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Good day. I'd like to welcome everyone to Corpay Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. I would now turn the call over to Jim Eglseder. Please go ahead.

Senior Vice President of Global Investor Relations Good afternoon, and thank you for joining us today for our earnings call to discuss the second quarter 2025 results. With me today are Ron Clarke, our Chairman and CEO; and Peter Walker, our 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 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 discuss 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 in other companies. Reconciliations of the non-GAAP to 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, business development expectations, 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. 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 Form 8-K and on our annual report on Form 10-K. These documents are available on our website and at sec.gov. Now I'll turn over the call to Ron Clarke, our Chairman and CEO. Ron?

Okay. Jim, thanks. Good afternoon, everyone, and thanks for joining our Q2 2025 earnings call. With me today here is Peter Walker, our new CFO, joining his first earnings call with us. Hopeful that you'll get an opportunity to interact with Peter over the coming weeks. At the top here, I'll plan to cover 3 subjects. First, provide my take on Q2 results along with rest of your forecast. Second, I'll provide a brief update on our 2025 top priorities, and then lastly, provide a bit of an update on our M&A activities. Okay. Let me begin with our Q2 results. We reported Q2 print revenue of $1.102 billion, up 13%, and cash EPS of $5.13, also up 13%. Cash EPS would be up 17% on a constant macro basis. The Q2 results really right in line with our expectations, both in terms of revenue and profits. We did enjoy a bit more favorable Q2 macro than expected, but that was mostly offset by both weaker lodging performance and fewer gift card shipments than we had planned, really landing us kind of right back at our Q2 revenue target of $1.1 billion. Our Q2 overall organic revenue growth, 11% in the quarter. That's up 2% sequentially from Q1. Inside of that, Vehicle Payments segment grew 9%, our Corporate Payments segment grew 18% in the quarter, and our Lodging segment declined 2% year-over-year. Trends in Q2, quite good. Q2 sales finishing up 31%. That's on the back of 36% growth in Q4 and 35% in Q1. So three consecutive quarters of 30% plus sales and bookings growth, again, we think the best indicator of demand. Retention in the quarter ticked up to 92.3%, that's the highest level we've seen in quite some time. Same-store sales really essentially flat in the quarter. So look, in summary, Q2 really finishing right on expectations. We did enjoy accelerating Vehicle Payments revenue growth, continued high teens Corporate Payments revenue growth and again, really solid fundamental trends. Let me make the turn to our rest of year guidance. So updated full year 2025 guidance today, mostly unchanged. So after Q1, we provided $4.420 billion in revenue and $21 of cash EPS at the midpoint. So today, we're inching up full year revenue $25 million to $4.445 billion and full year cash EPS to $21.06. So our second half outlook does reflect a bit more positive macro, particularly more favorable FX. Some of that will be offset by continued lodging revenue softness, so results in $25 million of incremental print revenue. Really, most everything else in the second half is tracking to plan. We do expect our second half Vehicle segment revenue growth to reach 10%, so hallelujah. But inside of that, our U.S. vehicle growth accelerating to mid-single digits. Outlook in Corporate Payments to report high teens organic revenue growth for the full year. So this updated guidance would imply full year print revenue growth of 12% and full year organic revenue growth of 10%. Okay. I'll transition now to our 2025 top priorities, which are intended to, first, simplify the company, so that it's easier to manage and understand; and then second, to better position the company for the long term. So first priority, the portfolio, working hard here to have fewer, bigger businesses, rotating the portfolio to more Corporate Payments with the recent Avid and Alpha announcements, and we are expecting the Corporate Payments segment to reach $2 billion in revenue and represent over 40% of the company next year. Second priority, U.S.A. sales. We're now live in market with our new Corpay brand advertising that targets CFOs now with our entire solution set. We do have some impressive sales momentum, a streak of 3 straight quarters with 30% plus sales and bookings growth. Third priority, payables. So we have successfully implemented the new enterprise client, which I spoke about. That client has reached $1 billion in spend in the month of July. So now in search of our next enterprise client. Additionally, we have just launched our Corpay Complete payables tech platform in the U.K. So bringing those capabilities now into the international arena. And then fourth priority is cross-border. We have successfully extended our cross-border business to now serve 4 market segments. You can see that on Page 15 in the supplement. So we've moved beyond our original core business serving just middle market corporate accounts to now also serving FIs and more aggressively now with the Mastercard partnership. We're serving and plan to serve more institutional asset managers as a result of the Alpha acquisition. And we're beginning to serve digital asset and stablecoin providers like Circle and Ripple with our on- and off-ramp services. Super excited about the Circle partnership we announced earlier, should give us a fast start in the space. In terms of products and cross-border. Our new MCA multicurrency account product off to a terrific start. We've got 10,000 accounts live now from 0 a year ago. And we've reached $1 billion in deposits in July. So clearly, one of the best new product launches of the company. So overall, we're making terrific progress transforming the company into some faster growth categories and across more geographies, should extend the company's runway for years. All right. Last subject up, let me cover the progress on the M&A front beginning with our 2024 acquisitions. So Paymerang, an AP automation and payment company acquired last July, that's on track to double EBITDA this year. It also extends the verticals that our core payables business can serve. GPS, a cross-border company acquired in December, performing quite well. We have shuttered the GPS IT infrastructure and also seeing the GPS sales or bookings double from the same sales group as a result of them being in our system. And last is the

