When COVID-19 hit, payments company FLEETCOR had billions of dollars of credit at risk as businesses around the globe teetered on insolvency. 

One of the company's main business models is making payments on behalf of its customers and then collecting the money from them, but the pandemic threatened to leave them on the hook if customers folded. So FLEETCOR took three quick steps: it stopped issuing credit to new customers, pared back credit for its existing customers hit by government shutdown orders, and mobilized teams to ramp up collections.

"We had to get money in the door," said Charles Freund, the company's CFO. "Even though we don't lend like a bank, we were extending credit, so you have billions of dollars out with customers, and I've already paid the merchants. What if they decide not to pay me or they're not in business anymore and can't pay me? What happens?"

With the exception of one large customer that went bankrupt, forcing the company to write off $90 million in bad debt, FLEETCOR's customers largely held to their side of the bargain and the company got through the second quarter with limited damage. 

After seeing results that quarter drop 19%, the company improved the next quarter to a 14% decline, and forecasts further improvement by the end of the year.

"We're at 80% of our sales forecast ... and we're building plans, working with our business units, to get sales back to or above our 2019 sales levels," he said. "That for us is a great sign that demand is coming back. So we've been loosening up credit again."

New CFO

Freund joined FLEETCOR's corporate development team in 2000 when it was a small fuel-card company. Since then he’s worked largely on the strategic and operational side of the business, so when he was named CFO in September, he had never held a formal finance position. But as one of the executives who helped take the company from $28 million to $2.6 billion a year in revenue, he believes he knows what makes the company tick.

"What I'm bringing is deep company knowledge, product knowledge, revenue models, and, having been an operator, I understand how to think about things as an operator," he said.

He benefits from having strong finance and accounting teams in place, compensating for his lack of background in those areas and enabling him to focus on the strategic side of his job. 

"All those functions that report to me have very strong leaders," he said. "That allows me to be more comfortable."

His priority is improving back-office operations. The company has grown over the years through global acquisitions. It has 8,000 employees in 100 countries. That's left it with an inefficient mix of systems.

"Everything needs to map to a new global chart of accounts that I'm working on," he said. "Then I'm going to consolidate systems. Once I can reduce our system complexity, I can talk about what the new organization looks like and eliminate redundant processes, etc. We've got a number of ERP systems, planning tools, HR systems. Having spent enough time talking to people, it's pretty clear what we need to do."

Path ahead

Separate from COVID's impact, the company's financial model is built to generate 13% year-over-year growth in EBITDA, supplemented with deals to reach 19% top line growth. 

"If you do that consistently, you'll double every four years, compounding," he said.

Since the company went public in 2010, it's consistently hit 20% compounded top line growth, with 55% EBITDA margins.

"We don't have a lot of cap ex," he said. "We're not building factories or buildings, so a lot of that revenue turns into cash flow to buy companies with, or buy back shares."

Sales investment is calibrated to generate 10% organic top line growth each year, he said, which the company supplements with share buybacks or acquisitions. 

"Either way, the earnings per share grow," he said. "If you put a multiple against it, our stock price should go up. So, our model generally focuses on a 10% top line, 13% EBITDA line, and supplementing that with deals and buybacks gets us to 18-19% a year."

Depending on what happens with the pandemic in the months ahead, that's a formula he thinks the company will hit again in 2021. 

"We feel more comfortable that our credit experience with COVID has been quite good," he said. "That gives us confidence going into next year that we can set a more aggressive sale plan and deliver on it, and our company will be back on the growth trajectory we want once the comparable periods normalize."