Good day, and welcome to the FLEETCOR Technologies First Quarter 2023 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Jim Eglseder, Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our first quarter 2023 earnings call. With me today are Ron Clarke, our Chairman and CEO; Tom Panther, our new CFO; and Alissa Vickery, our Chief Accounting Officer. Following their prepared comments, the operator will announce the queue will open for the Q&A session. It is only then that you can get in line for questions. Please note that our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com. Now throughout this call, we will be covering organic growth. As a reminder, this metric neutralizes for the impact of year-over-year changes in foreign exchange rates, fuel prices and fuel spreads. It also includes pro forma results for acquisitions closed during the 2 years being compared. We will also be covering non-GAAP financial metrics, including revenues, net income, and net income per diluted share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website. I also need to remind everyone that part of our discussion today may include forward-looking statements. These statements reflect the best information we have as of today, and all statements about our outlook, new products and expectations regarding business development and future acquisitions 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. These expected results are also 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 on Form 8-K and in our annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at sec.gov. With that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay. Jim, thanks. Hi, everyone, and thanks for joining our Q1 '23 earnings call. Also joining us here today is Tom Panther, our new CFO, who is now official, so delighted to have Tom here with us. Upfront here, I'll plan to cover 4 subjects: first, provide my take on Q1 results; second, I'll share our updated full year 2023 guidance; third, discuss progress on our value creation and simplification plan; and then lastly, I'll comment briefly on our newly formed strategic review committee. Okay. Let me turn to our Q1 results. We reported revenue of $901 million, up 14%, and cash EPS of $3.80. That's up 4%. Both results finished above the top of our guidance range. The cash EPS of $3.80 is clearly weighed down predominantly by higher interest expense. At constant interest expense for the quarter, cash EPS would have been $4.30, up 17%, so our model's intact. The macro environment did cooperate, basically coming in as we anticipated. EBITDA for Q1 exceeded $460 million, up 17%. Margins were up 100 basis points year-over-year. We invested incrementally about another 100 basis points of margin and a set of capability acquisitions from 2022, those intended to better position the company for the midterm. Trends in the quarter were quite good. Organic revenue growth in Q1 was up 12% overall. That accelerated sequentially and is above our 9% to 11% target range. Same-store sales finished plus 3%, so healthy. Retention finished at 91%, slightly impacted by the credit actions we took in Q4 to contain credit risk in the micro segment. That does drive a bit of involuntary attrition. Sales performance was absolutely terrific in the quarter, up 31%, setting new record levels of new bookings. So look, fundamentals are in a good spot. I do want to highlight our Brazil performance in Q1. So that business is really doing a nice job of transforming from a toll-centric business initially to now a broader vehicle payments business, again, for both businesses and consumers. The vehicle-related payments now include not only tolls but fuel, parking, fast food, and recently now even vehicle insurance. Another super good sales quarter for Brazil, new toll tags at record levels, and those were helped by a new bank relationship with Santander, which added almost 15% to the overall sales in the quarter. We also had terrific fuel transaction growth, up 39%, as we continue to increase the fueling acceptance sites. But most surprisingly in the quarter is, of our approximately 5 million active consumer users there, 3 million utilized our new Sem Parar app, mobile app in the quarter. And that engagement helped drive almost a 15% attach rate of insurance policy add-on sales, so consumers came to the app, looked around, saw offers and actually transacted with us. So we think this engagement opens up significant cross-sell opportunities. So look, all in all, a very good start here to Q1. Sales, revenues, profits, all of those above our expectations. Okay. Let me shift gears and turn to our updated full year 2023 guidance along with assumptions behind it. So we're revising full year revenue and cash EPS guidance up from our Q1 beat, so revenue at the midpoint now of $3.840 billion and cash EPS at the midpoint now, $17.15. We are expecting the rest of the year environment to be pretty consistent with what we forecasted 90 days ago, a few puts and takes but overall in the same place. Also, we've got an early view of April trends and results, so continuing to track to our plan. I do want to point out that we're expecting rest of year organic revenue growth in the 9% to 11% range. Inside of that, fuel improving to kind of mid-single digits, Brazil and Lodging in the mid-teens, and Corporate Payments in the high teens. We're expecting rest of year earnings to accelerate. That'll be driven by these record levels of sales flowing into the second half, a stronger Q2 and