WEX Inc. Reports Third Quarter 2023 Financial Results

Q3 revenue increased 6% year-over-year to a record $651 million, driven by 34% growth in the Benefits segment and 19% in the Corporate Payments segment

Q3 GAAP net income was $0.42 per diluted share; Q3 adjusted net income was $4.05 per diluted share

Q3 GAAP operating income margin of 26.8% and adjusted operating income margin of 41.8%

Raises full-year 2023 financial guidance

PORTLAND, Maine–(BUSINESS WIRE)–WEX (NYSE: WEX), the global commerce platform that simplifies the business of running a business, today reported financial results for the three months ended September 30, 2023.

“The third quarter marked another strong period of financial results for WEX along with meaningful progress against our strategic initiatives. I’m delighted to share that we were able to deliver record highs for quarterly revenue and adjusted net income per diluted share, even with fuel price headwinds, reflecting our strong momentum and resilient business model,” said Melissa Smith, WEX’s Chair, Chief Executive Officer, and President.

“I am also excited to announce that we entered into a definitive agreement to purchase Payzer, a leader in field service management software that will extend our ability to serve our current Mobility customer base. In addition, we continue to advance our EV strategy, including the expansion of our DriverDash™ mobile app to include EV functionality. Overall, our performance this quarter positions us well to drive growth across the business heading into the end of the year.”

Third Quarter 2023 Financial Results

Total revenue for the third quarter of 2023 increased 6% to $651.4 million from $616.1 million for the third quarter of 2022. The revenue increase in the quarter includes a $31.9 million unfavorable impact from fuel prices and spreads and a $5.3 million favorable impact from foreign exchange rates.

Net income attributable to shareholders on a GAAP basis increased by $62.5 million to a net income of $18.4 million, or $0.42 per diluted share, for the third quarter of 2023, compared with net loss of $44.1 million, or $1.00 per diluted share, for the third quarter of 2022. The Company’s adjusted net income attributable to shareholders, which is a non-GAAP measure, was $176.8 million for the third quarter of 2023, or $4.05 per diluted share, up 15% per diluted share from $157.8 million, or $3.51 per diluted share, for the same period last year. GAAP operating income margin for the third quarter of 2023 was 26.8% compared to 3.5% for the prior year comparable period. Adjusted operating income margin was 41.8% in the third quarter of 2023 compared to 39.1% for the prior year comparable period. See Exhibit 1 for a full explanation and reconciliation of adjusted net income attributable to shareholders, adjusted net income attributable to shareholders per diluted share, and adjusted operating income to the most directly comparable GAAP financial measures. See Exhibit 5 for information on the calculation of adjusted operating income margin.

Third Quarter 2023 Performance Metrics

• Total volume across all segments was $61.9 billion, an increase of 7.6% from the third quarter of 2022.
• Mobility payment processing transactions decreased 0.5% from the third quarter of 2022 to 144.6 million.
• Average number of vehicles serviced was approximately 19.1 million, an increase of 4% from the third quarter of 2022.
• Benefits’ average number of Software-as-a-Service (SaaS) accounts grew 9% to 19.9 million from 18.2 million in the third quarter of 2022.
• Average HSA custodial cash assets in the third quarter of 2023 were $3.9 billion, which is 23% higher than $3.2 billion a year ago.
• Corporate Payments’ purchase volume grew 35% to $27.9 billion from $20.7 billion in the third quarter of 2022.
• Cash flows from operating activities through the third quarter of this year were $146.0 million. Adjusted free cash flow, which is a non-GAAP measure, was $391.6 million for the same period. Please see Exhibit 1 for a reconciliation of cash flows from operating activities to this non-GAAP measure.

“We continued to execute against our strategic initiatives and drive strong financial results in the third quarter, all while remaining resilient in an uncertain macroeconomic environment,” said Jagtar Narula, WEX’s Chief Financial Officer. “We are in the enviable position of deploying capital across a number of fronts, including strategic efforts to grow the business, opportunistically returning capital to our shareholders through stock buybacks, and funding acquisitions that expand our addressable market. Because of the significant amount of cash we generate, we are able to do all of this while maintaining a solid balance sheet with low leverage. To that end, I’m excited to share that we are again raising our full year guidance for both revenue and earnings.”

