CPAY - NYSE

Good day, everyone, and welcome to today’s Corpay Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Please note this call is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn today's call over to Head of Investor Relations, Jim Eglseder. Please go ahead.

Good afternoon, and thank you for joining us today for our third 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 of our website at corpay.com. Now, throughout this call, we will be covering several non-GAAP financial metrics, including revenues, net income, and net income per diluted share, all on an adjusted basis. We will also be covering organic revenue growth. This metric neutralizes the impact of year-over-year changes in FX rates, fuel prices and fuel spreads. It also includes pro forma results for acquisitions and divestitures or scope changes closed during the two years being compared. None of these measures are calculated in accordance with GAAP and may be calculated differently than other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today’s press release and on our website. It’s important to understand that part of our discussion today may include forward-looking statements. These statements reflect the best information we have as of today. All statements about our outlook, new products, and expectations regarding business development and future acquisitions are based on that information. They are not guarantees of future performance, and you should not put undue reliance upon them. We undertake no obligation to update any of these statements. These expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today’s press release on Form 8-K and in our Annual Report on Form 10-K. These documents are available on our website and at sec.gov. 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 Q3 2024 earnings call. Upfront here, I'll plan to cover three subjects. First, provide my take on Q3 results, share our Q4 guidance along with a 2025 preview. Second, I'll discuss our U.S.A. opportunity. and our recent sales reorganization. And then lastly, I'll provide an update on our M&A activities. Okay. Let me begin with our Q3 results, starting with we surpassed $1 billion in quarterly revenue for the very first time. So, quite a big milestone for us. We reported revenue of $1.29 billion, up 7%, excluding Russia and cash EPS of $5, up 14%, excluding Russia. The result is really in line with our expectations, both revenue and earnings finishing on the high side of our guidance range. EBITDA margins in Q3, 54.2%, that's up about 100 basis points sequentially. Our trends in Q3 really quite good. Same-store sales remained essentially flat, and that's consistent with Q2. Retention improved slightly to a bit above 92% for the quarter. That's a return to record levels. Sales are what we call new bookings growth of 14% and inside of that corporate payment sales growth leading the way with a 28% sales growth in the quarter. And payables spend monetization levels remaining steady sequentially. Organic revenue growth, finishing at 6% overall. Again, strong growth in corporate payments, Brazil and international fleet. And a continued drag for North America fleet in lodging. Although lodging did show signs of improvement in the quarter. So, the wrap on Q3, really, no surprises here, lodging a bit better. North America fleet a bit worse. But more importantly, trends, same-store sales, retention, sales and spend monetization, all stable or improving. So, really a good result. Okay. Let me make the turn to Q4 and full year 2024 guidance. So, we're outlooking a very strong Q4 finish. We're expecting organic revenue growth to accelerate to 13% and an early view of our October revenue flash supports this acceleration. Outlook in EBITDA margins of 55.6%, which should be up about another 140 basis points sequentially. Cash EPS of $5.35 at the midpoint, up 21% and hopeful for Q4 sales growth coming in above 20%. So, really firing on all cylinders. A couple additional positives. We expect lodging revenue growth to turn positive here in Q4 and the infamous Corporate Payments channel segment expected to finally grow again here in Q4. So, both of these things support our overall revenue growth acceleration. So, as I said back in August, our expected arrival to a better place is now Q4. For full year 2024, our staying put with $19 of full year cash EPS at the midpoint. That implies 16% year-over-year EPS growth, excluding Russia. So, really in line with our 15% to 20% midterm earnings growth target. Okay. Let me transition to a 2025 preview, obviously, early days, but we think it's setting up quite well. In terms of organic revenue growth, we're out looking 9% to 11% driven by a recovery of our North America fleet in lodging businesses, both moving into positive territory next year. Corporate Payments in Brazil maintaining mid- to high teens growth rates even our gift business outlooking double-digit growth next year. We do expect an incremental 3% of print revenue growth that's above organic from the combination of the two Corporate Payments acquisitions. Planning our 2025 sales growth around 20% next year. That's driven by the demand for our new products, along with incremental investment in sales coverage. So, taken together, we're targeting 2025 cash EPS at a $22 per share ballpark. Still lots to work through a couple of big assumptions behind the 2025 cash EPS will be FX assumptions, particularly the Brazil real, along with the net impact of lower interest rates offset by higher 2025 tax rates. So, look, net-net, we're outlooking a pretty good 2025 setup. Okay. Let me make the turn to our USA sales opportunity, along with the recent decision to reorganize U.S. sales and a point a new CRO. So, recently, our U.S. sales growth has not been as good as our international sales growth and particularly our North America fleet and lodging solutions. We see the U.S. opportunity for all of our lines to be enormous. Take, for example, our payables business, we've got about a 2% or 3% share of the mid-market. Recall that's a business of about $500 million of annualized revenue. And yet there's a couple hundred thousand prospects to convert and we've got 2% to 3%. So, look, a big opportunity. So, to get at this opportunity more urgently, we've taken the following actions. We've established a consolidated U.S. sales organization with the associated marketing and sales support functions reporting into one new CRO exec. His name is Mike Jeffrey. We've rebranded sections of the vehicle, lodging and payables lines of business to Corpay to leverage the brand and we've established a dedicated cross-sell team that will take each of our solutions back to our existing client base to drive sales. So, lots of energy focus and urgency around selling more here in the U.S. Okay. And finally, I'll move to my last subject, which is an M&A update. So, quite busy in 2024 on the M&A front. Four deals finalized, a couple still in the pipeline. So, first, Paymerang, the AP automation company -- we closed that July 1st. Good news. It's tracking closely to our second half plan and we're seeing significant synergies here in Q4. GPS across border business that we signed up this summer, still on track to close at the end of the year. Through Q3, the business is performing at forecast. So good news there. So, we'll be excited to bring that business across. Taken together these two Corporate Payment deals should contribute about $0.50, of cash EPS accretion in 2025. Third is our

