2Q revenue increased 4% year-over-year to a
second quarter record $621 million, driven by 34% growth in the
Benefits segment and 21% in the Corporate Payments segment
2Q GAAP net income was $2.20 per diluted share;
2Q adjusted net income was $3.63 per diluted share
2Q GAAP operating income margin of 25.7% and
adjusted operating income margin of 40.3%
Raises full-year 2023 financial guidance
WEX (NYSE: WEX), the global commerce platform that simplifies
the business of running a business, today reported financial
results for the three months ended June 30, 2023.
“WEX achieved a strong first half of 2023 as we delivered
another impressive quarter with record high second quarter revenue.
We achieved this growth despite a dynamic macro-environment and
declines in fuel prices. Our results were bolstered by strong
growth in both our Benefits and Corporate Payments segments, while
simultaneously delivering performance improvements in our credit
portfolio. This quarter further demonstrated the resiliency of our
business,” said Melissa Smith, WEX’s Chair and Chief Executive
Officer.
Ms. Smith added, “We continued to execute against our strategic
initiatives during the quarter, including further expansion of our
EV capabilities and the application of machine learning and
artificial intelligence tools in our processes. As we head into the
second half of 2023, I remain confident in WEX’s path forward and
the long-term growth opportunities ahead.”
Second Quarter 2023 Financial Results
Total revenue for the second quarter of 2023 increased 4% to
$621.3 million from $598.2 million for the second quarter of 2022.
The revenue increase in the quarter includes a $53.0 million
unfavorable impact from fuel prices and spreads and a $0.3 million
favorable impact from foreign exchange rates.
Net income attributable to shareholders on a GAAP basis
increased by $61.2 million to a net income of $95.3 million, or
$2.20 per diluted share, for the second quarter of 2023, up 191%
compared with net income of $34.1 million, or $0.76 per diluted
share, for the second quarter of 2022. The Company's adjusted net
income attributable to shareholders, which is a non-GAAP measure,
was $159.3 million for the second quarter of 2023, or $3.63 per
diluted share, down 2% per diluted share from $169.4 million, or
$3.71 per diluted share, for the same period last year. GAAP
operating income margin for the second quarter of 2023 was 25.7%
compared to 28.6% for the prior year comparable period. Adjusted
operating income margin was 40.3% in the second quarter of 2023
compared to 42.3% for the prior year comparable period. See Exhibit
5 for information on the calculation of adjusted operating income
margin. 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.
Second Quarter 2023 Performance Metrics
- Total volume across all segments was $55.3 billion, a decrease
of 2.3% from the second quarter of 2022.
- Mobility payment processing transactions decreased 1% from the
second quarter of 2022 to 142.4 million, reflecting the slow
freight environment.
- Average number of vehicles serviced was approximately 18.9
million, an increase of 8% from the second quarter of 2022.
- Benefits’ average number of Software-as-a-Service (SaaS)
accounts grew 11% to 19.5 million from 17.6 million in the second
quarter of 2022.
- Average HSA custodial cash assets in the second quarter of 2023
were $3,878 million, which is 25% higher than $3,110 million a year
ago.
- Corporate Payments’ purchase volume grew 34% to $22.9 billion
from $17.1 billion in the second quarter of 2022.
- Cash flows from operating activities through the second quarter
of this year are $99.5 million. Adjusted free cash flow, which is a
non-GAAP measure, is positive $130.9 million for the same period.
Please see Exhibit 1 for a reconciliation of cash flows from
operating activities to this non-GAAP measure.
“We delivered solid financial performance in the second quarter,
achieving results that continued to show the strength of our global
commerce platform, the competitiveness of our offerings, and the
power of our business model,” said Jagtar Narula, WEX’s Chief
Financial Officer. “I am pleased to share that we are again raising
our full year guidance for both revenue and adjusted earnings per
share, as we expect our strong performance to more than outpace our
outlook for lower fuel prices in the second half of the year.”
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 third quarter of 2023, the Company expects revenue in
the range of $629 million to $639 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 $2.50 billion to $2.52 billion, up from the prior guidance
range of $2.45 billion to $2.49 billion. Adjusted net income
attributable to shareholders is now expected to be in the range of
$14.15 to $14.35 per diluted share, an increase from the prior
guidance range of $13.85 to $14.25 per diluted share.
