- Earnings call transcript Q3 2022

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Operator

My name is Chantal, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Q3 2022 Earnings Conference Call.

As a reminder, today's conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator may conference. you begin Elder, your Steve

Steve Elder

X-K issued Thank today and is and to good walk release CEO; slide prepared and With me morning, everyone. we press Melissa The copy the the our through also and release the earlier Jagtar you, deck have remarks this deck CFO, morning to section our the Investor have been to website a of of operator, and Narula. included we in earlier this Smith, our morning. an been Relations SEC posted at submitted our wexinc.com. A Chair slide

may and income a attributable related as well discussing December free including to for be the non-GAAP of on and margins as result in Please identified a cash we loss adjusted our to XXXX, flow. a SEC risk shareholders those income provides net we ended flow for adjustments income discussed reconciliation XX, release of reported operating and report flow press forward-looking which press company results from uncertainty materially income basis XXXX. X a our operating income a GAAP net XXXX, Act statements an shareholders, filed in basis to forward-looking refer adjusted the Exhibit adjusted or GAAP those as X, operating reconciliation I on to XX-K amount on adjusted cash earnings. year Private and indeterminant and differ As Securities the we certain The revenue shareholders, also income, reminder, with to and of SEC and will of you on reconciliation to the annual GAAP of adjusted March see Litigation that as metrics, in like explanation subsequent to attributable and our guidance under that attributable will discuss guidance of of explanation call. during net free included operating the factors net GAAP earnings specifically, due to filings. Actual release would Form adjusted ANI, GAAP elements cash various are non-GAAP to an statements Reform factors, the remind

While future, forward-looking do so. obligations statements in update we disclaim any may we the to

You today. should not With undue forward-looking turn as statements, which the only place call of reliance I'll of Melissa. to these that, on over speak all

Melissa Smith

resiliency. events joining up on Thanks, inflation it home. Steve. a its our business in Good rates word customers, for and morning witnessed call past from economic areas: morning results, WEX interest and focus all, initiatives. significant This geopolitical open company, highlights Through at my has the and I'll and everyone three to comments us I'll our perform rising updates that this shareholders. financial Ukraine each with you thank year well our on and our to QX quarter embodies the employees today. segments across war grow most our from and continues for of several

morning. and I'm the increase year-over-year majority this revenue to had that of million volume $XXX business, with an was revenue year-over-year record The $XXX results, higher of fees. of QX the across of driven pleased and volume a quarter growth. impact growth normalization increase about strong earlier due Revenue the expectations. continued growth to quarterly prices which million, XX%. primarily by growth start our late we fee that me was Let report fuel This financial a in released was QX WEX exceeded

power year's an prices, quarter business. year-over-year So XX% the billion share period. with the results revenue the presentation in our basis, income to our rates Record the organic our the business net Total grew by impact to volume $X.XX, growth the driven XX% segments. compared XX% processed of third change revenue of of the $XX year. engine quarter with benefit grew nature quarter. of to higher scalability across organization fuel excludes of of in model increase each last strong $XX.X I'm of reflects the quarterly accounting and our reoccurring fuel resulted paired represented in this of compared million pleased approximately of for exchange the adjusted prior same On performance foreign our diluted prices an an This in which performance really increase.

Let account our markets by to the gain color me and on continue of I'm also see serve. leading highlights we a over Benefit pleased be accounts. to past electronics global we this able growth, serve continue success company. custodian HSA signing some as Employee few investment including our the of years strong add consumer to In the to Health we where in with momentum touching a to segments, few our American the arm

provide did custodian we're now HSA not we the to sixth largest an Devenir. according that XXXX, For in offering

our health customers our Our health service the along our and ecosystem. focused rich for we to customer employees the with innovations, customers' provide insights breadth the offerings data choose continue of our

past global COBRA, Sam's capabilities to well billing, to merchant data build security, won leading fleet Bimbo a our exchange segment, and and and and of in McPherson new Our recent FSAs, on logistics focus third-party the establish our bakeries commercial U.S. benefit we Club, all control the new with as extended with Walmart compliance. fraud have a strong quarter, at momentum. and NFI, administration, Bakeries, one In on partnerships also firm, we acceptance We're contracts largest HSAs, AEG. delivered as This pleased span with the continue

our segments to of onboard out payments the in our seek specialized to solutions implement applied States the the Europe. vehicle and fleet capture. controls to network benefits proprietary Customers the expertise and and data both United electric and in WEX new customers mixed WEX our continue rich unique We and fleet for we

volume the QX rebounds travel operating summer benefits strong segment, segment. in saw volume performance That the realized strong revenue translated season. to in for XX% the and in scale even corporate well growth of post-pandemic Travel as our greater Turning portfolio we this our busy in Solutions growth has payments margins and as Corporate

labeling a with to we the Over mid-market of First our selling the that is of solutions join year, It's in portfolio corporate we stages, but issuers the customers. pleased our white the top Omaha still are have payment built results today. corporate partner, payments will team, card market. to direct sales early also financial which National Bank past next leverage the institution in announce solutions. a corporate is commercial FNBO payments payment other We're our pleased

turn topics more enterprise broadly. on affect that me to Now, updates few our let a

