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¶¶ ¶¶ © transcript Emily Beynon

Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero. Any member of our team will be happy to help you.

. . . . . . . . . . . . . . Thank you for your continued patience your meeting will begin shortly.

If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Please stand by your meeting is about to begin. Hello and welcome, everyone, joining today's CorePay third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. And it's now my pleasure to turn the meeting over to Jim Eglseder. Investor Relations.

Good afternoon, and thank you for joining us today for our earnings call to discuss the third quarter of 2026 results. With me today are Ron Clarke, our Chairman and CEO, and Peter Walker, our CFO. Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of courtpay.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call along with a reconciliation of those measures to the most applicable GAAP measures. Our remarks today will include forward-looking statements about expected operating and financial results, strategic initiatives, acquisitions and divestitures, among other matters. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Some of those risks are mentioned in today's press release and on Form 8K and can also be found in our annual report on Form 10K. These documents are all available on our website and at sec.gov. So now I'll turn the call over to Ron Clarke, our chairman and CEO. Ron?

Okay, Jim, thanks. Good afternoon, everyone, and thanks for joining our Q3 2026 earnings call. Up front here, I'll plan to cover three subjects. First, provide my take on our Q3 results. share our Q4 forecast and an early preview of 2027. Second, I'll cover our portfolio transformation and M&A progress. And then lastly, I'll share just a few exciting developments since we last spoke. Okay, let me begin with our Q3 results. We reported Q3 revenue of $1.38 billion. That's up 18%, and cash EPS of 754. That's up 32%. These results better than expectations. We had a slightly better macro in the quarter, and our spend management business overperformed. Overall organic revenue growth in Q3, 11%. That marks six consecutive quarters of double-digit organic revenue growth. Inside that, our corporate payment segment accelerated to 18% organic growth, actually 20% excluding float. Vehicle payment segment grew 8% right on expectations. Trends in Q3, quite good. Sales or new bookings up 24% versus prior year. Retention stable at 92.2%. and improving same-store sales plus 2% for the quarter. We did continue to get meaningful earnings accretion from our two big deals, Alpha and Avid, in the quarter. So look, in summary, another very good quarter, very clean, and importantly, our corporate payments growth accelerating. Okay, let me make the turn to our Q4 outlook. We are raising Q4 revenue guidance at the midpoint to $1.37 billion and cash EPS at the midpoint to $7.65. That would be up 27%. We expect Q4 overall organic revenue growth of 10% at the midpoint, led by our corporate payments growth, which we expect to remain in the high teens. and that's consistent with what we've been delivering all year. We do have preliminary October results and have incorporated those into this overall guide. Assuming we achieve today's Q4 guidance, our full year 2026 results will finish as follows. Full year revenue would finish up 18%. Cash EPS would be up over 30%. and Cash EPS of 28 for the full year would be a full $2 higher than our initial $26 guy back in February. So look, a terrific year financially. Okay, on to a 2027 preview. We are again outlooking 9% to 11% organic revenue growth in 2027. Corporate payments segment, again, we're expecting mid-teens growth or better there. Our corporate payments new sales this year, here in 2026, expected to top half a billion dollars. So that provides really an embedded revenue ramp for growth into 2027. We'll also put roughly $2 billion of free cash flow to work. Next year, either on spend management acquisitions or buybacks, wherever we see the best return. All right, let me make the turn to our portfolio transformation and M&A. Again, we're progressing our portfolio transformation to fewer bigger businesses, the portfolio becoming simpler, corporate payments becoming larger. We have divested two non-core businesses here in 2026, receiving proceeds of about $1.2 billion. We use those proceeds to buy back over 3 million CPay shares, or roughly 5% of the company. We have launched a couple additional divestiture candidates that are in the market now. We're also continuing to pursue new and meaningful corporate payment acquisition targets that can further accelerate our mix shift to more spend management. In terms of performance, our two most recent deals, Alpha and Avid, exceeding our 2026 accretion targets. We expect together they'll contribute over $1.40. of cash EPS accretion this year versus our going-in $1 target. We have migrated Alpha's cross-border corporate payments line of business off its IT platform and onto ours, along with its back office compliance and ops functions. Avid doing well. We expect Avid to double earnings here in 2026. and then materially increase them again in 2027. Maybe more importantly, AVID expects to execute for this year with double-digit organic revenue growth, which would be the first in a long time. So these deals aren't just financially accretive. They're making our corporate segment bigger, more profitable and more important to us. On the Brazil front, we did acquire two Brazil vehicle debt companies last year. Combined, these two deals will grow over 30% this year here in 2026. And those two deals will now represent about 20% of our overall Brazil consumer revenue, so becoming significant. So it makes this vehicle debt adjacency A terrific add-on for us. It's really just another example of finding attractive adjacency around businesses where we already have some kind of built-in advantage. The important point here is the portfolio rotation. It's working. We're simplifying the company. We're putting more capital behind corporate payments. and the assets we've bought, they're performing. And you should expect to see even further rotation again next year. Okay, so last up today, I do want to share just a few exciting developments since we spoke last. So first on the AI front, we've made some real progress. AI for us is now providing some tangible clients and productivity benefits. We've launched conversational virtual assistants across a number of our businesses being used to help automate our clients' work. We are incorporating the new AI tools into our client-facing IT development work, boosting IT productivity, and we've developed some really cool proprietary AI agents. I'll call out one, our super dealer clone in our cross-border business. It analyzes and recommends hedging solutions across our global client base and uncovers kind of new risk mitigation opportunities that our dealers might otherwise miss. So really exciting. Look, so for us, AI isn't just about productivity. It's also about helping identify opportunities to serve our clients better. So corporate payments, you may recall that we entered the UK market earlier this year with our core pay complete spend management solution. That leverages our U.S. tech platform and our pretty big presence in the U.K. So this year, with that platform, we've now grown the U.K. spend management volume to over $1 billion annualized exiting Q4 with a $15 million revenue run rate. So it proves our U.S. tech platform can travel internationally. We do have customers, distribution, infrastructure around the world. So taking our corporate payments platform to new markets does create additional runway for us. So last up, we dropped our new what we call hidden gem video ad on the Corpay website today. It touts CPay's relative performance within the storied S&P 500 index. So if you screen the S&P 500 for companies that grow revenue more than 9%, grow profits more than 15%, and have margins above 50%, there are 18, 18 companies. And Corpay is one of them, joining other elite performers, the likes of Microsoft, Visa, MasterCard, NVIDIA. So look, Corpay combines... A pretty rare combination of growth, margins, and free cash flow. So look, to wrap today in conclusion, again, obviously pleased with our Q3 performance. We put up some real growth versus last year and marked, again, six straight quarters of double-digit organic growth. Our corporate payment segment, again, high teens growth in the quarter We are raising our Q4 guidance based on the momentum along with our preliminary view of October. Excited about 2027. We're outlooking another year of double-digit organic growth. And again, roughly $2 billion of free cash flow to put to work. And overall, we're building a simpler company with fewer bigger and faster growing businesses. So lots of progress. So with that, let me turn the call back over to Peter. He'll provide some additional details on the quarter and our outlook.

