WEX Inc. Reports Fourth Quarter and Full Year 2019 Financial Results

PORTLAND, Maine–(BUSINESS WIRE)–WEX Inc. (NYSE: WEX), a leading financial technology service provider, today reported financial results for the three months and year ended December 31, 2019.

Fourth Quarter and Full Year 2019 Financial Results

Total revenue for the fourth quarter of 2019 increased 15% to $440.0 million from $381.2 million for the fourth quarter of 2018. The $58.8 million increase in the quarter includes an $8.7 million negative impact from lower average fuel prices and foreign exchange rates. In addition, the 4th quarter includes a $20.9 million reduction to properly reflect fleet segment revenue and expenses.

Net income attributable to shareholders on a GAAP basis for the fourth quarter increased by $33.2 million to $54.4 million, or $1.24 per diluted share, compared with $21.3 million, or $0.49 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 $114.7 million for the fourth quarter of 2019, or $2.61 per diluted share, up 24% from $91.8 million, or $2.11 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 2019, revenue increased 15% to $1.72 billion from $1.49 billion in 2018.Net income attributable to shareholders on a GAAP basis was $2.26 per diluted share in 2019 compared to $3.86 per diluted share in 2018. On a non-GAAP basis, adjusted net income per diluted share increased 11% to $9.20 from $8.28 in 2018.

“2019 was another record year for WEX, capped off by an impressive fourth quarter driven by double-digit top-line growth and strong operating leverage.” said Melissa Smith, WEX’s Chair and Chief Executive Officer. “The fourth quarter built upon the momentum from earlier in the year, marked by robust transaction volume growth, strong performance from acquisitions, significant contribution from our previous contract signings and meaningful new contract wins.”

Smith continued, “Our strong performance in 2019 is due to WEX’s commitment to generating sustainable long-term growth, reflected in the customer volume ramp, successful integration of Noventis, Discovery Benefits and Go Fuel Card, strong execution in our Shell and Chevron portfolios, and a great contribution from the U.S. Health business. We remain committed to providing best-in-class technologies and capabilities to our customers and focused on driving innovation across our segments. We are well-positioned to gain additional market share in 2020 as we continue to execute against our strategic pillars and create shareholder value.”

Fourth Quarter 2019 Performance Metrics

  • Average number of vehicles serviced was approximately 14.9 million, an increase of 19% from the fourth quarter of 2018.
  • Total fuel transactions processed increased 12% from the fourth quarter of 2018 to 156.0 million. Payment processing transactions increased 9% to 126.7 million.
  • U.S. retail fuel price decreased to $2.80 per gallon from $2.94 per gallon in the fourth quarter of 2018.
  • Travel and Corporate Solutions’ purchase volume grew 17% to $9.6 billion from $8.2 billion for the fourth quarter of 2018.
  • Health and Employee Benefit Solutions’ average number of Software-as-a-Service (SaaS) accounts in the U.S. grew 17% to 13.4 million from 11.5 million for the fourth quarter of 2018.

“WEX delivered strong fiscal year results with fourth quarter adjusted earnings at the top-end of our guidance, despite a number of macroeconomic headwinds,” said Roberto Simon, WEX’s Chief Financial Officer. “Good organic growth coupled with solid returns from our strategic acquisitions are proof of the extraordinary progress we’ve made in 2019. Looking forward into 2020, we plan to capitalize on additional opportunities, focusing on our core fleet business and the high-growth travel, corporate payments, and U.S. health markets in the coming year.”

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. This guidance does not include any impacts from the recently announced acquisition of eNett and Optal.

  • For the first quarter of 2020, WEX expects revenue in the range of $445 million to $455 million and adjusted net income in the range of $95 million to $99 million, or $2.15 to $2.25 per diluted share.
  • For the full year 2020, the Company expects revenue in the range of $1,860 million to $1,900 million and adjusted net income in the range of $447 million to $464 million, or $10.15 to $10.55 per diluted share.

