Corpay - Q2 2023
August 8, 2023
Transcript
Operator (participant)
Good afternoon, ladies and gentlemen, and welcome to the FLEETCOR Technologies, Inc. Second Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Tuesday, August 8, 2023. I would now like to turn the conference over to Jim Eglseder, Investor Relations. Please go ahead.
Jim Eglseder (SVP, Global Investor Relations)
Good afternoon, everyone, thank you for joining us today for our second quarter 2023 earnings call. With me today are Ron Clarke, our Chairman and CEO, and Tom Panther, our CFO. Following the prepared remarks, the operator will announce that 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 the 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 closed during the two years being compared.
We will also be covering non-GAAP financial metrics, including revenues, net income, and net income per diluted share, all on an adjusted basis. These measures are not calculated in accordance with GAAP and may be calculated differently than at other companies. Reconciliations of the historical non-GAAP to the most directly comparable GAAP information can be found in today's press release and on our website. I also need to remind everyone that part of our discussion today may include forward-looking statements. These statements reflect the best information we have as of today. All statements about our outlook, new products, and 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.
The expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect today. 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 both on our website and at sec.gov. Now, with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?
Ron Clarke (CEO)
Okay, Jim, thanks. Good afternoon, everyone, and thanks for joining us today. Upfront here, I'll plan to cover four subjects. First, provide my take on our Q2 results. Second, I'll share our updated 2023 guidance. Third, update you on a few key priorities that we're working. Lastly, discuss the status of our strategic review. Okay, let me let me begin with our Q2 results, which finished better than our expectations. We reported revenue of $948 million and cash EPS of $4.19, both of those up sequentially. Our Q2 EBITDA almost touched $500 million, which is an all-time record for us. Both our print revenue growth and organic revenue growth came in at 10% for the quarter.
The reason is Q2 print revenue helped by acquisition revenue and hurt by lower fuel prices, effectively a wash. The components of our overall 10% organic revenue growth were fleet stepping up 6% for the quarter, helped a lot there by our international markets, particularly Mexico and Australia, both of those up over 20% for the quarter. Our EV revenue increased 45% year-over-year. Brazil grew 15% in Q2, continued strength in our core toll line tag volume, they are up 7%, helped by our new bank partnerships, also increasing demand for our new vehicle insurance add-ons. Lodging up 14%, led by our airline vertical.
That results from a number of new airline implementations, along with the growing usage of our auto rebooking feature for distressed passengers. Finally, Corporate Payments up 22%. That was led by our direct payables business. That was up over 30% in the quarter. Also, our cross-border business doing great, enjoyed record levels of new sales and new accounts. Turning to the trends or fundamentals in the quarter, also, quite good. Sales grew 20% in Q2. Inside of that number, Corporate Payment sales up 80% versus last year, which reflects, you know, strong demand for that product line. Our North America fuel sales remained pretty soft in the quarter.
That reflects the pivot we made away from micro, SMB accounts, last fall, in an effort to control bad debt. Retention, good, remains steady at 91%, that's despite a set of aggressive credit policies that we changed. Same-store sales, finishing flat, really a mix of pockets of both strength and weakness. Weakness we saw in our lodging, managed accounts, business, and strength, really, in the stability- improving stability in our North America trucking business. Look, all in all, a bit better Q2 than we had expected. A really terrific start to the first half, year-to-date revenues, sales, and earnings, all coming in ahead of plan. Okay, let me shift gears and share our outlook for rest of year 2023.
First off, we're calling for the second half macro to be roughly neutral to our recent three plus nine view, albeit with some puts and takes, specifically expecting better FX, but lower fuel prices. We're revising full year 2023 guidance, including Russia, of revenue of $3.848 billion at the midpoint, and cash EPS of $17.22 at the midpoint. This updated guide reflects the flow-through of our $8 million Q2 revenue beat and $0.07 cash EPS beat, so leaving the second half prior guide intact. Although the business is running ahead of our internal expectations for the first half, there is considerable sequential revenue growth still baked into our second half forecast.
The revised second half guide implies print revenue growth of about 12%, and organic revenue growth of about 10%. Pretty consistent with the first half. Finally, the guide implies an attractive Q4 exit, with revenue growth expected to be 14% and reach $1 billion in quarterly revenue for the first time. Pretty exciting. We do expect cash EPS growth of 16% in the exit as we begin to lap interest rates from last year. Okay, let me, let me make the turn and share our progress against a few important priorities. First, EV. We're continuing to progress our EV efforts, along with our understanding of how the energy transition may in fact affect our business.
If you would, look at pages 12 through 14 in our earnings supplement. On the economics front, EV vehicles, at least among our commercial, mixed fleet clients, continues to be very favorable. EV vehicles there are generating more revenue per vehicle than a comparable ICE vehicle. We've seen this positive trend now over the last 10 quarters, really super good news there. Second, EV is beginning to grow. EV revenue in Q2, up 45% versus the prior year, and the number of UK EV commercial accounts nearly tripled in Q2 versus prior year. Second up is our fleet board refreshment initiative. We added 3 new directors to the fleet board here in calendar 2023 and have had 2 long tenured directors retire.
This move has strengthened both our audit and tech committee oversight and greatly, you know, enhanced our diversity. Last up in terms of updates is our North America fleet sales pivot. You may recall, we were selling a lot of super small micro accounts digitally last year and made the decision to move digital sales upmarket to bigger company prospects. So some progress there. Again, we essentially stopped onboarding new, super small, 1 and 2 card size companies, you know, about 9 months ago. And although this reduces our overall North America fleet sales, we do expect the second half fleet credit losses to decrease about 30%-35% sequentially, first half versus second half. Good news, we are increasing the number of new fuel apps that have more than 5 cards.
That's from modifying our digital advertising bidding engine, so that's working. We do expect to be on the other side of this digital sales transition as we exit 2023, and thus better positioned to accelerate fuel card sales next year. Okay, last up is the status of our strategic review, in which we're reevaluating the portfolio of our company, with the idea of potentially separating one or more of our businesses. As you can imagine, we've been quite busy with this review, along with our overall value creation plan. First on overhangs, on the FTC front, we have closed the FTC injunctive relief chapter. You may recall we received the court order. We're implementing the remaining disclosure requests there and expect to be in compliance by the end of this month.
