Corpay Q1 2025 Earnings Report

Corpay EPS Results

• Actual EPS: $4.51
• Consensus EPS: $4.50
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $4.10

Corpay Revenue Results

• Actual Revenue: $1.01 billion
• Expected Revenue: $1.02 billion
• Beat/Miss: Missed by -$9.55 million
• YoY Revenue Growth: +7.50%

Corpay Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 5:00PM ET

Corpay (NYSE:CPAY) operates as a payments company that helps businesses and consumers manage vehicle-related expenses, lodging expenses, and corporate payments in the United States, Brazil, the United Kingdom, and internationally. The company offers vehicle payment solutions, which include fuel, tolls, parking, fleet maintenance, and long-haul transportation services, as well as prepaid food and transportation vouchers and cards. It also provides corporate payment solutions consisting of accounts payable automation; virtual cards, cross-border solutions; and purchasing and travel and entertainment card products, as well as lodging payments solutions for employees who travel overnight for work purposes; traveling crews and stranded passengers from airlines and cruise lines; and insurance policyholders displaced from their homes due to damage or catastrophe. In addition, the company offers gifts and payroll cards. It serves business, merchant, consumer, and payment network customers. The company was formerly known as FLEETCOR Technologies, Inc. and changed its name to Corpay, Inc. in March 2024. Corpay, Inc. was founded in 1986 and is headquartered in Atlanta, Georgia.

Corpay Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day. I'd like to welcome everyone to the Corpay First Quarter twenty twenty five 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. Today's call is being recorded.

[Operator]

I would now like to turn the call over to Jim Egglestader, Investor Relations. Please go ahead.

[Jim Eglseder, Investor Relations at Corpay]

Good afternoon, and thank you for joining us today for our earnings call to discuss the first quarter twenty twenty five results. With me today are Ron Clark, our Chairman and CEO and Alissa Vickery, our Interim CFO. Following the prepared comments, the operator will announce that the queue will open for the Q and A session. Today's documents, including our earnings release and supplement, can be found under the Investor Relations section of our website at corpay.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.

[Jim Eglseder, Investor Relations at Corpay]

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 form a 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.

[Jim Eglseder, Investor Relations at Corpay]

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 or 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 on Form eight ks and in our annual report on Form 10 ks.

[Jim Eglseder, Investor Relations at Corpay]

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 Clark, our Chairman and CEO. Ron?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining our Q1 twenty twenty five earnings call. Upfront here, I'll plan to cover three subjects. So first, provide my take on Q1 results, along with rest of year guidance.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Second, cover our recent M and 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 twenty twenty five revenue of 1.6 that's up 8% and cash EPS of $4,510,000,000 that's up 10%. Cash EPS would be up 18% on constant macro.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

The results really right in line with expectations, along with the environment coming in mostly as expected. Organic revenue growth in the quarter, percent overall. Our two biggest businesses doing quite well, vehicle payments, 8% organic revenue growth and corporate payments, 19% organic revenue growth. Operating trends in the quarter, quite good. Same store sales finished positive, plus 1%.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Retention stayed steady at 92%. And sales or new bookings 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. All right, let me make the turn to our rest of year forecast.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So first off, macro, the factors that affect us really setting up to be effectively neutral to our rest of year forecast versus our prior guide. So, the forward curves for FX, fuel and SOFR have moved just a bit, but essentially zero out in terms of their impact on our business. Obviously, with that said, we do acknowledge that the overall macro environment is quite uncertain, but we're just not seeing anything yet that 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.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So $4.42 in revenue guide at the midpoint and sticking with $21 in cash EPS. The slightly increased full year guide reflects the Gringo acquisition in Brazil, and that's net of the $6,000,000 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, 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.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

That is, we won't directly pay tariffs. Our businesses are services, not goods. Our international businesses in The UK and Brazil operate intra countries, 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 our cross border clients trading across borders. We have included this slide in our supplement that shows a bit less than 20% of our cross border business will actually be affected by U.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

