WEX(US:WEX)2025-02-20 16:18Regulatory Compliance - WEX Bank is subject to the Durbin Amendment, which regulates interchange fees for debit transactions, with minimal applicability to prepaid or debit card products as of the filing date[99]. - Compliance with the Dodd-Frank Act has added costs to the business, particularly in the over-the-counter derivatives market, which may require changes in hedging practices[100]. - WEX Bank's acceptance of brokered deposits is restricted unless it is "well capitalized," impacting funding strategies[101]. - The company is subject to significant anti-money laundering compliance obligations, including monitoring and reporting unusual account activity[122]. - WEX's European operations must comply with the Payment Services Directive (PSD2) and the Electronic Money Directive (EMD2), with specific regulatory requirements in Ireland[124]. - In the UK, WEX's operations are governed by the Electronic Money Regulations 2011 and the Payment Services Regulations 2017, requiring safeguarding of customer funds[126]. - The company has established anti-money laundering compliance programs, including internal policies, employee training, and independent review functions[122]. - WEX Bank must provide initial and annual privacy notices to customers under the Gramm-Leach-Bliley Act, ensuring transparency in information sharing practices[111]. - The company is subject to various international privacy and data protection laws, including the GDPR, which imposes stringent privacy protections for EU residents[115]. - WEX's operations are impacted by economic sanctions imposed by the U.S. government, affecting transactions with designated foreign countries and nationals[102]. Market and Financial Risks - The company is exposed to market risks including interest rates, foreign currency exchange rates, and commodity prices, with ongoing management of these risks through derivative instruments[407]. - As of December 31, 2024, the company had $3.8 billion invested in current available-for-sale debt securities at fair value, with a potential decrease in fair value of less than 2% from a hypothetical increase in interest rates of 25 basis points[413]. - A 1% hypothetical increase in interest rates could result in an estimated impact of $31.4 million on interest expense related to the company's Credit Agreement[418]. - The company expects to incur a full contingent consideration liability of $225.0 million based on increases in the Federal Funds rate from the date of acquisition, extending through December 31, 2030[419]. - The company estimates that each one cent decline in average domestic fuel prices would result in a $2.0 million decline in revenue for 2025[408]. - If all currencies in which the company earned revenue weakened or strengthened by 10% against the U.S. dollar, revenues and operating income would each change by approximately 2% or less[410]. - The company is not currently hedged for changes in fuel prices, but management continually monitors the market for alternatives[408]. - The company does not utilize hedging instruments to mitigate foreign currency risks but may initiate strategies in the future as international operations grow[410]. Financial Performance - Total revenues for WEX Inc. in 2024 were $2,628.1 million, an increase of 3.1% from $2,548.0 million in 2023[434]. - Payment processing revenue decreased to $1,200.5 million in 2024 from $1,213.7 million in 2023, a decline of 1.3%[434]. - Account servicing revenue increased by 6.8% to $690.6 million in 2024, up from $646.4 million in 2023[434]. - Net income attributable to WEX Inc. rose to $309.6 million in 2024, compared to $266.6 million in 2023, reflecting a growth of 16.1%[434]. - The company's cash and cash equivalents decreased to $595.8 million in 2024 from $975.8 million in 2023, a decline of 38.9%[438]. - Total assets decreased to $13,321.6 million in 2024 from $13,882.1 million in 2023, a reduction of 4.0%[438]. - Total liabilities decreased to $11,832.8 million in 2024 from $12,061.5 million in 2023, a decline of 1.9%[438]. - The company reported a comprehensive income of $226.5 million in 2024, down from $343.7 million in 2023[436]. - Basic earnings per share increased to $7.59 in 2024 from $6.23 in 2023, a rise of 21.7%[434]. - The provision for credit losses decreased to $68.2 million in 2024 from $89.8 million in 2023, a reduction of 24.0%[434]. - Total cash flows from operating