We do believe that our North America fuel business exceeds the very best industry marketing and disclosure practices. Russia, we have now received all necessary government approvals to close the Russia sale. We are working through some final closing mechanics and hopeful that that deal will close later this month. Tom will speak to the expected financial impact of the Russia sale here in just a minute. Second, non-core assets. We are progressing the potential sale of a couple non-core assets. We're well underway in exploring the sale of our prepaid businesses. We're also in discussions regarding a few small divestitures that are within our vehicle line of business. Third, fleet reinvention. We're pretty aggressively working to reposition our global fleet business.
The goal is to create really an exciting future for fleet that promises sustainable and durable growth. We think we're out in front here in EV, and actually expect EV to accelerate growth in that business. We're continuing to broaden our, our set of vehicle-related payment solutions, so solutions beyond fuel. We do believe that re-rating our biggest business and biggest earnings contributor is really the number one driver of the company's overall value creation. Lastly, the topic of separation. We are exploring, with the help of Goldman Sachs, the idea of separating one or more of our businesses to further unlock value. Our path, initially is to look simply at separating or spinning off one of our major businesses into a separate company.
The considerations, or assumptions here are around forward pro forma multiples. You know, what, what would the standalone company trade at? Tax impacts, the synergies of the separation, opportunities for future M&A, really a whole host of things. 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, you know, very similar solutions to one of our three big businesses. We are actively involved in exploring a few dance partner combinations and evaluating the attractiveness of that path. As promised on our last call, we expect to complete our work on each of these four initiatives before year-end, and for sure, we'll share our conclusions with you then.
Look, in closing today, I do wanna reiterate that we are pleased with Q2 and our first half performance, our financials and KPIs, ahead of our initial expectations. We are flowing through our Q2 beat and raising full year 2023 guidance. We are progressing a few of our key priorities, again, particularly on the EV front, and we are actively exploring several portfolio moves in an effort to rerate our multiple. With that, let me turn the call back over to Tom to provide some additional detail on the quarter. Tom?
Tom Panther (CFO)
Thanks, Ron. Here are some additional details related to the macro environment during the Q2. We had 10% organic revenue growth in Q2, and our reported revenue growth was also 10%, as the growth from recent acquisitions offset fuel price headwinds. Revenue of $948 million exceeded the midpoint of our guidance by $8 million, comprised of $13 million in higher revenue, partially offset by $5 million of fuel-related macro, which flowed through to our $0.07 beat in cash EPS of $4.19. Fuel prices were $3.65 per gallon for the quarter, lower than our $3.99 guide from May, which caused approximately $20 million of lower revenues versus prior year.
We exited the quarter with fuel prices around $3.55 per gallon. Prices rose in July to approximately $3.60 per gallon, a trend we expect to continue over the balance of the year based on the EIA forecast. Fuel spreads were positive versus prior year by about $5 million. Lastly, we had $9 million of negative impact from lower foreign exchange rates, mainly due to the decline in the ruble as the economic impact from the war drags on. In aggregate, we had $23 million of macro headwind versus last year that we were able to power through by way of organic and acquisition-related growth. Now, onto our performance for the quarter.
As I previously mentioned, organic revenue growth was 10%, reflecting the healthy diversification of our business and the realization of strong sales from last year that continued into the first half of this year. Corporate payments revenue was up 22%, driven by strength in our direct business, including full AP software solutions, which again grew over 50%. Our comprehensive menu of high-quality payment solutions continues to sell incredibly well as we sign up new customers who are looking to transform their AP operations. Cross-border revenue was up almost 30%, as sales remained strong and client transaction activity was again robust. We completed the Global Reach Group customer migration and are now focused on selling our combined set of products and services in all geographies, which is contributing to our strong performance.
In addition, we remain committed to realizing the cost synergies as we rationalize the IT and facilities overlap, which will help expand margins in the second half of the year. Turning to our fleet business, organic revenue increased 6%, driven by higher revenue per transaction and sales growth, especially in our international markets. In the US, we are seeing early success from our pivot in digital sales to a slightly larger customer segment, but we are still feeling the effects from significantly reducing our micro SMB fleet sales beginning in the 3rd quarter of last year. We anticipate digital sales to improve heading into next year as we adjust our lead generation strategies and conversion pipelines.
To expand on Ron Clarke's comments regarding our market-leading EV solutions in Europe, we are seeing over 20% sequential quarter growth in accounts, cards, and home charging users, and we continue to expand our proprietary charging network, which translated into over 30% sequential growth in kWh charged. While the revenue base remains relatively small, given the emerging usage of commercial EVs, it's a great start, and we are committed to building upon our unique capabilities. Brazil's revenue grew 15% compared to last year, driven by 7% tag growth. We now have 6.5 million tag users, which enables us to further increase the proportion of revenue from our expanding network of products, where we earn interchange. In the current quarter, approximately 36% of our B2C revenue was from the expanded network.
Sales also remained strong, increasing 16%, driven by our robust digital, field, and partner distribution channels. Lodging revenue increased 14%, which was in line with our expectations. I would note that the business grew 41% last year, this quarter is up against a tough year-over-year comp. This quarter's solid performance was highlighted by sales success across our industry verticals, in addition to revenue per room night that increased 19%, driven primarily from channel and product mix. The other segment declined 14% due to a shift in the timing of cards ordered by our retail clients in our gift business. In Q2 of last year, card orders were pulled forward from Q3 and Q4 as retailers wanted to ensure supply chain delays did not impact their card stock for the year-end holiday season.
Our full year net revenue expectations for this business remain in line with our prior expectations. Looking further down the income statement. Operating expenses of $536 million represented a 9% increase over Q2 of the prior year, primarily due to the addition of the Roomex, Plugsurfing, and Global Reach Group operations. The increase in OpEx was also impacted by higher bad debt, increases tied to higher transaction and sales activities, and investments to drive future growth. Bad debt expense was $35 million, or 7 basis points of spend, which was stable with last year and in line with our expectations. We currently expect bad debt to improve approximately 20% in the back half of the year compared to the second half of 2022.
