Earnings Call Transcript - CPAY Q4 2025

Operator, Operator

Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Hello, and welcome, everyone, to today's Corpay Fourth Quarter 2025 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. To register to ask a question at any time, please press 1. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Jim Eglseder, Investor Relations. Please go ahead.

Jim Eglseder, Investor Relations

Good afternoon. Thank you for joining us today for our earnings call to discuss the fourth quarter and full year 2025 results. With me today are Ronald F. Clarke, 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 our website. Please refer to these materials for an explanation of the non-GAAP financial metrics discussed on this call along with the reconciliation of those measures to the nearest applicable GAAP measures. Our remarks today will also include forward-looking statements about expected operating and financial results, strategic initiatives, acquisitions and synergies, 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 8-Ks, and can also be found in our annual report on Form 10-Ks. These documents are available on our website and at sec.gov. So now I'll turn the call over to Ronald F. Clarke, our Chairman and CEO. Ron?

Ronald F. Clarke, Chairman and CEO

Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining today's call. Upfront here, I plan to cover three subjects along with highlights for 2025. First, provide my take on Q4. Second, I'll share our 2026 guidance. And then lastly, I'll outline our major priorities for 2026. Okay. Let me begin with our Q4 results. We reported revenue of $1.248 billion, up 21%, and cash EPS of $6.04, up 13%. That would be up 20% at a constant tax rate. The results were better than our expectations, mostly driven by cross-border and Alpha overperformance. We did call the macro spot on, so impact versus our guide. In the quarter, overall revenue growth was 11%, marking three consecutive quarters. Inside of that, our core businesses are performing quite well against pretty difficult comps. Importantly, our trends in the quarter were also quite positive. New sales, or bookings, were up 29% versus the prior year. So super robust sales. Same-store sales inched into the territory, up 1%. And overall, revenue retention was stable at 92%. Cash EBITDA in Q4 surpassed $700 million in the quarter. So look, all of this produced a record cash EPS print of over $6 a share. So really a terrific quarter for us. Let me make the turn to highlights for the full year 2025. So first, our financial performance for the year was quite good. Full year revenue of $4.5 billion, that's up 14%. Cash EPS of $21.38, up 12%, or again up 17% at a constant tax rate. Organic revenue growth for the full year was 10%. So that makes four of the last five years 10% organic revenue growth or higher. Full year sales growth was also 29%, with improving productivity. So we're continuing to sell a lot. Additionally, in the year, we made a number of moves to better position the company for the midterm. We acquired Alpha, the second largest acquisition in the company's history, giving us access to an international bank account product as well as the asset management market segment. Mastercard invested $300 million in our cross-border business at a $13 billion valuation, hopefully unlocking and serving the FI channel. We invested in Avid, which deepens our position in the middle market AP automation and payment space. And lastly, we acquired a second vehicle debt company in Brazil that'll further help accelerate Brazil's non-toll revenue growth. Overall, financial performance was ahead of our initial 2025 guide, along with a further rotation of our portfolio towards corporate payments. So quite pleased. Okay. Let me transition to our 2026 guidance. We are quite excited about it. So we're providing full year 2026 guidance at the midpoint of print revenue, $5.265 billion, that's up over $700 million versus last year or up 16%. And we're writing cash EPS at the midpoint of $26, on the button. That it's up 22%. Look. The drivers behind this 2026 guide are a few things. First, fundamentals. Look, the business is working. We had a record Q4 finish. And the corresponding exit rate showed great trends, you know, positive sales, a healthy client base, stable retention trends, big sales year again in 