WEX Inc. Reports Third Quarter 2021 Financial Results

PORTLAND, Maine--()--WEX Inc. (NYSE: WEX), a leading financial technology service provider, today reported financial results for the three months ended September 30, 2021.

“We delivered impressive results in the third quarter driven by recovering customer spend patterns from the COVID impacted lows and implementation of new customer wins coming from continued success in the marketplace. Importantly, total purchase volume processed across the Company reached an all-time high of $26 billion up 93% as we continue to capitalize on these positive trends,” said Melissa Smith, WEX’s Chair and Chief Executive Officer.

Ms. Smith added, “The strategic investments we have made over the last few years to expand our modern commerce platform are paying dividends. Our proven track record coupled with market-leading innovation, integrated solutions, and digital marketing engine is resonating in the marketplace and underpinning our impressive results. Payment ecosystems can be complex, which is why we work to seamlessly integrate into our customer’s workflows and create an intelligent, secure, highly scalable, and resilient infrastructure. We are excited about the growth opportunities ahead and remain committed to driving long-term shareholder value while delivering for our customers.”

Third Quarter 2021 Financial Results

Total revenue for the third quarter of 2021 increased 26% to $482.8 million from $382.1 million for the third quarter of 2020. This revenue increase in the quarter includes a $34.9 million favorable impact from fuel prices and spreads and a $1.0 million positive impact from foreign exchange rates.

Net income attributable to shareholders on a GAAP basis increased by $114.2 million to net income of $48.3 million, or $1.07 per diluted share, compared with a net loss of $65.8 million, or $(1.49) per diluted share, for the third quarter of 2020. The Company's adjusted net income attributable to shareholders, which is a non-GAAP measure, was $111.1 million for the third quarter of 2021, or $2.45 per diluted share, up 54% per diluted share from $70.9 million or $1.59 per diluted share for the same period last year. See Exhibit 1 for a full explanation and reconciliation of adjusted net income attributable to shareholders and adjusted net income attributable to shareholders per diluted share to the comparable GAAP measures.

Third Quarter 2021 Performance Metrics

  • Average number of vehicles serviced was approximately 16.2 million, an increase of 6% from the third quarter of 2020.
  • Total fuel transactions processed increased 8% from the third quarter of 2020 to 161.8 million. Payment processing transactions increased 11% to 134.0 million.
  • Travel and Corporate Solutions' segment purchase volume grew 172% to $12.8 billion from $4.7 billion in the third quarter of 2020.
  • Health and Employee Benefit Solutions' average number of Software-as-a-Service (SaaS) accounts in the U.S. grew 16% to 16.9 million from 14.6 million in the third quarter of 2020.

“Building upon the strong momentum in the first half of the year, third quarter results exceeded our expectations, with revenues substantially surpassing the previous quarterly high and adjusted earnings up both year-over-year and sequentially. Our strong adjusted earnings results were driven primarily by persistent better-than-expected volume in our Fleet Solutions and Travel and Corporate Solutions segments, and double-digit revenue increases across each segment,” said Roberto Simon, WEX’s Chief Financial Officer. “We continue to integrate our recent acquisitions ahead of schedule, while driving robust organic growth and realizing operating efficiencies. In addition, we remain focused on driving innovation across technology platforms in-line with accelerating global trends.”

In a separate press release, the Company also announced today that Robert Deshaies, current President of the Health segment, will be its new Chief Operating Officer, Americas, effective January 1, 2022. In addition, Scott Phillips, currently President, Global Fleet, will retain his current position until January 1, 2022, and will help facilitate a smooth transition of the Fleet business, until he leaves WEX on April 1, 2022.

Financial Guidance and Assumptions

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

  • For the fourth quarter of 2021, the Company expects revenue in the range of $468 million to $483 million and adjusted net income in the range of $102 million to $111 million, or $2.25 to $2.45 per diluted share.
  • For the full year 2021, the Company expects revenue in the range of $1.821 billion to $1.836 billion and adjusted net income in the range of $400 million to $409 million, or $8.81 to $9.01 per diluted share.