Financial Guidance and Assumptions

The Company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis, due to the uncertainty and the indeterminate amount of certain elements that are included in reported GAAP earnings.

• For the fourth quarter of 2023, the Company expects revenue in the range of $650 million to $660 million and adjusted net income attributable to shareholders in the range of $3.65 to $3.75 per diluted share.
• For the full year 2023, the Company now expects revenue in the range of $2.53 billion to $2.54 billion, up from the prior guidance range of $2.50 billion to $2.52 billion. Adjusted net income attributable to shareholders is now expected to be in the range of $14.64 to $14.74 per diluted share, an increase from the prior guidance range of $14.15 to $14.35 per diluted share.

Fourth quarter and full year 2023 guidance is based on assumed average U.S. retail fuel prices of $3.80 and $3.83 per gallon, respectively. The fuel prices referenced above are based on the applicable NYMEX futures price from the week of October 16, 2023. Our guidance assumes approximately 44.4 million fully diluted shares outstanding for the full year.

The Company’s adjusted net income attributable to shareholders guidance, which is a non-GAAP measure, excludes unrealized gains and losses on financial instruments, net foreign currency gains and losses, changes in fair value of contingent consideration, acquisition-related intangible amortization, other acquisition and divestiture related items, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, and certain tax related items. We are unable to reconcile our adjusted net income attributable to shareholders guidance to the comparable GAAP measure without unreasonable effort because of the difficulty in predicting the amounts to be adjusted, including, but not limited to, foreign currency exchange rates, unrealized gains and losses on financial instruments, and acquisition and divestiture related items, which may have a significant impact on our financial results.

Payzer Acquisition

In a separate press release issued today, WEX announced the signing of an agreement to acquire Payzer, a high growth, cloud-based, field service management software provider. The acquisition will advance WEX’s growth strategy of expanding its product suite and creating additional cross-sell opportunities by providing a new, scalable SaaS solution for its approximately 150,000 small business customers who operate field service companies.

Additional Information

Management uses the non-GAAP measures presented within this earnings release to evaluate the Company’s performance on a comparable basis. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for, or superior to, disclosure in accordance with GAAP.

To provide investors with additional insight into its operational performance, WEX has included in this earnings release: in Exhibit 1, reconciliations of non-GAAP measures referenced in this earnings release; in Exhibit 2, tables illustrating the impact of foreign currency rates and fuel prices for each of our reportable segments for the three and nine months ended September 30, 2023; and in Exhibit 3, a table of selected other metrics for the quarter ended September 30, 2023 and the four preceding quarters. See segment revenue for the three and nine months ended September 30, 2023 and 2022 in Exhibit 4 and information regarding segment adjusted operating income margin and adjusted operating income margin in Exhibit 5.

Conference Call Details

In conjunction with this announcement, WEX will host a conference call today, October 26, 2023, at 10:00 a.m. (ET). As previously announced, the conference call will be webcast live on the Internet, and can be accessed along with the accompanying slides at the Investor Relations section of the WEX website, www.wexinc.com. The live conference call also can be accessed by dialing (888) 510-2008 or (646) 960-0306. The Conference ID number is 2237921. A replay of the webcast and the accompanying slides will be available on the Company’s website.

About WEX

WEX (NYSE: WEX) is the global commerce platform that simplifies the business of running a business. WEX has created a powerful ecosystem that offers seamlessly embedded, personalized solutions for its customers around the world. Through its rich data and specialized expertise in simplifying benefits, reimagining mobility, and paying and getting paid, WEX aims to make it easy for companies to overcome complexity and reach their full potential. For more information, please visit www.wexinc.com.

