Q1 2022 Fleetcor Technologies Inc Earnings Call
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2022.
At this time all participants.
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Now like you had to call over to your speaker today Mister Ron Clark. Please go ahead.
Good afternoon, everyone and thank you for joining us today for our first quarter of 2022 earnings call.
With me today, Ron Clark, our chairman and CEO and Charles for all I know CFO .
Following the prepared comments, the operator will announce the queue will open for the Q&A session.
It was only then that you can get in line for questions.
Please note our earnings release and supplement can be found under the Investor Relations section of our website hopefully core dot com.
This call, we will be covering organic revenue growth as a reminder, this metric noodle neutralizes the impact of your to your changes foreign exchange rates fuel prices Anfield spreads.
It also includes pro forma results for acquisitions closed during the two years being compared.
We will also be covering non-GAAP financial metrics, including revenues net income and net income per diluted share all on and adjusted basis.
These measures are not calculated in accordance with gap and may be calculated differently than at other companies.
Reconciliations of the historical non-GAAP cause most directly comparable gap information can be found in today's press release and on our website.
I need to remind everyone that part of our discussion today may include forward looking statements.
These statements reflect the best information has of today.
All statements about our outlook, new products and expectations regarding business development and future acquisitions are based on that information.
They are not guarantee of future performance and you should not put undue reliance upon them.
We undertake no obligation to update any of these statements.
These expected results were subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect.
Some of these risks I mentioned in today's press release inform me K and in our annual report on Form 10-K filed with the Securities and Exchange Commission. These.
These documents are available on our website and it is to see that Gov.
Now is that out of the way I will turn the call over to Ron Clark, Our chairman and CEO Brian .
Okay. Jim Thanks, Good afternoon, everyone and thanks for joining R Q1, 20 twenty-two earnings call.
Upfront here I'll plan a cover for subjects. So first give you my take on Q1 second.
<unk> lay out our updated rest of year 20 twenty-two guidance.
Third I gave you a brief update on our Russia business.
And then lastly, I'll share some new things some good things happening in the company.
Okay, Let me make the turn to our queue. One result, terrific really really great performance, we reported revenue.
789 million up 30% in cash EPS of 365 Ah up 29%.
Revenue came in a very strong about 40 million above our queue. One mid point guide with only 12 million of that beat a macro related so a lot of very good fundamental overperformance in the corner.
Organic growth overall, 15% Africa Q1 in each of our four major lines of business, all growing organically double digits trends in Q1 excellent sail up 39% versus.
Versus last year, we added about 50000, new clients to the fold.
Sold in Q1 and over 50% of all of our new global fuelled car clients came to was digitally so a terrific sales quarter.
30 revenue retention of 93% and healthy same store sales for the quarter at plus 7%.
So Q1 really one of the best quarterly performance is that I can recall.
Alright, let me, let me shift to our updated rest of year 20 twenty-two guidance. So first off we're expecting a bit of a mixed macro rest of the year.
So on the positive side, our clients are healthier spending.
Spending more which we can see in the volumes.
A fuel prices are at record levels in the Brazil currency has rebounded some since the start of the year on the not so good side were out looking higher interest expense really depending on the pace of the rate hikes and likely higher bad Dad X.
<unk> the real wildcard we thank for rest of year is the Brazil F. X has continued to be quite volatile year to date.
Fortunately, we're enjoying a pretty strong fundamental exiting Q1, we've got healthy volume's. We've got record sales, we've got steady retention. So all the things that set up well for us for rest of year. So with that we're revising our 20 twenty-two full your guy.
Guidance today up as follows so revenue to 3.360 billion at the mid point, that's up $140 million in cash EPS of 15 60.
That's up 35 cents from our initial guide so a much stronger full year 20 twenty-two outlook. Today. Then then we had 90 days ago.
Uhm, assuming we achieve today's guidance it would imply a full year 22 revenue growth of 19% and full year twenty-two cash EPS growth of 18%.
So that would be back to back years post Covid, 2021, and 2022, and which fleet Gore would compound earnings by 18%.
I do want to remind everyone. We are out looking still meaningful sequential improvement in the guide as we run through the year with our queue for revenue expected to be up about 90 million versus R Q1 print.
Ah Okay. Let me, let me shift gears and give you just a brief update on our Russia business. So I'll start by reminding you that Russia represents a very small part of the company about 3% of revenue.
So on a 20 twenty-two annualized basis.
Russia will contribute about $85 million in revenue in approximately 77 cents and cash EPS.
The Russia business is really a pure fleet card business. It runs very stand alone and we employ about 600, a local employees.
As you can imagine we've been quite busy sent the start of the conflict we've been taking actions to derisked. The business, we've been complying with the ever evolving sanctions and we continue to weigh the various options that we have.
We're certainly being super cautious to take care of the well being of our employees.
So look we'll we'll continue to keep you updated as the situation evolves.
So last up today I'd like to run through some good things that are happening in the company. So.
So first some new wind so we've got a fair number of notable new wins and client renewals in the quarter. So so just a couple examples speedway Ah one of our largest North America retail partners recently extended their relation ship with us delighted with that.
That.
Amazon awarded us their middle mile trucking fleet.
Which is growing like a weed we won the eclipse Lee leasing a business contract in Australia pretty big piece of business for us in the region.