Fourth quarter and full year 2021 guidance is based on assumed average U.S. retail fuel prices of $3.45 and $3.12 per gallon, respectively, with some of the benefit of higher prices in the U.S. being offset by expected lower spreads in Europe. The fuel prices referenced above are based on the applicable NYMEX futures price from the week of October 18, 2021. Our guidance assumes approximately 45.4 million fully diluted shares outstanding for the full year. In addition, in October, the Company renewed a contract with a significant Corporate Payments customer which will alter the presentation of revenue. While there is no material impact to operating income, the accounting presentation of revenue will change from gross to net, with a corresponding change in sales and marketing costs. In 2020, fourth quarter revenue would have been approximately $15 million lower due to this change, which is reflected in the guidance above.

The Company's adjusted net income 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, the gain/loss on sales of subsidiary, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, similar adjustments attributable to our non-controlling interests and certain tax related items. We are unable to reconcile our adjusted net income 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, acquisition and divestiture related items and adjustments to the redemption value of a non-controlling interest, 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 nine months ended September 30, 2021, and in Exhibit 3, a table of selected non-financial metrics for the quarter ended September 30, 2021 and four preceding quarters. The Company is also providing segment revenue for the three and nine months ended September 30, 2021 and 2020 in Exhibit 4 and information regarding segment adjusted operating income margin and adjusted operating income margin in Exhibit 5.

Conference Call Details

In conjunction with this announcement, WEX will host a conference call today, October 28, 2021, 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 +1 (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 a leading financial technology service provider. We provide payment solutions to businesses of all sizes across a wide spectrum of sectors, including fleet, corporate payments, travel and health. WEX has offices in 14 countries and employs approximately 5,400 people around the world. Learn more at LinkedIn, Facebook, Instagram, Twitter, and our corporate blog. For more information, visit www.wexinc.com.

Forward-Looking Statements

This earnings release contains forward-looking statements, including statements regarding: assumptions underlying the Company's future financial performance, future operations; future growth opportunities and expectations; expectations for future revenue performance, future impacts from areas of investment, expectations for the macro environment; and, expectations for volumes. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this earnings release, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the demand for worldwide travel as a result of COVID-19 and the length of time it may take for the travel industry to rebound to and grow beyond pre-pandemic levels; the extent to which the coronavirus (COVID-19) pandemic and measures taken in response thereto impact our business, results of operations and financial condition in excess of current expectations; the impact of fluctuations in fuel prices and fuel spreads in our international markets, including the resulting impact on our revenues and net income; the effects of general economic conditions, including those caused by the effects of COVID-19, on overall employment, travel and fueling patterns as well as payment and transaction processing activity; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; limitations on interchange fees; failure to comply with the applicable requirements of MasterCard or Visa contracts and rules; the Company’s failure to maintain or renew key commercial agreements or to maintain volumes under such agreements; breaches of the Company’s technology systems or those of our third-party service providers and any resulting negative impact on our 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 Company’s ability to successfully finalize the recently announced Executive Leadership Team transition plan and to appoint additional officers; the success of the Company’s recently announced Executive Leadership Team and strategic reorganization; the effects of the Company’s business expansion and acquisition efforts; the failure of corporate investments to result in anticipated strategic value; the Company’s failure to comply with the Treasury Regulations applicable to non-bank custodians; potential adverse changes to business or employee relationships, including those resulting from the completion of an acquisition; competitive responses to any acquisitions; uncertainty of the expected financial performance of the combined operations following completion of an acquisition; the failure to complete or successfully integrate the Company’s acquisitions or the ability to realize anticipated synergies and cost savings from such transactions; unexpected costs, charges, or expenses resulting from an acquisition; the Company’s failure to successfully acquire, integrate, operate and expand commercial fuel card programs; the impact and size of credit losses; the impact of changes to the Company’s credit standards; failure to successfully implement the Company’s information technology strategies and capabilities in connection with its technology outsourcing and insourcing arrangements and any resulting cost associated with that failure; legal, regulatory, political and economic uncertainty surrounding the United Kingdom’s departure from the European Union and the resulting trade agreement; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of the future transition from LIBOR as a global benchmark to a replacement rate; the impact of the Company’s debt instruments on the Company’s operations; the impact of increased 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 our outstanding common stock into the public market, or the perception that such sales or dispositions could occur; the possible dilution to our stockholders caused by the issuance of additional shares of common stock or equity-linked securities, whether as result of our convertible notes or otherwise; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 1, 2021 and in Item 1A of our quarterly report on Form 10-Q for the quarter ended June 30, 2021, filed with the Securities and Exchange Commission on August 4, 2021.