Third quarter and full year 2023 guidance is based on assumed
average U.S. retail fuel prices of $3.70 and $3.72 per gallon,
respectively. The fuel prices referenced above are based on the
applicable NYMEX futures price from the week of July 17, 2023. Our
guidance assumes approximately 45.2 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.
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 six months ended June 30,
2023; and in Exhibit 3, a table of selected other metrics for the
quarter ended June 30, 2023 and the four preceding quarters. See
segment revenue for the three and six months ended June 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, July 27, 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 health care 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,
whether as a result of the Company’s Convertible Notes or
otherwise; 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 Report on Form 10-Q for the quarter ended March 31,
2023, filed with the Securities and Exchange Commission on April
27, 2023, and subsequent filings with the Securities and Exchange
Commission. The Company's forward-looking statements do not reflect
the potential future impact of any alliance, merger, acquisition,
disposition or stock repurchases. 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.
WEX INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in millions, except per share
data)
(unaudited)
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
Revenues
Payment processing revenue
$
300.5
$
312.3
$
588.6
$
551.8
Account servicing revenue
152.9
137.6
313.6
277.6
Finance fee revenue
76.4
85.3
157.1
163.9
Other revenue
91.5
63.0
174.0
122.5
Total revenues
621.3
598.2
1,233.3
1,115.8
Cost of services
Processing costs
149.7
137.4
295.3
269.9
Service fees
17.9
14.9
36.2
30.6
Provision for credit losses
22.7
42.2
68.1
67.8
Operating interest
19.5
3.2
32.3
5.5
Depreciation and amortization
25.2
26.6
50.4
52.6
Total cost of services
235.0
224.3
482.3
426.5
General and administrative
106.2
83.5
195.1
162.1
Sales and marketing
78.9
80.4
158.8
154.4
Depreciation and amortization
41.8
38.9
83.4
79.3
Operating income
159.4
171.1
313.7
293.4
Financing interest expense
(42.4
)
(31.8
)
(80.8
)
(61.5
)
Change in fair value of contingent
consideration
(1.2
)
(88.2
)
(3.0
)
(104.8
)
Net foreign currency loss
(0.2
)
(19.4
)
(1.6
)
(14.4
)
Net unrealized gain (loss) on financial
instruments
2.2
16.9
(12.3
)
66.7
Income before income taxes
117.8
48.6
216.0
179.4
Income tax expense
22.5
14.5
52.7
56.5
Net income
95.3
34.1
163.3
122.9
Less: Net income from non-controlling
interests
—
—
—
0.3
Net income attributable to WEX
Inc.
$
95.3
$
34.1
$
163.3
$
122.6
Change in value of redeemable
non-controlling interest
—
—
—
34.2
Net income attributable to
shareholders
$
95.3
$
34.1
$
163.3
$
156.9
Net income attributable to shareholders
per share:
Basic
$
2.22
$
0.76
$
3.80
$
3.50
Diluted
$
2.20
$
0.76
$
3.76
$
3.47
Weighted average common shares
outstanding:
Basic
42.9
44.8
43.0
44.9
Diluted
43.4
45.1
43.5
45.2
WEX INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
(unaudited)
June 30, 2023
December 31, 2022
Assets
Cash and cash equivalents
$
901.4
$
922.0
Restricted cash
1,217.6
937.8
Accounts receivable, net
3,622.3
3,275.7
Investment securities
2,641.1
1,395.3
Securitized accounts receivable,
restricted
138.1
143.2
Prepaid expenses and other current
assets
184.1
143.3
Total current assets
8,704.6
6,817.1
Property, equipment and capitalized
software
222.2
202.2
Goodwill and other intangible assets
4,122.0
4,202.5
Investment securities
48.0
48.0
Deferred income taxes, net
10.8
13.4
Other assets
240.4
246.0
Total assets
$
13,348.0
$
11,529.2
Liabilities and Stockholders’
Equity
Accounts payable
$
1,506.7
$
1,365.8
Accrued expenses and other current
liabilities
733.5
643.9
Restricted cash payable
1,217.0
937.1
Short-term deposits
4,154.2
3,144.6
Short-term debt, net
723.0
202.6
Total current liabilities
8,334.4
6,294.1
Long-term debt, net
2,499.1
2,522.2
Long-term deposits
167.7
334.2
Deferred income taxes, net
131.6
142.2
Other liabilities
446.5
587.1
Total liabilities
11,579.3
9,879.7
Total stockholders’ equity
1,768.7
1,649.5
Total liabilities and stockholders’
equity
$
13,348.0
$
11,529.2
WEX INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended June
30,
2023
2022
Net cash provided by (used for)
operating activities
$
99.5
$
(321.4
)
Cash flows from investing
activities
Purchases of property, equipment and
capitalized software
(65.3
)
(45.6
