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Good afternoon, and welcome to FLEETCOR Technologies, Inc. Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Jim Eglseder, Head of Investor Relations. Please go ahead.
Good afternoon, everyone, and thank you for joining us today for our third quarter 2022 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Alissa Vickery, our Interim CFO. Following their prepared comments, the operator will announce that the queue will open for the Q&A session. It is only then you can get in line for questions. Please note, our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com.
Now, throughout this call, we will be covering organic revenue growth. As a reminder, this metric neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices and fuel spreads. It also includes pro forma results for acquisitions closed during the two years being compared.
We will also be covering non-GAAP financial metrics, including revenues, net income and net income per diluted share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than that at other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website.
I also need to remind everyone that part of our discussion today may include forward-looking statements. These statements reflect the best information we have as of today. All statements about our outlook, new products and expectation regarding business development and future acquisitions are based on that information. They are not guarantees of future performance, and you should not put undue reliance upon them. We undertake no obligation to update any of these statements.
These expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release on Form 8-K and in our annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at sec.gov.
Now with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?
Jim, thanks. Good afternoon everyone and thanks for joining our Q3 2022 earnings call. Up front here, I'll plan to cover four subjects; first, I'll provide my take on Q3 results; second, I'll provide updated full year 2022 guidance; third, provide just a brief preview of 2023 along with some of the factors that will affect our performance; and then lastly, I'll catch you up on a few recent developments.
Okay. Let me turn to our Q3 results, which were quite good and ahead of our expectations. We reported revenue of $893 million, that's up 18% and cash EPS of $4.24, that's up 21% . Our EBITDA for the quarter exceeded $450 million. Organic revenue growth, quite good, coming in at 13% , that was led by our corporate payments business at 21% and our lodging business at 28% .
Trends in the quarter are quite good also. Same store sales finished plus 2% , retention remaining steady at 92% and overall sales performance, just terrific, up 24% for the quarter, we on-boarded almost 60,000 new clients during Q3. So the fundamentals of the business remain very solid, obviously, selling a lot and retaining a lot.
Look, additionally, I want to point out that we're continuing to strengthen the setup, the positioning of the company which, obviously, improves our growth prospects going forward. Added some important EV assets and further refined our plan to go on offense. We added some pretty important AP automation software to front end our corporate payments solution set that really rounds out for us that AP solution set. And we continue to expand our fuel footprint in Brazil, driving transaction growth there. I think we're expecting an exit rate of about $10 million annual add on fueling transactions. So good progress.
Okay. Let me shift gears and turn to our updated full year 2022 guidance along with the assumptions behind it. So we're revising full year 2022 revenue guidance up to $3.410 billion at the midpoint. This includes absorbing about $8 million of macro headwind in the second half versus our August guide.
We're maintaining full year 2022 cash EPS guidance of $15.95 at the midpoint, same number we gave in August. This does include a bit of a flip flop. We pulled some revenue forward through gift orders into Q3 that we had out looked in Q4. We're also absorbing about $0.04 to $0.05 of dilution from the new Plugsurfing and Accrualify acquisitions. We're also incurring about $30 million of incremental bad debt and interest expense way above our August guide as the Fed has accelerated their interest rate increases. So if we achieved this $3.410 billion and $15.95 updated ’22 guidance, that would represent 20% revenue growth and 21% % earnings growth for the full year versus 2021.
Okay. Importantly, next up I'm going to share a brief preview of our early look into 2023. So like most companies we're expecting the ’23 setup to be quite challenging. We do run the business, plan the business on a macro neutral basis really so that we can operate through any kind of cycle, good or bad. Then we do overlay our spending and capital allocation decisions based on the environment we're seeing. So for ‘23, we're expecting organic revenue growth overall of about 10% , which is our target. That's based on our preliminary ’23 budget submissions. Inside of that, probably no surprise, global fleet out looking mid to high single digits, our lodging and Brazil businesses mid-teens and our corporate payment business for next year high teens. And by the way, closing in on almost $1 billion of overall revenue next year, so getting quite significant.
We'll bake in clearly less OpEx expense growth next year with a goal of delivering 200 basis points to 300 basis points of margin improvement. We're hopeful we can reach a ’23 cash EPS with a ‘17 handle, but that's ultimately going to turn on, one, the level of sales investment we make and then the corresponding bad debt that comes with that. Two, interest rates where they peak and if and when they start down. Three, FX rates, particular eye on the pound, does it recover? And then lastly, recession, do we get one, and if we do, what would the depth duration be?
So look, on the recession front, in particular, we wouldn't describe FLEETCOR is recession proof, but pretty recession resilient. Some of the reasons that we should be pretty recession resilient are: First, our solutions are essential, generally not discretionary. Demand for our services runs higher in inflationary or cost conscious times, think fuel this year and the demand that we see. And lastly, our businesses are really diverse geographically by client size from SMB to enterprise, lots of verticals we serve, obviously, lots of product or spending categories. We're by no means immune to some client segments, certain client segments being impacted by recession, for example, construction. And for sure we will reel in restrict credit in the event of a downturn. And that for sure pressures revenue. So, look, we plan to have a much clearer picture of 2023 when we speak again in 90 days and we'll offer up our formal ’23 guidance then.
Okay. Let me transition to my last subject, which is to catch you up on a few recent developments and let me begin with the FTC case. So the court held a two day hearing on the FTC matter that was on October 20 and 21. Importantly, the judge concluded that she would not enter the proposed FTC order and rather encouraged the parties to mediate to negotiate so that we've agreed to engage with the FTC and see what we can work out. We do think that the face to face court hearing was really quite helpful. It gave us a chance to summarize the various disclosure and process enhancements that we have voluntarily made really over the last four or five years. All of them aimed at enhancing our customer experience.
So some of the enhancements we called out were eliminating certain digital ad claims and the language around that. We ceased selling add on features via negative option and instead packaged up various features in the three packages and sell those affirmatively upfront. We designed and implemented much bigger, bolder [Ts and Cs] (ph) including a schemer like fee box that's front and center. And lastly, we collected express or what we call affirmative consent from 96% of our fuel card client base to the specific terms of their card program.
We've also proposed some new incremental enhancements going forward, that would include crediting client payments on the day we receive them versus the day they're posted along with some other items that comply with the CSPB consumer payment standards. Obviously, we're B2B, but are willing to do this. We've talked about combining our invoicing and reporting materials into a single consolidated package to make it easier for clients to review. And we said repeatedly, I think throughout this FTC case that we're trying to cooperate, trying to be transparent. We simply emphasize to the court that we need to know exactly what the practices are that we're being asked to implement. And if we can understand them, we'll implement, we'll comply with them.
