# CORPAY, INC. (CPAY) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from CORPAY, INC.'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1175454/000162828024008060/flt-20231231.htm Accession: 0001628280-24-008060 Filing date: 2024-02-29 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/CPAY/ All MD&A years: /company/CPAY/mda/ Previous year: /company/CPAY/mda/fy2022/ (FY 2022) Next year: /company/CPAY/mda/fy2024/ (FY 2024) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences include, but are not limited to, those identified below and those described in Item 1A “Risk Factors” appearing elsewhere in this report. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by Oanda for the applicable periods. The following discussion and analysis of our financial condition and results of operations generally discusses 2023 and 2022 items, with year-over-year comparisons between these two years. A detailed discussion of 2022 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. Executive Overview FLEETCOR is a global payments company that helps businesses and consumers better manage their expenses. FLEETCOR's suite of modern payment solutions help customers better manage vehicle-related expenses (e.g. fueling, tolls and parking), lodging expenses (e.g. hotel bookings) and corporate payments (e.g. domestic and international vendors). This results in our customers saving time and ultimately spending less. Since its incorporation in 2000, FLEETCOR’s smarter payment and spend management solutions have been delivered in a variety of ways depending on the needs of the customer. From physical payment cards to software that includes customizable controls and robust payment capabilities, we provide businesses and consumers with a better way to pay. FLEETCOR has been a member of the S&P 500 since 2018 and trades on the New York Stock Exchange under the ticker FLT. We expect to rebrand FLEETCOR to Corpay, Inc. in March 2024, including changing our New York Stock Exchange ticker from FLT to CPAY. Businesses spend an estimated $135 trillion each year in transactions with other businesses. In many instances, businesses lack the proper tools to monitor what is being purchased, and employ manual, paper-based, disparate processes and methods to both approve and make payments for their business-to-business purchases. This often results in wasted time and money due to unnecessary or unauthorized spending, fraud, receipt collection, data input and consolidation, report generation, reimbursement processing, account reconciliations, employee disciplinary actions, and more. FLEETCOR’s vision is that every payment is digital, every purchase is controlled, and every related decision is informed. Digital payments are faster and more secure than paper-based methods such as checks, and provide timely and detailed data that can be utilized to effectively reduce unauthorized purchases and fraud, automate data entry and reporting, and eliminate reimbursement processes. Combining this payment data with analytical tools delivers powerful insights, which managers can use to better run their businesses. Our wide range of modern, digitized solutions generally provides control, reporting, and automation benefits superior to many of the payment methods businesses often use such as cash, paper checks, general purpose credit cards, as well as employee pay and reclaim processes. Impact of Geo-Political Events on Our Business The current military conflicts between Russia and Ukraine, as well as within the Middle East, continue to create substantial uncertainty about the global economy in the future. Although the length, impact and outcome of the ongoing military conflicts between Russia and Ukraine and within the Middle East are highly unpredictable, these conflicts could lead to significant market and other disruptions. We recently exited the Russia market via the disposition of our Russia business, which closed in the third quarter of 2023 (see "Russia Disposition" section below), and we do not have material operations in Israel or Gaza. We cannot predict how and the extent to which these conflicts will affect our customers, operations or business partners or the demand for our products and our global business. We are actively monitoring the situations and assessing the impact on our business. The extent, severity, duration and outcome of the military conflicts, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Russia Disposition During the second quarter of 2023, we signed definitive documents to sell our Russia business to a third party. At June 30, 2023, we concluded that the sale was not considered probable due to continued uncertainty regarding regulatory approvals and ongoing discussions regarding the nature and timing of deal completion. As such, the assets and liabilities associated with our Russian business were not classified as held for sale prior to the completion of the transaction. The Russia business was historically reported within our Vehicle Payments segment and did not meet the criteria to be presented as discontinued operations. We completed the sale of our Russia business on August 15, 2023. 37 The sale included the entirety of our operations in Russia and resulted in a complete exit from the Russia market. We received total proceeds, net of cash disposed and net of a $5.6 million foreign exchange loss upon conversion of the ruble-denominated proceeds to U.S. dollars, of $197.0 million, which have been recorded within investing activities in the accompanying Consolidated Statements of Cash Flows. In connection with the sale, we recorded a net gain on disposal of $13.7 million during the year ended December 31, 2023, which represents the proceeds received less the derecognition of the related net assets, the reclassification of accumulated foreign currency translation losses, and the foreign exchange loss upon conversion of the ruble-denominated proceeds to U.S. dollars. The net gain is included within other (income) expense, net in the accompanying Consolidated Statements of Income. Exclusive of the impact of disposition, our business in Russia accounted for approximately $62.0 million and $84.7 million of our consolidated income before income taxes for years ended December 31, 2023 and 2022, respectively. Our assets in Russia were approximately 3.2% of our consolidated assets at December 31, 2022. Results Revenues, net, Net Income and Net Income Per Diluted Share. Set forth below are revenues, net, net income and net income per diluted share for the years ended December 31, 2023 and 2022 (in millions, except per share amounts). [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023","","2022"],["Revenues, net","","$","3,758","","","$","3,427"],["Net income","","$","982","","","$","954"],["Net income per diluted share","","$","13.20","","","$","12.42"]] [[/GREPCENT_TABLE]] Adjusted Net Income, Adjusted Net Income Per Diluted Share, EBITDA and EBITDA margin. Set forth below are adjusted net income, adjusted net income per diluted share, EBITDA and EBITDA margin for the years ended December 31, 2023 and 2022 (in millions, except per share amounts). [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023","","2022"],["Adjusted net income","","$","1,259","","","$","1,237"],["Adjusted net income per diluted share","","$","16.92","","","$","16.10"],["EBITDA","","$","1,994","","","$","1,769"],["EBITDA margin","","53.1","%","","51.6","%"]] [[/GREPCENT_TABLE]] Adjusted net income, adjusted net income per diluted share, EBITDA and EBITDA margin are supplemental non-GAAP financial measures of operating performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures” for more information and a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with U.S. generally accepted accounting principles, or GAAP. We use adjusted net income, adjusted net income per diluted share, EBITDA and EBITDA margin to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. These non-GAAP measures are presented solely to permit investors to more fully understand how our management assesses underlying performance and are not, and should not be viewed as, a substitute for GAAP measures, and should be viewed in conjunction with our GAAP financial measures. Sources of Revenue FLEETCOR offers a variety of payment solutions that help to simplify, automate, secure, digitize and effectively control the way businesses and consumers manage and pay their expenses. We provide our payment solutions to our business, merchant, consumer and payment network customers in more than 150 countries around the world today, although we operate primarily in three geographies, with approximately 83% of our business in the U.S., Brazil, and the U.K. Our customers may include commercial businesses (obtained through direct and indirect channels) and partners for whom we manage payment programs, as well as individual consumers. We report information about our operating segments in accordance with the authoritative guidance related to segments. In the fourth quarter of 2023, in order to align with recent changes in our strategy and resulting organizational structure and management reporting, we updated our segment structure. The presentation of segment information has been recast for the prior years to align with this segment presentation for 2023. We manage and report our operating results through the following three reportable segments: Vehicle Payments, Corporate Payments and Lodging Payments. The remaining results are included within Other, which includes our Gift and Payroll Card businesses. These segments align with how the Chief Operating Decision Maker (CODM) allocates resources, assesses performance and reviews financial information. Our revenue is generally reported net of the cost for underlying products and services purchased. In this report, we refer to this net revenue as “revenue" or "revenues, net". See “Results of Operations” for additional segment information. 