Q3 2022 Fleetcor Technologies Inc Earnings Call
Good afternoon, and welcome to the free core technological technologies, Inc. Third quarter 2022 earnings conference call.
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Unlike some of the concert Jim Eglseder head of Investor Relations.
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Good afternoon, everyone and thank you for joining us today for our third quarter 2022 earnings call.
With me today are Ron Clarke, our chairman and CEO and Elisa victory, our interim CFO .
Following the prepared comments, the operator will announce that the queue will open for the Q&A session. It is only then that you can get in line for questions. Please.
Please note our earnings release and supplement can be found under the Investor Relations section of our website, that's the core dotcom.
Throughout this call, we will be covering organic revenue growth.
As a reminder, this metric neutralizes the impact of year over year changes in foreign exchange rates fuel prices and fuel 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 revenue net income and net income per diluted share on an adjusted basis.
These measures are not calculated in accordance with GAAP and may be calculated differently than that at other companies.
Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website.
I also need to remind everybody that part of our discussion today may include forward looking statements.
These statements reflect the best information, we have as 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 guarantees of future performance and you should not put undue reliance upon them. We undertake no obligation to update any of these statements.
These expected results are 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 on form 8-K and in our annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and it S. You see that Gov now.
Now with that out of the way I will turn the call over to Ron Clarke, our chairman and CEO Rod.
Jim Thanks, Good afternoon, everyone and thanks for joining our Q3 2022 earnings call upfront here I'll plan to cover four subjects first I'll provide my take on Q3 result.
Second I'll provide updated full.
Full year 2022 guidance third provide just a brief preview of 2023.
Along with some of the factors that will affect our performance and then lastly, I'll catch you up on a few recent developments.
Okay, Yeah, let me turn to our Q3 results which were quite good.
And ahead of our expectations, our reported revenue of 893 million, that's up 18% and Kashi P. S. A 424, that's up 21%.
Our EBITDA for the quarter exceeded $450 million.
Our organic revenue growth quite good coming in at 13%.
That was led by our corporate payments business at 21%.
In our lodging business at 28%.
<unk> in the quarter are quite good also our same store sales finished plus 2% our retention are remaining steady at 92% and overall sales performance just terrific up 24%.
For the quarter are we on board at almost 60000, new clients during Q3.
So the fundamentals of the business remain very solid obviously, selling a lot and retaining a lot look Additionally, I want to point out that we're continuing to strengthen our the setup the positioning of the company, which obviously improves our growth prospects going forward.
Added some important E V assets and further refined our plan too wide to go on offense, we added some pretty important a P automation software to front end or corporate payments a solution set that really rounds out for us a that a P. <unk> <unk>.
Solution set.
And we continue to expand our fuel footprint in Brazil are driving transaction growth. There I think we're expecting a an exit rate of about 10 million.
Annual AD on fueling transactions. So so good progress.
Okay, Let me shift gears and turn to our updated full year 2022 guidance along with the assumptions behind it. So we're revising full year 2022 revenue guidance up to 3.410 billion at the mid <unk>.
Point.
This includes absorbing about 8 million of macro a headwind in the second half versus our Oh August guide.
We're maintaining full year 2022 Kashi P. S guidance of 15 95 at the midpoint same number we gave in August. This does include a bit of a flip flop. We pulled some revenue forward through gift orders into Q3 that we had.
It looked in Q4 mm. We're also absorbing about four to five cents of dilution from the new plug surfing and a cooler Fi acquisitions, Oh, we're also incurring about 30 million of incremental bad.
Bad debts and interest expense way above our August guide are you know as the fed has accelerated.
Their interest rate increases.
So if we achieve this 3 billion for 10.
And 15 ninety-five updated 'twenty two guidance that would represent 20% revenue growth and 21% earnings growth for the full year versus 2021.
Okay Importantly next up.
I'm going to share a brief preview.
Of our early look into 'twenty twenty-three so like most companies, we're expecting the twenty-three setup to be a quite challenging.
We do run the business are planned the business on a macro neutral basis.
Really so that we can operate through any kind of cycle, you know good or bad.
Then we do overlay you know our spending and capital allocation decisions are based on the environment. We're seeing so for twenty-three you know, we're we're expecting organic.
Revenue growth overall of about 10%.
Which is our target that's based on our preliminary twenty-three budget submissions are inside of that probably no surprise global fleet I'm out looking a mid to high single digits.
Our lodging and Brazil businesses are mid teens, and our corporate payments business for next year are high teens are.
And by the way closing in on almost a billion dollars of overall revenue next year, so so getting quite significant.
We'll bake in a clearly less opex expense growth next.
Next year with a goal of delivering a two to 300 basis points of margin improvement.
We're hopeful we can reach a twenty-three kashi P S. A with a 17 handle.
But that's ultimately going to turn on one the level of sales investment we make and then the corresponding bad debt that comes with that to interest rates are where they peak in a if and when they start down the <unk>.
Three FX rates, a particular I on the pound does it recover and then lastly recession do we get one and if we do what what would the depth duration Bay. So look on the on the recession front in particular, we wouldn't is rightfully course recession proof.
But a pretty recession resilient.
Some of the reasons that we should be pretty recession resilient are first our solutions are essential generally are not discretionary demand for our services runs higher in inflationary or cost conscious times, you know think fuel.
This year and the demand that we see and lastly, our businesses are a really diverse geographically.
By client size from SMB to enterprise AR.
Lots of verticals, we serve obviously lots of our products are spending categories.
We're by no means immune to some client segments certain client segments, you know being impacted by recession for example, construction.
And for sure, we'll real and restrict credit in the event of a downturn.
And that for sure.
<unk> revenue.
So look we plan to have a bunch a clearer picture of 'twenty twenty-three when we speak again in 90 days and AR will offer up our formal twenty-three guidance then.
Okay. Let me transition my last subjects are which is to catch you up on a few recent developments and let me begin with the FTC case. So the court held a two day hearing I'm on the FTC matter that was on October 20th and twenty-first.
Importantly, the judge concluded that she would not enter a their proposed FTC order.
And lastly, we collected express or.
Or what we call affirmative consent from 96% of our fuel card client base to the specific terms of their card program.
We've also proposed new incremental enhancements going forward that would include our crediting client payments on the day, we receive them versus the day they're posted.
Along with some other items that comply with the C. S. P. B consumer payment standards honestly were b to b, but are willing to do this.
We've talked about combining our invoicing and reporting materials into a single consolidated package to make it easier for clients to review.
And we've said repeatedly I think throughout this FTC case that we're trying to cooperate.
Trying to be transparent.
We simply emphasize or the court that we need to know exactly.