Thanks, Ron, and good afternoon, everyone. We delivered another excellent quarter with 18% revenue growth and 32% adjusted EPS growth year over year, both ahead of our expectations. Organic revenue growth was 11%, our sixth consecutive quarter of double-digit organic growth. The quarter demonstrates the durability of our model. We continue to benefit from strong execution across the business and a favorable macro environment. Sales grew 24%, same-store sales increased 2%, and retention remained healthy at 92.2%. Those results reflect the focus and discipline of our teams as we continue to invest behind the opportunities with the strongest long-term returns. Now, let's turn to our segment performance and the underlying drivers of our organic revenue growth in the quarter. Corporate payments delivered 18% organic growth in the quarter, accelerating from Q2. The performance was driven by continued strength in both cross-border and spend management. We're pleased with the momentum in these businesses, driven by new sales growth and strong underlying customer activity, with organic spend increasing 24% to $95 billion. Cross-border continued to deliver strong sales performance with year-over-year sales growth over 25% on an organic basis. The alpha corporate system migration is substantially complete and the global bank account integration on track for early 2027. Our spend management business, formerly referred to as our payables business, performed exceptionally well, driven by sales and volume growth. We continue to be pleased with the strong performance of AVID, our minority investment, which is reflected as an equity investment in our financials. AVID continues to deliver sales growth, strength in volume and revenue, and EBITDA doubled year over year to a record level. Vehicle payments delivered 8% organic growth consistent with Q2 and in line with our expectations. The business continues to execute well across the globe. We remain focused on allocating our investments to the highest return opportunities, including investing in vehicle payments to continue high single-digit growth. Lodging delivered 3% organic growth, improving sequentially for the third consecutive quarter. While there's still work to do, the direction of the business is encouraging and consistent with the progress we expected through the year. In summary, our 11% organic growth was broad-based across the largest businesses. Corporate payments and vehicle payments, which together represent over 80% of our revenue, delivered a combined 13% organic growth rate. These results give us continued confidence in the consistency and compounding of our model. Now, looking further down the income statement, operating costs increased 9%, excluding the impact of FX, M&A, stock compensation, amortization, and a prior year other operating loss of $11 billion. The 9% increase reflects growth investments and the cost of supporting higher volumes. Adjusted EBITDA grew 17% to almost $800 million and adjusted EBITDA margin was 57.4%. The strong margin reflects the high flow through of revenue growth as well as continued operating discipline. Adjusted EPS grew 32% driven by strong operating performance, The year-over-year decrease in the tax rate was primarily driven by excess tax benefits in the period related to grandfathered stock options exercised. Turning to the balance sheet. We generated approximately $500 million of free cash flow in the quarter. We ended the quarter at 2.72 times leverage. Following the November 2nd closing of the maintenance divestiture and application of the proceeds, Proforma leverage is approximately 2.47 times and decreased sequentially. Post receipt of the maintenance divestiture proceeds, we had approximately 2.6 billion of total liquidity, including 1.7 billion of undrawn capacity under our revolving credit facility. During the quarter, we repurchased 750 million of stock or approximately 1.9 million shares. Also, the board approved a $1 billion increase to our share repurchase authorization, bringing total remaining capacity to approximately $1.6 billion. This is another example of our disciplined capital allocation approach, maintaining a strong balance sheet, investing in the business, and returning excess capital to shareholders when it represents an attractive use of capital. Now, let me share some additional information on our updated 2026 full year and fourth quarter outlook. We are raising our full year revenue guidance to $5.35 billion at the midpoint, growing 18% year over year. We are also raising full year adjusted EPS guidance to $28 at the midpoint, growing 31% year over year. As a housekeeping item, the $5.35 billion includes approximately $120 million from the two divestitures completed in 2026, which were neutral to adjusted EPS due to buybacks. This $120 million will not be included in our 2027 print revenue. Our updated outlook reflects the flow through of our third quarter outperformance. raises fourth quarter due to favorable macro conditions and continued underlying strength in the business and the updated closing date of the maintenance divestiture. For the fourth quarter, we expect revenue of approximately $1.37 billion and adjusted EPS of $7.65 at the midpoint. Before I close, I want to put our midterm opportunity in perspective. We are clear on the direction of the company. Build a simpler portfolio of scaled, advantaged businesses, expand our corporate payments platform, and deploy capital where it can compound value most effectively. Our objective is to continue to be a top-quartile S&P growth compounder. The growth algorithm we outlined in our investor presentation can compound adjusted EPS at more than 20% annually. from $28 this year to approximately $50 per share by 2029. That objective is supported by sustained 10% organic revenue growth, cash profit expansion, and disciplined share repurchases and accretive corporate payments M&A. Over time, a larger corporate payments mix and continued investor confidence in our growth model could support a rerating of our valuation. So, operator, that concludes our prepared remarks. Please open the call for questions.

