Corpay, Inc. Q2 FY2024 Earnings Call

Good day, everyone, and welcome to today's Corpay's Second Quarter 2024 Earnings Conference Call. Please note, this call is being recorded. It is now my pleasure to turn the conference over to Jim Eglseder, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today for our second quarter 2024 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Tom Panther, our CFO. Following their prepared comments, the operator will announce 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 on our website at corpay.com. Throughout this call, we will be covering several non-GAAP financial metrics, including revenues, net income and net income per diluted share, all on an adjusted basis. We will also be covering organic revenue growth. This metric neutralizes the impact of year-over-year changes in FX 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. None of these measures are calculated in accordance with GAAP and may be calculated differently than other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website. 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. All statements about our outlook, new products and expectations regarding business development and future acquisitions are based on that information. They are not guarantees of future performance, and you should not put undue reliance upon them. We undertake no obligation to update any of these statements. These expected results are 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 on our annual report on Form 10-K. These documents are available on our website and at sec.gov. So now, I'll turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay, Jim, thanks. Good afternoon, everyone, and welcome to our Q2 2024 earnings call. Upfront here, I'll plan to cover three subjects. First, provide my take on Q2 results, along with an update on our problem children. Second, I'll share updated 2024 full year guidance, including an up-close look at our expected Q4 exit. And then lastly, I'll speak to our portfolio and our commitment to deeper versus wider. Okay. Let me begin with our Q2 results. We reported Q2 revenue of $976 million, up 7%, excluding Russia. And cash EPS of $4.55, up 14%, excluding Russia. Results really right in line with our expectations, both revenue and earnings finishing on the high side of our guidance range. Most importantly here, the trends in Q2 improving. Overall retention improved to nearly 92%. That's up 100 basis points from last year. Same-store sales improved to flat in the quarter, that's up 2% sequentially. And sales or new bookings strong, up 21%, particular strength in our Corporate Payments business, sales there up 28%. So clearly, a noticeable improvement in all three of our key business trends. Organic revenue growth for the quarter was 6%, but clearly a tale of two cities: our Corporate Payments business, Brazil business and international fleet business performed exceptionally well, while our Lodging and North America fleet businesses were not as strong and presented a drag on growth. So taken together, that averaged out to 6% overall. So let me update you on the two problem children. First, North America fleet performed really in line in Q2 against expectations but still a drag on growth. We've now mostly lapped the infamous micro pivot and the implications there around late fee revenue and bad debt. Real progress is happening in the business on a few fronts. Retention is better, 150 basis points better, in fact, than Q2 last year. Softness is improving, 100 basis points better sequentially, and sales are growing. In the quarter, 80% of all of our digital sales are now 5-plus vehicle accounts. So a significant pivot in new business there. One third of our field sales are now being booked to our new Corpay One fuel card, business card and virtual card in one, and 25% of our SMB trucking sales are now on our new Comdata Connect Card that has no credit exposure. Additionally, we signed some important new accounts, GasBuddy and AT&T, which are now coming online. So look, the evidence is building that there's demand for our new products and that this larger prospect segment sales can be grown. So that's happening. On the back of these trends, we're expecting North America