CPAY - NYSE

Good day. I'd like to welcome everyone to Corpay's First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question-and-answer session. [Operator Instructions]. Today's call is being recorded. I would now like to turn the call over to Jim Eglseder, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today for our earnings call to discuss the first quarter 2025 results. With me today are Ron Clarke, our Chairman and CEO; and Alissa Vickery, interim CFO. Following the prepared comments, the operator will announce that 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 closed throughout the two years being compared. None of these measures are calculated in accordance with GAAP, so may be different than that at 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 our comments may include forward-looking statements, which reflect the information we have currently. All statements about our outlook, expected macro environment, new products and expectations regarding business development and future acquisitions or synergies are based on that information. They are not guarantees of future performance, and you should not put undue reliance upon them, and we undertake no obligation to update any of these statements. These expected results are also 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 and on Form 8-K and in our annual report on Form 10-K. These documents are available on our website and at sec.gov. With that out of the way, I'll turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay. Jim, thanks. Good afternoon, everyone, and thanks for joining our Q1 2025 earnings call. Upfront here, I plan to cover three subjects. So first, provide my take on Q1 results, along with the rest of your guidance; second, cover our recent M&A activity. And then lastly, I'll share a progress update on our 2025 top priorities. Okay. Let me begin with our Q1 results. We reported Q1 2025 revenue of $1.6 billion. That's up 8% and cash EPS of $451 million that's up 10%. Cash EPS would be up 18% and on constant macro. The results really right in line with expectations, along with the environment coming in mostly as expected. Organic revenue growth in the quarter, 9% and overall. Our two big businesses doing quite well. Vehicle payments 8% organic revenue growth. and corporate payments, 19% organic revenue growth. Operating trends in the quarter, quite good. Same-store sales finished positive plus 1%. Our retention stayed steady at 92% and sales or new bookings way up -- up 35% versus Q1 last year. And again, that's on the back of up 36% sales growth in Q4. So look, despite really everything going on, the business performed as planned here in Q1. All right. Let me make the turn to our rest-of-year forecast. So first off, macro -- the factors that affect us really setting up to be effectively neutral forecast versus our prior guide. So the forward curves for FX, fuel, and SOFR have moved just a bit, but essentially zeroed out in terms of their impact on our business. Obviously, with that said, we do acknowledge that the overall macro environment is quite uncertain, but we're just not seeing anything yet, that causes us to revise our forecast. Additionally, our revenue flash for April looks to be spot on our forecast. So as a result, we're pretty much maintaining our full-year 2025 guidance at the midpoint as follow. So $4 billion to $4.20 billion in revenue guide at the midpoint and sticking with $21 in-cash EPS. The slightly increased full-year guide reflects the Gringo acquisition in Brazil, and that's net of the $6 million unfavorable spread shortfall we saw in Q1. So with this updated full-year guide, we're still expecting full-year organic revenue growth of 11% at the midpoint. Inside of that, Corporate Payments business expected to grow high-teens to 20% for the full year. As it relates to tariffs, we're not a particularly sensitive tariff stock that is, we won't directly pay tariffs. Our businesses are services, not goods. Our international businesses in the U.K. and Brazil operate intra-country, so not subject to tariffs. So the direct tariff exposure that we have is really limited to our Cross-Border business, where it does rely on our Cross-Border clients trading across borders. We have included a slide in our supplement that shows a bit less than 20% of our Cross-Border business will actually be affected by U.S. tariff policies. So look, all of this is to say that our business is not directly impacted much by U.S. tariff policy. But certainly, we're not immune to our clients, being negatively affected by tariffs, and that could ultimately soften their volumes with us. Okay. Let me make the transition to our recent M&A activity. We have announced a couple of exciting deals here in the last week. So last week, we announced a strategic Cross-Border partnership with Mastercard. So in that case, Mastercard will invest $300 million for about a 3% share in our Cross-Border business. That does value our Cross-Border unit in excess of $10 billion. Second, we signed a commercial agreement to be Mastercard's exclusive, provider of Cross-Border services to their clients to their FI clients. And we think this financial institution partnership could add about 2% to 3% incremental revenue growth to our Cross-Border business beginning next year. Secondly, just announced that we're making a $500 million minority investment into Avid. That's alongside the take private transaction with TPG. Many of you know Avid a leader in B2B invoice automation and payments and they do see pretty distinct verticals from our payables business. We're out looking the investment in Avid to be accretive to our earnings in 2026 and really throughout the forecast period. Our agreement with TPG does provide us a call option to acquire the remaining equity of Avid down the road. So pretty exciting. So these two corporate payment acquisitions for sure, strengthen our position in the space and do provide us the option to dramatically scale up our position over time. Lastly, we are looking a bit harder at divesting three of our non-core or less related businesses. Taken together, those three businesses could provide upwards of $2 billion of incremental liquidity if we are to transact. We'll obviously keep you posted. Okay. Let me make the turn to our 2025 top priorities. So in the February earnings call, we laid out four priorities for 2025. And here's a bit of the progress. So first, the portfolio. We said our goal was to expand our corporate payments business mix. We're doing just that with the Mastercard and Avid transactions. And in addition, we are still looking some additional corporate targets in our pipeline. So the goal, again, fewer bigger businesses. Second priority, USA sales, we did have a good Q1 USA sales result. USA sales up 25% year-over-year. We have staffed a new cross-sell team that goes back to our client base and the new

