Q1 2025 Corpay Inc Earnings Call
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Good thing I'd like to welcome everyone to core pays first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press Star then the number two on your telephone keypad. Today's call is being recorded I would now like to turn the call over to Jim Eglseder Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us today for our earnings call to discuss the first quarter of 2025 results.
With me today are Ron Clarke, our chairman and CEO analysts vickery, our interim CFO.
All of them in 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 of our website at Corp, <unk> com.
Now 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 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 closed throughout the two years being compared.
None of these measures are calculated in accordance with GAAP, so may be different 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.
It's important to understand that our comments may include forward looking statements, which reflect the information we have currently.
All statements about our outlook expected macro environment, new products and expectations regarding business development and future acquisitions, our synergies are based on that information.
They are not guarantees of future performance and you should not put undue reliance upon them and we undertake no obligation to update any of these statements.
These expected results are also 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 a form 8-K and in our annual report on Form 10-K. These.
These documents are available on our website and at SEC Gov.
With that out of the way I'll turn the call over to Ron Clarke, our chairman and CEO Brian.
Okay, Jim Thanks, Good afternoon, everyone.
And thanks for joining our Q1 2025 earnings call.
Upfront here I'll plan to cover three subjects. So first provide my take on Q1 results.
Along with the rest of year guidance.
Second cover our recent M&A activity.
And then lastly, I'll share a progress update.
On our 2025 top priorities.
Okay. Let me begin with our Q1 results. We reported Q1 2025 revenue of a 1 billion six.
That's up 8% and cash EPS of $4 51.
That's up 10%.
Cash EPS would be up 18%.
Constant macro.
The results really right in line with expectations, along with the environment coming in mostly as expected.
Organic revenue growth in the quarter, 9%.
Overall, our two biggest business is doing quite well.
Vehicle payments at 8%.
Organic revenue growth and corporate payments, 19% organic revenue growth.
Operating trends in the quarter are quite good.
Same store sales finished positive at plus 1%.
Retention stayed steady at 92%.
Sales or new bookings are way up.
Up 35% versus Q1 last year and again, that's on the back of up 36% of sales growth in Q4. So look despite really everything going on the business performed as planned here in Q1.
Alright, let me make the turn to our our rest of year forecast so.
First off macro.
Factors that affect us really setting up to be effectively neutral.
Two our rest of year forecast versus our prior guide so the forward curves for FX fuel and silver have moved just a bit.
But essentially zero out in terms of their impact on our business.
Obviously with that said we do.
Acknowledged that the overall macro environment is quite uncertain.
But we're just not seeing anything yet.
Causes us to revise our forecast. Additionally, our revenue flash for April looks to be spot on our forecast. So as a result, we're pretty much maintaining our full year 2025 guidance at the midpoint as follows.
So 4 billion for 'twenty.
And revenue guide at the midpoint and sticking with $21 in cash EPS.
The slightly increase full year guide reflects the gringo acquisition.
In Brazil.
That's net of the $6 million unfavorable spread shortfall we saw in Q1.
So with this updated full year guide, we're still expecting full year organic revenue growth of 11% at the midpoint.
Inside of that court.
Corporate payments business expected to grow high teens.
To 20% for the full year.
As it relates to tariffs, we're not a particularly sensitive tariff stock.
That is we wont directly pay tariffs our businesses our services not goods are.
<unk> businesses in the UK and Brazil.
Operate intra country, so so not subject to tariffs so the direct.
Tariff exposure that we have is really limited.
To our cross border business.
Where it does rely on a cross border clients trading across borders. We have included a slide in our supplement that shows a bit less than 20% of our cross border business.
We will actually be affected by U S. Tariff policies. So look all of this is to say that our business is not directly impacted much by U S tariff policy, but certainly we're not immune to our clients being negatively affected by tariffs and that could ultimately soften their.
<unk> with us.
Okay, Let me make the transition to our recent M&A activity, we have announced a couple <unk>.
Exciting deals here in the last week.
Last week, we announced a strategic cross border partnership with Mastercard.
So in that case Mastercard will invest.
300 million for about a 3% share in <unk>.
Our cross border business that does value our cross border unit in excess of $10 billion.
Second we signed a commercial agreement to be mastercard's exclusive provider of cross border services to their clients to their Fi clients.
Clients and we think this financial institution partnership could add about 2% to 3% incremental revenue growth to our cross border business beginning next year.
Secondly, just announced that we're making a $500 million.
Minority investment into avid that's alongside their take private transaction with TPG.
Many of you know avid a leader and B to B invoice automation and payments and they do serve pretty distinct verticals from.
From our payables business.
We're all looking the investment in <unk> to be accretive to our earnings in 2026 and.
And really throughout the forecast period.
Our agreement with TPG does provide us a call option to.
To acquire the remaining equity of average down the road so pretty exciting.
So these two corporate payment back.
The acquisitions for sure.
And our position in this space and do provide us the option to dramatically scale up our position over time.
Lastly, we are looking a bit harder at divesting three.
Three of our non core or less related businesses.
Taken together those those three businesses could provide upwards of $2 billion.
Of incremental liquidity, if we are to transact.
We'll obviously keep you posted.
