Corpay, Inc. (CPAY) Earnings

Management highlights

- **Core Quarterly Results**: CorePay reported Q2 2026 total revenue of $1.34 billion, up 21% year-over-year and $45 million above management expectations, with 10% underlying organic growth. Cash EPS was $7.00, up 36% year-over-year, an all-time company record. The Alpha Acquisition and Avid Investment delivered 39 cents of cash EPS accretion, hitting management's target exactly. Core operational metrics were strong: customer retention held steady at 93%, year-over-year new sales/bookings grew 30%, and same-store sales grew 1%. - **Long-Term Strategic Direction**: Management is executing a plan to simplify the company's portfolio by divesting subscale, non-core businesses, and doubling down on three core high-growth areas: 1) spend management (cards, AP, expanding into procurement and broader geographic markets); 2) vehicle fleet services (investing in the advantaged core fleet business and embedding fleet capabilities into the broader spend management platform to serve fleet-intensive companies); 3) cross-border payments (adding new real-time private blockchain rails and building out a global banking and deposit offering for middle market clients). The combined addressable TAM for these three core areas is $600 billion, giving the company long-term potential to grow revenue from ~$5 billion today to $50 billion over time. - **Value-Added Expansion ("Go Left")**: Management plans to expand upstream into pre-payment indirect expense decision support for clients, adding services including vendor selection benchmarking, spend pricing and term insights, and renewal negotiation guidance, enabled by AI. This adjacent offering builds on CorePay's existing client base and spend data to deliver additional value. - **Mid-Term Growth Algorithm & Capital Allocation**: The company's mid-term target remains 10%+ organic revenue growth, low-teens PBT growth, and over 20% cash EPS growth. Management expects ~$15 billion in available capital over the forecast period (from annual free cash flow and increased debt capacity as earnings grow), which will be allocated to either share repurchases or accretive acquisitions of complementary corporate payment businesses, based on relative returns. CorePay ended Q2 with a strong balance sheet: 2.55x leverage, $1.6 billion available capacity on its revolving credit facility, and $1.4 billion remaining under its current share repurchase authorization. It recently completed refinancing its entire debt stack, extending maturities, lowering borrowing costs, and increasing revolver size by $1 billion to $3.7 billion. Approximately 85% of floating rate debt exposure is naturally hedged by cash holdings, and including interest rate swaps, the company is over 120% hedged, so no additional swaps are planned.

Guidance

- Full-year 2026 revenue guidance was raised to $5.31 billion at the midpoint (17% year-over-year growth), maintaining the 10% full-year organic revenue growth target. The revision reflects a $45 million uplift from the Q2 beat, an additional $15 million uplift from better-than-expected macro and business fundamentals, partially offset by a $40 million reduction from the planned Epix divestiture. - Full-year 2026 adjusted cash EPS guidance was raised to $27.35 at the midpoint (28% year-over-year growth), up from the prior $26.00 midpoint. The revision reflects a $0.45 uplift from the Q2 beat and an additional $0.20 uplift from higher revenue and productivity improvements, with no net impact to EPS from the Epix divestiture (proceeds will be used for share repurchases). - Second half 2026 is expected to deliver 10% organic revenue growth, with corporate payments maintaining mid-teens+ organic growth, and lodging accelerating to mid-single digit organic growth. Full-year 2026 guidance implies a Q4 2026 cash EPS exit rate of over $29, full-year EBITDA of ~$3 billion, and full-year free cash flow of $1.8 billion (~7% yield). - Q3 2026 guidance calls for $1.355 billion revenue at the midpoint (16% year-over-year growth), 9-11% organic revenue growth, and $7.15 adjusted EPS at the midpoint (26% year-over-year growth). - Management reaffirmed confidence in delivering 25% year-over-year cash EPS growth in the second half of 2026.