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter. The first quarter was a good start to the year with our business is exhibiting strong organic revenue growth of 9% overall, right in line with our expectations. Our print revenue of $1.06 billion was up 8% over last year. Normalizing for macro, Q1 revenue would have been $1.013 billion, slightly ahead of the midpoint of our guide. Our revenues were impacted by approximately $6 million of unfavorable fuel spread revenue compared to our February expectation as there was little volatility in prices in the quarter, which led to the fuel spread revenue headwind. Adjusted EPS increased 10% over last year to $4.51 per share. As Ron mentioned, performance drivers during the quarter were strong and were paired with solid expense management, fewer shares outstanding partially offset by a higher tax rate. We completed the acquisition of Gringo in March, which had an immaterial impact on revenue and adjusted EPS. In summary, the quarter generated strong top and bottom line growth on a constant macro basis while maintaining strong margins and included significantly higher sales that should fuel rose over the balance of the year. Turning to our segment performance and the underlying drivers of revenue growth. Corporate Payments revenue was up 19% organically during the quarter, driven by solid spend volumes, which also increased 19% organically in the quarter. Our corporate payment solutions continue to sell extremely well with payables revenue up 19% organically, including direct sales up 30% year-over-year. Within sales, we signed two new channel partners in the quarter. Cross-border sales grew 51% for the quarter compared to the prior year, and revenue increased 18% organically. We did see heightened activity throughout the quarter, driven by FX rate volatility from tariff policy changes. But much of that early benefit was given back in March as uncertainty caused US goods-based volumes to soften somewhat. Active and volume did rebound in April post announcement of the 90-day tariff pause. We've already migrated most of our GPS customers from the 2024 acquisition onto our Corpay platform with remaining migration planned to be completed by the end of the third quarter. This positions us well to cross-sell our sophisticated risk management solutions to GPS' customers. Clearly, US trade policy and tariffs are challenges for our customers as they operate today and look forward Cross-border is a global business for us, where we help customers pay for both services and goods. Services have been largely excluded from the tariff policy changes to date. So for the remainder of 2025, we expect tariff impacts to be relatively modest unfavorably impacting our cross-border revenue by approximately $10 million to $15 million based on our assumptions. We've provided additional details on Slide 20 in our earnings supplement. Turning to vehicle payments. Our revenue grew 8% organically during the quarter, consistent with the fourth quarter of 2024. In Brazil, toll tags increased 8% year-over-year with more than a third of our customer spending coming from our extended network. Active insurance policies increased more than 50% and Kardex users were up 40%. We closed the Gringo acquisition in March, and we continue to be excited about the significant opportunity in the Kardex space. Our app-based strategy, growth of offerings as well as consistent sales execution, powered Brazil organic revenue growth of 22% for the quarter. In international vehicle payments, revenue grew 8% organically for the quarter. Consistent strong sales, array of products and channels, notably EV offerings throughout the UK and Europe and continued geographic diversification are the drivers of these results. I'm delighted to say we have resigned our existing reseller agreement with Shell for another fives years to manage Shell fuel and EV cards in multiple markets across Europe. In US vehicle payments, revenue growth was down 3% organically but we continue to see improvement in new customer application approvals, growth in sales to our lower to mid-market customers and better retention. In the revamped US sales organization, we are focused on standardizing performance criteria to manage sales with incremental investment and brand awareness to drive mid-market growth in leads. Lodging organic revenue growth for the quarter was down 1% compared to down 9% in the first quarter of 2024. So a big improvement over last year. Room nights increased 19%, led by the workforce business, which was particularly active as a result of last fall's hurricanes and wildfires as well as improved new sales. Airline revenues were lower due to tough prior year comps and volume softness. To accelerate US sales growth, we are focused on building a single unified Corpay go-to-market strategy by combining people, processes and measurements across US vehicle payments, workforce lodging and most of our payables products, led by our Chief Revenue Officer. We are building scalable infrastructure and are seeing early returns with double-digit growth in bookings across each of these lines of business. We continue to gain traction in leveraging our product portfolio across our client base, propelled by our unified brand with meaningful growth in website traffic and a strong sales pipeline, while also having sales representatives focused on cross-selling and upselling to our existing customers. In summary, we are pleased with the performance of our business to start the year. Now looking further down the income statement. First quarter operating expenses of $579 million increased 8% versus the first quarter of last year. As a reminder, we acquired three businesses in 2024.

