Q2 2020 Fleetcor Technologies Inc Earnings Call

August 6, 2020

[music].

Greetings and welcome to the Fleetcor technologies second quarter <unk> earnings Conference call.

This conference call.

Oh.

Our host Mr., Jim I got better head of Investor Relations for Fleetcor technologies. Thank you you may begin.

Good afternoon, everyone and thank you for joining us today for our second quarter 2020, <unk> earnings Conference call.

With me today around Clark, our chairman and CEO.

Today, our long time, CFO and Charles Froind, who as you saw early earlier press release will be taking up for Eric as of September 1st.

Following the prepared comments today. The operator will then announce your opportunity to get into the queue for the Q when they session.

It is only then that the Q will open for questions.

Please note our earnings release and something that can be found on the Investor Relations section on our website actually core dotcom.

Throughout this call will be presenting non-GAAP financial information, including adjusted revenues adjusted net income and adjusted net income per diluted share.

This information is not calculated in accordance with gap and maybe calculated differently than non-GAAP information that they are companies.

Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described.

Now before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements.

It includes forward looking statements about our outlook, new products and fee initiatives and expectations regarding business development acquisitions and future performance.

They are not guarantees I've said, Peter performance and therefore, you should not put undue reliance upon.

These results are subject to numerous risks and uncertainties, which could cause actual results to differ materially from what we expect.

Some of those risks I mentioned in today's press release on form 8-K, and on our annual report on form 10-K filed with the Securities Exchange Commission.

These documents are available on our website and as you see that go.

With that out of the way I would like to turn the call over around Clark, our chairman and CEO Rob.

Okay, and good afternoon, everyone and thanks for joining our second quarter earnings call.

I had before I begin my opening remarks, I I do want to say a big Thank you to Mitel Air day.

For making the Fleetcor a journey with me.

Hi, almost from the beginning.

I think we've had a pretty good time together and.

Enjoyed some of success along the way so all of US we'll Miss you Eric.

At the same time I do want to welcome my other longtime partner Chuck Froind.

Also with us or in the very beginning.

As he transitions into the new role as CFO. So Chuck spend involved in and literally every aspect of the company. He's he's run some of our businesses. He bought businesses. He's helped us plot the future. So.

I can assure you he'll be a.

Terrific CFO.

Okay. So back to my prepared remarks, and which I'll cover four subjects. So first I'll report on the progress.

I'm against the initial.

Hello. Good response plan that we undertook a second I'll provide my perspective on Q2 results.

Third I'll speak to the trends the line of business trends that we're seeing a here in July along with thoughts on rest of year and then lastly provides our perspective on fleets long term prospects you know what oppose cold of world.

Okay. So let me begin by summarizing.

The progress against the coal with response plan a that we put into motion in Q2.

It was focused against a six areas so first with safety.

So very pleased to report today, we've had very few.

Positive virus cases, among our 8000.

Global employees.

And Fortunately no one seriously ill, so a very very happy with that.

Two on business continuity, we've been able to deliver our services in this new remotes.

Environments and we can report again in Q2 that our systems performance and uptime more around we're very good [noise].

Three credits were delighted honestly with our two Q2 credit results.

Came in at I think 21 million, which was about our original a loss plan and receivables aging continues to look quite good.

So while real bright spots so far.

Fourth liquidity you know we quickly tried to strengthen our liquidity back at the beginning of the quarter.

We stepped up collections intensity, we repatriated cash.

We even secured a a bridge loan so today or liquidity is quite good 1.9 billion.

And our leverage ratio 2.6 times.

Expenses, you know, we anticipated obviously weakness in Q2.

So we trimmed expenses, we actually managed our expenses, a 15 million lower which is 20% lower than that the original plan that we built so that that questioned our future profits.

And then last is selling we knew in this new remote world, we'd have to sell differently. So lots of progress around targeting a different kinds of companies new ways to get leads.

Providing new tools for our sales people to work at home I knew monitoring approaches so really a revamped.

Selling model that side, but starting to rebound.

So I do want to give us a shout out really to all.

The fleet poor employees, who jumped on a the set of things it was quite urgent to get at these things. So I T. H R. A credit sales management really good performance.

Okay, Let me I'll, let me make the turn over to our Q2 results. So a we reported Q2 revenue of 525 million, which is down 19% and Kashi P.S. It to 28, a which is down 20% versus prior year. So.

<unk> expense.

Reduction actions held narrow our profit decline in terms of organic revenue for the quarter, finishing down 17% behind the prior year overall fuel coming in at a minus 16. So about line average corporate pay at minus 17.

Lodging in total at minus 37, but the workforce.

Portion or somewhere in the high Twentys.

And told in the plus call them plus three for the quarter driven by its subscription model.

In terms of trends.

In Q2, obviously, yeah, a affected by Cove. It same store sales the big one declined 17%. So about the same as our organic revenue growth as we saw client softness really across every business.

Thankfully client retention remained stable at 91% and then do sales weren't great about half.

Of last years level for the quarter, but clearly rebounding as we move through the quarter.

So it's pretty hard to reflect I'm on a quarter like this [noise], but but what kind of heres my conclusion, it's for US. It's really a story Q2 of client softness and client softness being you know way down as a result of of Cove. It because if you look at other.

Or aspects of our business. They were generally kind of okay. You know retention stable at 91.

Feeling good about finding a new way to sell in this environment and confirm that we can keep selling our services in this environment credit Didnt bite US you know losses about on plan.

Reflects expenses down.

The key profits kind of in line with revenue right size the company, a and we generated 200 million of a free cash flow in the quarter. So you know a few a few bright spots.

Okay, Let me transition to the trends that we're seeing a in July and how we're thinking about the rest of the year or so we've included I'm in the earnings supplement.

A line of business volume chart that runs through the last few months, including July a and you'll see there that really every business. We have has at least bottomed out and many of the businesses are recovering and recovering a bit more quickly in July.

[noise] their effect it really by the entire a client distributions. So clients that are down a little bit clients that are down a medium amount clients are down a super lot. When we look at those distributions, they're all moving up so all clients are kind of moving back up by adding volume.

So just a couple of call outs, you can see international fuel recovering you know very nicely as you know Europe out ahead of us on the covert thing and our high growth businesses.

Full 80 tolls, Russia simply just powering through.

Their clients softness because a lots of new business.

So clearly add things getting better.

In terms of rest of year, we do expect continued improvement, but we I will still have challenges air short term. So volume, we think we'll continue to recover but unclear as to how quickly.

Our second half revenues will recover more slowly than volume, that's mostly because of mix a we're seeing larger enterprise clients I would lower rates recover faster that our small business portfolio.

We expect the macro, particularly FX to continue to weigh on our second half year versus prior year.