Okay, Let me make the turn to our 2025 top priorities. So in the February earnings call. We laid out four priorities for 2025 and here is a bit of the progress.
So first the portfolio, we set our goal was to expand our corporate payments business mix.
Doing just that.
With the Mastercard and avid transactions and in addition, we are still looking at some additional corporate payments targets in our pipeline. So the goal again fewer bigger businesses.
<unk> priority USA sales, we did have a good <unk>.
Q1, USA sales result.
USA sales up 25% year over year.
We have staffed.
New cross sell.
Team It goes back to our client base and the new zoom sale.
Sales team both of those groups now live and end market.
We have developed a new core pay brand AD campaign.
That we expect to be in the market later this quarter to further support USA sales.
Third payables so on the payables front, we did just go live with the enterprise client I mentioned in February so far so good we do expect the single.
Mega client will process over 30 billion.
$30 billion in annual spend with us so a significant opportunity.
We do expect to launch our new payables product in the UK using kind of next Gen Tech this summer.
So super excited to bring that product to our second biggest market.
And then lastly on the cross border front.
A major push into this new segment for US this institutional client segments. So think PE firms asset managers. So we're doing that with our new multi currency product. So progress quite good we've signed over 2000 new.
It's already since launch.
And we've aggregated $800 million of total deposits balances so off to a good start so pretty pleased with progress here against our four top priorities.
So look in conclusion today again Q1 financial.
Results, finishing really on plan.
Maintaining our rest of year full year 2025 financial guidance.
Based on what we're seeing we are expanding our corporate payments segments.
With additional acquisition targets still in front of us.
And as you can tell laser focused on our 2025 top priorities and advancing them.
So with that let me turn the call back over to Elissa to provide some additional details on the quarter Elisa.
Thanks, Ron and good afternoon, everyone Harrison additional details related to the quarter. The first quarter was a good start to the year with our business is exhibiting strong organic revenue growth of 9% overall right in line with our expectations. Our revenue of 1.006 billion was up.
<unk>, 8% over last year normalizing for macro Q1 revenue would have been 1.013 billion slightly ahead of the midpoint of our guide our revenues were impacted by approximately $6 million of unfavorable fuel spread revenue compared to our February expectation and there is a little volatility in prices in the quarter with slides.
The fuel spread revenue headwind.
Adjusted EPS increased 10% over last year to $4 51 per share as Ron mentioned performance drivers during the quarter were strong and were paired with solid expense management fewer shares outstanding partially offset by a higher tax rate.
We completed the acquisition of Green DAU in March, which had an immaterial impact on revenue and adjusted EPS.
A summary of the quarter generated strong top and bottom line growth on a constant macro basis, while maintaining strong margins and included significantly higher sales that should fuel growth over the balance of the year.
Turning to our segment performance and the underlying drivers of revenue growth corporate.
Corporate payments revenue was up 19% organically during the quarter driven by solid sand volumes, which also increased 19% organically in the quarter.
Our corporate payment solutions continue to sell extremely well with payables revenue up 19% organically, including direct sales up 30% year over year.
Within sales, we signed two new channel partners in the corner.
Cross border sales grew 51% for the quarter compared to the prior year and revenue increased 18% organically.
We did see heightened activity throughout the quarter driven by FX rate volatility from tariff policy changes, but much of that early benefit was given back in March as uncertainty caused U S goods based volumes to soften somewhat.
Activity in volumes did rebound in April post announcement of the 90 days here.
We've already migrated most of our GPS customers in the 2020 for acquisition onto our core pay platform with remaining migration plan to be completed by the end of the third quarter. This positions us well to cross sell our sophisticated risk management solutions to GPS as customers.
Clearly U S trade policy and tariffs are challenges for our customers as they operate today and look forward.
Florida is a global business for us, where we help customers paying for both services and goods and services have been largely excluded from the tariff policy changes to date.
For the remainder of 2025, we expect tariff impacts to be relatively modest unfavorable impacting our cross border revenue by approximately $10 million to $15 million based on our assumptions.
We've provided additional details on slide 20 in our earnings supplement.
Turning to vehicle payment our revenue grew 8% organically during the quarter consistent with the fourth quarter of 2024, and Brazil toll tags increased 8% year over year with more than a third of our customer spending coming from our extended network active insurance policies increased more than 50% and car. That's users were at <unk>.
40%.
We closed the Greenville acquisition in March and we continue to be excited about the significant opportunity in the car that space.
Our app based strategy growth of offerings as well as consistent sales execution power in Brazil organic revenue growth of 22% for the quarter.
And international vehicle payments revenue grew 8% organically for the quarter consistent strong sales array of products and channels, notably EV offerings throughout the UK and Europe and continued geographic diversification are the drivers of these results.
I am delighted to say, we have refined our existing reseller agreement with shell for another five years to manage shelf Hill and EV cars in multiple markets across Europe.
In U S vehicle payments revenue growth was down 3% organically, but we continue to see improvement in new customer application approvals growth in sales to our lower to mid market customers and better retention and the revamped U S. Sales organization. We are focused on standardizing performance criteria to manage sales with incremental investment in brand awareness.
Turning to drive mid market growth in leads.
Lodging organic revenue growth for the quarter was down 1% compared to down 9% in the first quarter of 2024, so a big improvement over last year.