Thank you. At this time, if you would like to ask a question, please press star 1 now on your telephone keypad. To withdraw yourself from the queue, you may press star 2. Once again, to ask a question, that is star 1 on your telephone keypad, and we'll pause for just a moment to allow everyone a chance to join the queue. Thank you. We'll take a question from Ramzi Alassal with Cantor Fitzgerald. Your line is open.

Hi, thanks so much for taking my question this evening. Another great quarter here. I want to ask about the sales growth of 24%. That's a great outcome. Just curious if you can give us any more color on where you're seeing the strength in the business.

Hey, Ramzi, it's Ron. Yes, another good sales number. I just want to point out A huge amount of them now are in our corporate payments business. I quoted in the thing for the full year, we're looking at probably $500 million plus in new business. And I want to point out to people that that creates, because it gets booked, obviously, over the course of the year, right? It's on its latest November and December. That creates kind of a ramp of 7% or 8% revenue growth in 2027. So sometimes people don't appreciate, you know, the power of sales that we make in the prior year in terms of its benefit in the forward year. So also Brazil, super good in terms of sales, Blockbuster, including the vehicle debt thing that I mentioned. So those two would be best, and I'd say our international business maybe helps a little bit by fuel prices, also super good. So those three, all high performances.

Awesome. One quick follow up for me. Are you seeing any downstream impact from higher diesel prices on credit performance or any other aspects of the fleet side of the business? I know the freight's got a role and I know that freight prices don't necessarily correlate, but I was just curious if you're seeing any impact in the business from just a sustained higher kind of diesel price level. Thanks.

I think it helps, Ramsey, a bit on sales, right? Higher prices creates more, you know, more cost to control. I'd say a smidgey bit of same-store sales, you know, softness still probably a point or so, you know, with prices being higher, people cutting back a little bit, but nothing significant. As I mentioned, our consolidated business was plus two in terms of same-store sales, so, you know, two of the 11 points come from The client base is getting healthy. Fortunately, not much in terms of impact from the price.

Got it. Thanks so much.

Thank you. We'll move next to Michael Insante with Morgan Stanley. Your line is open. Please go ahead.

Hey guys, nice results here. Thanks for taking my question. Ron, you called out on your prepared remarks, the M&A focus within corporate payments being on spend management. Why is that relative to cross-border? Is that just a function of the portfolio being pretty well rounded out post-alpha with the MCA product and you sort of feel like incremental acquisition can sort of improve the value propers, competitors in the core payables business? Just any color there would be great.

Yeah, that's a super good question. I would say it's really more timing, so I don't want anyone to leave the call thinking we won't buy more across border. Mostly, it's just trying to digest what we've got. We've done a lot there. We're still digesting alpha, particularly the banking side, and so we turned our energy starting in the spring over to the spend management category, both here and abroad. So it's really just that. We want to keep building both both of those categories, but the one up right now is spend management.

Makes a lot of sense, man. Just for a quick follow-up, I'm curious if there's any context you could share on the U.S.-Canada corridor in corporate payments in the corridor. Was there any notable take rate pressure we should be aware of that maybe actually made the growth, which obviously incrementally accelerated, potentially be a little bit more depressed than it otherwise would have been? And then Stepping back, as you think about higher levels of FX vol being good for your hedging business, are there instances where customers, for whatever reason, are choosing to wait for vol to reside a little bit before placing those hedging trades? I'm just trying to think about the puts and takes between those two. Thanks again, guys.