S. Tariff policies. So look, all 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 volumes with us.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Okay, let me make the transition to our recent M and A activity. We have announced a couple exciting deals here in the last week. So last week, we announced a strategic cross border partnership with Mastercard. So in that case, Mastercard will invest $300,000,000 for about a 3% share in our cross border business that does value our cross border unit in excess of $10,000,000,000 Second, we signed a commercial agreement to be Mastercard's exclusive provider of cross border services to their clients, to their FI 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.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Secondly, just announced that we're making a $500,000,000 minority investment into Avid. That's alongside their take private transaction with TPG. Many of you know Avid, a leader in B2B invoice, automation and payments, and they do serve pretty distinct verticals, from our payables business. We're outlooking the investment in Avid to be accretive to our earnings in 2026, and really throughout the forecast period. Our agreement with TPG does provide us a call option to acquire the remaining equity of Avid down the road, so pretty exciting.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So these two corporate payment acquisitions, for sure, strengthen our position in the 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 of our noncore or less related businesses. Taken together, those three businesses could provide upwards of $2,000,000,000 of incremental liquidity if we are to transact. We'll obviously keep you posted. Okay.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

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's a bit of the progress. So first, the portfolio, we said our goal was to expand our corporate payments business mix. We're 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.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So the goal, again, fewer bigger businesses. Second priority, USA sales. We did have a good Q1 USA sales result. USA sales up 25% year over year. We have staffed a new cross sell team that goes back to our client base and the new Zoom sales team, both of those groups now live and in market.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

We have developed a new CorPay brand ad campaign that we expect to be in the market later this quarter to further support USAA 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 this single, mega client will process over 30,000,000,000 in annual spend with us, so a significant opportunity.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

We do expect to launch our new payables product in The UK, using our 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, we're making a major push into this new segment for us, this institutional client segment. So think PE firms, asset managers. So we're doing that with our new multi currency products.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So progress quite good. We've signed over 2,000 new clients already since launch, and we've aggregated $800,000,000 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 rest of year, full year 2025 financial guidance.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

That's 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 Alyssa to provide some additional details on the quarter. Alyssa?

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter. The first quarter was a good start to the year with our businesses exhibiting strong organic revenue growth of 9% overall, right in line with our expectations. Our print revenue of $1,006,000,000 was up 8% over last year. Normalizing for macro, Q1 revenue would have been $1,013,000,000 slightly ahead of the midpoint of our guide.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Our revenues were impacted by approximately $6,000,000 of unfavorable fuel spread revenue compared to our February expectation as there was little volatility in prices in the quarter, which led to 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 Gringo in March, which had an immaterial impact on revenue and adjusted EPS. In summary, 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.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Turning to our segment performance and the underlying drivers of revenue growth, Corporate Payments revenue was up 19% organically during the quarter, driven by solid spend 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 quarter. 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.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

S. Goods based volume to soften somewhat. Activity and volumes did rebound in April post announcement of the ninety day tariff pause. We've already migrated most of our GPS customers from the 2024 acquisition onto our Corpay platforms, with remaining migration planned to be completed by the end of the third quarter. This positions us well to cross sell our sophisticated risk management solutions to GPS' customers.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Clearly, U. S. Trade policy and tariffs are challenges for our customers as they operate today and look forward. Cross border is a global business for us where we help customers pay for both services and goods. Services have been largely excluded from the tariff policy changes to date.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

So for the remainder of 2025, we expect tariff impacts to be relatively modest, unfavorably impacting our cross border revenue by approximately 10,000,000 to $15,000,000 based on our assumptions. We've provided additional details on slide 20 in our earnings supplement. Turning to vehicle payments, our revenue grew 8% organically during the quarter consistent with the fourth quarter of twenty twenty four. In Brazil, toll tags increased 8% year over year with more than a third of our customers spending coming from our extended network. Active insurance policies increased more than 50% and card debt users were up 40%.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

We closed the Gringo acquisition in March and we continue to be excited about the significant opportunity in the card debt space. Our app based strategy, growth of offerings, as well as consistent sales execution powered Brazil organic revenue growth of 22% for the quarter. In 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'm delighted to say we have re signed our existing reseller agreement with Shell for another five years to manage Shell fuel and EV cards in multiple markets across Europe.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

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. In the revamped U. S.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Sales organization, we are focused on standardizing performance criteria to manage sales with incremental investment and brand awareness to drive mid market growth and leads. Lodging organic revenue growth for the quarter was down 1% compared to down 9% in the first quarter of twenty twenty four, 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. Airline revenues were lower due to tough prior year comps and volume softness. To accelerate U.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

