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Greetings. Welcome to the FLEETCOR Technologies Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Eglseder, Head of Investor Relations. Thank you. You may begin.
Good afternoon, everyone. And thank you for joining us today for our Fourth Quarter and Full Year 2021 earnings call. With me today are Ron Clarke, our Chairman and CEO, and Charles Freund, our CFO. Following the prepared comments, the operator will announce the queue will open for the Q&A session. It is only then that you can get in line for questions.
Please note that 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 discussing organic growth. As a reminder organic revenue growth neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices and fuel spreads and includes pro forma results for acquisitions closed during the two years being compared.
We will also be discussing non-GAAP financial metrics including revenues, 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 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 do need to remind everybody that part of our discussion today may include forward looking statements. These statements reflect the best information as of today. All statements about our outlook, new products and expectations 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 it. 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 and 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 Clark, our chairman and CEO, Ron.
Okay, Jim. Thanks. Good afternoon, everyone. And thanks for joining our Q4 earnings call. So up front here, I'll plan to cover three subjects. So first, provide my view of Q4 along with full year ‘21 results. Second, layout our 2022 guidance and priorities for the year. And then lastly, I'll share my thoughts on the company's midterm imperatives.
Okay, let me make the turn to our Q4 results which were quite good. So we reported revenue of $802 million up 30% and cash EPS of 372, that's up 24%; both record highs for the company. Revenue came in quite hot, almost $40 million higher than the revenue guidance we provided 90 days ago. Organic revenue growth for Q4 good up 17% also up 7% against Q4 of ‘19. Every line of business double digit organic revenue growth in the quarter.
Our Q4 trends continued quite good. Record sales in the quarter up 40% versus prior year; steady revenue retention at 93%, same-store-sales healthy at plus 6%. We have had some notable call outs since we spoke last. We formalized our partnership with the largest bank in Brazil which will help distribute our total products. So we expect lift there. We launched formally our Corpay One SMB platform business. So getting our corporate payments business into the SMB space. We just completed another investment on an EV software company. We upsized our term loan of 750 million. We repurchased over 3 million FLT shares in Q4 and in January and we completed the rebranding of our corporate payments business, all the brands now under Corpay.
So in summary, really a good finish to the year better than we expected and the trends helpful as we look into 2022. Okay, let me turn to 2021 full year. I think we characterize 2021 really as a comeback year, where we moved ahead of our 2019 pre-pandemic baseline, really good financial results, ‘21 revenue of $2.8 billion up 19%. Cash EPS of 1321 also up 19%. Both of those results record highs for the company. We did open 2021 with an initial guide of 1231 of cash EPS at the midpoint. So now finishing $0.90 better than that initial guide.
So clearly a better year than expected. Organic revenue growth for 2021 up 12%. That's the highest organic revenue growth that we've ever reported. 2021 sales, super good record levels up 46% versus 2020 and up 19% versus 2019. We've added 175,000 new clients to our books and ‘21 across the world. So strong demand for our services. We did close to accretive acquisitions in ‘21 and expect to gather those to deliver $0.50 to $0.60 of incremental cash EPS here in ‘22. So all in all a meaningful recovery from 2020.
All right, let me cover now our initial thoughts on 2022 guidance along with the priorities for the year. We've mentioned before our stated midterm objectives for the company are to grow sales 20% plus, to grow organic revenue 10% plus and to grow cash EPS 15% to 20%. Good news our ‘22 guidance meets all three of these objectives. So here goes for revenue in 2022 at the midpoint $3.22 billion, that’s up 14%. Cash EPS of 1525 at the midpoint up 15%. Organic revenue growth overall up 10% and sales growth just over 20%.
This guidance does not include any forward capital allocation beyond deleveraging. There is no real macro help in these numbers. We're basically looking the macro to be neutral. Yes, higher fuel prices but really offset by some weaker FX. We have assumed about a 1% COVID recovery in our same-store-sales client base coming back this year in ‘22. Confidence pretty high in these numbers. About half of the expected year-over-year performance improvements is already in our exit rate or run rate coming into the year. So that helps. Our recent sales and retention trends support the forecast. Most of the synergies for the two big acquisitions are really already baked. So we expect to get that accretion. And we have repurchased about 6.5 million shares from a year ago. So obviously going to be quite accretive.
In terms of priorities, we have picked a few things that we will invest in incrementally this year. So digital sales. We are expecting a big increase in digital sales production in ‘22 and are making thus incremental investments in digital advertising, and staff. IT, big investments in IT transformation to accelerate our move to the cloud, in this platform business that I spoke of where we're joining up our walk around services with our central AP services, going to push those platforms pretty hard and get a read on demand. So all in all a pretty ambitious year.
Okay, so last up today I'd like to talk about our midterm prospects and the imperatives for the company. I thought it might be helpful to rewind just a bit. For anyone new on the call. Just remind everyone who FLEETCOR is and what we're trying to do. So in a nutshell FLEETCOR provides B2B specialty payments solutions, really all intended to do one thing, which is to help businesses, our clients spend less primarily by controlling what they buy and what they pay for.
Our differentiation kind of really comes in two forms. First, our products are highly specialized. We target certain kinds of clients with very specialized needs. So our products would look different for trucking firms than they would look for plumbing firms. Our travel services will look different for blue collar travelers than they would for white collar travelers. So very dialed in kind of product line.
And second, we operate more than 15 proprietary acceptance networks that allows us to capture very unique data at the point of sale. We also enjoy very favorable economics, which we share with our clients. So this focused or specialized approach, coupled with a two sided business model has allowed us to deliver consistent growth over a long period of time.
So let me turn to the three imperatives, the big things that we're on that we think are critical to driving sustained growth over the long term. So first up is EV. We're working, EV and the in the energy transition hard. We do feel like we've made a lot of progress so far. So both here and in Europe, we've added public acceptance networks for EV. So public charge points or recharge points. We've invested in EV software companies that facilitate at home recharging and reimbursement. We signed up a few 100 clients to our EV service to get feedback on the service. And initially here we're seeing the revenue or the you economics from our service, EV service roughly in line with our more traditional refueling services. So look we're on this EV, we will manage along with a transition and continue to report out.
