Tom Panther
Chief Financial Officer at FLEETCOR Technologies
Thanks, Ron, and good afternoon, everyone. Here are some additional details related to the quarter and the full year. Organic revenue growth was 7%, the same as the fourth quarter of last year. Revenue growth was slightly below our expectations due to pockets of softness, mostly in US Vehicle Payments and Lodging, while our Corporate Payments and international businesses continued to perform well. The revenue weakness was mostly offset by strong expense discipline, continued improvements in bad debt expense and a lower tax rate, which delivered $4.44 per share in cash EPS, within our guidance and up 10% versus last year.
Looking at the full year, organic revenue grew 10% and EBITDA increased 13%, which are both in line with our midterm targets. We also absorbed nearly $200 million of incremental interest expense during the year due to the rate hikes and still posted cash EPS growth of 5%. Normalizing for the higher interest expense, adjusted earnings would have grown 16% for the full year 2023.
Now, turning to our segment performance and the underlying drivers of our revenue growth. Corporate Payments revenue was up 15% during the quarter and increased 19% for the full year. For the quarter, our direct business grew 19% and was again led by growth in full AP. Our full suite of high-quality payment solutions continues to sell extremely well with sales up 27% this quarter, as we signed up customers who are looking to modernize their AP operations. I'd note that the drag from lower partner channel volumes accelerated in the quarter with channel revenue declining 31%. Excluding the partner channel, revenue grew 20% and spend volumes increased 27% in the quarter, so quite strong on a core basis. We believe the partner channel volumes have bottomed, and volumes and revenue are expected to be flat in 2024.
Cross-border revenue was up 21%. Sales grew 51%, and recurring client transaction activity was robust. We've now fully lapped all the revenue synergies from the GRG acquisition in January 2023. More importantly, our best-in-class technology, service and products allow us to have market-leading retention and client acquisition, which you can see in our results. We continue to make significant investments in this business through increased sales and marketing resources, as well as new product capabilities. Over the last few years, we have transformed this business into becoming the largest nonbank provider of B2B FX payment solutions in the world.
Turning to Vehicle Payments, recall, this is the new segment that we introduced on our last earnings call. It reflects the combination of our fleet and Brazil businesses, along with our new consumer vehicle initiative. Consistent with our goal of creating a simpler company, we have now put all vehicle-related payment solutions in one segment that operates across North America, Brazil and Europe, offering a full suite of vehicle-related solutions to both businesses and consumers. You'll note that we've defined the new segment's KPI as transactions. But given the different products that comprise the segment, we've provided transaction counts by product type such as fleet, tags and parking. We have also realigned our executive team to support this new segment, with Armando Netto serving as the Group President of North America and Brazil and Alan King as the Group President of International Fuel, EV and Parking.
Vehicle Payments organic revenue increased 5% during the quarter, with particular strength in Brazil and international fuel markets. In the UK, more than 30% of all new sales involve a non-fuel product, namely EV or vehicle maintenance. Our EV strategy in the UK is clearly winning as our three-in-one product, fuel, on-road charging and at-home charging, all in one app, has more than doubled from a year ago. The results speak for themselves, with both EV cards and EV revenue continuing to increase. In addition, we're having great success selling our at-home charging solution with a 30% attachment rate to all new sales. Our charging network also continues to expand, and we now offer charging at over 600,000 charge points in Europe. And by the end of March, we will have coverage of nearly 80% of the rapid chargers in the UK, including Tesla, which we signed in the fourth quarter.
In Brazil, we ended the year with nearly 6,000 extended network locations, including 2,500 gas stations, 2,900 parking locations, 750 drive-through restaurants and 270 condos. Total tags were up 7% year-over-year to nearly 7 million, and approximately 37% of customer spend was from our Beyond Toll network. Sales of insurance policies are up fourfold when we launched in Q4 '22 to nearly 200,000 in Q4 '23, so from zero to 200,000 per quarter in five quarters, and now total over 1 million policies. Our success in Brazil is a tangible proof point of our broader Vehicle Payments vision to leverage an anchor product used by a large customer base and to then add additional services via mobile app, driving incremental revenue growth.
We are leveraging our strong success in the UK to launch our consumer vehicles payment solution in the market. We have begun selling the parking network that we acquired in the third quarter via PayByPhone to our business customers, and we're building the integrations to be able to offer to the over 2 million PayByPhone consumer users in the UK access to our proprietary fuel, EV, insurance, toll and maintenance networks.
In the US, softness in small fleet and the impact from our shift away from micro clients continue to affect our sales and revenue results. Our digital and field sales efforts are improving as we continue to see growth in applications, approvals and starts. As we mentioned last quarter, the shift to higher credit quality clients also impacted late fees, which were down 38% from Q4 '22. While the decline in late fees is a drag on our revenue growth, it has resulted in a similar decline in bad debt expense, so essentially a wash.
Lodging revenue was flat Q4 2022. And for the year, the business grew 12%. This quarter was affected by continued softness in our existing workforce customers, which appears to have now stabilized. Certain verticals within the business like airline and insurance can have quarterly revenue growth fluctuations, driven by weather and natural disasters. Recall, in Q4 of last year, there were significant weather events and airline cancellations, which benefited the airline and the insurance verticals. By comparison, there were no major weather events in Q4 of this year. And in fact, according to the Department of Transportation, 2023 flight cancellations were the lowest in a decade. And in the fourth quarter, cancellations were down approximately 90% from Q4 '22.
We're experiencing similar results related to insurance claims, which were down approximately 20% in the quarter. Despite the recent soft quarters, we are confident that this business can return to low-double-digit growth over the coming quarters. We recently launched new product capabilities that will extend our customer experience and drive new sales. Additionally, we're excited to welcome Joff Romoff as the new Group President of Lodging, replacing the retiring Ron Rogers. Joff has extensive hospitality and lodging experience that will be a strong asset to the business.