What the practices are that we're being asked to implement and if we can understand them well, we'll implement will comply with them.
We're also saying again today that we don't believe that the disclosure enhancements that we've already made which we can see nor the additional ones that we're contemplating will have a material impact on the company's go forward financial performance.
Okay, Let me turn to our situation in Russia.
We've made the decision to explore selling the Russia business.
We've retained.
A local investment bank, we have formally launched the sales process. It is a it is underway.
The business does generate meaningful free cash flow, so that could potentially support acquisition financing along with annual dividends and we think that that should provide a reasonable floor on the valuation.
Additionally, we've completed all of the isolation or separation steps.
Necessary to carve the business away from fleet core this.
Provides assurance that we can maintain compliance with the sanctions and.
And we do plan to move into this isolation or passive ownership phase.
Beginning in early December .
And obviously, we will keep you updated on the on the sale process. So lastly on the acquisition and capital allocation front, we did complete three capability acquisitions. Since we spoke last so a corporate payments add on called the cooler Fi on August 1st.
And important E V deal in Europe plug surfing on September 1st.
We closed literally yesterday and international workforce lodging deal.
Called room X.
And finally, we expect to complete the cross border deal called global reach which is a bolt on.
Round the end end of the year.
So as you can see we focused really on capability acquisitions in this in this environment choosing to strengthen again the positioning.
And setup of the company over the midterm, we do hope that M&A valuations reset a bit next year, you know higher interest rates will obviously take hold and.
Just maybe we can we can get back to larger accretive transactions.
<unk>, we did repurchase 500 million of F. L. T. In Q3 at what we think are quite attractive prices.
So look in closing today again very good Q3 results our earnings grew 21%.
Maintaining our full year 'twenty to cash EPS guidance.
At 15, 95, despite a bit weakening.
Macro that we're absorbing.
This would represent a 70 cents a higher number than the initial EPS guidance that we provided in February we do expect twenty-three to be a challenging year, but see our overall organic growth rate and at around 10% or target and.
And again, our earnings turning mostly on the.
The interest rate and FX environment.
FX the FTC case, finally winding down again, we do not expect a material impact going forward are.
We have decided to explore the sale of our Russia business again underway.
And delighted with these handful of capability acquisitions. This quarter lastly, many thanks to alyssa here for stepping in to the C. F O role on an interim basis. So now over to you.
Yeah.
Thanks, Ron and happy to be here on my first earnings call as CFO , albeit on an interim basis.
Foreign to meeting many of you on the conference circuit in the fourth quarter.
Now, let's look at some more detail on the corner.
As Ron mentioned, it posted 18% growth in revenue driven by 13% organic growth or $96 million, which I'll delve into in a moment.
The remaining growth was 4% or $27 million from macro tailwind and 2% or 14 million from acquisitions made over the past year.
Impacting our results for fuel prices of $4.46 per gallon for the quarter higher than prior year of $3 15.
<unk> contributed $26 million of additional revenues versus prior year and lower than our $4.64 guidance assumption from August .
The all spread revenue was also quite positive by about 21 million compared to the prior year as falling fuel prices during the quarter caused spreads to widen.
Offsetting these <unk> was at 21 million negative impact of lower foreign exchange rates, primarily resulting from unfavorable movements in the British pound.
Now moving to organic growth.
Payments was up 21% Gen by continuing strong new sales across both direct and cross border.
Specifically, our direct corporate payments business, our non partner business grew 24% and continues to demonstrate very robust growth, especially full AR AP, which grew 44%.
Cross border was at 30% another very good quarter as new sales remained strong and activity levels were again robust across nearly all geographies.
Our channel partner business is just under 10% of the corporate payments category and declined 13% in the corner as our focus is on growing our direct businesses.
Youll grew organically, 5% as we did see some volume softness in our U S. SMB businesses. However, our new sales growth was 13% and we continued to see a normalized level of flat same store sales contributing to the performance.
Overall transaction volumes remained positive and consistent with last quarter. Although we continue to continue to see slight moderation in new sales activity.
Pulp was up 12% organically compared with last year as the business continues to perform new sales are solid driven by our expanded product utility and differentiated value proposition as a reminder, our toll solution can be used to pay from multiple spend categories, such as parking and drive through.
Retail and we are now generating meaningful revenue from our beyond telling use cases.
Lodging continued to show strength in Q3 up 28% all three business lines workforce Airlines and insurance each had double digit organic growth when airlines again, leading the way at 55%.
Growth was driven by a combination of higher year over year volume and workforce and airlines and a favorable rate environment across all three businesses.
Guests had another good quarter up 9% as customer card orders continue to be pulled forward from Q4, we estimate that approximately $6 million of revenue was pulled into Q3 due to early ordering in advance of the holiday season. In addition to the $10 million to $12 million. We estimated was pulled forward into the second quarter.
Looking further down the income statement.
Operating expenses of 504 million, representing a 21% increase over $417 million in Q3 of the prior year due to increases tied to higher volumes across our businesses incremental bad debt stock compensation and new sales generation activities.
Increases were also driven by the inclusion of the Aley and plug surfing acquisition. In addition to higher incentives and commissions as a result of strong new sales in certain of our businesses.
Bad debt expense was 37 million or eight basis points, which was about 10 million higher than last quarter and more in line with pre pandemic adds at levels.
In the third quarter of 2021, and that was $11 million or three basis points.
This increase was driven primarily by higher loss severity as a result of higher fuel prices in the second quarter as well as increases in application volume in application fraud.
Bad debt levels remain elevated as a result of strong sales to new customers, who tend to have a higher loss rates than the existing book higher fuel prices and the changing macroeconomic landscape, which puts pressure on our smaller customers.
Interest expense increased 56% year over year, driven by higher rates on our floating rate debt with average LIBOR or sofa and the current quarter of two 2% compared to 0.09% in the same period prior year.
As Ron noted, we'll provide guidance for 2023 in February when we report our full year earnings I did want to make one comment on how to think about net interest expense all in for 2023.
We currently estimate that our 2023 net interest expense is likely to be closer to double the 2022 level.
This assumes that benchmark index rates, peaking next year between four and a half and 5% and remain in that range for most of the year.
While all of our debt instruments are floating rate, we do have $500 million of hedges that will be in place for almost all of 2023 at 2.56%.
Also we have over 1 billion in cash balances globally on which we earn interest.
Our effective tax rate for the quarter was 26, 8% versus 24, 1% last year.
Which is more of a normalized tax rate for the business.
Now turning to the balance sheet, we ended the quarter with over one 3 billion in unrestricted cash and approximately $600 million available on our revolver.
There was $5 7 billion outstanding on our credit facilities, and we had $1 5 billion borrowed in our securitization facility.