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 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 thousands, except per share data)
(unaudited)

 

Three months ended September 30,

 

Nine months ended September 30,

 

2021

 

2020

 

2021

 

2020

Revenues

 

 

 

 

 

 

 

Payment processing revenue

$

226,126

 

 

$

171,077

 

 

$

627,941

 

 

$

522,575

 

Account servicing revenue

137,724

 

 

112,417

 

 

389,344

 

 

335,736

 

Finance fee revenue

67,769

 

 

46,307

 

 

179,421

 

 

144,945

 

Other revenue

51,145

 

 

52,315

 

 

156,298

 

 

157,623

 

Total revenues

482,764

 

 

382,116

 

 

1,353,004

 

 

1,160,879

 

Cost of services

 

 

 

 

 

 

 

Processing costs

121,207

 

 

102,244

 

 

347,177

 

 

307,152

 

Service fees

14,246

 

 

10,881

 

 

39,151

 

 

34,335

 

Provision for credit losses

14,127

 

 

12,283

 

 

32,148

 

 

66,851

 

Operating interest

2,124

 

 

5,262

 

 

7,019

 

 

20,151

 

Depreciation and amortization

28,226

 

 

26,202

 

 

83,871

 

 

76,115

 

Total cost of services

179,930

 

 

156,872

 

 

509,366

 

 

504,604

 

General and administrative

79,486

 

 

73,131

 

 

245,460

 

 

197,432

 

Sales and marketing

82,225

 

 

64,592

 

 

246,177

 

 

188,118

 

Depreciation and amortization

40,301

 

 

39,314

 

 

118,360

 

 

118,907

 

Loss on sale of subsidiary

 

 

46,362

 

 

 

 

46,362

 

Operating income

100,822

 

 

1,845

 

 

233,641

 

 

105,456

 

Financing interest expense

(32,493)

 

 

(40,950)

 

 

(98,250)

 

 

(101,813)

 

Change in fair value of contingent consideration

2,800

 

 

 

 

(44,900)

 

 

 

Other income

3,617

 

 

 

 

3,617

 

 

 

Net foreign currency loss

(9,962)

 

 

(784)

 

 

(11,375)

 

 

(31,973)

 

Net unrealized gain (loss) on financial instruments

6,424

 

 

3,774

 

 

19,470

 

 

(32,115)

 

Income (loss) before income taxes

71,208

 

 

(36,115)

 

 

102,203

 

 

(60,445)

 

Income tax expense (benefit)

19,340

 

 

21,602

 

 

16,924

 

 

(3,852)

 

Net income (loss)

51,868

 

 

(57,717)

 

 

85,279

 

 

(56,593)

 

Less: Net income from non-controlling interests

134

 

 

1,244

 

 

1,099

 

 

3,282

 

Net income (loss) attributable to WEX Inc.

