Washington, D.C. 20549
Item 1. Financial Statements
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
1. Summary of Significant Accounting Policies
Throughout this Quarterly Report on Form 10-Q, the terms "our," "we," "us," and the "Company" refers to FLEETCOR Technologies,Corpay, Inc. and its subsidiaries. Effective March 25, 2024, FLEETCOR Technologies, Inc. changed its corporate name to Corpay, Inc. At that time, the Company ceased trading under the ticker symbol "FLT" and began trading under our new ticker symbol, "CPAY," on the New York Stock Exchange ("NYSE") effective March 25, 2024.
The Company prepared the accompanying unaudited interim consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim consolidated financial statements reflect all adjustments considered necessary for fair presentation. These adjustments consist of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Actual results may differ from these estimates.
The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.2023.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available to us as of March 31, 20232024 and through the date of this Quarterly Report. The accounting estimates used in the preparation of the Company’s interim consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ from these estimates due to the uncertainty around the ongoing conflict between Russia and Ukraine, the impact of changes to monetary policy, as well as other factors.estimates.
The Company provides payment solutions to our business, merchant, consumer and payment network customers. Our payment solutions are primarily focused on specific commercial spend or geographically-defined categories, including Fuel,Vehicle Payments, Corporate Payments, Tolls, Lodging as well as Gift solutions (stored value cardsPayments and e-cards).Other. The Company provides solutions that help businesses of all sizes control, simplify and secure payment of various domestic and cross-border payables using specialized payment products. The Company also provides other payment solutions for fleet maintenance, employee benefits and long haul transportation-related services.
*Columns may not calculate due to rounding.
The Company uses spot trades to facilitate cross-currency corporate payments in its cross-border payments business. The Company applies offsetting to our spot trade assets and liabilities associated with contracts that include master netting agreements with the same counterparty, as a right of setoff exists, which the Company believes to be enforceable. As such, the Company has netted spot trade liabilities against spot trade receivables at the counter-party level. The Company recognizes all spot trade assets, net in accounts receivable and all spot trade liabilities, net in accounts payable, each net at the customer level, in its Consolidated Balance Sheets at their fair value. The following table presents the Company’s spot trade assets and liabilities at their fair value at March 31, 20232024 and December 31, 20222023 (in millions):
2. Accounts and Other Receivables
The Company's accounts and securitized accounts receivable include the following at March 31, 20232024 and December 31, 20222023 (in thousands):
The Company utilizes proceeds from the securitized assets as an alternative to other forms of financing to reduce its overall borrowing costs. The Company has agreed to continue servicing the sold receivables for the financial institution at market rates, which approximates the Company’s cost of servicing. The Company retains a residual interest in the transferred asset as a form of credit enhancement. The residual interest’s fair value approximates carrying value due to its short-term nature. Funding determines the level of funding achieved by the sale of trade accounts receivable, subject to a maximum amount. As the Company maintains certain continuing involvement in the transferred/sold receivables, it does not derecognize the receivables from its Consolidated Balance Sheets. Instead, the Company records cash proceeds and any residual interest received as a Securitization Facility liability.
The Company’s Consolidated Balance Sheets and Statements of Income reflect the activity related to securitized accounts receivable and the corresponding securitized debt, including interest income, fees generated from late payments, provision for losses on accounts receivable and interest expense. The cash flows from borrowings and repayments associated with the securitized debt are presented as cash flows from financing activities.
3. Fair Value Measurements
liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
The following table presents the Company’s financial assets and liabilities which are measured at fair value on a recurring basis as of March 31, 20232024 and December 31, 20222023 (in thousands):
The Company has highly-liquid investments classified as cash equivalents, with original maturities of 90 days or less, included in our Consolidated Balance Sheets. The Company utilizes Level 2 fair value determinations derived from directly or indirectly observable (market based) information to determine the fair value of these highly liquid investments. The Company has certain cash and cash equivalents that are invested in highly liquid investments, such as, repurchase agreements,overnight deposits, money markets, and certificates of deposit and Treasury bills, with purchased maturities ranging from overnight to 90 days or less. The value of overnight repurchase agreementsdeposits is determined based upon the quoted market prices for the treasury securities associated with the repurchase agreements.deposit. The value of money market instruments is determined based upon the financial institutions' month-end statement, as these instruments are not tradable and must be settled directly by us with the respective financial institution. Certificates of deposit and certain U.S. Treasury bills are valued at cost, plus interest accrued. Given the short-term nature of these instruments, the carrying value approximates fair value. Foreign exchange derivative contracts are carried at fair value, with changes in fair value recognized in the Consolidated Statements of Income. The fair value of the Company's derivatives is derived with reference to a valuation from a derivatives dealer operating in an active market, which approximates the fair value of these instruments. The fair value represents the net settlement if the contracts were terminated as of the reporting date. Cash collateral received for foreign exchange derivatives is recorded within customer deposits liability in our Consolidated Balance SheetSheets at March 31, 20232024 and December 31, 2022.2023. Cash collateral deposited for foreign exchange derivatives is recorded within restricted cash in our Consolidated Balance SheetSheets at March 31, 20232024 and December 31, 2022.2023.
The level within the fair value hierarchy and the measurement technique are reviewed quarterly. Transfers between levels are deemed to have occurred at the end of the quarter. There were no transfers between fair value levels during the periods presented for March 31, 20232024 and December 31, 2022.
The Company regularly evaluates the carrying value of its investments. The carrying amount of investments without readily determinable fair values was $67.6$68.3 million and $69.5 million at March 31, 2023.2024 and December 31, 2023, respectively.
The fair value of the Company’s cash, accounts receivable, securitized accounts receivable and related facility, prepaid expenses and other current assets, accounts payable, accrued expenses, customer deposits and short-term borrowings approximate their respective carrying values due to the short-term maturities of the instruments. The carrying value of the Company’s debt obligations approximates fair value as the interest rates on the debt are variable market based interest rates that reset on a quarterlymonthly basis. These are each Level 2 fair value measurements, except for cash, which is a Level 1 fair value measurement.
4. Stockholders' Equity
5. Stock-Based Compensation
The following table summarizes the expense recognized within general and administrative expenses in the Unaudited Consolidated Statements of Income related to share-based payments recognized instock-based compensation for the three months ended March 31, 20232024 and 20222023 (in thousands):
The following table summarizes the Company’s total unrecognized compensation cost related to outstanding stock based compensationawards as of March 31, 20232024 (cost in thousands):
The following table summarizes the changes in the number of shares of restricted stock awards and restricted stock units outstanding for the three months ended March 31, 20232024 (shares in thousands):
6. Acquisitions
2024 Acquisitions
In March 2024, the Company acquired 70% of Zapay, a Brazil-based digital consumer mobility solution for paying vehicle-related taxes and compliance fees, for approximately $56.3 million, net of cash. As part of the agreement, the Company has the right to acquire the remainder of Zapay in four years from the acquisition date. The majority investment in Zapay further scales the Company's Vehicle Payments business in Brazil. Results from the Zapay acquisition have been included in the Company's Vehicle Payments segment from the date of the acquisition.
Acquisition accounting is preliminary for the Zapay acquisition as the Company is still completing the valuation for intangible assets, income taxes, working capital, and contingencies. As the Zapay acquisition occurred near the end of the first quarter of 2024, the Company preliminarily allocated the excess of the purchase price of the acquisition over the estimated assets acquired and liabilities assumed to goodwill and intangibles on a provisional basis, based on historical valuation outcomes. Further, the provisional amounts assigned to such intangibles of $18.6 million were preliminarily assigned to the customer relationship intangible asset. The provisional estimated fair value of the noncontrolling interest was based on the price the Company paid for its 70% controlling interest.
The following table summarizes the preliminary acquisition accounting for the Zapay acquisition noted above (in thousands):
| | | | | |
Trade and other receivables | $ | 2,542 | |
Prepaid expenses and other current assets | 112 | |
Other long term assets | 960 | |
Goodwill | 77,846 | |
Intangibles | 18,624 | |
Accounts payable | (1,486) | |
Other current liabilities | (7,884) | |
Other noncurrent liabilities | (6,332) | |
Total fair value of net assets acquired | $ | 84,382 | |
Less: Noncontrolling interest | (28,057) | |
Aggregate purchase price | $ | 56,325 | |
2023 Acquisitions
During the three months ended March 31,In January 2023, the Company acquired 100% of Global Reach, Group, a UK-based globalU.K.-based cross-border payments provider, for approximately $102.9 million, net of cash. In February 2023, the Company acquired the remainder of Mina Digital Limited ("Mina"), a cloud-based electric vehicle ("EV") charging software platform, andplatform. In February 2023, the Company also acquired 100% of Business Gateway AG, a European-based service, maintenance and repair technology provider. In September 2023, the Company acquired 100% of PayByPhone Technologies, Inc., the world's second largest mobile parking operator, for approximately $301.6 million, net of cash. Each of these 2023 acquisitions provide incremental geographic expansion of our products, with PayByPhone specifically intended to progress the Company's broader strategy to transform our vehicle payments business. Results from these acquisitions have been included in the Company's consolidated results from the respective date of each acquisition.
The aggregate purchase price of these acquisitions was approximately $135.1$436.7 million (inclusive of the $8.5 million previously-held equity method investment in Mina), net of cash of $104$117 million. The Company financed the acquisitions using a combination of available cash and borrowings under its existing credit facility. Any noncompete agreements signed in conjunction with these acquisitions were accounted for separately from the business acquisition.
Acquisition accounting is preliminary for PayByPhone as the Company is still completing the valuation for goodwill, intangible assets, income taxes, working capital, and contingencies. Acquisition accounting for the other 2023 acquisitions was finalized during the first quarter of 2024 as the measurement period closed. There were no material measurement period adjustments recorded during the three months ended March 31, 2024.
The following table summarizes the preliminary acquisition accounting, in aggregate, for the business acquisitions noted above (in thousands):
| | | | | |
Trade and other receivables | $ | 683,9016,004 | |
Prepaid expenses and other current assets | 1,54446,425 | |
Other long term assets | 5,08413,302 | |
Goodwill | 132,774383,851 | |
Intangibles | 109,298158,689 | |
Accounts payable and accrued expenses | (739,803)(24,842) | |
Other current liabilities | (37,249)(129,561) | |
Other noncurrent liabilities | (20,413)(18,923) | |
Aggregate purchase price | $ | 135,136434,945 | |
2022 Acquisitions
During 2022, the Company acquired Levarti, an airline software platform company reported in the Lodging segment; Accrualify, an accounts payable (AP) automation software company reported in the Corporate Payments segment; Plugsurfing, a European EV software and network provider reported in the Fleet segment; and Roomex, a European workforce lodging provider reported in the Lodging segment. The aggregate purchase price of these acquisitions was approximately $197.6 million, net of cash. The Company financed the acquisitions using a combination of available cash and borrowings under its existing credit facility. In connection with one of these acquisitions, the Company signed noncompete agreements of $1.1 million with certain parties affiliated with the business for which the Company is still completing the valuation. These noncompete agreements were accounted for separately from the business acquisition.
Acquisition accounting is preliminary (with the exception of Levarti) as the Company is still completing the valuation for goodwill, intangible assets, income taxes, working capital, and contingencies.
The following table summarizes the preliminary acquisition accounting, in aggregate, for the business acquisitions noted above (in thousands):
| | | | | |
Trade and other receivables | $ | 13,725 | |
Prepaid expenses and other current assets | 4,007 | |
Other long term assets | 1,192 | |
Goodwill | 161,343 | |
Intangibles | 50,145 | |
Accounts payable and accrued expenses | (18,598) | |
Other current liabilities | (4,960) | |
Other noncurrent liabilities | (9,282) | |
Aggregate purchase price | $ | 197,572 | |
The estimated fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):
| | | | | | | | | | | | |
| Useful Lives (in Years) | | Value | |
Trade Namesnames and Trademarkstrademarks | 2 -to Indefinite | | $ | 4,70512,459 | | |
Proprietary Technologytechnology | 5 - 10to 7 | | 11,64611,885 | | |
| Lodging / Supplier Network | 10 - 20 | | 1,402 |
Customer Relationshipsrelationships | 5 -6 to 20 | | 32,392134,345 | | |
| | | | |
| | | $ | 50,145158,689 | | |
Results from the Global Reach Group are included in the Company's Corporate Payments segment and the results for Mina Digital Limited, Business Gateway AG and PayByPhone are included in the Company's Vehicle Payments segment.
7. Goodwill and Other Intangibles
A summary of changes in the Company’s goodwill is as follows (in thousands):
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| | December 31, 2022 | | Acquisitions | | | | Acquisition Accounting Adjustments | | Foreign Currency | | March 31, 2023 |
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Goodwill | | $ | 5,201,435 | | | $ | 132,774 | | | | | $ | 2,171 | | | $ | 43,670 | | | $ | 5,380,050 | |
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| | December 31, 2023 | | Acquisitions1 | | | | Acquisition Accounting Adjustments | | Foreign Currency | | March 31, 2024 |
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Goodwill | | $ | 5,644,958 | | | $ | 77,846 | | | | | $ | 1,058 | | | $ | (50,130) | | | $ | 5,673,732 | |
1 Reflects the recognition of goodwill assigned to the Vehicle Payments segment related to the Zapay acquisition completed by the Company during the three months ended March 31, 2024.
As of March 31, 20232024 and December 31, 2022,2023, other intangibles consisted of the following (in thousands): | | | | | | March 31, 2023 | | December 31, 2022 | | | | | March 31, 2024 | | December 31, 2023 |
| | | Weighted- Avg Useful Lives (Years) | | Gross Carrying Amounts | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amounts | | Accumulated Amortization | | Net Carrying Amount | | | Weighted- Avg Useful Lives (Years) | | Gross Carrying Amounts | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amounts | | Accumulated Amortization | | Net Carrying Amount |
Customer and vendor relationships | Customer and vendor relationships | | 16.7 | | $ | 3,049,204 | | | $ | (1,396,086) | | | $ | 1,653,118 | | | $ | 2,922,586 | | | $ | (1,332,542) | | | $ | 1,590,044 | |
Trade names and trademarks—indefinite lived | Trade names and trademarks—indefinite lived | | N/A | | 424,684 | | | — | | | 424,684 | | | 419,270 | | | — | | | 419,270 | |
Trade names and trademarks—other | Trade names and trademarks—other | | 2.0 | | 49,370 | | | (10,931) | | | 38,439 | | | 47,939 | | | (9,111) | | | 38,828 | |
Software | Software | | 6.1 | | 285,447 | | | (223,076) | | | 62,371 | | | 278,460 | | | (216,858) | | | 61,602 | |
Non-compete agreements | Non-compete agreements | | 4.4 | | 80,965 | | | (61,990) | | | 18,975 | | | 80,098 | | | (58,868) | | | 21,230 | |
| Total other intangibles | Total other intangibles | | $ | 3,889,670 | | | $ | (1,692,083) | | | $ | 2,197,587 | | | $ | 3,748,353 | | | $ | (1,617,379) | | | $ | 2,130,974 | |
| Total other intangibles | |
Total other intangibles | |
N/A = Not Applicable | |
Changes in foreign exchange rates resulted in a $15.8$15.4 million increasedecrease to the net carrying values of other intangibles in the three months ended March 31, 2023.2024. Amortization expense related to intangible assets for the three months ended March 31, 2024 and 2023 was $55.8 million and 2022 was $57.7 million, and $54.9 million, respectively.
8. Debt
The Company is party to a $6.4$7.0 billion Credit Agreement (the "Credit Agreement"), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and a syndicate of financial institutions (the "Lenders")., which has been amended multiple times. The Credit Agreement includes a term loan A, a term loan B, and a revolving credit facility. As noted in footnote 2, the Company is also party to athe Securitization Facility.
The balances of the Company’s debt instruments under the Credit Agreement and the Securitization Facility are as follows (in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Term Loan A note payable, net of discounts | | $ | 2,937,692 | | | $ | 2,956,053 | |
Term Loan B note payable, net of discounts | | 1,851,983 | | | 1,855,891 | |
Revolving line of credit facilities | | 720,675 | | | 935,000 | |
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Other obligations | | 3,266 | | | 2,950 | |
Total notes payable and credit agreements | | 5,513,616 | | | 5,749,894 | |
Securitization Facility | | 1,284,000 | | | 1,287,000 | |
Total notes payable, credit agreements and Securitization Facility | | $ | 6,797,616 | | | $ | 7,036,894 | |
Current portion | | $ | 2,097,066 | | | $ | 2,314,056 | |
Long-term portion | | 4,700,550 | | | 4,722,838 | |
Total notes payable, credit agreements and Securitization Facility | | $ | 6,797,616 | | | $ | 7,036,894 | |
On May 3, 2023, the Company entered into the thirteenth amendment to the Credit Facility. The amendment replaced LIBOR on the term B loan with the Secured Overnight Financing Rate ("SOFR"), plus a SOFR adjustment of 0.10%. | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
Term Loan A note payable, net of discounts | | $ | 3,185,375 | | | $ | 2,882,595 | |
Term Loan B note payable, net of discounts | | 1,836,326 | | | 1,840,244 | |
Revolving line of credit facilities | | 320,014 | | | 692,318 | |
Other obligations | | 1,339 | | | 748 | |
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Total notes payable, credit agreements, and other obligations | | 5,343,054 | | | 5,415,905 | |
Securitization Facility | | 1,421,000 | | | 1,307,000 | |
Total debt | | $ | 6,764,054 | | | $ | 6,722,905 | |
Current portion | | $ | 1,901,433 | | | $ | 2,126,749 | |
Long-term portion | | 4,862,621 | | | 4,596,156 | |
Total debt | | $ | 6,764,054 | | | $ | 6,722,905 | |
The Company was in compliance with all financial and non-financial covenants under the Credit Agreement and Securitization Facility at March 31, 2023.2024.
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Remaining 2024 | | $ | 439,562 | |
2025 | | 185,250 | |
2026 | | 185,250 | |
2027 | | 2,774,312 | |
2028 | | 1,778,375 | |
Thereafter | | — | |
Total principal payments | | 5,362,749 | |
Less: debt discounts and issuance costs included in debt | | (19,695) | |
Total debt | | $ | 5,343,054 | |
9. Income Taxes
The Company's effective tax rate was 24.7% and 27.1% and 26.0% for the three months ended March 31, 20232024 and 2022,2023, respectively. Income tax expense is based on an estimated annual effective rate, which requires the Company to make its best estimate of annual pretax accounting income or loss before consideration of tax or benefit discretely recognized in the period in which such occur. Our effective income tax rate for the three months ended March 31, 20232024 differs from the U.S. federal statutory rate due primarily to the unfavorable impact of state taxes net of federal benefits, additional taxes on undistributed foreign-sourced income, and foreign withholding taxes on interest income from intercompany notes. For the three months ended March 31, 20232024, the effective tax rate was increased bydecreased due to discrete items of $1.6$8.5 million incurred from an uncertain tax position relatedmainly attributable to previous years and tax benefits arising from stock-based compensation previously recorded in pretax income.stock option exercises and awards vesting.