Thank you very much. [Operator Instructions] We'll take our first question from Tien-tsin Huang with JPMorgan. Please go ahead.

Thanks a lot, Ron. You've been real busy, I know. I want to ask on the two deals. Maybe first on Mastercard. Just give us a little bit more on your confidence level in getting this 2 to 3 points of incremental revenue growth out of the agreement we've seen these kind of partnerships before. And of course, Mastercard's got a ton of reach with banks. But ultimately, the banks still have to promote it. So, what kind of line of sight do you have into that. The energy that it's going to get put into that -- to drive that 2 to 3 points?

Hey, Tien-tsin, good to hear voice. So I think the opportunity is just so big. I think if Mastercard dedicated people get us introduced, that this thing will go. And I say that again because the clients of these Tier 2 banks pay half of these payments in U.S. dollars. So I think when our people show up, and can provide that kind of benefit. I think it's going to be big. I do think the question is how long -- remember the space, there's a handful of us independents like us all the rest of cross-border dollars are done at banks. And so the size of the flow sitting there are just massive. And so this is, for sure, a marathon thing, but I think lining up with them creates just enormous opportunity over the cycle.

Yes. It seems aligned with what the banks want to do in terms of monetization of front end. But yes, just curious on that, that's good to hear. Just on the Avid one. Interesting deal. Maybe the simple high-level question and let you opine on this. Just -- is this a financial investment or a strategic one? I mean it could be both. You have a call option. But to see you do the minority deal in somewhat of a mid-market, I'm just curious how passive or active you'll be as an investor in Avid?

Yes, it's a good question, strategic for sure, right? We have said repeatedly, we want to be bigger in corporate payments and particularly in the payables portion of that. And so this is a terrific asset and stuff. And so for us, it's just seeing progress really on profit acceleration, which we got a bit of a line of sight into. And so we are super hopeful that the company will progress that, and we'll be in a spot to acquire that company in a few years. So that's the primary basis that we're going into this.

Understood. Good time. Thank you, Ron.

Thanks.

