Good afternoon, everyone, and welcome to the FLEETCOR Technologies, Inc. Third Quarter 2023 Earnings Conference Call. This call is being recorded on Wednesday, November 8, 2023. I would now like to turn the conference over to Jim Eglseder, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our third quarter 2023 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Tom Panther, our CFO. Following the prepared comments, the operator will announce that the queue will open for the Q&A session. Please note, our earnings release and supplement can be found under the Investor Relations section on our website at fleetcor.com. Throughout this call, we will be covering organic revenue growth. Now as a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices and fuel spreads. And it also includes pro forma results for acquisitions and divestitures or scope changes closed during the two 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 at 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 need to remind everyone that part of today's discussion may include forward-looking statements. These statements reflect the best information we have as of today. 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. The expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release 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. So now with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay, Jim. Thanks. Good afternoon, everyone. I appreciate you joining us today. Upfront here, I plan to cover three subjects: first, our financials, our Q3 results, our Q4 guidance and a brief 2024 preview. Second, I'll provide an update on our strategic review and where we're coming out. And then lastly, I'll introduce our fleet transformation plan, which is aimed at accelerating the revenue growth of that business. Let me begin with our Q3 results, which were generally in line with our expectations. We reported revenue of $971 million, up 9%, and cash EPS of $4.49, up 6% versus last year. But it would have been up 16% at constant interest rates. Q3 macro was weaker than our August outlook. Our fuel spreads contracted about 25% in the quarter, and that was the result of a $0.50 fuel price point-to-point increase from the Q2 exit to the Q3 exit, which compresses fuel spreads. Look, despite this weaker macro, our Q3 earnings powered through. We actually finished a few cents ahead of our August guide if you exclude just the Russia and PayByPhone transactions. Overall, organic revenue growth for Q3 was up 10%. Inside of that, our Corporate Payments business maintained its 20% growth rate. So I'm super pleased there. Our pivot, which we started last year in North America fuel away from new super small micro accounts clearly paid dividends this quarter. Our North America fuel credit losses went in half from about $24 million last year to $12 million this year. Trends in the quarter are generally quite good. Continued strong demand for our products. Our new sales were up 17% versus the prior year, which is very good. Retention remained stable across the enterprise at 91%. Our same-store sales did soften a bit, from flat last quarter to kind of minus 1 this quarter. We did notice pretty noticeable softening in our managed services subsegment in Lodging, which we're digging into. Our Q3 EBITDA reached $529 million, which is an all-time record high for the company, held by EBITDA margins, which expanded to 54.5%. That's up about 200 basis points versus last year. So all in all, I'd say a pretty good Q3 performance. Let me make the turn to our updated Q4 guidance, which reflects a couple of changes in scope, including the Russia divestiture, which we mentioned last time, and the recent PayByPhone acquisition. We've also refreshed the Q4 macro, which is outlooking a bit weaker FX than we saw in August. So look, despite these adjustments and these pressures, the fundamentals remained quite good such that our underlying Q4 profit guide is actually a bit stronger than our view 90 days ago. You can see on Page 14 in our earnings supplement that refreshed bridge. So we're updating Q4 guidance today to $968 million in revenue at the midpoint and $4.49 in cash EPS at the midpoint. So really, we are right on top of our Q3 print. Historically, Q3 and Q4 results have been very similar. This updated Q4 guide implies a 10% organic revenue growth in the quarter and a 14% EBITDA growth. So again, the forecast is really spot on to our compounding model. Let me transition to our preliminary view of 