Fleetcor Technologies Inc

NYSE:CPAY

Earnings Call Analysis

Solid 2023 Performance Outshines Soft Patches

Despite softness primarily in U.S. Vehicle Payments and Lodging, the company celebrated a record 2023 with 10% organic revenue growth, strong Corporate Payments performance up 19%, and a 20% sales increase maintaining a 92% retention rate. The EV progress and a consumer vehicle payment strategy are shaping a robust future. Cash EPS is projected to increase 18% in 2024, excluding Russian operations, while expecting to balance out higher interest expenses. The strengthening portfolio, including PayByPhone network expansion to U.K. consumer users, and reined-in expenses resulting in a minor 10% EPS boost prevail over $200 million in additional interest expenses. Anticipating an 8-10% revenue growth and a 10-12% EBITDA increase in 2024, the company holds high hopes for newly launched products accompanying buybacks of $800 million in shares, despite anticipating first-quarter headwinds from fuel prices.

New Product Launches Aimed at Fueling Revenue Acceleration

In a move to broaden its market appeal and drive growth, the company has introduced a series of new products. These products range from solutions for fuel-based businesses, encompassing fuel cards and virtual cards, to robust corporate payments products designed to streamline expenditures for mid-sized companies. One notable release is the CLC Choice product, enhancing lodging options for employee travel. These innovations, which have been in development for some time, are anticipated to stimulate revenue growth by 1% to 2% over time.

2023: A Record Year on the Financial Horizon

The company has reported an exemplary year in 2023, flagging record revenues and earnings. Organic revenue noted a significant uptick of 10%, matched by sales increasing by 20% and a stable retention of 92%. The company has adeptly restructured to cement its position for mid-term successes, making strides particularly in electric vehicle (EV) progress and payment strategies. For 2024, there are plans for profits, with cash earnings per share (EPS) forecasted to grow by 18% when excluding Russia from calculations.

Corpay: The Next Chapter in Brand Evolution

In a strategic rebranding effort, the company plans to adopt the name Corpay in March. This move marks the beginning of a novel phase in the company's evolution, indicating a possible shift in market approach and corporate identity.

Cautiously Optimistic Financials and Operating Metrics

Precise details on segment performance reveal a mixed bag, with corporate payments outperforming expectations, while vehicle payments and lodging displayed some softness. The growth in corporate payments was driven by robust direct business and transformative investments in technology and service offerings. Vehicle payments saw success in international markets, particularly with their 3-in-1 EV charging product. However, the U.S. market experienced some headwinds in sales and revenue. The lodging segment's flat performance reflects stabilization in the workforce customer base with an eye on future growth. Overall, efficient discipline in expenses and improvements in bad debt expenses painted a financially sound picture for the company.

Solid Free Cash Flow and a Healthy Balance Sheet

Operating expenses remained flat in Q4 of 2023 compared to the previous year, but acquisitions, higher transaction activity, and growth investments were balanced out by lower bad debt expense and the sale of the Russia business. A notable decline in bad debt expense contributed to a favorable EBITDA margin. The balance sheet showcases strength with significant unrestricted cash and available credit facilities, positioning the company for strategic capital deployment in buybacks and M&As. For 2024, there is an anticipation of $1.4 billion in free cash flow to support a robust capital allocation plan featuring share repurchases and potential acquisitions.

2024 Outlook: Growth Anchored in New Ventures and Prudent Credit Extension

The company outlined its full-year guidance for 2024 with cash EPS expected to grow between 14% and 16%, and revenue growth projected at 8% to 10%. The company remains cautious about extending credit, especially since it has improved the credit quality of its client mix. M&A priorities for the near term include a focus on corporate payments and consumer capabilities. Overall, the company is set to leverage new products and initiatives, cross-sell opportunities, and dynamic pricing strategies to bolster revenue growth and focus for the forthcoming fiscal year.

Earnings Call Transcript 2023-Q4

[Operator]

Hello, and welcome to the FLEETCOR Technologies, Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jim Eglseder, Investor Relations. Please go ahead.

[James Eglseder, executive]

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2023 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Tom Panther, 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, our earnings release and supplement can be found under the Investor Relations section on 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 and divestitures or scope changes closed during the 2 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 at other companies. Reconciliations of 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 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 them. We undertake no obligation to update any of these statements.

Now the 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. So with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?

[Ronald F. Clarke, executive]

Okay, Jim, thanks. Good afternoon, everyone, and thanks for joining our Q4 2023 earnings call. Upfront here, I'll plan to cover four subjects: first, provide my take on both Q4 and full year 2023 results; second, I'll share our 2024 priorities and guidance; third, give you a bit of an update on the status of our strategic review; and then lastly, highlight a few pretty exciting new products that we've recently launched.

Okay, let me begin with our Q4 results, which, frankly, were a bit mixed. We reported revenue of $937 million, up 6%; cash EPS of $4.44, up 10%; and EBITDA of approximately $500 million, up 11%. Q4 revenue did finish a bit weaker than we outlooked 90 days ago. But fortunately, our earnings flow-through was quite a bit better than expected. That was helped mainly by credit losses finishing at about half the level of last year.

The revenue weakness in the quarter showed up in a few areas. First, gift cards. So we had some delays in gift card shipments that have been pushed here into Q1. In Lodging, we had a pretty soft distressed passenger vertical in the quarter, mostly because airline cancellations were at a record low level. North America fleet late fees, pretty light. That, again, is a continuation of exiting a lot of micro accounts that we started about a year ago when we tightened credit terms. Again, fortunately, the late fee reduction was essentially washed away by the improvement in credit losses.

And then the last here is our Corporate Payments, or Payables business with a channel partner business finishing even softer than we had outlooked. Fortunately there, we think it's bottomed out. So these kind of weak spots, soft spots or either timing related, weather related or have kind of reached and have kind of bottomed out as we head into our 2024 guide. So hopefully, not surprising us again.

The organic revenue growth in Q4, 7% overall, again, impacted by the soft spots I just called out. The Vehicle Payments organic revenue growth, 5%, for the quarter. Corporate Payments revenue growth, 15%, but 20% if you exclude the partner channel. Trends in Q4, also a bit mixed. Retention quite good, improved slightly to 92%. Sales grew 12% overall with a terrific performance in Corporate Payments, sales there up over 40%. And what we call same-store sales, finished 3% down. Again, we saw the weakness in the workforce lodging and the airline lodging business and a bit in the U.K.