10. Earnings Per Share
The Company reports basic and diluted earnings per share. Basic earnings per share is computed by dividing net income attributable to shareholders of the Company by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflect the potential dilution related to equity-based incentives using the treasury stock method. The calculation and reconciliation of basic and diluted earnings per share attributable to Corpay for the three months ended March 31, 20232024 and 20222023 is as follows (in thousands, except per share data):
| | | | Three Months Ended March 31, | |
| | | 2023 | | 2022 | |
Net income | | $ | 214,835 | | | $ | 217,952 | | |
| |
| |
| |
| |
Net income attributable to Corpay | |
Net income attributable to Corpay | |
Net income attributable to Corpay | |
Denominator for basic earnings per share | |
Denominator for basic earnings per share | |
Denominator for basic earnings per share | Denominator for basic earnings per share | | 73,521 | | | 77,737 | | |
Dilutive securities | Dilutive securities | | 962 | | | 1,549 | | |
Dilutive securities | |
Dilutive securities | |
Denominator for diluted earnings per share | Denominator for diluted earnings per share | | 74,483 | | | 79,286 | | |
Basic earnings per share | | $ | 2.92 | | | $ | 2.80 | | |
Diluted earnings per share | | $ | 2.88 | | | $ | 2.75 | | |
Denominator for diluted earnings per share | |
Denominator for diluted earnings per share | |
Basic earnings per share attributable to Corpay | |
Basic earnings per share attributable to Corpay | |
Basic earnings per share attributable to Corpay | |
Diluted earnings per share attributable to Corpay | |
Diluted earnings per share attributable to Corpay | |
Diluted earnings per share attributable to Corpay | |
Diluted earnings per share attributable to Corpay for the three months ended March 31, 20232024 and 20222023 excludes the effecteffect of 2.40.3 million and 2.12.4 million shares, respectively, of common stock that may be issued upon the exercise of employee stock options because such effect would be anti-dilutive. Diluted earnings per share attributable to Corpay also excludes the effect of an immaterial amount of performance-based restricted stock for which the performance criteria have not yet been achieved for the three month periods ended March 31, 20232024 and 2022.
2023.
11. Segments
The Company reports information about its operating segments in accordance with the authoritative guidance related to segments. In the second quarter of 2022, in order to align with recent changes in the organizational structure and management reporting, the Company updated its segments structure into Fleet, Corporate Payments, Lodging, Brazil and Other, which includes our Gift and Payroll Card businesses. We manage and report our operating results through these fourthree reportable segments: Vehicle Payments, Corporate Payments and Lodging Payments. Our Gift and Payroll Card operating segments which alignsincluded within Other. These segments align with how the Chief Operating Decision Maker (CODM) allocates resources, assesses performance and reviews financial information. The presentation of segment information has been recast for the prior period to align with this segment presentation for the three months ended March 31, 2023.
The Company’s segment results are as follows for the three month periods ended March 31, 20232024 and 20222023 (in thousands):
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| | Three Months Ended March 31, | | |
| | 20231 | | 2022 | | | | |
Revenues, net: | | | | | | | | |
Fleet | | $ | 372,712 | | | $ | 351,592 | | | | | |
Corporate Payments | | 227,206 | | | 183,769 | | | | | |
Lodging | | 122,334 | | | 94,576 | | | | | |
Brazil | | 121,744 | | | 102,538 | | | | | |
Other2 | | 57,337 | | | 56,766 | | | | | |
| | $ | 901,333 | | | $ | 789,241 | | | | | |
Operating income: | | | | | | | | |
Fleet | | $ | 173,532 | | | $ | 167,845 | | | | | |
Corporate Payments | | 75,513 | | | 58,207 | | | | | |
Lodging | | 54,563 | | | 39,779 | | | | | |
Brazil | | 54,817 | | | 37,328 | | | | | |
Other2 | | 16,770 | | | 14,562 | | | | | |
| | $ | 375,195 | | | $ | 317,721 | | | | | |
Depreciation and amortization: | | | | | | | | |
Fleet | | $ | 35,086 | | | $ | 34,706 | | | | | |
Corporate Payments | | 20,871 | | | 16,349 | | | | | |
Lodging | | 11,398 | | | 10,534 | | | | | |
Brazil | | 14,553 | | | 13,121 | | | | | |
Other2 | | 2,324 | | | 2,092 | | | | | |
| | $ | 84,232 | | | $ | 76,802 | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 20241 | | 20232 | | | | |
Revenues, net: | | | | | | | | |
Vehicle Payments | | $ | 494,061 | | | $ | 495,490 | | | | | |
Corporate Payments | | 265,396 | | | 226,172 | | | | | |
Lodging Payments | | 111,295 | | | 122,334 | | | | | |
Other | | 64,499 | | | 57,337 | | | | | |
| | $ | 935,251 | | | $ | 901,333 | | | | | |
Operating income: | | | | | | | | |
Vehicle Payments | | $ | 225,695 | | | $ | 223,480 | | | | | |
Corporate Payments | | 104,711 | | | 80,382 | | | | | |
Lodging Payments | | 47,276 | | | 54,563 | | | | | |
Other | | 19,656 | | | 16,770 | | | | | |
| | $ | 397,338 | | | $ | 375,195 | | | | | |
Depreciation and amortization: | | | | | | | | |
Vehicle Payments | | $ | 50,321 | | | $ | 50,350 | | | | | |
Corporate Payments | | 20,803 | | | 20,160 | | | | | |
Lodging Payments | | 11,630 | | | 11,398 | | | | | |
Other | | 2,006 | | | 2,324 | | | | | |
| | $ | 84,760 | | | $ | 84,232 | | | | | |
1Results from Global Reach GroupZapay acquired in the first quarter of 20232024 are reported in the CorporateVehicle Payments segment.segment from the date of acquisition.
2Other includes Gift and Payroll Card operating segments.
Results of the Company's Russian business disposed of in August 2023 are included in the Vehicle Payments segment for all periods prior to disposition.
12. Commitments and Contingencies
In the ordinary course of business, the Company is involved in various pending or threatened legal actions, arbitration proceedings, claims, subpoenas, and matters relating to compliance with laws and regulations (collectively, "legal proceedings"). Based on our current knowledge, management presently does not believe that the liabilities arising from these legal proceedings will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal proceedings could have a material adverse effect on our results of operations and financial condition for any particular period.
Derivative Lawsuits
On July 10, 2017, a shareholder derivative complaint was filed against the Company and certain of the Company’s directors and officers in the United States District Court for the Northern District of Georgia ("Federal Derivative Action") seeking recovery from the Company. The District Court dismissed the Federal Derivative Action on October 21, 2020, and the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal on July 27, 2022, ending the lawsuit. A similar derivative lawsuit that had been filed on January 9, 2019 in the Superior Court of Gwinnett County, Georgia (“State Derivative Action”) was likewise dismissed on October 31, 2022.
On January 20, 2023, the previous State Derivative Action plaintiffs filed a new derivative lawsuit in the Superior Court of Gwinnett County, Georgia. The new lawsuit, City of Aventura Police Officers’ Retirement Fund, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, alleges that the defendants breached their fiduciary duties by causing or permitting the Company to engage in unfair or deceptive marketing and billing practices, making false and misleading public statements concerning the Company’s fee charges and financial and business prospects, and making improper sales of stock. The complaint seeks approximately $118 million in monetary damages on behalf of the Company, including contribution by defendants as joint tortfeasors with the Company in unfair and deceptive practices, and disgorgement of
incentive pay and stock compensation. On January 24, 2023, the previous Federal Derivative Action plaintiffs filed a similar new derivative lawsuit, Jerrell Whitten, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, against Mr. Clarke and Mr. Dey in Gwinnett County, Georgia. On May 1, 2024, both pending derivative cases were transferred to the Fulton County Metro Atlanta Business Case Division and consolidated as In re Corpay, Inc. Shareholder
Derivative Litigation, CAFN 2023CV383303 (consolidated with CAFN 2023CV381421). The defendants dispute the allegations in the consolidated derivative complaintsaction and intend to vigorously defend against the claims.
FTC Investigation
In October 2017, the Federal Trade Commission ("FTC") issued a Notice of Civil Investigative Demand to the Company for the production of documentation and a request for responses to written interrogatories. After discussions with the Company, the FTC proposed in October 2019 to resolve potential claims relating to the Company’s advertising and marketing practices, principally in its U.S. direct fuel card business within its North American Fuel Card business. The parties reached impasse primarily related to what the Company believes are unreasonable demands for redress made by the FTC.
On December 20, 2019, the FTC filed a lawsuit in the Northern District of Georgia against the Company and Ron Clarke. See FTC v. FLEETCOR and Ronald F. Clarke, No. 19-cv-05727 (N.D. Ga.). The complaint alleges the Company and Clarke violated the FTC Act’s prohibitions on unfair and deceptive acts and practices. The complaint seeks among other things injunctive relief, consumer redress, and costs of suit. The Company continues to believe that the FTC’s claims are without merit. On April 17, 2021, the FTC filed a motion for summary judgment. On April 22, 2021, the United States Supreme Court held unanimously in AMG Capital Management v. FTC that the FTC does not have authority under current law to seek monetary redress by means of Section 13(b) of the FTC Act, which is the means by which the FTC has sought such redress in this case. FLEETCOR cross-moved for summary judgment regarding the FTC’s ability to seek monetary or injunctive relief on May 17, 2021. On August 13, 2021, the FTC filed a motion to stay or to voluntarily dismiss without prejudice the case pending in the Northern District of Georgia in favor of a parallel administrative action under Section 5 of the FTC Act that it filed on August 11, 2021 in the FTC’s administrative process. Apart from the jurisdiction and statutory change, the FTC’s administrative complaint makes the same factual allegations as the FTC’s original complaint filed in December 2019. The Company opposed the FTC’s motion for a stay or to voluntarily dismiss, and the court denied the FTC’s motion on February 7, 2022. In the meantime, the FTC’s administrative action is stayed. On August 9, 2022, the District Court for the Northern District of Georgia granted the FTC's motion for summary judgment as to liability for the Company and Ron Clarke, but granted the Company's motion for summary judgment as to the FTC's claim for monetary relief as to both the Company and Ron Clarke. The Company intends to appeal this decision after final judgment is issued. On October 20-21, 2022, the court held a hearing on the scope of injunctive relief. At the conclusion of the hearing, the Court did not enter either the FTC’s proposed order or the Company’s proposed order, and instead suggested that the parties enter mediation. Following mediation, both parties have filed proposed orders with the Court.
On June 8, 2023, the Court issued an Order for Permanent Injunction and Other Relief.The Company filed its notice of appeal to the United States Court of Appeals for the Eleventh Circuit on August 3, 2023. On August 17, 2023, the FTC Commission ordered that the stay of the parallel Section 5 administrative action will remain in place during the pendency of the Eleventh Circuit appeal. The Company has incurred and continues to incur legal and other fees related to this FTC complaint. Any settlement of this matter, or defense against the lawsuit, could involve costs to the Company, including legal fees, redress, penalties, and remediation expenses.
Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where, as here, the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, the Company is currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above.
13. Derivative Financial Instruments and Hedging Activities
Foreign Currency Derivatives
The Company uses derivatives to facilitate cross-currency corporate payments by writing derivatives to customers within its cross-border solution. The Company writes derivatives, primarily foreign currency forward contracts, option contracts, and swaps, mostly with small and medium size enterprises that are customers and derives a currency spread from this activity.
Derivative transactions associated with the Company's cross-border solution include:
•Forward contracts, which are commitments to buy or sell at a future date a currency at a contract price and will be settled in cash.
•Option contracts, which give the purchaser the right, but not the obligation, to buy or sell within a specified time a currency at a contracted price that may be settled in cash.
•Swap contracts, which are commitments to settlement in cash at a future date or dates, usually on an overnight basis.
The credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. Concentrations of credit and performance risk may exist with counterparties, which includes customers and banking partners, as the Company is engaged in similar activities with similar economic characteristics related to fluctuations in foreign currency rates. The Company performs a review of the credit risk of these counterparties at the inception
of the contract and on an ongoing basis. The Company also monitors the concentration of its contracts with any individual counterparty against limits at the individual counterparty level. The Company anticipates that the counterparties will be able to
fully satisfy their obligations under the agreements, but takes action when doubt arises about the counterparties' ability to perform. These actions may include requiring customers to post or increase collateral, and for all counterparties, if the counterparty does not perform under the term of the contract, the contract may be terminated. The Company does not designate any of its foreign exchange derivatives as hedging instruments in accordance with ASC 815, "Derivatives and Hedging".
The aggregate equivalent U.S. dollar notional amount of foreign exchange derivative customer contracts held by the Company was $63.1 billion and $56.6 billion as of March 31, 20232024 and December 31, 2022 (in millions) is presented in the following table:
| | | | | | | | | | | |
| Notional |
| March 31, 2023 | | December 31, 2022 |
Foreign exchange contracts: | | | |
Swaps | $ | 155.1 | | | $ | 160.9 | |
Futures and forwards | 19,178.9 | | | 15,159.4 | |
Written options | 15,302.7 | | | 13,701.9 | |
Purchased options | 12,228.7 | | | 11,474.2 | |
Total | $ | 46,865.4 | | | $ | 40,496.4 | |
2023. The majority of customer foreign exchange contracts are written in currencies such as the U.S. dollar, Canadian dollar, British pound, euro and Australian dollar.
The following table summarizes the fair value of derivatives reported in the Consolidated Balance Sheets as of March 31, 20232024 and December 31, 20222023 (in millions):
| | March 31, 2023 | |
| Fair Value, Gross | | Fair Value, Net | |
| Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities | |
| March 31, 2024 | |
| March 31, 2024 | |
| March 31, 2024 | |
| Fair Value, Gross | |
| Fair Value, Gross | |
| Fair Value, Gross | |
| Derivative Assets | |
| Derivative Assets | |
| Derivative Assets | |
Derivatives - undesignated: | |
Derivatives - undesignated: | |
Derivatives - undesignated: | Derivatives - undesignated: | | | | | | | | |
Foreign exchange contracts | Foreign exchange contracts | $ | 613.5 | | | $ | 543.1 | | | $ | 273.3 | | | $ | 202.9 | | |
Cash collateral | 53.9 | | | 198.4 | | | 53.9 | | | 198.4 | | |
Total net of cash collateral | $ | 559.6 | | | $ | 344.7 | | | $ | 219.4 | | | $ | 4.5 | | |
Foreign exchange contracts | |
Foreign exchange contracts | |
Less: Cash collateral | |
Less: Cash collateral | |
Less: Cash collateral | |
Total net derivative assets and liabilities | |
Total net derivative assets and liabilities | |
Total net derivative assets and liabilities | |
| | December 31, 2022 | |
| Fair Value, Gross | | Fair Value, Net | |
| Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities | |
| December 31, 2023 | |
| December 31, 2023 | |
| December 31, 2023 | |
| Fair Value, Gross | |
| Fair Value, Gross | |
| Fair Value, Gross | |
| Derivative Assets | |
| Derivative Assets | |
| Derivative Assets | |
Derivatives - undesignated: | |
Derivatives - undesignated: | |
Derivatives - undesignated: | Derivatives - undesignated: | | | | | | | | |
Foreign exchange contracts | Foreign exchange contracts | $ | 582.2 | | | $ | 540.0 | | | $ | 266.9 | | | $ | 224.7 | | |
Cash collateral | 56.1 | | | 148.2 | | | 56.1 | | | 148.2 | | |
Total net of cash collateral | $ | 526.1 | | | $ | 391.8 | | | $ | 210.8 | | | $ | 76.5 | | |
Foreign exchange contracts | |
Foreign exchange contracts | |
Less: Cash collateral | |
Less: Cash collateral | |
Less: Cash collateral | |
Total net derivative assets and liabilities | |
Total net derivative assets and liabilities | |
Total net derivative assets and liabilities | |
The fair values of derivative assets and liabilities associated with contracts, which include netting terms that the Company believes to be enforceable, have been recorded net within prepaid expenses and other current assets, other assets, other current liabilities and other noncurrent liabilities in the Consolidated Balance Sheets. The Company receives cash from customers as collateral for trade exposures, which is recorded within cash and cash equivalents, restricted cash and customer deposits liability in the Consolidated Balance Sheets. The customer has the right to recall their collateral in the event exposures move in their favor, they perform on all outstanding contracts and have no outstanding amounts due to the Company, or they cease to do business with the Company. The Company has trading lines with several banks, most of which require collateral to be posted if certain mark-to-market (MTM) thresholds are exceeded. Cash collateral posted with banks is recorded within restricted cash and can be recalled in the event that exposures move in the Company’s favor or move below the collateral posting thresholds. The Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral. Cash flows from the Company's foreign currency derivatives are classified as operating activities within the Unaudited Consolidated Statements of Cash Flows. The following table presents the fair value of the Company’s derivative assets and liabilities, as well as their classification on the accompanying Consolidated Balance Sheets, as of March 31, 20232024 and December 31, 20222023 (in millions):
| | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
| Balance Sheet Classification | | Fair Value |
| | | | | |
Derivative Assets | Prepaid expenses and other current assets | | $ | 193.4 | | | $ | 254.2 | |
Derivative Assets | Other assets | | $ | 59.5 | | | $ | 66.0 | |
Derivative Liabilities | Other current liabilities | | $ | 131.4 | | | $ | 190.4 | |
Derivative Liabilities | Other noncurrent liabilities | | $ | 47.5 | | | $ | 54.3 | |
| | | | | | | | | | | | | | | | | |
| | | March 31, 2023 | | December 31, 2022 |
| Balance Sheet Classification | | Fair Value |
| | | | | |
Derivative Assets | Prepaid expenses and other current assets | | $ | 204.8 | | | $ | 204.9 | |
Derivative Assets | Other assets | | $ | 68.6 | | | $ | 62.0 | |
Derivative Liabilities | Other current liabilities | | $ | 164.3 | | | $ | 184.1 | |
Derivative Liabilities | Other noncurrent liabilities | | $ | 38.6 | | | $ | 40.6 | |
Cash Flow Hedges
On January 22, 2019, the CompanyCompany entered into three interest rate swap cash flow contracts (the "swap contracts"). One contract (which matured in January 2022) had a notional value of $1.0 billion, while the other two remaining contracts (with maturity dates of January 2023 and December 2023) each havehad a notional value of $500 million. The objective of these swap contracts iswas to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of unspecified variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. At inception, the Company designated these contracts as hedging instruments in accordance with ASC 815, "Derivatives and Hedging." As of March 31, 2023, only one LIBOR-based interest rate swaps remains, with a receive-variable one month LIBOR and a pay-fixed monthly rate of 2.55% based on a notional amount of $500 million and a maturity date of December 19, 2023. On May 4, 2023, the Company amended the remaining LIBOR-based swap. The amendment replaced LIBOR on the swap with one-month term SOFR resulting in a pay-fixed monthly rate of 2.50%, without further changes to the terms of the swap.
