Corpay, Inc. ($CPAY)

To get the ball rolling. Thank you again for being here. Again, I'm Darrin Peller, covering payments at Wolfe Research. Really happy to have Corpay with us, also known as previously FLEETCOR when I brought it public many years ago, but look, really happy to have you guys with us. We have Peter Walker, who's the CFO of the company. And I think maybe just a quick backdrop. I mean, I remember when I -- when we did the IPO several years ago, it was really a mobility and a fleet card business. It's changed a lot.

For sure.

So Peter, if you could just start off before we even get into your learnings since you've been here. Just a quick reminder of the business overview, the 3 segments and the percentage makeup of each and we'll go from there.

Yes. Yes, happy to. So yes, our foundation of the business when we went public, which is what, over 15 years ago today is in the fleet card business. That's now actually a small percentage of our business today, call it, the U.S. fleet is around 10% of what we believe will be $5.3 billion in revenue this year. We've made a big rotation into corporate payments. And so the focus of corporate payments kind of high level, the way I think about it is businesses spend money in 2 categories, payroll and non-payroll. So when you move over to that nonpayroll side of business payments, that's where we're focused. And we're focused on helping businesses control those payments, and we're also focused on helping the businesses make those payments on a global basis. And so this year, our Corporate Payments segment will be 41% of our revenue. So really a big rotation of the company into corporate payments. Vehicle Payments is our other large segment. So those 2 together make up over 80% of the business. And then kind of the tail there would be our lodging business, and then we have another business, which is mostly made up of gift.

Gift card. Yes. Thanks for that. So you've been here 8 months. Help us understand what you've really learned in the last 8 months you've been here so far. And what are your priorities for '26 now just for the remainder of the year?

Yes. So I'm an incredibly commercially focused CFO. So what I've been leaning into is our businesses, where we're performing, enhancing performance. And probably most importantly is the M&A activity we've been up to. So in 2025, we spent over $3 billion in deals. When we think about those deals, kind of the 2 big ones to think about is the Alpha acquisition in the U.K. in our cross-border business and an investment in AvidXchange. That was a take-private deal that we partnered with TPG on and brought about 1/3 of that business. So really been focused on both of those businesses as they roll into our Corporate Payments segment, as we've been talking about. And we see that Corporate Payments segment as our high grower segment growing in the mid-teens this year kind of net of float headwind. The Alpha business has been really fun to dive into. I'd say the biggest opportunity that we see there beyond just normal cross-border business is the global bank account business that they built. We in our cross-border business have been building a multicurrency account product. We sell that into corporates. Alpha sells their product, their global bank account product into private capital markets. So I'd say one of the most exciting learnings I've had, right, is just a lot more about these 2 bank account products that we offer today. It's about $4 billion in deposits, about 10,000 accounts and what we think the growth can be off of this business when we look forward.

Right. Let's go back to the fourth quarter. Just remind us how you -- the financial exit growth rate of the business? And maybe just give us some overview on '26 and the outlook. Both on a company-wide basis, remind everyone of the growth profile and then segment-level detail would be helpful as well.

Yes, happy to. So if we look at how we ended the year, we delivered 10% organic growth for 2025. That was 4 out of the last 5 years that we've delivered 10% organic growth or better. So when we look at our midterm guidance, pretty pleased by that. We also exited at 11% organic growth rate in 2025. So that sets us up well as we go into 2026. Think about '26 guidance, kind of 3 things that are setting up well for us. Number one, business fundamentals are strong. So sales were 30% year-over-year in 2025, setting us up well for 2026. Retention, 92%. Same-store sales kind of positive, 1%. So fundamentals are standing up really well. Next, macro setting up really well. The world is being helpful to us. About 50% of our revenue come from outside the U.S. So when we look at a weak dollar, that's actually helpful for our business. And we look at interest rates moderating, that's helpful in terms of interest expense. And then lastly, as I mentioned, when we kind of opened up the [ ascension ], we spent about $3 billion last year in acquisitions. So as we see those acquisitions come online this year and gain synergies, we expect about $1 synergies out of those acquisitions. So sets us up overall for what we think it's going to be a really good 2026.