Yeah, hey, Michael, it's Peter here. So on your Canada-U.S. corridor question, I would say, you know, nothing unusual happening within that corridor. You did ask about kind of the uptick in corporate payments, and so just wanted to share with you there's about, you know, 100 basis points of call-in payments. One-time monetization happy within Q3 that we don't know is necessarily repeatable in Q4. So corporate payments normalized is probably more like 17, and overall organic is more like 10.

Hey, Michael, it's Ron. Just a follow-up. It was a good question. So we've studied what you said of, hey, when we look at the volatility index around FX, how does it affect things? So we've looked at it over a longer period of time. I think for our business, given the mix, it can have kind of up to a 10%, you know, help or hurt. But basically what happens is the timing that you spoke of, it kind of cleans up over a quarter. So to your point, if someone's kind of sitting still for a month and the terror on some of their contracts is running out, they basically tend to get the thing cleaned up. So I'd say over a quarter and obviously over the year, it doesn't have that big an impact.

Thanks, guys. Thank you. We'll move on now to Sanjay Sakrani with KBW. Your line is open.

Thank you. Very nice acceleration in corporate payments. I'm just curious, was there anything specific that drove that inside the business? And then do we think that that type of growth is sustainable as we move into next year?

Sanjay, very good question, and it was kind of all things firing. Volume was up crazy good because of my comment earlier about we've been making a lot of sales. The retention, again, in that business is above the line average. It's closer to 95%, and I'd say some of the extra juice is we've gotten focused a bit more on the monetization front, so we've got a couple more Dances in our repertoire. So instead of just virtual cards, we did launch earlier this year debit cards as a way to monetize. And we've advanced what we call kind of paid or ACH plus, getting paid for ACH. So it would be a mix of those things. It would be volume from, again, continued good retention, crazy amount of sales, getting online, and then a bit better monetization, particularly here at Q3.

Got it. And then maybe just to go back to the questions on expense management, I think the cross-border piece of your story is pretty well known now and appreciated. I guess when we think about expense management, and then you layer in Avid as well to some extent, what's the kind of growth rate that business can see over a sustained period, maybe over the intermediate term, like the next three years? I'm just curious if it's the same type of growth that the cross-border corporate payments business can deliver.

That's another good question. I mean, the TAM is obviously gigantic, right? Kind of all the domestic indirect spend of a business. And so it's really a function of sales investment there. I think the biggest difference in the two businesses is our cross-border business is super global. 75% of the revenue of that business is originated outside of the U.S. So think Canada, U.K., Europe, Australia, etc. Whereas in the spend management business, even including Avid, it's predominantly U.S. business today. Got it. Thank you.

Thank you. We'll move on now to Tinson Wang with J.P. Morgan. Your line is open.

Please go ahead. Hey, Ron and Peter and Jim. Just wanted to ask on the quota, of course, just thinking here about the visibility into double-digit growth next year, how would you characterize that, the visibility part, maybe compared to last year or last couple of years?

Good to hear from you as always. High is how I characterize it. And I was saying to people earlier that, you know, we keep talking about the growth algorithm in the company. Hey, 10, 13, 19, 10, 13, 19, and we don't spend enough time on the growth algorithm for revenue. Hey, how do you get to 10%? And so I continue to say to you guys, hey, you know, how are sales in the quarter? How is retention in the quarter? How are sales? That is the growth algorithm. And so the way we get to 10% is, hey, the base grows 2%. We sell a bunch. We lose 7% or 8%. And so the beauty, particularly as we rotate into corporate payments, is my comment earlier that we sell more of it in the prior period. So the example that I gave of if we sold, call it $500 million of corporate payments last year, we already know how much revenue we're going to get from the ramp in 2027 that we didn't get in 2026. and we also have a good sense of how much we get in the current year. Like, what will we sell? Like, we're up 24%. So, if we're up 20%, how much of that will print in 2027? So, it gives us a pretty wide band, if you think about it, to build the plan. You know, the revenue exits and I keep 92% of it. The same store sales, inches up, you know, a point or two. I've already got the ramp and the bag. And even if I sell the same amount as the prior year, I know what we print. So the variables to get to a number, this is a business you can plan, I'll remind you of. So we like that, and I'd say it's even more so in the corporate payments space than in the vehicle.

Sounds familiar to ADP in a lot of ways. I know you've said that to me before. No, thanks for going through that.

That's how I got here, partner. That was the model I chased. You got it.

It's been a durable one for us. Two, three decades as I've tracked it. Just maybe as my follow-up, I'm just curious, because coming off of some of these conferences, digital assets and tokenized deposits, blockchain rails, any change or surprise in activity there, movement there, Ron?