$

51,734

 

 

$

(58,961)

 

 

$

84,180

 

 

$

(59,875)

 

Change in value of redeemable non-controlling interest

(3,416)

 

 

(6,879)

 

 

(72,283)

 

 

50,437

 

Net income (loss) attributable to shareholders

$

48,318

 

 

$

(65,840)

 

 

$

11,897

 

 

$

(9,438)

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to shareholders per share:

 

 

 

 

 

 

 

Basic

$

1.08

 

 

$

(1.49)

 

 

$

0.27

 

 

$

(0.22)

 

Diluted

$

1.07

 

 

$

(1.49)

 

 

$

0.26

 

 

$

(0.22)

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

44,861

 

 

44,166

 

 

44,664

 

 

43,720

 

Diluted

45,279

 

 

44,166

 

 

45,334

 

 

43,720

 

WEX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

 

September 30,
2021

 

December 31,
2020

Assets

 

 

 

Cash and cash equivalents

$

533,830

 

 

$

852,033

 

Restricted cash

628,436

 

 

477,620

 

Accounts receivable

3,053,565

 

 

1,993,329

 

Securitized accounts receivable, restricted

126,648

 

 

93,236

 

Prepaid expenses and other current assets

93,275

 

 

86,629

 

Total current assets

4,435,754

 

 

3,502,847

 

Property, equipment and capitalized software

178,797

 

 

188,340

 

Goodwill and other intangible assets

4,596,436

 

 

4,240,150

 

Investment securities

36,855

 

 

37,273

 

Deferred income taxes, net

36,431

 

 

17,524

 

Other assets

229,858

 

 

197,227

 

Total assets

$

9,514,131

 

 

$

8,183,361

 

Liabilities and Stockholders’ Equity

 

 

 

Accounts payable

$

1,289,591

 

 

$

778,207

 

Accrued expenses

432,879

 

 

362,472

 

Restricted cash payable

627,217

 

 

477,620

 

Short-term deposits

1,016,327

 

 

911,395

 

Short-term debt, net

183,244

 

 

152,730

 

Other current liabilities

55,377

 

 

58,429

 

Total current liabilities

3,604,635

 

 

2,740,853

 

Long-term debt, net

2,802,317

 

 

2,874,113

 

Long-term deposits

600,496

 

 

148,591

 

Deferred income taxes, net

204,730

 

 

220,122

 

Other liabilities

266,221

 

 

164,546

 

Total liabilities

7,478,399

 

 

6,148,225

 

Commitments and contingencies

 

 

 

Redeemable non-controlling interest

191,487

 

 

117,219

 

Stockholders’ Equity

 

 

 

Total WEX Inc. stockholders’ equity

1,844,245

 

 

1,904,895

 

Non-controlling interest

 

 

13,022

 

Total stockholders’ equity

1,844,245

 

 

1,917,917

 

Total liabilities and stockholders’ equity

$

9,514,131

 

 

$

8,183,361

 

Exhibit 1
Reconciliation of Non-GAAP Measures
(in thousands, except per share data)
(unaudited)

Reconciliation of GAAP Net Income (Loss) Attributable to Shareholders to Adjusted Net Income Attributable to Shareholders

 

Three Months Ended September 30,

 

2021

 

2020

 

 

 

per diluted share

 

 

 

per diluted share

Net income (loss) attributable to shareholders

$

48,318

 

 

$

1.07

 

 

$

(65,840)

 

 

$

(1.49)

 

Unrealized gain on financial instruments

(6,424)

 

 

(0.14)

 

 

(3,774)

 

 

(0.09)

 

Net foreign currency remeasurement loss

9,962

 

 

0.22

 

 

784

 

 

0.02

 

Change in fair value of contingent consideration

(2,800)

 

 

(0.06)

 

 

 

 

 

Acquisition–related intangible amortization

46,965

 

 

1.04

 

 

42,831

 

 

0.97

 

Other acquisition and divestiture related items

3,395

 

 

0.07

 

 

20,328

 

 

0.46

 

Loss on sale of subsidiary

 

 

 

 

46,362

 

 

1.05

 

Stock–based compensation

22,166

 

 

0.49

 

 

18,170

 

 

0.41

 

Other costs

1,711

 

 

0.04

 

 

1,045

 

 

0.02

 

Debt restructuring and debt issuance cost amortization

2,879

 

 

0.06

 

 

5,329

 

 

0.12

 

ANI adjustments attributable to non–controlling interests

2,848

 

 

0.06

 

 

6,233

 

 

0.14

 

Tax related items

(17,904)

 

 

(0.40)

 

 

(614)

 

 

(0.01)