Second imperative is digital where companies working super hard to make the digital transition accelerated by COVID. So the first thing I'd say is sales has really made the pivot. So last year, over 50% of our global fuel card sales came in digitally and over half of those processing end to end with no human intervention. On the marketing front, we've moved our focus to top of the funnel. So we're using digital advertising, ABM technology to identify prospects interested in our services. On the client experience front, we've really advanced our UIs and their capability to allow our clients to do more themselves. So faster and easier than ever before. And at the point of sale, we've added new ways to transact with us beyond cars. So including mobile phones, RFID technology, even connected cars, so a lot of progress on the digital front.
So last up is diversification transitioning our portfolio to bigger TAMs into higher growth segments. So you've heard us speak of beyond, going beyond, in which we extend each of our existing businesses into adjacent market segments to create more opportunity. So just a few examples there. So our corporate payments business, traditionally a middle markets business, now entering the SMB space. Our travel or lodging business really a workforce, blue collar focused business, has recently added airline or lodging for crews, and displaced homeowners or homeowners insurance companies really to extend the potential of that business. In Brazil, historically a toll centric highway centric client base, we're now adding hundreds of 1000s of urban or city dwellers to our expanded offering. So look over time, we do expect these adjacencies to increase the opportunity for each of our businesses.
Platform business, I mentioned we will join up our specialized payment solutions into one comprehensive platform in which a single business or client could use, for example, our smart business cards, our travel solutions, and our online bill pay services all from the same UI and all from us. So this platform concept really combines our capabilities for employee walk around kinds of purchases, along with central bill pay. So we think the platform idea has big potential and can be quite additive to the specialized payment services that we offer now.
As a result of these extensions, we are expecting our global fleet card business to account for about 40% of the company's revenue this year that's down from about 50% five years ago. So again, repositioning for faster growth. So we do plan to work these three midterm imperatives hard; EV, digital and diversification. Of course, we'll report progress as we go.
So in conclusion today, back to Q4 again better than we expected and good trends coming into the year. 2021 really, again a comeback year, finishing much, much better than we thought at the outset. This year 2022 another guide to growth, organic growth of expected a 10%, earnings expected to be up 15%. So a lot of distance from our pre-pandemic baseline and the midterm again, we're pretty focused on these three imperatives that I just outlined, key to sustainable growth for the company.
So with that, let me turn the call back over to Chuck to provide some additional details on the quarter. Chuck?
Thanks, Ron. So jumping into the product category details behind our 17% organic revenue growth in Q4. Corporate payments was up 18% with another quarter of strong performance in full AP which was up over 50% yet again. Our card products virtual and multi card were up 16% and cross border was up 14% which is normalized for the AFEX acquisition we closed in June.
In cross border, we completed the final customer migrations from AFEX systems to our Corpay cross border platform in December. We'll continue with the integration of back office systems and processes throughout this year. Our [thesis] are holding with synergies and accretion in line with our expectations. I'd like to give a big shout out to our integration team, as it's due to their hard work and dedication that the conversion has been so seamless and successful.
Fuel was up organically 12% with growth in every geography, largely as a result of our digital sales efforts and strong retention rates. Our ability to sell and retain fuel card customers around the world demonstrates the attractiveness of our offers, the competitiveness of our products and the effectiveness of our technology. We continue to make good progress in developing and marketing our EV charge management solutions, particularly in Europe, where we now have over 5000 clients with EV enabled cards or fobs. We've also been actively expanding the on road network acceptance of our EV solutions, with approximately 6500 charge points in the UK now accepting our products. This represents about 22% coverage of all publicly available charge points in the country.
On the continent, we've got around 85% coverage, as our products are accepted at roughly 190,000 charge points. We built a dedicated organization to advance our EV efforts and will continue to support our fuel card customers as they slowly migrate to EVs. Tolls was up 17% compared with last year as strong new sales up 20% and some new retention initiatives are really paying off. We made tremendous progress to expand our toll business this year. We doubled our fuel locations year-over-year to nearly 1200 and we had nearly half a million active fuel users as of yearend. We recently signed Mitsubishi, Hyundai, Toyota and Kia to install our tags on vehicles before they leave the factories. And as Ron mentioned earlier, we completed our joint venture with Keisha, Brazil's largest bank.
Our lodging business continued to perform well up 39%. Workforce lodging has improved with higher volume, and airlines especially outperformed with organic growth over 100% as domestic air travel rebounded from COVID lows. The integration of ALD solutions, a provider of lodging services to displaced policyholders of major insurance companies is going quite smoothly. We're increasingly confident in the value it will deliver. Gift organic growth was 19% year-over-year. As the new efforts we've discussed on the last several calls continue to produce results, especially the retailer online sales channel. We also saw a pickup in card replenishment orders, which had been delayed due to COVID concerns.
Now looking further down the income statement, operating expenses of $462 million represented an increase over prior year, primarily due to the addition of the AFEX and ALE operations, as well as higher deal and integration related costs, increases tied to higher volumes across our businesses, stock compensation, and new sales generation activities and investments to drive future growth. Bad debt expense was $18.5 million or five basis points, as credit losses have returned to more historical levels. Interest expense decreased 9% year-over-year due to a slight decline in LIBOR rates and the offset of higher interest rates applied to customer deposits and cash balances in certain foreign jurisdictions. We incurred $9.9 million of costs during the quarter associated with the incremental $750 million in term B debt we added in December.
On the term B increase, the rate was the same as our existing facility and LIBOR plus 175 basis points and matures in April 2028. Our ratings and leverage remained effectively unchanged, reflecting the strength and earnings power of our company. Our effective tax rate for the quarter was 25.6% versus 20.3% last year, with the increase driven primarily by the lack of excess tax benefit on stock option exercises.