During January 2023, the Company entered into five receive-variable Secured Overnight Financing Rate ("SOFR"), pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar notional amountsvalue of $1.5 billion as follows shown disaggregated in the table below(in millions):.
| | | | | | | | | | | | | | |
Notional Amount | | Fixed Rates | | Maturity Date |
$250 | | 4.01% | | 7/31/2025 |
$250 | | 4.02% | | 7/31/2025 |
$500 | | 3.80% | | 1/31/2026 |
$250 | | 3.71% | | 7/31/2026 |
$250 | | 3.72% | | 7/31/2026 |
On May 4, 2023, the Company amended the remaining LIBOR-based interest rate swap with a notional amount of $500 million from one-month term LIBOR of 2.55% to one-month term SOFR of 2.50%, without further changes to the terms of the swap. The Company applied certain expedients provided in ASU No. 2020-04, Reference Rate Reform (Topic 848), related to changes in critical terms of the hedging relationships due to reference rate reform, which allowed the change in critical terms without dedesignation of the hedging relationship.In August 2023, the Company entered into eight additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $2.0 billion as shown disaggregated in the table below. Further, in December 2023, the Company entered into five additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a total notional U.S. dollar value of $500 million as shown disaggregated in the table below.
As of March 31, 2024, the Company had the following outstanding interest rate swap derivatives that qualify as hedging instruments within designated cash flow hedges of variable interest rate risk (in millions):
| | | | | | | | | | | | | | |
Notional Amount | | Fixed Rates | | Maturity Date |
$250 | | 4.01% | | 7/31/2025 |
$250 | | 4.02% | | 7/31/2025 |
$500 | | 3.80% | | 1/31/2026 |
$250 | | 3.71% | | 7/31/2026 |
$250 | | 3.72% | | 7/31/2026 |
$100 | | 4.35% | | 7/31/2026 |
$250 | | 4.40% | | 7/31/2026 |
$250 | | 4.40% | | 7/31/2026 |
$400 | | 4.33% | | 7/31/2026 |
$250 | | 4.29% | | 1/31/2027 |
$250 | | 4.29% | | 1/31/2027 |
$250 | | 4.19% | | 7/31/2027 |
$250 | | 4.19% | | 7/31/2027 |
$150 | | 3.87% | | 1/31/2027 |
$50 | | 3.83% | | 1/31/2027 |
$50 | | 3.85% | | 1/31/2027 |
$125 | | 4.00% | | 1/31/2028 |
$125 | | 3.99% | | 1/31/2028 |
The purpose of these contracts is to reduce the variability of cash flows in interest payments associated with the Company's unspecified variable rate debt, the sole source of which is due to changes in the SOFR benchmark interest rate. The Company has designated these derivative instruments as cash flow hedging instruments, which are expected to be highly effective at offsetting changes in cash flows of the related underlying exposure. As a result, changes in fair value of the interest rate swaps are recorded in accumulated other comprehensive loss. For each of these swap contracts, the Company pays a fixed monthly rate and receives one month SOFR. The Company reclassified $12.7 million and $5.1 million from accumulated other comprehensive loss resulting in a benefit to interest expense, net for the three months ended March 31, 2024 and 2023, respectively, related to these interest rate swap contracts. Cash flows related to the Company's interest rate swap derivatives are classified as operating activities within the Unaudited Consolidated Statements of Cash Flows, as such cash flows relate to hedged interest payments recorded in operating activities.
For derivatives accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. The Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are highly effective at offsetting changes in cash flows of the related underlying exposures.
The following table presents the fair value of the Company’s interest rate swap contracts, as well as their classification on the accompanying Consolidated Balance Sheets, as of March 31, 20232024 and December 31, 20222023 (in millions). See Note 3 for additional information on the fair value of the Company’s swap contracts.
| | March 31, 2023 | | December 31, 2022 |
| | | March 31, 2024 | | | | | March 31, 2024 | | December 31, 2023 |
| | Balance Sheet Classification | | Fair Value | | Balance Sheet Classification | | Fair Value |
Derivatives designated as cash flow hedges: | Derivatives designated as cash flow hedges: | | | | |
Swap contracts | Swap contracts | Prepaid expenses and other current assets | | $ | 8.3 | | | $ | 12.0 | |
Swap contracts | Swap contracts | Other assets | | $ | 4.4 | | | $ | — | |
| Swap contracts | Swap contracts | Other noncurrent liabilities | | $ | (8.8) | | | $ | — | |
Swap contracts | |
Swap contracts | |
Swap contracts | |
TheAs of March 31, 2024, the estimated net amount of the existing gains expected to be reclassified into earnings within the next 12 months is approximately $20.1 million at March 31, 2023.
Net Investment Hedge
In February 2023, the Company entered into a cross currencycross-currency interest rate swap that iswas designated as a net investment hedge of our investments in euro-denominated operations. This contract effectively convertsconverted $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offsets the impact of changes in currency rates on our euro denominatedeuro-denominated net investments. This contract also createscreated a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.96% interest rate savings on the USD notional. The Company terminated this net investment hedge on February 1, 2024, which resulted in net cash payments totaling $3.9 million. The loss on the net investment hedge will remain in accumulated other comprehensive loss and will only be reclassified into earnings if and when the underlying euro-denominated net investment is sold or liquidated.
In February 2024, we entered into four new cross-currency interest rate swaps that are designated as net investment hedges of our investments in euro-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offset the impact of changes in currency rates on our euro-denominated net investments. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.55% interest rate savings on the USD notional.
Hedge effectiveness is tested based on changes in the fair value of the cross currencycross-currency swap due to changes in the USD/euro spot rate. The Company anticipates perfect effectiveness of the designated hedging relationship and records changes in the fair value of the cross currencycross-currency interest rate swap associated with changes in the spot rate through accumulated other comprehensive loss. Excluded components associated with the forward differential are recognized directly in earnings as interest expense, net. The Company recognized a benefit of $2.0 million and $1.5 million in interest expense, net for the three months ended March 31, 2024 and 2023, respectively, related to these excluded components. Upon settlement, cash flows attributable to derivatives designated as net investment hedges will be classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.
The cross currencyfollowing table presents the fair value of the Company’s cross-currency interest rate swapswaps designated as a net investment hedge, is recorded in Other current liabilities at a fair value of $5.1 millionas well as their classification on the accompanying Consolidated Balance Sheets, as of March 31, 2023.2024 and December 31, 2023 (in millions).
| | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
| Balance Sheet Classification | | Fair Value |
Cross-currency interest rate swaps designated as a net investment hedge: | | | | | |
Net investment hedge | Prepaid expenses and other current assets | | $ | 7.9 | | | $ | — | |
| | | | | |
Net investment hedge | Other current liabilities | | $ | — | | | $ | 14.5 | |
Net investment hedge | Other noncurrent liabilities | | $ | 9.5 | | | $ | — | |
14. Accumulated Other Comprehensive Loss (AOCL)
The changes in the components of AOCL, net of tax and noncontrolling interest, for the three months ended March 31, 20232024 and 20222023 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | Cumulative Foreign Currency Translation | | Unrealized (Losses) Gains on Derivative Instruments | | Total Accumulated Other Comprehensive (Loss) Income |
Balance at December 31, 2022 | | $ | (1,518,640) | | | $ | 8,990 | | | $ | (1,509,650) | |
Other comprehensive income (loss) before reclassifications | | 81,107 | | | (3,640) | | | 77,467 | |
Amounts reclassified from AOCL | | — | | | (5,089) | | | (5,089) | |
Tax effect | | — | | | 3,256 | | | 3,256 | |
Other comprehensive income (loss) | | 81,107 | | | (5,473) | | | 75,634 | |
Balance at March 31, 2023 | | $ | (1,437,533) | | | $ | 3,517 | | | $ | (1,434,016) | |
| | | | | | |
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| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Cumulative Foreign Currency Translation | | Unrealized Gains (Losses) on Derivative Instruments | | Total Accumulated Other Comprehensive Loss Attributable to Corpay |
Balance at December 31, 2023 | | $ | (1,258,282) | | | $ | (30,817) | | | $ | (1,289,099) | |
Other comprehensive (loss) income before reclassifications | | (95,870) | | | 72,951 | | | (22,919) | |
Amounts reclassified from AOCL | | — | | | (12,688) | | | (12,688) | |
Tax effect | | — | | | (16,141) | | | (16,141) | |
Other comprehensive (loss) income, net of tax | | (95,870) | | | 44,122 | | | (51,748) | |
Balance at March 31, 2024 | | $ | (1,354,152) | | | $ | 13,305 | | | $ | (1,340,847) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | |
| | Cumulative Foreign Currency Translation | | Unrealized (Losses) Gains on Derivative Instruments | | Total Accumulated Other Comprehensive (Loss) Income | | |
Balance at December 31, 2021 | | $ | (1,441,505) | | | $ | (23,111) | | | $ | (1,464,616) | | | |
Other comprehensive income before reclassifications | | 182,949 | | | 16,094 | | | 199,043 | | | |
Amounts reclassified from AOCL | | — | | | 8,148 | | | 8,148 | | | |
Tax effect | | — | | | (6,012) | | | (6,012) | | | |
Other comprehensive income | | 182,949 | | | 18,230 | | | 201,179 | | | |
Balance at March 31, 2022 | | $ | (1,258,556) | | | $ | (4,881) | | | $ | (1,263,437) | | | |
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| | | | | | | | |
Other comprehensive loss attributable to the Company's noncontrolling interest, which are not included in the table above, for the three months ended March 31, 2024 consisted of foreign currency translation losses of $0.2 million.
| | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | |
| | Cumulative Foreign Currency Translation | | Unrealized (Losses) Gains on Derivative Instruments | | Total Accumulated Other Comprehensive Loss Attributable to Corpay | | |
Balance at December 31, 2022 | | $ | (1,518,640) | | | $ | 8,990 | | | $ | (1,509,650) | | | |
Other comprehensive income (loss) before reclassifications | | 81,107 | | | (3,640) | | | 77,467 | | | |
Amounts reclassified from AOCL | | — | | | (5,089) | | | (5,089) | | | |
Tax effect | | — | | | 3,256 | | | 3,256 | | | |
Other comprehensive income (loss), net of tax | | 81,107 | | | (5,473) | | | 75,634 | | | |
Balance at March 31, 2023 | | $ | (1,437,533) | | | $ | 3,517 | | | $ | (1,434,016) | | | |
15. Subsequent Events
Acquisition
In May 2024, the Company signed definitive agreements to acquire 100% of Paymerang, a U.S.-based leader in accounts payables automation solutions, for approximately $475 million. The acquisition expands Corpay's presence in several vertical markets. The transaction is expected to close in the second quarter of 2024, subject to regulatory approval and customary closing conditions.
Net Investment Hedges
On April 15, 2024, the Company terminated its existing net investment hedge and simultaneously entered into four new cross-currency interest rate swaps designated as net investment hedges of our investments in euro-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offset the impact of changes in currency rates on our euro-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.85% interest rate savings on the USD notional.
On May 7, 2024, the Company entered into three new cross-currency interest rate swaps designated as net investment hedges of our investments in CAD-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in CAD, and partially offset the impact of changes in currency rates on our CAD-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 0.602% interest rate savings on the USD notional.
Further, on May 8, 2024, the Company entered into four new cross-currency interest rate swaps designated as net investment hedges of our investments in GBP-denominated operations. These contracts effectively convert an aggregate $750 million of U.S. dollar equivalent to an obligation denominated in GBP, and partially offset the impact of changes in currency rates on our GBP-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 0.317% interest rate savings on the USD notional.
| | | | | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences include, but are not limited to, those identified below and those described in Item 1A "Risk Factors" appearing in our Annual Report on Form 10-K for the year ended December 31, 20222023 and in Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by Oanda for the applicable periods.
The following discussion and analysis of our financial condition and results of operations generally discusses the three months ended March 31, 20232024 and 2022,2023, with period-over-period comparisons between these periods. A detailed discussion of 20222023 items and period-over-period comparisons between the three months ended March 31, 20222023 and 20212022 that are not included in this Quarterly Report on Form 10-Q can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 2 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.2023.
Executive Overview
Effective March 25, 2024, FLEETCOR Technologies, Inc. changed its corporate name to Corpay, Inc. At that time, the Company ceased trading under the ticker symbol "FLT" and began trading under our new ticker symbol, "CPAY," on the New York Stock Exchange ("NYSE") effective March 25, 2024. Corpay is a leading global businesscorporate payments company that helps businesses spend less by enabling them toand consumers better manage and control their expense-related purchasingexpenses. Corpay's suite of modern payment solutions help customers better manage vehicle-related expenses (e.g., fueling, tolls and vendorparking), lodging expenses (e.g., hotel bookings) and corporate payments processes. FLEETCOR’s smarter(e.g., domestic and international vendors). This results in our customers saving time and ultimately spending less. Since its incorporation in 2000, Corpay's payment and spend management solutions arehave been delivered in a variety of ways depending on the needs of the customer. From physical payment cards to software that includes customizable controls and robust payment capabilities, we provide businesses with a better way to pay. FLEETCOR has been a member of the S&P 500 since 2018 and trades on the New York Stock Exchange under the ticker FLT.
Businesses spend an estimated $135 trillion each year in transactions with other businesses. In many instances, theybusinesses lack the proper tools to monitor what is being purchased, and employ manual, paper-based, disparate processes and methods to both approve and make payments for their business-to-business purchases. This often results in wasted time and money due to unnecessary or unauthorized spending, fraud, receipt collection, data input and consolidation, report generation, reimbursement processing, account reconciliations, employee disciplinary actions, and more.
FLEETCOR’sCorpay’s vision is that every payment is digital, every purchase is controlled, and every related decision is informed. Digital payments are faster and more secure than paper-based methods such as checks, and provide timely and detailed data that can be utilized to effectively reduce unauthorized purchases and fraud, automate data entry and reporting, and eliminate reimbursement processes. Combining this payment data with analytical tools delivers powerful insights, which managers can use to better run their businesses. Our wide range of modern, digitized solutions generally provides control, reporting, and automation benefits superior to many of the payment methods businesses often use such as cash, paper checks, general purpose credit cards, as well as employee pay and reclaim processes.
Impact of Russia's Invasion of UkraineGeo-Political Events on Our Business
The current conflictmilitary conflicts between Russia and Ukraine, is creatingas well as within the Middle East continue to create substantial uncertainty about the role Russia will play in the global economy in the future. Although the length, impact and outcome of the ongoing military conflict between Russia and Ukraine isconflicts are highly unpredictable, this conflictthese conflicts could lead to significant market and other disruptions. The escalationWe have recently exited the Russia market via the disposition of our Russia business, which closed in the third quarter of 2023 (see "Russia Disposition" section below), and we do not have material operations in Israel or continuation of this conflict presents heightened risks and has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to information systems, heightened risks to employee safety, significant volatility of the Russian ruble, limitations on access to credit markets, increased operating costs (including fuel and other input costs), the frequency and volume of failures to settle securities transactions, inflation, potential for increased volatility in commodity, currency and other financial markets, safety risks, and restrictions on the transfer of funds to and from Russia.Gaza. We cannot predict how and the extent to which the conflictthese conflicts will affect our customers, operations or business partners or the demand for our products and our global business. Depending on the actions we take or are required to take, the ongoing conflict could also result in loss of cash, assets or impairment charges. Additionally, we may also face negative publicity and reputational risk based on the actions we take or are required to take as a result of the conflict, which could damage our brand image or corporate reputation.
The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the extent, severity, duration and outcome of the conflict. We are actively monitoring the situationsituations and assessing itsthe impact on our business, analyzing options as they develop, and are continuing to refine our business continuity plan, which may include the potential disposition of our Russian operations, and crisis response materials designed to mitigate the impact of disruptions to our business. We have signed definitive documents to sell our Russia business, subject to Russian government approval. Although we expect the sale to close near the end of the second quarter of 2023, there is risk that the current sale could be denied or that current terms of the sale could change. There can be no assurance that our plan will successfully mitigate all disruptions. To date we have not experienced any material
interruptions in our infrastructure, technology systems or networks needed to support our operations. The extent, severity, duration and outcome of the military conflict,conflicts, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any such disruptions may also magnify the impact of other risks described herein and in our Annual Report on Form 10-K.
Russia Disposition
We completed the sale of our Russia business on August 15, 2023. The sale included the entirety of our operations in Russia and resulted in a complete exit from the Russia market. Our business in Russia accounted for approximately 3.5% and 9.0%$24.5 million of our consolidated net revenues and net income before income taxes for the three months ended March 31, 2023, respectively and accounted for approximately 3.3% and 7.2% of2023. The Russia business was historically reported within our consolidated net revenues and net income for the year ended December 31, 2022, respectively. Our assets in Russia were approximately 2.9% and 3.2% of our consolidated assets at March 31, 2023 and December 31, 2022, respectively. The net book value of our assets in Russia at March 31, 2023 was approximately $234.6 million, of which $224 million is restricted cash. We currently have not recognized any impairment charges related to the assets of our Russian business. However, the extent, severity, duration and outcome of the conflict between Russia and Ukraine and related sanctions could potentially impact the value of our assets in Russia as the conflict continues. Our Russian business is part of our FleetVehicle Payments segment.
Impact of Recent Bank Failures
Recent failures of several financial institutions, including Silicon Valley Bank, have created uncertainty in the global financial markets and a greater focus on the potential failure of other banks in the future. Although we did not experience losses as a result of these failures, we regularly maintain cash balances with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit or the equivalent outside the U.S. A disruption in financial markets could impair our banking partners, which could affect our ability to access our cash or cash equivalents; our ability to provide services to our customers; and our customers' ability to access their cash to fulfill their payment obligations to us, their vendors, and other third parties. The occurrence of these events could negatively affect our business, financial condition and results of operations.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.
Results
Revenues, net, Net Income Attributable to Corpay and Net Income Per Diluted Share.Share Attributable to Corpay. Set forth below are revenues, net, net income attributable to Corpay and net income per diluted share attributable to Corpay for the three months ended March 31, 20232024 and 2022,2023, (in millions, except per share amounts).
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
(Unaudited) | |
(Unaudited) | |
(Unaudited) | (Unaudited) | | 2023 | | 2022 | |
Revenues, net | Revenues, net | | $ | 901.3 | | | $ | 789.2 | | |
Net income | | $ | 214.8 | | | $ | 218.0 | | |
Net income per diluted share | | $ | 2.88 | | | $ | 2.75 | | |
Revenues, net | |
Revenues, net | |
Net income attributable to Corpay | |
Net income attributable to Corpay | |
Net income attributable to Corpay | |
Net income per diluted share attributable to Corpay | |
Net income per diluted share attributable to Corpay | |
Net income per diluted share attributable to Corpay | |
Adjusted Net Income andAttributable to Corpay, Adjusted Net Income Per Diluted Share.Share Attributable to Corpay, EBITDA and EBITDA margin. Set forth below are adjusted net income, and adjusted net income per diluted share, EBITDA and EBITDA margin for the three months ended March 31, 20232024 and 20222023 (in millions, except per share amounts).
