WEX Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 1, 2025
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Operator

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

I would now like to turn the call over to Steve Elder. You may begin.

Steve Elder
Steve Elder
Senior Vice President-Global Investor Relations at WEX

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO and Jagtara Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk through prepared remarks have been posted to the Investor Relations section of the website at wexinc.com. A copy of the press release and supplemental materials have been included in an eight ks filed with the SEC yesterday afternoon. As a reminder, we will be discussing non GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin as well as adjusted free cash flow during our call.

Steve Elder
Steve Elder
Senior Vice President-Global Investor Relations at WEX

Please see Exhibit one of the press release for an explanation and reconciliation of these non GAAP measures. The company provides revenue guidance on a GAAP basis and earnings guidance on a non GAAP basis. Due to the uncertainty and indeterminate amount of certain elements that are included in reported GAAP earnings. I would also like to remind you that we will discuss forward looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward looking statements as a result of various factors, including those discussed in the press release, the supplemental materials and the risk factors identified in the most recently filed annual report on Form 10 ks and other subsequent SEC filings.

Steve Elder
Steve Elder
Senior Vice President-Global Investor Relations at WEX

While we may update forward looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Thank you, Steve, and good morning, everyone. We appreciate you joining us today. Let me begin by addressing the current macroeconomic landscape. While recent U. S.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Tariff policy decisions have created uncertainty in the economy, they do not directly impact WEX's operations. That said, we recognize that these policies influence our customers' behavior. In response, we are proactively engaging with them to assess potential impacts and develop plans for a wide range of possible scenarios. In this ever changing environment, our ability to adapt, innovate and stay focused on what matters most has never been more important. The secular growth drivers in each of our segments remain highly relevant and very much intact, and WEX is well positioned to continue advancing as an industry leader in our segments.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We've also consistently maintained high customer retention even during times of economic uncertainty, a testament to the strength of our value proposition and the trust we've built across our customer base. We believe that one of the advantages of WEX's business model is that our strong financial position in diversified segments provide a meaningful buffer against short term softness in any one sector. Our segments each have different opportunities and risks through economic and business cycles, which helps position us well to navigate ongoing macro uncertainty. In addition, these segments can leverage common technology, resources and investments, increasing our operating leverage and ability to scale quickly. I remain excited about the opportunities in front of us.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We are committed to balancing our long term investments while remaining disciplined and responsive to near term macro dynamics. Now turning to the first quarter results. We reported revenue of $636,600,000 for the quarter, a decrease of 2.5% year over year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q1 revenue was down 0.8% compared to the prior year. Adjusted net income per diluted share was $3.51 an increase of 1.4 compared to the same quarter last year.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q1 adjusted EPS grew 5%. Revenue for the quarter exceeded the midpoint of our guidance, while adjusted EPS was above the range. Operationally, our results were consistent with our expectations and we benefited from slightly higher than anticipated fuel prices. We remain laser focused on the factors we can control, including executing against our strategy, delivering differentiated products and value to our customers, and driving long term shareholder value through a disciplined returns driven approach to investment and capital allocation. At the same time, where we can, we're assessing and preparing for any financial impacts of policy and macroeconomic changes.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Now let's turn to an overview of our segments and how they performed in Q1. WEX operates across three large and growing markets: Mobility, Benefits and Corporate Payments, each of which we believe offers significant long term secular growth opportunities where we hold distinct competitive advantages. Mobility, our largest segment at approximately 50% of total revenue, delivers fleet payment solutions, transaction processing, and data driven insights to fleet operators and managers globally. Our proprietary closed loop payment network provides customers with enhanced data capture, custom controls and tailored economics and covers approximately 90% of fuel stations and 80% of EV charging locations in The U. S.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

These capabilities help fleet managers optimize costs, detect misuse, improve operational efficiency, and support the complexity of operating a mixed energy fleet. This segment has two primary categories. The first category, comprising roughly 70% of mobility revenue, is local fleets. The remaining 30% is driven by our over the road trucking customers. With more than 600,000 fleet customers globally, our competitive moat is built on being data rich, capital efficient and deeply embedded in our customers' daily operations, delivering both functional value and long term stickiness.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Q1 results for the mobility segment were in line with expectations. Transaction levels were down slightly from the prior year, partly due to external factors, including a number of weather events across The U. S. Same store sales growth for local fleets was down 3.9%. Commercially, over the road customers saw an uptick of approximately 2.6%.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Our working thesis for same store sales is that local fleets have been responding to the effects of a softening macro environment, while OTR benefited from a pull forward of trucking demand ahead of the implementation of tariffs. We're particularly pleased with our continued momentum in sales, renewals and customer retention. In Q1, we successfully extended long standing partnerships with several of the most respected names in the industry, including Circle K, Enterprise Fleet Management and J. B. Hunt, a testament to the value we deliver and the trust we've earned in the marketplace.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Turning now to our Benefits segment, which simplifies the complex world of employee benefits administration and represents approximately 30% of total company revenue. Here we offer a comprehensive platform that spans HSA, FSAs, HRAs, COBRA, and benefit enrollment and administration, enabling both employers and partners to help their employees make more informed benefit decisions. WEX serves nearly 60% of the Fortune 1,000 in this segment and manages more than 21,000,000 SaaS accounts. This segment is sticky due to the deeply embedded nature of our offering. For partners, it's integrated into their platforms.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

