CPAY - NYSE

Good day, everyone, and welcome to today's Corpay's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] 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. 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 2 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 3 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 3 of our key business trends. Organic revenue growth for the quarter, 6%, but clearly a tale of 2 cities, our Corporate Payments business, Brazil business and international fleet business performed exceptionally well. while our Lodging and North America fleet businesses, not as good, presented a drag on growth. So taken together, averaging out to 6% overall. So let me update you on the 2 problem children. So 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, though happening in the business on a few fronts. Retention is better, 150 basis points better, in fact, than Q2 last year. Softness improving 100 basis points better sequentially and sales growing. In the quarter, 80% of all of our digital sales now 5 card and plus size accounts. So a significant pivot new business there. 1/3 of our field sales now being booked to our new Corpay One fuel card, business card and virtual card in one and 25% of our SMB trucking sales 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. So on the back of these trends, we're out looking 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 happening on the Lodging front, the first IT there, 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, if you will, to bigger accounts and increased pricing to walk-in travelers. And then lastly, sales in Lodging growing, up 36% in Q2, again, evidence to us that there's demand for the solutions. So again, 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 no more. So the ramp on the quarter, again, 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 2 problem children 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. So 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 out looking weaker FX. I hear 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 outlooking accelerated double-digit print and organic revenue growth and $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 3 segments. We're well underway with our integration and synergy planning for our Paymerang and GPS acquisitions. Initial thinking there calls for conversion and shattering 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 2 deals to add about 15% to our Corporate Payments business revenue next year, and 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 buyback 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 in fact, the deals survive diligence. So in conclusion then, today, Q2, again, finishing in line, but don't miss improving trends, the base, new sales and retention, 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 2 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. Print 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 businesses 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 against 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 solution consumer vehicle payment app by adding the ability to purchase insurance and search for nearby fuel stations and EV chargers. And 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 we 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,

[Operator Instructions] 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 resignings you're already seeing evidence of and 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, but it's great to hear, given the trends?

Darrin, it's Ron. I mean, the short answer, let me start with the Lodging thing, is really the base, right? The client base less down, call it about a year ago, starting in Q2 last year, both the IT issue and kind of just softness macro in those areas. And so it's really less about the Lodging business accelerating and more basically that the base went down and it stabilized. So effectively, if you look sequentially, if I said to you, which I guess we have, hey, our print for Lodging in Q2 is x, think of it being mostly stable or flat sequentially. And so what that does is it takes the decline now, right, which was whatever, 9 or 10 in the first couple of quarters, that lifts obviously the whole company. And it's really the same story for NAF, right, that the business was in decline when we made the pivot, we kicked out all that micro business revenue and bad debt. So effectively, we took the revenue down, and fortunately, we've refilled the bucket with more stable revenue. So the same thing. The better Q4 performance is not a function of Lodging or NAF really growing, think of them as honestly just flat and mostly just not declining anymore. And again, the main thing is really just 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 is on the Corporate Payment 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? I mean 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, think, the new tech guys like Disney and Ramp and Brexit. So we have those products. We've obviously got the full AD automation products. I think from a product perspective, we spent lots of time and money assembling a pretty broad set of products in this middle market. So the game now is really selling. So when we say to you guys, "Hey, I think of 28% or something for the quarter." So that's the game out there. The game has shifted from assembling a competitive and a good business to now really just 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 expect it to continue to come -- Darrin, I'm saying that we'd expect it to continue to become a bigger piece of the overall Corpay portfolio, on just its growth rate will cause it to continue to be a bigger portion of it. We said 30% now, at 40% by the end of next year. And certainly, from a capital allocation perspective, we could still view it as 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, just on the Corporate Payment 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 I think, Tom, you talked about take rates and trends there being positive. Maybe just hunting on that with the direct business. And I know there's some concerns out there around virtual card monetization and adverse payment selection, that kind of thing. What's your view on that?