are wallet managing results simplify size We're Our business. focused the We're a have in lack hundreds to our simplify where of helping deepening of customer payment truck set purpose million Today, to corporate which our WEX on industry. payments as trucking fleets from solutions our to of of contributed running suite of them ability customers. Expect our products corporate benefits customers, of customers. them enabling full We of business OTR we employee of digital full solutions enable by products, is on a that to their OTR allowing of current growth. achieve our they to them payable, seeing are the hundreds at payment suite running payments. the focused our We business of selling focus initial access of share the field the common sector. healthcare customers for of customer to us our our we been the or the using encouraging Each these revenue because of over-the-road products. our customized and to use easily future customers accounts have any serve. business of to in our digitization key results. solutions $X the vehicles quarterly with see With thousands to gain characteristics of enabler

insight was touch, on with want us small Let smallest me gears update demanding mission primary The Flume, more for on experiences. our help we've the and to to get pay venture innovation. you XX launched a past the to switch are user paid. months that business which I is over new our customer-focused consumer-like customers customers next

met. where to opportunity an meet be to have We them they want

powering technology focusing on are business in the just beta and flow. promoted able participate WEX’s We solution but existing Flume launch Our recently this an a to small with funds more from digital UI, and being not XXX,XXX full wallet bringing approach is to customers. testing easy a it to than

communities. One customer This in fleet of their WEX of general local fleet years of to has our contractor a buildings power Flume customers used products the in landmark for small specializing is vehicles. preservation

to launch new the expand they of a find were their delighted to With avenue relationship with WEX. Flume

with for by powered constant for for source now keeping receive subcontractors into In speed their the and their the of full payment on to process, filing manual money. particular, subcontractors. visibility payments, with friction Their was XX track process and its color Flume entirely were out of Before invoices was a to cutting They transparency. need more payments subcontractors drawn chase coded immediately can and relying checks Flume, cabinets. an than binders documents,

digital, on incremental Additionally, can a paper easy customers. to we a for which from to business felt moving Flume Flume value our provide chassis to is use. business small accessible and

modern revenue us look this its opportunities. to new future, help the we will unlock and As product architecture

free capital allocation WEX thoughts to significant generated on further take Now, of our adjusted moment a resiliency. cash flow. me let amount a update you priorities on and

Our providing offering a an move buffer to HSA interest rated movements. against custodial rate

benefits the travel, of payments which to further of healthcare focused nimble also the of an purchase to model. out to to the an and even volume create businesses and organization resiliency we're WEX. rising to times our automate use At business. and more see our During squeeze inflation, the on an items These add technology eye due increasing in corporate same with time, fleet, prices, continuing costs on increase profitable

optimization growth half our to those end run $XXX operating of and further in which and expect reinvest targets. rate business, savings the by improvements a XXXX, to supports in probably of million opportunities We across long-term achievement growth of deliver the

our move generate us invest to to our capacity confidence diversity flows strong shareholders. to combined cash with in As model, forward, return gives the ability we capital and business in our flexibility the and of business

purchased cash WEX resilient confidence $XXX team's approximately and conditions model EV and reminder, million repurchased. common offerings growth solutions shareholders our to year, remain and XXXX in on Earlier are compelling But balance repurchase $XXX scale; $XX We're internally existing share a generate execute growth board overall, million a flow. an amended on now will excited maintaining quarter, I This authorization share M&A As relationships common incredibly and expands Jagtar? return and earnings reach and with engine health that customers, may in free date strong energy invest for while which some stock To to and up WEX’s our announced the customer diversify under our today, be approximately fourth more customers, a about amended program [Indiscernible] WEX’s appropriate, are: we capital and our extend management and powerful we healthy and our our new to flexible Investor including which reflects with focus under win our insights. sheet. amended ability of capital addressable corporate outlined when all path worth million organic cash our leveraging priorities, plan innovation, expand to Day, of payments; QX. on this that flow new about capabilities strategic forward. stock, with allocation market.

Jagtar Narula

everyone. morning good and Melissa, you, Thank

a achieve to make As you on line heard third we while strategic our continuing growth quarter objectives. progress just delivered we top good Melissa, in from strong solid which

of competitiveness with business our the platform, global prior our quarter strength and As our model. the power quarters, of the offerings show of commerce this

with a start quarter Slide let's Now, X. on results

the price quarter, fuel revenue the purchase of of For in the due our a $XX XX% impacts, a Total payments high high total by than XX% of revenue record a reoccurring in with $XXX.X nature. and to travel normalization and combination more at QX of guidance XXXX late third fees. corporate quarter over exceeded million million, for end came revenue volume, increase

$X.XX to sector. income year. is per payment net revenue, QX. a the a and European impairment diluted net note million an GAAP had other processing increase items. or as XX% $XX.X revenue revenue up shareholders million our earnings fees charge income $XXX million included a a account predominantly of year, our for from attributable business. XX% adjusted in solutions from and we our GAAP represents related was $XXX.X prior basis, company was and reminder, As margin would the by loss transaction recurring non-cash like corporate we fleet to last on travel to the a total, adjusted factoring largely I business, servicing share. which over Non-GAAP a due goodwill earnings perspective, to processing that This define XX.X%, driven From operating In smaller

to and by strong customer Now, quarter wins for was fleet on X. recovery revenue $XXX.X let's increase over with year-over-year, the in customer and renewals, on up and were growth move XX% increase with year, powered which a higher is our historical fuel segment million, transactions base. results, Slide fees, in volumes Payment continued late X% prices starting existing from the new line in prior Fleet the rate. processing

number XXXX. was fuel fuel late even in revenue for price year, domestic prices was approximately in prices. net which in in Overall, approximately fee of prices. $X.XX including revenue to higher European of fuel in by finance versus fee and in of from fuel price fleet fuel up fuel net is late the instances. following up impact rate increases XXXX volume, the increased see prior metrics, increase $X.XX QX The the the $XX year-over-year a you QX The rapid higher fleet due X.XX%, As $X segment the fee interchange slightly million, our We prices, XX% in rate was the an normalized benefit spreads. estimate with million increase