fleet to grow revenue organically in Q4 and get back in the plus column. Okay. Over to Lodging, our second problem child. Lodging finished a bit weaker in Q2 than we expected, mostly the result of lower flight cancellations and fewer homeowner insurance claims. Progress, though, is happening on the Lodging front: the IT there has much better uptime and search response time now exceeding our SLAs, big improvement in client softness and client retention in the business, our new differentiated pricing now in place, increasing our yields, where we've lowered room rates to bigger accounts and increased pricing to walk-in travelers. And then lastly, sales in Lodging were growing, up 36% in Q2, again, evidence to us that there's demand for the solutions. So again, with the progress that we're seeing, we do expect the Lodging business to turn positive organic growth in Q4. So hopefully, as we exit Q4 this year, our problem children will be no more. The ramp in the quarter had no real surprises in Q2 results—kind of right on expectation. Trends—same-store sales, new sales and retention trends—significantly improved across the board. And our two problem children are progressing on a path of growing again. Okay. Let me make the turn to our 2024 full year guidance. So today, we're reiterating the full year 2024 guidance at the midpoint that we provided in May. As a reminder, $4 billion in revenue and cash EPS of $19. For sure, some changes—some puts and takes—in this guide. We're outlining weaker FX in the second half than we were 90 days ago, and a bit weaker second half Lodging revenue. That's offset by Paymerang revenue and some expected synergies that we'll capture there, along with some expense management actions that we're putting in place to maintain profitability. I do want to put special emphasis on our Q4 guide, which you can see in our earnings supplement: we're outlining accelerated double-digit organic revenue growth and a $21 of run-rate cash EPS heading into 2025. Additionally, we are expecting to capture some meaningful synergies from our Paymerang and GPS corporate payments acquisitions next year, likely in the $0.50 accretion ballpark. So look, the main message to take away here is that Corpay is headed to a better place. We're leaving behind some challenges—the Russia divestiture, Fed hikes, the fleet pivot, Lodging softness, even the strategic review—and heading to a place with accelerating performance, driven by problem-children improvements, lower interest rates, higher sales and fewer shares. Our expected arrival to the better place is Q4. Okay. Last up, let me transition to an update on our portfolio, which again calls for a deeper, not wider company, squarely focused on three segments. We're well underway with our integration and synergy planning for our Paymerang and GPS acquisitions. Initial thinking there calls for conversion and rationalization of the acquired IT systems, a significant streamlining of back-office operations and G&A and really a leveraging of our broader product line to increase revenues in both businesses. We expect these two deals to add about 15% to our Corporate Payments business revenue next year, with Corporate Payments overall representing about 40% of the overall company. We're also progressing a couple of small vehicle-related divestitures, totaling approximately $400 million of after-tax proceeds. We anticipate using any proceeds from these divestitures to buy back CPAY stock to minimize dilution heading into next year. Lastly, we are working a couple of interesting deals in the pipeline where we maintain our target leverage and, frankly, have the liquidity to pull the trigger if the deals survive diligence. So in conclusion, today, Q2 again finished in line, but don't miss improving trends in the base, new sales and retention. We are maintaining our full year '24 guide at $4 billion in revenue and $19 in cash EPS, tracking to a better place with accelerating revenue and an EPS run-rate of $21 exiting Q4, and ongoing simplification of the company—doubling down on Corporate Payments and aggressively working the synergies of our two newest deals. So with that, let me turn the call back over to Tom to provide some additional detail on the quarter. Tom?