Tien-Tsin, it's Ron. So on the first part, the acceleration is mostly sales, right? I think you know this well, but in that business, the revenue was driven by sales literally from a year before. And so when we step up sales like we did in that business in '23, we get the benefit here really throughout 2024. And the business basically had record sales last year. And then the second one is, we're really out of the blocks in terms of synergies with the Paymerang. We're back to the old FLEETCOR, Corpay wheelhouse deals, right? When we buy stuff right in the space that we're in, and we know where profit pools are and revenue pools. So we're able to basically get at improving businesses like that, like super quickly. So I'd say those obviously, retention has stayed super good in those businesses. So it's just the model of the sales relative to the base, in this case, a little bit extra from the synergies. Well, let me let Tom pick up because I know there was some question in part of our business with one of the other guys, you want to go to say?

Yes. Sure. So Tien-Tsin, what I'd say is the health related to the health of the network, we feel like our network related to the merchant portfolio really stands out. It's differentiated relative to what we see others having, one, just a sheer size. It crosses multiple industries and verticals, we're not wedded in any particular one. Obviously, we have a fair amount of focus on construction and field services and transportation, but it's wider than that as we've built it over the years. Our customer segment is much larger than what we would say is the -- some of our peers in the marketplace, what we're dealing with customers that are $100 million to $200 million to $500 million in revenue. So that gives them the ability to really influence the merchants on the other end. We have to offer merchants a much more customized acceptance program where we can do things for them in terms of the levels of acceptance that they're willing to have and what expenses they'll accept versus what they won't accept. So it's not a one-size-fits-all model with us. So we just think we've got a healthy merchant portfolio and then numbers that we referenced in terms of seeing take rates on the move-up and card penetration gradually moving up. That's not something you would expect to see, rate up that's going to move gradually. All kind of points to a healthy merchant portfolio. The acquisition we did with Paymerang will only make that larger. So we feel good about what we're seeing from an overall network perspective.

Great. Just my quick follow-up on the M&A front. I know you got some divestitures, you're going to buy back stock with those proceeds. You're going to close GPS later, I mean, early '25. Can you -- how quickly can you replenish the acquisition pipeline with similar type deals?

In sort of replenish, Tien-Tsin, in my opener, we've got a couple of deals active that we're sitting -- looking to pull the trigger on now. So I think you know we're kind of mostly never out of that business. It's really just a question of whether the prices that sellers are looking for is something we can meet. So yes, we're in the game. We're going to buy stuff, as we said, in the spaces that we're in. And I think digging into these 2 most recent ones, when we signed and when we closed, it helps your confidence playing the game again and going after the synergies. So I'd say we're full speed ahead on that. And I'd say the confidence in the divestitures is much higher than what I spoke to you last time, I'd say 100% we'll exit one and probably 75% we'll exit two by Christmas.

And our next question comes from Sanjay Sakhrani with KBW.

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

Yes. Sanjay, it's Ron. So I'd say the best way to think about it is flat, forget plus or minus a percentage of -- if you look at the things sequentially, the goal in this year, exiting this year is to have our North America fleet business revenue flat, be 100% past the pivot, will have higher quality revenue sitting in there that's obviously got better retention rates, which I called out as better same-store sales rates and stuff like that. So the real question is next year, okay, hey, you made the pivot, you're done with that speech. You got better revenue, better trends and stuff. So what's going on. It's just sales. The million dollar question is these couple of new products in this new channel investment, will we sell enough business relative to the base that, that business can be a single or high mid-digit grower again? So that's the question. It will be acceptance of the 2 new products that I called out, we call one of them Corpay One, which is kind of the 3-in-1 product and the other one called Comdata Connect, which is for trucking. So with those 2 products as the build in the field, in the pivot and digital, which I called out, will those things create enough absolute amount of sales that, that base grows decently next year? That's the call. And obviously, 90 days, we'll give you our answer of what we're planning and what we think we can do. But look, the early returns, which is why I called it out, are good. When you launch new products, the question is always, does the market like them? What's the acceptance? And as you can see in the quarter, we're just leaving 1/3 to 1/4 of the sales of the channels are these new products, which is quite good. So we're optimistic that we've got the right things, and we'll give you a better outlook in 90 days.