We do expect sales to continue to recover to get better.

We're hopeful of getting back to 90% of prior year as we exit 2020.

And then lastly expenses, we plan to continue to manage expenses down.

Here in the second half targeting about 10% lower expense levels than the prior year.

So in conclusion, or Q3, and four will be better than Q2, but again still lot still challenging.

So the last me, let me transition here over to kind of a long term view of Fleetcor and how all of this impacts the company I mean at the headline level, we think the new behaviors coming out of Cove Ed.

We'll be a mixed bag in others, there's puts and takes but the main point as we think that.

Those new behaviors will impact us kind of that the margins. If you will have our business and that the core.

Because it's essential workers that keep powering on that the core of our business will hold up you know quite well so negative impacts that we expect long term is probably less white collar commuting.

Long term, which again will impact our European.

Fuel card business is a bit at the edge is because some have white color around fuel cards, a likely less business travel or at least over the mid terms. So that will dampen our RTT card business and our airline accrue lodging business.

And then the accelerated shifted digital and digital purchasing.

And away from face to face shopping will create pressure on our gift card business.

On the positive front.

The whole work from home remote working model certainly will drive demand for outsourcing outsourcing it everything generally so that'll list, how our payables business, we think our virtual card on our fully p. prospects and the preference for touched less.

And avoidance of attendance, we think will lift demand for really almost all of our card businesses. So.

Fuel cards pay at the pump versus in store, Brazil, nonstop electric tolls versus cash boost you know payroll cards that are reloadable versus payroll checks.

Virtual cards instead of printing 80 check so.

Look again, the the headline is that our view is that these impacts we think our at the margin at the core of what we do is serve clients with a central workers and that there will be continuing a demand for a good payment solutions for that group apply.

Hi, it's.

So what do we do while we wait wait for our clients in the world to recover here.

We're gonna stay focused on what we can control and what we can do to namely that to advance. The the three main priorities primary priorities as a company. So one is portfolio.

We're continuing to look at things to reposition our portfolio I prayed fewer bigger businesses add more non fuel businesses add more faster growing businesses.

And likely more Jason disease.

Second time penetration of our big how for businesses. We're we're working again to enhance our products create a more sales pressure.

Strengthen our cross sell channels back to our clients were also pushing our beyond strategy, which transforms our businesses and their Tam both through broadening what each business offers but but more importantly, maybe the segments that each of our businesses can target.

So for example, urban.

City dwellers in Brazil versus highway toll users or airline crew lodging versus only workforce people.

And then lastly, we're working on strengthening the based capabilities of the company a particular emphasis on tech on technology, So you'll see us invest more and I T.

More and I T transformation will move more applications to the cloud will improve digital you lies in the eyes for clients.

And we'll continue to advance our cyber security protection. So we'll continue to get better and I T.

So from our perspective, if we keep progressing that east re priorities portfolio business penetration in our capabilities.

And supports our ambition of 15% to 20% profit growth company.

So look a in closing Q2, our Q2 performance again really a story of same store sales our clients softness as result of co bid.

Again with other aspects of our business, particularly in our attention and credit holding up nicely second half for sure better than Q2, but again still challenging we think over the short term.

Most importantly longer term the message from US today is that the core the main thing that we do around the world, which is to to serve clients essential services payments needs. We think that that remains quite good quite robust and that we see.

Lets it takes again around the margins of our business as it relates to coated.

So with that let me turn the call one more time back over to air to provide some additional details on the quarter arc.

Thank you Ron.

For the second quarter of 2020, we reported revenue of 525.1 million down 19% compared to 647.1 billion in the second quarter of 2019.

GAAP net income decreased 39% to 158.5 million from 261.7 million.

And GAAP net income per diluted share decreased 37% to $1.83 cents from $2, a 90 cents in the second quarter of 2019.

However, there were a couple of unusual items in the quarter that I want to call out.

The second quarter of 2020 was impacted by a 9.8 million discrete tax item related to a prior tax position and a gain on the company's investment in build dot com of approximately 34 million.

Also in the second quarter of 2019, where the tax benefit of approximately 65 million related to the sale of the company's investment in master not.

Excluding these discrete items net income decreased 28% and net income per diluted share decreased 25%.

Non-GAAP financial metrics that we will be discussing our adjusted net income and adjusted net income per diluted share.

And the reconciliation to GAAP numbers is provided in exhibit one of our press release.

Adjusted net income for the second quarter of 2020 decreased 23% to 197 point fourmillion compared to 256.7 million in the same period last year.

Adjusted net income per diluted share decreased 20% to $2.28 compared to $2. An 85 cents an adjusted net income per diluted share in the second quarter of 2019.

Second quarter of 2020 results reflect a negative year over year impact from the macroeconomic environment of approximately 22 million in revenue.

The negative macro was driven mostly by lower foreign exchange rates, primarily in Brazil, when compared with the second quarter of 2019.

We believe FX negatively impacted revenue by approximately 35 million.

[noise] fuel prices were down year over year for the full quarter and although we cannot precisely calculate the impact of these changes we believe it unfavorably impacted revenue by approximately 13 million in the quarter.

And finally fuel spreads were quite favorable for most of the quarter and had about a 26 million favorable impact in the quarter.

Organic revenue in the quarter was a negative 17% overall driven primarily by same store sales softness of 17%.

All of our major product categories were impacted by the covert pandemic in the quarter some more than others.

Our fuel category was down organically about 16%.

For a lot of moving parts, where fuel businesses around the world.

Fuel volumes at our international business were impacted more than the U.S. fuel businesses.

Both geographies volumes bottomed out in April and we have been recovering in May June and into July.

Volume should continue to improve over the remainder of the year barring any setbacks in the reopening of the economy.

And although volumes seem to recovering.

Revenues are recovering at a slower rate in the fuel category as large enterprise account volumes with lower rates are improving faster than our SMB accounts, which have higher revenue per gallon.

The corporate payments category was down organically approximately 17% in the second quarter.

As a reminder, our corporate payments business is made up of virtual cards cross border payments full service, a p. accounts and physical t. any plastic cross sell mostly to our virtual card customers.

The same store sales softness in corporate payments came mostly from accounts in the travel oil and gas retail and elective healthcare verticals.

We're seeing some recovery in verticals other than travel and the retail verticals.

Which we expect will recover at a slower rate.

Our full service a p. business continues to perform well and is growing in the mid to high double digit range.

Our total category has proven to be our most resilient business.

Grew organically a 3% in the second quarter.

Most of the revenue in this category is subscription based.

And has not been significantly impacted by the slowdown and the Brazilian economy due to covert.

The products that have been impacted our mostly the beyond told products, where we are in interchange by parking fuel and fast food where volumes decreased significantly.