Just the targets are -- just remind us the top line and the earnings growth targets.

Yes. So organic growth, 10% full year. The revenue growth, 16% and adjusted EPS growth of 26%. So the thought is we're going to produce -- sorry, 22%, we're going to produce $26 of adjusted EPS.

Right. And that included the accretion you just talked about for M&A?

Correct.

Any recent trends you're seeing so far in first quarter giving you confidence around near-term outlook or just conviction in those targets you just went through that would drive either, first of all, in line or better or anything that worries you that could take you to the lower end or below?

Yes. Based on what I've seen, we're right line with our expectations. So fully closed January met our expectations. I've seen a flash of February revenue kind of right where we'd expect to be.

Okay. All right, let's go to the segments now. When you look at Corporate Payments, again, you've built out a pretty dramatic percentage of your business coming from cross-border, right? But I mean the account payables business is also nicely growing and obviously, seeing acquisition benefit as well, whether it's AvidXchange or more. And so if we take it a step back, again, the mix of your Corporate Payments business, again, remind us between cross-border and accounts payables. And then we're going to go into the subsegments of it.

Yes. So we've typically spoken about the Corporate Payments business as payables and cross-border. I'd say the mix is, call it, 1/3 payables, 2/3 cross-border. How we're evolving that because we think it's better market disclosure, we'll come out with more information on it this year is really there are 4 businesses within Corporate Payments. That would be the commercial card business, the AP Automation business, the cross-border business and the global bank account business. As we move into '26, you should expect us to give more granular level view into the business and really trying to lean in to help people forecast the business better going forward.

Okay. If we go now into the subsegments, again, the growth profile of Corporate Payments first and then the subsegments of cross-border versus accounts payable, what are you expecting for each?

Yes. So I'd say the cross-border, and this has been the case for the last couple of years, is growing slightly higher than the payables business. So kind of a continued trend of that. Both of these businesses in the back half of last year and in the first part of this year are going to be -- organic growth rate is going to be hampered by float revenue headwinds. So the guidance that we gave for the year for Corporate Payments was, call it, mid-teens net float headwind.

Okay. All right. Let's go into the differentiation. So what is it about Corporate Payments that you guys are doing so well that's allowing you to grow mid-teens, especially on the cross-border side. I mean it's a competitive market. obviously, competing with banks and others. But maybe in your own words, what do you see as the key go-to-market differentiation?

Yes. So we've been in the cross-border business. We started it in 2016 with an acquisition and then have continued to grow the business significantly. To your point, banks are our main competitors, right? So banks typically don't serve well our clients, which is, call it, corporations of, call it, $500 million, right? Those are typically focus areas for kind of Tier 2 and Tier 3 banks, which don't have the capabilities that we have in terms of international payments and risk management services. So that's where we've been able to win. I think it's really important to note that from day 1, we focused on the technology within cross-border and building a system that enables us to win. So it's really that powerful combination of having a platform combined with a very high-performing sales team.

All right. Let's talk about the acquisitions now. I mean, Alpha being one of them, obviously, more recently. It not only brings a new customer cohort, but also new product capabilities, global multicurrency accounts. Just talk about a little more about how the company can cross-sell the solution into existing client base. And I'd love to hear a little more update on timing. Is it a '26? Or is it more of a '27 opportunity?

Yes. So really excited about the Alpha acquisition. About 1/3 of the business was in the corporate space, which we're in today and about 2/3 of the business is in the private capital market space. The Alpha business was exclusively either in the U.K. or on the continent. They were not licensed to be in any other jurisdiction. So in the private capital markets business, which is new for us, we were not in that customer segment before. We can automatically -- I shouldn't say automatically. It's going to take us kind of first half of the year to get things flowing, but we can use the licenses of our current cross-border business in the U.S. and in Asia to begin to sell into the private capital markets within both of those markets. So we think that there's quite a bit of opportunity there, significant opportunity as part of our diligence. We called those private capital markets clients who've done business with us in Europe and said, hey, if we were in the U.S., would you do business with us, et cetera. And got really strong voice of the customer feedback. So we think that, that's one of the vectors in terms of synergies and growth for Alpha that's pretty exciting.

