Corpay, Inc. (CPAY) Q2 2026 Earnings Call Transcript

Hello, everyone, and welcome to today's CorPay Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press the star and one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. And it's now my pleasure to turn the meeting over to Jim Eglesetter. Please go ahead.

Good afternoon, and thank you for joining us today for our earnings call to discuss the second quarter 2026 results. With me today are Ron Clark, our chairman and CEO, and Peter Walker, our CFO. Our earnings release and supplemental materials for the quarter are available on the investor relations section of CorpA.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call, along with the reconciliation of those measures to the most applicable gap measures. Our remarks today will include forward-looking statements about expected operating and financial results, strategic initiatives, acquisitions, and divestitures, among other matters. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Some of those risks are mentioned in today's press release and on Form 8K and can also be found in our annual report on Form 10K. These documents are all available on our website and at sec.gov. So now I'll turn the call over to Ron Clark, our chairman and CEO. Ron?

Okay, Jim. Thanks. Hello, everyone, and thanks for joining today's call. Up front here, I'll plan to cover three subjects. First, provide my take on Q2 results. Second, share our updated guidance for 2026. And then lastly, I'll speak to our future and where we're headed. Okay, let me begin with our Q2 results, which were very, very good. We reported revenue of $1.34 billion. That's up 21%, coming in $45 million above our expectations. Q2 macro, super favorable to us. It contributed about $30 million more than our expectations, meaning about $15 million of the beat was just underlying performance. We reported cash EPS of $7 on the button. That's up 36%, setting an all-time company earnings record. So it feels good. Our two biggest corporate payments deals, the Alpha Acquisition and the Avid Investment, contributed $0.39 of cash EPS accretion in the quarter, spot on our target. Q2 fundamentals, very solid. Overall organic revenue growth, 10%. That was led by our corporate payment segment at 16%, and our vehicle payment segment at 8%. So taken together, our two biggest segments delivered 12% organic growth. Operating trends also very good in the quarter. Retention remaining steady at 93%. Year-over-year sales or new bookings, terrific, growing 30%. And same-store sales in the plus column, plus 1%. So look, these trends are super helpful and bode well for continued performance here in the second half. So all in all, really an outstanding quarter, an outstanding first half, really against both our expectations and maybe more importantly against the prior year. All right, let me make the turn to our 2026 outlook. We're raising full-year revenue guidance to $5,310,000 at the midpoint. The bridge as follows. First, we'll flow through our Q2, $45 million revenue beat. Second, we'll increase full-year revenue guidance another $15 million based on expected better macro and business fundamentals. We'll net out $40 million related to our expected EPICS divestiture, and there we're assuming a September 1 close. We will continue to outlook 10% organic revenue growth in the second half, with our corporate payment segment expected to maintain a mid-teens plus organic growth, and our lodging segment set to accelerate to mid-single digits. On the earnings side, we're raising full year 2026 cash EPS to $27.35 at the midpoint. That's up a ways from our $26 initial guide at the start of the year. The rest-of-year EPS bridge goes like this. We'll flow through our Q2 cash EPS beat of $0.45. We'll raise the rest-of-year cash EPS another $0.20, and we'll hold the EPICS divestiture EPS impact neutral as we plan to use the deal proceeds to repurchase CPAY shares. Look, this higher full-year 2026 guidance implies good things, 17% full-year revenue growth, 28% full-year cash EPS growth, cash EPS for 26 up about $6 from 2025, cash EPS Exit rate in Q4 exiting over $29, a full-year