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter. Reported revenue was $976 million, which I was pleased to see at the high end of our guide despite a $3 million macro headwind from both fuel and FX. Organic revenue grew 6%, led by 18% growth in Corporate Payments. Reported revenue growth was 3%. However, excluding the impact from the sale of our Russia business, revenue grew 7%. Strong expense discipline and another quarter of lower bad debt resulted in EBITDA margin expanding to 53.1%. We generated $325 million of free cash flow, which translates into $4.55 per share and cash EPS $0.05 above the midpoint of our guide, up 8% versus last year and up 14% excluding the impact of the sale of our Russia business. Overall, solid results for the quarter. Now turning to our segment performance and the underlying drivers of our organic revenue growth. Across all of our segments, sales increased 21%, retention improved to nearly 92%, and same-store sales were flat compared to down 2% in the first quarter. Corporate Payments revenue increased 18% during the quarter, driven by impressive 19% growth in spend volume. Our direct business revenue grew 22% with sales up 34% and solid growth across spend volume, transactions and customers. Revenue per total spend—sometimes referred to as the take rate—increased during the quarter, and our card penetration, which measures the percentage of total spend processed via virtual card, increased approximately 6% and is now above 11%. Both of these measures reflect the strength of our business relative to recent sector trends. Also, on July 1, we closed the Paymerang transaction, and we are squarely focused on integrating the business. Inclusive of our initial synergies, we expect Paymerang to contribute approximately $25 million to $35 million to second half revenue. Cross-border revenue increased 19% and sales grew 25% during the quarter. Client spend volume was robust across all geographies, which reflects our ability to further penetrate our large addressable markets. It's clear from our consistent strong performance that our go-to-market strategies are working. Consequently, we continue to make significant investments in this business through increased sales and marketing resources. In addition, we announced in June the acquisition of GPS, which will add over $125 million of revenue in 2025 and increase our scale, particularly in the U.S. Currently, Corporate Payments as a segment contributes 30% of Corpay revenue. But on a pro forma basis, at the end of next year, Corporate Payments will be approaching 40% of our company. Now turning to Vehicle Payments. Organic revenue increased 5% during the quarter, with growth driven by Brazil and international fleet. Our international fleet business continues to perform very well, led by low double-digit revenue growth in both Australia and our U.K. maintenance business. In the U.K., we've expanded the PayByPhone parking app into a multipoint consumer vehicle payment app by adding the ability to purchase insurance and search for nearby fuel stations and EV chargers. We expect to integrate our vehicle maintenance and repair network into the app in the third quarter. It's early days in terms of customers transacting on the app, but we've made good progress and are excited about the opportunity. In Brazil, business performance was extremely strong with revenue growing 20% and sales increasing 27%. The business is clicking on all cylinders. The anchor toll product grew tags 9% and toll-related revenue grew 20%. Our product offering now includes nearly 7,000 acceptance locations including 2,800 gas stations resulting in fueling transactions being up 24% year-over-year. We have sold nearly 2.5 million insurance policies, up 3x from last year. Additionally, Zapay users and revenue are both up approximately 40% compared to last year, which is all organic as we are in the early stages of cross-selling the product. In the U.S., our local fleet business continues to be a drag on revenue growth. Excluding this business, North American fleet grew 3%. While the shift away from micro accounts has impacted our sales and revenue, we are beginning to see increased sales from our upmarket digital and field efforts. Sales of our proprietary Fuelman products grew 29% in the quarter, and we're seeing signs this trend has momentum. Sales to the company's operating five-plus vehicle customers were the highest they've been in the last three years, which puts us on track to surpass our 2022 revenue from that customer segment. So our plans are working; they're just taking longer than we would like. Lodging revenue declined 10%, which was a bit worse than we expected due to slightly lower room nights and rate. Sales of our overall Lodging product were quite good, up 36% over last year, which gives us confidence that our customers like our Advantage product. Digging deeper into the segment's performance, we are encouraged to see same-store sales, which had been the primary source of the business' recent softness, improved 300 basis points compared to Q1. Specifically, workforce showed improvement as we lapped some of the weakness from last year. Insurance was the primary cause of this quarter's weakness in revenue. Insurance results were impacted by the decline in claims activity and some one-time benefits recognized last year that did not recur. Excluding last year's one-time insurance commissions, revenue would have declined 3%. Now looking further down the income statement: Q2 operating expenses of $542 million were up 1% versus Q2 of last year. Expense growth from acquisitions and sales investments were essentially offset by lower bad debt expense, a 4% decline in G&A expenses and