Greetings, welcome to the FLEETCOR Technologies, Inc. Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jim Eglseder, Head of Investor Relations. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2021 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Charles Freund, our CFO. Following their prepared comments, the operator will announce the queue will open for the Q&A session. It is only then that you can get in line for questions. Please note that our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com. Now throughout this call, we will be discussing organic growth. As a reminder, organic revenue growth neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices and fuel spreads, and includes pro forma results for acquisitions closed during the 2 years being compared. We will also be discussing 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 do need to remind everybody 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. These expected results are subject to numerous uncertainties and risks, which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release on Form 8-K and in our annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at sec.gov. Now with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay. Jim, thanks. Good afternoon, everyone, and thanks for joining our Q4 earnings call. So upfront here, I plan to cover 3 subjects. So first, provide my view of Q4, along with full year '21 results; second, lay out our 2022 guidance and priorities for the year; and then lastly, I'll share my thoughts on the company's midterm imperatives. Okay. Let me make the turn to our Q4 results, which were quite good. So we reported revenue of $802 million, up 30% and cash EPS of $3.72 , that's up 24%, both record-highs for the company. Revenue came in quite hot, almost $40 million higher than the revenue guidance we provided 90 days ago. Organic revenue growth for Q4, good. Up 17%, also up 7% against Q4 of '19. Every line of business, double-digit organic revenue growth in the quarter. Our Q4 trends continued quite good. Record sales in the quarter, up 40% versus prior year. Steady revenue retention at 93%. Same-store sales, healthy at plus 6%. We have had some notable callout since we spoke last. We formalized our partnership with the largest bank in Brazil which will help distribute our toll products, so we expect a lift there. We launched formally our Corpay One SMB platform business, so getting our corporate payments business into the SMB space. We just completed another investment in an EV software company. We upsized our term loan of $750 million. We repurchased over 3 million FLT shares in Q4 and in January. And we completed the rebranding of our corporate payments business. All the brands now under Corpay. So in summary, really a good finish to the year better than we expected and the trends helpful as we look into 2022. Okay. Let me turn to 2021 full year. I think we characterize…

Thanks, Ron. So jumping into the product category details behind our 17% organic revenue growth in Q4, corporate payments was up 18%, with another quarter of strong performance in full AP, which was up over 50% yet again. Our card products, virtual and multicard, were up 16%, and cross-border was up 14%, which is normalized for the AFEX acquisition we closed in June. In cross-border, we completed the final customer migrations from AFEX' systems to our Corpay cross-border platform in December. And we'll continue with the integration of back-office systems and processes throughout this year. Our thesis are holding, with synergies and accretion in line with our expectations. I'd like to give a big shout out to our integration team as it's due to their hard work and dedication that the conversion has been so seamless and successful. Fuel was up organically 12%, with growth in every geography largely as a result of our digital sales efforts and strong retention rates. Our ability to sell and retain fuel card customers around the world demonstrates the attractiveness of our offers, the competitiveness of our products and the effectiveness of our technology. We continue to make good progress in developing and marketing our EV charge management solutions, particularly in Europe, where we now have over 5,000 clients with EV-enabled cards or fobs. We've also been actively expanding the on-road network acceptance of our EV solutions, with approximately 6,500 charge points in the U.K. now accepting our products. This represents about 22% coverage of all publicly available charge points in the country. On the continent, we've got around 85% coverage as our products are accepted at roughly 190,000 charge points. We've built a dedicated organization to advance our EV efforts and will continue to support our fuel card customers as they slowly migrate…

[Operator Instructions] Our first question comes from the line of Pete Christiansen with Citi.

[Technical Difficulty] which is good to see. Ron, looking at the outlook, which...

Pete, we're struggling to hear you.

I'm sorry, can you hear me?

Yes. We -- I can, now.

[indiscernible]

If you could dial back in. We can take the next question.

Our next question comes from the line of Ramsey El-Assal with Barclays.

Congratulations on solid results in the fourth quarter here. I wanted to ask about CapEx as a percentage of revenue. It looks like it moved up to 4% from 3% where it's been for quite some time. Now I know Ron called out a lot of critical business investment. But I'm just wondering, should we view the investment you're making as more kind of cyclical in nature? And meaning, you'll kind of finish with this investment cycle and maybe CapEx as a percentage of revenue will tick back down again? Or is this sort of what we should expect in terms of a new level of business investment going forward?