As of September 30th our leverage ratio was 295 times trailing 12 month adjusted EBITDA as calculated in accordance with our credit agreement.
In the quarter, we upsized and extended our securitization facility by 100 million to $1 7 billion and extended the maturity by year to August 2025.
There were a number of minor changes to the agreement, which will be detailed in our 10-Q next week.
We repurchased roughly 2.2 million shares at an average price of $224 per share for a total of 500 million during Q3.
This includes the roughly 900000 shares repurchased before our earnings call in August .
Year to date, we have repurchased five 6 million shares for $1 $3 billion.
The board approved another $1 billion and repurchases under our program on October 20th debt and extended the program through February 2024.
With this upsizing, we now have approximately 1.355 billion available for future repurchases.
As Ron has covered our full year guidance update let me now share some thoughts on our guidance assumptions.
We are assuming fuel prices of $4.25 in Q4.
Market spreads favorable to the fourth quarter of 2021.
Total interest expense of 157 million to $167 million for 2022, which assumes average reference rates of 375% in Q4.
The rest of our assumptions can be found in our press release and supplement.
Thank you for your interest and now operator, we'd like to open the line for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one telephone keypad.
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Two a car a question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question will come from Darrin Peller with Wolfe Research you May now go ahead.
Hey, Thanks, guys you know even looking on like a two year basis. The fleet segment looks like it's high single digits or about 9% to 10% growth one just stacking it.
It definitely looks like it's trending back to a normal rate or even better than a normal rate versus what I think you guys would have expected. So can you touch on that for a minute in terms of.
Where we are in your view versus any type of recovery and then obviously again going into a more uncertain macro environment.
The resilience of that business because it does look like it's gotten to a point, where it's doing the right thing from a growth rate standpoint.
And then just quickly.
The add ons the follow ons on the cross sells that you've been really able to implement.
How's that been going wrong, and maybe if you could just touch on that too.
Hey, Dara. Thanks, so on the first one I think we're still cognizant.
5% to 8% kind of target range based on what we like to invest.
Some of the over performance recently is literally the COVID-19 recovery kind of claw back from the depths there 2020, so I think.
Well, probably mostly unchanged because we got a lot of the business.
The speed and investments to make that we're kind of happy in that.
Mid to high single digits, so that's our target.
I'd still say, it's still early days.
We're still struggling with where in the in the.
In the base right, we've got a couple of hundred thousand clients.
We should target. So I think I mentioned initially we were thinking hey will go to where the bulk as Downmarket and then realized most of the spend.
It was in the larger accounts, there, which we get after a different distribution. So I'd say, we're still testing.
So different ways to do that but how the.
Of the company to turn the fuel card business as I said it into a corporate payments business.
Work in process.
Yeah, No that's helpful and just one quick follow up if you don't mind is on the.
Your preliminary outlook for next year when you when you talked about the different assumptions I guess first of all the reported a revenue growth target and you talked I think you said, 10% organic is that that's organic I'm, assuming is that reported or constant currency I think it's.
Then also when we think of the 17 $17 is just the assumptions on fuel in macro that go into that.
Again, it seems like the underlying core assumptions are sustainable and seem like they've really gone to a point that's been strong.
Yes, so on the first one I'd say, we're kind of halfway through Jarrod.
23 budget cycles. So we've worked our revenue honestly harder than the expense of the profit side. So as I said, it's a.
The mix of the different business lines fuel lodging in Brazil in corporate payments.
Different.
Growth rates, but kind of wait themselves can.
Is an organic number although the trend at this point looks pretty similar because we have some pro forma.
Revenue kind of rolling forward right from 'twenty two into 'twenty, three offset by what we think could be some macro headwinds you know, particularly FX. So at this point sitting here today not a big difference.
Inorganic in France and that on the bottom.
Again, I think the thing we can control is really.
Really the operating margin. So we're doing a lot of work on metering.
And so that we can grow EBITDA margins, you know two or 300 bps next year. So call. It I know, we're coming out I think around 52 ish. This year that we try to get that up.
A couple of points and then the wildcard is really the below the line.
After todays.
Fed call I'm, not sure how encouraged or not any of us.
Should be but wherever that number.
Flies to the sands.
Honestly, the opex, particularly the pound so that's really the wait and see as to where we're just trying to get a a rough super early days.
Hopefully all of US will know no a bunch more in 90 days.
Yeah.
Our next question will come from Graham.
Hello, Paul.
With Barclays.
You May now go ahead.
Alright, thanks, so much for taking my question Tonight.
I wanted to first ask about Russia, and maybe if you wouldn't mind updating us on the size of that business. So it kind of contemplated what it might mean to take it out of numbers and also just a I'm pretty sure. The answer here is it's not contemplated in that in that preliminary read of next year, but the idea would be if you came to it.
An agreement there to solve the business that we would then need to sort of.
Get that out of our models next year.
Yes.
So yeah, both both good questions. So on the first one.
So on the on the FX, but the kind of ballpark it.
<unk> hundred million ish, a little bit more in revenue with kind of a 75% EBITDA.
Margin again kind of where the FX is today and yes, we haven't done anything in terms of taking it out although of course, we've looked at models were.
We sell it for X and we use that cash to buy back which really manages honestly the dilution as we look into next year. So we'll certainly keep you guys. You know apprised, we're kind of life.
You know sharpen the thing now so we'll keep you posted.
Okay and I'll just add this is elisa.
The specifics around Russia have been included in our 10-Q disclosures previously as well.
In terms of sizing it.
Great great. Thanks for that one quick follow up for me on the FTC matter I guess first is there any sense of timing and.
In terms of when this might be resolved is this the type of thing that where there's a relatively protected negotiation or will it be.
All sort of in short order to the degree that you can tell and then and then Ron do you seem pretty confident there's no P&L impact here is there any best or worst case type of outcomes or is it really like no matter how the cookie crumbles here you guys are going to come out of it okay.
Yeah on the first one.
We're clearly on some kind of glide path right the things in defense.
Gas would be you know a couple of months two to three months, depending on how our chitchat goes in.
When the court I gets back involved if they do so that would be that would be my guess on the impact.
Theres nothing either in their order, which the judge said no two or really anything we're contemplating.
Because its disclosure based again Ramsey right, it's not hey, we can't charge something or we can sign up a customer or whatever and so the good news is we've done a bunch of things that has a chance to see and obviously, we're reporting those changes are embedded right and the results, we're putting out so again theres nothing weakens.
I see that would have any material go forward impact so probably like.
You and others on the call, we mostly just want to get on the other side. You know we've repeatedly said just be specific tell us.
What it is that makes everyone happy and we're happy to do it and so we've done a lot of that and again its a little to no impact.