2025. We get a lot of that benefit as it rolls into 2026. We are also expecting continued 10% organic revenue growth this year. A second driver is accretive acquisitions. Our Alpha acquisition is expected to contribute about $300 million of incremental revenue, and Alpha paired with Avid together should contribute approximately $1 of cash EPS to our 2026 outlook. And then third, macro factors are expected to support our growth in 2026. We expect favorable FX rates, particularly so in the first half, lower SOFR rates, and a constant year-over-year tax rate expected. So look, lots of reasons for confidence in our 2026 guide. The guide, just for clarity, does not include the impact of expected divestitures, including the pay by phone, nor the impact of any material capital allocation actions beyond simply deleveraging. Okay, let me turn to our top five priorities for 2026, which really are consistent with last year's priorities. First up is our portfolio. The goal, again, is to further simplify the company resulting in fewer bigger businesses and accelerate our rotation of corporate payments. We've announced one vehicle payment divestiture. We have two additional divestitures that we're working on. As always, we're continuing to work the acquisition pipeline for new corporate payment acquisition opportunities. Second priority, USA sales. We're continuing to work to improve U.S. sales, particularly of our vehicle payments and lodging solutions. We've done a few things. We've hired a new CMO who recently started. We've developed some new Corpay brand creative ads to raise awareness of the company. We're growing our Zoom sales teams here in 2026. Concurrently, we're also rethinking entirely new ways to sell our U.S. vehicle payment solutions as we deemphasize digital sales. A third priority, in payables, we are trying to add new enterprise accounts there, particularly after our success with our first significant accounts last year. We are selling payables now in the UK, seeing some initial traction increasing our sales force in the UK. Lastly, we are exploring new monetization options with our merchant base or our vendor base. These options include instant payment options, debit card payments, and even eChecks to help accelerate revenue growth in the AP segment. Our fourth priority is cross-border. We are super focused on our multi-currency account and our international bank account capabilities, especially given the Alpha deal. We're furthering our stablecoin capabilities. And obviously working hard to implement synergies related to the Alpha acquisition. We are progressing the FI channel opportunity with Mastercard. We recently logged our first joint sale, so kudos there. All these initiatives are building a meaningful pipeline, and we are excited about that. Finally, AI. Yes. We have gotten religion around AI. We're currently in pilot programs with conversational AI being added to a number of our client user interfaces. We're using AI agents to reduce live agent expenses, particularly in our lodging business. Moreover, we’re applying AI to accelerate our merchant matching process against our internal merchant database to help drive new payable sales with prospects. So, look, five key priorities here in 2026. Each is well-defined, each is being worked on: the portfolio, USA sales, payables expansion, cross-border capabilities, and AI implementation. So, a busy year for sure. So look, in conclusion today, a strong finish, record earnings in Q4, on the high side of our guide, again encouraging organic revenue, new sales, same-store sales, and retention trends. Our full year 2025 financial performance again finished ahead of our initial guide. We logged another 10% full year organic revenue growth year that makes again for the last five years, and again, we had an active repositioning year. Further simplification of the company, and the addition of more corporate payment assets. In terms of 2026, again, outlooking really a super strong 2026 with EPS expected to be up over 20%, driven by favorable fundamentals, accretive acquisitions, and even favorable macro conditions. Lastly, we have laid out a clear set of priorities to better position the company to continue to compound over the midterm. So with that, let me turn the call back over to Peter to provide some additional detail on the quarter, the year, and our 2026 outlook. Peter?