Q3 seasonality; again, a second half fuel acceleration driven really by the pivot in sales in that business from micro to a bit up market. We'll see better operating leverage as we run through the year. Revenues will expand faster than expenses. That should result in EBITDA margins in Q4 about 200 to 250 basis points better than last year. Second half EPS will also improve mostly as we lap the interest expense and higher bad debt levels that we experienced last year. Finally, we will keep a close eye out for any signs of macro weakness so that we can react quickly if we need to. Again, our solutions are generally pretty essential, pretty important. And demand for our services tends to actually run higher in inflationary times. Okay. Let me transition to the progress that we're making on our value creation or simplification plan. So we're working across 3 areas there: first, to eliminate overhang related to the Russia and FTC case; we're working to reduce complexity and present a simpler company; and finally, in EV, we're working to demonstrate that we can basically succeed in this energy transition. So first up, Russia. We have signed definitive documents now to sell our Russia business to a local firm. We're awaiting Russian government approval for the deal. And if we can get through the various hoops here, we would expect to close at the end of the quarter, the end of Q2. Tom Panther will provide some additional details on the impact of the transaction. Okay. Next up, the FTC case. So not much new to report here. As a reminder, both we and the FTC filed proposed orders back in February outlining some additional disclosure enhancements that we have been discussing with the court. So now it's really up to the court to decide what the conclusions will be and what the order will be. Given again that these are disclosure-related subjects, we continue to believe the court order will not have a material impact on the go-forward financial performance of the company. Over to simplification, we are evaluating ways to simplify our company. Three things are under consideration: first, we are actively exploring the divestiture now of a few noncore assets, so that's underway; second, we're considering moving to 3 reporting segments versus today's 5; and then lastly, we're continuing to evaluate a brand change for the entire company to Corpay that would better reflect really the broad set of corporate payments solutions that we're offering. So expect to make decisions on these simplification ideas over the next 90 days. Okay. Let me make the turn to EV and reference Pages 11, 12, and 13 in our earnings supplement. So we've launched a pretty unique solution, the EV solution in the U.K. We call it our 3-in-1 solution. So that solution provides our fleet clients with a single program, one program where they can make traditional diesel purchases, on-road public EV recharging, and manage at-home EV recharging and reimbursement, so 3 in 1. The early indications are that the EV economics could actually be favorable to us. We looked at a sample of 271 clients in the U.K. that have been with us over the last 8 quarters, and examined the revenue pattern. And what you can see in the supplement is that the EV revenue per vehicle is actually higher than our ICE revenue per vehicle. So although early days, that's really pretty good news. The driver here has really the need for businesses to measure and reimburse recharging and potentially, in our case, 1 million homes, right, the number of users we have. So it will be quite a task. I also want to point out that we're continuing to pursue the consumer EV payment opportunity, providing some potential upside to the EV energy transition. Since we are building, acquiring EV networks and EV technology for the B2B market, we decided to repurpose those capabilities to serve consumers. So we're underway doing that in Europe, and we've signed 10 EV vehicle manufacturers, and we're serving their new EV consumer buyers. So when a new EV consumer drives off a lot, they will be using our EV network and payment app, so out of the blocks there. Okay. Let me make the turn to my last subject, which is our new strategic review committee, formed to evaluate the portfolio options for the company. We did retain Goldman Sachs to support the assignments. They have shared their preliminary analysis and thoughts with both the committee and our Board. I do want you to know we're taking this portfolio assessment quite seriously, and we're evaluating really all options to potentially increase shareholder value. I want you to know that I am personally aligned here with shareholders, both in terms of the importance of re-rating our multiple but also the urgency of doing so. So early days, but we're digging in. We're evaluating options. We're meeting folks. We're sizing dissynergies, and we're getting at it. We do expect to have much more to report when we speak again in 90 days. So look, in closing, again, Q1 out of the blocks in a good way, ahead of our expectations. Our rest of year guide is up, assuming 9% to 11% organic revenue growth with improving margins and earnings, working aggressively to close out our Russia and FTC overhangs, begin communicating hopefully a simpler company, and advancing the EV capabilities. And lastly, as I just said, we are just underway evaluating portfolio separation options, so a lot going on. So with that, let me turn the call over to Tom Panther, our new CFO, to provide some additional details on the quarter. Tom?

