Q3 2024 Corpay Inc Earnings Call
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Please standby your program is about to begin.
Good day, everyone and welcome to today's Colgate third quarter 2024 earnings Conference call. At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing star one on your telephone keypad.
Please note that this call will be recorded and I will be saying why should you need any assistance.
It is now my pleasure to turn today's call over to head of Investor Relations. Jim <unk>. Please go ahead.
Good afternoon, and thank you for joining us today for our third quarter 2024 earnings call.
With me today are Ron Clarke, our chairman and CEO and Tom Panther, Our CFO Paul.
Blowing the prepared comments, the operator will announce the queue will open for the Q&A session.
Todays documents, including our earnings release and supplement can be found under the Investor Relations section on our website at Corp, <unk> com.
Throughout this call, we will be covering several non-GAAP financial metrics, including revenues net income and net income per diluted share all on an adjusted basis.
We will also be covering organic revenue growth. This.
This metric neutralizes the impact of year over year changes in FX rates fuel prices and fuel spreads.
It also includes pro forma results for acquisitions and divestitures or scope changes closed during the two years being compared.
None of these measures are calculated in accordance with GAAP and maybe calculated differently than other companies' reckon.
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.
It is important to understand that part of our discussion may include Fourthly statements. These statements reflect the best information we have today all statements about our outlooks new product and.
And expectations regarding business development and future acquisitions are based on that information there.
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 and form 8-K and in our annual report on Form 10-K. These documents are available on our website and at SEC Gov.
Speaker Change: Now I'll turn the call over to Ron Clarke, our chairman and CEO.
Ron Clarke: Okay. Jim Thanks, Good afternoon, everyone and welcome to our Q3 'twenty.
Ron Clarke: 2024 earnings call.
Ron Clarke: Upfront here I'll plan to cover three subjects first provide my take on Q3 results.
Ron Clarke: Sure our Q4 guidance along with a 2025 previewed.
Ron Clarke: Second I'll discuss our USA opportunity.
And our recent sales reorganization.
Ron Clarke: And then lastly, I'll provide an update on our M&A activities. Okay.
Ron Clarke: Okay, Let me begin with our Q3 results starting with.
We surpassed $1 billion in quarterly revenue for the very first time.
Ron Clarke: So quite a big milestone for us.
We reported revenue of $1 29.
Ron Clarke: Up 7%, excluding Russia, and cash EPS of $5 up 14%, excluding Russia. The results really in line with our expectations, both revenue and earnings finishing on the high side of our guidance range.
Ron Clarke: EBITDA margins in Q3 54, 2%.
Ron Clarke: That's up about 100 basis points sequentially.
Ron Clarke: Our trends in Q3 really quite good.
Ron Clarke: Same store sales remained essentially flat and that's consistent with Q2.
Ron Clarke: Retention improved slightly to a bit above 92% for the quarter, that's a return to record levels.
Ron Clarke: Sales of what we call new bookings growth at 14% inside of that corporate payments sales growth, leading the way with a 28% sales growth in the quarter.
Ron Clarke: And payables.
Ron Clarke: Spend monetization levels are remaining steady sequentially.
Our organic revenue growth, finishing at 6% overall again strong growth in corporate payments.
Ron Clarke: Brazil and international fleets.
Ron Clarke: Continued drag from North America fleet in lodging.
Ron Clarke: The lodging did show.
Ron Clarke: Signs of improvement in the quarter.
Ron Clarke: So the the wrap on Q3 really no surprises here.
Ron Clarke: Lodging a bit better.
Ron Clarke: North America fleet a bit worse.
Ron Clarke: But more importantly trends same store sales our.
Ron Clarke: Retention sales and spend monetization all are stable or improving so really a good result.
Speaker Change: Okay, Let me make the turn to Q4 and full year 2020 for guidance.
Speaker Change: So we're out looking a very strong Q4 finish we're.
Speaker Change: We're expecting organic revenue growth to accelerate to 13%.
Speaker Change: An early view of our October revenue Flash supports this acceleration out looking EBITDA margins of 55, 6%, which should be up about another 140 basis points sequentially.
Speaker Change: Cash EPS of $5 35 at the midpoint.
Speaker Change: 21%.
Speaker Change: And hopeful for Q4 sales growth coming in about 20%, so really firing on all cylinders.
Speaker Change: Couple additional positives are we expect lodging revenue growth to turn positive here in Q4.
Speaker Change: And the infamous corporate payments channel segment.
Speaker Change: Expected to finally grow again here in Q4, so both of these things support our overall revenue growth acceleration.
Speaker Change: So I said as I said back in August are expected arrival to a better place.