First quarter and full year 2020 guidance is based on an assumed average U.S. retail fuel price of $2.69 and $2.70 per gallon, respectively. The fuel prices referenced above are based on the applicable NYMEX futures price from the week of February 3, 2020. Our guidance also assumes that fleet credit loss for the first quarter will be in the range of 15 to 20 basis points and the full year will be in the range of 13 to 18 basis points. Our guidance assumes approximately 44.0 million 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, acquisition-related intangible amortization, other acquisition and divestiture related items, stock-based compensation, restructuring and other costs, impairment charges, debt restructuring and debt issuance cost amortization, non-cash adjustments related to our tax receivable agreement, similar adjustments attributable to our non-controlling interests and certain tax related items. We are unable to reconcile our adjusted net income guidance to the comparable GAAP measure without unreasonable effort because of the difficulty in predicting the amounts to be adjusted, including, but not limited to, foreign currency exchange rates, unrealized gains and losses on financial instruments, acquisition and divestiture related items and adjustments to the redemption value of a non-controlling interest, which may have a significant impact on our financial results.

Additional Information

Management uses the non-GAAP measures presented within this news 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 news release in Exhibit 1, a reconciliation of non-GAAP measures referenced in this news release, in Exhibit 2, a table 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, 2019 and 2018, and in Exhibit 3, a table of selected non-financial metrics for the quarter ended December 31, 2019 and four preceding quarters. The Company is also providing segment revenue for the three and twelve months ended December 31, 2019 and 2018 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 at 9:00 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 866-334-7066 or 973-935-8463. The Conference ID number is 1968236. A replay of the webcast and the accompanying slides will be available on the Company’s website.

About WEX

Powered by the belief that complex payment systems can be made simple, WEX (NYSE: WEX) is a leading financial technology service provider across a wide spectrum of sectors, including fleet, travel and healthcare. WEX operates in more than 10 countries and in more than 20 currencies through more than 5,000 associates around the world. WEX fleet cards offer 14.9 million vehicles exceptional payment security and control; purchase volume in travel and corporate solutions grew to $39.6 billion in 2019; and the WEX Health financial technology platform helps 390,000 employers and 31.8 million consumers better manage healthcare expenses. For more information, visit www.wexinc.com.

Forward-Looking Statements

This earnings release contains forward-looking statements, including statements regarding: financial guidance; assumptions underlying the Company’s financial guidance; future growth opportunities and expectations; expectations for the macro environment; and, anticipated volumes. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this earnings release, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the effects of general economic conditions on fueling patterns as well as payment and transaction processing activity; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of fluctuations in fuel prices; the effects of the Company’s business expansion and acquisition efforts; potential adverse changes to business or employee relationships, including those resulting from the completion of an acquisition; competitive responses to any acquisitions; uncertainty of the expected financial performance of the combined operations following completion of an acquisition; the failure to successfully integrate the Company’s acquisitions; the ability to realize anticipated synergies and cost savings; unexpected costs, charges or expenses resulting from an acquisition; the Company’s ability to successfully acquire, integrate, operate and expand commercial fuel card programs; the failure of corporate investments to result in anticipated strategic value; the impact and size of credit losses; the impact of changes to the Company’s credit standards; breaches of the Company’s technology systems or those of the Company’s third-party service providers and any resulting negative impact on the Company’s reputation, liabilities or relationships with customers or merchants; the Company’s failure to maintain or renew key commercial agreements; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; failure to successfully implement the Company’s information technology strategies and capabilities in connection with its technology outsourcing and insourcing arrangements and any resulting cost associated with that failure; 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 impact of the material weaknesses first disclosed in Item 9A of the Company’s Annual Report for the year ended December 31, 2018 filed on Form 10-K with the Securities and Exchange Commission on March 18, 2019 and the effects of the Company’s investigation and remediation efforts in connection with certain immaterial errors in the financial statements of our Brazilian subsidiary; the impact of the Company’s outstanding notes on its operations; the impact of increased leverage on the Company’s operations, results or borrowing capacity generally, and as a result of acquisitions specifically; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of our Annual Report for the year ended December 31, 2018, filed on Form 10-K with the Securities and Exchange Commission on March 18, 2019. 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 INCOME

(in thousands, except per share data)

(unaudited)

 

 

Three months ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

Payment processing revenue1

$

199,212

 

 

$

193,928

 

 

$

825,592

 

 

$

723,991

 

Account servicing revenue

110,369

 

 

71,928

 

 

413,552

 

 

308,096

 

Finance fee revenue

71,651

 

 

50,520

 

 

247,318

 

 

208,627

 

Other revenue

58,813

 

 

64,820

 

 

237,229

 

 

251,925

 

Total revenues

440,045

 

 

381,196

 

 

1,723,691

 

 

1,492,639

 

Cost of services

 