Thanks, Ron. It's great to be formally onboard and to have joined the FLEETCOR team at such an exciting time. The last several weeks have been a great opportunity for me to learn the business by spending in-depth time with our people to better understand our markets, products, sales strategies, key initiatives, technology, and much more. There is more for me to learn, but the team has been incredibly helpful, accelerating my journey up the learning curve. I'm impressed by the exceptional talent and high-caliber capabilities that support the organization. FLEETCOR has a proven track record of generating strong top line growth and accretive operating leverage, and I can see why it's able to deliver those sustained high-quality results. I'm looking forward to digging in and helping the company achieve its business, strategic, and financial objectives, and I'm confident in FLEETCOR's growth prospects, both organic and inorganic moving forward. And we need to look no farther than the first quarter results to understand why I'm confident in the company's future. As Ron mentioned, we posted 14% revenue growth in the quarter, including 12% organic growth. The incremental 2% of reported growth was due to acquisitions made last year as the macro fuel and FX factors were mostly a push versus the prior year. Revenue of $901 million exceeded our guidance by $19 million, which flowed through to our $0.15 beat in cash EPS of $3.80. Moving on to the segments. I want to point out that we changed our organic growth solution disclosures to match the segment reporting that we implemented last year. Going forward, both reported and organic results will be disclosed in Fleet, Corporate Payments, Lodging, Brazil, and other. This will be cleaner and eliminate any confusion between segment and solution categories. We've provided organic growth information on this basis for the last 8 quarters on Slide 7 of our earnings supplement, and we've provided a map in the appendix so you can track these classification changes. Now on to the quarter. Organic revenue growth was 12% as we delivered results 2% above guidance, reflecting the strong diversification of our business and the realization of strong sales results from last year across all of our businesses. This is despite the intentional strategy to pivot our U.S. fleet sales upmarket to mitigate credit exposure. Our Corporate Payments revenue grew 19%, led by our direct Corpay payables business, which was up over 30%, driven by continuing strong sales, especially in full AP automation. Our solutions are selling well in the marketplace, and we continue to believe that we have attractive and differentiated offerings that will drive future growth over time. Cross border revenue was up 21%, which is normalized for the Global Reach acquisition in January. The cross border team had another very good quarter as new sales and customer wins remained strong while also substantially completing the Global Reach integration, which is underscored by 90% of the Global Reach revenue already migrated to our platform. Fleet revenue increased 6% on a reported basis, driven by higher volume. Organically, when we isolate the impact of fuel prices, Fleet grew 3%, in line with our expectations. This reflects the continued drag from the weakness in the micro-SMB fleet and the recent change in sales focus to a slightly larger customer. We are seeing good success from our sales pivot with sales trends continuing to improve, and we feel good about our ability to reaccelerate the growth in the back half of the year. Brazil revenue was up 18% compared to last year as the business continues to perform at an extremely high level. Our strategy of using the vehicle and now the Sem Parar mobile app for additional purchases like fuel, insurance, and certain retail purchases continues to grow, which significantly expands the addressable market across B2B and B2C. We have transformed the Brazil business beyond a single-product toll tags business. It really is the center of an entire vehicle payment ecosystem that continues to grow, and we're the only provider that offers this breadth in the market. We have a highly differentiated value proposition in the marketplace, and it is clearly winning share. Lodging continued to perform well, growing 26%. This solid performance is highlighted by strong sales across our industry verticals that reflect our success in driving innovation to win new clients and capturing more business from existing clients. In addition, revenue per night increased 24% due to customer mix and additional fee-based revenue sources as we continue to expand our product capabilities. Our near-term focus is on consolidating our various hotel networks into one in order to enhance the customer experience. Looking further down the income statement. Operating expenses were $526 million, representing a 12% increase over the prior year, primarily due to the addition of the Global Reach operations and the capability acquisitions we made last year, like Plugsurfing in the EV space. The remaining increase in operating expense was primarily in Corporate Payments and Lodging, where we generated significant operating leverage. Bad debt expense was 8 basis points but more importantly, slightly down sequentially from Q4 '22. Our delinquency trends give us confidence that we're on the path to lower bad debt expense in the back half of the year, even after giving consideration to a potentially soft macroeconomic cycle. The EBITDA margin in the quarter was 51%, 100 basis points better than Q1 '22. This includes $11 million or about 100 basis points of drag from expenses associated with recent acquisitions, including integrating and building out our AP automation and EV capabilities that we bought last year. We still expect our full year EBITDA margin to increase approximately 150 basis points compared to last year and Q4 to exit the year 200 to 250 basis points higher than Q4 '22. Remember, margins expand throughout the year as we generate revenue growth and realize the benefits of synergies from recent acquisitions. Interest expense increased by $58 million year-over-year, driven by higher rates on our debt stack. The impact of higher interest rates resulted in approximately $0.49 drag on first quarter adjusted EPS. Our effective tax rate for the quarter was 27.1% versus 26% last year, with the increase driven primarily by increases in tax rates in some international jurisdictions and some one-time discrete items. We anticipate the quarterly effective tax rate for the rest of the year to be between 26% and 27%. Now turning to the balance sheet. We ended the quarter with about $1.3 billion in unrestricted cash, and we had $779 million available on our revolver. There was $5.5 billion outstanding on our credit facilities, and we had $1.3 billion borrowed in our securitization facility. As of March 31, our leverage ratio was 2.7x trailing 12-month adjusted EBITDA as calculated in accordance with our credit agreement. We made no open market share repurchases in the quarter as we deployed roughly $230 million in capital for 3 deals, including Global Reach while also maintaining our leverage ratio. I would like to remind you that our first port of call for capital deployment is always accretive acquisitions. And then if there's nothing near term, we'll evaluate buybacks or debt paydowns as appropriate. We still have over $1.2 billion authorized for share repurchases, and we believe we have ample liquidity to pursue near-term M&A opportunities and continue to buy back shares when it makes sense. In addition to Ron's overview of our full year guidance, let me give some additional detail, including some thoughts on our Q2 outlook and supporting assumptions, which can be found on Slide 14. For the full year, we now expect GAAP revenues between $3.82 billion and $3.86 billion, adjusted net income between $1.263 billion and $1.303 billion, adjusted net income per diluted share between $16.95 and $17.35, and finally, EBITDA growth of 15%. All of these numbers include Russia for the full year. Assuming a June 30 close of our Russia business, we expect GAAP revenues to be $55 million to $65 million lower, resulting in a $0.30 to $0.40 decline in adjusted EPS based on using the sale proceeds for buybacks over the remainder of the year. I also want to emphasize that the transaction is subject to approval by the Russian government, which involves an added level of complexity. For the second quarter, we're expecting revenue to be between $930 million and $950 million and adjusted net income per share to be between $4.02 and $4.22, which at the midpoint is down slightly from what we reported in Q2 of 2022, driven by higher interest expense of approximately $60 million and roughly $20 million of expected macro headwinds from fuel price and FX rates. Related to our guidance assumptions, we are using $3.99 as our fuel price assumption for the rest of the year. Our interest expense guidance of $310 million to $330 million is based off an average LIBOR rate of 4.9% for the rest of the year. The rest of our assumptions can be found in our press release and supplement. Finally, I'd like to thank our 10,000-plus employees around the world who helped deliver a fantastic start to 2023. This quarter's results and our go-forward prospects reinforce the power of our growth-oriented, diversified business and the strength of our franchise. Thank you for your interest in FLEETCOR. And now operator, we'd like to open the line for questions.