Peter Walker, CFO

Thanks, Ron, and good afternoon, everyone. Let's start with highlights of the quarter and the year. Q4 revenue was $1.248 billion, overperforming the midpoint of our guidance driven by strong corporate payments performance. GAAP revenue grew 21% year over year driven by 11% organic revenue growth. Q4 adjusted EPS of $6.04 per share was over the midpoint of our guidance and grew 13% year over year due to strong top-line performance and solid expense management. The headline for the quarter is overperformance, over 20% top-line and low teens bottom-line growth driven by our third consecutive quarter of delivering 11% organic revenue growth. We grew Q4 new sales 29% year over year and delivered a 92.3% retention rate fueling our business for 2026. For the full year, revenue was $4.528 billion delivering organic revenue growth of 10% and consistent growth for four out of the last five years. Full year adjusted EPS was $21.38, growing 12%, but growing 17% at a constant tax rate. These strong year-over-year results are reinforced by the healthy, consistent sequential quarterly growth in revenue, EBITDA, and adjusted EPS throughout 2025, which positions us well for 2026. We exited 2025 as an even stronger company than we entered the year. Now turning to our segment performance and the underlying drivers of our organic revenue growth. Corporate Payments delivered 16% organic growth for the quarter, facing a 200 basis points drag from float revenue compression due to lower interest rates. This exceeded our expectations by 100 basis points, driven in part by Alpha’s revenue overperformance, setting us up well for 2026. Overall, corporate payments performance was driven by growth in spend volumes, which increased 44% on a pro forma basis to over $81 billion in spend. Cross-border continued to deliver strong sales and revenue performance in Q4. This business is quite resilient with significant demand even in the face of trade-related uncertainty throughout the year. Additionally, the Alpha Group integration efforts are progressing well. The payables business continues to perform with especially strong sales performance in Q4. We’re optimistic about the future of the business as we are in the early stages of market penetration and closed our strategic investment in Avid Exchange during the fourth quarter. We see tremendous upside for this business. Vehicle Payments organic revenue growth was 10% again this quarter. As a reminder, we operate three approximately equal-sized vehicle payments businesses across the globe in the U.S., Europe, and Brazil. We saw continued strong results in all three geographies which drove the performance; improving U.S. vehicle payments performance throughout the year is particularly encouraging. Lodging, representing less than 10% of our total revenue, decreased 7% year over year but was roughly flat for the quarter when adjusting for a 600 basis point drag from lower FEMA emergency revenue year over year. While not recovering, we are assuming low single-digit growth in our 2026 outlook, with headwinds in the first half of the year and returning to positive organic growth in the latter half of the year as new sales and implementations come online. In summary, we delivered 11% organic growth in Q4 at the high end of our target range driven by strong corporate payments organic growth and double-digit vehicle payments organic growth. Now looking further down the income statement. Operating expenses of $684 million increased 25%, primarily driven by a lower net gain on business dispositions year over year, acquisitions, divestitures, and related expenses and FX partially offset by a non-cash impairment charge in Q4 of last year. Excluding these impacts, operating expenses increased 8% driven by investments in sales and processing expenses related to higher transaction volumes. As we exited the quarter, we're starting to see benefit from expense rationalization initiatives recently that will deliver additional savings in 2026. Our adjusted EBITDA margin was 57.1%, and our adjusted effective tax rate for the quarter was 25.8%. The increase in the rate was due to the favorable impact of employee stock options on the tax rate last year. On to the balance sheet, we ended the quarter in excellent shape with a leverage ratio of 2.8 times, spot on our guidance. We repurchased 1.7 million shares in the quarter for $500 million and a total of 2.6 million shares for the year. This leaves us with approximately $1.5 billion authorized for share repurchase inclusive of the $1 billion of additional authorization approved by the Board at the December meeting. We will continue to pursue M&A opportunities and plan to buy back shares at this valuation while maintaining leverage within our target range. Now, let me share some additional information on our 2026 full year and Q1 outlook. As Ron mentioned, as part of our continued rotation into corporate payments, we signed a definitive agreement to sell pay by phone, a non-core vehicle payments asset. The transaction is expected to close in 2026. The impact of this sale is not included in our guidance as we are sharing today as our policy is to update guidance for closed deals. Pay by phone is expected to produce 2026 annual revenues of approximately $100 million and the transaction is not expected to have a material impact on adjusted EPS, as we plan to use the proceeds to buy back shares. We'll provide more information when the deal is closed. Our 2026 revenue guidance is $5.265 billion at the midpoint of our range, growing 16% year over year. This assumes 10% organic revenue growth, also the midpoint of our range. 2026 organic revenue growth is lower than our 2025 exit rate of 11% due to additional float headwinds heavier weighted in 2026 in our corporate payments business. Our 2026 guidance for adjusted EPS is $26 per share at the midpoint, growing 22% year over year. Our confidence in our guidance is high, given most of the building blocks for this performance are already in place. This includes our strong organic growth exit rate and annualized Q4 trends, our expense rationalization initiatives yielding savings, and our Q4 share buybacks. We project $1 of accretion from the Avid and Alpha deals is achievable given our strong record of M&A integration. The macro environment provides additional tailwinds, including a flat tax rate year over year. As a reminder, our revenue and adjusted EPS build throughout the year. The percentage of full-year revenue and EPS are lowest in Q1 and highest in Q4. This pattern is driven by our clients' highest business volumes occurring in Q2 and Q3, along with acquisition synergy realization increasing through the year, all over a relatively fixed cost basis. The consistent historical pattern gives us confidence in our ability to deliver our 2026 guidance. Below EBITDA, we're expecting net interest expense to be $370 million and $400 million, the adjusted tax rate to be between 25% to 27%, and weighted average shares to be flat with the period-end shares for Q4. Relating to capital allocation, our forecast assumes free cash flow is used to pay down debt, which provides some potential upside opportunity should we deploy capital for buybacks or M&A. Our guidance does not include any share buybacks. From a segment perspective, we expect the following organic revenue growth rates: Corporate payments, mid-teens inclusive of the drag on float revenue from lower interest rates; Vehicle payments, high single digits; Lodging, low single digits. Our Q1 revenue guidance is $1.21 billion at the midpoint, growing 20% year over year. We expect Q1 organic revenue growth of 9% at the midpoint, lower than the full year 10% organic growth guide driven by the float headwind I mentioned earlier. We're expecting adjusted EPS of $5.45 at the midpoint, growing 21% year over year. We're planning organic revenue growth to increase in the remaining quarters as we digest the float headwinds. We provided additional detail regarding our full year and Q1 outlook in our press release and earnings supplement. Before I turn it over to the operator for Q&A, I'm delighted to share that we've remediated the outstanding material weakness related to user and you'll see this formally in our 10-K. I want to thank the team that made this happen. So operator, please open the line for questions.