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 payments, workforce lodging and most of our payables products led by

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

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 up selling 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 $579,000,000 increased 8% versus the first quarter of last year. As a reminder, we acquired three businesses in 2024, Zeppey in March, Paymarang in July and GPS in December and disposed of our Merchant Solutions business in December.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

The net impact of these transactions resulted in incremental operating expenses of approximately $40,000,000 in the first quarter of twenty twenty five over the prior year. Excluding the M and 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 spend was 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 consistent with those adjustments and our cash net income definition to the extent they are operating expenses.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

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. 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.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

We ended the quarter with the balance sheet in excellent shape with a leverage ratio at 2.69 times, which is down six bps from year end. As we mentioned on the last call, we raised $750,000,000 of additional Term Loan B debt and used the proceeds to pay down the revolver in the first quarter. We have over $2,500,000,000 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 $300,000,000 for an approximate 3% stake in our cross border business unit. We expect this transaction to close in the second half of twenty twenty five.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Our capital allocation in the quarter was limited as we spent $59,000,000 on share buybacks associated with employee stock option exercises and $164,000,000 for Gringo. Given the sell off of our stock this year, we are buyers of our stock, but our first priority remains M and A. Meaningful M and 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. While the forward FX and fuel price curves have changed since our February call, the net effect factors on the rest of the year financial outlook is awash.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Here are the puts and takes. Fuel prices are now expected to be $2.96 approximately 9% lower. The U. S. Dollar is now weaker against most currencies other than the Brazil real.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Interest rates are slightly better and tariffs have 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. Based 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.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

What we do know is that the majority of our products are B2B and intra country focused, generally not discretionary and provide a more efficient way to pay for what our customers are buying. There has been a lot of volatility with FX rates in the global economic outlook, but today we're not seeing any meaningful impact to our business. If economic activity and the outlook change, we'll be nimble on adjusting our spending as warranted, but today we are maintaining our full year financial estimates. For the second quarter, we expect print revenue growth of 12% to 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 to increase 18% at the midpoint compared to the second quarter of last year.

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

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.

[Operator]

Thank you very much. We'll take our first question from Tien Tsin Huang with JPMorgan. Please go ahead.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Thanks a lot. Ron, you've been real busy, know. I want to ask on the two deals, maybe first on Mastercard. Just give us a little bit more on your confidence level in getting this two to three points of incremental revenue growth agreement? We've seen these kind of partnerships before.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

And of course, Mastercard has got a ton of reach with banks, but ultimately, the banks still have to promote it. So what kind of line of sight do you have into that, the energy that's going to get put into that to drive that two or three points?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Tien Tsin, good to hear your voice. So I think the opportunity is just so big. I think if Mastercard dedicated people get us introduced that this thing will go. And I say that again because the clients of these Tier two Tier three banks pay half of these payments in U. S.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Dollars. So I think when our people show up and can provide that kind of benefit, I think it's going to be big. I do think the question is how long remember in this space, there's a handful of us independents like us. All the rest of cross border dollars are done with banks. And so the size of the flow sitting there are just massive.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And so this is for sure a marathon thing, but I think lining up with them creates just enormous opportunity over the cycle.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Yes. It seems aligned with what the banks want to do in terms of monetization of the front end. But yes, just curious on that. That's good to hear. Just on the Avid one, interesting deal.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Maybe the simple high level question I'll let you opine on is just, is this a financial investment or a strategic one? I mean, I guess it could be both. You have call option, but to see you do the minority deal in somewhat of a mid market, I'm just curious how passive or active you'll be as an investor in Avid?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. A good question. Strategic for sure, right? We have said repeatedly, we want to be bigger in corporate payments and particularly in payables portion of that. And so this is a terrific asset and stuff.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And so for us, it's just seeing progress really on profit acceleration, which we got a bit of a line of sight into. And so we are super hopeful that the company will progress that and we'll be in a spot to acquire that company in a few years. So that's the primary basis that we're going into this.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Good times with Prager. Thank you, Ron.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Thanks, Dow.

[Operator]

Thank you. Next, we'll go to Andrew Jeffrey with William Blair. Please go ahead.