Our first question comes from Pete Christiansen with Citi.

Tom, welcome aboard here. Great to have you. I had 2 questions here. There's a lot to dig into. But Ron, I guess now with the new segmentation, how should we think about long-term kind of normalized growth for the Fleet business now that we've added some other things to that segment? I know in the past, you've talked about the segment being kind of like 4% to 8%. Does that change with the new classification? And perhaps maybe we could also address Brazil in that same vein.

Yes. Pete, it's Ron. So I'd say in the base business based on how we're allocating sales and marketing investment, we're probably still in that target range, kind of mid-single digits. But I think the couple of wild cards on it are AEV, right? Does that thing, particularly with the early view we're getting of the economics, help accelerate it along with that consumer leg? And then B, do we get the cross-sell thing to hunt a bit more? So I'd say those 2 things are the wildcards. If those 2 things come in, obviously, we could accelerate quite a bit.

Okay. That's helpful. I know the toll businesses in Brazil, switching to free flow. I know it's been a benefit to some toll payment administrators here in the U.S. when E-ZPass went free flow. Just curious your take on how that could impact the business in the near term.

Yes, that's a good question. So far, it's good news. It's pretty early days in Brazil regarding the transition to free flow. They are currently testing it in one region. The positive aspect for the toll operator is that there are no more gates and people aren't being stopped. The downside is for the 20% to 30% of people who don't have electronic payment methods available afterward. This change will benefit us in the short term because the electronic process will be even more appealing, as it will be harder for people to follow up with payments later. We're actually seeing some improvement in the test region, where the implementation has taken place, which is exciting. However, it will likely take a significant amount of time since there is much to test, and a lot of infrastructure work needs to be done for the post-payment system to function effectively. So while it may not happen immediately, I believe it will be beneficial for us in the midterm.

The next question comes from Andrew Jeffrey with Truist Securities.

Ron, I wonder if you can update a little bit on the selling motion as you move upmarket in fuel. It sounds like you've met with some pretty good early success. But can you just kind of elaborate on what that looks like? Can you continue to go to market using primarily digital means? Is it more kind of feet on the street? Is there a pricing or yield difference on some of those bigger fleets? Just want to try to understand how that might compare to how the fuel business looks prior.

Andrew, another good question. So point one is we already sell upmarket, so although we don't say it, call it, I don't know, 40% of the sales even in the U.S. business are kind of not digital, 40% to 50%. So we're already kind of in the business is point one. And point two is, I'd say, even more so internationally, we have way longer time and see there with universal networks, so we sold a bigger account for a lot longer. But back here to the U.S. So the 2 ways that we'll kind of drift upmarket are, one, repointing our digital engine. So we basically kind of reworked the algorithm to look for different kind of search characteristics. So we let through the door, if you will, we bid in a way basically to encourage bigger accounts to come to us and shun smaller accounts. So that's underway. We made that pivot, call it, last October, November, so that's already started to work. And then second, what you said. We're starting to grow now the feet on the street that would go into the seam. And what we're working on is what I mentioned to Pete, Andrew, a few minutes ago, of maybe going to market with not only the fuel card but going to market with this Corpay One that kind of has the corporate payments stuff built into it to see if that might be a little more compelling. So we're kind of in test mode now of putting some people against a bit larger prospects and giving them something a little newer to say. So those are the couple of ideas.