Ramsey, it's Ron. I'd say probably the latter. Probably think about this level, this 4%-ish level. And the 2 drivers, kind of new things in the last couple of years, would be that Brazil network buildout that we've referenced before. So a fair amount of cost in getting those incremental few thousand stations up. And then two, we've earmarked a fair amount of kind of incremental money through the IT transformation. So not just enhancing, obviously, the systems we have, but effectively building new ones in parallel. So I'd say those couple of things would have at least probably a couple more years to run and then it may bottom back down a bit.

And on capital deployment or balance sheet deployment, more generally, maybe Ron, if you could give us your view on the appetite for sort of, A, first, buybacks versus M&A? And then on the M&A side, I'm really curious to see whether you're seeing more opportunities emerge or the deal pipeline increasing just because the valuation environment seems to have shifted down quite a bit. It might be a little too soon, but I'm just curious what you're seeing out there.

Yes. Good question. So I'd say that our priorities are unchanged, Ramsey,right? We're first M&A, if we like it, for capabilities and/or it's accretive. But as you can tell from Chuck's comments earlier, we -- what did we say, 6.5 million shares we bought back in the last 12 months. So we've had a bit of an appetite for our own stock, which we think is appropriate. In terms of the M&A, we did press the pause button, call it, 3 months ago when we saw the volatility, both in our own stock and in some of the others in our category. And so literally post this, we're going to kind of reach back out to some of those things that are super late in the pipeline and test where sellers are basically. We've got a view of where we are now. So I'd say ask me again in 30 days whether sellers have got the message that things are volatile and maybe at a lower price that they'll take.

[Operator Instructions] Our next question comes from the line of Darrin Peller with Wolfe Research.

When we look forward on the fuel segment, on a stack basis, you're running in the low single-digit range now, but I think embedded in your outlook is definitely an acceleration. Can you talk through that a bit in terms of the OTR side versus the fleet -- the local fleets, and really how you're going to bridging from the run rate now to a higher level of growth? And then I just have a quick follow-up on the corporate payments side.

Darrin, hey, it's Ron. Yes. I'd say the guide embedded in the guide for '22 would be high single digits for fuel cards, so off of obviously more normalized comps this year. And Part B, yes, the OTR, which is, I don't know, call it, 30% of our business globally across Europe and Brazil continues to run softer, right? The COVID impact, getting drivers to soften that business more. So I think inside of our high single digit, that thing would be a smidge softer than the local or partner business.

Okay. And you've had decent sales [ flow ] that's probably flowing through, too, right now?

Yes. This -- you kind of cut out a bit. But if you said we had decent sales, I mean we've had literally record sales in the fuel card business.

Right. Yes, I figure that's flowing through starting now. Just a quick follow-up on the corporate payments side. I mean, really, I'm trying to figure out when the cross-sell, you think, is going to really kick into full gear for Corpay, right. When we think about the opportunity in really the software in Nvoicepay side versus the virtual car alone, but really the holistic offering, where do you think we're going to be? When do you think we're going to be in a full-scale effort around that initiative? Which sounds like -- I know there's been a lot of good industry chatter on it, but that could probably flow through to some meaningful trends.

Yes, another good question. I'd say probably another quarter or so, and let me tell you why. So we started out, call it, in the second half testing, going out to, call it, 1,000 clients, 2,000 clients, putting them on a new payment platform, seeing if they had an interest in our new platform, billpay solution, saw some decent reaction to it. And so what we've decided to do is kind of be careful in changing the payment platform and basically presenting a new service at the same time. We want to be super cautious around not upsetting, if you will, the golden goose of these fuel card clients. So we're moving to put that platform in against a broader set of clients, get them comfortable using that and then effectively present harder this add-on for them. So my guess is probably somewhere in Q2, we'll be able to report out on it.

Our next question comes from the line of Sanjay Sakhrani with KBW.

Just a question on the expense growth. Obviously, very strong coming out of the pandemic, sort of deflationary there. Could you just talk about how much is driven by inflationary pressure versus more investments you're making? And kind of what you're assuming that's going to translate to in terms of top line growth?