Our expectation is for these revenues to recover as a Brazilian economy starts to reopen and recover.

The logic category is made up of our legacy lodging business, which provides a lodging accommodation services to workforce travelers and emergency service organizations, such as FEMA and the Red Cross.

This business was down 29% organically in the second quarter.

And our airline logic business, which provides lodging accommodation services, primarily to the airline crew and distressed passenger segments was down 68% in the quarter.

Our expectation is for our workforce lodging business to see continued improvement as this business, mostly provides lodging for blue collar workers, who generally dry vehicles to the hotel.

This business has been impacted much less than other travel related businesses.

However, we do expect revenue in the category to recover slower as large enterprise accounts, which lower rates are recovering faster than our SMB accounts.

We expect our airline lodging business recovery could be slower at is linked to the recovery of the airline industry.

Now moving down the income statement.

Total operating expenses were down 11% for the second quarter of 2020 to 312.3 million compared with 349.8 million in the second quarter of 2019.

The decrease was primarily due to a decrease in cost related to decreases in volume.

Cost cutting initiatives implemented in the second quarter and the impact of foreign exchange rates.

As a percentage of total revenues operating expenses were approximately 59.5% compared to 54.1% in the second quarter of 2019.

Bad debt expense in the second quarter of 2020 was 21.3 million or seven basis points.

Fair to 18 million or seven basis points in the second quarter of 2019.

Bad debt has in one of them more surprising bright spots as our aging, they're mostly normal, particularly given the environment. We're in today.

And increase in bad debt has been driven mostly by one off bankruptcies versus increases is aging categories.

Depreciation and amortization expense decreased 12% to 62.2 million and the second quarter. If 2020 from 70.9 million in the second quarter of 2019.

The decrease was primarily due to the impact of foreign exchange rates.

Interest expense decreased 18% to 32.4 million compared to 39.5 million in the second quarter of 2019.

The decrease in interest expense was due primarily to decreases in LIBOR or related to the unhedged portion of our debt, partially offset by the impact of additional borrowing for share buybacks and lower borrowings on our securitization facility due to lower volumes in the second quarter.

Our effective tax rate for the second quarter of 2020 was 25.1% compared with negative 1.7% for the second quarter of 2019.

The second quarter of 2020 was impacted by a 9.8 million increase into reserve for uncertain tax positions related to prior years.

Also in the second quarter of 2019, but the tax benefit of approximately 65 million related to the sale of accompanies investment in Masternaut.

Excluding these discrete items, our tax rate would have been 20.4% in the second quarter, if 2020 and the tax rate in the second quarter of 2019 would have been 23.6%.

A decrease in the tax rate was due primarily to excess tax benefit on stock option exercises.

Now turning to the balance sheet.

We ended the quarter with 1.19 billion in total cash.

Approximately 426 million is restricted and consist primarily of customer deposits.

As of June Thirtyth 2020, we had 3.8 billion outstanding on our credit facilities and 654 million borrowed in our securitization facility.

We believe that we have ample liquidity to whether any covance scenario, Andrew pursue any near term M&A opportunities.

In total we have approximately 1.9 billion in total liquidity consisting of cash on the balance sheet Undrawn revolver and the Undrawn bridge loan.

During the second quarter, we repurchased approximately 127000 shares in connection with employee stock sales for 32.2 million as employees forfeited shares to cover taxes.

And we have approximately 294 million in repurchase capacity remaining under our current authorization.

As of June Thirtyth 2020, our leverage ratio was 2.62 times, EBITDA, which is well below our covenant level of four times EBITDA as calculated under our credit agreement.

Finally, we spent approximately 19.4 million on capex during the second quarter of 2020.

Now turning to the outlook for the balance of the year.

I want to remind everyone that although our businesses are very resilient our businesses have all been impacted by the cobot pandemic some more than others.

Our business models are primarily recurring revenue in nature.

We have very broad customer bases and diversified businesses across industries and geographies.

We're not reinstating our guidance at this point there is simply too much uncertainty regarding the resumption of business activity around the world to accurately predict what our volumes could be the rest of the year.

We do expect that second half of the year volume will continue to improve as economy improves.

However, we expect second half of the revenues to recover more slowly than volume.

'cause larger enterprise accounts was lower rates will likely recover faster than our SMB portfolio.

We also expect at the macro will continue to be a drag on revenue due to lower expected fuel prices and foreign exchange rates when compared to last year.

And finally before I turn the call over for questions I want to thank Ron for his kind words earlier.

It has been quite a ride over the last 18 years.

I have spent some time thinking about my Fleetcor journey, and really cannot believe everything that we have accomplished over this period of time.

And I cannot think of many things I would rather have done.

I have no Charles for a long time and I can say that there is not a person better equipped to take over this challenging role.

I'll be around to help with the transition over the next several months and look forward to catching up with many of you before I had off into the next chapter of my life.

And with that said operator, we'll open it up for questions.

Thank you. The Q is now open for your questions. If you would like to ask a question. Please press star one on your telephone keypad and if you are using a speaker phone. Please make sure that your mute function is turned off prior signal to reach our equipment. Once again that star one just a couple of questions. At this time and our first question comes from Tencent Wang of JP Morgan.

Thanks, So much Eric let me add my I think as well.

Yeah.

And well keep weaver with how long.

Okay and.

Good my.

My question I suspect it was just thinking about Ron your confidence in the three priorities.

You mentioned the gate, the beating a profitable area.

Hoping that you could.

And on that or do you think of it gave the similar to what you did with entering.

The tolling business or is it more like entering the.

If the automation side of things that kind of it.

I think about how far you might go when you're thinking about a bit.

Yes, Hi engine.

Your next to the sentimental so.

Sure So I can't really along here.

They all good things come what Ed.

Yes.

The adjacency thing I mentioned I guess in the last call 'em. So so came out of this idea of looking at clients kind of what they do.

Before or after the payment. So I gave the example, Alaska.

In court repaying the payables business all front end.

In boys trap and at work flow and approvals and all that stuff, we press a button so.

We continue to look on the front end those thing to see if we can be you know more help clients.

For example would be kind of in the core fuel card business.

Particularly what else can be other other kinds of software a little bit was the acquirers have done.

Yeah, first date or unroll levels or software NASS around what our small business guys give them an old examples that north range of telematics. So we were trying to figure out if there was another service out of the software service about close to fuel card it out field asset meet people. So we have a couple.

Well things that we're looking at there were there some software that in the categories in the verticals where.

So again the thought of his knowledge of the more helpful too.

[noise] clients that we've got do more for us.

But also from the selling respect right that those those adjacency bring books of clients, we could cross sell through so they may help.

