Good day everyone, and welcome to today's Corpay First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. It is now my pleasure to turn the call over to Jim Eglseder. Please go ahead, Sir.

Good afternoon and thank you for joining us today for our first quarter 2024 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. Today's documents, including our earnings release and supplement, can be found under the Investor Relations section of our website at corpay.com. Throughout this call, we will be covering organic growth. As a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices and 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 other 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. It's important to understand 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 obligations to update any of these statements. These expected results are subject to numerous risks and uncertainties, 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 10-K. 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 welcome to our Q1 2024 earnings call, our first as Corpay, the corporate payments company. So upfront here, I'll plan to cover three subjects. First, provide my take on Q1 results and share our updated 2024 guidance. Second, I'll cover conclusions from our recent three-year strategy offsite regarding the way forward for the company, and then lastly, I'll highlight a couple of developments since we last spoke. Okay, let me begin with our Q1 results, which finished right in line with our expectations. We reported revenue of $935 million. That's up 8% excluding Russia and cash EPS of $410 million. That's up 14% excluding Russia. Overall, organic revenue growth is 6% for the quarter, although against a pretty tough comp. I am pleased with our corporate payments business, revenue growth there was up 17% overall, but up 21% if you exclude the channel partners. Trends in Q1 were quite good; overall retention remains stable at 91%. Sales or new bookings were up 11% year-over-year and same-store sales were soft negative 2% for the quarter, driven primarily by lodging, although same-store sales did improve one point sequentially from minus three to minus two this quarter. For sure, we're dealing with a couple of problem areas here in Q1, our North America vehicle business, as you'll recall, making the pivot away from low quality micro accounts to SMB accounts. We are increasing the sales ramp there with incremental digital and a new kind of upmarket field sales channel to drive the pivot, but it's taking a bit longer than expected; however, I do want to say we are definitely making progress. Our workforce lodging business continues to experience continued softness due to a combination of macro weakness and a couple of areas there, along with issues in converting to a new IT system. Fortunately, we've now converted the majority of the client base across to the new IT system, and we've introduced a brand new employee-friendly solution we call Choice, hoping these enhancements will stabilize the base. The good news is the early look at April volume in lodging suggests that the softness is stabilizing. We're projecting both the North America vehicle business and the workforce lodging business to return to positive organic growth in Q4. So look, in summary for the quarter, no real surprises, and numbers coming in really as expected. All right, let me shift to our updated 2024 full year guidance. There are really two major differences today in our outlook for the year versus 90 days ago. First, FX has moved against us, and interest rates look to be holding higher for longer. So both of these macro factors will unfortunately depress our performance the rest of the year. Additionally, as I said, we're expecting our lodging client softness to linger longer, thereby reducing our full year lodging revenue forecast. On the positive front, we do have greater visibility now around our high-performing businesses, corporate payments, international vehicle, and Brazil, and their ability to outperform for the rest of the year. As a result of these updated assumptions, we're reducing our full year 2024 revenue guidance at the midpoint from $4.80 billion to $4 billion, down by $80 million. That consists of $40 million of lower FX translation and $40 million of incremental lodging revenue softness. We're also reducing full year '24 cash EPS at the midpoint from $19.40 to $19. This is 100% the result of the macro factors. We do plan to absorb the profit impact from the $40 million lodging revenue shortfall through a combination of expense reductions, currency swaps, and some tax planning. So despite the slightly softer full year outlook, we're still expecting a very strong Q4 exit, with organic revenue there well above 10% and cash EPS above $5. Okay, moving on, let me shift gears to share some of our conclusions from our recent midterm strategy offsite, where we laid out plans for the next three years. First off, in terms of objectives, we aspire to be a top quartile growth company within the S&P 500. We're committed to 10%-plus organic revenue growth and 15%-plus earnings growth. That's a pretty exclusive club. Second, deeper, not wider; we've concluded that we're better off going deeper in each of our three core segments: vehicle, corporate payments, and lodging, rather than expanding into new segments, at least for now. Our research across the three core segments confirms that we've got plenty of Total Addressable Market (TAM) and sales expansion opportunities in each major business so that we can achieve our growth objectives without going wider. Third, in terms of our acquisition strategy, we'll be focusing on corporate payments and consumer vehicle businesses, like pay by phone. We're committed to pursuing accretive rather than capability deals that we've executed recently. Lastly, from the offsite, in each of our major businesses, we plan to actively sell what we call a flagship product most of the time, so that more and more of our scale will be built on a single product in each line of business. Over time, we would then convert existing clients off of other products onto the flagship product. This will result in a narrower set of SKUs over time. We believe that this more focused approach will lead to a much easier company to manage and grow. Okay, lastly, let me discuss two recent developments. First, our brand and ticker change. We did implement our overall company brand change to Corpay, the corporate payments company, in March, at the same time changing the ticker symbol to CPAY. We plan to use the Corpay brand as a go-to-market brand here in the US. We already go to market as Corpay in our corporate payments business. We've now launched the Corpay1 universal fleet card and business card in our vehicle payment segment and we're soon to relaunch CLC as Corpay Lodging. Thus, we'll have one single Corpay go-to-market brand across payables, lodging, and vehicles. This will certainly help us on the cross-selling front. Second, acquisitions; we've been quite active on this front. We announced earlier this year that we closed the majority investment in Zapay, a vehicle payments business in Brazil with three million monthly active users. The goal there is to add Zapay's vehicle registration renewals and vehicle ticket payments to our overall Brazil consumer vehicle bundle. The business is performing very well, with Zapay revenue growing over 50% in Q1. We also announced earlier today the signing of Paymerang, a full accounts payable corporate payments company that generates about $50 million in annual revenue. We like this deal, which will strengthen our corporate payments AP automation business across four new verticals. We anticipate the deal to close in Q2, pending regulatory approval, and it is expected to be accretive to both revenue and earnings growth next year. We see many synergies to pursue. In conclusion, Q1 was essentially as we expected. For the rest of the year, the outlook is a mixed bag, now expecting unfavorable macro conditions and lodging softness to persist longer, offset by strong performance in corporate payments, international vehicle, and Brazil. We have refined our three-year growth plan to focus on a narrower, simpler company that we can manage and compound, which has plenty of growth potential. We appreciate the pathway forward. Finally, we're excited about these latest acquisitions: Zapay and Paymerang, along with the active acquisition pipeline in front of us. We expect these strategic deals to be accretive to our revenue and earnings growth in 2025. With that, let me turn the call over to Tom to provide some additional details on the quarter. Tom?