For direct customers, it serves as a critical employee benefit solution. For both customer sets, switching providers is complex and disruptive. The embedded nature of the platform, combined with high retention and predictable SaaS and custodial revenue streams, leads to attractive margins and long term customer value. We had a very good open enrollment season, which sets us up well for the remainder of this year. We grew total HSA accounts on the WEX benefits platform by 7% in Q1, bringing us to more than 8,500,000 HSA accounts.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Overall, SaaS account growth was 6% for the quarter. According to the twenty twenty four year end Devenir HSA Research report, HSA industry account growth was 5% for the market. So our 7% organic growth compares very well and underscores our competitive strength. This performance was driven largely by our direct accounts, which grew nearly 10% compared to the prior year. As we discussed in February, this is one of the key areas where we are increasing sales investments this year.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We believe the benefit segment is less sensitive to macroeconomic trends than the rest of the company and provides stability to wax during economic downturns. For example, during the COVID-nineteen pandemic, we saw the increase in unemployment have a modest impact to account growth, but this was partially offset by increasing usage of our COBRA product. As a result, total account growth remained fairly consistent despite the disruption. In addition, the interest income we earn is less sensitive to changes in interest rates as it is invested predominantly in fixed rate products with maturities that vary and extend over several years. As I stated earlier, one of the strengths of the company is how diverse segments don't react in lockstep to macro events.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

In the case of our Benefits segment, we evaluate long term growth profile and stability. Moving now to our Corporate Payments segment, which represents approximately 20% of our revenue and includes two major offerings, Embedded Payments and Direct Accounts Payable. Embedded Payments represents the majority of the revenue in the corporate payment segment, including all of our travel related customers. With this solution, we integrate virtual card payment capabilities into our customers' existing workflows. We combine highly customizable reconciliation benefits with a range of card products and currencies, an order of magnitude larger than most competitors.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

These capabilities are coupled with deep industry knowledge and experience and a best in class service approach. Our embedded payments offering has high operating leverage. Because the investment in the technology platform represents the majority of cost, it is a largely fixed cost base, and most incremental volume is accretive to our margins and cash flow. Our ability to compete and win here is built on our technical and domain expertise strengths and our economic strength that stems from scale. Within our embedded payments offering, Q1 purchase volume was down, in line with our expectations.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

The large travel customer we've mentioned in recent quarters is nearing the end of their transition to a new operating model with us. We remain on track to lap this headwind that began in Q3 last year, and we continue to expect a return to growth in the second half of twenty twenty five. Switching gears to talk about the DirectAP product with our Corporate Payments segment, which accounts for approximately 20% of segment revenue. This solution automates accounts payable by integrating with enterprise resource planning system and accounting workflows to maximize virtual payment usage. During the quarter, direct AP volume grew nearly 25% compared to last year.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We're seeing a contraction in spend per account in the face of a tougher economic environment similar to the market. That said, our new account growth is outweighing the slowdown in spending, which only bolsters our confidence that additional sales, marketing and product investments we discussed last quarter will have a strong return even in a diminished macroeconomic environment. From a macro perspective, I do want to provide some context on our Corporate Payments segment. We have deep relationships with our embedded payments customers. Our portfolio is skewed towards international hotel spend, and we appear to be holding up better than the noise we've heard in domestic travel.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

At this point, we have not seen signs of a slowdown in our travel volume, but we remain vigilant and will continue to monitor this given the rapidly evolving macroeconomic outlook. For our direct accounts payable product, we are monitoring business spending and usage trends along with the credit health of our portfolio as we progress through 2025. During an economic downturn, middle market companies need a partner that will give them security, visibility and control as it relates to their AP spend. As mentioned above, our intent here is to grow through a contraction in spend per account, being mindful of how we extend credit in a risk tolerant fashion. I'd now like to provide an update on the growth initiatives we outlined last quarter.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

As a reminder, the incremental investments we discussed in February are being deployed across all of our segments roughly in line with their size. While we are progressing as planned, we're also being mindful of the rapidly evolving economic landscape. We believe that the investments we're making will deliver strong ROIs and contribute to a reacceleration of growth. At the same time, should external economic conditions deteriorate substantially from here, we will, of course, be thoughtful about our approach. Roughly 75% of our incremental Q1 investment within the mobility segment, where we've been deploying a multichannel marketing strategy targeted at small business customers, We are seeing encouraging early results for our small business prospects.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

New application volumes are outperforming the prior year by 18%. These early results give us added confidence in the ROI of these investments and I'm excited about how well we are positioned as we exit Q1. We're also making investments in sales headcount across the company, which will drive further impact as our pipeline gets onboarded and ramped later in the year. In closing, while we continue to monitor the broader macroeconomic environment, we remain focused on thoughtfully driving our strategic initiatives forward. Greater policy clarity will undoubtedly help our customers navigate the uncertainties they face, and we expect that resolving these uncertainties will lead to a return to more normal buying cycles and payment volumes.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