The towards slight adjusted net see in down space. has quarter to from higher fleet transaction a operating road over XX.X% rate. segment our slightly XX.X%, interchange margin mix transaction transactions the the income fuel prices, but more for continue This frequent to owners XXXX. We in with the a cope shift benefit was smaller as especially

volume increased briefly in credit our address XX.X above losses. at QX decline fraud me spend saw points points primary basis were margin. credit losses Let basis XX losses high in the the approximately end we were of cause that Fleet range the of including of of

are large the increases start from losses, trucking the customers payments shipping have likely with after spot healthy small newer to business, credit we seeing over me road portfolio declining overall. we Let while a In the rates slower during due pandemic.

a based prior our As losses qualitative reason reserve credit for we QX economic the customers, outlook. This these reserves primary the our for on a was increased higher quarter. result, including in versus

terms focused managing including warranted. are adjusting very credit were additional our hiring portfolio, reducing collections We on actively personnel, the and credit models

have we rates fraud onto improved application fraud Next, our transaction fraud while rates losses, seen sequentially, remain elevated.

outcome problem this until we with this to resolved. satisfied is attack will not are continue We it and aggressively

of point the limited compromise is Our model transactional has the in of determined merchants. fraud specific number business road that concentrated with a in set over of a geographies our

include our product policies our with with our closely tools and additional actions monitoring Our updating and while continuing fraud partners. working account to enhance controls offering merchant

down contributing and the Breaking percentage related to This Revenue versus in approximately compared travel basis last is segment sequentially, to to points travel corporate travel travel Purchase solutions. purchase segment versus was quarter Total was segment larger of three XX% grew total for reflects million. net by year. volume The issued demand. volume consumer strength related due from the down further, year. $XXX Turning in and revenue XX% XX% of billion, increased spend continued QX WEX XXX% $XX.X which now customers the a the XX% represented up customer was customers travel rate increase volume. to interchange of XXXX. total an last predominantly

was XX.X% in last This channel. by margins results. these adjusting year We up partner been but an very income up XX% of delivered margin accelerated. are customer change. as volume XX% volume from There and reported, The growth after pleased down strength last improvement in X% it payments accounting for as has in grew Corporate with these was presentation is QX operating versus led significant year. travel-related XX.X% segment continued adjusted the an revenue

is model strong, and fixed Our segment drop-through very cost here business given relatively base. revenue is this for our high

Finally, Health let’s the look a at take segment.

purchase approximately increase represents SaaS XX% XX% prior increased over to million increase to year, million. Health versus continued processing was X% an temporary in in We QX This payment volume the a segment year, year. leading account growth XX% in growth $XXX.X accounts revenue of last X QX. growth resulting adjusting revenue. in COBRA drive strong for account was XX% the prior QX

approximately held I revenue by a in were of gears WEX end driver and of an third-party with on Bank in from quarter invested realized primary banks. The million starting position. the year is the also Shifting update deposits $XX remain We position that now, operating XX.X%, at late last deposits XXXX. We margin. provide in XX.X% the from and our HSA adjusted segment the healthy $XXX was in sheet HSA invested funds increase margin Health revenue the million balance compared to income The in financial will liquidity cash. in the

$XXX end. borrowing agreement cash as of have the credit million defined company’s We under of capacity and corporate $XXX available quarter million at

The and the you’d decrease is the million credit, total last credit target end on strong end prices X.X notes of fuel balance the times quarter receivable $XXX our moderated. billion. of X.X from defined at ratio the the sizeable to the term as of bottom As outstanding revolving of stands convertible down expect, in we saw due quarter, accounts in the is versus and At a our was X.X agreement earnings. times, loans our XXXX primarily leverage of end nearing $X.X times which long-term line

like significant WEX would turn cash. to a amount I flow. to of cash generates Next,

view definition, performance flow, X company. flow of cash which with cash is million a our included how the have adjusted is summary $XXX Using We through we free generation the on adjusted of the graph free Slide QX. cash

this repurchase year flow use has discussed, shares. As Melissa primary cash been free our of to

manage shareholders. between to and to investment, allocation capital continue M&A organic will capital We returning

full year and to in X. and revenue the fourth Slide move on guides let’s quarter earnings Finally,

us, expect share the good for a quarter revenue $XXX $XXX The are Starting in XXXX. of fourth increasing report again the third I’m million. range was pleased quarter that and we very with guidance we our to to quarter, to million for

expect ANI and to between We per EPS $X.XX share. be diluted $X.XX

billion $X.XX full in we to billion. the range $X.XX report to expect year, of revenue For the