38 Revenues, net, by Segment. Revenues, net by segment for the years ended December 31, 2023 and 2022, our segments generated the following revenues, net (in millions): [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["Revenues by Segment*","","Revenues, net","","% of Total Revenues, net","","Revenues, net","","% of Total Revenues, net","","Revenues, net","","% of Total Revenues, net"],["Vehicle Payments","","$","2,005.5","","","53","%","","$","1,950.0","","","57","%","","$","1,690.0","","","60","%"],["Corporate Payments","","981.1","","","26","%","","769.6","","","22","%","","598.2","","","21","%"],["Lodging Payments","","520.2","","","14","%","","456.5","","","13","%","","309.6","","","11","%"],["Other","","250.9","","","7","%","","251.0","","","7","%","","235.9","","","8","%"],["Consolidated revenues, net","","$","3,757.7","","","100","%","","$","3,427.1","","","100","%","","$","2,833.7","","","100","%"]] [[/GREPCENT_TABLE]] *Columns may not calculate due to rounding. Other includes our Gift and Payroll card operating segments. We generate revenue in our Vehicle Payments segment through a variety of program fees, including transaction fees, card fees, network fees and charges, as well as from interchange. These fees may be charged as fixed amounts, costs plus a mark-up, based on a percentage of the transaction purchase amounts, or a combination thereof. Our programs also include other fees and charges associated with late payments and based on customer credit risk. In our Corporate Payments segment, our payables business primarily earns revenue from the difference between the amount charged to the customer and the amount paid to the third party for a given transaction, as interchange or spread revenue. Our programs may also charge fixed fees for access to the network and ancillary services provided. In our cross-border payments business, the majority of revenue is from exchanges of currency at spot rates, which enables customers to make cross-currency payments. Our cross-border payments business also derives revenue from our risk management business, which aggregates foreign currency exposures arising from customer contracts and economically hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Our performance obligation in our foreign exchange payment services is providing a foreign currency payment to a customer’s designated recipient and therefore, we recognize revenue on foreign exchange payment services when the underlying payment is made. Revenues from foreign exchange payment services are primarily comprised of the difference between the exchange rate we set for the customer and the rate available in the wholesale foreign exchange market. In our Lodging Payments segment, we primarily earn revenue from the difference between the amount charged to the customer and the amount paid to the hotel for a given transaction or based on commissions paid by hotels. We may also charge fees for access to the network and ancillary services provided. The remaining revenues represent our Gift and Payroll card businesses, referred to as Other. In these businesses, we primarily earn revenue from the processing of transactions. We may also charge fees for ancillary services provided. Revenues, net, by Geography Revenues, net by geography for the years ended December 31, 2023 and 2022, were as follows (in millions): [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023","","2022"],["Revenues by Geography*","","Revenues, net","","% of total revenues, net","","Revenues, net","","% of total revenues, net"],["United States","","$","2,134.7","","","57","%","","$","2,093.9","","","61","%"],["Brazil","","525.1","","","14","%","","442.2","","","13","%"],["United Kingdom","","441.4","","","12","%","","363.3","","","11","%"],["Other","","656.5","","","17","%","","527.7","","","15","%"],["Consolidated revenues, net","","$","3,757.7","","","100","%","","$","3,427.1","","","100","%"]] [[/GREPCENT_TABLE]] *Columns may not calculate due to rounding. 39 Revenues, net, by Key Performance Metric and Organic Growth. Revenues, net by key performance metric and organic growth by segment for the years ended December 31, 2023 and 2022, were as follows (in millions except revenues, net per key performance indicator)*: [[GREPCENT_TABLE]] [["","","As Reported","","Pro Forma and Macro Adjusted2"],["","","Year Ended December 31,","","Year Ended December 31,"],["","","2023","","2022","","Change","","% Change","","2023","","2022","","Change","","% Change"],["VEHICLE PAYMENTS"],["'- Revenues, net","","$2,005.5","","$1,950.0","","$55.5","","3%","","$2,037.5","","$1,913.8","","$123.8","","6%"],["'- Transactions","","648.6","","594.7","","53.9","","9%","","648.6","","629.3","","19.3","","3%"],["'- Revenues, net per transaction","","$3.09","","$3.28","","$(0.19)","","(6)%","","$3.14","","$3.04","","$0.10","","3%"],["'- Tag transactions3","","79.6","","74.4","","5.2","","7%","","79.6","","74.4","","5.2","","7%"],["'- Parking transactions","","68.0","","\u2014","","68.0","","100%","","68.0","","59.1","","8.9","","15%"],["'- Fleet transactions","","477.4","","501.1","","(23.8)","","(5)%","","477.4","","476.7","","0.7","","\u2014%"],["'- Other transactions","","23.7","","19.2","","4.5","","24%","","23.7","","19.2","","4.5","","24%"],["CORPORATE PAYMENTS"],["'- Revenues, net","","$981.1","","$769.6","","$211.6","","27%","","$987.4","","$829.6","","$157.8","","19%"],["'- Spend volume","","$145,571","","$116,827","","$28,743","","25%","","$145,571","","$126,076","","$19,494","","15%"],["'- Revenues, net per spend $","","0.67%","","0.66%","","0.02%","","2%","","0.68%","","0.66%","","0.02%","","3%"],["LODGING PAYMENTS"],["'- Revenues, net","","$520.2","","$456.5","","$63.7","","14%","","$520.1","","$465.6","","$54.5","","12%"],["'- Room nights","","36.5","","37.3","","(0.8)","","(2)%","","36.5","","37.9","","(1.4)","","(4)%"],["'- Revenues, net per room night","","$14.25","","$12.24","","2.0","","16%","","$14.25","","$12.29","","$1.96","","16%"],["OTHER1"],["'- Revenues, net","","$250.9","","$251.0","","$(0.1)","","\u2014%","","$251.1","","$251.0","","$\u2014","","\u2014%"],["'- Transactions","","1,309.2","","1,192.6","","116.6","","10%","","1,309.2","","1,192.6","","116.6","","10%"],["'- Revenues, net per transaction","","$0.19","","$0.21","","$(0.02)","","(10)%","","$0.19","","$0.21","","$(0.02)","","(9)%"],["FLEETCOR CONSOLIDATED REVENUES, NET"],["'- Revenues, net","","$3,757.7","","$3,427.1","","$330.6","","10%","","$3,796.1","","$3,460.0","","$336.1","","10%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1 Other includes Gift and Payroll Card operating segments."],["2 See heading entitled \"Managements' Use of Non-GAAP Financial Measures\" for a reconciliation of pro forma and macro adjusted revenue by product and metric non-GAAP measures to the comparable financial measure calculated in accordance with GAAP. The calculated change represents organic growth rate."],["3 Represents total tag subscription transactions in the year. Average monthly tag subscriptions for 2023 is 6.6 million."],["* Columns may not calculate due to rounding."]] [[/GREPCENT_TABLE]] Revenue per relevant key performance indicator (KPI), which may include transactions, spend volume, room nights, or other metrics, is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates, fuel prices and fuel price spreads. Relevant KPI is derived by broad product type and may differ from how we describe the business. Revenue per KPI per customer may change as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates. See “Results of Operations” for further discussion of transaction volumes and revenue per transaction. Organic revenue growth is a supplemental non-GAAP financial measure of operating performance. Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period. See the heading entitled “Management’s Use of Non-GAAP Financial Measures” for more information and a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP. We believe that organic revenue growth on a macro-neutral, one-time item, and 40 consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR. Sources of Expenses We incur expenses in the following categories:  •Processing—Our processing expenses consist of expenses related to processing transactions, servicing our customers and merchants, credit losses and cost of goods sold related to our hardware and card sales in certain businesses. •Selling—Our selling expenses consist primarily of wages, benefits, sales commissions (other than merchant commissions) and related expenses for our sales, marketing and account management personnel and activities. •General and administrative—Our general and administrative expenses include compensation and related expenses (including stock-based compensation and bonuses) for our employees, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses. •Depreciation and amortization—Our depreciation expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space. Our amortization expenses include amortization of intangible assets related to customer and vendor relationships, trade names and trademarks, software and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable. •Other operating, net—Our other operating, net includes other operating expenses and income items that do not relate to our core operations or that occur infrequently. •Other (income) expense, net—Our other (income) expense, net includes gains or losses from the following: sales of assets or businesses, foreign currency transactions, extinguishment of debt, and investments. This category also includes other miscellaneous non-operating costs and revenue. Certain of these items may be presented separately on the Consolidated Statements of Income. •Interest expense, net—Our interest expense, net includes interest expense on our outstanding debt, interest income on cash balances and interest on our interest rate and cross-currency swaps. •Provision for income taxes—Our provision for income taxes consists of corporate income taxes related primarily to profits resulting from the sale of our products and services on a global basis. Factors and Trends Impacting our Business We believe that the following factors and trends are important in understanding our financial performance:  •Global economic conditions—Our results of operations are materially affected by conditions in the economy generally, in North America, Brazil, and internationally, including the current conflict between Russia and Ukraine and other geopolitical events in the Middle East, as discussed elsewhere in this Annual Report on Form 10-K, and the ultimate impact of the COVID-19 pandemic. Factors affected by the economy