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter. Overall results were in line with our expectations. Print revenue was $935 million, consistent with our guidance, despite a $7 million macro headwind from both fuel and FX. Organic revenue growth was 6% as 17% growth in corporate payments was partially offset by softness in lodging. Reported revenue growth was 4%, but if you exclude the impact from the sale of our Russia business, revenue growth was 8%. Strong expense discipline and another quarter of lower bad debt produced positive operating leverage. Combined with a lower tax rate, we delivered cash EPS of $4.10 per share, which is $0.03 above the midpoint of our guidance, up 8% versus last year, and excluding the impact from the sale of our Russia business, cash EPS increased 14%. Now, turning to our segment performance and the underlying drivers of our revenue growth, corporate payments revenue increased by 17% during the quarter, with our direct business growing by 27%. Our direct business exhibited strong underlying performance, with solid growth across spend volume transactions and customers. In addition, higher revenue per transaction rates further contributed to the revenue growth. Cross-border revenue increased by 18% and sales grew 25%, despite low FX volatility during the quarter. Client acquisition and spend volume activity was robust, as nearly every geography saw double-digit growth, with particular strength in Asia Pacific. We continue to make significant investments in this business through increased sales and marketing resources. Turning to vehicle payments, organic revenue grew by 4% during the quarter, driven by Brazil and international fleet. Our international fleet business continues to perform very well, led by double-digit revenue growth in Europe, Australia, and our maintenance business. In the UK, the soft economy has impacted volumes in specific industry sectors, but we are confident that it will rebound as economic growth resumes, given our strong market position, which includes 75% of the UK's top 200 fleet companies. During the quarter, we continued to build on our market-leading position in EV, with customer accounts nearly doubling, including our three-in-one charge pass product and home charging sales. We're also excited to report that the charge pass product won the Innovation in EV Technology Award at the 2024 Great British Fleet Awards, a prestigious event within the automotive and fleet community. Our EV success is further underscored by over 40% of the top 200 fleet companies using our charge pass product. Regarding our expansion into the UK consumer vehicles market, we are making progress on developing the integrations between our proprietary fuel, EV, and vehicle networks, into the pay by phone app. We expect this functionality to be ready by the third quarter of this year. In Brazil, our business performance has been extremely strong, with tag growth of 9%, now totaling over seven million tag users. Our B2C extended network revenue was double compared to Q1 of 2023, and now over 30% of total revenue is non-toll. Sales growth continued to be robust across our tag and insurance products. In March, we closed on the majority investment of Zapay, which has over three million customers using the Zapay solution for vehicle registration and compliance fees. The addition of Zapay enhances our consumer vehicle payment strategy in Brazil and allows us to capitalize on the attractive two-way cross-sell opportunity. We are now beginning to cross-sell Zapay solutions to our existing seven million drivers and conversely, cross-sell our existing suite of vehicle payment products to Zapay's client base. In the US, the impact from our transition away from microclimates continues to affect our sales and revenue results. Our upmarket digital and field sales efforts are improving as we continue to see growth in applications, approvals, and starts. As we mentioned last quarter, the shift to higher credit quality clients has impacted late fees, which were down $8 million compared to Q1 of 2023. However, we've seen a $15 million reduction in bad debt expense, yielding positive earnings trade. Lodging revenue was down 9% against 26% organic growth in Q1 2023, so it's a tough comp. Recall that last year, we experienced significant storm-related passenger volume distortions and insurance claims. We continue to see softness in the base, particularly among smaller field services companies that are deploying fewer workers due to the uncertain macro environment. We've recently completed some IT enhancements that strengthen our value proposition for both existing and new customers, resulting in a 