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2023 | | 2022 | | | | |
Adjusted net income | | $ | 283.1 | | | $ | 289.7 | | | | | |
Adjusted net income per diluted share | | $ | 3.80 | | | $ | 3.65 | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2024 | | 2023 | | | | |
Adjusted net income attributable to Corpay | | $ | 301.3 | | | $ | 283.1 | | | | | |
Adjusted net income per diluted share attributable to Corpay | | $ | 4.10 | | | $ | 3.80 | | | | | |
EBITDA | | $ | 482.4 | | | $ | 460.1 | | | | | |
EBITDA margin | | 51.6 | % | | 51.0 | % | | | | |
Adjusted net income andattributable to Corpay, adjusted net income per diluted share attributable to Corpay, EBITDA and EBITDA margin are supplemental non-GAAP financial measures of operating performance. See the heading entitled "Management’s Use of Non-GAAP Financial Measures" for more information and a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with U.S. generally accepted accounting principles, or GAAP. We use adjusted net income andattributable to Corpay, adjusted net income per diluted share attributable to Corpay, EBITDA and EBITDA margin to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. These non-GAAP measures are presented solely to permit investors to more fully understand how our management assesses underlying performance and are not, and should not be viewed as, a substitute for GAAP measures, and should be viewed in conjunction with our GAAP financial measures.
Sources of Revenue
FLEETCORCorpay offers a variety of business payment solutions that help to simplify, automate, secure, digitize and effectively control the way businesses and consumers manage and pay their expenses. We provide our payment solutions to our business, merchant, consumer and payment network customers in more than 150 countries around the world today, although we operate primarily in three geographies, with 82%with 83% of our revenues generated in the U.S., Brazil, and the U.K. Our customers may include
commercial businesses (obtained through direct and indirect channels), and partners for whom we manage payment programs, as well as individual consumers.
In the second quarter of 2022, in order to align with recent changes in the organizational structure and management reporting, we updated our segment structure. The presentation of segment information has been recast for the prior years to align with this segment presentation for 2022. We manage and report our operating results through the followingthree reportable segments, Fleet,segments: Vehicle Payments, Corporate Payments, and Lodging Brazil andPayments. The remaining results are included within Other, which alignsincludes our Gift and Payroll Card businesses. These segments align with how the Chief Operating Decision Maker (CODM) allocates resources, assesses performance and reviews financial information.
To help facilitate an understanding of our expansive range of solutions around the world, we describe them in two solution-driven categories: Vehicle and Mobility solutions and Corporate Payments solutions. Our Vehicle and Mobility solutions are purpose-built to enable our business and consumer customers to pay for vehicle and mobility-related expenses, while providing greater control and visibility of employee spending when compared with less specialized payment methods, such as cash or general-purpose credit cards. Our Vehicle and Mobility solutions include fuel, lodging, tolls and other complementary products. Our Corporate Payments solutions simplify and automate vendor payments and are designed to help businesses streamline the back-office operations associated with making outgoing payments. Companies save time, cut costs, and manage B2B payment processing more efficiently with our suite of corporate payment solutions, including AP automation, virtual cards, cross-border, and purchasing and T&E cards. We provide other payments solutions that are not considered within our Vehicle and Mobility and Corporate Payments solutions, including gift and payroll card.
Our revenue is generally reported net of the cost for underlying products and services purchased. In this report, we refer to this net revenue as “revenue". or "revenues, net." See “Results of Operations” for additional segment information.
Revenues, net, by Segment. For the three months ended March 31, 20232024 and 2022,2023, our segments generated the following revenue (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
(Unaudited)* | | Revenues, net | | % of Total Revenues, net | | Revenues, net | | % of Total Revenues, net | | | | | | | | |
Fleet | | $ | 372.7 | | | 41 | % | | $ | 351.6 | | | 45 | % | | | | | | | | |
Corporate Payments | | 227.2 | | | 25 | % | | 183.8 | | | 23 | % | | | | | | | | |
Lodging | | 122.3 | | | 14 | % | | 94.6 | | | 12 | % | | | | | | | | |
Brazil | | 121.7 | | | 14 | % | | 102.5 | | | 13 | % | | | | | | | | |
Other | | 57.3 | | | 6 | % | | 56.8 | | | 7 | % | | | | | | | | |
Consolidated revenues, net | | $ | 901.3 | | | 100 | % | | $ | 789.2 | | | 100 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2024 | | 2023 | | | | |
Revenues by Segment* | | Revenues, net | | % of Total Revenues, net | | Revenues, net | | % of Total Revenues, net | | | | | | | | |
Vehicle Payments | | $ | 494.1 | | | 53 | % | | $ | 495.5 | | | 55 | % | | | | | | | | |
Corporate Payments | | 265.4 | | | 28 | % | | 226.2 | | | 25 | % | | | | | | | | |
Lodging Payments | | 111.3 | | | 12 | % | | 122.3 | | | 14 | % | | | | | | | | |
Other | | 64.5 | | | 7 | % | | 57.3 | | | 6 | % | | | | | | | | |
Consolidated revenues, net | | $ | 935.3 | | | 100 | % | | $ | 901.3 | | | 100 | % | | | | | | | | |
*Columns may not calculate due to rounding. Other includes our Gift and Payroll Card
businesses.
Segment and solutions reporting have converged to be the same. The Fuel solution is now included with the Fleet segment, with the exception of Brazil fuel which is included in the Brazil segment. Vehicle maintenance, telematics, and Mexico benefits were included in the Other solution category previously, and are now included in the Fleet segment. The Brazil segment includes Brazil benefits from the Other solution category and the Tolls solution category. The Gift and Payroll card solution categories are now included in the Other segment.
Revenues, net by Geography. Revenue by geography for the three months ended March 31, 2023 and 2022, was as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2023 | | 2022 | | | | |
Revenues, net by Geography* | | Revenues, net | | % of Total Revenues, net | | Revenues, net | | % of Total Revenues, net | | | | | | | | |
United States | | $ | 513.6 | | | 57 | % | | $ | 471.8 | | | 60 | % | | | | | | | | |
Brazil | | 121.7 | | | 14 | % | | 102.5 | | | 13 | % | | | | | | | | |
United Kingdom | | 107.7 | | | 12 | % | | 94.6 | | | 12 | % | | | | | | | | |
Other | | 158.2 | | | 18 | % | | 120.3 | | | 15 | % | | | | | | | | |
Consolidated revenues, net | | $ | 901.3 | | | 100 | % | | $ | 789.2 | | | 100 | % | | | | | | | | |
*Columns may not calculate due to rounding.
We generate revenue in our FleetVehicle Payments segment through a variety of program fees, including transaction fees, card fees, network fees and charges, as well as from interchange. These fees may be charged as fixed amounts, costs plus a mark-up, based on a percentage of the transaction purchase amounts, or a combination thereof. Our programs also include other fees and charges associated with late payments and based on customer credit risk.
In our Corporate Payments segment, the primary measure of volume is spend, the dollar amount of payments processed on behalf of customers through our various networks. Wepayables business primarily earnearns revenue from the difference between the amount charged to the customer and the amount paid to the third party for a given transaction, as interchange or spread revenue. Our programs may also charge fixed fees for access to the network and ancillary services provided. In our cross-border payments business, the majority of revenue is from exchanges of currency at spot rates, which enables customers to make cross-currency payments. Our performance obligation incross-border payments business also derives revenue from our foreign exchange payment services is providing arisk management business, which aggregates foreign currency payment to a customer’s designated recipientexposures arising from customer contracts and therefore, we recognize revenue on foreign exchange payment services wheneconomically hedges the underlying payment is made.resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Revenues from risk management products and foreign exchange payment services are primarily comprised of the difference between the exchange rate we set for the customer and the rate available in the wholesale foreign exchange market.
In our Lodging Payments segment, we primarily earn revenue from the difference between the amount charged to the customer and the amount paid to the hotel for a given transaction andor based on commissions paid by hotels. We may also charge fees for access to the network and ancillary services provided.
In our Brazil segment, we primarily earn revenue from fixed fees for access to the network and ancillary services provided. We also earn interchange and merchant discounts on certain non-toll products. The primary measure of volume is average monthly tags active during the period.
The remaining revenues represent other solutions in our Gift and Payroll card businesses. In these businesses, we primarily earn revenue from the processing of transactions. We may also charge fixed fees for ancillary services provided.
Revenues, net, by Geography. Revenues, net by geography for the three months ended March 31, 2024 and 2023, were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2024 | | 2023 | | | | |
Revenues by Geography* | | Revenues, net | | % of Total Revenues, net | | Revenues, net | | % of Total Revenues, net | | | | | | | | |
United States | | $ | 504.6 | | | 54 | % | | $ | 513.6 | | | 57 | % | | | | | | | | |
Brazil | | 148.4 | | | 16 | % | | 121.7 | | | 14 | % | | | | | | | | |
United Kingdom | | 121.4 | | | 13 | % | | 107.7 | | | 12 | % | | | | | | | | |
Other | | 160.8 | | | 17 | % | | 158.2 | | | 18 | % | | | | | | | | |
Consolidated revenues, net | | $ | 935.3 | | | 100 | % | | $ | 901.3 | | | 100 | % | | | | | | | | |
*Columns may not calculate due to rounding.
The following table presents revenue perRevenues, net by Key Performance Metric and Organic Growth. Revenues, net by key performance metric and organic growth by segment for the three months ended March 31, 2024 and 2023, and 2022were as follows (in millions except revenues, net per key performance metric).indicator)*: | | As Reported | | Pro Forma and Macro Adjusted2 |
| Three Months Ended March 31, | | Three Months Ended March 31, |
| As Reported | | | As Reported | | Pro Forma and Macro Adjusted2 |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
(Unaudited) | (Unaudited) | 2023 | | 2022 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change | (Unaudited) | 2024 | | 2023 | | Change | | % Change | | 2024 | | 2023 | | Change | | % Change |
FLEET | | | | | | | | | | | | | | | |
VEHICLE PAYMENTS | |
'- Revenues, net | |
'- Revenues, net | |
'- Revenues, net | '- Revenues, net | $372.7 | | $351.6 | | $21.1 | | 6% | | $364.6 | | $352.8 | | $11.8 | | 3% | $494.1 | | $495.5 | | $(1.4) | | —% | | $492.1 | | $475.0 | | $17.2 | | 4% |
'- Transactions | '- Transactions | 118.6 | | 116.6 | | 2.0 | | 2% | | 118.6 | | 116.8 | | 1.8 | | 2% | '- Transactions | 199.7 | | 148.1 | | 51.6 | | 35% | | 199.7 | | 186.5 | | 13.2 | | 7% |
'- Revenues, net per transaction | '- Revenues, net per transaction | $3.14 | | $3.01 | | $0.13 | | 4% | | $3.07 | | $3.02 | | $0.05 | | 2% | '- Revenues, net per transaction | $2.47 | | $3.35 | | $(0.88) | | (26)% | | $2.46 | | $2.55 | | $(0.08) | | (3)% |
'- Tag transactions3 | | '- Tag transactions3 | 21.3 | | 19.6 | | 1.7 | | 9% | | 21.3 | | 19.6 | | 1.7 | | 9% |
'- Parking transactions | | '- Parking transactions | 60.9 | | — | | 60.9 | | 100% | | 60.9 | | 54.3 | | 6.6 | | 12% |
'- Fleet transactions | | '- Fleet transactions | 107.9 | | 122.8 | | (14.9) | | (12)% | | 107.9 | | 106.9 | | 1.0 | | 1% |
'- Other transactions | | '- Other transactions | 9.6 | | 5.7 | | 3.9 | | 68% | | 9.6 | | 5.7 | | 3.8 | | 67% |
CORPORATE PAYMENTS | CORPORATE PAYMENTS | |
'- Revenues, net | |
'- Revenues, net | |
'- Revenues, net | '- Revenues, net | $227.2 | | $183.8 | | $43.4 | | 24% | | $234.8 | | $197.4 | | $37.3 | | 19% | $265.4 | | $226.2 | | $39.2 | | 17% | | $264.3 | | $226.2 | | $38.1 | | 17% |
'- Spend volume | '- Spend volume | $36,526 | | $27,435 | | $9,091 | | 33% | | $36,526 | | $29,971 | | $6,556 | | 22% | '- Spend volume | $36,804 | | $36,518 | | $286 | | 1% | | $36,804 | | $36,518 | | $286 | | 1% |
'- Revenue, net per spend $ | '- Revenue, net per spend $ | 0.62% | | 0.67% | | (0.05)% | | (7)% | | 0.64% | | 0.66% | | (0.02)% | | (2)% | '- Revenue, net per spend $ | 0.72% | | 0.62% | | 0.10% | | 16% | | 0.72% | | 0.62% | | 0.10% | | 16% |
LODGING | |
LODGING PAYMENTS | |
'- Revenues, net | |
'- Revenues, net | |
'- Revenues, net | '- Revenues, net | $122.3 | | $94.6 | | $27.8 | | 29% | | $122.8 | | $97.5 | | $25.3 | | 26% | $111.3 | | $122.3 | | $(11.0) | | (9)% | | $111.2 | | $122.3 | | $(11.2) | | (9)% |
'- Room nights | '- Room nights | 9.4 | | 9.0 | | 0.4 | | 4% | | 9.4 | | 9.1 | | 0.2 | | 2% | '- Room nights | 8.2 | | 9.4 | | (1.1) | | (12)% | | 8.2 | | 9.4 | | (1.1) | | (12)% |
'- Revenues, net per room night | '- Revenues, net per room night | $13.07 | | $10.54 | | $2.53 | | 24% | | $13.13 | | $10.67 | | $2.45 | | 23% | '- Revenues, net per room night | $13.52 | | $13.07 | | $0.45 | | 3% | | $13.51 | | $13.07 | | $0.44 | | 3% |
BRAZIL | |
OTHER1 | |
'- Revenues, net | '- Revenues, net | $121.7 | | $102.5 | | $19.2 | | 19% | | $121.0 | | $102.5 | | $18.5 | | 18% |
'- Tags (average monthly) | 6.5 | | 6.1 | | 0.4 | | 7% | | 6.5 | | 6.1 | | 0.4 | | 7% |
'- Revenues, net per tag | $18.63 | | $16.74 | | $1.89 | | 11% | | $18.51 | | $16.74 | | $1.77 | | 11% |
OTHER1 | |
'- Revenues, net | |
'- Revenues, net | '- Revenues, net | $57.3 | | $56.8 | | $0.6 | | 1% | | $58.2 | | $56.8 | | $1.4 | | 2% | $64.5 | | $57.3 | | $7.2 | | 12% | | $64.3 | | $57.3 | | $6.9 | | 12% |
'- Transactions | '- Transactions | 298.0 | | 293.0 | | 5.0 | | 2% | | 298.0 | | 293.0 | | 5.0 | | 2% | '- Transactions | 367.3 | | 325.7 | | 41.6 | | 13% | | 367.3 | | 325.7 | | 41.6 | | 13% |
'- Revenues, net per transaction | '- Revenues, net per transaction | $0.19 | | $0.19 | | $— | | (1)% | | $0.20 | | $0.19 | | $— | | 1% | '- Revenues, net per transaction | $0.18 | | $0.18 | | $— | | —% | | $0.17 | | $0.18 | | $— | | (1)% |
FLEETCOR CONSOLIDATED REVENUES, NET | | |
CORPAY CONSOLIDATED REVENUES, NET | |
'- Revenues, net | '- Revenues, net | $901.3 | | $789.2 | | $112.1 | | 14% | | $901.4 | | $807.1 | | $94.3 | | 12% |
'- Revenues, net | |
'- Revenues, net | | $935.3 | | $901.3 | | $34.0 | | 4% | | $931.8 | | $880.8 | | $51.0 | | 6% |
| | |
1 Other includes Gift and Payroll Card operating segments. |
2 See heading entitled "Managements' Use of Non-GAAP Financial Measures" for a reconciliation of pro forma and macro adjusted revenue by solutionproduct and metric non-GAAP measures to the comparable financial measure calculated in accordance with GAAP. The calculated change represents organic growth rate. |
3 Represents total tag subscription transactions in the quarter. Average monthly tag subscriptions for 2024 is 7.1 million |
* Columns may not calculate due to rounding. |
Revenue per relevant key performance indicator (KPI), which may include transactions, spend volume, room nights, or other metrics, is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates, fuel prices and fuel price spreads. Relevant KPI is derived by broad product type and may differ from how we describe the business. Revenue per KPI per customer may change as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates. See “Results of Operations” for further discussion of transaction volumes and revenue per transaction.
Organic revenue growth is a supplemental non-GAAP financial measure of operating performance. Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period. See the heading entitled "Management’s Use of Non-GAAP Financial Measures" for more information and a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP. We believe that organic revenue growth on a macro-neutral, one-time item, and consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR.
Revenue per relevant key performance indicator (KPI), which may include transaction, spend volume, monthly tags, room nights, or other metrics, is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates, fuel prices and fuel price spreads. Revenue per KPI per customer may change as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates. See "Results of Operations" for further discussion of transaction volumes and revenue per transaction.Corpay.
Sources of Expenses
We incur expenses in the following categories:
•Processing—Our processing expense consists of expenses related to processing transactions, servicing our customers and merchants, credit losses and cost of goods sold related to our hardware and card sales in certain businesses.
•Selling—Our selling expenses consist primarily of wages, benefits, sales commissions (other than merchant commissions) and related expenses for our sales, marketing and account management personnel and activities.
•General and administrative—Our general and administrative expenses include compensation and related expenses (including stock-based compensation and bonuses) for our employees, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses.
•Depreciation and amortization—Our depreciation expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space. Our amortization expenses include amortization of intangible assets related to customer and vendor relationships, trade names and trademarks, software and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable.
•Other operating, net—Our other operating, net includes other operating expenses and income items that do not relate to our core operations or that occur infrequently.
•Other expense, (income), net—Our other expense, (income), net includes gains or losses from the following: sales of assets or businesses, foreign currency transactions, extinguishment of debt, and investments. This category also includes other miscellaneous non-operating costs and revenue. Certain of these items may be presented separately on the Consolidated Statements of Income.
•Interest expense, net—Our interest expense, net includes interest expense on our outstanding debt, interest income on our cash balances and interest on our interest rate and cross-currency swaps.
•Provision for income taxes—Our provision for income taxes consists of corporate income taxes related primarily to profits resulting from the sale of our products and services on a global basis.