EBITDA margin in the quarter was 52.4%, which is 140 basis points improvement from 51% in the first quarter of this year. 30 basis points higher than last year. Normalizing for our recent capability acquisitions, EBITDA margin increased 130 basis points compared to the prior year quarter. We still expect our full-year EBITDA margin to improve throughout the year and exit around 200-250 basis points better than the prior year. This will be driven by solid revenue growth and synergies realized from acquisitions. Interest expense increased $65 million year-over-year, driven by the increase in SOFR on our debt stack. The impact of higher interest rates resulted in an approximate $0.57 drag on Q2 adjusted EPS.
Over the past few months, we have been monitoring swap rates relative to the SOFR forward curve. In August, we executed $2 billion of fixed-rate swaps with an average maturity of 3.5 years and average fixed rate of 4.3%. These swaps provide immediate positive carry of approximately 100 basis points and ladders out the fixed-rate portion of our debt stack, which is now approximately 60% fixed. These interest rate risk management actions capitalize on the strong relative value of swap rates at the 3-4 year point of the curve, generating an immediate benefit to interest expense, and substantially reduces interest expense volatility going forward without incurring outsized duration risk. Our effective tax rate for the quarter was 26.6% versus 23.7% last year, which reflected a discrete tax item that positively affected the 2022 tax rate.
Turning to the balance sheet. We ended the quarter with $1.25 billion in unrestricted cash, and we had $768 million available on our revolver. We have $5.5 million outstanding on our credit facilities, and we had $1.25 billion borrowed under our securitization facility. As of June 30th, our leverage ratio was 2.6x trailing twelve months EBITDA, as calculated in accordance with our credit agreement. We made no open market share repurchases in the quarter, and we are still have over $1.2 billion authorized for share repurchases. We have ample liquidity to pursue near-term M&A opportunities and continue to buy back shares when it makes sense.
In addition to Ron's overview of our full year guidance, let me give you some additional detail, including some thoughts on our Q3 outlook and supporting assumptions, which can be found in our supplemental materials. For the full year, we now expect GAAP revenues between $3.836 billion and $3.86 billion. Adjusted net income between $1.281 billion and $1.303 billion. Adjusted net income per diluted share between $17.09 and $17.35. Finally, EBITDA growth of 17%.
For Q3, we're expecting revenue to be between $980 million and $1 billion, and adjusted net income per share to be between $4.44 and $4.64 per share, which at the midpoint, is up 7% over what we reported in Q3 of 2022. All of these estimates include Russia for the full year. We are now assuming an August close of our Russian business as we continue to work through the final closing details. Upon close, we expect revenues for the year to be $45 million-$55 million lower, resulting in a $0.25-$0.35 decline in adjusted EPS over the remainder of the year, based on using the sale proceeds for buybacks. This guidance is consistent with our previous guidance after adjusting for anticipated August close.
Related to our guidance assumptions, we are using $3.66 for our fuel price assumption for the rest of the year. Our interest expense guidance of $330 million-$340 million is based off an average SOFR rate of 5.31% for the rest of the year. Additional assumptions can be found in our press release and supplement. With that, thank you for your interest in Corpay. Now, operator, we'd like to open the line for questions. Thank you.
Operator (participant)
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to withdraw your question, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Tien-Tsin Huang with J.P. Morgan. Please go ahead.
Tien-Tsin Huang (Managing Director and Senior Analyst)
Hey, great. Good afternoon, everybody. I appreciate the update on that thing. I guess, Ron Clarke, I want to ask you, you know, with you're moving forward with the strategic review, you mentioned a couple of options on the separation and some views on the non-core. I know you've probably learned a ton here. I don't think you're going to tell us which way you're leaning, per se, but as you've learned through this process, I mean, have you changed your priorities on how you're going to seek value? I know this has taken up a lot of your time, but is the preference to seek immediate value for certain?
You know, are there some other things that you see that could be value creative, that maybe could last over the mid to longer term, if you follow my question? Thanks. Really, immediate gratification versus sort of a long-term balancing act. Thank you.
Ron Clarke (CEO)
Hey, Tien, should have no idea where to go with that question.
Tien-Tsin Huang (Managing Director and Senior Analyst)
Yeah, sorry.
Ron Clarke (CEO)
Yeah, we're, we're obviously, as I tried to say in the, in the opening, working the thing pretty hard, right? Running through these, these three or four different areas. I, I guess I would say in terms of leaning your comment of, hey, you know, what do we think? What do I think, has the chance to, to rearray, to get value? I'd, I'd say two things. One, we think getting people to believe that Fleet business or, or what we're, we're going to transform into the vehicle business, that that's got a, a durable, you know, an exciting future, is kind of job one, two, and three, because it's so big, it's such a big part of the company, you know, and particularly the EV part of that story.
I'd say we are working that, like, super hard, and we'll come forward with some stuff in 90 days. The second one, on the separation thing, I'd say that, to me, the separation is much more interesting and compelling, if we can do it in combination with something, not only-
Tien-Tsin Huang (Managing Director and Senior Analyst)
Mm-hmm
Ron Clarke (CEO)
... because that could create, you know, more scale and stuff in the space, but also potentially have a bunch of synergies with it. The structural, you know, separation enables, in some ways-... transactions that are not as easy, you know, out of the mothership. I'd say that those would be my two. It's the fleet reinvention, where people believe in the future, and the potential for separation that would also include a combination.
Tien-Tsin Huang (Managing Director and Senior Analyst)
I wrote down, Ron, thank you. I didn't ask the question very well. I, I think you mentioned that EV would accelerate growth in the fleet business. I think EV grew 47%. Do you feel like you, you have a good line of sight now, at least in the short to midterm, on the, you know, on the EV piece and how it would supplement growth within fleet? Can you tell us a little bit more on where these sources of revenues are coming from?
Ron Clarke (CEO)
Yeah, that's, that's another super good question. I mean, the first thing to mention is just, if you take the existing accounts, the defensive nature. Hey, there's vehicles, you know, we have millions of vehicles. What if some of those vehicles are EVs? The first conclusion or forming conclusion is, we don't care. We could be indifferent, no matter what commercial vehicles exist in, in a bunch of years from now, as long as they're, you know, owned by the company, we can make money, we can make revenue. In fact, we're making more.
The second one is, it's looking like because our EV stuff is a bit better, we're out ahead of other people, including, for example, the oil companies, that we might do better in our basic selling and retaining, you know, commercial fleets that we have, because we get advantage by having the combined, you know, old-fashioned and new-fashioned package. Then the third one, we've got a new trick coming on the consumer side, which is a segment that we're not in. To the extent that we can light up the consumer side by just, you know, repurposing the stuff we have. That's kind of the one, two, three. You know, neutral to, to flat, kind of in the first one, win a bit more in the commercial, and then add the consumer. That, that would be the trifecta.