Now turning to the balance sheet. We ended the quarter with over $1.5 billion in unrestricted cash and we had $1.1 billion available on our revolver. There was $4.9 billion outstanding on our credit facilities, which included the incremental $750 million term B debt I just mentioned.
Finally, we had $1.1 billion borrowed in our securitization facility. All in as of December 31 our leverage ratio was 2.71 times trailing 12 months adjusted EBITDA as calculated in accordance with our credit agreement. As Ron mentioned, in the quarter, we repurchased roughly 2.3 million shares and in total, we repurchased about 5.5 million shares during 2021. We also bought 1.1 million shares in January, under our 10-B51 plan. You may have seen in our press release, that our board authorized another $1 billion in repurchases. So taking all that into account, we still have almost $1.4 billion authorized for repurchases as of today. We believe we have ample liquidity to pursue any near term M&A opportunities, and continue to buy back shares when it makes sense.
I think it's important to remind everyone of the power that our earnings and cash flow gives us. Recapping 2021; we repurchased 5.5 million shares for $1.36 billion. Our guidance for share count for 2022 is down 7 million shares from what we guided a year ago. We spent $950 million on deals, which will generate incremental earnings of $0.50 to $0.60 per share next year, and continue to provide growth in future years. We also raised an additional $1.55 billion of term B debt, $800 million in Q2 and $750 million in Q4 at very attractive rates and terms, and our leveraged barely changed. We believe the combination of our strong position, the structure of our business model and high recurring revenues will enable us to deliver consistent quality growth year after year after year.
Now let me share some thoughts on our Q1 outlook and our full year assumptions. Looking ahead, we're expecting Q1, 2022 revenue to be between $740 million and $760 million and adjusted net income per share to be between $3.45 and $3.55, which at the midpoint is approximately $0.68 or 24% higher than what we reported in Q1 of 2021. You may notice the midpoint of our Q1 guide is also approximately $0.22 or 6% lower than what we reported in Q4 of 2021. This is largely due to revenue seasonality where certain businesses such as gift and tolls have strong fourth quarters, while fuel and lodging tend to have soft first quarters due to weather and holiday. As such, the first quarter tends to be the lowest in terms of both revenue and profit for our company.
I'd like to note a few assumptions underlying the full year 2022 guidance Ron provided earlier. We expect bad debt to be about $30 million higher than 2021 levels as we see a return to more normalized credit losses due in part to increasing sales production. Our interest expense guidance of $90 million to $100 million assumes 325 basis point rate increases throughout the year. And our tax rate is also expected to be higher at between 24% and 26% as we expect any excess tax benefit from stock option exercises to remain low relative to the last few years. The effects of these higher expenses will be partially offset by the lower share count resulting from our repurchase activity over the past 13 months. The rest of our assumptions can be found in our press release and supplemental.
Now let's move beyond the results and the outlook. Since we last spoke, our new ESG report was published and is available in the investor relations section of our website. Some highlights you will find in the document are more details around our workforce advantage, including our comprehensive employee development and training programs, and our adoption of the Rooney rule for all vice president and above positions, as well as some reporting on our global data centers, including the significant reduction in power usage and footprint which are down 40% and 62% respectively over the last five years.
Finally, I would like to thank our nearly 10,000 employees around the world who helped us deliver a strong finish to a great year and who will be the driving force to even greater heights in 2022. Thank you for your interest in FLEETCOR. And now operator, we'd like to open the line for questions.
Thank you. At this time, we will be conducting a question and answer session. [Operator Instructions] Our first question comes from the line of Pete Christiansen with Citi. Please proceed with your question.
Good evening [Technical Difficulty] which is good to say. Ron, looking at the outlook, which [Technical Difficulty].
We are struggling to hear you.
I'm sorry. Can you hear me?
Yes. [indiscernible].
[Technical Difficulty]
Hey Pete if you could dial back in.
We will take next question.
Thank you. Our next question comes from the line of Ramsey El-Assal with Barclays. Please proceed with your question.
Hi, thanks for taking my questions and I appreciate it. And congratulations on solid results in the fourth quarter here. I wanted to ask about CapEx as a percentage of revenue. It looks like it moved up to 4% from 3%, where it's been for quite some time. Now. I know Ron called out a lot of critical business investment. But I'm just wondering should we view the investment you're making is more kind of cyclical in nature, and meaning you're kind of finished with this investment cycle and maybe CapEx as a percentage of revenue will tick back down again? Or is this sort of what we should expect in terms of a new level of business investment going forward?
Hey, Ramsay it’s Ron. I'd say probably the latter probably think about this level, this four percentage level and the two drivers kind of new things in the last couple of years of be that Brazil network build out that we've referenced before. So a fair amount of costs in getting those incremental few 1000 stations up. And then two, we've earmarked a fair amount of kind of incremental money for the IT transformation. So not just enhancing, obviously, the systems we have but effectively building new ones in parallel. So I say those couple of things would have at least probably a couple more years to run, and they bought them back down a bit.
Okay, thank you for that. And on capital deployment or balance sheet deployment more generally, maybe Ron if you could give us your view on the appetite for sort of A, first buybacks versus M&A and then on the M&A side, I'm really curious to see whether you're seeing more opportunities emerge or the deal pipeline increasing just because the valuation environment seems to have shifted down quite a bit. It might be a little too soon, but I'm just curious what you're seeing out there.
Yes, good. Good question. So I'd say that our priorities are unchanged. Ramsey, right. We're first M&A if we like it for capabilities and/or accretive. But as you can tell from Chuck's comments, earlier, we -- we say 6.5 billion shares we bought back in the last 12 months. So we've had a bit of an appetite for own stock which we think is appropriate. In terms of the M&A we did press the pause button, call it three months ago, when we saw the volatility both in our own stock and in some of the others in our category. And so literally post this, we're going to kind of reach back out to some of those things that are super late in the pipeline and test where sellers are basically. We've got a view of where we are now. So I'd say ask me again in 30 days, whether sellers have gotten the message that things are volatile and maybe there's a lower price that they'll take.