Yes, Sanjay, this is Charles. So the expense growth you're seeing comes from a couple of different areas. One, we've got the AFEX and ALE acquisitions that are rolling in, so that's number one. Two, we've got the normalization of credit losses. We expect that to be quite a bit higher, some [ start comp ] in there. Also related to the deals, we've got ongoing integration costs. The AFEX integration is probably the most advanced we'll have taken as a company, so to really move them off their systems, close redundant offices, et cetera. It's a multiyear journey there and we're spending money to basically create synergies for the future. So that's also kind of baked in, both in the fourth quarter here as well as into our guide for next year. We are seeing some inflationary pressure predominantly around staffing. So wages in some of the call centers and such, we've taken measures to remedy that. As it relates to vendors, a little bit. But I'd say that, that will help us eventually as it flows through to vendor payments in, say, our corporate payments arena. So it's a tale of two cities, right? We're going to have some additional costs from inflation, but we'll also get some benefit from it on the revenue side.

Sanjay, it's Ron. Let just jump on the last thing Chuck said, which would be some of the increment is really directed by us, choice that we made around EV capabilities and sales. And again, some testing and advertising things and even in IT to really better position the business. We like the profit number we got to. So in addition to the factors that Chuck just laid out, I do want you to hear that we've chosen to chase some things that help the company on a forward basis.

Understood. And I actually have a follow-up question on the EV point. I'm just curious, Ron, like how you think the distribution channels are going to look like in the future, some payment processors that partnered with like the auto manufacturers? And I'm just curious how unconventional the partnerships that you're trying to forge are going forward. I know you have some of them, but maybe you can just speak to what you're targeting.

Yes. I think it's actually been the other way so far. I think that we announced again a follow-on in kind of a new investment in software companies. I think companies that are working on software see people like us, leasing companies, as the best distribution pipe in the fleet, particularly as they're mixing stuff. And so we continue to like our chances, both offering that back to our client base because we're first to see if they're moving off of a fuel -- of internal combustion approach to something else so we could spot it in our client base. And then B, we've got obviously lots of coverage generally, right, to bring new clients into the fold. And so I'd say, for sure, our distribution capabilities are probably as good as any. With that said, we did mention the Brazil thing, which is a bit of a case study where we've now basically put tags -- effectively, toll tags in with 3 or 4 partners literally as those cars come off the line. So when you buy your new Kia or whatever the heck it is, Nissan, in Brazil, it's got a Sem Parar tag when you come out. So look, we think over time, these cars will be coming off the line connected, where they're sending data every couple of seconds. And so we mostly want to be set up just to grab that, relationships where we have access to that connected car information and can then help, again, the client, whether he's at a public location or road location or at home basically pay for the thing. So I would say -- I said earlier in the office, we are just so much smarter on this transition now and how to play and how we're advantaged or not and what help we need. So I don't know if we're communicating it well, but we are just in a way better spot than we were.

Our next question comes from the line of Trevor Williams with Jefferies.

I wanted to ask another one on expenses, kind of similar to what Sanjay was getting after. But so margins in Q4 were down about 300 basis points from the third quarter despite all the revenue upside. I mean is this kind of a new stepped-up level of spend that's just kind of rebased higher that we should just expect to run through 2022? Just kind of as we're thinking about how much leverage you can get from -- you're guiding to 14% revenue growth next year, if you do better than that, if we get kind of another light back just on some of the piece of the revenue pie that are still kind of lagging versus '19. So just give us a sense for kind of what your -- for how we should be thinking about operating leverage going forward, given that you've already -- it seems like in the last couple of quarters, there's been a stepped-up level of investment to kind of prepare for the new go-to-market strategy.

Yes. Trevor, it's Charles. I'd say that it is a bit of a reset. So some of the acquisitions that we bought do operate at slightly lower margins. So they're dealing with big airlines or insurance companies, right? These are very, very focused on the rates they pay, and then also require a very, very high levels of service. And so we need to make investments. And as the airline volumes of revenue is pouring back, we need to staff up to accommodate those service level requirements. So I think the 54% is probably a good assumption going for next year. And as Ron mentioned, we are continuing to make investments for future growth. And so I'd say, operating margin should hold at that level for the remainder of this year.

Okay. Got it. And then, Charles, just a follow up on interest expense. It sounds like you guys have 3 hikes built into what you're guiding to for '22. Can you give us a sense just -- and even if it's not an exact number, that's fine. But if we end up at 5 or 6 hikes what the interest expense sensitivity could look like in that scenario?

We've got about $5.9 billion that would flow with LIBOR. So for every 25 basis points, you're looking at kind of $14 million to $15 million of incremental annualized expense, so you got to layer that in over time. On the flip side, we do have customer deposits and cash balances that sit around the world, and we're earning pretty good interest on those. And so if interest rates continue to rise around the world, we might actually see enough benefit.