include our transaction volumes, the credit risk of our customers and changes in tax laws across the globe. These factors affected our businesses in each of our segments. •Foreign currency changes—Our results of operations are significantly impacted by changes in foreign currency exchange rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, euro, Mexican peso, New Zealand dollar and Russian ruble (for periods prior to the disposition or our Russia business), relative to the U.S. dollar. Approximately 57%, and 61% of our revenue in 2023 and 2022, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See “Results of Operations” for information related to foreign currency impact on our total revenue, net. Our cross-border foreign risk management business aggregates foreign currency exposures arising from customer contracts and economically hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. These contracts are subject to counterparty credit risk. In February 2023, to further manage the impact of economic changes in the value of certain foreign-denominated net assets, we entered into a cross currency interest rate swap on $500 million of notional value of investments in various euro-functional subsidiaries. This swap was terminated in February 2024, and we subsequently entered into four new cross-currency interest rate swaps totaling $500 million of notional value that are designated as net investment hedges of our investments in euro-denominated operations. •Fuel prices—Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer’s total purchase. Changes in the absolute price of fuel may also impact unpaid account 41 balances and the late fees and charges based on these amounts. We estimate approximately 10% and 13% of revenues, net were directly impacted by changes in fuel price in 2023 and 2022, respectively. See "Results of Operations" for information related to the fuel price impact on our total revenues, net. •Fuel price spread volatility—A portion of our revenue involves transactions where we derive revenue from fuel price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchant’s wholesale cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel price spread contraction when the merchant’s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchant’s wholesale cost of fuel. The inverse of these situations produces fuel price spread expansion. We estimate approximately 5% and 6% of revenues, net were directly impacted by fuel price spreads in 2023 and 2022, respectively. See "Results of Operations" for information related to the fuel price impact on our total revenues, net. •Acquisitions—Since 2002, we have completed over 95 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods. •Interest rates—From January 1, 2022 to July 23, 2023, the U.S. Federal Open Market Committee increased the target federal funds rate eleven times for a total rate increase of 5.25%. Additional increases are possible in future periods. We are exposed to market risk changes in interest rates on our debt, particularly in rising interest rate environments, which is partially offset by incremental interest income earned on cash and restricted cash. As of December 31, 2023, we have a number of receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $4.0 billion. The objective of these contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with variable rate debt, the sole source of which is due to changes in SOFR benchmark interest rate. See "Liquidity" section below for additional information regarding our derivatives. •Expenses—Over the long term, we expect that our expense will decrease as a percentage of revenue as our revenue increases, except for expenses related to transaction volume processed. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and sales force. •Taxes—We pay taxes in various taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in non-U.S. taxing jurisdictions are different than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates. Acquisitions, Investments and Divestitures 2023 •In January 2023, we acquired Global Reach, a U.K.-based cross border payments provider, for approximately $102.9 million, net of cash. Results from Global Reach Group are reported in our Corporate Payments segment. •In February 2023, we acquired the remainder of Mina Digital Limited, a cloud-based electric vehicle ("EV") charging software platform, and we also acquired Business Gateway AG, a European-based vehicle maintenance provider, for a total of approximately $23.8 million, net of cash. Results from Mina Digital Limited and Business Gateway AG are reported in our Vehicle Payments segment. •In September 2023, we acquired PayByPhone Technologies, Inc. a global parking payment application, for approximately $301.6 million, net of cash. Results from PayByPhone are reported in our Vehicle Payments segment. •In the third quarter of 2023, we disposed of our Russian business for $197.0 million, net of cash disposed and net of a $5.6 million foreign exchange loss upon the conversion of the ruble-denominated proceeds to U.S. dollars. Results from our Russian business were previously included in our Vehicle Payments segment. Each of these 2023 acquisitions provide incremental geographic expansion of our products, with PayByPhone specifically intended to progress our broader strategy to transform our vehicle payments business. 2022 •In November 2022, we completed the acquisition of Roomex, a European workforce lodging provider serving the U.K. and German markets for approximately $56.8 million, net of cash. Results from Roomex are included in our Lodging Payments segment. •In September 2022, we made an investment of $6.1 million in a U.K.-based EV search and pay mapping service. 42 •In September 2022, we completed the acquisition of Plugsurfing, a European EV software and network provider, for $75.8 million, net of cash. Results from Plugsurfing are reported in our Vehicle Payments segment. •In August 2022, we completed the acquisition of Accrualify, an accounts payable (AP) automation software company, for $41.2 million, net of cash. Results from Accrualify are reported in our Corporate Payments segment. •In March 2022, we completed the acquisition of Levarti, a U.S.-based airline software platform company, for $23.7 million, net of cash. Results from Levarti are included in our Lodging Payments segment. •In February 2022, we made an investment of $7.8 million in Mina Digital Limited, an EV charging payments business and $5.0 million in an EV data analytics business. Results of Operations Year ended December 31, 2023 compared to the year ended December 31, 2022 The following table sets forth selected financial information from the consolidated statements of income for the years ended December 31, 2023 and 2022 (in millions, except percentages)*. [[GREPCENT_TABLE]] [["","","Year EndedDecember 31, 2023","","% of Total Revenue","","Year EndedDecember 31,2022","","% of Total Revenue","","Increase (Decrease)","","% Change"],["Revenues, net:"],["Vehicle Payments","","$","2,005.5","","","53.4","%","","$","1,950.0","","","56.9","%","","$","55.5","","","2.8","%"],["Corporate Payments","","981.1","","","26.1","%","","769.6","","","22.5","%","","211.6","","","27.5","%"],["Lodging Payments","","520.2","","","13.8","%","","456.5","","","13.3","%","","63.7","","","14.0","%"],["Other","","250.9","","","6.7","%","","251.0","","","7.3","%","","(0.1)","","","(0.1)","%"],["Total revenues, net","","3,757.7","","","100.0","%","","3,427.1","","","100.0","%","","330.6","","","9.6","%"],["Consolidated operating expenses:"],["Processing","","819.9","","","21.8","%","","764.7","","","22.3","%","","55.2","","","7.2","%"],["Selling","","340.2","","","9.1","%","","309.1","","","9.0","%","","31.1","","","10.1","%"],["General and administrative","","603.4","","","16.1","%","","584.1","","","17.0","%","","19.3","","","3.3","%"],["Depreciation and amortization","","336.6","","","9.0","%","","322.3","","","9.4","%","","14.3","","","4.4","%"],["Other operating, net","","0.8","","","\u2014","%","","0.3","","","\u2014","%","","0.5","","","NM"],["Operating income","","1,656.9","","","44.1","%","","1,446.6","","","42.2","%","","210.2","","","14.5","%"],["Investment (gain) loss","","(0.1)","","","\u2014","%","","1.4","","","\u2014","%","","(1.5)","","","NM"],["Other (income) expense, net","","(16.6)","","","(0.4)","%","","3.0","","","0.1","%","","19.6","","","NM"],["Interest expense, net","","348.6","","","9.3","%","","164.7","","","4.8","%","","183.9","","","111.7","%"],["Loss on extinguishment of debt","","\u2014","","","\u2014","%","","1.9","","","0.1","%","","(1.9)","","","NM"],["Provision for income taxes","","343.1","","","9.1","%","","321.3","","","9.4","%","","21.8","","","6.8","%"],["Net income","","$","981.9","","","26.1","%","","$","954.3","","","27.8","%","","$","27.6","","","2.9","%"],["Operating income by segments:"],["Vehicle Payments","","$","943.4","","","","","$","884.5","","","","","$","58.9","","","6.7","%"],["Corporate Payments","","382.1","","","","","273.6","","","","","108.5","","","39.7","%"],["Lodging Payments","","254.3","","","","","218.6","","","","","35.6","","","16.3","%"],["Other","","77.1","","","","","69.9","","","","","7.2","","","10.3","%"],["Operating income","","$","1,656.9","","","","","$","1,446.6","","","","","$","210.2","","","14.5","%"]] [[/GREPCENT_TABLE]] *The sum of the columns and rows may not calculate due to rounding. NM - not meaningful Consolidated revenues, net Our consolidated revenues were $3,757.7 million in 2023, an increase of 9.6% compared to the prior year. The increase in consolidated revenues was due primarily to organic growth of 10%, driven by increases in transaction volumes and new sales growth and net revenue growth of 2% from acquisitions completed in 2022 and 2023, partially offset by the macroeconomic 43 environment that negatively impacted revenue growth by 1%. Revenues were also negatively impacted in 2023 by the disposition of our Russia business in August 2023 of approximately $50 million, or 1%. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our consolidated revenues for 2023 over 2022, driven primarily by the unfavorable impact of lower fuel prices of approximately $39 million and unfavorable fuel price spreads of approximately $15 million. These decreases were partially offset by favorable foreign exchange rates of approximately $16 million, mostly in our Brazil business. Consolidated operating expenses Processing. Processing expenses were $819.9 million in 2023, an increase of 7.2% compared to the prior year. Increases in processing expenses were primarily due to approximately $40 million of expenses related to acquisitions completed in 2022 and 2023, higher variable expenses driven by increased transaction volumes and investments to drive future growth. The increases were partially offset by lower bad debt of $10 million due to our shift away from micro-SMB (small-medium business) clients in the U.S. and the impact of the disposition of our Russia business of approximately $3 million. Selling. Selling expenses were $340.2 million in 2023, an increase of 10.1% compared to the prior year. Increases in selling expenses were primarily associated with approximately $24 million of expenses related to acquisitions completed in 2022 and 2023 and commissions from higher sales volume, partially offset by the impact of the disposition of our Russia business of approximately $4 million. General and administrative. General and administrative expenses were $603.4 million in 2023, an increase of 3.3% compared to the prior year. Increases in general and administrative expenses were primarily due to the impact of acquisitions completed in 2022 and 2023 of approximately $32 million and other increases associated with the growth of our business over the prior year. These increases were partially offset by approximately $9 million of lower overhead expense, approximately $5 million of lower stock based compensation expense and the impact of the disposition of our Russia business of approximately $5 million. Depreciation and amortization. Depreciation and amortization expenses were $336.6 million in 2023, an increase of 4.4%. Increases in depreciation and amortization were primarily due to incremental capital investments over the past three years, as well as approximately $17 million due to acquisitions completed in 2022 and 2023, partially offset by the impact of the disposition of our Russia business of approximately $2 million. Consolidated operating income Operating income was $1,656.9 million in 2023, an increase of 14.5% compared to the prior year. The increase in operating income was primarily due to the reasons discussed above, resulting in operating income margin expansion of approximately 190 basis points over the prior year. The increase was also impacted by the flow through impact on operating income of favorable changes in foreign exchange rates of approximately $5 million. These favorable effects were offset by the impact on operating income of the disposition of our Russia business in the third quarter of 2023, which resulted in lower operating income of approximately $36 million in 2023 compared to the prior year. Other (income) expense, net. Other income, net of $16.6 million in 2023 was primarily the net gain of approximately $13.7 million resulting from the disposal of our Russia business during the third quarter of 2023. Interest expense, net. Interest expense was $348.6 million in 2023, an increase of 111.7% compared to the prior year. The increase in interest expense is primarily due to rising interest rates on our borrowings and net cash used in financing activities, partially offset by the benefit of higher cash balances in certain foreign jurisdictions resulting in an increase in interest income from higher interest rates. The following table sets forth the weighted average interest rates paid on borrowings under our Credit Facility, excluding the related unused facility fees and swaps. [[GREPCENT_TABLE]] [["(Unaudited)","","2023","","2022"],["Term loan A","","6.49","%","","3.22","%"],["Term loan B","","6.84","%","","3.46","%"],["Revolving line of credit A & B (USD)","","6.51","%","","3.62","%"],["Revolving line of credit B (GBP)","","5.83","%","","2.06","%"]] [[/GREPCENT_TABLE]] We have a portfolio of interest rate swaps which are designated as cash flow hedges and one cross-currency interest rate swap, which is designated as a net investment hedge. During 2023, as a result of these swap contracts and net investment hedges, we recorded a benefit to interest expense, net of approximately $48 million. Provision for income taxes. The provision for income taxes and effective tax rate were $343.1 million and 25.9% in 2023, compared to $321.3 million and 25.2% in the prior year. The increase in the provision for income taxes was driven primarily by the increase in income before income taxes, higher foreign withholding taxes and less excess tax benefit on stock option exercises. The increases were partially offset by additional foreign tax credits and tax planning impacts in the fourth quarter of 2023 that resulted in an $8.2 million benefit that lowered the 2023 tax rate by 0.6%. 44 Net income. For the reasons discussed above, our net income was $981.9 million in 2023, an increase of 2.9% compared to the prior year. Segment Results Vehicle Payments Vehicle Payments revenues were $2.0 billion in 2023, an increase of 2.8% compared to the prior year. Vehicle Payments revenues increased primarily due to organic growth of 6% driven by new sales growth in our international markets, higher revenue per transaction, as well as the impact of acquisitions, which contributed approximately $14 million in revenue. The increase in revenues was partially offset by the disposition of our Russia business in August 2023, which lowered revenue by approximately $50 million and softness in our small fleet customers based in the U.S. Our shift away from micro-SMB clients in the U.S. affected our sales and overall results, including lower late fees revenues, which were down 19% from the prior year. The macroeconomic environment also negatively impacted revenues by approximately $32 million, driven primarily by the impact of lower fuel prices of $39 million and unfavorable fuel price spreads of $15 million, partially offset by favorable changes in foreign exchange rates on revenue of $21 million. Vehicle Payments operating income was $943.4 million in 2023, an increase of 6.7% compared to the prior year due to the reasons discussed above and the flow through impact of the disposition of our Russia business, which resulted in lower operating income of approximately $36 million. These unfavorable impacts were partially offset by lower bad debt of approximately $9 million, as we shift away from micro-SMB clients and to higher credit quality customers in the U.S. Corporate Payments Corporate Payments revenues were $981.1 million in 2023, an increase of 27.5% compared to the prior year. Corporate Payments revenues increased primarily due to organic revenue growth of 19%, driven by 15% organic growth in spend volume, strong new sales in our AP automation and cross-border solutions, as well as the impact of acquisitions, which contributed approximately $60 million in revenue. Corporate Payments operating income was $382.1 million in 2023, an increase of 39.7% compared to the prior year. Corporate Payments operating income and margin increased primarily due to revenue growth and operating leverage and integration synergies, as revenues grew faster than expenses, partially offset by higher selling expenses driven by growth of the business. Lodging Payments Lodging Payments revenues were $520.2 million in 2023, an increase of 14.0% compared to the prior year. Lodging Payments revenues increased primarily due to organic revenue growth of 12% driven by our insurance and airline verticals, as well as the impact of acquisitions, which contributed approximately $9 million in revenue. Lodging Payments revenues also grew due to sales success across industry verticals, in addition to higher revenue per room night driven primarily from our distressed passenger product and higher hotel commission revenues. Offsetting this growth was softness in our workforce vertical as the weaker macroeconomic environment is impacting this business, resulting in lower room nights. This growth was also impacted by lower same store sales in airlines and insurance in the second half of 2023 over 2022 due to fewer weather events and airline cancellations. Lodging Payments operating income was $254.3 million in 2023, an increase of 16.3% compared to the prior year. Lodging Payments operating income and margin increased primarily due to revenue growth and our operating leverage, as revenues grew faster than expenses. Other Other revenues were relatively flat at $250.9 million in 2023 compared to the prior year. Other operating income was $77.1 million in 2023, an increase of 10.3% compared to the prior year, with the increase primarily due to our operating leverage and disciplined expense management. 