 

Dilutive impact of stock awards1

 

 

 

 

 

 

(0.01)

 

Adjusted net income attributable to shareholders

$

111,116

 

 

$

2.45

 

 

$

70,854

 

 

$

1.59

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2021

 

2020

 

 

 

per diluted share

 

 

 

per diluted share

Net income (loss) attributable to shareholders

$

11,897

 

 

0.26

 

 

$

(9,438)

 

 

(0.22)

 

Unrealized (gain) loss on financial instruments

(19,470)

 

 

(0.43)

 

 

32,115

 

 

0.73

 

Net foreign currency remeasurement loss

11,375

 

 

0.25

 

 

31,973

 

 

0.73

 

Change in fair value of contingent consideration

44,900

 

 

0.99

 

 

 

 

 

Acquisition–related intangible amortization

134,713

 

 

2.97

 

 

127,847

 

 

2.92

 

Other acquisition and divestiture related items

28,881

 

 

0.64

 

 

36,005

 

 

0.82

 

Loss on sale of subsidiary

 

 

 

 

46,362

 

 

1.06

 

Stock–based compensation

62,771

 

 

1.38

 

 

45,059

 

 

1.03

 

Other costs

15,653

 

 

0.35

 

 

7,980

 

 

0.18

 

Debt restructuring and debt issuance cost amortization

19,432

 

 

0.43

 

 

9,989

 

 

0.23

 

ANI adjustments attributable to non–controlling interests

69,854

 

 

1.54

 

 

(52,101)

 

 

(1.19)

 

Tax related items

(82,722)

 

 

$

(1.82)

 

 

$

(72,298)

 

 

$

(1.65)

 

Dilutive impact of stock awards1

 

 

 

 

 

 

(0.03)

 

Adjusted net income attributable to shareholders

$

297,284

 

 

$

6.56

 

 

$

203,493

 

 

$

4.61

 

1 As the Company reported a net loss for the three and nine months ended September 30, 2020 under U.S. Generally Accepted Accounting Principles (“GAAP”), the diluted weighted average shares outstanding equals the basic weighted average shares outstanding for those periods. The non-GAAP adjustments described above resulted in adjusted net income attributable to shareholders (versus a loss on a GAAP basis) for the three and nine months ended September 30, 2020. Therefore, dilutive common stock equivalents have been included in the calculation of adjusted diluted weighted average shares outstanding to arrive at adjusted per share data.

Reconciliation of GAAP Operating Income to Total Segment Adjusted Operating Income and Adjusted Operating Income

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Operating income

$

100,822

 

 

$

1,845

 

 

$

233,641

 

 

$

105,456

 

Unallocated corporate expenses

20,977

 

 

14,817

 

 

54,360

 

 

45,313

 

Acquisition-related intangible amortization

46,965

 

 

42,831

 

 

134,713

 

 

127,847

 

Other acquisition and divestiture related items

7,012

 

 

15,430

 

 

32,498

 

 

31,107

 

Loss on sale of subsidiary

 

 

46,362

 

 

 

 

46,362

 

Stock-based compensation

22,166

 

 

18,170

 

 

62,771

 

 

45,059

 

Other costs

1,711

 

 

1,045

 

 

15,653

 

 

7,980

 

Debt restructuring costs

120

 

 

(240)

 

 

6,056

 

 

525

 

Total segment adjusted operating income

$

199,773

 

 

$

140,260

 

 

$

539,692

 

 

$

409,649

 

Unallocated corporate expenses

(20,977)

 

 

(14,817)

 

 

(54,360)

 

 

(45,313)

 

Adjusted operating income

$

178,796

 

 

$

125,443

 

 

$

485,332

 

 

$

364,336

 

The Company's non-GAAP adjusted net income 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, loss on sale of subsidiary, 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, loss on sale of subsidiary, stock-based compensation, other costs, and debt restructuring costs. Total segment adjusted operating income incorporates these same adjustments and further excludes unallocated corporate expenses.