Second cross-sell, where we really liked the cross-sell opportunity in front of US, we're still exploring selling our corporate payment products into our fuel guard base, and we're progressing selling or add ons to our toll customers you've heard us talk about selling fueling.
We're also testing now selling insurance and even lodging, we did <unk> reach 1.7 million add on fueling transactions in the core our to our to our toll customer base, so progressing quite well.
Third E V. We're going on offense you know, we we've talked previously about building capabilities to serve our fleet use case and protect the customers. We have in the revenue. We have we have now identified a couple of new customer segments that we can re.
Purpose, we think R. E V assets like our network too and generate incremental revenue beyond the fleet business, so potentially hear some incremental revenue upside to the energy transition in.
And lastly, we had our Offsite outgrowth off site meeting last month, and and set the internal goal of selling 1 billion of new business annually within the forecast period.
Uhm, so pretty excited to aspire to a billion dollars a new business. We've concluded we have the product set now and the time to do it and we think we filled the marketing credit and digital underlying capabilities to do it so super excited about Jason a bigger number.
[noise], So love taken together, new wins cross-sell opportunities E V on offense and selling selling more pretty pretty exciting for us. So look in conclusion today just a few final fought so one R Q1 results were terrific.
Clearly better than we had expected.
Rest of year or full year 20 twenty-two performance.
Expected to be much better then we envision 90 days ago, [noise] and lots of good things new things happening in the company. So all in all we're we're in a pretty good place so with that let me turn the call back over to check to provide some additional details on the quarter Chuck.
Yeah, Thanks wrong.
So before digging into the financial results I'd like to make sure that you were all aware of the new investor deck, we posted on our website a few weeks ago.
In there we tried to simplify how we talk about the company and.
At its core three core provides a set of corporate payment solutions to help businesses reduce fat.
Now we do it in two ways, one by enabling and controlling what's purchased.
We call this expense management and it comes on a few flavors fight fuel tolls and lodging.
Four two by enabling controls after the purchase but before the payments have been made we.
We call. This a P payments, where we provide the options businesses have to make their payments such as online bill pay full a P outsourcing virtual cards and cross border.
So when you think of it this way the company really does only two things expense management and a P payments in a couple of different ways.
So with that context, let's look at some more detail on the corner.
As Ron mentioned, we posted an impressive 30% growth quarter, including 15% organic growth, which I'll get into in more detail in a moment.
About 10% or $58 million of the growth was due to acquisitions, we made last year and.
And about 3% or $21 million came from macro tailwinds.
Speaking of macro fuel prices were $3.88 per gallon for the quarter higher than our three dollar 40 cents guidance assumption based on January levels.
Higher fuel prices contributed about $22 million of additional revenues versus prior year.
And we exited the quarter with fuel prices at around $4.50 per gallon, but we do think this'll moderates some over the balance of the year.
Fuel spreads in the quarter had a positive impact of about $5 million and we had a 6 million dollar negative impact to the lower foreign exchange rates as unfavorable movements in European currencies, which affect our cross border on fuel business more than offset the strength of the <unk>.
Brazilian Hey, I that helps our toll revenue.
Now moving to organic growth starting with a P payments.
Our corporate payables were up 23% and that was led by fully P outsourcing, which was up over 50 per cent, yet again, driven by continuing strong new sales.
Cross border was up 17%.
That's normalized for the apex acquisition.
Cross border team had a great quarter is new sales remains strong and activity recovered in Australia.
So moving onto our expense management solutions fuel was up organically, 14% is new sales growth of twenty-five percent and higher same store sales of 3% to 4% continued to drive the performance I.
I may sound like a broken record on this but we continue to see fantastic results from our digital marketing and customer acquisition efforts across this business.
Toes were up 18% compared with last year as the business just continues to perform.
New sales are solid and retention initiatives are showing to be quite effective as we highlight the differentiated value proposition we offer versus our competitors.
Barge and continued to perform well two up 22%.
Our workforce logging business has improved with higher new sales and better volumes.
Airlines again outperformed with organic growth over 65%.
In the quarter, we did announce the purchase of Lavar already and Airlines software platform company.
The deal is immaterial to our financials, but we believe the software combined with our lodging solution will drive more sales in the airline vertical.
Now looking further down the income statement operating expenses of $472 million represented a 38% increase over prior year, primarily due to the addition of the <unk> and <unk> operations increases tied to higher volumes across our businesses incremental bad debt stock.
Compensation, he and new sales generation activities and investments to drive future growth.
God that expense was $25.5 million or six basis points as bad debt levels have returned to more historical levels as customer spend increases with higher fuel prices and as a result of much stronger new sales, which tend to have a higher loss rates.
The EBIT a margin in the quarter was 50 per cent is higher stock comp in Baghdad expenses negatively impacted the margin. This.
This was largely expected as the company will took actions to stimulate growth coming out of the Covid environment. We still expect our full your EBIT margin to be in line with our original expectations of 52% is margins expand throughout the year, along with revenue growth and the increased benefit of cinergy realisation from acquisitions.
Interest expense decreased 23% year over year, driven by the effect of a 1 billion dollar fixed rate swap that matured in January and.
In the benefit of higher interest income earned on customer deposits and cash balances in certain foreign jurisdictions.
Are effective tax rate for the quarter was 26% versus 22% last year with the increase driven primarily by less excess tax benefit on stock option exercises.