We're also saying again today that we don't believe that the disclosure enhancements that we've already made which we can see nor the additional ones that we're contemplating will have a material impact on the company's go forward financial performance.
Okay. Let me turn to our situation in Russia. We've made the decision to explore selling the Russia business. We've retained a local investment bank, we have formally launched the sales process, it is underway. The business does generate meaningful free cash flow, so that can potentially support acquisition financing along with annual dividends. And we think that that should provide a reasonable floor on the valuation. Additionally, we've completed all of the isolation or separation steps necessary to carve the business away from FLEETCOR. This provides assurance that we can maintain compliance with the sanctions. And we do plan to move into this isolation or passive ownership phase beginning in early December. And obviously we will keep you updated on the sale process.
So lastly, on the acquisition and capital allocation front. We did complete three capability acquisitions since we spoke last. So corporate payments add on called the Accrualify on August 1, an important EV deal in Europe Plugsurfing on September 1, we closed literally yesterday an international workforce lodging deal called [Roomx] (ph). And finally, we expect to complete the cross border deal called Global Reach, which is a bolt-on around the end of the year.
So as you can see, we focused really on capability acquisitions in this environment, choosing to strengthen, again, the positioning and setup of the company over the mid-term. We do hope that M&A valuations reset a bit next year. Higher interest rates will, obviously, take hold and just maybe we can get back to larger accretive transactions. Additionally, we did repurchased $500 million of FLT in Q3 at what we think are quite attractive prices.
So look, in closing today, again, very good Q3 results. Earnings grew 21% , maintaining our full year ’22 cash EPS guidance at $15.95 despite a bit weakening macro that we're absorbing. This would represent a $0.70 higher number than the initial EPS guidance that we provide in February. We do expect ’23 to be a challenging year, but see, our overall organic growth rate in and around 10% are target, and again our earnings turning mostly on the interest rate and FX environment. The FTC case finally winding down, again, we do not expect a material impact going forward. We have decided to explore the sale of our Russia business again underway and delighted with these handful of capability acquisitions this quarter.
Lastly, many thanks to Alissa here for stepping in to the CFO role on an interim basis. So now over to you, Alissa.
Thanks, Ron. I'm happy to be here on my first earnings call as CFO, albeit on an interim basis. I look forward to meeting many of you on the conference circuit in the fourth quarter. But now, let's look at some more detail on the quarter.
As Ron mentioned, we posted 18% growth in revenue, driven by 13% organic growth or $96 million, which I'll delve into in a moment. The remaining growth was 4% or $27 million from macro tailwinds and 2% or $14 million from acquisitions made over the past year. Impacting our results were fuel prices of $4.46 per gallon for the quarter, higher than prior year of $3.15, which contributed $26 million of additional revenues versus prior year and lower than our $4.64 guidance assumption from August.
Fuel spread revenue was also quite positive by about $21 million compared to the prior year as falling fuel prices during the quarter caused spreads to widen. Offsetting these tailwinds was a $21 million negative impact of lower foreign exchange rates, primarily resulting from unfavorable movements in the British pound.
Now moving to organic growth. Corporate payments was up 21% , driven by continuing strong new sales across both direct and cross border. Specifically, our direct corporate payments business, our non-partner business grew 24% and continues to demonstrate very robust growth, especially for our AP, which grew 44% . Cross border was up 30% , another very good quarter as new sales remained strong and activity levels were again robust across nearly all geographies.
Our channel partner business is just under 10% of the corporate payments category and declined 13% in the quarter, as our focus is on growing our direct businesses. Fuel grew organically 5% as we did see some volume softness in our US SMB businesses. However, our new sales growth was 13% and we continue to see a normalized level of same store sales contributing to the performance. Overall, transaction volumes remained positive and consistent with last quarter, although we continue to see slight moderation in new sales activity.
Tolls was up 12% organically compared with last year, as the business continues to perform. New sales are solid, driven by our standard product utility and differentiated value proposition. As a reminder, our toll solution can be used to pay for multiple spend categories, such as parking and drive thru retail, and we are now generating meaningful revenue from our beyond toll use cases.
Lodging continued to show strength in Q3, up 28% . All three business lines, workforce, airlines and insurance each had double digit organic growth, with airlines again leading the way at 55% . Growth was driven by a combination of higher year-over-year volume in workforce and airlines, and a favorable rate environment across all three businesses.
Gift had another good quarter, up 9% as customer card orders continue to be pulled forward from Q4. We estimate that approximately $6 million of revenue was pulled into Q3 due to early ordering in advance of the holiday season. In addition to the $10 to $12 million we estimated was pulled forward into the second quarter.
Looking further down the income statement, operating expenses of $504 million represented a 21% increase over $417 million in Q3 of the prior year, due to increases tied to higher volumes across our businesses, incremental bad debt, stock compensation and new sales generation activities. Increases were also driven by the inclusion of the ALE and Plugsurfing acquisitions, in addition to higher incentives and commissions as a result of strong new sales in certain of our businesses.
Bad debt expense was $37 million or 8 basis points, which was about $10 million higher than last quarter and more in line with pre pandemic bad debt levels. In the third quarter of 2021, bad debt was at $11 million or 3 basis points. This increase was driven primarily by higher loss severity as a result of higher fuel prices in the second quarter, as well as increases in application volume and application fraud. Bad debt levels remain elevated as a result of strong sales to new customers who tend to have a higher loss rates than the existing book, higher fuel prices and the changing macroeconomic landscape, which puts pressure on our smaller customers.
Interest expense increased 56% year-over-year, driven by higher rates on our floating rate debt with average LIBOR or SOFR in the current quarter of 2.2% compared to 0.09% in the same period prior year. As Ron noted, we'll provide guidance for 2023 in February when we report our full year earnings.
I did want to make one comment on how to think about net interest expense all in for 2023. We currently estimate that our 2023 net interest expense is likely to be closer to double the 2022 level. This assumes that benchmark index rates peak next year between 4.5% and 5% and remain in that range for most of the year. While all of our debt instruments are floating rate, we do have $500 million of hedges that will be in place for almost all of 2023 at 2.56% . Also, we have over $1 billion in cash balances globally on which we earn interest. Our effective tax rate for the quarter was 26.8% versus 24.1% last year, which is more of a normalized tax rate for the business.