Although adjusted net income, 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 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 basis that excludes the above items because:

  • 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 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 health savings accounts, 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 are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate.
  • The Company considers certain acquisition-related costs, including 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.
  • The loss on sale of subsidiary relates to the divestiture of the Company’s former Brazilian subsidiary as of the date of sale, September 30, 2020, and the associated write-off of its assets and liabilities. As previously discussed, gains and losses from divestitures are considered by the Company to be unpredictable and dependent on factors that may be outside of our control. The exclusion of these gains and losses are consistent with the Company’s practice of excluding other non-recurring items associated with strategic transactions.
  • 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.
  • We exclude certain other costs when evaluating our continuing business performance when such items are not consistently occurring and do not reflect expected future operating expense, nor provide insight into the fundamentals of current or past operations of our business. These include costs related to certain identified initiatives (including 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. For the nine months ended September 30, 2021, other costs additionally include a penalty of $10.3 million incurred on termination of a vendor contract. For the three and nine months ended September 30, 2020, other costs include certain costs incurred in association with COVID-19, including the cost of providing additional health, welfare and technological support to our employees as they work remotely.
  • Debt restructuring and debt issuance cost amortization are unrelated to the continuing operations of the Company. Debt restructuring costs 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 U.S. GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes as well as the impact from certain discrete tax items. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s U.S. GAAP tax provision.
  • 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, 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, 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, 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.

Exhibit 2

Impact of Certain Macro Factors on Reported Revenue and Adjusted Net Income

(in thousands, except per share data)

(unaudited)

The table below shows the impact of certain macro factors on reported revenue:

 

Segment Revenue Results

 

Fleet Solutions

 

Travel and Corporate
Solutions

 

Health and Employee
Benefit Solutions

 

Total WEX Inc.

 

Three months ended September 30,

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

Reported revenue

$

286,361

 

 

$

228,704

 

 

$

91,002

 

 

$

64,296

 

 

$

105,401

 

 

$

89,116

 

 

$

482,764

 

 

$

382,116

 

FX impact (favorable) / unfavorable

$

(790)

 

 

$

 

 

$

(223)

 

 

$

 

 

$

 

 

$

 

 

$

(1,013)

 

 

$

 

PPG impact (favorable) / unfavorable

$

(34,894)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(34,894)

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Revenue Results

 

Fleet Solutions

 

Travel and Corporate
Solutions

 

Health and Employee
Benefit Solutions

 

Total WEX Inc.

 

Nine months ended September 30,

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

Reported revenue

$

804,586

 

 

$

682,931

 

 

$

243,406

 

 

$

203,150

 

 

$

305,012

 

 

$

274,798

 

 

$

1,353,004

 

 

$

1,160,879

 

FX impact (favorable) / unfavorable

$

(8,406)

 

 

$

 

 

$

(1,101)

 

 

$

 

 

$

 

 

$

 

 

$

(9,507)

 

 

$

 

PPG impact (favorable) / unfavorable

$

(67,199)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(67,199)

 

 

$

 

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 2020 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 2020 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:

 

Segment Estimated Earnings Impact

 

Fleet Solutions

 

Travel and Corporate
Solutions

 

Health and Employee
Benefit Solutions

 

Three months ended September 30,

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

FX impact (favorable) / unfavorable

$

(426)

 

 

$

 

 

$

(165)

 

 

$

 

 

$

2

 

 

$

 

PPG impact (favorable) / unfavorable

$

(22,035)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

Nine months ended September 30,

 

2021

 

2020

 

2021

 

2020

 

2021

 

2020

FX impact (favorable) / unfavorable

$

(4,061)

 

 

$

 

 

$

(704)

 

 

$

 

 

$

5

 

 

$

 

PPG impact (favorable) / unfavorable

$

(42,509)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

To determine the estimated earnings 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 2020 acquisitions for one year following the acquisition dates.

