WEX Inc. Reports Fourth Quarter and Full Year 2022 Financial Results

·18 min read

PORTLAND, Maine, February 09, 2023--(BUSINESS WIRE)--WEX Inc. (NYSE: WEX), the global commerce platform that simplifies the business of running a business, today reported financial results for the three months and year ended December 31, 2022.

Fourth Quarter and Full Year 2022 Financial Results

Total revenue for the fourth quarter of 2022 increased 24% to $618.6 million from $497.5 million for the fourth quarter of 2021. The $121.1 million increase in revenue in the quarter includes a net $34.2 million favorable impact from fuel prices and spreads and an $8.7 million negative impact from foreign exchange rates.

On a GAAP basis, net income attributable to shareholders for the fourth quarter of 2022 was $88.7 million, or $2.02 per diluted share, compared to a net loss attributable to shareholders of $11.8 million, or $0.26 per diluted share, for the same period a year ago. The Company's adjusted net income attributable to shareholders, which is a non-GAAP measure, was $152.8 million for the fourth quarter of 2022, or $3.44 per diluted share, up 33% from $116.8 million, or $2.58 per diluted share, for the same period last year. See Exhibit 1 for a full explanation and reconciliation of adjusted net income attributable to shareholders and adjusted net income attributable to shareholders per diluted share to the comparable GAAP measures.

For the full year 2022, revenue increased 27% to $2.35 billion from $1.85 billion in 2021. Net income attributable to shareholders on a GAAP basis was $4.50 per diluted share in 2022 compared to breakeven per diluted share in 2021. On a non-GAAP basis, adjusted net income per diluted share increased 48% to $13.53 from $9.14 in 2021.

"We finished 2022 in a strong position with another impressive quarter, beating our guidance for revenue and adjusted net income per share and delivering revenue growth for the tenth straight quarter. We had several exciting new product launches and customer wins throughout the year, and we are proud of our outstanding results," said Melissa Smith, WEX’s Chair, Chief Executive Officer and President.

"Looking ahead to 2023, our strategy remains focused on deepening share of wallet, maintaining our market-leading positions by driving customer-focused innovation, and further building out the scalability of our platform. I am confident in our path forward and the future of WEX as we continue to manage the business through a dynamic economic environment."

Fourth Quarter 2022 Performance Metrics

  • Total volume across all segments increased 45% year over year to $212 billion.

  • Fleet Solutions segment payment processing transactions increased 5% year over year to 139.2 million.

  • Average number of vehicles serviced was 18.7 million, an increase of 11% from the fourth quarter of 2021.

  • Health and Employee Benefit Solutions' average number of Software-as-a-Service (SaaS) accounts grew 14% to 18.5 million from 16.2 million for the fourth quarter of 2021.

  • Custodial HSA cash assets in Q4 2022 were $3.5 billion compared to $2.5 billion a year ago.

  • Travel and Corporate Solutions' purchase volume grew 57% to $17.1 billion from $10.9 billion for the fourth quarter of 2021.

  • During the fourth quarter of 2022 the Company repurchased 947 thousand shares of its stock for a total cost of approximately $141.2 million.

  • Cash flow provided by operating activities in 2022 was $679.4 million. Adjusted free cash flow, which is a non-GAAP measure, is $782.4 million for the same period of time. Please see the reconciliation of this non-GAAP measure to operating cash flow in Exhibit 1.

"We delivered strong financial results for the fourth quarter and full year 2022 while continuing to make progress on our strategic initiatives, proving the strength of our global commerce platform, the competitiveness of our offerings and the power of our business model," said Jagtar Narula, Chief Financial Officer. "We remain confident in our ability to win new customers, expand with existing customers and drive product and technology innovation in 2023, enabling the continued resiliency of our model while also delivering value for our shareholders."

Financial Guidance

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. See "Additional Information" below for more information about the Company’s forward-looking non-GAAP measures.