That said, I remain as confident as ever in WEX's competitive position across each of our markets. I think it's worth adding that our Board regularly reviews composition of our business portfolio. They balance the strategic advantages of diversity and scale with potential opportunities to acquire or dispose of businesses at attractive valuations while factoring in hard costs that might be borne as a result of any strategic shifts. These reviews are conducted thoughtfully on a regular basis and when appropriate with the assistance of independent advisers. While we believe our current configuration is attractive and there is value in our scale and diversification, we will continue to use our best judgment about our business composition, always with the goal of delivering great returns for our shareholders.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

I believe that WEX is better positioned than ever before to meet our customers' demands. The careful investments we're making in product, sales and marketing will position us to be at the forefront of capturing this demand. We have a stable and experienced management team and a deep bench of talent that is focused on what we can control. I am confident WEX will navigate this period and ultimately emerge stronger, even better positioned to deliver value to our customers and shareholders. I want to thank our teams for their hard work and commitment as we kicked off 2025.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We're pleased with our Q1 performance and the progress we're making on our strategic priorities. While there's more to do, we enter the rest of the year with strong momentum and clear focus. With that, I'll turn it over to Jagdtar to walk you through our financial performance in more detail. Jagdtar?

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Thank you, Melissa, and good morning, everyone. In an effort to shift the focus of these earnings calls to our most strategic items, we have published a supplemental information deck with commentary that historically would have been included during my prepared remarks. So similar to last quarter, I will keep my remarks brief. Total revenue in the quarter was 6 and $36,600,000 which is down 2.5 versus last year. The impact of foreign exchange rates and lower fuel prices reduced revenue growth by 1.7% year over year.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Revenue was slightly ahead of the midpoint of the guidance range we provided last quarter, primarily due to higher fuel prices. Adjusted earnings per share of $3.51 was up 1.4% year over year, including a reduction of 3.7% from lower fuel prices and foreign exchange rates. Adjusted EPS was just above the high end of the guidance range we provided in February, also due mostly to higher than expected fuel prices. In our Mobility segment, revenue declined 1.5% during Q1 compared to the last year. This includes a drag of 2.9% due to lower fuel prices and foreign exchange rates.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Our payment processing rate of 1.3 was flat year over year. In our Benefits segment, total revenues of $199,300,000 rose 4.2% on a year over year basis. SaaS account growth of 6.1% was in line with our expectations coming out of the open enrollment season. Custodial investment revenue, which represents the interest we earn on the custodial cash balances we hold, rose 10.6% and it was $55,800,000 This interest rate we earned has remained fairly steady with the yield rising five basis points from Q1 last year. Turning to our Corporate Payments segment.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Revenues of $103,500,000 declined 15.5% year over year, which was in line with our expectations. Purchase volume and corporate payments declined on a year over year basis in large part due to our customer transition to a new operating model, which has progressed in line with our expectations. We will lap this difficult comparison starting in Q3 of this year. On a positive note, I'd like to call out that our direct purchase volume, which includes our AP Automation Solutions, grew nearly 25% versus last year. This is one of the key focus areas that we discussed last quarter where we plan to invest more in the future.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Let me transition now to the balance sheet. Our balance sheet and ability to generate cash flow reliably remains a source of strength for us, especially in periods of economic uncertainty. Our leverage ratio ended the quarter at 3.5 times, which is at the high end of our long term range of 2.5 to 3.5 times. This was driven by normal quarterly trends and our debt raise to fund the Dutch auction tender offer. During the first quarter, we returned $790,000,000 to investors through share repurchases, including the Dutch auction tender offer, reducing share count by more than 5,000,000 shares or approximately 13.1% since the end of last year.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

For the remainder of the year, you should expect that we will use available cash flow to reduce leverage. As part of our growth acceleration actions we discussed last quarter, we are continuing to make investments in new product development and in sales and marketing. We are paying for some of these investments through efficiency measures and temporary cost actions across the business. But consistent with our commentary last quarter, we believe that the amount of incremental investment we are making will exceed these cost reduction measures. We are still planning for an approximate $25,000,000 increase to our sales and marketing expenses allocated to each segment roughly in line with its size in addition to natural expense growth in the business.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

We are also continuing to closely and thoughtfully monitor the macro environment and as conditions dictate may choose to make adjustments to the plan. However, at this point, we believe these prudent investments make a lot of sense to help drive our long term success. Now let's move to earnings guidance for the second quarter and the full year. It's important to note that we are updating our full year 2025 guidance to account for the macro related impacts of fuel prices, FX and interest rates, plus our recently completed tender offer with all other changes being minor in nature. To be clear, our guidance is based on current trends and small but manageable incremental headwinds since providing our original outlook in February.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

The business environment is dynamic and our guidance does not include the impact of a potential further slowdown in the economy. In Q2, we expect to report revenue in the range of $640,000,000 to $660,000,000 We expected adjusted net income EPS to be between $3.6 and $3.8 per diluted share. For the full year, we expect to report revenue in the range of $2,570,000,000 to $2,630,000,000 We expect adjusted net income EPS to be between $14.72 and $15.32 per diluted share. Our current assumption is that fuel prices, interest rates and FX will drive a $31,000,000 net negative impact to revenue for the full year, which accounts for nearly all of the change. The impact of these anticipated revenue changes should be more than offset by the reduced share count leading to a $07 increase in adjusted EPS at the midpoint of guidance.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