Tien-Tsin Huang (Managing Director and Senior Analyst)
Oh, that's helpful, Ron. Thank you for the time.
Ron Clarke (CEO)
Yeah. Always, always good to talk to you.
Operator (participant)
Thank you. Your next question comes from Ramsey El-Assal from Barclays. Please go ahead.
Ramsey El-Assal (Managing Director, Equity Research Analyst)
Hi, gentlemen. Thanks for taking my, my question this evening. I wanted to ask about the fleet segment organic revenues. It came in above our model. I think you called out some outperformance in international markets, Mexico, Australia. Just curious, what was the driver there of that sort of upside surprise? Should we expect whatever boosted growth internationally to kind of continue through the remainder of the year?
Tom Panther (CFO)
Hey, Ramzi, it's Tom. Appreciate the question. You know, Ramzi, it's just a variety of things. I think we saw some good transaction activity in our international markets. Keep in mind, our international market is diversified beyond just fuel. We have other businesses within that fleet segment that, that also helps drive growth. You know, so it, it's just a function of, of, you know, where, you know, the business was performing. I'll also say that fuel price in our international markets were stickier, particularly at the retail side, than what we necessarily would experience here in the US. That also helped kind of bolster the international side and, and the overall, you know, revenue growth. You know, obviously, we'll relook at that growth rate going forward when we're successful in closing the, the Russia transaction.
That'll affect it to some degree, but, you know, overall, you know, we saw, you know, a nice, healthy pickup in, in the overall growth rate.
Ron Clarke (CEO)
Hey, Ramzi, it's Ron. Just, just to add, I think we said on the last call that the thing would kind of tick along, right? That it was, it was lower, and so kind of mid-single digits is still kind of where our guide is.
Ramsey El-Assal (Managing Director, Equity Research Analyst)
Okay. All right. I think the answer to this question is probably no, based on your performance in the quarter and your guide, but, but, but I wanted to ask regardless. Any impact from the Yellow bankruptcy? I, I know they're not a big customer. Any residual credit exposure or anything like that?
Ron Clarke (CEO)
No. None. No, no exposure to Yellow.
Ramsey El-Assal (Managing Director, Equity Research Analyst)
Got it. Short answer, short question, short answer. Appreciate it. Thanks.
Operator (participant)
Thank you. Your next question comes from Nik Cremo with Credit Suisse. Please go ahead.
Nik Cremo (VP, Payments and FinTech Equity Research)
Great. Thanks for taking the question. I just wanted to, to follow up on Ramzi's question on the fleet segment. Could you just tell us what growth was in the North American fleet segment, maybe just, like, on a same store sales basis? As my follow-up question, could, should we expect that this mid-single digit revenue per transaction growth to continue in the second half? Thank you.
Tom Panther (CFO)
Hey, Nik, it's Tom. Yeah, we actually don't break it down beyond the, the segment level. I mean, I, I think, you know, overall, you know, we kind of keep it at the total fleet level and, you know, the international business outperformed U.S., but getting into kind of the details is just something that, that we stay away from. Then, you know, going forward, I think it's as we just said, I, I think you can continue to expect barring, you know, we see fuel prices and spreads hang to, you know, somewhere in the range of our guidance, that you would see that mid-single digit type growth rate as we look ahead into Q3 and Q4.
Ron Clarke (CEO)
Yeah. Hey, Nik, it's Ron.
Nik Cremo (VP, Payments and FinTech Equity Research)
Thank you.
Ron Clarke (CEO)
Let me, let me just add on top of what Tom said, pretty consistent, same store sales in the fleet business. It's looked about the same in the last few quarters, so not, not a lot going on there.
Nik Cremo (VP, Payments and FinTech Equity Research)
Got it. Thanks, Ron.
Operator (participant)
Thank you. Your next question comes from Darrin Peller with Wolfe Research. Please go ahead.
Darrin Peller (Managing Director and Senior Analyst)
Hey, guys, thanks. You know, I, maybe just hone in on the Corpay segment for a minute, just given how strong it continues to be. If we break down the, if we break down the segment by, obviously, the different sources of growth, I'd love to hear more about what you what you're seeing the most strength out of and sustainability of those. I mean, you made some comments, obviously, on invoice pay, but anything more would be great. Ron, I know we've touched on cross-selling that business into the fleet side as well, so curious on your thoughts there, if there's any progress?
Ron Clarke (CEO)
Yeah. Hey, Darrin, good, good question. Yeah, first off, we're happy. You know, someone picked on us or me, I think last time, saying, "Hey, you said around 20%," I think it was 19, I don't know if that guy's on the call today, 22. On the strength side, the direct business is what I'd say. We've called out before that we're not happy with the channel or the partner business, where the thing started 7 years ago. That thing is still negative and trending down. To end up with 22 consolidated tells you that the direct stuff is well north of 22, which obviously we're super, you know, excited about. There's no concentration in that business, that's doing well. I do need to call out for the cross-border thing.
I mean, I don't know if you heard it, but the sales-
Darrin Peller (Managing Director and Senior Analyst)
Yeah.
Ron Clarke (CEO)
New business was up 80%, 80% quarter-over-quarter. It's an all-time record of the amount of new business that we've sold. Cross-border was just crazy in terms of sales. I don't know if people are hearing this, but sales in that business and the performance in the direct business are, are, are trending way above what we thought they would be. Your last question on cross-sells, we did an interesting thing as part of the strategic review, where we looked at our three biggest businesses in the U.S., right? Fleet, lodging, and corporate payments. We said, let's go into what we call the blue box, so companies that are not like micro, call it above $10 million.
We focus on three industries, where about 70% of the clients are, and we find that we've got about 15%-20% overlap already. In other words, when we take the clients that, let say, fleet has, that lodging has, and that corporate payments has, that are kind of not small, and we say, "Hey, do they have more than one?" The answer is, lots of the clients have more than one. That's 15%-20% overlap. The reason that we haven't called it out before is because we started in those product silos and unrelated brands. The businesses just went to Ron Clark Inc. and sold each of the three products. Now, clearly, we've started advertising carrying the Corpay brand to those bit bigger accounts.