45 Recast Segment Results - Year Ended December 31, 2021 As discussed above, in the fourth quarter of 2023, in order to align with recent changes in our strategy and resulting organizational structure and management reporting, we updated our segment structure into three reportable segments: Vehicle Payments, Corporate Payments, Lodging Payments and an Other category. The new Vehicle Payments segment includes the prior Fleet and Brazil segments and results from our Corpay One business, which was previously reported in the Corporate Payments segment. The segment change did not impact prior period segment results presented for Lodging Payments or the Other category. The following table sets forth our recast segment results for the year ended December 31, 2021 (in millions, except percentages). [[GREPCENT_TABLE]] [["","","Year EndedDecember 31, 2021","","% of Total Revenue"],["Revenues, net:"],["Vehicle Payments","","$","1,690.0","","","59.7","%"],["Corporate Payments","","598.2","","","21.1","%"],["Lodging Payments","","309.6","","","10.9","%"],["Other","","235.9","","","8.3","%"],["Total revenues, net","","$","2,833.7","","","100.0","%"],["Operating income by segments:"],["Vehicle Payments","","$","811.8"],["Corporate Payments","","210.3"],["Lodging Payments","","149.0"],["Other","","71.5"],["Operating income","","$","1,242.6"]] [[/GREPCENT_TABLE]] Liquidity and capital resources Our principal liquidity requirements are to service and repay our indebtedness, make acquisitions of businesses and commercial account portfolios, repurchase shares of our common stock and meet working capital, tax and capital expenditure needs. Sources of liquidity. We believe that our current level of cash and borrowing capacity under our Credit Facility and Securitization Facility (each defined below), together with expected future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for the next 12 months and the foreseeable future, based on our current assumptions. At December 31, 2023, we had approximately $2.2 billion in total liquidity, consisting of approximately $0.8 billion available under our Credit Facility (defined below) and unrestricted cash of $1.4 billion, a portion of which is required for working capital. Restricted cash primarily represents customer deposits repayable on demand held in certain geographies with legal restrictions, collateral received from customers for cross-currency transactions in our cross-border payments business, which are restricted from use other than to repay customer deposits and secure and settle cross-currency transactions, and collateral posted with banks for hedging positions in our cross-border payments business. We also utilize the Securitization Facility to finance a portion of our domestic receivables, to lower our cost of borrowing and more efficiently use capital. Accounts receivable collateralized within our Securitization Facility relate to trade receivables resulting primarily from charge card activity in Vehicle Payments and receivables related to our Lodging Payments business in the U.S. We also consider the available and undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At December 31, 2023, we had no additional liquidity under our Securitization Facility. We have determined that outside basis differences associated with our investments in foreign subsidiaries would not result in a material deferred tax liability, and, consistent with our assertion that these amounts continue to be indefinitely invested, have not recorded incremental income taxes for the additional outside basis differences. 46 Cash flows The following table summarizes our cash flows for the years ended December 31, 2023 and 2022. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions)","","2023","","2022"],["Net cash provided by operating activities","","$","2,101.1","","","$","754.8"],["Net cash used in investing activities","","$","(380.7)","","","$","(368.3)"],["Net cash used in financing activities","","$","(898.2)","","","$","(311.2)"]] [[/GREPCENT_TABLE]] Operating activities. Net cash provided by operating activities was $2,101.1 million in 2023, an increase from $754.8 million in 2022. The increase in operating cash flows was primarily due to increases in restricted cash and favorable movements in working capital in 2023 versus 2022. Investing activities. Net cash used in investing activities was $380.7 million in 2023, an increase from $368.3 million in 2022. The increased use of cash was primarily due to incremental spending on acquisitions completed in 2023 over the comparable period in 2022, partially offset by net proceeds of $197.0 million received for the disposition of our Russian business. Financing activities. Net cash used in financing activities was $898.2 million in 2023 compared to $311.2 million in 2022. This increase in net cash used by financing activities was primarily due to an increase in net repayments on our Credit Facility and Securitization Facility of $1,378 million, offset by a decrease in repurchases of common stock of $718 million in 2023 versus 2022. Capital spending summary Our capital expenditures were $153.8 million in 2023, an increase of 1.6%, compared to the prior year due to the impact of acquisitions and continued investments in technology. Credit Facility FLEETCOR Technologies Operating Company, LLC, and certain of our domestic and foreign owned subsidiaries, as designated co-borrowers (the “Borrowers”), are parties to a $6.4 billion Credit Agreement (the “Credit Agreement”), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and a syndicate of financial institutions (the “Lenders”), which has been amended multiple times. The Credit Agreement provides for senior secured credit facilities (collectively, the "Credit Facility") consisting of a revolving credit facility in the amount of $1.5 billion, a term loan A facility in the amount of $3.0 billion and a term loan B facility in the amount of $1.9 billion as of December 31, 2023. The revolving credit facility consists of (a) a revolving A credit facility in the amount of $1 billion with sublimits for letters of credit and swing line loans and (b) a revolving B facility in the amount of $500 million with borrowings in U.S. dollars, euros, British pounds, Japanese yen or other currency as agreed in advance and a sublimit for swing line loans. The Credit Agreement also includes an accordion feature for borrowing an additional $750 million in term loan A, term loan B, revolving A or revolving B facility debt and an unlimited amount when the leverage ratio on a pro-forma basis is less than 3.75 to 1.00. Proceeds from the credit facilities may be used for working capital purposes, acquisitions, and other general corporate purposes. On June 24, 2022, we entered into the twelfth amendment to the Credit Agreement. The amendment replaced the then-existing term loan A with the $3 billion term loan A described above and the then-existing revolving credit facility with the $1.5 billion revolving credit facility described above, resulting in net increases of $273 million and $215 million to the capacities of the term loan A and revolving credit facility, respectively. In addition, the amendment replaced LIBOR for USD borrowings with the SOFR plus a SOFR adjustment of 0.10% for the term loan A and the revolving Credit Facility and extended the maturity date. The maturity date for the new term loan A and revolving credit facilities A and B is June 24, 2027. The term loan B has a maturity date of April 30, 2028. On May 3, 2023, we entered into the thirteenth amendment to the Credit Facility. The amendment replaced LIBOR on the term B loan with the Secured Overnight Financing Rate ("SOFR"), plus a SOFR adjustment of 0.10%. On January 31, 2024, we entered into the fourteenth amendment to the Credit Agreement. The amendment a) increased the capacity on the revolving credit facility by $275.0 million and b) increased the term loan A commitments by $325.0 million. We used the term loan A proceeds to pay down existing borrowings under the revolving credit facility. As a result, the transaction was leverage neutral and results in a $600 million increase in our availability under the revolving credit facility. The interest rates and maturity terms remain consistent with the existing credit facilities. Interest on amounts outstanding under the Credit Agreement accrues as follows: for loans denominated in U.S. dollars, based on SOFR plus a SOFR adjustment of 0.10%, in British pounds, based on the SONIA plus a SONIA adjustment of 0.0326%, in euros, based on the EURIBOR, or in Japanese yen, at the TIBOR plus a margin based on a leverage ratio, or our option (for U.S. dollar borrowings only), the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the prime rate announced by Bank of America, N.A., or (c) SOFR plus 1.00% plus a margin based on a leverage ratio). In addition, we pay a quarterly commitment fee at a rate per annum ranging from 0.25% to 0.30% of the daily unused portion of the credit facility. 47 At December 31, 2023, the interest rate on the term loan A was 6.83%, the interest rate on the term loan B was 7.21%, the interest rate on the revolving A and B facilities (USD borrowings) was 6.83%, and the interest rate on the revolving B facility (GBP borrowings) was 6.59%. The unused credit facility fee was 0.25% for all revolving facilities at December 31, 2023. The term loans are payable in quarterly installments due on the last business day of each March, June, September, and December with the final principal payment due on the respective maturity date. Borrowings on the revolving line of credit are repayable at the maturity of the facility. Borrowings on the domestic swing line of credit are due on demand, and borrowings on the foreign swing line of credit are due no later than twenty business days after such loan is made. The obligations of the Borrowers under the Credit Agreement are secured by substantially all of the assets of FLEETCOR and its domestic subsidiaries, pursuant to a security agreement and includes a pledge of (i) 100% of the issued and outstanding equity interests owned by us of each Domestic Subsidiary and (2) 66% of the voting shares of the first-tier foreign subsidiaries, but excluding real property, personal property located outside of the U.S., accounts receivables and related assets subject to the Securitization Facility and certain investments required under money transmitter laws to be held free and clear of liens. At December 31, 2023, we had $2.9 billion in borrowings outstanding on term loan A, net of discounts, $1.8 billion in borrowings outstanding on term loan B, net of discounts, and $0.7 billion in borrowings outstanding on the revolving credit facility. We have unamortized debt issuance costs of $3.6 million related to the revolving credit facility as of December 31, 2023 recorded in other assets within the Consolidated Balance Sheets. We have unamortized debt discounts and debt issuance costs of $19.0 million related to the term loans as of December 31, 2023 recorded in notes payable and other obligations, net of current portion within the Consolidated Balance Sheets. As a result of the amortization of debt discounts and debt issuance costs, the effective interest rate incurred on the term loans was 6.83% during 2023. During the year ended December 31, 2023, we made principal payments of $94.0 million on the term loans, and $9.1 billion on the revolving facilities. As of December 31, 2023, we were in compliance with each of the covenants under the Credit Agreement. Securitization Facility We are a party to a $1.7 billion receivables purchase agreement among FleetCor Funding LLC, as seller, PNC Bank, National Association as administrator, and various purchaser agents, conduit purchasers and related