 

 

 

 

 

 

Processing costs

111,543

 

 

77,689

 

 

400,439

 

 

309,450

 

Service fees

13,679

 

 

13,808

 

 

57,027

 

 

53,655

 

Provision for credit losses

18,194

 

 

16,070

 

 

65,664

 

 

66,482

 

Operating interest

10,150

 

 

10,126

 

 

41,915

 

 

38,407

 

Depreciation and amortization

26,519

 

 

19,877

 

 

94,725

 

 

79,935

 

Total cost of services

180,085

 

 

137,570

 

 

659,770

 

 

547,929

 

General and administrative

69,732

 

 

55,172

 

 

275,807

 

 

209,319

 

Sales and marketing1

49,230

 

 

60,385

 

 

259,869

 

 

229,234

 

Depreciation and amortization

37,140

 

 

31,053

 

 

142,404

 

 

119,870

 

Impairment charge

 

 

3,225

 

 

 

 

5,649

 

Operating income

103,858

 

 

93,791

 

 

385,841

 

 

380,638

 

Financing interest expense

(33,378

)

 

(26,463

)

 

(134,677

)

 

(105,023

)

Net foreign currency gain (loss)

12,822

 

 

(11,362

)

 

(926

)

 

(38,800

)

Net unrealized gains (losses) on financial instruments

4,424

 

 

(15,792

)

 

(34,654

)

 

2,579

 

Non-cash adjustments related to tax receivable agreement

932

 

 

(775

)

 

932

 

 

(775

)

Income before income taxes

88,658

 

 

39,399

 

 

216,516

 

 

238,619

 

Income taxes

23,871

 

 

17,464

 

 

61,223

 

 

68,843

 

Net income

64,787

 

 

21,935

 

 

155,293

 

 

169,776

 

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

(797

)

 

678

 

 

(1,030

)

 

1,481

 

Net income attributable to WEX Inc.

65,584

 

 

21,257

 

 

156,323

 

 

168,295

 

Accretion of non-controlling interest

(11,138

)

 

 

 

(57,317

)

 

 

Net income attributable to shareholders

$

54,446

 

 

$

21,257

 

 

$

99,006

 

 

$

168,295

 

 

 

 

 

 

 

 

 

Net income attributable to shareholders per share:

 

 

 

 

 

 

 

Basic

$

1.26

 

 

$

0.49

 

 

$

2.29

 

 

$

3.90

 

Diluted

$

1.24

 

 

$

0.49

 

 

$

2.26

 

 

$

3.86

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

43,367

 

 

43,199

 

 

43,316

 

 

43,156

 

Diluted

43,931

 

 

43,535

 

 

43,769

 

 

43,574

 

1 Fleet segment payment processing revenue and sales and marketing expenses for the 4th quarter of 2019 includes a $20.9 million reduction to properly reflect fleet segment revenue and expenses. $14.3 million of this amount relates to Q1-Q3 of 2019.

WEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

December 31,

 

2019

 

2018

Assets

 

 

 

Cash and cash equivalents

$

810,932

 

 

$

541,498

 

Restricted cash

170,449

 

 

13,533

 

Accounts receivable

2,661,108

 

 

2,584,203

 

Securitized accounts receivable, restricted

112,192

 

 

109,871

 

Prepaid expenses and other current assets

87,694

 

 

149,021

 

Total current assets

3,842,375

 

 

3,398,126

 

Property, equipment and capitalized software

212,475

 

 

187,868

 

Goodwill and other intangible assets

4,016,251

 

 

2,866,323

 

Investment securities

30,460

 

 

24,406

 

Deferred income taxes, net

12,833

 

 

9,643

 

Other assets

184,024

 

 

284,229

 

Total assets

$

8,298,418

 

 

$

6,770,595

 

Liabilities and Stockholders’ Equity

 

 

 

Accounts payable

$

969,816

 

 

$

814,742

 

Accrued expenses

315,642

 

 

312,268

 

Restricted cash payable

170,449

 

 

13,533

 

Short-term deposits

1,310,813

 

 

927,444

 

Short-term debt, net

248,531

 

 

216,517

 

Other current liabilities

34,692

 

 

27,067

 

Total current liabilities

3,049,943

 

 

2,311,571

 

Long-term debt, net

2,686,513

 

 

2,133,923

 

Long-term deposits

143,399

 

 

345,231

 