Darrin Peller (Managing Director and Senior Analyst)
Yep.
Ron Clarke (CEO)
Tell them, "Hey, we got all three things." Everyone should expect that there'll be more of that, more of the same kind of decent-sized prospective customer taking, taking everything we've got.
Darrin Peller (Managing Director and Senior Analyst)
Good. Good. That's good to hear. Thanks. Just, just my quick follow-up would be around capital allocation. You know, it just seems like there was a, a little bit less in the way of buybacks in the first half. You know, is there any change to your strategy on cap allocation, or is it waiting for the Russia deal to close, or anything else going on that we should just be aware of?
Ron Clarke (CEO)
Yeah, it's a good, it's a good follow-up. No change. Obviously, M&A, you know, continues to be the, the, the lead dog, and given the strategic review, and some of the M&A activity that's inherent, right, in the combination, a promise that I've made, so that, that, that's part of it. The second one, you got it. We, we basically will earmark proceeds if we're successful in closing out the Russia sale, and/or the Prepaid sale, you should expect we'll be buying stock back.
Darrin Peller (Managing Director and Senior Analyst)
Okay, good. Thanks, Ron.
Operator (participant)
Thank you. Your next question comes from Peter Christiansen with Citigroup. Please go ahead.
Peter Christiansen (Analyst)
Good evening, guys. Thanks for the question. Nice, nice, nice trends here. I wanted to first talk about the margin expansion that you're looking for this year, which is pretty commendable, considering, you know, the full fuel price decline, which is, we all know, can be quite detrimental. I was just wondering where, where you're seeing the sources of margin uptake, I guess, for the full year, I guess, the second half of the year? Is it mix shift? Is it a particular segment that you're seeing better cost execution, operating leverage? Any color there would be helpful.
Ron Clarke (CEO)
Yeah. Hey, Pete, it's Ron. Let, let me start, and then I'll, I'll let Tom jump in. The first one is there's always operating leverage inherent in the business, right? As our revenue climbs, right, so our second half revenue will be up, I don't know, Tom, $100 million-$150 million. Pete, you know, is our, is our guide over the first half. The marginal EBITDA flow through on that incremental revenue is super-duper high. Then the second one I'd say is kind of lapping the capability acquisitions. I think we said earlier that that's sapping, you know, call it 100-200 basis points out of our EBITDA margin, right? Investing in things for the future. As we lap that, we'll pick it up.
In fact, the piece of paper in front of me is our internal Q4 forecast, which has our consolidated margin up about 340 basis points. If the revenue comes in, and we get the operating leverage, and we lap the thing, our margins will be way stronger exiting Q4 than they were last year.
Tom Panther (CFO)
I would just add that keeping on the acquisition front, we also expect to continue to realize some synergies from our GRG acquisition, so that'll help some. Also, stock comp bad debt will also improve relative to year-over-year related to those two items as well. Those items and the items that Ron commented on all give us that acceleration in margin.
Ron Clarke (CEO)
Yeah, Pete, that bad debt was an important one, right? That thing grew, surprisingly, lots of people, right, in the second half, which is why we, you know, reacted relatively quickly. We're seeing the trends, both in what we reported here and what we're forecasting. To Tom's point, there's a pretty big step down, you know, as you exit Q4, which, which, you know, obviously is super helpful to the, to the EBITDA margin.
Peter Christiansen (Analyst)
No, that's a good point. You guys just have a good history of getting after bad debt in the past, for sure. My follow-up question, Ron hit on it earlier, you called out some really impressive growth in, in Corpay, particularly the, the cross-border and, and certainly full AP. Just wondering if you could paint the picture, at least qualitatively, of what's going on in the virtual card side, in the direct side a little bit more. Just give us a sense of the direction of, you know, those slices of the business would be helpful. Thank you.
Ron Clarke (CEO)
Yeah, Pete, Ron again, I think, you know, as I mentioned, the, the sales is the lead indicator, right? The fact that not only in the quarter, but I'm looking at the year to date, it's a, it's a record level of sales, both in the payables side of the business and in the cross-border. That's the, that's the first point. Then in terms of what we're selling, the mix has shifted more to full AP, but we still do sell standalone virtual card. And I think if, if you had our sales group in the room, the idea of having, you know, both areas to draw on, "Hey, look, I'll pay some of your bills, pal, or I'll pay all of your bills.
You, you tell me what you want, and I can give you some money back either way." That, that 2 for pitch, I think, is resonating. We're still selling both the standalone and the full, but a bit more of the full these days.
Tom Panther (CFO)
Peter, we're also seeing good acceleration on just sheer volume increase. Some of that is from the sales, and some of that's just from deepening with our existing customer base, getting implementations on board, and also working real hard to try to get as much cardable spend as possible. All of those things in terms of, you know, the front door and mining the existing portfolio, all drive that, that impressive growth level.
Peter Christiansen (Analyst)
Thank you. That's a helpful call. Thank you, gentlemen. Good result.
Operator (participant)
Thank you. Your next question comes from Andrew Jeffrey from Truist Securities. Please go ahead.
Andrew Jeffrey (Managing Director and Senior Analyst)
I appreciate you taking the question. Great results in, in Corpay, which is good to see. Maybe for you, Tom, can you elaborate a little bit on what mix might mean to yield in that segment? Are you, you know, sort of and, and maybe gross profit too, relatively indifferent to full stack payables versus FX? You know, if FX continues to be as strong as it is, anything we need to think about as far as mix or contribution margin or, or gross profit margin within that segment?
Tom Panther (CFO)
No, they don't, Andrew, they don't differ materially between, you know, the, the subsegments within that overall business. Both of them are attractive. They're also, they're obviously different businesses. Our payables business is much more domestically oriented, where our cross-border is much more internationally oriented. We like the diversification that that brings. But, but there isn't necessarily material, you know, margin difference that you need to be modeling in. I think both of them, you know, as Ron mentioned, just in terms of what we see from a sales perspective, have, you know, very strong sales results, solid pipeline. Both of them have recurring business with existing customers. You may kind of think of cross-border as more transaction-oriented, one-and-done kinds of relationships. They're anything but that.
