WEX Inc. Reports Second Quarter 2022 Financial Results

By: via Business Wire

2Q revenue increased 30% year-over-year to a record $598 million

2Q GAAP net income per share increased to $0.76 per diluted share; 2Q adjusted net income per share increased 61% year-over-year to $3.71 per diluted share

2Q GAAP operating income margin of 28.6% and adjusted operating income margin of 42.3%

Total purchase volume increased 77% year-over-year to $37 billion

Raises full-year 2022 financial guidance

WEX (NYSE: WEX), the global commerce platform that simplifies the business of running a business, today reported financial results for the three and six months ended June 30, 2022.

“I am pleased to report that in the second quarter, we once again delivered record revenue and adjusted net income per share, driven by strong volume trends across the Company and favorable fuel prices,” said Melissa Smith, WEX’s Chair and Chief Executive Officer.

Ms. Smith added, “I'm proud of this performance, and it is a testament to our team's continued hard work that our results exceeded our high expectations. I believe we are well positioned as we continue to expand and diversify our offerings that businesses rely upon. We are also making targeted investments, which we believe will further solidify our market leadership position, accelerate our strategy, and enhance our speed to market.”

Second Quarter 2022 Financial Results

Total revenue for the second quarter of 2022 increased 30% to $598.2 million from $459.5 million for the second quarter of 2021. The revenue increase in the quarter includes a $64.2 million favorable impact from fuel prices and spreads and an $8.4 million negative impact from foreign exchange rates.

Net income attributable to shareholders on a GAAP basis increased by $68.0 million to net income of $34.1 million, or $0.76 per diluted share for the second quarter of 2022, compared with a net loss of $33.9 million, or $(0.76) per diluted share, for the second quarter of 2021. The Company's adjusted net income attributable to shareholders, which is a non-GAAP measure, was $169.4 million for the second quarter of 2022, or $3.71 per diluted share, up 61% per diluted share from $104.9 million or $2.31 per diluted share for the same period last year. GAAP operating income margin was 28.6%. Adjusted operating income margin was 42.3% in the second quarter of 2022 compared to 36.3% in the prior year. 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 2022 Performance Metrics

  • Total volume across the Company totaled $56.6 billion, an increase of 60% from the second quarter of 2021.
  • Fleet Solutions segment payment processing transactions increased 10% from the second quarter of 2021 to 143.2 million.
  • Average number of vehicles serviced was approximately 17.5 million, an increase of 8% from the second quarter of 2021.
  • Health and Employee Benefit Solutions' average number of Software-as-a-Service (SaaS) accounts in the U.S. grew 7% to 17.6 million from 16.4 million in the second quarter of 2021.
  • Travel and Corporate Solutions' segment purchase volume grew 96% to $17.1 billion from $8.7 billion in the second quarter of 2021.
  • During Q2 the company purchased approximately 520,000 shares of its stock for a total cost of approximately $81 million.

“Building on the momentum we had after the first quarter, we delivered a record-breaking second quarter in terms of both revenue and adjusted earnings by a wide margin,” said Jagtar Narula, WEX’s Chief Financial Officer. “I’m pleased to share that we are raising our full year guidance, while simultaneously making targeted investments in specific areas of strategic focus, including cross-sell, additional enhancements to our technology, product innovation including EV’s and process simplification.”

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 2022, the Company expects revenue in the range of $580 million to $590 million and adjusted net income in the range of $152 million to $156 million, or $3.35 to $3.45 per diluted share.
  • For the full year 2022, the Company now expects revenue in the range of $2.250 billion to $2.280 billion, up from the prior guidance range of $2.155 billion to $2.195 billion. Adjusted net income is now expected to be in the range of $592 million to $603 million, or $13.05 to $13.30 per diluted share, an increase from the prior guidance range of $569 million to $588 million, or $12.40 to $12.80 per diluted share.

Third quarter and full year 2022 guidance is based on an assumed average U.S. retail fuel prices of $4.50 and $4.36 per gallon, respectively. The fuel prices referenced above are based on the applicable NYMEX futures price from the week of July 18, 2022. Our guidance assumes approximately 46.5 million fully diluted shares outstanding for the full year.

