Hello, and welcome to the FLEETCOR Technologies, Inc. Fourth Quarter 2023 Earnings Conference Call. I would now like to hand the call over to Jim Eglseder, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2023 earnings call. With me today are Ron Clarke, our Chairman and CEO, and Tom Panther, our CFO. 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 discussing organic revenue growth. This metric neutralizes the effect of year-over-year changes in foreign exchange rates, fuel prices, and fuel spreads. It also includes pro forma results for acquisitions and divestitures or scope changes closed during the two years being compared. We will cover 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 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. 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. 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, and thanks for joining our Q4 2023 earnings call. Up front here, I'll plan to cover four subjects: first, provide my take on both Q4 and full year 2023 results; second, I'll share our 2024 priorities and guidance; third, give you a bit of an update on the status of our strategic review; and then lastly, highlight a few exciting new products that we've recently launched. Okay. Let me begin with our Q4 results, which, frankly, were a bit mixed. We reported revenue of $937 million, up 6%; cash EPS of $4.44, up 10%; and EBITDA of approximately $500 million, up 11%. Q4 revenue did finish a bit weaker than we outlooked 90 days ago, but fortunately, our earnings flow-through was quite a bit better than expected. That was helped mainly by credit losses finishing at about half the level of last year. The revenue weakness in the quarter showed up in a few areas. First, gift cards. So we had some delays in gift card shipments that have been pushed here into Q1. In Lodging, we had a pretty soft distressed passenger vertical in the quarter, mostly because airline cancellations were at a record low level. North America fleet late fees were pretty light. That, again, is a continuation of exiting a lot of micro accounts that we started about a year ago when we tightened credit terms. Again, fortunately, the late fee reduction was essentially washed away by the improvement in credit losses. And then last is our Corporate Payments or payables business with a channel partner business finishing even softer than we had outlooked. Fortunately, there, we think it's bottomed out. So these weak spots were either timing-related, weather-related, or have kind of reached the end, have kind of bottomed out as we head into our 2024 guide. So hopefully, not surprising us again. The organic revenue growth in Q4 was 7% overall, again impacted by the soft spots I just called out. The Vehicle Payments organic revenue growth was 5% for the quarter. Corporate Payments revenue growth was 15%, but 20% if you exclude the partner channel. Trends in Q4 were also a bit mixed. Retention was quite good, improved slightly to 92%. Sales grew 12% overall with a terrific performance in Corporate Payments. Sales there were up over 40%. And what we call same-store sales finished 3% down. Again, we saw the weakness in the workforce lodging, in the airline lodging business and a bit in the U.K. Okay. Let me make the turn to our full year 2023 results, which reached record levels. 2023 revenue of $3.8 billion was up 10%; EBITDA of approximately $2 billion was up 13%; and cash EPS of $16.92 was up 5%. Trends for full year 2023 were quite good. Sales for the full year were up 20% overall. And again, inside of that, Corporate Payment sales were up about 50%. We did sell 100,000 new B2B clients in 2023. In terms of organic revenue growth, for the full year, it was 10%, making it three consecutive years of over 10% organic revenue growth. Again, retention was stable at 92%. Additionally, we advanced a number of important strategic initiatives in the year, progressed EV and our understanding of the relative economics of EV versus ICE. So promising results there. We did clean up our Russia and FTC issues. We introduced this transformation idea for our Fleet business, envisioning it really as a broader Vehicle Payments-related business. We closed a couple of important acquisitions, one in cross-border, which we fully integrated, and one in parking, really to jump-start our consumer vehicle payments initiative. So look, all in all, a pretty successful year. Okay. Let me make the transition to our 2024 guidance and start by outlining our major objectives for the year. A few things. First, as always, to deliver financial performance that's consistent with our midterm objectives. Second, we hope to deepen our position in Corporate Payments through some new acquisitions in that space. Third, we hope to build out our Vehicle Payments business with proof of successful cross-selling and accelerate revenue growth throughout the year. Lastly, to succeed with some new product launches and confirm market acceptance for them. So on to our 2024 