[Andrew Jeffrey, Research Analyst at William Blair]

Hi, I appreciate you taking the question. Yes, a lot of good stuff going on here. Ron, when you think about the Avid investment and the option seems to be a great way to go about it. Can you talk specifically to their network as well as your own AP business just around monetization rates? And I assume that strategic investment, as you term it, of this nature indicates a confidence ability to improve card attach and monetization.

[Andrew Jeffrey, Research Analyst at William Blair]

I know new sales are a

[Andrew Jeffrey, Research Analyst at William Blair]

big part of that too. But can you

[Andrew Jeffrey, Research Analyst at William Blair]

speak to the monetization piece and your confidence in being able to drive card acceptance and or ACH pricing?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. I think it's high. In some ways, Avid has done really even a better job than we have, right? Their revenue mix includes a fair amount of just stand alone software fees. They've also advanced what they call kind of paid for or ACH plus getting paid for sending ACH.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So I think that they've made great progress on that and so have we. So I think to your point, I think this is for us less about confidence in those networks because they're already both super scaled. It's 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 scale effectively to have the incremental revenue flow through at way higher margins.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So those are really the two things that we're key in on is really acceleration in buyer sales or spend and then really flow through of the increment into earnings. If they do those two things, we will be over the moon.

[Andrew Jeffrey, Research Analyst at William Blair]

Yes. That makes sense. And as a quick follow-up, you mentioned enterprise last quarter is a new thrust within the corporate payments business. Can you give us an update there in terms of pipeline?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes, it's live. So I think what we said, first of all, was slight bit accidental, right, that we kind of stumbled into this thing six months ago having been a middle market focus. So we did contract this one mega account and we have gone live. So that account is starting to ramp. And so I think I said in the last call that I tried to 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.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

But we do have the I think we mentioned there's some big consulting firms that facilitated the introduction that have already kind of run out to a handful of incremental prospects. So I think what I said still holds. To the extent that we get success in this initial account and call that account referenceable, I think you'll see us start to move forward with additional accounts. So this is a big incremental opportunity in the payables space for us. Again, it's the size of it, right, that, call it, four or five of these accounts are literally the size of our entire business today.

[Operator]

We'll go next to Ramsey El Assal with Barclays. Please go ahead.

[Shray Gurtata, Assistant Vice President at Barclays]

Hi. This is Shrey on for Ramsey. Thanks for taking my questions. So my first question is on the AV exchange investment. So in your press release, you mentioned that the take private transaction structure gives Avid the flexibility to transform and accelerate profit growth.

[Shray Gurtata, Assistant Vice President at Barclays]

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?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. It's really just a it's a scale question, right? The company is whatever twenty plus years old. They built the foundation with software. They've been in pay that we've helped them with for twenty years.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And so I think they're getting to a scale now four hundred to five hundred million dollars in revenue where we're looking for the increment, call it, the next $2 to $300,000,000 of revenue to just flow through at just a much higher rate, which I think it will because the foundation like the network of suppliers, the tech, the sales structure, a bunch of the foundational work has been in place. And so I think it's literally as simple as that. If they can add more spend to the wheel here, we think the flow through will be significantly better and margins will accrete. So that's again what we're looking for.

[Shray Gurtata, Assistant Vice President at Barclays]

Got it. And then as a quick follow-up, earlier in the call, you called out that outside of your cross border business, any tariff impact would be indirect in nature. I was wondering if you could help us think through what this indirect impact might look like in vehicle payments specifically. Would it be isolated to your OCR business or in particular geographies? And then could you potentially deploy pricing as an offset?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. I mean, I think probably like everyone on the call like who knows, right, when something is indirect, right? We're not going to pay tariffs directly. And so, hey, we have all flavors of clients. So I think your comment is a good one that clients of ours that have goods as their business instead of services.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So think an 18 wheeler who moves products around could be more impacted than local businesses that do plumbing, right, or HVAC. And so certainly our mix would affect a little bit what happens. But we just like everyone on this call, we don't really have any kind of view at all of how much any of these accounts will be affected. We just know that as a company that is a stock, we're kind of not in the gun sight to this. We won't pay tariffs.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Again, we're mostly a services business. It's really the only business with any kind of smidge of direct exposure is cross border. And then as we put aside in the supplement that only about 20% of those flows are on goods and to or from The U. S. And so even there, impact is limited.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So really, it's just a function of what happens to the planet and to all the businesses out there. They're hurt a little bit by it, will be hurt a little bit. They're hurt a lot by it, will be hurt a lot by it. But we're not going be hurt directly by it is our message.