Thanks, Ron, and good afternoon, everyone. I'm thrilled to join Corpay during such an exciting time. The last several weeks have been super busy and a great opportunity to learn the business and meet the team. I look forward to meeting more of our investors and analysts soon. I'm impressed by the exceptional talent and high-caliber capabilities that support the organization. Corpay has a proven track record of generating top line and bottom line growth, and I'm excited to dig in and drive the company forward to achieve our objectives. Now onto some additional details about the quarter. As Ron mentioned, Q2 print revenue of $1.102 billion was just above the midpoint of our guide. In the quarter, our print revenue benefited from a favorable FX environment, partially offset by weakness in our lodging business. Print revenue increased 13% year-over-year, driven by organic revenue growth of 11%, a 500 basis point improvement over the prior year. Q2 adjusted EPS of $5.13 per share increased 13% over the prior year due to strong top line performance paired with solid expense management. Adjusted EPS grew 17% over the prior year on a constant macro basis. The headline for the quarter is double-digit top and bottom line growth, excellent organic growth, all while maintaining strong margins. We've also produced significant sales growth this year that will fuel our business over the balance of the year and into next year. All of this puts us halfway down the path to delivering both the revenue and profit targets laid out back in February. Turning now to our segment performance and the underlying drivers of revenue growth. Corporate Payments delivered 18% organic revenue growth for the quarter, with similar results in the Payables and cross-border businesses. Overall, the performance was driven by growth in spend volumes, which increased 36% on a reported basis and was up 19% organically. Spend volume was just over $58 billion in Q2, which puts us on pace to be well north of $200 billion annually. The Payables business continues to perform driven by strong execution on Paymerang synergies and solid progress implementing and ramping enterprise customers. We remain confident and excited about the future of the business and are laser-focused on customer acquisition. Cross-border sales were excellent in the quarter, setting a new record high. While there is little incremental clarity on U.S. trade policy and tariffs, the global coverage and nature of our business is such that markets outside of North America are doing quite well and made up for some softness in North America. There's no shortage of opportunity in cross-border regardless of the macro backdrop. Vehicle Payments delivered 9% organic revenue growth for the quarter, our third quarter in a row delivering high single-digit organic growth, and a 400 basis point increase over the prior year. U.S. Vehicle Payments organic revenue growth turned positive in the quarter, a significant improvement over prior year. This was driven by improved sales production, applications and approvals, onboarding new customers and stronger retention. Brazil and international Vehicle Payments continued to perform well. In Brazil, the combination of 7% tag growth, growth in our extended network, including the car debt offering, is driving the strong results. International Vehicle Payments continues to deliver consistent results driven by strong sales and performance across the U.K., Europe and AN

[Operator Instructions] We'll take our first question from Andrew Jeffrey with William Blair.

I guess I wanted to dig in a little bit on Corporate Payments. It seems like you've built and are building certainly one of the most complete vertically integrated tech stacks in the market. And when we think about GPS and the very strong sales and the pending acquisition of Alpha and very good performance, as we think the '26 and '27 that organic revenue growth could even accelerate from these levels? Or how are you framing that as you plan out over the next couple of years?

Andrew, it's Ron. It's a good question. So yes, we pretty pleased with the setup. So I think it will be mostly a function of what we elect to spend. I think we've told you before, we try to design businesses to grow at a certain rate based on the sales and marketing investment, which is that high net business, which is why it's high teens. So I don't want to get out over my skis, but I'd say assuming that we continue to pour money into that, these incremental segments should be additive. So again, that business will finish high teens this year. I think if we spend enough, we could probably tick that up another couple of points. Again, we don't overspend where things become unproductive. But the width of the thing, I think, creates even more runway would be my headline. I think the diversity of the segments, right, not just end accounts, but banks, the asset class, the new digital players, to me, that's the super attraction and is really the diversity of the client base going forward.

