, what is the one message you want investors to walk away from this presentation with?
Yeah, so I'd say it's hard to give one.
Or a couple. That's fine.
But I think at the top, I would say we're ending the year with a stronger business than we went into the year. So the acquisition of Alpha, setting ourselves up for over 40% of our revenue from corporate payments is really exciting. The Alpha business itself is giving us access to new products that we can take across the world. The Avid investment that we made also sets us up for potentially a much bigger corporate payables business in the U.S. So really excited about that. And then the other thing that I would say is we just believe the stock is extremely undervalued. So it's a great time, I think, for investors to get into a high-performing company.
If you look at our organic growth rate, we've delivered, if we include this year, if we count that in the number, right, we will deliver greater than 10% organic growth for four out of five of the last five years. So I think that's a pretty healthy track record.
All right. Well, we're going to leave it there. Thanks, Peter.
Thanks.