To reiterate, our guidance is based on what we know today and does not consider a broader economic downturn. However, we continue to evaluate the impact of the macro environment and would like to provide additional insights to help you assess the impact to the company. We view a potential economic downturn impacting the company through three primary levers: the macro levers of fuel prices and interest rates, the business levers of volume and the final lever of asset quality. We've provided details in the past on fuel price and interest rate impacts and continue to provide sensitivities in our earnings supplement posted on the Investor Relations section of our website. As a reminder, we estimate that a zero one zero dollars change in average fuel prices on a full year basis would result in an annual impact of approximately $20,000,000 of revenue and $0.35 to EPS.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

A 100 basis point change in interest rates would result in an annualized $40,000,000 change to revenue with an opposite impact of zero three zero to $0.35 in EPS. In other words, if revenue declines as a result of lower interest rates, adjusted earnings per share would increase. Note that both fuel and interest rate EPS impacts have increased due to the reduction in share count. Turning now to business volumes, starting with mobility. Over multiple economic cycles, we have observed that gallon volumes in our book are correlated to GDP.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Generally, we see that a 1% change in U. S. GDP impacts gallons by 2% up or down. In our travel business, it is global in nature with two thirds of the spending both originating and occurring outside of The U. S.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

And heavily weighted towards hotels. While travel spend can be impacted by economic activity, right now, we expect a bit more resiliency given our exposure to international travelers versus U. S. Domestic. On the non travel side, about 20% of our volume is related to direct business, where we expect volume resiliency as we continue to add customers.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

On the remaining volumes, which are a mix of our embedded and partner channels, we have seen some impacts from business spending levels and what we know today has been factored into our guidance. As Melissa discussed earlier, our benefits segment is more resilient in the near term to economic cycles as changes in employees on benefit programs is typically at least partially replaced by COBRA related revenue. The final impact to excess from asset quality, primarily our accounts receivable. We have previously seen short duration spikes in credit losses as business stress increases. In past severe recessionary periods, we have seen credit losses spike to 40 to 50 basis points of spend, which typically lasts only one quarter and then improves due to the short duration of our receivables combined with proactive management of credit policies.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

I would also note that we have made significant investments in our credit tools over the years that would help to mitigate the magnitude of these losses. In closing, we recognize that we are in a period of economic uncertainty and that our customers may face challenges that may cause them to adjust their payment volumes and transactions with us. In these times, our financial stability, experience through economic cycles and product strength help us to deliver tangible support to our customers. We remain focused of what we can control and are enthusiastic about the progress we've already made this year in helping WEX realize its full potential to drive long term returns and growth. With that, operator, please open the line for questions.

Operator

Our first question comes from the line of Sanjay Sakhrani with KBW. Your line is open.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Thank you. Good morning. Melissa, you talked a little bit about the tariff impact and the pull forward in Mobility. Just trying to sort of foot some of the comments because it seemed like Mobility was still weaker despite the pull forward. I understand weather impacted to the non OTA side, but maybe you could just talk about what the assumptions are on a go forward basis that you expect a little bit of a rebound from here if the pull forward doesn't Sure.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Sure. So there are two things that happens. If you look at the local part of the business, which is the majority of the business, we saw same store sales were down 3.9%. So a piece of that, we believe, was weather related. A piece of that, we believe, is more economic related.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And just to remind people, we measure same store sales as similar volume from similar customer year over year. We separately measure retention and our customer retention rates were very strong again this quarter across the board. So we think that part of what we were seeing is again weather related, some of it was a little bit more economic softness. And then when you get to the over the road business, we saw that positive in same store sales. We believe both from the fact that that number was positive 2.6% and so it's up sequentially.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And because of the conversations we're having with our customers that we saw a pull forward in that part of our business, which is the smaller part of that segment. We also, since that point in time, as we put together our guide, the first couple of weeks of April in the Over the Road business were quite strong in terms of volume. That had deteriorated over the last couple of weeks, has dropped off, which further substantiates this idea that there was a pull forward that was happening. We factored all of that softness, everything we're seeing the last couple of weeks in April and the continued softness in same store sales we've seen with our local fleets into our guide. So I feel pretty good about the fact that we're holding the full year guide excluding the macro impacts and absorbing the softness that we're seeing that we hadn't contemplated when we put out the original guide at the beginning of the year.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Okay.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

And I guess, like, I have

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

a follow-up similar on the non direct, non travel corporate payments piece. Like you mentioned that you've seen a little bit of impact, which has now been incorporated in. As we think about the major verticals inside that business, like, where are they? Like, what are they? And then, you you know, what's is there a lot of cyclicality there?

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

I'm I'm just trying to think about that assumption.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Sure. So if you look at our corporate payments business, which again is 20% of the total, about half of that revenue is outside of travel. So you get to about 10% of the company. If you look within that portfolio of customers, it's it's you you get into a lot of different micro accounts just because it's not that large. Some of the concentration, if you would call it that, we have where we have cross sold into our existing customers.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And so think of some of them in the mobility related space. We've also in health care. You know, we we have syntax that sit within that portfolio. So it is pretty broad brush. The places that we have seen softness in terms of same store sales year over year are more where people are either spending in T and E or just more discretionary spending that's going across that portfolio.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And again, if you look at where we're selling in our AP direct product offering, we've sold through that. So we saw a 25% increase in spend volume year over year. But with the existing customer base outside of that part of the portfolio there is some softness in spend volume year over year.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Okay. All right. Great. Thank you.