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, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, 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, 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, 2022; and in Exhibit 3, a table of selected non-financial metrics for the quarter ended June 30, 2022 and the four preceding quarters. The Company is also providing segment revenue for the three and six months ended June 30, 2022 and 2021 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 28, 2022, 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 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; expectations for the macro environment; assumptions regarding future fuel prices; assumptions regarding Fleet credit loss; assumptions regarding our income tax rate; assumptions regarding the number of fully diluted shares outstanding; 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,” “will” 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 effects of general economic conditions, including a decline in demand for fuel, travel related services, or healthcare related services, and payment and transaction processing activity; the impact of fluctuations in fuel prices and fuel spreads, including the resulting impact on the Company’s revenues and net income; the failure to maintain or renew key customer and partner agreements and relationships, or to maintain volumes under such agreements; 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, and the Company’s and its industrial bank’s responses thereto, 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 comply with the applicable requirements of MasterCard or Visa contracts and rules; the extent to which the COVID-19 pandemic, including the emergence of new variants, and measures taken in response thereto impact the Company’s employees, business, results of operations and financial condition in excess of current expectations, particularly with respect to demand for worldwide travel; the impact and size of credit losses, including losses attributable to fraud; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; changes in interest rates and the rate of inflation; the ability to attract and retain employees; limitations on or compression of interchange fees; the effects of the Company’s business expansion and acquisition efforts; the failure of corporate investments to result in anticipated strategic value; the 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; 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 to realize anticipated synergies and cost savings from such acquisitions; unexpected costs, charges, or expenses resulting from an acquired company or business; 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; 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 possible dilution to the Company’s stockholders caused by the issuance of additional shares of common stock or equity-linked securities, whether as result of the Company’s convertible notes or otherwise; the impact of the transition from LIBOR as a global benchmark to a replacement rate; 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 of Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022. 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 June 30,

 

Six months ended June 30,

 

2022

 

2021

 

2022

 

2021

Revenues

 

 

 

 

 

 

 

Payment processing revenue

$

312,305

 

 

$

213,426

 

 

$

551,783

 

 

$

401,815

 

Account servicing revenue

 

137,638

 

 

 

132,997

 

 

 

277,579

 

 

 

251,620

 

Finance fee revenue

 

85,310

 

 

 

59,499

 

 

 

163,892

 

 

 

111,652

 

Other revenue

 

62,984

 

 

 

53,561

 

 

 

122,518

 

 

 

105,153

 

Total revenues

 

598,237

 

 

 

459,483

 

 

 

1,115,772

 

 

 

870,240

 

Cost of services

 

 

 

 

 

 

 

Processing costs

 

137,435

 

 

 

116,208

 

 

 

269,942

 

 

 

225,970

 

Service fees

 

14,856

 

 

 

13,759

 

 

 

30,606

 

 

 

24,905

 

Provision for credit losses

 

42,186

 

 

 

12,962

 

 

 

67,826

 

 

 

18,021

 

Operating interest

 

3,197

 

 

 

2,271

 

 

 

5,497

 

 

 

4,895

 

Depreciation and amortization

 

26,633

 

 

 

26,451

 

 

 

52,635

 

 

 

55,645

 

Total cost of services

 

224,307

 

 

 

171,651

 

 

 

426,506

 

 

 

329,436

 

General and administrative

 

83,482

 

 

 

79,543

 

 

 

162,145

 

 

 

165,974

 

Sales and marketing

 

80,440

 

 

 

85,605

 

 

 

154,385

 

 

 

163,952

 

Depreciation and amortization

 

38,877

 

 

 

40,406

 

 

 

79,331

 

 

 

78,059

 

Operating income

 

171,131

 

 

 

82,278

 

 

 

293,405

 

 

 

132,819

 

Financing interest expense

 

(31,820

)

 

 

(32,473

)

 

 

(61,509

)

 

 

(65,757

)

Change in fair value of contingent consideration

 

(88,200

)

 

 

(47,700

)

 

 

(104,800

)

 

 

(47,700

)

Net foreign currency (loss) gain

 

(19,408

)

 

 

1,342

 

 

 

(14,402

)

 

 

(1,413

)

Net unrealized gain on financial instruments

 

16,894

 

 

 

6,013

 

 

 

66,721

 

 

 

13,046

 

Income before income taxes

 

48,597

 

 

 

9,460

 

 

 

179,415

 

 

 

30,995

 

Income tax expense (benefit)

 

14,468

 

 

 

(746

)

 

 

56,500

 

 

 

(2,416

)

Net income

 

34,129

 

 

 

10,206

 

 

 

122,915

 

 

 

33,411

 

Less: Net income from non-controlling interests

 

 

 

 

239

 

 

 

268

 

 

 

965

 

Net income attributable to WEX Inc.