cash EBITDA approximately $3 billion, and $1.8 billion of full-year free cash flow, which is approximately a 7% yield. The drivers, really, of this 26 performance are a combo of a few things. obviously a very favorable macro environment for us particularly the first half the two big accretive corporate payments deals and mostly just strong underlying fundamental operating performance so look taken together we've got a lot of confidence in the outlook okay so um so last up uh today i do want to share our thoughts on the future uh the road ahead for the company We did post an updated investor presentation today to our website. It lays out our direction along with our growth algorithm. And I do want to say we've really never felt clearer about the way forward or even more excited about the prospects of the company. So we're really in a great spot. So let's start out with the portfolio. We have said repeatedly that our plan is to create a simpler company with fewer, bigger businesses. You should expect to see us divest more subscale businesses like today's EPICS announcements and really double down in three primary areas. So first, spend management, which is our card and AP businesses. We'll do more there. We'll head towards the procurement space more. We'll expand wider geographically. We will make that a bigger business. In vehicle, we'll stay invested in our largest and most advantaged fleet businesses. And we'll also embed fleet into our spend management platform so that our spend management platform can serve the unique needs of fleet-intensive companies and their drivers. There's actually a slide, I think it's the last slide in our supplement, that lays out our progress there where we're selling our spend platform to both fleet-intensive businesses and traditional businesses. So take a look. Last area to double down will be cross-border. Obviously, plan to do more there. We're in the process of adding new real-time private blockchain rails, also investing to build out our global banking and deposit offering. Both of these things, we think, game changers for middle market companies. So the portfolio repositioning gives us a $600 billion revenue TAM for a $5 billion company today. So look, it certainly gives us the potential to at least 10 times this company to say $50 billion over time. So the second direction for us is to go left, which means we plan to help our clients with their indirect expense decision-making before they approve payments. So we'll help support decisions like the selection of vendors, the pricing of vendors, the terms they have with vendors, the renewal decisions they need to make with vendors. And we'll deliver, you know, a set of things to be helpful there. We'll provide some benchmarking data. We'll provide spend insights. We'll even guide clients on how to negotiate renewals to a better outcome. So, look, we really do aspire to bring more value and go left, better helping our clients with the expense management assignment. So finally, let me turn to our midterm growth algorithm. It remains unchanged. As a reminder, we target 10% plus organic revenue growth, low teens PBT growth, and over 20% cash EPS growth. The model works, first again, because there's a large opportunity for us to sell into. We do have proven retention and sales capabilities, and we generate a material amount of free cash flow yield. We do expect to have approximately $15 billion of available capital over the forecast period. That's via a combo of our annual free cash flow plus higher debt capacity as our earnings grow. So this capital is what creates EPS acceleration, as we'll either buy back, you know, half of CPAY or alternatively we'll buy the earnings of other corporate payment companies based on the relative returns there. So, look, in conclusion today, we are obviously delighted with the Q2 performance. We're confident in our raised second-half guide, again, expecting mid-20s, year-over-year cash EPS growth. And we're really excited about the future, the road ahead, and what CorPay can become. So with that, let me turn the call back over to Peter to provide some additional details on the quarter.