I just think, Tension, we feel clear. I don't know if the world has caught up to our view, but what I think we would say is we're pretty convinced that People should separate currencies, you know, tokenized fiat, you know, from crypto or stable coins from the rails, you know, from blockchain versus, you know, Swift or something else. So our view on the world is the winner will be tokenized fiat because everyone's already got it and it's what's worked. And then the blockchain is going to be a super interesting additional rail because It's programmable and it's 24-7. So as the banks, as you see in the announcements, as they get ready to credit positions that come off of the blockchain 24-7, we see way increase in that rail being used. And so we're still kind of short on the stablecoin narrative and believe in the blockchain rail coming on as the banks start to move that crediting to real time. So that's what we're behind. We're investing a lot, and we see it already. The mix of our business that moved from Swiss started to move on to these private blockchain rails and stuff. And so we think the lift on that is going to be quite substantial next year.

Good. Thank you.

Thank you.

Thank you. We'll move on now to Darren Peller with Wolf Research. Your line is open.

Hey, guys. Thanks for the time and nice job. You know, you mentioned investing in the vehicles area to maintain high single budget growth. Is this just a specific geo or further in sales and marketing or product development? Just help us understand a little bit more about where you're putting it towards and the outcome. Thank you.

Hey, Darren. So, again, the vehicle business is global. It's here, it's in Europe, and it's in Brazil. I think we've said repeatedly we kind of love our competitive positioning even more in Brazil and in Europe. You know, it's super dominant. We've got leading products and stuff. So, of the three geos, we tend to spend more. kind of incremental new money, distribution money in those places. And the margins are quite attractive and stuff. And so, look, we're balancing. We've said it repeatedly. We're balancing particularly the sales and tech investment in vehicle versus corporate payments. The target is trying to keep the vehicle business in all geographies in the high single digits. put most of the money behind, obviously, corporate payments. So, really, no change in approach there, and you should continue to see the best market, the best geography, Brazil, the second-best Europe, and the third, the U.S.

Okay. All right, Ron. Thanks. Just a quick follow-up on the divestitures. Again, I appreciate the announcement of another divestiture this quarter. Just Help us understand how we should think about further divestitures. I mean, should we expect it to be in the vehicles business? And as you focus on a few large businesses, could we see something more strategic? Any more color you can give us to update us would be great. Thanks, guys.

That's a good question, Darren. So as I did mention at the top that we've got a couple additional divestiture assets in the market now. I think, you know, call it a billion five to two billion worth. and so, yes, generally the answer is you would find smaller, niche-year vehicle businesses or other kind of non-core, non-corporate payments businesses as the likely candidates and basically it's either, you know, size, you know, it's smaller or B, it's Thank you for joining us. pieces inside those businesses that don't make sense for us the whole long term that makes sense for someone else to own to be better owner than us so that's what we're focused on and we're being smart I think and patient we're not Throwing them out of the plane at any price. We're being thoughtful about the state of those businesses and again the tax leakage on them and selling things like this maintenance one where effectively it's a push. We can exit the business and get enough proceeds to kind of wash the thing from an earnings perspective. So my message to everybody is we're going to keep doing it. We're not like in a super-duper rush. We're going to keep doing it. You'll see more stuff sold in the next, you know, 14 months, and you'll see more stuff acquired in corporate payments. So while we're sitting here a year from today, in addition to the differential growth rates, you'll see the mix keep moving as we acquire corporate payments in the best of our own.

Right. Okay. Makes sense.

Thanks, Ron.

Thank you. We'll move on now to Raina Kumar with Oppenheimer. Your line is open.

Good evening. Thanks for taking my question. I just want to ask on lodging. So you had organic growth improve to 3%, but our room nights remained down and revenue per room increased. So can you just talk about how much of the recovery is pricing versus mix? And how if you think this recovery is sustainable and just the long-term plans for lodging. Thank you.

Yeah, hey, that's another good question. So, yeah, the rate and the volume is really Just what you said, it's mixed. So for example, we talked about this, you know, emergency kind of client or FEMA that has sporadic kind of uneven volumes and is super duper cheap. So when that thing flexes up or down, you know, hey, there's a lot of rooms that are cheap or hey, there's no rooms that are cheap, that drives the average. You know, room rate up or down. So there's really nothing other than that going on. It's just, it has a big swing because, again, it's so cheap. On the more important question, the recovery question, it is clearly better. I mean, let me point out something maybe more important. So, yeah, hey, the lodging business is in positive territory. I think it's, what, plus three for the quarter. Inside of that, the biggest business, which we continue to like a lot, we call workforce. which means we go to businesses that have kind of blue-collar people that stay in kind of blue-collar hotels. That workforce business is up double-digit. And so the other smaller, Taryn's question, niche-ier things like insurance or airline are doing less well. And so it's averaging to that 3%. That business will do better, we think, again in Q4. on a combined basis. So the headline is the bigger business in lodging, the more important one is doing significantly better than a couple years ago when it was a problem child. And yes, we do think we can make that. It used to be for the first 10 years we owned it a terrific business, and we think we can make it a good business again. The other two I'd say the jury's still out on those of whether they're fixable or not.

Thank you. We'll move on now to Ken Suchosky with Autonomous Research. Your line is open.

