Greetings and welcome to the FLEETCOR Technologies Third Quarter 2020 Earnings Conference Call. As a reminder, this conference call is being recorded. I would like to turn the conference over to our host, Mr. Jim Eglseder, Head of Investor Relations for FLEETCOR Technologies. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us today for our third quarter 2020 earnings call. With me today are Ron Clarke, our Chairman and CEO; and Charles Freund, our CFO. [Operator Instructions] Please note, our earnings release and supplement can be found under the Investor Relations section on our website at fleetcor.com. Throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and adjusted net income per diluted share. This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information at other companies. Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described. Now before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements. This includes statements about our recovery and outlook, new products and fee initiatives and expectations regarding business development and acquisitions, among others. They are not guarantees of future performance, and therefore, you should not put undue reliance upon them. These results are subject to numerous risks and uncertainties, 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 on 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. With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Okay, Jim. Thanks. Hi, everyone, and thanks for joining our third quarter earnings call. Upfront here, I plan to cover 4 subjects, so first, provide my perspective on Q3 and our Q4 outlook; second, provide an update on our AFEX cross-border acquisition; third, I'll discuss our plans for pivoting the work of the company in getting back on offense; and then finally, I'll close with some preliminary thoughts on next year. Okay. So let's start with our Q3 results. So earlier, we reported Q3 revenue of $585 million, that's down 14%, and cash EPS at $2.80, that's down 10% versus last year. We did manage operating expenses down 9% in Q3 versus last year, obviously, to minimize the impact on our bottom line. The macro, not helpful in the quarter, primarily weaker Brazilian FX, we estimate that it depressed our Q3 print revenue by approximately $33 million. Organic revenue growth, overall in the quarter, down 12% versus last year, but that is a sequential improvement of 5% from Q2. Corporate pay also improved sequentially, their revenue, down 11% in Q3 versus was down 17% in Q2. We did see a step rate improvement in what we call same-store sales or client softness between Q2 and Q3. So softness improved to minus 8% in the quarter versus minus 17% in Q2. So that's a pretty significant softness recovery point-to-point, or said another way, increased client usage. Good news on the client retention front, we improved a point there to 92%, highlights to us again that all of the weakness is attributable to client softness. Sales recovering further here in Q3, finishing at 80% of the prior year. That's up from 54% of the prior year in Q2. Inside of that, our corporate pay sales in the quarter finished at 100% of…

Thank you, Ron. I'm happy to be here on my first earnings call as CFO. I'd like to note that in an effort to streamline my prepared remarks, all of my rates of change are on a year-over-year basis, unless otherwise noted. So let's get into it. The third quarter of 2020 was affected by COVID-related business slowdowns, but to a lesser degree than what we experienced last quarter. As such, we reported revenue of $585 million, down 14%. GAAP net income decreased 16% to $189 million, and GAAP net income per diluted share decreased 12% to $2.19. As usual, we will be discussing certain non-GAAP financial metrics, such as adjusted net income and adjusted net income per diluted share, and a reconciliation to GAAP numbers is provided in Exhibit 1 of our press release. Adjusted net income for the third quarter of 2020 decreased 14% to $242 million. And adjusted net income per diluted share decreased 10% to $2.80. We're well-positioned to bring business back in conjunction with economic recoveries. I'm pleased with our ability to effectively manage expenses and minimize the negative impacts on our bottom line. From a macro perspective, third quarter of 2020 results reflect the negative year-over-year impact of approximately $33 million in revenue. The macro was driven mostly by lower foreign exchange rates, primarily the Brazilian real, which we believe had a negative impact of approximately $28 million. Fuel prices were also down year-over-year for the quarter, which we estimate had a negative impact on revenue of approximately $9 million, while fuel spreads had an estimated $4 million favorable impact. Organic revenue in the quarter was down 12% overall, primarily due to same-store sales being down 8%. Our fuel category was down organically about 11%, net of the impact of the unfavorable macro. There…

[Operator Instructions] And our first question is from the line of Ramsey El-Assal from Barclays.

