Q2 2021 Fleetcor Technologies Inc Earnings Call
Greetings and if I could just fleet core technologies, Inc. Second quarter, 2020.1 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation and.
If anyone should require operator assistance during the conference. Please press Star Zero and your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Jim and also.
And that her head of Investor Relations. Thank you you may begin.
Good afternoon, everyone and thank you for joining us today for our second quarter 2021 earnings call.
With me today are Ron Clarke, our chairman and CEO and Charles <unk> our CFO.
Following the prepared comments, the operator will announce to the queue work and for the Q&A session and as well.
And then you can get in the line for questions.
Please note that our earnings release and supplement can be found on the Investor Relations section of our website at <unk> Dot com.
Now throughout this call, we will be presenting non-GAAP financial information, including adjusted revenue adjusted net income and adjusted net income per diluted share. This.
This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information and other companies.
Reconciliations of historical non-GAAP information to the most directly comparable GAAP information appears in today's press release and on our website as previously described.
You need to remind everyone that part of our discussion today may include forward looking statements. These statements reflect the best information we as of today all statements about a recovery outlook, new products and acquisitions expectations regarding business development and future acquisitions are based on that information. They are not guarantees of future performance and you should not put undue reliance upon and we do not undertake.
Any obligation to update any of these statements.
These expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect some of those risks are mentioned in today's press release and form 8-K, and and our annual report on form 10-K, both filed with the Securities and Exchange Commission. These documents are available on our website and at SEC Gov.
Now with that out of the way I will turn the call over to Ron Clarke, our chairman and CEO Rob.
Okay, Jim My Thanks, and good afternoon, everyone and thanks for joining our Q2 earnings call upfront here I'll plan to cover 3 subjects first I'll share my perspective on our Q2 results along with the rest of year outlook.
Second I'll provide an update on our 2 newest acquisitions and then lastly, I'll talk about our fuel card business.
Including our latest view on EV, along with a couple innovative developments underway and that business.
Okay. Let me, let me turn to our Q2 results. So very pleased to report an outstanding Q2 financial results meaningfully above our internal expectations. We reported Q2 revenue of 667 million, that's up 27% and cash.
EPS of 315 up 38%.
Both our Q2 'twenty, 1 revenue and cash EPS exceeded our Q2.19 results. So finally, moving past our pre pandemic baseline organic revenue growth came in at 23 per cent for the quarter our full E P.
And outsourcing platform segment up 53% versus Q2 last year.
The trends and the quarter are really quite good or same store sales metric.
Improved to plus 18% so hardness of 18%.
Many of the sectors and our client base are recovering retention a record level, we reached nearly 94% and all time high since we've been reporting the metric and interestingly, our global fuel card business reached 92% retention.
And also an all time high.
Losses are.
Remained very good running at historic levels and sales outstanding and the quarter, finishing up almost 2 times last year's Q2 and up 6%.
Against our 2019.
Okay. Let me, let me transition to our view of the rest of the year. So today, we're raising guidance to $2.765 billion at the midpoint for full year revenue raising cash E. P. S. At the midpoint to 12.90 that.
Driven by our Q2 be.
The ASX close and really the momentum.
That we have running into the second half I do want to remind everyone. We had previously guided to a pretty substantial second half sequential step up already.
As a reminder, cash EPS guidance up nearly 60 cents from the start of the year and so.
And so we opened the year at 12.30 today 12, 90, so obviously are better than we outlook. The second half guidance implies a few things. So first that revenue growth will run about 20% ahead of last year and high single digits really above the.
Second half 2019 baseline.
So we are expecting the business to reach all time highs again, and both revenues and profits.
Our Q4 EPS profit guidance.
Implies nearly a 14 dollar annualized cash EPS exit rate.
Okay, Let me transition arrow and update on our recent acquisitions. So as a reminder, we closed a FX that's the add on cross border deal on June 1st.
And then last week, we signed definitive documents to acquire a L. A which is a lodging are provided to the insurance vertical.
So let me start with a L. A.
Really a highly complementary.
Add on to our existing lodging business.
And that company brings a whole set of specialized capabilities designed just to serve the the insurance vertical. So we've got a pretty interesting synergy plan for that business and expect accelerated revenue and profit growth our growth next year, we're also well underway on our <unk>.
The effects integration, we've already exited about 10 million of run rate payroll expense.
We've implemented 1 unified cross border management organization and.
And we've designed and I T consolidation plan to move to a single system.
That will significantly reduce run rate I T and and operations expense. So look book both of these acquisitions Classic fleet.
Fleet wheelhouse deals we paid reasonable prices.
They are extensions of our existing business. So we know them well and both have a very rich synergy opportunities, we're expecting the businesses too to grow about 20%.
On the top on a pro forma basis next year and together deliver incremental cash E. P. S. In 2020, 2 and the 50 to 70 cent range. So so big upside. So obviously, we are quite enthusiastic about the transactions.
Alright, let me, let me shift gears now and talk a bit about our fuel card business.
Which we continue to love and which we think is a bright a bright future. So I'll talk a bit about E V. The the latest and greatest and then talk about innovation and specifically to new things that were due and to improve the growth prospects of our fuel card business.
So starting out with E V. I mentioned last time were really embracing E V as an opportunity and in no way see it putting and end to our fuel card business.
Employers are going to need to reimburse employees for recharging electric vehicles much like they reimburse employees for refueling combustion engines and I think you may find that it cost more to operate.