Speaker Change: Is now a Q4.
Speaker Change: For full year 2024 hour staying put with $19 a full year cash EPS at the midpoint.
Speaker Change: That implies 16% year over year EPS growth, excluding Russia, so really in line with our 15% to 20% mid term earnings growth target.
Speaker Change: Okay, Let me transition to a 2025 preview obviously early days, but we think its setting up quite well.
Speaker Change: In terms of organic revenue growth, we're out looking at 9% to 11%.
Speaker Change: Driven by a recovery of our North America fleet and lodging businesses.
Speaker Change: Both moving into positive territory next year.
Speaker Change: Corporate payments in Brazil, maintaining mid to high teens growth rates, even our gift business outlook in a double digit growth next year we.
Speaker Change: We do expect an incremental 3% of print.
Speaker Change: Revenue growth that's above organic.
Speaker Change: From the combination of the two corporate payments acquisitions now.
Speaker Change: Our planning our 2025 sales growth around 20% next year, that's driven by the demand for our new products, along with incremental investments in sales coverage.
Speaker Change: So taken together, we're targeting a 2025 cash EPS at a $22 per share ballpark.
Speaker Change: Still lots to work through.
Speaker Change: A couple of big assumptions behind the 2025 cash EPS will be.
Speaker Change: FX assumptions, particularly.
Speaker Change: There, Brazil re I, along with the net impact of lower interest rates.
Speaker Change: Offset by higher 2025 tax rates, so look net net.
We're out looking a pretty good 2025 setup.
Speaker Change: Okay, Let me make the turn to our U S. A sales opportunity along with our recent decision to reorganize our U S sales and appoint a new CRM tool. So recently our U S sales growth has not been as good as our.
Speaker Change: National sales growth and particularly our North America fleet and lodging solutions.
Speaker Change: We see the U S opportunity.
Speaker Change: For all of our lines to be enormous.
Speaker Change: Take for example, our payables business, we've got about a two or 3% share.
Speaker Change: Some of the mid market.
Speaker Change: Recall that as the business of about 500 million of annualized revenue and yet there is a couple hundred thousand prospects to convert and we got 2% to 3%. So a look a bit a big opportunity.
Speaker Change: So to get at this opportunity more urgently we've taken the following actions we've.
Speaker Change: <unk> consolidated U S sales organization.
Speaker Change: With the associated marketing and sales support functions reporting into and do one new CRM exact his name is Mike Jeffrey.
Speaker Change: We've rebranded.
Speaker Change: Sections of the vehicle lodging in payables.
Speaker Change: Lines of business to core pay two to leverage the brand.
Speaker Change: And we've established a dedicated cross sell team that will take each of our solutions back to our existing client base to drive sales so lots of energy and.
Speaker Change: Focus and urgency around selling more here in the U S.
Speaker Change: Okay, and finally I'll move to my last subjects, which is an M&A update so quite busy in 2024 on the M&A front four deals are finalized a couple still are in the pipeline. So first Tamar rang the AP automation company.
Speaker Change: We closed that July 1st.
Speaker Change: Good news it's tracking.
Speaker Change: Closely to our second half plan and.
Speaker Change: And we're seeing a significant synergies here and in Q4.
Speaker Change: G P S. The cross border business that we signed up this summer are still on track.
Speaker Change: To close at the end of the year.
Speaker Change: Through Q3, the business is performing at forecast. So so good news there so we'll be excited to bring.
Speaker Change: That business across.
Speaker Change: Taken together these two corporate payment deals should contribute about 50 cents.
Speaker Change: Cash EPS accretion in 2025 third as ours that pay Brazil deal, which is a vehicle card debts company helps drivers pay for registration renewals and.
Speaker Change: And tickets.
Speaker Change: We acquired that business in the spring it gave us an entry to really a new payments Tam.
Speaker Change: That is five times the size of the total Tam.
Speaker Change: So pretty big.
Speaker Change: And does that pay business year to date are up 45% in revenue. We've also signed up 90000 sand prior toll users.
Speaker Change: To using does that pay solutions are in the first six months. So so a good start.
Speaker Change: Lastly, the Comdata merchant solutions business, it's a P O S solutions.
Speaker Change: <unk> solutions.
Speaker Change:
Speaker Change: Business for truck stop merchants.
Speaker Change: It's being sold to a P E back company planning that sale to close by year end you.
Speaker Change: You might recall this divestiture is tied to the strategic review from last spring.
Speaker Change: And meant to simplify the company we.
Speaker Change: We do have a couple of active deals now that we're still working and although although relatively small if.
Speaker Change: If we do proceed.