And higher interest income on foreign deposits, which are taxed at a higher rate.
Now turning to the balance sheet.
We ended the quarter with over $1.3 billion in unrestricted cash and we had $969 million available on a revolver.
There was $4.9 billion outstanding on our credit facilities, and we had $1.4 billion borrowed and our securitization facility.
As of March 31st or leverage ratio was 2.72 times trailing 12 month adjusted EBITDA Yea is calculated in accordance with our credit agreement.
In the quarter, we upsized are securitization facility to $1.6 billion in order to accommodate higher receivables balances due to higher fuel prices, we intend to maximize the use of the facility given that it is the lowest cost of capital funding instrument that we have.
We repurchased roughly 1.8 million shares 1.1 million of which were completed under our 10 B five plan that we had in place in January and which were included in our original guidance.
We still have $1.23 billion authorized for repurchase and we believe we have ample liquidity to pursue any near term M&A opportunities and continue to buy back shares when it makes sense.
Ron is covered our full year guidance updates. So now let me share some thoughts on our queue to outlook and our assumptions.
Four Q2, we're expecting revenue to be between $805 million and $825 million and adjusted net income per share can be between $3.80 and $3.90, which at the mid point is approximately 70 cents or 22% higher than what we.
Report, it and Q2 of 2021.
Regarding our guidance assumptions, we are using $3.90 as our fuel price assumption for the rest of the year.
This reflects fuel prices of $4.25 free.
$3.85 and $3.65 for the next three quarters, respectively.
Clearly, we don't expect fuel prices to remain at the current elevated levels. So we're using this forward curve as the basis of our forecast.
Our interest expense guidance of $105 million to $150 million is based off of a library average of 154 basis points for April through December .
Our original assumption had liver of 54 basis points for that same period.
The rest of our assumptions can be found in our press release and supplement.
I would note that our rest of your guidance expectations do still include revenue and adjusted earnings per share from our fuel business in Russia. We.
Which are $67 million.63, respectively for the remainder of the year.
Moving away from the results and outlook I'd like to thank our circuit 10000 employees around the world, who helped us deliver a fantastic start to 20, twenty-two and who will be the driving force as we continue to grow her company. Thank.
Thank you for your interest and flea core now operator will open the line for questions.
I see a reminder to ask a question you will need to press star one on your telephone.
Question.
And please stand by while the compiled Boston.
Your first best friend.
<unk>.
<unk> J P. Morgan your line is open.
I think so it's nice to speak to you guys and the results look really great here.
I'll ask maybe you think Ron you talked about.
The the guidance change and it looks like it's well above the beep uhm.
Both macro and fundamentally as well so is there a way that may be break that up for us just to better understand with the the hundred and 40 million whatever that revision is.
For the full year, how much of that is is macro fuel, etc, uhm versus underlying performance being better.
[noise] your voice too so yes, simplistically the 140 would be 40.
Q1 hundred rest of ear and call that one third realtor for me that's two thirds macro help.
Got it and.
And then from a from a new sales perspective, I think you set up 39 per cent.
No you've always stressed to us the importance of driving new sales how about for the rest of the year have you upgraded your thinking on on sales productivity and targets I heard the the.
<unk> comment earlier, but just thinking about the next two to three quarters.
Have you changed your thinking is.
<unk> you have a really good question. So so yes.
On the.
And the thing that's interesting is.
You know higher fuel prices, obviously helps from a revenue perspective.
You know Andy are but they actually held in sales.
Literally it was a period the digital guys came down to be inserted yet.
March.
The search volumes were running about to ask.
Normalised level of <unk>.
Our sales in that business were super good in Q1, and we've taken up for gas rest of the year.
So again I said it repeatedly is the single best indicator.
That's right we can grow Papau sales February the 20th.
When we're trying to carve out of revenue.
Double digit obviously that.
Improves begin to that number and.
Alright.
Yeah, I'm glad to hear it.
<unk> thanks for the update.
Your next question.
<unk> Morgan Stanley .
<unk>.
Hey, guys. This is Jeff Goldstein offer James you were talking about in your prepared remarks about possibly seeing revenue upside to energy transition given repurposing repurposing. Some of your E. V assets can you just expand on that a little and talk about what needs to go right for you to actually see that revenue upside from the ongoing transition.
H as in it's wrong, so I don't want to get too much away, but I'd say there was.
A moment where.
<unk> you know the assets that we're building, particularly the.
Sure.
E D data and then the network the public network getting accepted.
To settle there uhm it up until very.
Recently, our whole focus has been you know serving basically are currently customers with respect to fleet customers with this and all of a sudden two or three other interesting customer segment likes what we have.
Okay, so that that.
Headline they're not sweet.
Kinds of customers that need help in a V until the assets that we bill for one purpose. We think are pretty transferable to the other and then D. We've actually got a pretty interesting target sitting in our in our M&A pipeline that would be supportive of that.
Right out of our move there so.
Oh really headline as we just open.
Basically sir.
Right is that of people in the ecosystem in and hopefully.
Got it that's helpful.
And then I want to ask about the competitive landscape within corporate payments. How are you thinking about competition and investment in that space just give in the range of new competitors increasingly attacking that opportunity set just anything in particular caught there.
Yeah, I need to add a line on that.
One is it it's just so Nathan I know that.
You know you guys have some theme of a the Disrupter theory.