Sells well so those would be a couple of examples of each one of the areas. We've studied kind of brought back around our services.

That's because.

Because of the though.

A follow up real quick.

Get off the causes them to the new sales visibility a but obviously this new sales were impacted this quarter, just as we think about replenishing and the second half of a year.

As visibility you you have there and the quality of the sales that you see as we view.

You know it beyond with them.

Can you broke up just a little can you I think an aerosol can you can you repeat the question.

Yeah, sorry, I'm them at those signals that I've, no power or Matt just the new sales.

Outlook and visibility.

And your confidence the replenishing that as you exit the year.

Any any additional color color there.

Yes.

I heard that now it's a great question. So first thing is is that are already right. So I think I reported that it was around half awesome.

He is.

Each.

Line numbers. So the first the first headline is it's better already and I think second is.

We kind of figure it out.

Things, which took us sometime in Q2 right you got different people you got to find leads in different ways not going to go and trade shows.

So you are assuming right not calling agent base I think the.

Tool kit for people in the case and the way is selling.

Turning to page and returns early in the forecast.

We've got some people again, it is getting back to call 90%.

As we head towards the end the year. So I mean, we're delighted honestly, we found a way to engage people in closed and is this world I mean it it was a point there where we were super short. So now it's really just a question of whether we get sales kind of.

Back to back.

Okay, well in that time.

Our revenue in 2020 number of our business is de Sal, we contract and dance designation some businesses the more selling the alive and other businesses or sell and a lot different day. So the key to latest until we ended the year synodex or.

2020.

Gotcha understood. Thanks America permit that will ask you had to calculate the the fuel spread your retirement then they go.

Tape out.

And we'll go next to Ramsey I, let's start with Barclays.

Hi, guys. Thanks, so much for taking my question and Erika I wish you the very best to appreciate all your hope over the years.

I wanted to follow up on Finjans question on on M&A first and.

Prospective of the deals that you'd like to do it puts a strange environment, where a lot of the valuations for some of the kind of your tech assets are really run what is the pipeline looking like are there deals out there that you think are workable or is that sort of proven not to be the time for sort of opportunistic M&A just curious about the broader kind of M&A environment, you're seeing there.

Ron.

Yes, it's it's a good question. So I guess I can't I categorize pipeline kind of in those into three buckets. So one is we continue to look at deals right in our in our big four categories. So there's other providers to do.

The same things and so obviously, we're already conversations with other players that are in those spaces and to like I mentioned the last time, there's a handful all kind of commented assets.

Sit inside some distressed companies or chase in a couple of.

Things I think I mentioned that wouldn't event available probably different day, where it makes more sense of the company's to talk to US and then last is gone back and tenge as.

Question, we are engaged with a handful of companies in these adjacent disease, which again off the call. It four or five months ago. We warrant so we're kind of I guess.

You know working if you will chasing stopped and kinda two new buckets.

First let's call it six months ago, Yeah, I agree on the valuation I question, we're talking about it in a review earlier this week that I guess when this happened three or four months ago, we thought valuations.

We would be we'd be better I think many of them at a lot of away back. So we're back to the same playbook.

Finding synergies and finding ways, we can operate assets batter and what we see as a way to be able to pay off. So we continue to work at same angle.

Having a clear away that we can improve profits to be able to pay for prices.

Okay.

That's helpful and did a question I wanted to ask you is on just the credit performance in the quarter, which I thought it was pretty pretty outstanding and I'm sure I just wanted to get your impression about expectations in terms of how you. How we should think about that metric kind of in the back half the year.

And also sort of when do you sort of more broad broader question about your sort of philosophy on credit when do you know how to open up that kind of credit aperture again.

To drive to drive growth.

But the you know what to expect and then sort of how do you approach opening up correctly again in the questions.

One other thing great question, So I'd say, if anything maybe we gotta overreacted initially so on this thing.

Happened in the yield on our balance sheet and at the receivables we had to collect all although I think we had 20 meetings literally over the course month tightening terms cutting lines doing things, we frankly it in that.

Revenue growth in Q2 that it will know.

All the rules, we I was wrong intake.

So far are like along the way happy with the accretive.

Some of the banks that turned in the reserves they put in effectively we'd come in on our on our on our credit loss plan and again just to remind people on the call a lot of that is structural or charge cards, we get tons of.

Short term daily a bunch in our payables businesses.

Right and insurance tons in eastern Europe, So the structure Maui collect money lends itself to kind of the able to collect it and and being a central a lot of these field services they need our product. So they basically need to pass those kind of keep doing what they're doing so I think were again.

Super Happy with one of the result in terms of the second question, we were kind of forecasting it kind of actually goes we don't see anything in the aging or in a in the payment behaviors that make us think.

Things are going to get worse.

Our two and then par three is were tested our way into it. So now that we've seen these results.

That clients are able to repay us we start loosening up. So for example, we really clamp down on our companion car will be open up for beyond fuel.

And saw the people that still Ron that we're able to pay off and we blockbuster new accounts and now it's kinda, we opened yet for existing accounts, but not yet for new accounts, so effectively kind of stepping our way into into illusory policies and making sure that weekend, we can see repayment.

Happy.

Got it.

Thanks, again and best Electric security.

Thanks Frank.

Our next question comes from Ashish Sabadra I'm, sorry to banks.

Hi, Thanks for taking my question, Eric Best wishes to you and Charles Congrats to you.

Question on corporate payment.

The the having a group that was softer than what we would expect thing and I like get the most of the softness within the FX, particularly in May and June.

We see that rebound pretty well in July I was wondering if you could just provide some color on back Frank.

Looks like it had stuck at the <unk> by the end of each of them then softened in May and June So just what happened that and how should we think about going forward. Thanks.

Hey, Ashish is it's Ron so I'd say a few things.

Corporate thank you choose to the first one is.

It's a function of our clients and the reason again the business was softer wasn't sales that line of business was actually 85% a plan in terms of his sales in the quarter. So we found a way to sell the steel demand actually quite robust demand. So it was having pockets of clients like.

Retail clients and travel clients fit what was way way down 70, 80% down and then other clients in that book reader offer only got a little debt. So point why did so it's a function of who we as clients because we never had a screen or hey.

Don't sign up corporate paying clients that don't do good when things were at all we never knew that that was how some some to be aware of.

Second I mentioned earlier, we tightened credit.

And we cut lines down in that business, both in our hedging product and FX and obviously in our core virtual are in terms of the terms that we offer. These besides account and then lastly, about 10 or 15% of overall corporate paid business is really TV.

Parts walk around classic, which are not all white collar you know there supplies from construction at other kinds of stuff, but that's I think was way down because travel went in all effectively to zero. So so I'd say back is you know its spot either parts visit await add other parts that are healthy and.