Okay, Ron, thanks so much. That was really helpful. I appreciate it.
Thank you. [Operator Instructions] Our next question comes from the line of Darrin Peeler with Wolfe Research. Please proceed with your question.
Hey, thanks, guys. Nice end to the year. When we look forward on the fuel segment on a stack basis, you're running in the low single digit range now, but I think embedded in your outlook is definitely an acceleration. Can you talk through that a bit in terms of the OCR side versus the fleets, the local fleets and really how you're going to bridging from the run rate now to a higher level of growth? And then just have a quick follow up on the corporate payment side?
Hey Darrin hey it's Ron. Yes, I'd say the guide, embedded in the guide for ‘22 with the high single digits for fuel cards. So off of obviously, more normalized comps, this year. And part B yes the [OTR] which is I don't call it 30% of our business globally across here Europe and Brazil, continues to run softer the COVID impact and getting drivers to soften that business more. So I think it's inside of our high single digit, that thing would be a smidge softer than the local or partner business.
Okay, and you've had a decent sales that's probably flowing through it?
Yes, you kind of cut out of it. But if you said we had decent sales, I mean, we've had literally record sales in the fuel cards business.
Right. Yes, I figured that's flowing through and starting now. Just a quick follow up on the corporate payment side. I mean, really, I'm trying to figure out when the cross sell you think is going to really kick into full gear for core pay, right when we think about the opportunity, and really this software and invoice pay side versus the virtual card alone, but really the holistic offering Where do you think we're going to be, when do you think we're going to be at a full scale effort around that initiative which sounds like I know, there's been a lot of good industry chatter on it, but I could probably go through some meaningful trends. Thanks, guys.
Yes. Another good question. I'd say probably another quarter or so. And then let me tell you why. So we started out all that in the second half testing, going out to call the 1000 clients, 2000 clients putting them on a new payment platform, seeing if they had an interest in our new platform bill pay solution, saw some decent reaction to it. And so what we've decided to do is kind of be careful in changing the payment platform and basically presenting a new service at the same time where we want to be super cautious around not upsetting if you will, the golden goose to these fuel card clients. So we're moving to put that platform in against a broad set of clients, get them comfortable using that and then effectively present higher this add on for them. So my guess is probably somewhere in Q2 we'll be able to report out on.
That's great. That's good to hear Ron. Thanks, guys.
Our next question comes from the line of Sanjay Sakhrani with KBW. Please proceed with your question.
Thanks. Good evening. Just question on the expense growth, obviously very strong coming out of the pandemic, sort of deflationary there. Could you just talk about how much is driven by inflationary pressure versus more investments you're making and kind of what you're assuming that's going to translate to in terms of top line growth?
Yes, this is Charles. So the expense growth you're seeing comes from a couple of different areas. One, we've got the AFEX and ALE acquisitions that are rolling in. So that's number one. Two, we have got the normalization of credit losses, we expect that to be quite a bit higher, some extra stock comp in there. Also related to the deals we've got ongoing integration costs, the AFEX integration is probably the most advanced will have taken as a company. So to really move them off their systems, close redundant offices, etc. So it's a multiyear journey there, and we're spending money to basically create synergies for the future. So that's also kind of baked in both in the fourth quarter here, as well as into our guide for next year.
We are seeing some inflationary pressure predominantly around staffing. So wages in some of the call centers and such and we've taken measures to remedy that as it relates to vendors a little bit but I'd say that that will help us eventually as opposed through to vendor payments and say our corporate payments arena. So it's a tale of two cities. We're going to have some additional costs from inflation, but we'll also get some benefit from it on the revenue side.
Hey Sanjay it's Ron. Let me just jump over the last thing Chuck said which would be some of the environment is really directed by us choice that we made around EV, capabilities and sales, again some testing and advertising things, and even in IT to really better position the business we like that like the profit number we got to. So in addition to the factors that Chuck just laid out, I do want you to hear that we chose the chase and things that help a company on a forward basis.
Understood, and I actually have a follow up question on the EV point. I'm just curious, Ron, like how you think the distribution channels are going to look like in the future? Some payment processors have partnered with, like the auto manufacturers? And I'm just curious how unconventional the partnerships that you're trying to forge are going forward? I know you have some of them, but maybe just speak to what you're targeting. Thanks.
Yes. I think it's actually been the other way so far. I think we announced again, a follow on and kind of a new investment in software companies I think. Companies that are working on software, see people like us and leasing companies is the best distribution pipe in the fleet particularly as their mix and stuff. And so we continue to like our chances both offering that back to our client base, because we're first to see if they're moving off of a fuel internal combustion approach to something else, so we can spot it in our client base. And then B, we've got obviously lots of coverage, generally trying to bring new clients on into the fold.
And so I'd say, for sure our distribution capabilities are probably as good as any. With that said, we did mention the Brazil thing, which is a bit of a case study where we've now basically put tags, effectively toll tags in with three or four partners, literally, as those cars come off the line. So when you buy your new Kia, whatever the heck it is Nissan in Brazil, it's got us some prior tag when you when you come out. So look, we think over time, these cars will fundamentally coming off the line connected where they're sending data every couple of seconds. And so we mostly want to be set up just to grab that and have relationships where we have access to that connected car information and can then help again the client, whether it’s a public, location work location or at home, basically pay for the thing. So I would say that in earlier in the office, we're just so much smarter on this transition now and how to play and how we're managed or not and what help we need. So I don't know if we're communicating it well but we are just in a way better spot than we were.
Thank you. Our next question comes from a line of Trevor Williams with Jefferies. Please proceed with your question.