V than people think we also think there'll be some new economics and that we've got and opportunity to achieve very similar economics from E V measuring and reimbursing as we do from from combustion engines. We we've included a couple of E V exhibits and.
Our Q2 earnings supplement you'll see some comparisons of spend where the cost of public charging.
It's about 70% of fossil fuel charging and then because theres more attractive a M. D. Our rates, we believe that we can achieve a pretty interesting revenue there as well.
And a nutshell, we expect the at home software subscription fees.
To be pretty significant and augment a number of the other fees that we get the revenue mix.
We are out looking and the commercial transition to EV to be slow, particularly here in the U S, giving us ample time to build out our public charging network.
And implement recharging at home, we expect mix fleets are to be how things start out so our incumbent position should give us quite an advantage and consolidating them activity.
Activity and data for our clients, so look and conclusion, where we're out looking E V to really just be a different way to serve commercial fleets and but 1 in which we think and still be attractive.
Well, let me, let me leave E V and cut over to the couple of innovations that we're working and the fuel card business. So so first is digital and.
And particularly digital selling which now and in Q2 has reached about 60%.
Of all our new fuel card sales globally coming to us digitally so lots of improvements and our and our digital selling capabilities.
We've got automated keyword bidding now we've redesigned our websites.
To maximize sales conversion and we're beginning investments at the top of the funnel and the form digital T V Radio Facebook advertising, which is driving about 50% more visitors to our websites and.
So obviously leading to incremental sales.
The last innovation and I'd like to touch on is our effort to transform our fuel card UI, which is used by over 100000.
And really into our broader pay a payment platform.
So we're combining our newest cloud based SMB bill pay platform.
With our fuel card UI, so that clients go on to pay us the fuel card bill that they would have the option and then are paying additional vendors with the same software platform.
So this idea is really aimed at accelerating the number of active bill pay clients, we can add to our platform and again beginning the transformation of the fuel card business into our corporate payments business. So.
So we'll keep you updated there as we go.
So so look and closing 3 thoughts for you. So so 1 on 'twenty, 1 and again, we're pleased with Q2, particularly the record retention.
And record sales levels and again, our second half outlook calls for a new all time highs again and revenue and profits.
Second on the fuel car business again, we think the prospects are bright for the business.
We do have a plan to monetize E V adoption.
By providing some new services, and particularly measuring and reimbursing at home recharging.
We've got and opportunity to keep stepping up digital sales and and digital advertising and the top of the funnel. We think we can drive incremental visitors and incremental sales and.
And we're launching a a bill pay.
Cross sell opportunity to our fuel card clients again by turning our existing fuel UI and to a broader payment platform.
And lastly, our although early where we're quite encouraged by our 2020 to set up our second half guidance.
Calls for nearly $7.7 and cash EPS for the second half.
Or approximately $14 annualized.
And again forecasting record sales.
For the full year, which will flow revenue into next year.
We'll roll off a billion and interest rate hedges and January that'll free up about 20 cents of incremental cash E. P. S.
And lastly, our 2 newest acquisitions and hoping to contribute and the 50 to 70 cent range of incremental cash EPS. So look taken together a a lot to like about our 2020.2 setup.
So with that let me turn the call back over to Chuck and he'll provide some additional details on the quarter Chuck.
Thanks, Ron.
And I'm delighted to share with you the results of a very good quarter.
For Q2 of 2021, we reported revenue of $667 million up 27%.
GAAP net income up 24% to $196 million and GAAP net income per diluted share up 26% to $2.30 sacks.
Adjusted net income for the quarter or a N I increased 36% to $268 million and Eni per diluted share increased 38% to $3.15 as we finally lapped the worst of Covid.
Organic revenue growth improved 29 points sequentially, 2 up 23% on a year over year basis, driven by strong sales record retention levels and same store sales recovery.
Looking at organic growth across the categories corporate payments was up 32% and the second quarter led by our full AP solutions.
We're seeing very good success, leading with our full AP and selling a more complete package versus just a standalone virtual card offering.
Fully P is clearly what we prefer to sell so we've reoriented our combined sales force with this focus and it's paying off.
Teeny card revenue was up 58% year over year rebounding significantly as business activity and travel began to resume.
And this T and E description is a bit of a misnomer and it's really a multi purpose card that can be used as either a purchasing card or as walk around plastic depending on how the customer wants to use it.
And while spending within teeny related categories has rebounded it's still below historical levels. So there's clearly room for further improvement there.
Cross border revenue was up 25%. These results do include 1 month of apex with pro forma results for Q2 last year. So it's as if we owned it in both periods.
And finally virtual card revenue was up 13%.
Both of these areas are still affected by Covid softness and industries that we've discussed before like airlines cruise operators hotels, and restaurants international trade and commercial construction to a lesser extent.
We do believe much of this softness is recoverable, but the timing is hard to predict.
Fuel was up organically and 19% year over year with strong retention trends and record digital sales helping to drive the performance.
We still see opportunities for further softness recoveries and fuel once the labor shortage affecting our large trucking fleet customers subsides and offices reopen more broadly so our white collar commuters can return to normal activity levels.
Tolls was up 9% compared with last year and showed impressive performance and lighter for lockdowns in place for much of the quarter.
This growth was driven by record first half tag sales, demonstrating the value proposition and attractiveness of our offerings, even when many folks arent driving on the roads and.
And approximately 1 quarter of all consumer tags sold year to date are signed up to urban plants, which allow purchases beyond tolls such as for parking fuelling and fast food.