financial guide. Revenue at the midpoint is $4,080 million. That's up 9% on a print basis or 11% excluding Russia. EBITDA is $2.2 billion. That's up 11% or 14% excluding Russia. Finally, cash EPS at the midpoint is $19.40, up 15% print and up 18% excluding Russia. Planning '24 profits forecast cash EPS growth of 18% this year, excluding Russia. We are expecting good earnings flow through to EPS. One, revenue will grow faster than expenses throughout the year, so that operating leverage will help, and we do expect to have fewer shares, better FX, and a slightly lower tax rate. In terms of revenue and organic growth, we're obviously helped by our Q4 exit rate in the sales from last year growing into 2024. We expect higher sales levels this year, which will add to revenue. We have a number of cross-sell initiatives planned into our client base this year. So in the Fleet business, selling business cards, EV, parking, breakdown services back into the fleet clients. In Brazil, the toll business, selling insurance, parking, and fuel back into the toll base. Tom will provide some more specifics on the 2024 guide and how it rolls out across the year in a bit. We also plan to mark the next chapter of the company with the rebranding of FLEETCOR to Corpay, and that's scheduled for March. Okay. Let me turn to our strategic review. Just as a reminder, we initiated a formal strategic review of our portfolio last spring and initially focused on the question of whether separating our Fleet business from our Corporate Payments business could unlock value for shareholders. We ran a rigorous process over the last 11 months with a lot of help, particularly from Goldman Sachs. We fielded numerous inquiries, looked at many alternatives and explored some combinations with potential partners. The review process was quite helpful for us in exploring some new structures for the company and spotlighted the value creation potential of transitioning our Fleet business into a broader Vehicle Payments business that serves both businesses and consumers. We're announcing today the conclusion of the review process. For now, we determined that keeping our Fleet business and Corporate Payments together is the best way forward. We remain open to reconsidering options to unlock value down the road, but right now, we're squarely focused on repositioning the Vehicle Payments business. My last subject here is on new products. We've released four new products into the marketplace this year, each with terrific potential. First, what we call our Corpay One business card, fuel card and virtual card in one. That's targeted to fuel-based businesses, where the solution includes a business card for the owner, fuel cards for the field drivers and replaces paper checks with virtual cards. All in one account and all in one UI, so pretty exciting. Second, we have the Comdata Connect Card. It targets small trucking companies, connecting the Comdata truck stop fuel discounts and reporting to the trucking company's existing business credit card. Trucking firms get the best of both worlds, as they continue to earn credit and rewards from their existing business card while combining that with the fuel discounts and reporting of a truck stop card. This also helps us in terms of the credit challenge with small trucking companies, so hopefully, we can bring on many small trucking firms without the credit risk. Third is the Corpay Complete product, our newest Corporate Payments product targeted to midsized businesses. This is a platform build, combining what we call walk-around solutions, business cards and fuel cards with a central AP automation solution packaged in one platform and mobile app. We believe this modernizes the way businesses manage their expenses and spend less. Lastly, in Lodging, we have a new product called CLC Choice. It provides a workforce lodging solution for employers wanting a more friendly and flexible employee travel experience, giving travelers a choice of virtually any hotel, room type, and even keeping rewards points from their favorite hotel brand. We think this solution will complement our current control solution and widen market opportunity. We're excited about these new products, which have been in development for quite a while, and we hope this set of products will accelerate revenue by 1% to 2% over time. In conclusion, 2023 was a record year, with record revenue, record earnings, and organic revenue growth of 10%. Sales grew significantly this year, up 20%. Stable retention at 92%. We made good moves to better position the company for the midterm, with EV progress and our new Vehicle Payment strategy. For 2024, we're planning profits or cash EPS growth of 18% excluding Russia, assuming flat interest expense and launching new products we have high hopes for. We're also beginning the next chapter for the company as we move to rebrand to Corpay in March. So with that, let me turn the call back over to Tom to provide additional detail on the quarter. Tom?