  • For the first quarter of 2023, the Company expects revenue in the range of $600 million to $610 million and adjusted net income in the range of $140 million to $145 million, or $3.15 to $3.25 per diluted share.

  • For the full year 2023, the Company expects revenue in the range of $2.43 billion to $2.47 billion and adjusted net income in the range of $604 million to $627 million, or $13.55 to $14.05 per diluted share.

First quarter and full year 2023 guidance is based on a number of assumptions including an assumed average U.S. retail fuel prices of $3.86 and $3.83 per gallon, respectively. The fuel prices referenced above are based on the applicable NYMEX futures price. Our guidance also assumes approximately 45.7 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, impairment charges, 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 twelve months ended December 31, 2022 and 2021; and in Exhibit 3, a table of selected non-financial metrics for the quarter ended December 31, 2022 and the four preceding quarters. The Company is also providing segment revenue for the three and twelve months ended December 31, 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, February 9, 2023, 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 +1-888-510-2008 or +1-646-960-0306. The Conference ID number is 2237921. A replay of the webcast and the accompanying slides will be available on the Company's website.

About WEX

WEX (NYSE: WEX) is 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: expectations of the Company’s future financial performance, assumptions underlying such expectations; future operations; future growth opportunities and expectations; expectations for future revenue performance, future impacts from areas of investment, expectations for the macro environment; expectations for volumes; and assumptions regarding the future number of outstanding diluted shares. 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 impact of fluctuations in demand for fuel and volatility of fuel prices, including fuel spreads in the Company’s international markets, and the resulting impact on the Company’s revenues and net income; the effects of general economic conditions, including a decline in demand for fuel, travel related services, or healthcare services, and payment and transaction processing activity; the impact and size of credit losses, including fraud losses, and other adverse effects if the Company fails to adequately assess and monitor credit risk or fraudulent use of our payment cards or systems; failure to implement new technology and products; 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, 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 maintain or renew key customer and partner agreements and relationships, or to maintain volumes under such agreements; the failure of corporate investments to result in anticipated strategic value; the extent to which unpredictable events in the locations in which the Company or the Company’s customers operate or elsewhere may adversely affect the Company’s employees, ability to conduct business, results of operations and financial condition; the failure to comply with the applicable requirements of Mastercard or Visa contracts and rules; the failure to comply with the Treasury Regulations applicable to non-bank custodians; 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 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 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 our annual report for the year ended December 31, 2021, filed on Form 10-K 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three months ended December 31,

Year ended December 31,

2022

2021

2022

2021

Revenues

Payment processing revenue

$

295,092

$

231,049

$

1,155,907

$

858,990

Account servicing revenue

153,381

137,514

569,284

526,858

Finance fee revenue

99,878

75,902

360,468

255,323

Other revenue

70,259

53,073

264,852

209,371

Total revenues

618,610

497,538

2,350,511

1,850,542

Cost of services

Processing costs

142,653

135,693

558,911

482,870

Service fees

17,974

13,653

65,194

52,804

Provision for credit losses

58,041

12,966

179,897

45,114

Operating interest

7,195

2,138

20,579

9,157

Depreciation and amortization

25,969

28,293

105,869

112,164

Total cost of services

251,832

192,743

930,450

702,109

General and administrative

95,250

81,418

343,901

326,878

Sales and marketing

76,566

72,901

311,833

319,078

Depreciation and amortization

39,813

42,117

157,999

160,477

Impairment charges

—

—

136,486

—

Operating income (loss)

155,149

108,359

469,842

342,000

Financing interest expense

(34,762

)

(30,172

)

(130,690

)

(128,422

)

Net foreign currency gain (loss)

15,145

(964

)

(22,702

)

(12,339

)

Change in fair value of contingent consideration

(3,988

)

4,800

(139,088

)

(40,100

)

Other income

—

—

—

3,617

Net unrealized (losses) gains on financial instruments

(7,077

)

19,720

83,184

39,190

Income (loss) before income taxes

124,467

101,743

260,546

203,946

Income tax provision (benefit)

35,776

50,883

93,085

67,807

Net income (loss)

88,691

50,860

167,461

136,139

Less: Net (loss) income from non-controlling interests

—

(253

)

268

846

Net income (loss) attributable to WEX Inc.