We also added 25% more fuel stations to our tag acceptance network during the first half with plans to add another 50% during the second half.
The combination of urban tag sales and non toll network expansion should produce beyond toll volume growth as lockdowns ease and consumer activity increases.
Lodging was up 39% with work force up 36%.
Pace of improvement and work force lodging has leveled off some as customers are being held back by the labor shortage, but we feel this volume will come back over time as the labor market normalizes.
Airline lodging was up 49% as domestic air travel recovered faster than expected, but still remains below historical norms.
For National airline margins should come back as international Air travel recovers.
So despite the sizeable recovering and lodging, we still see upside potential here.
Gift organic growth was 22% year over year benefiting from continued retailer embrace of the online sales channel.
We expect this trend to continue as we are experiencing success with gift clients using our proprietary platform to sell both digital and physical cards online.
In fact, we expect to double the number of clients utilizing this platform by year end.
Momentum and mobile wallet services, and B to B sales, where third party sell gift cards to companies for uses employee incentives and rewards are also contributing to the improvement.
Looking further down the income statement, our operating expenses were up 18% to $370 million totaling 55 per cent of revenue.
The increase was primarily due to higher levels of business activity.
The effect of currency translation impact on international expenses and acquisitions.
We've also made incremental investments and digital sales and top of funnel marketing efforts and encourage some nonrecurring integration related expenses for apex, such as severance and platform migration costs.
Operating margins improved 4 points from last year to 45% due to recovering volumes that have higher margins higher fuel prices and solid expense control.
In the quarter bad debt was $6 million or 2 basis points.
Credit performance continues to be strong, although we do expect our bad debt to normalize as our new sales improve and grow.
Interest expense increased 7% to $34.7 million due to a $6.2 million charge associated with our debt refinance a higher balance on our new term B note, partially offset by lower borrowings on our revolver and lower LIBOR rates on the unhedged portion of our debt.
Our effective tax rate for the second quarter was 25, 2% similar to last year and reflects a $6.5 million dollar adjustment to our deferred tax position due to a rate change in the U K.
And our guidance, we are increasing our expected tax rate for the year, given this adjustment and and assumed a lower level of excess tax benefits on stock option exercises in the second half.
Now turning to the balance sheet.
We ended the quarter with $1.3 billion of unrestricted cash and we all.
Also had approximately $1.2 billion of undrawn availability on our revolver.
In total we had $4.1 billion outstanding on our credit facilities and $1 billion borrowed on our securitization facility.
As of June 30th our leverage ratio was 2.62 times trailing 12 month adjusted EBITDA as calculated in accordance with our credit agreement.
We repurchased approximately 926000 shares during the quarter for $246 million at an average price of $266 per share.
The board increased our share repurchase authorization by $1 billion on July 27th, which now gives us $1.6 billion of share buyback capacity.
Now, even including the recent buybacks the apex closing and the pending <unk> deal, we still have low leverage and ample liquidity for additional deals and or buybacks.
Our high margin high cash flow business, which generated $268 million of Eni this quarter quickly replenishes capital, allowing us to pursue attractive buying opportunities as they present themselves.
And let me share some thoughts on our outlook.
We are raising our full year revenue guidance to between $2, 7 and 4 and $2.79 billion, which is up over $100 million at the midpoint.
We are also raising our adjusted net income per diluted share guidance to between $12.80 and $13.
Or 12.90 at the midpoint.
FX is a big contributor as is a better macro environment. In addition to volumes that improved faster than we expected in the first half of the year.
We continue to be encouraged by our strong sales and retention trends and currently expect Covid volume recovery to continue through the second half of the year.
We are being mindful of the potential impact from the Delta variant and will adjust our outlook and operations as necessary.
We are expecting Q3, 2020, 1 adjusted net income per diluted share to be and the range of $3.35 to $3.55.
You can see our full updated guidance and assumptions and our press release, so I won't reiterate them here.
I would note that our guidance does not include the impact of the Aley acquisition that we just announced will update for that when we actually close the transaction.
In closing I'd like to thank my 8000, plus fleet core colleagues around the world, who persevered through the pandemic helped us return to growth this quarter and have positioned our company for a strong second half and beyond.
With that said operator, we'll open it up for questions.
Thank you and if he would like to ask a question. Please press star 1 on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May press star 2 and he was like 3.
Remove your question from the queue and fair.
Since using speaker equipment, and it may be necessary to pick up the handset before pressing the star keys.
Our first question is from Sanjay <unk>.
And with it can't be Debbie you. Please proceed.
Okay.
Ron I'm curious what surprised you and the second quarter in terms of sort of relative to your expectation as you looked at the strength and I know Charles you just mentioned.
You guys, just sort of anticipating the rebound.
But the second half guidance didn't go up a whole lot understandably last quarter, you guys took up guidance I'm just trying to reconcile all of that if you could just walk us through that thanks.
We are having technical difficulties.
Well we.
Difficulties just 1 moment please.
Yeah.
Okay.
Hum.
Okay.
Hum.
Okay.
Okay. You May proceed thank you.
Yeah.
Hi, James Rob I don't know.
And every now and I can hear you.
Okay great.
So what I was saying.
Brian cut out here is.
Most surprising sales right.
<unk>.
Previously kind of decline that right from a year ago, where we were against the baseline.
And so to basically post really a record number.
And really almost across the board I would say that that's probably the most surprising most most positive thing and.
And then.
And I'd say, it's just.