Hey, good evening, guys. Thanks for taking the question. I wanted to ask about corporate payments and the outlook there. You're obviously growing high teens to 20% ex-float year-to-date, 20% this quarter. Is there any reason the underlying business wouldn't keep growing at these levels next year? You have the seven- to eight-point ramp from new sales. Retention is great. So that was the first part of it. And then the second part was just on the reported like corporate payments organic number because you've been absorbing this 200 basis point float headwind. As you lap that and it turns neutral or possibly a tailwind, just help us bridge from where we are today to that mid-teens or better type of level. Is that just conservatism necessarily or are there other offsets like the one-time monetization, this quarter, comps or take rate or anything like that? Thank you.

Yeah, hey, Ken, that's another good question. I'd say, first and foremost, it's just early days. It's, you know, it's the first of November, something here. We're, you know, eagerly working on the plans and try to get precision, right? We're trying to get, whatever, $5 to $6 billion, so there's a lot of details to do. We will get help, to your point, to the extent that the SOFR curves become true. I think the thing ticks up kind of 25 basis points. per quarter next year, kind of 75 for the total. That'll help. That may give us a point or so, depending on our deposit balance. But the main answer to the question of, hey, are we at 15, 17, or 20, is just sales. Like the retention number, I keep saying, is like super stable. We have statistics. We have the clients. They like the product. That thing is like super-duper solid. And so it's really this level of investment that we put in and the production that we get. And so I'm making this up. If we sold $550 million instead of $500 million, you know, you could do the math. That would add another point or two right to the growth in the following year. So the positive thing is we roll into the next year kind of partway already getting there. We've sold enough and retaining enough that we still have a decent growth rate heading into 2027. So the creme de la creme, the top of it's going to be just what level of sales production do we get? A good one, a little bit better than this year, or a great one, a lot more? So that's why we're always like, oh, is it 16, 17, 18? What is it? It's really a function of that level of selling production.

Mm-hmm. Yeah, and it seems like the corporate payment sales are becoming a bigger part of the mix as well by our estimates. Just one on Avid, because the results are really impressive there. I mean, doubling earnings year over year. I think you talked about growing double digit organically exiting this year. So just maybe give us some detail on what's driving that. Is it sales investment you put in? Is it product changes? Is it pricing? What's What's driving that and how durable is that?

I think it's been great for them that you talked to the guys there getting out of the public things so they could work on the business. I think has helped that the management team there is focused and we with our partner have been kind of super clear on, hey, these are the things and you're on them. We've way stepped up the sales investment in the business. We pushed some of the monetization things that we think were lay downs. and we cut the cost structure a bit, or I should say right-sized the cost structure to the thing. And a lot of that happened throughout, you know, 2026. I can't remember, we closed the thing in the fall, about a year ago. So by the time we got the plan in place and going, we were kind of into 26. So one of the reasons I say that the 27, numbers will be better. It's a lot of the things that Mike and Dan are putting in there, you know, got going during this calendar year. And so some of that will just literally roll into 2027. So it's just in a, they always had a really good business, like happy clients, higher retention stuff. I think it hasn't been product. They got a good product. It's really been on the economics that we bring our way you know, aggressive pricing and cost and economic profit lends to a business. And so they've kind of taken that thing and they're getting way better numbers and they're going to get better numbers. I think the 27 will be materially better and we think even better after that. They signed some significant new partners this year and stuff. And so the business is really performing well. Great to see the progress. All right. Thanks, Ron. Yeah.

Thank you. We'll move on now to Dave Koenig with Baird. Your line is open. Please go ahead.

Yeah. Hey, guys. Thank you.

And I guess my question is on Brazil. You give a nice disclosure about Brazil revenue dollars. And from looking at that, if I kind of back out currency, it looks like that accelerated a little bit in Q3, maybe the higher teens, more mid-teens in the first half of the year. and I guess you have that phenomenon but then transactions, total transactions decelerated just a bit.

So maybe just describe kind of what's happening, maybe the Google Ads search data, you know, all the Brazil stuff.

Yeah, it's doing well and the Google thing is still not working well although the government and Google have agreed that it'll be back. They're just running through some paperwork. So we think Certainly no later than January 1, that thing will be back. But the Brazil thing is doing well for a few reasons. One, it's a Goliath in the core business, and that thing keeps chugging along. But the two accelerants have been this vehicle debt thing that I named, which probably doesn't sound that clear, but we've got, I don't know, seven or eight million people that have accounts and have toll accounts and stuff. And so we literally go to them plus the 80 million people that don't go on the toll road and we say, hey, look, we're connected to every DMV which is 36 in Brazil and can immediately re-register you on your phone and let you know if you have a ticket and when it's due and pay it online and stuff. And so that add-on thing is just crazy growing. We've got like a 5% share of the business. It's compounding at 30%. It's got five times the TAM because you can drive anywhere and still need a registration and stuff. So I do want to point out that although it seemed like a bit of a sideshow when we entered it, it's left the sideshow status, right? It's reached 20% of the business. and Compounding Faster. The second one is we're just killing it on the B2B side. This thing called Valley Padagio, which in English, I paused the translation, but basically suppliers or shippers have to pay for drivers to go places. And so we came up with a super duper electronic product that if you're like a serial, You know, manufacturer, shipper, and you've got to pay like 100 truckers to go somewhere. The product literally defines exactly where they can go and when so that it's optimized. The shipper doesn't pay any more than they needed with stuff. And so we are selling. Crazy amounts of that product, like the sales growth is like 40%. So those two things are going at crazy levels of growth on top of a pretty sound, solid business to begin with.