Alex? [Technical Difficulty] Okay. Thanks, Trevor. I apologize for any technical difficulties. It looks like we're going to take Tien-Tsin next. Except I can't promote him. Alex, can we take Tien-Tsin? All right, guys, let's see if we can do the next one. Alex, can you hear us? Okay, he can hear us, but I don't know where the operator was. Guys, give us just a minute, okay, to get this sorted. Okay. Well, while we wait for -- that's getting squared away, Pete's questions from earlier were, how should we think about expectations on the Corpay One SMB initiative factoring into the guide? Trying to understand if there's upside opportunity versus normalized corporate payments growth expectations. I don't know if...

Yes. Can people hear us?

Yes, they can hear us.

Pete, I don't think you can hear, but it's Ron. So I kind of answered a bit of this earlier that we're going a bit slower to be cautious on the cross-sell, and we are obviously selling to new prospects in the market. So I'd say it would be pretty minimal. So if you look at our overall corporate payments guide for the year, the SMB piece would still be relatively small, again, mostly because we're trying to be careful and make sure we have the acquisition economics, right? So in terms of upside, I think, yes, since we don't have scalable views of that yet, I'd say as we get into the second half and get through some of the testing that's going to go on, there could be some upside. We could step on the gas there a bit if we like what we're seeing, and maybe lift the growth rate in the second half.

Okay. And then another question is, can you flesh out the Brazilian banking relationship a bit, how you see this impacting the value prop, and how could this impact future revenue growth going forward?

Yes. So we completed the joint venture with Caixa Bank. It's the largest bank in Brazil, tends to focus a bit more downmarket. So if you look at our historic Sem Parar business, we've tend to focus a bit more on -- I won't say, affluent, but kind of more middle class users and such. And with Caixa, we'll be able to, one, move a bit downmarket and leverage all of the distribution capabilities, so all the branches, their ATMs, et cetera. And so we view it as extensive distribution, but also reaching slightly different segments around the country that we just weren't as focused on historically.

Let me just jump on, Jim, and talk about it. Hey, it's Ron. I would just add to it that we love how incremental different distribution channels are. So when we bought the business, I can't remember, 70% or 80% of all new sales came through the stores, kiosks -- the [ 500 ] stores and in toll booths, where people were waiting in line, and we diversified that into digital hanging things at retail, outbound sales, et cetera, and then a whole slew of partners, including the manufacturers that Chuck referenced. So what I'd say most is we just love the incremental nature of a bank and those accounts and those relationships and being in that channel. So we haven't put a ton into the guide yet because that thing just lifted off, I think, a couple of months -- 2, 3 months ago. But we are super excited about it because it is the single largest bank, largest set of account holders in the entire country. And so we're super hopeful again that, that will be additive. And to Chuck's point, because it targets a slightly different set of user than the traditional one.

And I think we have Alex back. Alex?

Ladies and gentlemen, we apologize for the technical difficulties. We will now take our next question. Our next question comes from the line of Tien-Tsin Huang with JPMorgan.

Hey, Ron, Charles, Jim. It's Andrew, actually, on for Tien-Tsin. Congrats on the quarter. I wanted to ask a question on retention. So obviously, still running strong compared to pre-pandemic, a little bit of a slide quarter-over-quarter. But what I wanted to ask was, as you guys started to sell more services in bundled, with the Corpay integration, could there be any lift in terms of retention as you sell potentially stickier products?

Andrew, it's Ron. Yes, we actually have statistics on that. So we look at different cohorts, similar sets of clients and look at whether they have 1, 2, 3 kinds of services. And your thesis is absolutely right that as you move beyond one service, you're stickier with clients, have a deeper relationship, yes. So to the extent that we get what we call our platform or bundle to work and someone had walk-around products and then we were able to get their central billpay, we do think we'll get a lift. And particularly when the bundle could include smart business cards or fuel cards, which is the predominant walk-around.

Great. Just one more quick follow-up. I was just curious, were there any hiring pressures or wage pressures that impacted your clients, whether it be in the fuel or corporate payment side that might have been a little bit of a headwind as a result of this quarter that we could expect to normalize over time?