16% growth in Q1 sales compared to a year ago. Looking further down the income statement, our Q1 operating expenses of $538 million were up 2% versus Q1 of last year. Expense growth from acquisitions and sales investments were offset by lower bad debt expense and the sale of our Russia business. Bad debt expense dropped by $14 million, or 35% from last year, totaling $25 million, or five basis points of total spend. Substantially all of the decline can be attributed to US vehicle payments, as we realized the benefit from our lower exposure to US micro clients. EBITDA margin in the quarter was 51.6%, a 53 basis point improvement from the first quarter of last year. The positive operating leverage was driven by solid revenue growth, lower bad debt expense, and disciplined expense management. Excluding the sale of our Russia business in 2023, EBITDA margin increased by approximately 160 basis points. Interest expense for the quarter rose by $9 million year-over-year, caused by a decline in interest income from the sale of our Russia business and the impact of higher interest rates, which were partially offset by lower debt balances. Our effective tax rate for the quarter was 24.7% versus 27.1% last year, driven primarily by tax benefits from the exercises of stock options. Now, regarding the balance sheet, we ended the quarter with $1.3 billion in unrestricted cash and nearly $1.5 billion available on our revolver. We have $5.4 billion outstanding on our credit facilities and $1.4 billion borrowed under our securitization facility. As of the end of the quarter, our leverage ratio was 2.4 times trailing 12-month EBITDA, which is at the lower end of our target range. Our strong liquidity and debt capacity, along with our ability to generate over $300 million in quarterly free cash flow, positions us well to actively deploy capital during the year. We have ample capacity to support M&A as well as to continue buying back our stock. As related to our $800 million buyback program announced in February, we have repurchased approximately 2.4 million shares for $700 million to date. We view $800 million as a floor, not a ceiling, and will continue to evaluate additional buybacks throughout the year. In addition to Ron's comments regarding guidance, let me provide some additional detail on our full year guidance and some thoughts on our Q2 outlook. For the economic outlook, we are not assuming either a recession or meaningful economic improvement across our markets. We have updated our macro forecast to reflect the latest fuel, FX, and interest rate projections. The fuel-related macro assumptions remain unchanged. However, the higher for longer expectation regarding interest rates, which gained traction in April, caused the US dollar to strengthen significantly and increased the forward curve by approximately 90 basis points as of year-end. The impact from FX is approximately a $40 million reduction in revenue, and higher interest rates resulting in an additional $14 million of interest expense. Additionally, we are lowering our revenue guidance by $40 million due to the softness in lodging. However, we are executing specific actions to reduce expenses that offset this reduction in revenue, so that it doesn’t impact earnings. In the supplement, we outline the impact of these changes in macro and operating performance to revenue, EBITDA, and adjusted EPS. To summarize, for the full year, we now expect GAAP revenue growth of 5% to 7% and organic revenue growth of 7% to 9%, with EBITDA growth of 7% to 9% as well, along with margin expansion of 100 basis points, and adjusted net income per diluted share growth of 11% to 13%. Excluding the impact of the sale of our Russia business, we anticipate cash EPS growth of 15% to 17%. I’ll emphasize that these estimates exclude the impact of our pending acquisition of Paymerang. For Q2, we expect revenue to grow by 1% to 3% on a GAAP basis and 4% to 6% organically, with cash EPS anticipated to grow by 6% to 8%. Excluding the impact from the sale of our Russia business, we expect Q2 cash EPS growth of 12% to 14%. This reflects roughly $13 million of expected revenue macro headwinds from FX and $3 million of additional interest expense compared to the outlook provided in February. Looking forward into the second half of the year, we expect revenue and adjusted net income growth to accelerate as we realize the benefits from the implementation of new sales, improved retention in US vehicle payments, and specific business initiatives. The rest of our assumptions can be found in our press release and supplement. Thank you for your interest in Corpay, and now, operator, please open the lines for questions.