Okay. That's helpful. Maybe we talk now about the Mastercard investment. I think you guys talked about it contributing potentially 1 to 2 points of growth for the segment, right? Help us understand what is it actually doing for you? And how is it helping to boost your growth rate?

Yes. So just to be clear, the thought was 1 to 2 points of organic growth for cross-border, not for the segment in totality. So what I would say is a pretty exciting partnership. I mean the reason why we partnered with Mastercard here is we thought that our capabilities could be really helpful to the Tier 2 and Tier 3 banks globally. Mastercard has the ability to open the door to those customers for us. So it's a combined go-to-market approach with Mastercard. Happy to share at this conference a new data point, right? We've signed 3 clients now rather than just 2, which we shared on the earnings call a couple of weeks ago. And we've got a really healthy pipeline of clients. So we're seeing kind of initial clients coming online in LatAm. There's nothing special about LatAm other than it was one of the first target markets we were focused on. So LatAm, Europe and U.S. were the 3 kind of we're going at, and we just happen to get kind of 2 clients, 2 banks based in Mexico first. What's been pretty interesting about the process, right, is we're going in and saying, hey, this is our suite of cross-border solutions for the bank to sell on our behalf, whether they sell it as a Corpay product or they white label it. And the product that's been resonating most with them has been either a multicurrency account offering or a global bank account offering because that is really the place that they do not have an offering today other than a correspondent offering, which would take 6 months to open a bank account globally versus we can do it in 7 days. So it all of a sudden gives them a competitive advantage, something to offer their client. And what those banks are really focused on is maintaining those client deposits and those client loans and not losing the client to a Tier 1 bank.

Yes, it makes sense. One of the other questions we get about the cross-border business is obviously stablecoins and just whether or not that's a real risk for your model being the most applicable use we hear about for stablecoins is cross-border, high friction areas where there's maybe long settlement times. What do you think about that? I mean, is your business at risk of disintermediation from it? It's been a little while now since it's been a topic. You've hopefully had more time to digest it. What are you seeing?

Yes. So we see stablecoins as a real opportunity. I mean if you think about the cross-border business, there's really 3 pieces to revenue. The pieces to revenue first is the risk management piece of it, which is, call it, 45% to 50% of the revenue base. The second piece is international payments, which is call it 45% to 50%. And then there's the rail. There's actually how do we move the money across the globe. That's where stablecoin plays a role. So today, in terms of rails, how do we move money globally today? About 60% of the money is moved on our own proprietary networks, which we can actually settle 24/7 in some countries, et cetera, and about 40% is on SWIFT. So what stablecoin introduces is a third rail into that. Again, that's about 5% of the revenue. Stablecoin does not solve the problem of how do I convert the currency into the local currency and how do I do the risk management contract. So we think in that rail, which, again, is about 5% of the overall cross-border business. It's a nice option to bring on. And so today, where we think we've got really the first opportunity to do this is within Alpha, within the private capital market space. Those PE firms, et cetera, who are looking to buy companies in foreign currencies are sometimes looking to close those deals outside of a normal banking hours. So if we don't have 24/7 settlement on our own rails, that's where stablecoin may play a part. So I'd say we're out there with our clients talking about it. None of our clients yet are kind of signing up to adopt using it. But for a rail case, we think there's good optionality.

Right. But as far as risk goes to your model, I mean, I suppose, again, you have pretty small percentage of your business that's in these more esoteric currencies and markets.

So 90% plus of what we do is in G20 currencies. That's from a volume perspective and a revenue perspective. So yes, I would say the use case of kind of exotic currencies and that is where stablecoin is a benefit, it's not a place that impacts our business.

And just one last one on it, given it was such a hot topic at least last year, right? Has there been much progress and momentum in the last 6 to 9 months around any in terms of your customer adoption or anywhere you're seeing any disintermediation or risks popping up?