We had a little bit, actually. Chuck referred to this earlier in our lodging business, where we have a decent-sized servicing group which is one of the lowest wage groups kind of in the company. And so I'd say that's the place that we felt some pressure and responded to that in the fall, both to retain people that we were losing and to add additional people. I think like the rest of corporations in America, we're seeing some pressures in different areas, in IT, digital, certain pockets. But we basically have built that in again to the guide. I think it's been going on for, call it, 3 to 6 months. So I think we're comfortable with what we plan.

And Andrew, just to pick up on that, I think you were talking maybe wage pressure on some of our customers. And what I'd say there is we have seen that in lodging, in particular. And so our workforce lodging business, which has recovered, which is not to the extent that we -- where it could, is that they've had actually small businesses turn down jobs. And I can't travel there and do the work because I can't hire the people. And so it will be interesting to see, as government subsidies and other things fall aside and see what happens to the employment market, but we think there is some upside opportunity there. Having built a whole lot into the plan a little bit, but not a whole lot. But wait and see, maybe truck drivers, too. Yes.

Our next question comes from the line of Bob Napoli with William Blair.

Ron, I guess, could you give some color on your expectations for the growth of the corporate payments business in 2022 and I guess, over the medium term? And maybe the various pieces, full AP versus cross-border versus other?

Sure, Bob. I'd say the guide for that business in totality is in the high teens. And again, to your point, there's different pieces. The payables portion of that, virtual cards, full AP. Chuck mentioned the full AP, I think, grew 50% last quarter, so that will grow a bit faster. The partner business that we called out will grow slower than that and probably the cross-border business would be closer to the mid-teens. So there'll be those different pieces in it. And you ask me this every time, "Hey, can you grow it faster?" Well, obviously, if we could spend more money. But we -- again, we try to balance what we spend to kind of growth target and a profit target and spend wisely so that we don't again have 50% new people or advertising that doesn't work. So we try again to be disciplined in terms of -- productive in terms of the monies that we spend.

Then a follow-up question. Ron, as you called out at the beginning of the call, I mean, FLEETCOR has 15 proprietary acceptance networks, I think, for your fuel card business. Are that many necessary? Is there -- how do you think about those proprietary acceptance networks versus leveraging an open-loop network? What benefits are you getting out of that? Is there an opportunity to optimize?

Yes, that's a great question. So the answer is it's not only our fuel cards business, it's kind of the underlying core of the company. So it's the same thing in lodging. We've got 15,000 hotels here in the U.S. out of, call it, 45,000 or 50,000. We have super economics again and unique data. We've got a toll network, for example, in Brazil. We have fuel networks in, I don't know, 10 countries, where it's impossible for you or someone to go try to create a proprietary network today. So I call it out really just to remind new people that those networks and the volume that we run through them and the data that we collect and the economics that we collect are just massively advantageous to us when we turn around to the client side, to the business account side and pitch our offer to them. So I was really just trying to let people know that it's not some plain vanilla, jumping on someone else's network that everyone else basically has access to.

Our next question comes from the line of David Togut with Evercore ISI.

The lodging business did nicely, exceeded our forecast for revenue in the quarter. Could you walk through what your forecast is for lodging revenue growth in 2022? And if you could discuss some of the underlying drivers, kind of the domestic business versus the international business. And then talk a little bit about Travelliance which you acquired a couple of years ago, and are you seeing a nice recovery there.

Yes, David, this is Charles. So lodging performing extremely well. We do have some continued recovery to go there, particularly in the airline space. So a lot of the performance you're seeing here is reflective of the domestic air travel. International has still been way, way down versus historic norms. [ So seeing ] that kind of swinging back a bit next year. Workforce has a bit of room to recover, but it's also just chugging along and doing pretty well. ALE business, which was a recent acquisition, accretive, a good buy for us. Still work to do to realize those synergies, but I'd say we're confident that the plans come together, so that looks pretty good. In terms of that specific line of business or product category, I have it in front of me.

Hey, David, it's Ron. I leave it here, as Chuck has talked, and so the guide on that thing is plus 20% organically and obviously crazy high in the 40s on a print basis because we bought something, I guess, closed in September. And the drivers to get to that are the sales plan is way up. I think the sales plan is up 35% or 40%. It's our plan for '22. And then what Chuck said that there's super sensitivity in that one, particularly the airline, for example, about 1/4 of that segment historically of our revenue came from international flights, which in Q4 was still effectively 0. And so to the extent that the world opens and airlines go back crossing borders, again, let's say, in Q2, we have the contracts, and we're already serving the airlines on the domestic legs. And so we've assumed a little bit of kind of bounce back in that kind of in the second half. So it's big sales. It's bounce back in the airline thing. It's synergies that are baked into the recent acquisition, it's big sales plan. There's just a lot of things going right in that business.