$

34,129

 

 

$

9,967

 

 

$

122,647

 

 

$

32,446

 

Change in value of redeemable non-controlling interest

 

 

 

 

(43,823

)

 

 

34,245

 

 

 

(68,867

)

Net income (loss) attributable to shareholders

$

34,129

 

 

$

(33,856

)

 

$

156,892

 

 

$

(36,421

)

 

 

 

 

 

 

 

 

Net income (loss) attributable to shareholders per share:

 

 

 

 

 

 

 

Basic

$

0.76

 

 

$

(0.76

)

 

$

3.50

 

 

$

(0.82

)

Diluted

$

0.76

 

 

$

(0.76

)

 

$

3.47

 

 

$

(0.82

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

44,790

 

 

 

44,788

 

 

 

44,851

 

 

 

44,566

 

Diluted

 

45,077

 

 

 

44,788

 

 

 

45,211

 

 

 

44,566

 

WEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

 

June 30,

2022

 

December 31,

2021

Assets

 

 

 

Cash and cash equivalents

$

438,754

 

$

588,923

Restricted cash

 

815,496

 

 

667,915

Accounts receivable

 

4,444,958

 

 

2,891,242

Investment securities

 

1,442,416

 

 

948,677

Securitized accounts receivable, restricted

 

171,415

 

 

125,186

Prepaid expenses and other current assets

 

112,995

 

 

77,569

Total current assets

 

7,426,034

 

 

5,299,512

Property, equipment and capitalized software

 

180,954

 

 

179,531

Goodwill and other intangible assets

 

4,428,374

 

 

4,551,353

Investment securities

 

37,253

 

 

39,650

Deferred income taxes, net

 

7,010

 

 

5,635

Other assets

 

243,296

 

 

231,147

Total assets

$

12,322,921

 

$

10,306,828

Liabilities and Stockholders’ Equity

 

 

 

Accounts payable

$

1,958,545

 

$

1,021,911

Accrued expenses

 

529,865

 

 

476,971

Restricted cash payable

 

815,520

 

 

668,014

Short-term deposits

 

2,885,727

 

 

2,026,420

Short-term debt, net

 

175,834

 

 

155,769

Other current liabilities

 

33,387

 

 

50,614

Total current liabilities

 

6,398,878

 

 

4,399,699

Long-term debt, net

 

2,761,531

 

 

2,695,365

Long-term deposits

 

588,932

 

 

652,214

Deferred income taxes, net

 

181,448

 

 

192,965

Other liabilities

 

575,765

 

 

273,706

Total liabilities

 

10,506,554

 

 

8,213,949

 

 

 

 

Redeemable non-controlling interest

 

 

 

254,106

Stockholders’ Equity

 

 

 

Total stockholders’ equity

 

1,816,367

 

 

1,838,773

Total liabilities and stockholders’ equity

$

12,322,921

 

$

10,306,828

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 June 30,

 

2022

 

2021

 

 

 

per diluted share

 

 

 

per diluted share

Net income (loss) attributable to shareholders

$

34,129

 

 

$

0.76

 

 

$

(33,856

)

 

$

(0.76

)

Unrealized gain on financial instruments

 

(16,894

)

 

 

(0.37

)

 

 

(6,013

)

 

 

(0.13

)

Net foreign currency loss (gain)

 

19,408

 

 

 

0.43

 

 

 

(1,342

)

 

 

(0.03

)

Change in fair value of contingent consideration

 

88,200

 

 

 

1.96

 

 

 

47,700

 

 

 

1.07

 

Acquisition–related intangible amortization

 

42,538

 

 

 

0.94

 

 

 

45,294

 

 

 

1.01

 

Other acquisition and divestiture related items

 

6,461

 

 

 

0.14

 

 

 

10,690

 

 

 

0.24

 

Stock–based compensation

 

25,267

 

 

 

0.56

 

 

 

21,662

 

 

 

0.48

 

Other costs

 

7,926

 

 

 

0.18

 

 

 

1,705

 

 

 

0.04

 

Debt restructuring and debt issuance cost amortization

 

4,694

 

 

 

0.10

 

 

 

11,461

 

 

 

0.26

 

ANI adjustments attributable to non–controlling interests

 

 

 

 

 

 

 

43,206

 

 

 

0.96

 

Tax related items

 

(42,348

)