Thanks, Ron, and good afternoon, everyone. We delivered another outstanding quarter with 21% revenue growth and 36% adjusted EPS growth year over year, marking our fourth consecutive quarter of outperforming expectations. Our first half performance was exceptional, and we're proud of what the team accomplished. While we've certainly benefited from favorable macro conditions, the foundation of our performance continues to be consistent, double-digit organic growth. That consistency is the engine behind our compounding model, and we've now delivered double-digit organic revenue growth for five consecutive quarters and 10% organic growth in five of the last six years. Having been in the CFO seat for just over a year, I can tell you these outcomes don't simply happen. They are the result of constant focus, active management, and thousands of decisions made across the organization every day to drive returns. I wouldn't underestimate just how important our operating discipline is to our long-term performance. Now let's turn to segment performance and the underlying drivers of our organic revenue growth in the quarter. Corporate payments delivered 16% organic growth for the quarter, including a 180 basis point drag from float revenue compression driven by lower interest rates year over year. The organic revenue growth was in line with our expectations, with strong performance in both cross-border and payables. Overall corporate payments continued to be driven by strong underlying customer activity, with organic spend increasing 43% to $95 billion. Cross-border continued to deliver strong sales and revenue performance in Q2. Alpha's integration continues to progress exceptionally well, with over 80% of Alpha's corporate volume now migrated to our global tech platform. The payables business continued to perform well, driven by sales and volume growth in Q2. We're also pleased with the strong performance of Avid, our minority investment, which is reflected as an equity investment in our financials. Avid continues to execute well under new ownership, with sales growing more than 30%, continued strength in volume and revenue, and EBITDA more than doubling year over year to a record level. Vehicle payments organic growth was 8%, right in line with our high single-digit expectations. Brazil and Europe remain quite strong. In the U.S., growth remains consistent with our strategy of reallocating sales investment toward the higher return opportunities within corporate payments. Lodging was in line with our expectations, delivering sequential organic revenue growth improvement of 2% versus Q1 2026. We've now lapped the more episodic events last year that created tough comps, and we continue to expect organic growth to perform in the second half of the year. In summary, we delivered 10% organic growth in Q2, driven by sales growth of 30% and retention rates of 93%, all quite robust. Our corporate payments and vehicle payment segment totaled 84% of our Q2 revenue and delivered a combined organic growth rate of 12%, consistent with Q1. Taken together, these results reinforce our confidence in the durability of our growth model and support our decision to increase four-year guidance. Now, looking further down the income statement, operating costs increased 9%, excluding the impact of FX, A, stock compensation, amortization, and a settlement charge. The settlement charge of $100 million relates to the FTC matter and is subject to final commission approval. The 9% increase was primarily due to sales investments and modestly higher credit losses. Adjusted EBITDA margin of 57.3% was up approximately 100 basis points over the prior year, primarily due to operating leverage and flow-through of macro benefit. Our adjusted effective tax rate for the quarter was 25.3%. The year-over-year decrease in the tax rate was driven by our improved mix of earnings. Turning to the balance sheet, we ended the quarter in a very strong financial position. Our leverage ratio finished at 2.55 times, and we had approximately $1.6 billion of available capacity under our revolving credit facility. During the quarter, we repurchased $321 million worth of stock, retiring approximately 1 million shares. As of quarter end, we still had roughly $1.4 billion remaining under our current share Repurchase Authorization. We also completed the refinancing of our revolving credit facility and Term Loan A, increasing the size of our revolver by approximately a billion dollars to $3.7 billion while paying down our Term Loan B by a billion dollars. Over the past nine months, we've successfully refinanced our entire debt stack, extending maturities, lowering borrowing costs, and further strengthening our balance sheet. More importantly, from a capital allocation perspective, we've increased our financial flexibility and are well positioned to continue executing our balanced strategy of both meaningful share repurchases and disciplined accretive M&A. Finally, I'd like to touch on our interest rate profile. Following the alpha acquisition, our restricted cash balance increased significantly, primarily reflecting the growth of the global bank account business. Our cash now creates a meaningful natural hedge against our floating rate debt, with approximately 85% of our exposure naturally offset during the second quarter. Including our interest rate swaps, we were effectively more than 120% hedged. Given the strength of that natural hedge, we don't expect to enter into additional interest rate swaps going forward. Now, let me share some additional information on our updated 2026 full year and Q3 Outlook. As Ron mentioned, we signed a definitive agreement to sell EPICS, a non-core vehicle payments asset. We expect the transaction to close this fall, likely between September and October. For planning purposes, we've assumed a September 1st closing. The transaction is expected to reduce 2026 revenue by approximately $40 million, or roughly $10 million per month, but is not expected to have an impact on adjusted EPS because we intend to redeploy the proceeds into share repurchases. We're raising our 2026 revenue guidance to $5.31 billion at the midpoint, growing 17% year-over-year. Importantly, this guidance continues to assume approximately 10% organic revenue growth for the year. Our updated revenue outlook flows through our Q2 beat of $45 million, raises the rest of the year by $15 million, driven by a combination of macro favorability and business momentum, partially offset by $40 million from the sale of Epyx. We're raising our four-year guidance for adjusted EPS to $27.35 per share at the midpoint, growing 28% year-over-year. This captures the $0.45 beat in Q2 and raises guidance by $0.20 from higher revenue and productivity improvements over the rest of the year. Our Q3 revenue guide is $1.355 billion at the midpoint, growing 16% year-over-year. We expect Q3 organic revenue growth in the range of 9% to 11%. We expect adjusted EPS of $7.15 at the midpoint, growing 26% year-over-year. Stepping back, our model is built to compound over time. We remain focused on consistently delivering double-digit organic growth, maintaining strong margins, and deploying capital where we believe it generates the highest long-term returns for shareholders. Additional details regarding our four-year guidance raise and Q3 outlook can be found in our earnings release and earnings supplement. So, operator, please open the line for questions.