)
Purchase of equity investments
(5.0
)
—
Purchases of securities
(1,362.0
)
(594.5
)
Sales and maturities of securities
114.4
29.4
Acquisition of intangible assets
(4.5
)
—
Net cash used for investing activities
(1,322.4
)
(610.7
)
Cash flows from financing
activities
Net activity from share-based compensation
plans
(7.9
)
(12.1
)
Purchase of treasury shares
(104.0
)
(80.6
)
Net change in deposits
842.8
797.9
Net change in restricted cash payable
1
271.5
183.2
Payment of contingent consideration
(27.2
)
—
Net debt activity 2
493.3
88.3
Net cash provided by financing
activities
1,468.5
976.7
Effect of exchange rates on cash, cash
equivalents and restricted cash
13.6
(47.2
)
Net change in cash, cash equivalents and
restricted cash
259.2
(2.6
)
Cash, cash equivalents and restricted
cash, beginning of period
1,859.8
1,256.8
Cash, cash equivalents and restricted
cash, end of period
$
2,119.0
$
1,254.3
1 The change in restricted cash payable for the six months ended
June 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; and net borrowings on other
debt.
Exhibit 1
Reconciliation of Non-GAAP
Measures
(in millions, except per share
data)
(unaudited)
Reconciliation of GAAP Net Income
Attributable to Shareholders to Adjusted Net Income Attributable to
Shareholders
Three Months Ended June
30,
2023
2022
per diluted share
per diluted share
Net income attributable to
shareholders
$
95.3
$
2.20
$
34.1
$
0.76
Unrealized gain on financial
instruments
(2.2
)
(0.05
)
(16.9
)
(0.37
)
Net foreign currency loss
0.2
—
19.4
0.43
Change in fair value of contingent
consideration
1.2
0.03
88.2
1.96
Acquisition–related intangible
amortization
44.3
1.02
42.5
0.94
Other acquisition and divestiture related
items
1.4
0.03
6.5
0.14
Stock–based compensation
36.5
0.84
25.3
0.56
Other costs
9.0
0.21
7.9
0.18
Debt restructuring and debt issuance cost
amortization
4.8
0.11
4.7
0.10
Tax related items
(31.2
)
(0.72
)
(42.3
)
(0.94
)
Dilutive impact of convertible debt1
—
(0.04
)
—
(0.05
)
Adjusted net income attributable to
shareholders
$
159.3
$
3.63
$
169.4
$
3.71
Six Months Ended June
30,
2023
2022
per diluted share
per diluted share
Net income attributable to
shareholders
$
163.3
$
3.76
$
156.9
$
3.47
Unrealized loss (gain) on financial
instruments
12.3
0.28
(66.7
)
(1.48
)
Net foreign currency loss
1.6
0.04
14.4
0.32
Change in fair value of contingent
consideration
3.0
0.07
104.8
2.32
Acquisition–related intangible
amortization
88.4
2.03
85.3
1.89
Other acquisition and divestiture related
items
2.5
0.06
11.0
0.24
Stock–based compensation
62.6
1.44
50.5
1.12
Other costs
13.5
0.31
16.1
0.36
Debt restructuring and debt issuance cost
amortization
9.5
0.22
8.0
0.18
ANI adjustments attributable to
non–controlling interests
—
—
(34.6
)
(0.77
)
Tax related items
(51.6
)
(1.19
)
(45.2
)
(1.00
)
Dilutive impact of convertible debt1
—
(0.08
)
—
(0.06
)
Adjusted net income attributable to
shareholders
$
305.1
$
6.94
$
300.4
$
6.59
1 During the three and six-month periods ended June 30, 2023 and
2022, the dilutive impact of the Convertible Notes have been
calculated under the ‘if-converted’ method. Under the
‘if-converted’ method, interest expense, net of tax, associated
with our Convertible Notes of $3.8 million and $7.7 million and
$3.8 million and $7.6 million was added back to adjusted net income
for the three and six months ended June 30, 2023 and 2022,
respectively. For each period presented, approximately 1.6 million
shares of the Company’s common stock associated with the assumed
conversion of the Convertible Notes as of the beginning of the
period was included in the calculations of adjusted net income per
diluted share, as the effect of including such adjustments was
dilutive. The total number of shares used in calculating adjusted
net income attributable to shareholders per diluted share for the
three and six months ended June 30, 2023 is 44.9 million and 45.0
million, respectively. The total number of shares used in
calculating adjusted net income attributable to shareholders per
diluted share for the three and six months ended June 30, 2022 is
46.6 million and 46.8 million, respectively.
Reconciliation of GAAP Operating Income to Total Segment
Adjusted Operating Income and Adjusted Operating Income
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Operating income
$
159.4
$
171.1
$
313.7
$
293.4
Unallocated corporate expenses
25.3
19.0
47.7
40.0
Acquisition-related intangible
amortization
44.3
42.5
88.4
85.3
Other acquisition and divestiture related
items
1.4
6.5
2.5