The weighted ability, obviously competent and this year we were low.
Cautious right should we give guidance, how well can we plan and this business.
Et cetera, and so I'd say.
And this quarter and the first half along with our outlook.
And.
Debt basically things are tracking as well or better and kind of and the plan that we built.
So that those would be the couple of things from me.
Okay.
And I guess im sorry.
If we think about the second half.
You guys aren't necessarily expecting thats great.
And that strength is and it's outpacing your expectations.
Is that because we're sort of putting in some more conservatism or.
Or something else.
Yes, that's a good question. So I'd say a couple things. So again, we have taken off.
The second half from from 90 days ago, but.
More importantly, I think.
The sequential number was already up a lot.
Before we printed.
The number for Q2, I think I commented 90 days ago that our full year number and our Q4 revenue up I think 100 million.
And from Q2, so that that would be my second point that we were all looking basically making sound and box and in second half versus 6.
Have a good quarter here, so there's still a lot, but but we had already.
The forecast and the thing to sequentially keep improving and.
Got it got it and then my final question just.
I always ask this question and just M&A pipeline I know you guys took up the share buyback is that a reflection of the M&A pipeline or or alright.
There's opportunities to do both.
Yes.
Yeah, So I think I said and the last call. We all we always start with hey.
And why do we have attractive things in front of us and and yes, we do and that's what.
Cost is to refi the thing and and take up our liquidity so yes.
And I know it sounds a bit like a broken record, but in front of me as our pipeline sheet, we've got 2 and 3 things.
Closed and.
And on and we've got another 2 or 3 things that are.
We made you before the year's over so as always.
We've got some interesting things and then second.
We've got enough liquidity and I don't have it in front of me, but you know circa 1 billion by the Jubilee and <unk>.
And what 250 million of course, that's another 500 and the second half. So we really got for one's kind of plenty of liquidity.
<unk> ratio and things in the mid twos and they were all together I think we feel pretty able to do Sanjay versus anything we want.
Perfect. Thank you.
Our next question and from it teams for a study with Morgan Stanley. Please proceed.
Thank you very much and I appreciate the color and commentary on the capital allocation and that kind of thing I wanted to dig in a little bit on the court.
And we have lots of science and we'll just move on until he retires and our next question is from.
Tenzing hung with J P. Morgan. Please proceed.
Yes.
Hey, Thanks, I Hope you can hear me, Okay, I think maybe building on.
Sanjay question around M&A, and just run due to the deals look similar to the as you call. It. The classic 2 deals you guys closed here similar in terms of size and accretion or somebody.
And somebody think perhaps bigger or smaller I'm, just trying to get a better sense of.
What you're seeing and what might be different.
Hey, kitchen, you can see if we don't like the questions, we just yanked and guy off somewhere.
Great strategy great strategy.
And your question so I.
I think looking at the thing in front of me.
As we got.
Kind of 2 flavors.
A couple of things that are similar to.
The apex and alley, there kind of more of what we do where we like the prices and they are accretive and that.
We've got a couple of things that are more adjacent and and I called out a year ago. This idea of kind of go out and the value chain and corporate day.
And AP automation as an example kind of do more from the client between as ERP and our payments. So we've had a couple.
Things like that that are not square and the categories, but you know net.
Pretty close to them.
Okay, good and it's fun and it'll be fun to see what it is and then just on the on the new sales front you said.
That was a nice surprise, how about and the second half I mean do you feel like there is some.
Pent up demand is let's hope everyone's sort of getting back to more normal or a business do you see that stepping up or maybe even more than the catch up.
Yeah, I mean, that's.
And that's always a good question. So so yes, we did our cash.
93% 10 G box review half past halfway through the year review and the sales forecasts are.
Absolute numbers are always higher in the back half. So we have forecast that are often up even more.
And against the 2019 baseline and.
And I did try it and I know, there's a lot of chat and the and these opening scripts, but I did want to just double down on the comment around the digital thing and I try and I try to call up and I'd say, it's the most hopeful like for me that I've done I've taken this question.
100 times that Hey, Ron can you just spend more why don't you just and that's more sales and marketing.
Sell more and all that kind of stuff and I've I've always said that hey, we want at good returns, we and our waste money and it's hard to hire.
Per cent and more people and yet turnover. So this time.
Different with the digital because you can kind of turn the crank right and away.
And and and generate more visitors and all of the call.
And he says we did that and generated 50% more visitors and Q2, and we had and the trailing baseline quarters. So that's the 1 place I'd say, there's a there's a ray of light there.
Being able maybe to really step up the.
Digital sales even more.
Okay.
And I'm glad you found on thanks for the update guys.
And good to talk to you.
Our next question is from Peter Christiansen with Citigroup. Please proceed.
Good evening and good evening nice trends guys really nice.
Earlier in the year I think there was this assumption that there was expectations that you'd make up roughly 2 thirds of hard hit accounts by year and clearly you're running ahead of that schedule. It's just wondering if you can update us on your thinking there and then just piggybacking on on the.
Last response.
How how are we thinking about.
Incremental outperformance, so far reinvesting versus dropping that to the bottom line.
Hi, how are you thinking about the decisioning there. Thank you.
And this is Charles.
So on the softness recovery I'd say.
And Pac as basically tracks and plan.
And a little bit differently.
And G&A spend came roaring back faster.
Domestic airline travel and lodging that's associated with it.
A few and the other areas were a little bit slower. So some of the industries that we called out.