Okay. That's helpful. And then I like the U.K. mixed fleet disclosure slide from a revenue standpoint. Is it safe to assume that you see similar unit economics or maybe think about it as contribution margin in addition to more revenue? In other words, is operating leverage in those mixed fleet EV offerings?

Yes, I'd say that's way too early to call, right? We've got a tiny EV business and set of assets and cost structure. So our 99% focus at this point is on the revenue side, right, and figuring out how to serve these clients and win. And I don't know if people think it's a big deal, but as I dug through the data, I'll say to everybody, it is a big deal, right, that companies, real clients that we have are willing to pay us more money to be more helpful in more places, and if you look at the chart, it shows significantly more money. So that is way different than I think we would have thought 2 years ago getting into the thing. So what I would say people ought to focus on is the fact that we have it. I think I'm accurate in saying we're the only ones. There's no one else that has this 3-in-1 kind of offering that brings all the things together. So I'd say, come back, Andrew, a different day to me on the margin side, but there's nothing structurally that would make us think we couldn't be at the same level over time. It's just not we're on today.

The next question comes from Sheriq Sumar with Evercore ISI.

I just wanted to get a sense of the trends in the month that you saw in the first quarter as to whether there was a sequential decline in the month of March versus what you saw in January and February? Or was it highly consistent across all the months? And an early read across how trends have been in April and any areas of weakness or strength that you have seen so far?

Yes, Sheriq, it's Ron. The months are actually increasing for us; we operate like a snowball business where we gain more than we lose. March likely had more workdays, which would explain a higher figure. We've also experienced a solid peak in April, with revenue and other trends aligning with our expectations and guidance. Overall, we're not observing significant changes. A few months ago, we established a plan, and as reflected in our results and comments about April, we are tracking in line with our projections.

One follow-up. On Corporate Payments, if I remember correctly, on the last quarter, you had mentioned that the growth would be around 20%, north of 20%, but now you had around high teens, unless I'm wrong here. So I just wanted to get a sense as to what's causing the difference in outlook for Corporate Payments?

Are you trying to pick on, hey, it's 19% instead of 20%? Yes. No, I thought it was more like 20-plus percent, so I thought it probably was more like a 50, 100 basis points of decline. Yes. If you go back and read kind of prior scripts, I would have said high teens to 20%. So 19%, I think qualifies as high teens. And I did say it's likely you'll see one of the next 2 or 3 quarters tick above the 20%. So again, we try to build, design that business to run right around the 20%, plus or minus, so still highly confident of that.

The next question comes from Sanjay Sakhrani with KBW.

Ron, appreciate the commentary on the strategic review committee, and it seems like you're onboard. I know in the past, you've considered divestitures or sales of some of the businesses, and the price simply was not compelling enough. I'm just curious, one, has the backdrop changed in terms of that pricing? Or are you just willing to make the deal in the name of simplification? And then second, maybe you could just talk about core versus noncore, sort of how you guys are looking at this.

Yes, Sanjay. Regarding the first part of your question, the situation has altered our earnings valuation. Historically, for about the last year and a half, we operated in the mid- to high teens range for EBITDA, trading at about 10 to 11 times next 12 months EBITDA. Therefore, if a third party were to offer a significantly higher price than our current valuation, it would be more appealing to me than if we were trading at 15% to 20%. When it comes to our core segments, the size of the businesses is how we differ. We consider businesses with substantial leadership positions as core, which includes Fleet, Brazil, Corporate Payments, and Lodging, as they all have strong standings. However, as I mentioned earlier, since we are currently trading at this level, I'm completely open to others valuing some or all of the company at a more suitable level. I want to ensure people are aware that we are actively engaging and seeking feedback to find individuals who may value some or all of the business at a higher price.

Okay. Okay. And then just a follow-up on the Russia sale. I guess, can you just elaborate a little bit on what specific approvals need to be received from the Russian authorities, and how much time that takes if this presents a risk?

Yes, that's a good question. Several months ago, the Russian government established a separate agency to oversee the exit of international western companies. This agency requires sign-offs similar to antitrust reviews. When western companies, like ours, negotiate deals, these agreements are submitted to this group for their approval or feedback. We've been informed that the process could take a month or two, which likely depends on the number of transactions they are processing. Historically, they have been consistently reviewing transactions since their formation. The buyer has indicated they are in discussions with this group, so something is happening. There is some risk involved. It wouldn't be accurate for us to say we know how things will turn out. We have an agreement, and if it receives approval, we will proceed with the transaction. Our best estimate is that this could happen within the next 60 days. However, I want everyone to understand that it is not without risk. There is a possibility that they might deny the sale or request changes that we would find unacceptable, so we are just waiting at this point.