Speaker Change: We would close those early.
Early next year.
Speaker Change: So look in conclusion today, our Q3 again results, finishing on the high side of our guidance range stayed.
Speaker Change: Stable or improving same store sales, our retention and spend monetization trends are out looking meaningful revenue growth acceleration here in Q4.
Speaker Change: Along with record earnings.
Speaker Change: Early take on 2025, good outlook and revenue and earnings growth kind of in line with our stated midterm objectives.
Speaker Change: And lastly, very pleased with our 2020 for M&A activity. The two corporate payment acquisitions are tracking in the business really just positioned.
Speaker Change: Better overall for faster growth, so with that let me turn the call over to Tom to provide some additional detail on the quarter Tom.
Tom: Thanks, Ron and good afternoon, everyone here are some additional details related to the quarter as we announced last week Q3 revenue was 1.029 billion, which I was pleased to see at the higher end of our guide despite lower fuel prices.
Tom: Organic revenue grew 6% versus Q3 last year led by 18% growth in corporate payments strong expense discipline and another quarter of lower bad debt resulted in EBITDA margin of 54, 2%.
Tom: We generated $355 million of free cash flow, which translates into $5 per share and cash EPS <unk> <unk> above the midpoint of our guidance.
Tom: Up 11% versus last year and up 14%, excluding the impact of the sale of our Russia business.
Tom: Overall, our first billion dollar revenue quarter, reflecting.
Tom: Reflecting the quality and diversification of our business.
Tom: Now turning to our segment performance and the underlying drivers of our organic revenue growth.
Tom: Corporate payments revenue was up 18% driven by 7% resin spend volume and stable card penetration rates strong.
Tom: Strength in our direct business, which grew 21% was again led by strong growth in full AP.
Tom: We closed the <unk> deal in July, which contributed $14 million of revenue in the quarter and we continue to migrate the business to our platform.
Tom: Everything is progressing according to plan and we expect meaningful synergy contributions beginning in the fourth quarter from.
Tom: From an adjusted EPS perspective, we still expect <unk> to be EPS neutral in Q4.
Tom: Cross border revenue was up 21% led by 40% sales growth.
Tom: Both new client acquisition and recurring client transaction activity was robust as our scale technology and talent advantages continue to power share gains from legacy financial players.
Tom: Our previously announced acquisition of GPS capital markets continues to progress through the approval process and we expect it to close in early 2025.
Tom: Turning to vehicle payments organic revenue increased 4% during the quarter.
Tom: Growth was driven by a 7% increase in transactions and higher revenue per transaction, which were both broad based across all businesses and geographies.
Tom: Organic revenue growth was again, driven by Brazil, and international fleet, which both grew double digits.
Tom: We're beginning to see some progress related to our sales and marketing investment and our local U S fleet business.
Tom: As a reminder, this customer segment services middle market and SMB field services businesses.
Tom: That used vehicles to deliver their goods and services every day.
Tom: During the quarter transactions and spend volume on a constant fuel price basis showed signs of accelerating growth.
Tom: In addition, we're seeing a quarterly trend of improving performance across same store sales new sales and retention.
Tom: There is more work to be done to increase sales, but it is encouraging to see some initial progress.
Tom: In the U K, we continue to expand the paybacks on parking at under a multi point consumer vehicle payment that by leveraging our proprietary networks and partnerships to add relevant products and services.
Tom: In Q2, we launched the ability to acquire.
Tom: Car content insurance, when parking and added a search function for nearby fuel stations and EV Chargers.
Tom: We've gone live this quarter with two additional services.
Tom: One our first vehicle maintenance and repair product for the U K, it's mandatory annual vehicle inspection service and.
Tom: And secondly, EV charging payments, where app users can directly pay for EV charging.
Tom: They are pay by phone App.
Tom: We continue to be quite excited about the future prospects from Repurposing, our BTB networks and payment solutions to a large consumer segment.
And Brazil business performance was again quite strong with revenue growing 18% and sales increasing 22%.
Tom: Tag growth was 8% and toll related revenue grew 20%.
Tom: We continue to see success not just in selling tags, but also selling additional payment solutions. Both insurance policies sold in card debt payment transactions were up over 100% in the quarter.
Tom: Additionally, car that App users and revenue were up over 30% compared to last year.
Tom: These additional products are quite popular and continue to support our cross sell success.
Tom: Lodging revenue decreased 5% and improved five points sequentially from Q2.
Tom: Room nights increased 10% in part due to an improvement in same store sales as well as storm related emergency services.
Tom: Softness in the business appears to have bottomed and we're expecting the segment to grow slightly in the fourth quarter.