Okay. That's helpful. It's pretty exciting to watch. And then just on the Circle deal, which I think is also notable, are they going to be both a customer using on-ramp and off-ramp? And are you going to be a customer of theirs or a distribution partner of theirs in terms of incorporating US DC in your MCA product?

Yes, that's the concept. It's kind of a reciprocal partnership. So they, as you know, the currency, the rails, the blockchain and even the wallet, so we'll plan to use that in certain use cases. And then just what you said that we would help them in certain geographies on, on- and off-ramp. So yes, that's the whole thing.

Peter, look forward to working with you. Welcome to Corpay.

Thanks, Andrew.

Our next question comes from Darrin Peller with Wolfe Research.

Maybe we could just hit on the U.S. vehicle acceleration and just help us understand what underpins the acceleration that you're anticipating into the second half? And just to hit on whether it contemplates the BP portfolio to you guys.

Darrin, it's Ron. Yes. The couple of drivers of that thing getting a bit better in the second half are retention, which we can see sequentially in the report that I'm looking at. So for example, Q2 of this year versus Q2 of the prior year, the retention is up about 130 basis points. And we're out looking to inch up a bit more as we head into Q3 and Q4. So less businesses will fall away this second half than did last year. And then number two, the sales are better. Specifically, we have a couple of big elephants like GasBuddy, I think we did announce that back in the spring, which is a pretty big account, and Amazon that were both sold a while ago, they kind of beefing up volumes in the second half. So it's really just super basic incremental volume through those new sales and better retention.

Okay. Ron, that helps. Just a quick follow-up on the Corporate Payments side. Just the contribution of the enterprise domestic payables client to the Corporate Payments segment, was there anything there? And then just what were the underlying signs in the segment from a same-store sales activity. Just how is activity from either domestic or international AP payments as well, if you don't mind?

Yes. Let me take the first part, and Peter can take the second one. It's crazy exciting Darrin to me that I think we mentioned this the first time whatever 90 days ago that we contracted that account at the end of the year and literally went live and literally moved $1 billion of spend. I don't know if people heard that. In the month of July and outlooking that thing as we finish the Halloween month to be at about $1.5 billion in spend for the month of October. So it's a super big contributor to volume. Obviously, the monetization and the rate is not as good as the rest of the spend, but still super contribution to profit. I think the key to the thing is really the extensibility. Now that we've learned we can go to like super duper big enterprise accounts through some of these relationships, can we get the pipeline? We've got a few accounts in the pipeline. Can we get more accounts like this big enterprise to fall, which again will create some acceleration in that business. So yes, super pleased with it. Do you want to take the same-store sales?

Yes. So I think same-store sales was what is our expectation for the rest of the year you're looking for?

Just what you're seeing in the underlying trends right now more than anything else in the last quarter and then into this quarter coming up?

Yes. So for the total same-store sales relatively flat year-over-year, and that's what we've assumed for the rest of the year.

Darrin, it's Ron. I'm just looking at the page. If you're on Corporate Payments, let's see year 4, the period, it's basically pretty steady as she goes over the last few quarters. No big change in same-store sales. So again, all the incremental -- all the growth rate is really just on the ad side. Losses have actually improved their spends. They're 100 basis points better than a year ago, even in that business. So really, the math there is the sales just massively outpacing the losses and same-store sales are steady.

We will take our next question from Tien-Tsin Huang with JPMorgan.

Thank you so much, Peter. Welcome to the call. Just on the Lodging side, I'm just curious on the visibility there and what could turn out differently than what you're forecasting either on the upside or the downside. I'm sure you've got some plans, I assume, to reenergize growth as well?