They're generally customers who have recurring-type cross-border transactions, and so that provides us kind of a, a healthy, recurring type revenue stream coming from, from those businesses. They're more probably, other than a product and their geography, their economics, and their kind of compositions are more similar than you may, you know, normally think.
Ron Clarke (CEO)
Andrew, it's Ron. Just one other difference to point out on top of Tom's thing. The cross-border business, not only do we make a lot of sales, and their sales are way up, but their cost of sales are super attractive. They're the second, most efficient sale in our company in terms of what it costs us to get a $1 of sale, so we love that. Then second, they start super fast. So the start rate, or what you would call implementation, is super duper quick from kind of when we roll call or say it's contracted. So those, those are two things actually about that particular line of business that make it, really attractive.
Andrew Jeffrey (Managing Director and Senior Analyst)
Okay, that's, that's helpful. Then I wanted to touch a little bit, if I could, on the, the digital marketing initiatives. It sounds like they're starting to gain some traction on market. Any sort of LTV to CAC considerations, as you sign those, those bigger accounts that we need to be thinking about?
Ron Clarke (CEO)
Yeah, I'd say not, not really, Andrew. I'd say it's, you know, pretty complicated to, you know, move a big machine like that, that gets tuned right a certain way, like, you know, like a piano or something, gets tuned to work a certain way, and then we kind of, you know, halt the thing and say, okay, repoint, you know, the machinery a different way. It needs to grab lots of data to start it to kind of sort itself out again. It's taken probably a bit longer, but as, as I said in my opening, it's working. The number of bigger new accounts coming to us digitally is growing now. I don't want to say it was easy, but it's way easier to stop the problem. They just don't sign up the small ones. It's way harder to get more of the big ones.
We've always, I think, 50% of our business has always been bigger accounts, so we're totally used to that, both, you know, underwriting them and, and servicing them and starting them and all that. Really, it's just getting smarter about how to spend money to get the, the, you know, the appropriate segment in the door.
Andrew Jeffrey (Managing Director and Senior Analyst)
Okay, it sounds like, only upside from here.
Ron Clarke (CEO)
Yeah, it didn't matter. I mean, that's what I wanted to call out, you know, literally, I brought the thing to a screeching halt because we were not going to post some crazy credit number. The good news is that worked. The credit numbers are already down, we're forecasting as the roll rates were to be down. Job one is past tense. It's accomplished. Job two, I'm saying, started in Q2 to get better. The number of new, bigger stuff has increased, now I told the guy, "It's giddy up and go. Get your horse going. We need way more of it." We'll report whether, you know, we're picking that pace up as we run through the second half.
Tom Panther (CFO)
Field sales remain strong, and those are obviously already at a larger client segment level, and they continue to be a significant portion of the overall, and they've been doing quite well as, as well. That kind of buffers a little bit of the impact from our pivot to digital.
Andrew Jeffrey (Managing Director and Senior Analyst)
Okay, appreciate that. Thank you.
Operator (participant)
Thank you. Your next question comes from Nate Svensson with Deutsche Bank. Please go ahead.
Ron Clarke (CEO)
Hey, Nate.
Nate Svensson (Director, Senior Equity Research Analyst)
Hi, thanks for taking my question. I wanted to ask about monthly trends in the organic fleet business, as we move through the second quarter, and then any update on what you've seen in July and August month to date. The reason I ask is that previously you had pointed for sort of a continued acceleration off of that 3% organic growth that you saw in the first quarter through the remainder of the year. Kind of just wondering how that trended through the quarter. I know you got into mid-single digits for the full year, but just wondering about the potential for a continued sequential acceleration, as we move into 3Q.
Ron Clarke (CEO)
Tom?
Tom Panther (CFO)
Yeah, I'll, I'll take it, Nate. I mean, yeah, really, from a monthly perspective, there weren't really anomalies. Obviously, there's certain day counts and how many weeks within a particular month that can kind of skew the numbers from, from month to month, so it can be a little bit, you know, misleading to kind of just look at, at pure months. Just from a business momentum perspective, wouldn't say we saw, you know, significant shifts in terms of volumes and transactions and, and things like that. As we head into July, I'd say probably more of the same, maybe with the benefit of what we've seen more recently, uptick in, in crude. That'll translate into higher retail.
That should provide, you know, a number that's right within the guidance number that we reference right in that, you know, 365-366 range. Nothing, nothing really out of the ordinary to call out. I think we'll continue to expect some level of seasonal growth. As the summer continues, we then get into some of the agri-- heavy agricultural months. Those months can also drive a fair amount of usage. All, all of those things, I think, point us to kind of the direction we've commented on here earlier on the call.
Nate Svensson (Director, Senior Equity Research Analyst)
You got it. I appreciate all that color. I guess for my follow-up, I'll ask on lodging. I don't think that's come up here in the Q&A. Revenue growth, you know 14% off a very difficult comp was impressive, noticed that revenue nights were down sequentially and year-over-year. I also believe in the prepared remarks, you mentioned some softness in managed accounts. Maybe you can give some color on that softness that you're seeing. Relatedly, I know you maintained sort of that mid-teens growth for the full year, but any color on the cadence of growth as we move into the back half and comps get a lot easier moving past the second quarter? Thank you.
Ron Clarke (CEO)
Yeah, Nate Svensson. Hey, hey, it's Ron Clarke again. Yeah, you're right, I did, I did call it out. I, I'd say we're a little surprised. I'm not really super sure why, but when we go through our managed accounts, which in English means something like, you know, groups of people, consulting groups, or an environmental group, a utility going somewhere, so larger groups like going to a place, like, to do something, merchandising groups that would go, you know, to Walmart. I think that's kind of what that business is. For some reason, some number of accounts just on their own did less of it in Q2 than, than we were out looking. When we call, it's not super clear.
We say, "Hey, is that, is that going to be at that level or kind of where you were before?" That was kind of a bit, call it a couple points of growth of the soft pocket, that we didn't outlook. I'd say we're not super certain what, what that's going to look like, going forward. It's not like a lot of them quit us, as you can see in the retention rate. Look, we're hopeful that, that whatever that is, was kind of transitory for the quarter.
Tom Panther (CFO)
The good news there on that, yeah, Nate, is that we have the nice diversification of airline and insurance that kind of helps offset that as well, where we've seen some pretty good strength as, as we commented earlier.