Okay. Let me make the turn to our full year 2023 results, which reached record levels. 2023 revenue of $3.8 billion, up 10%; EBITDA of approximately, $2 billion, up 13%; and cash EPS of $16.92, up 5%. Trends for full year 2023, quite good. Sales for the full year up 20% overall. And again, inside of that, Corporate Payment sales up about 50%. We did sell 100,000 new B2B clients in 2023.

In terms of organic revenue growth, full year 10%, so that makes 3 consecutive years of 10% plus organic revenue growth. And again, retention stable at 92%. Additionally, we did advance a number of important strategic initiatives in the year, progressed EV and our understanding of the relative economics of EV versus ICE. So promising results there. We did clean up our Russia and FTC issues.

We did introduce this transformation idea for our Fleet business, envisioning it really as a broader vehicle payments-related business. We did close a couple of important acquisitions, 1 in cross-border, which we fully have integrated and 1 in parking really to jump-start our consumer vehicle payments initiative. So look, all in all, a pretty successful year.

Okay. Let me make the transition to our 2024 guidance and start out by outlining our major objectives for the year. So a few things. First, as always, to deliver financial performance, that's consistent with our midterm objectives. Second, we hope to deepen our position in Corporate Payments through some new acquisitions in that space. Third, we hope to build out our Vehicle Payments business with proof of successful cross-selling and accelerate revenue growth throughout the year. And then lastly, to succeed with some new product launches and confirm market acceptance for them.

So on to our 2024 financial guide. So revenue at the midpoint of $4.8 billion, that's up 9% on a print basis or 11% excluding Russia. EBITDA of $2.2 billion, that's up 11% or 14%, excluding Russia. And finally, cash EPS at the midpoint of $19.40, up 15% print and up 18%, excluding Russia. So let me just say that again, planning '24 profits, cash EPS growth of 18% this year, excluding Russia.

We are expecting good earnings flow through to EPS. One, revenue will grow faster throughout the year than expense. So that operating leverage will help, and we do expect to have fewer shares, better FX and a slightly lower tax rate. In terms of revenue and organic growth, we're obviously helped by our Q4 exit rate in the sales from last year growing here into 2024. We are expecting higher sales levels here in 2024, which will add to revenue and then we do have a number of cross-sell initiatives planned into our client base this year.

So in the Fleet business, selling business cards, EV, parking, breakdown services back into the fleet clients. And in Brazil, the total business, selling insurance, parking, fuel back into the toll base. Tom in a bit will provide some more specifics on the 2024 guide and how it rolls out across the year. We also plan to mark the next chapter of the company with the rebranding of FLEETCOR to Corpay and that schedule for March.

Okay. Let me make the turn to our strategic review. So just as a reminder, we did initiate a formal strategic review of our portfolio last spring and initially focused on the question of whether separating our Fleet business from our Corporate Payments business could unlock value for shareholders. We have run a pretty rigorous process over the last 11 months with a lot of help, particularly from Goldman Sachs. We fielded numerous inbounds, looked at lots of alternatives and explored some combinations with Dan's Partners.

I got to say the review process was quite helpful for us in exploring some -- really some new structures for the company and spotlighted the value creation potential of transitioning really our Fleet business into a broader vehicle payments business that will serve both businesses and consumers. So that's a super high priority for us.

So look, we're announcing really the conclusion today of the review process. At least for the time being, we determined that keeping our Fleet business and Corporate Payments together is the best way forward. Obviously, we remain open to reconsidering various options to unlock value down the road. But right now, squarely focused on repositioning the Vehicle Payments business.

Okay. My last subject upfront here is on new products. We've released 4 new products into the marketplace this year, each with really terrific potential. So first, what we call our Corpay 1 business card, fuel card and virtual card in 1. That's targeted to fuel-based businesses, where the solution includes a business card for the owner, fuel cards for the field drivers and even replaces paper checks with virtual cards. That's all in 1 account and all in 1 UI, so pretty exciting.

Second, product we call the Comdata Connect Card. It's targeted to small trucking companies. So it connects the Comdata truck stop fuel discounts and reporting to the companies -- the trucking company's existing business credit card. So trucking firms here would really get the best of both They continue to get the credit and rewards from their existing business card, but combine that with the fuel discounts and reporting of a truck stop card.

Look, this also helps us in terms of the credit challenge with small trucking companies. So hopefully, we can bring on lots of small trucking firms without the credit risk. Third up is a product that we call Corpay Complete. It's our newest corporate Payments Product targeted to midsized businesses. And again, this is really a platform build, so we've combined what we call walk around solutions, business cards and fuel cards really with the central kind of AP automation solution, again, packaged all in 1 platform, all in 1 mobile app.

So really, we think kind of the modern way really for businesses to manage they're all around business expenses and spend less. And lastly, in Lodging, we have a new product called CLC Choice. So it's really a workforce lodging solution for employers who want really a more friendly and flexible employee travel solution with the idea of being more choice for travelers.

So in this case, travelers could choose virtually any hotel, any room type and even keep rewards points from their favorite hotel brand. So we think the choice solution will complement really our current control solution and widen the market opportunity there. So look, we're super excited about these new products have been in the kitchen for quite a while and hopeful that this new set of products will accelerate revenue 1% to 2% over time.

Okay. So look, in conclusion today, 2023, really a record year, record revenue, record earnings. Organic revenue growth for the full year up 10%. Sales super good, up 20%, a stable retention at 92%. Made some good moves to position the company better for the midterm. EV progress, and our new go-forward vehicle payment strategy. 2024, we're planning profits or cash EPS up 18%, excluding Russia, and that's on really an assumption of flat interest expense. Launching a set of new products that we have high hopes for.

And then beginning really the next chapter for the company as we move to rebrand the company to Corpay in March. So with that, let me turn the call back over to Tom to provide some additional detail on the quarter. Tom?

[Thomas Panther, executive]

Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter and the full year. Organic revenue growth was 7%, the same as the fourth quarter of last year. Revenue growth was slightly below our expectations due to pockets of softness, mostly in U.S. Vehicle Payments and Lodging, while our Corporate Payments and international businesses continue to perform well. The revenue weakness was mostly offset by strong expense discipline, continued improvement in bad debt expense and a lower tax rate, which delivered $4.44 per share in cash EPS within our guidance and up 10% versus last year.

Looking at the full year, organic revenue grew 10% and EBITDA increased 13%, which are both in line with our midterm targets. We also absorbed nearly $200 million of incremental interest expense during the year due to the rate hikes and still posted cash EPS growth of 5%. Normalizing for the higher interest expense, adjusted earnings would have grown 16% for the full year 2023.