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter and the full year. Organic revenue growth was 7%, the same as the fourth quarter of last year. Revenue growth was slightly below our expectations due to pockets of softness, mostly in U.S. Vehicle Payments and Lodging, while our Corporate Payments and international businesses continue to perform well. The revenue weakness was mostly offset by strong expense discipline, continued improvements in bad debt expense, and a lower tax rate, which delivered $4.44 per share in cash EPS, within our guidance and up 10% versus last year. Looking at the full year, organic revenue grew 10% and EBITDA increased 13%, both in line with our midterm targets. We absorbed nearly $200 million of incremental interest expense during the year due to the rate hikes and still posted cash EPS growth of 5%. Normalizing for the higher interest expense, adjusted earnings would have grown 16% for full year 2023. Now turning to our segment performance and the underlying drivers of our revenue growth. Corporate Payments revenue was up 15% during the quarter and increased 19% for the full year. For the quarter, our direct business grew 19% and was again led by growth in full AP. Our full suite of high-quality payment solutions continues to sell extremely well, with sales up 27% this quarter, as we signed up customers seeking to modernize their AP operations. Note that the drag from lower partner channel volumes accelerated in the quarter, with channel revenue declining 31%. Excluding the partner channel, revenue grew 20% and spend volumes increased 27% in the quarter, showing strength on a core basis. We believe the partner channel volumes have bottomed, and volumes and revenue are expected to be flat in 2024. Cross-border revenue was up 21%, and sales grew 51%, with robust recurring client transaction activity. We've fully lapped all the revenue synergies from the GRG acquisition in January 2023. More importantly, our best-in-class technology, service, and products enable us to maintain market-leading retention and client acquisition, which is demonstrated in our results. We're continuously investing in this business through increased sales and marketing resources, as well as new product capabilities. Over the last few years, we've transformed this business into the largest non-bank provider of B2B FX payment solutions worldwide. Turning to Vehicle Payments, this is the new segment we introduced on our last earnings call, reflecting the combination of our Fleet and Brazil businesses, along with our new consumer vehicle initiative. In line with our goal of creating a simpler company, we've streamlined all vehicle-related payment solutions into one segment that operates across North America, Brazil, and Europe, offering a full suite of vehicle-related solutions to both businesses and consumers. You'll note that we have defined the new segment's KPI as transactions, and given the diverse products that comprise the segment, we've provided transaction counts by product type, such as fleet, tags, and parking. We've realigned our executive team to support this new segment, with Armando Netto serving as the Group President of North America and Brazil, and Alan King as the Group President overseeing International Fuel, EV, and Parking. Vehicle Payments organic revenue increased 5% during the quarter, with notable strength in Brazil and international fuel markets. In the U.K., over 30% of all new sales involve a non-fuel product, namely EV or vehicle maintenance. Our EV strategy in the U.K. is clearly succeeding as our 3-in-1 product, which includes fuel, on-road charging, and at-home charging, all in one app, has more than doubled from a year ago. The results speak for themselves, with both EV cards and EV revenue continuing to grow. Additionally, we're having great success selling our at-home charging solution with a 30% attachment rate to all new sales. Our charging network continues to expand, currently offering charging at over 600,000 charge points in Europe. By the end of March, we will cover nearly 80% of the rapid chargers in the U.K., including those from Tesla, which we signed in the fourth quarter. In Brazil, we ended the year with nearly 6,000 extended network locations, including 2,500 gas stations, 2,900 parking locations, 750 drive-through restaurants, and 270 condos. Total tags increased 7% year-over-year to nearly 7 million, and approximately 37% of customer spend came from our Beyond Toll network. Sales of insurance policies have quadrupled since we launched in Q4 '22, reaching nearly $200,000 in Q4 '23. Our success in Brazil is a tangible proof point of our broader vehicle payments vision to leverage an anchor product used by a large customer base and to then add additional services via a mobile app, driving incremental revenue growth. We're leveraging our strong success in the U.K. to introduce our consumer vehicles payment solution to the market. We've begun selling the parking network acquired in the third quarter via PayByPhone to our business customers and are building integrations to offer over 2 million PayByPhone consumers access to our proprietary fuel, EV, insurance, toll, and maintenance networks. In the U.S., softness in small fleet and the impact from our shift away from micro clients continue to affect sales and revenue results. Our digital and field sales efforts are improving as we see growth in applications, approvals, and starts. As mentioned last quarter, the shift to higher credit quality clients also impacted late fees, which were down 38% from Q4 '22. While the decline in late fees is a drag on revenue growth, it resulted in a similar decline in bad debt expense, resulting in an essentially balanced impact. Lodging revenue was flat compared to Q4 2022, and for the year, the business grew 12%. This quarter was impacted by ongoing softness in existing workforce customers, which appears to have stabilized. Certain verticals, such as airlines and insurance, can experience quarterly revenue growth fluctuations due to weather and natural disasters. Recall that in Q4 of last year, there were significant weather events and airline cancellations benefiting the airline and insurance verticals. In contrast, there were no major weather events in Q4 of this year. According to the Department of Transportation, 2023 flight cancellations were the lowest in a decade, down approximately 90% from Q4 '22. Similar results related to insurance claims, which declined approximately 20% in the quarter. Despite the recent soft