And in terms of cruise operators or hotels, and logins are still haven't quite.
Recovered where we.
Thought they would.
So mixed bag and the good news is it is true.
And our plan.
We do believe there is still further upside moving forward into the second half.
So still optimistic and we'll get to where we more or less planned.
But it may be just coming a little bit different.
And it's Ron let me just jump on and off the back of Jack's comment your part B, yes.
The answer maybe not obvious from our Q2 results, but we actually spent some incremental money right.
Late in the quarter.
And kind of incremental digital investments and I spoke off along with it.
So I think I think the answer is to the extent and where we're tracking ahead of what we're committing to here I think you would see us spend.
Spend more money and we've got we've got some places where we think we can get returns.
That's great. Thank you. Thank you gentlemen.
Our next question is from mid teens, plus Eddie with Morgan Stanley. Please proceed.
Hey, Thank you very much and not sure what happened there technically but and I apologize if I.
And you already answered this question and my absence, but I was wondering if you could talk a little bit about the corporate payments growth. It seemed like that was a source of both better performance at least versus our model.
And especially accounts payable what are the kind of key drivers and strength this quarter and it was a quick follow up I'll just get it and know how correlated is that segment right now right.
Now with respect to fuel in particular, and and kind of the broader business more generally thanks a lot.
Yeah.
And so this is Charles.
The corporate payments business as you said kind of outpaced.
And number the other other businesses in terms of organic growth and it was really driven.
And by 2 areas of our portfolio.
And over 50%.
Our G&A teeny piece.
A lot.
Recovery of our environmental recovery I should say.
In terms of the full AP being up over 50%, that's driven by strong sales and so as we came through the pandemic.
So a lot of that product as people were looking for digital automated solutions, where you didn't have as many people touching invoices and you don't need as many people to run processes and.
During a lockdown and super helpful to outsource that that process was so we hired a lot of demand through through Covid and that's continued.
And so this year so sales continued to be strong there and youre seeing the flow through on the revenue.
Got it got it and and and.
And just as a clarification and then and so that flow through and and benefit that you're seeing is that driven by general read like just movement and accelerates and the business and how much of that is tied whereas being benefited by fuel prices and a little bit higher levels there.
And we don't have a lot of <unk>.
Buying in the full AP.
Area. So you have a little bit of it and G&A.
And our and our teeny or multi car business jewel.
About 7.8% maybe the spend.
But in terms of overall kind of what we call corporate payments and it's not a big factor.
Okay, great great to hear that thanks, a lot guys.
Hey, James.
Alright, and there's probably a technical thing to cut you off and just to add to the shop thing again, the retention and that business is all world, It's Super Duper high.
And then obviously, we had incremental payments with clients. We have so that that obviously drives the growth that continues to inch up.
Yeah, and starting to hear that thank you.
Our next question is from Trevor Williams with Jefferies. Please proceed.
Great Hey, guys. Thanks for taking the question and just so on the guide for the second half if we back out the.
<unk> beat the midpoint of the revenue guide at least for the second half there's a range of about $80 million from where you were could you just break out kind of how much of that is the contribution from FX.
Fuel is a little bit higher than what it was in the prior guy and maybe a little bit better FX versus just building and <unk>.
More organic revenue dollars and the second half.
Yeah.
Yeah. So the.
80 million lift.
Apex.
Runs about 10 million.
Roughly.
Per quarter I'm, sorry per.
Per month, so that'll be a sizable contributor there.
We are getting a little bit of.
Macro love with fuel prices.
And we'll be coming.
FX seems to be kind of okay. So so I'd say that between.
And facts of call it 60, and some of the macro and then we got you now.
The rest would be organic lift versus where we thought.
Okay and travelers from the macro and kind of go and a couple of different ways right. There's happiness.
Fuel price that you called out and.
And then their sass like for us like Covid and Brazil honestly is just came in worse.
Is it worse than we thought so there's kind of puts and takes and that but to me again.
And I tried to say it early on and low people, who heard me is it's not just so much the incremental guy and guidance to whatever 80, more and the midpoint is sequentially, even and previously we continue to believe there is an acceleration of the business again and if you look at second half versus first half right in Q3 versus Q2, we're talking about.
Revenue stepping up another call it $50 million. So so I just don't want people to Miss that.
And we it's a business we can plan and so we forecasted that debt that roll rate, if you will and at the end of the subsequent quarters.
Okay, No that's helpful and it I mean, it's all moving in the right direction.
And then just my follow up on corporate pay and there was good acceleration on the year over year growth rate, but really no change from the first quarter, just normalizing for the easier comp and I'm I'm guessing just based on the numbers Charles ran through and it sounds like virtual card is where theres still probably the most softness relative to.
And 19 levels and at least I mean, how much of that is the timing lag with invoicing from when you guys actually get paid there versus the potential for there being something that could be more permanent with the underlying customers and then just as a clarification. There I mean, how much recapture from those soft virtual car.
Customers do you have embedded and the second half guide thanks.
Yes, so trevor you're spot on in terms of where the softness lives, mostly and that virtual card area, where we would handle payments for cruise operators ticket operators.
Hotels, restaurants, et cetera, and commercial commercial construction continues to lag a bit and as well.
There is still some softness we're seeing lingering softness and the cross border business, which I'd call out there, particularly Australia that market struggling they've actually come back and the lockdown now so.
I'd say youre spot on.
This is structural meaning that we believe it can come back or at least most of it will come back. It's just more of a timing issues and potential is there it just hasn't recovered.