the sale of our Russia business. Bad debt expense declined $7 million or 20% from last year to $28 million, or 5 basis points of total spend. Substantially all of the decline was in U.S. Vehicle Payments as we realized the benefit from our higher-quality customer portfolio. EBITDA margin in the quarter was 53.1%, approximately 60 basis points of improvement from last year. The positive operating leverage was driven by solid revenue growth, lower bad debt expense and disciplined expense management. Excluding our Russia business sold in August of 2023, EBITDA margin increased approximately 165 basis points. Interest expense this quarter increased $6 million year-over-year due to a decline in interest income from the sale of our Russia business and the impact of higher interest rates and debt balances. Our effective tax rate for the quarter was 24.7% versus 26.6% last year, driven primarily by tax benefits from specific tax planning strategies. Now turning to the balance sheet. We ended the quarter with nearly $1.4 billion in unrestricted cash, and we had approximately $850 million available on our revolver. We have $5.9 billion outstanding on our credit facilities, and we had $1.4 billion borrowed under our securitization facility. As of the end of the quarter, our leverage ratio was 2.6x trailing 12-month EBITDA, which remains within our target range. As previously mentioned, we acquired Paymerang on July 1, which increased our leverage to 2.8x. Our ability to generate over $300 million in quarterly free cash flow will increase our capacity on the revolver and cause leverage to decline during the rest of the year. In the quarter, we repurchased 2.2 million shares and year-to-date, we've repurchased 3.3 million shares for $949 million. We have $610 million remaining under the current Board authorization, and we will continue to evaluate additional buybacks over the course of the year based primarily around the timing of some potential noncore vehicle-related divestitures and the acquisition of GPS, which we expect to close in early 2025. Now, let me provide some details related to our outlook. As Ron indicated, we are maintaining our guide at the midpoint of $4 billion of revenue and $19 per share. We are tightening the range, reflecting increased visibility into our second half performance; however, the unsettled macro environment, particularly of late, increases the possibility of coming in towards the lower end of the range. For the overall economy, last week's economic data in the U.S. reflected a slowing economy, which triggered significant moves in the equity and fixed income markets. However, a broader view of economic data continues to point to low single-digit growth in our major markets, giving us confidence that business spending will grow at similar levels. We have analyzed recent historical and forward-looking information to inform our fuel and FX projections. Overall, we're estimating a modest macro headwind based on lower fuel prices and weaker FX, namely the Brazilian real. But financial markets are fluid, causing a degree of variability regarding our macro forecast. Nonetheless, we remain focused on what we can control, which is running the business and optimizing its performance. Related to our core business, we are maintaining our full year guide in each of our businesses, except for Lodging as we continue to work through the softness. While we see indications of the business improving, we're electing to further de-risk the forecast by assuming room nights to be relatively flat in Q3 and seasonally declined in Q4 compared to Q2. The impact from the macro headwind and Lodging is offset by $25 million to $35 million of revenue from Paymerang. From a cash EPS perspective, we expect Paymerang to be EPS neutral, and we've taken actions to offset the revenue headwinds through a range of expense initiatives, the flow-through effect from the lower FX rates and fewer shares. I would also note that there was about $5 million of gift revenue that was pulled forward in Q2 from Q3 based on customer shipment demand, which is simply timing and why we don't flow through this quarter's beat to the full year guide. So in total, some minor changes to our full year outlook, but no changes to print. For Q3, we're expecting revenue to grow 5% to 7% and cash EPS to grow 9% to 11%, which is supported by our preliminary July results. This translates into $1.015 billion to $1.035 billion of revenue and $4.90 to $5 per share of cash EPS. A little over half of the sequential increase in revenue is driven by Paymerang and the seasonal lift from our gift business. The remaining sequential increase is driven by the implementation of new sales, same-store sales remaining flat, improved retention, especially in the U.S. Vehicle Payments business and specific business initiatives that are underway. We're projecting to exit the year with organic revenue growing in the low to mid-teens led by Corporate Payments growing in excess of 20%. However, equally important, North America fleet and Lodging are projected to have turned the corner and returned to growth. These estimates exclude the impact from our pending acquisition of GPS that is scheduled to close in early 2025 pending regulatory approval. We expect at least $0.50 of accretion next year from the combination of Paymerang and GPS. However, more importantly, we expect earnings accretion of approximately 2x that amount once we've completed our integration plans in the back half of 2025. The rest of our assumptions related to our guide can be found in our press release and supplement. With that, thank you for your interest in Corpay. And now operator, please open the lines for questions. Thank you.