 

 

(0.94

)

 

 

(35,613

)

 

 

(0.80

)

Dilutive impact of stock awards1

 

 

 

 

 

 

 

 

 

 

(0.03

)

Dilutive impact of convertible debt 2

 

 

 

 

(0.05

)

 

 

 

 

 

 

Adjusted net income attributable to shareholders

$

169,381

 

 

$

3.71

 

 

$

104,894

 

 

$

2.31

 

 

 

Six Months Ended June 30,

 

2022

 

2021

 

 

 

per diluted share

 

 

 

per diluted share

Net income (loss) attributable to shareholders

$

156,892

 

 

$

3.47

 

 

$

(36,421

)

 

$

(0.82

)

Unrealized gain on financial instruments

 

(66,721

)

 

 

(1.48

)

 

 

(13,046

)

 

 

(0.29

)

Net foreign currency loss

 

14,402

 

 

 

0.32

 

 

 

1,413

 

 

 

0.03

 

Change in fair value of contingent consideration

 

104,800

 

 

 

2.32

 

 

 

47,700

 

 

 

1.07

 

Acquisition–related intangible amortization

 

85,257

 

 

 

1.89

 

 

 

87,748

 

 

 

1.97

 

Other acquisition and divestiture related items

 

11,001

 

 

 

0.24

 

 

 

25,486

 

 

 

0.57

 

Stock–based compensation

 

50,487

 

 

 

1.12

 

 

 

40,605

 

 

 

0.91

 

Other costs

 

16,105

 

 

 

0.36

 

 

 

13,942

 

 

 

0.31

 

Debt restructuring and debt issuance cost amortization

 

7,973

 

 

 

0.18

 

 

 

16,553

 

 

 

0.37

 

ANI adjustments attributable to non–controlling interests

 

(34,587

)

 

 

(0.77

)

 

 

67,006

 

 

 

1.50

 

Tax related items

 

(45,173

)

 

 

(1.00

)

 

 

(64,818

)

 

 

(1.45

)

Dilutive impact of stock awards1

 

 

 

 

 

 

 

 

 

 

(0.07

)

Dilutive impact of convertible debt 2

 

 

 

 

(0.06

)

 

 

 

 

 

 

Adjusted net income attributable to shareholders

$

300,436

 

 

$

6.59

 

 

$

186,168

 

 

$

4.10

 

1 As the Company reported a net loss for the three and six months ended June 30, 2021 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 six months ended June 30, 2021. 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.

2 During the three and six months ended June 30, 2022, the dilutive impact of convertible notes has been calculated under the 'if-converted' method in accordance with GAAP. Under such method, $3.8 million and $7.6 million of interest expense associated with our convertible notes, net of tax, was added back to adjusted net income for the three and six months ended June 30, 2022, respectively, and 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 periods were included in the calculation of adjusted net income per diluted share, as the effect of including such adjustments was dilutive.

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,

 

2022

 

2021

 

2022

 

2021

Operating income

$

171,131

 

 

$

82,278

 

 

$

293,405

 

 

$

132,819

 

Unallocated corporate expenses

 

18,986

 

 

 

17,174

 

 

 

39,997

 

 

 

33,383

 

Acquisition-related intangible amortization

 

42,538

 

 

 

45,294

 

 

 

85,257

 

 

 

87,748

 

Other acquisition and divestiture related items

 

6,461

 

 

 

10,690

 

 

 

11,001

 

 

 

25,486

 

Stock-based compensation

 

25,267

 

 

 

21,662

 

 

 

50,487

 

 

 

40,605

 

Other costs

 

7,926

 

 

 

1,705

 

 

 

16,105

 

 

 

13,942

 

Debt restructuring costs

 

(17

)

 

 

5,299

 

 

 

(29

)

 

 

5,936

 

Total segment adjusted operating income

$

272,292

 

 

$

184,102

 

 

$

496,223

 

 

$

339,919

 

Unallocated corporate expenses

 

(18,986

)

 

 

(17,174

)

 

 

(39,997

)

 

 

(33,383

)

Adjusted operating income

$

253,306

 

 

$

166,928

 

 

$

456,226

 

 

$

306,536

 

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, 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, 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 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.
  • 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 six months ended June 30, 2021, other costs additionally include a penalty incurred on a vendor contract termination.
  • 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 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 tables below show 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 June 30,

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

Reported revenue

$

379,223

 

 

$

274,388

 

$

100,410

 

$

81,762

 

$

118,604

 

$

103,333

 

$

598,237

 

 

$

459,483

FX impact (favorable) / unfavorable

$

4,849

 

 

$

 

$

3,565

 

$

 

$

 

$

 

$

8,414

 

 

$

PPG impact (favorable) / unfavorable

$

(64,203

)

 

$

 

$

 

$

 

$

 

$

 

$

(64,203

)

 

$

 

 

Segment Revenue Results

 

Fleet Solutions

 

Travel and Corporate Solutions

 

Health and Employee Benefit Solutions

 

Total WEX Inc.