New vehicle do and lots of new things, which is true, but I try to remind people, Jeff that's us where the.
Less than 1% of that.
[noise], it's fundamentally you know the banks did have most of what we call a corporate payments business. So it is a you know with the masses mm.
Payables basically to get digitized and to tell virtually with the banks and so it's I think it's a food frenzy really for all of us that are.
And you'll always have the new and I'm hopeful. The other guys that are new can get something too, but the real competition for us is the other.
The current provider. So it is it's super wide open for us.
Understood. Thanks for the call.
So your next question is from <unk>.
K B.
On line is open.
Thanks, Ron you mentioned, there's a number of ways, Russia can go.
What's the likelihood we seem meaningful negative hid from that region, whether it's related to sort of discontinuing operations or other macro specific factors in the country.
<unk> I say you know.
Really answer right, how that how that ball's gonna bounce, we're doing lots of things. So that you can imagine exploring I everything right selling it transferring and doing all kinds of things. So ballpark I think we're caring you know serve around 300 million on our books.
So the extent that the the thing where shattered and there was some complete loss that's kind of ballpark eat what what the number is.
So look I I don't I don't know, where it's Gonna go we've obviously got some ideas of how we're running a thing differently.
Cutting ties, obviously with a business a bit back here to the mothership and so it's really more of a wait and see you were gonna, possibly continue to explore.
Whether there's fires that are you interested in the business and honestly just see how the the conflict.
As a lawyer.
Okay, Great and I can't help but not ask the the M&A question, just because valuations have come in so significantly I mean.
How do you feel about the backdrop now and and what's really interesting in terms of.
He is you'd want to add to.
Yeah I think it's mixed is is what I say honestly.
You know, we're always working a pipeline Oh no different today, we've got three or four things and I'd say if I won.
Though some of them are later stage some of the salaries haven't moved a lot you know we point out a you watch it like even today you know some of the cough groups. So I'd say some some people are just I think kind of stay and put maybe you're gonna wait to see if things come back and then I say, there's a couple of new ones.
Things that we'd negotiate it let's say in the last couple of months, we've been able to agree to prices that we like.
For us so I'd say it's.
Interesting, but it's kind of mixed not everybody is as you know we sat but I think some people have.
Okay, great. Thanks.
Your next question is from <unk>.
That's all of my please your line is open.
Hi, Thanks, so much for taking my question I wanted to ask just a general question about corporate payment came in <unk> higher than our number and I think the street number is well what kind of outperformed in the corner versus your own expectations. What are you seeing that business is just really working right now.
Yeah, Hey, Ramsey is raw and I'd say everything in there or if the sales were good we did get a bit of recovery and the base and that business. You know we talked about some of the clients get healthier for sure.
<unk> I don't know if you'd call it out before but we have a bit of with all the model of the car business and and it's not only purchasing but it does pick up the time travel so like others. We got some decent amount of that back you know the full a painting is warning was still you know, 50% plus up in the corner and despite.
You know eating and a giant cross the water business, you know not that long ago. The the cross border business was also better than we thought mostly Australia.
You know so that that does this originates really in for four markets for US one of which is Australia and it was when I <unk> I mean, it was silver in the ditch and 21. So it's really I'd say, so have a fair amount of underlying health and Australia cross border and the amount of the card.
Business and I'm really just again super-duper sale, so kind of all work in there.
Alright, Okay, and I wanted to ask you too about your comment on the easy strategy and sort of going on the offensive there.
This.
This is a bit of a new one so I think it's important or is this sort of in response to what you're seeing in the marketplace in terms of sweets starting to shift in this direction or is this more you're seizing an opportunity because you see well the opportunity to kind of shaped the market and create a customer and you know drive revenue in a new way in a market that looks like it's about you.
You sort of involved in the right direction cause it kind of reactive or or the opposite is kind of is the question.
Yeah, I think it's b, it's the it's the opportunities I Love you still Super-duper early days as you guys know I think it's just one of those.
Things, where you look at everything we've been doing it for a couple of years I made a bunch of investments. We you know we.
We work our system so that it can come by you know easy and and and combustion and we've worked on network building and contracts and all this kind of stuff. We're doing all this stuff right in preparation of serving our clients and then kind of out of the woodwork. A couple of non fleet customers kind of poke their heads up and go ahead.
Need help wanted to stop for like wait a minute here why are we just trying to make a good sleep transition why don't we take advantage of the new needs that are being created given we have these new assets and stuff. So I think it was honestly like shame on shame on me shame on us it was a bit of an Ah ha moment, but.
As I mentioned, we've also got ideal once we had that idea of your months ago. We've we've <unk>. How long has this been changed on that a bit too and so it's.
It's a super Duper way of hedging. However, this goes right. If it goes slow which is my pet.
So I'll go slow if it goes faster we could have something that actually goes up any event that our other things fix that once again, we don't think much early days, but instead of people call in a look it's sad really or maybe the Holy moly, they're gonna hold on to most or all of their bleep business and I got out of if they're gonna be beneficiary.
The south of new because of what they built so maybe people like Wow.
Cause he literally ahead positive yeah.
Today is and and we're obviously gonna provide way more info here what is appropriate as long as those customers are and what we're gonna do in N y and can be outside but I'm, telling you. We're we're super excited about it.
That's great. So it's still quite early days, but you're you're laying the groundwork for for for whichever way. It goes I appreciate it thanks for that.