Thanks Ron, and good afternoon, everyone. Here are some additional details related to the quarter. As we announced last week, Q3 revenue was $1.029 billion, which I was pleased to see at the higher end of our guide despite lower fuel prices. Organic revenue grew 6% versus Q3 last year, led by 18% growth in Corporate Payments. Strong expense discipline and another quarter of lower bad debt resulted in EBITDA margin of 54.2%. We generated $355 million of free cash flow, which translates into $5 per share in cash EPS, $0.05 above the midpoint of our guidance, up 11%, versus last year and up 14%, excluding the impact of the sale of our Russia business. Overall, our first $1 billion revenue quarter, reflecting the quality and diversification of our business. Now, turning to our segment performance and the underlying drivers of our organic revenue growth. Corporate Payments revenue was up 18%, driven by 7% growth in spend volume and stable card penetration rates. Strength in our direct business, which grew 21% was again led by strong growth in full AP. We closed the Paymerang deal in July, which contributed $14 million of revenue in the quarter and we continue to migrate the business to our platform. Everything is progressing according to plan, and we expect meaningful synergy contributions beginning in the fourth quarter. From an adjusted EPS perspective, we still expect Paymerang to be EPS neutral in Q4. Cross-border revenue was up 21%, led by 40% sales growth. Both new client acquisition and recurring client transaction activity was robust as our scale, technology, and talent advantages continue to power share gains from legacy financial players. Our previously announced acquisition of GPS Capital Markets continues to progress through the approval process, and we expect it to close in early 2025. Turning to vehicle payments. Organic revenue increased 4% during the quarter. Growth was driven by a 7% increase in transactions and higher revenue per transaction which were both broad-based across all businesses and geographies. Organic revenue growth was again driven by Brazil and international fleet, which both grew double-digits. We're beginning to see some progress related to our sales and marketing investment in our local U.S. fleet business. As a reminder, this customer segment services middle market and SMB field services businesses that used vehicles to deliver their goods and services every day. During the quarter, transactions and spend volume on a constant fuel price basis showed signs of accelerating growth. In addition, we're seeing a quarterly trend of improving performance across same-store sales, new sales, and retention. There's more work to be done to increase sales, but it's encouraging to see some initial progress. In the U.K., we continue to expand the PayByPhone parking app into a multi-point consumer vehicle payment app by leveraging our proprietary networks and partnerships to add relevant products and services. In Q2, we launched the ability to acquire car content insurance when parking and added a search function for nearby fuel stations and EV chargers. We've gone live this quarter with 2 additional services. One, our first vehicle maintenance and repair product for the U.K.'s mandatory annual vehicle inspection service. And secondly, EV charging payments, where app users can directly pay for EV charging from their PayByPhone app. We continue to be quite excited about the future prospects from repurposing our B2B networks and payment solutions to a large consumer segment. In Brazil, business performance was again quite strong with revenue growing 18% and sales increasing 22%. Tag growth was 8% and toll-related revenue grew 20%. We continue to see success not just in selling tags, but also selling additional payment solutions. Both insurance policies sold and car