11.0
Stock-based compensation
36.5
25.3
62.6
50.5
Other costs
9.0
7.9
13.5
16.1
Total segment adjusted operating
income
$
275.9
$
272.3
$
528.4
$
496.2
Unallocated corporate expenses
(25.3
)
(19.0
)
(47.7
)
(40.0
)
Adjusted operating income
$
250.6
$
253.3
$
480.7
$
456.2
The Company's non-GAAP adjusted net income attributable to
shareholders excludes unrealized gains and losses on financial
instruments, net foreign currency gains and losses, change 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, adjustments attributable to our
non-controlling interests, and certain tax related items.
The Company's non-GAAP adjusted operating income excludes
acquisition-related intangible amortization, other acquisition and
divestiture related items, stock-based compensation, and other
costs. Total segment adjusted operating income incorporates these
same adjustments and further excludes unallocated corporate
expenses.
Although adjusted net income attributable to shareholders,
adjusted operating income, and total segment adjusted operating
income are not calculated in accordance with GAAP, these non-GAAP
measures are integral to the Company's reporting and planning
processes and the chief operating decision maker of the Company
uses total segment adjusted operating income to allocate resources
among our operating segments. The Company considers these measures
integral because they exclude the above specified items that the
Company's management excludes in evaluating the Company's
performance. Specifically, in addition to evaluating the Company's
performance on a GAAP basis, management evaluates the Company's
performance on a non-GAAP basis that excludes the items specified
above for the reasons discussed below:
- Exclusion of the non-cash, mark-to-market adjustments on
financial instruments, including interest rate swap agreements and
investment securities, helps management identify and assess trends
in the Company’s underlying business that might otherwise be
obscured due to quarterly non-cash earnings fluctuations associated
with these financial instruments. Additionally, the non-cash,
mark-to-market adjustments on financial instruments are difficult
to forecast accurately, making comparisons across historical and
future quarters difficult to evaluate;
- Net foreign currency gains and losses primarily result from the
remeasurement to functional currency of cash, accounts receivable
and accounts payable balances, certain intercompany notes
denominated in foreign currencies and any gain or loss on foreign
currency economic hedges relating to these items. The exclusion of
these items helps management compare changes in operating results
between periods that might otherwise be obscured due to currency
fluctuations;
- The change in fair value of contingent consideration, which is
related to the acquisition of certain contractual rights to serve
as custodian or sub-custodian to HSAs, is dependent upon changes in
future interest rate assumptions and has no significant impact on
the ongoing operations of the Company. Additionally, the non-cash,
mark-to-market adjustments on financial instruments are difficult
to forecast accurately, making comparisons across historical and
future quarters difficult to evaluate;
- The Company considers certain acquisition-related costs,
including certain financing costs, investment banking fees,
warranty and indemnity insurance, certain integration related
expenses and amortization of acquired intangibles, as well as gains
and losses from divestitures to be unpredictable, dependent on
factors that may be outside of our control and unrelated to the
continuing operations of the acquired or divested business or the
Company. In addition, the size and complexity of an acquisition,
which often drives the magnitude of acquisition-related costs, may
not be indicative of such future costs. The Company believes that
excluding acquisition-related costs and gains or losses on
divestitures facilitates the comparison of our financial results to
the Company’s historical operating results and to other companies
in our industry;
- Stock-based compensation is different from other forms of
compensation, as it is a non-cash expense. For example, a cash
salary generally has a fixed and unvarying cash cost. In contrast,
the expense associated with an equity-based award is generally
unrelated to the amount of cash ultimately received by the
employee, and the cost to the Company is based on a stock-based
compensation valuation methodology and underlying assumptions that