Tom: Now looking further down the income statement.
Tom: Operating expenses of 561 million represent a 7% increase versus Q3 of last year, driven primarily by acquisitions.
Tom: Excluding acquisitions and divestitures operating expenses were flat.
Tom: Bad debt expense declined 3% from last year to $28 million or five basis points of spend so credit remains controlled.
Tom: EBITDA margin in the quarter was 54, 2% the slight year over year decline was impacted by acquisitions and divestitures over the last 12 months.
Tom: Normalizing for these transactions EBITDA margin increased 77 basis points are positive operating leverages, driven by solid revenue growth and disciplined expense management.
Tom: Of which we're quite good at.
Tom: Interest expense increased $21 million versus Q3 of 2023 due to higher debt balances from acquisitions and share buybacks.
Tom: Our effective tax rate for the quarter was 22, 9% versus 26, 6% last year quite a bit lower as a result of option exercises during the quarter.
Tom: Now turning to the balance sheet.
Tom: We ended the quarter with $1 3 billion in unrestricted cash and we had $800 million available on our revolver.
Tom: We have $6 $2 billion outstanding on our credit facilities, which includes an additional $500 million of term loan B. We issued in September at substantially similar terms to the existing credit facility.
Tom: We used the proceeds to pay down our revolver after our purchase of <unk> on July one.
Tom: As of September 30th our leverage ratio was 282 times trailing 12 month EBITDA.
Tom: We also took actions in September to reduce our interest expense by entering into an additional $500 million, 3.19% fixed rate swap and restructure our Canadian dollar to USD cross currency swap at a more favorable rate.
Tom: The combination of these transactions is expected to reduce interest expense next year by approximately $7 million.
Tom: We repurchased 300000 shares in the quarter for $90 million entirely related to employee stock option exercises.
We have over 500 million authorized for share repurchases and our board recently authorized an additional $1 billion.
Tom: Share repurchases. So we now have over $1.5 billion available for buybacks.
We will continue to pursue near term M&A opportunities will also buy back shares when it makes sense, while maintaining our leverage within our target range.
Tom: Now, let me provide some additional details related to our outlook.
Tom: For the full year, we are maintaining our cash EPS guide of $19 per share and slightly lowering our revenue guidance to $3 90 95 billion at the midpoint as a result of unfavorable fuel prices and FX rates.
Tom: We are not flowing through the third quarter beat as most of that $4 million of revenue was driven by the timing of customer transactions near quarter end.
Tom: For the fourth quarter, we are out looking 13% revenue growth and 21% earnings growth at the midpoint we.
Tom: We expect revenue growth acceleration across each of our segments in the fourth quarter, driven by new sales strong retention and the realization of synergies from the <unk> acquisition.
Tom: So all in all quite similar to what we expected in August.
Tom: For more details regarding our fourth quarter and full year outlook. Please refer to our earnings release.
Speaker Change: Thank you for your interest in core pay and now operator, we'd like to open the line for questions.
Speaker Change: At this time again, if you would like to ask a question. Please press star one on your telephone keypad you may withdraw your question at any time by pressing star to again that is.
Speaker Change: Star one and we will take our first question from Ramsey El <unk>.
Speaker Change: With Barclays. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hi, This is trey on for Ramsey. Thanks for taking my question I was just wondering if you could break down the retention by segment and how much of the retention improvement that you saw how much of that is from corporate payments, becoming a larger part of the business versus just improving retention trends throughout the remainder of the business.
Speaker Change: Yes, Sean Thanks for the question, Yes, we really don't break the retention down by segment.
Speaker Change: Generally in terms of how the segments performed relative to the overall line average corporate payments businesses.
Speaker Change: Then the line average in some of the SMB businesses within fleet vehicle payments are below.
Speaker Change: I think generally what we see is improving signs of retention.
Speaker Change: Absolute basis, yes, as the mix gets more directed towards those higher retention businesses internationally.
Speaker Change: But that's going to move it at a slow pace and have seen a dramatic shift in mix just from one quarter to the next you'd have to look out 12.
Speaker Change: Month period, before you're probably starting to see that have much of an impact I think you can.
Speaker Change: I assume.
Speaker Change: Assume or takeaway the point that the improvement that we saw on retention is just core retention improving.
Speaker Change: And the businesses versus the mix.
Speaker Change: Got it very helpful. And then just a quick follow up on I'm sorry.
Speaker Change: No go ahead.
Speaker Change: And then just a quick follow up on margin for me I was wondering if you guys could size if FEMA had any contribution to lodging payments in the quarter given given the hurricanes and if you guys are expecting any further tailwind from just extended disaster relief efforts.