quarters, we are confident that this business can return to low double-digit growth in the upcoming quarters. We've recently launched new product capabilities to enhance customer experience and drive new sales. Additionally, we're excited to welcome Joff Romoff as the new Group President of Lodging, replacing the retiring Ron Rogers. Joff brings extensive hospitality and lodging experience, which will be a strong asset to the business. In summary, we're proud of the performance delivered in 2023, showcasing the growth of our diversified business and the strength of our business model that generated over $1.25 billion of free cash flow. Looking down the income statement, Q4 operating expenses of $513 million were flat compared to Q4 of last year. Expenses from acquisitions, higher transaction and sales activities, and investments in future growth were offset by lower bad debt expense and the sale of our Russia business. Bad debt expense declined $19 million or nearly 50% year-over-year to $22 million or 3 basis points of spend. Most of the decline was in vehicle payments, which saw a $17 million year-over-year decrease as we benefit from our lower exposure to U.S. micro clients. EBITDA margin in the quarter was 54.2%, a 220 basis point improvement from Q4 of last 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 this quarter increased $18 million year-over-year, and the impact of higher interest rates resulted in approximately $0.27 drag on Q4 adjusted EPS, partially offset by lower debt balances year-over-year. Our effective tax rate for the quarter was 23.3% versus 24.2% last year, with the lower rate primarily related to specific tax planning items. Regarding the balance sheet, we are entering 2024 with it in excellent shape. We ended the quarter with $1.4 billion in unrestricted cash, up $300 million from 90 days ago, and we had over $800 million available on our revolver. We have $5.4 billion outstanding on credit facilities and $1.4 billion borrowed under our securitization facility. As of year-end, our leverage ratio was 2.4x trailing 12 months EBITDA, within the lower end of our target range. In January, we upsized our term loan A and revolver A credit facilities by $600 million with no rate concessions and no change in maturity. This added capital will provide incremental capacity and flexibility for both deals and share buybacks in 2024, which I'll elaborate on in a few minutes. Our capital allocation in 2023 was balanced as we deployed $1.6 billion. In the quarter, we repurchased roughly 600,000 shares at an average price of $254 per share or $143 million. For the year, we repurchased 2.6 million shares for $690 million. We spent $545 million on acquisitions during the year, enhancing our position in EV, the consumer vehicle payment space, and cross-border. The remaining excess cash flows were directed towards debt amortization and reducing our revolver balance. As mentioned, our 2024 capital allocation plan is supported by our substantial cash and liquidity position. We have $1.4 billion in unrestricted cash, and have increased our capacity on our revolver by $600 million, anticipating $1.4 billion in free cash flow in 2024. Our first priority remains M&A, with a robust pipeline of potential acquisitions to deepen our position in our three core operating segments. We are also allocating capital for share buybacks in 2024. In January, the Board increased our repurchase authorization by $1 billion, now totaling over $1.6 billion. We expect to repurchase $800 million of shares this year, using the open market and establishing a 10b5-1 plan later this month. Any residual cash flows from earnings will be directed towards reducing our revolver or building our cash position. Generating significant cash creates a high-class problem, and we plan to leverage this strength to systematically support EPS growth through M&A and buybacks in 2024. Now let me share some thoughts on our full year and Q1 outlook for 2024. Economically, we are not assuming a recession or meaningful economic improvement in overall business activity. Our forecast for the year is based on the consensus outlook in our markets, which suggests modest economic growth and lower interest rates in the second half of the year. We expect fuel prices to be a headwind in Q1, projecting U.S. fuel prices to average $3.65 per gallon, a blend of diesel and unleaded. In 2024, we anticipate cash EPS growth between 14% and 16%, inclusive of planned buybacks mentioned previously. Revenue growth is projected at 8% to 10%, and EBITDA is expected to increase by 10% to 12%, with margins expanding to approximately 54%. These growth rates include our Russia business through mid-August of last year. Excluding Russia, cash EPS is projected to grow 17% to 19%, with revenue up 10% to 12%, and EBITDA increasing 13% to 15%, all slightly above our midterm growth targets. These details are provided in our earnings supplement on Page 20. Net interest expense is projected at $340 million to $370 million, incorporating the replacement of a $500 million interest rate swap that matured in December. About 80% of our credit facility is currently fixed utilizing swaps, with a blended swap rate of 4.1%. Also, recall that our securitization is a variable rate facility. Lastly, we expect our tax rate to be between 25% and 26%. From a segment perspective, we anticipate organic revenue growth rates as follows: Vehicle Payments in the mid-single digits; Corporate Payments around 20%; and Lodging Payments in the high single digits. For the quarter, we expect revenue growth in Q1 to be below our full-year average due to ongoing softness, challenging comps that include Russia, and a tough operating environment with lower fuel prices. We anticipate revenue growth to accelerate in the back half of 2024 as the economic outlook clarifies, we lap the divestiture of Russia, and realize the benefits of our growth initiatives and new sales. For Q1, we're expecting revenue growth between 3% and 5%, with cash EPS increasing between 6% and 8%, which also reflects higher interest rates. Normalizing for Russia, revenue and cash EPS growth at the midpoint would be 7% and 13%, respectively. The rest of our assumptions can be found in our press release and supplement. Before completing my prepared remarks, I'd like to express our gratitude to our more than 10,000 employees around the globe who helped us achieve such a successful year and who will be the driving force for even greater achievements throughout 2024. Thank you for your interest in our company.