Could you provide some inter-quarter -- common intra-quarter trend commentary kind of what you're seeing in the business right now relative to Q3 levels?

Ramsey, this is Charles. Pleasure speaking with you this evening. So what we've seen inter-quarter is a bit lumpy. So we've got some stuff that's moving up, some stuff that's moving down. Hard to say kind of consistently what's going to go on here. So Q3, I'd say, it was a good step up versus Q2. So pleased with that result, and quite frankly, did a bit better than what we initially had thought back in Q2. But in terms of inter-quarter trends, hard to really put a measure on it there.

Okay. Fair enough. Could you also give us some kind of updated commentary on what you're seeing in terms of rates of recovery and your kind of larger versus smaller customers? I know that, that differential in rates of recovery was having an impact on kind of revenue yields. But I'm just curious what you're seeing in your business now in terms of those smaller customers potentially starting to come back a little stronger or what have you?

Yes. It depends on the line of business. In our fuel business, we have seen a bit more recovery, particularly in trucking in the small fleet segment. Keeping in mind that the small fleets dipped down quite a bit more than the large fleets, so they've been coming back faster, but they're still not at the level of recovery of the large fleets. In our lodging space here in the U.S., we are still seeing that phenomenon, though, but the small customers are lagging the large customer recovery pretty significantly.

And our next question is from the line of David Togut with Evercore ISI.

Good to see the corporate payments bookings reached 100% of year-ago levels. Can you frame for us whether this business might get back to meaningful growth in 2021? This historically has been your best growth engine, yet you called out the bookings performance and yet, about 100 clients or so are still quite weak. So can you help us think about the year ahead and where you might land in this business?

Yes, David, it's Ron. I think it hinges totally on the kind of sick client group that we laid out in the supplement. So the sickest client in the T&E business way, way down, which is having that thing penciled out at minus 11% for the quarter, kind of flat without those. So clearly, the non-T&E, non-sick people will be a growing business in 2021 as we look at the plans. The wildcard is how much of that softness that we're seeing still here in Q3 will come back. So that's the debate we're having, and we're obviously watching it closely. To Chuck's point, we saw a little encouraging sign intra-quarter there in virtual cars. It looked like it was getting a little bit healthier. So I'd say -- it's not a super answer, but I'd say, if you park the 2 sick portions for sure, you will see, again, mid- to high-teens growth for the rest of that business. To your point, based on the sales and the forecast we have for Q4 is another good one. So the sales are clearly there to grow that business.

Got it. Appreciate that. And then just as a follow-up on capital allocation, you increased the buyback authorization by $1 billion and you're about to complete AFEX. How should we think about the year ahead in terms of share repurchase versus other meaningful M&A?

I'd say, probably, the philosophy, David, is the same as always. We do have a number of deals that we're working on, and I think we called it out in the press release, including a couple that are close-in, kind of late stage. So we're always balanced and right the liquidity that we need for the deals in front of us versus opportunistic on the share price. So I'd say, it's, a, function of those 2 things. If there's a lot of deals we like, we've got conviction in, we'll spend the money on that. And if people trade our stock to a price that -- where buyers will buy it back. So the goal was to give us the management, the flexibility to make those calls. But I think, Chuck, our liquidity or availability is still well north of $1 billion?

Yes. Yes.

So we do have plenty to go, and obviously, the ability, David, to borrow more money. So capital [ isn't ] the main question for us.

And our next question is from the line of Tien-Tsin Huang Wang with JPMorgan.

So I want to ask, Ron, on the new sales, the bookings also. Just I'm curious, do you see some pent-up demand there potentially? And I'm just curious on your confidence in being able to replenish the pipeline now that you get to some kind of new normal and new rhythm on selling in this -- during this pandemic, as you see it. What's going on in the ground there?