Now turning to our segment performance and the underlying drivers of our revenue growth. Corporate Payments revenue was up 15% during the quarter and increased 19% for the full year. For the quarter, our direct business grew 19% and was again led by growth in full AP. Our full suite of high-quality payment solutions continues to sell extremely well, with sales up 27% this quarter, as we signed up customers who are looking to modernize their AP operations.

I'd note that the drag from lower partner channel volumes accelerated in the quarter, with channel revenue declining 31%. Excluding the partner channel, revenue grew 20% and spend volumes increased 27% in the quarter. So quite strong on a core basis. We believe the partner channel volumes have bottomed, and volumes and revenue are expected to be flat in 2024. Cross-border revenue was up 21%. Sales grew 51%, and recurring client transaction activity was robust. We've now fully lapped all the revenue synergies from the GRG acquisition in January 2023.

More importantly, our best-in-class technology, service and products allow us to have market-leading retention and client acquisition, which you can see in our results. We continue to make significant investments in this business through increased sales and marketing resources as well as new product capabilities. Over the last few years, we have transformed this business into becoming the largest nonbank provider of B2B FX payment solutions in the world.

Turning to Vehicle Payments. Recall this is the new segment that we introduced on our last earnings call. It reflects the combination of our Fleet and Brazil businesses, along with our new consumer vehicle initiative. Consistent with our goal of creating a simpler company, we have now put all vehicle-related payment solutions in one segment that operates across North America, Brazil and Europe offering a full suite of vehicle-related solutions to both businesses and consumers.

You'll note that we have defined the new segment's KPI as transactions. But given the different products that comprise the segment, we've provided transaction counts by product type, such as fleet, tags and parking. We've also realigned our executive team to support this new segment with Armando Netto serving as the Group President of North America and Brazil and Alan King as the Group President over International Fuel, EV and Parking.

Vehicle Payments organic revenue increased 5% during the quarter with particular strength in Brazil and international fuel markets. In the U.K., more than 30% of all new sales involve a nonfuel product, namely EV or vehicle maintenance. Our EV strategy in U.K. is clearly winning as our 3-in-1 product, fuel, on-road charging and at-home charging, all in one app has more than doubled from a year ago. The results speak for themselves with both EV cards and EV revenue continuing to increase.

In addition, we're having great success selling our at-home charging solution with a 30% attachment rate to all new sales. Our charging network also continues to expand, and we now offer charging at over 600,000 charge points in Europe. And by the end of March, we will have coverage of nearly 80% of the rapid chargers in the U.K., including Tesla, which we signed in the fourth quarter.

In Brazil, we ended the year with nearly 6,000 extended network locations, including 2,500 gas stations, 2,900 parking locations, 750 drive-through restaurants and 270 condos. Total tags were up 7% year-over-year to nearly 7 million, and approximately 37% of customer spend was from our Beyond Toll network. Sales of insurance policies are up fourfold when we launched in Q4 '22 to nearly $200,000 in Q4 '23, so from 0 to $200,000 per quarter in 5 quarters and now total over 1 million policies.

Our success in Brazil is a tangible proof point of our broader vehicle payments vision to leverage an anchor product used by a large customer base and to then add additional services via a mobile app driving incremental revenue growth. We are leveraging our strong success in the U.K. to launch our consumer vehicles payment solution in the market. We have begun selling the parking network that we acquired in the third quarter via PayByPhone to our business customers, building the integrations to be able to offer to the over 2 million PayByPhone consumer users in the U.K. access to our proprietary fuel, EV, insurance, toll and maintenance networks.

In the U.S., softness in small fleet and the impact from our shift away from micro clients continue to affect our sales and revenue results. Our digital and field sales efforts are improving as we continue to see growth in applications, approvals and starts. As we mentioned last quarter, the shift to higher credit quality clients also impacted late fees, which were down 38% from Q4 '22. While the decline in late fees is a drag on our revenue growth, it has resulted in a similar decline in bad debt expense, so essentially a wash.

Lodging revenue was flat Q4 2022. And for the year, the business grew 12%. This quarter was affected by continued softness in our existing workforce customers, which appears to have now stabilized. Certain verticals within the business like airline and insurance can have quarterly revenue growth fluctuations driven by weather and natural disasters. Recall, in Q4 of last year, there were significant weather events and airline cancellations, which benefited the airline and the insurance verticals.

By comparison, there were no major weather events in Q4 of this year. And in fact, according to the Department of Transportation, 2023 flight cancellations were the lowest in a decade. And in the fourth quarter, cancellations were down approximately 90% from Q4 '22. We're experiencing similar results related to insurance claims, which were down approximately 20% in the quarter. Despite the recent soft quarters, we are confident that this business can return to low double-digit growth over the coming quarters.

We recently launched new product capabilities that will extend our customer experience and drive new sales. Additionally, we're excited to welcome as the new Group President of Lodging, replacing the retiring Ron Rogers has extensive hospitality and lodging experience that will be a strong asset to the business.

In summary, we're proud of the performance we delivered in 2023. It clearly demonstrates the growth of our diversified business and the strength of our business model that generated over a billion and a quarter billion of free cash flow. Now looking down the income statement. Q4 operating expenses of $513 million were flat versus Q4 of last year. Expenses from acquisitions, higher transaction and sales activities and investments to drive future growth were offset by lower bad debt expense and the sale of our Russia business.

Bad debt expense declined $19 million or nearly 50% from last year to $22 million or 3 basis points of spend. Most of the decline was in Vehicle Payments, which was down $17 million year-over-year as we realized the benefit from our lower exposure to U.S. micro clients. EBITDA margin in the quarter was 54.2%, a 220 basis point improvement from the fourth quarter of last year. This positive operating leverage is driven by solid revenue growth, lower bad debt expense, disciplined expense management and synergies realized from recent acquisitions.

Interest expense this quarter increased $18 million year-over-year, and the impact of higher interest rates resulted in an approximate $0.27 drag on Q4 adjusted EPS, partially offset by lower debt balances year-over-year. Our effective tax rate for the quarter was 23.3% versus 24.2% last year. The lower rate related to specific tax planning items.

Now turning to the balance sheet. We are entering 2024 with the balance sheet in excellent shape. We ended the quarter with $1.4 billion in unrestricted cash, up $300 million from 90 days ago, and we had over $800 million available on our revolver. We have $5.4 billion outstanding on our credit facilities, and we had $1.4 billion borrowed under our securitization facility.