And, Sanjay, related to your second question, nothing material from a macro perspective in the second half. There's a, call it, $0 million to $5 million spend on where fuel price lands of where that could be, but nothing that would be really significant to them overall, give or take, $1 billion business.

Okay. And just a follow-up on Tien-Tsin sort of alluded to, in terms of the virtual card businesses out there. I mean, it just seems like there's been a little bit of disappointing growth there. I guess like is that creating an opportunity for you guys to go in and buy companies that are in that field. I'm just trying to think about how you guys look at some of the data around that and how it affects you.

I think the good news, Sanjay, is it hasn't. I mean I think it's always something to look at what other people are doing, but I think Tom said it earlier, all of our setups are different, right? Some guys have super low and an inability to influence the merchants. Other people are more highly monetized. We have a different business than other people, right, in terms of the amount of card, pure card business versus full AP. So the first thing that I'd say is you got to be a little careful drawing conclusions across the businesses. But look, it's working for us. We're calling out that our monetization is growing. And to Tom's point, we have a couple of things going on with both the partner and with the Paymerang deal that will increase our monetization as we go through the second half. So we're right now kind of outside of the problem, if you will, of people experiencing less card penetration.

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

I guess on margins, really nice to see another quarter of solid margin expansion. You got margins up 60 basis points, even more ex Russia. Kind of just wondering your thoughts on the ability to continue expanding margins in the back half of the year, particularly given you'll be lapping some really strong margin expansion in the back half of '23 and then you start to layer Paymerang in there. So anything we should keep in mind for our models with regard to cadence or magnitude of margin expansion and what that exit rate might look like heading into next year?

High, is the headline made high, right? I think we said repeatedly that we've got significant operating leverage in this business. So I think our print was what's on low 53, 53 and change, let's say, for Q2. We're looking sequentially, Nate, for revenue to go up $50 million, here in Q3, $975 million, call it, to $1,025 million and then I think up another $40 million as we head into Q4. So the flow-through, the margin flow-through of that incremental revenue is 80% or 90% in our business. So margins will expand another 200 to 250 basis points between Q2 and Q4. So this is the model. The model is if you get sequential incremental revenue on the books that you'll have significantly good flow-through.

That's great to hear. I guess for the follow-up, I kind of want to talk about retention. So obviously, really nice to see the step up in retention, both sequentially and year-over-year. So I was hoping you could unpack a little more what's driving that. How much of this is kind of the external environment getting a little better? How much of it is explicit actions taken by you at Corpay? And then I know for the growth algorithm in the back half of the year, you talked about a number of different factors: retention, same-store sales, new products, et cetera. So I guess just any way to like help size each of those metrics and their contribution to growth for the remainder of the year with a focus on retention there.

Yes. Let me take the first part, Nate. It's Ron, and then Tom can pick up. Just on the pay retention, we called out the retention trend was good, nearly at a 92%, which is the best in a while. It's really mostly mix. And what I mean by that is, simplistically the retention of a company like ours is really both fundamentally based on the size and the health of the clients, we provide credit and we probably kick out half the people, so for 92% retention, so 8% loss is probably closing it and half of that is us not liking the client enough anymore right to extend credit. So the mix, like we talked about in the "infamous North America fleet pivot", we're pivoting to higher quality, better creditworthy accounts, more stable accounts, so that structurally will create retention improvement. And then corporate payments as a business is bigger accounts. Tom said it earlier, call, the average accounted $200 million to $300 million company in its own right. And so when you have clients like that, they're way stable and generally decent creditability. So Corporate payments grows from whatever it was 20% to call it, 30% now on the way to 40%, that's another part of the mix that will improve our attention. So I would say that we'd be outlooking improving retention certainly as we run through the next 4 to 8 quarters.