Ron Clarke (CEO)
We have a big, what we call, custom business of giant accounts like railroads and trucking firms. We have a small SMB business we call direct. There's a lot of other segments in the business, but there was this one, this kind of consulting travel group that I did want to call out. Look, still happy with mid-teens. We plan that business at mid-teens, it's performed above that level. I want people to be clear, still happy with it.
Tom Panther (CFO)
Awesome. Appreciate it, Ron, bye.
Operator (participant)
Thank you. Your next question comes from Trevor Williams with Jefferies. Please go ahead.
Trevor Williams (Analyst)
Great. Thanks. Hey, guys. On Russia, I appreciate the updated sale impact on the reported numbers, but was hoping we could get some help on what the organic growth in fleet in the quarter would have looked like, ex Russia. Same thing for the mid-single digit target for the full year for fleet, just what that growth rate would look like, without Russia. Thanks a lot.
Tom Panther (CFO)
Yeah, Trevor, we'll update all of that when, you know, the transaction closes, and we'll kind of refresh all of that. Let us come back to you on that. I, I think until we kind of get the transaction closed, you know, we'll, we'll wait and reset after that, if that's okay?
Trevor Williams (Analyst)
Okay, fair enough. Then, on the guide, Ron, you alluded to there, there is still a decent amount of sequential growth implied both for the third and fourth quarter. Maybe just talk us through, especially for Q4, kind of the level of visibility you think you have in, I think it's $20 million that's implied, quarter over quarter in Q4. It sounds like maybe you're getting some of the new sales into the larger fleet customers that might start layering on, anything else just on kind of level of visibility into that? Thanks.
Ron Clarke (CEO)
Yeah, good, good question. The first thing I'd say is, you know, we got a decent look in July, so that's always helpful. That's tracking to our guide. When Tom and I built the second half, the output we have is that, that that's on track. Yep, the thing does build sequentially, which is Ron's favorite thing about the business. I think I've told people this is a snowball. You start it down a hill, and, you know, there's more snow as it rolls down the hill. That's the nature of, you know, recurring revenue business as we beat sales, and we're ahead of sales year to date.
I, I call it like Corpay, which is way ahead, as that stuff gets implemented, to Tom's point, that attaches more snow, the ball rolls, and obviously, sequentially, I think we're up, like, $40 million sequentially already Q2 versus Q1. I'd say, look, our confidence is pretty high. We're on track. We have the sales in the bag. We just need to get them implemented, and then there's the seasonality, right? Q3 is always a super-duper quarter, and Q4 is better than Q1, so we get some benefit of, you know, strength. You know, for example, Brazil is always super-duper good, for example, in Q4. We've been at it a long time. I think unless something, you know, kind of goes sideways on the planet, that we're, we're pretty comfortable with the guide.
Operator (participant)
Thank you. Your next question comes from Mihir Bhatia with Bank of America. Please go ahead.
Mihir Bhatia (Director and Senior Equity Research Analyst)
Good afternoon. Thank you for squeezing me in here. I, I wanted to ask a little bit more about take rates or, you know, just revenue per transaction or per spend in corporate payments. We saw some pretty good growth there. I think in lodging you called out it was product and channel driven, but maybe on... Talk a little bit more about the fleet segment in particular. What drove the strength in revenue per transaction there and also in corporate payments, if you wouldn't mind? Thank you.
Tom Panther (CFO)
Yeah, I'll take a swing at that, and I, I may have missed a little bit of the question. It's, it's take rate in both corporate payments and fleet, Mihir, is that?
Mihir Bhatia (Director and Senior Equity Research Analyst)
Yeah. Yeah, correct.
Tom Panther (CFO)
Okay, got you. Yeah, you know, generally just kind of mix. I mean, there's really nothing in particular to, to call out. You see a little bit of an increase in take rate when you refer to our release. Again, it's a pretty modest increase. So I think it's, it's just a matter of just mix of business, and really nothing more to really call out besides that. We're always, you know, competitive with respect to our pricing and, and things like that. So, you know, I, I think fuel will also factor into what our overall, you know, spread and, and how those things have played out. It's just a combination of things, but nothing really out of the ordinary.
That's kind of, you know, what you're seeing in the numbers in terms of just kind of a, a slight increase in rate.
Ron Clarke (CEO)
Hey, Hey, Mihir, it's, it's Ron. Just, just to add to that, which is in corporate payments, the mix shift that Tom refers to, we think, will go on. When we tell you guys today that we're growing, you know, mid to high 20s in the direct corporate payments business and that the channel business is going backwards, the delta in those take rates is significant. You know, call it 4-5 times different. Every turn of that, you know, every forward quarter where the direct business is growing, let's say 25% or higher, and the channel business is shrinking, that will improve that rate prospectively.
Mihir Bhatia (Director and Senior Equity Research Analyst)
Got it. No, that is helpful. Thank you. Then if I could ask one big-- one more, just a big picture type question. You know, I think in earlier you were talking about, you know, doing a little bit more digital marketing, more cross-sell. At the same time, you are in the midst of a strategic review about potentially divesting some businesses.
Speaker 15
I just wanted to ask about, you know, the puts and takes with that. How, how aggressive are you gonna be on cross-sell in the short term till we know where the strategic review is ending up? Thanks.
Ron Clarke (CEO)
Yeah, another really good question. I'd say that we're, we're trying to learn. I think the, the first, you know, finding today is that we have cross-selling, that when we study among the larger clients that we have, do they use more than one of our products? I'm reporting today, yes, they do. The second thing we're doing is advertising. Now that we've consolidated the brand, we're generating way more leads by offering up, you know, more solutions to the same prospective company. I think that's just another input for us, potentially, into, you know, synergies or dis-synergies, you know, as we think about the separation. Obviously, to the extent that the separation still made lots of sense, there's no reason we couldn't have some kind of a, you know, agreement, commercial agreement with the company afterward, as an example.
I think we're just running them on, you know, separate tracks and learning what we can and, and see where it lands us. It's clearly an input into the separation decision for sure.
Speaker 15
Got it. Thank you. Thank you for taking my questions.
Operator (participant)
Thank you. Your next question comes from Ken Suchoski from Autonomous Research. Please go ahead.