As of year-end, our leverage ratio was 2.4x trailing 12 months EBITDA, which is at the lower end of our target range. In January, we upsized our term loan A and revolver A credit facilities by $600 million with no rate concessions and no change in the maturity. This added capital will provide incremental capacity and flexibility for both deals and share buybacks in 2024, which I'll elaborate on in a few minutes.

Our capital allocation in 2023 was once again balanced as we deployed $1.6 billion. In the quarter, we repurchased roughly 600,000 shares at an average price of $254 per share or $143 million. For the year, we repurchased 2.6 million shares for $690 million. We spent $545 million on acquisitions during the year, improving our position in EV, the consumer vehicle payment space and cross-border. We used the remaining excess cash flows for debt amortization and reducing our revolver balance.

As I previously mentioned, our 2024 capital allocation plan is supported by our significant cash and liquidity position. We have $1.4 billion in unrestricted cash and increased our capacity under our revolver by $600 million, and we expect to generate $1.4 billion in free cash flow during 2024. Our first priority remains M&A, and the M&A pipeline is robust. We'll look to acquire businesses that deepen our position in our 3 core operating segments.

We are also allocating capital for share buybacks during 2024. In January, the Board increased our repurchase authorization by $1 billion. We now have over $1.6 billion authorized for share repurchases. We expect to repurchase $800 million of shares throughout the year. We plan to purchase these shares through the open market, and we'll establish a 10b5-1 plan later this month.

Any residual cash flows from earnings will be used to reduce our revolver or build our cash position. Generating so much cash is a high-class problem, and we plan to leverage this strength to systematically support our EPS growth through M&A and buybacks in 2024. Now let me share some thoughts on our 2024 full year and Q1 outlook. From an economic perspective, we are not assuming a recession nor meaningful economic improvement in overall business activity.

Our forecast for the year is based on the consensus economic outlook in our markets, which generally calls for modest economic growth and lower interest rates in the second half of the year. We expect fuel prices to be a headwind in the first quarter. And for the full year, we're anticipating U.S. fuel prices to average $3.65 per gallon, which is a blend of diesel and unleaded. In 2024, we expect cash EPS to grow between 14% and 16%, which is inclusive of the planned buybacks I mentioned previously.

Revenue growth is projected to be between 8% and 10%, and EBITDA is expected to increase 10% to 12% with margin expanding to approximately 54%. Keep in mind, these growth rates are inclusive of our Russia business through mid-August of last year. Excluding Russia, cash EPS is growing 17% to 19%, revenue is up 10% to 12%, and EBITDA is increasing 13% to 15%, all slightly above our midterm growth targets. We've provided these details in our earnings supplement on Page 20.

Net interest expense is projected to be between $340 million and $370 million, which includes the replacement of a $500 million interest rate swap that matured in December. Roughly 80% of our credit facility is now fixed utilizing swaps, and the blended swap rate is 4.1%. Also recall that our securitization is a variable rate facility. And finally, our tax rate is expected to be between 25% and 26%. From a segment perspective, we expect the following organic revenue growth rates: Vehicle Payments in the mid-single digits; Corporate Payments approximately 20%; Lodging payments in the high single digits.

Related to the quarters, we expect revenue growth in the first half of the year to be below our full year average due to the continued pockets of softness, a tough comp that includes Russia as well as a challenging operating environment, including lower fuel prices. We expect revenue growth to accelerate in the back half of the year as the economic outlook becomes clear, we lap the divestiture of Russia and we realize the benefits of our growth initiatives and new sales.

For the first quarter, we're expecting revenue to grow between 3% and 5%, and cash EPS to increase between 6% and 8%, which also reflects higher interest rates. Normalizing for Russia, revenue and cash EPS growth at the midpoint would be 7% and 13%, respectively. The rest of our assumptions can be found in our press release and supplement. Before completing my prepared remarks, I would like to extend our gratitude to our more than 10,000 employees around the world, who helped us deliver such a great year and who will be the driving force to even greater heights throughout 2024.

Thank you for your interest in our company. And now operator, we'd like to open the line for questions.

[Operator]

[Operator Instructions] Today's first question comes from Peter Christiansen with Citi.

[Peter Christiansen, analyst]

Two questions for you, Ron. Just curious, you performed pretty well on the credit loss side. How are you thinking about, at least tactically about extending credit in 2024 versus last year, particularly after improving the mix of your midsized -- mid-market clients?

[Ronald F. Clarke, executive]

Peter, good question. I'd say, looser. So the model that we've used has gotten a bit better over the last 12 months. And I think I called out credit losses coming in literally about half of the prior year. So I'd say we're going to kind of open this carefully. And then second, again, that we're pointing to larger prospects, which generally a better credit. So my guess is we have the full year plan just to smidge lower than full year '23, but it should help on the revenue side.

[Peter Christiansen, analyst]

That's helpful. And then, Ron, I guess now exiting the strategic review, how should we think about at least your acquisition -- M&A priorities going forward? Any particular areas, horizontal vertical? Just want to get your fresh sense on FLEETCOR soon to be Corpay's M&A priorities going forward?

[Ronald F. Clarke, executive]

Yes. Another good question. Glad to be back at kind of the basic buying company. So the primary focus be is on Corporate Payments. So we've got a pipeline of a couple of interesting things in that space. And then the one other area that we're kind of on is this consumer capability, this idea again of getting a big block of consumers that we could market all of our networks to. So I would say those would be the two short-term things to look for.

[Operator]

The next question comes from Ramsey El-Assal from Barclays.

[Ramsey El-Assal, analyst]

I wanted to ask about some of the Q4 headwinds that you called out. And just maybe ask you to give us a little more color on what was going on and the degree to which you're confident that they'll represent sort of transient headwinds rather than more permanent sort of impacts? I know you implied that as we get deeper into '24 that you could see some improvement. But I'm just curious if you could give us a little more color on what sort of happened in the quarter?

[Ronald F. Clarke, executive]

Yes. I mean, in a nutshell, Ramsey, I call it, the story of the quarter was same-store sales. So I called out it was minus 3%. And if you went back to our prior transcripts, Q4 '22 would have been plus 2%. So in that 12-month period basically went from plus 2% to minus 3%. So obviously, that's 5 points of organic growth. So that's the whole story. Retention was good, sales were good, expense controls, credit below the line. Everything effectively in Q4 through my lenses was kind of in line stands that 1 call out.