Just a quick final question on capital allocation priorities for 2022. You've been very opportunistic with the stock at the current price, you've also been able to make some solid acquisitions. What's your thought process for the year ahead when you look at your stock at the current price versus what you have in the acquisition pipeline?

We're still buyers. I mean, I guess, I mentioned in my opening comments, that not only did we buy a couple of million shares in Q4, but we made the decision with the Board to keep buying at the price into January, right, through a 10b5. And so I don't know where the stock is going to be, but at this price, we're buyers. And I think Chuck said it super well, Dave, earlier that with the liquidity we have, $1.5 billion, $1.7 billion, depending on what cash we elect to use, we can do a lot of things, right? At this kind of stock price, we can buy back still a lot more of the company. And as I mentioned, we're going to un-pause a set of deals that we worked on in the summer into the fall. And so my guess, if you said to me, "Hey, we talk in 6 months," is you see us do both.

Our next question comes from the line of George Mihalos with Cowen.

I guess, first, just to build off David's, the last one, can you sort of break down for us now the composition of revenue within lodging from your traditional blue collar business and the airlines business now? Just trying to get a sense of how they are in terms of size and how we should be thinking about that bounce back in airlines going forward if it materializes.

Yes, that's a good question. So I think we probably get the details of that, but we do think of it in 3 pieces or 3 verticals. So we have what we call workforce, which is the original business we've owned for 10 years, which targets blue collar, travelers, a tree-cutting firm that goes when the power lines are down. And then a couple of verticals that we've gotten into the last couple of years of airline crew. So the airlines, again, it's a global business. 10% of the lodging rooms, I think, are crew around the world. So a nice segment for us to be in. And then this newest one for us of homeowner insurers basically put people when you have water damage or a fire or something like that, they're putting people up and then put them into longer-term housing. So there's super unique things in terms of the systems that we integrate into -- right into the crew management system or into the claims system in the case of the insurer. The networks are a little bit different than we try to put together depending on who the traveler is. And so I'd say that the 2 newest things would be circa 40%, just to give you kind of a number relative to the workforce [ figure ]. And the good news is all 3 of those, again, are growing for the reasons that I outlined a bit ago.

Okay. Just a quick follow-up on the expense side. I know it's something that's been talked about here. But if we look at '22, I mean, certainly, it sounds like there are some expenses that are somewhat more transitory, right? You've got a big increase as the bad debt normalizes and starts to come back. Obviously, you've got some integration costs. But could you just help us think about how much of those are transitory specific to '22 versus sort of structural over the next several years as you accelerate investments to the cloud into your tech transformation?

Yes, George, let me -- it's Ron. Let me take a swing and then Chuck can maybe provide a bit more detail. The way that I think about it, we think about it is what I'll call kind of discretionary expense so that we think about the business sitting there to operate and run the book of business we have, we need a set of expenses, right? We need IT to run and com and people and credit and things like that. And then the big incremental expenses are really sales and IT and then a little bit of management to figure out the way. And so those are gigantic. They're -- call those things I'm talking about $600 million to $700 million of our total expense plan in '22. So the call for us is really just how much do we spend in those things, which, again, are 50% or more helping 2023 and 2024, right? Because by the time you sell the thing and get it on board and you do it by next Thanksgiving, you don't get the business until the following year, you build an IT thing, you don't roll it out until Christmas. So that's the message I think that you ought to hear is we made the call when we like the revenue and profit guide that we can get to, to basically chase some things that we like, that we think are additive and incremental in the future years. And so the answer is it depends. If those things go well, we'll double down on it more. If they don't, we'll probably back off. If we need a different profit target, we may back off if we don't. So I'd say that those are the ones we kind of keep in our hand on the steering wheel and decide kind of how much we want to do with it. Unless investors told me, "Hey, they don't care about what our profits are," and then we might do more of it. I haven't heard that yet, so -- but we're still balancing it.

Our next question comes from the line of Andrew Jeffrey with Truist.