Operator

And your next question comes from the line of Nick Cremo with UBS. Your line is open.

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

Hey, good morning and thanks for taking my questions. First, I just wanted to go back to the Mobility segment and good to see that that segment came in line with expectations. First, could you just provide some incremental color on the composition of the 70% of segment revenue from local fleets and how that split up between SMBs, enterprise related local fleets? And I know there's a small international piece as well. And if you have the information in front of you, just how same store sales have trended across those three buckets of the local fleet business?

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

Thank you.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So the way that we categorize same store sales, it's actually by the different NAICS codes. So it's not by size. It was pretty mixed if you look across. And if you look at our portfolio, it really mimics what the market looks like in terms of small and large, and the majority of the market is small. And our average fleet vehicle size is a fifteen, sixteen vehicle fleet as a result of that.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So we do business with lots of large customers, but there's a mix across the portfolio. If you look at the NAICS codes, one of the surprising things is that the public administration sector was actually up 2% year over year. But if you look across the rest of the portfolio, you're not seeing huge deviations across the portfolio. The same store sales were down pretty ratably. Construction fared slightly better.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And if you think of construction within our portfolio, it's new people who laid roads all the way up into what you would think is more traditional retail construction. So there's a really broad base of customers that sit across that. So if you look across the portfolio, I would say it's acting largely homogeneous. And we're not seeing big deviations in terms of you know, for what we can see either in size or industry.

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

And then in terms of International sorry.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

It's the international part of the business is is small, 10%.

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

Got it. Okay. Great. And for my follow-up, I just wanted to ask about the cadence of the remainder of the year for macro neutral growth for the mobility segment. I know Q3 last year benefited from, I think, two extra business days.

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

And then also just if you could put a finer point on how much the same store sales trends slowed in the OTR segment in the April relative to the strength you saw in the

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

first part of the month? Thank you.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yeah. So from a calendarization standpoint, Nick, I would say that, you know, we're expecting mobility growth rates to sort of be comparable to the first quarter as we go through the year. So, you know, we had outlined a range of 1% to 3% from a guidance perspective we put in the last guide. We're expecting kind of in the same range, low end of that guidance range. We sort of expected even as we go through the year.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

And then what was the second part

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

of your question?

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

Oh, OTR?

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yeah.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

So we saw, you know, two to three percentage point reduction in growth rates going into the last two weeks of April, but I would also say there was also some noise there from the Easter holiday. So it's a little noisy. Like I like most of us have, we factored that into the guide and we were watching it closely. But there was some noise because we had a strong April.

Nik Cremo
Nik Cremo
Executive Director, Lead Equity Research Analyst - Payments & FinTech at UBS Group

Okay. Got it. Makes sense. Thank you.

Operator

And your next question comes from the line of Dave Koning with Baird. Your line is open.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Yes. Hey, guys. Thank you. I would like to just ask a couple of questions on corporate. So I thought it encouraging, guess, couple of things.

David Koning
Senior Research Analyst at Robert W. Baird & Co

First of all, purchase volume after a few quarters of unnormal sequential patterns, Q1 returned to normal. And I guess, A, is that now in a sequential pattern basis going to be back to normal? And then B, yields were up a ton year over year. Are yields given a little bit of the change in composition, yields stable from here going forward?

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yes. From a sequential standpoint, I think Q1 was a bit more normalized. We had some noise last year as we've talked about with some particular customer movements. We're now getting past that and I would expect things to more stabilize. On the Corporate Payments side, I would expect yields to be pretty stable for the rest of the year.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Q1 is a little high. We tend to mix more heavily the travel as we progress, especially Q2, Q3, which with travel at lower yields than our direct corporate side tends to mix the total rate down a little bit, but I expect on a full year basis will be at or slightly below the level that we saw in Q1.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Okay. Good. Thanks. And just a quick follow-up. Just to make sure we're clear on debt rates or really interest expense going forward since there was the big borrowing and then the buyback.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Will Q2 kind of all in interest expense be like mid-60s or so? Is that about right?

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

I think that's about right. Yes.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Okay. Thanks guys.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yes.

Operator

And

Operator

your next question comes from the line of Ramsey El Assal with Barclays. Your line is open.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

Hi, thank you so much for taking my question this morning. I had a question about credit and I know, Jack Tar, right at the end of your prepared comments you talked about how credit could typically trend in a kind of a cyclical event. Right now, feels like you guys just went through this process of exiting some of the smaller fleet exposure. It felt to me like maybe fortifying the mobility book at least on the credit side a bit relative to maybe going into a prior cycle. Is that a fair way to look at it?

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

Should we expect now given everything you've gone through with Fleet that you might fare a little better in the next cycle versus the last on the credit side?

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Yes. The last cycle I'll add because I was here in the cycle. And and we're going back to 02/2008 at that point in time. But in 02/2008, Jeff had talked about what happened, within that quarter, so he was referring back to 02/2008. The full year was still like mid-20s, like 25 ish basis points a lot.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

It as you said, there was a kind of rapid spike and then it really moderated very quickly. And then the year after that was normal. We agreed a %. We've, you know, invested a lot of time creating proprietary tools that we believe have been incredibly impactful over our ability to moderate fraud, but also make better decisions on where we're extending credit. And we're seeing the benefit of that right now, and our portfolios are holding up incredibly well.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We're just trying to give people as much information as we have. So, yes, we we feel much more confident, you know, at this point in time going into, any type of environment that we have tools that will help us with that.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

That's great. And and another follow-up on the credit side. I mean, when I think back to 02/2008, that was the business was a more simpler organism at that point. I'm just curious if you compare and contrast sort of mobility to the corporate payments segment and the embedded payment segment within the corporate payment segment, where do you see sort of the greater risk in terms of credit exposure?