Tien-Tsin, no, no plans. On the downside, a couple of things. One is which has got a weird to wish for maybe worse weather. But probably half of the softness in the second half versus what we thought back at the turn of the year is basically in what we call kind of the emergency or distressed segment, which shows up for us in like the FEMA contract, right? People run out to a location or in our airline business where people get stranded and have to hurry into hotel rooms. So that's about half of it, that's run is softer. And so we're just outlooking at softer. In between us, who knows, but I didn't want to make up a number that's better. And then the other one half is just the sales aren't good enough. I said it before, that the positive here, if there is any, is the business has stabilized. That divot we had a year plus ago, as I had hoped, has stabilized back to the same-store sales. And now it's just what goes in the top versus what goes go out the bottom. And so the second problem is we're just not selling enough and implementing enough new business. And so again, we built the plan 6 months ago, we thought implementations of that thing would be high. I mean, quantum is nothing, right? It's a $100-some million business per quarter. You're talking about $2 million or $3 million or something in that kind of a range. So when we say it's off of what we thought, to the company, it's not a material amount, but it's just not -- obviously, it's not working the way we want. The mix again is super clear. It's mostly sales. Now that we stabilize the base, we've gotten put a bunch of product fixes in to make the product more competitive in the segment that we have problems with. So it's really just harping on the same thing. It's just getting the sales engine to fill the top so that, that thing turns positive. I put more people in to put a new sales leader in the spring. And so like you, we're going to keep an eye on it and kick at it a bit harder here. But fortunately, 85% of the play, right, get the vehicle back in the second half back to 10. I think it was probably 4 in Q3 or whatever, Q2 last year and keeping the Corporate Payments thing humming and expanded. I'm glad that the bigger section is working well.

Got you. And just my quick follow-up just on the divestitures, Ron. If you achieve your target EV, it sounds like you have some target EV around the $1.5 billion. Just thinking about the earnings impact and how much flex you have and what you're thinking in achieving your goals there with the divestitures?

Yes. That's a good question, Tien-Tsin. I mean I think the headline I want to give is, this is a different assignment than the last time around right around what the gift business did. We're looking at exiting what we would call good businesses, right, that are growing revenues and have futures and stuff, good futures. And so it's really just a function of the multiple, right? We've laid out a target of kind of net proceeds. Obviously, we're not selling these assets if the multiples aren't in the teens, right, against EBITDA. So we penciled out a model and those things are kind of a push. They're not dilutive. So we get out of them, they're kind of a push. We get the capital back to contribute to the Alpha deal. So I'd say it's obviously just a function of what prices we get to the assets. If we don't get a good enough price, we'll hold them because they're good businesses.

We will take our next question from Nate Svensson with Deutsche Bank.

I know last quarter, we were talking a lot about tariffs. So I guess I'm just wondering if there was any impact to 2Q numbers from tariffs, any sort of pull forward, strength in the FX hedging business we talked about last quarter, anything on volume impacts? And then I guess the related question, in the prepared remarks, you called out record cross-border sales. And so I guess I'm just wondering like, given how dynamic the environment is, is it actually helping the go-to-market motion and your value prop as your end consumer -- or your end companies that you're serving to deal with an environment that's changing on a daily basis?

Nate, it's Ron. It's a super good question. I mean, I think the summary, that's a mixed bag. I think the tariff situation uncertainty, whatever you want to call, is landing differently on different companies, both geographically, like it's landing affected us more here in North America because of the early Canada, Mexico posture. So I'd say those geographies are still a bit softer for us than anticipated, whereas the U.K. and European and Asian side is stronger. And then second, I think it's just the individual companies. Some companies are super committed. They have to be international. They're figuring out ways to deal with it. They're looking at risk management ways to deal with the thing. And then other companies are like, "Oh my God, it's freed to me, maybe I should find different suppliers or target customers at different places." So I don't think there's one across the board answer to it because it is uncertain. I mean, to your point, certainly, the volatility, if you will, of currencies is generally a help. We say it probably is a plus 10% in a period of time versus completely flat nonvolatile periods. So I'd say we've gotten a little bit of help, but not a ton, and we're kind of outlooking steady as she goes. Some clients will like and come to the table, others will wait. So again, overall kind of a mixed bag.

That's helpful. For the follow-up, the

That's a load. Let me start with I could remember, the first one of

Our next question comes from Sanjay Sakhrani with KBW.

I guess I have a question for Peter and Ron, maybe you too. The growth is really strong and the setup for the second half for Vehicle and Corporate Payments. Obviously, in Corporate Payments with the enterprise relationship coming on in July, it looks good. But the fourth quarter is a pretty difficult comparison in terms of the growth rate. I mean, could you just talk about like the cadence of the growth? Like do we need to worry just about the fourth quarter growth rates? Just trying to think through all of that.