Hearing from the people I mean, the only thing I want to make up or is it just you know on Clark's brain turn it alone in the ninth if there's actual prospective customers out there talking to us and and taking on some of these things. So it's it's real which is the other thing I wanted to make sure ear mmm.
Great alright, thanks, so much.
You got Randy.
Your next question.
Andrew Jeffrey.
Your line is open.
Hey, guys discuss stepping on for Andrew.
Justice when you look at the cycle and you're kind of starting to see rising badge that expense is that safe to assume reflects some late fees and overdue balances.
<unk> commented that that's kind of happens with be higher new skills are you seeing be bad <unk> because of the existing client. Please as well just cut person that I would be very helpful.
Yeah. This is Charles so.
Yes that that came in higher.
And part of that is due to fuel prices price you have higher fuel prices equal higher customer balances default that's unfortunate.
Then, yes, new sales tend to default much.
Much higher rate Rachel once we underwrite someone if they stick with it for a couple of years that can be okay. The first year that when you get hired losses. So record sales last year and continue to record sales and keep one of this year are are driving some of that.
Fuel prices are normalized throughout the course of the year that will also normalize a bit down but for this quarter at the 25 five it came at a little hot.
Okay helpful. Thank you and following up I want to ask about the efforts to drive it feels worse broke devotee.
And where we are in terms of the glidepath driving cross sell it <unk> <unk>.
Oh boy.
And can you just repeat the question again I missed the first part of it.
Sorry, just wanted to ask you guys to talk a little bit about salesforce productivity and kind of where we are in the glidepath driving crossover core beg to sleep.
Got it so let me take the first part first which is just sounds part of its.
You know I was.
One two and three on my list and Ireland's right. The more we can sell from I asked the perspective and the more efficiently. We can sell at <unk> at least the profitable sales profitable business. So it's a huge focus I'd say the two things that really help our aging right of our people based assets.
We have people in case, some people and territory long or they get more productive.
So we made huge strides increasing the head count in the last couple of years. So now we're getting some benefit basically from that aging off the people side and then on the digital side, it's a bit of a breeder reactor right the bigger the business gets.
Ah smarter, we add I've had a match and he would've put AD and try that have it and everything else so that business keys.
Getting better basically we keep getting more effective at it because we keep getting smarter.
As well as you know the the Googles and stuff index people that have successful thing so to the extent that we get better or organic portion of free portion of digital selling gets higher and so all of that other than the inflation of people getting more it's super path, so not only a way to <unk>.
<unk> production or sales land were also in a super attracted pasta sales as well.
The second part of the question the court a cross selling like I mentioned I think I mentioned in the last 90 days, we kind of paused selling.
Decor K payable solution until we put the platform and so what we started out with <unk>. The first couple of thousand houses, we went to Ryan Clarke Your guard Guy and today, we're giving you a new way to pay us pay your bill to us and here. It is all you like it and Oh by the way you can pay some other bills.
And we found out it was maybe a into my <unk> My cheese and I paid the Bill 90, pitching me something else and so we decided basically to do the first thing put the platform in.
To make sure people are comfortable being able to pay us on this new platform and then go back which we plan to do in this quarter and Q2.
So while I'm home and have a better update for you in terms of demand and stuff when we speak next time.
Thanks, guys.
Your next question is from here.
Bank of America.
Hi, Thank you for taking my questions. It maybe I'll just start with a few <unk> business can you talk a little bit about just April Clinton's obviously, if there's been some chop around you know sleep recession and things like that.
What what are you seeing in terms of fleet miles driven those holding up nicely any any commentary about what it would look like.
Yeah. This is Charles.
<unk>.
Over the road business.
Deal with Big trucking, which is like you mentioned you see a little bit of softness in that business what is it.
Yeah, a little bit <unk>.
Single low single digits, but it's.
Here's related to vote driver shortages as well as now with supply chain issue, so some truck and or trailer shortages, so, yes, a little bit of softness there, but nothing material.
Okay and then just in terms of wanted to go back to your comments just about you know the guidance, increasing and if I think if I followed it right. The fundamental improvement in the guide is you know other than the first quarter beat obviously, excluding the macro and few looks like put the 35 million.
Are there particular segments that are driving that increase in terms of your expectations that maybe just <unk> a growing group foster than you would expect it all you pay 30 outgoing would it be going faster than you did at the start of your [noise].
[noise] sure. So obviously the the benefit from fuel prices. So I'm. So most of the the macro you see there and also in terms of.
Come back in terms of Covid, you seen a whole lot of that in the lodging space.
Which we expect will continue his pent up demand for travel will help our airline logging business. So we have a lot of sequential improvement expected getting a business in particular.
Okay.
And this is my last question.
Just in terms of you mention you'll see it was false productivity or the inquiries, increasing because of higher fuel prices, but just can't talk a little bit about just how you are managing the credit side of that right. I mean, some of the folks phobia coming to you just because that stretched it might have you know used up there are the existing line on <unk>, what about methods they used to.
<unk>.
And I was just looking to increase there'll be able to borrow so I just need to talk about how are you managing the credit side of that thank you.
Yeah. So we are taking a look at policies such generally will underwrite to a full amount and then as prices go up supposed to call me to ask for increases in what we underwrite them or underwriting someone new we're looking at an amount and if we can't come.