The next question comes from Ken Suchoski with Autonomous Research.

Tom, congrats on the new role. Great to connect again. It's great to hear the comments on the portfolio review and that you're moving quickly on that front. There have been some discussions going around that FLEETCOR should consider breaking up the business and maybe ring-fencing some of the things that might be weighing on the multiple. So I guess, one, what is your preliminary analysis pointing to in terms of value creation as well as any dissynergies that need to be taken into account? And I guess if you were to go through with a potential corporate action, what might a separation look like and how should we think about the timing around that?

Yes, Ken. I'd say it's too early really to try to answer that. We're about 5 or 6 weeks into kicking this thing into gear and studying it. So we don't really have a super formed view. I think I kind of said what I said, which is we're underway. We've run and tumbled a bunch of numbers. We're obviously out talking to people. So really, we're just working our way through the options, and as I said, we would be in a way better spot for a clear answer to you in 90 days.

Okay. Okay. We'll wait on that, Ron. I guess as my follow-up, can you talk about the trends you're seeing on the corporate payments side? I mean, it kind of feels like the current macro slowdown or recession looks a little different than '08 and '09, and maybe businesses might be pulling back ahead of the consumer. So maybe you could just talk about how you're feeling about the spending trends in the Corporate Payments segment and then any puts and takes across the underlying businesses within that segment?

Sure. I believe our spending reports show continued strength across the board. What's particularly noteworthy is that our sales have reached record levels. In Q1, our Corporate Payments sales were not only at an all-time high but exceeded previous records by about 50%. We are significantly investing in brand advertising and expanding our outreach. Our product line is finally well-structured, and I feel that our current performance is the best it has ever been. Without getting overly optimistic, everything is functioning well. We aim to achieve a growth rate in the high teens to 20%. Aside from the channel aspect, which comprises about 10% to 12% of the business, the other segments are performing exceptionally well, and there are no warning signs.

The next question comes from Trevor Williams.

I want to ask on corporate payments in the cross-border business in particular. Maybe just a higher level if you could give us a refresher on what differentiates you on the cross-border and the FX side. And now with AFEX and Global Reach, just the main benefits you get with that added scale and then how that feeds into the durability of the growth that you're seeing there?

Yes. That's really a super good question, Trevor. The first and most important thing I think I'd say is who do we compete with. So how do we get business and who would we lose business to? And the answer is banks. Because we mostly serve the middle market, it's Tier 2 banks. So it's super important that everyone has that in the brand. We're playing little league. But maybe we're playing Minor League Baseball versus Major League Baseball. And so we have to be able to get mid-sized businesses to trust us to make either spot or hedge transactions for them versus, let me call it, kind of a Tier 2 bank. So when you have that context, the answer is we got to win everywhere. We have a better network, right, in terms of basically the destination, if you will, of payments, more breadth, more countries. We have better tech because it's all we do versus a bank running or using some third party. But the winner, I think, Trevor, is the people. We just have more specialists, right? We have hundreds of people in these different originating markets here, Canada, the U.K., Europe, Australia, that really know FX, that have grown up in FX. So I think they really just outthink and outpitch the representatives that are at these Tier 2 banks. And so it's the combo of all of those things. But we compete well because honestly, who has the book of business would be my answer to you.

Okay. Got it. And then on the Fleet segment, any help just on how we should think of the cadence of growth over the course of the year? Is the pivot of new sales to the larger customers as those start to flow through? Ron, I think you said earlier on, getting to the mid-single digits. But just any way you could put a finer point around timing and just as we're thinking of the next 3 quarters, just progression of growth in fleet would be helpful.

Super good question. I'd say think of it as just stepping up. So if it's about 3 for the print for Q1, we're going to end middle kind of 3, 4, 5, 6. It's going to step up basically based on the plan we've built. So kind of 1 point or so acceleration sequentially.

The next question comes from Bob Napoli with William Blair.

This is Spencer James standing in for Bob Napoli. We're really impressed with the new sales. Ron, could you summarize what factors are contributing to the strength in new sales and break down the components of that figure? Also, could you discuss how the digital advertising environment might be affecting the momentum of new sales?