Forward-Looking Statements

This earnings release includes forward-looking statements including, but not limited to, statements about management’s plans, goals, and guidance and assumptions with respect to future financial performance of the Company. Any statements in this earnings release that are not statements of historical facts are forward-looking statements. When used in this earnings release, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project”, “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or performance to be materially different from future results or performance expressed or implied by these forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this earnings release and in oral statements made by our authorized officers: the impact of fluctuations in demand for fuel and the volatility, and prices, of fuel, including fuel spreads in the Company’s international markets, and the resulting impact on the Company’s margins, revenues and net income; the effects of general economic conditions, including a decline in demand for fuel, corporate payment services, travel related services, or healthcare related products and services; failure to implement new technologies and products; breaches of, or other issues with, the Company’s technology systems or those of its third-party service providers and any resulting negative impact on its reputation, liabilities or relationships with customers or merchants; the actions of regulatory bodies, including banking and securities regulators, or possible changes in banking or financial regulations impacting the Company’s industrial bank, the Company as the corporate parent or other subsidiaries or affiliates; the failure to maintain or renew key customer and partner agreements and relationships, or to maintain volumes under such agreements; the impact and size of credit losses, including fraud losses, and other adverse effects if the Company fails to adequately assess and monitor credit risk or fraudulent use of our payment cards or systems; changes in interest rates, including those which we must pay for our deposits, and the rate of inflation; the effect of adverse financial conditions affecting the banking system; the failure to adequately safeguard custodial HSA assets; the failure of corporate investments to result in any anticipated economic or strategic value; the extent to which unpredictable events in the locations in which the Company or the Company’s customers operate or elsewhere may adversely affect the Company’s employees, ability to conduct business, results of operations and financial condition; the failure to comply with the applicable requirements of Mastercard or Visa contracts and rules; the failure to comply with the Treasury Regulations applicable to non-bank custodians; the ability to attract and retain employees; the ability of the Company to protect its proprietary rights; the ability to incorporate artificial intelligence in our business successfully and ethically; limitations on or compression of interchange fees; the effects of the Company’s business expansion and acquisition efforts; the failure to achieve commercial and financial benefits as a result of our strategic minority equity investments; the impact of changes to the Company’s credit standards; the impact of foreign currency exchange rates on the Company’s operations, revenue and income and other risks associated with operations outside the United States; the impact of the Company’s debt instruments on the Company’s operations; the impact of leverage on the Company’s operations, results or borrowing capacity generally, and as a result of acquisitions specifically; the impact of sales or dispositions of significant amounts of the Company’s outstanding common stock into the public market, or the perception that such sales or dispositions could occur; the impact of regulatory capital requirements and other regulatory requirements on the operations of WEX Bank or its ability to make payments to WEX Inc.; the possible dilution to the Company’s stockholders caused by the issuance of additional shares of common stock or equity-linked securities; the incurrence of impairment charges if the Company’s assessment of the fair value of certain of its reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, filed with the Securities and Exchange Commission on April 27, 2023 and July 27, 2023, respectively, and subsequent filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of the initial filing of this earnings release and undue reliance should not be placed on these statements. The Company disclaims any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

¹ The change in restricted cash payable for the nine months ended September 30, 2022 has been reclassified from net cash provided by operating activities to net cash provided by financing activities to conform to the current period presentation.

² Net activity on debt includes: borrowings on revolving credit facility; repayments on revolving credit facility; repayments on term loans; borrowings on BTFP; repayments on BTFP; net change in borrowed federal funds; and net borrowings on other debt.

¹ As the Company reported a net loss for the three months ended September 30, 2022 under U.S. Generally Accepted Accounting Principles (“GAAP”), the diluted weighted average shares outstanding equals the basic weighted average shares outstanding for that period. The non-GAAP adjustments described above resulted in adjusted net income attributable to shareholders (versus a loss on a GAAP basis) for the three months ended September 30, 2022. Therefore, dilutive common stock equivalents have been included in the calculation of adjusted diluted weighted average shares outstanding to arrive at adjusted per share data.

Contacts

News media:
WEX

Julie Lydon, 415-816-9397

[email protected]

or

Investors:
WEX

Steve Elder, 207-523-7769

[email protected]

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