For all their volume, we do lose a bit of Cheryl wallet in that regard.
So we do watch it closely it is an area, where you can quite quickly monitor spending levels and such so yeah. We get a good sense for someone comes on or are they good are they performing their fuel volume, sending me pretty stable and so as long as they're with us for awhile I will feel more comfortable to kind of ride.
The prices up with them, but for new clients, it's pretty stretched right off the bat, there's an amount if I can cover what you what you've got great. If I can't then we will have to share a wallet stuff in the early days.
Hey, it's wrong, let me let me just add on one other track it worse in the fuel card business, which is we change the payment cycle.
So your appointment forgetting a lot of digital stop in and it's not screening out as well <unk> one of the things. We can do is effectively like in trucking move it to you know daily daily or at a local business you know a little bit to weekly weekly Ned fine so because.
Because of the you know the turn of that kind of business and they usage and stuff.
We do a fair number appliance that are on shore of payment terms. So obviously, that's a way to check is going to still basically bring on customers, but but basically you know minimize if you will the limits of the law says that we can occur.
At a certain savings, where we don't feel comfortable pushing up pretty good.
<unk>.
Thank you so much.
You got it.
Your next question is from Jeff cancel Wells Fargo. Your line is open.
Hi, Thanks for allowing me to Jordans cost.
You said it.
Uhm.
[noise], great results here, and you're giving us a ton of color maybe could you digging someone to call. So maybe you know <unk>.
Sort of talking about a survey where those opportunities developing.
What are your date of all beings and maybe could you separate those out for US and you can dimensionalize from I guess, the ultimate goal would be to have some sort of framework for thinking about how cross sell revenue fits into our models. So just wanted to see if we can think about crosstown appropriately certainly seems like a nice opportunity for Ya.
Thanks.
Yeah, I'm I'm not sure what's wrong with my cache of the thing are you, saying, Hey, how how do we use a company.
Hang about and measure the cross-sell opportunity I think.
I think we've had a run through it that we we go area by area. So if you'll garth.
<unk> Court, we payments. So we sell you know companion cards and there were selling you know bill pay in the air.
And our total business I mentioned before selling fueling I mentioned resolved you know January at 1.7 million transactions in the corner when I was starting to sell insurance and Ah logging business. Obviously, we've added cars that allow the same client that by logging goodbye am or other kinds of travel.
If not lodging and so whenever you're virtually every business we have because we've gotten bigger way more products now we're taking that was related products you know back to the group that we have and.
I guess, we could report out Jim if it's interesting out of what those sales revenues add up to people who are interested but I'd say, we're making pretty good progress on most of them I can say, we paused the the core pay Pamela wanted to get people on the platform first but what we have 800000 customers now.
Bending you know vermilions weather, so obviously <unk>. So we got you know.
Plenty of opportunity to sell products back.
Okay. That's a great color and then May I ask if you could do the same for your new <unk>, how many coins new card was did you say you have this quarter and.
Could you provide any color what you think it's driving then I guess, if you think back to the last year the year before.
His name is came out about now about while you're winning versus previously just curious if you could give us some color cause I. Just you know be able to follow up will be you know I would hardly sizeable any sort of dimensions to that would be great as well.
This is Charles so I think you're on the the new client Williams I think Ron mentioned, we had 50000 and a quarter of new clients a lot of them tend to be small digitally acquired.
A lot of them in our fuel base, when we get into the corporate payments Arena, we do so more in the mid market. So it's they are larger clients of such so we'd get those really depend on on the business that you read in Brazil. So you know lots of consumers tax and such so independent we are still in the maid showing individual products.
Your prospects are not really bundling, yet and it's one of the big opportunities as long as you mentioned it before is around the platform. So as we filled out the platform and it has multiple products payments once we sell it and then people can in turn on that additional functionality, but we haven't been doing that as of late so a lot of the new ways that you're seeing.
It's really a function of just better sales performance and I'll walk coming through you know digital channels.
Okay, Thanks, very much and congrats on the results.
Thank you.
Your next question is from Peter Simpson S.
Ah City.
Open.
Good afternoon, gentlemen, great results here.
I expect that you would like to see wanted to ask Rottweiler and you call that some really nice queens and fuel card space here some large deal.
Just just wondering if you provide some color on on how you're seeing RFP activity. These days, maybe looking out the next quarter or so looking for large deals are you seeing healthy activity.
In the in that area.
Yeah, I don't think it's anything eight out of the ordinary I say currently you know with the the larger accounts, which we call out because we have 50000 new account that.
The board would take the rest of the call the run through those names I, I'd say that enterprise and partners.
They run on cycles, they're under contract with us or someone else and they come up and so no no no super.
No change I think in in that in that right I do think there's some kind of newish your different kinds of stuff like that Amazon, saying that I mentioned, so there's some different kinds of players a bit.
A little bit on the E. I, so that that would be the one difference I think some of the.
New business that that's out there is just a little bit different in terms of the type of business. It is.
Mmm.
And then I was just curious you know how you're thinking about utilizing some of the macro upside that you've been enjoying obviously, you're getting a lot more inbound activity with with higher fuel prices just in general but in terms of dedicating more spend variable spend to digital marketing things like that.
Verses, perhaps you know letting some of that Florida. The bottom line. Just just wondering if you calculus is change there and if you're thinking about anything differently at at this juncture.