debt payment transactions were up over 100% in the quarter. Additionally, card debt app users and revenue were up over 30% compared to last year. These additional products are quite popular and continue to support our cross-sell success. Lodging revenue decreased 5% and improved 5 points sequentially from Q2. Room nights increased 10%, in part due to an improvement in same-store sales as well as storm-related emergency services. The softness in the business appears to have bottomed, and we're expecting the segment to grow slightly in the fourth quarter. Now, looking further down the income statement. Operating expenses of $561 million represent a 7% increase versus Q3 of last year, driven primarily by acquisitions. Excluding acquisitions and divestitures, operating expenses were flat. Bad debt expense declined 3% from last year to $28 million or 5 basis points of spend. So, credit remains controlled. EBITDA margin in the quarter was 54.2%, the slight year-over-year decline was impacted by acquisitions and divestitures over the last 12 months. Normalizing for these transactions, EBITDA margin increased 77 basis points. Our positive operating leverage is driven by solid revenue growth and disciplined expense management, both of which we're quite good at. Interest expense increased $21 million versus Q3 of 2023, due to higher debt balances from acquisitions and share buybacks. Our effective tax rate for the quarter was 22.9% versus 26.6% last year, quite a bit lower as a result of option exercises during the quarter. Now, turning to the balance sheet. We ended the quarter with $1.3 billion in unrestricted cash, and we had $800 million available on our revolver. We have $6.2 billion outstanding on our credit facilities, which includes an additional $500 million of Term Loan B we issued in September at substantially similar terms to the existing credit facility. We used the proceeds to pay down the revolver after our purchase of Paymerang on July 1st. As of September 30th, our leverage ratio was 2.82 times trailing 12-month EBITDA. We also took actions in September to reduce our interest expense by entering into an additional $500 million 3.19% fixed rate swap and re-struck our Canadian dollar to USD cross-currency swap at a more favorable rate. The combination of these transactions is expected to reduce interest expense next year by approximately $7 million. We repurchased 300,000 shares in the quarter for $90 million entirely related to employee stock option exercises. We have over $500 million authorized for share repurchases and the Board recently authorized an additional $1 billion of share repurchases, so we now have over $1.5 billion available for buybacks. We will continue to pursue near-term M&A opportunities, and we'll also buy back shares when it makes sense while maintaining our leverage within our target range. Now, let me provide some additional details related to our outlook. For the full year, we are maintaining our cash EPS guide of $19 per share and slightly lowering our revenue guide to $3.995 billion at the midpoint as a result of unfavorable fuel prices and FX rates. We are not flowing through the third quarter B as most of that $4 million of revenue was driven by the timing of customer transactions near quarter end. For the fourth quarter, we are outlooking 13% revenue growth and 21% earnings growth at the midpoint. We expect revenue growth acceleration across each of our segments in the fourth quarter, driven by new sales, strong retention, and the realization of synergies from the Pairing acquisition. So, all-in-all, quite similar to what we expected in August. For more details regarding our fourth quarter and full year outlook, please refer to our earnings release. Thank you for your interest in Corpay. And now operator, we'd like to open the line for questions.

