FleetCor(FLT) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Q2 revenue was $948 million, with cash EPS of$ 4.19, both up sequentially [116] - Q2 EBITDA nearly touched $500 million, an all-time record [116] - Organic revenue growth was 10%, with fleet revenue up 6% and EV revenue up 45% year-over-year [116][123] - Full-year 2023 guidance: GAAP revenues between$ 3.836 billion and $3.86 billion, adjusted net income between$ 1.281 billion and $1.303 billion, and EBITDA growth of 17% [39] - Q3 revenue expected to be between$ 980 million and $1 billion, with adjusted net income per share between$ 4.44 and $4.64 [39] Business Line Performance - Fleet business organic revenue increased 6%, driven by higher revenue per transaction and strong international markets, particularly Mexico and Australia [116][126] - Corporate Payments revenue grew 22%, with direct payables business up over 30% and cross-border revenue up almost 30% [134][137] - Brazil revenue grew 15%, driven by 7% tag growth and strong sales in digital, field, and partner distribution channels [135][137] - Lodging revenue increased 14%, with sales success across industry verticals and revenue per room night up 19% [135] Market Performance - International markets, particularly Mexico and Australia, outperformed, with both markets up over 20% in Q2 [116] - North America fuel sales remained soft due to the pivot away from micro SMB accounts to control bad debt [117] - EV revenue grew 45% year-over-year, with the number of UK EV commercial accounts nearly tripling [123][132] Strategic Direction and Industry Competition - The company is aggressively repositioning its global fleet business, focusing on EV growth and broadening vehicle-related payment solutions [9] - Exploring the separation of one or more businesses, potentially combining with a pure-play company to unlock value [139] - EV vehicles are generating more revenue per vehicle than ICE vehicles, with the company leading in EV solutions in Europe [123][126] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the future, with strong sales growth and a solid pipeline across businesses [7][17] - The company expects to exit Q4 with revenue growth of 14% and cash EPS growth of 16% [17] - The strategic review is ongoing, with a focus on fleet reinvention and potential separation to unlock value [5][35] Other Important Information - The company is working on closing the sale of its Russian business, expected to reduce full-year revenues by$ 45 million to $55 million [39] - Bad debt expense was$ 35 million, stable with last year, and expected to improve by 20% in the second half of 2023 [120] - The company has $1.25 billion in unrestricted cash and$ 768 million available on its revolver, with ample liquidity for M&A and share repurchases [122] Q&A Session Summary Question: Trends in fleet segment organic revenue and international market drivers [46] - Answer: International markets, particularly Mexico and Australia, drove growth due to strong transaction activity and sticky fuel prices [46] Question: Impact of EV on fleet business growth [36] - Answer: EV is expected to accelerate growth in the fleet business, with EV revenue up 45% year-over-year and more revenue per vehicle compared to ICE vehicles [36][123] Question: Corporate Payments segment strength and sustainability [50] - Answer: Corporate Payments saw strong growth, with direct payables up over 30% and cross-border revenue up almost 30%, driven by strong sales and recurring business [134][137] Question: Capital allocation strategy and buybacks [66] - Answer: No change in capital allocation strategy, with M&A as the lead focus and potential share buybacks after closing the Russia sale [66] Question: Lodging segment performance and softness in managed accounts [58] - Answer: Lodging revenue grew 14%, but managed accounts showed softness, with diversification in airline and insurance helping to offset the impact [58][59] Question: Take rates and revenue per transaction in Corporate Payments and Fleet [108] - Answer: Take rates in Corporate Payments are improving due to a mix shift towards higher-margin direct business, while Fleet revenue per transaction is driven by international markets and EV growth [110][127] Question: Strategic review and potential separation of businesses [42] - Answer: The company is exploring the separation of one or more businesses, with a focus on fleet reinvention and potential combinations to unlock value [42][139]