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

Reported revenue

 

698,362

 

 

 

518,225

 

 

177,661

 

 

152,404

 

 

239,749

 

 

199,611

 

$

1,115,772

 

 

$

870,240

FX impact (favorable) / unfavorable

$

6,933

 

 

$

 

$

4,259

 

$

 

$

 

$

 

$

11,192

 

 

$

PPG impact (favorable) / unfavorable

$

(105,342

)

 

$

 

$

 

$

 

$

 

$

 

$

(105,342

)

 

$

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 date.

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:

 

Segment Estimated Adjusted Net Income Impact

 

Fleet Solutions

 

Travel and Corporate Solutions

 

Health and Employee Benefit Solutions

 

Three months ended June 30,

 

2022

 

2021

 

2022

 

2021

 

2022

2021

FX impact (favorable) / unfavorable

$

2,081

 

$

 

$

2,529

$

 

$

16

 

$

PPG impact (favorable) / unfavorable

$

(40,347

)

 

$

 

$

 

$

 

$

 

$

 

 

Segment Estimated Adjusted Net Income Impact

 

Fleet Solutions

 

Travel and Corporate Solutions

 

Health and Employee Benefit Solutions

 

Six months ended June 30,

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

FX impact (favorable) / unfavorable

$

2,895

 

 

$

 

$

2,550

 

$

 

$

24

 

$

PPG impact (favorable) / unfavorable

$

(66,065

)

 

$

 

$

 

$

 

$

 

$

To determine the estimated adjusted net income 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 date.

To determine the estimated adjusted net income 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 Non-Financial Metrics

(unaudited)

 

Q2 2022

 

Q1 2022

 

Q4 2021

 

Q3 2021

 

Q2 2021

Fleet Solutions:

 

 

 

 

 

 

 

 

 

Payment processing transactions (000s) (1)

 

143,163

 

 

 

132,663

 

 

 

132,894

 

 

 

134,029

 

 

 

130,104

 

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

 

3,690,875

 

 

 

3,549,562

 

 

 

3,569,979

 

 

 

3,576,781

 

 

 

3,483,695

 

Average US fuel price (US$ / gallon)

$

4.98

 

 

$

3.95

 

 

$

3.42

 

 

$

3.23

 

 

$

3.04

 

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

$

18,639,733

 

 

$

14,390,257

 

 

$

12,600,745

 

 

$

11,907,220

 

 

$

10,995,418

 

Net payment processing rate (4)

 

1.09

%

 

 

1.06

%

 

 

1.16

%

 

 

1.09

%

 

 

1.15

%

Payment processing revenue (000s)

$

202,359

 

 

$

151,906

 

 

$

146,333

 

 

$

130,006

 

 

$

126,450

 

Net late fee rate (5)

 

0.38

%

 

 

0.44

%

 

 

0.48

%

 

 

0.45

%

 

 

0.41

%

Late fee revenue (000s) (6)

$

70,830

 

 

$

63,110

 

 

$

60,101

 

 

$

53,104

 

 

$

45,235

 

Travel and Corporate Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (7)

$

17,119,962

 

 

$

11,809,450

 

 

$

10,916,015

 

 

$

12,799,555

 

 

$

8,736,019

 

Net interchange rate (8)

 

0.52

%

 

 

0.55

%

 

 

0.63

%

 

 

0.62

%

 

 

0.78

%

Payment solutions processing revenue (000s)

$

88,608

 

 

$

65,075

 

 

$

68,747

 

 

$

79,815

 

 

$

68,282

 

Health and Employee Benefit Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (9)

$

1,514,004

 

 

$

1,630,218

 

 

$

1,146,436

 

 

$

1,173,913

 

 

$

1,311,131

 

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

 

17,572

 

 

 

17,847

 

 

 

16,222

 

 

 

16,912

 

 

 

16,380

 