may vary over time;
- Other costs are not consistently occurring and do not reflect
expected future operating expense, nor do they provide insight into
the fundamentals of current or past operations of our business.
This also includes non-recurring professional service costs, costs
related to certain identified initiatives, including restructuring
and technology initiatives, to further streamline the business,
improve the Company’s efficiency, create synergies and globalize
the Company’s operations, all with an objective to improve scale
and efficiency and increase profitability going forward;
- Debt restructuring and debt issuance cost amortization are
unrelated to the continuing operations of the Company. Debt
restructuring costs are not consistently occurring and do not
reflect expected future operating expense, nor do they provide
insight into the fundamentals of current or past operations of our
business. In addition, since debt issuance cost amortization is
dependent upon the financing method, which can vary widely company
to company, we believe that excluding these costs helps to
facilitate comparison to historical results as well as to other
companies within our industry;
- The adjustments attributable to non-controlling interests,
including adjustments to the redemption value of a non-controlling
interest, have no significant impact on the ongoing operations of
the business;
- The tax related items are the difference between the Company’s
GAAP tax provision and a pro forma tax provision based upon the
Company’s adjusted net income attributable to shareholders before
taxes as well as the impact from certain discrete tax items. The
methodology utilized for calculating the Company’s adjusted net
income attributable to shareholders tax provision is the same
methodology utilized in calculating the Company’s GAAP tax
provision; and
- The Company does not allocate certain corporate expenses to our
operating segments, as these items are centrally controlled and are
not directly attributable to any reportable segment.
For the same reasons, WEX believes that adjusted net income
attributable to shareholders, adjusted operating income and total
segment adjusted operating income may also be useful to investors
when evaluating the Company’s performance. However, because
adjusted net income attributable to shareholders, adjusted
operating income, and total segment adjusted operating income are
non-GAAP measures, they should not be considered as a substitute
for, or superior to, net income, operating income or cash flows
from operating activities as determined in accordance with GAAP. In
addition, adjusted net income attributable to shareholders,
adjusted operating income and total segment adjusted operating
income as used by WEX may not be comparable to similarly titled
measures employed by other companies.
Reconciliation of GAAP Operating Cash Flow to Adjusted Free
Cash Flow
The Company’s non-GAAP adjusted free cash flow is calculated as
operating cash flow, adjusted for net purchases of current
investment securities, capital expenditures, the change in net
deposits and certain other adjustments, which for the six months
ended June 30, 2023, reflects an adjustment for contingent
consideration paid to sellers in excess of acquisition-date fair
value. Although non-GAAP adjusted free cash flow is not calculated
in accordance with GAAP, we feel adjusted free cash flow is a
useful measure because (i) adjusted free cash flow indicates the
level of cash generated by the operations of the business, which
excludes consideration paid on acquisitions, after appropriate
reinvestment for recurring investments in property, equipment and
capitalized software that are required to operate the business;
(ii) changes in net deposits occur on a daily basis as a regular
part of operations; (iii) borrowings under the BTFP are primarily
used as a replacement for brokered deposits as part of our accounts
receivable funding strategy; and (iv) purchases of current
investment securities are made as a result of deposits gathered
operationally. We believe this is a useful measure for investors to
further evaluate the results of operations. However, because
adjusted free cash flow is a non-GAAP measure, it should not be
considered as a substitute for, or superior to, operating cash flow
as determined in accordance with GAAP. In addition, adjusted free
cash flow as used by WEX may not be comparable to similarly titled
measures employed by other companies.