Room nights increased 19% led by the workforce business, which was particularly active as a result of last fall's hurricanes and wildfires as well as improved new sales are.
Airline revenues were lower due to tough prior year comps and volume softness.
To accelerate U S sales growth, we are focused on building a single unified core pay go to market strategy by combining people processes and measurement across U S vehicle payment workforce lodging and most of our payables products led by our Chief revenue Officer.
We are building scalable infrastructure and are seeing early return with double digit growth in bookings across each of these lines of business.
We continue to gain traction and leveraging our product portfolio across our client base propelled by our unified brand with meaningful growth in website traffic and a strong sales pipeline. While also having sales representatives focused on cross selling and upselling to our existing customers.
In summary, we are pleased with the performance of our business to start the year.
Now looking further down the income statement.
First quarter operating expenses of $579 million increased 8% versus the first quarter of last year.
As a reminder, we acquired three businesses in 2024.
In March <unk> in July and GPS in December and dispose of our merchant solutions business in December.
Net impact of these transactions resulted in incremental operating expenses of approximately $40 million in the first quarter of 2025 over the prior year.
Excluding the M&A activity and normalizing for lower FX rates operating expenses increased approximately 5% versus Q1 of last year.
The increase in operating expense was driven by higher transaction volumes and sales activities to drive future growth.
Bad debt expense as a percentage of bandwidth five basis points consistent with Q1 of last year.
To better understand our operating performance, we evaluate EBITDA with and without the impact of add backs.
System with those adjustments and our cash net income definition to the extent they are operating expenses, we refer to this metric as adjusted EBITDA or cash EBITDA. Adjusted EBITDA margin was 55, 2% consistent with Q1 of prior year.
Interest expense this quarter increased 7% year over year due to higher balances related to capital deployment, partially offset by lower interest rates and higher interest income due to higher deposit balances are.
Our effective tax rate for the quarter was 25, 5% compared with 24, 7% in Q1 of last year with the change driven primarily by the mix of earnings.
Now turning to the balance sheet, we ended the quarter with the balance sheet in excellent shape with a leverage ratio at $2 six nine times, which is down six tenths from year end as we mentioned on the last call. We raised $750 million of additional term loan b debt and used the proceeds to pay down the revolver in the first quarter.
We have over $2 5 billion of cash and revolver availability at the end of the quarter, which gives us ample capacity to pursue acquisitions.
As Ron mentioned, we announced an expansion of our partnership with Mastercard to deliver an enhanced suite of corporate cross border payment solutions, which includes Mastercard investing $300 million for an approximate 3% stake in our cross border business unit.
Expect this transaction to close in the second half of 2025.
Our capital allocation in the quarter was limited as we spent $59 million on share buybacks associated with employee stock option exercises and 164 million for gringo.
Given the sell off of our stock. This year, we are buyers of our stock, but our first priority remains M&A.
Meaningful M&A cycles are few and far between so we want to take advantage of them when they present and the pipeline is very active.
So now let me share some additional information on our updated 2025 full year and Q2 outlook.
All the forward FX and fuel price curves have changed since our February call. The net effects of the macro factors on the rest of the year financial outlook as a wash here of the puts and takes fuel prices are now expected to be $2 96 at approximately 9% lower.
S. Dollar is now weaker against most currencies other than the Brazil real high interest rates are slightly better and tariffs had a slightly unfavorable impact to our cross border unit.
Consequently, we're maintaining our 2025 guidance and now, adding gringo, which adds to revenue, but is neutral to cash EPS.
Just on the current environment, we are maintaining our expectation of 10% to 12% organic revenue growth and $21 of cash EPS at the midpoint.
There is currently a lot of noise about if and how the demand environment will change in response to tariff uncertainty and sentiment deterioration through April we're not seeing any meaningful change in customer behavior. So it's difficult to handicap what might happen. What we do know is that the majority of our products are <unk> and intra country focused generally not discretionary and <unk>.
A more efficient way to pay for what our customers are buying.
There has been a lot of volatility with FX rates and the global economic outlet, but today, we're not seeing any meaningful impact to our business if economic activity and the outlet change, we'll be nimble and adjusting our spending is warranted, but today, we are maintaining our full year financial estimates for.
For the second quarter, we expect revenue growth of 12%, 14% and print cash EPS to grow 11% to 13%.
On a constant year over year macro basis, we expect organic revenue growth of 12% and cash EPS increased 18% at the midpoint compared to the second quarter of last year.
We've provided additional details regarding our rest of year and second quarter outlook in our press release and earnings supplement so now operator, we'd like to open the line for questions.
Thank you very much at this time, if you'd like to ask a question. Please press the star one on your telephone keypad, if you need to remove yourself from the queue. Please press star two and again that is star one for a question. We will take our first question from Tien Tsin Huang with Jpmorgan. Please go ahead.
Thanks, a lot Ron you've been real busy I know.
Want to ask on the two deals maybe first on Mastercard, just give us a little bit more on.
On your confidence level in getting this two to three points of incremental revenue growth out of the.
Speaker Change: Under the agreement we've seen these kind of partnerships before and of course Mastercard has got a ton of reach with banks, but ultimately the banks still.