Speaker Change: Hey, Brian It's a good question I'd say, it's probably about a $1 billion.
Speaker Change: Each for maybe a $1 million above kind of the normalized emergencies, we get in maybe a $1 million this quarter.
Speaker Change: Very helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you we will take our next question from Tien Tsin Huang with Jpmorgan. Please go ahead.
Speaker Change: Okay, great. Good afternoon, and good to talk to you guys is just wanted to ask on new sales, but that's okay. Just a couple of questions. There how did how did the third quarter come in versus plan and how quickly can the new sale.
Speaker Change: Sales re org and the C. R O here produce results in your mind. Thank you.
Speaker Change: Hey, Ron Good question as always I'd say corporate payments was.
Ron Clarke: Rocket in Q3, I think I called it out it was in the high <unk> over the prior year.
Ron Clarke: The <unk> business is still a bit soft I think it was 14 in total the outlook is kind of low to mid twenties for Q4.
Ron Clarke: So the full year would be around 20% for the full year.
Ron Clarke: In the preliminary plan that we built for 2025.
Ron Clarke: Yes, again, 20% next year.
Ron Clarke: Hope is that we're going to get some leverage from this thing just why we did it both on the expense side consolidated back office things, So we'll get into more aligned people right out customers.
Ron Clarke: And then also the cross selling right, it's cheaper to sell things back to clients. We have in terms of the contact rate my standards. So he's a terrific guy the guy who we put in a job and about half of this deal at Paychex.
Ron Clarke: So pretty pretty Big group, and so look I'm on Super bullish both on the structure.
Ron Clarke: The advantages the structure creates and then second just on the Guy just a super Duper Guy so with a product that we have the structure now that guy Im hoping things get better.
Ron Clarke: Sure.
Speaker Change: Okay, No that's great to hear and then just.
Speaker Change: My follow up just thinking about visibility into 25 nowhere.
Speaker Change: So got certainty on the election, and you know, we'll see what happens with rates here, but.
Speaker Change: Double digit growth.
Speaker Change: At this point, how do you feel about visibility there Ron versus 90 days ago or even same time. This at this time last year.
Ron Clarke: Yes, I think better tissue hollow reasons one is.
Ron Clarke: That were outlook in the acceleration right now sitting in this quarter.
Ron Clarke: And I've had a chance to peek in October right, which supports the door, which is good so.
Ron Clarke: Sit here today, and say Hey, I think organic is going to go from $606 13 is the first statement I'd make and then the second one I think is just the mix helps us as we as we look into next year I think the confidence is higher because the two problem children move to flat or kind of low single.
And the corporate payments in Brazil that are super good mid to high teens or bigger share side of the business. So I think the mix the ratios will get back in line averages and so I think.
Ron Clarke: This is the business you can plan, where we go into next year with kind of 90% of the revenue heading into next year.
Ron Clarke: Whatever is 20 years of SaaS now on.
Ron Clarke: <unk> same store sales and you guys are good at math, so that that helps us basically.
Ron Clarke: Frame, what the revenue is going to be.
Speaker Change: Great. Thank you.
Speaker Change: Thank you we will take our next question from Nate Robinson with Deutsche Bank. Please go ahead.
Speaker Change: Hey, guys sorry.
Nate Robinson: Sorry about that I wanted to ask you about North American fleet.
Speaker Change: Still remains a little bit of a drag on overall growth and I know one of the other players in the space recently talked about some macro driven softness there. So wondering if you call out some of the broader trends you're seeing in that business.
Speaker Change: You mentioned same store sales flat in <unk>, but any callouts you have on trends quarter to date and then maybe more importantly, your 25 outlook calls for North American fleet to return to positive growth. So can you talk about your confidence maybe follow up on <unk> questions about visibility into that positive inflection sort of beyond the sales org changes that you've made here.
Ron Clarke: Yeah, Hey, Nate it's Ron so on the first one the same store sales.
So again the thing is basically flat sequentially and again, it's improved from the couple of previous quarters 0.1 point.
Ron Clarke: 0.2, the retention.
Ron Clarke: And that business has improved sequentially.
Ron Clarke: Sequentially and quite a bit from 12 months ago and so at this point now that we finally lap the emptiness pivot two years ago, It's really just a function now of sales.
Ron Clarke: Retention levels are good we're not seeing anything unusual the same store sales and lastly, setting that data target to try to get to our overall.
Ron Clarke: In the 9% to 11% number.
Ron Clarke: Hey, let's look for that they may be low single digit better than it was this year, but no noteworthy theater. So we're not trying to plan. So crazy amount of sales next year, but we do expect sales to be up so we're not seeing.