Yes. And, Nate, let me kind of walk you through the sequential quarter from Q2 through Q4 because I think it's important for you to kind of understand the pieces. So if we printed $975 million in Q2 and are guiding toward a midpoint of $1,025 million. That $50 million increase, half of that -- a little over half of that is related to Paymerang coming on board, which obviously have a lot of visibility into and the seasonal uplift that we have seen from gift. That's over half of the $50 million increase. The other increase is really the snowballing of what we would call really our outperforming companies, the Brazil, the cross-border, the payables, that makes up the lion's share of the remaining sequential increase. We'll be getting some lift from some of the other businesses, but not meaningful. That's more back to your question about a pretty similar retention-based sales kind of model. But the snowballing of cross-border payables in Brazil is what coupled with the Paymerang and the gift gets you to the $1,025 million. And then Q4 is more of the same. It's both the growth of Paymerang because we'll then start harvesting some of the synergies. So that gets you -- of the $40 million growth between Q3 and Q4, half again is Paymerang and gift. Gift typically has a high seasonal second half. I mentioned the third quarter already. It also typically have a strong fourth quarter for the obvious reasons of the holiday season and vendors wanting to refill their virtual shelves, if you will, of gift cards. And then the rest of that increase, call it, another $20 million is the snowballing again, of our growing businesses and the sales that we've been talking cross border and payables growing almost 30%. Brazil growing 27%. Those just pour into the second half that then drives the revenue. Now it's certainly not without some risks. I mean, clearly, we got to execute, we've got to deliver. You don't look at those numbers and say, oh, well, that's a laydown forecast for the second half of the year. But it's something that we do have discrete planned up against and the plans are up against things that we've got a fair amount of visibility in and things that are performing today is how I would describe the way we get from here to there.

And our next question comes from Peter Christiansen with Citibank.

I wanted to dig into the transaction momentum we're still seeing in the Brazil business. It looks fantastic. As we think about like parking, fueling stations, that kind of growth that you've seen there, I was wondering if you can attribute that more on like footprint expansion versus kind of like same-store growth or more user engagement and then on the footprint expansion kind of story, can you just remind us where we are? And do you see more opportunities to expand those 2 networks?

Pete, it's Ron, good question. Yes. The headline is the Brazil business is doing great. So if you divide between kind of the core toll business or tags, which I think we said the tag volume, tag count grew 9% in the quarter. The reason, again, for that is we're coke. We have every distribution channel known to man to buy a tag. We're at toll booths, we're in malls, we're in retail stores. We're in digital. We're in all the new cars they make on the wind shield coming out. So if you've got a vehicle, you can buy our tag. And so there's just nobody with 2,000 people in those various places helping sell these tags. And then second, we told you, and it's come true, that the cross-sell when you have 6 million or 7 million active users, including more than half of them come into your app every month, you can sell other vehicle-related stuff, and we are. We're selling a pile of it. Fueling compounding, I think it's 25% or 30%. The funniest one we bought is a cutout. We call it car debt fee. It's like tickets and registration for your car. And so that thing is compounding. I think it's 40% in the quarter. But literally were up like 5x selling that to our own user base because when users now come on their phone to the homepage, we know who you are, you're Pete Christiansen, you're 1020, we know your registration. We literally put up on the home page, "Hey, you've got 2 tickets, Pete. Your outstanding partner, and they're due on Friday." And so the power of -- I hope people aren't missing this, the math, the size of the base and the number of new users we add and the broadening line of vehicle things that we're selling now, we've got the model working. I don't know people can see it, but we're growing the platform or the flagship product because of our distribution and we're broadening the add-on things. And your relating question is, yes, the footprints of those related things are grown. So we've added another, I think, 400, 500 fueling stations this year or next year. We've added thousands and thousands of incremental parking locations through a deal we've added this car debt thing from one of the largest companies in the country doing it. So we are doing that widening where the users can use these add-on services, which helps us reach more of the base. So the models' working. It's incrementally profitable, obviously, because we're cross-selling, right, versus just getting new accounts. So I'm hoping that the model that we articulated a few years ago, people can see that it's working.

That's really encouraging. And I hate to beat the dead horse on virtual cards. And it sounds -- it's really encouraging about the mix being really healthy there as part of overall payment files. So just curious if you could give any color on rebate levels and how you're seeing those trends at least in your business?