So we're building the capabilities. So we're building digital wallets not only in the private capital markets business in those global bank accounts, but for some of our largest merchants. What we're not seeing is the people opting in to actually using stablecoin. So we believe there's value in having the optionality there and first-mover advantage. But I think an important thing here, Darrin, is like just step back and think about the landscape. Like if we think about corporate payments in the U.S. and AP payments, 50% of those payments are done by check today. So like job #1 for me is to digitize the space, right? Once I digitize the space, then stablecoin might become something of interest. But today, if I can't get you to stop sending a check and move to a digital currency to do it, making the leap that stablecoin is going to be the solution tomorrow is probably not where we'd go, but we are adopting stablecoin because maybe in 5 years, that's where people...

Okay. Let's shift gears to the account payable side, the payable side of the business. I mean, again, I think it's growing pretty much in line with your overall segment, right? I mean is there anything you're seeing that's change that? And maybe for the audience, just help explain what the differentiation is there and how you're going to market.

Yes. So really, it's the AP automation space. So the thought is that we work with -- we have a client who's got a $0.5 million company, and we go to them and make the offering of outsourcing their AP. The benefit of them outsourcing their AP is, number one, we protect them against all fraud. There's been a bunch of fraud, obviously, of people going into AP departments. The other thing that we introduced to them is that we can pay their merchants through our network. We have over 1 million merchants in our network, the largest network, and we're able to monetize those payments. So basically, my value proposition to -- by the way, the CFO, so it's my value proposition to myself is, hey, you can stop doing AP, you can reduce the expense, you'll have no fraud and I'll give you a cut of the rebate. How does that sound? I actually pay you to do your AP for you. And that value proposition has resonated well in the marketplace and is why the business is performing the way it is.

All right. That's helpful. Let's shift gears to vehicles, which is obviously what you were almost built on from years ago. It showed in the -- at least the U.S. fleet business showed 5% growth, which for what it's worth, I mean, you're in a market that's basically flat, right, in terms of underlying transaction growth. So was it new sales that you've added that's really revamping that growth to 500 basis points or 400 basis points of outperformance?

It is. It's investments in the sales engine. It's the sales tactics, how we're going about our sales process, et cetera, that have proven out quite successful for us in that business and kind of landing it in that mid-single-digit space.

I mean is that sustainable from your perspective? Or is there any even potential to accelerate that?

We believe it's sustainable. I think the question that we're asking ourselves today is for that sales dollar, am I best using that sales dollar in USVP, which is, call it, 10% of our revenue? Or do I move that sales dollar into global -- into Corporate Payments, which is 40%. So I would say current guide is that, that USVP is going to deliver mid-singles, but we may revisit our allocation of sales dollars into higher performing and higher multiple businesses.

Okay. And then the other part of vehicles on Brazil. I mean, an area that I still think is pretty underappreciated. It's just not as well understood perhaps. But it's been a really strong growth business for you guys for a while, and it's expanded now with Gringo and Zapay. Just help us understand the competitive differentiation versus local peers in that market. What it even does for anyone in the room that wants to understand it a little bit more? And then how do you think about the growth algorithm for it?

Yes. So for those of you who have not been to Brazil, I think you need to go to Brazil to really get it, at least that's what I needed to do. So it was the first trip I made when I took the role, I went early September. And what resonated with me very quickly is in Brazil, owning a car is like owning a home in the United States, right? This is considered freedom. You can't lease a car in Brazil, right? So the only way you can get a car is to actually own a car. Once you own that asset, protecting it is incredibly important. So the business was born in the toll space in terms of creating an RFID reader that allowed you to go through the toll and get charged with the toll without stopping. Then what we did is we built a super app around that, which really we're offering, call it, 30-plus products that allow the customer to protect their largest investment. So you can get in your car today the Sem Parar app as it's branded locally in Brazil, and you can pick up food at McDonald's and pay for it. You can go to a gas station, you can go to a toll, you can park. Oh, you can buy insurance because you're going to take a 2-hour trip. And in countries like Brazil, you have to buy micro insurance as opposed to have what we would consider comprehensive insurance. So what I would say is it's really a wraparound product offering around the mobility in Brazil. And we've been so successful there because we've been continuing to find additional products that we can bring to that customer. And so as you know, the investments we made in the last couple of years is we bought both the debt protection businesses, what we call them in Brazil, but it's basically when you go to register car every year in Brazil, if you get tickets throughout the year, you have no idea it's happening. And so you show up to get your registration and you're going to spend BRL 100 and they want BRL 300 because the tickets escalate if you don't pay them. Well, what we have is the only digital solution where a customer can track did I get a ticket or not? Do I need to pay the ticket? Oh, and I can pay my registration. So I'd say the differentiator that we have from the bank competitors is the super app that we've created with Sem Parar and then also the digital experience we've created around registration and vehicle debts.