[Shray Gurtata, Assistant Vice President at Barclays]

Very helpful. Thanks.

[Operator]

Thank you. And next, we're going to go to Andrew Schmidt with Citi. Please go ahead.

[Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi]

Hi, Ron. Hey, Alyssa. Congrats on all the progress here. Thanks for taking the questions. I wanted to ask about The U.

[Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi]

S. Business within vehicle payments. It sounds like you're pretty optimistic around the sales trends there. And maybe just comment around just the confidence in sort of driving improvement in revenue there as the year progresses, obviously, macro side, but would love to get some details based on the sales trends and the initiatives you have there? Thanks so much.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Hey, Andrew, it's Ron. It's a super good question. So I'd say the it's a two part answer. The first part is really retention. And so we went on the nausea with you guys about the great pivot of The U.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

S. Vehicle business a couple of years ago and getting out of micro accounts and buying all that kind of stuff. And I can report that that is now distant And so what's come out of that, let me just quote this to you that the retention rates for that entire U. S.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Business in Q1 of twenty twenty five are improved more than 200 basis points from Q1 of twenty twenty four. So the loss rate in that business used to be of a nine handle on the call low nine to 9.5, and now it has a seven handle. So that's the first message is, obviously, getting 200 to two fifty points back prospectively, and we think that will even get a spinch better is the first point. And then on the second point, yes, the sales relative to the base is up. And the forecast that we have sitting here says that we think the first half is, call it, flat and the second half is literally mid single digits or better.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So we're sitting here on this call telling you that we think there's a big pivot in organic revenue growth coming in that business here in whatever sixty days. And then if we get that, all of a sudden, organic growth rate steps way up because that's a pretty big business. So I'd say our confidence is high because we're good at math and we kind of captured the retention number already as we thought we would when we made that change. So we're finally after this time going to start to see some benefits from that decision.

[Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi]

Got it. Thank you, Ron. Yes, retention is a big lever. So that's good to hear. Every time we see macro fluctuations, we always get the question on sort of supplier acceptance trends within the AP business.

[Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi]

It doesn't sound like there's been much variation based on the commentary, but maybe just talk about what you hear from suppliers in terms of payment choice, things like that, whether there's been any change on that front? Thanks so much.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. It's a good follow-up. So no is the answer. That number is basically flat. It's kind of remaining flat.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And I think it's just what you'd expect, which is payment certainty. Suppliers want to get paid, right, and not defaulted. And payment speed are of high importance. So any supplier that runs good margins, like service businesses, like as an example, that run 50 to 70% marginal cost basically, they love card products because they're certain and they're fast. And so I think the answer is we're not seeing really all that much different.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And so back to the comment, the same thing I said about ad is that our payables business goes as spend goes. If we can keep growing the buyer side and increasing spend, we think, if anything, we'll take up the monetization as we add more ACH plus ourselves into the network. So we're not seeing really any downtick there yet.

[Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi]

That's great to hear. Thank you, Ron.

[Operator]

Thank you. We'll next go to Sanjay Sakhrani with KBW. Please go ahead.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thank you. 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 like sell the product?

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Have your sales got I'm just trying to think about that part of it. And then just on expenses, obviously, might be some redundancies between what you guys do and they do. Is there any plans to sort of get involved on the expense rationalization there? And just one final one, just what are the terms of the call option in 2027? Thanks.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

That was kind of a three parter there Sanjay, if I was listening. So let me see if I can go back and remember part one. So on, hey, our involvement in Avid sales, you got a good guy, in my opinion, running the place and you've got some good leaders there with Mike. And so I think our role is that we've been a part of the idea side of, okay, maybe being helpful in terms of priority and where to point and sharing some practices that we think and some investments that we think may help them perform better. But we wouldn't have made this investment if we didn't have some confidence that they could do it.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

In terms of synergies in this early hold period, Avid is going to run kind of as Avid. But clearly, we thought about and sized what I call our second bite, which would be if in fact we get a few years out and we like the profit growth, the profit acceleration there, is a pretty whopper incremental synergy right through combination to your point, whether it's the merchant network or the tech side or other things. So we would really plan to two step that. It will run mostly kind of as it is. We'll be helpful where we can.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And then if that day comes that we try to buy the rest, we'll get the second bite. On the terms front, we're basically going to kick the can and provide that detailed disclosure in our Q, which will be probably later this week or Monday. We'll lay out more of the details of the things. But yes, at the high level, what you said is right, which is we've taken a minority position along with TPG and management and basically have the option a couple of years out to buy the rest of the equity. So we'll fill in the details a different day.