Certainly. [Operator Instructions] And we will take our first question from Ramsey El-Assal with Barclays.

Hi, this is Shyam [ph] on for Ramsey. Thanks for taking my question. I was just wondering if you could break down the retention by segment? And how much of the retention improvement that you saw, how much of that is from Corporate Payments becoming a larger part of the business versus just improving retention trends throughout the remainder of the business?

Yes, Shyam, thanks for the question. Yes, we really don't break the retention down by segment. We've talked generally in terms of how the segments performed relative to the overall line average but Corporate Payments business is much better than the line average in some of the SMB businesses within fleet, vehicle payments are below. I think generally, what we've seen is improving signs of retention on an absolute basis yes, as the mix gets more directed towards those higher retention businesses that are naturally repeat up. But that's going to move at a slow pace, and you haven't seen a dramatic shift in mix just from one quarter to the next. You'd have to look out over a 12-month period before you probably start seeing that have much of an impact. So, I think you can assume or take away the point that the improvement that we saw in retention is just core retention improving within the businesses versus a mix story.

Got it. Very helpful. And then just a quick follow-up on -- sorry.

Go ahead.

And then just a quick follow-up on lodging for me. I was wondering if you guys could size if FEMA had any contribution to lodging payments in the quarter, given the hurricanes and if you guys are expecting any further tailwind from just extended disaster relief efforts?

Hey it's Tom. It's a good question. I'd say it's probably about $1 million each for, maybe $1 million above kind of the normalized emergencies we get and maybe $1 million this quarter.

Very helpful.

Thank you. We will take our next question from Tien-Tsin Huang with JPMorgan. Please go ahead.

Hey, great. Good afternoon. Good to talk to you guys. I just want to ask on new sales, if that's okay. Just a couple of questions there. How did the third quarter come in versus plan? And how quickly can the new sales reorg and CRO here produce results in your mind? Thank you.

Good question. So, I'd say Corporate Payments was rocking in Q3, I think I called it out, it was in the high 20s over the prior year. The NAF business was still a bit soft. I think it was 14 in total. The outlook is kind of low to mid-20s for Q4. So, the full year would be around 20% for the full year in the preliminary plan that we built for 2025 kind of did that to be up against 20% next year. The hope is that we're going to get some leverage from this thing, which is why we did it both on the expense side, right, consolidating some of the back office things so we can have more line people right out with customers. And then also the cross-selling, right? It's cheaper to sell things back to clients we have in terms of the contact rate is much better. So, he's a terrific guy. The guy we put in the job ran about half of the field in pay checks. So, a pretty big group. And so look, I'm super bullish both on the structure, the advantages the structure creates -- and then second, just on the guy just a super duper guy. So with the products that we have, the structure now in that guy, I'm hoping that things are going to do better next year.

Okay. No, that's great to hear. And then just my follow-up just thinking about visibility into 2025. I know we're so got certainty on the election, and we'll see what happens with rates here, but double-digit growth at this point? How do you feel about visibility there, Ron versus 90 days ago or even same time this time last year?

Yes, I think better, Tien-Tsin, for a couple of reasons. One is that we're outlooking the acceleration right now sitting in this quarter. And I've had a chance to peak in October, right, which supports the port, which is good. So, to sit here today and say, hey, I think organic is going to go from 666 to 13 is the first statement I'd make. And then the second one, I think, is just the mix helps us as we look into next year, I think the confidence is higher because the two problem children and moved to flat or kind of low single-digit and the Corporate Payments in Brazil that are super good mid- to high teens or bigger share side of the business. So, I think the mix, the ratio to get back the line averages better. So, I think it's a business you can plan when we go into next year, we've got 90% of the revenue engine next year. Whatever is 20 years of stats now on retention, same-store sales, I mean, you guys are good at math. So, that helps us basically frame what the revenue is going to be.