Yeah. Well, great job. Thanks, guys. Thank you. We'll move next to Meera Bhatia with Bank of America. Your line is open.

Hi, good afternoon. Thanks for taking my question. I wanted to start first with just corporate payments. I mean, you obviously have very nice spend growth there. I think there's a little bit of a gap to the revenue growth. I think the spend was 24, revenue was 18. You did talk a little bit about better monetization, and I think you've talked in the past about inciting bigger clients. But maybe just remind us what's driving the gap and how should revenue continue to grow, meaning should this gap increase as we get into 27 and 28? Thanks.

It's just mixed. I think we said we signed a giant elephant that took a while to eat that's at a completely different kind of a rate. So you move a ton of volume through the system and you move less revenue through. So no, there's nothing structurally between the spend levels and the revenue. We're obviously focused on revenue more than spend. But you do raise a good question, which is, you know, we have a lot of spend, you know, I don't know what it is, 80, 85% of the spend that we move, billions and billions that is not monetized. As I mentioned earlier, that is the assignment. We are on trying to widen the ways that we can pay merchants that's useful to them beyond virtual cards. And we're seeing a lot of success, as I mentioned, with debit cards as another way to pay. We've got a lot more people to take this kind of recon and fast, instant kind of ACH product. And so we did get a lift, as I mentioned, in Q3 from that. So that would be the other thing. We keep selling a lot, like I mentioned earlier, in addition to what's already in the bag, and then basically try to push this monetization a bit higher with some of the merchants. Got it.

Maybe then just switching quickly to Avid. You mentioned, you spoke, you gave quite a bit of detail on it, and Progress they've made, but given you have the option to buy the rest of Avid, I believe, in 2028, does the progress you're seeing now make that increasingly likely? Should we just think about that as a remaining use of capital in 2028, and is Avid part of the $50 EPS guide?

That's another good question. So, hey, I don't know. Like, we have an option, you know, a couple years out, we could buy it tomorrow. We could buy it up to whatever, two years plus from now. So, like, what we want is what you said, which is to see more progress. You know, I want to see more absolute profitability there so that when we send the capital, we're bringing, you know, more earnings into the company. And I do still want to see further acceleration in their revenue closer to an hour. Corporate Payments, Book of Business. And so we're kind of cheering and help directing from the sidelines to get the company's performance higher. But I would say Thank you. Thank you.

We'll move on now to Chris Zhang with UBS. Your line is open. Please go ahead.

Hi, thanks for taking my question. My first question is about your partnership or relationship with MasterCard and BVNK and specifically focusing on maybe the cross-border business as MasterCard and BVNK recently launched a global money platform. We've been getting some of the questions on whether this is an implementation opportunity for you to partner, whether there's some of the competition to your multi-currency account business. And knowing your multi-currency account probably approaches clients from a different perspective in the form of a local bank account opening. But maybe can you just talk to and maybe compare and contrast some of the opportunities Differences between the Mastercard and BVNK partnership and your opportunities with them specifically related to the Google Money Platform and multi-currency accounts and whether, you know, just in the market, whether you're seeing maybe some of the competition picking up because of some of the newer offerings out there.

Yeah, Chris, it's Peter. Thanks for the question. So maybe focus on the MasterCard partnership first. That partnership was focused on our cross-border business, and MasterCard made an investment in us as part of that. And that is a go-to-market to partner with MasterCard with FIs and really sell our cross-border products into FIs. And so what I'd say is that that partnership's been going well in terms of, you know, full pipeline. We signed up quite a few clients, but what we are learning is that FIs are, you know, much longer to implement than our corporate clients. So I'd say it's going well, but it's going probably slower than we would ideally like it to be. The BB&K, which is now owned by MasterCard, is a different partnership where we partnered with BB&K to enable our stablecoin rails that we established earlier this year. Moving to tokenized currency, we wanted to make sure that we had stable coins available, and we're doing that via BBNK as the partner there. And then we've also partnered with JPM using their Connexus network for tokenized currency. So I'd say the Connexus network has really been where we've moved the majority of our volume. We're still not seeing a lot of volume on the stable coin side.

Chris, it's Ron. Just to add on to what Peter said about the competition. My view is they're more of a platform kind of provider, and we're more a marketer. So for us, the competition or the opportunity is taking multi-currency accounts to the markets, to the accounts and prospects that we have. So obviously with Alpha, we've got a dominant position in the asset management Group, along with all those fund administrators. So as we widen that product to new geographies, we already have built-in clients, right? I've got Bain Capital in Boston. I've got Bain Capital in UK. I've got Bain Capital in Australia. And so, and then second, we've got a ton, I don't know, 30,000, 40,000 corporate clients, mid-sized clients that we're signing up, you know, thousands every year. The idea of taking these products and to the clients that we have as an add-on. So don't mix kind of the supply of the products, if you will, from the marketing. So, yes, there's probably more competition in making of the products, but our real advantage is in the marketing of the selling of the products.