[Operator]

Next, we'll go to Andrew Bosch with Wells Fargo. Please go ahead.

[Analyst]

Hey, guys. It's Samar on for Andrew. Thanks for taking the question. It's good to see the progress that you're making on the payables front in terms of moving up market to the enterprise segment and that one client win that you called out and the intention to, I guess, expand into The UK this summer. I guess with the noise around tariffs and incremental macro uncertainty, maybe just give us an update if there's been any kind of like revised thoughts around kind of like the scale of that expansion over the coming months?

[Analyst]

You.

[Jim Eglseder, Investor Relations at Corpay]

Can you last part of that? You kind of broke up.

[Analyst]

No. I was just asking if with the incremental macro uncertainty and kind of like the comments that you made around the tariff implications and cross border, if there are any revised thoughts as it relates to the scale of that expansion, whether it be moving upmarket to enterprise or The UK?

[Jim Eglseder, Investor Relations at Corpay]

Okay.

[Jim Eglseder, Investor Relations at Corpay]

The payments extension in The UK.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes. I'm sorry,

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

I'm sure I was hearing the question, but I think you're asking, hey, the payables group, we're happy about the enterprise the adjacent enterprise space and the prospects there. And then going to The U. K, I think it's yes and yes. Like we said, we've gone live with the first account. This partner has introduced us to the next set of people.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And so this is really just walk before you run. We want to make sure the thing is working and we're doing well. But the size of the step that we could get if it's successful is large. And then The U. K.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Thing again is an intra market thing, right? We're taking a product that's here and it's going to help clients in The U. K. So there won't be really specific any tariff impacts of that. It's really a product that will be used by U.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

K. Businesses for purchases there. And then to the extent that they have cross border payments there, which again two thirds or three quarters of those will be into the continent of Europe or Asia or other places. So yes, we don't think that that's going to have really any bearing on the launch. We're just excited to stand up a super important business in a second market that adds TAM and leverages like all the assets, all the clients, all the people and stuff that we have there.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So that's really what we're trying to tell people is we're going to make this a way bigger business.

[Operator]

And

[Operator]

next, we'll go to James Faucette with Morgan Stanley.

[James Faucette, Analyst at Morgan Stanley]

Hey, thanks a lot for the question and all the details today. Wanted to turn to another topic really quickly. Ron, curious to hear about the performance of the hedging business in Q1 and anything you can give us on how it has performed since then during the month of April and early May. I'm just wondering if it's fair to think about that business as a beneficiary of sustained heightened market volatility. And can you give us kind of the puts and takes on that dynamic and any other impacts on tariffs on that segment specifically?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes, that's a good question, James. So on our cross border business Q1, good. I think we reported it high teens revenue growth against the prior year and sales, I think, grew 50% in the quarter over Q1 of the prior year. So we're selling the stuff like crazy. In terms of April, we did look at the flash.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Gangbusters, maybe the adjective I used, the April flash across 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 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 less clear. But yes, through four months, the business is truly rocking. With that said, I don't know how clear we were, but we did Alyssa and I did have 10,000,000 or $15,000,000 out of the second half full year guide to just be a bit conservative.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

If the post pause tariff world is not super attractive, we wanted to make sure 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 trim a bit the second half in the event that tariffs are mean looking to us.

[James Faucette, Analyst at Morgan Stanley]

Thanks.

[Operator]

Thank you. And next, we'll go to Trevor Williams with Jefferies. Please go ahead.

[Trevor Williams, Managing Director at Jefferies LLC]

Great. Thanks very much. If we could go back to the organic guide, Ron, you've given some kernels on this over the course of Q and A, but we're at 9% organic in Q1, you're keeping the 11% for the year. It sounds like a lot of that acceleration is coming from U. S.