Sanjay, our belief, when we kind of look at the growth rates quarter-over-quarter on a print basis, right, delivered 13% this quarter. That's what we're projecting for Q3 and then just a tick up in Q4. So again, pretty consistent on a basis of growth rates. And then to your point, Vehicle Payments, we expect to improve 10% organic growth and then Corporate Payments to continue in that high-teens arenas.

Okay. So you expect the grow over to be just fine to the fourth quarter?

We do.

Okay. Got it. And just maybe, Ron, a follow-up just on same-store sales. Obviously, it ticked down a little bit. Just curious, like, is there anything that you're seeing from an economic standpoint that concerns you, and what can drive a reacceleration there? I know you said you've kind of figured for flat same-store sales for the rest of the year, but just trying to think through what the puts and takes there are?

It's a good question, Sanjay. We did study it and when you go from plus 1, I don't think it's exactly 0, it's like plus 0.3 or something like. It is just such fine. I have the reports set up in front of me across all the different categories. And there's literally barely anything moving. It's almost literally mass. So I wouldn't say, hey, take a lot away from that, hey, that it went from plus 1. So yes, there's no super duper trend in the thing. And I'm looking again across all the categories, and they're mostly kind of tracking to where they've been over the prior 4 or 5 quarters. But this whole how the economy that we're just -- we're not seeing anything, again, significant on that front. I know we all keep looking. But I'd say whether it's in the fleet business or in the Corporate Payments, the spend business or even the Brazil business, there's nothing we see yet this material that's given us concern around kind of the health of the clients.

We'll take our next question from Ramsey El-Assal with Barclays.

And welcome to you, Peter. I wanted to ask about retention. It was another nice result in the quarter. And I'm not implying that necessarily this was the driver of that result. But given the structurally higher retention rates in Corporate Payments versus some of your other historical businesses, should we expect retention -- overall company retention rates to climb up over time just given the mix shift to corporate payments? And then I guess the next logical step is, will that have an impact on driving some revenue acceleration as you don't have to turn -- replace so many clients that sort of churn through? Sort of longer-term philosophical questions, but just curious your perspective.

Ramsey, it's Ron. That's quite observant by you. So the best retention in a while is really two things. The first thing that you called out, which is Corporate Payments mix being higher, and it's got a kind of best-in-class retention rate. But the second one is the vehicle. I'm looking at that better and particularly the U.S. vehicle. And I think it's an old song now, but it's super related to that pivot a couple of years ago of larger clients. And so life is about really the mix of small, medium to large clients. In every business, retention rates are dramatically higher with larger enterprise accounts than in small and micro. So those are the 2 mix things that are happening. On your second question of structurally, given those 2 things, if the vehicle business keeps acquiring a higher mix of bigger clients and Corporate Payments keeps growing, should it go up? Yes. But I'd moderate you, I would say, that's not the magic. Let's use 7%, not to hurt our head. Hey, you think about the mix over the next years, could you maybe get a point? Could you get 7 to go to 6. Remember, half the losses are us cutting clients off, right? People who don't pay credit issues, mergers, bank stuff going on that really they're not going somewhere else or quitting us. So the number is really small. And although I constantly beat our guys up, hey, give me 0.5 point, give me a point of retention. If I'm trying to get 10% or 12% growth rate, the game is sales. I just don't want you guys to miss that. Obviously, we have to hold this and try to improve it. But the key to this company's long-term growth is really at the top of the funnel more than inching this thing up a point.

Got it. A quick follow-up on gift. I know it's noncore, but Q3, I know there's this reissuance in terms of tamper-proof packaging. And I'm just curious in terms of your visibility to what arrived in Q2 versus what may come in Q3? With anything, are we in there? Should we expect kind of a days to come? Or are you already sort of past the halfway point with that whole cycle?

Although the thing is bumpy because literally, they ship DICK'S Sporting Goods or Macy's or somebody wants cards and they got some big campaign or something so ship to me, or, hey, don't or whatever. So despite the thing being bumpy, it's performing quite well. And our forecast for the full year is the thing to be probably somewhere in like the mid-teens in terms of growth over the prior year. And it's not only this improved kind of card tamper-proof packaging thing, it's pretty new sales. They're on a tear of signing a bunch and implementing a bunch of kind of new gift card clients and stuff. So it's pretty fundamental. So I'm going to go on the limb here, Ramsey, and say it's probably like the best period of gift performance since I bought the thing, whatever it is, like 8 or 9 years ago. So it is this tamper-proof packaging, but the core underlying part of the business is just way healthier than it was before. And yes, we expect the second half growth over the prior year in that segment to be quite good.

