Okay, welcome everyone to day one of the UBS Global Technology Conference. My name is Nik Cremo, and I help cover the payments and FinTech sector here at UBS. Just one quick housekeeping item. If you have any questions for Tom, feel free to submit those through the conference app, and then we can address those towards the end of the conversation. But with that, I'm excited to have Tom Panther, CFO of FLEETCOR, with us today. So thanks for joining, Tom. Yep, great, Nik. Good to be here. So you've been at FLEETCOR for about nine months now, and it's been a very busy first nine months for you with divesting the Russia business, completing a large portion of the strategic review. You acquired PayByPhone, and the list goes on. So, heading into 2024, what are you most focused on? And also, just what's the biggest adjustment been for coming from EVO? Yeah, great. Well, it has been an active eight or nine months, as you said, Nik. We've accomplished a lot. We've done a variety of things. What I would say in terms of the focus on 2024 is just continuing the growth trajectory that we're on across each of our three primary segments. We can unpack that a little bit more as the conversation goes on in terms of what some of those key initiatives are. But you know, just very focused on how we continue to capitalize on the market that we operate in, and continue to gain as much market share as possible. We feel like we are gaining market share in our business. We've got proof points to demonstrate that, and I think we'll continue to deploy certain strategies to achieve that. In terms of the transition for me, but I guess one, I'll start with the similarities. My career has been focused in financial services and financial institutions, so I've been exposed on the banking and payment side my whole career. So that's nice to be able to walk into FLEETCOR, which was literally five miles down the road from where EVO is, so an easy transition, even from being in Atlanta. A global company, just like EVO was a global company, all of those things that were quite similar. I'd say the area, though, of just greatest adjustment, that I spend a bunch of time and continue to spend a bunch of time on, is just understanding our revenue model. And my approach as CFO is really to kind of dig in on some of the details and really kind of understand how things operate. I'm a big believer in that if you understand the inputs, then the outputs will take care of themselves. And so understanding the revenue model and how we price customers, what are the variable costs associated with those respective revenue models, has been something that I've been very, very focused on. And I think you've got to be able to understand those things and all of those different variables in order to have an influence on them. And regardless of what markets we're in or what products we're talking about, we just have a lot of different ways in which we go about pricing customers, and that's been a complicated process that I spend a ton of time looking into and understanding. I can imagine. A lot more different business segments. Mm-hmm. Okay, so just starting on the fleet segment, we get a lot of questions here. So maybe like, it's... If you exclude Russia, it's been, you know, low single-digit grower this year, ex macro. Yep. Can we just start on, you know, the trends that you're seeing in Q4 to date? Are they about similar to what you saw in Q3 or? Yeah, I think it is similar. We've continued to see really good performance from our international business, both in Mexico and Europe and Australia. Those markets continue to perform quite well. It's not that the U.S. overall has some level of softness. It's more around our SMB business, where we've seen some level of revenue softness, not from the base, but just from the standpoint of our pivot away from the micro customer to the more upmarket lower middle... Larger SMB, lower middle market, is where we've seen the challenge in getting those sales identified, closed, and into the book of business. We analyzed the base, and regularly, the base has stayed relatively consistent. It's just the level of new business coming in has been something that as we pivoted away from SMB and upmarket, that's caused a little bit of that revenue softness. But we see the trend in continuing along that same trajectory. We think there continues to be some good upside associated with the business on a go-forward basis, particularly as we introduce some of the new products and that we talked about during our earnings call, where we think we'll have additional opportunity to grow the legacy business, and then we can talk about the whole movement into the fleet transformation and consumer side later on, if you want to get into that. Yeah, absolutely. Before we do that, so on the last earnings call, Ron mentioned you guys are targeting about 25% sales growth for the U.S. domestic fleet business in 2024. So can you just walk us through kind of how you're getting there between some of the salespeople you added and- Yep ... as well as some of the new products? Yep. Yeah, so our go-to- market is a blend. So one, it's some element of digital that then stimulates lead generation in terms of inbound call volume. We also have outbound lead generation, and then we have field. So we do all of those and continue to invest in those. So some of this is just the engine of sales and marketing dollars spent, correlates back to the level of new business that we can generate. And so it'll be refining and moving forward with that, where we'll continue to invest the dollars in order to generate the sales. Meet on it regularly in order to get valid, tangible proof points. But on top of that, you mentioned some of the new products. One of the things that we're particularly excited about that, that we've already rolled out, is the ability to have a, two-in-one, if you will, card that allows it