Speaker Change: You'll have to promote it so what kind of line of sight you have into that the energy that you put into that to drive that two to three points.
Speaker Change: Good to hear your voice, so I think.
Speaker Change: The opportunity is so big I think is.
Speaker Change: Mastercard dedicated people get US introduced this this thing will go.
Speaker Change: And I say that again because of the clients of these tier two tier three banks pay half of these payments in U S dollars.
Speaker Change: So I think when our people show up and can provide that kind of benefit.
Speaker Change: I think it's going to be big I do think the question is how long remember this space, there's a handful of us independents like US all the rest of cross border dollars Mcdonald's banks and so the size of the slow sitting there just massive and so this is for sure a marathon.
Speaker Change: One thing, but I think lining up with them.
Speaker Change: <unk> is enormous.
Speaker Change: Opportunity looks like.
Speaker Change: Yeah, It seems aligned.
Speaker Change: With what the banks want to do in terms of the monetization of that front end, but just curious on that that's that's good to hear.
Speaker Change: <unk> one.
Speaker Change: Interesting deal maybe the simple high level question on what you opine on is just is this a financial investment or a strategic one.
Speaker Change: Could be both you have a call option, but to see you do the minority deal.
Speaker Change: Somewhat of a mid market I'm, just curious how passive or active you'll be.
Speaker Change: As an investor and avid.
Speaker Change: Yeah. Good question strategic for sure right.
Speaker Change: I've said repeatedly we want to be bigger in corporate payments and particularly in the payables.
Speaker Change: A portion of that and so this is a terrific.
Speaker Change: Asset and stuff and so for us, it's just seeing progress really on profit acceleration.
Speaker Change: Which we got a bit of a line of sight into as well.
Speaker Change: We are super hopeful that.
The company will progress that and we will be in a spot to acquire that company in a few years. So that's the primary basis.
Speaker Change: Going into this.
Speaker Change: Understood.
Speaker Change: With Gregor Thank you Ron.
Speaker Change: Okay.
Speaker Change: Thanks Bill.
Speaker Change: Thank you next we'll go to Andrew Jeffrey with William Blair. Please go ahead.
Andrew Jeffrey: Hi, I appreciate you taking the question you had a lot of good stuff going on here.
Speaker Change: Ron when you think about the avid investment in the option seems to be a great way to go about it can you talk specifically to.
Speaker Change: Their network as well as your own AP business, just around monetization rates and I assume that strategic investment is determined of this nature indicates confidence ability to improve current attach and monetization of new sales are a big part of that too, but can you speak to the monetization piece and your confidence in being able to drive card acceptance <unk> pricing.
Speaker Change: I think it's I think it's high in some ways as it has done really even a better job than we have right. There. The revenue mix includes a certain amount of just standalone software.
Speaker Change: <unk> also advanced.
Speaker Change: What they call kind of paid for or AC H, plus getting paid for a percentage so I think that.
Speaker Change: They've made.
Speaker Change: Great progress on that and so I think that to your point I think this is for us less about competence and those those now to rock the boat Super scale is really on the buy side. The game is.
For both of us to sign up more spend right to run through that network and then in their case to realize some since scale effectively.
Speaker Change: You have the incremental revenue flow through.
Speaker Change: Go through it a way higher margins. So those are really the two things that were key in on as really excel.
Acceleration in buyer sales are span and then really flow through of the increment into into earnings if they do those two things we will be we'll be able to.
Speaker Change: Yes that makes sense and as a quick follow up.
Speaker Change: You mentioned enterprise last quarter as a new thrust within.
Speaker Change: The corporate payments business can you give us an update there in terms of pipeline.
Speaker Change: Yeah, it's like so I think what we said first of all.
Speaker Change: Slide the accidental right that we kind of stumbled into this thing six months ago, having been a middle market focus.
Speaker Change: We did contract is one Mega account and we have gone live so that is kind of starting to ramp and so I think I said in our last call.
Speaker Change: The hold the horses a bit of the corral to make sure that this thing works gets out of the blocks works well for the client, but we do have the I think we mentioned this a big consulting firms that facilitated the introduction that have already kind of run out to a handful of incremental prospects.
Speaker Change: So I think what I said still holds at least to the extent that we get to success. In this initial of Hal and call that a cow referenced Apple I think youll see us start to move forward with additional accounts. So this is a this is a big incremental opportunity of the payables days.
Speaker Change: Again, it's the size of that right.
Speaker Change: Four or five of these accounts are literally the size of our entire business today.
Speaker Change: Perfect. Thank you.
Speaker Change: We will go next to Ramsey El <unk> with Barclays. Please go ahead.
Trey: Hi, This is trey on for Ramsey. Thanks for taking my questions. So my first question is on the average Appexchange investment.
Speaker Change: So in your press release, you mentioned that the take private transaction structure gives us the flexibility to transform and accelerate profit growth and Ron I know you hit on a little bit, but and then I know it's still very early on in the process, but I was just wondering what kinds of strategic initiatives. This could entail.
Speaker Change: Yes, it's really just a its a scale question right the company.
Speaker Change: So whatever 20 plus years old they build the foundation was soft where they've been in PE that we help them with for 20 years and so I think they're.