Yes. I'm not sure on the sales thing. It's -- I used the word tension, but It's pent-up demand. I'd say that it's 2 things. One, that the marketplace, the prospect universe is kind of getting back to listening again. They're less distracted. So what we do, we go in and analyze and that Google Analytics package, search volumes across all of our categories against baselines. And we see in that outside-in data the planet getting more receptive again to the kinds of things that we offer. So that's point one, which is obviously super important. And then point two, I think we finally have the rhythm of how to sell. We all ran home and fuel people became phone people, and we remixed more money to digital. And we shrunk credit, now we've opened credit. So I think we ying-ed and yang-ed in our various channels, and now we've got kind of a sense of how to do it, how to play the game as it is now. And so this 80% number, which was pretty good in lots of places, particularly in corporate pay, I'm looking at a forecast that's over 90% for Q4. We've obviously got one of the months in the can. So I'd say of all the areas, that's the one where I feel like we have more control over our future. We stay in this kind of a place, the fact that we can continue to move that number up as we roll forward, so pretty confident.

Okay. I got you. Because I know in the past, you said you can -- you're pretty -- when you're confident, you throw in dollars on the sales side and you'll get the return. I know you're talking about double-digit OpEx savings. But does that signal that you're not quite ready to deploy capital towards the sales and marketing point? Or is that a different discussion?

Yes. We are -- the reason -- I don't know on the disclosures how much detail we give you, but one of the reasons it looks like there's not a step-up in sales and marketing is the commission rolls are soft, right, because of the bad performance in Q2 and now just improving performance. But we made the call probably 60 days ago to start to step-up investments, both in people, on the recruiting front and a certain kind of new digital campaign. So no, it's -- again, it's the one -- it's the key to the company, right? When you get all done with this softness, sickness thing of who is healthy and who is not, we still have a business you can plan, right? Whatever you give me, that baseline and then we lap whatever the softness or hardness is, we got a business that we can run 10% on the top. And so we're back at that game trying to build a sales plan for next year that keeps the company rolling in that fashion. And it's -- I mean, what I'd say back is that's a bunch of words, but more importantly, when 90%, 50%, 80%, and we're forecasting above 90%, so there's real evidence that it's working.

Okay. No, I'm sure that's the case. Last quick one, I'm sorry for asking a third one. Just the Cambridge playbook applied to AFEX. I mean is it very similar? I mean you sound pretty confident in getting that level of the normal accretion with AFEX.

Yes. I mean we -- this is a thing called down the fairway. But number one, that playbook, which is part of our model for every deal, worked quite well. I mean I think we reported or in one of these calls, I told you that we've more than doubled the profitability of Cambridge between '17 and '19. And so the first point is, yes, we'll reinstitute that same playbook for AFEX. But then the second one is, that there's 2 businesses now that look the same. So there's a second bite of synergies in the combinations that we didn't have obviously in the Cambridge deal. So that's why we gave the range. Obviously, our thinking is the 2 steps of thing, make sure we understand it. So we'll run them. And we started the planning for that thing to get to first phase. And then as we get smarter, for example, they've done a small business in North America in a management layer, call it, the last 10%, 15% of the Cambridge business we have. So we'll clearly assimilate things like that, and they have way stronger positions in Asia. So it sets up really well, both to grow the business and to make it way more profitable, so we like it.

And our next question is from the line of Steven Wald with Morgan Stanley.

Maybe coming back to the corporate payments, I know we've asked a lot about this, but from a different angle. You guys had previously said, I think, back in September, Charles, you were talking about sort of working through some of the backlogs on previous bookings and getting those up and running at a faster clip than perhaps it would typically be done at over a sort of 12-month-plus period. I'm curious how we're thinking with a large chunk of the business outside of T&E being back to pre-COVID levels. How are you thinking about the potential for that to hockey stick up, now having gotten back to even from the onboarding of those volumes? It seems like there's a natural beneficial mix shift away from T&E just by virtue of the fact that it's subdued in activity. So what are you thinking in terms of the next 3 to 9 months from those faster implementations?