Ron, lots of pretty interesting initiatives, I think, first, digital, which you noted is now half of fuel sales and the progress towards a platform selling motion. I'm trying to wrap my head around a little bit, and I don't expect you to speak to anything beyond '22, but is there anything that we should be thinking about as sort of leaking out of the bottom of the funnel if you're having success with more value-added solutions, maybe expanded spend on fuel cards. I'm not sure you called that out this quarter in particular, but all this stuff collectively, should we think that maybe this business can grow faster at the current margin? Or is there -- I just want to make sure I'm not missing any puts and takes here that you'd want us to focus on.

It's a super good question, Andrew. And my answer, a little lawfully, would be it depends. So what I would say to you is this direction we're going of effectively repackaging and integrating a bunch of the products that we have has enormous incremental potential for the company because it will be served up differently, and it will appeal to different businesses than we're targeting today. So the first message I'm trying to get everybody to say is we're on to something that leverages the capabilities we've built over 20 years, that it's a 10x kind of opportunity for the company. The process that we could make is going to be a function of the selling economics of that, which we're just getting into. So if you said to me, "Hey, how do you think the profit margins will look in 2 or 3 years?" My answer is probably pretty similar of the set of businesses that we have because we've got great experience and history and statistics, and we know the curves. We kind of know what we can produce. I would say we don't know that answer for some of these platform things. And so if those things sell kind of at a line average or even a smidge worse, I think you'll continue to see growth with similar kinds of margins. And if not, then we'll fight that fight when we get there and ask people, "Hey, would you rather see accelerated revenue with slightly lower margins?" If that's the conclusion. But it's really just a bit too -- it's a bit too early to call.

Okay. That's helpful. And then just philosophically or theoretically as a follow-up, is this a business that at some point you'd like to be simpler? Or do you feel really good about all the businesses you're in? I know gift has sort of been kind of a mixed bag over the years.

Yes. I think we -- it's a great question. I think that it's the oldest vantage point, like we made the great idea of talking to you guys and buy-side people about the way we run the company and we have these different things and stuff. When we sit around in the company, it's really pretty simple. I tried to say in my opening remarks of basically, we just work for businesses and we work on their expenses or their spend and we try to reduce it. Then the programs that we created control what they buy and what they pay for. So for us, whether it's the lodging room piece of spend or fuel or business card piece of spend or a vendor, it all looks like a business expense that we're trying to help control. And the reason that it seems complicated is we've made like super specialized ways to do it. So we ended up like talking to everybody, "Hey, let me tell you about the super secret sauce I use in lodging versus whatever." And I think we're going to start to talk to the marketplace, to your point, a little simpler and just say, "Hey, look, we're about trying to help you spend less on kind of nonpayroll expenses, and we've got super special stuff and we've got kind of more generalized stuff. And what's your need, and we've got a product line. Let's see if we can help you." And maybe get a back off a little bit of all the detail that we provide everybody on how we make the sausage, I think.

Yes. I think that could help a lot. Very helpful, thanks.

The selling is a perfect example or whatever. Like we use this pivot we've made to digital. We use it everywhere in the company. We figured out how to build the tech stack. We figured out how to advertise. We figured out how to automate bidding. We figured out how to get applications processed through the system. We figured how to make credit instant. We've done like so many things that we can basically print and copy into the other businesses that we have. And so I think you'll see more of that. As we launch this platform line, you'll see us tucking the things that we have into the platform. And they may seem more of the same to people than different.

[Operator Instructions] Our next question comes from the line of Ken Suchoski with Autonomous Research.

Ron, I wanted to follow up on some of the questions on EV. I think you mentioned in your prepared remarks that the EV economics are roughly in line with traditional fueling services. So can you provide some insight on what the unit economics might look like for the EV offering? It's impressive that the transition to EV is revenue neutral. So I'm just curious what's driving that.

Ken, this is Charles. Good question. And I actually had our analyst pull data from the Netherlands, a country that's a little bit further ahead in terms of EV migration than the U.K., which is further ahead than the U.S. And there, we have about 18,000 clients. And we said, "Okay, let's split those clients into 2 categories: a group that only buys fuel. It has no EV. So IC, internal combustion engine-only; and then mixed fleets." And what I'd tell you is about 14% of the clients, about 2,500 clients are mixed fleets. So they've got both types of vehicles. And they tend to be larger, so the enterprise-level clients are moving faster. So the mixed fleets average about 20 cards per account or vehicles per account, whereas on the fuel-only fleet, say IC-only fleets, there are about 5 cars per account. When I look at those mixed fleets, the actual revenue per vehicle that we receive on EVs versus fuel, it's actually slightly higher. And part of the reason is that these enterprise-level clients get rebates when they go out in the fuel networks, which we provide to them, which we don't see on the EV reporting side. And so the economics turn out to be neutral to actually slightly favorable on the EV side. And so without now getting into specifics, client-level type of revenue per, I would tell you that EV is about 20% higher for these mixed fleets. Now of their cards, they've got about 15% to 20% over to EV already. So we're seeing some real data points here. But that just gives you enough sense of who's moving, the size of accounts that are moving, how far they moved and the economic kind of relationship there and why it is comparable.