And so I tried to kind of go through it. They obviously were surprising to me since I looked through the guy pretty carefully. Really, it's just 2 or 3 pockets that are not new. If you go back and look at what we communicated in '23, we would have talked about lodging having some softness in the base; the partner channel and payables having some softness; the pivot from micro accounts, which shed a bunch of late fees, unfortunately, credit losses. And so, basically, I'd say those three things that I called out were just heavier on the downside, say, we're looking at kind of 1% to 2% minus same store and it came in at 3%.

And so that's really the story of the quarter. And so the good news, if there is any, is in all 3 of those cases, it deals like in the data showing even through January, it looks like we've hit the bottom. So the thought process that we have is that we climb out of the same-store sales, almost the reverse pattern. So minus 3, minus 2 basically getting that thing back to positive because that book of business basically flatlined in the '24. So that's basically the perspective on it. So it's really no new things. It's things that we have seen that basically were a bit heavier in the quarter than we outlooked.

[Ramsey El-Assal, analyst]

Okay. A follow-up for me. I was wondering if you could kind of comment on the closure of the strategic alternatives process and just kind of revisit what kind of a postmortem in essence? Why was it so difficult to find the strategic alternatives to execute on? Was it lack of at partners? Was it a valuation hang up? Was it rates? Where was the friction in the process that kind of prevented you guys from executing on that sort of monetization strategy?

[Ronald F. Clarke, executive]

Look, it's a super complicated question, right, which is why we spent 11 months on quick with an answer here. But look, the main thing against just the straight I think we said was uncertainty of the trading range of RemainCo wasn't so much. We got a great Corporate Payments business. It was really what's the multiple on the MainCo. So I think that caused us to pivot into this stance partner to -- if we were going to separate things to do something that would have scale and synergies. And so the short answer to that is we engaged with 3 or 4 different partners, and it's a combination of either the synergies didn't pan out to be as good as we thought or we couldn't agree relative valuation or one case, maybe social issues around it.

So these kinds of combinations, as you guys know, are always quite difficult. But I did say it seriously, we've learned a lot. We looked at a lot of structures. We've met a bunch of people. And so we will continue to look. The focus now is back on buying things in our lane and obviously rebuilding this vehicle business, but we are open a different day to relooking at it again. So kind of close for now, but not forever.

[Operator]

Next question comes from Tien-Tsin Huang with JPMorgan.

[Tien-Tsin Huang, analyst]

I was just thinking on the new product side that you're going -- that you laid out here to enhance growth. I think you mentioned around 1 to 2 points over time. How quickly do you think that can convert into in your sales? Do you have the sales engine humming already? Just curious where you are with that.

[Ronald F. Clarke, executive]

Tien-Tsin, good to hear your voice. So I mean the headline of why I call this out is, over the last 2 or 3 years, we've done a fair amount of what our term capability acquisitions. And really behind the scenes, those have been some tech capability acquisitions, right? The Corpay 1, we bought an AP platform, a software platform called the front end. We bought a European workforce business with a brand-new platform. And so the tech that we got allowed us to spin up kind of some, what I call them internally kind of next-gen products that I described at the top.

And so we're out selling them now, we've got a pretty robust sales plan for them. So I would say the convert would be next year. The key thing for us to report this year to you is sales of those products. And then obviously, next year, as those roll into revenue, basically, we'd expect the acceleration. So the key is what's the reception? Does the market like these 3 or 4 things that we'll put in front of them?

[Tien-Tsin Huang, analyst]

Got it. Got it. And then just my follow-up, maybe for you, again, Ron, just thinking about visibility into revenue growth in '24 versus prior years. It feels like there's a little bit more reliance on new products and initiatives. I know cross-sell is something you've always done. Macros always what it is, but how would you consider the visibility this year versus recent years?

[Ronald F. Clarke, executive]

Yes, that's a super good question. It sounds like most things. Some things stay the same and some things are different. So the most important thing for us, as you know, is sales, which is why I call out the growth rate. And I think I called out for the full year last year 20. That's our target again for 2024, obviously, off of a bigger base.

So the first thing is we've had success selling and expect the same here in '24. Two is the retention is getting a bit better. And as we flush those micro accounts last year, structurally, that should help retention. So you take those two things, those underpin, as you know, the basic right new business versus losses is the key to a recurring business.

So the wildcard, the bet here has been the softness thing, which, again, entered the year in the plus column and then ended the year in the minus column. So that thing turning or getting back to flat, I think, is the most important in the acceleration. But then on top of that, we've got some super new pricing ideas around the technology as the new dynamic pricing, for example, where we could price rooms and lodging different for someone walking into a hotel than someone who prebooks 3 weeks ago instead of a platform that didn't let us differentiate.

We've got a few new partners that we've signed that we haven't announced that will come on. And then to your point, we've got a big plan around cross-sell, adding a buck for vehicle insurance every time people park if they want it to basically lay the fear of something happen to their carl when they park. So it's a pretty balanced. I'd say it's not super different than the past, but I would say that the new products and some of the cross-sell should be a little more supportive than historically.

[Tien-Tsin Huang, analyst]

Got it. No, that's helpful. And I think in a strategic view of the way also might help with the focus to, I would think, but I appreciate the update, Ron.

[Ronald F. Clarke, executive]

Yes, for the back of the base extension

[Operator]

The next question comes from Darrin Peller with Wolfe Research.

[Darrin Peller, analyst]

Ron, maybe just go back to -- it's a bit of a follow-up to Tien-Tsin's question just now. But when we think of the vehicle segment and the aspirations for being mid-single -- I'm sorry, double-digit -- low double-digit growth from what we're now guiding to a mid-single-digit year, maybe just talk a little bit about the initiatives that you feel are going to really drive that strength?

And it does look like you're having a lot of success, obviously, now with whether it's EV or obviously in Brazil. So I'm assuming it's a combination of all those factors, but any more color on that? And just a quick follow-up, but also the fourth quarter. I know you had some headwinds on certain variables like you mentioned on the call, credit and -- it just seems like you would have a better growth in '24 than fourth quarter just as some of those abate, but yet you're guiding a similar rate of growth for vehicles. So just a little more color on that.

[Ronald F. Clarke, executive]

Say the last part, Darrin, on guiding to what is in 24.

[Darrin Peller, analyst]

Yes, per vehicle segment, mid-single-digit growth, I would have thought it'd be a little bit better comparing it to a fourth quarter, which I know has some headwinds in it.