Yes, that's, Steven, a super, super good question. I mean I think some of the softness this year at 2020 is not only sales, but what you said in that business implementations, because we kind of sell the year before and then implement the year after. And so a number of implementations in that business have been stalled, slowed as we certainly went through the second quarter and are starting to kind of reactivate. So the million-dollar question there, just like David's earlier is, how many of those implementations will hold? Will people stay with them if they agree to do the thing 3 or 6 months ago? And will they be away from their distractions where they could work hand and hand with us to implement the thing? So I think it's the same -- a bit of the same question, which is we've got a book of business that we can convert into revenue there, but we need cooperation of the clients that have agreed. So to the extent that they're agreeable, that, back to your point, will accelerate some of the recovery next year. And to the extent that it doesn't, they quit on the thing or they continue to back burner it, then that won't be helpful. So I think we're just seeing now signs in the last month or 2 of those implementations kind of getting back to a targeted level.

Very helpful. And then just squeezing in a quick follow-up here. You mentioned at the beginning of the call, getting back to work on the Beyond initiatives. And I think it's pretty straightforward, with the fuel piece in terms of cross-selling sort of more attached to those customers. But could you just speak to the conditions on the ground you're seeing on the Brazil side for Beyond? And obviously, there's been quite the disruption from the pandemic there. I'm kind of curious what the ability is to have those conversations and get the uptake in Beyond in Brazil.

Yes. I think the Brazil and the other ones, we did slow things down mostly around our credit paranoia back when this thing first broke. So we've obviously relaxed that, and then be just their population getting back out and about, right, driving around, refueling, going to fast food places, going back into the city, and they had a big closure like we did here in terms of their malls and stuff. So it was a real slowdown in the Beyond areas, right, of fueling, parking and fast food. That's kind of recovered. They've kind of reopened the country. So we're seeing those transaction volumes tick back up. And we're also seeing it on new sales. I think you've heard that a big part of that initiative is to attract people that are kind of in the city that aren't toll people that want to use those things. Well, obviously, when there's no need to use those things, it's not as interesting a pitch. So we're seeing it in the last month or 2 that gets resonating again as the activities picked up. So I wouldn't say it's all the way back to pre-levels, but it is way back from where they were in Q2.

And our next question is from the line of Ashish Sabadra with Deutsche Bank.

I also would like to focus on the corporate payment. But I would like to go back to the Slide 8, where we have the volume trends by individual segment. My understanding was virtual card and FX were like almost 40% each, and then T&E and full AP at 10% each of that business. So when we do a bottom-up, we don't see the kind of 18% volume decline or 11% revenue weakness. What could we be missing when we think about it, about that weakness there?

Yes, Ashish, we're probably going to have you back you on that and do some math. This is Jim. Happy to do that, but I'm not sure that we have the disconnect [indiscernible]

Say the question -- Ashish, it's Ron, just so I got it again?

Maybe a broader question would be just within the segment, I understand you talked about some of the weakness in the top 100 customers. But within the subsegment, were there any particular areas other than T&E, which has been relatively weak, which has been like weighing on the growth in that segment?

Yes. You're saying the difference between the volume recovery versus the revenue? I mean I'd say in the virtual card business, a lot of it is mix that some of our channel partners that have lower revenue to us per spend dollar have recovered more, think of the people that are investing lots in sales and marketing. And then obviously, we have, again, some series of sicker clients and the -- unfortunately for us, they used to pay us more. So I'd say that probably the biggest delta between that exhibit would be the mix. There's a fair number of pretty large clients on both sides of that wheel, some clients that are going up, like health care, as an example, would be like a perfect example. That had a, I don't have it in front of me, but a dramatic step up Q2 to Q3. It's kind of elective surgery and kind of normal hospital stuff kind of came back. And our margins in that health care business are way worse than in kind of the more traditional horizontal kind of a business. So that would be the partners, if you will, the wholesale business and the health care business have recovered better than some of the other businesses that pay us more.

That's very helpful color, Ron. And then maybe just on the fuel. One of the questions that we get a lot from investors is the difference in the growth between your fleet -- fuel business versus what WEX has been reporting in terms of gallons. I was wondering if you could just provide any color on the difference. Is it more the customer mix? Any color on that front.

