Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Corpay Inc (CPAY, Financial) surpassed $1 billion in quarterly revenue for the first time, reporting $1.29 billion, up 7% excluding Russia.
• EBITDA margins improved to 54.2%, up about 100 basis points sequentially.
• Corporate payment sales growth was strong at 28% for the quarter, leading the company's sales growth.
• The company expects organic revenue growth to accelerate to 13% in Q4, with EBITDA margins projected to increase to 55.6%.
• Corpay Inc (CPAY) is optimistic about 2025, projecting organic revenue growth of 9% to 11% and targeting $22 per share in cash EPS.

Negative Points

• North America fleet continues to be a drag on growth, with performance worse than expected.
• Lodging revenue decreased by 5%, although it showed signs of improvement.
• Interest expense increased by $21 million due to higher debt balances from acquisitions and share buybacks.
• The company faces uncertainties related to FX assumptions, particularly the Brazil real, and the net impact of lower interest rates offset by higher 2025 tax rates.
• The gifting business, which is seasonal, poses a risk to Q4 projections if it does not perform as expected.

Q & A Highlights

Q: Can you break down the retention by segment and explain the improvement in retention trends? A: We don't break retention down by segment, but generally, corporate payments have better retention than the line average, while some SMB businesses within fleet are below. The improvement in retention is due to core retention improving within the businesses rather than a mix shift. - Thomas Panther, CFO

Q: Did FEMA contribute to lodging payments due to hurricanes, and do you expect further tailwinds from disaster relief efforts? A: FEMA contributed about $1 million each quarter, which is above the normalized emergencies we typically see. - Ronald Clarke, CEO

Q: How did new sales perform in Q3, and what is the expected impact of the new sales reorganization and CRO? A: Corporate payments performed strongly with high-20s growth over the prior year. The new sales reorganization and CRO are expected to leverage expenses and enhance cross-selling, with a positive impact anticipated next year. - Ronald Clarke, CEO

Q: What are the broader trends in the North American fleet business, and how confident are you in its return to positive growth in 2025? A: Same-store sales are flat, and retention has improved. We expect low single-digit growth next year, driven by improved sales, without setting overly ambitious targets. - Ronald Clarke, CEO

Q: How do you view the impact of lower interest rates and higher taxes on the 2025 outlook? A: We expect lower interest rates to benefit our debt, with a slight headwind from float revenue. The tax rate will normalize closer to historical levels, considering the global minimum tax and fewer stock option exercises. - Thomas Panther, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.