[Ronald F. Clarke, executive]

Yes. So let me take that last part and then back -- my way back to the beginning of your question. So yes, if you looked inside our quarterly role, that thing would go from kind of low mid-single digit up to 10%. So the internal plan we have is exactly what you said to the vehicle organic growth to accelerate. So the two drivers of that beyond the normal things of retention, which should get better again structurally because we kicked out the micro accounts.

And obviously, sales being good is the new products that I just talked about, right, some extensions in both the core fuel card business and in the trucking business, and to your point, the EV thing working. But the second one is this consumer, it's just all incremental. So to the extent that we can take 2 million people in the U.K. and another couple of million people, which we'll talk about soon in Brazil, and add on 3 or 4 services that we already have, it's just every dollar there is incremental and pretty profitable.

So those are really the two drivers. The base same-store sales, retention and new sales, which we have a good handle on and then the couple of new things on the new products and the consumers. So look, we're bullish on it. Obviously, we had a pivot in this vehicle thing and then a bit distracted working on this restructuring. But I think where we're headed now is super clear.

[Thomas Panther, executive]

And Darrin, one thing I'd add for Ron, to your other question about longer-term vehicle. Keep in mind, the first half of last year had the elevated late fees from the SMB micro clients that we still have on the platform. So we all start lapping that until you get into late Q2. So that creates a little bit of a grow-over challenge when you look at it on an annual basis.

[Ronald F. Clarke, executive]

And it's one of the reasons, Darrin, someone send me some text, hey, the revenue looks a little light. And we've effectively taken $20 million, $30 million of late fee revenue out and $20 million to $30 million of credit losses out. It's been basically kind of a one-for-one swap, which people out there may not like, but I like the ratability of having lower credit losses. And so to Tom's point, that portfolio shift kind of moved both revenue and expense.

[Darrin Peller, analyst]

That really -- that's helpful. I don't know if there's time for a quick follow-up. Just very quickly on Corpay. I just want to understand a little bit more on the channel business bottoming out here. And maybe you can explain a little more of what the dynamic is and the underlying drivers, if it's around a channel -- one of the partners if that's finished or its virtual card adoption or anything else, guys?

[Ronald F. Clarke, executive]

Let me take that one. Another good question. So if you think about what we call a channel business, it's some third-party U.S. customers where we provide virtual card processing. And the basic trend, which started 2 years ago, is those partners effectively moving from an exclusive relationship with us to nonexclusive. So I, Ron are used to use you for 100% of my processing. Someone told me it's a good idea to have 2 providers.

So over time, I'm going to kind of give you half the business or I'm going to try to haircut your rate. So effectively, over the last 2 years, Darrin, we've gone from having, call it, 15 really important partners that we were exclusive with having 15 partners were nonexclusive with.

So the good news on this one is we have the contracts now 4 '24 that have us flat with '23. So our print for that business, which moved its way down during the course of '23, we're out looking effectively flat revenue in that business across into '24. So instead of every quarter saying oh, the Corporate Payments business was great, but hey, the channel business was crummy, hopefully, you'll hear me say that at '24. The answer will be it will be flat.

[Operator]

The next question comes from Nate Svensson with Deutsche Bank.

[Christopher Svensson, analyst]

So Darrin actually leads right into what I wanted to ask on Corporate Payments. Very -- first off very nice to hear about the outlook for 20% growth in 2024. I wanted to ask -- because in the past, you've talked about sort of a stickiness and resilience that you see with regards to suppliers continuing to accept virtual card payments, despite the challenging macro.

So maybe can you give us an update on how that sort of resilience has trended since we last spoke 3 months ago? Anything changing with the decision process with your suppliers? Or any update there would be great?

[Ronald F. Clarke, executive]

Nate, it's Ron. I'd say not much change. So I think we said it before that acceptance or not acceptance of a virtual card turns really more on the profile of merchants. Merchants that have obviously higher margins, for example, are more accepting or merchants more need a cash flow because they're paid sooner. So I'd say there's really nothing super new. Kind of the opt-out rate, if you will, has been pretty steady. And again, who takes the car is really a function of kind of who the merchant is. So nothing new.

[Thomas Panther, executive]

And Nate, we've actually seen card penetration levels tick up a little bit. So at the end of the day, it kind of comes down to the amount of spend that's on a card, and that's moved up as you look at it over a quarterly trend.

[Christopher Svensson, analyst]

That's great to hear about the penetration levels. And so I know there's been a lot of talk about new products throughout the call. One, I kind of wanted to dig deeper on was the new Corpay Complete products? I know there was a press release that came out at the end of January. So maybe you can talk about the go-to-market motion there, where you're seeing the sort of synergy potential between the full AP offering, cross-border, et cetera, within that Corpay Complete?

[Ronald F. Clarke, executive]

Yes. That's another good question. I mean, simplistically, Nate, we used to do not knock on a midsized company, high CFO and hey, we've got some great expense management products here. And mostly, the pitch was kind of menu based or a la carte. Hey, it looks like you got some drivers, we've got fuel cards. Looks like you need a better control business card, given some of the expenses that are coming in or one that's got automated expense reimbursement. So historically, that's how we presented things. And so the idea was to be able to have kind of a wrap or rebate or look at the spend of the whole company. So not CFO, you've got walk around spend, you've got AP spend. I could combine all of that and give you 100 basis points back, 0.5 million a month back and make your life easier. How does that sound?

So we finally have a platform where all those things, the walk around stuff and the AP automation stuff is literally brought together, call it, in terms of 1 report, 1 credit underwriting system and stuff. And so that's the idea that we could present now to a company effectively a package deal, if you will, instead of an a la carte deal. So we just literally been underway, call it, just what you said, call it, a month or so with the first set of leaves in it.

But clearly, it's going to be the future. My hope is even if we sell someone a la carte the first day, that they're on the railroad. It's easier to go back. They've learned how to use the UI. They know we have an account, we credit underwritten them and stuff. And so we think it certainly lends to better add-on sales over time.

[Operator]

The next question comes from Sanjay Sakhrani with KBW.

[Sanjay Sakhrani, analyst]

Sorry, I hopped on a little bit late. I apologize if you've answered these questions. But just on the macro assumptions that you guys are using for the year, what kind of macro are you guys assuming sort of the beginning and ending of the year?

[Thomas Panther, executive]

Sure. Sanjay, it's Tom. So I think in big picture macro, let's start there, and then we can talk a little bit in terms of more detailed macro as it relates to specific to our company. But big picture macro, we're expecting an economic outlook to stay relatively consistent, completely in line with the broad economic guide. When you look at our 3 major markets of Brazil, U.S. and U.K., we expect in all of those markets to see relatively stable, maybe slightly improving economy as rate cuts in those various markets occur, but we're not expecting any kind of recession, and certainly, we're not expecting a GDP kind of gangbuster-type year.