2024, which I characterize as quite encouraging. We are outlooking the 2024 macro environment to be neutral to maybe slightly positive. That's simply looking at the various macro factors as they exit this year into next year. Revenue, we're outlooking, again, although early, organic revenue growth in the same 9% to 11% range. That's consistent with prior years. Lastly, the key profit drivers of the business are generally setting up favorably. We're expecting lower bad debt, flat to lower interest expense, and a stable tax rate and share count. So generally, a good setup. Although it's early days in our '24 planning, I'd say we generally like what we see. Let me shift gears and provide an update on our strategic review. As a reminder, the goal of our strategic review or portfolio review is really twofold: first, to make a simpler company; and second, to evaluate separation options to increase shareholder value. On the simplification front, we've done a few things. We've sold Russia. We decided to keep our prepaid business, although we are working on a couple of other non-core asset sales. We are moving to three primary reporting segments, and all of these things make a simpler company. On the separation front, we've concluded not to pursue a pure spin, primarily looking at RemainCo derating risk. We've also decided not to pursue a strategic sale, mainly due to tax leakage and our estimate of dis-synergies. However, we are continuing to evaluate a couple of separation alternatives with strategic partners that we think are potentially quite attractive. We do expect to conclude those discussions with the counterparties over the next 90 days, and we'll certainly report back then. Lastly, my final subject is to introduce our fleet transformation plan, which we believe is the single most important effort to unlock shareholder value and re-rate our stock. The objective of the fleet transformation plan is to accelerate our global Fleet business growth in the double digits, so that we have three big primary businesses that can all target double-digit revenue growth. We have prepared a few slides in our lengthy earnings supplement beginning on Page 22 to help walk you through how we intend to accelerate fleet growth. The plan really centers around three big ideas. First, BAU. On the BAU front, we plan to get performance improvement through new fleet products, which we're leasing into the market now. These products join up with our corporate payment products to really create a differentiated offering in the marketplace. As you may recall, we're also pivoting that business from kind of small micro prospects to a bit larger seam prospects, both from repointing our digital marketing machine and adding additional field and Zoom reps targeted at this slightly larger market segment. The emphasis will be on two primary verticals; those are field services and construction, both of which are sizeable and significant opportunities. Second, underpinning for the plan is EV. We believe we can capitalize on the EV transition. We're getting much more confident that our 3-in-1 commercial fleet EV-ICE solution is a real winner and that we can maintain or maybe even increase our fleet revenues throughout the transition. Early experience in the U.K. over the last 11 quarters bears this out. Revenue per EV vehicle is running higher than revenue per ICE vehicle, so again, pretty positive. Lastly, there’s this idea of a consumer vehicle payments business versus just the B2B vehicle payments business. The idea is to further expand on that front, leveraging the networks and payment networks we have, which have been built on the B2B side over the last 20 years. The idea would be to start with anchor apps, such as toll tags in Brazil or digital parking in the U.K. that have millions of active mobile users, and then offer additional vehicle payment-related solutions that utilize our payment networks. We've demonstrated success in this approach in Brazil, where over 60% of our active consumer toll users now use a second or even third payment solution, like parking or insurance. Overall, we believe that we have the potential to incrementally drive the overall fleet/vehicle business into double-digit territory via these three ideas. We believe this fleet transformation plan is quite exciting and has the potential to reaccelerate the Fleet business and potentially lift the entire enterprise to faster growth. Let me turn the call back over to Tom to provide some additional detail on the quarter.