And we will take our first question from Darrin Peller with Wolfe Research.

Look, it's great to hear about the confidence in reacceleration on both the Lodging side and North American fleet. I guess just one quick one on the Lodging and then a little more color on fleet also. But on Lodging, just the conviction around that is coming from — I think you were saying just the re-signings you're already seeing evidence of and I just want to make sure that the tech side of it is all good now and ready to go in terms of new volume coming on. And then really on fleet, if you could just reiterate a little more of what you're saying around conviction on that, just why you see the confidence there. It's great to hear, given the trends.

Darrin, it's Ron. I mean, the short answer—let me start with Lodging—is really the base, right? The client base was worse about a year ago, starting in Q2 last year, both because of the IT issue and kind of just softness in those areas. So it's really less about the Lodging business accelerating and more about the base stabilizing. If you look sequentially, our print for Lodging in Q2 was mostly stable or flat sequentially. So what that does is it takes the prior decline and lifts the whole company. And it's really the same story for North America fleet: the business was in decline when we made the pivot, we kicked out all that micro business revenue and bad debt. So effectively, we reduced revenue to improve quality, and we've refilled the bucket with more stable revenue. So the better Q4 performance is not a function of Lodging or NAF growing dramatically; think of them as honestly just flat and mostly not declining anymore. Again, the main thing is we lapped the basis going down and both businesses have stabilized since then.

Okay. That's really helpful, Ron. Guys, just one more follow-up on the Corporate Payments side. The growth has continued to be strong. I just want to make sure—and we've had good feedback on the deals, especially Paymerang and the accretion coming—but Ron, how do you feel about your positioning now? Given the number of deals you've done, where the assets are all placed, do you think strategically where you want to be? Or do you anticipate more?

Yes, Darrin, this is a good question. We talked about it before. I would say I feel like the Humpty Dumpty work is mostly over. We have a pretty broad product line now. We've got card products and the new tech guys; we've got AD automation products. From a product perspective, we spent a lot of time and money assembling a broad set of products in this middle market. The game now is really selling. We have to sell what we've assembled. We saw strong sales last year which flow through into 2024. The game has shifted from assembling a competitive business to really selling a lot of it. And I think the numbers show that we're not only selling it, but the business is compounding too. So we're in a good spot.

And Darrin, we'd expect Corporate Payments to continue to be a bigger piece of the overall Corpay portfolio, its growth rate will cause it to be a larger portion. We said 30% now, and pro forma could be around 40% by the end of next year. From a capital allocation perspective, it's an attractive way to deploy capital.

And our next question comes from Tien-Tsin Wang with JPMorgan.

Just a follow-up on Darrin's last question there, on the Corporate Payments side: The acceleration to the 20%, what's fueling that? I know there's a slightly easier comp. I just want to make sure if there's anything else in there. And Tom, you talked about take rates and trends there being positive. Maybe just hunting on that with the direct business. I know there's some concerns out there around virtual card monetization and adverse payment selection; what's your view on that?

Tien-Tsin, it's Ron. The acceleration is mostly sales—last year's record sales are flowing through this year. We stepped up sales in 2023, and that benefits us throughout 2024. In addition, we're executing synergies from Paymerang and we're good at deals in our wheelhouse. We know where profit pools are and can improve acquired businesses quickly. Retention has stayed strong in those businesses. So the model is sales into a growing base, with some extra benefit from synergies. Tom, I'll let you pick up on the network and monetization question.

Tien-Tsin, regarding the health of the network: we feel our merchant portfolio stands out. It's differentiated by sheer size and diversity across multiple industries and verticals; we're not wedded to any single vertical. Our customer segment is larger in terms of company size, which gives them the ability to influence merchants. We offer merchants customized acceptance programs and we're not a one-size-fits-all model. We see take rates moving up and card penetration gradually increasing; that's a sign of a healthy merchant portfolio. The Paymerang acquisition will make that even larger.