To determine the estimated earnings 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 2020 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 Non-Financial Metrics

(unaudited)

 

Q3 2021

 

Q2 2021

 

Q1 2021

 

Q4 2020

 

Q3 2020

Fleet Solutions:

 

 

 

 

 

 

 

 

 

Payment processing transactions (000s) (1)

134,029

 

 

130,104

 

 

118,389

 

 

118,287

 

 

120,900

 

Payment processing gallons of fuel (000s) (2)

3,576,781

 

 

3,483,695

 

 

3,233,943

 

 

3,265,927

 

 

3,247,507

 

Average US fuel price (US$ / gallon)

$

3.23

 

 

$

3.04

 

 

$

2.72

 

 

$

2.26

 

 

$

2.23

 

Payment processing $ of fuel (000s) (3)

$

11,907,220

 

 

$

10,995,418

 

 

$

9,176,960

 

 

$

7,767,530

 

 

$

7,609,098

 

Net payment processing rate (4)

1.09

%

 

1.15

%

 

1.20

%

 

1.27

%

 

1.35

%

Payment processing revenue (000s)

$

130,006

 

 

$

126,450

 

 

$

110,577

 

 

$

98,954

 

 

$

102,419

 

Net late fee rate (5)

0.45

%

 

0.41

%

 

0.45

%

 

0.54

%

 

0.48

%

Late fee revenue (000s) (6)

$

53,104

 

 

$

45,235

 

 

$

41,150

 

 

$

41,901

 

 

$

36,232

 

Travel and Corporate Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (7)

$

12,799,555

 

 

$

8,736,019

 

 

$

6,107,675

 

 

$

4,968,321

 

 

$

4,699,737

 

Net interchange rate (8)

0.62

%

 

0.78

%

 

0.94

%

 

1.26

%

 

1.13

%

Payment solutions processing revenue (000s)

$

79,815

 

 

$

68,282

 

 

$

57,248

 

 

$

62,376

 

 

$

53,239

 

Health and Employee Benefit Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (9)

$

1,173,913

 

 

$

1,311,131

 

 

$

1,484,226

 

 

$

1,074,977

 

 

$

1,120,786

 

Average number of SaaS accounts (000s) (10)

16,912

 

 

16,380

 

 

15,513

 

 

14,502

 

 

14,599

 

Definitions and explanations:

(1) Payment processing transactions represents the total number of purchases made by fleets that have a payment processing relationship with WEX.
(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 dollars 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 the dollar value of each payment processing 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 in the Health and Employee Benefit Solutions segment represents the total US dollar value of all transactions where interchange is earned by WEX.
(10) Average number of Health and Employee Benefit Solutions accounts represents the number of active Consumer Directed Health, COBRA, and billing accounts on our SaaS platforms in the United States.

Exhibit 4

Segment Revenue Information

(in thousands)

(unaudited)

 

Three months ended
September 30,

 

Increase (decrease)

 

Nine months ended
September 30,

 

Increase (decrease)

Fleet Solutions

2021

 

2020

 

Amount

 

Percent

 

2021

 

2020

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

130,006

 

 

$

102,418

 

 

$

27,588

 

 

27

%

 

$

367,032

 

 

$

305,888

 

 

$

61,144

 

 

20

%

Account servicing revenue

43,671

 

 

39,350

 

 

4,321

 

 

11

%

 

125,955

 

 

115,252

 

 

10,703

 

 

9

%

Finance fee revenue

67,529

 

 

46,129

 

 

21,400

 

 

46

%

 

178,627

 

 

143,934

 

 

34,693

 

 

24

%

Other revenue

45,155

 

 

40,807

 

 

4,348

 

 

11

%

 

132,972

 

 

117,857

 

 

15,115

 

 

13

%

Total revenues

$

286,361

 

 

$

228,704

 

 

$

57,657

 

 

25

%

 

$

804,586

 

 

$

682,931

 

 

$

121,655

 

 

18

%

 

Three months ended
September 30,

 

Increase (decrease)

 

Nine months ended
September 30,

 

Increase (decrease)

Travel and Corporate Solutions

2021

 

2020

 

Amount

 

Percent

 

2021

 

2020

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

79,815

 

 

$

53,239

 

 

$

26,576

 

 

50

%

 

$

205,345

 