Great. Thank you.

Thank you. We will take our next question from Nate Svensson with Deutsche Bank. Please go ahead.

Hey guys. Sorry about that. I wanted to ask about North American fleet still remains a little bit of a drag on overall growth. And I know one of the other players in the space recently talked about some macro-driven softness there. So, wondering if you can call out some of the broader trends you're seeing in in that business. I know you mentioned same-store sales flat 3Q, but any call-outs you have on trends quarter-to-date? And then maybe more importantly, your 2025 outlook calls for North American fleet to return positive growth. So, can you talk about your confidence, maybe follow-up on Tien-Tsin's questions about visibility into that positive inflection sort of beyond the sales work changes that you mentioned?

Hey Nate, it's Ron. So on the first one, the same-store sales, we're seeing nothing. So, again, the thing is basically flat sequential and again, it's improved from the couple of previous quarters, point one. Point two, the retention and that business has improved it sequentially and quite a bit from 12 months ago. And so at this point, now that we finally lapped the infamous pivot of two years ago, it's really just a function now of sales, right? The retention levels are good. We're not seeing anything unusual in the same-store sales. And lastly, we're not setting that big target to try to get to our overall number in the 9% to 11% number, we're saying, hey, let's look for that thing be low single digit, better than it was this year, but no work beater. So, we're not trying to plan some crazy amount of sales next year, but we do expect sales to be up. So, we're not seeing many of the same things that the other company called those.

Got it. That's helpful. And then another question with regard to the 2025 outlook. I think you mentioned a couple of the key assumptions being the net impact of lower interest rates and higher taxes. So, hoping you could drill down into each of those a little more? So, on interest rates, obviously -- lower interest rate impact to interest expense. But I wanted to ask about the impact of flow revenue, particularly within Corporate Payments. I know it's not something you manage the business for probably spend two seconds thinking about it. But it's obviously been a little bit of a tailwind to growth there. year-to-date. So, how should we weigh sort of lower rates versus maybe higher average cash balances that you hold for clients and anything else we could be with aware of regards to lapping float revenue? And then on tax rate, I know there's been a lot of talk about Pillar 2 and the impact facing other companies. So, I just wanted to clarify if you had any impact there. And then beyond Pillar 2, any other things we should keep in mind when thinking about the tax rate next year, whether it's impact the share options and back with the election, et cetera?

That is one loaded--

Hold on Nate, let's write that down and move on.

Let me try to move through each of those quickly to leave some time for another caller. So first on rates, obviously, we had about $3 billion of our debt that's still rate sensitive. So, as the Fed mood continues to cut off, and they cut today and expectation would be to continue to move down, we will get the benefit of that. So, you can against the $3 billion notional. We pencil that out based on what we're seeing in the rate curve is that rates go down average to average, call it, 70 basis points. With respect to float, it doesn't have an overly material impact in terms of the overall impact -- affect our revenue or to our interest income, depending on where the balances are classified and we a little bit of a headwind. But the numbers that we quoted in terms of the overall guide, take that into account in terms of being able to power through any impact from the flow side. With respect to your question on taxes, we do have some exposure to the global minimum tax as that rounded to 2025, it's not overly material. I think what I would say is that this year, we've commented that our tax rate was benefited from some discrete items, namely the exercise of some stock options just by employees given where the stock price has moved over the course of the year, not necessarily counting on that to always continue. And so I think you can look at the tax rate that's closer to our more recent history versus where we were this year where we benefited from outsized employee exercises.

Thanks for the color. I appreciate the [indiscernible].

Thank you. We will take our next question from Dave Koning with Baird. Please go ahead.

Yes, hey guys. Thanks so much. I guess, first of all, the growth is so good in Q4, and then obviously it's good next year, too. But what's in Q4, the 13% that if we look at next year at 10%, that's not totally sustainable. It seem lodging would probably get better next year, not worse. So, what is going to be different in Q4 than the rest of next year?