[Trevor Williams, Managing Director at Jefferies LLC]

Vehicle, but if there's anything else that you could point us to, and I hear you on April running in line, but just with everything on the macro, how would you frame the level of confidence in the full year and the specific drivers you guys have baked in today versus three months ago? Thanks.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes, Trevor, good question. High would be the answer. So kind of interesting. We expect Q2 that we're sitting in. Again, we had a look at April already.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

I'd say we think probably closer to 12% at the midpoint. So I know it's a big step. Hey, we just printed 9% and here although I think we printed what we print in Q4 is it 12% in Q4. So 12%, nine % I'm going to say driver twelve percent here in Q2. And surprisingly, The U.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

S. Vehicle one is not the big contributor, the big step. The strangest thing is that the gift business, 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 then when you go into the second half, what you said is right. Then the lift is we think The U.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

S. Vehicle business will step into mid single digits or plus, and that's what we'll have the back half still double digits, 1211%, twelve %, thirteen % in Q3 and Q4. So GIP gets you there in Q2 and then U. S. Vehicle gets you there in the second half and Corporate Payments stays steady as you go, high teens to 20%.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And again, who knows if, again, some recession, we're just calling them as we seize 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.

[Operator]

And

[Operator]

next, we'll go to Raynaud Kumar with Oppenheimer.

[Rayna Kumar, Managing Director - Fintech Equity Research at Oppenheimer & Co. Inc.]

Hi. Thanks for taking my question. Are you seeing any differing trends across SMBs versus your larger fleet clients? And can you talk about same store sales trends for both segments?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes, I'd say not much. I mean, think historically, middle market enterprise clients have been steadier. But I think we did such a cleaning, such a remixing, starting a couple of years ago that are truly kind of micro super small accounts are just way fewer in our portfolio. So I think that first headline is we're just way less exposed to it, would be the first point. And then on the base, again, plus one, which is, I think, the same thing we quoted for Q4.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And again, the good news is that's up three from Q1 of the prior year. If I remember right, Q1 of 'twenty four, we were minus two. Q1 of 'twenty five, we're plus one. So we moved that plus three over the period of time. And so the base report that I look at is pretty steady as she goes.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

There's 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 1%. And so yes, we don't see much that's patchy in it. It's pretty solid right now.

[Rayna Kumar, Managing Director - Fintech Equity Research at Oppenheimer & Co. Inc.]

Appreciate the color.

[Operator]

And next, we'll go to Dave Koenig with Baird. Please go ahead.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes. Hey, guys. Thank you. And I guess my question just with the Avid deal. Do you guys immediately get access to their supplier network?

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

And maybe could you talk through like if today your accounts payable clients, maybe you have 20% of each of their payment files on average that can go into one of your suppliers and now with Avid, does that 20% raise to 30%? I'm making up numbers, obviously, but do you have metrics like that? And am I thinking of that correctly?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Dave, it's Ron. That's a super good question. And the good news is we have a bit of a head start on the subject you're on. So call it, I don't know, six or twelve months ago, Mike and I met on this very subject and created a commercial agreement, kind of 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 and not, and then using that data to basically help each other monetize more. And so that thing has gotten lifted up already.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

And obviously, the deepening of the relationship now, I think, will improve that. So we will clearly double down on that initiative. And then as I said, a different day, we would move to a complete combination of that. We would just effectively think of it double the spend in the merchant network, which is would be obviously super synergistic, right, would create enormous leverage for us to have doubled the spend running through that set of suppliers. So that's obviously one of the attractive things for us in the second bite.

[Operator]

Next, we'll go to Rufus Hone with BMO Capital Markets.

[Rufus Hone, Equity Research Analyst at BMO Capital Markets]

Maybe just a quick one on you mentioned some potential noncore divestitures. The $2,000,000,000 number sort of implies it could be something pretty chunky. I guess just what businesses does that cover? Any details there would be great. Thank you.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes, Rufus, it's a good question. So not shockingly, the three units that we've kind of teed up, two are from our what we call our vehicle segment and one is from our lodging segment. So the concept here, again, is more in corporate payments, less in vehicle and lodging. And so the 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 non core and potentially divest those and kind of things on the margin.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

We picked two or three businesses that have more size, think, call it, 150,000,000, 1 hundred and 70 million in EBITDA combined across these three businesses. As a larger set of divestitures, a couple of them are really good businesses and should fetch a pretty good price. And so the idea really is just to simplify the company more, create more liquidity, in this case, 2,000,000,000 and pour it back into the pipeline in front of us at corporate payments. So it's just a more the message you guys is just a more aggressive repositioning of our portfolio, I think, towards corporate payments.