88,691

51,113

167,193

135,293

Change in value of redeemable non-controlling interest

—

(62,873

)

34,245

(135,156

)

Net income (loss) attributable to shareholders

$

88,691

$

(11,760

)

$

201,438

$

137

Net income (loss) attributable to shareholders per share:

Basic

$

2.03

$

(0.26

)

$

4.54

$

—

Diluted

$

2.02

$

(0.26

)

$

4.50

$

—

Weighted average common shares outstanding:

Basic

43,660

44,880

44,398

44,718

Diluted

43,980

44,880

44,724

45,312

WEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

December 31,

2022

2021

Assets

Cash and cash equivalents

$

921,978

$

588,923

Restricted cash

937,755

667,915

Accounts receivable

3,275,663

2,891,242

Investment securities

1,395,272

948,677

Securitized accounts receivable, restricted

143,198

125,186

Prepaid expenses and other current assets

143,283

77,569

Total current assets

6,817,149

5,299,512

Property, equipment and capitalized software

202,229

179,531

Goodwill and other intangible assets

4,202,489

4,551,353

Investment securities

47,998

39,650

Deferred income taxes, net

13,364

5,635

Other assets

246,000

231,147

Total assets

$

11,529,229

$

10,306,828

Liabilities and Stockholders’ Equity

Accounts payable

$

1,365,776

$

1,021,911

Accrued expenses and other current liabilities

643,904

527,585

Restricted cash payable

937,147

668,014

Short-term deposits

3,144,602

2,026,420

Short-term debt, net

202,638

155,769

Total current liabilities

6,294,067

4,399,699

Long-term debt, net

2,522,206

2,695,365

Long-term deposits

334,183

652,214

Deferred income taxes, net

142,156

192,965

Other liabilities

587,104

273,706

Total liabilities

9,879,716

8,213,949

Redeemable non-controlling interest

—

254,106

Total stockholders’ equity

1,649,513

1,838,773

Total liabilities and stockholders’ equity

$

11,529,229

$

10,306,828

WEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Year ended December 31,

2022

2021

Net cash provided (used) by operating activities1

$

679,425

$

(42,579

)

Cash flows from investing activities

Purchases of property, equipment and capitalized software

(112,875

)

(86,041

)

Proceeds from sale of equity investment

—

3,117

Purchases of equity securities and other investments

(2,888

)

(318

)

Purchases of available-for-sale debt securities

(658,405

)

(994,035

)

Sales and maturities of available-for-sale debt securities

60,852

34,955

Acquisition of intangible assets

(3,338

)

—

Acquisitions, net of cash and restricted cash acquired

—

(558,784

)

Net cash used for investing activities

(716,654

)

(1,601,106

)

Cash flows from financing activities

Repurchase of share-based awards to satisfy tax withholdings

(18,888

)

(23,457

)

Purchase of treasury shares

(282,787

)

—

Proceeds from stock option exercises

4,952

44,197

Restricted cash payable1

305,409

192,977

Net change in deposits

801,592

1,620,284

Net activity on debt 2

(129,019

)

(237,755

)

Net cash provided by financing activities1

681,259

1,596,246

Effect of exchange rates on cash, cash equivalents and restricted cash

(41,135

)

(25,376

)

Net change in cash, cash equivalents and restricted cash

602,895

(72,815

)

Cash, cash equivalents and restricted cash, beginning of year

1,256,838

1,329,653

Cash, cash equivalents and restricted cash, end of year

$

1,859,733

$

1,256,838

1 The change in restricted cash payable for the year ended December 31, 2021 has been reclassified from net cash provided by operating activities to net cash provided by financing activities to conform to the current period presentation.