Speaker Change: They're getting to a scale out $4 million to $500 million in revenue, where we're looking for the increment calls the next $2 million to $300 million of revenue to just flow through and just a much higher rate, which I think it will because the foundation like the network of suppliers attack.
Speaker Change: The sales structure or a bunch of the foundational work has been in place.
Speaker Change: And so I think it's literally as simple as that if they can add more spend.
Speaker Change: The wheel here, we think the flow through will be significantly better and margins will accrete. So that's that's again, what we're looking for.
Speaker Change: Got it. Thank you and then as a quick follow up earlier on the call you called out the outside of your cross border business any tariff impact would be indirect in nature. So I was wondering if you could help us think through what this indirect impact might look like and vehicle payment specifically would it be isolated to your OTR business or in particular geographies.
Speaker Change: And then could you potentially deploy pricing as an offset.
Speaker Change: Yes, I mean, I think probably like everyone on the call and who knows right. When something is indirect right, we're not going to pay tariffs directly and so hey, we are all all flavors of clients. So I think your your comment is a good one that clients of ours that have.
Speaker Change: Good as they.
Speaker Change: The business instead of services of zinc and <unk>.
Speaker Change: <unk> 18, Wheeler, who move products around where it could be more impacted than local businesses do plumbing.
Speaker Change: Right or HVAC, and so certainly our mix.
Affect a little bit what happens, but we just like everyone. On this call. We don't really have any kind of view it all up.
Speaker Change: How much any of these accounts will be affected we just know that.
Speaker Change: As a company that is we're kind of not in the gun sides of this we won't pay tariffs.
Speaker Change: Again.
Speaker Change: <unk> services business is really the only business with any kind of major direct exposure is cross border and then as we put the slides in the supplement that only about 20% of those flows are on goods.
Speaker Change: <unk> from the U S and so even even there the impact is limited so really it's just a function of what happens to the plant.
Speaker Change: To all of the businesses out there their current a little bit viable they are a little bit her a wildfire will be a parallel path, but we're not going to be hurt directly by us or as a message.
Speaker Change: Very helpful. Thanks.
Andrew Schmidt: Thank you and next we're going to go to Andrew Schmidt with Citi. Please go ahead.
Andrew Schmidt: Hey, Rob Hey, lesser congrats on all the progress here, thanks for taking the questions.
Andrew Schmidt: Wanted to ask about the U S business within vehicle payments.
Andrew Schmidt: It sounds like you're pretty optimistic around the sales trends there.
Andrew Schmidt: You can just comment around just the.
Andrew Schmidt: Confident in sort of driving.
Speaker Change: Improvement in revenue there as the year progresses, obviously macro side, but would love to get some details.
Andrew Schmidt: Based on the sales trends and initiatives you have there. Thanks so much.
Speaker Change: And on Friday Super Good question, So I'd say, it's a two part answer the first part is really.
Andrew Schmidt: Retention and so.
Andrew Schmidt: He went on the nausea with you guys about the great pivot as the U S vehicle business, a couple of years ago and getting out of micro accounts in line and all that kind of stuff and I can report that that is now.
Andrew Schmidt: In our rearview mirror and so whats come out of it let me just quote as to you that the retention rate for that entire U S business in Q1 of 25, our improved more than 200 basis points from Q1 of 2024.
Andrew Schmidt: So the loss rate in that business used to be a nine handle on the call low 99, nine and a half and now it has a seven handle so that's the first message is obviously getting to that 250 points back.
Andrew Schmidt: Prospectively, and we think that will even get a smidge better is the first point and then on the second point, yes.
Andrew Schmidt: Sales relative to the base.
Andrew Schmidt: And the forecast that we have sitting here says that we think the first half is call. It flat in the second half is literally mid single digits or better.
So we're sitting here on this call telling you that we think there is a big pivot and organic revenue growth coming in that business year. Whatever it is 60 days and then if we get that.
Andrew Schmidt: All of a sudden our organic growth rate steps way out because that's a pretty big business.
Andrew Schmidt: So I'd say our confidence is high because we're good at math and we've kind of captured the.
Andrew Schmidt: The retention number already as we thought we would when we made that change. So were finally after this time going to start to see some benefits from that decision.
Speaker Change: Got it. Thank you Ron Yes retention is a big lever so thats good to hear.
Speaker Change: Every time we.
Andrew Schmidt: <unk>.
Andrew Schmidt: See macro fluctuations, we always get the question on sort of supplier acceptance trends within the AP business and it doesn't sound like there's been much variation based on the commentary, but maybe just talk about what you're hearing from suppliers in terms of payment choice things like that whether there's been any change on that front. Thanks. So much.
Andrew Schmidt: Yes, it's a good fall so no.
Andrew Schmidt: The answer that number is basically flat.
Andrew Schmidt: It's kind of made a flat and I think it's just.
Andrew Schmidt: What you would expect which is.
Andrew Schmidt: Payment certainty suppliers want to get paid right and not default and payment speed.
Andrew Schmidt: Hi, important so any supply as it runs good margins like service businesses like as an example that run at a 50% 70%.
Andrew Schmidt: My marginal cost basically they love card products.
Andrew Schmidt: They are served in their fast and so I think the answer is we're not seeing really all that much different and so that added a column at the same thing I said about avid that are.