Our first question comes from Tien-Tsin Huang at JPMorgan.

Good afternoon, Ron and Tom. I just wanted to ask about the lodging segment. I don't think I fully caught why some of it was macro and there was an IT cutover, which may have caused some attrition, but it didn't look like the retention was off either. So could you provide a little more detail on what we might expect in the next two to three quarters before it turns positive again in the fourth?

Hey, Tien-Tsin, it's Ron. You mostly got it right. Essentially, last year we put in an upgraded IT system, laying the foundation, but waited until this first quarter to try to convert. This created some bumps and a divot with a set of clients, resulting in some softness. The good news is, fortunately, it hasn't worsened. We shared a page, Tom, in the document—Page 16 in the supplement—that essentially shows the softness remaining in Q1, but we have fresh data indicating that in April, it has stabilized. The business is flattening out, and we are optimistic that as we move past the challenges from the previous quarters, we can see growth. Retention remains strong, and new sales are also performing well. Sales actually rose by 16% in Q1, so we're hoping this is just a temporary dip with a select client group.

I see. Okay, so you're basically rebasing off of the set of clients coming off and you're seeing growth from that. I think I get it. Thanks for the slide I missed it. On the Paymerang acquisition, what stood out about this one? Was it the verticals? Something around the technology specifically? I'm curious what drew you to it.

Yeah, the first thing, Tien-Tsin, is that it's the kind of business we like. Within corporate payments, our preferred segment is what we call full accounts payable, where we manage 100% of clients' invoices, no matter how we pay them. We like that model the most because it gives us the most control, and we experience the best retention with it. The appeal of Paymerang is that we pick up three or four verticals that we are not currently in, and we have no referenceable clients or a couple of vendors that are active in those verticals or some like ERPs or other partners. So essentially, after whatever 10 or 15 years that company has been building that presence, we find ourselves well positioned in those areas now. Lastly, the synergies, as you would expect, are quite significant for us because it's so closely related to our core operations. So, yes, I believe it's going to be quite accretive in 2025.

Our next question comes from Sanjay Sakhrani with KBW.

Ron, could you talk about the North America vehicle business? It sounded like it's performing a little weaker than you'd like. Are you expecting that to inflect as we move through the year? What is going to drive that?

Yeah. Hey, Sanjay, it's a good question. This issue has been ongoing for a year and a half, since we made the pivot to eliminate around 40,000 micro accounts that provided revenue and late fees but also brought a considerable amount of bad debt. Through this process, we stopped new micro accounts from coming in and trimmed down terms and credit lines in the first half of last year. We have successfully exited much of that business. Now we possess a cleaner business with a steadier base of around 80,000 larger clients and a steadier latency and volume mix. As we transition to market with some new products and allow new sales to build on this solid new base, we expect positive results. I would say getting there has taken a bit longer than I hoped, but I'm confident in a positive outcome as we exit the year. As we approach the latter part of the year into Q4, we’re seeing improved retention and structural benefits from flushing those micro accounts out.

Sanjay, just a couple of proof points on that. In the first quarter, we actually saw sales growth up 12%. That represents an improvement from what we experienced on a quarterly basis last year. Furthermore, we have seen approval rates return to levels we had in 2021. We refinements have led to approval rates now surpassing those rates we experienced pre-pivot into the digital channel. Additionally, we have noticed our late fees have bottomed out and are starting to see a slight rebound. Therefore, I believe we have clear indicators that the issues that dragged us down for the past three to four quarters are beginning to normalize.