The following table reconciles GAAP cash flows from operating
activities to adjusted free cash flow:
Six Months ended June
30,
2023
2022
Cash flows from operating activities,
as reported
$
99.5
$
(321.4
)
Adjustments to cash flows from operating
activities:
Other
1.5
—
Adjusted for certain investing and
financing activities:
Increases in net deposits
842.8
797.9
Increases in borrowings under the BTFP
500.0
—
Less: Purchases of current investment
securities, net of sales and maturities
(1,247.6
)
(565.0
)
Less: Capital expenditures
(65.3
)
(45.6
)
Adjusted free cash flow
$
130.9
$
(134.1
)
Exhibit 2
Impact of Certain Macro
Factors on Reported Revenue and Adjusted Net Income Attributable to
Shareholders
(in millions, except per share
data)
(unaudited)
The tables below show the impact of certain macro factors on
reported revenue:
Segment Revenue
Results
Mobility
Corporate Payments
Benefits
Total WEX Inc.
Three months ended June
30,
2023
2022
2023
2022
2023
2022
2023
2022
Reported revenue
$
340.2
$
379.2
$
121.9
$
100.4
$
159.2
$
118.6
$
621.3
$
598.2
FX impact (favorable) / unfavorable
$
0.8
$
(1.1
)
$
—
$
(0.3
)
PPG impact (favorable) / unfavorable
$
53.0
$
—
$
—
$
53.0
Six months ended June
30,
2023
2022
2023
2022
2023
2022
2023
2022
Reported revenue
$
682.5
$
698.4
$
226.7
$
177.7
$
324.1
$
239.7
$
1,233.3
$
1,115.8
FX impact (favorable) / unfavorable
$
3.3
$
—
$
0.8
$
—
$
—
$
—
$
4.0
$
—
PPG impact (favorable) / unfavorable
$
51.7
$
—
$
—
$
—
$
—
$
—
$
51.7
$
—
To determine the impact of foreign exchange translation (“FX”)
on revenue, revenue from entities whose functional currency is not
denominated in U.S. dollars, as well as revenue from purchase
volume transacted in non-U.S. denominated currencies, were
translated using the weighted average exchange rates for the same
period in the prior year, exclusive of revenue derived from
acquisitions for one year following the acquisition dates.
To determine the impact of price per gallon of fuel (“PPG”) on
revenue, revenue subject to changes in fuel prices was calculated
based on the average retail price of fuel for the same period in
the prior year for the portion of our business that earns revenue
based on a percentage of fuel spend, exclusive of revenue derived
from acquisitions for one year following the acquisition dates. For
the portions of our business that earn revenue based on margin
spreads, revenue was calculated utilizing the comparable margin
from the prior year.
The table below shows the impact of certain macro factors on
adjusted net income attributable to shareholders:
Segment Estimated Adjusted Net
Income Attributable to Shareholders Impact
Mobility
Corporate Payments
Benefits
Three months ended June
30,
2023
2022
2023
2022
2023
2022
FX impact (favorable) / unfavorable
$
0.3
$
(1.1
)
$
—
PPG impact (favorable) / unfavorable
$
34.0
$
—
$
—
Six months ended June
30,
2023
2022
2023
2022
2023
2022
FX impact (favorable) / unfavorable
$
1.4
$
(0.4
)
$
—
PPG impact (favorable) / unfavorable
$
32.5
$
—
$
—
To determine the estimated adjusted net income attributable to
shareholders impact of FX on revenue and expenses from entities
whose functional currency is not denominated in U.S. dollars, as
well as revenue and variable expenses from purchase volume
transacted in non-U.S. denominated currencies, amounts were
translated using the weighted average exchange rates for the same
period in the prior year, net of tax, exclusive of revenue and
expenses derived from acquisitions for one year following the
acquisition dates.