activities decreased to $481.4 million in 2024 from $907.9 million in 2023, reflecting a decline of 46.9%[441]. - The company reported a net cash used for investing activities of $960.6 million in 2024, compared to $2,138.3 million in 2023, indicating a reduction of 55.1%[441]. - Cash, cash equivalents, and restricted cash at the end of 2024 totaled $1,437.0 million, down from $2,230.0 million at the end of 2023, a decrease of 35.5%[442]. - Stock-based compensation expense increased to $112.2 million in 2024 from $127.0 million in 2023, a decrease of 11.3%[441]. - The company repurchased common stock totaling $655.1 million in 2024, compared to $297.6 million in 2023, an increase of 120.4%[441]. - Accounts receivable increased by $325.2 million in 2024, contrasting with a decrease of $195.1 million in 2023[441]. - The company experienced a foreign currency translation loss of $50.8 million in 2024, compared to a gain of $15.6 million in 2023[441]. - The total stockholders' equity at the end of 2024 was $1,488.8 million, a decrease from $1,820.6 million at the end of 2023, reflecting a decline of 18.2%[439]. - The company reported a provision for credit losses of $68.2 million in 2024, down from $89.8 million in 2023, a decrease of 24.1%[441]. Investments and Acquisitions - The company completed the acquisition of Payzer Holdings for approximately $250.0 million, contributing $4.3 million to Mobility segment revenues from acquisition date to December 31, 2023[534][537]. - The Ascensus acquisition was completed for approximately $185.5 million, contributing $14.0 million to Benefits segment revenues from acquisition date to December 31, 2023[538][542]. - The company entered into an ASR agreement to repurchase $300.0 million of common stock, receiving approximately 1.3 million shares initially[545]. - The weighted average useful life of amortizable intangible assets acquired in the Payzer acquisition is 3.9 years[536]. Asset Management - The total investment securities as of December 31, 2024, amounted to $3,845.2 million, an increase from $3,088.9 million in 2023, representing a growth of approximately 24.6%[551]. - The fair value of U.S. treasury notes decreased from $378.6 million in 2023 to $353.5 million in 2024, a decline of about 6.6%[551]. - The total unrealized losses on investment securities increased from $107.9 million in 2023 to $131.6 million in 2024, reflecting a rise of approximately 22.0%[553]. - The company has pledged debt securities with a fair value of $1,206.5 million as collateral for FHLB advances as of December 31, 2024[551]. - The total amortized cost of debt securities due after 10 years was $1,960.3 million, with a fair value of $1,903.3 million as of December 31, 2024[558]. - The company reported no expected credit losses recorded against its investment securities for both 2024 and 2023[551]. - The receivables portfolio showed no individual customer with a balance representing 10% or more of the outstanding receivables at the end of 2024 or 2023[550]. Goodwill and Intangible Assets - Goodwill is reviewed for impairment at least annually, with the last review conducted on October 1[477]. - Net goodwill decreased from $3,015.7 million at the beginning of 2024 to $2,983.4 million by December 31, 2024, a reduction of 1.1%[561]. - Gross goodwill for the Mobility segment decreased from $1,556.6 million to $1,545.2 million, a decline of 0.7%[561]. - Accumulated impairment losses remained stable at $200.6 million for both 2024 and 2023[561]. - The total value of computer software, including internal-use software, increased from $714.4 million in 2023 to $823.5 million in 2024, a growth of 15.3%[560]. - The gross amounts capitalized for internal-use computer software were $143.0 million in 2024, up from $136.4 million in 2023 and $107.7 million in 2022[472]. - The amounts expensed for amortization of internal-use computer software were $109.7 million in 2024, compared to $78.7 million in 2023 and $78.0 million in 2022[472]. Depreciation and Capital Expenditures - Total property, equipment, and capitalized software, net increased from $242.9 million in 2023 to $261.2 million in 2024, reflecting a growth of 7.9%[560]. - Depreciation expense rose to $119.5 million in 2024 from $92.2 million in 2023, indicating a year-over-year increase of 29.7%[560]. - Leasehold improvements decreased from $20.8 million in 2023 to $18.6 million in 2024, a decline of 10.6%[560].