2 Net activity on debt includes: borrowings and repayments on revolving credit facility; borrowings and repayments on term loans; redemption of notes; issuance costs; net change in securitized debt; and net activity on other debt.

Exhibit 1

Reconciliation of Non - GAAP Measures

Reconciliation of GAAP Net Income Attributable to Shareholders to Adjusted Net Income Attributable to Shareholders

(in thousands, except per share data)

(unaudited)

Three Months Ended December 31,

2022

2021

per diluted share

per diluted share

Net income (loss) attributable to shareholders

$

88,691

$

2.02

$

(11,760

)

$

(0.26

)

Unrealized loss (gain) on financial instruments

7,077

0.16

(19,720

)

(0.44

)

Net foreign currency (gain) loss

(15,145

)

(0.34

)

964

0.02

Acquisition-related intangible amortization

42,757

0.97

46,981

1.05

Other acquisition and divestiture related items

2,731

0.06

8,035

0.18

Stock-based compensation

22,334

0.51

13,779

0.31

Other costs

13,523

0.31

7,518

0.17

Debt restructuring and debt issuance cost amortization

4,656

0.10

2,336

0.05

Change in fair value of contingent consideration

3,988

0.09

(4,800

)

(0.11

)

ANI adjustments attributable to non-controlling interest

—

—

62,176

1.39

Tax related items

(17,804

)

(0.41

)

11,264

0.25

Dilutive impact of stock awards1

—

—

—

(0.03

)

Dilutive impact of convertible debt 2

—

(0.03

)

—

—

Adjusted net income attributable to shareholders

$

152,808

$

3.44

$

116,773

$

2.58

Year Ended December 31,

2022

2021

per diluted share

per diluted share

Net income attributable to shareholders

$

201,438

$

4.50

$

137

$

—

Unrealized gains on financial instruments

(83,184

)

(1.86

)

(39,190

)

(0.86

)

Net foreign currency loss

22,702

0.51

12,339

0.27

Acquisition-related intangible amortization

170,500

3.81

181,694

4.01

Other acquisition and divestiture related items

17,874

0.40

36,916

0.81

Stock-based compensation

100,694

2.25

76,550

1.70

Other costs

38,434

0.86

23,171

0.52

Impairment charges

136,486

3.05

—

—

Debt restructuring and debt issuance cost amortization

17,333

0.39

21,768

0.48

Change in fair value of contingent consideration

139,088

3.11

40,100

0.88

ANI adjustments attributable to non-controlling interests

(34,587

)

(0.77

)

132,030

2.91

Tax related items

(115,781

)

(2.59

)

(71,458

)

(1.58

)

Dilutive impact of convertible debt 2

—

(0.13

)

—

—

Adjusted net income attributable to shareholders

$

610,997

$

13.53

$

414,057

$

9.14

1 As the Company reported net losses for the fourth quarter of 2021, the diluted weighted average shares outstanding equal the basic weighted average shares outstanding for this period under U.S. Generally Accepted Accounting Principles ("GAAP"). The non-GAAP adjustments described above resulted in adjusted net income attributable to shareholders (versus a loss on a GAAP basis) for the fourth quarter of 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 quarter and year ended December 31, 2022, the dilutive impact of convertible notes has been calculated under the 'if-converted' method. Under such method, $3.8 million and $15.1 million of interest expense associated with our convertible notes, net of tax, was added back to adjusted net income for the three and twelve months ended December 31, 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 calculations of adjusted net income per diluted share, as the effect of including such adjustments was dilutive. The total number of share used in calculating Adjusted Net Income per diluted shares for the three and twelve months ended December 31, 2022 is 45.5 million and 46.3 million, respectively.

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

(in thousands)

(unaudited)

Three Months Ended December 31,

Year Ended December 31,

2022

2021

2022

2021

Operating income

$

155,149

$

108,359

$

469,842

$

342,000

Unallocated corporate expenses

20,569