Just to add to Tom’s comment, our approval rate is now about 50% higher than it was in September. We track this monthly, and we're targeting marketing efforts towards higher quality prospects or better applications now that allow for easier operation.

Okay, great. As a follow-up question regarding Paymerang, I understand it’s focused on full AP automation, but how does it fit into what you currently have? How long have you been looking into this business? Lastly, Tom, are you including the revenues associated with the acquisition? I know Ron mentioned it's probably not going to be accretive until next year, but could you clarify that?

So to answer your questions in order, we have known the business for a few years and have visited and engaged with them prior to this transaction. Regarding the revenues from the acquisition, no, they are not included yet. We signed the agreement, but we have not closed. We expect this to close, certainly this quarter and when we meet again in 90 days, we’ll integrate the revenue, which we estimate to be about $25 million to $30 million, provided we finalize in the next couple of months. In terms of how it fits, we’re operating in the same business model, but we generally serve different types of companies and verticals. When you move into a vertical, your brand becomes established, you build client relationships, and it enhances the ability to pay vendors effectively within those networks. We have a sound understanding of the business, which is why we consider this a highly attractive acquisition, what we call a wheelhouse deal. We feel confident about our strategy moving forward.

It aligns perfectly with our strategy. We’re gaining both customers and expanding our merchant portfolio by an additional 250,000 merchants with this acquisition. As we've mentioned, customers and networks serve as our two competitive advantages, and this acquisition solidifies our standing in those areas.

I'm curious if they’re currently profitable or when do you expect them to achieve full profitability?

Yes, they are generating profits currently, but we anticipate significant growth moving forward.

Our next question comes from Ramsey El Assal with Barclays.

Hi guys, thanks for taking my question this evening. I wanted to inquire again about lodging and just maybe ask for your visibility into that business right now. It was great to see April stabilize. Do you feel like the recovery in lodging is more or less locked in at this point, or are there still variables that you're concerned about?

Hey, Ramsey, it's Ron. That’s a good question. To say it's 'locked in' is quite strong. What I can say is we have clarity on what caused the dip and the deceleration—softness in a specific client group. We currently serve around 15,000 clients, with only a select group experiencing reduced business since Q2, Q3 last year. The good news is that retention rates did not suffer, and we haven’t seen any significant spikes there. Thus, as we move forward, we're focusing on our sales strategies to ensure recovery in this client base. The early signs from April demonstrate stability. I believe we could see a turnaround in business by Q3.

Further, we've implemented a structured campaign where we proactively engage with those clients, discussing the improvements we've made and gathering insights into the reduced utilizations. This move has provided us with valuable insights over the past month.

Thanks. As a quick follow-up, I noticed that stock repurchases have significantly accelerated in the last month, meaning you've repurchased more shares in that timeframe than in the entire first quarter. Should we expect you to lean more aggressively into buybacks?

Yes, I understand your point. The first quarter was predominantly just March when we initiated buybacks after the filing of our K, so you're only seeing one month's worth there. The April activity was higher. In terms of our buyback program, we had established a 10b5-1 plan to permit buybacks during the blackout period. Therefore, the recap is largely dependent on timing. We're close to completing the $800 million buyback program; we’ll likely finish that around May. We have ample liquidity now despite the pending Paymerang acquisition. Over a billion available on our revolver allows us to be active in markets should we choose to go above $800 million.

Hey, Ramsey, it's Ron again. I mentioned previously that we have an active pipeline. We're working on additional transactions, so I anticipate we will continue both acquiring companies and executing stock buybacks this year. Considering our liquidity and the expected divestitures, we are well-positioned to pursue both of those opportunities.

Our next question comes from Nate Svensson with Deutsche Bank.

Hey guys, thanks for the question. Following up on buybacks, could you detail the corporate actions you're taking to offset the lodging softness? Specifically, what efforts are being made to lower operating expenses? Also, regarding the repurchase question, I noticed that $800 million plan was highlighted along with an increase in repurchases. How does that align with previous guidance? Lastly, how much of these actions have been completed?