Andrew Schmidt: Our payables are available business goes as spend goes as we can keep growing the buyer side and increasing spend we think if anything will take up the monetization as we add more AC H foster ourselves into the network. So we're not seeing really any any downtick there yet.
Andrew Schmidt: That's great to hear thank you Ross.
Speaker Change: Thank you and ladies and gentlemen to ask that you limit yourself to one question to allow everyone to be able to ask their question. We will next go to Sanjay <unk> with <unk>. Please go ahead.
Sanjay: Thank you good morning, good afternoon, and congrats on this avid minority ownership Ron could I, just follow up a little bit on the acceleration of the sales at avid like how exactly will you guys be involved in that will you actually sell the product have your sales guide I'm, just trying to think about that part of it.
Sanjay: And then just on expenses, obviously, there might be some redundancies between what you guys do when they do is there any plan to sort of get involved on the expense rationalization. There and then just one final one just what are the terms of the call option in 2027.
Sanjay: That was kind of a three part of their Sanjay if I if I look within so let me see if I can go back and remember part one and so on.
Sanjay: Our involvement in added sales you've got a good guy in my opinion run into places and you've got some good leaders there with Mike and so I think our.
Sanjay: Our role is that we've been part of the idea side of Okay, maybe being helpful. In terms of priority and we're at a point in sharing some practices that we think.
Sanjay: And the investments that we think may help them perform better, but we wouldnt have made this investment if we didn't have some sort of confidence that they could do it in terms of synergies in this early whole period.
I'll add is going to run kind of as Abbott.
Sanjay: But clearly we've thought about and sized what I call, our second bi which would be if in fact, we get a few years out and we like the profit growth profit acceleration there is a pretty one or incremental.
Sanjay: Synergy right through through combination to Europe white, whether it's the the merchant networks or the tech side or other things. So we would really planned to.
Sanjay: Two step that it'll it'll run mostly kind of as it is will be helpful, where we can.
Sanjay: And then if that day comes.
Sanjay: We try to buy the rest we'll get the second bite on the terms front.
Sanjay: No.
Sanjay: We're basically going to kick the can and.
Sanjay: Provide that detailed disclosure in our Q, which will be probably later this week on Monday.
Sanjay: We will lay out more of the details.
Sanjay: Things like the high level.
Sanjay: Evel, what you said is right, which is we've taken a minority position along with TPG and management.
Sanjay: And basically have the have the option a couple years out to.
Sanjay: By the rest of the equity so we will fill in the details a different day.
Thank you.
Speaker Change: Next we'll go to Andrew Bosh with Wells Fargo. Please go ahead.
Hey, guys, it's similar on France, and thanks for taking the question.
Speaker Change: Good to see the progress that you're making on the payables front in terms of moving upmarket to the enterprise segment on that one.
Speaker Change: Alright win that you called out and the intention.
Speaker Change: I guess expand into the U K this summer I guess with the <unk>.
Speaker Change: Noise around tariffs for the increments of macro uncertainty.
Speaker Change: Maybe just give us an update there has been any kind of revised thoughts around kind of like Oh.
Speaker Change: Got it.
Speaker Change: Over the coming months.
Speaker Change: Sure.
Speaker Change: And then use the repeat of this part.
Speaker Change: Can you repeat the last part of that you kind of broke up.
Speaker Change: No I was just asking.
Speaker Change: The incremental macro uncertainty.
Speaker Change: Kind of a comment that you made around.
Speaker Change: The tariff implications on cross border.
Speaker Change: Yes.
Speaker Change: There are any revised thoughts.
Speaker Change: So the scale of that expansion.
Speaker Change: Whether it be moving upmarket to enterprise or.
Speaker Change: Okay. Okay.
Speaker Change: Okay.
Speaker Change: The payments.
Speaker Change: The payment extensions of UK.
Speaker Change: Yes, Im sorry, Im sure I was hearing the question, but I think youre asking hand, the payables grew we happy about the enterprise mid Jason in enterprise.
Speaker Change: <unk> got there and then and then go into the U K I think it's yes, and yes like we said we've gone live with the first account.
Speaker Change: This partner's introduce us to the next set of people and so this is really just walk before you run we want to make sure the things working and we're doing well, but the size of the step that we could get if it's successful as large and then the UK thing again is an intra.
Speaker Change: Market thing right, we're taking a product is here and it's going to it's going to help clients in the UK. So there won't be really specific any tariff impacts of that it's really a.
Speaker Change: Our product will be used by U K businesses.
Speaker Change: For purchases there and then to the extent that they have.
Speaker Change: Ross border payments, there, which again two thirds of three quarters of those will be end of the court and as Europe.
Speaker Change: And in Asia or other places. So yeah. We we don't think that thats going to have really any bearing on the launch. We're just excited to stand up a super important business in the second market that as Tam and Leverages like all the assets all the clients all of the people and stuff that we have there so.
Speaker Change: That's really what we're trying to tell people is what we're going to make this a way bigger business.
Speaker Change: Okay. Thank you.
Speaker Change: And next we'll go to James Faucette with Morgan Stanley. Please go ahead.
James Faucette: Hey, Thanks, a lot for for the question and all the details today.