Yeah. That's a good question, so I'd say not add a lot. So so a couple a couple of reasons one is.
We already you know fed the army air of it. Thank you will like we said at the beginning of we we gave because we could get a profit target this year more expense growth than normal.
I T. So one I think our our initial died and another guy still a decent amount and it too is you know I don't love the uncertainty two thirds of the side you know being the plan at the Atlantic and you know shift around and read factor on Assam, and so I don't like to spend money that like.
Yeah, 100 per cent down onto that that would be number two with.
That I would say you hit the one area. If there was one area, where we would and and I do plan just been a bit more it would be in digital selling and the reason is you can't you know unlike some of the other things to take way longer to build right and prepare and to get into the market.
You know the digital Guy can walk down in my office and say look you know we're getting twice the things you do you want me to spend another you know two or 3 million Bucks. This month so.
Because it fails, which which you know it was great for the future and because you can do it quickly that would be the one area that we would we step on the gas.
But.
Alright. Thank.
Thanks, so much nice nice Joplin.
Your next question is from David target Evercore ISI. Your line is open.
Yes. It. Thanks, so much I appreciate you taking the questions I have two first step rod that we're looking at the 19 per cent growth in corporate payments.
Could you talk through what were the strongest growth verticals in the corner and then based on a new business signings that you saw what would you expect to be kind of the highest growth verticals within corporate payments going forward and then the second question.
Looking at the 18% revenue growth and the total is business is it possible to breakdown the growth contribution of that 18% between told tags and transaction growth.
Yes, let me anyway, good to hear from you David <unk>, Let me take the the first thing so when you're referring to vertical that onto your front of the customer verticals as products, but let me let me try to answer bozo on the kind of product lines I, what we call the full a beautiful outsourcing is.
Is obviously going right great throw in over 50 per cent. So obviously well above the light average and the good news, which is which you apply is it also represented half of our sale. So a much larger part of our newest sales and it does have a revenue obviously, which is why it. It's it's it's growing.
I asked her and then on the on the customer side I'd say.
We're just goin', we're going gangbusters in the <unk> in the construction vertical.
That that vertical has come back it's super healthy at least here in the United States, We've got a a super great position in terms of Parker's.
Adding an E. R. P. R. Because we had a great merchant network and so the sales any interest from that channel is it just the record levels for us.
Not sell it out in places too, but but that what's goin' break.
Sure I'd want to take the.
Second.
[noise] yeah.
I think if you.
<unk> even in our.
Service to financial you'll see you needed a cheaper saying.
And tolls, 5% tag Rose.
Perfect.
And so part of that is pricing adjustments, we make some of that is inflation in the country, which we can pass on to the card holders and.
A little bit of it if some of the M D or that we're getting from some of these non total related purchases like parking or fast food or fuel, it's still a fairly small piece, but as we filled out, particularly the fuel network. We would expect it to be much more in the next couple of years.
Hey, I knew you you've been excited this whatsoever.
A little bit of the forward you. So mmm I call about 1.7 million transactions with the Guy that runs that business is that what made it it'll be $10 million plus.
For the year and so the thing is gone from pay as an idea you know, let's see how we go do it you know really exiting even even drove me a grown like a weed. During this year and next thing it does sound kind of crazy level. The only plan a double again next year. The accepting size. We have the same 6 million you know vehicles or tag older. So.
It's a little too early to say they should accomplish but that thing is really working out.
Great well I appreciate the insights and it'll be exciting to track your progress Sir.
Thank you that I appreciate it.
Your next question is from.
George.
<unk>.
Alright, let me at my my congrats on the quarter and thank you for reference squeezing me in here I guess the first question Charles if we just look the updated guidance, you're you're you're you're taking revenues up you know five per cent higher than where where there were previously the.
<unk> net income that's going up about two points, if there's a bit of a differential can you just kind of bridge that gap for so I assume one of them that are part of that is gonna be interest expense, but maybe what else is maybe weighing down some of the the grill to be adjusted net income relative to the the.
Better revenue outlook.
Yeah, <unk> definitely interest expense will be going up the other one is our tax rate. So in the first half of this year, we are still getting some benefit from stock option exercises of some very low price stock options that are actually expiring and came to.
<unk>. So we don't see that we will get that benefit in the second half essentially that of course change the flow through.
H O are just wrong, let me let me just just add to that it's all below the line so the hundred million.
Of kind of upside from from our initial guy right rest of ear, Hey, why isn't it flowing through its E. D. A line <unk> it will be up a couple of points from our two one print. So we will get operating leverage down there. It's all the two things charges that I mean, it's a whopper for cash we have.
Interest expense I mean, who knows we put in I think shaq has it in the in the back up there. Some honestly massive increase is we run through the year in interest expense and then a tax rate again, it's high I mean on you know a billion three or four of cash P. B T. You know every point or two is bad.
And so we're losing interest in those two things, but I want to make sure of April here at the operating leverage line that that thing is flowing through it's gonna be way better than Q1.
Okay. That's that's great that's exactly what.
What I was getting that's a really appreciate that color and then you have to worry about the interest rates down that would help us do.
[laughter] <unk> fairpoint that that that that might be a bit a bit tough to you just just to to close at that point. How many rate increases are you factor in getting out of this increased interest expense guidance and again. Thanks. Thanks, guys. Congrats on the up on the corner.