Thank you. As a reminder, at this time, if you would like to ask a question, it is the star and one on your touchtone telephone. We do ask that you please limit yourself to one question and one follow-up. We'll take our first question from Ramsey Ellisella with Cantor Fitzgerald. Please go ahead.

Hi, thank you so much for taking my question and another great quarter. As freight prices remain healthy and fleet operators seem to be in a much better place than they were, God knows, post-COVID, do you see an opportunity to open up the credit box a little bit more, maybe lean in harder to, you know, some slightly higher risk parts of the market to drive on the vehicle side of the business, obviously, to drive, you know, incremental growth?

Hey, Ramsey, thanks for the question. So, you know, we do experience with fuel prices going up and the demand that there's naturally a higher risk to credit losses. So, we've taken a provision for that within the quarter, a slight provision for it. But what I would say is we're not going to weaken our underwriting standards to gain business here.

Okay, fair enough. And then on a follow-up from me, you announced the EPICS divestiture, and you also talked about the intention to create a simpler company. Should we think about that as more, you know, trimming more of these very small kind of embedded business lines? Or is there an appetite or demand out there for a larger simplification of something like a lodging segment or larger chunks of the business?

Hey, Ramsey, it's Ron. It might be both. I'd say we're on the track for the first thing you said. We've ID'd another two, three, four businesses that are kind of subscale or not as related like the EPICS thing. And as I said, on other things, we want better performance first, I want to have improved performance because then it gives us options. You should look for more of the ethics-like things over the next 6 to 12 months and if performance improves, maybe something additional.

Got it. Thank you.

Thank you. And we'll take our next question from Tianjin Huang from J.P. Morgan. Please go ahead.

Your line is open. Please make sure you check your mute switch.

Even we can't hear you, Tianjin.

Now, is this better?

Yes, we can hear you now. Please go ahead.

Sorry to waste your time. It's always nice to talk to you guys. Just thinking maybe for you, Ron, has the bar changed at all for M&A and buybacks given pipeline valuations? I know you're focused on these investors. You announced one that you just said. Has the bar changed?

Yeah, I don't think so, Ginger. Like I said last time, if anything, you know, we've seen some of the transactions, and some of the deals on the acquisition side get back into a realistic range. So I think that we're actually in a pretty good spot.

I'm glad to hear it. And then just on the bookings front, that was really strong. Maybe just double-clicking on that. How broad-based was it? Where are you outperforming? Can you replenish the pipeline as we go into the second half?

Yeah, it was pretty good. I'd say I'm looking at that report. It was pretty broad-based. We did kind of high teams year over year in the vehicle, and crazy, circa close to 40% sales growth in the corporate payment segment. So we're obviously selling a lot of that. Now, again, we poured, you know, incremental investment into it. So, you know, there's more spend behind that reflecting the increase. But, no, it's good. We target, I think, you know, sales to grow 20% to kind of hit our world's So this is a bit better than that. So I'd say, you know, our rest of the year is probably targeting about that 20% again. Good to talk to you, Joe.

Thank you. And we'll take our next question from Sanjay Sakharani with KBW. Please go ahead.

Thank you. Ron, like the corporate payments division obviously did really well with the organic revenue growth up 16%. As we look ahead, it seems like the comparisons get easier. I mean, can this growth rate sort of sustain itself, if not accelerate from here?

I think it's a good question, Tony. I think it's a function, again, of investment. You know, we're guiding basically to 16, you know, plus here in the second half, which is obviously attractive. And we've got, you know, super-lying to sight in that business on both the retention and base. Like I'm staring at it. it's better than our line average, right? Our line average is 93. That business is, you know, closer to 96 or 97 percent retention, and the base is positive. It's in the plus column. So whenever you have that set up, it's not complicated for math people that the whole growth rate is sales, right? It's just really the sales. I said, the contingent's question, we sold 40 percent more in the quarter so that's the toggle and again unlike you know the startups we always are trying to balance you know making a buck with growing and so that that's that's the balancing act we we put incremental money into it we've taken a bit of money you know out of the vehicle thing and so I'd say that's our plan for now we're continuing to build spending that and we'll update if we decide to invest more you know as we look at the next year but we're obviously pleased with um with this growth rate okay and then second question is just on um the divestitures um as we think about

the you know the divestitures you will make or that you've identified do those accelerate the revenue growth rate or are they just um sort of too small to have an impact and then And you could also just comment on what you're seeing in the M&A market in terms of acquiring Yeah, I'd say the answer to the first part is it depends.

We have, you know, businesses, so I guess we've announced to you guys two divestitures this year, and the answer is those would actually be, you know, slightly growth diluted to us. The parking business was a high flyer, right, grew at 20%, 25%. And this Epyx thing was kind of a perennial 10%, 11% grower. Some of the other things we're looking at, Sanjay, might be lower growth. If I said, hey, we have three or four things in the block, my comment would be a mix. Some of the stuff might be a little bit slower growing. But it's really what you said. we're just trying to clean house with kind of smaller things you know we need to add billions of revenue to the company and so growing you know a hundred million dollar business to 110 is not is not getting us there so so that's the emphasis and I said the same thing on the acquisition side obviously we did a couple of pretty large transactions last year you know we've got our gun sights on some other pretty significant things. And so, as I said, attention, we're super clear on what we want to acquire, what would be helpful. We target and we're in discussions, obviously, with those companies, and some of those transactions are meaningful. And because of the way we can run the things, they're actionable. We can actually do them. So I'd say, like always, stay tuned on the acquisition front.

Thank you.

Thank you. And we'll take our next question from Mahir Bhatia with Bank of America. Please go ahead.

Good afternoon. Thank you for taking my question. Ron, I was wondering if you could give us an update on the MasterCard, the FI channel. I think previously you called out three wins. But where does the pipeline stand? And are you still expecting a couple of points of cross-border acceleration from that? Is that – just trying to get an update on that MasterCard partnership and where things stand with the pipeline.