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter. Let me start by acknowledging that it was an active quarter with the sales of the Russia business, the acquisition of PayByPhone, and significant movements in fuel prices and FX rates. I'll address the impact from each of these factors to better compare our actual results to our previous guidance. First, our prior guidance included a full year of revenue and earnings from the Russia fuel business. Based on the August 15 closing date and final cash proceeds, the disposition of Russia resulted in $12 million of lower revenue and $0.06 of lower cash EPS. Secondly, the acquisition of PayByPhone on September 15 added $2 million of revenue and was $0.01 dilutive to adjusted earnings. Turning to the macro headwinds in the quarter. Compared to the assumptions used for our guidance in August, the total negative impact was $17 million. Average fuel prices of $3.88 were 7% higher during the quarter, resulting in a $4 million benefit. However, it's important to note that the point-to-point increase in fuel price from July 1 to September 30 was around $0.50. The majority of this 15% increase occurred in August and plateaued for the remainder of the quarter. Underlying that rapid increase in the retail fuel price was an even greater increase in wholesale fuel costs, which compressed fuel spreads approximately 25%, compared to our forecast, adversely affecting revenue by $13 million. So the net impact from changes in fuel prices on revenue was a $9 million headwind. It's typical when fuel prices rapidly increase for spreads to compress due to wholesale fuel prices increasing faster than retail prices, which can overwhelm the fuel price increase benefit. We get asked regularly if there's a way to track the price and spread impact. We found that OPIS or the Oil Price Information Service, which is a subscription-based provider, does a good job depicting retail and wholesale fuel prices and the resulting spread. Now turning to FX rates. The significant strengthening of the dollar beginning in August, when the Fed's tone became more hawkish, caused the dollar to strengthen relative to our foreign currencies, resulting in an $8 million drag on revenue. In summary, if we knew in early August what we know now about these factors I just discussed, our guide would have been revenue of $963 million and cash EPS of $4.33 per share compared to our reported results of $971 million and $4.49 per share. The majority of the $8 million revenue beat came from our international businesses. Our earnings out-performance is particularly impressive because the flow-through of our revenue results, combined with our strong expense management and lower bad debt expense, enabled us to power through the macro headwind and still exceed our pro forma August cash EPS guidance, when adjusting only for the impact from Russia and PayByPhone. We've included Slide 7 in our earnings supplement that walks you through these moving parts. Now on to more details regarding our results for the quarter, focusing on year-over-year revenue growth. Organic revenue growth was 10%, reflecting the diversification of our business and the realization of the strong sales that we've produced throughout the year. Year-over-year, lower fuel prices resulted in a $12 million reduction in revenue, and lower fuel price spreads reduced revenue by $23 million. FX rates were favorable relative to last year, translating into a $15 million benefit. So net-net, a $20 million macro headwind versus last year. Putting aside the macro noise in comparison to our prior guidance, GAAP revenue increased 9%, which reflects the business's ability to consistently deliver solid revenue growth. Corporate Payments revenue was up 20%, driven by 20% growth in spend. Strength in our direct business, which grew over 30%, was again led by outstanding growth in full AP. Our comprehensive menu of high-quality payment solutions continues to sell extremely well, up 28% as we sign up new customers who are looking to modernize their AP operations. We also continue to expand our proprietary merchant network and increase the amount of cardable spend. Cross-border revenue was up 19% as sales also grew 28% and recurring client transaction activity was robust. We are the largest nonbank FX provider in the world, and the name recognition we now have is a real advantage when we compete for our clients' business. More importantly, our best-in-class capabilities, service and products allow us to have market-leading retention and client acquisition, as you can see in our results. Turning to our Fleet business, organic revenue increased 4%. We experienced strength in our international markets, and in the U.K., we are pleased with the continued strong sales performance of our 3-in-1 product offering, which customers find very attractive as they add EVs to their fleet. In the U.S., some softness in small fleet, in addition to the impact from our shift away from micro clients, are affecting our sales and overall results. Our shift to higher-credit quality clients also impacted late fees, which were down 21% from Q3 2022. While the decline in late fees results in a drag on our revenue growth, it has been more than offset by a decline in bad debt expense, which I'll comment on later. But it's important to point out that our decision to pivot upmarket has been EBITDA positive. Lastly, as Ron mentioned, we continue to refine our go-to-market strategy to acquire larger customers and we are excited about the rollout of additional products that we expect will drive a significant uplift in sales heading into next year and going forward. Before I move on, Ron addressed the PayByPhone acquisition and how it fits into our fleet transformation strategy. To give you some deal specifics, PayByPhone is the world's second largest global parking payments platform, with over 6 million monthly active users on its mobile app. Their network covers approximately 4 million parking spaces primarily in North America, the U.K. and Europe, and they process over 200 million transactions annually, totaling $900 million in spend. We paid approximately $300 million for the company and expect to realize about $50 million in revenue next year. Now