I mean, when you can sign up 96% of a couple of hundred thousand customers to say they want to continue affirmatively with your program and you have given them the biggest Ts and CS and boxes that you have it. It makes me feel pretty confident that we've been straight ahead with people.
Fantastic. Thanks for your answers appreciate it.
Got it.
Our next question will come from Sanjay Sock Rami with K B W.
You May now go ahead.
Thanks, I guess question for you Ron just on the valuations for M&A I mean, it seems like there's been a pretty marked decline in fintech valuations I'm just curious.
If youre seeing anything pop into your wheelhouse, how we should balance that relative to the share repurchases.
Yes, I think to your point there has been some a bit of a reset.
In the last few months.
Can see but what we announced in this quarter. This.
When we started the process we focused on these capabilities things because no matter what the prices there.
They are about capabilities and they're not large amounts of absolute money we.
We do have a couple of what I'll call more traditional kind of weak or you know in the wheel house deals.
Seem to be in ranges that we like that we can transact at.
And then second I think let's see how the thing plays out as you know people move.
Their valuation aspirations, you know with time and so to the extent that.
As people wait and stuff doesn't trade, we think there could be even a further reset next year cause right. So people are getting squeezed. These days. So we're optimistic that things will get better and we can go back to targeting some of the larger deals.
Okay.
Follow up.
You mentioned, the the fuel price softness sorry, the fuel softness volume softness and I'm. Just curious if we just dig underneath that is there is there something going on there do you think it's macro driven or or what's driving that and then just just a clarification on the interest expense. So we should target around 300 million.
Net interest expense just wanted to make sure I got that number right.
Yes, Hi, Jay it's wrong, well why don't I take the first one and then model is to take the second one so no I would say the.
The fuel kind of volume and transactions I think we reported I think four.
4% volume growth transaction growth for the quarter I would say, it's it's it's pocketed theres a couple of spots like SMB trucking.
<unk> that are a bit softer than normal although most of that is offset by enterprise.
Trucking firms I think the biggest thing Sanjay is and some of the research we did with kind of local SMB accounts is the higher price you know had a smidge of elasticity kind of moved them back a little bit like Hey, we'll shrink the radius of where we do a P.
Plumbing call you know, we won't go 30 miles out of the city now will only go 10 and stuff and so I do think when the prices were at those peaks.
Whatever three four or five months ago that that also dialed it back a bit but I'd say, we're in the mid teen level. It's really nothing significant there is really nothing across the board.
So once again interest so hey, Sanjay it's Elisa.
So on the interest side.
Asking about going into 'twenty three.
And everybody in the world to know that that's charter rates are just skyrocketed.
Well close out the year somewhere around $3 75 per cent for Matt as.
As a reminder, we all started around zero.
And going into 2023 targeting somewhere around.
4.5% to 5% for the year and so we're really out looking at interest expense probably around.
300, and 300 million plus so maybe I would take our number and multiply it by two and you are probably in the ballpark yeah. That's a net number two saatchi right is kind of gross interest.
Interest expense and then we've got you know a bunch of cash at high rates. So to Louis' point. The gross numbers you know significantly larger probably comes down 20 or 25%.
You know with the cash that we have offsetting it but what is the total swag of root. We're sitting here like you guys trying to guess what the next 14 months are going to be in and we don't know so we just said hey, we'll take what we're airing will kind of run the math that way and we'll be a lot smarter when we talk again.
No I appreciate it thank you.
Got it.
Okay.
Yeah.
Our next question will come from Andrew Jeffrey with true Securities.
You May now go ahead.
Hi, I appreciate you taking the time answering my question this afternoon.
Ron some some pretty encouraging commentary on.
Margin next year can you talk a little bit about.
How much of that is being driven by cloud migration and digital sales initiatives versus maybe being a little bit more selective.
In terms of the customers you sign up in the current macro environment and then if we get a recovery would we expect say in 'twenty four would we expect the margin to sort of come back down a little bit as you lean in to.
New customer growth a bit more.
Yeah, that's a really good question, Andrew So I'd say that.
The target that we like to see in the company is 55% again I think we're penciling out around 52 of this year, but that thing moves around based on things. We buy right. That's run lower margins are weirdos stuff like coal visit the crushes you know revenue quickly and stuff, but I would say our <unk>.
Running a journal targets closer to 55 in terms of next year I think the two things you you picked up one is we knew this was going to be a half a year I mean, we're going to I think be about 70 cents higher than we told you in February I don't know if anyone's applauding, but I can say to that you know good news it to do better than we said.
And so because we saw that we kind of opened the stake as we let people work to your point on some additional projects we tested some additional things we staffed up in areas that we spent I'd say you know money that we could afford to kind of make the targets that we run the company on so when I see the world Heightening the answer is no.
It will be will be a little bit more frugal little bit more selective to use your word and I think the big thing is really around you know our view of the economy and the credit environment, particularly.
Particularly around the digital side like you said, because that's where you know the sales growth if you will versus the credit risk or Super correlated. So my guess is we'll kind of interesting a bit cautious.
No kind of caught a little bit of a tail as the bottom out initially maybe not try to grow that thing in the in the low to mid 20%, but maybe you know three to five points lower and see how it goes.
So it would be just a little bit of a diet on kind of overall opex in a little bit of caution around the micro selling and related credit risk.
Okay.
Thank you thank you for that and.
In lodging.
This is a business you've been adamant is awesome and you've definitely been right in.
In terms of the growth.
What do you think that looks like as we lap some tougher compares what's the normalized growth rate do you think for that lodging business.
I think it's high teens to 20 to your point, we have you know some favorable comps we've got a segment of their for airlines, which will which are obviously in the ditch. So some of it's that but where we.
We're just all parts of that business or kind of go on great. We're selling a lot and all three of them. We bought a new software front end for that airline business and airlines are looking to get out of in house work and stuff. So you know we're you know we have the best network. The best rates to offer the you know the different clients that we have and so.
<unk>.
Between the scale of the and the selling machine that we have there in the process.
Was it pretty specialized offerings. So there's not lots of other players that can offer really what we do both the convenience and the and the pricing. So I would say is it's in the high teens to 20% on a normalized basis.
Okay I appreciate that thank you.
Our next question will come from Shar Sumer with Evercore ISI.
I will go ahead.
Thanks, a lot for taking my question Oh I have a question on the cross selling opportunities I mean, it's it's been a quarter, where it's been like few quarters, where you have talked about a little bit slow on that front just to not to upset the customer was on the process, but oh, what's the update on that process.
On the cross selling opportunities and is there potential for you ramp up the cross selling efforts going into 'twenty two 'twenty three.