Got it. And by the way, I think you bought the business 11 years ago. So time flies, Ron.

We'll take our next question from John Davis with Raymond James.

Ron, I just want to circle back to lodging. You're not known for owning businesses that don't really grow. So as we think about that segment, the flattish plus or minus growth, how much of that is macro? Like what do you think you can do to reaccelerate growth? And if you can't get it back to something that's more reasonable from a growth perspective, does it make sense to own it? And would you potentially offload to deploy capital to Corporate Payments or a faster-growing segment of the business?

John, I think, yes is the answer to your question. The mandate in our company is to be a growth company and kind of the nonnegotiable part of that is 10%. I've said that for years and years, the floor is 10%, 13%, 19%. I got a 10% organic. Little operating leverage and then use cash or buying earnings to get the yield. And so it has to perform. Again, this is not a business that's always been crummy. Like if you looked over the longer history since we've been in that, going back even 2, 3, 4 years ago, the thing was growing 15%, 20% year after year. So we have the position and the market to be a good business. We did some bumbling. We took a huge divot that we're digging out of. So what you said is right, it either gets fixed and it gets growing or it goes. And so the question is just how long. And it is disappointing that kind of half of its miss this year is kind of this emergency weather macro stuff, which obviously the group running and we have no control over. But it's not an excuse. We have to do better in that thing. I think we will. But if we don't, we will not be in it long term.

Okay. Great. And then just switching to the balance sheet here. So Ron, you laid out kind of a mid- to high 2s pro forma kind of leverage at year-end closing Alpha with some of the divestitures. Given kind of the integration of GPS and Alpha, should we expect more buybacks given kind of you do have some balance sheet flexibility, but you are also integrating a couple of acquisitions at the same time? Just curious what kind of the appetite for M&A from here, call it, over the next 12 months versus buybacks and how we should think about it?

That's a super good follow-up. So the kind of the BAU model for us is kind of getting into the low 2s. I think we printed 2.5 here coming out of Q2, call it, 2.2 -- 2.1, 2.2 exiting the year on a BAU basis, which gives us, to your point, a lot of room on our revolver. I think the size is now $1.7 billion and change. That will literally be completely undrawn. So it's really a function of how what you said, these different deals, right, come together, like, hey, when does Alpha close, when does the Mastercard thing close, when does Avid close? We do have a pipeline. I know we've done a lot of deals, but once kind of prices reset, we've been back at it. So the answer is our first priority is always to buy attractive growing businesses that strengthen or scale our business if we can make good returns on it. So that's always the first call on capital. But at the stock price that I'm looking at, we're obviously buyers of our stock. And so if our stock were to stay around this level and we've got liquidity, we'll be buying stock back, too. So I think if you look over the last 4 or 5 years, we can see on the chart, it's been a pretty balanced set of spending between buying businesses and buying earnings, if you will, and buying the stock back. And we've had a rotation back to M&A over the last, whatever, 12 to 18 months. So it's a function of liquidity, the pipeline of attractive stuff versus the stock price. And so we're always trying to manage between those sets of factors.

We'll take our next question from Mihir Bhatia with Bank of America.

Welcome, Peter. So I wanted to take a step back maybe and ask a question about stablecoin. Just from a big picture perspective, lots of announcements in recent weeks around stablecoin, including from you. And I was wondering if you could talk a little bit more about everything you're doing there. I'm particularly interested in the opportunities and risks you see to your existing business? And also, what parts of stablecoin are exciting for you and what parts are where you're looking at it and say, hey, maybe we need to rejig the business a little bit to accommodate stablecoin? Maybe even talk about the transaction economics with stablecoins versus without.