It's another good question. So I think we said it last time, and if I had Mark, the guy that runs it, or the MasterCard folks, it's a high level better than expected again. I think the thesis that we had that MasterCard knows bank folks and we know cross-border, and that that's a good combo, that that's proving to be true. The numbers are good. We're now at 10 FIs that have been closed. On the last report I saw, we've got 100 active additional FIs in the pipeline. So I would say it's positive the offer is resonating. MasterCard's being super helpful in introductions. You know, with FIs, the selling cycle is definitely longer, you know, than it is with corporates. But I would say we're still bullish on it. And, you know, I said to the NASCAR people when we did the deal, please don't make this a press release. And I kind of applaud, you know, their effort and the energy so far. So I'd say so far, so good.

Great. And then if I could ask about the global, just the global banking. I think, Ron, you've described it, you know, prepare the mouse as a game changer. I just want to think about the monetization timeline there. I think Peter called out some of the benefits of the hedging, but just from a revenue standpoint, what's the monetization timeframe, and what kind of expectations should we have over the next year or two?

I think we should see a big step up next year. We still, frankly, are building the product. Let me give the baby 101 here. So what we do is we open local foreign bank accounts. So if there's a company in Atlanta that's trying to do business in Europe, boom, in less than a week or a few days, we can open a foreign bank account for them, which would take months, years, potentially, through a correspondent. The work that we're doing by year-rounder thing is effectively linking multiple local accounts. So let's say the client in Atlanta wants to open something in the U.K., on the continent, and Australia, and we go open three local foreign accounts in those jurisdictions so that they can run on the pipes there. So what we're finishing up is tying those together and then balancing them back to that account's primary bank account. Let's say it's back here in Atlanta. And so that kind of second part, I'm going to call that the enhanced, the better product than just the one-off sell of a local account, which is where Alpha, you know, kind of focused. So that is due to be out of the kitchen in Q4. And two things. One is I think we'll sell a lot more of it because it's way more attractive, right, to go to an account and tell them, I can add these in different places but then tie them all together for you. And then second, we're going to sell the you-know-what out of it back to the client base. I mean, think of how many middle market clients we have in cross-border, in payables, even in fleet here and internationally. And so that's the second part of the idea is to tell all the existing clients we have, whether they're in cross-border or not, hey, we can be way helpful in this way. So I'd say it's going good. You know, Alpha's selling a lot of the kind of the single local thing, but the hopes are that this kind of premium offer will be a big deal next year.

Got it.

Thank you. And we'll take our next question from Darren Peller with Wolf Research. Please go ahead.

Hey, guys. Thanks. You know, I know you've talked, Ron, you talked about the opportunity to cross sell your fleet card, your fleet management products into the spend management customer base. Maybe just talk us through how you're thinking about that cross-sell opportunity now and where it stands, where could it go more broadly across other products in AP and Bill Pay also and cross-border, where are the opportunities to further expand with your existing base that you have now?

It's a good question, Darren. It has been a long, you know, articulation of that. We did stick in. You probably haven't seen it yet, but if you guys on the call would open at some point the, what do we call, Jim, the earnings supplement. So the last page in there, Darren, is an internal slide where we actually show what you're asking, which is, so we have a, we call it internally a spend management platform, call it cards plus, you know, software, and basically on that same platform, a client can buy different things. They could, you know, drivers could buy fleet stuff, travelers could buy T&E stuff, you know procurement or purchasing people could buy you know purchasing stuff and so if you look at the the thing which is interesting is we take that same platform and we sell it to fleet intensive businesses and if you see that slide not shockingly they buy a lot of fleet a lot of fuel and they do buy some other stuff like in the mid-sized ones almost half their spend is non fuel and then we sell the same exact thing to kind of traditional companies maybe the white collar that don't have the same kind of drivers and they buy a little bit of fuel but all the other spend categories so that the message to everybody is we're just embedding it in other words we're taking the the fleet networks that we build and the point-of-sale data capture and the the mobile apps for people and we're just sticking it in the same platform so that when our guys go to companies, they can actually ask them, hey, do you have a lot of, you know, drivers and fuel or don't you? And so to your point, it's not a dumb idea now to go back to all the big-sized fleet guys and say, hey, how about buying some other stuff on the same thing and going to the regular guys and asking, hey, do we miss the fact that you actually have some drivers? And so I think it's going to be simpler, hopefully, for people outside. It's not just a bunch of kludgy, you know, proprietary fleet things. It's literally now core, you know, to this spend offering that we're going to take out of the market. And I think advantage, Darren, because other guys that make, you know, business cards or corporate cards don't have 20-year-old networks, you know, for fleet purchasing or even the virtual card network that we built. They have just vanilla MasterCard or Visa networks. And so I think us attaching those networks to kind of our card program is going to be a pretty big advantage. You know, we collect more data than they do. We have better economics at those merchants than they do. And so we're quite – if you take a peek at that thing, hopefully the slide in there will be, you know, explanatory.