Yes. I'm not so sure, Spencer, the second part of the question, but the first part, I can cover, which is, yes, it was a crazy good sales quarter, right? We're tallying guys up 31%, and that's in the face of taking the gas off of our North America Fleet business, right? We used to get, I don't know, 10%, 15% of the business in that micro segment, and I just shut it down to try to contain. So it tells you that the rest of international fleet and all the rest of the businesses grew faster even to 31%. I think it's a combo of things. One is, again, we've stepped up marketing and sales investment, particularly marketing. We've been pouring more money into corporate payments into this Corpay brand campaign, and so that's helping a lot. And then I'd say, second, I think we're finally getting the hang of digital leads, which is generating way more leads in every business. We have a couple of unique campaigns, digital campaigns, both in Fleet. We call one of them Barbara, and one in our Lodging business called Sara. And so these campaigns that create a bit of a personality in the space have been incredibly successful for us. So I don't want to say they're shooting fish in a barrel, but the sales force is getting fed with a lot more quality leads in the last year than they were before. So it's just all good. It's inflationary time, so we have cost reduction products. We have better products than we have. We have more people on the street, and our lead thing is working better. So it's just, I mean, I'd just say it's working, what we're doing. So I don't have a good answer on maybe the second part of the question.

Great. And as a follow-up, maybe an update on credit and fraud trends in the Fleet business.

Yes, I’m not sure if Alissa printed that or not, but it shows a slight improvement compared to Q4. The majority of benefits from our recent actions are expected in the second half of the year. We're observing significant changes in our delinquency roll rates. We have excellent visibility into Q2, which may not immediately affect our current quarter's credit reserve but will likely impact the next quarter. We're seeing promising signs that our measures will reduce credit losses in the second half, as we anticipated. Regarding fraud, we’re experiencing issues with application fraud, where individuals are posing as someone else to exploit us. We’ve implemented a new system that performs better by assessing additional variables before approval. Additionally, there is criminal fraud, such as people at truck stops skimming and selling cars. We have managed to reduce fraud in these areas by 40% sequentially. Our partners at truck stops have been instrumental in enhancing security. As fuel prices peaked last year in Q2, these areas became more appealing targets for fraud. It took time for us and others to respond, so while we haven't completely solved the issue, we're making significant progress.

The next question comes from James Faucette with Morgan Stanley.

I had a couple of follow-up operational questions here. Retention in the quarter was really strong. I think it was like 91.2% but was down about 100 basis points from last quarter. And I know you just mentioned the credit actions taken, but can you expand on if there were any other factors driving that? Is there seasonality, etc., that we should be aware of? And how are you thinking about that for the remainder of the year?

Yes, James, Ron again. No, that's it. I mean the reason it shows up there is what we call involuntary attrition, which is about half of our losses. Right? So let's use 10% not to hurt our head. Hey, 10% of our customers quit us every year. We quit 5 of them, which means we get uncomfortable with your credit profile, and so you are no longer our customer. And so when you go through what we did of having greater, heightened attention on these small card accounts, we took actions to cut lines and pull back payment cycles to contain losses. And so that just translates into us effectively kicking those clients out. So that's it. That's the totality of the thing. I want everyone clear; we did it with our eyes wide open. And based on what we're seeing, I’m happy that we did it. In your opening comment, we're still work for ADP for 10 years and still super happy with a consolidated 91% revenue retention rate. No tears here.

Got it. And just a follow-up on the conversations around segments and strategy. From a realignment perspective, considering some of the redefined segment definitions, is there any change in how that strategically affects those businesses or the planned go-to-market approach?

That's a really great question. To share my perspective, it stems from our initial focus on a product-centered approach to our business lines versus a market or customer-focused approach. Brazil has demonstrated that if we aim to transform our business by assisting vehicle-related drivers with payments—whether they are business professionals or consumers—this encompasses all expenses tied to vehicles, such as fuel, tolls, electric vehicle costs, maintenance, food stops, parking, and now even insurance. Engaging with these aspects shows that businesses and consumers feel we are justified in offering solutions for these payments, and having all of them accessible through one account appears appealing to them. So that's the direction we are taking. The goal is to consider all the various products we could provide to our customers that would be beneficial to them.

The next question comes from Jeff Cantwell with Wells Fargo.

And just to follow up on some of the questions about core versus noncore, and you giving us a ton of color on this. I just wanted to bounce something off you and see if you would agree that, over the years, amongst Fleet, Corporate Payments, and Lodging, there would be potentially a number of operational synergies amongst those 3 segments. And so the clear follow-up question to that would be could you maybe give us some comments on Brazil within the context of core versus noncore? Just curious how that piece of your business ties in with the rest.