Speaker Change: To turn to another topic really quickly Ron curious to hear about the performance of the hedging business in Q1.
James Faucette: Anything you can give us on how it has performed.
James Faucette: Since then during the month of April and early May I'm. Just wondering if it's fair to think about that business is a beneficiary of sustained heightened market volatility can you give us kind of the puts and takes on that dynamic and any other impacts on tariffs on that segment specifically.
James Faucette: Yes, that's a good good question James so on.
James Faucette: Our cross border business Q1, good I think we reported it.
James Faucette: High teens revenue growth against the.
James Faucette: The prior year.
James Faucette: Sales I think grew 50% in the quarter over Q1 of the prior year. So we're selling the stuff.
James Faucette: Like Crazy in terms of April we did look at the flash.
James Faucette: Gangbusters, maybe the adjective I use the April flash or cross border is way way ahead of our budget and our forecast and significantly ahead of the prior year and yes. There's no question that certainly in April.
James Faucette: So that it's been a beneficiary of the uncertainty of what the heck is going on and so to your point what the sustainability of that is is less clear, but but yes through four months. The business is truly rocketing with that said I don't know how clearly we did it.
James Faucette: And I did have 10 or 15 million out of the second half.
James Faucette: Full year guide to just be a bit conservative.
James Faucette: Post pause tariff world is not super attractive we wanted to make sure. We we went into the second half a bit conservative, but frankly, we don't know I just wanted to put it on the table that we decided to.
James Faucette: The trend a bit the second half of the events of tariffs or be looking to us.
James Faucette: Great. Thanks.
Speaker Change: Thank you and next we'll go to Trevor Williams with Jefferies. Please go ahead.
Trevor Williams: Great. Thanks, very much if we could go back to the organic guide and Ron you've given some cornells on this over the course of Q&A, but.
Trevor Williams: We're at 9% organic in Q1, you are keeping the 11% for the year. It sounds like a lot of that acceleration is coming from U S vehicle, but if theres anything else that you could point us to and I hear you on kind of April running in line, but just with everything on the macro how.
Trevor Williams: How would you frame the level of confidence in the full year and specific drivers you guys have baked it today versus three months ago. Thanks.
Trevor Williams: Yes, good questions Hi.
Trevor Williams: It would be the answer so.
Trevor Williams: Kind of interesting we expect Q2 that were that were sitting and again we've had.
Trevor Williams: Look at April already.
Trevor Williams: I'd say, we think probably closer to 12% at the midpoint. So I know, it's a big step Hey, we just printed nine.
Trevor Williams: So I think we will.
Trevor Williams: We print in Q4 to 12 in Q4, so 12, nine I'm going to say driver 12 here in Q2 and surprisingly the.
Trevor Williams: The U S vehicle, one is not the big contributor to the Big staff. The strange thing is that the gift business.
Trevor Williams: Which was super soft in Q1 versus the prior year is going to be Super strong here in Q2 against the prior year and so.
Trevor Williams: So then when you go into the second half what you said is right. Then the lift is we think the U S vehicle business will step into the mid single digits or plus and that's what we'll have to back half still double digits.
Trevor Williams: 12.
Trevor Williams: The 12 to 13.
Trevor Williams: In Q3 and Q4, so it gets you there, but in Q2, and then U S vehicle get you there the second half and corporate payments stays steady as you go high teens to 20%.
Trevor Williams: And again, who knows if again some recession, we're just call them as we see them today. The data that we can read out. So obviously all of this is a function of the world not melting down, but given what we could see confidence is high.
Trevor Williams: Okay. Thank you.
Rena Kumar: Thank you and next we'll go to Rena Kumar with Oppenheimer. Please go ahead.
Rena Kumar: Hi, Thanks for taking my question are you seeing any different trends across the smbs versus your larger fleet clients and can you talk about same store sales trends for both segments.
Speaker Change: Yes, I'd say not much I mean, I think historically.
Speaker Change: Our middle market enterprise clients had been steadier, but I think we did such a cleaning such a remixing.
Speaker Change: Starting a couple of years ago that are truly kind of micro super small.
Speaker Change: So just way fewer.
Speaker Change: Our portfolio, so I think that first headlines which is way less.
Speaker Change: Close to it.
Speaker Change: We'll be the first point and then on the on the base again.
Last one which is I think the same thing we quoted for.
Speaker Change: Q4, and again the good news is that's up.
Speaker Change: Three from Q1 over prior year.
Speaker Change: Remember right Q1 of 2004, we were minus two <unk>.
Speaker Change: Q1 of 25 or plus one so we move that plus three over the period of time and so the base report that I look at is pretty steady as she goes there is.
Not a ton of movement kind of each of the areas is kind of similar to what it was in Q4, where it was plus one and so yeah.
Speaker Change: Yes, we don't see much that's patchy and it is it's pretty solid right now.
I appreciate the color.
Speaker Change: And next we'll go to Dave Koning with Baird. Please go ahead.
Dave Koning: Yeah, Hey, guys. Thank you and I guess my question just with the avid deal do you guys immediately get access to their supplier network.
Maybe could you talk through like if today your accounts payable clients.
Dave Koning: You have 20% of each of their payment files on average that can can go into one of your suppliers and now with avid does that 20% raised to 30% I'm, making up numbers, obviously, but do you have metrics like that and am I thinking of that correctly.