All right. That's really helpful. Just maybe a quick follow-up, if you can, on margins. Just I continue to see them taking up sequentially. Should we expect for when we're thinking about further expansion, Vermeer, just how much more investment do you think is needed to sustain this type of 10 percent plus organic profile? You know, clearly it's not a small you're not you're not on a low margin base for now. And so I'm curious where your thoughts are on that. Thanks.

Hey, Darren, it's Peter. Thanks for the question. So what I would say is for the quarter, we obviously achieved a really strong 57 percent EBITDA margin. and a lot of that was helped by flow through the favorable macro, right? So for the back, we kind of expect to be slightly below where we are last year, and we feel like we're really invested at the right level to deliver on the organic growth targets. So we already, you know, achieved really strong margins. The thought is that, you know, we won't look to increase it significantly.

Okay. More of an investment story. That makes sense. Okay, guys, thanks. Thank you.

And we'll take our next question from David, from Dave Koning with Baird. Please go ahead.

Yeah. Hey guys, great job. What, one thing I was just wondering about, it looked like Brazil remains a little slower than normal and you still had a great quarter. I guess I'm wondering how much better maybe it would have even been if Brazil was running normal and maybe, you know, Am I right about that? How is the Google partnership or ad search stuff going? Maybe just reflect on all of that.

Hey, it's Ron. So, yeah, I'd say, you know, to your point, you know, splitting hairs, it was a smidge slower. Yes, we're still sitting in the same spot with the Google search. But we have a couple of, like, always new ideas. So you'll see that thing kind of in our rest of the year. We have that thing kicking back up again, a point or two in Q3 and Q4. So despite – and we haven't basically planned in that forecast for that Google issue to resolve. But we have some other kind of tricks up our sleeve there to keep that thing chugging. So the free flow thing is actually helping us some. I don't know if people want to call them on what that is. But, you know, still a third of 40% of all the total transactions in Brazil are not electronic. And I think like 7% of the market is now moved to free flow, which means there's no other way to pay. You have to pay electronically. You can't pay, you know, cash or credit card. So it's bringing, you know, incremental travelers into the mix. And so things like that, along with some of the sales things we're doing. So that thing will be, again, you know, high teams' performance here in the second half.

Great. Thank you. And just one follow-up. The other revenue stream was up a lot sequentially in Q3. It was up about $20 million sequentially last year in Q3. Does that create a tough comp at all, or is that kind of normal seasonality going forward?

Yeah, so I appreciate the question. And as you know, our gift business is in there. In the other, that's really the largest component. And there's, you know, quite a bit of volatility between the quarters in the gift business. And last year, they also had the changeover in terms of the new cards, which really drove that up. So I'd say it does create a tougher comp in other in the back half of the year.

Gotcha. Thanks, guys. Great job. Thanks, David.

Thank you. And our next question comes from Nate Svensson with the Wichita Bank. Please go ahead.

Hey, guys. Nice results, and thanks for the question. Rod, I thought your commentary on go left was pretty interesting, so I was maybe hoping for a little more color on what your optionality there looks like in practice. I guess what products and solutions do you plan to bring to market to help clients with vendor selection, pricing, et cetera? Is this going to require a certain level of investment, either organic or inorganic, or is it simply more kind of reorganizing your existing resources into something that will help clients? And then maybe lastly, how big do you think that opportunity could be and what could it add to growth in the coming years?

Yeah, super good question. Big, Nate, would be my comment. So at the high level, it's the AI models, right? Those things are changing the game in lots of places, and not shockingly they're changing the game is around, you know, corporate procurement and contract management and price comparisons and all that kind of stuff. And so this idea from Tonkador clients and being have tons of clients and stuff is, hey, you know, I've got, in our case, you know, $800 million of indirect expense, and you guys are super helpful at helping us manage and control and pay all that. But, like, should I have it? Should I have $750 million in expense? And should I have these people I have? And so this idea is super adjacent, Nate, to what we do. It's left. It's earlier. It's before you approve the payment, you decide whether you should have the expense and stuff. And so we're vetting, you know, a set of partners that have done some things here and looking at kind of integrating some of those capabilities. And what's interesting is we've got gazillions of clients already that were already, you know, they're telling us they approved the payment, we're making the payment with huge amounts of spend where we're not helping on the decision support very much, let alone telling new prospective clients, hey, we can be even more helpful to you. So, I think it's a big, big deal, both in terms of revenue acceleration in that spend business and potentially sales, Nate, of getting people more interested because bosses want to spend less indirect expense. AP managers want it to work well, the process to work better, right, and not to have fraud, not to lose money and stuff. And so we're really trying to appeal, you know, to that C-suite a bit more with these add-ons, if you will.