Thank you. Next, we'll go to Andrew Jeffrey with William Blair. Please go ahead.

Hi. I appreciate you taking the question. Yes, a lot of good stuff going on here. Ron, when you think about the Avid investment and the option seems to be a great way to go about it, can you talk specifically to their network as well as your own AP business just around monetization rates. And I assume that strategic investment as you terminated this nature indicates the confidence ability to improve card attach and monetization. I know new sales are a big part of that, too. But can you speak to the monetization piece and your confidence to be able to drive card acceptance and/or ACH pricing?

Yes, I think it's high. In some ways, Avid has done really even a better job than we have, right? Their revenue mix includes a fair amount of just standalone software fees, they've also advanced what they call kind of paid for or ACH for us getting paid for sending ACH. So, I think I think that they've made great progress on that. And so -- to your point, I think this is for us less about confidence in those networks because they're already both super scale. It's really on the buy side. The game is for both of us to sign up more spend right to run through that network. And then in their case, to realize some scale effectively to have the incremental revenue flow through at way higher margins. So those are really the two things that we're key in on. It's really acceleration in buyer sales or spend and then really flow through of the increment into earnings. If they do those two things, we'll be over the moon.

Yeah. That makes sense. And as a quick follow-up, you mentioned enterprise last quarter as a new thrust within the corporate payments business. Can you give us an update there in terms of pipeline?

Yeah, it's live. So I think what we said, first of all, is a slight bit accidental right, that we kind of stumbled into this thing six months ago, having been a middle market focus. So we did contract this one mega account, and we have gone live. So that is kind of starting to ramp. And so I think I said in the last call that I tried to hold the horses a bit at the coral to make sure that this thing works, gets out of the blocks, works well for the client. But we do have -- I think we mentioned the big consulting firms that facilitated the introduction that have already kind of run out to a handful of incremental prospects. So I think what I said still holds to the extent that we get success in this initial account and call that account referenceable, I think you'll see us start to move forward with additional accounts. So this is this is a big incremental opportunity in the payable space for us. Again, the size of it, right, that, call it, four or five of these accounts are literally the size of our entire business today.

Perfect. Thank you.

We'll go next to Ramsey El-Assal with Barclays.

Hi. This is Shrion [ph] for Ramsey. Thanks for taking my questions. So my first question is on the Avid exchange investment. So in your press release, you mentioned that the take private transaction structure gives Avid the flexibility to transform and accelerate profit growth. And Ron, I know you hit on it a little bit, but -- I know it's still very early on in the process, but I was just wondering what kinds of strategic initiatives this could entail.

Yeah. It's really just a -- it's a scale question, right? The company whatever, 20-plus years old, they built the foundation with software, they've been in pad that we've helped them with for 20 years. And so I think they're getting to a scale now $400 million to $500 million in revenue, where we're looking for the increment, call it, the next $200 million to $300 million of revenue to just flow through at just a much higher rate, which I think it will because the foundation like the network of suppliers to tech the sales structure, a bunch of the foundational work has been in place. And so I think it's literally as simple as that, if they can add more spend to the wheel here, we think flow-through will be significantly better and margins will accrete. So that's, again, what we're looking for.

Got it. Thank you. And then as a quick follow-up. Earlier in the call, you called out that outside of your cross-border business, any tariff impact would be indirect in nature. So I was wondering if you could help us think through what this indirect impact might look like in vehicle paint specifically. Would it be isolated to your OTR business or in particular geographies? And then could you potentially deploy pricing as an offset?