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

If you look across the business, the over the road business was a smaller part of our business at that point in time, although we were doing business with over the road customers and they tended to be smaller in size. So and if you look across that portfolio, those are customers that are typically paying us quite rapidly. So they've already been modified from a risk perspective. The over the road customers I mean, I'm sorry. The online travel agencies also pay us rapidly.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And so if you think about areas where we would have exposure, we've done a lot over the years through the different cycles that we've had to make sure that we're pretty balanced about the way that we're approaching extending credit across our customer base. I don't know that I would call out any one particular area is riskier than the other. I think that we've used tools to reduce risk in areas that are more naturally risk prone.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

Great. Thank you so much.

Operator

And your next question comes from the line of Baron Peller with Wolfe Research. Your line is open.

Darrin Peller
Managing Director at Wolfe Research, LLC

Guys, thanks. Can we just touch on the benefits spending for a minute? When we think about confidence potentially outgrow the HSA market versus your guidance this year roughly in line with the market growth, I mean, maybe just what are the drivers we should watch for that may display the differentiation of WEX's products here going forward?

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Yeah. When we went through this first open enrollment cycle this last year, we brought in 7% HSA accounts. It feels across the portfolio. We feel really good about that compared to Devenir's report of market growth of 5%. We are also had really good success in our direct business within benefits, which is a place that we've across the company in terms of highest returns.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

It is the highest return in terms of LTV to CAC. So when we are adding in there I'll give an example that we added in some marketing dollars, and 75% of our marketing our incremental investment spend in the first quarter went into mobility, just to be clear. But we did add in a little bit into our benefit space, and we sourced the largest ever markedly marketing generated deal that we've ever had. And so it's it's a place that we feel as we're adding in that we're gonna see benefits that comes out of that. I think net net, what we're looking at is we've got a huge market.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

It's over 13 and a half billion dollar TAM that we're addressing with the products that we have, and we feel like we can continue to grow and outgrow in the HSA space HSA account growth. And then on top of that, continue to build the presence we have in our BenEd, Ben product. And the net net of that, we're looking through the overall growth rate to be higher, you know, over time than the growth of the market. But I think it's, like, ultimately, you're gonna you're gonna judge us on what we deliver in terms of revenue growth.

Darrin Peller
Managing Director at Wolfe Research, LLC

Okay. Thanks, Melissa. I guess just more broadly, I mean, anything change in your mind or the way you're approaching, the review and just the portfolio of assets you have? I know you mentioned obviously being comfortable and liking the position you have in most of your assets. But that's obviously language you've used for some time now.

Darrin Peller
Managing Director at Wolfe Research, LLC

And so I'd be curious if anything at all has changed from your perspective, whether it's in the backdrop of the market or in our valuations and across the competitive landscape. Thanks.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Yes, sure. Sure. And we think our current configuration is attractive and that there's value around scale and diversification. They also mentioned on the call that our board regularly reviews the composition of our business portfolio. And so, you know, it's something that they obviously take quite seriously.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

They bring in outside advisers when appropriate, and we'll continue to make a call around what's what's the best, composition of our portfolio.

Darrin Peller
Managing Director at Wolfe Research, LLC

Okay.

Darrin Peller
Managing Director at Wolfe Research, LLC

Thanks guys.

Operator

Your next question comes from the line of Andrew Bao with Wells Fargo. Your line is open.

Andrew Bauch
Andrew Bauch
Director - Equity Research at Wells Fargo

Hey, good morning and thanks for taking the question. It's encouraging to see the new application volumes on the small business side being up 18% year over year on the back of your investments. I guess what my question is though is like if we continue down this path of macro continuing to weaken, what are the trigger points that would kind of signal to you to pull your foot off the gas on those investments? Or if we stay in kind of a status quo macro environment and you're seeing good ROIs, like, apparently, that that data point would suggest, then maybe you can even dial it back up.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Yeah. Very fair question. No. I'm I'm very sensitive in the fact we're operating with a lot of uncertainty right now. We know historically that our products, because they help our customers save money and increase confidence in their decisions, we know that we typically actually sell really well through a period of downturn.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So the way we think about the business is sales coming in the front door, customer retention, which is typically high during the course of a period of economic uncertainty. And then what happens with your your kind of in the back book, your same store sales. And so far, that front of the business, that funnels look really strong for us in the kind of across the board. Mhmm. And to your point, you know, we've seen 18% increase year over year in the mobility business in new applications.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