Yeah, interesting stuff. And I guess just for a follow-up, sorry, sorry, a little bit of feedback, because I don't know if that was on my end. But, you know, it was on the beat and raise, obviously some help from macro, but also you called out underlying momentum, I guess, both in 2Q and for the rest of the year. So I was hoping you could maybe put a finer point on that underlying momentum. Is there one or two segments you would maybe call out as being better than expected in 2Q, and then I guess for the rest of the year relative to your prior expectations? I know high level, you know, the relative growth rates sound like they're all in the same ballpark, so I guess just on the margin, what came in better than expected, and what do you expect to be better than expected for the rest of the year?

Hey, Nate, appreciate the question. And so maybe starting with the rest of your guide question that you put forward, you know, our thought process here is it's a relatively immaterial raise at $15 million of revenue and $0.20 of EPS, but our message is our confidence in achieving our back half guidance. And just a reminder that we set a significant climb for ourselves in the back half of the So absolute revenue is growing, call it $100 million, Q1 to Q4. And absolute EPS is growing, you know, called over $1.50 from Q1 to Q4. So, you know, quite impressive numbers by themselves in Q4. So, again, just, you know, sharing with everybody our confidence in achieving those.

Hey, Nate, it's Ron. Most of it I want you to miss. Hey, Ron, hey, how's your guide versus last time? And make sure your lens is on. It's 25% cash EPS growth in the second half of the prior year. So that's what we're focused on, is delivering an absolute growth rate and amount, you know, exiting the $29 or something. Like, that's our main message is don't miss that the numbers that were sticking out there were significant versus prior period.

Main message, well received.

Thank you. And we'll take our next question from Madison, sir, with Raymond James. Please go ahead.

Hey, guys. Good afternoon. and appreciate you taking the questions. You've talked about some reallocation of investment from U.S. vehicle to corporate payments. Obviously, the U.S. business is much slower growth, but I guess maybe touch on your confidence level around sustaining high single-digit organic vehicle growth, especially as you reallocate some of those resources. It seems like it would be pretty high, given your comments just now around high-teens Brazil growth, but we'd love to just hear your thoughts about the sustainability, especially in lieu of some of those allocations of resources?

It's another good question. The first thing I'd say is they're really good businesses. You know, whether they're growing, you know, 8% or 10%, they're durable as hell. They're hard to knock over. They're super profitable. They have advantageous stuff, networks, tech people and stuff. So the first headline of people is, you know, don't discount just the quality of the businesses. The second point I'd make is the pivot, the infamous pivot we made a couple years ago has landed us now at literally line average retention, particularly in the U.S. and international markets. And so, historically, because they were smaller, the vehicle businesses had, you know, a worse loss rate, lower retention rate. And generally, they had a worse same-store sales. And so, I'm happy to report today, problem solved. Because we changed the mix of business, it was always larger internationally, but because we've moved the mix here in the U.S. larger, We've now gotten the line average loss rates and same-store sales again around flat to plus one. So it's really just a straight sales game now is my message. The growth rate now that we have stable base, which we didn't have, and way improved retention because of the business mix, now it's literally just selling. It's just investment level and productivity. And so that's what we're still talking with. We've only got so much money, right, to try to make returns, and so we're trying to trade that off between the vehicle business and other people value our corporate payments business higher. So I'd say we lead a little bit more that way, but I'd say it's high. If we keep spending money on sales and we keep making sales, I referenced high teens, sales growth in Q2 over the prior year, so we're still selling stuff. So I'd say that's the answer. It's stable. If we spend money and make sales, we can keep growing at high single digits.

Okay, that's helpful. And just a follow-up on – sorry, there was some feedback. A follow-up on corporate payments here. Obviously, you guys mentioned that you expect to maintain this mid-teens plus organic growth in the second half. You gave some color on retention versus new sales. But I was hoping you could maybe also double-click on just what you're seeing on the cross-border versus payable sides and just any changes in expectation from the recent teach-in or are things kind of tracking with what you laid out there?