Operator, Operator

Thank you. If you'd like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. We ask that you please limit yourself to one question and one follow-up. Once again, that is 1 to ask a question. Our first question comes from Andrew Jeffrey with William Blair. Please go ahead. Your line is now open.

Andrew Jeffrey, Analyst

Thank you. Appreciate you taking the question. Great to see the business momentum. Ron, I wanted to ask a little bit about the commentary around payables monetization. I know this is an area that has been historically a little bit stubborn when it comes to non-check based payments. I know you mentioned eChecks. But could you maybe dimensionalize that for us? Is it an initiative that could add to already impressive segment organic revenue growth? Or what's the timeline for driving better yield from those initiatives?

Ronald F. Clarke, Chairman and CEO

Hey, Andrew. It's a great question. I think, you know, we've been a one-trick pony to the industry in terms of using virtual cards for monetization. The idea of getting rid of paper checks and implementing options like eChecks, debit at lower interchange, and ACH plus instant payments is crucial. Research suggests merchants like that choice, and some will adopt these new methods of payment where they won't accept virtual cards. We are currently in the middle of it. We're laying that stuff out, doing research, and testing. I would say, sometime in Q2 or Q3, we should see some impact from that. I think it creates more legs for the business long term.

Andrew Jeffrey, Analyst

Yeah. I agree. And then just a quick follow-up for Peter, if I may. Could you sort of parse out domestic vehicle payment organic revenue growth versus Brazil? I assume that US and Europe look pretty similar. Just trying to understand what positive same-store sales might mean for that business.

Peter Walker, CFO

Yeah. So UFCP business, you know, approximately 5% organic growth for the quarter. And, Europe and the rest of the world and Brazil, you know, tracked right on where they were earlier in the year, yielding consistent results across all three for the 10% overall organic growth rate for vehicle payments.

Operator, Operator

Thank you. We'll now move on to Darrin Peller with Wolfe Research. Your line is now open.

Darrin Peller, Analyst

Hey, guys. Thanks. Nice job. I just wanted to start off with one more of a strategic question and then a sustainability question on the growth rate on vehicles. Then I'll have a follow-up on the modeling side. But just when I look at the double-digit growth rate, I'm glad to see it holding up in these ranges even against what you're getting into harder comps towards the end of '24. So maybe just touch on sustainability, especially of the U.S. Fleet acceleration and what's needed to push same-store sales meaningfully higher. Your view?

Ronald F. Clarke, Chairman and CEO

Hey, Darrin. It's Ron. The answer to that is sales. Just to follow-up on Peter's comments, the three horsemen that create 10% growth depend on whether they are low single-digit or similar. High double-digit. Approval rates are up, and credit is improving. So the business has gotten to a good reset spot. The entire assignment sales can push growth rates higher, but that also depends on how much we can invest in the business.