That was a long but interesting question, and I guess an important question. So the first thing I'd say is it ain't just stablecoins to me, it's kind of a bit of a new payment ecosystem, whether it's crypto or stablecoins and blockchain and digital wallets, just a different currency and pipe, right, to move money. And so I kind of think about the things related, right? You've got fiat currency going over swift to a traditional bank account. You've got U.S. stablecoin go to blockchain to a digital wallet. And so the way we think about it is, we are and will incorporate that incremental or new or modern rail, and we will use it. We are using it. And so there'll be use cases with our clients. To me, the biggest one will be outside of kind of banking hours. I think the biggest edge that the new payment train has here is the 24/7. It could move money after the banks are closed every day. And then selectively, we'll probably use it in some geographies, some kind of exotic geography. So the first thing I'd say is we just view it as another tool, another way to move money for our clients that have certain application. In certain situations, it's better than kind of the traditional rails. But the second one is the opportunity side is, it's creating a new set of players, right, that meant the stablecoins and a variety of different blockchain providers and stuff. And so they need help getting their new kind of ecosystem to talk to the traditional one. And so given the fact that we have a big position in the traditional and we're all in, in the new one, we can play a bit of a role helping money move across between Caravan A and B. So someone that comes down in stablecoins needs to go over to fiat or vice versa. So that's where we think there's real upside is, someone has to play that role. We have the compliance to be able to do it. Lots of banks are uncomfortable with the stablecoin bridge across, given who's in it. And so that's our view that this thing is something we're going to use. We'll figure out what the best use cases are. There's an upside from this new set of digital asset providers. And so we're generally pretty excited about it because we think ultimately, it will be better for clients.

Ron, if you just touch on transaction economics?

The economics, I think people don't get it super good. So if you're in B2B cross-border, which we're in 90% plus of the value creation and our revenue comes from the actual conversion of the currency, buying and selling in dollars into sterling. It's the actual liquidity, it's the exchange, the conversion. A handful, call it, 3% to 5% is in the moving, is in the rails and stuff. And so whether you use swift, which is the most expensive way to move global funds or use the proprietary network we have, which is a quarter of the cost or use blockchain, which is free, it has a de minimis impact really on the overall kind of revenue equation for us. But we don't see the impact being economic here. We see it being speed, we see it being 24/7. We see the programmability part of it. There are other aspects of this that we think are more interesting than a few cents cheaper to actually run the rail.

We will take our next question from Trevor Williams with Jefferies.

I want to go back to Corporate Payments and the 18% growth. On the Q1 call it sounded like April had been a very strong month. So if you could just talk us through what the sequencing and puts and takes look like from there in May and June. I think Peter, you called out some softness in North America, but any more detail there would be helpful?

Yes. So when we think about the 18% organic revenue growth in Corporate Payments, I'd say, it was really the same when we look at the Payables business and the cross-border business. In the cross-border business, what I've shared is, we've seen some weakness in North America, but that has been more than offset outside of North America. So overall, we were really pleased with the results for the quarter.

Okay.

Trevor, it's Ron. Not a lot, it did a little better, I think, in April, cross-border. I think the Payables, to Peter's point, was steady as she goes every month. I can't remember whether it was May or June, whether it is mid softer. I mean, cross-border beat their plan by bit. So they had a better April, I think it was a bit softer June and the other one was steady as she goes. I've seen July and we're kind of tracking. We try to obviously, given the call here, whatever it's August 6, we guided to Q3, so we've got July and the tank. And so we're tracking good here sitting 1 month for 2.

Okay. Got it. And then just going back to the full year revenue guide, if you could put a finer point on the moving pieces, just within the organic guide, it sounds like it's mostly lodging. That's a part of the 1 point cut, but the relative sizing of that against the better FX, just how we net to the $25 million full year race?

Yes. I think just use 1%, Trevor, simplistically, you said, hey, the revenue is ballpark $2 billion, $2 billion and change in the second half, hey, a percent happy in macro, a percent sad in lodging. And then remember, if you get 2 points of revenue from macro, which is the print, you lose half of it back on the cost side, which is why you get no real earnings improvement. So to your point, really the only change from 90 days ago in the second half is macro up, lodging down a point, which takes the organic, call it, again, $20 million on $2 billion, a point. Everything else is kind of tracking, and I mostly don't want you to miss it, tracking of what we said is up, right? So vehicle getting from whatever it was to then a 9 and then getting to 10 and then particularly the U.S. getting to 5. I don't want people to miss it, that is super important to this company. For us to sit here today and say, hey, we're headed to get that number and keep corporate payments rocking that getting the 85% of the company in a good spot and following orders, I want to make sure everyone's there, it is more important to me. I wish the lodging was doing what it was supposed to, but the other 2 things are and that's super important to us.

We'll take our next question from Ken Suchoski with Autonomous Research.

Ron and Peter, maybe I'll ask on U.S. vehicle. I mean, it's nice to see the momentum and moving in the right direction and getting to mid-single digits in the back half. I guess I'm curious to get your view on whether U.S. vehicle can be a sustainable sort of mid-single- digit grower. And then I guess when you think about the drivers behind that mid-single-digit growth, like how do you think about the building blocks, whether new customer growth, same-store sales volume growth or pricing?