[Operator]

Thank you. And next we'll go to Ken Czochowski with Autonomous Research. Please go ahead.

[Ken Suchoski, Equity Research Analyst at Autonomous Research]

Hey, good afternoon. Thanks for taking the question. Maybe I'll ask one on lodging, since it wasn't covered here. But the organic growth took a step back this quarter. I know there's leap year impacts in there.

[Ken Suchoski, Equity Research Analyst at Autonomous Research]

But is the expectation to accelerate to mid single digit growth throughout the year and then ultimately get back to double digit growth? And I'm just curious how do you guys think about driving that acceleration?

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

Yes,

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

that's another good question. So the short answer for the Q1 is really all pocketed in airlines. So we built a plan for Q1 and the stitching part of lodging where we serve the airlines was just super soft. Maybe the weather was good, I don't know, but the disruption sub segment of that was super light as was just the maybe it's the Newark Airport store, I don't know. But the airline volume is super light.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So all of the softness different from our plan was airlines. Going forward, I think we said that we built the 2025 budget and guide today really on that business staying kind of flattish. It was declining. And so the goal was to get it stood up back towards level again and that we would make sales here in 2025. So that business is a good business again in 2026.

[Ron Clarke, Chairman and Chief Executive Officer at Corpay]

So there's nothing in our forecast that things are going to magically be much better. But the super important headline is, it's not declining. The base is stronger, the retention levels are way better than they were a year to year and a ago. So now it's literally just refilling the top of the bucket so that, that thing can grow. But so that's the update.

[Ken Suchoski, Equity Research Analyst at Autonomous Research]

Thanks, Ron.

[Operator]

Thank

[Operator]

you. And we'll go for our last question with Nick Cremo with UBS.

[Nik Cremo, Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group]

Hey, thanks for taking my questions. I just wanted to come back to The U. S. Vehicle payments business, given the deceleration versus I think 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?

[Nik Cremo, Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group]

And just put a finer point as to the drivers for the acceleration in the back half?

[Alissa Vickery, Chief Accounting Officer & Interim CFO at Corpay]

Sure. Hey, it's a good question, and this is Alyssa. So from a 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 the current trends in 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.

[Nik Cremo, Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group]

Got it. Thank you.

[Operator]

Thank

[Operator]

you. And that does conclude our question and answer session. I'd like to turn the call back over to Jim Eggleseeder with Investor Relations.

[Jim Eglseder, Investor Relations at Corpay]

Yes. Thanks, guys, for your flexibility today and staying on the call late. We know we were late into the wire, but I think you all understand why. If you have any other questions, feel free to reach out. We're happy to help wherever we can.

[Operator]

Thank you. And ladies and gentlemen,

[Operator]

that does conclude today's program. Thank you for your participation. You may disconnect at any time.

Participants

Executives

• Jim Eglseder, Investor Relations
• Ron Clarke, Chairman and Chief Executive Officer
• Alissa Vickery, Chief Accounting Officer & Interim CFO

Analysts

• Tien-tsin Huang, Senior Analyst at JP Morgan
• Andrew Jeffrey, Research Analyst at William Blair
• Shray Gurtata, Assistant Vice President at Barclays
• Andrew Schmidt, Equity Research Analyst - FinTech, Software & Payments at Citi
• Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)
• Analyst
• James Faucette, Analyst at Morgan Stanley
• Trevor Williams, Managing Director at Jefferies LLC
• Rayna Kumar, Managing Director - Fintech Equity Research at Oppenheimer & Co. Inc.
• David Koning, Senior Research Analyst at Robert W. Baird & Co
• Rufus Hone, Equity Research Analyst at BMO Capital Markets
• Ken Suchoski, Equity Research Analyst at Autonomous Research
• Nik Cremo, Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group