WEX, Inc. Q1 FY2025 earnings call

• Macro landscape: U.S. tariff policy uncertainty doesn't directly impact WEX's operations, but the company proactively engages with customers. - Q1 results: Revenue was $636.6 million, down 2.5% year-over-year. Excluding fuel and foreign exchange, revenue was down 0.8%, and adjusted EPS was $3.51, up 1.4% year-over-year. - Segment details: Mobility segment performance discussed with local and OTR fleets; Benefits segment highlighted strong HSA account growth and stability; Corporate Payments segment noted embedded payments trends and direct AP growth. - Growth initiatives: Incremental investments across segments, with 75% of Q1 incremental investment in Mobility for small business marketing, seeing early positive new application volumes (up 18%).

WEX operates in three segments: Mobility, Benefits, and Corporate Payments. The Mobility segment, representing approximately 50% of total revenue, saw Q1 revenue decline 1.5% year-over-year, with a 2.9% drag from lower fuel prices and foreign exchange rates. Local fleets had same-store sales down 3.9% while over-the-road customers saw an uptick. The Benefits segment, ~30% of total revenue, had total revenues of $199.3 million, up 4.2% year-over-year, with SaaS account growth 6.1% and custodial investment revenue up 10.6%. The Corporate Payments segment, ~20% of revenue, had revenues of $103.5 million, down 15.5% year-over-year, with embedded payments purchase volume down but direct AP volume up nearly 25% compared to last year.

• Q2 revenue expected in the range of $640 million to $660 million, with adjusted EPS between $3.60 and $3.80 per diluted share. - Full-year 2025 revenue expected $2.57 billion to $2.63 billion, with adjusted EPS between $14.72 and $15.32 per diluted share. - Sensitivities: A $0.10 change in average fuel prices annually impacts revenue by ~$20 million and EPS by ~$0.35; 100 basis point interest rate change impacts revenue by ~$40 million and EPS by ~$0.30 to $0.35.

• Macroeconomic uncertainties affecting customer behavior and spending. - Credit risk in accounts receivable, with potential spikes in credit losses during economic downturns. - Impact of tariff policies and supply chain issues on segments like over-the-road trucking.

Q: Sanjay Sakhrani asked about tariff impact and mobility rebound.

A: Melissa Smith discussed weather-related and economic softness in local fleets, and pull forward in OTR with recent softness factored into guidance.

Q: Nick Cremo inquired about Mobility segment composition and OTR trends.

A: Melissa and Jagtar provided details on same-store sales across local fleet NACS codes and OTR growth rate changes with Easter holiday noise factored in.

Q: Dave Koning asked about corporate payments purchase volume and yields.

A: Jagtar noted Q1 was more normalized, and yields expected to be stable with travel mix affecting rates.

Q: Ramsey El-Assal questioned credit risk and portfolio fortification.

A: Melissa Smith discussed improvements in credit tools and confidence in portfolio performance across segments.

Q: Darrin Peller asked about Benefits segment growth and portfolio review.

A: Melissa Smith highlighted HSA account growth outpacing market and Board's regular portfolio review.

Q: Andrew Bauch inquired about small business investments and macro triggers.

A: Melissa Smith discussed strong sales funnels, early positive new applications, and sensitivity to external environment on investments.

Q: Mihir Bhatia asked about portfolio overlap and cross-sell.

A: Melissa Smith discussed cross-sell between segments and common technology/infrastructure across businesses.

Q: Tien-Tsin Huang asked about enterprise client sales cycles and GDP sensitivity.

A: Melissa Smith and Jagtar discussed strong sales starts, comparability to Great Recession, and GDP impact sensitivities.