Now turning to the balance sheet. We ended the quarter with over $1.3 billion in unrestricted cash and approximately $six hundred million available on our revolver. There was $5.7 billion outstanding on our credit facilities and we had $1.5 billion borrowed in our securitization facility. As of September 30, our leverage ratio was 2.95 times trailing 12 month adjusted EBITDA, as calculated in accordance with our credit agreement. In the quarter, we upsized and extended our securitization facility by $100 to $1.7 billion and extended the maturity by a year to August 2025. There were a number of minor changes to the agreement, which will be detailed in our 10-Q next week.
We repurchased roughly 2.2 million shares at an average price of $224 per share for a total of $500 million during Q3. This includes the roughly 900,000 shares repurchased before our earnings call in August. Year to date, we have repurchased 5.6 million shares for $1.3 billion. The Board approved another $1 billion in repurchases under our program on October 25 and extended the program through February 2024. With this upsizing, we now have approximately $1.355 billion available for future repurchases.
As Ron has covered our full year guidance updates, let me now share some thoughts on our guidance assumptions. We are assuming fuel prices of $4.25 in Q4. Market spreads favorable to the fourth quarter of 2021, total interest expense of $157 million and $167 million for 2022, which assumes average reference rates of 3.75% in Q4. The rest of our assumptions can be found in our press release and supplement.
Thank you for your interest. And now, operator, we'd like to open the line for questions.
We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Darrin Peller with Wolfe Research. You may now go ahead.
Hey, thanks guys. Even looking on like a two year basis, the fleet segment looks like its high single digits or about 9% , 10% growth when just stacking it. It definitely looks like its trending back to a normal rate or even better than a normal rate versus what I think you guys would have expected. So can you touch on that for a minute in terms of where we are in your view versus any type of recovery? And then, obviously, again, going into a more uncertain macro environment, there is a link to that business, because it does look like it's gotten to a point where it's doing the right thing from a growth rate standpoint. And then just quickly, the add-ons, the follow-ons and the cross sells that you've been really able to implement. How's that been going, Ron? And if you could just touch on that too? Thanks.
Hey, Darrin. Thanks. So on the first one, I think we're still kind of in the 5% to 8% kind of target range based on what we like to invest. Some of the over performance recently is literally the COVID recovery kind of clawing back from the depths there 2020. So I think we're probably mostly unchanged because we got a lot of other businesses to feed and investments to make that we're kind of happy in that mid to high single digit. So that's our target.
On the add-ons, I'd still say, still early days. We're still struggling with where in the base, right? We've got a couple of hundred thousand clients we should target. So I think I mentioned initially, we were thinking, “hey, we'll go to where the bunk is”, down market and then realize most of the spend is in the larger accounts there, which we get after a different distribution. So I'd say we're still testing some different ways to do that, but have the goal of the company to turn the fuel card business, as I said, into a corporate payments business. So we're in process.
Yes. No, that's helpful. And just one quick follow-up, if you don't mind, is on the -- your preliminary outlook for next year. When you talk about the different assumptions, I guess, first of all, the reported -- the revenue growth target you talked -- I think you said 10% organic is that's organic, I'm assuming, is that reported or constant currency? I think it's -- And then also when we think of the $17 dollars, just the assumptions on fuel and macro that go into that. Again, it seems like the underlying core assumptions are sustainable and seem like they've really gone to a point that's been strong?
Yes. So on the first, I'd say, we've worked, we're kind of halfway through, Darrin, the ’23 budget cycle. So we've worked the revenue, obviously, harder than the expense of the profit side. So as I said, it’s a mix of the different business lines, fuel, lodging in Brazil and corporate payments have different growth rates to kind of weight themselves to 10% . That is an organic number, although the print at this point looks pretty similar because we have some pro form revenue kind of rolling forward right from ‘22 into ’23, offset by what we think could be some macro headwind, particularly FX. So at this point, sitting here today, not a big difference between organic and prints.
And then on the bottom, again, I think the thing we can control is really the operating margin. So we're doing a lot of work on metering the OpEx so that we can grow kind of EBITDA margins 200 bps, 300 bps next year, so call it, I’ don’t know, we're coming out I think around 52-ish this year that we try to get that up. A couple of points and then the wildcard is really the below the line. After today's Fed call, I'm not sure how encouraged or not any of us should be, but wherever that number flies to in the sense and then obviously the FX, particularly, the pound. So that's really the wait and see. So we're just trying to get a rough super early days view, obviously, hopefully all of us will know much more in 90 days.
Our next question will come from Ramsey El-Assal with Barclays. You may now go ahead.
Hi, thanks so much for taking my question tonight. I wanted to first ask about Russia and maybe if you wouldn't mind updating us on the size of that business, so we can kind of contemplate what it might mean to take it out of numbers. And also just I'm pretty sure the answer here is, it's not contemplated in that preliminary read of next year, but the idea would be if you came to an agreement there to solve the business then we would then need to sort of get that out of our models next year?
Hey, Ramsey, it's Ron. So yes, both good questions. So on the first one, it obviously depends on the FX, but kind of ballpark it's $100- ish million little bit more in revenue with kind of a 75% EBITDA margin, again, kind of where the FX is today. And yes, we haven't done anything in terms of taking it out. Although, of course, we've looked at models where we sell it for X and we use that cash to buyback, which really manages, obviously, the dilution as we look into next year. So we'll certainly keep you guys apprise, we're kind of live out shopping the thing now. So we'll keep you posted.
And I'll just add, this is Alissa. The specifics around Russia have been included in our 10-Q disclosures previously as well in terms of sizing.
Great. Thanks for that. One quick follow-up from me. On the FTC matter, I guess first, is there any sense of timing in terms of when this might be resolved? Is this the type of thing that where there's a relatively protracted negotiation? Or will it be resolved sort of in short order to the degree that you can tell. And then, Rom, you seem pretty confident there's no P&L impact here. Is there any best or worst case type of outcomes? Or is it really like no matter how the cookie crumbles here, you guys are going to come out of it okay?
Yes. On the first one, we're clearly on some kind of glide path, right? The things in the sense. So a guess would be a couple of months, two, three months depending on how the chit chat goes and when the court gets back involved if they do. So that would be my guess. On the impact, yes, there's nothing either in their order, which the judge said no to or really anything were contemplating because its disclosure based, again, Ramsey, right? It's not, hey, we can't charge something or we can't sign up a customer or whatever. And so, the good news is, we've done a bunch of things and have a chance to see and obviously we're reporting those changes are embedded right in the results we're putting out.