Yes. Pete, I'd say they're stable. I mean, we're not going to get into those details, and they can vary dramatically based on customer base side of the transaction, but there's nothing from a rebate standpoint that's noising up the numbers. I'd say the trends there are how they've been over the last several quarters.

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

I wanted to ask about Lodging's contribution to your longer-term growth algorithm. I mean, the segment is undoubtedly recovering. What's your confidence level that Lodging will eventually get back to its kind of historical growth watermark?

Ramsey. And the reason, again, I think if you go back to the very beginning of the thing is if you think about travel and U.S. travel and the different pockets of white collar or blue collar or big companies, little companies, this area that we go after is just completely uncertain. The word they use is kind of unmanaged. So us, people that are on the call have been spoon-fed and managed for travel forever and ever, but a group of guys going to fix wires in Tampa after a storm do not have very good travel health and stuff. And so I think that the niche and the product line and the network that we've got, serves this incredibly underserved market segment, of which we've got a decent share. I don't have that in front of me, maybe you call it 20%, something like that. So there's plenty of TAM and there's really not many good alternatives to help those companies. And so this isn't as bad as the IT thing we did in whatever, 6 or 7 years ago. But obviously, we created some of the problem and the fact that the base is stabilizing tells me that we've contained it that the people that didn't like what we did to them a year ago, that we were not doing that to kind of the rest of the client base. So as long as the client sitting on our books in July are happy, and we can keep selling like we said, what we grew about 36%, then the answer is, we'll be back on the other side. I mean the value, Ramsey, to a customer, I think the spreads which is our cost versus retail hit $50 a room night in June or July, $50. I think we turned over $25 of that back to the company. So your ability to have a simple way to book, save and then pay for all that stuff in an organized way and control it. So the people are going where you want, not spending other stuff, the combination of those things is just -- it's just such a great value prop. It's probably the best value prop we have in the company. And so we just have to execute well, not like we did a year ago. So confidence is high to do better again.

Super helpful, Ron. And one more for me. Can you unpack the same-store sales improvement, which was really meaningful in the quarter? Where was that localized in terms of industry verticals, products kind of across the business? I think throughout your remarks, you've addressed that a little bit, but maybe just kind of roll it up for us. Where are you seeing the best improvement there on same-store sales?

Yes. The 2 big ones would be North America fleet. And again, that's structural, right? We -- whatever 1.5 years ago, stops the micro thing. And so your base gets way more stable when you have better clients in it, right, more sturdy kind of clients in it and you don't kick them out again for credit. And then the other one is logic because, again, that they started to erode in Q2 of last year. And so the customers that we didn't do good for, again, we kind of contained that. So those would be sequentially the 2 businesses that had -- that carried the most improvement into Q2.

And that was the inflection point that we were for and anticipating to make sure that it didn't widen and this was the quarter where we were able to see that, in fact, it didn't widen, it's coming back. So that gives us that element of optimism in terms of how they're going to perform going forward.

And you guys, Ramsey, it's running at good models and good math guys. So when I say to you, "Hey, I've got 2 problems children, I say, I have home -- the 2 problem children here, hey they're going to go from declining to stable. Hey, trust me, Paul." What I'm trying to say to you is don't miss the trends. What are the 2 businesses whose same-store sales improved the most sequentially, the two problem children. Whose retention was better? The problem children. And so we're seeing already in the trends those businesses getting better. So when we run the models forward, that's a big part of what creates the improvement at least back to stable in those businesses.

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

Well, I think if you go back to 4Q of '22, there was a lot of travel disruption and the Lodging business benefited. So just curious, did you see any benefit from the CrowdStrike outage and the associated travel disruption there?