Today's first question comes from Peter Christiansen with Citi.

I have two questions for you, Ron. I'm interested in how you performed on the credit loss side. What are your tactical thoughts on extending credit in 2024 compared to last year, especially after improving the mix of your midsized and mid-market clients?

Pete, good question. I'd say, looser. So the model that we've used has improved over the last 12 months. I called out credit losses coming in at about half of the prior year. So I'd say we're going to kind of open this ticket carefully. Secondly, we're pointing to larger prospects with generally better credit. I guess we have the full year plan just a bit lower than full year '23, but it should help on the revenue side.

That's helpful. And then, Ron, I guess now exiting the strategic review, how should we view your acquisition priorities going forward? Any particular areas, horizontal, vertical? Just want to get your sense on FLEETCOR, soon to be Corpay's, M&A priorities moving forward?

Yes. Another good question. I'm glad to be back to the basics of buying companies. Our primary focus is on Corporate Payments. We have a pipeline of a couple of interesting opportunities in that space. Additionally, we're focused on enhancing our consumer capabilities, with the idea of acquiring a significant block of consumers that we can market all of our networks to. Those would be the two short-term priorities to look for.

The next question comes from Ramsey El-Assal from Barclays.

I wanted to ask about some of the Q4 headwinds that you called out and just maybe ask you to give us a little more color on what was going on and the degree to which you're confident that they'll represent transient headwinds rather than more permanent impacts. I know you implied that as we get deeper into '24 that you could see some improvement, but I'm just curious if you could give us a little more color on what sort of happened in the quarter.

Yes. In a nutshell, Ramsey, I would call it the story of the quarter was same-store sales. I pointed out it was minus 3%, and if you go back to our prior transcripts, Q4 '22 would have been plus 2%. In that 12-month period, we basically went from plus 2% to minus 3%. So that's the entire story. Retention was good, sales were good, expense controls, credit below the line. Everything in Q4 through my lens was in line, save for that one call out. I tried to go through it. They were clearly surprising to me since I looked through the guide pretty carefully. It's just two or three pockets that are not new. If you go back and look at what we communicated in '23, we would have discussed lodging having some softness, the partner channel and payables having some weak performance, the pivot from micro accounts, which shed a bunch of late fees, unfortunately, credit losses. Basically, I would say those three items I called out were just heavier and weightier on the downside. So we're looking at a kind of 1% to 2% minus same store, and it came in at 3%. That sums up the quarter. The silver lining is in all three of those cases. The data shows even through January, it looks like we've hit the bottom. So the thought process is that we climb out of the same-store sales, almost reverse trajectory. So minus 3, minus 2, essentially getting back to positive, as that book of business flatlined into '24.