We expect ANI and $XX.XX EPS to share. between diluted be $XX.XX per

For the compared the in these increase of ranges of $XX guidance. revenue $X.XX represent previous updated mid-point of year, and EPS an full million our to

assumptions You for on additional can Slide find XX. guidance

and would QX top complete I the to to moment I XXXX is were with expectations. a the remarks, our my pleased prepared At to how economy. results take of everyone’s mind As emphasize macro we like reflect on our

Let which to see me volatile, start we year. heading with fuel been may next prices continue into have movement

of week, $X.XX futures last is for next As fuel curve NYMEX an price year. the showing average of

fuel assumptions give We will our when February. price obviously in formal guidance update we

of million Next, turn debt is rates increased I year. balanced rate between interest add debt and have interest of QX to $XXX we our to significantly past that than will amount more floating interest the have year, on the hedges. increasing generally that we we have next some unless rates hedges the rates, higher expire today QX Obviously, effective will floating and think of over WEX impact which We understood. is

been rate few for see from the interest rates. causes risen also environment to We some invested, we assets the an income in the held our also where floating of HSA last including million banks, third-party have fuel rate are stream monetized from low at dollars deposits that Interest of rates billion rates in years. $XXX new have we’ve HSA escalator billion and another at interchange merchant point that benefit $X.X will

interest the We rates. a hit floor rates this as to in we raise go interchange negotiated have level higher we have ability lever, about not talked but once much rates contractual

of long-term, impacts rate changes of this the interest Given more all see as the over balanced. we

long-term existing products great new with to line and have targets that in win market ability for to confidence the company. bring open customers, customers, new to questions. expand With Finally, please our the growth we of leading operator,

Operator

with [Operator Barclays. Instructions] Our first El-Assal question comes Ramsey from

Your line is open.

Ramsey El-Assal

to sort quarter. any you that any and portfolio? you It super to I due Hi, seeing guess in credit sounded read broader a give Could shipping us macro stress of my spot story like Are and that question numbers in the in taking sales context? more rates. thanks whether same this for fleet was have impacts how you strong seeing see you’re on macro little changes look the deterioration the nice

Jagtar Narula

words Yes. Ramsey. on This quarter. the Jagtar. for Hey, Thanks is the

the that fraud being Obviously, side. losses seeing address into what I’ll up the macro me two break – this Let parts. we about we’re and quarter. in down talked credit

about. – down On was came points there movement seeing the mostly XX of spot point, a What XX road our of the some What result cost pressure talked business, credit that putting limited declining side, judgmental of the part seeing to loss XX reserve we point the our operators. it’s sort rates took. that fee customers, saw on where we that to and we’re I over smaller a we’re that really owner

as increase of as We haven’t we on took delayed but see the higher accounting talked specifically an just that losses, seen result, rates some for I did we payments a reserve And delinquent in payments. about. judgemental a

the North So we’re fleet of pretty portfolio, seeing the overall balanced, is still portfolio good. the fleet overall American quality things

feel good areas parts some things. we certain But generally we we saw that So in addressed. about

Melissa Smith

to expand this same but sales. It’s on that, Melissa. store And yes,

same over-the-road the On sales, in quarter, a American store real same strength, the in store was fleet flat and North sales. we saw business percent upside so business

larger the Jagtar And with for can what as some that customers portfolio because as far about guys. seeing in what what’s rates. happened results of are us October in you we’re continuing with spot well. volume’s within some through talked that that So losing of see share, for seeing But smaller the picked so we’re the up over-the-road been

saw you post kind you Wex portfolio across of you’ve QX. of trends, us which if overall really the seen volumes the through look strong factored to in So that

Ramsey El-Assal

Great.

working there, one I as case, expect $X to Let can OTR in If sell. where we usage think give set on segment and move that should that’s contribution, grow forward? deck, last we what million you’re about success one the I us expanding here. the cross number that’s you talked more is you seeing In a color and in the sneak think slide product me

Melissa Smith

over actually a done quarter. last We’ve Yes. lot the

million we we the our So increasing revenue about talked specifically wallet payments of the products. corporate $X customers that had and over-the-road of between share

We have over portfolio. last segmented the quarter the

So across sales lead list. built a and we’ve gone qualified

really is this the where smaller that we created attend And lead working so about the The go through. portfolio, more if qualified we’ve after customers think digitally. we list customers you our larger way to are

So the ability long-term we feel of this to that should to bullish X% come about customers. extend we that. with Investor mechanisms customers, The had from framework is and we really way wallet think on one that that Day, our we share about the that have we hit is growth our X% growth framed to intend existing the in

Ramsey El-Assal

much. Terrific, Thank you very

Operator

Suisse. Our Nik Credit next with comes question from Cremo

line Your is open.