turning to Brazil, where revenue grew 16% compared to last year, driven by 7% tag growth. Our tag growth enables us to further increase the proportion of revenue from our expanded network of products where we earn incremental revenue. In the quarter, approximately 35% of customer spend was from our expanded network. Fuel is a great example of how we're expanding our product network with the number of tag-enabled gas stations growing 25% and transactions up over 40%. Our extensive network enabled us to generate 20% sales growth in the quarter over the prior year, with almost 30% of the sales coming from non-tag products. Our success in Brazil is a tangible proof point of our broader vehicle payment strategy, where we leverage an anchor product used by a large customer base to deliver additional products and services driving incremental revenue growth. Lastly, we've received some questions over the last several quarters about the potential impact of the Brazilian government deploying free-flow tolling, where the toll station reads the license plate and the individual pays the toll after the fact by going to a website. Now that these free-flow stations have been in place for a few years, our experience is that we actually sell more tags when these toll stations are installed because the tag user receives a small discount and is able to pay the toll automatically via their tag. This frictionless customer experience drives incremental demand for our product. Lodging revenue increased 10% against a tough prior year Q3 comp where the business had grown 28%. It's not unusual for the business to have quarterly revenue growth fluctuations driven by weather and natural disaster variability. Year-to-date, the business is up 16%. This quarter's performance was highlighted by sales success across our industry verticals. In addition to revenue per night, which increased 20%, driven primarily from channel and product mix, namely from our distressed passenger product and higher hotel commission revenue. Offsetting that to some degree was softness in our construction and transportation verticals, as the weaker macroeconomic environment is impacting these sectors. We expect this softness to rebound as the economic outlook becomes clear. Before leaving the segments, I want to briefly comment on our expectation to move to three primary business segments. We're making this change in how we operate the company in the fourth quarter and reflect the new segments in our 10-K. Now looking further down the income statement. Operating expenses of $526 million represent a 4% increase versus Q3 of last year, driven by acquisitions, increases tied to higher transaction and sales activities, and investments to drive future growth, partially offset by lower FX rates and the sale of our Russia business. Bad debt expense declined 22% from last year to $29 million or 6 basis points of spend. Within that, fleet bad debt expense was down $15 million year-over-year as we realized the benefit from lower exposure to micro clients, as previously discussed. EBITDA margin in the quarter was 54.5%, a 225 basis point improvement from the third quarter of last year. After normalizing for the Russia sale, we still expect our full-year EBITDA margin to exit this year 200 to 250 basis points better than the prior year. This positive operating leverage is driven by solid revenue growth, lower bad debt expense, disciplined expense management and synergies realized from recent acquisitions. Interest expense increased $43 million year-over-year, driven by the increase in SOFR on our debt stack and higher debt balances driven by acquisitions. The impact of higher interest rates resulted in an approximate $0.44 drag on Q3 adjusted EPS. Our effective tax rate for the quarter was 26.6% versus 26.8% last year. Now turning to the balance sheet. We ended the quarter with $1.1 billion in unrestricted cash and we had $660 million available on our revolver. We have $5.6 billion outstanding on our credit facilities, and we had $1.4 billion borrowed under our securitization facility. As of September 30, our leverage ratio was 2.66x trailing 12-month EBITDA, as calculated in accordance with our credit agreement. We repurchased 2 million shares in the quarter for $530 million, including the ASR we announced in conjunction with the Russia sale. We have over $700 million authorized for share repurchases. We have ample liquidity to pursue near-term M&A opportunities, and we'll continue to buy back shares when it makes sense. Now turning to our guidance. Let me start by bridging the implied Q4 guidance we provided in August to reflect the acquisition and divestiture activity during the quarter and current macro environment. The sale of the Russia business would reduce revenue by $30 million, and the acquisition of PayByPhone would increase revenue by $10 million. We're now expecting a $20 million macro headwind versus what we thought back in August, driven primarily by worse FX rates, partially offset by higher fuel prices of $3.96. Making these pro forma adjustments to our prior Q4 guide lowers revenue to $968 million and adjusted earnings per share to $4.34 per share at the midpoint. We've included Slide 14 in the earnings presentation that lays out these factors. With that pro forma reference point established, let me comment on our Q4 outlook that includes the factors I just mentioned. We're expecting revenue to be between $953 million and $983 million, representing 10% growth versus last year at the midpoint. We expect adjusted net income per share to be between $4.34 and $4.64 per share, which, at the midpoint, is up 11% over what we reported in Q4 2022. Similar to the third quarter, we expect to generate solid year-over-year revenue and earnings growth despite some softening economic conditions in our markets. Based on this Q4 guidance, for the full year, we now expect GAAP revenues between $3.774 billion and $3.804 billion, adjusted net income between $1.252 billion and $1.276 billion, adjusted net income per diluted share between $16.82 and $17.12 per share, and EBITDA growth of 14% and EBITDA margin of 53%. Thank you for your interest in FLEETCOR. And now operator, we'd like to open the line for questions.