With respect to the more narrow macro that affects FLEETCOR, and I think about it in terms of a couple of categories, first, fuel price -- average fuel price, diesel and unleaded combined to 365, that's a little below where we are today. If you just kind of look at where we are through 2024, we're probably closer to a blended rate of around $3.40. So that's one of the callouts that we had in terms of the Q1 growth challenge. But we're not prognosticators of oil and the pull-through to fuel.

We just look at EIA and other providers of those things. And that was the consensus view of how the year would play out. I think as demand increases from a seasonal perspective, you would see that increase. Spreads generally consistent with last year. That's really hard to predict. It's more based on volatility of fuel price, not just absolute. So that's kind of in base gas, but we look at historical trends and done some modeling, we expect spreads to be relatively consistent.

FX, a little bit of a tailwind. If the dollar and rate cuts continue, the projection is correct and the dollar doesn't strengthen -- have a little bit of strengthening over the last week or so. But longer term, we expect the dollar to be a little weaker, and so that will help the FX side of our business. And so we think, overall, that will be a slight tailwind to us.

Rates generally kind of neutral to better. We have modeled out the rate curve based on the last rate curve out there. So we think rates will be a little bit better. Certainly, interest expense lapping the headwind from this year in terms of the grow over from '22 will be a significant benefit to us. And then, I guess, finally, taxes, we think will be generally consistent with the full year tax rate in 2023.

So overall, we characterize the macro is kind of neutral to -- from a macro perspective -- big macro perspective and kind of a slight benefit to us with respect to things that have affected us directly.

[Ronald F. Clarke, executive]

Sanjay, it's Ron. I got to jump in because that's clearly the optimist here. Play it off Tom. But I'd say it's all -- it's shiny days, right, living through 2023 with a $200 million interest expense anchor and sitting here at the beginning of the year with half FX and declining interest rates. It feels super great to get earnings print back to 15% or 18% that we can print instead of whatever we printed last year. So I would say that it's setting up at this moment to be super positive or super happy with it.

[Sanjay Sakhrani, analyst]

Yes. I'll take my fingers crossed. Just a follow-up. Ron, you mentioned sort of the cross-sell initiatives in your prepared remarks. How much of that can happen over 2024? Is there anything baked in? And then when can we actually get the contribution in a significant way?

[Ronald F. Clarke, executive]

Yes. I mean it's happening in different places. I think you -- we've called out before, it's probably 20% of the Brazil sales now in the company are taking add-on products there and selling them back to the core base. We're underway with that, as I said, with the parking app because we've got millions of consumers. We're back reselling something back into the base of Corporate Payments back into the fuel card base.

So it's clearly in our sales plan. I'd say it's probably relatively significant number as we get through the year in terms of what we're expecting there. So it's been a core part of the idea of we've got, as you know, 800,000 business clients and some number of them are pretty big. And so having more things to offer them has always been part of the idea. So I think it's meaningful this year.

[Operator]

The next question comes from Sheriq Sumar with Evercore ISI.

[Sheriq Sumar, analyst]

I was looking at Slide 37, and I can see that the Corporate Payments take rate has increased in 2023. So just wanted to get some context as to what's the pricing power over here? And can we expect the same trajectory? I think that's the function of the adjustments that you have done by the segments. So just to get some insights on that.

[Ronald F. Clarke, executive]

Sheriq, give page number again? It's 27?

[Sheriq Sumar, analyst]

37.

[Thomas Panther, executive]

37. Okay, sorry Yes, so a lot of that has to just do with the channel mix. So as Ron mentioned earlier in terms of the way the amount of take rate we have on channel versus the direct business as we saw the channel volume fluctuate in the quarter, that's what's causing the fluctuation in the take rate related to Corporate Payments.

[Sheriq Sumar, analyst]

Got it. And my follow-up is on the margins. We see that the margins have been grinding higher across all the segments, and especially within the Vehicle Payments and Corporate Payments. So just to get a sense as to what could be the biggest driver in margins in 2024, like which segment do you expect to be a meaningful contributor?

[Thomas Panther, executive]

Yes. I don't think it's kind of disproportionate one way or another, just kind of rounded out to summarize. For the year, we were at 53%. We were exiting around 54%, and we guided for the full year 2024 to be at 54%. I probably being a little bit higher than that, as you would expect. And so it's not really one. There's not a lot of change there. You're talking about, give or take, 100, 150 basis points.

And secondly, I think it's more of the structure of the business that's driving the margin, not necessarily something that we're doing necessarily inside the business to modify the existing business model and the structure. So just as we grow at the levels at which each of the businesses are growing from a revenue and sales perspective and the amount of fixed cost, you're just going to get this natural operating leverage benefit from margin where you'll see that rotate up.

So at the same time, we also want to continue to invest...

[Ronald F. Clarke, executive]

Credit

[Thomas Panther, executive]

I guess, fair point. Yes, credit is coming down a little bit, '23 to '24 that would also help the margin. But the other thing just from the standpoint of just investment, we continue to make significant investments in the company, particularly around sales and marketing. And so we are mindful in terms of the amount of spend that we're putting back into the company to make sure that the sales engine can continue to generate the kind of growth levels that we've historically generated.

[Operator]

The next question comes from Chris Kennedy with William Blair.

[Unknown Analyst]

I know you give the sample of the U.K. for unit economics of your EV business. But can you just talk broadly about that, how that's evolved over time, your confidence going forward in that?

[Ronald F. Clarke, executive]

Yes. Chris, it's Ron. So look, I preface it with -- it's still early days. I guess, we've been running this analysis for, what, 8 quarters or something and have 300 or 400 accounts in it. So look, we know a paramount. We have real customers that are paying real bills and paying us more. I'd say to you that conceptually the reason that I think we can get paid the same or more, just to me simplistically is there's just more purchase.

So in the fuel business, let's say, in the U.K., there's 9,000 gas stations. We have 1 million drivers there. So someday, when every guy or gal has an EV, there's going to be 1 million incremental charge points. It's way more than 9,000 public charging points. And so the ability, again, to help a company make the transition from some old fashion gas stations, some public charging to the 1 million at home, bring that all together and keep it simple is useful in the scope of what they pay for charging and fuel our fees or peanuts.