Yes, I think, Jeff, I kind of just said it. To me, in some ways, Brazil is the lead dog, is kind of the poster child for how we should think about the portfolio. That, hey, when we bought that business 7 years ago, it was mostly a toll-centric business, and it's transformed, right? Like I said, selling 5 or 6 things to the same, both businesses and consumers. And notice how we’re selling EV, right, to both businesses and consumers. We're just basically repurposing the networks and the tech. Obviously, that's what Brazil has done. They’ve got toll networks that both use. They’ve got fuel networks that both use. They have parking that both use. So they've literally taken the same networks and tech and sold the stuff to the 2 different groups. So I'd say that business looks more related. The other thing, which is so weird, is fleet's in 8 giant markets today. Fleet's not only in the U.S.A. It's in, obviously, the U.K., Czech, Germany, Russia, Australia, Canada, and obviously, it's in Brazil. So our lenses are, in some ways, it might be the most related business in the company to our Fleet business would be our Brazil business because all of it is another country doing fleet, vehicle stuff. So I would say that would be a super long shot. The only thing is I like businesses that are working, just as an aside. So the fact that the business is compounding in the teens is pressed at about the 50% EBITDA line and is still beating down people that are giving things away for free and continuing to compound, we like that. I mean I like that like a lot, the performance of the business.

The next question comes from Tom Panther.

Sure, Jeff. Look forward to working with you and good to work with many of you on the call that did cover EVO. My DNA as a finance person is really to approach it from a business-centric perspective. I've had the benefit over the last month or so of being able to participate in a variety of meetings here, really learning the company firsthand and getting grounded in how the business operates is centric to how I and the rest of the team within finance think and support the business. Our role is to make sure we bring good information and good advice and ideas to the business. And we can't do that by just looking at the output of the results. I've said repeatedly over the course of my career, I like focusing on the inputs in order to drive the outputs. My dialogue and the team's dialogue with the business is around their KPIs. If we can get their focus on their KPIs and how those KPIs drive the kind of outcomes we're looking for financially, then the company wins. So you'll find me and the rest of the team very focused on making sure that we understand how the business is operating and how we can help it become more and more successful. Very focused on things up and down the income statement and balance sheet, so no real bias there. It's where the opportunity is, is where we'll focus.

My first question just has to do with the consumer EV build-out that you kind of mentioned, Ron. Can you maybe expand on that? Is the idea there to build a FLEETCOR consumer brand? Or are you white labeling? I mean, I guess, based on some of your other comments about Brazil, is the thinking there that using EV instead of tolls, you can do something similar on the consumer side as what they have done in Brazil using tolls as the wedge if you will?

Yes, that's a good question. So as I mentioned at the top, the motivation initially here is repurposing assets we have, which are networks, right, in tech. But your comment about brand is a good one. So the first thing I'd say is some of that build initially will be under other people's brands, where we'll be kind of Intel Inside. What I mean by that is think of us going to an EV car manufacturer. Pick Volvo, Renault, somebody who's making EV cars and they want to give their new buyers an easy way to find public recharging and pay for it. They're going to use our network and our app. The brand and sometimes even the app will get pulled into Renault's or Volvo's way, right, of communicating. So that's one, leveraging the carmaker's brand to get to those drivers. And then the second one is kind of the CPOs, the gas stations, if you will, the charge point operators, is what they call them. Same thing, we would go to someone that's got 100 charge points who has customers coming in that want them to be able to roam to go to places other than their 100. They would be trying to sign those customers up and get them under an app that we would provide them. So that's the first headline; some amount of our consumer business will leverage these intermediary brands. But lastly, I think it is a good idea. We have this brand, this company we bought called Plugsurfing, which, I guess, kind of sounds like an EV brand. So yes, we're not going to use, for sure, the FLEETCOR brand. We want something that represents EV. So we might invest. We may take a market, to your point, and invest digitally to see if we can build that brand and add some consumers directly. But that's for a different day.

Understood. And then just switching gears to this year, and obviously, you're seeing some sales momentum that you've highlighted. But just in general, as you sit here today, do you think things are getting better or worse relative to 3 months ago? Because there's a lot of conflicting data. I guess, from the data you are seeing, are you seeing any pockets of weakness across your offerings? Or is it really just the macro is a big question mark for you?

Yes. I know it's the question on everyone's mind, but I guess I'd make a couple of points. So first is our best internal metric here is what we call same-store sales, which isolates existing clients in the period that we had in the same period a year ago and just asks, hey, are they getting healthier or sicker? And the answer is healthier. So across our globe, at least among our clients, they're plus 3% healthier than they were 12 months ago. So that's kind of point one. The second point is our company that grows revenues double digits and grows profits faster isn't super reliant on GDP. I don't know what our GDP is here in the U.S. or in some of our big markets, but let's say it's 1% or 2%. We're growing by gaining share, right? We sell way more than we lose. So the growth rate and potential of our company is way more in our control of being able to sell way more businesses at the top of the bucket and lose fewer businesses at the bottom. If the existing clients shrink 1 point or so, oh, woe is me for a quarter or 2 maybe, but that's not our game. Our game is to power through, either happier or a little bit sadder, GDP kind of environment. So again, we're not seeing much, and frankly, we think it's at the margin for us.

This has concluded our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may all now disconnect.