Factors and Trends Impacting our Business
We believe that the following factors and trends are important in understanding our financial performance:
•Global economic conditions—Our results of operations are materially affected by conditions in the economy generally, in North America, Brazil, the U.K., and in other locations internationally, including the current conflict between Russia and Ukraine and other geopolitical events in the Middle East, as discussed elsewhere in this Quarterly Report on Form 10-Q. Factors affected by the economy include our transaction volumes, the credit risk of our customers and changes in tax laws across the globe. These factors affected our businesses in each of our segments.
•Foreign currency changes—Our results of operations are significantly impacted by changes in foreign currency exchange rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, euro, Mexican peso, New Zealand dollar and Russian ruble (for periods prior to the disposition of our Russian business), relative to the U.S. dollar. Approximately 57%54% and 60%57% of our revenue in the three months ended March 31, 20232024 and 2022,2023, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See "Results of Operations" for information related to foreign currency impact on our total revenue, net.
Our cross-border foreign currency tradingrisk management business aggregates foreign exchangecurrency exposures arising from customer contracts and economically hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. These contracts are subject to counterparty credit risk.
We further manage the impact of economic changes in the value of certain foreign-denominated net assets by utilizing cross currency interest rate swaps. See "Liquidity and capital resources" below for information regarding our cross currency interest rate swaps.
•Fuel pricesprice volatility—Our fleetvehicle payments customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer’s total purchase. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts. We estimate approximately 8% and 12% of of revenues, net were directly impacted by changes in fuel price in both the three months ended March 31, 2024 and
2023 and 2022,, respectively. See "Results of Operations" for information related to the fuel price impact on our total revenues, net.
•Fuel-price spread volatility—A portion of our revenue involves transactions where we derive revenue from fuel price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchant’s wholesale cost of fuel is dependent on several factors including, among others, the factors
described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel price spread contraction when the merchant’s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchant’s wholesale cost of fuel. The inverse of these situations produces fuel price spread expansion. We estimate approximately 5% of revenues, net were directly impacted by fuel price spreads in both the three months ended March 31, 20232024 and 2022, respectively.2023. See "Results of Operations" for information related to the fuel price spread impact on our total revenues, net.
•Acquisitions—Since 2002, we have completed over 95 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.
•Interest rates—From January 1, 2022 to May 3,July 27, 2023, the U.S. Federal Open Market Committee has increased the benchmarktarget federal funds rate teneleven times for a total rate increase of 5.00%5.25%. Additional increases are possible in future periods. We are exposed to market risk changes in interest rates on our cash investments and debt, particularly in rising interest rate environments. On January 22, 2019,environments, which is partially offset by incremental interest income earned on cash and restricted cash. As of March 31, 2024, we entered into threehave a number of receive-variable SOFR, pay-fixed interest rate swap contracts.derivative contracts with a cumulative notional U.S. dollar value of $4.0 billion. The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBORSOFR benchmark interest rate. For each of these swap contracts, we pay a fixed monthly rate
See "Liquidity and receive one month LIBOR. In January 2022 and 2023, $1.0 billion and $500 million, respectively, ofcapital resources" section below for additional information regarding our interest rate swaps matured. In January 2023, we entered into five additional swap contracts. The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $1.5 billion of variable rate debt, the sole source of which is due to changes in the SOFR interest rate. For each of these swap contracts, we pay a fixed monthly rate and receive one-month term SOFR.derivatives.
•Expenses—Over the long term, we expect that our expenseexpenses will decrease as a percentage of revenuerevenues as our revenue increases,revenues increase, except for expenses related to transaction volume processed. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.
•Taxes—We pay taxes in various taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are different than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.
The Organization for Economic Co-operation and Development (“OECD”), continues to put forth various initiatives, including Pillar Two rules which include the introduction of a global minimum tax at a rate of 15%. European Union member states agreed to implement the OECD’s Pillar Two rules with effective dates of January 1, 2024 and January 1, 2025, for different aspects of the directive and most have already enacted legislation. A number of other countries are also implementing similar legislation. As of March 31, 2024, based on the countries in which we do business that have enacted legislation effective January 1, 2024, the impact of these rules to our financial statements was not material. This may change as other countries enact similar legislation and further guidance is released. We continue to closely monitor regulatory developments to assess potential impacts.
Acquisitions, Investments and InvestmentsDispositions
2024
•In March 2024, we acquired 70% of Zapay, a Brazil-based digital mobility solution for paying vehicle-related taxes and compliance fees, for approximately $56.3 million, net of cash. As part of the agreement, we have the right to acquire the remainder of Zapay in four years. The majority investment in Zapay further scales our Vehicle Payments business in Brazil.
•In May 2024, we signed definitive agreements to acquire 100% of Paymerang, a U.S.-based leader in accounts payables automation solutions, for approximately $475 million. The acquisition expands our presence in several vertical markets. The transaction is expected to close in the second quarter of 2024, subject to regulatory approval and standard closing conditions.
2023
•In January 2023, we acquired Global Reach, a U.K.-based cross-border payments provider, for approximately $102.9 million.million, net of cash. Results from Global Reach Group are reported in our Corporate Payments segment.
•In February 2023, we acquired the remainder of Mina Digital Limited, a cloud-based EVelectric vehicle ("EV") charging software platform, and we also acquired Business Gateway AG, a European-based vehicle maintenance provider.
2022
•In November 2022, we completed the acquisitionprovider, for a total of Roomex, a European workforce lodging provider serving the U.K.approximately $23.8 million, net of cash. Results from Mina Digital Limited and German markets for approximately $56.8 million.Business Gateway AG are reported in our Vehicle Payments segment.
•In September 2022,2023, we made an investmentacquired PayByPhone Technologies, Inc., a global mobile parking payment application, for approximately $301.6 million, net of $6.1 millioncash. Results from PaybyPhone are reported in a U.K. based electric vehicle (EV) search and pay mapping service.our Vehicle Payments segment.
•In September 2022,the third quarter of 2023, we completeddisposed of our Russian business for $197.0 million, net of cash disposed and net of a $5.6 million foreign exchange loss upon the acquisitionconversion of Plugsurfing, a European EV software and network provider, for $75.8 million.
•In August 2022, we completed the acquisition of Accrualify, an accounts payable (AP) automation software company, for $41.2 million.
•In March 2022, we completed the acquisition of Levarti, a U.S.-based airline software platform company, for $23.7 million.
•In February 2022, we made an investment of $7.8 million in Mina Digital Limited, an EV charging payments business and $5.0 million in an EV data analytics business.
ruble-denominated proceeds to U.S. dollars. Results from our Levarti acquisition areRussian business were previously included in our Lodging segment, results fromVehicle Payments segment.
Each of the 2023 acquisitions provide incremental geographic expansion of our Accrualify and Global Reach acquisitions are reported inproducts, with PayByPhone specifically intended to progress our Corporate Payments segment, and results frombroader strategy to expand our Plugsurfing, Business Gateway AG, and Mina acquisitions are reported in our Fleet segment, fromvehicle payments business into the date of acquisition.consumer market.
Results of Operations
Three months ended March 31, 20232024 compared to the three months ended March 31, 20222023
The following table sets forth selected unaudited consolidated statements of income for the three months ended March 31, 20232024 and 20222023 (in millions, except percentages)*. | (Unaudited) | (Unaudited) | | Three Months Ended March 31, 2023 | | % of Total Revenues, net | | Three Months Ended March 31, 2022 | | % of Total Revenues, net | | Increase (decrease) | | % Change | (Unaudited) | | Three Months Ended March 31, 2024 | | % of Total Revenues, net | | Three Months Ended March 31, 2023 | | % of Total Revenues, net | | Increase (decrease) | | % Change |
Revenues, net: | Revenues, net: | | | | | | |
Fleet | | $ | 372.7 | | | 41.4 | % | | $ | 351.6 | | | 44.5 | % | | $ | 21.1 | | | 6.0 | % |
Vehicle Payments | |
Vehicle Payments | |
Vehicle Payments | | | $ | 494.1 | | | 52.8 | % | | $ | 495.5 | | | 55.0 | % | | $ | (1.4) | | | (0.3) | % |
Corporate Payments | Corporate Payments | | 227.2 | | | 25.2 | % | | 183.8 | | | 23.3 | % | | 43.4 | | | 23.6 | % | Corporate Payments | | 265.4 | | | 28.4 | | 28.4 | % | | 226.2 | | | 25.1 | | 25.1 | % | | 39.2 | | | 17.3 | | 17.3 | % |
Lodging | | 122.3 | | | 13.6 | % | | 94.6 | | | 12.0 | % | | 27.8 | | | 29.3 | % |
Brazil | | 121.7 | | | 13.5 | % | | 102.5 | | | 13.0 | % | | 19.2 | | | 18.7 | % |
Lodging Payments | | Lodging Payments | | 111.3 | | | 11.9 | % | | 122.3 | | | 13.6 | % | | (11.0) | | | (9.0) | % |
Other | Other | | 57.3 | | | 6.4 | % | | 56.8 | | | 7.2 | % | | 0.6 | | | 1.0 | % | Other | | 64.5 | | | 6.9 | | 6.9 | % | | 57.3 | | | 6.4 | | 6.4 | % | | 7.2 | | | 12.5 | | 12.5 | % |
Total revenues, net | Total revenues, net | | 901.3 | | | 100.0 | % | | 789.2 | | | 100.0 | % | | 112.1 | | | 14.2 | % | Total revenues, net | | 935.3 | | | 100.0 | | 100.0 | % | | 901.3 | | | 100.0 | | 100.0 | % | | 33.9 | | | 3.8 | | 3.8 | % |
Consolidated operating expenses: | Consolidated operating expenses: | | |
Processing | |
Processing | |
Processing | Processing | | 205.0 | | | 22.7 | % | | 174.2 | | | 22.1 | % | | 30.8 | | | 17.7 | % | | 207.4 | | | 22.2 | | 22.2 | % | | 205.0 | | | 22.7 | | 22.7 | % | | 2.4 | | | 1.2 | | 1.2 | % |
Selling | Selling | | 81.6 | | | 9.1 | % | | 76.9 | | | 9.7 | % | | 4.7 | | | 6.1 | % | Selling | | 94.2 | | | 10.1 | | 10.1 | % | | 81.6 | | | 9.1 | | 9.1 | % | | 12.6 | | | 15.4 | | 15.4 | % |
General and administrative | General and administrative | | 154.7 | | | 17.2 | % | | 143.5 | | | 18.2 | % | | 11.2 | | | 7.8 | % | General and administrative | | 151.3 | | | 16.2 | | 16.2 | % | | 154.7 | | | 17.2 | | 17.2 | % | | (3.4) | | | (2.2) | | (2.2) | % |
Depreciation and amortization | Depreciation and amortization | | 84.2 | | | 9.3 | % | | 76.8 | | | 9.7 | % | | 7.4 | | | 9.7 | % | Depreciation and amortization | | 84.8 | | | 9.1 | | 9.1 | % | | 84.2 | | | 9.3 | | 9.3 | % | | 0.5 | | | 0.6 | | 0.6 | % |
Other operating, net | Other operating, net | | 0.7 | | | 0.1 | % | | 0.1 | | | — | % | | (0.6) | | | NM | Other operating, net | | 0.3 | | | — | | — | % | | 0.7 | | | 0.1 | | 0.1 | % | | (0.4) | | | NM | | NM |
Operating income | Operating income | | 375.2 | | | 41.6 | % | | 317.7 | | | 40.3 | % | | 57.5 | | | 18.1 | % | Operating income | | 397.3 | | | 42.5 | | 42.5 | % | | 375.2 | | | 41.6 | | 41.6 | % | | 22.1 | | | 5.9 | | 5.9 | % |
Investment loss | | (0.2) | | | — | % | | 0.2 | | | — | % | | (0.3) | | | NM |
Investment gain | | Investment gain | | (0.2) | | | — | % | | (0.2) | | | — | % | | — | | | NM |
Other expense, net | Other expense, net | | 0.7 | | | 0.1 | % | | 0.9 | | | 0.1 | % | | (0.1) | | | NM | Other expense, net | | 3.1 | | | 0.3 | | 0.3 | % | | 0.7 | | | 0.1 | | 0.1 | % | | 2.4 | | | NM | | NM |
Interest expense, net | Interest expense, net | | 79.8 | | | 8.9 | % | | 22.0 | | | 2.8 | % | | 57.8 | | | 262.2 | % | Interest expense, net | | 89.1 | | | 9.5 | | 9.5 | % | | 79.8 | | | 8.9 | | 8.9 | % | | 9.3 | | | 11.6 | | 11.6 | % |
| Provision for income taxes | Provision for income taxes | | 80.0 | | | 8.9 | % | | 76.7 | | | 9.7 | % | | 3.3 | | | 4.3 | % | Provision for income taxes | | 75.5 | | | 8.1 | | 8.1 | % | | 80.0 | | | 8.9 | | 8.9 | % | | (4.5) | | | (5.7) | | (5.7) | % |
Net income | Net income | | $ | 214.8 | | | 23.8 | % | | $ | 218.0 | | | 27.6 | % | | $ | (3.1) | | | (1.4) | % | Net income | | 229.8 | | | 24.6 | | 24.6 | % | | 214.8 | | | 23.8 | | 23.8 | % | | 15.0 | | | 7.0 | | 7.0 | % |
Less: Net income attributable to noncontrolling interest | | Less: Net income attributable to noncontrolling interest | | — | | | — | % | | — | | | — | % | | — | | | NM |
Net income attributable to Corpay | | Net income attributable to Corpay | | $ | 229.8 | | | 24.6 | % | | $ | 214.8 | | | 23.8 | % | | $ | 14.9 | | | 7.0 | % |
| Operating income by segment: | Operating income by segment: | |
Fleet | | $ | 173.5 | | | $ | 167.8 | | | $ | 5.7 | | | 3.4 | % |
Operating income by segment: | |
Operating income by segment: | |
Vehicle Payments | |
Vehicle Payments | |
Vehicle Payments | | | $ | 225.7 | | | | | $ | 223.5 | | | | | $ | 2.2 | | | 1.0 | % |
Corporate Payments | Corporate Payments | | 75.5 | | | 58.2 | | | 17.3 | | | 29.7 | % | Corporate Payments | | 104.7 | | | | | 80.4 | | | | 80.4 | | | | | 24.3 | | | | 24.3 | | | 30.2 | | 30.2 | % |
Lodging | | 54.6 | | | 39.8 | | | 14.8 | | | 37.2 | % |
Brazil | | 54.8 | | | 37.3 | | | 17.5 | | | 46.9 | % |
Lodging Payments | | Lodging Payments | | 47.3 | | | | | 54.6 | | | | | (7.3) | | | (13.4) | % |
Other | Other | | 16.8 | | | 14.6 | | | 2.2 | | | 15.2 | % | Other | | 19.7 | | | | | 16.8 | | | | 16.8 | | | | | 2.9 | | | | 2.9 | | | 17.3 | | 17.3 | % |
Total operating income | Total operating income | | $ | 375.2 | | | $ | 317.7 | | | $ | 57.5 | | | 18.1 | % | Total operating income | | $ | 397.3 | | | | | $ | | | | $ | 375.2 | | | | | $ | | | | $ | 22.1 | | | 5.9 | | 5.9 | % |
NM = Not Meaningful
*The sum of the columns and rows may not calculate due to rounding.
Consolidated revenues, netResults
Consolidated revenues, net
Consolidated revenues were $901.3$935.3 million in the three months ended March 31, 2023, 2024, an increase of 14.2%3.8% compared to the priorprior period. ConsolidatedThe increase in consolidated revenues increasedwas due primarily due to organic growth of 12%6%, driven by increases in spend and transaction volumes, implementation and ramping of new sales growth and the impact ofbusiness initiatives. Consolidated revenues also grew 1% from acquisitions completed in 20222023 and 20232024 and due to the slightly positive impact of the macroeconomic environment but were negatively impacted by approximately $18 million.$31 million, or 3%, from the disposition of our Russia business in August 2023.
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a neutralslightly positive impact on our consolidated revenues for the three months ended March 31, 20232024 over the comparable period in 2022,2023, driven primarily by the favorable impact of fuel prices of approximately $2 million and favorable fuel price spreads of approximately $9 million. These increases were partially offset by unfavorable foreign exchange rates of approximately $11$14 million mostly in our Brazil and U.K. and European businesses.
These increases were partially offset by lower fuel price spreads and fuel prices of approximately $6 million and $4 million, respectively.
Consolidated operating incomeexpenses
Processing. Processing
Operating income was $375.2expenses were $207.4 million in the three months ended March 31, 2023,2024, an increase of 18.1%1.2% compared to the prior period. Increases in processing expenses were primarily due to approximately $5 million of expenses related to acquisitions completed in 2023 and 2024, higher variable expenses driven by increased transaction volumes, investments to drive future growth and the unfavorable impact of foreign exchange rates of approximately $3 million. The increases were partially offset by lower bad debt of $15 million due to our shift away from micro-SMB (small-medium business) clients in the U.S. and the impact of the disposition of our Russia business of approximately $1 million.
Selling. Selling expenses were $94.2 million in the three months ended March 31, 2024, an increase of 15.4% from the prior period. Increases in selling expenses were primarily due to increased commissions from higher sales volume, approximately $2 million of expenses related to acquisitions completed in 2023 and 2024 and the slightly unfavorable impact of foreign exchange rates. These increases were offset by the impact of the disposition of our Russia business of approximately $2 million.
General and administrative. General and administrative expenses were $151.3 million in the three months ended March 31, 2024, a decrease of2.2% from the prior period. The decrease in general and administrative expenses was primarily due to lower overhead expense due to disciplined expense management andthe impact of the disposition of our Russia business of approximately $3 million. These decreases were partially offset by the impact of acquisitions completed in 2023 and 2024 of approximately $6 million and the slightly unfavorable impact of foreign exchange rates.
Depreciation and amortization. Depreciation and amortization expenses were $84.8 million in the three months ended March 31, 2024, a slight increase of0.6% from the prior period. Depreciation and amortization expenses increased due to incremental investments in capital expenditures, acquisitions completed in 2023 and 2024 and the slightly unfavorable impact of foreign exchange rates. These increases were offset by the impact of the disposition of our Russia business.
Consolidated operating income
Consolidated operating income was $397.3 million in the three months ended March 31, 2024, an increase of 5.9% compared to the prior period. The increase in operating income was primarily due to organic growth driven by increasesthe reasons discussed above, resulting in transaction volume, acquisitions completed in 2023 and 2022, the favorable impactEBITDA margin expansion of fuel prices of $2 million and the favorable fuel price spreads of approximately $9 million. The increase in operating income was partially offset by additional bad debt of $14 million in the second quarter of 202253 basis points over the comparable prior period and unfavorable movements in foreign exchange rates of $3 million.
Consolidated operating expensesperiod.