Darrin Peller, Analyst

Right. Alright. That's good to hear. Thanks. I guess just one follow-up would be on more of a modeling couple of questions, which is number one would be just if you could provide a little more color on the cadence of the accretion contribution given that's a notable part of the reported numbers versus some of the street numbers. Just understand how it ramps through the year. And then I know getting some questions on interest expense. I think you're assuming a lower interest expense rate dollar amount. Just help us understand that notion just given you're adding debt at a healthy rate as well. Thanks again, guys. Good job.

Ronald F. Clarke, Chairman and CEO

Well, Darrin, it's Ron. Let me take the first part, and Peter can take the second. We're done with the plan, and when we talked 90 days ago, we were onboarding. We finished the work. In my opening comments, I gave the dollar amount. Between the NAV and investment, the Alpha acquisition, we're confident we can achieve that. We're underway on cost takeout and revenue synergies, and the biggest unlock in the second half is the IT integration we are executing. This setup creates even acceleration in EPS as we move into next year.

Peter Walker, CFO

So, Darrin, picking up on your question on interest expense. We ended the year about $7.7 billion in debt. We produced really high cash flows, so call it $1.8 billion of cash flows we produced throughout the year. As debt is managed throughout the year, the forward curve is looking pretty positive for us on SOFR. So put those two together, leading to lower interest expense for us.

Operator, Operator

Thank you. We'll now move on to Tien-Tsin Huang with JPMorgan. Please go ahead.

Tien-Tsin Huang, Analyst

Thank you so much, Haifman, Peter, and Jim. Great results. I wanted to ask about corporate payments if that's okay. Just mid-teens growth expected this year. Do you have the backlog to support this growth, or is there more business to go get? I'm curious what the visibility looks like there. Could there be some room for upside? And if so, where?

Ronald F. Clarke, Chairman and CEO

Hey, Tien-Tsin. Thanks for the question. Regarding the 2026 number, in payables, we have the sales backlog because the implementation cycle is longer there. We have a bunch of deals that drive that revenue. In the cross-border business, the sales to implementation cycle is much shorter. We expect to have to make more sales there. But I would not bet against the cross-border sales there; we had a strong finish in the core business and even the new Alpha business. Therefore, our confidence is high in the growth outlook. However, the compression of float rates does have an acute impact.

Tien-Tsin Huang, Analyst

And if we get the monetization today, right, that Andrew asked if we get that cranking, that would be another upside, basically, to the business. Got it. No. You sound quite pleased with Alpha. That's great to hear. So mid-teens would be a win for that segment. I did want to ask just on margins, if that's okay, as my follow-up with the expense rationalization. Is there a way to think about the impact on 2026 and just some broader comments on incremental margins in 2026, any surprises or puts and takes to consider?

Peter Walker, CFO

Yeah. Maybe I'll start. We're targeting above $75 million of expense out. We've executed kind of $50 million of it and are still working on the other $25 million. If you looked at our internal plan, margins climbed sequentially. It's a pretty fixed-cost base once we make the sales investments early. Revenue increases will snowball. Overall, we expect approximately 300 basis points margin improvement from Q1 to Q4.

Tien-Tsin Huang, Analyst

Perfect. Great. Well done. Thank you.

Operator, Operator

Thank you. Our next question comes from Mihir Bhatia with Bank of America. Your line is now open.

Mihir Bhatia, Analyst

Hi. Good afternoon. Thank you for taking my question. Nice results here. But Ron, I wanted to ask you about pay by phone. I think you acquired that asset a couple of years ago. Just any lessons from that process regarding what worked and what didn't as you think about going forward?

Ronald F. Clarke, Chairman and CEO

Yeah. Hey! That's a good question. I'd say maybe two lessons on that. One is, you know, we had a thesis for buying that asset focusing on the 5, 6, or 7 million active users and the potential to integrate them into our network. However, we couldn't realize that potential as well as we had hoped. My second learning is that we can take a business, improve its profits by threefold, and sell it for 50% more than we bought it. This serves as a strong reminder that even when the thesis isn't perfect, we can still earn a good return. We are pleased with the outcome and the management team that's running it.