Okay, John, I hate to admit, yes. It did, which we saw kind of in our July flat. So I don't necessarily like to wish problems on people. But yes, remember that if you took our entire Lodging business and you looked at the pieces of it, right, we sell to like 3 or 4 different verticals there. We sell to what we call kind of workforce, blue collar, we sell to airlines and we sell to insurers and stuff. In the -- in a couple of those businesses, we have either what we call emergency like a hurricane or distressed, which is like the airlines not being able to get the flights across. That stuff probably is, I don't know, 10% or 15% of the entire business. So even if it's better 50% for all year, like the world was upside down. So I wouldn't say that it's super-duper meaningful to the overall thing, but it's certainly helpful. Certainly, our numbers in that segment will be better in this quarter.

Okay. That's helpful. And then, Ron, just to dig in a little bit. You saw a nice acceleration in sales growth. I think you called out Corporate Payments up 21% versus overall '21. And I think Tom called out North America fleet 5 cards plus, new sales being really strong. But maybe overall, like what is North America fleet new sales look like in the other segments to call out other than Corporate Payments driving that 21% and a nice sequential improvement.

You have that, Tom?

The North America fleet, John, is kind of mid-single digits, but it's really kind of a tale of 2 cities in there because there are some segments within there that were just kind of deemphasizing. If you look at our proprietary fuel product, it's actually up 30%. So that just gives you the range of variability that's going on within the North American fleet business. So I think you really have to kind of decompose it to get to what's going on there. Then as you said, as you work down the page in terms of Lodging. We referenced that. Corporate Payments almost 30%. So where we're focusing our sales efforts, we're seeing the result, I think, is the message we leave you with.

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

So I'm going to ask you, one, Ron, just big picture, and when I think about corporate payments and the 2 big deals you've announced recently, the profile of the businesses has really pretty meaningfully shifted and will continue to do so next year. And I know you did an exhaustive corporate review last year. But does there come a point where you kind of look at the merits of being a pure play, call it, 20% scale public B2B company and what that might mean for some of the parts for FLEETCOR? This is just it's such a distinctive, unique business where I think there could be scarcity value. I wonder if you revisit some of that potential shift in corporate structure.

Yes, not now, right? We said in the last year study that I think referenced our conclusion that the greatest value creation of the company is 2 things. One, keeping Corporate Payments going, which we're doing compounding organically 20% and buying accretive deals; and two, accelerating the vehicle business. And so that's what we're on. With that said, there's always a different day, wake us up a different day, and we'll see where we are in 6, 12 months. But I think we said that we like the company we have. We like the fact that we're in prepayment lines, and we've obviously got some fixed work to do in a couple of the businesses. So I'd say we're not on revisiting the 3 segments today, period. Again, our eyes are always open and our ears, but it's not today.

Okay. That's helpful. Glad it's not off the table completely in the future, though.

And we will take our next question from Dave Koning with Baird.

And just one question for me. So Q4, you've guided the 14% growth. Just the math around that. I mean it's pretty outstanding. Like is that Corporate 20% and everything else kind of over 10%? And then is that sustainable? Is there anything in Q4 that's really good that, that falls off in '25?

Well, I'm glad that you said that. Yes, my word is that's arriving at a better place, at a nice place. And so yes, 14% organic revenue growth and 14% print growth is attractive. So on the first part of your question, yes, obviously, virtually every business is performing. Tom mentioned before, obviously, the other categories with gifts would go way into the positive column. And Corporate Payments would go well into the 20s because we're picking up some planned synergies on the Paymerang side. And again, just the snowball of the sales there. And then continued great performance in Brazil and then the 2 problem children, as we said, kind of stabilizing. So that's what the thing looks like. So as soon as you get the problem children from declining to stable, the high-performing businesses pull up, obviously, the average growth rate quite a bit. In terms of, hey, does that mean that we're at 14%, hey, we're at 14% forever? No. What I'd say is so much of the turns on the earlier question of what can we sell next year, particularly in North America fleet in Lodging at those bases have stabilized, can we sell enough to grow those businesses attractively again, but I would say it certainly bodes for double-digit growth, right, which will certainly back you guys in 90 days with a view of '25. But yes, it's -- it will be a great outcome to get there, and I think it sets us up well to be north of 10% in 2025.