I would like to follow up and ask if you could discuss the closure of the strategic alternatives process and provide some insights on it. Why was it challenging to find strategic alternatives to pursue? Was it due to a lack of attractive partners, issues with valuation, or interest rates? What were the main obstacles that hindered you from moving forward with that monetization strategy?

Look, it's a complicated question. We spent 11 months on it, so I won't be too quick with an answer. The primary concern against just a straight SpinCo was the uncertainty of the trading range of RemainCo, particularly regarding the multiple on RemainCo. That caused us to pivot into engaging with 3 or 4 partners. The short answer is that the synergies didn't turn out as well as we had hoped, or we couldn't agree on relative valuation, or, in one case, we faced social issues. These kinds of combinations are always quite difficult. But we've learned a lot. We've looked at various structures, met many people, and we'll continue to explore options. Our focus now is back on making acquisitions that fit within our lane, while rebuilding the vehicle business, but we're open to revisiting other options down the road.

The next question comes from Tien-Tsin Huang with JPMorgan.

I was thinking on the new product side that you outlined to enhance growth. You mentioned around 1 to 2 points over time. How quickly do you think this can convert into sales? Do you have the sales engine already humming? Just curious where you are with that.

The key reason I call this out is over the last two to three years, we've made numerous capabilities acquisitions. Behind the scenes, these have included tech capability acquisitions. The Corpay One product, for instance, involved purchasing an AP software platform called Accrualify, and we've acquired a European workforce business with a brand-new platform. The technology we obtained permits us to launch next-generation products that I've outlined at the top. We're actively selling these products now, and we have a solid sales plan for these offerings. I would say the conversion will occur next year. The crucial point for us this year is to report sales of those products, and then next year, as those translate into revenue, we expect an acceleration.

Got it. And just to follow up, Ron, regarding visibility into revenue growth in '24 versus prior years. It feels like there's a bit more reliance on new products and initiatives. While cross-sell has always been part of your strategy, macro conditions are as they are. How would you assess visibility this year compared to recent years?

That's a good question. Some things stay the same, and some are different. Our main focus, as you know, is sales, which is why I mention the growth rate. For the full year last year, it was 20%, and that's our target again for 2024, based on a larger base. The first factor is we've had success selling and anticipate the same in '24. Next, retention appears to be improving slightly. As we flush out micro accounts, this should structurally enhance retention. So, when you combine these factors, they underpin the business's growth. The wildcard has been the softness in same-store sales, which entered the year in the positive and ended the year in the negative. This needs to turn or stabilize back to flat, which is crucial for acceleration. We've also implemented new dynamic pricing strategies and signed new partners that we have yet to announce, which will come on board soon, along with our plans around cross-selling additional services. This is fairly balanced; it is not dramatically different than past years, but I would say that the new products and cross-sell strategies should provide slightly more support than in the past.

The next question comes from Darrin Peller with Wolfe Research.

Ron, maybe just going back to Tien-Tsin's question. When we consider the vehicle segment and aspirations for low double-digit growth versus a current mid-single-digit guidance, can you elaborate on the initiatives that are likely to drive that strength? It seems you're seeing success in areas like EV and Brazil, but any additional color on that?

Certainly. If you look at our quarterly roll, the growth rate should move from low to mid-single digits up to 10%. Our internal plan is aimed precisely at what you described, to accelerate the vehicle organic growth rate. The two main drivers of this, aside from the usual retention and sales growth, include the introduction of new products I've discussed and the successful EV strategy. Additionally, our consumer initiative is incremental. As we integrate services that cater to millions of consumers in both the U.K. and Brazil, every additional service we add translates into incremental, profitable revenue.

Darrin, one thing I'd like to add before Ron addresses your second question on longer-term vehicle strategies is to remember the first half of last year featured elevated late fees from the SMB micro clients still on the platform. We will start adjusting for that, but this creates some growth challenges until we move into late Q2.

The last point to note is we've effectively taken out $20 million to $30 million of late fee revenue and an equivalent amount from credit losses. While some may not like that, I prefer the more predictable revenue from having lower credit losses. This portfolio shift has affected both revenue and expenses, but it leads to better profit flow-through.

That's helpful. If there's time for a quick follow-up. Just very quickly on Corpay. I want to understand the channel business potentially bottoming out. Can you explain the dynamics and underlying drivers? Is this due to a partner, or is it more about virtual card adoption?