So again, there's nothing we can see that would have any material go forward impact. So probably like you and others on the call, we mostly just want to get on the other side. We repeatedly said just be specific, tell us what it is that makes everyone happy and we're happy to do it. And so, we've done a lot of that. And again, it's at little to no impact. I mean, when you can sign up 96% of a couple of hundred thousand customers to say they want to continue affordably with your program, and you've given them the biggest Ts and Cs and boxes that you have, it makes me feel pretty confident that we've been straight ahead with people.
Fantastic. Thanks for your answers. Appreciate it.
You bet.
Our next question will come from Sanjay Sakhrani with KBW. You may now go ahead.
Thanks. I guess question for you, Ron, just on the valuations for M&A. I mean, it just seems like there's been a pretty marked decline in fintech valuations. I'm just curious if you're seeing anything pop into your wheelhouse, how we should balance that relative to share repurchases?
Yes, Sanjay. I think to your point, there has been some bit of a reset in the last few months and you can see by what we've announced in this quarter that when we started the process, we focused on these capability things, because no matter what the price is, they're about capabilities and they're not large amounts of absolute money. We do have a couple of what I'll call more traditional kind of sleep core in the wheelhouse deals that seem to be in ranges that we like that we can transact at.
And then second, I think, let's see how the thing plays out. As you know, people move their valuation aspirations with time. And so to the extent that people wait and stuff doesn't trade, we think that there could be even a further reset next year, because right, some people are getting squeezed these days. So we're optimistic that things will get better and we can go back to targeting some larger deals.
Okay. Just to follow-up, Alissa, you mentioned the fuel price softness -- sorry, the fuel softness, volume softness. And I'm just curious if we just dig underneath that, is there something going on there? Do you think its macro driven or what's driving that? And then just a clarification on the interest expense. So we should target around $300 million of net interest expense. Just want to make sure I got that number right? Thanks.
Yes, Sanjay, it's Ron. Why don't I take the first one and then let Alissa take the second one. No, I'd say the fuel kind of volume in transact, I think we reported, I think, 4% volume growth, transaction growth for the quarter. I would say it's pocketed, there's a couple of spots like SMB trucking that are a bit softer than normal, although most of that's offset by enterprise, the big trucking firms. I think the biggest thing, Sanjay, is in some of the research we deal with kind of local SMB accounts, the higher price had a smidge of elasticity, kind of moved them back a little bit like, hey, will shrink the radius of where we do a plumbing call. We won't go 30 miles out of the city now, we'll only go 10 and stuff. And so I do think what the prices were at those peaks, whatever three, four, five months ago, that also dialed it back a bit, but I'd say we're in the smidgey level. It's really nothing significant and it's really nothing across the board. Do you want to take on interest?
Hey, Sanjay, it's Alissa. So on the interest side, I think you're asking about going into ’23. So everybody in the world seems to know that Fed funds target rates have just skyrocketed. We will close out the year somewhere around 3.75%. As a reminder, we all started around zero. And going into 2023 targeting somewhere around 4.5% to 5% for the year. And so we're really out looking at interest expense probably around $300 million plus. So maybe I would take our numbers multiple it by two and you're probably in the ballpark.
That's the net number too, Sanjay, right? There's kind of gross interest expense and then we've got a bunch of cash at high rates. So to Alissa point, the gross number is significantly larger, it probably comes down 20% or 25% with the cash that we have offsetting it. But look, it is a total swag a row. We're sitting here like you guys trying to guess what the next 14 months are going to be and we don't know. So we just said, hey, we'll take what we're hearing, we'll kind of run the math that way and we will be a lot smarter when we talk again.
Appreciate it. Thank you.
Our next question will come from Andrew Jeffrey with True Securities. You may now go ahead.
Hi. I appreciate you taking the time to answer my question this afternoon. Ron, some pretty encouraging commentary on margin next year, can you talk a little bit about how much of that is being driven by cloud migration and digital sales initiatives versus maybe being a little bit more selective in terms of the customers who sign up in the current macro environment? And then, if we get a recovery would we expect say in ‘24, would we expect the margin to sort of come back down a little bit as you lean in to new customer growth a bit more?
Yes, that's a really good question, Andrew. So I'd say that the target that we'd like to see in the company is 55%. Again, I think we're penciling at around 52% this year, but that thing moves around [indiscernible] things we buy, right, that run lower margins or weirdo stuff like COVID that crushes revenue quickly and stuff. But I'd say running internal targets closer to 55%. In terms of next year, I think the two things you picked up. One is, we knew this was going to be a half year. I mean, we're going to I think be about $0.70 higher than we told it in February. I don't know if anyone's applauding, but I consider that good news to do better than we said. And so, because we saw that, we kind of open the tickets. We let people work to your point on some additional projects. We tested some additional things. We staffed up in areas we spent. I'd say, money that we could afford to kind of make the targets that we run the company on.
So when I see the world tightening, the answer is, we'll be a little bit more frugal, a little bit more select to use your word. And I think the big thing is really around our view of the economy and the credit environment, particularly around the digital side like you said, because that's where the sales growth, if you will, versus the credit risk are super correlated. So my guess is, we'll kind of enter the thing a bit cautious kind of cut a little bit of the tail at the bottom. I would initially maybe not try to grow that thing in the low to mid-20%, but maybe three to five points lower and see how it goes. So it would be just a little bit of a diet on kind of overall OpEx and a little bit of caution around the micro selling and related credit risk.
Okay. Thank you. Thank you for that. And in lodging, this is a business that you've been adamant is awesome and you've definitely been right in terms of the growth. What do you think that looks like as we lap some tougher compares, what's the normalized growth rate do you think for that lodging business?
I think its high teens to 20%. To your point, we have some favorable comps. We've got a segment in there for airlines, which we're obviously in the ditch or some of it’s that. But we're just -- all parts of that business are kind of going great. We're selling a lot and all three of them, we bought a new software front end of that airline business and airlines are looking to get out of in house work and stuff. So we have the best networks, the best rates to offer the different clients that we have. And so between the scale and the selling machine that we have there and the product, they are pretty specialized offerings, so there's not lots of other players that can offer really what we do, both the convenience and the pricing. So I'd say it's in the high teens to 20% on a normalized basis.
Okay. Appreciate that. Thank you.
Our next question will come from Sheriq Sumar with Evercore ISI. You may now go ahead.