Processing.Other expense, net. Processing expenses were $205.0Other expense, net was $3.1 million in the three months ended March 31, 2023, an increase2024, which primarily represents the impact of 17.7% compared to the prior period. Increases were primarily due to higher variable expenses driven by larger transaction volumes, incremental bad debt of $14 million and approximately $8 million of expenses related to acquisitions completedfluctuations in 2022 and 2023. Bad debt expense has increased as customer spend increased due to higher fuel prices and new sales, which tend to have a higher loss rate and higher losses among micro-SMB (small-medium business) customers more severely impacted by negative economic conditions.foreign exchange rates on non-functional currency balances.
Selling.Interest expense, net. Selling expenses were $81.6Interest expense, net was $89.1 million in the three months ended March 31, 2023,2024, an increase of 6.1% from the prior period. Increases in selling expenses were primarily associated with approximately $5 million of expenses related to acquisitions completed in 2022 and 2023.
General and administrative. General and administrative expenses were $154.7 million in the three months ended March 31, 2023, an increase of 7.8% from the prior period. Increases in general and administrative expenses were primarily due to the impact of acquisitions completed in 2022 and 2023 of approximately $11 million and other increases associated with the growth of our business over the comparable prior period. These increases were partially offset by $6 million of lower stock based compensation expense.
Depreciation and amortization. Depreciation and amortization expenses were $84.2 million in the three months ended March 31, 2023, an increase of 9.7% from the prior period. Increases in depreciation and amortization expenses were primarily due to incremental investments in capital investment expenses, as well as approximately $4 million due to acquisitions completed in 2022 and 2023.
Interest expense, net. Interest expense, net was $79.8 million in the three months ended March 31, 2023, an increase of $57.8$9.3 million from the prior period. The increase in net interest expense was primarily due to rising interest rates on our borrowings and lower interest income due to the sale of our Russia business, partially offset by benefit oflower debt balances and higher cash balances in certain foreign jurisdictions. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, excluding the related unused facility fees and swaps.
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Unaudited) | (Unaudited) | | 2023 | | 2022 | (Unaudited) | | 2024 | | 2023 |
Term loan A | Term loan A | | 5.98 | % | | 1.64 | % | Term loan A | | 6.81 | % | | 5.98 | % |
Term loan B | Term loan B | | 6.28 | % | | 1.89 | % | Term loan B | | 7.19 | % | | 6.28 | % |
Revolving line of credit A & B (USD) | Revolving line of credit A & B (USD) | | 6.01 | % | | 1.65 | % | Revolving line of credit A & B (USD) | | 6.76 | % | | 6.01 | % |
Revolving line of credit B (GBP) | Revolving line of credit B (GBP) | | 5.13 | % | | 1.92 | % | Revolving line of credit B (GBP) | | 6.60 | % | | 5.13 | % |
|
We have a portfolio of interest rate swaps which are designated as cash flow hedges and onefour cross-currency interest rate swap,swaps, which isare designated as aone net investment hedge. During the three months ended March 31, 2023,2024, as a result of these swap contracts and net investment hedge, we recorded a benefit to interest expense net of $6.6$14.7 million.
Provision for income taxes.taxes. The provision for income taxes and effective tax rate were $80.0$75.5 million and 27.1% in24.7%, respectively, for the three months ended March 31, 2023, an increase of 4.3%2024, compared to $80.0 million and 4.2%27.1%, respectively, fromfor the prior period. Income tax expense is based on an estimated annual effective rate, which requires us to make our best estimate of annual pretax accounting income or loss before consideration of tax or benefit discretely recognized in the period in which such occur. Our effective income tax rate for the three months ended March 31, 20232024 differs from the U.S. federal statutory rate due primarily to the unfavorable impact of state taxes net of federal benefits, additional taxes on undistributedundistributed foreign-sourced income, and foreign withholding taxes on interest income from intercompany notes. For the three months ended March 31, 2023,2024, the effective tax rate was increased bydecreased due to discrete items of $1.6$8.5 million incurred from an uncertain tax position relatedmainly attributable to previous years and tax benefits arising from stostock option exercises and awards vesting.
Net income attributable to Corpay.ck-based compensation previously recorded in pretax income. For the reasons discussed above, our net income attributable to Corpay increased to $229.8 million, or 7.0%, from the prior period, during the three months ended March 31, 2024.
Segment Results
Vehicle Payments
Net iVehicle Payments revenues were ncome.$494.1 million For the reasons discussed above, our net income decreased to $214.8 million in the three months ended March 31, 2023, 2024, a decrease 1.4% of 0.3% from the prior period.
Segment Results
Fleet
Fleet The decrease in revenue was primarily driven by the disposition of our Russia business in August 2023, which lowered revenue by approximately $31 million. Excluding the disposition, Vehicle Payments revenues were $372.7 million in the three months ended March 31, 2023, an increase of 6.0% from the prior period. Fleet operating income was $173.5 million in the three months ended March 31, 2023, an increase of 3.4% from the prior period. Fleet revenues and operating income increased primarily due to organic growth of 3%4% driven by increases in transaction volumes and new sales growth and the impact of acquisitions, which contributed approximately $1 million in revenue, as well as the positive impact of the macroeconomic environment.
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our Fleet revenues and operating income in the three months ended March 31, 2023 over the prior period of approximately $8 million and $10 million, respectively. This impact was driven primarily by the favorable impact of fuel prices on revenue and operating income of approximately $2 million and favorable fuel price spreads of approximately $9 million, over the comparable prior period. These increases were partially offset by unfavorable changes in foreign exchange rates on revenues and operating income of approximately $3 million and $1 million, respectively, mostly in our U.K. and European businesses, as well as incremental bad debt expense of $17 million.
Corporate Payments
Corporate Payments revenues were $227.2 million in the three months ended March 31, 2023, an increase of 23.6%, from the prior period. Corporate Payments operating income was $75.5 million in the three months ended March 31, 2023, an increase of 29.7% from the prior period. Corporate Payments revenues and operating income increased primarily due to organic growth of 19%, with strong new sales in our AP and cross-border solutions, higher spend volume,international markets, as well as the impact of acquisitions, which contributed approximately $14$11 million in revenue. These increases wereThe macroeconomic environment had a slightly positive impact of approximately $2 million, driven primarily by favorable changes in foreign exchange rates on revenue of $12 million, partially offset by the negative impactunfavorable fuel price spreads of the macroeconomic environment.$6 million, and lower fuel prices of $4 million.
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our CorporateVehicle Payments revenues and operating income was $225.7 million in the three months ended March 31, 2023 over2024, an increase of 1.0% compared to the comparable prior period, despite the impact of the disposition of our Russia business, which resulted in lower operating income of approximately $8$24 million. This negative impact was more than offset by organic growth described above as well as lower bad debt of approximately $15 million, as we shifted away from micro-SMB clients and $3to higher credit quality customers in the U.S. in 2023.
Corporate Payments
Corporate Payments revenues were $265.4 million respectively, in the three months ended March 31, 2024, an increase of 17.3%, from the prior period. Corporate Payments revenues increased primarily due to organic revenue growth of 17%, driven by strong new sales in our AP and cross-border solutions and a slight increase in spend volume.
Corporate Payments operating income was $104.7 million in the three months ended March 31, 2024, an increase of30.2% from the prior period. Corporate Payments operating income and margin increased primarily due to revenue growth, operating leverage and integration synergies, as revenues grew faster than expenses, partially offset by higher selling expenses driven primarily by unfavorable foreign exchange rates.
Lodginggrowth of the business.
Lodging Payments
Lodging Payments revenues were $122.3$111.3 million in the three months ended March 31, 2024, a decrease of 9.0% from the prior period. In 2023, an increaseLodging Payments benefited from high weather-driven distressed passenger volume and insurance claims. Lodging Payments also continued to see softness in the base particularly related to smaller, field services companies that are deploying fewer workers as a result of 29.3%the uncertain macro environment, which provided a tough comparable.
Lodging Payments operating income was $47.3 million in the three months ended March 31, 2024, a decrease of13.4% from the prior period. Lodging Payments operating income was $54.6and margin declined due to the reasons discussed above.
Other
Other revenues were $64.5 million in the three months ended March 31, 2023, 2024, an increase of 37.2%12.5% from the prior period. Lodging revenues and operating income increasedperiod, primarily due to organic revenue growth of 26%12%, driven in our workforceby the timing of gift card sales and airline verticals, as well asincreased transaction volume over the impact of acquisitions, which contributed $3prior period.
Other operating income was $19.7 million in revenue.
Brazil
Brazil revenues were $121.7 million in the three months ended March 31, 2023, 2024, an increase of 18.7% from the prior period. Brazil operating income was $54.8 million in the three months ended March 31, 2023, an increase of 46.9% from the prior period. Brazil revenues and operating income increased primarily due to organic growth of 18% driven by increases in toll tags sold and expanded product utility, with the differentiated value proposition of our products.
Other
Other revenues were relatively flat at $57.3 million in the three months ended March 31, 2023. Other operating income was $16.8 million in the three months ended March 31, 2023, an increase of 15.2%17% from the prior period, driven by organic growth in our gift segment, as well aswith the increase primarily due to the timing of card sales.revenue growth and our operating leverage, as revenues grew faster than expenses.
Liquidity and capital resources
Our principal liquidity requirements are to service and repay our indebtedness, make acquisitions of businesses and commercial account portfolios, repurchase shares of our common stock and meet working capital, tax and capital expenditure needs.
Sources of liquidity. We believe that our current level of cash and borrowing capacity under our Credit Facility and Securitization Facility (each defined below), together with expected future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for at least the next 12 months and into the foreseeable future, based on our current assumptions. AtAt March 31, 2023,2024, we had approximately $2.1$2.8 billion in total liquidity, consisting of approximately $0.8$1.5 billion available underunder our Credit Facility (defined below) and unrestricted cash of $1.3 billion, a portion of $1.3 billion. Based on our assessment of the currentwhich is required for working capital market conditions and related impact on our access to cash, we have reclassified all cash held at our Russian businesses of $224 million to restricted cash as of March 31, 2023. purposes. Restricted cash primarily represents primarily customer deposits in our corporate payments businesses in the U.S., cashrepayable on demand held in our Russian businesses, as well ascertain geographies with legal restrictions, collateral received
from customers for cross-currency transactions in our cross-border payments business, which areis restricted from use other than to repay customer deposits as well as toand secure and settle cross-currency transactions.transactions, and collateral posted with banks for hedging positions in our cross-border payments business.
We also utilize an accounts receivablethe Securitization Facility to finance a portion of our domestic receivables, to lower our cost of borrowing and more efficiently use capital. Accounts receivable collateralized within our Securitization Facility relate to trade receivables resulting primarily from charge card activity in Vehicle Payments and receivables related to our Lodging Payments business in the U.S. We also consider the available and undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At March 31, 2023,2024, we had no additional liquidity under our Securitization Facility.
We have determined that outside basis differences associated with our investments in foreign subsidiaries would not result in a material deferred tax liability, and, consistent with our assertion that these amounts continue to be indefinitely invested, have not recorded incremental income taxes for the additional outside basis differences.
Cash flows
The following table summarizes our cash flows for the three month periods ended March 31, 20232024 and 20222023 (in millions).
| | Three Months Ended March 31, |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
(Unaudited) | (Unaudited) | | 2023 | | 2022 | (Unaudited) | | 2024 | | 2023 |
Net cash provided by (used in) operating activities | | $ | 327.7 | | | $ | (112.3) | |
Net cash provided by operating activities | |
Net cash used in investing activities | Net cash used in investing activities | | $ | (159.0) | | | $ | (67.3) | |
Net cash used in financing activities | Net cash used in financing activities | | $ | (217.7) | | | $ | (49.8) | |
Operating activities. Net cash provided by operating activities was $327.7$350.2 million in the three months ended March 31, 2023,2024, compared to net cash used in operating activities of $112.3$877.7 million in the comparable prior period. The increasedecrease in operating cash flows was primarily due to favorable movementsdriven by an increase in working capital in the three months ended March 31, 2023 over the comparable period in 2022.restricted cash during 2023.
Investing activities. Net cash used in investing activities was $159.0$102.3 million in the three months ended March 31, 20232024 compared to $67.3$159.0 million in the comparable prior period. The increased use ofreduction in cash used for investing activities was primarily due to largerless spending on acquisitions completed in 2023 over the comparable period in 2022.2024 as compared to 2023.
Financing activities.Our capital expenditures were Net cash used in financing activities was $217.7$41.2 million in the three months ended March 31, 2023, compared to $49.8 million in the comparable prior period. The increase in net cash used by financing activities was primarily due to an increase in net repayments on our credit facility and securitization facility of $606 million, offset by a decrease in repurchases of common stock of $413 million in the three months ended March 31, 2023 over the comparable period in 2022.
Capital spending summary
Our capital expenditures were $36.7 million in the three months ended March 31, 2023,2024, an increase of $5.4$4.5 million, or 17.0%12%, from $31.4$36.7 million in the comparable prior period due to the impact of acquisitions and continued investments in technology.
Financing activities. Net cash used in financing activities was $158.6 million in the three months ended March 31, 2024, compared to $217.7 million in the comparable prior period. The decrease in net cash used by financing activities was primarily due to i) net borrowings on our credit facility and securitization facility of $42.0 million during the three months ended March 31, 2024 as compared to net repayments of $241.8 million during the comparable period in 2023 and (ii) an increase in proceeds from the issuance of common stock of $57.4 million, partially offset by an increase in repurchases of common stock of $279.2 million in the three months ended March 31, 2024 over the comparable period in 2023.
Credit Facility
FLEETCORCorpay Technologies Operating Company, LLC, and certain of our domestic and foreign owned subsidiaries, as designated co-borrowers (the "Borrowers"), are parties to a $6.4$7.0 billion Credit Agreement (the "Credit Agreement"), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and a syndicate of financial institutions (the "Lenders"), which has been amended multiple times. The Credit Agreement provides for senior secured credit facilities (collectively, the "Credit Facility") consisting of a revolving credit facility in the amount of $1.5$1.775 billion, a term loan A facility in the amount of $3.0$3.325 billion and a term loan B facility in the amount of $1.9 billion. The revolving credit facility consists of (a) a revolving A credit facility in the amount of $1$1.275 billion, with sublimits for letters of credit and swing line loans and (b) a revolving B facility in the amount of $500 million with borrowings in U.S. dollars, euros, British pounds, Japanese yen or other currency as agreed in advance, and a sublimit for swing line loans. The Credit Agreement also includes an accordion feature for borrowing an additional $750 million in term loan A, term loan B, revolving A or revolving B facility debt and an unlimited amount when the leverage ratio on a pro-forma basis is less than 3.75 to 1.00. Proceeds from the credit facilities may be used for working capital purposes, acquisitions, and other general corporate purposes. The maturity date for the term loan A and revolving credit facilities A and B is June 24, 2027. The term loan B has a maturity date of April 30, 2028.
On May 3, 2023, we entered into the thirteenth amendment to the Credit Facility. The amendment replaced LIBOR on the term B loan with the Secured Overnight Financing Rate ("SOFR"), plus a SOFR adjustment of 0.10%.
At March 31, 2023,2024, the interest rate on the term loan A was 6.28%6.80%, the interest rate on the term loan B was 6.59%7.18%, the interest rate on the revolving A and B facilities (USD borrowings) was 6.28%6.80%, and the interest rate on the revolving B facility (GBP borrowings) was 5.58%6.60%. The unused credit facility fee was 0.25% at March 31, 2023.2024.
At March 31, 2023,2024, we had $2.9$3.2 billion in borrowings outstanding on the term loan A, net of discounts and $1.9debt issuance costs, and $1.8 billion in borrowings outstanding on the term loan B, net of discounts and debt issuance costs. We have unamortized debt issuance costs
of $4.4$4.5 million related to the revolving facilities as of March 31, 20232024 recorded within other assets in the Unaudited Consolidated Balance Sheet.Sheets. We have unamortized debt discounts and debt issuance costs of $22.7$19.7 million related to our term loans at March 31, 20232024 recorded in notes payable and other obligations, net of current potion within the Unaudited Consolidated Balance Sheet.Sheets.
During the three months ended March 31, 2023,2024, we made principal payments of $23.5$25.5 million on the term loans and net repayments of $215.3$371.4 million on the revolving facilities.
As of March 31, 2023,2024, we were in compliance with each of the covenants under the Credit Agreement.
On January 22, 2019, we entered into three swap contracts. One contract (which matured in January 2022) had a notional value of $1.0 billion, one contract (which matured in January 2023) had a notional value of $500 million and the remaining contract, which will mature on December 19, 2023, has a notional value of $500 million. The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. These swap contracts qualify as hedging instruments and have been designated as cash flow hedges. For each of these swap contracts, we pay a fixed monthly rate and receive one month LIBOR. On May 4, 2023, we amended the remaining LIBOR-based swap. The amendment replaced LIBOR on the swap with one-month term SOFR resulting in a pay-fixed monthly rate of 2.50%, without further changes to the terms of the swap.
During January 2023, we entered into five receive-variable, pay-fixed interest rate swap derivative contracts with U.S. dollar notional amounts as follows (in millions):
| | | | | | | | | | | | | | |
Notional Amount | | Fixed Rates | | Maturity Date |
$250 | | 4.01% | | 7/31/2025 |
$250 | | 4.02% | | 7/31/2025 |
$250 | | 3.80% | | 1/31/2026 |
$250 | | 3.71% | | 7/31/2026 |
$250 | | 3.72% | | 7/31/2026 |
We reclassified approximately $5.1 million of gains from accumulated other comprehensive loss into interest income during the three months ended March 31, 2023 related to our cash flow hedges.
Net Investment Hedge
In February 2023, we entered into a cross currency interest rate swap that we designate as a net investment hedge of our investments in euro-denominated operations. This contract effectively converts $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offsets the impact of changes in currency rates on our euro denominated net investments. This contract also creates a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.96% interest rate savings on the USD notional.
Hedge effectiveness is tested based on changes in the fair value of the cross currency swap due to changes in the USD/euro spot rate. We anticipate perfect effectiveness of the designated hedging relationship and record changes in the fair value of the cross currency interest rate swap associated with changes in the spot rate through accumulated other comprehensive loss. Excluded components associated with the forward differential are recognized directly in earnings as interest expense, net. We recognized a benefit of $1.5 million in interest expense, net for the three months ended March 31, 2023 related to these excluded components. The cross currency interest rate swap designated as a net investment hedge is recorded in other current liabilities at a fair value of $5.1 million as of March 31, 2023.
Securitization Facility
We are party to a $1.7 billion receivables purchase agreement among FLEETCOR Funding LLC, as seller, PNC Bank, National Association as administrator, and various purchaser agents, conduit purchasers and related committed purchasers parties thereto. We refer to this arrangement as the Securitization Facility.thereto (the "Securitization Facility"). The Securitization Facility matures on August 18, 2025. At March 31, 2023,2024, the interest rate on the Securitization Facility was 5.85%6.36%.