Excellent question. The channel business involves third-party U.S. customers where we provide virtual card processing. Over the past two years, partners have shifted from exclusive partnerships with us to non-exclusive ones. I may have previously used you for 100% of my processing, but now another provider is involved. Over time, we've transitioned from having about 15 key exclusive partners to 15 partners that are now non-exclusive. The good news is we now have contracts in place for '24 that ensure flat revenue in that business. We aim to move forward without facing the same quarterly disappointments as before. In '24, we expect the business to stabilize.

The next question comes from Nate Svensson with Deutsche Bank.

So Darrin actually leads right into what I wanted to ask on Corporate Payments. First off, great to hear about the 20% growth outlook for 2024. Can you provide an update on the resilience concerning suppliers continuing to accept virtual card payments amidst the challenging macro conditions? Any updates there would be helpful.

Nate, I'd say no major changes. The acceptance of virtual cards is more dependent on the merchant's profile. Merchants with higher margins are more likely to accept virtual cards, as are those in need of improved cash flow, who are paid sooner. The opt-out rate has remained stable, with no new significant changes.

Nate, we've actually seen card penetration levels increase a bit. Ultimately, it comes down to the amount of spend on a card, which has shown a positive upward trend over recent quarters.

That's great to hear about the penetration levels. Regarding new products, can you provide insights on the Corpay Complete product following the recent press release? What is your go-to-market approach, and how are you seeing synergy potentials between the full AP offering and cross-border capabilities?

Sure, Nate. We used to engage midsized companies with an a la carte approach, presenting various expense management products. However, now we can present a package deal that combines walk-around spend and AP automation into a cohesive offering. This unified approach simplifies the pitch, making it more compelling for CFOs. We recently initiated this approach about a month ago and are optimistic as we roll it out. The challenge lies in gauging market reception. We hope to convert initial sales into future add-on sales due to this integrated offering.

The next question comes from Sanjay Sakhrani with KBW.

Sorry, I hopped on a little late. I apologize if you've answered these questions, but can you clarify the macro assumptions you're using for the year? What kind of macro environment do you anticipate for the beginning and end of the year?

Sure, Sanjay. On a macro scale, we expect the overall economic outlook to remain stable, possibly improving slightly, coinciding with anticipated rate cuts in various markets. We don't foresee a recession or a gangbuster year for GDP. Considering our three major markets—Brazil, the U.S., and the U.K.—we expect to see a relatively consistent and stable economy across the board. Regarding specifics affecting FLEETCOR, we're projecting average fuel prices of $3.65 per gallon, which will be a slight headwind in Q1. Fuel spreads should remain consistent with last year. We're also seeing a favorable FX environment that might yield slight benefits, assuming the dollar doesn't strengthen significantly.

Sanjay, I want to add that I’m feeling optimistic about the setup for 2024, particularly compared to the $200 million interest expense burden of last year. With lower interest rates, we believe our earnings will see a return to a growth rate of 15% or 18%, which is much better than recent performance. Overall, things are looking quite positive for us.

Just a follow-up, Ron. Regarding your cross-sell initiatives outlined in your remarks, how much of that can happen over 2024? Is there anything already baked into your projections? When can we expect significant contributions?

We're actively implementing cross-selling strategies in various segments. Approximately 20% of our sales in Brazil involve add-on products, and we're launching integrations with our parking app, opening new avenues for service. We anticipate this aspect of our plans to be significant throughout the year as we focus on leveraging the expansive base of our 800,000 business clients. Generating meaningful revenue is certainly a goal for this year.

The next question comes from Sheriq Sumar with Evercore ISI.

I noticed the Corporate Payments take rate has increased in 2023. Can you provide context regarding pricing power here and if we can expect a continuing similar trajectory?

A lot of that is related to our mix of channel activity. As we've discussed, the fluctuation in the take rate for Corporate Payments corresponds with the changes in partner channel volume. Recent declines in channel volume have influenced the metrics.

Got it. How do you see margin evolution moving into 2024? Which segments do you expect to be the primary contributors?

For 2023, we maintained margins at 53%, exiting the year around 54%, and we anticipate maintaining that 54% into 2024, likely exiting even higher. The growth in margins is not tied to any single segment but rather a result of the overall business structure and the fixed costs involved. As we progress and grow, we'll achieve natural operating leverage. Also, while we plan to continue investing in the company, particularly in sales and marketing, we're balancing this against the growth in revenue and margins.