All right. Thanks a lot, Ron and Peter. We appreciate the color. My follow-up is on the organic growth. In the Q4 guide, that's 10%. You can talk to some of the moving parts between that and the 11% is delivered in Q3. And if you were to be more conservative in some of the areas, where would that be? Specifically, I guess, for lodging, do you expect some of the pickup? Knowing it's like a smaller piece, but I think basically it's trending a little lower than previously expected. And then for vehicle, what's kind of the outlook outside of Brazil, especially North America and the rest of the world?

Yes, Chris, at the start of the call, I talked a little bit about corporate payments in the third quarter and the fact that we had about 100 basis points of call it modernization initiatives that we're not sure are repeatable in 4Q. So, you know, call that 100 basis points off of the 18 and off of the 11. So it's really a 10 to a 10. So you're seeing really equal performance between the two quarters. So that's kind of the main takeaway that I would give you. Maybe the other point that I would add is vehicle payments is obviously a little bit of a tougher comp over Q4 of last year.

Yeah, and Chris, the other thing is just the history of Q3 and Q4, we've got years, five, ten years that you guys have. They tend to be super comparable in terms of revenue. In fact, if you look at our guide, it's probably plus or minus $10 million. And so we do have a lot of stats based on days in which businesses are stronger in Q4 and stuff. And so to Peter's point, It's kind of mostly a mirror image that the print you see in Q3 will look super similar to that in Q4, probably with the one call-out Peter just made. Yep, that's super helpful. Thank you so much.

Thank you. We'll move next to Madison Suhr with Raymond James. Your line is open.

Hey, guys. Thanks for fitting me in here and taking the questions. You touched on it a few times just around early traction in the UK with spend management. Clearly a huge TAM to go after across Europe. And Ron, you touched on the geographic expansion opportunity. So the question is really just how aggressive do you plan to be on rolling out into other countries? And should we think about this as an early 2027 event?

Yeah, Matt, it's a good question. I think We wanted to start with this market because it's our second biggest market and find out, like, can we make it work? Can the platform travel and be adapted to there? And can we get people trained up and leverage the customers we have and all that kind of stuff? And so we kind of went at it a bit modestly, but got to a billion dollars, like, from kind of like from zero. So, you know, I was like, that's good. We're staring at the plans for next year and their submission is to double again the selling investment in that thing. Also, clearly, we're looking at deals in those geographies. I would say that you guys should expect to see more Spend Management Revenue, and more geographies that are outside of the U.S., both organically where we send our platform and stand up people. We already have people in all these places and tons of salespeople in these places, but also that we may acquire business commercial products in that region. We probably do both of those things.

Okay, that's helpful. And just a real quick follow-up, just on the Brazil competitive environment, any meaningful changes to what you're seeing just around new entrants or pricing in that market specifically?

Not really, other than I think the banks are getting tired. I think the great idea five years ago, hey, I give something away free and it's going to be great. I think they're getting a little wary of the thing, and it's gotten to a place where now like three or four of the banks are literally taking our product and we're holding Look, I think at some point they'll be tired of that and we'll look forward to that day. But our product is still so advantaged at such broader networks than just the toll tag. The free flow is a new thing which we're on. So, you know, we're the haberdas, if you will, of that product. And so we'd like the banks to like either charge or go away, but really nothing new right now.

Thank you. We'll move on now to Dominic Gabriel with Loop Capital. Your line is open. Hey, guys.

Thanks so much for taking the question. You know, the business really has turned towards corporate payments.

And so when we think about this mix shift over the long term, given it does feel like it could accelerate, you know, I'm looking at your processing costs as a percentage of revenue, and they've ticked down over the last number of years.

And I'm just wondering if there's a makeshift benefit across that line item in particular, given the payments that folks may use or whatever it may be. If you could help us understand some of the makeshift benefits of moving towards more corporate revenue as a percentage of the total in the P&L, I'd really appreciate it.

Thanks so much.

Dominic, it's Ron. That's a very astute observation. The simple answer is you're right. The processing economics are better because there's fewer systems. If you think about our vehicle business, which is in the U.S., the U.K., and Brazil, we probably run six, seven platforms. that are specialized, let's say, for the trucking business or the partner business or in Brazil or something. Whereas in the corporate payments business, like cross-border, we run one processing system. And we just closed Alpha's corporate processing system. And in spend management, same thing. And so the operating leverage, if you will, of effectively running one system with more volume on it, the flow-through margins, to your point, against the processing costs are better. So that is the main. Again, there's other costs. Obviously, you know, we might spend more on selling because we want to try to grow faster and stuff. So I don't want to imply the total margins are better. In fact, they're probably not because of the growth rate. But you're on the right thing. It's really scale against the number of processing systems.

Great. Thanks so much and good quarter. Appreciate it. Thanks, Dominic.

Thank you. This does conclude our question and answer session as well as our call today. You may now disconnect your lines and everyone have a wonderful day.