Ron Clarke: Many of the same things that the other company.
Speaker Change: Got it that's helpful and then.
Speaker Change: Another question with regards to the 25 outlook I think you mentioned a couple of the key assumptions being the net impact of lower interest rates and higher taxes. So hoping you could drill down into each of those a little more so on interest rates, obviously lower interest rates impacted interest expense, but wanted to ask you about the impact of float revenue, particularly within corporate payments I know, it's not something you manage the business for probably spend two seconds.
Speaker Change: About it but it's obviously been a little bit of a tailwind to growth there.
Speaker Change: Year to date, so how should we weigh sort of lower rates versus maybe higher average cash balances that you hold for clients and anything else, we should be aware of with aware of with regards to lapping float revenue and then on tax rate.
Speaker Change: Been a lot of talk about pillar, two and the impact facing other companies I just wanted to clarify if you had any impact there and then beyond pillar to any other things we should keep in mind when thinking about the tax rate next year, whether its impact the share options and you back when the election et cetera.
Speaker Change: And that is one loaded followed on a name that's right yeah.
Speaker Change: Yes.
Speaker Change: Let me try to move through.
Speaker Change: Each of those quickly to leave some time for another color so first on rates.
Speaker Change: Obviously, we have about $3 billion of our debt still rate sensitive so as the fed continues to cut today and expectation would be to continue to move down.
Speaker Change: Get the benefit of that.
Speaker Change: So you can apply that against the 3 billion notional, we pencil that out.
Speaker Change: Based on what we're seeing in the rate curve is that rates go down average to average call it 70 basis points.
Speaker Change: With respect to flows.
Speaker Change: It doesn't have an overly material impact.
Speaker Change: Terms of the overall.
Speaker Change: It affects our revenue more to our interest income has been on where the balances there are classified and be a little bit of a headwind, but the numbers that we quoted in terms of the overall guy take that into account in terms of being able to power through any impact from from the flow side.
Speaker Change: With respect to.
Speaker Change: Your question on taxes.
Speaker Change: Some exposure to the global minimum tax that amounted to <unk>.
Speaker Change: 25.
Speaker Change: Not overly material I think what I would say is that this year. We commented that our tax rate was benefited from some discrete items, namely the exercising of some stock options by.
Speaker Change: By employees, given where the stock prices.
Speaker Change: Most of the year not necessarily counting on that as always continue.
Speaker Change: Thank you can look at a tax rate that's closer to our more recent history versus where we were.
Speaker Change: This year, where we benefited from outsized employee exercises.
Speaker Change: Thanks for the color and I appreciate your tumor cell.
It sounds like 10.
Speaker Change: Question one.
[laughter].
Speaker Change: Yes.
Speaker Change: Thank you we will take our next question from Dave Koning with Baird. Please go ahead.
Speaker Change: Yeah, Hey, guys. Thanks, so much and I guess first of all the growth is so good in Q4, and then obviously, it's good next year or two but what what's in Q4, you know the 13% that if we look at next year at 10%, that's not not totally sustainable it seem lodging, we'd probably get better next year not worse. So.
Speaker Change: But what it's going to be different in Q4 than the rest of next year.
Ron Clarke: Yes, Hey, Dave it's Ron so.
Speaker Change: The comps would be the main things, let me start with <unk>.
Speaker Change: The acceleration from Q3 to Q4, so kind of 6% to 13.
Speaker Change: So call that what we report <unk> so call. It 25 billion 10 55 sequentially we've got.
Speaker Change: Three businesses that basically will do way better in Q4 than Q3, so Brazil, because its seasonality.
Speaker Change: Corporate payments business, partly to the synergies of the latest acquisition vague in that business is still volumes is growing fast and then our gift business, which is a big seasonal bid.
Speaker Change: Business Super active in Q4, so those three businesses the lad.
$530 million increments, so I'd say, our confidence plus peaking at October is pretty high. So then when you roll the clock to the next thing.
Speaker Change: Some of those things roll off right that Brazil and gifts.
Speaker Change: Super powerful in the other quarters, they are big quarters, Q4, and again like last year, where the comps to gifting got pushed out I think I mentioned into into 2024 for 2023. So it's really just housing lineup against the prior period.
Speaker Change: As I said for the 2025 number nine to 11, we're just taking the problem children in volume for a negative.
Speaker Change: Low single digits into the possible corporate Davis in Brazil, you know mid to high and then kind of international you know call. It around 10%. So we add those things together confidence in that number is pretty high for next year.
Speaker Change: Yes.
Speaker Change: And then also one thing to clarify the 10%.
Speaker Change: The midpoint of that range is exclusive.