Dave Koning: Yes, Dave Hey, it's Ron that is that's a super good question and the good news is.
Dave Koning: We have a bit of a head start on this subject to <unk>. So call. It I don't know six to 12 months ago, Mike and I met on this very subject and created a commercial agreement.
Arm's length agreement between the two companies to do exactly what you just said, which is to we had third parties look at the composition of our supplier networks, and which parts of it were monetized or not and then using that data to basically help each other.
Dave Koning: Monetize more and so that thing has gotten lifted up already and honestly the deepening of.
Dave Koning: The relationship now I think we'll improve that so we will we will clearly doubled down on that initiative and then as I said.
Dave Koning: A different day, we would move to a complete combination of that we would just effectively.
Dave Koning: Double the spend.
Dave Koning: In the merchant network, which is would be obviously super synergistic.
Dave Koning: It will create enormous leverage for us to have double the spend running through that set of suppliers. So that's obviously one of the attractive things for us in the second bite.
Speaker Change: Yeah, great. Thanks, guys.
Speaker Change: Thank you and next we'll go to <unk> with BMO capital markets. Please go ahead.
Speaker Change: Alright, guys. Thanks, maybe just a quick one on you mentioned some potential non core divestitures and the $2 billion number sort of implies it could be something pretty chunky, yes, just what businesses does that cover any details that would be great. Thank you.
Speaker Change: Rufus.
Speaker Change: It's a good question so not not shockingly.
Speaker Change: The three.
Units that we've kind of teed up to her from our what we call our vehicle segment and one is from our lodging segment. So the concept here again is.
Speaker Change: More in corporate payments.
Speaker Change: Les and vehicle in lodging and so that's a different message I think for everybody. This time is bigger. So historically, we've said hey, we're going to look for things that are less related noncore and.
Speaker Change: And potentially does that those kind of things on the margin we pick two or three businesses that have more size say call. It 150 $170 million in EBITDA combined across these three businesses.
Speaker Change: As a larger set of divestitures a couple of really good businesses and it's just such a pretty good price and so the idea really is just to simplify the company board.
Speaker Change: Create more liquidity in this case $2 billion and pour it back into the pipeline in front of us at corporate payments. So it's just a bore the message you guys is just a more aggressive.
Repositioning of our portfolio I think.
Speaker Change: Towards corporate payments.
Speaker Change: Thank you and next we'll go to Ken <unk> with Autonomous Research. Please go ahead.
Ken: Hey, good afternoon. Thanks for taking the question, maybe I'll ask one on lodging.
Speaker Change: Since it wasn't covered here, but.
Ken: The organic growth took a step back.
Ken: This quarter I know, there's leap year impacts in there, but is it your expectation to accelerate.
Mid single digit growth throughout the year, and then ultimately get back to.
Ken: Double digit growth and I'm just curious how do you guys think about driving that acceleration. Thank you.
Ken: So that's another good question. So the short answer for the Q1 is really the.
Ken: All pocketed in airlines.
Ken: So we built the plan for Q1 in the <unk> part of lodging, where we serve the airlines is just super soft.
Ken: The main maybe the weather was good I don't know, but the disruption.
Ken: Sub segment of that was Super light as was just David maybe it's the Newark Airport store I don't know.
Ken: The airline volume with Super League until all of the softness different from our plan was airlines going forward I think we said that we built the 2025 budget and.
Ken: The guide today really on that business staying kind of flattish.
Ken: It was declining and so the goal was to get it stood out back towards the level again, and then we would make sales here in 2025, so that business is a good business again in 2026. So there's nothing in our forecast is that things that are magically be much better but.
Ken: Super reported headline is it's not declining.
Ken: The base is strong or the retention levels are way better than they were a year to year half ago. So now it's literally just refilling the top of the buckets of that that thing can grow but.
Ken: So that's the update.
Ron: Thanks, Ron.
Speaker Change: Thank you and we'll go for a last question with Nick <unk> with UBS.
Nick: Hey, Thanks for taking my questions I, just wanted to come back to the U S vehicle payments business, it's given a deceleration versus being up slightly last quarter with strong sales last quarter as well. So can you just provide more specific color as to what drove the deceleration in Q1, and just put a finer point.
Nick: As to the drivers for the acceleration in the back half. Thank you.
Speaker Change: Yeah sure Hey, good question.
Nick: So from a.
Nick: What drove the current quarter I think it's just a little bit of softness, but as we continue to look towards the back half of the year. It really is.
Nick: The current trends and new sales that we're seeing right now continuing into the middle and the back half of the year better retention better same store sales, which should drive the ultimate back half acceleration.
Nick: Got it thank you.
Nick: Yeah.
Speaker Change: Thank you and that does conclude our question and answer session I would like to turn the call back over to Jim <unk> with Investor Relations.
Speaker Change: Yes, thanks, guys for your flexibility today and say it on the call late so.
Speaker Change: Lake into the wider but I think you'll understand why.
Speaker Change: Do you have any other questions feel free to reach out we're having out wherever we can.
Speaker Change: Thank you and ladies and gentlemen that does conclude today's program. Thank you for your participation you may disconnect at any time.
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