Okay. And the algorithm for it, how to think about growth? It seems like it's got years ahead of us of strong growth.

Significantly, especially with adding in vehicle debts because the TAM is so much larger. But that business has consistently delivered, call it, mid-double digits to high double digits growth. So a very successful business.

It's been great. Let's shift to the last of the main segments, which is lodging for a minute. I mean it's - I think it's been a little more disappointing as of late versus some of the other outperforming areas. And it's now guiding for -- you're guiding for an inflection to low single-digit growth in '26. So maybe just discuss some of the product enhancements that's driving your conviction on the turnaround of the business.

Yes, good question. So I think if you look at '25 and you look at the first half of 2026, it's really flat over the prior period. The reason for that is the emergency volumes in the prior period were quite high, and we just haven't had those emergencies. So for example, in Q1 of last year, with the California wildfires and event of that size is not happening. So really flat. Flat is not exciting nor where we want to be from a business perspective when we're growing at 10% in totality on an organic basis. So the view would be we kind of get past these grow-over issues in the first half. In the second half, we already have signed deals and implementations coming online that gets us into that, call it, single-digit growth category. We are focused on turning around the business. I think if eventually, we find ourselves that we can't get this to be a 10% growth business.

Is that the parameters? You want to see it all the way up to the corporate average?

That would be it. I mean, when I came in and I saw how the business was performing. My first question was like, why are we in this business, right? So I turned to Jim. And I said, pull me, the data from the past. I was like, wow, okay, 3 years ago, it's growing 22% organically. Like this business had a real competitive differentiation to it. So there is a path to get back to that. The question is how quickly can we do that? And right now, we're committed to doing that this year. And again, the results will kind of tell us.

So based on the deals you've already locked in, you feel good about the growth algorithm you gave, the mid-single digit or low to mid-single-digit type algorithm, I think, for second half getting back to mid...

We do.

Starting off a little slower, but ramping it up.

We do.

Okay. All right. Good to hear. On that note, I mean, if this -- you brought up whether the business fits, you've talked about divestitures as a company, right? And so maybe just an update on incremental divestitures as you noted on the last earnings call. Should we assume these are both noncore vehicle assets? Or are there other areas you think are in consideration for divestiture?

Yes. So we've been talking about 3 divestitures in particular. One, we've already signed and shared publicly what that is. It's a PayByPhone sale. PayByPhone is a great example of this is a great business, right, growing north of 20% organically, high EBITDA margin business. It was making no money when we bought it a couple of years ago. But when we looked at the business, the original kind of deal hypothesis is that we could take this business, Europe was a place we were going to start and turn it into a business similar to what we have in Brazil. And what we found is that wasn't where the puck was going for this business in that geo. So I think that, combined with the fact of it's not in the core of what we do was why we thought it was a perfect candidate for disposition. So the other 2 potential divestitures that we're in market with right now are similar. They're good businesses. They just don't kind of fit the core. And as we kind of kicked off, our goal is really this significant rotation into corporate payments as we continue to do that. So the divestitures are helpful for that.

Ron has always been a good portfolio manager of different assets. And so again, are we on schedule for those divestitures from your perspective? Do you think they'll be this later this year? I mean a little more on timing?