Nik Cremo

and morning my for Good Yes. question. taking thanks

I on much last more rate some by in those run one half investments in realize color in of know XXXX. the also those And this year, could expenses wanted improvements I First if operating of just Wex how the I million the were efficiency of curious related investments. back more and the to we on get ballpark benefits could did size the $XXX of there end I call. And time so just that year next XXXX. was XXXX

Melissa Smith

use technology to the and started experience. that quarter, bit I were were in But start the Yes. create we we making automation customer can last focused that is Jagtar where about probably talking We’ve been here. a increases Why we when investments. fill will don’t we little fact on looking

is the that twofer. think I

scalability. customer seeing at path, a about cost down the what just actually the we’re When a labor derisk experience really started growth, to shortages better this have ability to of first we how marketplace. in because were thinking where and We we have lower more

primary got the work focus. has we we’d it periods. this, quick resiliency pretty So into payback just was lot into of as the really a builds this of think and our that But model,

So that end-to-end at experience. we’re again, looking what is

heard talk technology we’ve transformed cloud, stack lot moved have. You’ve that we the about our digital and marketing a us increased how we’ve into capability the how

in that all just pulling it experience. is taking thread the this so through And way that customer

Jagtar Narula

and it and in jump we of side answer to from I’ll just couple what how seeing expect questions ramp investment quarter. a the we’re this on

million said on as prepared run ramping, XXXX. $XXX rate end the of we the expecting we’re of So in savings remarks, by the

We’re into of so ramp through our still kind guidance to that I’m But a to budget, going XXXX do get XXXX. expect not we working through kind discussion. of

that with to we the I the a from making. a see to so So run And talked that can we’re back $XX investments on basis. rate think we’ll exit the year then million about of call two-thirds we last in were XXXX half million seeing, results. to the the sequential expected in see And that that we quarter half you investments from of $X

$XX you QX versus QX, see the in at to you it’s If look $X laying roughly can QX results. $X million million million

Nik Cremo

it was to in follow-up corporate payments yield. Got it. know related on I expected so the Thanks quick a down half this a to use like taper all large run down a into much should like think if for XX%. we incremental If Like I of the it It how color. could year in like back just sneak customer. a QX came it in more? low to you. or to come if should like rate XXs, in XXXX, little Thank yield that’s looks good mid that the about

Melissa Smith

it’s really to I important sorry. think –

Let me start and then can go. you

actually I pars segment that think it’s pieces. you into really two to important look when at it

probably So two. quarters we’ve been the think actually split four for between now disclosing about and the

seeing to that of products said happen payments that we extent going the about the year. into business the this you more Travel that we’ve and We shift that see with has course rate what mix mixes embedded of during lot that experienced. in Corporate it mix the course the And in said year then our into with of the this been So and down. year that’s really it has. we’re there’s a been of can our We to rate stability business, a expected Payments

so a that of And out. there’s plays nicks lot

You that perspective margin has can of which profile. see from a profitability our significant through increased drop we’ve seen revenue,

those we with be rates well. So a all the factors the take how as products are into some there perspective. of from in may of about it associated while costs pricing think lower, that some And less

said next So rates. going when But we depends the the on to still and working it Payments to mix. see budget Corporate Jagtar the year. will on travel this we’re And forward, depend overall we’ve in expect mix through lot of of it again, stability gets really of business, a what some seen

embedded We in has take again great have the which marketplace, lower rate. payment that had our with success products

going So, to declining see to bit rate continued that that I into little into would expect a XXXX. factor

Nik Cremo

Understood. Thanks so much for explaining that.

Operator

with from America. Our Bank Bhatia next question comes of Mihir

open. is line Your

Mihir Bhatia

you worth Thanks. I the for then taking travel we expected, in and bit a quarter more just wanted And tailwind with came talk volumes. question. improvement you can come? from can than thinking to my there recovery where about Came outsized with growth little any but quarter-over-quarter geographies the XQ between is just morning. maybe start and contribute to that holidays XQ Good this Thank Just some Maybe nicely XQ, in U.S., in staying out? into there? calling again in summer Australia, travel

Melissa Smith

back price out XXXX. and even definitely would QX QX in in doing stands we’ve in the and are through pre-pandemic about what XXX% Optal. is we are then this if as owned was of been more that. say last and quarter, that forma true volume I is that comping it there travel, to But so XXXX, so With And it quarter, Yes. thing pro that eNett was increases coming

saw we against Even sequentially example have some X%. up of inflation, this ticket is the went that. we a QX, to resilience QX from So the we that average great when of talk that about

to a that volume the last spend but with quarter, the similar to an – we or levels, and higher below what saw ticket perspective, increases but the is growth portfolio. XXXX volume trends portfolio, within is the Europe we’re price. a that’s change geo I’d has lot the is still in it’s pricing happened down From average mix say So still do of a still great Asia, part in in smaller which above

Mihir Bhatia

you if But for Flume, other just be realistic through? year then of mile appreciate line on you of for the performing can XXX,XXX in up can and share coming you the and you. using prepared load you’re say And Are with markers or let’s remarks. us, many a growth target expectations to sign you’ll in it. which provided Got that is anecdotal or so? targeting, a Thank what’s some there next the any is detail off Flume customers that how maybe the judge

Melissa Smith

Yes, share. and interesting so XXX,XXX And we When it’s small Flume with question. increase rolled that is far. the we’ve some existing to of customers we’ve market our think an an opportunity customer us of that specifically out for evidence products base, with had

an launch quarter. went I told you from like We last this which portfolio. that – would into looks that that we we were the from early. go had across that learn rate launch launch from think full to this was And in still take we to we’re going actual quarter beta what full We did. quarter, third the of

of and here. things around So, more us, to I bit behind need time think bullish bunch you us more we give a really a experience little get but feel

ability in whole see that talked to added earlier the can a of work the the all market. just I First on you This about of the bring of team place. as years. actually at the done APIs technology is features over it side in moving ability why marketplace. that to product technology. the benefit product into a we advantage ability year, new digital into move many we’re introduce integrate into is, product, part different rapidly all, It’s the our portfolio beginning take of just product, that the can ability to to across so the you share to The through of the totally the ability the technologies, the

going not just but because about think I in using in that as I for this small we of how we use, sell other so we’ve marketplace, deploy into the us business will lot parts we there the learn the this to pieces that chassis a lot, talked how a And we’re developed of are company.