to work for both fuel as well as, business expenses. So we think it's a, a product that is particularly attractive in the market, where we can, go to new customers and our base, but particularly to, to new customers in that, lower middle market, segment of the, of the overall, market, and, and be able to, to sell both a fuel and a business card. It provides the same kind of spend management features that comes with the ordinary, fuel card, but it also provides the opportunity to, to offer a business card as well. As we get them into the fold, and they see the benefits of that, we also think that then there's opportunity to do virtual card and ultimately bring them along the product journey to be able to do potentially full AP, depending on their needs. That's the thing that's nice about our product set is that we can bring them along a product journey based on what their needs are. If they want something super specialized and relatively narrow for just their fleets, we can offer the fuel card. If they want something a little more general, then we can offer the business card. If they want something that's a bit more modern, we can do the AP file and virtual card. So, the whole range of that, I think, comes together into what we think is a pretty attractive sales opportunity heading into the next year. Got it. Just to clarify, the main distinction here with the two-for-one card versus what you guys previously were doing is that this is targeted at new customers versus the base? New customers versus the base. Not that we would ignore the base, but yes, and also larger. One of the things that we think was a bit of a misfire with respect to the prior strategy a couple of years ago, pre-pandemic, was that we were selling into smaller companies, business expense, AP-type products that really were to companies that didn't even have much of an AP business to begin with. So that was a bit of a misfire. What we've learned through the maturation of our corporate payments business is that the best way to sell AP products is to sell to companies that have a decent-sized AP operation, and so that's what we're targeting. Understood. We put a lot of marketing resources against that. Real feet on the street that we're bringing in, and experienced people who have card experience that can sell this. They're scattered across the United States in terms of field, and have massive networks of lead generation. So we think we've got the right sales engines to be able to bring some real interesting business in. And when you bring these businesses in, I wouldn't necessarily call it elephant hunting, but it's definitely upmarket, where you're getting customers that have, you know, $100 million, $200 million, $300 million in revenue, that you're able to, you know, get some pretty significant wins against, you know, a handful of closes. Got it. With time to revenue in the fleet segment being a little faster than some of your other- Right ... businesses, like corporate payments, do you think it's realistic for that business to accelerate into the mid-single digits in 2024, just with all these various initiatives? Yeah. We're not done with the planning process. I don't wanna get out ahead of that. We've got some work to do, and business leaders to get signed up to their growth targets and things like that. But I think you can certainly say that we have expectations that the business does. Just the U.S. alone, put international aside, which is kind of a 10%-ish grower, even without Russia, the U.S. alone, we think has that kind of potential to grow at that level. It's a huge base. It's a, what? Almost a $950 million business. You know, getting that from low single digits to mid single digits is not an insignificant number on the increments, in terms of when you think about the number of sales that you have to generate, close, and get onboarded, and transacting. Got it. So next, it would be good just to come back to the fleet transformation plan, goal to accelerate that segment into the double digits. Maybe if you could just kind of walk through the- Sure ... the various pieces of that. Yeah. This is something that we're really excited about. One of the things about the strategic review, and even before the strategic review, that the company was very focused on, is value creation, and we felt like the single biggest way to create value was around the fleet business. After all, it was almost half the company, and so if you're gonna improve the overall multiple of the company, you've got to be able to focus on the big, chunky stuff and not some of the ancillary things. And so as it relates to our fleet transformation idea that we rolled out on the earnings call, we identified as kind of three prong. One was the business card that I already talked about, where we think that can bring real, real advantages to that business, where it's a fuel and a business card coupled together. Ubiquitous network of usage, whether it's on our proprietary rails or a Mastercard. Two is continuing the investment on the EV side. We've seen some real tangible proof points of our EV assets being something that customers, existing customers, are really attracted to. We've spent over $150 million over the last couple of years alone on EV-related assets, and we're seeing those get some real traction. And, you know, the U.K. is the best use case for that, where we see customers who are making their own transition from... I wouldn't say from, 'cause I think that creates a bit of a misnomer. Making the transition toward EV, because they still keep their combustion engines, their ICE vehicles. It's not that they get rid of those and trade those in for an EV. They morph into EV by the next two or three vehicles that they buy are EV. So we keep the fuel business, and then add on the EV. And so they come to us and say, "Hey, we love your network on the fuel side. We love your products, the spend