Your first question comes from the line of Sanjay Sakhrani from KBW.

Good results in a tough backdrop here. Ron, could you give us a little bit more color on the strategic actions you're considering in this spin-or-merge scenario with these strategic partners? Maybe you can just speak to what certain permutations might be?

Sure, Sanjay. So it's really mostly around our Corporate Payments business. We have a couple of interesting counterparties where we might separate something and actually have a pure play that has more scale and synergies. We're kind of in the final mile of working through those conversations and seeing whether there's something there.

Understood. And then I appreciate the preliminary organic revenue outlook for next year. When we think about the different variables from a macro standpoint, such as the economy and FX, can you give us a sense of where we're at with that? What are you baking into that organic growth regarding the macro backdrop?

Yes. I think generally, the comment I made is comps. If you look at the various macro factors and the way we're exiting both fuel price spreads, FX, etc., I'd say that sitting here today, it feels kind of neutral-ish to maybe a smidge positive. Obviously, our organic growth puts that to the side. But I did want to provide a preview. Unlike this year, with interest rates up, whatever, 400 basis points, the growth across some of our key profit levers looks quite good. The setup looks way more normalized than it has in the last couple of years.

And your next question comes from the line of Tien-Tsin Huang from JPMorgan.

I know you guys covered a lot here. I wanted to ask maybe for you, Ron, just on the consumer vehicle payments, the $1 billion that you're talking about by '27. Do you have the assets you need today to get to that $1 billion? And do you expect the margin profile at that time to be different since this is a consumer or CDP business, as you called out?

It's a great question. Good to talk. We can only get into this debate, Tien-Tsin. Yes, we've got a couple of additional transactions that we're looking at to fill out a couple of the product lines. But this is mostly an organic play where we use these big consumer active blocks of accounts and just match it up with what we already have, which is the payment network and the merchants. So the million dollar question there, Tien-Tsin, is just that velocity. When we show 2 million people some additional related things, what's the take rate going to be? Most of the thinking, both studying what we've done in Brazil and studying this deal indicates that it will be organic. The key, as I mentioned, is the cost of sales. That’s the key to growth and profitability. Good news is we won't need to do tons of marketing; instead, we’ll try to light up big bases. We like the EBITDA profile and getting that thing to go. A couple more deals and mostly organic; that's the game plan.

And Tien-Tsin, we wouldn't expect it to be margin dilutive. Again, look at Brazil as our bellwether. It has attractive margins across the rest of our portfolio. We think that's a good indicator of what the overall business can be as it expands.

To add on to Tien-Tsin's point, as you know, we're always lower cost than new accounts.