 

$

166,768

 

 

$

38,577

 

 

23

%

Account servicing revenue

10,908

 

 

9,964

 

 

944

 

 

9

%

 

32,817

 

 

31,210

 

 

1,607

 

 

5

%

Finance fee revenue

200

 

 

145

 

 

55

 

 

38

%

 

693

 

 

900

 

 

(207)

 

 

(23)

%

Other revenue

79

 

 

948

 

 

(869)

 

 

(92)

%

 

4,551

 

 

4,272

 

 

279

 

 

7

%

Total revenues

$

91,002

 

 

$

64,296

 

 

$

26,706

 

 

42

%

 

$

243,406

 

 

$

203,150

 

 

$

40,256

 

 

20

%

 

Three months ended
September 30,

 

Increase (decrease)

 

Nine months ended
September 30,

 

Increase (decrease)

Health and Employee Benefit Solutions

2021

 

2020

 

Amount

 

Percent

 

2021

 

2020

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

16,305

 

 

$

15,420

 

 

$

885

 

 

6

%

 

$

55,564

 

 

$

49,919

 

 

$

5,645

 

 

11

%

Account servicing revenue

83,145

 

 

63,103

 

 

20,042

 

 

32

%

 

230,572

 

 

189,274

 

 

41,298

 

 

22

%

Finance fee revenue

40

 

 

33

 

 

7

 

 

21

%

 

101

 

 

111

 

 

(10)

 

 

(9)

%

Other revenue

5,911

 

 

10,560

 

 

(4,649)

 

 

(44)

%

 

18,775

 

 

35,494

 

 

(16,719)

 

 

(47)

%

Total revenues

$

105,401

 

 

$

89,116

 

 

$

16,285

 

 

18

%

 

$

305,012

 

 

$

274,798

 

 

$

30,214

 

 

11

%

 

Exhibit 5

Segment Adjusted Operating Income and Adjusted Operating Income Margin Information

(in thousands)

(unaudited)

 

 

Segment Adjusted Operating Income

 

Segment Adjusted Operating Income
Margin(1)

 

Three Months Ended September 30,

 

Three Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Fleet Solutions

$

144,853

 

 

$

102,276

 

 

50.6

%

 

44.7

%

Travel and Corporate Solutions

$

31,057

 

 

$

14,184

 

 

34.1

%

 

22.1

%

Health and Employee Benefit Solutions

$

23,863

 

 

$

23,800

 

 

22.6

%

 

26.7

%

Total segment adjusted operating income

$

199,773

 

 

$

140,260

 

 

41.4

%

 

36.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted Operating Income

 

Segment Adjusted Operating Income
Margin(1)

 

Nine Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Fleet Solutions

$

400,976

 

 

$

284,064

 

 

49.8

%

 

41.6

%

Travel and Corporate Solutions

$

55,229

 

 

$

47,060

 

 

22.7

%

 

23.2

%

Health and Employee Benefit Solutions

$

83,487

 

 

$

78,525

 

 

27.4

%

 

28.6

%

Total segment adjusted operating income

$

539,692

 

 

$

409,649

 

 

39.9

%

 

35.3

%

(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 total segment adjusted operating income to GAAP operating income.

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Adjusted operating income

$

178,796

 

 

$

125,443

 

 

$

485,332

 

 

$

364,336

 

Adjusted operating income margin (1)

37.0

%

 

32.8

%

 

35.9

%

 

31.4

%

(1) Adjusted operating income margin is derived by dividing adjusted operating income by revenue of the entire Company. See Exhibit 1 for a reconciliation of adjusted operating income to GAAP operating income.

Contacts

News media contact:
WEX
Rob Gould, 207-523-7429
robert.gould@wexinc.com

or

Investor contact:
WEX
Steve Elder, 207-523-7769
Steve.Elder@wexinc.com

Contacts

News media contact:
WEX
Rob Gould, 207-523-7429
robert.gould@wexinc.com

or

Investor contact:
WEX
Steve Elder, 207-523-7769
Steve.Elder@wexinc.com