Yes, definitely. We're looking at various options. It’s beneficial for the company to have structured flexibility with operational changes from project delays to curbing travel and expense budgets—all geared toward preserving strategic sales and marketing investment. There are several adjustments we can make to fixed costs, which could have a fundamental impact without infringing on our future growth potential. Additionally, some of the strategies are already in execution, such as cross-currency swaps that help convert portions of our debt. We have also been planning tax strategies that can now be executed. We have a clear line of sight into these actions, and there are no uncertainties in this plan; we just need to execute effectively.

Just to add, our guidance of $19.40 does not include additional stock repurchases above the $800 million threshold; any repurchase activity will depend on stock price performance.

Understood. That's helpful. In your prepared remarks, Ron, you mentioned that you have greater visibility into the high-performing businesses. Can you elaborate on that in terms of what data is giving you confidence around corporate payments, international vehicle, and Brazil? What are the growth projections for each segment for the full year?

Certainly, Nate. When you are laying out plans for businesses, it’s essential that volume rates are tracking according to revenue initiatives. For instance, in corporate payments, we have previously mentioned the importance of channel partners. While there was concern about declines previously, we're now projecting growth at 17% against our last call’s prediction of declines. Additionally, we've recently renewed agreements with existing partners and signed new ones. Instead of declining, the channel is actually beginning to recover. In Brazil, we benefit from strong distribution; we've identified various sales channels that are yielding great results. The introduction of cross-selling strategies has been successful, contributing to an impressive performance growth this quarter. Overall, the plans we devised are showing promising results throughout the businesses—both in volume and revenue.

Our next question comes from Chris Kennedy with William Blair.

Good afternoon, thanks for taking my question. Ron, you talked about narrowing the focus of the business. Can you frame what you're thinking about in terms of the relative sizes of these initiatives?

Chris, are you inquiring about the magnitude of the divestitures or how we discuss narrowing the focus of our business? Let me begin with the latter; as part of our strategic review, we identified a couple of smaller segments with potential value in the $200 to $300 million range. One of these segments is in our vehicle business, really focused on the core activities. We're far along in negotiations with potential counterparties regarding these transactions. Ultimately, we aim to streamline the company and redeploy that capital. Regarding narrowing our focus, the most crucial factor in creating company value is ensuring fleet transformation and defining our vehicle sector to encompass broader vehicle business practices, especially across the US, Brazil, and Europe. Our strategy looks at capture growth exclusively in vehicle, corporate payments, and lodging segments. This strategy is consistent, with the understanding that we have significant growth opportunities in those segments and a suite of new products to market.

Our next question comes from Pete Christiansen with Citigroup.

Thank you. Good evening, Ron. I appreciate the discussion around the deeper versus wider approach. As you look toward the next three years, are you considering any changes regarding the margin versus growth trade-off? Do you see any opportunities here to invest more aggressively to spur growth?

Yes, Pete, it's a great question. We’ve emphasized that we pursue profitable growth. Any incremental marketing and sales investments will need to be productive; we don't want to add $50 million in expenses without a return. Investor guidance has been on maintaining a balanced approach, where future spend escalates gradually rather than in large jumps. This method reduces waste and inefficiencies, ensuring our focus remains on revenue generation. If we find strategic opportunities for productive investments, especially digital advancements, we would increase outlays while managing costs from other avenues. Right now, we’re successful in compounding growth, aiming for 20%, and this seems sustainable. If we can maintain that trajectory combined with our other growth factors, we should be in an excellent position moving forward. For the Paymerang deal, we see both revenue and cost efficiencies. With the merger, the customer base and expanding merchant portfolio align with our competitive strengths. As we move into the future, we can leverage our existing sales techniques and contracts to expand our market share. We anticipate strong performance from this business and expect it to gain traction rapidly.

Our next question comes from Trevor Williams with Jefferies.

Great, thanks. I want to revisit fleet and your guidance for the year. Previously, there was an expectation that the vehicle business would rebound to back up to the high single digits or so by year-end. Is that still the case, and how do you see the visibility around acceleration on the previously mentioned aspects such as late fees and retention?

Yes, you’re correct. By examining our internal documents on the vehicle business in its entirety, we anticipate moving back up to high single digits as we exit both Q3 and Q4. This includes the lapping effects of our previous pivot. Overall, the other segments within the vehicle sector are performing well and are solidly compounding as well, so we continue to predict a recovery in vehicle as we approach the end of the year.