Great. Quick follow-up on M&A: you mentioned divestitures and buybacks, and GPS closing early '25—how quickly can you replenish the acquisition pipeline with similar-type deals?

We're actively working deals now. We're never really out of that business; it's a question of price. We're focused on buying in the spaces we're in, where we can capture synergies. We have a couple of active deals and higher confidence in the divestitures: I expect to exit one and probably two by Christmas.

And our next question comes from Sanjay Sakhrani with KBW.

I wanted to dig into the commentary on North America fleet. Tom talked about the growth being 3% excluding the micro pivot. What should we expect embedded in the guide for second-half growth, and can you elaborate on what's driving the weakness there? Any macro headwinds? I'm trying to think through a normalized growth rate on a go-forward basis.

Sanjay, the best way to think about it is flat. Our goal this year is to exit with North America fleet revenue flat—100% past the pivot—with higher-quality revenue and better retention. The question for next year is sales: will our new products—Corpay One and Comdata Connect—and our field and digital investments sell enough to grow the base into single-digit or high mid-digit growth? Early returns are good: a meaningful portion of sales are already the new products. We'll give a better view in 90 days, but we're optimistic.

Sanjay, related to macro: there's nothing material from a macro perspective in the second half. There's maybe a $0 to $5 million sensitivity tied to fuel price, but nothing significant to a roughly $1 billion business.

Okay. And a follow-up: virtual card businesses have shown some disappointing growth elsewhere. Does that create an opportunity for you to buy companies in that field? How do you look at that data and how it affects you?

The good news is it hasn't adversely affected us. Our setup is different—our merchant portfolio, our mix of card versus full AP products, and the customer segments we serve. We are seeing monetization growth. With Paymerang and other partnerships, we'll increase monetization through the second half. We're currently outside the problems some peers are facing on card penetration.

And our next question comes from Nate Svensson with Deutsche Bank.

On margins, nice to see another quarter of solid margin expansion—margins up 60 basis points, more ex Russia. Thoughts on continuing to expand margins in the back half, particularly since you'll be lapping strong margin expansion in the back half of '23 and adding Paymerang? Anything to keep in mind for cadence or magnitude of margin expansion and what exit rate might look like heading into next year?

High-level: we have significant operating leverage. Our Q2 margin was about 53%. We're looking sequentially for revenue to increase between Q2 and Q4, and the flow-through is very strong—incremental revenue has high flow-through. We expect margins to expand another 200 to 250 basis points between Q2 and Q4 if we achieve the sequential revenue growth.

Follow-up on retention: really nice to see the step-up. Can you unpack what's driving it? How much is the external environment improving versus actions you took? For the growth algorithm in the back half, can you help size contributions from retention, same-store sales and new products?

Retention improvement is mostly mix. When we moved away from micro accounts in the North America fleet pivot, we improved the quality of the portfolio—more stable, creditworthy accounts—which structurally increases retention. Corporate Payments also involves larger, more stable customers, which also improves retention as that segment grows. So we expect improving retention over the next several quarters.

Nate, to walk through the sequential quarters: if we printed $975 million in Q2 and target about $1,025 million in Q3, that $50 million increase is a little over half from Paymerang and seasonal gift activity. The remainder is the snowballing of our outperforming businesses—Brazil, cross-border, payables. Q4 is more of the same: growth of Paymerang and gift plus continued snowballing. There's execution risk, but these are concrete, visible drivers today.

And our next question comes from Peter Christiansen with Citibank.

Wanted to dig into the transaction momentum in Brazil. It looks fantastic. As we think about parking, fueling stations and that kind of growth, can you attribute it more to footprint expansion versus same-store growth or more user engagement? On footprint expansion, remind us where we are and if you see more opportunities to expand those networks.