Segment performance

1. **Corporate Payments**: Delivered 16% organic revenue growth, with an 180 basis point drag from float revenue compression due to lower year-over-year interest rates. Organic spend increased 43% to $95 billion, with strong performance across both cross-border and payables sub-segments. This segment is the company's top growth driver, holding ~45% of total Q2 2026 revenue. Over 80% of Alpha Acquisition volume has been migrated to CorePay's global tech platform, and Avid Investment (recorded as an equity investment) grew sales over 30% year-over-year, with EBITDA doubling to a record level. 2. **Vehicle Payments**: Delivered 8% organic revenue growth, in line with high single-digit expectations. Brazil and Europe delivered strong performance, while U.S. growth is stable as the company reallocates sales investment to higher-return corporate payments opportunities. This segment held ~39% of total Q2 2026 revenue. The Epix divestiture (a non-core vehicle payments asset) is expected to close in September 2026 and reduce full-year 2026 revenue by $40 million, with no impact to adjusted EPS. 3. **Lodging**: Delivered 2% sequential organic revenue improvement versus Q1 2026, in line with expectations. The segment has now lapped tough year-over-year comparables from 2025 episodic events, and management expects mid-single digit organic growth acceleration in the second half of 2026. Overall, corporate payments and vehicle payments combined for 84% of Q2 2026 total revenue, and delivered a combined 12% organic growth, consistent with Q1 2026 results. Total company organic growth for Q2 was 10%.

Risks & headwinds

- A $100 million pre-tax settlement charge was recorded in Q2 related to an ongoing FTC matter, which is still subject to final commission approval. - Modestly higher credit losses contributed to an overall 9% increase in operating costs (excluding adjustments); management noted that higher fuel prices and demand increases naturally create higher credit loss risk, which was provisioned for in the quarter. - Forward-looking results are inherently uncertain and may differ materially from guidance, due to a range of market, competitive, and operational risks that are disclosed in the company's public filings with the SEC.

Analyst Q&A

• Q: Given healthy freight markets and stronger fleet operator fundamentals, will CorePay loosen underwriting standards on the vehicle segment to drive incremental growth? /

  A: Management confirmed that even with improved market conditions, it will not weaken underwriting standards to gain market share. A modest provision for higher expected credit losses was already taken in Q2, and the firm will maintain its risk discipline. (192 characters)

• Q: Following the Epix divestiture, should investors expect more small subscale divestments, or could larger segments like lodging be sold to further simplify the portfolio? /

  A: Management expects 2-4 more small, subscale non-core divestments over the next 6-12 months, similar in size and scope to Epix. If smaller non-core businesses improve their performance after being held for improvement, management may consider larger additional divestments, but the immediate plan is focused on trimming small, non-strategic assets. (312 characters)

• Q: What is the update on the MasterCard FI channel partnership for cross-border, and is it still on track to deliver a couple of points of growth acceleration? /

  A: The partnership is performing better than expected. 10 FI partnerships have closed to date, with 100 additional FIs active in the pipeline. While selling cycles for FIs are longer than for corporate clients, the value proposition (MasterCard bank relationships + CorePay cross-border expertise) is resonating, and management remains bullish on the long-term growth upside from the partnership. (319 characters)

• Q: What is the monetization timeline for the new global banking product offering that management calls a game-changer? /

  A: The core product build for the enhanced global offering (which connects multiple local foreign currency accounts back to a client's home primary account) will be completed in Q4 2026. A meaningful step-up in revenue from this offering is expected in 2027, driven by higher sales to new prospects and cross-selling to CorePay's existing base of cross-border, fleet, and payables clients. (280 characters)

• Q: How does SWIFT's new real-time offering change CorePay's plan to shift cross-border volume from SWIFT to private blockchain rails? /

  A: CorePay is focused on the two key metrics for payment rails: speed and cost. The firm is already moving real volume on bank-operated private blockchain rails for tokenized fiat currency, and management expects half of all wire volume to shift from SWIFT to these alternative rails by the end of 2026. If SWIFT matches the speed and cost of private blockchain rails, CorePay is indifferent to which rail is used, but private blockchain currently outperforms SWIFT on both metrics. (416 characters)