Yes. Hey Dave, it's Ron. So, the comps would be the main thing. So, let me start with just the acceleration from Q3 to Q4, so kind of $6 million to $13 million. So call that, we report $10 million, $29 million, so call it $25 million, $55 million. Sequentially, we've got three businesses that basically will do way better in Q4 than Q3. So, Brazil because it our corporate Payments Business, partly to the synergies of the latest acquisition or big, and that business is still growing fast. And then our gift business, which is a big seasonal business super active in Q4. So, those three businesses will add $25 million, $30 million incremental. So, I'd say our confidence plus peaking in October is pretty high. So, then when you roll the clock to the next thing, some of those things roll off, right, that Brazil and gift are super powerful in the other quarters, they are big quarters Q4. And again, like last year, with the comps, the gifting got pushed out, I think I mentioned into 2024 or 2023. So, it's really just how things line up against the prior period. But as I said, for the 2025 number $9 million to $11 million, we're just taking the problem children going from negative to low single-digits into the plus column. Corporate Payments in Brazil, mid to high and then kind of international, call it, around 10%. So, when you add those things together, our confidence in that number is pretty high for next year.

And then also one thing to clarify, the 10% midpoint in that range is exclusive of the Paymerang and the GPS acquisition. So, on a print basis, it would be closer to the 13% that we've referenced.

Got you. Yes, that makes sense. And -- maybe a quick follow-up. Just corporate mix of growth in volume and yield, yield was super strong this quarter, volume decel. Was that just purely the mix of what was happening?

Yes. That's exactly right. It's just purely a mix story behind that.

Thank you.

Thank you. [Operator Instructions] We will take our next question from Sanjay Sakhrani with KBW. Please go ahead.

Thank you. Ron, and Tom, you guys talked about a pipeline and M&A pipeline. I'm just curious sort of what's in there. I know there's more on the share buyback. But as we think about where you're going to allocate your capital next, I mean, is it M&A more so than buyback given some of the valuations are compressed?

Yes. Let me go to the first part of the question, the pipeline. So, I think we said last time, we're focused really on corporate payments, transactions and then the consumer vehicle, things that could help us build bigger volume faster there. So, no shock that the things we're out looking are in that that group. In terms of the split between buybacks and acquisitions, it's always the same, if we have attractive earnings and assets that we can buy create forward growth. That's always our top priority, if the business case turns. And to the extent that -- the stock price rates out of a range that we like, we use liquidity for that. So, I don't think anything materially different in terms of the priority ahead into next year. Although I think the Board did at the last meeting increased the authorization. By another $1 billion. So, we've got liquidity get next year. We've got the authorization, so we'll see where the stock goes.

I guess to follow-up, I know you talked just on that previous question about the acceleration and then the comps and stuff. I guess -- as we think about this acceleration, I mean, you said you peaked into October, it looks good. where is there any risk in the numbers? I mean, it seems like things are progressing quite well. But they're -- you're calling for a pretty decent exception in the fourth quarter. I'm just curious as we look at these, is it just all comps and therefore, you're pretty comfortable because sometimes the comp base isn't more guy there? Just curious.

No, it's a good question to say, 13% revenue growth and I think a 21% earnings growth in Q4 is obviously we've arrived. I'd say the biggest risk, we tend to look at the business sequentially would be in that gifting -- last year, we had it in the Q4 number because it's historically been the big quarter. not only to retailers order tons of get cars, but then people activate them like crazy, late in the quarter. So, it's a late game call. And so there's only so much science in that. So, I'd say if we were back on a call in 90 days and we're short in Q4, I would say that would be the most likely answer as to why.

Sanjay -- what Ron said on the sequential point. So, it's going up $25 million sequentially. We've got -- the gift piece call that [indiscernible]. And then the other pieces are things that we've got a pretty good line of sight into some realization of Paymerang synergies is another piece of that. And then Brazil, given the summer season down there, predict we have high predictability around the sequential increase there from Q3 to Q4. So, I think those give us added confidence that we'll be able to hit the Q4 number.