management, the controls, the reporting, the discount, all of those things. Can you do the same thing for EV?" And through the assets that we've acquired, the networks that we've contracted with, we have over 60% coverage, 20,000 charge point stations across the U.K.. That's really attractive, and we see that, you know, continuing to pay some significant dividends related to the fleet business. And then the third idea, which is one that maybe was not necessarily telegraphed, but one of the things that we have been really looking at over the last number of quarters, was entry into the notion of how do we augment the fleet business by having an opportunity to enter into the consumer market? And we had an opportunity associated with PayByPhone, which was a company owned by Volkswagen that has 6 million registered users across the U.S., U.K., and Europe that use, you know, a parking app, and what we see there is basically an extension of what we do in Brazil, where you start with an anchor product and build around that anchor product of multiple use cases of payment needs associated with a vehicle. And again, I'll use Brazil as a great proof point, where years ago we started with a toll tag and sold customers a toll tag, where they paid $5 a month, 25 BRL for a monthly subscription to use a toll tag to pass through tolls. But as we got that captive audience and got them moved over to an app and things like that, we started to put other use cases around that, where we now sell them insurance. We have enabled their tags to work in fuel stations, to work in parking, to work in drive-through restaurants, all of those things. I won't go through the whole story, but when I was down in São Paulo doing one of my visits to get to know the company, we went on a little bit of a tour of São Paulo and got in a car and did all of those things, and it was quite amazing how all of these things work off of just a little tag that was on the windshield of the car. And all of it's integrated into a payment engine that allows those payments to get paid on generally a monthly basis. So that idea of taking an anchor app, in that case, tags, and in the case of PayByPhone, parking, and having the 6 million users who look at that app every day to park use... Widen their spectrum of buying needs to be able to show them opportunities for EV charging or for service and repair, maintenance of their vehicle. We have 40,000 garages in the U.K. signed up into our network. So our at a high level, it's that combination of customers and networks, and they kind of feed each other. If you have lots of customers, you're very attracted... networks are very attracted to you. If you have lots of networks, customers are very attracted to you. Those two things, and what FLEETCOR has been able to develop over almost 25 years, is massive customer base, as measured in, you know, numbers of drivers in the millions, and networks that can't be replicated by anyone else, at least not in any kind of near period of time. And that's what we do, whether it's in the lodging business or the payments business or the fleet business, it's this combination of bringing customers and networks together and facilitating those transactions in digital form. So we see that as something that we can do to an even greater scale on the fleet side, through you know those three things, but particularly that entry into the consumer side, where over the next, call it three or four years, we think there's an incremental $500 million-$600 million of revenue opportunity that otherwise wouldn't show up if we had just kind of stayed the course. Understood. So just, just going a little deeper into this consumer vehicle payment strategy. So of the 6 million users, can you give us a sense of where they're dispersed geographically? Sure. How that informs your sequencing of this initiative? Yeah. So 40%, so call it 2.5 million, are in the U.K.. 35% are in the U.S., and then the residual, the 25% are in Continental Europe. So call it 2.5 million, 2 million, and 1.5 million, just for rough math. And from a parking perspective, we'll mine all of those 6 million to meet some of their B2B needs. There's basically a two-pronged strategy to the PayByPhone acquisition. One, I would say, is very easy to execute in near-term benefits, where we can go to those 6 million users and start... Sorry, we can go to our customers, our B2B customers, and say, "We now have a parking solution for you." 'Cause many of our B2B customers, they're not, well, over-the-road, tractor-trailer, you know, long-haul vehicles. Most of our customers are 50-mile radius vans that work and park every day. They park every day to deliver things, to repair things, to go about doing what they do. And so we can go to our existing B2B customers and apply our strategy of not only do we offer you fuel, not only do we offer you EV, but, oh, by the way, we can also offer you parking, where we can take away the friction of your employee having to go through the traditional reimbursement model of keeping up with, you know, $5 or GBP 6 or EUR 5.5 receipts and reimbursing and all that kind of stuff. We can go to the employer and say, "Hey, if you get all of your employees on the app, we can handle the parking needs of all of your B2B, you know, customers, their drivers." So we think we can do that, and then have started piloting that right away. And we think that's particularly attractive because the economics associated with the B2B model from a revenue per trans perspective are much higher because it comes with a subscription model. But the other angle on the PayByPhone is, you know, being able to take those consumers and be able to, you know, offer them those suite of products. We'll start in the U.K. Our networks there are more advanced. It's the largest of their three major markets. And so we will begin working on the opportunity to put in front of those existing PayByPhone