To determine the estimated adjusted net income attributable to
shareholders impact of PPG, revenue and certain variable expenses
impacted by changes in fuel prices were adjusted based on the
average retail price of fuel for the same period in the prior year
for the portion of our business that earns revenue based on a
percentage of fuel spend, net of applicable taxes, exclusive of
revenue and expenses derived from acquisitions for one year
following the acquisition dates. For the portions of our business
that earn revenue based on margin spreads, revenue was adjusted to
the comparable margin from the prior year, net of non-controlling
interests and applicable taxes.
Exhibit 3
Selected Other Metrics
(in millions, except rate
statistics)
(unaudited)
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Mobility:
Payment processing transactions (1)
142.4
137.5
139.2
145.3
143.2
Payment processing gallons of fuel (2)
3,664.5
3,577.0
3,610.2
3,729.7
3,690.9
Average US fuel price (US$ / gallon)
$
3.68
$
3.86
$
4.34
$
4.54
$
4.98
Payment processing $ of fuel (3)
$
13,779.8
$
14,144.4
$
15,936.6
$
17,205.4
$
18,639.7
Net payment processing rate (4)
1.25
%
1.21
%
1.11
%
1.10
%
1.09
%
Payment processing revenue
$
172.1
$
171.5
$
177.4
$
188.6
$
202.4
Net late fee rate (5)
0.48
%
0.50
%
0.56
%
0.48
%
0.38
%
Late fee revenue (6)
$
66.3
$
70.2
$
90.0
$
83.2
$
70.8
Corporate Payments:
Purchase volume (7)
$
22,901.3
$
18,634.7
$
17,085.1
$
20,657.0
$
17,120.0
Net interchange rate (8)
0.46
%
0.48
%
0.58
%
0.49
%
0.52
%
Payment solutions processing revenue
$
104.8
$
90.1
$
98.5
$
101.5
$
88.6
Benefits:
Purchase volume (9)
$
1,715.9
$
1,928.5
$
1,374.4
$
1,350.5
$
1,514.0
Average number of SaaS accounts (10)
19.5
20.3
18.5
18.2
17.6
Definitions and explanations:
(1) Payment processing transactions represents the total number
of purchases made by fleets that have a payment processing
relationship with WEX where the Company maintains the receivable
for the total purchase.
(2) Payment processing gallons of fuel represents the total
number of gallons of fuel purchased by fleets that have a payment
processing relationship with WEX.
(3) Payment processing $ of fuel represents the total dollar
value of the fuel purchased by fleets that have a payment
processing relationship with WEX.
(4) Net payment processing rate represents the percentage of
each payment processing dollar of fuel transaction that WEX records
as revenue from merchants, less certain discounts given to
customers and network fees.
(5) Net late fee rate represents late fee revenue as a
percentage of fuel purchased by fleets that have a payment
processing relationship with WEX.
(6) Late fee revenue represents fees charged for payments not
made within the terms of the customer agreement based upon the
outstanding customer receivable balance.
(7) Purchase volume represents the total dollar value of all
WEX-issued transactions that use WEX corporate card products and
virtual card products.
(8) Net interchange rate represents the percentage of the dollar
value of each payment processing transaction that WEX records as
revenue from merchants, less certain discounts given to customers
and network fees.
(9) Purchase volume represents the total dollar value of all
transactions where interchange is earned by WEX.
(10) Average number of SaaS accounts represents the number of
active consumer-directed health, COBRA, and billing accounts on our
SaaS platforms.