Yeah, I think I'd kind of coverage to read this.
Comment a bit before but I'd say.
You know, it's still a work in process I think is my summary that we went headlong into the thing targeting the smaller clients that we have because we have so many of them and as we get into the thing got clearer the corporate payments turns on spend not on client now and then about five.
Thousands of our appliance up about half of all the spend all the purchasing so we've gone back and targeted those we have some of our blue suited salespeople going into our biggest fuel card accounts now and selling corporate payments, but we're still trying to figure out is there a cvs or a different place inside of our.
Our fuel card client base, where we can bring in corporate payments offerings. So I think a lot of this is like anything that's new we're learning we're trying to figure out what the sweet spot is.
Among this super Big base and what the product is that it fits that sweet spot. So we haven't given up still it's still a work in process.
Thank you so much.
Yeah.
Yeah.
Our next question will come from Pete Christiansen with Citi. You May now go ahead.
Thanks, Good evening.
Nice updates there Ron.
Two questions one.
I wanted to go back to the 12% organic growth that you're seeing in the toll business.
Wondering if you could tease that out a little bit you know.
The base tolls business versus some of the beyond tolls initiatives that you've put forth, including the Tad fueling stuff I'm wondering if you can give us a sense of how how is that contributing to segment growth at this point and then I have a follow up.
Yeah, a few days, but it's good to hear from you. So yeah that one I think.
For sure each question a minute ago is one that's working I think we're at about 20% now.
Of the revenue there in what we call beyond toll parking fuel. We've also gotten some super early traction on insurance right, where this this vehicle mobility company with millions of our customers and so offering a insurance that centers around the vehicle and stuff.
It's been it's been a pretty a pretty good uptake and so you know.
It's going well the fuel number which I would just say this accident, we think around 10 million annualized exactly as we thought it was kind of correlated to the number of sites. So as we add additional sites that basically can can read the tag you know conveniently Lo and behold.
As you know trans grow because more people more people use the thing. So we built a plan to continue that taken up by another 25 or 30% next year. So look the goal would be kind of over the next two or three years that that stuff is in the you know 40% kind of range you know on top of the core business.
And you know we continue to add I mean, if there was it reminds me of a cold here in the U S. If there was another way to sell a toll tag in Brazil, We know it like we sell it you know in stores, we sell it hangs things as doors, we sell on a toll booths, we sell a few carmakers we.
Sell it through insurance guys. We sell literally every way you can get you know a toll tag to market, where we're doing you know selling you know way way over a million new ones per year, and so it's a business that despite the competitive setup changing a lot is still you know perform a great force Super <unk>.
With it.
Yeah that sounds exciting.
I'd like to pivot to the fuel card sales a little bit here.
I mean, obviously, when we had fuel prices starting to pick up earlier in the year that I'm sure that was helpful. In driving new sales, maybe maybe giving you. Some a good degree of inbound activity you know now.
You know gas prices come down diesel is still holding up pretty strong what what's your sense for how fuel fuel prices today are still driving fuel card sales is that tailwind is still there.
Yeah, another really good question.
They're super related to your point as you think about particularly on the digital side, just raw demand you know little counting how many people you know key and fuel card.
You hit it on the add back in the spring early summer at the peak of that thing was up you know a lot right that that that that inbound demand, but remember we still sell I don't know 40, 45% of the business you know non digitally and summer miles a decent amount of our digital has us targeting.
You know our Cao so I'd say, it's it's down some from the peak, although it would be.
With that.
And we'd seen before.
And it Ain't cheap now the only thing I'd say back is you know even at today's current price over the last call. It whatever five or seven years. This is still that of <unk>.
Right.
So I'd say, yes down down a bit from the peak, but still you know still pretty robust.
Great. Thanks for the update.
Our next question will come from Jeff Cantwell with Wells Fargo Securities.
I'll go ahead.
Okay. Thanks very much.
Just wanted to follow up on some of the questions that are coming your way. One of them was you know can you talk to us a little bit about.
Some of the early underlying assumptions for fuel.
23.
And the way we want them to frame. The question is you know if we're all looking at.
Exhibit two in your press release, which was you know fewer transactions fuel revenue per transaction.
Do you have any sense of what the growth rates there no other questions.
I wanted to get you to mid to high single digit revenue growth in Peru.
And then along the same lines.
She is obviously very exciting.
Mick macro environment.
Interest rate environment globally.
A goalpost you're clearly moving all the time. So so my second question is this.
Can you talk about what you think is a.
Range right your companies and what is there is a wider range in that potential out there for next year.
You know versus prior years, and do you feel that the upside downside to the mid high single digits is the same as in past years or maybe it's one or this year I just love to hear your thoughts there thanks very much.
Alright.
Hey, Jeff its all of that so in terms of fuel price assumptions going into next year.
Basically last next year consistent with the current period. So we've assumed fuel prices in the range of 437 or so with them a.
A little bit of downside on the spread.
In terms of your question on Ras per Tran I think are our intent is generally always have a nice balance between them.
Volume and rate them to the extent that sort of incremental products.
Being offered and so no I would say that we would continue to expect that to be a balanced approach.
Hill H O. Let me is Ron you just jump on what Elisa said Odyssey mix continues to help US right. We we've over rotated to Smbs. So we get you know.
On a sequential rate happy just from the mix because we get more rate you know a smaller count than the big.
But on the macro question I'd say, who knows I'd say it seems you guys are sitting on the planet Wednesday at it's Crazy got a volatile not only the things for us like the oil prices, but clearly you know FX volatility is super high. This year, you know I don't even want to mentioned interest rate.
Volatility and so the question is you know in 90 days, when we get to kind of locking down.
Finalizing our plan will will the you know the fall would you be any clearer or will it be messaging that that thing is going to stabilize and so that's my answer to your to the extent that the big macro things seem like the volatility is slowing we will probably use kind of some traditional.
Arrange it and you can extend that those macro things you now have a bigger beta on them. Then yes, we probably would have something wider to let you know you know how are those things affect us, but I found it a million times like we run the company here forever and we're going to run the company too.
Generate growing revenue and growing you know certainly EBIT da profits faster and the below the line stuff will come and go and always clapping that I can hear that the macro is that our back and we have 70 cents more 100 million more I'm 50 million more revenue Noah's grabbing on your side or the other way. So we're just our game is we're just power through.
And look I can't go up forever, if interest rates go up there.
Cost goes up to 300 million that extra once you go on a $500 million twenty-four maybe it'll get attitude 50, and so as long as we can keep calm pounding the top end and the EBITDA line 10, and 13 were going to deliver you know mid to high teens EPS over the forecast period. So I say, we just do.
Don't see any of these variables continuing to rise sequentially year over year.