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 $ 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 June 30,

 

Increase (decrease)

 

Six months ended June 30,

 

Increase (decrease)

Fleet Solutions

2022

 

2021

 

Amount

 

Percent

 

2022

 

2021

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

202,359

 

$

126,450

 

$

75,909

 

60

%

 

$

354,265

 

$

237,026

 

$

117,239

 

49

%

Account servicing revenue

 

43,860

 

 

42,293

 

 

1,567

 

4

%

 

 

86,303

 

 

82,284

 

 

4,019

 

5

%

Finance fee revenue

 

85,067

 

 

59,258

 

 

25,809

 

44

%

 

 

163,472

 

 

111,098

 

 

52,374

 

47

%

Other revenue

 

47,937

 

 

46,387

 

 

1,550

 

3

%

 

 

94,322

 

 

87,817

 

 

6,505

 

7

%

Total revenues

$

379,223

 

$

274,388

 

$

104,835

 

38

%

 

$

698,362

 

$

518,225

 

$

180,137

 

35

%

 

 

Three months ended June 30,

 

Increase (decrease)

 

Six months ended June 30,

 

Increase (decrease)

Travel and Corporate Solutions

2022

 

2021

 

Amount

 

Percent

 

2022

 

2021

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

88,608

 

$

68,282

 

$

20,326

 

 

30

%

 

$

153,683

 

$

125,530

 

$

28,153

 

 

22

%

Account servicing revenue

 

10,400

 

 

11,222

 

 

(822

)

 

(7

) %

 

 

21,158

 

 

21,909

 

 

(751

)

 

(3

) %

Finance fee revenue

 

216

 

 

199

 

 

17

 

 

9

%

 

 

357

 

 

493

 

 

(136

)

 

(28

) %

Other revenue

 

1,186

 

 

2,059

 

 

(873

)

 

(42

) %

 

 

2,463

 

 

4,472

 

 

(2,009

)

 

(45

) %

Total revenues

$

100,410

 

$

81,762

 

$

18,648

 

 

23

%

 

$

177,661

 

$

152,404

 

$

25,257

 

 

17

%

 

 

Three months ended June 30,

 

Increase (decrease)

 

Six months ended June 30,

 

Increase (decrease)

Health and Employee Benefit Solutions

2022

 

2021

 

Amount

 

Percent

 

2022

 

2021

 

Amount

 

Percent

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing revenue

$

21,338

 

$

18,694

 

$

2,644

 

 

14

%

 

$

43,835

 

$

39,259

 

$

4,576

 

12

%

Account servicing revenue

 

83,378

 

 

79,482

 

 

3,896

 

 

5

%

 

 

170,118

 

 

147,427

 

 

22,691

 

15

%

Finance fee revenue

 

27

 

 

42

 

 

(15

)

 

(36

) %

 

 

63

 

 

61

 

 

2

 

3

%

Other revenue

 

13,861

 

 

5,115

 

 

8,746

 

 

171

%

 

 

25,733

 

 

12,864

 

 

12,869

 

100

%

Total revenues

$

118,604

 

$

103,333

 

$

15,271

 

 

15

%

 

$

239,749

 

$

199,611

 

$

40,138

 

20

%

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 June 30,

 

Three Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Fleet Solutions

$

192,969

 

$

137,865

 

50.9

%

 

50.2

%

Travel and Corporate Solutions

$

51,016

 

$

17,157

 

50.8

%

 

21.0

%

Health and Employee Benefit Solutions

$

28,307

 

$

29,080

 

23.9

%

 

28.1

%

Total segment adjusted operating income

$

272,292

 

$

184,102

 

45.5

%

 

40.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted Operating Income

 

Segment Adjusted Operating Income Margin(1)

 

Six Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Fleet Solutions

$

353,070

 

$

256,123

 

50.6

%

 

49.4

%

Travel and Corporate Solutions

$

79,346

 

$

24,172

 

44.7

%

 

15.9

%

Health and Employee Benefit Solutions

$

63,807

 

$

59,624

 

26.6

%

 

29.9

%

Total segment adjusted operating income

$

496,223

 

$

339,919

 

44.5

%

 

39.1

%

(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 June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Adjusted operating income

$

253,306

 

 

$

166,928

 

 

$

456,226

 

 

$

306,536

 

Adjusted operating income margin (1)

 

42.3

%

 

 

36.3

%

 

 

40.9

%

 

 

35.2

%

(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.

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