And so it feels to me like we know what we're doing. And more importantly, we have products that they like I think it doubled, Tom, year-over-year. And so I feel better about we've got the right solution clients like it and clients are paying for it and the they're paying more down than the whole fashion thing. So I'd say stop raining the frigid fire alarms. It would be my comment to people, "Hey, there's a lot of time in front of us. But I would not be super fray sitting here today."

[Operator]

The next question is from Trevor Williams with Jefferies.

[Trevor Williams, analyst]

I want to ask on Lodging. Any more detail you can give on some of the different components within the segment? It sounds like most of the incremental weakness was on the airline side. But any more color on the other pieces workforce, managed services, insurance, just how those did, especially relative to Q3 would be helpful?

[Thomas Panther, executive]

Sure. Trevor, it's Tom. So the Lodging business, as we mentioned in our prepared remarks, it did experience softness where our biggest surprise was for the quarter. was really more on the airline and the insurance piece. We actually saw the workforce piece come in about where we had anticipated, and a lot of the expected growth that we had forecasted in the fourth quarter was from what we've seen historically with the level of flight cancelations related to our distressed product, where you typically would see a seasonal uptick. There's lots of people in the air with holidays and things like that.

And that did come to fruition. Similarly on the insurance side, we saw the decline in the overall insurance. So the decline quarter-over-quarter in Lodging was really more directed towards those 2 businesses where those types of episodic type things that occur in the fourth quarter just didn't materialize. Workforce, we continue to see a little bit of softness there. But as Ron had indicated, we feel like that has stopped out and expect that to move forward based on new sales and the introduction of some of the new products.

[Trevor Williams, analyst]

Okay. No, that's helpful. And then just to put a finer point on the assumptions for the macro neutral or the organic guide. In terms of cadence, is the expectation that growth will accelerate progressively over the course of the year? So like you were saying with vehicle where Q1 low point, 4Q exit rate for '24 should be the high point of organic growth for the year or anything else to call out?

[Ronald F. Clarke, executive]

Yes, Trevor. Let me that and then Tom can add to it. So I mean, conceptually, the main reason is the same-store sales. So if you think about math, right, of how to get to 10%, right, we lose business, right, 8%. We make sales and then we have the same-store sales. And so the bet that we have, which we're seeing in the trends, is it the same store that was plus 2 4 quarters ago and was minus 3 this past quarter will head back to flat.

And if that does, obviously, in that example organic thing by 3 points. So that's A. B, we think the retention, again, will likely tick up because of this micro flush. When you have more bigger accounts, you structurally just have better retention. And then third, our Corporate Payments business is growing faster, and it has higher retention rates than our fuel card business. So those two things, as we model it will help the back half.

And then hopefully, the set of new products and the cross-sell stuff which we're pouring out, now that will start to build, those add-ons will start to build in the back half. So that's what makes up the curve as we run through the year.

[Operator]

The next question is from David Koning with Baird.

[David Koning, analyst]

Just a couple of things. I guess, on the corporate line, you called out the yield mix improvement. But corporate volumes were down about 15% sequentially. It must have been low-yielding volumes that fell off. But what is the mix? What was the falloff in volumes

[Ronald F. Clarke, executive]

Yes. It's just that channel thing that I said before. I mean, that literally was the point of our same-store sales reduction. We would have been 2% if that business was flat. So again, it's just a big partner that gives us lots of volume and no money goes, dates around and goes non-exclusively. And so, hey, we lose a little bit of revenue, and we lose a lot of volume.

But the take rate goes up because obviously, that's a lot of low-margin business that we weren't getting. And we also know that excluding channel, the spend level was north of 25%. So it's really a channel story that's driving both the volume and the take rate noise that you may be seeing. But again, just to -- you said for finer point on the thing, I want to make sure people have heard that we have the business to have contracted, right, for '24. So that helps us relate to you guys that we hit the bottom there because when I look at what's effectively contracted, inside of the minimums we have, we're kind of done with that dating around -- there's no more dating. If you day 1 or 2 in any more on that, that's where it is. So that -- if there's any good news, that's the good news here.

[Thomas Panther, executive]

And kind of belt and suspendered it was also some minimums as well. So we also got some protection that while we're under contract, we also have some commitments from a minimum perspective, too.

[David Koning, analyst]

Got you. And just a quick follow-up. Bad debt expense, you called it out, I mean, lowest -- $22 million, lowest in 8 quarters or so. Is your 2024 guidance for that to remain low? And if so, is anything related to reversals? Like is it unsustainably low in 2024 or just normal?

[Thomas Panther, executive]

No. I mean I'd say it's fairly normal. Obviously, it's going to fluctuate from a dollar perspective, as the business grows, we think of it more in terms of basis points of spend or percentage of revenue because the business grows, you'd expect the bad debt dollar amount to grow, but not necessarily that rate to necessarily grow. So I think we'll continue to see good performance in 2024. We have plus the micro client that's Ron said, we've tuned some of our models. We've gotten to a point where I think we've learned a lot over the last, call it, 6 quarters, and I think we'll be in a position where we can be a bit more opportunistic in terms of how we manage credit.

[Ronald F. Clarke, executive]

And again, just add the point is it helps the flow-through into earnings, right, although it looks like revenue is like when you take those late fees out because you're taking out the credit loss expense, basically, you have a decent flow-through down to EPS. So that's one of the reasons that the profit flow-through remain pretty good.

[Operator]

The next question comes from James Faucette with Morgan Stanley.

[Unknown Analyst]

It's Mike on for James. Just one quick one for me. On the buyback, anything that we should be mindful of just in terms of cadence there? Do you think it will be fairly evenly distributed based on seasonal free cash flow generation? Or will it be weighted to any particular quarter?

[Thomas Panther, executive]

Yes. Michael, it's Tom. I think we're going to be mindful in terms of market conditions, and we like where the stock price is. As I mentioned, we're flush with liquidity, both on the balance sheet and then when we upsized the revolver, we have another $600 million of liquidity. Obviously, we want to use some of that liquidity for M&A. But you add it all up, we have probably up to $2.5 billion, $3 billion worth of cash that we want to put to work, and we want to put it to work as quickly as possible.

So I think the timing is just going to be predicated on the market, the amount of the stock and those types of things. But I think we will be looking to be in the market over the course of this quarter and then we'll see how market conditions are as the year plays out.

[Operator]

Ladies and gentlemen, this concludes our question-and-answer session as well as the conference. Thank you for your participation. You may now disconnect your lines.