Yes. I mean that's always tough to call it because it's always about price. And these are really good businesses. So I don't want to sell them on the cheap. I do like the idea of divesting them, buying back CPAY stock considering what we're trading at and then using my dry powder to continue to build within the corporate payment space. So I do think we've seen the shift that we'd like to in terms of corporate payments with the acquisition we did with Alpha. And the next natural acquisition for us to do would be to buy the 2/3 of Avid that we don't own today, and that would double our AP automation business. So we're working really hard with TPG in terms of the financial performance of that business to get that in line with our financial performance. What's interesting about that business, right? They compete in different verticals than we do. So like they've got a big stronghold in the real estate vertical. So very complementary in terms of the portfolio business to our current portfolio of business.

Yes. I mean speaking of M&A, last year, you guys had a pretty big M&A. It was about 80% of your capital deployment. Usually, you're more of an equal split, right? Somewhere around -- I think looking back, it was 46% M&A, 54% buybacks more typically. What are your thoughts going forward now in terms of that mix? I mean, obviously, Avid is something you still want to eventually buyout in total. But beyond that, I mean, what are your thoughts in terms of breakdown of capital allocation?

Yes, it's a good question. I mean from the guide perspective, the view is, hey, we're going to use all the money to delever because it's really hard to predict M&A and buybacks, right? We always want to give ourselves optionality to do M&A. Also add to that, the stock is just incredibly cheap right now. So we shared with you as we do divestitures, we're going to buyback CPAY. So I'd say you're going to see a combination of that as we go throughout the year.

Okay. Great. Guys, why don't we take a couple of questions from the audience? We have about 6, 7 minutes left. So anyone have anything they'd like to ask? Yes, there's one in the back. Maybe just wait for the mic real quick. Thanks.

I know it's not part of the core business, but what's the guidance on the performance of your gift card, that business, the closed loop business and where do you see that going? Is that a part of your divestiture strategy?

Yes. To be fair, it's a really small business. You're talking about like a $250 million business on a $5.3 billion business. So a little bit of the tail wagging the dog. But what I would say in general in the gift business is it's really improved over the last several years. I mean 2 things that are happening, right, is we've improved our own capabilities. In addition to doing the gift card processing, we've actually also launched a bunch of initiatives that help retailers bring customers into stores. So that's resonated really well, and we're generating high-margin revenue off of that. we've also been able to move ourselves into much more of a stronger perspective from a competition standpoint. So we're winning a lot of new business. So I'd say the business is performing well. Last year, it overperformed because we had this change in gift card regulation. The only thing that I don't love about the business is its very volatile quarter-to-quarter. So even at that small amount of revenue, introducing that volatility quarterly into our model isn't terrific.

Any other questions? One for me that I know the audience is always wondering and then we'll wrap it up is just on AI. You guys actually have been almost looking at it as a net safety stock, I guess, you'd call it relative to a lot of other names around AI. But I'm just curious how you see it impacting your business in terms of either opportunity to leverage it or if there are any risks around someone leveling the playing field for versus what you guys offer?

Yes, let's talk about AI, and let's also talk about software because I think they are 2 important things that are really hot in the marketplace right now. So when we think about AI today, right, we really see it as an amplifier of our current products and our current advantages. So what we are focused on today is building AI agents within our businesses that make the products better. In terms of cost savings perspective, where we've been -- or should I say, a cost optimization perspective is where we've been focused on is in our engineering team. And so deploying AI in engineering. What we're tracking there is how much of the code is being produced by AI versus engineers. With that additional capacity that we're freeing up, we've been reinvesting in the business to create the AI product enhancements that we'll plan to roll out later this year. So pretty excited about that side of the business. On software, and I made this point at RJ last week, so to just share with this group, we are not a software company. We are not a software company. We are a payments company. Networks is what our critical advantages here, right? Our key advantages is our moat. So we've got over 30 proprietary networks across the globe. That's what makes our business so sticky and so difficult to get into. And just to put a finer tone on it because people are always cautious when I make statements like that, 1% of our revenue in 2026 will come from software. So just as a proof point, 99% of the revenue is coming from being a payments business with networks.

That's a pretty strong point. All right, guys, anything else? I think we'll stop it there then, Peter. Thank you very much for joining us.

Thanks, Darrin.

Appreciate you being with us.