Great, thanks. Good afternoon. I wanted to have another one on expenses kind of similar to what Sanjay was getting after but so margins in Q4 were down about 300 basis points from third quarter despite all the revenue upside. It mean is this kind of a new stepped
up level of span that's just kind of rebased higher that we should just expect to run through 2022. Just going to as we're thinking about how much leverage you can get from your guide into 14% revenue growth next year, if you do better than that, if we get kind of another leg back, just on some of the pieces of the revenue pipe that are still kind of lagging versus ‘19? So just give us a sense for kind of what you're, for how we should be thinking about operating leverage going forward, given that you've already it seems like in the last couple quarters, there's been a stepped up level of investment to kind of prepare for the new go to market strategy. Thanks.
Hey Trevor. This is Charles and say that it is a bit of a reset. So some of the acquisitions that we bought do operate at slightly lower margins when you're dealing with big airlines or insurance companies. They're very, very focused on the rates they pay. And they're also require a very, very high level of service. And so we need to make investments. And as the airline volumes of revenue it's pouring back, we need to staff up to accommodate those service level requirements. So I think the 54% is probably a good assumption going for next year. And as Ron mentioned, we are continuing to make investments for future growth. And so I'd say operating margins should hold at that level for the remainder for this year.
Okay, got it. And then Charles, just a follow up on interest expense. It sounds like you guys have three hikes built in to what you're guiding to for ‘22. Can you give us a sense, just and even if it's not an exact number, that's fine, but if we end up at five or six hikes, what the interest expense sensitivity could look like in that scenario. Thanks.
We've got about 5.9 billion that would flow with LIBOR. So for every 25 basis points you're looking at kind of 14 million to 15 million of incremental annualized expense. You're going to see you got to lay that in over time. On the flip side, we do have customer deposits and cash balances that sit around the world of earning pretty good interest on those and so if interest rates continue to rise around the world we might actually see a net benefit.
Got it. Okay. Perfect. Thank you.
Thanks Trevor. Apologize for technical difficulty. It looks like we're going to take [indiscernible] next except I can't promote. Alex [indiscernible] sorry guys. Let's see if we can move to the next one. [indiscernible] okay guys give us just a minute to get this sorted. Okay, well while we wait for that get squared away. Pete questions from earlier how should we think about expectations on the Corpay One SMB initiative factoring into the guide trying to understand if there's upside opportunity versus normalized corporate payments growth expectations?
Can people hear us?
Yes. Definitely they can hear us.
Pete and I can hear but it's Ron. So I kind of answered a bit of this earlier that we're going a bit slower to be cautious style in the cross sales and we are selling to new prospects in the market. So I'd say it would be pretty minimal. So if you looked at our overall corporate payments guide for the year, the SMB piece would still be relatively small. Again, mostly because we're trying to be careful and make sure we have the acquisition economics right. So in terms of upside, I think, yes since we don't have scalable views of that yet. I say, as we get into the second half and get through some of the testing that's going to go on. There could be some upside, we could step on the gas there a bit if we like what we're seeing, and maybe lift the growth rate in the second half.
Okay, and then another question is, can you flush out the Brazilian banking relationship a bit? How do you see this impacting the value prop? And how could this impact use of your revenue growth going forward?
Yes. So we've completed the just joint venture with Keisha bank, it's the largest bank in Brazil tends to focus a bit more downmarket. So if you look at our historic and for our business, we tend to focus a bit more on, I don't say affluent, but kind of more middle class users and such. And with Keisha we'll be able to one move a bit down market and leverage all of their distribution capabilities. So all the branches their ATMs, etc. And so we view it as extensive distribution, but also reaching a slightly different segments around the country that we just weren't as focused on historically.
Let me just jump on [indiscernible]. Hey, it's Ron, I would just add to it that we love how incremental different distribution channels are. So when we bought the business, I can remember 70% or 80%, of all new sales came through the stores, kiosks and stuff in the stores, and toll booths, where people were waiting in line and we diversify that and do digital hang things that retail outbound sales, etc. And then a whole slew of partners, including the manufacturers, the truck reference. So what I say most is we just love the incremental nature of a bank, and those accounts and those relationships and being in that channel. So we haven't put a ton into the guide yet, because that thing just lifted off, I think, a couple of months to three months ago. But we're super excited about it because it is the single largest bank, largest set of account holders in the entire country. And so we're super hopeful again, that that will be additive at Chuck's point because it targets a slightly different set of user than the traditional one.
And I think we have Alex back. Alex?
Ladies and gentlemen, we apologize for the technical difficulties. We will now take our next question. Our next question comes from the line of Tien-Tsin Huang with JPMorgan. Please proceed with your question.
Hey, Ron, Charles, Jim. It's Andrew actually on for Tien-Tsin. Congrats on the quarter. I wanted to ask a question on retention. So obviously still running strong compared to pre-pandemic, a little bit of a slide quarter-over-quarter. But what I wanted to ask was, as you guys started to sell more services in bundles with the corporate pay integration, could there be any lift in terms of retention, as you sell potentially stick your products?
Yes. Hey, Andrew. It's Ron. Yes, we actually have statistics on that. So we look at different cohorts, similar sets of clients and look at whether they have 1, 2, 3 kinds of services and your thesis is absolutely right, that as you move beyond one service, you're stickier with clients have a deeper relationship. Yes. So to the extent that we get what we call our platform or bundle to work in someone had walked around products, and then we were able to get their central bill pay, we do think we'll get a lift. And particularly when the bundle could include smart business cards or fuel cards, which is a prominent walk around.
Great, thank you. Just one more quick follow up. I was just curious were there any hiring pressures or wage pressures that impacted your clients, whether it be in the fuel or corporate payments side that might have been a little bit of a headwind to results this quarter that you could expect to normalize over time? Thank you guys.
Yes. we have a little bit actually, Chuck refer to this earlier in our lodging business where we have a decent size servicing group, which is one of the lowest wage groups kind of in the company. And so I'd say that's the place that we felt some pressure and responded to that in the fall both to retain people that we were losing and add additional people. I think like the rest of corporations in America, we're seeing some pressures in different areas, and IT, digital, certain pockets. But we basically have built that in again, to the guide, I think it's been going on for call three to six months. So I think we're comfortable with what we plan.