Hey, Charles It's Ron again, let me just jump on the charts thing the thing that's fascinating is it's super concentrated.
And I don't have the exhibit in front of me, but circa 75 clients account for half to 2 thirds and the softness.
And that particular line and the good news is they're still alive, because they haven't shown up and our losses.
So it's not and across the board thing, it's literally the small handful of Super <unk>.
Packed and clients that.
And are still kind of down, but not out and so to Jack's point to the extent that they come back we haven't planned a bunch of the second half of them, but to the extent that they stay open and come back and that could be happy force next year.
Okay got it and so there's not much from them that's embedded in the second half number.
Not much.
Perfect. Thank you.
Our next question is from Ted 2 Cheskey with Autonomous research. Please proceed.
Hi, guys. Thanks, and thanks for taking the question I just wanted to ask about beyond tolls.
I just wanted to get your appetite Ah just wanted 1 and ask you about your appetite there to kind of open up the credit lines and I think you mentioned that you expect the beyond tolls to contribute to revenue growth and volume growth. So what what's.
And what's the expectation there in terms of contribution to revenue growth.
And in the segment or to total company.
Whether that's back back half of this year or next year. Thanks a lot.
Yeah.
And that's why it's good it's a good question. So the first thing I'd say is it's been different than we planned because you know Brazil slit into.
Now.
Covid problem kind of and the February March period, I believe it's starting to come out if you look at the curve is it starting to kind of reopen so that's the first comment is the activity and people driving obviously is less and we plan, but what I'd say and at this particular thing is its less crap.
Because we do put some of the snap on credit cards, and and we do have experience with customers that we take money from their bank account and so we've got the credit line and control as a network issue for us and so we spent a lot of time optimizing the digits and the software does it go in parking.
Raj and fuel sites and fast food to get the right performance to get Super High performance and stuff and so we put a ton of capital I think junkets and the $10 million to $20 million.
Range get.
To build out and so they're adding network like Crazy now, which we see already even through this COVID-19 lands volume going up because we've got obviously millions of.
Consumers already that have the tag and they just need a gas station or a parking garage near them and so I say that it's a combo of those 2 things 1 the weighted which we build out the network and then to the range of recovery and people driving around and yet so I don't know windows that thing will cross the per whether it's later this year.
Or the beginning of next but I'd say, we're still based on the investment I just mentioned, we're super bullish on the idea.
Yeah that makes a lot of sense. Thanks. Thanks, I guess my follow up question, just maybe we could touch on on the Roger acquisition I mean, how is that.
And that cross sell progressing or are customers receptive to adopting that solution and any comments there would be really helpful. Thanks guys.
Yeah. Another good question, Ken So I'd say still early days and I guess, we've owned it for I think 6 months now we've had a few thousand.
Last time and looked at like 3000 and kind of active.
Clients SMB clients on the platform. So it's working it's out there we're starting to market and obviously, we had to do a lot of work to get the digital selling machine and the tech built in and get and combine it up and out of leak or assets and stopped and literally this month in August and we kind of launched cross.
So I think I mentioned, it and the top of my comments that we're taking the fuel card UI debt modest call. It 100000 clients use to to go in and pay their bills and basically putting in.
And the Roger payment platform to pay the bill and offer to pay additional bills. So that thing is is actually going live and this month so well.
We'll report back when I say again, where the category is Super all we've got a super good product, we're selling a few thousand we're making sure. The quality is good and were you know on the 1 yard line here to launch the cross sell so early but I'd say encouraging so far.
Great to hear thanks, a lot.
Okay.
Our next question is from Ramsey El <unk> with Barclays. Please proceed.
Hi, guys. Thanks for taking my questions. This evening.
And I wanted to ask you about EV and what are you seeing and the marketplace. Today are you sort of.
Planning for the future when it comes to thinking through this stuff or are you seeing fleets that are today and moving in that direction and other where does it sort of a demand side kind of pulling you in order to make these changes or you just sort of trying to see what's around the curve and and and prepare for it.
Hey, Ramsey, it's Ron and that's another really Super Good question I'd say.
And it's it's a mix so the the action. If you will is super pocketed. So we really only see stuff and you're so 1 we could mean and we talk about E D and who's doing what I'd say, it's all quiet on the western front here and and and all of the USA, but.
We see it in certain markets, it's pretty active for example in the Netherlands, it's starting to become active and the U and the U K and it's it's interestingly, it's starting with the big accounts and so what we are seeing is the corporate accounts, which I guess, we're trying to be green or whatever and have more money.
And and are willing to kind of dispose of the old fashion from Boston assets are part of the early adopters and the thing. So we are seeing.
Some exchanged on transition and among our client base at the debt.
And at that level at the corporate level and.
And part B is what you said.
And I guess the model clear, Okay, you know what spans and I'll get a chance to flip.
Slipped through the supplement we put out but to me, it's just almost shocking.
To drive a day.
And do the station and the UK motor drive and and E and into a into a polymer charge point, it's the same cost.
The guy who spends and organic sales.
A lot of money for those the fill up wasn't where the recharge like I don't know and that would be what people would think but when you look at it based on the you know the efficiency and the vehicles and the and the markup that the charge point, guys or charge and right there and you're like Oh I didn't know that you know something like LIBOR can actually get paid.
Because there's real spend and then this idea that we have live now of actually putting software at the employees home to so he's not burdened with its own electricity costs and put boxes and that stuff and we're getting a bunch of money for that and a lot of demand for it. So it's a little of both.