That's the think of that as the top of the funnel. If we see that top of the funnel work its way through, that's, obviously a really good sign. And so at this point in time, we're really bullish on what those returns are generating. But we'll continue to be really sensitive to what's happening in the external environment to make sure that those returns are paying off because we have to balance both short term and long term expectations. The only other thing I'd say is if you go across the business and you think, again, we're we're allocating those investments pro rata, so the majority of that is going into our mobility business.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We are seeing really great momentum also with the product rollouts that we've done in corporate payments. It's early. We talked about the fact that we released new functionality into Europe and just most recently into The US with our embedded payments products that create flexible funding capability that helps working capital of our customers. That's selling really well into the marketplace right now. So we're seeing pipeline expansion, deals closing, all things you'd want to see that leads leading indicators in terms of future growth for us, which we should see very end of this year in that product and going into 2026.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So again, I'd say all early indicators are actually really quite positive with the returns that we're generating, but we're going to continue to be mindful of how we're operating and you know, and accordingly make decisions real time based on that data.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

The only the only thing I'd

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

add, Andrew, is that we've built pretty good infrastructure in advance of making these investments. So as we invest like the marketing dollars in Mobility, for example, we have clear expectations of the metrics of how many applications we expect to come in, the credit quality of those applications, our approval rates, number of applications, how we expect those customers to ramp after they've been approved, and what the net result of that ROI is. And so we track each of those metrics not only from what we expect at the front end, but then what's actually happening in the back end. So, you know, the front end metric that Melissa mentioned, the applications came in right at or above our expectations, and now we're tracking as the revenue flows in as we expect. So I think all of those things will, right, help us, you know, determine, you know, what the right investment is on marketing investments.

Andrew Bauch
Andrew Bauch
Director - Equity Research at Wells Fargo

Understood. And then on my follow-up, it was also good to see that the travel business was holding in fairly well despite some of the fear and headlines that have been created in the market. But could you give us a finer point on the end mix of that market? I know you said international hotel is a big chunk of the portfolio, but any other additional granularity you could provide there so that we could be vigilant as well in monitoring these trends?

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So two thirds of the portfolio are originated and then activated. So think of these are customers that are booking outside The United States and actually traveling outside The United States. So, so that is all internationally based. About 3% right now are originated outside of The United States and then traveled into The US. And Mhmm.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

About 15% are coming think of that as people that are originating in The US and booking in The US and traveling outside The US, and about 17% are traveling within The US. So booking and travel.

Andrew Bauch
Andrew Bauch
Director - Equity Research at Wells Fargo

Very helpful.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Okay. So I think I think that's part of why like, if you look across our our book and and the majority of of this is hotels that Mhmm. You know, we we are seeing a lot of stability across. I think there's stability in general anyway. You're hearing that from the online travel agencies.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

But in particular in our book, some of the negative sentiment that might be out there, we don't seem to be reflected in our portfolio.

Andrew Bauch
Andrew Bauch
Director - Equity Research at Wells Fargo

Great. Thank you, Melissa.

Operator

And your next question comes from the line of Mihir Bhatia with Bank of America. Your line is open.

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

Hi, good morning. Thanks for taking my question. Melissa, I wanted to talk about the you mentioned the portfolio review. And I understand that this is somewhat routine, but it was somewhat new in the prepared remarks. So maybe just along those lines, just talk a little bit the overlap in the businesses.

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

Like how much overlap is there between the various segments? Because I know you've had a few cross sell initiatives along the way. So just trying to understand from a customer standpoint, but also from a internal operation standpoint, how much overlap is there between the various segments and businesses?

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Sure. Sure. So if you look across the business, we do have cross sell activity that happens. You know, I'd say that the biggest places of cross sell have been between our mobility customer base and our benefit customer base. In in particular, with the over road customers, they tend to be more senior relationships.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And so we've had success across that and, you know, continue to work cross selling across the whole portfolio. If you look at the places where there's commonality, increasingly over time, we've been focused around our technology stack and where we can create synergies across the portfolio. All of the, you the infrastructure is common. So think of that as loudly technical operations is common. And then some of the underlying apps that support it as well.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

And then from a a treasury perspective, it we're using our bank, you know, across both portfolios. So the bank being the depositor for our custodial accounts as well as the issuer for the deposits that we have with our bank. And so there's a number of nuances around how the, you know, the businesses have been integrated over time.

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

Okay. Thanks. And then, Jaktar, really helpful commentary about the impacts of a recession on the business in your remarks. I wanted to just dig in a little bit more just in terms of the levers that you would be able to pull if you started seeing the macro slowdown. Are they obviously, you're in the midst of this investment in sales.

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

Would that be something that you would have to pull back on? Are there other discretionary items or areas where there could be some levers that WEX could pull in as if the

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

macro was to slow down?

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yes. Thanks to hear. So I would say we have some levers. I would point out that the revenue impacts to us will largely outweigh the levers that we have readily to pull because we are to some degree a highly fixed cost business. But, you know, at the same time, we would look at our hiring plans pretty in-depth, especially, you know, discretionary noncritical hires that we have planned over the course of course of the year and put a high scrutiny on that and start to pull back on some of our hiring plans.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

The investment that Melissa has talked about, obviously, it's something that would be looked at. I think we would look at that with really an eye of are we getting the ROI and then making decision on what's best short term versus long term for the company. I don't want to be in a position given the resiliency of WEX of throwing the baby out with the bathwater and suspending investment that would be that's going to put WEX in a strong position coming out of a recession because we will come out at some point in time. So I think we'd look at discretionary spend, travel, a number of levers to contain the spend, then the investment spending would really be kind of where are we on the ROI view and what's the right for the short and long term of the company.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We're also we're very sensitive to the fact that, you know, that there's lot going on right now. And if you look across the portfolio, we've done a bunch of scenario planning. There's a couple places you know, Jack talked about, you know, hiring. It you know, we've been very selective around, and we'll continue to be around hiring through the end of this year. The other place that we had been focused, we've talked a lot about automation over the years.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

You know, we haven't talked about it as much last couple of calls, but it continues to be a big internal focus of ours. And, you know, particularly using AI tools in order to create automation, we're having, you know, continued success at that, and that's a place that we're looking at doubling down on our efforts as well. So looking for areas where we believe that you can actually create a better customer experience and lower cost and, you know, tightening the belt across across the organization and trying to preserve as much as we can of these investments.