Hey Andrew, just to pick up on that I think you were telling me maybe wage pressure on some of our customers. And when I say there, we have seen that in lodging in particular. And so our workforce lodging business, which has recovered, which is not to the extent that were it could is that they've had to actually small businesses turn down jobs, and I can't travel there and do the work because I can't hire the people. And so it'll be interesting to see as government subsidies and other things fall aside and see what happens. The employment market but we think there is some upside opportunity there. Haven't built a whole lot into the plan a little bit, but not a whole lot. But we'd see.
Maybe truck drivers too.
Yes.
All right. Thank you, guys.
Thank you Andrew.
Our next question comes from a line of Bob Napoli with William Blair. Please proceed with your question.
Hi, good afternoon and nice job in the quarter. Ron, I guess can you give some color on your expectations for the growth of the corporate payments business in 2022 and I guess, over the medium term, and maybe the various pieces [indiscernible] versus cross border versus other?
Sure Bob. I say the guide for that business in totalities, in the high teens. And again, to your point, there's different pieces, the payables portion of that virtual cards, Full AP, Chuck mentioned, the full AP, I think grew 50% last quarter. So that will grow a bit faster. The partner business that we called out, will grow slower than that, and probably the cross border business would be closer to the mid teens. So they'd be those different pieces in it. And then you asked me this every time hey, can you grow faster? Well, obviously, if we could spend more money, but we, again, we try to balance what we spend to hit a growth target, hit a profit target and spend wisely so that we don't again have 50% new people, or advertising that doesn't work. So we try again to be disciplined in terms of productive in terms of the money that we spend.
Thank you. Then follow up question. Ron, as you called out at the beginning of the call, FLEETCOR has 15 proprietary acceptance networks, I think for your fuel card business. Are that many necessary? Is there, how do you think about those proprietary acceptance networks versus leveraging an open loop network? What benefits are you getting out of that? Is there opportunity to optimize?
That's a great question. So the answer is, it's not only our fuel card business is kind of the underlying core of the company. So it's the same thing in lodging. We've got 15,000 hotels here in the U.S. out of college, 45,000 or 50,000 we have super economics again, and unique data, we've got a toll network for example high in Brazil. We have fuel networks in I don't know 10 countries, where it's impossible for you or someone to go try to create a proprietary network today. So I call it out really just to remind new people that those networks and the volume that we run through them and the data that we collect and the economics that we collect are just massively advantageous to us when we turn around to the client side to the business account side and pitch our offer to them. So I was really just trying to let people know that it's not some plain vanilla jumping on someone else's network that everyone else basically has access to.
Thank you. Appreciate it.
Our next question comes from the line of David Togut with Evercore ISI. Please proceed to your question.
Thank you very much. The lodging business, did nicely exceed our forecasts for revenue in the quarter. Could you walk through what your forecast is for lodging revenue growth in 2022. And if you could discuss some of the underlying drivers kind of the domestic business versus the international business. And then talk a little bit about travel alliance, which you acquired a couple of years ago? And are you seeing a nice recovery there?
Yes Dave this is Charles. So lodging performing extremely well. We do have some continued recovery to go there, particularly in the airline space. So a lot of the performance you're seeing here is reflective of the domestic air travel. The International has still been way, way down versus historic norms to do that kind of swimming back a bit next year. Workforce has a bit of room to recover, but it's also just chugging along, and doing pretty well. ALE business, which was a recent acquisition accretive, a good buy, for us, still work to do to realize those synergies, but I'd say we're confident that the plans come together. So that looks pretty good. In terms of that specific line of business or product category, I don't have it in front of me.
Yes David, hey, it's Ron. I listened here as Chuck has taught. And so the guide on that thing is plus 20% organically and obviously crazy high in the 40s on a frequent basis, because we bought something, I guess, close in September. And the drivers together that are the sales plan is way up. I think the sales plan is up 35%, or 40%, is our plan for ‘22. And then what Chuck said that there's super sensitivity in outlook particularly the airline, for example, about a quarter of that segment, historically, of our revenue came from international flights, which in Q4 was still effectively zero. And so to the extent that the world opens and airlines go back crossing borders, again, let's say in Q2 we have the contracts and we're already serving the airlines on the domestic legs. And so we've assumed a little bit of kind of balance back in that kind of in the second half. So it's big sales. It bounced back in the airline thing. It's synergies that are baked into the recent acquisition. It's a big sales plan. There's just a lot of things going right in that business.
Thanks for that. Just a quick final question on capital allocation priorities for 2022. You've been very opportunistic with the stock at the current price. You've also been able to make some solid acquisitions. What your thought process for the year ahead? When you look at your stock at the current price versus what you have in the acquisition pipeline?
Yes we're still buyers. I mean, I guess I mentioned in my opening comments that not only do we buy a couple of million shares in Q4 but we made a decision with the board to keep buying at the price into January through a 10-B5 and so I know where the stock is going to be. But at this price we're buyers and I think Chuck said it super well David earlier that was the liquidity we have billion [indiscernible] depending on what cash we elect to use, we could do a lot of things at this kind of stock price we can buy back still a lot more the company. And as I mentioned, we're going to unpause a set of deals that we worked on in the summer into the fall. And so my guess if you said to me, hey, we talk in six months is you see us do both.
Understood, thank you very much.
Yes. Good to talk to you.
Our next question comes from a line of George Mihalos with Cowen. Please proceed with your question.
Hey, guys, thanks for taking my questions. I guess for us just to build off David's question the last one, can you sort of break down for us now the composition of revenue within logic from your traditional blue collar business of the airlines business now? Just trying to get a sense of how they are in terms of size and I was thinking about that bounce back in airlines going forward if it materializes?