No we're selling a lot the things are caught ran up yet and she has built up what we put out a supplement I think aerials page nine based on page nine Ashish is there kind of shows or virtual card thing kind of came back almost flat in July.

I would come back you know rarely a tremendous amount just a last 60 days. So look our outlook on the thing is the TD thing will likely stay in the debt off and rest of the year and we think the other pieces will not will recover.

That's great that's good color on.

And maybe just a follow up question on fuel cards. So that the volumes have rebounded pretty well I was just wondering.

If you could give some more color around it that our industry's juggling better than others.

And then also there are a few states what have you seen as he said intelligence of why does have you seen any impact in those states that has been in like any impact in those states.

And precision of lives but.

Can you repeat that again.

Yes, so just on the fuel cuts the volume has improved any color on.

So different industries, which are doing better than others and also states, where they may have been as he surgeons in leidos or have you seen any impact some of those eight have.

Kind of economic recovery has slowed down it.

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Yes. She so first of all I'd say, we were kind of leave that.

Isn't that will be that.

Ours, which are a bit of the along the Gulf product right mobile mobility products were down kind of line average were soft at the same.

Hi level as Russ business, I think what that points to again as Dennis essential you don't lose all people tried it around.

No that are around people. So what we see what they look at it is a similar comment about the tables business of huge mix, so historically, 40% or something remarkable our clients grow you know in a quarter 20 would be down 5%. Another 20 indeed.

Santana then the remaining amount let me now something so what we see is the old curve as you down now only 20% ruling that order in 40% on data up to 20% and then tenets that 8% would add you know 75%. So when we look at the.

The clients that are at the bottom and they just decline there in just which you would expect he's got impacted.

The street, even it's hard to construction, where those projects fell away were other parts and construction, we're still at the top and so it's just a complete mixed bag of what the clients, we have do lend and how much their business was impacted but that's the good news is we've seen the old.

Kirk kind of move out so not just the evil down five or 10% getting a little bit healthier, but he's the people down at the other people at 75, all seem to be moving up over the last month. So.

Thats ingest to us as the tail well break is smaller so and that we expect hopefully you know as well as a plot turns here to get more and that is back.

That's very helpful color on thanks.

Well go next to matter Aneel with Goldman Sachs.

Yes, hi. Thank you guys are taking my question on again, my congrats to add to Eric and Charles on your respective move.

I was hoping it just trying to dig a little bit and follow up on.

Ramsey's question around credit and also she says question on that sort of end market exposure. So on credit again, very impressive I sort of stability there.

To what extent do you do you guys track in are you thinking about the that sort of government stimulus in payroll protection program.

The potential impact for you a lag effect on the Smbs.

And maybe you could remind us the kind of relative exposure to the smaller businesses versus the larger ones as you're thinking through the the recovery in the back half being sort of driven first by volume with revenue lagging.

To help.

Sort of flesh that out a little bit more for us.

Yes, there yeah I mean, the good news is where we're obviously, we're very pleased with the performance of bad debt as Brian indicated earlier agencies look mostly kind of normal Oh, and what we do have some bad that's unusual it was mostly kind of one off bankruptcies.

Yes, as we get to the second half a year to answer your kind of question.

Yeah, our SMB portfolio is recovering a little bit slower than the enterprise volume as we mentioned our asset base.

Business as a percentage of volume is about third of our overall volume.

So.

We do expect continued lag effect, there but were taken up.

Very conservative approach to that customer portfolio, we're looking at him closely look at the aging daily.

You know to see if there's any inherent weakness in any particular industry or category and obviously when we see that be you know we treat those customers you know accordingly.

And again I think the good news is it just just for not seen a whole lot and so customers are beginning to pay us from a stimulus perspective, I guess I'm sure that has helped a certain segment of customers.

It's difficult for us to kind of track, who is benefiting from that or not.

But we can't see that but I would say we are keeping up very very close watch on you know those suppose that can be account, particularly in certain more impacted.

Industries.

Yeah, Hey, Matt It's one lead kind of re credits or was it do.

Impacted industry overlay. So I don't know profits 60 days ago or something we started the layer that over and so we're not posting yet mission accomplished sign despite the good performance in Q2 or keep and get our credit still tied and as I mentioned earlier tests in our way no.

In the opening it up so we do you think theres some risk when the when the when the government slow things down but by pairs point, we are I just kind of on it.

And not providing particular large amounts of credit to you know clients, they're sitting in those industries.

Thank you both as a follow up I guess are related basis, one of the growth drivers that I think we'd collectively been getting incrementally excited about recently, our some of the beyond programs.

Particularly on beyond fuel with the pandemic now is there.

There are a little bit of or retrenchment reluctant to spend incremental credit and or the selling process, a little bit more challenged or because it typically being sold into existing clients that can continue.

Just sort of thinking through the cadence of the growth that from that from that program, particularly.

Yeah, Hey, Mathrani get into it so it's a good question. So again, what I'd say is we took the.

Sake, you out first over the growth route and make sure that we're protecting the company and the liquidity. So we did dial back.

Credit pretty pretty significantly whatever 90 days ago. So as I mentioned that we see the repayment performance.

Open that back up that the on fuel or existing clients. So we kind of frozen that.

You know pushing into.

Hello cart lines on that program, so whether it was a good or bad idea, we didn't want our eyes wide open less protect liquidity in the company, let's let's let's get careful and weaken spring back into an action as everyday so were getting comfortable that we've seen some some number cycles now I think.

Again are starting to lose picks up.

That's very helpful. Thanks, a lot that.

Our next question comes from Trevor Williams of Jefferies.

Hey, guys good afternoon, and their congrats on a great Ron on expenses run your comment about being down 10% year over year for the full year first I just want to make sure that caught that correctly.

And then any framework for how much of the decline in that is in variable versus fixed costs coming out that could end up being more permanent.

Yes, so on the first part you got it right against the prior year expenses were for Q2, I think that America 11, and I think Trevor I said that kind of our forecasts were kind of plant and down 10, you know high single digits kind of acreage.

And for Q3 in Q4.

And on that what you said some fair amount of it is variable honestly with volume and revenue lower you get money back.

Sales commissions, you get money back and then selectively we slow some projects that depend on outside parties third party industries drafted doing other things such low some things right and think we get the same kind of traction on them and I guess, we didn't get some help from FX, we honestly that into the headwind on the red.

You side, but clearly helping us on on the expense side, but we haven't I think I said this before we're you know what we're trying to fight along game. So we're not Carmen.

You know lots of money out of client service or product for attack lot of core sales were trying to protect.

Those has the capabilities for offer different day.