Hey, Ken, it's Ron. It's a super important question so let me -- it's Ron, just chip on to what Chuck said. So to me, there was and is maybe a massive misconception that, "Hey, when a business moves to EV, you plug in and everything is free." So goodbye, FLEETCOR, tough day. So the 2 things that I can't not admit that somewhere years ago, I was worried when I was dumber. But the 2 things that are clear are: one, it costs way more to recharge an EV vehicle than people thought. Certainly, when you do it publicly. There's a huge markup on the electricity, obviously, because the charge point versus trying to make money and there's way higher MDR for people like us because they're trying to build up volume. So the first misconception is, "Oh, it costs $50 to fill up a van and only $5 to recharge a van." So that's not true. And then the second thing, which I think we all missed is, most of the recharging is going to happen at home. So there's millions of charge points that we're not in the business today. We only do stuff at gas stations. And so, to me, those are the 2 things where you go, "Oh my God, most of the recharging is going to happen at home and it's got to be measured and reimbursed. So who's going to do it?" So I just discovered from the math that Chuck ran through, I just want to stick those concepts in people's heads that it is different than all of us thought coming into the thing. There's more money helping businesses in this thing, and it's going to cost them more than they think when they think about their golf cards.

Our final question comes from the line of James Faucette with Morgan Stanley.

I wanted to kind of follow up on that question and just ask on these minority investments that you've made, I think, at least in my mind, the case to be made for managing those expenses and the costs associated with it, as you just highlighted are probably more significant than people may have imagined. But can you talk about strategically why -- or under what conditions you do the minority investment versus acquisition, what you're expecting that to lead to down the road, and how we should think about that trajectory of relationships and potential contribution directly to FLEETCOR?

James, hey, it's Ron. It's a good question. It's kind of "try before you buy". So the category is new. There's a couple of partners that we called out today that have been working on software pretty hard and stuff. So for us, it's kind of a no-brainer to be supportive to them, give them money to keep kind of bill. And we have, obviously, commercial agreements that state the economics and the roles of the 2 companies. And so we like it. We kind of get -- some people have been working on it here in the U.S. and some people have been working on it in Europe. We integrated it into the stuff we have and off we go. We've got a product that works, and so we can focus on trying to sell those stuff, which is what those 2 partners are looking for. Honestly, to the extent the thing is a super big deal and we want to get more of the value chain, we would clearly look at other options and stuff down the road and obviously in other geographies. But initially, we're super pleased with these partners. We screened a lot of them. We like the offerings that we have. And we're still in the mode that I said we can. We're still trying to learn exactly what the clients want and need and to make sure that the products, including the software, are dialed into that. So we didn't want to get out over our skis before we were clearer.

That makes sense. And then just as a quick follow-up. You've talked a lot about the strength we're seeing in things like hotel and recovery in travel. Can you just give us a little bit of color on what we -- you saw as we went through the Omicron wave and where you're at on a run rate trajectory, if there was any impact there? Just trying to measure near-term sensitivity to recent events.

Yes. Another good question. I'd say a smidge. We, Chuck and I, obviously did a reconnaissance of January with our folks, and I think we had a bit more in Europe, again. Exiting December and a bit into January, I'd say, it's a pretty soft month change for us anyway. So a smidgy impact. Obviously, we've rolled that into our guidance yesterday. We've had our eyes open the whole time. And I'd say the most recent stop, call it, the last week or 2 that smidgy thing is kind of going away. So it's -- I don't want to get over my hopes easier, but it's sure feeling like we're coming out a bit into a clearing, finally. And again, I just want to reaffirm that the forward numbers we've given for '22, we're pretty confident sitting here, beginning of February.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. This concludes today's conference, and you may...

Hey, Alex, can we make just a quick comment? We just want to apologize to those on the call for the technical whiteout. Hopefully, it wasn't super confusing. So as always, appreciate the interest and the support.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.