Yeah. I mean, I think probably like everyone on the call like who knows, right, when something is indirect, right? We're not going to pay tariffs directly. And so hey, we have all flavors of clients. So I think you're your comments, a good one that clients of ours that have goods as their business instead of services, so think an 18-wheel who moves products around could be more impacted than local businesses that do plumbing, or HVAC. And so, certainly, our mix would affect a little bit what happens. But we just -- like everyone on this call, we don't really have any kind of view at all of how much any of these accounts will be effective. We just know that as a company and as a stock, we're not in the gun side to this. We won't pay tariffs, again, we're mostly a services business and really the only business with any kind of smidge and direct exposure is cross-border. And then as we put a slide in the supplement that only about 20% of those flows are on goods and two are from the US. And so even there, the impact is limited. So really, it's just a function of what happens to the plant and to all the businesses out there. There curve a little bit it, buyer we'll be here a little bit. The hurdle on buyer will be up, but we're not going to be hurdled directly by it is our message.

Very helpful. Thanks.

Thank you. And next, we're going to go to Andrew Schmidt with Citi. Please go ahead.

Hi, Ron. Hey, Alissa. Congrats on all the progress here. Thanks for taking the questions. I wanted to ask about the US business within the vehicle payments. It sounds like you're pretty optimistic around the sales trends there and maybe just comment around just the confidence in driving improvement in revenue there as the year progresses, obviously, macro aside, but would love to get some details based on the sales trends and initiatives you have there? Thanks so much.

Hey, Andrew, it's Ron. It's a super good question. So I'd say the -- it's a two-part answer. The first part is really retention. And so we went on the great deal [ph] with you guys about the great pivot of the US vehicle business a couple of years ago and getting out of micro accounts and buying all that stuff. And I can report that that is now distant in our rearview mirror. And so what's come out of that, let me just quote this to you that the retention rate for that entire US business in Q1 of 2025 are improved more than 200 basis points from Q1 of 2024. So the loss rate in that business used to be of a nine and on the call, low 9%, 9.5%, and now it has a seven handle. So that's the first message is obviously getting 200 to 250 points back prospectively, and we think that will even get a smidge better is the first point. And then on the second point, yes, the sales relative to the base is up. And the forecast that we have sitting here says that we think the first half is, call it, flat, and the second half is literally mid-single digits or better. So we're sitting here on this call, telling you that we think there is a big pivot in organic revenue growth coming in that business here in whatever in 60 days. And then if we get that all of a sudden, our organic growth rate steps way up because that's a pretty big business. So I'd say our confidence is high because we're good at math, and we captured the retention number already as we thought we would when we made that change. So we're finally, after this time, we're going to start to see some benefits from that decision.

Got it. Thank you, Ron. Yes, retention is a big lever. So that's good to hear. Every time we see macro fluctuations. We always get the question on sort of supplier acceptance trends within the AP business. It doesn't sound like there's been much variation based on the commentary. But maybe just talk about what you hear from suppliers in terms of payment choice, things like that, whether there's been any change on that front? Thanks so much.

Yes. It's a good call. So no, is the answer. That number is basically flat. It's kind of remaining flat. And I think it's just what you'd expect, which is payment certainty, suppliers want to get paid, right, and not default and payment speed are high importance. So any supply that runs good margins like service businesses, like an example that run 50%, 70% marginal cost basically. They love car products because they're certain and they're fast. And so I think the answer is we're not seeing really all that much different. And so that back to the comp the same thing I said about to have is that as our payables business goes as spend goes. If we can keep growing the buyer side and increasing spend, we think, if anything, we'll take up the monetization as we add more ACH plus ourselves into the network. So we're not seeing really any downtick there yet.

That’s great to hear. Thank you, Ron.

Thank you. And ladies and gentlemen, I do ask you to limit yourself to one question to allow everyone to be able to ask their questions. We'll next go to Sanjay Sakhrani with KBW. Please go ahead.

Thank you. Good afternoon and congrats on this Avid minority ownership. Ron, could I just follow up a little bit on the acceleration of the sales at Avid? Like how exactly will you guys be involved in that? Will you actually like sell the product? Have your sales -- I'm just trying to think about that part of it. And then just on expenses, obviously, there might be some redundancies between what you guys do and they do? Is there any plans to sort of get involved on the expense rationalization there? And just one final one, just what are the terms of the call option in 2027? Thanks.