The next question comes from Cristopher Kennedy with William Blair.

Can you discuss the unit economics of your EV business beyond the U.K.? How has that evolved over time, and what is your confidence level going forward?

Certainly, Cris. I preface this by noting it's still early days. We've conducted this analysis for eight quarters and currently have 300 or 400 accounts in it. We have real customers paying us more for our products. The reason I believe we can sustain or increase pricing is straightforward; there's simply more to purchase. There are 9,000 gas stations in the U.K. for our 1 million drivers. When every driver transitions to an EV, there will be a million incremental charge points compared to the 9,000 gas stations currently in operation. Our fees are minimal in comparison to what they pay for charging and fuel, so I believe we have a clear strategy that clients appreciate. Our EV income doubled, year-over-year, reinforcing our confidence in this evolution.

The next question comes from Trevor Williams with Jefferies.

I'd like more detail on the different components within the Lodging segment, particularly the airline side. How do workforce, managed services, and insurance compare, especially relative to Q3?

The Lodging business, as we stated in our prepared remarks, experienced some softness. Our biggest surprise was on the airline and insurance side. We anticipated some growth in the workforce segment, which materialized as expected. However, we didn't see the expected seasonal uptick in flight cancellations that would typically benefit our distressed product area during the holidays. Similarly, the insurance piece experienced a decline. So the drop in lodging revenue quarter-over-quarter was mainly due to those two episodic factors. We continue to see slight softness in workforce, but as Ron indicated, we expect that to have bottomed out and grow based on new sales and products.

Could you clarify the assumptions for the organic growth guide? Are you expecting growth to accelerate progressively throughout the year?

Absolutely, Trevor. The key to our organic growth lies in the same-store sales figures. As we approach 10% growth, we acknowledge that we might lose some business, but we strive to achieve net sales growth. The forecast is for the same-store sales to stabilize and turn positive after being at minus 3%. As we address this, retention will also improve due to the flush of micro accounts. Our core repayment business is outpacing the fuel card business, which structurally bolsters retention. We confidently anticipate growth in the latter half of the year as we begin to see the benefits of our new products and cross-selling efforts.

Regarding the Corporate Payments segment, you noted an improvement in yield mix. However, corporate volumes fell about 15% sequentially. What drove the mix change and volume fall-off?

The volume decline stems from the channel issue I discussed earlier. That was the key factor leading to the decrease in same-store sales. We would have been at around 2% if that business had remained flat. It's predominantly a partner-driven situation where a major partner transitioned to a non-exclusive deal, resulting in revenue and volume losses, albeit the take rate increased as a result. Excluding the partner channels, the spend level exceeded 25%. We now have our contracts in place for '24, which we can use to maintain stability and address these previous issues moving forward.

This situation serves as a safeguard; we also have some minimums in place. This setup ensures protection while under contract.

Lastly, regarding the bad debt expense, it appears at the lowest level seen in eight quarters. Are your expectations for 2024 in line with this low performance? Is it realistic to expect this trend to continue?

Yes, I view it as fairly sustainable. While this may fluctuate in dollar terms as the business grows, we focus on it in basis points of spend. As the business expands, we'd expect the dollar amount of bad debts to grow, but not necessarily the rate. Our outlook for performance in 2024 remains optimistic, supported by the improved client mix and adjustments we've made to our models.

It's crucial for profitability; while revenue growth may be light when we exclude late fees, the lower credit loss expenses enable a decent flow-through to earnings, which we should highlight as a positive point.

The next question comes from Michael Infante with Morgan Stanley.

Regarding the buyback, could you highlight any potential cadence in the process? Will it be distributed evenly, or is there a preference for specific quarters on that?

Michael, we plan to remain mindful of market conditions while being enthusiastic about our stock price. With our balance sheet in strong shape, we have ample liquidity from the recently upsized revolver. Our goal is to invest quickly, both in M&A and buybacks. Timing will be influenced by market conditions and the amount of floating stock. You'll see us in the market efficiently throughout the year.

Ladies and gentlemen, this concludes our question-and-answer session as well as the conference. Thank you for your participation. You may now disconnect your line.