Mihir Bhatia

in if last large you. And a the happened could quarter? take something this change like, made that what Just you. on Thank it. fairly thank just this I so, you there, squeeze just in it one quarter quarter? it’s amount to understand Got impairment trying Did one charge, the

Jagtar Narula

Yes, I’ll address that one.

analysis. change, free in impairment largely which flow economic discount impairment market impairment of our of So, term. we the cash number rates, is valuations of [ph] also analysis, the rate impacted the rising So, use the charge the Europe which related, impact kind seeing right? macro And in nine impact business we’re near interest the then was environment,

the that determined and factor macro that related, we largely So, we all together. It’s going to. impairment charges

Mihir Bhatia

Thank you.

Operator

next comes Bob from question Our Napoli Blair. with William

Your line is open.

Bob Napoli

indicator. watched cycles, good – Thank payment your are you, Having through transactions have macroeconomic pretty a been WEX number leading morning. good of processing a and

you in, you news pretty and held look you surprised lot are your but up are into the the macro? stability as a the quarter? have in mean, next getting this by up trucking as transactions your you And year of far We’re are there? been fourth out those of space, I look the quarter. What so Melissa, on I thoughts well transactions seeing, mixed holding mean, how

Melissa Smith

continue growth volume you when fourth in, give our really the looking guidance and the volume October, business. volume payments in look growth strong across quarter, portfolio health in we Really how fleet if the to Well, strong but corporate of for we’re obviously we across it growth business. travel at and see volume

I that diversified added that rate we’ve buffer but deposits different of said about look the from about or have many done really scenarios interest our the we’ve want macro lot mix in more resiliency we the helping a think to we HSA are, the future. because I we at to – very and forward we and sensitivity, could a what and a the happen So, our for on I remarks. into in when talk how bit points little prepared hit think business, But I much about minute, that

in costs, are costs you’re benefiting portfolio. charged higher just not inflation, through that energy that We’re now across from right but because getting seeing the higher coming

we’re the going nature open we’re trending reoccurring positive business and more and the got geos. season into enrollment we’ve in across much diversified revenue We’re of our and from XX% across that that’s

road talk our over around out flow felt comfortable we part segments, many labor good we really it’s when customers of why to the different hear feel to at could we of them macro just all across the play looking that program scenarios we different the cash resiliency, was in that and up about Again, is, earlier, has we that So, of about of increasing far do micro our the a been buyback segment being shared continue rate. is number segment have. smaller, for by which that impacted volume perspective, hit the same-store on from down customers. think the access the talked the We that the we a a when this spot is even larger road last of customers, and of lot XXXX, we thing still this generation about of to The a one by XXXX labor. marketplace, business X%, From picked so us, micro is or more cyclical in think, you in quarter. X% go there softness and again part with if part I the business, sales were was back to flat that over

positive seeing hearing really So think broader portfolio we’re segment that. I little micro a with across that of the that’s one of trends. segment we actually then distress, a again, are bit But

Bob Napoli

underperformed? into guess, acquisitions your more outperformed, U.S. been the your Great. Thank or as but what I acquisitions active, – but guess some M&A, see fleet, – you’ve you would of say grade mean, in look you fleet have M&A, in XXXX, how how I at you acquisitions. been give you which we like Obviously, you. – tough we just historic your should, Interesting. and have overall M&A of and what you up done I would have your have which some for going Europe on has yourself follow past your

M&A historical performance expectations? versus So just around any thoughts M&A, and

Melissa Smith

we we’ve Yes, feel reached the one synergy recent original in, that against models strong M&A really delivered, being we’ve the folded portfolio targets really deal we most then earnings about of the eNett across and do good that look things back can delivered across just as we’ve of the the growth. and how you portfolio see the with way how

see transaction, related is that recent most through to can again one. coming segment, which that the You the

building to So of also when think about capability about opposed which got allocation, a had key money still start more invest how we’ve Then going we at broadly M&A, we we we’re of internally, have just a a to capital active. look and pipeline think we we with as buying. as focus M&A ours that is

either pipeline. complicating we continue or do or distracting. probably long we’re six we’re the through I think multiples As strategically, assets can moving have so therefore elevated so far seen In over to nine to to market the that and still we’ve remember, trying as last, that months, and what assets

important active And is see generate say can own marketplace. we lot come haven’t X% think but cash. through part value. to the It’s look an both. very the we of so a is in something really we executed of compelling think X% M&A. growth. we We shares of time purchase we you What do we market spend recently, We are our at it’s a framework to going long-term – is the of if of on growth part current the our environment, And we very a X%

the be shares. M&A to in buyback to an active perspective an and So continue from marketplace ability to