Yes, I keep saying -- I mean obviously, it's a super strange time and stuff. But I think if you said what's the most surprising thing to us is how well those businesses, both our domestic and international fuel have recovered. I mean the softness recovery, I'm not sure I have it in front of me, but literally, I think our international business existing clients, we call same-store sales, was down 25% or something literally in Q2, and recovered a ton. Again, I don't have it in front of me, but I think it is to 5%, picked up kind of 20 points or something in the improvement. So that would be something. And then even in the U.S., I think it's improved. If it was down 15% or 20%, it's down 10% or something. So that is what I'd say is the biggest thing. Our applications are way up again because that Google outside-in, the world is more interested in searching again on fuel cards and fleet cards, so we're beneficiaries of that. Although, again, I think in the new business, we're still being a bit more careful in credit with the super small accounts, which tend to be in our fuel card business, is where we have smaller accounts. So we're still concerned with fraud and stuff. So we're being -- our approval rates are still lower in that line of business. But it's doing, Ashish, I think, significantly better, particularly in the third quarter on the strength of the -- really, again, the clients coming back and the forecast from our guys are even more recovery there. So it's doing well.

And our next question is from the line of Matt O'Neill from Goldman Sachs.

Ron and Chuck, I was hoping I could first ask just to clarify a little bit further on the re-extension of credit. I think you mentioned in the prepared remarks that you're back to pre-COVID levels across a lot of the businesses. Was that still -- was that sort of a quarter end comment or kind of on average across the quarter? I'm just trying to think about how close we are to being back to normal? And then as a follow-up, on the 10% to 12% expense reductions that you've discussed as far as balancing profitability this year, is there any expectation around parsing some of those that would be more permanent as we go forward versus are they predominantly transitory things? Isn't this year like T&E being down as a result of COVID, et cetera?

Let me, Matt, this is Ron, take the first half on credit, and then Chuck could take the expenses. I'd say that, no, it wasn't a green light at the beginning of the quarter where we turned the thing on. It's been very segmented. So we've moved at different speeds with different businesses. We've moved at different speeds with existing clients versus new clients. And we've moved at different speeds for super small clients, like we get in the fuel card business. So when I said in the comment that we were kind of back, I'd say, we are. We've gone back to medium and large clients, and re-extended their terms, days to pay and stuff that we had shortened. We've increased some of the credit lines again, so we could get more greater share of their business. But we continue to be careful on some of the Beyond because obviously, that increases our credit exposure, our credit limits within a single client, right, which we view as a bit more risk. And we continue to be cautious on the digital new business because they're coming in not as well as green as if they run through our people and they're smaller. So I'd say, it happened over the last 4 or 5 months, and sitting here today, it's probably, Chuck, I don't know, 80% or 85% back to normal with this Beyond and the small digital being the couple of exceptions.

This is Charles. Just the other point is we've kept some verticals that we know are still quite challenged due to the pandemic. We've kept them shut for credit purposes. Things that you would think of, right off the bat, heavy, heavy travel kind of industries, we're just not focused on them at this moment.

But we are tradable, Matt. When we see credit losses come in the way they have the last 2 quarters, we look and we see roll rates and all kinds of stuff that we look at and were like, huh, I guess we, along with some other people, maybe overreacted to the credit risk. And part of it is the essential nature, again, right, of what we do to people want to get our programs because it's part of their day-to-day jobs. And then, b, the velocity of what our receivables are, we have all kinds of stuff like daily terms, daily net buys and stuff and trucking. So our terms are quite rapid. So we've been, again, just super fortunate. And so we're now trying to lean back towards the growth side and saying, okay, we're open to taking a bit more credit risk now that we see it's controlled.

And then, Matt, to your other question on the expense reductions and what's permanent or not, some of this is from volume. So as our volumes bounce back, whether it's the base coming back or enhanced sales, as Ron was saying, some of that volume-based expense will come back. Some of it is driven by FX rates. So it hurts us on revenue, but we save on expenses. And so unless we see the Brazilian real turn around, some of that's going to stick around for a while. And we also mentioned our bad debt is running low, and the aging is also staying well below what it has been historically. And so you could see that kind of continuing to run at a low rate for some time. I'd say, going forward into next year, we're going to continue to manage expenses, but look for opportunities, as Ron has said, to shift to growth and get on offense. So we'll look to deploy some of the things that -- some of the savings that we have this year to focus more on sales and marketing and get the top line where we want it.