Yes. There are also record numbers, right? There's comps and the growth over the prior year, but it will be record revenue, record earnings, I mean, almost record margins. So, everything I'd say to you guys is pretty positive, separate from having easier comps from last year. Good spot.

Thank you.

[Operator Instructions] We will take our next question from Peter Christiansen with Citi. Please go ahead.

Good evening. Thanks for the question here. Really nice -- impressive results. Tom, question I was asking initiative in the past -- you have to pick the business out of the micro accounts in between that last effort, just trying to see how you're going about the cross-sell differently this time around and what makes you confident that this a more viable opportunity in 2024?

Hey Pete, thanks for reminding me -- [indiscernible], but -- it's a super fair question. I think a few things. Every day, we get a little bit smarter. So, the handful of differences this time around is, first and foremost, the targeting I think I've mentioned that before. We were romanced by the numbers instead of by the targets. And so this time, we're much clearer who among our client base makes sense to bring our other products to. It's a smaller group of larger accounts. That will be the first one. The second, I think, is the brand, bringing products back that share the brand. We've moved a bunch of existing clients, let's say, in the fleet card business, to what we call a Corpay One fleet card. So when you go to them with a Corpay Business card or Corpay AP Automation solution, that's that company

I appreciate that color. It certainly sounds more encouraging this time around. I did want to ask a little bit about the preview for 2025, super helpful. I appreciate the initial preliminary look there. Just curious on view on margins generally. Obviously, there's going to be a lot of factors that could influence that over the year. But at least from what you're looking at now, do you see that as a component to earnings growth next year? Thank you.

Yes, for sure. Again, you get a little bit of noise right from the acquisitions that generally come across as lower margin. But I think the answer is yes. We expect some operating leverage again, role in the next year.

Pete, you just have the structural advantage of the business where significant amount of fixed cost. And so when you're growing revenue 13% at the midpoint inclusive of acquisitions, you're just going to get positive operating coverage. We've been pleased with the sequential increase of margins quarterly this year, I don't have the numbers in front of me, but like a 51, 52, 54, 55 kind of number. And so I think that -- some of that quarterly variation is seasonal, but exiting at that mid-50s and overall at about 54, for the year, I think, gives us and reason to believe that it will bring paid up next year as well.

That’s really helpful. Thank you, Tom, thank you, Ron. Great results. Thank you.

Thanks Pete. Appreciate it.

Thank you. We will take our next question from Rufus Hone with BMO Capital Markets. Please go ahead.

Hey guys. Thanks. Sorry, I joined the call a little late, so hopefully it hasn't been asked. But on Corporate Payments, the gross sales performance looks really strong and you noted 40% growth in cross-border I think about the retention there is slightly better than the Corpay average. So, how are you thinking about the organic growth in that segment heading into 2025 with that kind of sales traction, obviously, moving pieces from the acquisitions, but any thoughts there would be great? Thank you.

Yes. Rufus, it's Ron. High-teens is what I say we're looking at, you're right, the sales have been literally record levels now for the last two years, and you write the retention in the business is a bit a bit above -- better, I should say, than our line average. And so when you put that math together, you get back to high teens in revenue. And obviously, as to Tom's point, this operating leverage in that business, it runs off of one system. So you're probably in the mid-20s in terms of EBITDA growth in the business. So, it's been compounding at that level for a couple of years now. And then as you recall, that's an interesting area for us in terms of deals. We're going to add, obviously, an asset that we hope to close at the end of the year that there's synergies in and continue to look in that space for other assets. So, we do have the ability to layer additional transactions in that space on our platform.

Thank you.

Thank you. And there are no further questions at this time. I'll turn the call back over to Jim Eglseder for closing remarks.

Thanks for interest in guys. I know it's a busy night. So, if you anything else, are you working through your model, feel to should be happy to help. But thank you for getting on the call.