Got it. Additionally, with corporate payments, Tom has pointed out higher revenue per transaction as a growth tailwind for the direct business segment. Can we expect that going forward, on top of the new sales growth? Will pricing become a more significant lever for growth in both the direct and cross-border businesses?

Yes, Trevor, I cannot overemphasize the pricing dynamics. We always aim to maintain competitive prices, but our revenue trend per transaction demonstrates a variation in mix. Conversely, last year saw channel partners as a more significant portion of our revenue, diluting our year-over-year figures. However, we're seeing a 10% growth in sequential terms across that sector. Overall, the run rate for take rates looks favorable. We will seek out opportunities to optimize our pricing where possible but, again, the current shift is primarily a mix rather than a direct price increase strategy.

It's essential to clarify that this price dynamic can also be advantageous. For instance, if we're managing your spending with interchange fees set at 250 basis points, we can benefit from efficiently capturing a greater portion of that spend through better technology and strategic pricing. Our overall advantages enable us to achieve greater monetary retention than traditional banks, driving a more profitable outcome for us.

Our next question comes from James Fossett with Morgan Stanley.

Thank you very much. We’ve touched on many topics today. I wanted to revisit the EV segment. You provided some insightful commentary along with details on the UK EV economics. However, I’m interested in understanding the drivers behind the increased penetration of EV cards relative to traditional fuel cards. Is the increase primarily due to mixed fleet growth, or are there other factors at play?

Yes, James, it’s Ron. The charts we've included in the supplement show a sample of around 300 to 400 clients that we've monitored over time. The increase indicates that they’re gradually incorporating more EVs into their fleets compared to traditional combustion vehicles. The key point here is that our dual offering of both on-road and at-home solutions allows us to generate more revenue per EV than we would for a traditional combustion vehicle. So, we are not at a disadvantage due to the shift towards EV; in fact, as our clients transition, they continue to engage with us for those services.

I appreciate that clarification. Finally, could you explain the expectations on corporate payments? I know you’ve indicated pricing and several other factors are being addressed, but when do you anticipate the channel drag to be fully resolved?

Yes. The short answer is by Q3, at which point we will see the channel surpass prior performance. We have clarity on the ensure channel recovery as well as the growth trend within our direct service.

Our next question comes from Daniel Krebs with Wolfe Research.

Thanks for taking my question. I wanted to explore the factors driving the fleet transaction growth, which is down 12% on a year-over-year basis. Is this primarily a consequence of the reduction in micro fleets?

It appears to be a larger impact, more so than we expected. If you’re looking at the print, it included Russia in the prior year. The organic metrics demonstrate more accurate performance. We experienced a 7% transaction upswing when viewed without the context of Russia.

Got it. So that should not be a future risk. Moving on, could you discuss the performance outcomes across the FX versus the full AP business? Are there any notable differences between the two in terms of revenue or volume growth?

Yes, they’re both growing in the high teens to 20% range. The cross-border business is somewhat larger, approximately 30% more, but it might not be quite as impactful after the integration of Paymerang. Overall, both segments have exhibited strong growth.

Our next question comes from Dave Koning with Baird.

Yes, hey guys, thank you. I wanted to follow up on the lingering channel drag. Should we anticipate a few more quarters of stagnant corporate payment volumes, or will this trend change? By Q4, will we see a resurgence as the comparisons ease?

That is correct. As mentioned, the channel represents higher volumes at lower rates, while the direct contributions are smaller but more lucrative. We expect this quarter we’re in now to be the final period where we contend with these channel declines. By Q4, we anticipate acceleration in corporate revenue.

I noticed that the share count remained flat sequentially despite the big buybacks in Q1. Was this just timing in March? Should we expect more in Q2?

Yes, David. A portion of this reflects timing during the stock buyback execution as we effectively only began in March; we’re not truly seeing the entire effect from the first quarter. We do anticipate an improved share count when we report on Q2 as the buybacks were back-end loaded during the March period.

Our final question comes from Rufus Hone with BMO Capital Markets.

Hey guys, thanks for the question. I wanted to delve into the same-store sales metrics. I know it's improved a percentage point sequentially to minus two this quarter. What's the timeline for getting that back to flat? Are we talking two quarters or potentially year-end?

I’d estimate it’s probably closer to year-end. Much of this relates to the lodging segment, which I noted earlier, was at 10% to 11%. The overall economic softness in the UK is also a factor. The remaining metrics are analytics, and I would expect that we approach at least a flat position near Q4.