Sure. I like it. It's exciting. Getting into the consumer side and getting the synergies there makes a lot of sense. Just curious on the cost side, as you called out, but I'm sure you're thoughtful about that. Now my follow-up then is on the three business lines and cleaning up the reporting segments. Is the general idea that it’s going to be Corpay, vehicle payments, and I suppose lodging? Can you give us an idea on the margin differences between the three?

Yes. Let me start, Tien-Tsin. Yes, so segment one will be vehicle, which will be our global Fleet business, our Brazil business, and the consumer, which is a big part of the Brazil venture. Second business is obviously Corporate Payments, and then the third is Lodging. Those will be the three lines.

For your modeling, we're really just combining Fleet and Brazil today. Based on how we report operating income and how you may model the business at a more detailed level, it would just be a simple summation of those two. We wouldn't anticipate any type of shift in the margin profile; it's just bringing those two together into the vehicle payments segment.

And your next question comes from the line of Darrin Peller from Wolfe Research.

I mean, sticking to just the current segments from this past quarter, they were strong in the Corpay side. It's an important part of the strategic thinking going forward. Ron, what do you see going well there? There's a lot of competitive chatter around macro headwinds, some debating structural changes. Talk to us a little more about your strategic plans for that segment before any real mergers or anything else.

Good question, Darrin. Mostly everything is going well; we're posting, I don't know how many quarters now, 20%. A lot of sales, mid-to-high 20s for that line of business tells us that we're selling a lot. There's a lot of demand. The sales pace is strong, and we're experiencing good retention rates. As I said before, we put a lot of effort into assembling our portfolio over the last couple of years now. The game now is really marketing and sales to drive new sales faster and get those implemented.

We haven't seen erosion on the supplier level either. We continue to see good network expansion. Cardable spend continues to gradually move up. So the interest level from the merchant side and the supplier side continues to be favorable.

That's really helpful color. Ron, just a quick follow-up to the prepaid business decision. What led you to decide to keep that now? Are there any other non-core assets that may make sense to sell potentially?

Good follow-up. Ultimately, Darrin, we just like the business more than some of the people that looked at it. We spent a lot of time making that a better business than when we shopped it three years ago. The premium we were looking for about what it's worth today, right, to pay the tax, I think people didn't get close enough to what I wanted to see. We feel good enough to hold it. We went through all the other small non-core things, and we do have two non-core things that we're actively discussing with buyers.

And your next question comes from the line of Ramsey El-Assal from Barclays.

I have a quick follow-up on the consumer, the new consumer business. How should we think about that from a geographic perspective? Are you focused on the U.S., Europe, or will it be a broader rollout depending on where helpful assets become available?

Great question, Ramsey. Our current business is in three markets—Brazil, the U.K., and the U.S., with about 90% of the revenue coming from these locations. Of the $1 billion target, we're about $350 million or $400 million of consumer payment business in Brazil today and close to zero in the U.K. and the U.S. The PayByPhone initiative is to get a great customer base in the U.K. and the U.S. where we already have these networks. We aren't looking to build a business where we don't have management and networks in place.

Makes a ton of sense. I have one follow-up regarding the Lodging segment. You mentioned a tough year-over-year comparison this quarter and some softness in a subvertical. How do you expect that to play out next quarter? Should we expect a bounce back on the easier comp next quarter?

Good question. It’s unclear. We thought this would start in Q2. Inside Lodging, we serve different customer subsegments. One of those segments is project-based, and recently, many clients have experienced softness. These clients might move to in-house teams. We’re not certain, but the indications suggest we might see some softness in Q4, but we hope to get a clearer outlook in the coming year.

And your next question comes from the line of Peter Christiansen from Citi.

Ron, I’m curious now that you’re through a good portion of the strategic review, what are your thoughts on share repurchase and leverage levels? How do you see the trade-off between margin and growth here? Do you think there’s an opportunity to accelerate growth by investing more in sales?