Okay got it that'll make sense and then just my follow up on corporate payments. So I think you're lapping a big Cambridge quarter from the third quarter last year. So just as we look at the supplement in the line that you've got on non FX revenue you had a big month over month access.

Coloration from June So July so I'm, just wondering if we could even read into that as being better if not for the tougher comp or if that number is actually just capturing the FX portion of Cambridge and not the entire piece with the cross border element too.

Yeah, I think some of that is is the comps are the difficult comps.

I think also some of it is you know people are that frozen when you know yet volatility and currencies, which we had kind of at the beginning of the quarter. The into the first quarter people Act and then and then I think they froze a bit wondering how things for about a moves I think its pros is going into hedging.

Product, which carries higher margins and then second don't Miss My credit comment.

We did the same thing there in some of those products, where there's volatility and and contrast and move out of the money, we I dialed those things back so lean trend lines, which which moved some of the share repurchase share that business across some clients. So again I want to make sure everybody here.

If you are squarely at a pretty high R. Squared between you know credit openness and grow even in existing clients and we were again quite cautious on at the beginning and now that we see kind of that good report I want everyone to hear me that we're starting to lose and we're not why not go and get out completely crazy.

Back to where we are before we're going to help enable basically the businesses to grab some of that share back.

All right got it Doesnt make sense. Thank you guys.

And we'll go next to Bob Napoli of William Blair.

[noise], Thank you and.

Eric It's been great wish you the best.

On the amount.

Great. Good when you need to pay so your balance sheet in great shape.

Driven a lot of interesting businesses, you tighten credit you're starting to listen up where it can be there can you go what happens.

And then best more.

The and I guess, it's on the M&A side, but.

Around no corporate payments virtual cards at organically expanding I shouldn't isn't it's a good time.

Be putting more money on offense.

Understanding so earnings will be lower in the back half a year, but you're going to come out of this.

It will be behind us and what six months nine months 12 months.

Where where can you go on offerings.

The commodities evolve as Ron.

It's a it's a good question I think the answer is the fall 80.

Product line, because we thought that this year, though and it is.

I mean this is blockbuster on that front I mean, it's up some crazy a mild essentially valeant and not even a crazy mile in Q2, but more importantly them in front of me I think the sales were in the quarter and I'm in a quarter, where we sold half those sales was 50% or something above plan, so that demand to your point.

The market place to be able to remotely pay bills I know, it's going to stay at an all time high but it's certainly top of mind for people that finished their houses.

So to your point, we're clearly going to spend more money on marketing and sales there and shift you know more energy. So for example, we used to sell.

You know virtual cars, and then and played off a teeny cars to that same account, which is obvious and teeny cars in our portfolio well, we've got a reoriented those people to pitch virtual card and then maybe held by the way you know virtual card handful AG, but not T E car, so well for sure step.

The marketing and sales pressure against that line of business and then second currently on the on the transaction side. We are we certainly know all the assets in the space and we like the category and.

I'm comfortable were comfortable that we have money now we've got maybe set a billion nine and its building right we generated cash flow.

So worried about the receivables and leverages that to monetize so were sent.

You know it up at a place in some of our pals and compete or not sitting as good a place Bob So I'd say, we we like where are we are in terms of the pipeline.

There as well so more marketing money and then use the balance sheet.

Okay, and then I mean, it Jason seats that are they going to be adjacent seems to corporate payments is that really where that focuses are there other.

Other portions of the big sectors to your liquidity chasing fees.

Yeah, we're looking at.

Okay. All right. We started this thing as I mentioned back that out in the fall or our winter last year looking at our four big business isn't this whole construct.

Jason season, particularly software, Jason Cesar help clients and so we've identified.

As I mentioned attention earlier, Jason see both payable around invoicing for example.

And at our other business as well and lodging we've got some adjacent season as I mentioned in your car. So.

I'm, saying it so that people are surprised if you see us transact in something that is you know not exactly in the four or five Odyssey Super Jason are tied in the fourth is a threat.

But yeah, we still like the other categories I know you summer follows payable like that we like it but we like really just like our other product lines I quite a bit too if you look at Atlantic and onto lines. It rolled it out.

Oh man you know that teens for three years now Bob So where we're happy with some of the other businesses do.

Thank you appreciate it.

And we'll go next to George Mihalos of Cowen.

Hey, good afternoon, guys and Eric My my Congrats and best wishes as well.

Just one follow up on expense question kind of the 8% to 10% Opex reduction that you're thinking or for for third and fourth quarter. I think last quarter, you were kind of thinking in the 5% range and I'm just gonna be more more variable I'm just or is that eight to 10 is there a way to think of a portion of that that may be permanently.

Removed beyond what you're thinking for the back half of 20 Twond.

[noise] aimed towards Eric Yeah, I mean, I really wouldn't look at it that way I certainly not what we want to do long term I mean, we want to grow this business and we want to invest in the business I mean shirts certainly over the short term we are looking at ways to rightsize business. So we can maximize profitability.

He over the over the short term, but we're also looking at ways to reinvest in the business. You know so we can reaccelerate growth, let me come out of this this environment that we're in so I would say over the medium term you know short in the short term I would say hey, we're going to have some cost savings over the medium term, they're going to reinvest back in the business and.

Probably get around back to where we kind of work from a margin standpoint.

Okay. That's that's helpful. I was just a quick follow up within the tolls business I know the last couple of quarters, I think sort of the tail end of a of last year. There was some some pre tax in some some some promotional activity that yeah that was in there did that have an impact on the total business at all in Q1, how are you thinking about her from.

I was just on a go forward business.

Okay.

Most of it.

Oh.

And about promoting to sell intact.

Oh, yes, just basically some some some discounting as it relates to the the told business.

Yes, so so as one so yeah. The short answer is.

Some of the competitors came into the told as as you know.

We just haven't prior as it relates to it.

Top line and as the most coverage the best systems. The biggest networks is very hard.

Our new these with crime hairstyle my opinion to sell so they went to try it and so we.

Decided to match some of their kind of you know for are you starting a things to make sure that we kept you know a dominant share the new business. So that's worked pretty well we started the kind of at the end of the air and roll through you know three in sales month kind of promotions, we tested some other ways of signing people up for example.

Hey, if you use the thing you pay the monthly they you know when if you don't get out so when we got creative and so were still selling a lot sales are still quite good and that business and more importantly, the the promotional stuff is converting into pay which we studied quite a lot to that.

The people that come on a free pass you know actually convert to tag and they do so I'd say the approach.

So far so that.

All right well go next to Sanjay Sakhrani of KBW.

Thank you and congrats to Eric and Charles as well my side.

Going back to the M&A question, I'm, sorry, Ron, but when we think about valuation and Jason Ariad should we think about the IR are being comparable to some of the deal that you've done in the past or or will the complex and look different because they are different types of businesses in the valuation.