That was kind of a three-part of the Sanjay, if I was listening. So let me see if I can go back and remember part one. So on hey, our involvement in Avid sales, you got a good guy in my opinion, running the place and you've got some good leaders there with Mike. And so I think our role is that we've been a part of the idea side of, okay, maybe being helpful in terms of priority and where to point and sharing some practices that we think in some investments that we think may help them perform better. But we wouldn't have made this investment if we didn't have some confidence that they could do it. In terms of synergies in this early hold period, Avid is going to run kind of as Avid. But clearly, we thought about and sized what I call our second bite which would be if, in fact, we get a few years out and we like the profit growth, profit acceleration there. There's a pretty labor incremental synergy right through combination to your like, whether it's the merchant network or the tech side or other things. So we would really plan to choose step that. It will run mostly kind of as it is, we'll be helpful where we can. And then if that day comes, that we try to buy the rest, we'll get the second bite. On the terms front, we're basically going to kick the can and provide that detailed disclosure in our Q, which will be probably later this week on Monday. We'll lay out more of the details of the thing. But at the high level, what you said is right, which is we've taken a minority position along with TPG and management and basically have the option a couple of years out to buy the rest of the equity. So we'll fill in the details a different day.

Thank you.

Next, we'll go to Andrew Bauch with Wells Fargo. Please go ahead.

Hi, guys. It's similar on for Andrew. Thanks for taking the question. It's good to see the progress that you're making on the payables front in terms of moving upmarket to the enterprise segment and that one win that you called out and the intention to, I guess, expand into the U.K. this summer. I guess with the noise around tariffs or the incremental macro uncertainty, maybe just give us an update if there's been any kind of kind of like revised thoughts around like the of that expansion over the coming months. Thank you.

Mark, can you repeat the last stuff or that you kind of broke out?

No, I would just ask with the incremental macro is starting to kind of like the comments that you made around the tariff implications on cross-border if there are any revised stocks as it relates to the scale of that expansion, whether it be moving upmarket to enterprise or the U.K. met the payments expansion in the U.K.

Yes. I'm sorry, I'm sure I hear the question, but I think you're asking, hey, in the payables group. We're happy about the enterprise, the adjacent enterprise fairness there and then going to the U.K., I think the answer is yes. Like we said, we've gone live for the first account this partners induce us to the next set of people. And so this is really just walk before you run. We want to make sure the thing working, and we're doing well. But the size of the step that we could get if it's successful, is large. And then the U.K. thing, again, is an intra market thing, right? We're taking a product that's here and it's going to help clients in the U.K. So there won't be really specific any tariff impacts of that. It's really a product that will be used by U.K. businesses for purchases there. And then to the extent that they have cross-border payments there, which, again, two-thirds or three-fourth f those will be into the continent of Europe or in Asia or other places. So yes, we don't think that that's going to have really any bearing on the launch. We're just excited to stand up a super important business in a second market that adds TAM and leverages like all the assets, all the clients, all the people and stuff that we have there. So that's really what we're trying to tell people is going to make this a way bigger business.

Okay. Thank you.

And next, we'll go to James Faucette with Morgan Stanley. Please go ahead.

Hi. Thanks a lot for the question and all the details today. I wanted to turn to another topic really quickly, Ron, I'm curious hear about the performance of the hedging business in Q1? And anything you can give us on how it has performed since then during the month of April and early May. I'm just wondering if it's fair to think about that business as a beneficiary of sustained heightened market volatility. And can you give us kind of the puts and takes on that dynamic and any other impacts on tariffs that segment specifically?