The Securitization Facility provides for certain termination events, which includes nonpayment, upon the occurrence of which the administrator may declare the facility termination date to have occurred, may exercise certain enforcement rights with respect to the receivables, and may appoint a successor servicer, among other things.
We were in compliance with all financial and non-financial covenant requirements related to our Securitization Facility as of March 31, 2023.2024.
Cross-Border Facilities
We carefully monitor and manage initial and variation margin requirements for our cross-border solutions, which can result in transitory periods of elevated liquidity needs in cases where the currency market experiences disruption. In order to help mitigate that liquidity risk, we have recently entered into facilities intended to provide additional means to manage working capital needs for our cross-border solutions.
During 2023, we entered into two unsecured overdraft facilities with a combined capacity of $105.0 million, which may be accessible via written request and corresponding authorization from the applicable lenders. There is no guarantee the uncommitted capacity will be available to us on a future date. Interest on drawn balances accrues under the agreements at either (a) at a fixed rate equal to the lender's reference rate or the Federal Funds Effective Rate (as defined in the respective agreements) plus 1% or (b) SOFR plus 1.25%. As of March 31, 2024, we had no borrowings outstanding under the uncommitted credit facilities.
During 2023, we also entered into a 364-day committed revolving credit facility with a total commitment of $40.0 million. This committed facility matures on October 10, 2024. Borrowings under the new facility will bear interest at the borrower’s option at a rate equal to (a) Term SOFR (as defined in the agreement) plus 1.25% or (b) the Base Rate (determined by reference to the greatest of (i) the Federal Funds Effective Rate, at that time, plus 0.50%, (ii) the Prime Rate, at that time, and (iii) Term SOFR (as defined in the agreement) at such time plus 1.00%). As of March 31, 2024, we had no borrowings outstanding under the committed credit facility.
Cash Flow Hedges
On January 22, 2019, we entered into three LIBOR-based swap contracts. One contract (which matured in January 2022) had a notional value of $1.0 billion, while the two remaining contracts (which matured in January and December 2023, respectively) each had a notional value of $500 million. The objective of these swap contracts was to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. These swap contracts qualify as hedging instruments and have been designated as cash flow hedges. On May 4, 2023, we amended the remaining LIBOR-based swap. The amendment replaced LIBOR on the swap with one-month term SOFR resulting in a pay-fixed monthly rate of 2.50%, without further changes to the terms of the swap.
During January 2023, we entered into five receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $1.5 billion as shown disaggregated in the table below.
In August 2023, we entered into eight additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $2.0 billion, as shown disaggregated in the table below. Further, in December 2023, we entered into five additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $500 million as shown disaggregated in the table below.
As of March 31, 2024, we had the following outstanding interest rate swap derivatives that qualify as hedging instruments within designated cash flow hedges of variable interest rate risk (in millions):
| | | | | | | | | | | | | | |
Notional Amount | | Fixed Rates | | Maturity Date |
$250 | | 4.01% | | 7/31/2025 |
$250 | | 4.02% | | 7/31/2025 |
$500 | | 3.80% | | 1/31/2026 |
$250 | | 3.71% | | 7/31/2026 |
$250 | | 3.72% | | 7/31/2026 |
$100 | | 4.35% | | 7/31/2026 |
$250 | | 4.40% | | 7/31/2026 |
$250 | | 4.40% | | 7/31/2026 |
$400 | | 4.33% | | 7/31/2026 |
$250 | | 4.29% | | 1/31/2027 |
$250 | | 4.29% | | 1/31/2027 |
$250 | | 4.19% | | 7/31/2027 |
$250 | | 4.19% | | 7/31/2027 |
$150 | | 3.87% | | 1/31/2027 |
$50 | | 3.83% | | 1/31/2027 |
$50 | | 3.85% | | 1/31/2027 |
$125 | | 4.00% | | 1/31/2028 |
$125 | | 3.99% | | 1/31/2028 |
The purpose of these contracts is to reduce the variability of cash flows in interest payments associated with $4.0 billion of unspecified variable rate debt, the sole source of which is due to changes in the SOFR benchmark interest rate. For each of these swap contracts, we pay a fixed monthly rate and receive one month SOFR.
Our cash flow hedges resulted in a $12.7 million reduction in interest expense, net during the three months ended March 31, 2024.
Net Investment Hedge
In February 2023, we entered into a cross-currency interest rate swap that we designated as a net investment hedge of our investments in euro-denominated operations. This contract effectively converts $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offsets the impact of changes in currency rates on our euro-denominated net investments. This contract also created a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.96% interest rate savings on the USD notional. We terminated this net investment hedge on February 1, 2024, which resulted in net cash payments totaling $3.9 million. The loss on the net investment hedge will remain in accumulated other comprehensive loss and will only be reclassified into earnings if and when the underlying euro-denominated net investment is sold or liquidated.
On February 2, 2024, we entered into four new cross-currency interest rate swaps that are designated as net investment hedges of our investments in euro-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offset the impact of changes in currency rates on our euro-denominated net investments. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.55% interest rate savings on the USD notional.
Hedge effectiveness is tested based on changes in the fair value of the cross-currency swap due to changes in the USD/euro spot rate. We anticipate perfect effectiveness of the designated hedging relationship and record changes in the fair value of the cross-currency interest rate swap associated with changes in the spot rate through accumulated other comprehensive loss. Excluded components associated with the forward differential are recognized directly in earnings as interest expense, net. We recognized a benefit of $2.0 million in interest expense, net for the three months ended March 31, 2024 related to these excluded components.
On April 15, 2024, the Company terminated its existing net investment hedge and simultaneously entered into four new cross-currency interest rate swaps designated as net investment hedges of our investments in euro-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offset the impact of changes in currency rates on our euro-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.85% interest rate savings on the USD notional.
On May 7, 2024, the Company entered into three new cross-currency interest rate swaps designated as net investment hedges of our investments in CAD-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in CAD, and partially offset the impact of changes in currency rates on our CAD-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 0.602% interest rate savings on the USD notional.
Further, on May 8, 2024, the Company entered into four new cross-currency interest rate swaps designated as net investment hedges of our investments in GBP-denominated operations. These contracts effectively convert an aggregate $750 million of U.S. dollar equivalent to an obligation denominated in GBP, and partially offset the impact of changes in currency rates on our GBP-denominated net assets. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 0.317% interest rate savings on the USD notional.
Stock Repurchase Program
On February 4, 2016, we announced that our Board approved a stock repurchase program (as updated from time to time, the "Program") authorizing us to repurchase our common stock from time to time until February 1, 2024.4, 2025. On OctoberJanuary 25, 2022, we announced2024, the Board increasedauthorized an increase to the aggregate size of the Program by $1.0 billion to $7.1$8.1 billion. Since the beginning of the Program through March 31, 2023, 26,327,8352024, 29,975,624 shares have been repurchased for an aggregate purchase price of $5.9$6.9 billion, leaving us up to $1.2 billion of remaining authorization available under the Program for future repurchases in shares of our common stock. Subsequent to March 31, 2024 and through the date of this filing, we repurchased an additional 1.4 million shares for an aggregate purchase price of $412.4 million.
AnyUnder the Program, any stock repurchases may be made at times and in such amounts as deemed appropriate.appropriate by management. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information we may possess. Any repurchases have been and are expected to be funded by a combination of available cash flow from the business, working capital and debt.
Critical accounting policies and estimates
In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenues and expenses. Some of these estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. In many instances, however, we reasonably could have used different accounting estimates and, in other instances, changes in our accounting estimates could occur from period to period, with the result in each case being a material change in the financial statement presentation of our financial condition or results of operations. We refer to estimates of this type as critical accounting estimates.
Accounting estimates necessarily require subjective determinations about future events and conditions. During the three months ended March 31, 2023,2024, we have not adopted any new critical accounting policies that had a significant impact upon our consolidated financial statements, have not changed any critical accounting policies and have not changed the application of any critical accounting policies from the year ended December 31, 2022.2023. For critical accounting policies, refer to the Critical Accounting Estimates in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 20222023 and our summary of significant accounting policies in Note 1 of our Notes to the Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Management’s Use of Non-GAAP Financial Measures
We have included in the discussion above certain financial measures that were not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors. Because our non-GAAP financial measures are not standardized measures, they may not be directly comparable with the non-GAAP financial measures of other companies using the same or similar non-GAAP financial measures. Although management uses these non-GAAP measures to set goals and measure performance, they have no standardized meaning prescribed by GAAP. These non-GAAP measures are presented solely to permit investors to more fully understand how our management assesses underlying performance. These non-GAAP measures are not, and should not be viewed as, a substitute for GAAP measures, and should be viewed in conjunction with our GAAP financial statements and financial measures. As a result, such non-GAAP measures have limits in their usefulness to investors.
Pro forma and macro adjusted revenue and transactionsOrganic Revenues, net by segment.KPI. We define the pro forma and macro adjusted revenue as revenue, net as reflected in our statement of income, adjusted to eliminate the impact of the macroeconomic environment and the impact of acquisitions and dispositions. The macroeconomic environment includes the impact that market fuel price spreads, fuel prices and foreign exchange rates have on our business. We use pro forma and macro adjusted revenue and transactions to evaluate the organic growth in our revenue and the associated transactions.
Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period.We define the pro forma and macro adjusted revenue as revenue, net as reflected in our statement of income, adjusted to eliminate the impact of the macroeconomic environment and the impact of acquisitions and dispositions. The macroeconomic environment impact includes the impact that market fuel price spreads, fuel prices and foreign exchange rates have on our business. We use pro forma and macro adjusted revenue and transactions to evaluate the organic growth in our revenue and the associated transactions. We believe that organic revenue growth on a macro-neutral, one-time item, and consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR.Corpay.
Set forth below is a reconciliation of pro forma and macro adjusted revenue and key performance metric by segment, used to calculate organic revenue growth, to the most directly comparable GAAP measure, revenue, net and key performance metric (in millions):*:
| | Revenues, net | | Key Performance Metric |
| Three Months Ended March 31, | | Three Months Ended March 31, |
| | Revenues, net | | | | Revenues, net | | Key Performance Metric |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, | Three Months Ended March 31, |
(Unaudited) | (Unaudited) | | 2023 | | 2022 | | | 2023 | | 2022 | (Unaudited) | | 2024 | | 2023 | | 2024 | | 2023 |
FLEET - TRANSACTIONS | | | | | | | | |
VEHICLE PAYMENTS - TRANSACTIONS | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 364.6 | | | $ | 352.8 | | | 118.6 | | | 116.8 | |
Impact of acquisitions/dispositions | Impact of acquisitions/dispositions | | — | | | (1.3) | | | — | | | (0.2) | |
Impact of fuel prices/spread | Impact of fuel prices/spread | | 10.9 | | | — | | | — | | | — | |
Impact of foreign exchange rates | Impact of foreign exchange rates | | (2.8) | | | — | | | — | | | — | |
As reported | As reported | | $ | 372.7 | | | $ | 351.6 | | | | 118.6 | | | 116.6 | |
| CORPORATE PAYMENTS - SPEND | CORPORATE PAYMENTS - SPEND | | | | | | | | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 234.8 | | | $ | 197.4 | | | $ | 36,526 | | | $ | 29,971 | |
Impact of acquisitions/dispositions | Impact of acquisitions/dispositions | | — | | | (13.7) | | | — | | | (2,536) | |
Impact of fuel prices/spread | Impact of fuel prices/spread | | — | | | — | | | — | | | — | |
Impact of foreign exchange rates | Impact of foreign exchange rates | | (7.5) | | | — | | | — | | | — | |
As reported | As reported | | $ | 227.2 | | | $ | 183.8 | | | | $ | 36,526 | | | $ | 27,435 | |
BRAZIL - TAGS | | | | | | | | |
LODGING PAYMENTS - ROOM NIGHTS | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 121.0 | | | $ | 102.5 | | | 6.5 | | | 6.1 | |
Impact of acquisitions/dispositions | | — | | | — | | | — | | | — | |
Impact of fuel prices/spread | | — | | | — | | | — | | | — | |
Impact of foreign exchange rates | | 0.7 | | | — | | | — | | | — | |
As reported | | $ | 121.7 | | | $ | 102.5 | | | | 6.5 | | | 6.1 | |
LODGING - ROOM NIGHTS | | | | | | | | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 122.8 | | | $ | 97.5 | | | 9.4 | | | 9.1 | |
Impact of acquisitions/dispositions | Impact of acquisitions/dispositions | | — | | | (2.9) | | | — | | | (0.2) | |
Impact of fuel prices/spread | Impact of fuel prices/spread | | — | | | — | | | — | | | — | |
Impact of foreign exchange rates | Impact of foreign exchange rates | | (0.5) | | | — | | | — | | | — | |
As reported | As reported | | $ | 122.3 | | | $ | 94.6 | | | | 9.4 | | | 9.0 | |
OTHER1- TRANSACTIONS | OTHER1- TRANSACTIONS | | | | | | | | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 58.2 | | | $ | 56.8 | | | 298.0 | | | 293.0 | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | |
Impact of acquisitions/dispositions | Impact of acquisitions/dispositions | | — | | | — | | | — | | | — | |
Impact of fuel prices/spread | Impact of fuel prices/spread | | — | | | — | | | — | | | — | |
Impact of foreign exchange rates | Impact of foreign exchange rates | | (0.8) | | | — | | | — | | | — | |
As reported | As reported | | $ | 57.3 | | | $ | 56.8 | | | | 298.0 | | | 293.0 | |
| FLEETCOR CONSOLIDATED REVENUES, NET | | |
CORPAY CONSOLIDATED REVENUES, NET | |
CORPAY CONSOLIDATED REVENUES, NET | |
CORPAY CONSOLIDATED REVENUES, NET | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | |
Pro forma and macro adjusted | Pro forma and macro adjusted | | $ | 901.4 | | | $ | 807.1 | | | Intentionally Left Blank | | $ | 931.8 | | | $ | | $ | 880.8 | | | Intentionally Left Blank | | Intentionally Left Blank |
Impact of acquisitions/dispositions | Impact of acquisitions/dispositions | | — | | | (17.9) | | | |
Impact of fuel prices/spread2 | Impact of fuel prices/spread2 | | 10.8 | | | — | | | |
Impact of fuel prices/spread2 | |
Impact of fuel prices/spread2 | |
Impact of foreign exchange rates2 | Impact of foreign exchange rates2 | | (10.9) | | | — | | | | Intentionally Left Blank |
Impact of foreign exchange rates2 | |
Impact of foreign exchange rates2 | |
As reported | |
As reported | |
As reported | As reported | | $ | 901.3 | | | $ | 789.2 | | | | Intentionally Left Blank |
| * Columns may not calculate due to rounding. | | * Columns may not calculate due to rounding. | |
| * Columns may not calculate due to rounding. | |
1 Other includes Gift and Payroll Card operating segments. | 1 Other includes Gift and Payroll Card operating segments. | |
2 Revenues reflect an estimated $2 million positive impact from fuel prices and approximately $9 million positive impact from fuel price spreads, partially offset by the negative impact of movements in foreign exchange rates of approximately $11 million. | 1 Other includes Gift and Payroll Card operating segments. | |
1 Other includes Gift and Payroll Card operating segments. | |
2 Revenues reflect an estimated $4 million and $6 million negative impact from fuel prices and fuel price spreads, respectively, as well as the positive impact of movements in foreign exchange rates of approximately $14 million. | |
2 Revenues reflect an estimated $4 million and $6 million negative impact from fuel prices and fuel price spreads, respectively, as well as the positive impact of movements in foreign exchange rates of approximately $14 million. | |
2 Revenues reflect an estimated $4 million and $6 million negative impact from fuel prices and fuel price spreads, respectively, as well as the positive impact of movements in foreign exchange rates of approximately $14 million. | |
Adjusted net income attributable to Corpay and adjusted net income per diluted share.share attributable to Corpay. We have defined the non-GAAP measure adjusted net income attributable to Corpay as net income attributable to Corpay as reflected in our statement of income, adjusted to eliminate (a) non-cash stock based compensation expense related to share based compensation awards, (b) amortization of deferred financing costs, discounts, intangible assets, and amortization of the premium recognized on the purchase of receivables, (c) integration and deal related costs, and (d) other non-recurring items, including the impact of certain discrete tax items, the impact of business dispositions, impairment charges, asset write-offs, restructuring and related costs, loss on extinguishment of debt, and legal settlements and regulatory-related legal fees. We adjust net income for the tax effect of adjustments using our effective income tax rate, exclusive of certain discrete tax items. We calculate adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance.
We have defined the non-GAAP measure adjusted net income per diluted share attributable to Corpay as the calculation previously noted divided by the weighted average diluted shares outstanding as reflected in our statement of income.
Adjusted net income attributable to Corpay and adjusted net income per diluted share attributable to Corpay are supplemental measures of operating performance that do not represent and should not be considered as an alternative to net income, net income per diluted share or cash flow from operations, as determined by GAAP. We believe it is useful to exclude non-cash
share based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and share based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. Integration and deal related costs represent business acquisition transaction costs, professional services fees, short-term retention bonuses and system migration costs, etc., that are not indicative of the performance of the underlying business. We also believe that certain expenses, certain discrete tax items, gains on business disposition, impairment charges, asset write-offs, restructuring and related costs, losses on extinguishment of debt, and legal settlements and regulatory-related legal fees do not necessarily reflect how our business is performing. We adjust net income for the tax effect of each of these adjustments using our effective income tax rate during the period, exclusive of certain discrete tax items.
Management uses adjusted net income attributable to Corpay, adjusted net income per diluted share andattributable to Corpay, organic revenue growth:growth and EBITDA:
•as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis;
•for planning purposes, including the preparation of our internal annual operating budget;
•to allocate resources to enhance the financial performance of our business; and
•to evaluate the performance and effectiveness of our operational strategies.