customers, whether it's through the app they have today or something else that we can build, the opportunity for them to see insurance, for them able to see service garages, for them to be able to see fuel opportunities, all of those types of things that we already have networked. So it's this combination of let's leverage the networks that we have and put them in front, using a phone, put them in front of the various, you know, customers that already exist today. Understood. So on the last earnings call, Ron mentioned that you guys are evaluating a few other deals in the consumer vehicle payment side. So what types of assets do you think would augment your strategy the most? Yeah, I think for the most part, we've got the assets that we need. I think I would not expect us to have significant amount of capital deployment related to this execution of this strategy. I think more of our deployment will be around the sales and marketing side, but we don't see this as being margin dilutive. Again, given the launch point that we have, the fact that we're using the phone, which is an inexpensive distribution digital model. But that's not to say that if we didn't see assets out there that brought with it large customer bases, like the PayByPhone or large networks that were easier to buy versus create from scratch organically, that we wouldn't entertain those things. But I think those would be more on the margin. There's nothing holding us back today, given the customer base and the networks that we have, from executing the strategy. So it would be more as things present themselves than a gating item for us to move forward. Understood. Wanna make sure that we touch on the preliminary 2024 outlook that you guys provided on the last earnings call. Yep. So can you just walk through the high-level assumptions for the top line of 9%-11% organic, and reclarify what you mean by the macro neutral? Sure, sure. Yeah, so on the call, what we were trying to do is just provide the setup for how we see 2024. It wasn't intended to be a guide and... But at the same time, we wanted to try to just provide some view of what things look like. So from the operating businesses, we are far enough into the planning process, where we felt like that 9-11 midterm target guide that we have quoted in the past is something that we think is still within the range of our expectations. Where we fall and what businesses and how all that shakes out is some of the stuff that we need to close out the year and figure out. But the larger point of that call was particularly kind of picking back up from last year, where the outlook associated with some of those other, what I call, surround sound type areas, was much more challenging. We were dealing with bad debt that was elevated for two quarters in a row, that we're dealing with interest costs that were higher because the Fed had started hiking. You know, there was uncertainty around what does fuel price and FX and everybody was thinking that we were heading into some level of a recession. It was a matter of when and not if, then it was a matter of depth and severity of the recession. Well, what we were trying to clarify is, from the macroeconomy perspective, we see it as remaining stable to neutral from this point forward. We don't see certainly the same kind of headwind that we were facing from a comparable perspective. We think we've lapped and cured a lot of those headwinds, from bad debt coming down, from interest costs lapping, from more fixed debt than what we had before. And so all of those things, I think, are neutral relative to our run rate. And it's really just based on what we read. We're not economists, but it feels like in our three major markets of Brazil, U.S., and U.K., also in Europe, by extension, that the macro environment seems relatively stable from this point. It feels like the central banks have threaded a needle to maintain some level of a soft landing. If there is a recession, it feels like it's gonna be mild and shallow and short in duration. And so we see the outlook for 2024 to be something that has kind of a low level of variability off of what we see today. Many times when we talk about macro, externally and internally, we are very focused on FX specifically, and fuel, and how those translate into our revenue, and to some degree, our expenses when it comes to FX. And so that level of macro, we also see is relatively neutral from here. You know, fuel has some level of a three handle. It's come down a little bit over the last, call it six weeks, but, you know, people are projecting fuel to kind of stay in this three-- call it $3.50, ±25 cents on either side. And it feels like the currencies that we operate in relative to the U.S. dollar, the Brazilian real and the sterling being our two most major ones. Right now, it has actually been favorable. The dollar has weakened a little bit, as the Fed's tone has softened a little bit. So right now, FX is better than, say, where it was six months ago. So all of that just feels like a stable environment for our planning purposes, where we don't have a big overhang that we're having to overcome. And so I think our focus can be on going and optimizing the those businesses and their and their performance, and executing our strategies, and not having to deal with what we call kind of some of the below the line noise of bad debt and interest and and things like that, that that were a bit of a challenge that we were coming off of last year. Understood. Just to clarify, if you pull aside the noise from fuel prices, FX, currencies, interest rates- Mm-hmm. Do you think the general economic underlying demand from your customer base and sales pipeline, that- Yeah All should generally be stable? Yeah, we think that's stable. Obviously, some may be a little bit stronger than others. We continue to see very good momentum on the corporate payment side and things like