Good question, Pete. It's been a busy strategic review. Good news is when you put out an ad like that, it generates incremental activity. We have some separation discussions still ongoing. Our target is 3x leverage. We're running about 2.5 or 2.6. We're buyers of our stock; if we grow 9-11% next year, we grow the bottom line faster. We’ve plenty of liquidity to keep pursuing mergers and acquisitions alongside share repurchases. It’s the order of business.

And regarding growth versus margin, are you coming out any differently post-review?

Good question. Our EBITDA margin has been ramping up sequentially, aiming for 54-55% for Q4. We plan to ramp up sales and marketing investments but aim to maintain margins between 54-55% as our target next year.

And your next question comes from the line of Mihir Bhatia from Bank of America.

I wanted to go back to the fleet product transformation strategy. Can you elaborate more on the Fuel+ business card? How is it different than the Beyond Fuel strategy from a couple of years ago?

It's a good question. The competition for our target prospects is primarily based on business cards. The idea is to approach new accounts with a combined business and fuel card. The focus is on new clients rather than returning to the base. The product has been revamped with modern technology. Testing has been very positive, and we're now actively marketing.

Switching back to the Corporate Payments segment, what is driving the strength you're seeing? I know you're mid-market, but aren’t you facing macro slowdown and larger suppliers pushing back?

The strength is driven by volume. We're seeing strong sales from both the payables and FX businesses. We have this huge implementation backlog that adds predictability to our outlook. We've finally made significant progress in building competitive offerings and are focusing on selling them effectively.

And your next question comes from the line of Nick Pramo from UBS.

Congrats on the strong quarter. I just wanted to ask about how the sales pipeline has been trending in the Fleet business with the pivot to larger customers and how that informs the 2024 outlook for the Fleet business with the new products planned.

It's happening, but a bit slower than we'd like. The pivot is working; I can't remember how clear I said it, but it’s effective. In Q3, credit losses in that business dropped from $24 million to $12 million. Our outlook for Q4 is $25 million dropping to $10 million. We're investing digital efforts to target larger accounts. We plan for growth; our sales targets for the U.S. are up 25% next year.

Don't lose sight of the international business that continues to see positive growth, aiding overall fleet performance.

What’s the revenue growth profile of PayByPhone, and what optimization opportunities do you see there?

PayByPhone has been growing quickly, compounding at about 20%-25% over the last three years. Expect it to hit around $50 million next year while still earning virtually nothing. Our plan is to leverage our existing networks to enhance their offerings.

And your next question comes from the line of Bob Napoli from William Blair.

Ron, I see you're through much of the strategic review. Can you share your thoughts on share repurchase, leverage levels, and the potential trade-off between growth and margin?

Yes, Bob. We have several interesting potentials around M&A and share repurchase based on our cash flow. We’re looking at growth opportunities while managing leverage prudently. Growth opportunities are on our radar, but we won’t overlook share buybacks during advantageous pricing.

Is the 20% organic growth sustainable for next year?

Yes, early indications suggest it may hold, with a strong backlog and monetization ideas to improve card revenue.

And your next question comes from the line of Nate Svensson from Deutsche Bank.

I wanted to double-click on organic growth within the fleet segment a little bit. If you take Russia out from all periods, organic growth stayed around 3% this quarter. Can you provide geographic detail on what drove that growth? What deals grew well versus which ones softened?

International markets performed well: Mexico, Australia, and Europe. In the U.S., the enterprise segment did well, while small fleet growth struggled due to our pivot upmarket.

And your next question comes from the line of Nick Pramo from UBS.

Is the view on the consumer vehicle ecosystem in the U.S. similar to Brazil? What hurdles do you see?

The key lies in the existing active customer base. Early in Brazil, tagging consumers worked well. In the U.S. and U.K., the strategy is much the same: retain the existing tag market while unlocking associated products through technology. We believe existing user engagement in branded apps will facilitate this migration.

Thank you. There are no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.