Bob Napoli

it. you. Appreciate Thank

Operator

comes question next Sanjay from Sakhrani KBW. Our with

open. is line Your

Sanjay Sakhrani

how discussed with like start be expect Want Good you I’m curious, or see authorization. Thanks. million to just, to you where limitations in aggressive to are the any that nice the just on much Melissa, large you that’s remaining. increase repurchase morning. there was Thanks. just it buy? so how $XXX could And do

Melissa Smith

piece I think to plug probably going Jagtar another in this. is of

course see, buyback can You far. been ratable we’ve authorizations we’ve about so this of the about share how used then and in year, we’ve in how opportunistic pretty used our

how limitations. more keep of of about talk that we’re in thinking if backdrop about kind Jagtar, and the that So you

Jagtar Narula

doing our in covenants head. some off we this Yes, of limitations my have top the Sanjay. I’m debt

like debt something it’s eight $XXX think goes above. up to I times. two, want that, EBITDA times it’s like say two once million I to three

we at and with there and to back obviously should We those So, we’ve some go could levels end up got limitations. lenders. our room the

about the pretty I ability were share repurchase that So program lines execute along good continue feel our to authorized. to our

Sanjay Sakhrani

before. Okay. like Great. And of follow-ups a that then two points quick couple on were just I’d discussed

the those aren’t well right? and a against to, I machinations debt hedge hedge. hedge those the if I the more, them other just assets you you you HSA to I’m are them that have, the like rate make how as factors one deposits use of a and ladders, that discount have the are, as is need to have On expect sensitivity, yes, the understand through, the against we hedge make rate and interest And or trying floating want I to sure I’ll the rate mean, but then you just think sorry.

Jagtar Narula

helpful. would Yes, sure, math, walk I be you the think through I Sanjay. Why don’t

loans, So about right? $X.X we debt, revolver. have million our term This our of financing is

kind have operational We debt. of of call billion $X.X I another what

we $X HSA the When are money interest of roughly the within liabilities, rate fixed. and swaps group of that end look billion with liabilities essentially deposits, deposits. it these have at that about with market that bank that the float convert interest We that are So some things I deposits, and like of rates. up the fix

On the have the we you items equations, assets the talked about. side of that

in as of well the – with are clauses deposits HSA assets the assets, HSA our the have escalator we contracts in So invested as some the merchants.

I billion when I interest net So liabilities about with move those that would net end up together, $X with roughly two rates.

million movements. result a $XX in point Net fact. is basis interest XXX as it of think I

it lower than So of at look were look kind would if just you bit to our balance a sheet. you at down nets

Sanjay Sakhrani

how like this but mean, more maybe Okay. you is to any I this charge. should charges? much forward final All point macro, going I we pretty right. impairment Wonderful. it? made a understand of see And then or should change, further was necessary think just about on related we Thanks. the these if

Jagtar Narula

teen not headroom, of our not so any rest would goodwill further further and expecting charges. on the near lot charges. I'm business any our There’s Yes, a Sanjay, no say no I’m portfolio's of got I expecting remaining fleet

Sanjay Sakhrani

very you much. Great. Thank

Operator

Research. comes next with Our Peller question Wolfe from Darrin

open. is line Your

Darrin Peller

the guys. nice than mean, levels, comps a adjusted think easier little that. trends? with macro growth, we the mid-teens I want When Just back, back of to recovery even start seems I I type a normalized one are in would've little quarter, going at bit Hey, terms stronger this but off I expected to a for minute. I just got look side of know where terms in lead

bit I can or really sustainable just the a And guess you something comps on wonder is touch recoveries? could it nuances some elevated just for see you that as – that so a or drivers more rate, there's of drive If if that growth moment. little an I and

Melissa Smith

I win think business. we the that what part is to continue important that's

portfolio, to into about we seeing what adding We the portfolios in mix those into we have going we're of we're is the see that you're quarter our rebound we portfolio some adding sales that year and as on the have were the last that selling to rates, capability rebound quarter. coming things you course the added, high the the retention areas combination add continuing and so that in we top And are of year we levels. that strong or is seeing so that a from of into Exxon things you're very an together, growth if did this look sold execution we in talked the vehicle the of then example, you at two that pandemic things

grow If we're of keep business. we you the customers names part about our that is through on, coming part which quarters. of four why So to that talking next of can ability in it the important we'll of realize see through, an benefit bringing the because

more. So it see in the bit a fourth normalize quarter you start to little

should two X% net and two long-term X% exist this sales growth customers. as about said the more penetration customer is company that existing we a we from to to in the we've course that's model retention, there, on the again long-term of increased coming and products to in put X% some new, one growth through that reminder M&A The delivered year. from out three in the grow with So just over customers to X% organic would we that just clearly

Darrin Peller

Melissa. thanks, Okay,

just a cycle a – other want question expense maybe flexible? of management levers what of on economy remind us next potentially the line really now, that do and then in bottom front. think The willingness of be you the really to you And it's I the you capability terms just protect to more have kind tough year just combination to through a could about if you and a have and is

Melissa Smith

Jagtar Let this. can you me then add start to and

squeezing And the invest that think sure business long-term that price ways on create talked that and through create to can that's that continue neutral. better have we as make if that thoughtful we about so I and out that aspect important managed and reach customer we're a make some that factors. And to enterprise I experience its an to do we efficiencies. opportunity said the much to want we cycles that about are feels potential the can being trying thinking about focusing We're of of We our that. investing ways growth being an to think we it we sure efficiency. hit

big of So term way benefit. do ours for you relatively And customers their simplifying way of the a that we very the for investment. business we is focus it's that created think our that, a short investment, of an

get actually You that from benefit the way and a bit of quite lead Jagtar.