Speaker Change: The <unk> and the GPS acquisitions on a print basis, it would be closer to the 13%.
We've referenced.
Speaker Change: Gotcha, Yeah that makes sense and maybe a quick follow up just corporate mix it of growth in volume and yield yield was super strong this quarter volume D cell was that just purely the mix of what was happening.
Speaker Change: Yes, that's exactly right, it's just purely a mix.
Speaker Change: Story behind that.
Speaker Change: Yeah. Thank you.
Speaker Change: Thank you and as a reminder, it is star one for your questions. We will take our next question from Sanjay <unk> with <unk>. Please go ahead.
Speaker Change: Thank you.
Speaker Change: And then Tom you guys talked about.
Speaker Change: Our pipeline of M&A pipeline I'm, just curious sort of what's in there I know there is more on the share buyback.
Speaker Change: But as we think about.
Speaker Change: Or are you going to allocate your capital next I mean is it M&A more so than buyback and then some of the valuations have compressed.
Speaker Change: Yeah, Let me let me go to the first part of the question is the pipeline. So I think you said last time, we're focused really on corporate payments transactions and then the <unk>.
Speaker Change: Silver vehicles things that can help us build bigger volume fast in there so no shop at the things we're out looking.
Speaker Change: That group in terms of the split between.
Speaker Change: Buybacks and acquisitions its always the same that we have attractive.
Speaker Change: Earnings and assets that we can buy the grateful with growth that is.
Speaker Change: As always our top priority if the business case turns and to the extent that the Saar.
The price raise out of a range that we like we use we use liquidity from that so I don't think anything materially different in terms of the priority heading into next year, Although I think the board did.
Speaker Change: At the last meeting increase increase the authorization.
Speaker Change: Another $1 billion. So we've got liquidity you get next year, we've got the authorization, So we'll see where the stock goes.
Speaker Change: And I guess, just a follow up I know you talk just on that previous question about the acceleration and then the commentary Scott.
Speaker Change: As we think about this acceleration I mean, you said your peak. This October it looks good I mean, where is there any risk in the numbers I mean, it seems like things are progressing quite well, but you are calling for a pretty decent acceleration in the fourth quarter I'm. Just curious as we look at these is it just all comps and therefore, you are pretty comfortable because sometimes the comp base doesn't work either just curious.
Speaker Change: Yeah.
Speaker Change: So it's a it's a good question to say Hey, we're going to have a 13%.
Speaker Change: Revenue growth and I think a 21%.
Speaker Change: Earnings growth in Q4 is obviously.
Speaker Change: Right I would say the biggest risk we tend to look at the business sequentially would be in that yesterday.
Speaker Change: Last year, we had it in the Q4 number because it's historically been the big quarter not only to retailers.
Speaker Change: There are tons of gift cards, but then people activate them like crazy late in the quarter. So it's a late game.
Speaker Change: Call and so there's only so much science in that so I'd say, if we were back on a call in 90 days and we're short in Q4, I would say that would be the most likely answer as to why.
Speaker Change: Alright, thank you.
Speaker Change: Building off what Ron said on the on the sequential point, so it's going up $25 million sequentially, we've got the gift piece.
Speaker Change: Call that 10, and then the other piece of things that we've got a pretty good line of sight into some realization of pay marine synergies with them.
Speaker Change: Another piece of that and then Brazil, given the summer season down there.
Speaker Change: Predictability, we have a high predictability around the sequential increase there from Q3 Q4 so.
Speaker Change: I think.
Speaker Change: Does give us added confidence that.
Speaker Change: Will.
Speaker Change: We will be able to hit the Q4.
Speaker Change: So record numbers right Theres Thompson's growth over the prior year, but it would be record revenue record earnings.
Speaker Change: Almost record Myers, and so everything I say to you guys is pretty positive safford from having easier comps from last year.
Speaker Change: The spot rate and this is Scott.
Speaker Change: Okay.
Speaker Change: And once again as a reminder that is star one for your questions. We will take our next question from Peter Christiansen with Citi. Please go ahead.
Peter Christiansen: Hi, good evening, Thanks for the question here.
Speaker Change: Thanks.
Some results.
Speaker Change: It's been an initiative in the past.
Speaker Change: That statistic.
Speaker Change: Business.
Out of the mine.
Accrual accounts in between that last effort, just just trying to see how youre going about cross sell differently. This time around and what makes you confident that.
Speaker Change: This is.
Speaker Change: A more viable opportunity.
Speaker Change: Gordon sell side.
Speaker Change: Yeah, Hey, P. Thanks for thanks for reminding me.