And backdrop is different.

Yes.

Suze Orman question I think Andrew.

I mean, I'd say, if the transaction in any meaningful signs a uses any meaningful amount of capital.

We have to see our wage our returns. So we look at returns the way you guys do money down in what we get back and again, Matt perspective, we study.

Our thesis of.

If we can do they can create better returns there, but I'd say in some of the smaller ones.

But we look at other attacks like the ability to sell for example, so if we if we added an adjacent see in payable and help clients in the front end June we hear back and we see into sales result, you know better when rates in the pipeline because our packages.

That more complete do you see that you know the feedback in the our piece and so I'd say it is.

Smaller kind of transactions, we will look at you know factors other than just.

The profit returns.

Okay.

[laughter] following on from other questions again on the line for the SMB versus enterprise mix and its impact on revenues, Eric their way to think through the actual quantification of the drag and we think about the second half I mean is there any way to dimensionalize that if we think about the recovery of the.

Actual impact I'm, just trying to make sure I understand that part.

It was really a couple of businesses were seeing a little bit right. You know that probably keep fuel that we called out earlier, but percentage of our business. There is SMB and we're seeing a little bit I'm watching side as well actually we got some very large enterprise accounts and that in that business. That's how that business where was built and we bought mark.

Down market over the years, so those again those accounts as well as she has a little bit a lag in terms of how is coming back in terms of quantifying it.

I think we'd have to go back and actually try to put pencil to paper that come up with a better estimate I wouldn't want to just throw something out over the phone. So if you want to get back to us uneconomical to come up.

Oh, Thank you guys and congrats again.

And our final question will come from John coffee or South Florida.

Great. Thank you very much for taking my call.

My question for you is on the corporate payments segment and I guess is really looking at slide 19, I see that you have those four subline for virtual card can easily be NFX.

I would tell me if one were to look at the April May and June month, and then you compare that to the 17% revenue decline.

Would you be able at what would you look at.

Say that okay I see these figures on slide nine and that that makes sense. When I see the declined 17 is really looking at virtual card the best way to figure out which way the windows blowing because clearly you fully p. was up a lot sums from maybe maybe a better way to say that help understand the revenue contribution of each of those sub lines a little bit.

Better.

Okay.

Contribution from each of the score.

Yeah, we went out we wouldnt you know share that other than than that I will make the point, which I think we did on on page nine that if you look at the a teeny card along with a couple level things, we call that Brazil benefits and the airline thing collectively those things are less than four or 5% of our revenue in July.

Hi, so they headline is the T. anything was not assimilate part of the corporate payments business overall machine seats out for you in a 40% volume since you for San Antonio and revenue.

And so it's it's not always going to make the thing, though we think that things going to kind of sit for that.

And as a growth you know the way to look at the thing is the delta between.

Virtual card performance Corporatepay performance in revenue in Q2 being down mid teens, and then see in the virtual card volume recover in July almost a flat and settled the.

The corporate banking business has gotta, though as virtual card and FX Kostas full HD is rock and I'm going to spend more money on it a de thing I'll say flat, so the recovery and virtual card and client getting comfortable again to make trades in FX those to determine the pace of growth.

Great. So it helps a lot. Thank you very much.

[noise] [noise], we've reached the end of our allotted time. So this will conclude today's conference. We appreciate everyone's participation you may now disconnect.

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Greetings and welcome to the Fleetcor technologies second quarter 2020 earnings Conference call. As a reminder, this conference call is being recorded I'd like to turn the conference over our host Mr., Jim I got better head of Investor Relations for Fleetcor technologies. Thank you you may begin.

Good afternoon, everyone and thank you for joining us today for our second quarter 2020, <unk> earnings Conference call.

With me today around Clark, our chairman and CEO.

Today, our longtime CFO and Charles Froind, who as you saw early earlier press release will be taking up for Eric as of September 1st.

Following the prepared comments today. The operator will then announce your opportunity to get into the queue for the Q when they session.

It is only then that the key will open for questions.

Please note our earnings release and supplement can be found under the Investor Relations section on our website actually core dot com.

Throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues adjusted net income and adjusted net income per diluted share.

This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information that they are companies.

Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described.

Now before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements.

This includes forward looking statements about our outlook, new products and fee initiatives and expectations regarding business development acquisitions and future performance.

They are not guarantees of said future performance and therefore, you should not put undue reliance upon them.

These results are subject to numerous risks and uncertainties, which could cause actual results to differ materially from what we expect.

Some of those risks are mentioned in today's press release on form 8-K.

And on our annual report on form 10-K filed with the Securities Exchange Commission. These documents are available on our website and at FCC Dot Gov.

With that out of the way I would like to turn the call over Iran. Clark, Our chairman and CEO Ron.

Okay.

Good afternoon, everyone and thanks for joining our second quarter earnings call.

Before I begin my opening remarks, I do want to say a big Thank you to Mitel Air day.

For making the Fleetcor journey with me.

Almost from the beginning you know I think we've had a pretty good time and together and.

Enjoyed some success along the way so.

All of US, we'll Miss you Eric.

At the same time I do want to welcome my other longtime partner Chuck flowing.

Also with us from the very beginning.

As he transitions into the new role as CFO, So Chuck spend involved and literally every aspect of the company. He's he's run some of our businesses keys bought businesses. He has helped us plot the future. So.

I can assure you he'll be a.

Terrific CFO.

Okay. So back to my prepared remarks, and which I'll cover four subjects. So first.

I'll report on the progress.

I'm against the initial.

Hello, Good response plan that we undertook.

Second I'll provide my perspective on Q2 results.

Third I'll speak to the trends the line of business trends that we're seeing here.

In July along with thoughts on rest of year and then lastly.

I will provide our perspective on fleets long term prospects.

Postcode World.

Okay. So let me begin by summarizing.

The progress against the Colvin response plan that we put into motion in Q2.

It was focused against six areas. So first was safety.

So very.

Please to report today, we've had very few.

Positive virus cases, among our 80000.

Global employees.

And Fortunately no one's seriously ill, so very very happy with that.

Two on business continuity.

We've been able to deliver our services in this new remotes.

Environments and we can report again in Q2 that our systems performance and uptime more around we're very good.

Three credits were delighted honestly with our two Q2 credit results.

Came in at I think 21 million, which was about.

Our original loss plan.

And receivables aging continues to look quite good.

So real bright spots so far our fourth liquidity you know we quickly tried to strengthen our liquidity back at the beginning of the quarter.

We stepped up collections intensity, we repatriated cash.

We even secured a bridge loan so today liquidity is quite good 1.9 billion.

And our leverage ratio 2.6 times.