Yeah. Thanks for all the color I appreciate it and congrats on the results.
Yeah.
Our next question will come from Mihir Bhatia with Bank of America, You May now go ahead.
Good afternoon, and thank you for taking my questions.
One.
Second the.
Thanks for the updates on the FTC, Russia and also the early look on 2023 very helpful.
Maybe I did want to start on interest expense just for 2020 case I.
I apologize to go back to this but just wanted to make sure we have it right.
The 300 to three Twentyish million that you talked about does that include Russia, I think that if I recall correctly does it fit does it fairly high interest rates, there, which are getting a high cash balance which helps that so since it's a net number does that include the Russia.
The benefit I guess.
And there is all of that again. It wouldn't include any benefit that we're getting off of the deposits that are in Russia for us certainly on the income side, you don't really have any any expense interest expense in that in that region.
So it is really the peanuts, but here I guess, it's number one it's a rounding error in the business.
Oh, okay.
Yep got it.
We do see rates going down in Russia, So hopefully not.
Got you thanks a lot.
And then the other question.
I wanted to ask was just in terms of our lodging just wanted to understand a little bit more about the room ex acquisition in terms of just you're not expanding your workforce lodging business.
The fact is is that how much of the business was in Europe anyway or is this like more of a beachhead, where you grow from here or just trying to understand a little bit more about that thank you.
Yeah.
Good question. Thanks, Thanks for that so the the room X business first of all it's really a copycat of our U S. What we call workforce. If you think about you know a lot of the blue collar.
People to travel for work that's kind of what that room. Next thing is we were delighted to identify someone that does kind of the same thing. So it's really a U K business today, it's got a little bit like I remember, 5% maybe of its business in Germany. So the majority of it is in the U K, which as you know our.
Second our largest market, which which was interesting to us and so yeah. The the idea there is hey, they've got assets that sit in the U K they've got a lodging network that's attractive they have sales they have ops. They have tech that runs there and we have a ton of clients as you can imagine like tons of.
Clients and actually a fair number of kind of mid size.
I'm an enterprise clients there. So the idea is hey, we know this business Super well, it's in a market that we've got a good position.
So we get accelerated and its a good business on its own it's got a good group of people. So it's really just like our fuel card business. Our other businesses are we are a global player. If we have a business it looks exactly like a business we have and it's in another country that we can understand then we go there we like the price back someone's question earlier.
Earlier about an hour.
M&A valuations I think it was a reasonable price for both sides, which is why the trade work. So yeah, it'll it'll certainly accelerate and it kind of sets us up to make a business you know with bigger Tam that we get and understand.
Okay. Thank you.
Yeah.
Our next question will come from Bob Napoli with William Blair.
No go ahead.
Good afternoon nice job on quarter appreciate the the outlook for next year, just a I was hoping to get maybe a little bit more color on you know I. Appreciate the segment margins that you started giving us with just a with margin expansion next year, where are you most confident and margin.
Expansion.
Next year, and then maybe over the long term.
Yeah, Hey, Bob it's good.
Good to hear your voice and that with the drop in Adam here. So good to hear from you.
Don't really plan.
No the margin expansion really by lines of business, you know that the discretionary monies that are big and our company are our sales in I T and so that's how we think about it for us to Goose EBITDA margins, you know 200 basis points, we'll we'll just kind of.
Flatten out a little bit not not grow as fast some of the sales investment in I T and people May say, Oh, how is that going to war well when you make a pretty big investment incrementally like we did this year you pick up the productivity really in the forward years right because you've hired new people or you've got you know.
New leads in the pipeline and so some of the investments are.
Incremental investments we made in 'twenty, two will kind of roll in we'll pour into 'twenty. Three so we've got a decent game plan of Opex that will service the business, we have in and I'll meet the growth targets and again, because we spend you know.
Bit more this year, that's kind of helpful to us for next year.
Great. Thanks, and just a big picture question, which part of your business are you. Most excited about over the next three to five years, that's going to become a much bigger piece of your business. If you would.
Yeah, Matt let like you I know, it's your favorite I mean, it's hard not to like what we call our corporate payments business just.
Because of the enormity of the market.
You may get a kick out of the story, but I moved a guy that.
Ran you know it still runs our international fleet business to run our own business. So he's here and I'm talking on the other night and we got out of corporate payments of Jesus. He says I I never understood what a mess of the U S is.
Now with this paper.
The pays off and so like I think because we live here, we we don't even think about it that it's just the opportunity there to make that you know just a gigantic business is in our in our programs. It's closing in on $1 billion. You know next year and we spend no one knows us better than you.
A couple of years getting all the puzzle pieces together, so that we've got kind of a you know a full suite of stuff.
And so I just think that the you know the potential is so big and.
The competition, even though you would always keep talking about fragrance syntax I'd tell you the whole market as banks at Amex, and we're winning that's where 90% of our business comes from it. So we we just liked the chances to bring what we have a great sales again in Q3 record sales and so that that's the business that will be.
Dramatically bigger than the next few years great. Thank you Ron appreciate it.
Well to well thanks, you too.
Our next question will come from Ken <unk>.
So Joe scheming with Autonomous research you May now go go ahead.
Hey, good afternoon, thanks for all the detail and for taking the questions. I just had a clarification question on Russia does the 17 dollar EPS figures include the EPS contribution from Russia, and I. Just can you talk a little bit about how you're able to actually access the proceeds.
From a sale of that Russia business, just wanted to make sure that we have that right.
Hey, Ken its Ron Yeah. So on the first one we haven't sold the business. So it's still a part of our planning although again.
The idea that we have would be to take the cash from the sale and obviously the retained earnings that we have sitting there and if our stock stays at this price obviously by a lot of it.
What you will compress the dilution in terms of the proceeds of a tower, we're going to set it up with a buyer the buyer's gonna have to basically you know be able to pay US you know outside of there. So that's one of the kind of the conditions.
Some of the buyers that were looking at so we we do have a way basically depending on who the buyer is for them to be able to pay us.
Okay, Great. That's really helpful. Ron and then I appreciate all the continued disclosure on profitability by segment I just had a follow up question to Bob's question I mean, it looks like the corporate payments business. It has a 43% EBITDA margin.
Is there an opportunity to bring that segment margin up closer to the corporate average over the long term or do you have to continue invest in that business to drive that that high teens revenue growth.
That's not a super Super Good question, so kind of a two part.
Question to the first one is really scale right trying to make that business and in some of the pieces in it you know dramatically bigger so like all of our businesses. It's got a lot of fixed cost call. It 40% to 50% of the cost structure of that business is fixed so clearly the incremental margins are better.