Set forth below is a reconciliation of adjusted net income attributable to Corpay and adjusted net income per diluted share attributable to Corpay to the most directly comparable GAAP measure, net income attributable to Corpay and net income per diluted share attributable to Corpay (in thousands, except shares and per share amounts)*:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2023 | | 2022 | | | | |
Net income | | $ | 214,835 | | | $ | 217,952 | | | | | |
Net income per diluted share | | $ | 2.88 | | | $ | 2.75 | | | | | |
Stock-based compensation | | 26,096 | | | 32,631 | | | | | |
Amortization1 | | 60,039 | | | 57,630 | | | | | |
| | | | | | | | |
Integration and deal related costs | | 5,885 | | | 6,253 | | | | | |
Legal settlements/litigation | | 344 | | | 435 | | | | | |
Restructuring, related and other2 costs | | 1,298 | | | — | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total pre-tax adjustments | | 93,662 | | | 96,949 | | | | | |
Income taxes | | (25,416) | | | (25,241) | | | | | |
| | | | | | | | |
Adjusted net income | | $ | 283,081 | | | $ | 289,660 | | | | | |
Adjusted net income per diluted share | | $ | 3.80 | | | $ | 3.65 | | | | | |
Diluted shares | | 74,483 | | | 79,286 | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2024 | | 2023 | | | | |
Net income attributable to Corpay | | $ | 229,769 | | | $ | 214,835 | | | | | |
Net income per diluted share attributable to Corpay | | $ | 3.12 | | | $ | 2.88 | | | | | |
Stock-based compensation | | 24,979 | | | 26,096 | | | | | |
Amortization1 | | 57,858 | | | 60,039 | | | | | |
Integration and deal related costs | | 4,235 | | | 5,885 | | | | | |
Restructuring and related costs2 | | 4,382 | | | 619 | | | | | |
| | | | | | | | |
Other2,3 | | 3,612 | | | 1,023 | | | | | |
| | | | | | | | |
| | | | | | | | |
Total pre-tax adjustments | | 95,066 | | | 93,662 | | | | | |
Income taxes4 | | (23,515) | | | (25,416) | | | | | |
| | | | | | | | |
Adjusted net income attributable to Corpay | | $ | 301,320 | | | $ | 283,081 | | | | | |
Adjusted net income per diluted share attributable to Corpay | | $ | 4.10 | | | $ | 3.80 | | | | | |
Diluted shares | | 73,545 | | | 74,483 | | | | | |
| | |
1 Includes amortization related to intangible assets, premium on receivables, deferred financing costs and debt discounts. |
2 Certain prior period amounts have been reclassified to conform with current period presentation. |
3 Includes impact oflosses and gains on foreign currency transactions; prior amounts were not material (0.4 million)transactions, legal expenses, and removes the amortization attributable to the Company's noncontrolling interest. |
4 Represents provision for recast.income taxes of pre-tax adjustments |
*Columns may not calculate due to rounding. |
EBITDA and EBITDA margin. EBITDA is defined as earnings before interest, income taxes, interest expense, net, other expense, net, depreciation and amortization, investment gain and other operating, net.
The following table reconciles EBITDA and EBITDA margin to net income (in millions)*:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Unaudited) | | 2024 | | 2023 | | | | |
Net income from operations | | $ | 229.8 | | | $ | 214.8 | | | | | |
Provision for income taxes | | 75.5 | | | 80.0 | | | | | |
Interest expense, net | | 89.1 | | | 79.8 | | | | | |
Other expense, net | | 3.1 | | | 0.7 | | | | | |
Investment gain | | (0.2) | | | (0.2) | | | | | |
Depreciation and amortization | | 84.8 | | | 84.2 | | | | | |
| | | | | | | | |
Other operating, net | | 0.3 | | | 0.7 | | | | | |
EBITDA | | $ | 482.4 | | | $ | 460.1 | | | | | |
| | | | | | | | |
Revenues, net | | $ | 935.3 | | | $ | 901.3 | | | | | |
EBITDA margin | | 51.6 | % | | 51.0 | % | | | | |
* Columns may not calculate due to rounding. |
Special Cautionary Notice Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FLEETCOR’sCorpay’s beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," "may," "will," "would," "could" or "should," the negative of these terms or other comparable terminology.
These forward-looking statements are not a guarantee of performance, and you should not place undue reliance on such statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements are subject to many uncertainties and other variable circumstances, including those discussed in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20222023 filed with the Securities and Exchange Commission on February 28, 2023,29, 2024, many of which are outside of our control, that could cause our actual results and experience to differ materially from any forward-looking statement.
Forward-looking statements may not be realized due to a variety of factors, including, without limitation:
•our ability to successfully execute our strategic plan and portfolio review, manage our growth and achieve our performance targets;
•regulatory measures, voluntary actions, or changes in consumer preferences, that impact our transaction volume, including impacts to supply chain, workforce or other impacts of the coronavirus (including any variants thereof, “COVID-19”); volume;
•adverse changes in program fees or charges we may collect, whether through legal, regulatory or contractual changes;
•the impact of macroeconomic conditions and the current inflationary environment and whether expected trends, including retail fuel prices, fuel price spreads, fuel transaction patterns, electric vehicle, and retail lodging price trends develop as anticipated and we are able to develop successful strategies in light of these trends;
•the international operational and political risks and compliance and regulatory risks and costs associated with international operations, including the impact of the conflictglobal military conflicts between Russia and Ukraine and in the Middle East, on our business and operations;
•our ability to attract new and retain existing partners, fuel merchants, and lodging providers, their promotion and support of our products, and their financial performance;
•the failure of management assumptions and estimates, as well as differences in, and changes to, economic, market, interest rate, interchange fees, foreign exchange rates, and credit conditions, including changes in borrowers’ credit risks and payment behaviors;
•the risk of higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings;
•our ability to successfully manage our credit risks and the sufficiency of our allowance for expected credit losses;
•our ability to securitize our trade receivables;
•the occurrence of fraudulent activity, data breaches or failures of our information security controls or cybersecurity-related incidents that may compromise our systems or customers’ information;
•any disruptions in the operations of our computer systems and data centers;
•our ability to develop and implement new technology, products, and services;
•any alleged infringement of intellectual property rights of others and our ability to protect our intellectual property;
•the regulation, supervision, and examination of our business by foreign and domestic governmental authorities, as well as litigation and regulatory actions, including the lawsuit filed by the Federal Trade Commission (FTC);
•the impact of regulations and related requirements relating to privacy, information security and data protection; derivative contracts and hedging activities; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering (AML) and anti-terrorism financing laws;
•changes in our senior management team and our ability to attract, motivate and retain qualified personnel consistent with our strategic plan;
•tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations;
•the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;
•our ability to remediate material weaknesses and the ongoing effectiveness of internal control over financial reporting;
•our restatement of prior quarterly financial statements discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 may affect investor confidence and raise reputational issues and may subject us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries; and
•the other factors and information in our Annual Report on Form 10-K and other filings that we make with the Securities and Exchange Commission (SEC) under the Exchange Act and Securities Act. See "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 20222023 filed with the Securities and Exchange Commission on February 28, 2023.29, 2024.
Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not undertake, and specifically disclaim, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.
You may get FLEETCOR’sCorpay’s SEC filings for free by visiting the SEC web site at www.sec.gov.
This report includes non-GAAP financial measures, which are used by FLEETCORCorpay and investors as supplemental measures to evaluate the overall operating performance of companies in our industry. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. See "Management’s Use of Non-GAAP Financial Measures" elsewhere in this Quarterly Report on Form 10-Q for additional information regarding these GAAP financial measures and a reconciliation to the nearest corresponding GAAP measure.
| | | | | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
As of March 31, 2023,2024, there have been no material changes to our market risk from that disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
| | | | | |
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
As of March 31, 2023,2024, management carried out, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, and as a result of the material weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023,2024, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are not designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, we identified the following material weaknesses in internal controls:
(1) A material weakness in internal control related to ineffective information technology general controls (ITGCs) in the area of user access management over certain information technology systems used in the execution of controls that support the Company’s financial reporting processes. Our business process application and manual controls that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.
(2) A material weakness resulting from ineffective controls over the application of U.S. GAAP guidance related to the balance sheet recognition of customer funds held for the benefit of others, which resulted in the restatement of previously issued 2023 interim consolidated financial statements as further discussed within our Annual Report on Form 10-K.
As a result of the material weaknesses, identified, the Company has begun updating its internal control over financial reporting as discussed in its remediation plan updated below.
Remediation Update
(1) Our management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the ITGC material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) enhancing the information technology compliance oversight function; (ii) developing a training program addressing ITGCs and policies, including educating
control owners concerning the principles and requirements of internal controls, with a focus on those related to user access over information technology systems impacting financial reporting; (iii) developing and maintaining documentation underlying ITGCs to enhance the information evidencing the performance of ITGCs; (iv) developing enhanced integration functionality and controls related to the ongoing implementation of user access information technology system; (v) enhancing the information technology management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes; and (vi) enhancing quarterly reporting on the remediation measures to the Audit Committee of the Board.
We believe that these actions will remediate the material weakness. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively.
(2) Management has developed enhanced monitoring and oversight controls in the application of U.S. GAAP guidance pertaining to customer funds held for the benefit of others. We believe that these actions have remediated the material weakness, but the material weakness cannot be considered fully remediated until the improved controls have been in place and operate for a sufficient period of time to enable testing of the operating effectiveness of the controls. We expect that the remediation of this material weakness will be completed by the end of 2024.
Changes in Internal Control over Financial Reporting
ThereOther than the changes to our internal control over financial reporting described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2023,2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
In the ordinary course of business, the Company is involved in various pending or threatened legal actions, arbitration proceedings, claims, subpoenas, and matters relating to compliance with laws and regulations (collectively, "legal proceedings"). Based on our current knowledge, management presently does not believe that the liabilities arising from these legal proceedings will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal proceedings could have a material adverse effect on our results of operations and financial condition for any particular period.
Derivative Lawsuits
On July 10, 2017, a shareholder derivative complaint was filed against the Company and certain of the Company’s directors and officers in the United States District Court for the Northern District of Georgia ("Federal Derivative Action") seeking recovery from the Company. The District Court dismissed the Federal Derivative Action on October 21, 2020, and the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal on July 27, 2022, ending the lawsuit. A similar derivative lawsuit that had been filed on January 9, 2019 in the Superior Court of Gwinnett County, Georgia (“State Derivative Action”) was likewise dismissed on October 31, 2022.
On January 20, 2023, the previous State Derivative Action plaintiffs filed a new derivative lawsuit in the Superior Court of Gwinnett County, Georgia. The new lawsuit, City of Aventura Police Officers’ Retirement Fund, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, alleges that the defendants breached their fiduciary duties by causing or permitting the Company to engage in unfair or deceptive marketing and billing practices, making false and misleading public statements concerning the Company’s fee charges and financial and business prospects, and making improper sales of stock. The complaint seeks approximately $118 million in monetary damages on behalf of the Company, including contribution by defendants as joint tortfeasors with the Company in unfair and deceptive practices, and disgorgement of incentive pay and stock compensation. On January 24, 2023, the previous Federal Derivative Action plaintiffs filed a similar new derivative lawsuit, Jerrell Whitten, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, against Mr. Clarke and Mr. Dey in Gwinnett County, Georgia. On May 1, 2024, both pending derivative cases were transferred to the Fulton County Metro Atlanta Business Case Division and consolidated as In re Corpay, Inc. Shareholder Derivative Litigation, CAFN 2023CV383303 (consolidated with CAFN 2023CV381421). The defendants dispute the allegations in the consolidated derivative complaintsaction and intend to vigorously defend against the claims.
FTC Investigation
In October 2017, the Federal Trade Commission ("FTC") issued a Notice of Civil Investigative Demand to the Company for the production of documentation and a request for responses to written interrogatories. After discussions with the Company, the FTC proposed in October 2019 to resolve potential claims relating to the Company’s advertising and marketing practices, principally in its U.S. direct fuel card business within its North American Fuel Card business. The parties reached impasse primarily related to what the Company believes are unreasonable demands for redress made by the FTC.
On December 20, 2019, the FTC filed a lawsuit in the Northern District of Georgia against the Company and Ron Clarke. See FTC v. FLEETCOR and Ronald F. Clarke, No. 19-cv-05727 (N.D. Ga.). The complaint alleges the Company and Ron Clarke violated the FTC Act’s prohibitions on unfair and deceptive acts and practices. The complaint seeks among other things injunctive relief, consumer redress, and costs of suit. The Company continues to believe that the FTC’s claims are without merit and these matters are not and will not be material to the Company’s financial performance. On April 17, 2021, the FTC filed a motion for summary judgment. On April 22, 2021, the United States Supreme Court held unanimously in AMG Capital Management v. FTC that the FTC does not have authority under current law to seek monetary redress by means of Section 13(b) of the FTC Act, which is the means by which the FTC has sought such redress in this case. FLEETCOR cross-moved for summary judgment regarding the FTC’s ability to seek monetary or injunctive relief on May 17, 2021. On August 13, 2021, the FTC filed a motion to stay or to voluntarily dismiss without prejudice the case pending in the Northern District of Georgia in favor of a parallel administrative action under Section 5 of the FTC Act that it filed on August 11, 2021 in the FTC’s administrative process. Apart from the jurisdiction and statutory change, the FTC’s administrative complaint makes the same factual allegations as the FTC’s original complaint filed in December 2019. The Company opposed the FTC’s motion for a stay or to voluntarily dismiss, and the court denied the FTC’s motion on February 7, 2022. In the meantime, the FTC’s administrative action is stayed. On August 9, 2022, the District Court for the Northern District of Georgia granted the FTC's motion for summary judgment as to liability for the Company and Ron Clarke, but granted the Company's motion for summary judgment as to the FTC's claim for monetary relief as to both the Company and Ron Clarke. The Company intends to appeal this decision after final judgment is issued. On October 20-21, 2022, the court held a hearing on the scope of injunctive relief. At the conclusion of the hearing, the Court did not enter either the FTC’s proposed order or the Company’s proposed order, and instead suggested that the parties enter mediation. Following mediation, both parties have filed proposed orders with the Court.
On June 8, 2023, the Court issued an Order for Permanent Injunction and Other Relief. The Company filed its notice of appeal to the United States Court of Appeals for the Eleventh Circuit on August 3, 2023. On August 17, 2023, the FTC Commission
ordered that the stay of the parallel Section 5 administration action will remain in place during the pendency of the Eleventh Circuit appeal. The Company has incurred and continues to incur legal and other fees related to this FTC complaint. Any settlement of this matter, or defense against the lawsuit, could involve costs to the Company, including legal fees, redress, penalties, and remediation expenses.
Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where, as here, the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, the Company is currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above.
The information presented below supplements the risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2022. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20222023 and Part II, Item 1A, "Risk Factors" in other reports we file with the Securities and Exchange Commission, from time to time, all of which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed under the caption "Item 1A. Risk factors" to our annual report on Form 10-K for the year ended December 31, 2022.2023.
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Item 2. | Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Securities |
The Company announced on February 4, 2016 that its Board approved a stock repurchase program (as updated from time to time, the "Program") authorizing the Company to repurchase its common stock from time to time until February 1, 2024.4, 2025. On OctoberJanuary 25, 2022, the Company announced2024, the Board authorized an increasedase to the aggregate size of the Program by $1.0 billion to $7.1$8.1 billion. Since the beginning of the Program through March 31, 2023, 26,327,8352024, 29,975,624 shares have been repurchased for an aggregate purchase price of $5.9$6.9 billion, leaving the Company up to $1.2 billion of remaining authorization available under the Program for future repurchases in shares of its common stock.
The following table presents information as of March 31, 2023,2024, with respect to purchases of common stock of the Company made during the three months ended March 31, 20232024 by the Company as defined in Rule 10b-18(a)(3) under the Exchange Act.
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Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of the Publicly Announced Plan | | Maximum Value that May Yet be Purchased Under the Publicly Announced Plan (in thousands) |
January 1, 2023 through January 31, 2023 | | 27,621 | | | $ | 200.24 | | | 26,308,529 | | | $ | 1,240,183 | |
February 1, 2023 through February 28, 2023 | | 248 | | | $ | 210.95 | | | 26,308,777 | | | $ | 1,240,131 | |
March 1, 2023 through March 31, 2023 | | 19,058 | | | $ | 210.66 | | | 26,327,835 | | | $ | 1,236,116 | |
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Period | | Total Number of Shares Purchased1 | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of the Publicly Announced Plan | | Maximum Value that May Yet be Purchased Under the Publicly Announced Plan (in thousands) |
January 1, 2024 through January 31, 2024 | | 17,054 | | | $ | 288.95 | | | — | | | |
February 1, 2024 through February 29, 2024 | | 18,803 | | | $ | 272.53 | | | — | | | |
March 1, 2024 through March 31, 2024 | | 1,060,905 | | | $ | 293.37 | | | 948,985 | | | $ | 1,237,560 | |
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1 During the quarter ended March 31, 2024, pursuant to our Stock Incentive Plan, we withheld 147,777 shares, at an average price per share of $285.96, in order to satisfy employees' tax withholding obligations in connection with the vesting of awards of restricted stock. |
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Item 3. | Defaults Upon Senior Securities |
Not applicable.
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Item 4. | Mine Safety Disclosures |
Not applicable.
Not applicable.Rule 10b5-1 Trading Plans
During the period covered by this Quarterly Report on Form 10-Q, no director or executive officer of the Company adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Item 6. Exhibits
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Exhibit No. | | |
| | Amended and Restated Certificate of Incorporation of FLEETCOR Technologies, Inc., now known as Corpay, Inc., conformed to reflect amendments through June 9, 2022 (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 10-K, File No. 001-35004, filed with the SEC on February 28, 2023) |
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| | Certificate of Ownership and Merger Merging CPAY Merger Sub, Inc. into FLEETCOR Technologies, Inc. effective on March 24, 2024 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, File No. 001-35004, filed with the SEC on March 7, 2024) |
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| | Corpay, Inc. Amended and Restated Bylaws, adopted June 9, 2022effective as of March 24, 2024 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, File No. 001-35004, filed with the SEC on June 14, 2022)March 7, 2024) |
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| | Cooperation Agreement, dated as of March 15, 2023, by and among FLEETCOR Technologies, Inc., D.E. Shaw Oculus Portfolios, L.L.C. and D.E. Shaw Valence Portfolios, L.L.C. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, File No. 001-35004, filed with the SEC on March 20, 2023) |
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| | Offer letter, dated February 24, 2023, between FLEETCOR Technologies, Inc. and Tom Panther |
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| | ThirteenthFourteenth Amendment to the Credit Agreement, dated as of May 3, 2023January 31, 2024 among FLEETCOR Technologies Operating Company, LLC, as the Company, FLEETCOR Technologies, Inc.,Corpay, Inc, as the Parent, Cambridge Mercantile Corp. (USA) as the additional borrower, Bank of America, N.A., as administrative agent, a domestic swing line lender, the foreign swing line lender and the L/C issuer, and the other lenders party hereto (incorporated by reference to Exhibit 10.64 to the registrant's Form 10-K, File No. 001-35004, filed with the SEC on February 29, 2024) |
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| | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended |
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| | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended |
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| | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101* | | The following financial information for the Registrant formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Income, (iii) the Unaudited Consolidated Statements of Comprehensive Income; (iv) the Unaudited Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Consolidated Financial Statements |
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104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
*Filed Herein
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized, in their capacities indicated on May 10, 2023.9, 2024.
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| | | | FLEETCOR Technologies,Corpay, Inc. |
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Signature | | | | Title |
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/s/ Ronald F. Clarke | | | | President, Chief Executive Officer and Chairman of the Board of Directors (Duly Authorized Officer and Principal Executive Officer) |
Ronald F. Clarke | | | |
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/s/ Tom Panther | | | | Chief Financial Officer (Principal Financial Officer) |
Tom Panther | | | |