Expenses, you know, we anticipated obviously weakness in Q2.

So we trimmed expenses, we actually managed our expenses 50 million lower which is 20% lower than the original plan that we built so that that cushioned our future profits.

And then last is selling we knew in this new remote world, we'd have to sell differently. So lots of progress around targeting different kinds of companies new ways to get leads.

Providing new tools for our salespeople to work at home.

New monitoring approaches so really a revamped.

Selling model that.

Starting to rebound.

So I do want to give us a shout out really to all.

The fleetcor employees, who jumped on.

The set of things that was quite an urgent to get at these things. So I T. H R. A credit sales management really good performance.

Okay. Let me, let me make the turn over to our Q2 results. So we reported Q2 revenue of 525 million.

Which is down 19% in cash GPS it to 28.

Which is down 20% versus prior year.

So our expense.

Reduction actions.

Help narrow our profit decline in terms of organic revenue for the quarter, finishing down 17% behind the prior year overall fuel coming in at minus 16, So about line average corporate pay at minus 17.

Lodging in total at minus 37, but the workforce.

Portion somewhere in the high Twentys.

And toll in the plus column plus three for the quarter driven by its subscription model in terms of trends.

In Q2, obviously.

Affected by co bid.

Same store sales the big one declined 17% so about the same as our organic revenue growth as we saw client softness really across every business.

Thankfully client retention remained stable at 91% and new sales weren't great about half.

Of last years level for the quarter, but clearly rebounding.

As we move through the quarter.

So it's pretty hard to reflect on a quarter like this but but what kind of heres my conclusion, it's for US It's really a story Q2 of client softness and client softness being.

Way down as a result of Cove it because if you look at other aspects of our business. They were generally kind of okay retention stable at 91.

Feeling good about finding a new way to sell in this environment and confirmed that we can keep selling our services in this environment credit Didnt bite us losses about on plan.

We flex expenses down.

The key profits kind of in line with revenue right size the company.

And we generated 200 million of a free cash flow in the quarter. So you know a few a few bright spots.

Okay, Let me transition to the trends that we're seeing a in July and how we're thinking about the rest of the year.

So we've included.

In the earnings supplement.

A line of business volume chart that runs through the last few months, including July.

And you will see there that really every business. We have has at least bottomed out and many of the businesses are recovering and recovering a bit more quickly in July.

Their effect it really by the entire our client distributions. So clients that are down a little bit clients that are down a medium amount clients that are down a super lot. When we look at those distributions theyre all moving up so all clients are kind of moving back up by adding volume so.

Just a couple of call outs, you can see international fuel recovering very nicely as Europe odd ahead of us.

On the covert thing and our high growth businesses full 80 tolls, Russia simply just powering through.

Their clients softness because a lots of new business.

So clearly add things getting better.

In terms of rest of year, we do expect continued improvement, but we will still have challenges the or short term. So volume, we think we'll continue to recover but.

Unclear as to how quickly.

Our second half revenues will recover more slowly than volume, that's mostly because of mix.

We're seeing larger enterprise clients with lower rates recover faster.

That our small business portfolio.

We expect the macro, particularly FX to continue to weigh on our second half year versus prior year.

We do expect sales to continue to recover to get better.

We're hopeful of getting back to 90% of prior year as we exit 2020.

And then lastly expenses, we plan to continue to manage expenses down.

Here in the second half targeting about 10% lower expense levels than the prior year.

So in conclusion.

Q3, and four will be better than Q2, but again still still challenging.

So so last me, let me transition here over to kind of a long term view of Fleetcor on how all of this impacts the company I mean at the headline level, we think the new behaviors coming out of co bid.

We will be a mixed bag in others, there's puts and takes but the main point is we think that.

Those new behaviors will impact us kind of that the margins. If you will have our business and that the core.

Because it's essential workers that keep powering on that the core of our business will hold up.

Quite well so negative impacts that we expect long term is probably less white collar commuting.

Long term, which again will impact our European fuel card business is a bit at the edge is.

Because some have white color around fuel cards.

Likely less business travel at least over the mid terms, so that will dampen our RTT card business in our airline accrue lodging business.

And then the accelerated and shift to digital and digital purchasing.

And away from face to face shopping will create pressure on our gift card business.

On the positive.

Front.

The whole work from home remote working model certainly will drive demand for outsourcing outsourcing it everything generally so that'll list, how our payables business, we think our virtual card and our full HP prospects and the preference for touched lists.

And avoidance of attendance, we think will lift demand for really almost all of our card businesses. So fuel cards pay at the pump versus in store, Brazil nonstop electric tolls versus cash booze.

Payroll cards that are reloadable versus payroll checks.

Virtual cards instead of printing 80 check so.

Look again, the the headline is that our view is that these impacts we think our at the margin at the core of what we do is serve clients with essential workers and that there will be continuing.

Demand for a good payment solutions for that group of clients.

So what do we do while we wait wait for our clients and the world to recover here.

We're going to stay focused on what we can control and what we can do to namely that's to advance. The three main priorities primary priorities of the company. So one is portfolio.

We're continuing to look at things to reposition our portfolio create fewer bigger businesses add more non fuel businesses add more faster growing businesses.

And likely more Jason sees.

Second time penetration of our big how for businesses. We're we're working again to enhance our products create.

More sales pressure.

Strengthen our cross sell channels back to our clients were also pushing our beyond strategy.

Which transforms our businesses and their Tam both through broadening what each business offers but but more importantly, maybe the segments that each of our businesses can target. So for example urban.

City dwellers in Brazil versus highway toll users or airline crew lodging versus only workforce people.

And then lastly, we're working on strengthening the based capabilities of the company a particular emphasis on tech on technology, So you'll see us invest more and I T.

More an IP transformation will move more applications to the cloud.

We'll improve digital you wise in the eyes for clients.

We will continue to advance our cyber security protection. So we'll continue to get better at ITC.

So from our perspective, if we keep progressing that these three priorities.

Portfolio.

Business penetration in our capabilities.

Supports our ambition of 15% to 20% profit growth company.

So look and in closing Q2, our Q2 performance again really a story of same store sales our client softness as result of co bid.

Again with other aspects of our business, particularly in our attention and credit holding up nicely second half for sure better than Q2, but again still challenging we think over the short term, but I think most importantly longer term the message from us today is that the core.

The main thing that we do around the world, which is to to serve clients essential services payments needs. We think that that remains quite good quite robust and that we see.

It's in takes again around the margins of our business as it relates to Cogan.

So with that let me turn the call.

One more time back over to Eric to provide some additional details on the quarter Eric.

Thank you Ron.

For the second quarter of 2020, we reported revenue of 525.1 million down 19% compared to 647.1 million in the second quarter of 2019.