Yes. That's a good question. So I think we probably have the details of that, but we do think of it in three pieces or three verticals. So we have what we call workforce, which is the original business we've owned for 10 years, which targets blue collar travelers, a tree cutting firm that goes when the power lines are down. And then a couple of verticals that we've gotten in the last couple of years of airline crew. So the airlines, again, it's a global business. There's 10% of the lodging rooms I think are crew around the world. So a nice segment for us to in and then this newest one for us of homeowner, insurers basically put people when you have water damage, or fire or something like that, to putting people off and then put them into longer term housing.
So the super unique things in terms of the systems that we integrate into the crew management system or into the claim system in the case of the insurer. The networks are a little bit different that we try to put together depending on who the traveler is. And so, I say that the two newest things would be circa 40%, just to give you a kind of a number relative to the workforce [Technical Difficulty] and the good news is all three of those again are growing for the reasons that I outlined a minute ago.
Okay, that's super helpful. And just hey, can you guys hear me?
We hear you George.
Okay. Just a quick follow up on the expense side. I know, it's something that's been talked about here. But if we look at ‘22, I mean, certainly, it sounds like, there are some expenses that are somewhat more transitory. You've got a big increase as the bad debt normalizes and starts to come back. Obviously, you've got some integration costs but can you just help us think about how much of those are a transitory specific to ‘22 versus sort of structural over the next several of years as you accelerate investments to the cloud into your tech transformation?
Yes George let me, it's Ron. Let me take a swing and then Chuck maybe provide a bit more detail. The way that I think about, we think about it is what I'll call kind of discretionary expense. So that we think about the business sitting there to operate and run the book of business we have, we need a set of expenses. We need IT to run and [calm] and people and credit and things like that. And then the big incremental expenses are really sales in IT and then a little bit of management to figure out to figure out the way. And so those are gigantic. They're called those things, I'm talking about $600 to $700 million of our total expense plan in ‘22.
So the call for us is really just how much do we spend in those things, which again, are 50% or more helping 2023 and 2024. Because by the time you sell the thing and get it on board, and you do it by next Thanksgiving the business of the following year, you build an IT thing, roll it out to Christmas. So that's the message I think that you ought to hear is we've made the call when we like the revenue and profit guide that we can get to, to basically chase some things that we like that we think are additive and incremental in the future years.
And so the answer is, it depends. If those things go well, we'll double down on them. Or if they don't, we'll probably back off. If we need a different profit target, we may back off. If we don't. So I say think that those are the ones we kind of keep in our hand on the steering wheel and decide kind of how much we want to do with it. Unless investors tell me Hey, that they don't care about what our profits are. And then and then we might, do more of it. I haven't heard that yet. So we're still balancing it.
Okay, thank you.
Our next question comes from the line of Andrew Jeffrey with Truist. Please proceed with your question.
Thanks. So appreciate you squeezing me in. Ron, lots of pretty interesting initiatives I think first digital, which you noted, is now half of fuel sales and the progress towards the platform selling motion. I'm trying to wrap my head around a little bit and I don't expect you to speak to anything beyond ‘22. But is there anything that we should be thinking about is sort of leaking out of the bottom of the funnel, if you're having success with more value added solutions, maybe expanded spend on fuel cards? I'm not sure you call that out this quarter in particular, but all this stuff collectively should we think that maybe this business can grow faster at the current margin? Or is there I just want to make sure I'm not missing any puts and takes here that you'd want us to focus on?
It's a super good question Andrew. And my answer a little wobbly would be it depends. So what I would say it is this direction we're going of effectively repackaging and integrating a bunch of the products that we have, has enormous, incremental potential for the company, because it'll be served up differently. And it'll appeal to different businesses than we're targeting today. So the first message I'm trying to get everybody to say is, we're on to something that leverages the capabilities we built over 20 years that it's a 10x kind of opportunity for the company.
The profits that we can make is going to be a function of the selling economics of that which we're just getting into. So if you said to me, hey what do you how do you think the profit margins will look in two or three years? My answer is probably pretty similar of the set of businesses that we have, because we've got great experience and history and statistics. And we know the curves. We kind of know we can produce. I would say, we don't know that answer for some of these platform things. And so if those things sell kind of at a line average would be even a smidge worse, I think you'll continue to see growth with similar kinds of margins. And if not, then we'll find that by when we get there and ask people, hey, would you rather see accelerated revenue at slightly lower margins, if that's the conclusion, but it's really just a bit too early to call.
Okay. That's helpful. And then just philosophically or theoretically to follow up, is this a business at some point you'd like to be simpler? Or do you feel really good about all the businesses you're in? I know get this sort of been kind of a mixed bag over the years?
Yes, I think we, it's a great question. I think that it's the old, it's the vantage point, like we made the great idea of talking to you guys and people about the way we run the company, and we have these different payment stuffs. When we sit around in the company, it's really pretty simple. I try to say in my opening remarks of, basically we just work for businesses, and we work on their expenses or their spend, and we try to reduce it. And the programs that we created control what they buy and what they pay for it.
So for us whether it's a lodging room pieces spend or a fuel or business card pieces spend or a vendor, it all looks like a business expense that we're trying to help control. And the reason that it seems complicated is we've made like super specialized ways to do it. So we ended up like talking everyone, hey let me tell you about the super secret sauce I use in lodging versus whatever. And I think we're going to start to talk to the marketplace, your point a little simpler, and just say, hey, look, we're about trying to help you spend less on kind of non payroll expenses, and we've got super special stuff that we've got kind of more generalized stuff. And what's your need, and we've got a product line, let's see if we can help you and maybe get a back off a little bit of all the detail that we provide everybody on how we make the sausage I think.
Yes. I think that could help a lot. Right. Very insightful, thanks.
Selling is a perfect example or whatever, like we use this pivot we made the digital using everywhere in the company. We figured out how to build a tech stack. We figured out how to advertise. We figured out how to automate bidding. We figured out how to get applications processed through the system. We figured out how to make credit instant. We've done like so many things that we can basically print and copy into the other businesses that we have. And so I think you'll see more of that as we launch this platform line, you'll see us tucking the things that we have into the platform and they may see more of the same to people in different.