Hey, thanks a lot for taking my question. I have a question on the cross selling opportunities. I mean, it's been a quarter -- it's been like a few quarters where you have talked about growing it a bit slow on that front just to not to offset the customers and the process. But A, what's the update on that process or on the cross selling opportunities? And is there potential for you to ramp up the cross selling efforts going into 2023?
Yes, I think I kind of covered, Sheriq, this comment a bit before, but I'd say, it's still a work in process. So I think it's my summary, that we went headlong into the thing targeting the smaller clients that we have because we have so many of them. And as we get into the thing, we got clear that corporate payments turns on spend, not on client count and that about 5,000 of our clients, of about half of all the spend, all the purchasing. So we've gone back and targeted those. We have some of our blue suited salespeople going into our biggest fuel card accounts now and selling corporate payments. But we're still trying to figure out is there a scene, is there a different place inside of our fuel card client base where we can bring corporate payments offerings. So I think a lot of this is like anything that's new. We're learning, we're trying to figure out what the sweet spot is among the super big base and what the product is that fits that sweet spot. So we haven't given up, still work in process.
Thank you so much.
Our next question will come from Pete Christiansen with Citi. You may now go ahead.
Thanks. Good evening and nice updates there, Ron. I have two questions. One, I wanted to go back to the 12% organic growth that you're seeing in the toll business. Just wondering if you could tease that out a little bit. The base tolls business versus some of the beyond tolls initiatives that you put forth, including the tag fueling stuff. Wondering if you can give us a sense of how is that contributing to segment growth at this point? And then I have a follow-up.
Yes, Peat. It's good to hear from you. So yes, that one I think, per Sheriq question a minute ago, was one that's working. I think we're about 20% now of the revenue there and what we call beyond toll parking fuel. We've also gotten some super early traction on insurance, right, where this vehicle mobility company with millions of customers. And so offering insurance that centers around the vehicle and stuff has been a pretty good uptake. And so it's going well. The fuel number, which I said is excellent, we think around $10 billion annualized exactly as we thought is kind of correlated to the number of sites. So as we add additional sites that basically can read the tag conveniently low and behold trans grow, because more people use the thing. So we build the plan to continue that, take it up by another 25% or 30% next year.
So look, the goal would be kind of over the next two or three years that that stuff is in the 40% kind of range on top of the core business. And we continue to add, I mean, if there was -- it reminds me of Coke here in the US if there was another way to sell a toll tag in Brazil, we know it, like we resell it in stores. We sell with hanks things in stores. We sell it at toll booths. We sell it through car makers. We sell it through insurance guys. We sell literally every way that you can get a toll tag to market. We're doing, selling way over 1 million new ones per year. And so it's a business that despite the competitive setup changing a lot is still performing great for us, super happy with it.
Yes, that certainly sounds exciting. I'd like to pivot to fuel card sales a little bit here. I mean, obviously, when we had fuel prices starting to peak up earlier in the year. I'm sure that was helpful in driving new sales, maybe giving you some -- a good degree of inbound activity. Now, gas prices come down, diesel is still holding up pretty strong. What's your sense for how fuel prices today are still driving fuel card sales, is that tailwind still there? Thank you.
Yes, another really good question. They're super related to your point. If you think about particularly on the digital side, just raw demand, Google counting how many people [indiscernible], you hit it on the head back in the spring or early summer at the peak. That thing was up a lot, right, that inbound demand. So remember, we still sell, I don't know, 40%, 45% of the business non-digitally and some amounts, a decent amount of our digital is us targeting account. So I'd say it's down some from the peak, although the peak was higher than we've seen before, and it aren’t cheap now. The only thing I'd say back is, even at today's current price over the last call it, whatever, five years or seven years, this is still at a super-high level. So I'd say, yes, it's down a bit from the peak, but still pretty robust.
Right. Thanks for the update.
Our next question will come from Jeff Cantwell with Wells Fargo Securities. You may now go ahead.
Hey, thanks very much. And just wanted to follow-up on some of the questions that are coming your way. One of them was, can you talk to us a little bit about some of the early underlying assumptions for fuel in 2023? And the way I wanted to frame the question is, if we're all looking at Exhibit 2 in your press release, which is fuel transactions, fuel revenue per transaction, do you have any sense of what the growth rates there would look like for the next year in order to get you to mid to high single digit revenue growth in fuel?
And then along the same lines, this is obviously a very dynamic macro environment, net interest rate environment, the goalposts are clearly moving all the time. So my second question is, can you talk about what you think is a range, right, that you're confidence and weather there's a wider range in that potential outlook for next year versus prior years. And I too kind of build that the upside-downside to the mid high single digit is the same as in postures and maybe it's this year. I'd just love to hear your thoughts there. Thanks very much.
Hey, Jeff, it's Alissa so in terms of fuel price assumptions going into next year, basically last -- next year consistent with the current-period, so we've assumed fuel prices in the range of $4.37 or with a little bit of downside on the spreads. In terms of your question on rev per trends. I think our intent is generally to always have a nice balance between volume and rate to the extent that there is incremental products being offered. And so now I'd say that we would continue to expect that to be a balanced approach.
Hey, Jeff, let me just -- let me just jump on what Alyssa said, obviously, mix continues to help us, right? We've over rotated the SMBs, so we get sequential rate half each is from the mix because we get more rate on smaller accounts than big. But on the macro question, I'd say, who knows. I'd say it seems if you guys are sitting on the planet with me, it's crazy kind of volatile, not only the things for us like fuel prices, but clearly FX volatility is super high this year. I don't even want to mention interest rate volatility. And so the question is, in 90 days we'll begin to kind of locking down finalizing our plan. Will the forward view be any clearer? Will we be messaging that that thing is going to stabilize some. And so that's my answer to it.
To the extent that the big macro things seem like the volatility is slowing, we'll probably use of some traditional ranges. And to the extent that those macro things have a bigger beta on them, then yes, we probably would have something wider to let you know how those things affect us. But I've said it a million times, like we run the company here forever and we're going to run the company to generate growing revenue and growing certainly EBITDIA profits faster and the below the line stuff will come and go. No one is clapping that I can hear that the macro was at our back and we have $0.70 more, $100 million more, $150 million more in revenue, no one's clapping. No one is sad the other way. So we just -- our game is we just power through it. And look, it can't go up forever if interest rates go up to -- cost goes up to $300 next year, was it going to $500 million in ’24, maybe they're going to add $250 million. And so as long as we can keep compounding the top and the EBITDA line 10 and 30, we're going to deliver mid to high teens EPS over the forecast period. So I say we just don't see any of these variables continuing to rise sequentially year-over-year.