Not much difference between those two kind of sublines. I'd say they're both, you know, it's not like one is 10 and one is 23 or something. They're both kind of, you know, paired up in terms of the growth rate. They're both, you know, selling a lot and stuff. And as I said, I think, you know, the couple of exciting things there that could potentially make us do better is the bank thing that I mentioned earlier. If we deliver that version 2.0 and take it back to the base, and then second, it's getting the payables and spend management product over the pond, which we've done, and grabbing that TAM, and we've got more sales and clients there. So those would be the two kind of upsides of kind of offering something or going somewhere that's not kind of in the current numbers. So both of those things are in flight. So if they take hold and do better, both of those things could be helpful the next year.

Thank you. Thank you.

And as a reminder, if you'd like to ask a question, it is the star and one on your touchtone telephone. We'll go next to Michael Infante with Morgan Stanley. Please go ahead.

Yeah, hey, guys. Thanks for taking my question. You've previously spoken about the 40% of your flows within cross-border that are still on SWIFT. I think you previously had mentioned trying to take that volume mix down closer to the mid-teens level by leveraging, you know, some of the private blockchain rails like Connexus. Ron, you obviously highlighted that in your prepared remarks, too. I just wanted to ask on Swift directly, just given, you know, their announcement about some more real-time capabilities as well. Like, how do you think about that volume mix shift and sort of the differentiation between that swift real-time rail relative to something like a Conexus and the decision tree there? Thanks, guys.

Yeah, Mike, Ron, it's a good question. So, for us, because it's a rail, it's just speed and cost. So, to your point, whether it's the JPM thing or, you know, Citi announced a similar thing. So, to me, having the banks kind of rally, you know, a consortium that wants to do this speedy blockchain thing, forget the stupid stablecoin, but just tokenize real money, we love that. And I think we said it before, I think 40,000, I think that's the number, I think we've done 40,000 transactions already over the JPM private blockchain. So, it's not just on a paper, it's real, we're actually moving money. The guy running of things tells me, A, I think we could get to half. By the time we leave for Christmas, I think we could get literally half of our wires, you know, from SWIFT on to, you know, on to one of these things. So, look, if SWIFT somehow, you know, matched the speed, which they have in today with their cost, like, between us, we're kind of indifferent in a way, right? I just, you know, as long as the thing goes there fast and it's low cost and it's super liable and we can follow the breadcrumbs, you know, we don't feel strongly. But the main message for me is we like the idea of tokenized fiat currency. We love the idea of helping clients move money instamatically to merchants 24-7. And some of the banks, Michael, have said they literally credit it, you know, outside of banking hours. And so what do you need to get on and out of, in and out of freaking stable coins for? You can just tokenize a euro and send it to somebody instamatically, and it gets credited right away. So for us, I've said this repeatedly, the bank's announcements and move, I think, way increase the chance of the outcome being what we said, where we think the ball's going to bounce here.

Yeah, it makes a ton of sense. And then just a quick follow-up on Avid to the extent that you can share. Anything interesting in terms of underlying split there between software and payments revenue at this point and sort of the willingness of suppliers to pay for that incremental software functionality over time with everything going on with AI? Thanks, guys.

Yeah, I mean, at the high level, Avid is doing super good. I think we said their earnings last quarter were about 50% over the prior year. But more importantly to me, I just had a review last week, their revenue growth is expected to pick up double digits as we get into the back half here. So the revenue growth has been the key indicator for us, which they're bullish on. And so the composition of that revenue, to your point, has been not much change. I'd say that the software revenue has been pretty stable. I think it's kind of low single digits growing. So we've seen no attrition, no losses, you know, from clients in terms of paying the thing. And they're doing a very good job in getting wider monetization. They've gone beyond, you know, virtual cards. They've added debit now as another way. Electronics, they've got a lot more volume on, you know, paid ACH, if you will, that goes a lot faster. So I'd say generally the thing is going well, and we don't see, you know, a lot of risk on the software side. They're also way, you know, AI-ing their software. They're putting in a lot of cool things that they couldn't do before that clients like. I don't know if you like this, but called Fetch Me, where, hey, normally I'm the little person that sends out 100 invoices. I don't see Ron Clark's invoice the thing goes and fetches it brings it back Like so so I would say to you they're sexing up. They're making the software better For clients which adds value and so so we're liking it I'd say I'm you know more excited about that company We didn't say it but the the combo of Avid and alpha is going to come in above. I think I gave $1 and I gave $0.39, but that thing is going to be pretty above the dollar, which is one of the reasons we're up about $0.35. And so both of those big transactions might look performing for us.

That's great detail.

Thanks, Ron.

And as a reminder, if you would like to ask a question, it is the star and one on your touchtone telephone. We'll pause briefly for any further questions or follow-ups to Q. and it does not appear we have any further questions at this time so we'd like to thank everybody for their participation in today's conference this does bring us to the end of the meeting and you may now disconnect