And our next question is from the line of Bob Napoli with William Blair.

So the corporate payments business seems to be the key long-term driver to being able to hit the targets that you've had historically, Ron. What is the key -- strategically, what do you need to add to that business? I mean the opportunity is so large. And where are you investing? Because there's a lot of innovation going on in the corporate payment space. Where are you investing? What do you need to add? What are you looking at M&A-wise? What is most strategically important to keep that growth -- to make that business multiples the size it is today over the long term?

Bob, it's Ron. It's a good question. I think we described this business to you before, we look at it kind of like as a game board, so kind of chessboard, and it's got segments on it. So it's got kind of small, medium and large companies, and then it's got off to different verticals and stuff. And so if you look at the early days of the corporate pay or payables business, players are kind of going after certain cell. So some guy is focus on some verticals like us even, take construction, is a big part of our business. Some people like our pals, Bill.com, focused on super small clients and so on. So the first thing I'd say to you is, we're acutely aware and focused on those, if you look at that game board, which ones were capable to be good at today and then what capabilities would we need to be good as some of the cells were not in. So there's a few verticals that we like, that I like a lot, that we'd like to be in, where there's connections to ERPs and client references that we need, so some opportunities maybe to buy into some of those. And then the same on size, right? One of the things we've debated is do we take our full AP product that's a super good product, but target it in the mid-market and make a down-market version, so that we can chase that to the 500,000 little clients we have with it. So I'd say that, that's -- the primary thing is widening the capabilities to play in more of those segments. And then, b, I think I told you in the prior calls, the running up the value chain, like, for example, getting good at invoice automation. So the client doesn't have to open 100 invoices and tear them open and somehow get them into their system, and then we help them pay it, but maybe be more helpful to them as they pull those invoices and digitize those invoices. So those are the 2 games. We're going to get wider in the segments, and I'm hoping you'll hear more about that, and we'll get kind of broader in the value chain of the adjacency. So a year or 2 from now, you'll see us more in those 2 spots.

Are you building the invoice automation piece internally? Or is that something that you need to acquire?

Yes. I'm not going to answer that, other than say, obviously, we always look at the made by, so we're analyzing all of those options. All I can tell you is, we'll have this. We're committed, to your point, to this space, and we're looking at the various ways to get wider in this game and we will be wider in this game.

And our next question is from the line of John Coffey with Susquehanna.

One -- sort of 2 questions, one of which is fairly basic. Looking at Slide 8, this is a little bit differently set up than it was last quarter. So I was just wondering, in this -- again, maybe obvious, the last column of growth, is this sequential growth from Q2 to Q3? I just want to make sure I understood that right. Or is it some other kind of maybe, I don't know, an early October number? And then I'll just give you my second question right off the bat, is on the next slide. When I look at the declines that you see from the 100 most effective customers, would a lot of that be primarily driven by the T&E cards? Or would some of this be virtual cards as well?

John, this is Charles. So on Slide 8, what you're seeing there, the volume trends Q2 year-over-year and Q3 year-over-year, that third column is really the difference between Q2 and Q3. So sequentially, right, we improved, say as an example, in the local fuel business, from minus 17% to minus 12%, we improved 500 basis points. And so you can see kind of the recovery that we're seeing sequentially quarter versus quarter, Q2 to Q3 this year. And then in terms of the 100 customers, in that slide, which is Slide 9, we're actually explicitly removing the T&E card product and looking at that separately. So the 100 most affected customers would be those that are using our payment products, either our virtual card or our cross-border and AFEX services.

Yes, I don't know, John, whether we're making this point clear why we put this thing in here. Again, no one understands this better than you guys of how COVID and shutdowns have helped some companies and hurt some companies and then super hurt some companies, the whole distribution. I guess the headline we're trying to give is that partitioning of impact sits in our client base. So when we look at the business that we built, it's a function of the health of our clients. And so just like the investments that you guys look at, we have some set in all of our businesses of super sick clients that we didn't know could get so sick, using fuel cards or corporate pay products. And so the softness and the down performance of our company is really, as we've said, mostly now just a function of the health of a narrow group of our clients because we're back selling, our retention is fine, our credit's fine. And so the other parts of our business that allow our business to go forward, fortunately, are kind of okay again. So it's really just -- the point of it is really just we have, in our 800,000 clients, ones that were massively impacted by this thing and continue to be.

