WEX (NYSE:WEX) 2025 Conference December 02, 2025 05:35 PM ET Company ParticipantsMelissa Smith - CEOConference Call ParticipantsChris Stein - AnalystChris SteinAll right. So, let's get started. My name is Chris Stein. I'm an analyst as part of the UBS Payments and FinTech team. We're very excited to have Melissa Smith here with us from WEX. And I think this is your first time in quite a few years. And we're good to have you and heard your third quarter update. I guess maybe just to kick it off, it would be ...

Financial Data and Key Metrics Changes - The company reported revenue of $659.6 million for Q2 2025, a decrease of 2.1% year over year, with revenue flat when excluding fuel price and foreign exchange fluctuations [8][34] - Adjusted net income per diluted share was $3.95, an increase of 1% compared to the same quarter last year, with an 8% growth when excluding fuel price and foreign exchange impacts [8][34] - The leverage ratio ended the quarter at 3.4 times, at the high end of the long-term range of 2.5 to 3.5 times, primarily due to share repurchase activity [39] Business Line Data and Key Metrics Changes Mobility Segment - Revenue declined 3.7% year over year, impacted by a 4.2% drag from lower fuel prices and foreign exchange rates [35] - Transaction levels were down slightly from the prior year, with same store sales growth for local fleets in the U.S. declining in line with Q1 results [13][14] - The segment represents approximately 50% of total revenue, with a focus on fleet payment solutions and data-driven insights [11] Benefits Segment - Total revenue rose 8.5% year over year to $195.1 million, with SaaS account growth of 6% [36][20] - Custodial investment revenue increased by 11.4% to $57.8 million, benefiting from stable interest rates [36][23] - The segment represents approximately 30% of total company revenue, serving nearly 60% of the Fortune 1,000 [19] Corporate Payments Segment - Revenues decreased 11.8% year over year to $118.3 million, primarily due to a large customer transition [36] - Direct accounts payable volume grew more than 25% compared to last year, marking the third consecutive quarter of such growth [28] - The segment accounts for approximately 20% of total revenue, with embedded payments being the majority offering [24] Market Data and Key Metrics Changes - The company operates in three large markets: mobility, benefits, and corporate payments, each with significant long-term growth opportunities [11] - The benefits segment is expected to see increased market potential due to recent legislation expanding HSA eligibility [22] Company Strategy and Development Direction - The company remains optimistic about growth potential across all segments, driven by disciplined investments and a strong pipeline of new business [7][30] - Focus on enhancing product offerings and expanding customer base, particularly in the mobility and corporate payments segments [31][32] - The company is prioritizing cash flow to pay down debt and reduce leverage, with no additional share repurchases or material M&A expected in the near term [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment remains uncertain, but they are focused on factors within their control [41] - The company expects revenue growth to return in the second half of 2025, particularly in the corporate payments segment [38][41] - Management expressed confidence in the ability to close new sales and the positive impact of recent customer wins [15][32] Other Important Information - The company signed a long-term agreement with BP, which is expected to add between 0.5% to 1% to company revenue in the first full year after conversion [18][80] - The company is investing in AI-powered solutions to enhance customer experience and operational efficiency [23] Q&A Session Summary Question: Corporate payments initiatives and trends - Management discussed investments in product capabilities and early traction in the DirectAP business, highlighting a focus on mobile capabilities and end-to-end processing [45][46] Question: Mobility segment reacceleration timeline - Management indicated that same store sales weakness is expected to continue, but they are seeing good momentum in small business investments [48][49] Question: Corporate payments growth expectations - Management expects a return to growth in the corporate payments segment in Q3, driven by lapping negative comparisons and a strong pipeline of new customers [66][68] Question: HSA account growth strategies - Management attributed HSA account growth to the implementation of new customers and the scale of their platform, with expectations for continued market outperformance [69][70] Question: Corporate payments travel trends - Management noted stable travel trends with growth in volume, despite shifts in travel corridors and ticket rates [87][88]

Summary of WEX FY Conference Call (May 20, 2025) Company Overview - **Company**: WEX Inc. - **Industry**: Mobility and Corporate Payments Key Points Mobility Segment - **Tariff Impact**: The Over the Road (OTR) segment, which constitutes about one-third of the Mobility business, experienced strong volumes initially in Q1, but saw a softening towards the end of April due to tariff discussions and Easter-related disruptions [2][3] - **Domestic vs. Import Freight**: Approximately 90% of trucking in the U.S. involves domestically produced goods, with only 10% related to imports. This indicates a limited impact from import-related freight on overall volumes [4][5] - **Volume Increase**: A 50 basis point increase in volumes was estimated from Q4 to Q1 due to demand pull forward [4][5] - **Freight Pricing Correlation**: There is a loose correlation between freight prices and WEX's performance, particularly with spot rates reflecting real-time shipment needs [6][9] Credit Management - **Dynamic Credit Box**: WEX has invested in data analytics and machine learning to manage its credit box dynamically, allowing for adjustments based on customer spending patterns and delinquencies [10][11] - **Credit Losses**: Credit losses improved to 12 basis points in Q1, down from 15 basis points in the previous year, indicating effective credit management [12][13] - **Recession Preparedness**: The company has conducted scenario modeling for potential recession impacts and feels well-prepared to manage credit losses [17][18] Electric Vehicle (EV) Transition - **Market Readiness**: WEX has developed solutions for the EV transition, including on-route charging and home charging solutions, but adoption in commercial fleets is slow due to complexity and varied use cases [21][24] International Opportunities - **Global Expansion**: WEX sees potential for international growth, particularly in Europe and Australia, but prioritizes investments based on the highest return opportunities [26][28] Corporate Payments Segment - **Travel and Non-Travel Business**: The travel segment is undergoing a contract migration, which has temporarily affected revenue, but volumes remain strong. The non-travel segment is slower growing, but investments in embedded and direct business are yielding positive results [29][31] - **Volume Growth**: The direct business saw a 25% volume growth in both Q1 and Q4, reflecting successful investments [33] Competitive Landscape - **Infrastructure Advantage**: WEX's established infrastructure for servicing complex travel needs provides a competitive edge over new entrants who lack similar capabilities [40][41] - **Market Position**: WEX has captured market share due to its scale and ability to meet sophisticated client needs across multiple geographies [48] Financial Sensitivity to Interest Rates - **Revenue Impact**: A 100 basis point change in interest rates could impact revenue by approximately $40 million, primarily affecting the mobility and HSA segments [54][55] - **EPS Sensitivity**: Higher interest rates could negatively impact EPS due to corporate debt, despite benefiting revenue [56] Capital Allocation Strategy - **Leverage Management**: WEX is focused on reducing leverage to historical levels and is not currently pursuing M&A opportunities [63][64] Additional Insights - **SaaS Accounts Growth**: A 6% increase in SaaS accounts was noted, driven by a successful open enrollment season [49][50] - **HSA Market Trends**: The HSA market continues to grow, supported by regulatory advocacy and employer interest, despite a slowdown in account growth rates [51][52] This summary encapsulates the key insights and data points from the WEX FY Conference Call, highlighting the company's performance, strategic initiatives, and market dynamics.