Mihir Bhatia, Analyst

Got it. No. And I think, kudos to you all for trying and pulling the plug when you realized it wouldn't work. Wanted to switch gears to corporate payments, just trying to understand the timelines for the priorities you outlined like building The UK payables, adding enterprise accounts, and monetization options. How should we think about what's going to make a significant contribution there in 2026 versus initiatives that are more long term?

Ronald F. Clarke, Chairman and CEO

Yeah. That's a really good question. The main goal is to ensure clarity on the opportunities available. There are additional factors beyond our current operations where we can improve monetization against the spend. Adding enterprise customers and expanding into new geographies will widen our total addressable market. Monetization will definitely be the short term focus, likely impacting our 2026 results because we already have the clients and the merchant network. Consolidation and synergy efforts from the Alpha acquisition will also contribute this year.

Sanjay Sakhrani, Analyst

Thank you. Ron, could you talk about a couple more divestitures you mentioned and what kind of liquidity you're looking at to raise from those? Last quarter, you indicated a $1.5 billion number. If we think about today's announcement plus the other two, could that get you to a higher or equal number?

Ronald F. Clarke, Chairman and CEO

Yes. It's a good question, Sanjay. If we end up transacting on both of those additional vehicle businesses we're working on, it could be over $1 billion, around $1 billion or $1.3 billion. We’d use proceeds to buy back shares, so we will have clarity on that in about the next 30 days.

Sanjay Sakhrani, Analyst

Got it. And then just maybe if you could elaborate on lodging. I know it remained weak, and you are assuming low single digits but any specifics regarding that turnaround and how we should approach that on a go-forward basis?

Ronald F. Clarke, Chairman and CEO

Yeah. The results for lodging have not been good. I characterize these businesses as problems from previous performances with lots of issues. Both have stabilized, and we fixed our IT and product challenges. Positive same-store results for U.S. vehicles, but somewhat flat for lodging. However, the management teams have stabilized revenue, but I’m still disappointed in new sales. The ticket for both is producing new sales now that losses have stabilized.

Nate Svensson, Analyst

Hey, guys. Thanks for the question. I want to follow up on some of the cross-border priorities discussed in the prepared remarks. You mentioned outperformance at Alpha and the proposed $1 contribution from alpha plus avid accretion. Can you elaborate on what’s going better than expected at Alpha? What's causing revenue synergies? Is it better organic growth? Anything beyond that?

Ronald F. Clarke, Chairman and CEO

Yeah, Nate. Two good questions there. I think the overperformance in Alpha is driven by how well the integration process is going, especially regarding team dynamics. The transition has been smoother than expected, and the teams are excited about the prospects of working together. Their sales teams have embraced our products, resulting in robust business closures. Integration saw improvements not only in sales but also in cultural alignment. Looking at future synergies, we anticipate significant operational advantages from cost and contract integrations. Even though we are just beginning this journey, initial results are promising.

Nate Svensson, Analyst

Super exciting stuff. For a follow-up, what’s your outlook regarding potential Supreme Court rulings that could impact CFAI or the potential rollback of tariffs? How might this affect the corporate payments business or vehicle payments?

Ronald F. Clarke, Chairman and CEO

Yeah, that's a super good follow-up. I'd say care for certainty is our friend. Anything that rolls back tariffs, especially regarding trade, would be a positive outcome for the cross-border business. We’ve seen the impact of trade uncertainty before, and clear rulings tend to stabilize our performance in North America. With about a third of our business being North America-based, any certainty regarding tariffs would be beneficial.

Ramsey El-Assal, Analyst

Hi. Thank you so much for taking my call tonight. I wanted to ask about the strong sales growth... Do you see any changes regarding the conversion of bookings to revenue now that you have shifted more into corporate payments? Is it faster or slower compared to when you were primarily fleet card business?

Ronald F. Clarke, Chairman and CEO

Well, hey, Ramsey. Welcome to your new spot. Congrats! It's a really good question. The answer is that it varies by business. The payables business has a slower ramp from bookings to revenue; conversely, the cross-border business has a much quicker turnaround. If we consider an example where we recorded $300 million in bookings, we would typically recognize about $100 million in revenue that same year, while the remaining balance rolls into the next fiscal year.