Pete, the Brazil business is doing great. For the core toll tags, distribution channels are broad: toll booths, malls, retail stores, digital, OEM distribution, etc., so footprint expansion is significant. Cross-selling to our base is also driving growth: we have millions of active users and high monthly engagement, which enables selling add-on vehicle-related products. Fueling transactions are up about 24% year-over-year, and we continue to add acceptance locations—hundreds of additional fueling stations—and thousands of parking locations via partnerships. So it's both footprint expansion and cross-sell into an engaged base, and it's working well.

Helpful. On rebates and virtual card monetization—any color on rebate levels and how you're seeing those trends?

Pete, rebate levels are stable. We won't get into granular details, and they can vary by customer, but there's nothing noisy on rebates right now and trends are consistent with the last several quarters.

And our next question comes from Ramsey El-Assal with Barclays.

Wanted to ask about Lodging's contribution to your longer-term growth algorithm. The segment is recovering—what's your confidence that Lodging will eventually get back to its historical growth watermark?

Ramsey, think about our Lodging TAM and the underserved market segment we target—companies that need simple, unmanaged travel solutions. We serve an underserved market with a good value proposition: booking, saving and paying, with control and cost savings. The IT issues that created some of the previous weakness have been contained, and with strong sales (up 36%), customers like our Advantage product. Confidence is high we'll do better, provided we execute without repeating past mistakes.

Super helpful. One more: can you unpack the same-store sales improvement and where that was localized across the business?

The two biggest contributors were North America fleet—structural improvement from removing micro accounts and getting higher-quality portfolio—and Lodging, which had significant declines starting a year ago and has now stabilized. Those two businesses carried the most sequential improvement into Q2.

That sequential stabilization was the inflection point we were anticipating. This quarter shows it didn't widen and is coming back, which supports optimism for future performance.

And our next question comes from John Davis with Raymond James.

If you go back to 4Q of '22, there was a lot of travel disruption and the Lodging business benefited. Did you see any benefit from the CrowdStrike outage and associated travel disruption there?

Yes, John, we did see some benefit, which is reflected in our July results. A portion of Lodging is emergency or distressed travel—hurricanes, airline disruptions, etc.—which can meaningfully impact the segment but is still a minority portion of the business. It's helpful but not the core driver of our overall Lodging performance.

Okay. And Ron, you saw nice acceleration in sales growth—Corporate Payments up about 21%—what did North America fleet new sales look like relative to other segments? Which pieces to call out other than Corporate Payments?

John, North America fleet new sales are mid-single digits overall but vary by subsegment. Our proprietary fuel product was up about 30%, showing variability across the business. Corporate Payments was nearly 30% growth in sales. The message is our sales focus is yielding results in the targeted areas.

And our next question comes from Andrew Jeffrey with William Blair.

Big picture question: with Corporate Payments and the recent deals, the company profile is shifting. After last year's review, does there come a point where you consider shifting toward a purer-play public B2B corporate payments company and what that might mean for parts of FLEETCOR? Is that revisited?

Not now. Our conclusion from last year's review remains: greatest value creation comes from (1) continuing to grow Corporate Payments—organic growth and accretive deals—and (2) accelerating the vehicle business. That's our focus. With that said, we're always evaluating strategic options, but revisiting corporate structure isn't on today's agenda.

And our next question comes from Dave Koning with Baird.

For Q4, you've guided to 14% growth. Is that mostly Corporate Payments at 20% and everything else above 10%? Is that sustainable and is there anything in Q4 that falls off in 2025?

Yes, achieving 14% organic and print growth is a great outcome. Corporate Payments will be well into the 20s because of synergies and snowballing sales. High-performing businesses like Brazil and cross-border will continue to contribute, and the two problem children should be stabilized. Is it sustainable forever? Not necessarily, but it bodes well for double-digit growth into 2025. Much depends on whether we can sell enough next year into the stabilized bases in North America fleet and Lodging.

We have reached our allotted time for questions. This concludes today's Corpay's Second Quarter 2024 Earnings Conference Call. Thank you for your participation. You may disconnect at any time.