Big accounts start and.
And this way and that Australia and get out ahead of it. So we can articulate what the model looks like.
Okay. That's super helpful. Thank you.
Just a really quick follow up I just wanted to make sure that I got your kind of preliminary 2022, EPS view, it's effectively all in about 14, 7% to 14.90 is what you're seeing in terms of the base run rate and addition to the interest rate hedges rolling off M&A contribution at this point it looks like about 4.
14, 70 or 14.90.
Yeah, So let me let it be.
And so we're not we're not trying to give guidance. So let me let me go on the record and its really just trying to say Shanghai provide and I'll provide guidance here and the back half of 7 and box will just help and everybody will the math, so and a recurring business and that's an exit rate of 14, and that's just what we provide.
And then I just didn't Wanna Com and on a couple of Super Happy things, you know and work on deals and these are kind of fleet core wheelhouse deals and so they are rich with synergies. So our confidence my confidence is super high and that kind of 50 to 70 cent increments because obviously they were late coming into our company and the synergies are.
Our role as the year goes on and the other thing is our Sop and the friendship and took me through a couple of weeks ago that you know we made a bad agile rolling off and so I'm happy. So I just wanted to make sure people are clear that there is some happy setup things and our business, including the exit rate of the business and these couple of things that we can see.
But obviously, we're going to work hard to keep selling way more and buy and way more so why I wasn't and 1 second and try to suggest that what I'm, saying is anywhere near what the guidance is going to be able to hook that as we as we run through the year.
Alright fair enough appreciate it thanks.
Our next question is from David Koning with Baird. Please proceed.
Oh, Yeah, Hey, guys. Thank you and I guess my first question is just in the fuel segment, you know thinking about Q3 normally and we look back it's kind of flat to up a little bit sequentially. I think this quarter you talked about your fuel will be a little bit of a sequential tailwind which is nice.
But it seems like there's going to be more it's gonna be a nice sequential growth just the way you're kind of guiding the year.
And what what's all getting better like sequentially from Q2 to Q3, like what what's going to kind of drive that higher than normal.
Yes.
Jay This is Charles So 1 thing is we are seeing some higher fuel prices and that's certainly helpful.
As Ron mentioned also great digital sales, so sales are and and that business sales are recognized and turn into revenue pretty quickly.
Pretty quick translation. So that's helpful last year and you know sales were pretty awesome. So the accretive slightly different trajectories and we're back on growth.
But we want to be so.
And those couple of things combined with a little bit a little bit of Covid recovery.
And so it would go and those things combined will help help lift us a bit faster and in Q3.
For Q2.
Hey, David It's Ron just the 1 asset to Chuck's thing there is the retention I think someone Sanjay you asked me and the opening of the call it and I Should've I should've calls and what's surprised us.
So far fuel card retention I called out at the top of the call we hit an all time high.
Take it out of him or not but we were showing off and 94 per cent for the company, but inside of that we hit 92% from the fuel card business and so when you roll that through our sequential models that creates lift and the second half as well. So we're at all time, you know potentially get crazy good sales the checks.
And we're getting a little bit of macro happy from fuel and and Covid recovery. So you put it all together things climb and pretty good.
Yeah. Thanks for that and then I guess just as a quick follow up the credit provisions have been really low you know, we can see that and the cash flow statement and you mentioned it early and the call to is does your guidance. The rest of the year assume that that stays low and should we think of that changing much and in 'twenty..2 should we like normalize it or what should we think about there.
And David Charles So we are forecasting for credit to kind.
And normalize as we go.
And exit the year. So Q3, you get up a little bit of Q4 and get back and kind of what we would see more historically.
As we are selling a lot more now generally credit follows the sales and sell someone and I try to underwrite really well. However, some people do get through and they go bad and then they get weeded out and the based and performs better and so as we have way more new sales now we would expect that it's normalized.
And so.
What I'd say is you know going into next year I'd look for more kind of what we've done historically.
And as a baseline.
Gotcha, Alright, thanks, guys good job.
Yeah.
Our next question is from David.
To go with Evercore ISI. Please proceed.
Good afternoon.
Transformation of the fuel card.
You I and to a broader bill payment platform seems intriguing and reminiscent of what you did on the fuel card side. When you open that up to more of a beyond fuel card. So can you talk about.
What do you need to do to build this broader bill payment platform, mostly on the merchant acceptance side, because that would seem to be.
Probably the heaviest lifting with this type of a payments project.
Yeah, Hey, David.
Good to hear your voice on it yeah, It's all day.
We think it's a pretty big ideas and we're going live.
This month and I think.
You know the trend.
And just coming to us right that more and more of our both U S and European fuel card clients or use and are you.
You are using their phone and use and the desktop and particularly going there.
Chaos right their invoices right, whether they get an email reminder, and so we have all these clients showing off pretty frequently.
Syed you know our software UI and so what we've done what we've been working on is taking the low Roger.
Hey, software and basically making it the bill payment system of records. So when you go entity UI and click over to pay something that platform is working so we don't really have to rebuild that.
Bill pay platform and the network as we got that already and and honestly, we have all those capabilities from our other businesses you know merchant networks and you know the.
And the deals we have and our friends at mass fairway and all that other stuff vendors to do paper, making and everything so really it's just customers. It's just seeing if the house are comfortable using the UI to do more and then just pay offs and animal have certainly a report for you back but the numbers are.