And then it's really just a trade for grow like we you know it's not hard math you guys. If you want to grow something at 20% versus 10 or a you have to spend more money right.
To grow it faster and so that that's really the second part of it is given the the Tam given the size of the opportunity, we'll probably continue to overinvest and run that EBITDA margin is much lower than the line average, but again, it's it's because we're setting it up to grow faster.
Okay, alright, thanks, a lot wrong reason, just there's nothing structurally in other words. If you said to me that thing gets to a billion five or 2 billion and I want to take the growth rate down to the line average there's nothing structurally that would stop us from having that business look an awful lot like the rest of our you know mine average businesses.
Great. Thanks, Ron.
You got it.
Our next question will come from John Davis with Raymond James.
You May now go ahead.
Hey, good afternoon, Ron just wanted a little talk a little bit about bad debt expense and have you tightened the credit box at all I know, we've just kind of normalize but given what most feel as some sort of macro softness coming at some point you have you contemplated.
Contemplated that especially when you talk about kind of mid to high single digit fueled growth next year.
Yeah. Good good question, John Yes is the short answer so I think we.
Hope we've reported this but I think we have to call. It 25, 25, 35, 35 is kind of a guesstimate at the at the full year credit loss number and so when we saw the thing the forwards are the roll rates getting a bit worse, we did tightened the new account selling so we have two kinds of <unk>.
Credit one is hey are we going to take in we used to take and 10 people and companies that we're gonna taken eight so we're gonna cut cut the tail off and then the second one is really credit lines right for customers that we have right. If we're willing to give you more credit to buy more things we can get more revenue. So that's the one that were.
Looking at it pulling back selectively kind of in a certain area. So we've done it on new we haven't done it yet on existing and partly because we have much better information right. The underwriting is much better on our existing customers because we have all that payment history on them. So that's that's a key thing for us too.
Watch is really the trade remember probably about half of all of our credit losses. Whatever 25, 25, 35, 35 adds up to whatever 100 in 20 or $30 million half of that John is basically tied to new business, right, which which you know does it does.
<unk> weihai number versus versus the base. So that's the place that we always start.
Okay. No. That's helpful. And then just a follow up on the margin kind of commentary going into next year.
I think about fuel prices, probably being flat to down.
Little bit higher at least for the full year bad debt expense.
I am penciling out what kind of opex is going to be kind of flat to down year over year to get to kind of two to 300 basis points of margin expansion. Just you know I know you said you spent a lot kind of given the outperformance this year on kind of the better COVID-19 recovery, but just wanted to kind of make sure that that pencils and you know that you can kind of hold the line on opex in order to get back.
Kind of what you called normalized profitability kind of in the mid fifties honest EBITA margin.
Yeah, again, I want to make sure people clear it's Super early days, where we're doing what we call. The envelope work of framing. It you know what an envelope is so we're far from done but I think the biggest difference to what you said is that the sales investments and as the nature of the sales investment has a huge impact on the bad debt on a forward.
So the easiest way for us to improve profitability in 2023 would slow or cut the tail certainly end of digital micro accounts and keep all that you know bad debt you know out of our out of our P&L. So that that's the that's the most logical place, but yeah, it's it's not far off.
<unk>, what you're saying that the exit rate of our Opex will obviously grow probably low single digits and then what you said it depends honestly where fuel prices, but remember that also ties is correlated to bad debt right. So one of the reasons. Our bad debt is higher again is our fuel price was high.
Ear in 2022 if the fuel prices lower by definition, the bad debt will be lower so lots of these variables move together in my messaging is just to tell everybody that we're going to run the business you know kind of macro constant and then opened our eyes to what the macro is me you know opex.
And capital allocation, you know pivot state based on what we see and what we're seeing now is we're probably going to slow the opex.
Okay. Appreciate all the color. Thank you.
Got it.
Our next question will come from Trevor Williams with Jefferies. You May now go ahead.
Great. Thanks, I was hoping you guys could unpack the <unk> guidance a bit in some of the moving pieces because it implies revenues down more than $20 million Q3 to Q4 typical seasonality for you guys is up 20 million plus in normal years at least I get fuel prices are lower sequentially, you've got the pull forward.
Gift some of the softness in U S. S M B in fleet, but anything else moving pieces wise you'd call out organically for why you aren't seeing the same normal Q3 to Q4 step up thanks.
Yeah.
I'll jump on that if it was I think you'd made God most of them I'm sure. It's you know whenever you're saying kind of plus or minus $10 million on whatever 900 million. So it's not a material number but but those are it's kind of a flip flopping. This year versus last back last year. There was some huge lake gift or.
Because retailers were out of stock from being careful and so that number was a pretty big whopper number if I remember in Q4 last year and this year. They said hey, we're getting ready sooner until put tons of orders in you know earlier and then what you said where it run it at I don't know 430, or something fuel price, which has ticked down obviously from <unk>.
Q2 to Q3, and then and then into Q4, which takes them off the top but then again it helps expenses.
As I said earlier, both borrowings and end up in bad debt. So the biggest thing is just the normal seasonality. What you said if we look at the last whatever years, you cleaned up pro forma acquisitions or stuff two or three of our business is soft in a fair amount of it's just less work days in the in the fourth quarter, both here and abroad.
And so it's just it's really just that that you know Q4 and Q1 are just less workdays are softer in Q2 Q3 are higher and so theres not theres really nothing like Super Duper going on like as we model the thing to do to embed the guidance here I would say, there's nothing else to that.
Sticks out.
And I'll just add.
Add on to that a little bit you know we talked about it earlier in the call that interest expense really is significantly worse than more of a I think we all projected even from the peds perspective back in July when we were getting our previous guidance and so.
But that is a big big headwind going into the fourth quarter. Okay.
Like what do you see this but hey, we're kind of standpoint in the second half of revenue for the second asked the spare tire than we said 90 days ago, and I guess the profit targets.
I've said before our macro was off by $8 million of wrong wage expenses wherever 20 million or so underneath the hood, we been able to do some things to make the thing work so that the trends in the performance again separate from the macro my message would be a pretty good kind of as good or better than we thought.
90 days ago, So we're not seeing any kind of.
You know blinking red lights, yet and like all the questions on this call the profitability a lot will turn on where those macro things you know landing glide path next year, but I, just do want to remind people that like to own stock for more than a week that you know what comes up does come down and things they'll keep going on for multiple years in a row.
So don't forget the frequency went up this year right 2022 fuel prices went up you know interest rates. You know are going to be you know started obviously lower and so these things will move again I just don't think we've ever seen volatility like this honestly the amount of movement in some of these factors and the and the <unk>.
Frame that they know that that's what seem strange to us.
Yeah understood and then just as a follow up on corporate payments.