committed purchasers parties thereto (the "Securitization Facility"). On March 23, 2022, we entered into the tenth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.3 billion to $1.6 billion and replaced LIBOR with SOFR plus a SOFR adjustment of 0.10%. On August 18, 2022, we entered into the eleventh amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.6 billion to $1.7 billion, reduced the program fee margin and extended the maturity of the Securitization Facility to August 18, 2025. At December 31, 2023, the interest rate on the Securitization Facility was 6.43%. The Securitization Facility provides for certain termination events, which includes nonpayment, upon the occurrence of which the administrator may declare the facility termination date to have occurred, may exercise certain enforcement rights with respect to the receivables, and may appoint a successor servicer, among other things. We were in compliance with all financial and non-financial covenant requirements related to our Securitization Facility as of December 31, 2023. Cross-Border Facilities We carefully monitor and manage initial and variation margin requirements for our cross-border solutions, which can result in transitory periods of elevated liquidity needs in cases where the currency market experiences disruption. In order to help mitigate that liquidity risk, we have recently entered into facilities intended to provide additional means to manage working capital needs for our cross-border solutions. During the year ended December 31, 2023, we entered into two unsecured overdraft facilities with a combined capacity of $105.0 million, which may be accessible via written request and corresponding authorization from the applicable lenders. There is no guarantee the uncommitted capacity will be available to us on a future date. Interest on drawn balances accrues under the agreements at either (a) a fixed rate equal to the lender's reference rate (as defined in the respective agreement) plus 1% or (b) SOFR plus 1.25%. As of December 31, 2023, we had no borrowings outstanding under the uncommitted credit facilities. During the year ended December 31, 2023, we also entered into a 364-day committed revolving credit facility with a total commitment of $40.0 million. This committed facility matures on October 10, 2024. Borrowings under the new facility will bear interest at the borrower's option at a rate equal to (a) Term SOFR (as defined in the agreement) plus 1.25% or (b) the Base Rate (determined by reference to the greatest of (i) the Federal Funds Effective Rate, at that time, plus 0.50%, (ii) the Prime Rate, at that time, and (iii) Term SOFR (as defined in the agreement) at such time plus 1.00%). As of December 31, 2023, we had no borrowings outstanding under the committed credit facility. 48 Cash Flow Hedges On January 22, 2019, we entered into three interest rate swap contracts. One contract (which matured in January 2022) had a notional value of $1.0 billion, while the two remaining contracts each had a notional value of $500 million. One of the remaining contracts matured on January 31, 2023 and the other matured on December 19, 2023. The objective of these swap contracts was to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of unspecified variable rate debt, the sole source of which is due to changes in the LIBOR and/or SOFR benchmark interest rate. At inception, we designated these contracts as hedging instruments in accordance with ASC 815, "Derivatives and Hedging." During January 2023, we entered into 5 receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $1.5 billion as shown disaggregated in the table below. On May 4, 2023, we amended the remaining LIBOR-based interest rate swap with a notional amount of $500 million from one-month term LIBOR of 2.55% to one-month term SOFR of 2.50%, without further changes to the terms of the swap. We applied certain expedients provided in ASU No. 2020-04, Reference Rate Reform (Topic 848), related to changes in critical terms of the hedging relationships due to the reference rate reform, which allowed the change in critical terms without designation of the hedging relationship. This interest rate swap matured in December 2023. In August 2023, we entered into 8 additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $2.0 billion as shown disaggregated in the table below. Further, in December 2023, we entered into 5 additional receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $500 million as shown disaggregated in the table below. As of December 31, 2023, we had the following outstanding interest rate swap derivatives that qualify as hedging instruments within designated cash flow hedges of variable interest rate risk (in millions): [[GREPCENT_TABLE]] [["Notional Amount","","Fixed Rates","","Maturity Date"],["$250","","4.01%","","7/31/2025"],["$250","","4.02%","","7/31/2025"],["$500","","3.80%","","1/31/2026"],["$250","","3.71%","","7/31/2026"],["$250","","3.72%","","7/31/2026"],["$100","","4.35%","","7/31/2026"],["$250","","4.40%","","7/31/2026"],["$250","","4.40%","","7/31/2026"],["$400","","4.33%","","7/31/2026"],["$250","","4.29%","","1/31/2027"],["$250","","4.29%","","1/31/2027"],["$250","","4.19%","","7/31/2027"],["$250","","4.19%","","7/31/2027"],["$150","","3.87%","","1/31/2027"],["$50","","3.83%","","1/31/2027"],["$50","","3.85%","","1/31/2027"],["$125","","4.00%","","1/31/2028"],["$125","","3.99%","","1/31/2028"]] [[/GREPCENT_TABLE]] The purpose of these contracts is to reduce the variability of cash flows in interest payments associated with our unspecified variable rate debt, the sole source of which is due to changes in the SOFR benchmark interest rate. We have designated these derivative instruments as cash flow hedging instruments, which are expected to be highly effective at offsetting changes in cash flows of the related underlying exposure. As a result, changes in fair value of the interest rate swaps are recorded in accumulated other comprehensive loss. For each of these swap contracts, we pay a fixed monthly rate and receives one month SOFR. We reclassified $39.4 million from accumulated other comprehensive loss resulting in a benefit to interest expense, net for the year ended December 31, 2023 related to the our interest rate swap contracts. 49 Net Investment Hedge In February 2023, we entered into a cross-currency interest rate swap that we designated as a net investment hedge of our investments in euro-denominated operations. This contract effectively converts $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offsets the impact of changes in currency rates on our euro-denominated net investments. This contract also creates a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.96% interest rate savings on the USD notional. Hedge effectiveness is tested based on changes in the fair value of the cross-currency swap due to changes in the USD/euro spot rate. We anticipate perfect effectiveness of the designated hedging relationship and record changes in the fair value of the cross-currency interest rate swap associated with changes in the spot rate through accumulated other comprehensive loss. Excluded components associated with the forward differential are recognized directly in earnings as interest expense, net. We recognized a benefit of $9.0 million in interest expense, net for the year ended December 31, 2023 related to these excluded components. The cross-currency interest rate swap designated as a net investment hedge is recorded in other current liabilities at a fair value of $14.5 million as of December 31, 2023. We terminated our existing net investment hedge on February 1, 2024, which resulted in net cash payments totaling $3.9 million. The loss on the net investment hedge will remain in accumulated other comprehensive loss and will only be reclassified into earnings if and when the underlying euro-denominated net investment is sold or liquidated. Subsequently, on February 2, 2024, we entered into four new cross-currency interest rate swaps that are designated as net investment hedges of our investments in euro-denominated operations. These contracts effectively convert an aggregate $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offset the impact of changes in currency rates on our euro-denominated net investments. These contracts also create a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.55% interest rate savings on the USD notional. Stock Repurchase Program Given our returns on our capital investments and significant cash provided by operations, management believes it is prudent to reinvest in the business to drive profitable growth and use excess cash flow to return cash to shareholders over time through stock repurchases. Our Board of Directors (the "Board") has approved a stock repurchase program (as updated from time to time, the "Program") authorizing us to repurchase our common stock from time to time until February 4, 2025. On January 25, 2024, the Board authorized an increase to the aggregate size of the Program by $1.0 billion to $8.1 billion. Since the beginning of the Program through December 31, 2023, we have repurchased 28,878,862 shares for an aggregate purchase price of $6.5 billion, leaving us up to $1.6 billion of remaining authorization available under the Program for future repurchases in shares of our common stock. We repurchased 2,597,954 common shares totaling $0.7 billion in 2023; 6,212,410 common shares totaling $1.4 billion in 2022 and 5,451,556 common shares totaling $1.4 billion in 2021. On August 18, 2023, as part of the Program, we entered an accelerated share repurchase ("ASR") agreement ("2023 ASR Agreement") with a third-party financial institution to repurchase $450 million of our common stock. Pursuant to the 2023 ASR Agreement, we delivered $450 million in cash and received 1,372,841 shares based on a stock price of $262.23 on August 18, 2023. The 2023 ASR Agreement was completed on September 26, 2023, at which time we received 293,588 additional shares based on a final weighted average per share purchase price during the repurchase period of $270.04. Any stock repurchases may be made at times and in such amounts as deemed appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information we may possess. Any repurchases have been and are expected to be funded by a combination of available cash flow from the business, working capital and debt. Material Cash Requirements and Uses of Cash Material cash requirements primarily consist of debt obligations and related interest payments, along with lease obligations. Refer to the Debt footnote on page 86 and Leases footnote on page 91 of this Form 10-K for more information. Deferred income tax liabilities as of December 31, 2023 were approximately $470.2 million. Refer to Income Taxes footnote on page 89 of this Form 10-K for more information. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, as this scheduling would not relate to liquidity needs. At December 31, 2023, we had approximately $63.1 million of unrecognized income tax benefits related to uncertain tax positions. We cannot reasonably estimate when all of these unrecognized income tax benefits may be settled. We do not expect reductions to unrecognized income tax benefits within the next 12 months as a result of projected resolutions of income tax uncertainties. 50 Critical Accounting Policies and Estimates, Adoption of New Accounting Standards, and Pending Adoption of Recently Issued Accounting Standards In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenue and expenses. Some of these estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. In many instances, however, we reasonably could have used different accounting estimates and, in other instances, changes in our accounting estimates could occur from period to period, with the result in each case being a material change in the financial statement presentation of our financial condition or results of operations. We refer to estimates of this type as critical accounting estimates. Our significant accounting policies are summarized in the consolidated financial statements contained elsewhere in this report. The critical accounting estimates that we discuss below are those that we believe are most important to an understanding of our consolidated financial statements. See the Summary of Significant Accounting Policies footnote on page 67 of this Form 10-K for additional information. Revenue recognition and presentation. We provide payment solutions to our business, merchant, consumer and payment network customers. Our payment solutions are primarily focused on specific commercial spend or geographically-defined categories, including Vehicle Payments, Corporate Payments, Lodging Payments and Other (stored value cards and e-cards). We provide solutions that help businesses of all sizes control, simplify and secure payment of various domestic and cross-border payables using specialized payment products. We also provide other payment solutions for fleet maintenance, employee benefits and long-haul transportation-related services. Payment Services Our primary performance obligation for the majority of our payment solutions (Vehicle Payments, Corporate Payments, Lodging Payments, and Gift, among others) is to stand-ready to provide authorization and processing services (payment services) for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the customer’s use (e.g., number of transactions submitted and processed) of the related payment services. Accordingly, the total transaction price is variable. Payment services involve a series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. As a result, we allocate and recognize variable consideration in the period we have the contractual right to invoice the customer. For the tolls payment solution, our primary performance obligation is to stand-ready each month to provide access to the toll network and process toll transactions. Each period of access is determined to be distinct and substantially the same as the customer benefits over the period of access. In our cross-border payments business, a portion of revenue is from exchanges of currency at spot rates, which enables customers to make cross-currency payments. Gift Card Products and Services Our Gift solutions deliver both stored value cards and e-cards (cards), and card-based services primarily in the form of gift cards to retailers. These activities each represent performance obligations that are separate and distinct. Revenue for stored value cards is recognized (gross of the underlying cost of the related card, recorded in processing expenses within the Consolidated Statements of Income) at the point in time when control passes to our customer, which is generally upon shipment. Other We account for revenue from late fees and finance charges, in jurisdictions where permitted under local regulations, primarily in the U.S. and Canada in accordance with Accounting Standards Codification (ASC) 310, "Receivables". Such fees are recognized net of a provision for estimated uncollectible amounts, at the time the fees and finance charges are assessed and services are provided. We cease billing and accruing for late fees and finance charges approximately 30 - 40 days after the customer’s balance becomes delinquent. In addition, in our cross-border payments business, we write foreign currency forwards, option contracts and swaps for our customers to facilitate future payments in foreign currencies. The duration of these derivative contracts at inception is generally less than one year. We aggregate our foreign exchange exposures arising from customer contracts, including forwards, options and spot exchanges of currency, as necessary, and economically hedge the net currency risks by entering into offsetting derivatives with established financial institution counterparties. The changes in fair value related to these instruments are recorded in revenues, net in the Consolidated Statements of Income. Refer to the Revenue footnote on page 74 of this Form 10-K for additional information. Financial Instruments-Credit Losses. Our current expected credit loss methodology for measurement of credit losses on financial assets measured at amortized cost basis, replaces the previous incurred loss impairment methodology. Our financial assets subject to credit losses are primarily trade receivables. We utilize a combination of aging and loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool, 51 based on product, size of customer and historical losses. Expected credit losses are estimated based upon an assessment of risk characteristics, historical payment experience, and the age of outstanding receivables, adjusted for forward-looking economic conditions. The allowances for remaining financial assets measured at amortized cost basis are evaluated based on underlying financial condition, credit history, and current and forward-looking economic conditions. The estimation process for expected credit losses includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, economic trends and relevant environmental factors. Refer to the Financial Instruments-Credit Losses section in the Summary of Significant Accounting Policies footnote on page 67 of this Form 10-K for additional information. Impairment of goodwill and indefinite-lived assets. We complete an impairment test of goodwill at least annually or more frequently if facts or circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level. We first perform a qualitative assessment of certain of our reporting units. Factors considered in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required. We then perform the quantitative goodwill impairment test for the applicable reporting units by comparing the reporting unit’s carrying amount, including goodwill, to its fair value which is measured based upon, among other factors, a discounted cash flow analysis and, to a lesser extent, market multiples for comparable companies. Estimates critical to our evaluation of goodwill for impairment include forecasts for revenues, net, and earnings before interest, taxes, depreciation and amortization (EBITDA) growth, and the discount rates. If the carrying amount of the reporting unit is greater than its fair value, a goodwill impairment loss is recognized. We also evaluate indefinite-lived intangible assets (primarily trademarks and trade names) for impairment annually. We test for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. Estimates critical to our evaluation of indefinite-lived intangible assets for impairment include the discount rate, royalty rates used in our evaluation of trade names and projected revenue growth. An impairment loss is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date. Refer to the Impairment of long-lived assets, intangibles and investments section in the Summary of Significant Accounting Policies footnote on page 68 of this Form 10-K and the Goodwill and Other Intangible Assets footnote on page 84 of this Form 10-K for additional information. Income taxes. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. We have elected to treat the Global Intangible Low Taxed Income (GILTI) inclusion as a current period expense. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. We evaluate on a quarterly basis whether it is more likely than not that our deferred tax assets will be realized in the future and conclude whether a valuation allowance must be established. We account for uncertainty in income taxes recognized in an entity’s financial statements and prescribe thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. We include any estimated interest and penalties on tax related matters in income tax expense. Refer to the Income Taxes footnote on page 89 of this Form 10-K for additional information. Business combinations. Business combinations completed by us have been accounted for under the acquisition method of accounting, which requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined as of the acquisition date. The excess of the purchase price over the fair values of the tangible and intangible assets acquired and liabilities assumed represents goodwill. The results of the acquired businesses are included in our results of operations beginning from the completion date of the transaction. The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. The estimated fair values of customer-related and contract-based intangible assets are generally determined using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented a risk adjusted market participant weighted-average cost of capital, derived using customary market metrics. These measures of fair value also require considerable judgments about future events, including forecasted revenue growth rates, forecasted customer attrition rates, contract renewal estimates and technology 52 changes. Acquired technologies are generally valued using the replacement cost method, which requires us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names are generally valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital. This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trade name. While we use our best estimates and assumptions to determine the fair values of the assets acquired and the liabilities assumed, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in our Consolidated Statements of Income. We also estimate the useful lives of intangible assets to determine the period over which to recognize the amount of acquisition-related intangible assets as an expense. Certain assets may be considered to have indefinite useful lives. We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. Refer to the Acquisitions and Equity Method Investments footnote on pages 82 of this Form 10-K for additional information and the Goodwill and Other Intangible Assets footnote on page 84 of this Form 10-K for additional information. Management’s Use of Non-GAAP Financial Measures We have included in the discussion above certain financial measures that were not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors. We have defined the non-GAAP measure adjusted net income as net income as reflected in our statement of income, adjusted to eliminate a) non-cash share based compensation expense related to share based compensation awards, (b) amortization of deferred financing costs, discounts, intangible assets and amortization of the premium recognized on the purchase of receivables, (c) integration and deal related costs, and (d) other non-recurring items, including unusual credit losses, the impact of discrete tax items, the impact of business dispositions, impairment charges, asset write-offs, restructuring costs, loss on extinguishment of debt, and legal settlements and regulatory-related legal fees. We have defined the non-GAAP measure adjusted net income per diluted share as the calculation previously noted divided by the weighted average diluted shares outstanding as reflected in our statement of income. We calculate adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance. We believe it is useful to exclude non-cash share based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and share based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. Integration and deal related costs represent business acquisition transaction costs, professional services fees, short-term retention bonuses and system migration costs, etc., that are not indicative of the performance of the underlying business. We also believe that certain expenses, the impact of discrete tax items, the impact of business dispositions, impairment charges, asset write-offs, restructuring and related costs, losses on extinguishment of debt, and legal settlements and regulatory-related legal fees do not necessarily reflect how our business is performing. We adjust net income for the tax effect of each of these non-tax items using our effective income tax rate during the period, exclusive of discrete tax items. Adjusted net income and adjusted net income per diluted share are supplemental measures of operating performance that do not represent and should not be considered as an alternative to net income, net income per diluted share or cash flow from operations, as determined by GAAP. Adjusted net income and adjusted net income per diluted share are not intended to be a substitute for GAAP financial measures, and our calculation thereof may not be comparable to that reported by other companies. Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period. We believe that organic revenue growth on a macro-neutral and consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR. EBITDA is defined as earnings before interest, income taxes, interest expense, net, other expense (income), depreciation and amortization, loss on extinguishment of debt, investment loss/gain and other operating, net. EBITDA margin is defined as EBITDA as a percentage of revenue. Management uses adjusted net income, adjusted net income per diluted share, organic revenue growth and EBITDA: 53 •as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis; •for planning purposes, including the preparation of our internal annual operating budget; •to allocate resources to enhance the financial performance of our business; and •to evaluate the performance and effectiveness of our operational strategies. Reconciliation of Non-GAAP Revenue and Key Performance Metric by Segment to GAAP. Set forth below is a reconciliation of organic growth by segment, calculated using pro forma and macro adjusted revenue and transactions to the most directly comparable GAAP measure, revenue, net and transactions (in millions): [[GREPCENT_TABLE]] [["","","Revenue","","Key Performance Indicators"],["","","Year Ended December 31,*","","Year Ended December 31,*"],["(Unaudited)","","2023","","2022","","2023","","2022"],["VEHICLE PAYMENTS - TRANSACTIONS"],["Pro forma and macro adjusted","","$","2,038","","","$","1,914","","","649","","","629"],["Impact of acquisitions/dispositions","","\u2014","","","36","","","\u2014","","","(35)"],["Impact of fuel prices/spread","","(53)","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","21","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","2,006","","","$","1,950","","","649","","","595"],["CORPORATE PAYMENTS - SPEND"],["Pro forma and macro adjusted","","$","987","","","$","830","","","$","145,571","","","$","126,076"],["Impact of acquisitions/dispositions","","\u2014","","","(60)","","","\u2014","","","(9,249)"],["Impact of fuel prices/spread","","(1)","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","(5)","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","981","","","$","770","","","$","145,571","","","$","116,827"],["LODGING PAYMENTS - ROOM NIGHTS"],["Pro forma and macro adjusted","","$","520","","","$","466","","","37","","","38"],["Impact of acquisitions/dispositions","","\u2014","","","(9)","","","\u2014","","","(1)"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","520","","","$","457","","","37","","","37"],["OTHER1 - TRANSACTIONS"],["Pro forma and macro adjusted","","$","251","","","$","251","","","1,309","","","1,193"],["Impact of acquisitions/dispositions","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","251","","","$","251","","","1,309","","","1,193"],["FLEETCOR CONSOLIDATED REVENUES"],["Pro forma and macro adjusted","","$","3,796","","","$","3,460","","","Intentionally Left Blank"],["Impact of acquisitions/dispositions","","\u2014","","","(33)"],["Impact of fuel prices/spread2","","(54)","","","\u2014"],["Impact of foreign exchange rates2","","16","","","\u2014"],["As reported","","$","3,758","","","$","3,427"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["* Columns may not calculate due to rounding."],["1 Other includes Gift and Payroll Card operating segments."],["2 Revenues reflect an estimated $39 million negative impact from fuel prices and approximately $15 million negative impact from fuel price spreads, as well as $16 million positive impact due to movements in foreign exchange rates."]] [[/GREPCENT_TABLE]] 54 Adjusted net income and adjusted net income per diluted share. Set forth below is a reconciliation of adjusted net income and adjusted net income per diluted share to the most directly comparable GAAP measure, net income and net income per diluted share (in thousands, except per share amounts)*: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Unaudited)","","2023","","2022"],["Net income","","$","981,890","","","$","954,327"],["Net income per diluted share","","$","13.20","","","$","12.42"],["Stock-based compensation","","116,086","","","121,416"],["Amortization1","","233,870","","","238,020"],["Loss on extinguishment of debt","","\u2014","","","1,934"],["Integration and deal related costs","","30,660","","","18,895"],["Restructuring, related and other costs2","","3,825","","","6,690"],["Legal settlements/litigation","","2,750","","","6,051"],["Gain on disposition of business","","(13,712)","","","\u2014"],["Total pre-tax adjustments","","373,479","","","393,006"],["Income taxes3","","(96,781)","","","(110,634)"],["Adjusted net income","","$","1,258,588","","","$","1,236,699"],["Adjusted net income per diluted share","","$","16.92","","","$","16.10"],["Diluted shares","","74,387","","76,862"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1 Includes amortization related to intangible assets, premium on receivables, deferred financing costs and debt discounts."],["2 Includes impact of foreign currency transactions; prior amounts were not material for recast ($1.7 million loss for the year)."],["3 Includes $9 million adjustment for tax benefit of certain income determined to be permanently invested in Q2 2022."]] [[/GREPCENT_TABLE]] EBITDA and EBITDA margin. EBITDA is defined as earnings before interest, income taxes, interest expense, net, other expense (income), depreciation and amortization, loss on extinguishment of debt, investment loss/gain and other operating, net. EBITDA margin is defined as EBITDA as a percentage of revenue. The following table reconciles EBITDA and EBITDA margin to net income (in millions)*: [[GREPCENT_TABLE]] [["","","","Year Ended December 31,"],["","","","2023","","2022"],["Net income","","","$","981.9","","","$","954.3"],["Provision for income taxes","","","343.1","","","321.3"],["Interest expense, net","","","348.6","","","164.7"],["Other (income) expense","","","(16.6)","","","3.0"],["Investment (gain) loss","","","(0.1)","","","1.4"],["Depreciation and amortization","","","336.6","","","322.3"],["Loss on extinguishment of debt","","","\u2014","","","1.9"],["Other operating, net","","","0.8","","","0.3"],["EBITDA","","","$","1,994.2","","","$","1,769.2"],["Revenues, net","","","$","3,757.7","","","$","3,427.1"],["EBITDA margin","","","53.1","%","","51.6","%"],["* Columns may not calculate due to rounding."]] [[/GREPCENT_TABLE]] 55