Okay, I look forward to that evolution. Thank you again.
Yes. You are welcome.
Thank you. [Operator Instructions] Our next question comes from a line of Ken Suchoski with Autonomous Research. Please proceed with your question.
Hey good evening, everyone. Thanks for taking the question. Ron, I wanted to follow up on some of the questions on EV. I think you mentioned in your prepared remarks that the EV economics are roughly in line with traditional fueling services. So can you provide some insight on what the economics might look like for the EV offering? It's impressive that the transition to EV is revenue neutral. So I'm just curious what what's driving that? Thank you.
Hey Ken this is Charles. Good question. And I actually had our analysts pull data from the Netherlands, a country that's a little bit further ahead in terms of EV migration in the UK, which is further ahead than the U.S. And there we have about 18,000 clients. And we said, okay, let's split those clients into two categories, a group that only buys fuel, it has no EV. So ICE, internal combustion engine only, and then mixed fleets. And what I tell you is about 14% of the clients about 2500 clients are mixed fleets. So they've got both types of vehicles. And they tend to be larger. So the enterprise level clients are moving even faster. So the mixed fleets averaged about 20 cards per account or vehicles per account. Whereas on the fuel only fleets ICE only fleet, there are about five cards per account.
When I look at those mixed fleets, the actual revenue per vehicle that we receive on EVs versus fuel, it's actually slightly higher. And part of the reason is that these enterprise level clients get rebates when they go out in the fuel networks, which we provide to them, which we don't give on the EV reporting side. And so the economics turn out to be neutral and actually slightly favorable on the EV side. And so without getting into too specifics client level type of revenue per, I would tell you that EV is about 20% higher for these mixed fleets.
Out there cards, they've got about 15% to 20% over EV already. So we're seeing some real data points here. But that just gives you a sense of who's moving kind of the size of accounts that are moving, how far they've moved and the economic kind of relationship there and why it's comparable.
Hey Ken, it's Ron. It's a super important question. So let me just jump on to what Chuck said. So to me there was maybe a massive misconception that, hey, when a business moves to EV the plug in and everything's free. So goodbye, [flee] tough, tough days. So the two things that I can't but not admit it some years ago, I was worried when I was dumber. But the two things that are clear are one, it costs way more to recharge an EV vehicle than people thought certainly when you do it publicly.
There is a huge markup on the electricity, obviously because the charge point versus trying to make money and is way higher MDR for people like us because they're trying to build up volume. So the first misconception is oh, it costs 50 bucks to fill up a van and only five to recharge van. So that that's not true. And then the second thing, which I think we all missed is most of the recharging is going to happen at home.
So there's millions of charge points that we're not in the business today. We only do stuff at gas station. And so to me, those are the two things where you go, oh, my God most of the recharging is going to happen at home. And it's got to be measured and reimbursed. So who's going to do it. And so I just started from the map that Chuck ran through, I just want to stick those concepts in people's heads that it is different than all the thought coming into the thing. There's more money helping businesses in this thing and it's going to cost them more than they think when they think about their [indiscernible] guard.
Extremely helpful. Thank you guys appreciate.
Our final question comes from the line of James Faucette with Morgan Stanley. Please proceed with your question.
Hey, sorry about that fumbling with my phone. I wanted to kind of follow up on that question and just ask on these minority investments that you've made, I think, at least in my mind that the case to be made for managing those expenses and the cost associated with as you just highlighted are probably more significant than people may have imagined. But can you talk about strategically why or under what conditions you do the minority investment versus acquisition? What you're expecting that to lead to down the road? And how we should think about that trajectory of relationships and potential contribution directly to FLEETCOR.
Hey James it's Ron. It's a good question. It's kind of try before you buy. So the category is new. There is couple of partners that we, that we call out today have been working on software pretty hard and stuff. So for us, it's kind of a no-brainer to be supportive to them, give them money to keep kind of build. And we have, obviously, commercial agreements that state the economics of the roles of the two companies. And so, we like it. We kind of get some, people have been working on here in the U.S. and some people have been working on it in Europe, we integrate it into the stuff we have. And off we go.
We've got a product that works. And so we can focus on trying to sell the stuff, which is what those two partners are looking for. Honestly, to the extent that thing is a super big deal, and we want to get more on the value chain, we would clearly look at other options and stuff down the road. And then obviously, in other geographies but initially, were super pleased with these partners. We screened a lot of them. We liked the offerings that we have and we're still in the mode that I said they can, we're still trying to learn exactly what the clients want and need and to make sure that the products, including the software are dialed into that. So we didn't want to get out over our skis before we were clear.
That makes sense. And then just as a quick follow up, you've talked a lot about the the strength we are seeing in things like hotel and recovery and travel. Can you just give us a little bit of color on what we you saw as we went through the Omicron wave and where you're at on a run rate trajectory? If there was an impact there? Just trying to measure near term sensitivity to recent events.
Yes another good question. I'd say, [indiscernible] we Chuck and I obviously did a bit of reconnaissance of January with our folks. I think we had a bit more in Europe again exiting December and a bit into January, but it's a pretty soft month James for us anyway. So [major] impact obviously, we've rolled that into our guidance we have today we've had our eyes over the whole time. And I'd say the most recent stock called the last week or two, that [indiscernible] things kind of going away. So it's I don't want to get over my skis here but it sure feeling like we're coming out a bit into a clearing finally and again, I just want to reaffirm that the full of numbers we give them for ‘22 where we're pretty confident in them sitting here beginning February.
That's great. Thanks for all the great color.
Thank you. Ladies and gentlemen, we have reached to the end of the question and answer session. This concludes today's conference.
Hey Alex could we make just a quick comment.
Okay.
We just want to apologize to those on the call for the technical bite out. Hopefully it wasn't super confusing. So we always appreciate the interest and the support.
Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.