Yeah. So we gave kind of a forward curb on fuel prices. Let me give you the forward curve there were using for the interest expense.
LIBOR equivalent of 83 days since you 259 votes in Q3 221 bitch. Thank you for.
[noise]. Thank you.
[noise]. Your next question is from <unk>.
Jeffrey.
Hoping.
Great. Thanks, excuse me and I had another question on the guide as well and more just on the macro assumptions you have underpinning and particularly in fuel just eat in terms of underlying volumes are you guys. Assuming the rest of the year follows kind of normal pre COVID-19 seasonal trends and then.
Is there any notable call out to just on what you're assuming any any differences between the U S and Europe and then the UK within Europe in particular thanks.
Okay, I'd say in terms of volumes, we've seen more of a recovery in Europe, because they were more in the dish and we see you know a bit of a balance back also in Australia with fuel volumes, but going forward. We don't have a lot of COVID-19 related recovery. So it would follow kind of normal seasonality.
Your prices assumptions.
<unk>, we outline then they really don't change anything in terms of our volume it'll change demand for the product is wrong mentioned in Detroit, but are.
Our our customers have the drug for work or they have to make the delivery is you have to make the service calls et cetera et cetera. So the pricing does it really matter.
But yeah volume should follow up in a in a normal seasonal horse.
Okay, perfect and then on capital allocation it looks like the updated full your guide as an embedding anything <unk>.
Additional on buybacks just ran any update just in terms of how you're thinking about capital allocation priorities between buybacks.
Pay down potentially with where rates are going M&A any help there just on your framework for for how you're thinking about it. Thanks.
You got it so no was the answer to the first question. We we provide guidance basically with 100 per cent delevering assumption because unless we do something that that is what we do is is the default. So so that that's what's in the in the full would guide.
I'd say really unchanged you know our first course is always.
Mana, if we have access that we can dramatically improve or add meaningful capabilities that that's our first and highest use of capital like looking at the the F. L. T style fries today, you can imagine that my interest in buying F. L. Destock is high so so.
Clearly mm checks put it out there we've got a billion something in our facilities.
Facilities generating whatever you know a few hundred million more a quarter. So we've got obviously a lot of liquidity. This bad. So my my guess is you know both laugh and there'll be some transactions will try to get done at these prices where buyers of our stock and so it's likely per cent.
Nine months or today that will have done you know some of both of those things.
Got it okay. That's great. Thank you.
And your next question is from cancer.
E S anonymous research per line is open.
Hi, good evening, everyone. Thanks for taking the question I'm Gonna ask about the logging segment cause I I don't think we touch on it yet and there was some decent growth there. There's there's a lot of noise trying to track the recovery relative to pre COVID-19 levels, just give me the acquisitions over the last few years, but I was wondering how.
If things fully normalized to pre Covid bubbles.
Where would that logging business be in terms of revenue and our room nights.
Hey, Kenneth Raw and it's a it's a good question. So you're right whenever it is 60% brand is happiness everywhere right. It's a it's a it's deal getting into the insurance vertical it's a recovery.
Our airlines, saying that they're right as airline travel and flights have come back and it's also our core workforce face our clients have gotten healthier and done you know more more driving kinds of travel. So all three happy things are happening in the base I I'd say that.
Bass again, you know <unk>.
Hi, James business for US if you said Hey, you get you get through this and you'll get to kinda sounds normal baseline or no cough the market potential is enormous and all three of those obviously the airline business is global we just bought a little software company that we think ought to be incredibly helpful.
Some of those global airline sales so the prospects. We've we've look way harder now it taken the core workforce product launching it in Europe . We finally have an idea of how to do that to increase the Tam. So the prospects for that thing or great. It's the lowest Nancy and the company which means.
We sell new business more efficiently there than any other line of business in the company the margins the business or Super-duper. Good. So we we love you know, we we loved the business.
Alright, that's that's really helpful and maybe just says my follow up question. There. There's a lot of competitors on the on a P automation a side of the business you know your your full E. P business continues to grow really quickly can you just talk about what you're seeing on the RFP side. You know are they getting more crowded or are we still.
Early date at adoption curve.
Yeah, I think it's mostly be you're right there there's more.
People and more products, but as you've laid out the game is distribution and again as networks. You know just just to remind everybody. The products don't work. If if you can't monetize at the the car stalled monetize I wash or you know relegated to a software fee and so we just love I've said this a million times a week maybe.
We don't have the world's greatest but we get a pretty good product and we have a couple of things that the the new guys right don't which is kind of proven age distribution that can create pressure on on the marketplace and we've got a 10 year old merchant network right that accepts these these purchasing and.
And virtual cards, and so we're able to actually process and create economic so we still I still feel like we've got a big advantage in the offer but mostly what you said that is just kind of you know which is white space is just.
Lots of companies wrong kind of an old disjointed kind of cocky model and what we and other people have is certainly way better than what they're doing and so you know that one for Wednesday, I'm sure, but as I mentioned were telling a lot. So we're we're winning.
Sure So again.
I can make this point, but we want to be as a disruptor, we're kind of the new guy still paying for the business from out of the old method. So we want to join these other people basically that you guys. He was describing and put us in the bucket of trying to go get that business. So.
That's our view of it.
Alright very helpful. Thanks, Rob.
Get you got it.
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Thanks for calling it today.
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Okay.
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Mm mmm.
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