Just staggeringly big right. It's over 100000, just here in the United States are paying a bill every month you know on the issue is so we're hopeful and I don't even want to call. It a super App.
Ear as more and more people are using.
And the software apps with US, we just want them to be more useful and and we've got another product that's ready to go so it's its own life.
Got it and just as a follow up what is the unit pricing looked like on this bill payment platform. When you go beyond kind of fuel card Bill pay.
Yes, so it's just kind of almost free at this point too to the client where we're looking at.
Whether we shouldn't we should get subscription Ani for the for the software if you will but really as you know we get paid.
Back and mostly the stuff that we run through our through our cards and then obviously cross border call. It 8 to 10 per cent of the stuff that could be cross border. So.
It will probably make it super attractive to our client base initially to get paid on the back side and then looked at the Sather and you know some software SaaS fees as we go.
Understood. Thank you very much.
Our next question is from John.
And <unk> with Susquehanna Financial Group. Please proceed.
Great. Thank you very much for taking my call. My question is on the corporate payments segment and then I.
He was actually looking at a company and Thats not traditionally a competitor of yours Cooper and you know 1 thing that they've been saying they as a software company and focusing procurement they'd be getting more involved and Cooper pay and I think what they would say is procurement and payments or payments of the procured items are actually complementary services and if I'm paraphrasing their position.
Right and they say why would you go if you if you're doing procurement with US why would you go outside and do payment. When these things 2 things could be bundled and I was 1.
Wondering what you thought of that sentiment I was wondering if you disagree with and if you disagree with that why and if you agree with it or is there any thought you would have that you would get maybe more exposed to the software side of the universe, particularly the procurement side of the universe.
Yeah, Hey, John it's wrong and it's also a good question. So first just FYI for you and company. We bought 2 years ago called invoice pay and Portland was the pay provider to pay and so we're pretty clear on book.
Base trying to do I don't think you can ask them that they've done a lot today and combining the pay with the software, but I know that that's their ambition.
So what what I'd say is you know per year or 2 we've studied and looked at a bunch of companies that have software and thats kind of off the value chain right.
AP automation and scheduling approval workflow software and these and on top of that kind of a procurement contract compliance kind of software that you that you've mentioned our take on it is it'll be all day about which means you know some clients will just take that AP automation software.
Like they do from Cooper and and not the day. Some people will just take pay like what we offer and how.
And people will take both and I think I've repeated that we probably will offer that we probably will offer the boat I.
I don't know if the law for the stand alone AP automation software and off of that that's our take debt based on the size of the company and the industry that they're in and the research that we've done is it won't be 1 size fits all and sounds like everybody is going to do it 1 way. So we think it's a good idea and something that will.
Look probably the offer we do partner with people, where we offer the pay and do their software. So we're studying how well they're doing it I call and peanut butter and jelly and hours or is it kind of be peanut butter jelly or is it going to be you know not peanut butter jelly. So I think the jury's still out at all.
Great. Thank you very much.
And and our final question is from George Melas with Cowen and company. Please proceed.
Hey, guys. Thanks, Thanks for squeezing me in.
And I'll ask 2 quick ones upfront I guess on the on the sales momentum the 106 per cent of of.
Of 19 levels, just just curious Ron and Charles.
You know what we're from a segment perspective that seems to be outperforming where you feel you're doing better than expected and maybe sort of the pockets of any weakness. If there are any from not from the new sales side and then separately.
Ron just just just curious at a high level out of Washington, any thoughts about the infrastructure Bill and what that might mean for for fleet. Thanks guys.
Yeah, Hey, George it's Ron on the on the first part of the sales thing. So yes, I think I mentioned, we've been surprise to the.
And the upside against the plan that we built and I say this.
I'm sure it was not binding to everybody, but it's been fuel we've actually sold a more a year to date and our forecast for the second half is actually higher and fuels and the plan that we built so most of the book.
And over performance against our internal expectations as fuel and most of that over performance is digital and Sally we keep growing the share of.
New digital accounts that were that were onboarding and as I mentioned, we're investing more at the top to try and drive that so that that's the over performance I'd say everything else is kind of mostly on plan and we're super pleased with it and as you mentioned the plan is up.
Way way out from from last year, and even up against 19, and so I'd say everybody else is kind of a deliberate and what what.
What we hope for.
And on part D.
You know who knows.
On the infrastructure Bill I'd say first tell me what infrastructure is.
And if it's like what it would be you know what you would think it would be which is you know kind of fix and stop and and construction centric. It could help us a lot of I'd say it looks a lot to us like the.
The stimulus from last year, obviously helped us get paid and helped a lot of our clients sales and and pay payroll and so I'd say the same thing that if that comes to pass and gets funded.
And it's regular old fashion economy infrastructure, where stuff gets built.
We're pretty you know weighted concentrated in that construction segment. So it's got to help us if theres, if theres more money and more work for those sets of companies.
And that'll flow through to us I'm not counting on it.
George Busway for based on the political thing, but if it comes to be and it and it has to be the old fashion and infrastructure, it's a happy per fleet.
And Georgia, Okay great.
And as Ron talked about the concentration and the construction vertical that's not just and fleets that also pertains to our lodging business and our R. A T.
AP and AR and virtual card businesses.
Okay.
Okay and that looks good.
George anything else.
No I think I think Ross that that's that's great color really appreciate and hopefully that's a that's a point.
Yeah.
And that does conclude our question and answer session.
This is this concludes the conference you may disconnect your lines at this time and thank you everybody for your participation.