Jagtar Narula

Yes.

said. with I think Melissa what generally concur

our be think identified. year the will focus Melissa for next on that savings I the cost

have will that, next into some million costs, getting $XXX next we of when we our year year that think that I focus can. as really work think levers I much be on number So as and to

economic I for the think big that's the number us, environment. basically

Darrin Peller

Thanks right. All Got it. guys.

Operator

with Sheriq question ISI. Sumar Our next Evercore comes from

open. Your is line

Sheriq Sumar

that's I American the all SaaS said about kind question. a out versus should thanks side. And in competitors? benefits forward mean, our how But offering a my The taking like what's when from Hey, trend on of for to here? we pickup accounts the WEX's believe going account, the strength in for understanding that average of the as health there and terms I just to think you nice lot

Melissa Smith

Yes.

last So we we talked had that about we that accounts the X% some temporary year. but fact growth, account saw

customer if with was partners. – really for more and the saw we're we tracked our a XX%, sheer ecosystem really Health health which the that uniquely base with size of that directly have Solutions So both that consistently the it in Benefit and the us Employee just in that because spent-on you things normalize we of big positioned benefit

testament us of SaaS business should and us. wisdom partners creates that data do XXXXs going positively over determine the And now, XX how benefit highlight things is that best and creates time, are help in season, our our are and able then use do the capability HSA to our like that account, ease sits putting open a being do They end-to-end million FSA nice that account or a to for is of the much collect with XX% to that a customers have trying with for to types this really again, an that away to and like just with resonating we and that HSA a all portfolio. the they to And of us determine, enrollment and be enables able into place, that accounts, offering host admin fact and think We Fortune that which right one can options across we of consumer in money cycle capability important where’s is marketplace. in because them that our an data helping like customers FSA partner. and all do whole also

Sheriq Sumar

does opportunity provide squeeze Got can it. for Flume one an in, stands if where there And the just on and can That’s update I helpful. Flume? cross-selling you what’s out

Melissa Smith

so business where the customers our outside and Flume, a into from product with marketplace, both we of beta in their that offering launch full say we early, have we the have customers customers launch we’re seeing quarter. moved wallet we’re And really existing are increasing Yes, a that this share for us.

a we we that’s us related customers SaaS the with a is creates within to fast that fees opportunity for model other portfolio, think we business small have charge that share plus fees. we wallet so XXX,XXX so that this transaction plus, the And have. unique It deepen

and our so And and as talk opportunity to it go an will says next also we more it year. about but it we diversify gives us revenue early broaden through stream,

Sheriq Sumar

you Thanks much. Thank a so lot.

Operator

Jeff Our Wells with Fargo. from Cantwell next comes question

line open. is Your

Jeff Cantwell

follow been Flume. Most prior up obviously days, ask have questions you now answered. hearing and Flume full very good we’ve much. so of any, on have question it’s a my early of understand but in based a question I a production, on about these so things we to lot thanks wanted Hey,

I impacts So underlying is confirm just just understanding to then is of there that that, the underlying kind what Flume, in for actually thought about XXXX. a it. what way as you of have the and for we’re color you expect the first as you’re great. and all questions offensively at commentary mine us there kind or the are you’re business Any the, a margins thinking think growth much. so would there want type on of second help point And this revenue couple Flume thinking XXXX about of the creative be firm potential into question. Thanks about very

Melissa Smith

Yes, sure.

share that portfolio. that, an so little Going micro about The that customers think business way it sits that with Flume were customers working to a impact small customer within a we were designed we’re segmenting existing kind our we our of with this existing targeting within base started segment is seeing bit, of the our was small like of very to when kind the that wallet ability it, way that gives we thinking customers. us increase as

We people using process also products well. the in our through not brought product existing as who are

became are customers base digital are age. customer business it very that And that of the highly into getting enabled. So that this paid it them been part focusing customer These clear not is the things offering. places, informed. the small other often is that is we on digital important an was pretty clear something moves but wants was that, digitally The have nature

was now. that customers, manual to people way very and was remarks, designed the processes using way of these thoughtful that, the it in that the so but example are enabled, an the And really who and that I with many about look in prepared digitally give is mind are the fact appeals field,

it so the into this, to marketplace about rapidly. we able we if were thought And move

then customer about our our that primary a to in of base. an ability the and outside as we directly thinking this use the existing into base the, say need is. existing then existing to of being think learn the meeting I’d have focus we’re their for going We cross-sell opportunistically we’ll potentially opportunity of customer kind Again, it that. marketplace more the that was were And what and lot able to it, pick up able maybe we’re to better customers. size be outside early, I have customers a we

Jeff Cantwell

color. Okay. Great. Appreciate all the very much. Thanks

Operator

to turn back closing for We the for session. Steve question-and-answer remarks. have out time over the run call of I’ll

Steve Elder

appreciate I went and but time we over, everyone. for you to we’ll minutes look attention and fourth know again a our earnings. the with for Thank few forward everyone’s quarter today call you speaking

Operator

conference concludes call. This today’s

disconnect. now may You

WEX (WEX) 27 Oct 222022 Q3 Earnings call transcript