that. But as a generalization, given putting aside kind of the puts and takes on the margin, we see a relatively strong level of demand and just generally a trend. You know, as companies... What we sell to companies is the ability to have more effective spend management and be able to pay expenses more effectively. What better environment to sell that value proposition into than an environment where companies are dealing with their own margin pressures and wanting to optimize their bottom line? So if we can come to them with value propositions that help them optimize their bottom line, fairly low points of challenging onboarding, you know, it's not hard to onboard our products. Some a little more time-consuming than others, but measured in months, not quarters, then it's an attractive value proposition. So we think the customer demand will still be high because what we offer is a value proposition that is very attractive to them. Understood. So the other part of the outlook was, like, you guys are aiming for 54%-55% adjusted EBITDA margins, which is up, like, 100 or 200 basis points versus the full year of 2023 for what you're tracking towards. So can you just walk us through the puts and takes to that? You know, Russia coming out, which is a headwind. Yeah. You also have PayByPhone, but then you have, you know, corporate payments- Right ... you know, generating- Yeah -a lot of operating leverage. Like, what's the level of confidence that you can get there? And, like, what are some leverage that you can pull to get there in case the- Sure Demand environment is slower? Yeah. So I think one, maybe the easiest way to deal with some of that noise of Russia out, PayByPhone in, is just what do we think the exit rate's gonna be for Q4? And we think the exit rate for Q4 is, you know, somewhere in that 54%-55% range, and so that becomes our jumping off point into 2024. There'll be quarterly seasonal variation across the margin, but, you know, we see that as a reasonable expectation for the full year of 2024. That would still be up relative to 2023, since our full year average margin this year is probably gonna be ex Russia, somewhere around 52.5%. So we'll still be up relative to the prior year. But you know, so from that standpoint, I think we've got a fair amount of visibility and confidence in that. In terms of levers, it's you know, continuing to manage expenses with a high degree of discipline, especially costs associated with some of the functional areas and things like that. We'll look to get those efficiencies. On the PayByPhone, we'll look to get synergies out of that acquisition, more on the top line than, say, on the expense base. But what we think there's definitely efficiencies there. I think we quoted it was $0.04-$0.05 dilutive in Q4. I would not annualize that number. We'll get efficiencies that cause that to be much lower. To that, you would even hardly be able to find it in the overall 2024 number, but we'll refine that as we come out with a more formal outlook for 2024. Understood. Just wanted to poll the audience for Q&A, and we've got about a minute left. Okay, so we will just pivot back to a question to end on. On the strategic review, there are two remaining parts outstanding, which is you guys are evaluating disposing some small non-core assets and also looking at a strategic partner, probably around the corporate payments business. Any updates to provide there? Yeah. Well, on the former, I would say I wouldn't spend a whole lot of time thinking about what some of those non-core assets would be. There are things just around the margin that we'll just always be looking at to potentially dispose of, if it made sense in a particular market, to do something that we thought was more strategic deployment. So that would be more of a paired trade kind of transaction. Oh, well, that business doesn't have as much strategic focus of ours, so let's get rid of it in order to allocate capital somewhere else. But those would be small and insignificant relative to the overall company. In terms of the more meaty potential transaction around, you know, some type of structural change in corporate payments, that's something I'd say we're in late innings of evaluating. As we work through the strategic review process, we came to the conclusion over the last several quarters, with us and our advisors and our board, of really kind of now narrowing the options down to whether or not we would do something with a strategic partner. We're a big believer that the way you get one plus one to equal four is by partnering with somebody, finding synergies, looking for opportunities to cross-sell and things like that. And so if we could find a marriage with a particular partner that we think gives us the opportunity to do things in a tax effective way, avoid any type of dilution, you know, that's different than just an outright purchase transaction, then that's something that we would consider. We had anticipated maybe being able to land those types of things, those evaluations, by our earnings call in November, but when you're dealing with other parties and complicated transactions, you can't control the timeline. But we feel pretty confident that we'll be able to control, you know, resolve it by February. But what I would say is nothing's a forcing mechanism. It's not a fait accompli that we're gonna do something. It's something that's gonna be something that if it makes sense, we'll do something. If it doesn't, we're excited about the business that we have and the opportunities ahead of us, and that we will continue to, you know, execute those strategies. So it would only be if we felt like it was really additive, on a longer term basis. Understood. That makes sense to us. Well, unfortunately, we are all out of time, but really appreciate all the insight you provided, Tom. Good. I appreciate the opportunity, Nik. All right. Thanks, everyone. Thank you.