Yes, that's a good question, James. So on our cross-border business, Q1, good. I think we reported a high teens revenue growth against the prior year and the sales, I think, grew 50% in the quarter over Q1 the prior year. So we're selling the stuff like crazy. In terms of April, we did look at the flash gangbusters, maybe the adjective I used the April flash or cross border is way ahead of our budget and our forecast and significantly ahead of the prior year -- and yes, there's no question that certainly in April that it's been a beneficiary of the uncertainty of what the heck is going on. And so to your point, what the sustainability of that is less clear. But yes, through 4 months, the business is truly rocking. With that said, I don't know how clear we were, but we did -- listen, I have $10 million or $15 million out of the second half full year guide to just be a bit conservative if the post pause tariff world is not super attractive. We want to make sure we -- we went into the second half a bit conservative, but frankly, we don't know. I just wanted to put it on the table that we decided to trim a bit the second half in the event that tariffs are meant to us.

Great. Thanks. And next, we'll go to Trevor Williams with Jefferies. Please go ahead.

Great. Thanks very much. If we could go back to the organic guide, and Ron, you've given some kernels on this over the course of Q&A, but we're at organic in Q1, you're keeping the 11% for the year. It sounds like a lot of that acceleration is coming from U.S. vehicle. But if there's anything else that you could point us to? And I hear you on kind of April running in line. But just with everything on the macro, how would you frame the level of confidence in the full year and the specific drivers you guys have baked in today versus 3 months ago?

Yes, Travis. Good question. High would be the answer. So kind of interesting. We expect Q2 that we're sitting and again, we've had a look at April already. I'd say we think probably closer to 12% at the midpoint. So I know it's a big step. Hey, we just printed 9%. And although I think we printed print in Q4 to the 12 in Q4. So 12,9, I'm going to say, Trevor, 12 here in Q2. And surprisingly, the US vehicle one is not the big contributor to the big step there thing is that the gift business which was super soft in Q1 versus the prior year is going to be super strong here in Q2 against the prior year. And so, then when you go into the second half, what you said is right, then the lift is we think the US vehicle business will step into mid-single digits or plus, and that's what we'll have the back half still double digits. So 10 to 12, 13 in Q3 and Q4. So can't get you there in Q2 and then US vehicle get you there in the second half and corporate payment stays steady as you go, high teens to 20%. And again, who knows if again, some recession, we're just calling the mass, we see them. today, the data that we can read out. So obviously, all of this is a function of the world, not melting, but given what we could see confidence is high.

Okay. Thank you.

And next, we'll go to Rayna Kumar with Oppenheimer. Please go ahead.

Hi. Thanks for taking my questions. Are you seeing any different trends across SMBs versus your larger fleet clients? And can you talk about same-store sales trends for both segments?

Yeah. I'd say not much. I mean, I think historically, our middle market enterprise clients have been steadier but I think we did such a cleaning such a remixing starting a couple of years ago that are truly kind of micro, super small accounts or just way fewer in our portfolio. So I think that first headline is we're just way less exposed to it would be the first point. And then on the on the base, again, plus one, which is, I think, the same thing we quoted for Q4. And again, the good news is that's up 3% from Q1 of the prior year. If I remember right, Q1 of Q1 of 2024, we were minus two 2025 or plus one. So we moved that plus three over the period of time. And so the base report that I look at is pretty steady as she goes. There's not a ton of movement kind of each of the areas is kind of similar to what it was in Q4 where it was plus 1%. And so -- yes. We don't see much that's patchy. It's pretty solid right now.

Appreciate the color.

And next, we'll go to Dave Koning with Baird. Please go ahead.

Yeah. Hey, guys. Thank you. And I guess my question just with the Avid deal, do you guys immediately get access to their supplier network? And maybe could you talk through like if today your accounts payable as maybe you have 20% of each of their payment files on average that can go into one of your suppliers and now with Avid, does that 20% raise to 30%? I'm making up numbers, obviously, but do you have metrics like that? And am I thinking of that correctly?