Ken Suchoski (Equity Research Analyst - Payments and FinTech)
Hey, good evening. Thanks for taking the question. I just wanted to ask about corporate payments. You know, I think you mentioned, Ron, that the cross-border new business is up 80% quarter over quarter. You know, those new sales ramp pretty quickly. I guess, is the expectation that this business, you know, grows above 20% or maybe, you know, even north of 22% for the rest of the year, and into 2024?
Ron Clarke (CEO)
Yeah. Look, let me, let me make sure it's clear what I said. I said that corporate payment sales, which are both-- which is both what we call payables internally and cross-border, collectively, that, that book was up 80% year-over-year. That's the first one. The second point is, yes, cross-border implements quickly, payables does not. To the extent that some amount of that incremental growth is in payables, it's actually a 2024 benefit more than it is 2023. On the guide, I don't have it in front of me, my, my guess is that we're still guiding in the overall to 20%+ in the Corporate Payments business.
Ken Suchoski (Equity Research Analyst - Payments and FinTech)
Okay.
Ron Clarke (CEO)
I don't know if you guys are hearing it, but it's kind of working. Sales are working, revenue is working, so it's, you know, the trends are certainly in a good spot.
Ken Suchoski (Equity Research Analyst - Payments and FinTech)
Yeah, totally. Then, Ron, I guess just real quick, just on the strategic review and the and the separation, you know, sale, spinning, et cetera. I mean, are there certain, you know, kind of segments that stand out in terms of, you know, having, having a greater opportunity to create more value? Anything else that you see just on the dis-synergies? I know you mentioned, some of the overlap in the customer base, but just anything on dis-synergies as you think about, the different, the different segments.
Ron Clarke (CEO)
Yeah, again, I think the, the strategic review of what we call value creation plan, it's pretty complicated. That's why I try to tick through kind of the 4, you know, different pieces, kind of how we operationalize the review, right? From the, the Russia thing, which is kind of a, a political and emotional thing, to the non-core assets, to the fleet reinvention, to, to the separation. We're, we're full speed ahead, as, as you heard, on, on the Russia thing. We're full speed ahead on the non-core businesses, including a couple of small things that, that sit inside the vehicle business. I think the question everyone has, really, we really have 3 big businesses, right? We have, you know, fleet, lodging, and corporate payments, and I think people are focused on fleet, which is half the company or 40%, and corporate payments.
That's really where we're focusing the attention on the separation. Would the company be better off if fleet and corporate payments were not all part of the same mothership, but in some way separated, whichever one was separated? I'd say that's the primary, you know, issue, if you will, question that we're trying to answer. As I mentioned before, we're looking not only at, quote, "pure separation or standalone separation," but looking at the idea of, some combination, you know, in parallel with, with the thing. That's what we're working on. Yes, unfortunately, in any separation, there's dis-synergies. I mean, to me, it takes away the most important thing, which is really the ability to sell something, where you can get a defined price.
I like to know, you know, what something is and, and have my eyes open. You know, losing whatever, 25% or 20% after the cost base makes a straight sale of one of those businesses pretty difficult. You got to get a really good price, right, to, to cover that tax dis-synergy. We're looking really, particularly around both IT and management, right? Which is what, what IT is co-mingled, and how would we run the stuff, you know, managerially. We're kind of digging through all that and want to make sure that any, any, you know, thing that we, that we pull, that it, it would be worth it, right? That the benefits would far outweigh the costs here.
we're still, we're still working it, and, and we, we did commit to it, so we're because we can't study it forever, we're gonna have an answer when we, when we talk in 90 days.
Ken Suchoski (Equity Research Analyst - Payments and FinTech)
Okay, great. All right. Thanks, Ron.
Operator (participant)
Thank you. Your next question comes from Sheriq Sumar, with Evercore ISI. Please go ahead.
Sheriq Sumar (Analyst)
Hey, thanks a lot for taking my question. I have a question on the, on the tags business, on the Brazil tag business. Strong growth of around 15%, and tag, and tag growth was, like, around 7%, and strong sales growth, too. Can you talk about what's working in terms of the products? The take rates in that, in that segment was also up pretty much, sequentially. What's driving the take rate higher? How should we think about the take rates for 3Q and 4Q from here? Any color would be appreciated.
Ron Clarke (CEO)
Yeah, I think, first of all, I think it's a great, a great question because it highlights, you know, the pivot in strategy there, right? That what you said, the, the volume of tags is up 7%, the revenue, the revenue's up double. Two, 2 points. One is the, the volume is healthy, partly because we keep widening the distribution channels. In the last year, we signed 2 of the 5 biggest banks in Brazil to sell our stuff, our Sem Parar tags. Those things are pretty additive. That channel doesn't cannibalize much the other ways that we sell tags, so we're reaching, you know, prospective customers that we, that we weren't reaching before. That's, that's super helpful. The second one is the, the take rate and the incremental growth is really from the add-on.
The fuel that we're selling back to the tag holders is compounding. I don't have it in front of me, we'll call it 40% or 50%. Then these insurance add-ons, vehicle insurance add-ons, for, like, contents and, and micro insurance are crazy in demand, so we're bolting incremental revenue onto the same account, you know, without adding any more tags. I think that's what we said to everybody, was the idea of that business was: keep expanding distribution to sell more tags, but because we have millions and millions of customers there, find more things that are vehicle-related, like fuel and parking, you know, and insurance, that we could add on, and, and the answer is, we are. Just as a reminder, in the 1st quarter, I think almost 40% of the spend in Brazil was beyond toll.
Lots and lots now of purchasing there is, is in the, quote, "beyond toll products." That's the idea for the business.
Tom Panther (CFO)
Yeah, you may have been saying in my prepared remarks, it was, right at just under 40% this quarter, again, in terms of our B2C customer base, in terms of how much was coming from, you know, revenue was coming from products other than our tag subscription. It's, it's showing good success, and their sales, success has been, you know, just continuing to add to the momentum of that business.
Ron Clarke (CEO)
Yeah, just, just on that, because things getting tired or whatever, whatever, the, the sales, the absolute sales of a year to date are at a record level, for the last 3 years, every year, it's been a record level of overall sales versus the prior year. There's been no slowdown at the rate that, that we're, you know, we're reaching new customers. Again, it's another business that I'd say is working.
Sheriq Sumar (Analyst)
Thank you so much. That's helpful.
Operator (participant)
Thank you. Ladies and gentlemen, there are no further questions at this time. This concludes your conference for today. You may now disconnect your lines.