Exhibit 4
Segment Revenue
Information
(in millions)
(unaudited)
Three months ended June
30,
Increase (decrease)
Six months ended June
30,
Increase (decrease)
Mobility
2023
2022
Amount
Percent
2023
2022
Amount
Percent
Revenues
Payment processing revenue
$
172.2
$
202.4
$
(30.2
)
(15
)%
$
343.7
$
354.3
$
(10.6
)
(3
)%
Account servicing revenue
$
40.8
43.9
(3.1
)
(7
)%
81.1
86.3
(5.2
)
(6
)%
Finance fee revenue
$
76.3
85.1
(8.8
)
(10
)%
156.7
163.5
(6.8
)
(4
)%
Other revenue
$
50.9
47.9
3.0
6
%
101.0
94.3
6.7
7
%
Total revenues
$
340.2
$
379.2
$
(39.0
)
(10
)%
$
682.5
$
698.4
$
(15.9
)
(2
)%
Three months ended June
30,
Increase (decrease)
Six months ended June
30,
Increase (decrease)
Corporate Payments
2023
2022
Amount
Percent
2023
2022
Amount
Percent
Revenues
Payment processing revenue
$
104.7
$
88.6
$
16.1
18
%
$
194.8
$
153.7
$
41.1
27
%
Account servicing revenue
10.6
10.4
0.2
2
%
21.2
21.2
—
—
%
Finance fee revenue
0.1
0.2
(0.1
)
(54
)%
0.3
0.4
(0.1
)
(16
)%
Other revenue
6.5
1.2
5.3
448
%
10.4
2.5
7.9
322
%
Total revenues
$
121.9
$
100.4
$
21.5
21
%
$
226.7
$
177.7
$
49.0
28
%
Three months ended June
30,
Increase (decrease)
Six months ended June
30,
Increase (decrease)
Benefits
2023
2022
Amount
Percent
2023
2022
Amount
Percent
Revenues
Payment processing revenue
$
23.6
$
21.3
$
2.3
11
%
$
50.1
$
43.8
$
6.3
14
%
Account servicing revenue
101.5
83.4
18.1
22
%
211.3
170.1
41.2
24
%
Finance fee revenue
—
—
—
NM
0.1
0.1
—
NM
Other revenue
34.1
13.9
20.2
146
%
62.6
25.7
36.9
143
%
Total revenues
$
159.2
$
118.6
$
40.6
34
%
$
324.1
$
239.7
$
84.4
35
%
NM = not meaningful
Exhibit 5
Segment Adjusted Operating
Income and Adjusted Operating Income Margin Information
(in millions)
(unaudited)
Segment Adjusted Operating
Income
Segment Adjusted Operating
Income Margin(1)
Three Months Ended June
30,
Three Months Ended June
30,
2023
2022
2023
2022
Mobility
$
150.3
$
193.0
44.2
%
50.9
%
Corporate Payments
$
66.3
$
51.0
54.4
%
50.8
%
Benefits
$
59.3
$
28.3
37.2
%
23.9
%
Total segment adjusted operating
income
$
275.9
$
272.3
44.4
%
45.5
%
Segment Adjusted Operating
Income
Segment Adjusted Operating
Income Margin(1)
Six Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Mobility
$
289.1
$
353.1
42.4
%
50.6
%
Corporate Payments
$
115.5
$
79.3
50.9
%
44.7
%
Benefits
$
123.8
$
63.8
38.2
%
26.6
%
Total segment adjusted operating
income
$
528.4
$
496.2
42.8
%
44.5
%
(1) Segment adjusted operating income margin is derived by
dividing segment adjusted operating income by the revenue of the
corresponding segment (or the entire Company in the case of total
segment adjusted operating income). See Exhibit 1 for a
reconciliation of GAAP operating income to total segment adjusted
operating income.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Adjusted operating income
$
250.6
$
253.3
$
480.7
$
456.2
Adjusted operating income margin (1)
40.3
%
42.3
%
39.0
%
40.9
%
(1) Adjusted operating income margin is derived by dividing
adjusted operating income by total revenues of the entire Company
as shown on the Condensed Consolidated Statement of Operations. See
Exhibit 1 for a reconciliation of GAAP operating income to adjusted
operating income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230725325274/en/
News media: WEX Julie Lydon, 415-816-9397
Julie.Lydon@wexinc.com or Investors: WEX Steve Elder,
207-523-7769 Steve.Elder@wexinc.com
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