Ken, it's Ron. So yes, we're pleased to and yes, it has been a long journey. So the hope in that business would be kind of somewhere where it is mid-single to maybe a smidge better, assuming we get there, that's what we're saying we're going to do. So running at that thing would be good. So the main thing is we've got the retention in a better place, and part of that is the mix. So continuing to acquire less micro clients and more kind of small and midsize is the key. I did mention we had a couple of elephants that came in. And then second, we're still at with some of our new products, trying to wrap, some Corporate Payments use around this huge base. The company started in this U.S. fleet space. We still have a giant client count and a lot of super high quality, midsized accounts there. So that's the second piece of the idea is get revenue from that. Take some of these products that are kind of all in one that have the fleet specificity in them, but basically give the client the ability to buy other things in the control way and pay for other things in a controlled way. And so keep selling the stuff to sell bigger accounts, keep the retention high and then wrap and love this thing that it was in corporate payments would be the ingredients.

That makes sense, Ron. And maybe just as my follow-up, I think Sanjay maybe asked about it, but just revisiting that 3Q versus 4Q growth rate, I mean when we looked at, pretty much every segment has a harder comp on the year-over-year growth rate in 4Q, even total company, I think, is like 6 points harder. So why doesn't that impact the year-over-year growth in 4Q? Ron, I know you look at the business sort of quarter-over-quarter, but just optically year-over-year, it looks like it's harder. And then, I guess, if you could just give us like what is the expectation for organic growth in 3Q versus 4Q, that would be helpful.

So specifically, on the 4Q guide, right, I mean, it's ticking up 14% versus 13%. But last year, we did experience a higher 4Q than 3Q rate, so it's kind of consistent on trends. And dollar-over-dollar it's not a significant dollar amount on the print side. I'm not sure if -- one of the question right, you're saying, hey, how are we out looking at organic growth and the difference between Q3 and Q4?

Yes. I think the organic growth in 3Q versus 4Q, Ron, but I think one question we're getting is just like the growth in 4Q of '24 was so much harder versus 3Q. So if you just look at that like run rate, it sort of implies some acceleration, I feel like, in the fourth quarter.

Yes, I'd say it's probably actually the other way around, I'd say that the organic guide and the print guide that we're giving you kind of the 10%, right, in the second half and 10% for the full year. If anything, I'd say the organic growth rate in Q3 will be better. So if you said, hey, the second half is 10%. I think 10.5% to 11% versus 9.5% and 10%. And the main reason is we have some stuff. We had some onetime happy stuff in Q4 last year around the Corporate Payments business and the Payables business related to a transaction. So I'd say it's nothing structurally per se. It's just the prior period. It's just to grow over. So I would have you guys think that it's kind of steady as she goes that the vehicle business is in that, call it, 10% range, and the other stuff is plus or minus 0.5 point between Q3 and Q4.

We'll take our next question from Dave Koning with Baird.

Just one question. free cash flow looked massive in Q2, look like your best cash flow ever. And just a question, I guess, a lot of companies actually guide to cash flow and a lot have less cash flow than earnings. In your case, you've had better cash flow than earnings. Maybe just philosophically, would you ever guide to that? And then maybe why is your cash flow so strong and is it sustainable?

Dave, it's Ron, let me try, and I think Peter sort of turn pages here. So there's two ways to look at cash flow. There's the accounting way, which maybe you're looking at that brings the balance sheet in, which is obviously a function of AR and AP. And the way I look at free cash flow, which is really kind of what I call cash income, which is really the operating cash. And so the full year, the way I look at it, we're trying to get to $1.5 billion for the full year, but what I call cash net income, what you're probably seeing in front of me the accounting one, as Peter's turning the pages, would be some change really in the working capital in the period that boosted us. So I wouldn't get -- maybe you can get excited. I don't get super excited about that. I'm just trying to make sure that the real free cash flow generated by operations continues to run hot and grows, which, again, that thing is planned to be up 10%, 12% again in '25, the way we look at it.

Just confirming that the accounting methodology is presenting something favorable in a quarter that is accounting methodology driven and really the method that Ron points to is the correct one to measure us by, which is an 11% growth of cash EPS year-over-year.

Thank you. And at this time, I'd like to turn the call back over to our speakers for any final and closing remarks.

Senior Vice President of Global Investor Relations Thanks, Margo, and thanks, everybody, for sticking with us. That's it for us. Anything else, please let us know.

Thanks guys, appreciate it.