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

Ron, just wanted to ask, I know it's early days around sort of EV and the like, and you talked about some networks overseas. I'm just curious on your thoughts about that kind of migrating to the States. Maybe how far behind are we to that playing a bigger role? And then just secondly, it sounds like you're, at least for now, somewhat encouraged on the economics. Just your thoughts around the ability to sustain that?

Yes. Let me start, George, with the second question first and then come back to the U.S. I'd say this is another one a bit like our credit thing. Probably all of you were like, oh, sheez, FLEETCOR's got fuel cards, and oh my god, it's going to be electric vehicles and oh, they won't have any business or whatever. Okay. So we're like, oh my god, I wondered when a client that's got 20 plumbing trucks gets 2 or 3 electric vehicles, while our business go down 10% or 15%. So what I was really trying to report now that we're in the game is no. That example of a mixed fleet, our business is basically flat. And I'm studying this over the last 6 months. I'm like -- what is going on here, guys? And the answer is that the business wants to know about their vehicles and usage and purchases and what the people are doing, frankly, across the entire 20 vehicle population in that example. And so having a card in a way that the 20 people can still all buy and get reported on one account, I guess we didn't really realize how valuable that was to companies, and they're willing to pay. They're still paying card fees on those 3 electric plumbing trucks and they're -- obviously, we're getting paid for the new networks we've established. And they even want to know when those things are getting charged because they have admin to do with their employees, right? Their employees want to kind of get reimbursed, if you will, for at-home charging, the gadgets and the electricity and stuff. And so the headline for everybody is, at least initially, while the fleets are mixed, it's not a big -- we don't view it as a big drag, which, to me, I want to tell that story because we think it's pretty good news. On the second question, I think it's as much a government question as anything. Look, the reason that some of the countries we're in, in Europe are ahead in EV is the government has set it up that way, right, in terms of incentives and targets and stuff that they've set up. So maybe we'll know something tonight or tomorrow here about our government. But I think a lot of it, the pace at which the U.S. will try to catch up, I think, is going to be a function really of the incentives that are put out there, how high a priority it is. But again, my guess is the behaviors will be probably pretty similar to what we're seeing. Networks will get billed, networks that work will get billed, and we'll probably copy the same playbook for a while. So to me, it just keeps pushing out the electric vehicle impact on our company.

Okay. That's great. That's very encouraging. And then, Charles, if I could sneak one more in, just looking at the full AP business, I think you grew 20% in the third quarter, that's good growth. But I think in July, volumes were up 27%. So I guess, you're sort of exiting the third quarter in the teens. Anything to kind of call out there and how maybe we should be thinking about that business near term?

Yes. So in terms of the 20% growth, I'm assuming you're referring to Slide 8, that is embedded volume growth. The business -- we are lapping some synergies that we put into place a year ago. So when we acquired the business, they had some payments that they were doing. But what we did is we basically tied that product to our vendor database, and so we could take a bunch of the payments they were making through other modalities and turn them on to our MasterCard virtual card. And so we saw a lot of MasterCard spend suddenly come into the system. We're now lapping those synergies. And so what you're going to see basically in that business going forward is really just organic growth. It's sales pouring in. And in this case, it's transaction volume overcoming COVID softness in the base, since that big sales that we keep telling you about is layering on. And so we're going to have this kind of, call it, high teens, 20% kind of growth rate in this business, provided the sales continued.

And our next question comes from the line of Trevor Williams from Jefferies.

And I just wanted to follow up, Charles, with you just a little bit on the expense comments you made to Matt's question earlier. I mean it sounds like you guys are going to start pouring some more fuel on the fire when you start to get more of a reacceleration on the top line. With that kind of framework, I mean, should we be thinking that maybe your incremental margins run a bit lower than the 70% level that we've historically thought about when revenues start to come back on the upswing?