Yes. Thanks for all the color. Appreciate it and congrats on the results.
Thank you.
Our next question will come from Mihir Bhatia with Bank of America. You may now go ahead.
Good afternoon, and thank you for taking my questions. Also [indiscernible] thanks for the updates on the FTC Russia and also the early look on 2023, very helpful. And maybe I did want to start on interest expenses just for 2023. I apologize to go back to this, but just want to make sure we have it right. The $300 million to $320-ish million that you talked about, does that include Russia? I think if I recall correctly, there's a fairly high interest rate there, which you're getting in high cash balance which helps that. So since it's a net number, does that include the Russia benefit I guess?
Hi, there, it's Alissa. Again, it would include any benefit that we're getting off of the deposits that are in Russia, certainly on the income side. We don't really have any expense in that region. So it's really the volume –
[indiscernible] here, I guess, it's a number, it's a rounding error in the [indiscernible].
We do see rates going down in Russia, so hopefully not too big of a lot.
Right. And then the other question I wanted to ask was just in terms of lodging, just wanted to understand a little bit more about the Roomx acquisition in terms of just expanding your workforce lodging business into Europe. Is that -- How much of the business was in Europe anyway? And is this like more of a beachhead where you grow from here? Or just trying to understand a little bit more about that? Thank you.
That's a good question. Thanks for that. So the Roomx business first of all is really a copycat of our US, what we call, workforce. If you think about a lot of the blue collar people that travel for work, that's kind of what that Roomx thing is. So we were delighted to identify someone that does kind of the same thing. So it's really a UK business today. It's got a little bit -- I can't remember 5% maybe of its business in Germany. So the majority of it is in the UK, which is our second largest market, which was interesting to us. And so, yes, the idea there is, hey, they've got assets that sit in the UK, they've got a lodging network that's attractive, they have sales, they have ops, they have tech that runs there. And we have a ton of clients if you could imagine like tons of clients and actually a fair number of kind of midsize and enterprise clients there. So the idea here is, hey, we know this business super well. It's in a market that we got a good position, so we can accelerate it. It's good business on its own. It's got a good group of people. So it's really just like our fuel card business, our other businesses. We we're a global player. If we have a business that looks exactly like a business we have and it's in another country that we can understand, then we go there, we like the price. Back to someone’s question earlier about M&A valuation. I think it was a reasonable price for both sides, which is why the trade work. So it'll certainly accelerate and it kind of sets us up to make a business with bigger TAM that we can understand.
Thank you.
Our next question will come from Bob Napoli with William Blair. You may now go ahead.
Thank you. Good afternoon. Nice job on quarter. I appreciate the outlook for next year. Just I was hoping to get maybe a little bit more color on, I'd appreciate the segment margins that you started giving us, but just with margin expansion next year, where are you most comp in margin expansion next year and then maybe over the long term?
Hey, Bob. It's good to hear your voice and that you're up and Adam here. So good to hear from you. We don't really plan the margin expansion really by lines of business, the discretionary monies that are big in our company are sales in IT. And so, that's how we think about it. For us to goose EBITDA margins 200 basis points will just kind of flatten out a little bit, not grow as fast some of the sales investment in IT and people may say, oh, how is that going to work? Well, when you make a pretty big investment incrementally like we did this year, you pick up the productivity really in the forward years, right, because you've hired new people or you've got new leads in the pipeline. And so some of the investments -- incremental investments we made in '22 will kind of roll in, will pour into '23.
So we've got a decent game plan of OpEx that will service the business we have and meet the growth targets. And again, because we spent a bit more this year, that's kind of helpful to us for next year.
Great, thanks. And just like a big picture question, which part of your business are you most excited about over the next three to five years that's going to become a much bigger piece of your business, if you would?
Yes, Matt, like you, I know it's your favorite. I mean, it's hard not to like what we call our corporate payments business, just because of the enormity. The market, we -- if you guys -- you may get a kick out of the story, but I moved a guy that ran -- still runs our international fleet business to run our old business. So he's here and I'm talking to him the other night. And we get on the corporate teams, Jesus, he says, I never understood like what a mess the US is. With this paper I’m trying to pay stuff. And so like I think as we live here, we don't even think about it. It's just the opportunity there to make that just a gigantic business. It's in our prelims. It's closing on $1 billion next year and we spent -- no one knows as better than you a couple of years getting all the puzzle pieces together so that we've got kind of a full suite of stuff. And so, I just think that the potential is so big and the competition even though you and others keep talking about fintechs. I tell you the whole market is banks and Amex and we're winning, that's where 90% of our business comes from. And so, we just like the chances to bring what we have a great sales again in Q3 record sales. And so that's the business that will be dramatically bigger in the next few years.
Great. Thank you, Ron. Appreciate it.
Be well too run.
Thanks. You too.
Our next question will come from Ken Suchoski with Autonomous Research. You may now go ahead.
Hey, good afternoon. Thanks for all the detail and for taking the questions. I just had a clarification question on Russia. Does the $17 EPS figure include the EPS contribution from Russia? And I just -- can you talk a little bit about how you're able to actually access the proceeds from a sale of that Russia business? Just want to make sure that we have that right?
Hey, Ken. It's Ron. Yes, on the first one. We haven't sold the business, so it's still part of our planning. Although again the idea that we have would be to take the cash from the sale and obviously the retained earnings that we have sitting there and if our stock stays at this price, so obviously buy a lot of it, which will compress the dilution. In terms of the proceeds, it's how we're going to set it up with the buyer. The buyer is going to have to basically be able to pay us outside of there. So it's one of the kind of the conditions of the buyers that we're looking at. So we do have a way basically depending on who the buyer is for them to be able to pay us.
Okay, great. That's really helpful, Ron. And then I appreciate all the continued disclosure on profitability by segment. I just had a follow-up question to Bob's question. I mean, it looks like the corporate payments business has a 43% EBITDA margin, is there an opportunity to bring that segment margin up closer to the corporate average over the long term? Or do you have to continue invest in that business to drive that high teens revenue growth?