Thinking about the macro sensitivity there if we go back to 2020, the perfect storm of the stuff that worked against you, but I think some of the cyclical exposure there had been a bit of a surprise.
Now today, you've got a FX global reach is going to close shortly so you'll have more FX hedging and cross border exposure than you did two years ago, I know, you're saying high teens as a target for next year, but kind of with that pro forma revenue mix any view just on how that segment should hold up in a recession kind of where you'd be.
Most vulnerable the pieces of revenue you think should be most durable any help there would be great. Thanks.
Another good question I'd say.
It'll hold up well and the reason is you know Covid is was a is buzzing bizarre.
A macro thing where I keeping people at home until it picked off.
You know companies cruise ships companies that they made a living working so we had some punishing set of clients. The great news about the corporate payments business is the majority of the payments are locked.
I think rents think I T services.
He is mostly can't get out of you know the AEP that's in front of them, even if their own situation you know soften some and then B you know you heard it again today, there's inflation, which rolls into you know honestly companies spend and so I'd say of all the businesses you know that one order.
Hold up well because the spend is pretty fixed and will likely go off and then on the cross border side I think you hit it you know FX volatility a little bit like high fuel prices create greater interest in you know FX management and so.
The extent that different countries had differential you know plans on interest rates, which triggers you know FX volatility that should be helpful to that business, which we're seeing now so all in all I'd say, we like the chances for the business next year.
Great. Thanks.
Our next question will come from Andrew <unk> with J P. Morgan you May now go ahead.
Yeah.
Hey, everyone. Thanks for taking my question I'm, just one getting back to the M&A side. I know you mentioned that you feel increasingly good about your positioning of the company broadly and obviously global reach further rounds out the FX business through Mexico authority in the lodging side I was curious which areas are most interesting for you guys right now looking for.
Incremental M&A next year.
Yeah, Andrew Hey, it's Ron that's a good question I I'd say that we've done you know a lot of the positioning.
Work literally last year of this year, if you look at the the beyond strategies of building out.
What segments, we can play in like our you know our core paying one.
As for SMB, and corporate payments or the lodging thing be in international or the front end of our mid market corporate payments business, where the process.
You know AP automation tool. So I think we really assembled like a lot of products.
You know in a in a lot of capability.
So that those those camps are bigger than us the sales and revenue, we can chase or bigger I think we're kind of ready to pivot back to more of the wheel House, you know scale base, let's buy stuff, we can run better.
The businesses are not saying that we won't do more if there's probably some more stuff around EV.
There were sniff and that's still in that kind of capability thing we want to be super. Good there are ready there, but that would be that would be the thing hey, one of the two or three main businesses.
You know corporate pay lodging for sure we could get you know wheelhouse deals that are larger and accretive would be would be the number one preference.
Got it that's helpful and one quick follow up you actually just mentioned that E V. I was going to ask on the you mentioned your all.
All your methods of toll distribution before and reaching consumers. So I wanted to ask if you could draw some parallels to your consumer side ambitions in the EV space and what you could share with US there I know it's early though.
So it's a it's a good follow up at it it's one of the.
You know things one of the models that we that we know well that caused us allowed us allowed me to pull the trigger them on an EV business that it was consumer centric and when we realize there's no credit risk. It's really a network play building up a super Duper easy network disadvantage it sounded a lot like the tolls.
So I think the biggest translation is partners could help. So if you think about you know the consumer business and in Brazil, Yes, there's a lot of direct capability about hundreds of people stand or Tollbooths are in you know in malls of kiosks and stuff, but the.
Partner models that are for sale guys have built you know every you know Nissan car with a with a toll tag when you come in at two of the largest banks you know reselling our stuff at a $40 million of cows.
That model of Oems that Didnt make EV cars aren't gonna be cars unless of the existing or new EV manufacturers make them and same with C. T. OS does not have any cars that people can't recharge them and so those two partners. The light went on for US Oh My Gosh, we can bill.
Our consumer business kind of you know b to B to C by by working through these partners and in there and they're gonna embraces so that that's kind of the thinking and that's the feedback we've had from talking to those to those various groups. So it allows us to basically.
Now Jan in our gun sites do extension for our company without doing some weird you know Super Bowl at right to try to get to consumers. So that that's that that that's the thing that we like about it.
Got it. Thank you I know Tien tsin that a Super Bowl AD. So I'll leave it there and congrats again.
Gentlemen, if he pays for it.
Right.
Yeah I'm on board.
Alright, well, thank you all right.
Our next question will come from James Faucette with Morgan Stanley You May now go ahead.
Hey, everybody. Thanks, a lot for all the color and and perspective, just a couple of quick follow up questions for me.
You guys have been really active in buying back your own shares, obviously and and but at the same time, you've sort of pick up the the acquisition activity as valuations have come down how should we be thinking about like.
Capital allocation priorities and what are you seeing opportunities and should we expect that kind of a continuation of the current mix or what it what are your expectations there right now.
Yeah, James Hey, It's Ron is the answer is it depends right are our capital allocation priorities are unchanged, we start with with deals because they position the company in and most of the ones. We do create accretion so that that's been all you know obviously number one.
But it depends really on our on our stock price obviously, the stock price our buyers with a better company to buy then people shop in big companies for higher multiples and so you know our prices at these levels I think we're probably leading to buying more stock back mostly because of what I said that we've gotten so many of the position.
Shifting or extension the strategic deals. If you will are kind of behind us we kind of have a sense of things we need to run the company.
So at today's stock price I'd say, we're probably more buyers of our stock than something else.
Higher stock prices would probably you know the the pendulum swings back you know a bit the other way.
No I appreciate that and then.
Just a quick follow up on the on kind of the the fraud and debt issues how much of that is just.
Purely function of fuel prices and as those come down that self resolved or are you seeing anything different in the current cycle than you have previously that could indicate it could be kind of an ongoing issue, even if fuel prices do come down next year.
Yeah.
Sure. Good point is most of it right. So higher fuel prices are right create more total spend so so the loss event is higher write off 100 gallons at five Bucks instead of 100 gallons of three and then second.
It attracts more fraud right you get targeted more by criminals again, when when the prices higher so really the question is if that normalizes. So those two things should improve and then it really swings over to just the economic health right of of of clients in Prague.
Opex for US you know do they remain healthy and and enable to repay and stop and so that that's the open question. I think you know we're not seeing a lot of that if we look at our distributions the higher quality accounts are repaying the role ray problems like always are.
Even though in the more credit challenged group. So it should reset if fuel prices stay at this level or a smidge down both fraud and an overall loss levels will decline.
Got it thanks for that.
Okay.
This concludes our question and answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect.
Yeah.