No, I'd say, we're pretty disciplined and balanced. So it's not -- when you say pouring fuel on the fire, everything we do is going to be incremental. It will be balanced. But what we try to do as a company is shift what we call calories. So I can make certain investments in back office stuff. I can make investments in sales and marketing. I much prefer the latter versus the former. And so we're very, very disciplined in cost control in all of our operations. And that way, we can put some disproportionate investment in sales and marketing, while still managing the bottom line effectively. So I would not anticipate any kind of dramatic changes in that regard. It's more of a shift in spending versus big incremental investment.

Okay. Got it. That's very helpful. And just one other clarification question for me. Ron, I mean you -- when you're talking about the fourth quarter, you're hoping to get sales up to 90% of last year's level. I just want to make sure I'm understanding that comment correctly. Is that new sales you're referencing? Or is that -- you're talking about revenue growth being down 10% or hopefully a little bit better for the fourth quarter?

Yes, that's new sales, Trevor. So we keep track of what we call annualized new business. We sign up 30,000 clients in the quarter, how much revenue will they create. And so we have a system that measures that. So yes. So I say, hey, we were 50% of new business. Now Q3, we're at 80%, and we hope to be at 90% or 90%-plus, that's comparing new business we got in Q3 this year to the amount of new business we got in Q3 last year.

Got it. Okay. That makes sense. That's why I asked. Appreciate it.

I mean let me go back to what I said earlier that Togut asked, which is, once you normalize this base softness or wherever it is, this is -- I want to make sure everyone gets it, this is the game. If you could get sales, right, to be more than attrition, and we said retention ticked up a point, it is the key to planning this machine running forward. So we will lap the softness, even though we're recovering some. So I don't want people to miss how important this metric is to us and to the revenue growth going forward.

And our final question comes from the line of Mihir Bhatia with Bank of America.

I just had one quick one, hopefully, on fuel card -- on the fuel card segment. Thanks for the incremental disclosure on the corporate payment side. I was wondering if you could do something similar for us, like just at a high level, maybe on the fuel card side. Are there particular customers or segments that are just not recovering while everything else is getting better? And then just relatedly, I was curious about your views just in terms of -- with parts of Europe and, I guess, the U.K. is talking about shutting down again or at least putting some kinds of movement restrictions in place. How should we be thinking about the headwinds from that for you next quarter?

So on the fuel card business, Mihir, we are still seeing some of that softness still in the small businesses, as we mentioned earlier, so that's still -- waiting for that to come back. In terms of some of the industries, manufacturing has been a bit slow. Obviously, transportation as such, public transportation, things of that nature has been a little slow in our local fuel business. The Europe stuff had bounced back more, as shown in our volume exhibits. To your point, we're watching the lockdowns. I think in terms of the nature of those lockdowns, they don't seem quite as severe, at least is what I've read in the press regarding how far they're going to shut down. So we're still waiting to see what that impact will look like. So I'd say, to be determined.

Yes. Let me just add to what Chuck said. The answer is yes to are there super sick clients like we show in corporate pay. We run the distributions of the clients. So let's say we had 100,000 clients, we basically put them in layers, call it, 5 or 6 layers, hey, 25,000 of the 100,000 have grown, hey, 25,000 are down like 5% or 10%, hey, 25,000 are down 20% to 30%, and then 6,000 are down 80% or more. So we see the whole distribution of super impacted industries versus industries that were nicked by, we're going to have one less plumber because some homes won't accept them. So it's not quite as stark as it is in the corporate pay business. And again, it's why we've seen actually more recovery, if you will, of our same-store sales in the fuel business than in the corporate pay, because we have retailers and maritime payroll and hotels, things that don't move that have been shuttered that are in our corporate pay business. So we were just dealt a more impacted set of clients, effectively sitting in that business.

And there are no further questions in the queue at this time. I will now turn the call back over for closing remarks.

Nothing further on our end, guys. Let me know if you need anything else, I'm always available. So have a good evening.

Thanks, everybody.

That does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines. Thank you, and have a great day.