FleetCor Technologies saw improving stability in the services it provides to trucking businesses across North America and its international units, helping the company to a better-than-expected quarter, officials said.

“It’s been a really terrific start to the first half — year-to-date revenues, sales and earnings all coming in ahead of plan,” Ron Clarke, chairman and CEO, said during a call with analysts after the market closed on Tuesday.

Total revenue increased 10% year over year (y/y) in the quarter to $948.2 million, while second-quarter adjusted earnings per share (EPS) increased 1% to $4.19. Revenue and EPS beat Wall Street’s consensus estimates of $945.2 million and $4.18, respectively.

The company’s adjusted earnings before interest, taxes, depreciation and amortization increased 11% y/y to $497.1 million.

FleetCor (NYSE: FLT) is an Atlanta-based global provider of fuel card and payment products for businesses, including the commercial transportation industry.

“The components of our overall 10% y/y organic revenue growth were our fleet services stepping up to 6% [y/y] for the second quarter, helped a lot by our international markets, particularly Mexico and Australia, both of those up over 20% for the quarter,” Clarke said. “Also, our electric vehicle revenue increased 45% y/y; Brazil revenue grew 15% y/y in the second quarter, with continued strength in our core toll-tag line.”

Revenue from the company’s fuel card program increased 6% to $399 million as revenue per fuel transaction increased 5%.

Last year, FleetCor changed its North American fuel fleet sales strategy by pivoting from small micro accounts to bigger-company prospects.

“We essentially stopped onboarding new super small one- and two-card-size companies about nine months ago. Although this reduces our overall North America fleet sales, we do expect the second-half fleet credit losses to decrease about 30% to 35%, sequentially, first half versus second half,” Clarke said. “The good news: We are increasing the number of new fuel line customers that have more than five cards.”

The company increased its full-year 2023 earnings guidance to an adjusted EPS range of $17.09 to $17.35 (previously $16.75 to $17.25). Total revenue guidance increased to a range of $3.83 billion to $3.86 billion (previously $3.8 billion to $3.85 billion).

FleetCor’s guidance currently expects third-quarter revenues between $980 million and $1 billion and an adjusted EPS between $4.44 and $4.64.

“The outlook for the second half of the year remains in line with our expectations as we expect the fundamental trends from the first half of the year to continue,” Tom Panther, FleetCor’s chief financial officer, said. “We expect solid growth in the second half of 2023 as we lap the interest and credit overhangs from last year and our organic revenue growth continues.”

In February, FleetCor acquired cloud-based EV charging software platform Mina. Officials said the purchase gives FleetCor a solution for commercial fleets in the United Kingdom and helps solidify the company’s offerings to both EV and internal combustion engine (ICE) fleets.

“On the economics front, EV vehicles, at least among our commercial mixed-fleet clients, continue to be very favorable,” Clarke said. “EV vehicles are generating more revenue per vehicle than a comparable ICE vehicle. We’ve seen this positive trend now over the last 10 quarters, so really super good news there.”

FleetCor is also close to finalizing the sale of its business in Russia and is “hopeful that the deal will close later this month,” he said.

Clarke also said FleetCor is exploring the possibility of spinning off at least one of its units into a separate company.

“We are exploring with the help of Goldman Sachs the idea of separating one or more of our businesses to further unlock value,” Clarke said. “Our path initially is to look simply at separating or spinning off one of our major businesses into a separate company.”

Clarke did not specify which of the company’s divisions are being considered for the spinoff.

“The considerations or assumptions here are around forward pro forma multiples, what would the stand-alone company trade at, the tax impact, synergies of the separation opportunities for future mergers and acquisitions, really a whole host of things,” Clarke said. “The second path is to potentially combine one of our three major businesses with a dance partner; that would be a pure-play company that provides very similar solutions to one of our three big businesses.”

FleetCor Technologies	Q2/23	Q2/22	Y/Y % Change
Total revenue	$948.2M	$861.3M	10%
Fuel revenue	$399.9M	$378.9M	6%
Fuel transactions	124M	122.9M	1%
Fuel net revenue/transactions	$3.23	$3.08	5%
EPS	$4.19	$4.17	1%

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