That's another super good question. So kind of a two part question. The first one is really scale right, trying to make that business and some of the pieces in it dramatically bigger. So like all of our businesses, it's got a lot of fixed cost, call it, 40% to 50% of the cost structure of that business is fixed. So clearly the incremental margins are better. And then it's really just the trade for growth. Like we -- it's not hard math for you guys, if you want to grow some at 20% versus 10% or 8% you have to spend more money right to grow it faster. And so, that's really the second part of it, given the TAM, given the size of the opportunity, we'll probably continue to over invest and run that EBITDA margin a switch lower than the line average. But again, it's because we're setting it up to grow faster.
Okay. All right. Thanks a lot, Ron.
There is no reason just to sum it structurally. In other words, if you said to me, that thing gets to $1.5 billion or $2 billion and I want to take the growth rate down on the line average. There's nothing structurally that would stop us from having that business look an awful lot like the rest of our line average businesses.
Great. Thanks Ron.
You got it.
Our next question will come from John Davis with Raymond James. You may now go ahead.
Hey, good afternoon. Ron, just want to talk a little bit about bad debt expense and have you tightened the credit box at all? I know we've just kind of normalized, but given where most fuel is, some sort of macro softness is coming at some point. Have you contemplated that especially when you talk about kind of mid to high single digit fuel growth next year?
Yes. Good question, John. Yes, is the short answer. So I think we -- hope we've reported this, but I think we have it, call it, [25:25, 35:35] (ph) is kind of a guesstimate at the full year credit loss number. And so when we saw the thing the forwards, the roll rates get a bit worse. We did tighten the new account selling, so we have two kinds of credit. One is, hey, who are we going to take in? We used to take in 10 people, 10 companies, now we're going to take in eight. So we're going to cut the tail off. And then the second one is really credit lines, right, for customers that we have, right? If we're willing to give you more credit to buy more things, we can get more revenue. So that's the one that we're looking at pulling back selectively kind of in certain areas. So we've done it on new. We haven't done it yet on existing and partly because we have much better information, right. The underwriting is much better on our existing customers because we have all that payment history on them. So that's the key thing for us to watch is really the trade.
Remember, probably about half of all of our credit losses whatever 25:25, 35:35 adds up to whatever $120 million, $130 million. Half of that, John, is basically tied to new business, right? Which -- this is a way high number versus the base. So that's the place that we always start.
Okay. That's helpful. And then just to follow-up on the margin commentary going into next year. As I think about fuel prices probably being flat to down, a little bit higher, at least for the full year bad debt expense. I'm penciling out the OpEx in going to be kind of flat to down year over year to get to kind of 200 basis points or 300 basis points of margin expansion. Just -- I know you said, you spend a lot kind of given the outperformance this year on kind of the better COVID recovery, but just want to kind of make sure that that pencils and that you can kind of hold the line on OpEx in order to get back to kind of what you called normalized profitability kind of in the mid-50s on an EBITDA margin basis?
Yes, again, I want to make sure people are clear. It's super early days where we're doing what we call the envelope work of framing what an envelope is. So we're far from done. But I think the biggest difference to what you said is that the sales investment and the nature of the sales investment has a huge impact on the bad debt on a forward basis. So the easiest way for us to improve profitability in 2023 would slow or cut the tail certainly in the digital micro accounts and keep all that bad debt out of our P&L. So that's the most logical place.
But yes, it's not far off what you're saying that the exit rate of our OpEx, we will, obviously, grow, probably at low single digits. And then what you said, it depends obviously where fuel price is, but remember, that also ties, it’s correlated to bad debt, right? So one of the reasons our bad debt is higher again is our fuel price was higher here in 2022. If the fuel price is lower, by definition, the bad debt will be lower. So look, lots of these variables move together and my messaging is just to tell everybody that we're going to run the business kind of macro constant and then open our eyes to what the macro is and make OpEx and capital allocation pivots based on what we see. And what we're seeing now was, we're probably going to slow the OpEx.
Okay. Appreciate all the color. Thanks guys.
You got it.
Our next question will come from Trevor Williams with Jefferies. You may now go ahead.
Great. Thanks. I was hoping you guys could unpack the 4Q guidance a bit in some of the moving pieces, because it implies revenue is down more than $20 million Q3 to Q4, typical seasonality for you guys is up $20 million plus in normal years at least. I guess fuel prices are lower sequentially. You've got the pull forward in gift, some of the softness in US SMB and fleet, but anything else moving pieces wise you'd call out organically for why you aren't seeing the same normal Q3 to Q4 step up? Thanks.
Yes. I'll jump on that [indiscernible]I think you named kind of most of them. I'm sure it's whatever you're saying plus or minus ten million on whatever $900 million So it's not a material kind of number, but those are it. It's kind of a flip flopping this year versus last -- back last year there was some huge late gift orders because retailers were out of stock from being careful. And so that number was a pretty big blocker number, if I remember, in Q4 last year, this year, they said, hey, we're getting ready sooner and so put tons of orders in. earlier. And then what you said, we're running at, I don't know, $4.30 something fuel price, which has ticked down obviously from Q2 to Q3 and then into Q4, which takes them off the top. But then again, it helps expenses, as I said earlier, both borrowings and bad debt. So the biggest thing is just the normal seasonality. What you said if we look at the last whatever years and you cleaned up pro form acquisitions or stuff, two or three of our businesses soften a fair amount. This just what work days in the fourth quarter both here and abroad. And so it's just -- it's really just that that Q4 and Q1 are just less workdays or softer and Q2 and Q3 are higher. And so there's really nothing like super stupid going on like as we model the thing to embed the guidance here. I would say there's nothing else that sticks out.
And maybe I'll just add on to that a little bit. We talked about it earlier in the call about interest expense really is, significantly worse than where we -- I think we all projected even from a Fed's perspective back in July when we were getting our previous guidance. And so that is a big headwind going into the fourth quarter.
I mean just for you guys, like, I don't how you see this, but hey, we're kind of staying put in the second half, the revenue for second is a pinch higher than we said 90 days ago, and I guess the profits are the same. I said before, our macro was off by $8 million, the runway interest expenses, whatever, $20 million higher. So underneath the hood, we've been able to do some things to make the thing work. So the trend and the performance, again, separate from the macro, my message would be a pretty good, kind of as good or better than we thought 90 days ago. So we're not seeing any kind of blinking red lights yet. And like all the questions on this call, the profitability a lot will turn on where those macro things land and glide path next year.
But I just do want to remind people that like to own stock for more than a week that what comes up, does come down and things don't keep going up for multiple years in a row. And so, don't forget, [indiscernible] went up this year, right, in 2022, fuel prices went up, interest rates are going to be started obviously lower. And so these things will move again. I just don't think we've ever seen volatility like this, honestly. The amount of movement in some of these factors in the time frame that they've moved. That's what seems strange to us.