Speaker Change: Yeah.
Speaker Change: <unk>.
Speaker Change: It's a super Fair question, I think I think a few things.
Speaker Change: Everyday we live we get a little bit smyers, though the handful of differences. This time around is first and foremost the targeting.
Speaker Change: I think I've mentioned that before we were you know.
Speaker Change: Romance by the numbers instead of by the targets and so this time, we're much clearer.
Speaker Change: Who among that client base.
Speaker Change: Makes sense to bring our other products too it's a smaller group of larger accounts that that will be the first one the second one I think is the brand.
Speaker Change: Bringing products back.
Speaker Change: Sure the brand we've moved a bunch.
Speaker Change: Existing clients, let's say in the in the fleet card business to what we call our core pay one fleet card. So when you go to them with.
Speaker Change: Our core pay business card or a core pay AP automation solution and they go Oh, that's that company CJ. Okay. It's the same thing and then lastly, I think this dedication of.
Speaker Change: Sales people that are just doing this so it's not a <unk>.
Speaker Change: <unk> job, but it is kind of what they do and we are marketing people focused on it. So I think the the whole approach to this thing is just <unk>.
Speaker Change: That are organized and and better setup.
Speaker Change: Time around he gets higher and cycles and so we should have some pretty easier read over the next three to six months. Whether this version is it's going to be way more successful it should be.
Speaker Change: I appreciate that.
Speaker Change: Certainly sounds.
Speaker Change: More encouraging this time around.
Speaker Change: I did wanted to ask a little bit about the preview for 25 Super helpful. I appreciate.
Speaker Change: The initial preliminary look there just curious on view on margins generally obviously, there's going to be a lot of factors that could influence that over the year, but at least from what youre looking at now do you see that as a.
Speaker Change: Component to earnings growth next year.
Speaker Change: Yes for sure.
Speaker Change: Again, you get a little bit of noise right from the acquisitions that generally come across.
Speaker Change: As lower margin, but I think I think the answer is yes, we expect some operating leverage again I'll roll into the next year.
Speaker Change: The structural advantage of the business, where there's significant amount of fixed cost and so when youre growing revenue, 13% at the midpoint inclusive of the acquisitions Youre just going to get positive operating leverage we've been pleased with the sequential increase in margins quarterly this year.
Speaker Change: Revenues in front of me, but it's like a $51 $52 50, 455 kind of number and so I think that some of that quarterly variation is seasonal, but but but exiting <unk>.
Speaker Change: <unk>.
And overall at about <unk> 54 for the year I think gives us reason to believe that it will gravitate up next year as well.
Speaker Change: Okay.
Speaker Change: That's really helpful. Thank you Tom Thank you Ralph Great results. Thank you. Thanks C J.
Speaker Change: Thank you we will take our next question from Lukas <unk> with BMO capital markets. Please go ahead.
Speaker Change: Hey, guys. Thanks, sorry, I joined the call a little late so hopefully hasnt been asked but on corporate payments. The gross sales performance looks really strong and.
Speaker Change: 40% growth in cross border I think about the retention there is slightly better than the copay average. So how are you thinking about the organic growth in that segment heading into 2025 would that kind of sales traction obviously moving pieces from the acquisitions, but any thoughts there would be great. Thank you.
Ron Clarke: Yeah, well this is Ron high teens is what I would say we're looking at your rights as the sales have been literally record levels now for the last two years and drive that retention.
Speaker Change: And the business as it evolves a bit better I should say than the line average and so when you when you put that math together you get back to.
Speaker Change: High teens in revenue and obviously faster to Tom's point is this operating leverage in that business. It runs off of one system. So you're probably in the mid twenties.
Speaker Change: In terms of EBITDA growth of the business. So it's been compounding at that level for a couple of years now and then as you recall, that's an interesting area for us in terms of deals we're going to add obviously, an asset that we hope to close at the end of the year.
Speaker Change: But there are synergies and continue to look.
Speaker Change: In that space for other assets. So we do have the ability to layer additional transactions and that stays on our platform.
Speaker Change: Thank you.
Speaker Change: Got it.
Speaker Change: Thank you and there are no further questions at this time I will turn the call back over to Jim Eglseder. Please.
Jim Eglseder: Please for closing remarks.
Jim Eglseder: Thanks, Andrew are saying guys I know, it's a busy night. So do you have anything else. So are you working through you.
Jim Eglseder: Models feel free to do should be happy to help.
Jim Eglseder: Thank you for being on the call.
Jim Eglseder: Okay.
Speaker Change: Thank you. This does conclude today's program. Thank you for your participation you may disconnect at any time.
Speaker Change: Okay.
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