Operator, Operator

Thank you. Our next question comes from Rayna Kumar with Oppenheimer. Your line is now open.

Rayna Kumar, Analyst

Good evening. Thanks for taking my question. Could you discuss what drivers will help lodging get back up to low single-digit growth this year? Also, how should we view your EBITDA margin this year and any puts and takes to consider?

Peter Walker, CFO

Yeah. Hi, Rayna. It's Peter. On the lodging side, we expect low single-digit growth for the full year, but it will be a tale of two halves. The first half will remain negative, but there’s optimism for a pickup in the latter half due to new sales implementations coming online. Concerning EBITDA margins, we expect an increase as business volumes grow and synergies are implemented; however, they may decline slightly year-over-year due to acquisitions.

Operator, Operator

Thank you. Our next question comes from Trevor Williams with Jefferies. Your line is now open.

Trevor Williams, Analyst

Great. Thanks very much, Peter. I want to go back to the organic guide. The 9% growth in Q1 relative to the 11% in Q4 and the 10% you're assuming for the full year. That seems mostly driven by float headwinds impacting corporate payments in the first half, and the lodging situation you just walked through. Any other factors we should consider with the cadence? Can you provide specifics for Corporate Payments growth guidance, including expected float impact?

Peter Walker, CFO

Sure, Trevor. You are correct regarding Q1 2026. The float headwinds mostly affect our numbers, particularly with how we manage the Alpha business. There will be a noticeable impact from the drop in rates which will be more acute in Q1, but we foresee a recovery to the 10% growth rate expected for the rest of the year as those pressures ease.

Ronald F. Clarke, Chairman and CEO

Yeah. Just to add to Peter's point, the weighted average earnings in Q1 versus last year is expected to demonstrate more acute compression, approximately 70 or 75 basis points compared to 25 to 30 basis points by the year's end. This accounts for our 9% in Q1 versus 10%. The Gift business has been running hot, but that too will normalize to a positive, yet moderated target.

Trevor Williams, Analyst

Okay, thanks. That's helpful. Just as a follow-up on Brazil, you guys are outpacing underlying tag growth coming from extended network. How do you view the sustainability of that? Are you targeting high teens to 20% growth in Brazil even without more acquisitions, like Gringo or ZapPay?

Ronald F. Clarke, Chairman and CEO

Great question, Trevor. We’re planning for another high-teens year in Brazil. Half the growth is due to last year's strong performance, which had a sizeable impact on our projections. We’re now combining product offerings with relevant financial services to build strong customer uptake—promising trends ahead as we enhance our offerings and seize market opportunities.

Operator, Operator

Thank you. Our last question will come from Michael Infante with Morgan Stanley. Your line is now open.

Michael Infante, Analyst

Yeah. Hey, guys. Thanks for squeezing me in here. I'll just ask one for the sake of time. Any commentary on minority interest, which appears more significant now with Avid and the Mastercard impact?

Peter Walker, CFO

Let's take that question offline so we can discuss it in more detail regarding your modeling.

Operator, Operator

And our last question comes from Madison Sewer with Raymond James. Your line is now open.

Madison Sewer, Analyst

Hey, guys. Thanks for sneaking me in, and I'll just ask one as well. Circling back to the Mastercard partnership, early indications are positive. Is the 200 to 300 basis point tailwind to cross-border still the right way to think about that contribution, or do you see potential upside given initial indications?

Ronald F. Clarke, Chairman and CEO

That's a good question. The timing is key, as the sales cycle for financial institutions is longer compared to corporates. However, considering the size of our pipeline and the early wins we’ve achieved, it is a very large segment. Most of the cross-border business is with existing relationships, thus if we successfully engage these banks, it will significantly add to our growth. It is an enormous potential contribution as timeframe remains a central question.

Operator, Operator

At this time, there are no further questions in the queue. I will now turn the meeting back to our presenters for any additional or closing remarks.

Jim Eglseder, Investor Relations

Great. Thanks, everybody, for your interest. If you need anything else, you know where to find me. Have a good evening.

Operator, Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.