Yes. Understood. And then just as a follow-up on corporate payments. Just thinking about the macro sensitivity there. If we go back to 2020, perfect storm of the stuff that worked against you. But I think some of the cyclical exposure there had been a bit of a surprise. Now today, you've got AFEX, Global Reach is going to close shortly. So you'll have more FX hedging and cross-border exposure than you did two years ago. I know you're saying high teens as a target for next year. But kind of with that pro forma revenue mix, any view just on how that segment should hold up in a recession kind of where you'd be most vulnerable, the pieces of revenue you think should be most durable? Any help there would be great. Thanks.
Another good question. I'd say it will hold up well. And the reason is, COVID isn't -- was a bizarre macro thing, right, keeping people at home. And so it ticked off hard companies, cruise ships companies that that made a living working, so we had some punishing set of clients. The great news about the corporate payments business is the majority of the payments are locked.
[indiscernible] IT services, companies mostly can't get out of the AP that's in front of them, even if their own situation softens some. And then, B, you heard again today, there's inflation which rolled into obviously company spend. And so I'd say of all the businesses, that went ought to hold up well because the spend is pretty fixed and will likely go up. And then on the cross-border side, I think you hit it, FX volatility, a little bit like high fuel prices creates greater interest in FX management.
And so to the extent that different countries have differential plans on interest rates, which triggers FX volatility, that should be helpful to that business, which we're seeing now. So all in all, I'd say, we like the chances for the business next year.
Great. Thanks.
Our next question will come from Andrew Pokevitz with JP Morgan. You may now go ahead.
Hi, everyone. Thanks for taking my question. Just one, getting back to the M&A side. I know you mentioned that you feel increasingly good about your positioning of the company broadly and obviously, global reach further [indiscernible] FX business, Roomx, Levarti on the lodging side. I was curious which areas are most interesting for you guys right now looking for incremental M&A next year?
Andrew, it's Ron. That's a good question. I would say that we've done a lot of the positioning work literally last year and this year. If you look at the beyond strategies of building out what segments we can play in like our Corpay One business for SMB and corporate payments or the lodging thing being international or the front end of our mid-market corporate payments business with a process AP automation tools. So I think we really assembled like a lot of products and a lot of capability so that those TAMs are bigger, and that's the sales and revenue we can chase are bigger.
I think we're kind of ready to pivot back to more of the wheelhouse scale base, let's buy stuff, we can run better, sets the businesses. I'm not saying that we won't do more if there's probably some more stuff around EV that we're sniping that's still in that kind of capability thing. We want to be super good there, ready there. But that would be the thing. Any one of the two or three main businesses, Corporate Pay and lodging for sure, where we could get wheelhouse deals that are larger and accretive would be the number one preference.
Got it. That's helpful. And one quick follow-up. You actually just mentioned the EV. I was going to ask on -- you mentioned your -- all your methods of toll distribution before and reaching consumers. So I wanted to ask if you could for us in parallel to your consumer side ambitions in the EV space and what you could share with us there? I know it's early still.
No, it's a good follow-up. It's one of the things, one of the models that we know well that cause has allowed us me to pull the trigger on an EV business that was consumer centric. And what we realize there's no credit risk, it's really a network play, building a super duper EV network that's advantage, which can sound a lot like the toll. So I think the biggest translation is partners could help.
So if you think about the consumer business in Brazil, yes, there's a lot of direct capability, having hundreds of people stand at toll booths or in malls or kiosks and stuff. But the partner model that our Brazil guys have built, every Nissan car with a toll tag when you come in at two of the largest banks, reselling our stuff at a 40 million accounts that model of OEMs that make EV cars aren't going to be EV cars unless the existing or new EV manufacturers make them, and same with CPOs, there's not going to be any cars that people can't recharge them.
And so those two partners, the light went on for us, "Oh my gosh, we can build a consumer business kind of B2B to C by working through these partners and they're going to embrace us. So that's kind of the thinking and that's the feedback we've had from talking to those various groups. So it allows us to basically getting in our gun sites, a new extension for our company without doing some were Super Bowl at, right, to try to get to consumers. So that's the thing that we like about it.
Got it. Thank you. I know [indiscernible] Super Bowl ad. So I'll leave it there and congrats on the result.
[indiscernible]
Thank you.
Our next question will come from James Faucette with Morgan Stanley. You may now go ahead.
Hi, everybody. Thanks a lot for all the color and perspective. Just a couple of quick follow-up questions from me. You guys have been really active in buying back your own shares, obviously. But at the same time, you have started to pick up the acquisition activity as valuations have come down. How should we be thinking about like capital allocation priorities and where you're seeing opportunities? And should we at kind of a continuation of the current mix? Or what are your expectations there right now?
Hey, James, it's Ron. The answer is, it depends, right? Our capital allocation priorities, I think, are unchanged. We start with deals because they position the company and most of the ones we do create accretion. So that's been obviously number one. But it depends really on our stock price. Obviously, the stock price -- we are buyers with a better company to buy than people shop in the companies for higher multiples. And so if our price is at these levels, I think we're probably leading to buying more stock back mostly because of what I said that we've gotten so many of the positioning or extension, the strategic deals, if you will, kind of behind us. We kind of have the set of things we need to run the company. So at today's stock price, I'd say, we're probably more buyers of our stock than something else. At higher stock prices with probably, the pendulum swings back a bit the other way.
I appreciate that. And then just a quick follow-up on kind of the fraud and debt issues. How much of that is just purely function of fuel prices. And as those come down, that self resolves? Or are you seeing anything different in the current cycles than you have previously that could indicate it could be kind of an ongoing issue even if fuel prices do come down next year?
Yes. That's a super good point. It's most of it, right? So higher fuel prices, right, create more total spend. So the loss event is higher, right, 100 gallons at $5 instead of 100 gallons of $3. And then second it attracts more fraud, right? You get targeted more by criminals, again, when the price is higher. So really, the question is, if that normalizes, those two things should improve.
And then it really swings over to just the economic health right of clients and prospects for us. Do they remain healthy and able to repay and stuff? And so that's the open question, I think. We're not seeing a lot in that. If we look at our distributions, the higher quality accounts are repaying, the [indiscernible] problems like always are in the more credit challenged group. So it should reset if fuel prices stay at this level or a smidge down, both fraud and overall loss levels will decline.
Got it. Thanks for that, Ron.
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