In summary, we're proud of the performance we delivered in 2023. It clearly demonstrates the growth of our diversified business and the strength of our business model that generated over $1.25 billion of free cash flow.
Now, looking down the income statement, Q4 operating expenses of $513 million were flat versus Q4 of last year. Expenses from acquisitions, higher transaction and sales activities and investments to drive future growth were offset by lower bad debt expense and the sale of our Russia business. Bad debt expense declined $19 million, or nearly 50% from last year, to $22 million, or 3 basis points of spend. Most of the decline was in Vehicle Payments, which was down $17 million year-over-year as we realized the benefit from our lower exposure to US micro clients.
EBITDA margin in the quarter was 54.2%, a 220 basis point improvement from the fourth quarter of last year. This positive operating leverage is driven by solid revenue growth, lower bad debt expense, disciplined expense management and synergies realized from recent acquisitions.
Interest expense this quarter increased $18 million year-over-year. And the impact of higher interest rates resulted in an approximate $0.27 drag on Q4 adjusted EPS, partially offset by lower debt balances year-over-year. Our effective tax rate for the quarter was 23.3% versus 24.2% last year. The lower rate related to specific tax planning items.
Now, turning to the balance sheet, we are entering 2024 with the balance sheet in excellent shape. We ended the quarter with $1.4 billion in unrestricted cash, up $300 million from 90 days ago, and we had over $800 million available on our revolver. We have $5.4 billion outstanding on our credit facilities, and we had $1.4 billion borrowed under our securitization facility. As of year-end, our leverage ratio was 2.4 times trailing 12 months EBITDA, which is at the lower end of our target range.
In January, we upsized our Term Loan A and Revolver A credit facilities by $600 million with no rate concessions and no change in the maturity. This added capital will provide incremental capacity and flexibility for both deals and share buybacks in 2024, which I'll elaborate on in a few minutes.
Our capital allocation in 2023 was once again balanced as we deployed $1.6 billion. In the quarter, we repurchased roughly 600,000 shares at an average price of $254 per share, or $143 million. For the year, we repurchased 2.6 million shares for $690 million. We spent $545 million on acquisitions during the year, improving our position in EV, the consumer vehicle payment space and cross-border. We used the remaining excess cash flows for debt amortization and reducing our revolver balance.
As I previously mentioned, our 2024 capital allocation plan is supported by our significant cash and liquidity position. We have $1.4 billion in unrestricted cash and increased our capacity under our revolver by $600 million, and we expect to generate $1.4 billion in free cash flow during 2024. Our first priority remains M&A, and the M&A pipeline is robust. We'll look to acquire businesses that deepen our position in our three core operating segments. We are also allocating capital for share buybacks during 2024. In January, the Board increased our repurchase authorization by $1 billion. We now have over $1.6 billion authorized for share repurchases. We expect to repurchase $800 million of shares throughout the year. We plan to purchase these shares through the open market and will establish a 10b5-1 plan later this month. Any residual cash flows from earnings will be used to reduce our revolver or build our cash position. Generating so much cash is a high-class problem, and we plan to leverage this strength to systematically support our EPS growth through M&A and buybacks in 2024.
Now, let me share some thoughts on our 2024 full year and Q1 outlook. From an economic perspective, we are not assuming a recession nor meaningful economic improvement in overall business activity. Our forecast for the year is based on the consensus economic outlook in our markets, which generally calls for modest economic growth and lower interest rates in the second half of the year. We expect fuel prices to be a headwind in the first quarter. And for the full year, we're anticipating US fuel prices to average $3.65 per gallon, which is a blend of diesel and unleaded.
In 2024, we expect cash EPS to grow between 14% and 16%, which is inclusive of the planned buybacks I mentioned previously. Revenue growth is projected to be between 8% and 10%, and EBITDA is expected to increase 10% to 12% with margin expanding to approximately 54%. Keep in mind, these growth rates are inclusive of our Russia business through mid-August of last year. Excluding Russia, cash EPS is growing 17% to 19%, revenue is up 10% to 12%, and EBITDA is increasing 13% to 15%, all slightly above our midterm growth targets. We've provided these details in our earnings supplement on Page 20.
Net interest expense is projected to be between $340 million and $370 million, which includes the replacement of a $500 million interest rate swap that matured in December. Roughly 80% of our credit facility is now fixed utilizing swaps, and the blended swap rate is 4.1%. Also recall that our securitization is a variable rate facility. And finally, our tax rate is expected to be between 25% and 26%.
From a segment perspective, we expect the following organic revenue growth rates: Vehicle Payments in the mid-single digits; Corporate Payments approximately 20%; Lodging Payments in the high-single digits.
Related to the quarters, we expect revenue growth in the first half of the year to be below our full year average due to the continued pockets of softness, a tough comp that includes Russia, as well as a challenging operating environment, including lower fuel prices. We expect revenue growth to accelerate in the back half of the year as the economic outlook becomes clear, we lap the divestiture of Russia, and we realize the benefits of our growth initiatives and new sales.
For the first quarter, we're expecting revenue to grow between 3% and 5% and cash EPS to increase between 6% and 8%, which also reflects higher interest rates. Normalizing for Russia, revenue and cash EPS growth at the midpoint would be 7% and 13%, respectively. The rest of our assumptions can be found in our press release and supplement.
Before completing my prepared remarks, I would like to extend our gratitude to our more than 10,000 employees around the world, who helped us deliver such a great year and who will be the driving force to even greater heights throughout 2024.
Thank you for your interest in our company. And now, operator, we'd like to open the line for questions.