Yes, Dave, it's Ron. Hey, Shawn. That's a super good question. And the good news is we have a bit of a head start on the subject you're on. So call it, I don't know, 6 to 12 months ago, Mike and I met on this very subject and created a commercial agreement, kind of arm's length agreement between the two companies to do exactly what you just said, which is to -- we had third parties look at the composition of our supplier networks and which parts of it were monetized and not and then using that data basically help each other monetize more. And so that thing has gotten lifted up already. And obviously, the deepening of the relationship now, I think we'll improve that. So we will clearly double down on that initiative. And then as I said, a different day, we would move to a complete combination of that. We just effectively think of it double the spend in the merchant network, which is -- would be obviously super synergistic, right? We create enormous leverage for us to have doubled the spend running through that set of suppliers. So that's obviously one of the attractive things for us in the second bite.

Yes. Great. Thanks guys.

Thank you. Next, we'll go to Rufus Hone with BMO Capital Markets. Please go ahead.

Hi guys. Thanks. Maybe just a quick one on -- you mentioned some potential non-core divestitures. The $2 billion number sort of implies it could be something pretty chunky. I guess just what businesses, does that cover? Any details there would be great. Thank you.

Yes, Rufus, it's a good question. So not shockingly, the three units that we kind of teed up from our -- what we call our vehicle segment and one is from our lodging segment. So the concept here, again, is more in corporate payments, less in vehicle and lodging. And so the different message, I think, for everybody this time is bigger. So historically, we've said, hey, we're going to look for things that are less related non-core potentially divest those and kind of things on the margin. We picked two or three businesses that have more size, I think, call it, $150 million, $170 million in EBITDA combined across these three businesses. As a larger set of divestitures, a couple of them really good businesses and should fetch a pretty good price. And so the idea really is just to simplify the company more, create more liquidity in this case, $2 billion and pour it back into the pipeline in front of us at corporate payments. So it's just a more -- the message you guys is just a more aggressive or repositioning of our portfolio, I think, towards corporate payments.

Thank you. And next, we'll go to Ken Suchoski with Autonomous Research. Please go ahead.

Hi. Good afternoon. Thanks for taking question. Maybe I'll ask one on lodging since it wasn't covered here. But the organic growth took a step back this quarter, I know there's leap year impacts in there. But is the expectation to accelerate to mid-single-digit growth throughout the year and then ultimately get back to double-digit growth. And I'm just curious how you guys think about driving that acceleration? Thank you.

That's another good question. So the short answer for the Q1 is really all pocketed in airlines. So we built a plan for Q1 and the big part of the lodging where we serve the airlines was just super soft. Maybe the weather was good, I don't know, but the disruption sub-segment of that was super light, as was just maybe it's the Newark Airport store, I don't know. But the airline volume is super light, so all of the softness, different from our plan, was airlines. Going forward, I think we said that we built the 2025 budget and guide today really on that business staying kind of flattish. It was declining. And so the goal was to get it stood out back towards level again. And that we would make sales here in 2025. So that business is a good business again in 2026. So there's nothing in our forecast that things going to magically be much better. But the super-important headline is its not declining. The base is strong. And the retention levels are way better than they were a year to 1.5 years ago. So now it's literally just refilling the top of the bucket, so that, that thing can grow. But, so that's the update.

Thanks Ron.

Thank you. And we'll go for our last question with Nick Cremo with UBS.

Hey. Thanks for taking my question. I just wanted to come back to the U.S. vehicle payments business, given a deceleration versus, I think, being up slightly quarter with strong sales last quarter as well. So can you just provide more specific color as to what drove the deceleration in Q1? And just put a finer point as to the drivers for the acceleration in the back half? Thank you.

Yeah. Sure. Hey. It's a good question, and this is Alissa. So from a -- what drove the current quarter, I think it's just a little bit of softness. But as we continue to look towards the back half of the year, it really is the current trends in new sales that we're seeing right now continuing into the middle and the back half of the year, better retention, better same-store sales which should drive the ultimate back-half acceleration.

Got it. Thank you.

Thank you. And that does conclude our question-and-answer session. I'd like to turn the call back over to Jim Eglseder, with Investor Relations.

Yeah. Thanks, guys, for your flexibility today, and staying on the call late. We know we were late into the wire, but I think you all understand why. If you have any other questions, feel free to reach out. We're happy to help where we can.