Mihir Bhatia
Mihir Bhatia
Equity Research Analyst at Bank of America Merrill Lynch

Understood. Thank you.

Operator

And your next question comes from the line of Shenzhen Huang with JPMorgan. Your line is open.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Hey, good morning. Thank you. As always, just a couple of questions. Just on the enterprise client side, I know you talked about SMBs and new applications being up, but I'm just curious on the enterprise side. Are you seeing any changes in sales cycles and pricing that kind of thing?

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

And also just to ask two together, was the sensitivity of GDP that, Jack, you mentioned with no cycles of course are comparable that way. But can we compare it to anything that you can recall? I know COVID feels different. We've seen some supply chain issues before. I'm just curious if we can point back to something else to help us sensitize the business.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Yeah. So really great questions. If you go across the two, I'll answer the the last one first. The comparability, I think you've you've lived through these cycles too. I don't know that there's anything quite comparable to what we're experiencing right now.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

We I would go back, like, if it to the great recession is kind of a, you know, a shock if we had to do a comparison case. And, you know, we we actually fared pretty well through that. And one and one of the things we learned from that, because we did see an uptick in demand from our customers that and it continuing to preserve, you know, the sales momentum and the product momentum was really important of how we came out of that, which I would argue we came out actually a lot stronger as a result. In terms of what we're seeing in pipelines right now, we're having a really strong sales first quarter across the board. And if you ask about mobility with our larger mobility customers, I'd say very strong start to the year.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

So if you if you think about the products because they're geared towards helping people save time, money, and increase confidence, like, I think the the periods of uncertainty largely across our portfolio actually helps from a selling perspective.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Tien Tsin, the only thing

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

I would add to that is because you brought up supply chain shock. I think it's worth pointing out within our segment, there's a lot of questions around what is tariffs and supply chain shocks due to the OTR segment. And there's ample data like from the federal government around truck volume in The US and what actually comprise the weight of what's moved around the country. And surprisingly, or maybe for people that haven't been immersed in it, right, less than 10 or call in the order of 10% of what's moved around from a volume basis is actually import related. 90% of what's on trucks is commodities and agricultural items and minerals and stuff that we produce domestically.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

It's really on the order of 10 that's import related. And when you think about China, which is where a lot of the focus is, it's really on the order of a third of that or less. So we think we have kind of our hands around what's the import impact, the tariff impact into our OTR business.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Yeah. No. It sounds like that's the case. Thank you. Still trying to learn, guys.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Thank you very much.

Jagtar Narula
Jagtar Narula
Chief Financial Officer at WEX

Yes. Thanks Tien Tsin.

Melissa Smith
Melissa Smith
Chairman of the Board, President & CEO at WEX

Thanks Tien Tsin.

Operator

And I would now like to turn the call back over to Steve Elder.

Steve Elder
Steve Elder
Senior Vice President-Global Investor Relations at WEX

Yes. Just wanted to wrap up and say thank you everyone for joining and we'll look forward to speaking again in the quarter. Thank you.

Operator

And this concludes today's conference call. You may now disconnect.

Executives
    • Steve Elder
      Steve Elder
      Senior Vice President-Global Investor Relations
    • Melissa Smith
      Melissa Smith
      Chairman of the Board, President & CEO
    • Jagtar Narula
      Jagtar Narula
      Chief Financial Officer
Analysts
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Key Takeaways

  • Q1 Results: Reported revenue of $636.6 M (–2.5% YoY, –0.8% ex fuel/FX) and adjusted EPS of $3.51 (+1.4% YoY, +5% ex fuel/FX), both exceeding guidance ranges.
  • Mobility Segment: Represents ~50% of revenue with local fleets’ same-store sales down 3.9% (weather and macro pressures) and over-the-road sales up 2.6% (tariff pull-forward), while customer retention and new partnerships remained strong.
  • Benefits Segment: Accounts for ~30% of revenue with HSA accounts up 7% (vs. 5% industry) and overall SaaS accounts up 6%, driving sticky custodial and subscription income with attractive margins.
  • Corporate Payments: ~20% of revenue; embedded payments volume down on a large customer transition (expected to rebound in H2), while Direct AP purchase volume grew 25% as new account growth offset spend headwinds.
  • Capital & Guidance: Leverage at 3.5×, $790 M returned via share repurchases (13.1% reduction), and FY25 guidance of $2.57–2.63 B revenue with adj. EPS of $14.72–15.32, with sensitivities modeled for fuel, FX, rates and volumes.
AI Generated. May Contain Errors.
Earnings Conference Call
WEX Q1 2025
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