Deferred income taxes, net

218,740

 

 

151,685

 

Other liabilities

106,422

 

 

32,261

 

Total liabilities

6,205,017

 

 

4,974,671

 

Commitments and contingencies

 

 

 

Redeemable non-controlling interest

156,879

 

 

 

Stockholders’ Equity

 

 

 

Total WEX Inc. stockholders’ equity

1,926,947

 

 

1,785,697

 

Non-controlling interest

9,575

 

 

10,227

 

Total stockholders’ equity

1,936,522

 

 

1,795,924

 

Total liabilities and stockholders’ equity

$

8,298,418

 

 

$

6,770,595

 

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,

 

2019

 

2018

 

 

 

per diluted share

 

 

 

per diluted share

Net income attributable to shareholders

$

54,446

 

 

$

1.24

 

 

$

21,257

 

 

$

0.49

 

Unrealized (gains) losses on financial instruments

(4,424

)

 

(0.10

)

 

15,792

 

 

0.36

 

Net foreign currency (gain) loss

(12,822

)

 

(0.29

)

 

11,362

 

 

0.26

 

Acquisition-related intangible amortization

42,929

 

 

0.98

 

 

34,590

 

 

0.79

 

Other acquisition and divestiture related items

12,971

 

 

0.30

 

 

1,351

 

 

0.03

 

Stock-based compensation

12,555

 

 

0.29

 

 

9,444

 

 

0.22

 

Restructuring and other costs

12,192

 

 

0.28

 

 

5,443

 

 

0.13

 

Impairment charge

 

 

 

 

3,225

 

 

0.07

 

Debt restructuring and debt issuance cost amortization

2,804

 

 

0.06

 

 

2,586

 

 

0.06

 

Non-cash adjustments related to tax receivable agreement

(932

)

 

(0.02

)

 

775

 

 

0.02

 

ANI adjustments attributable to non-controlling interest

9,161

 

 

0.21

 

 

(481

)

 

(0.01

)

Tax related items

(14,158

)

 

(0.32

)

 

(13,537

)

 

(0.31

)

Adjusted net income attributable to shareholders

$

114,722

 

 

$

2.61

 

 

$

91,807

 

 

$

2.11

 

 

Year Ended December 31,

 

2019

 

2018

 

 

 

per diluted share

 

 

 

per diluted share

Net income attributable to shareholders

$

99,006

 

 

$

2.26

 

 

$

168,295

 

 

$

3.86

 

Unrealized losses (gains) on financial instruments

34,654

 

 

0.79

 

 

(2,579

)

 

(0.06

)

Net foreign currency loss

926

 

 

0.02

 

 

38,800

 

 

0.89

 

Acquisition-related intangible amortization

159,431

 

 

3.64

 

 

138,186

 

 

3.17

 

Other acquisition and divestiture related items

37,675

 

 

0.86

 

 

4,143

 

 

0.10

 

Stock-based compensation

47,511

 

 

1.09

 

 

35,103

 

 

0.81

 

Restructuring and other costs

25,106

 

 

0.57

 

 

13,717

 

 

0.31

 

Impairment charge

 

 

 

 

5,649

 

 

0.13

 

Debt restructuring and debt issuance cost amortization

21,004

 

 

0.48

 

 

14,101

 

 

0.32

 

Non-cash adjustments related to tax receivable agreement

(932

)

 

(0.02

)

 

775

 

 

0.02

 

ANI adjustments attributable to non-controlling interests

53,035

 

 

1.21

 

 

(1,370

)

 

(0.03

)

Tax related items

(74,743

)

 

(1.71

)

 

(53,918

)

 

(1.24

)

Adjusted net income attributable to shareholders

$

402,673

 

 

$

9.20

 

 

$

360,902

 

 

$

8.28

 

Reconciliaton 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,

 

2019

 

2018

 

2019

 

2018

Operating income

$

103,858

 

 

$

93,791

 

 

$

385,841

 

 

$

380,638

 

Unallocated corporate expenses

15,847

 

 

15,717

 

 

67,982

 

 

58,095

 

Acquisition-related intangible amortization

42,929

 

 

34,590

 

 

159,431

 

 

138,186

 

Other acquisition and divestiture related items

12,971

 

 

1,351

 

 

37,675

 

 

4,143

 

Stock-based compensation

12,555

 

 

9,444

 

 

47,511

 

 

35,103

 

Restructuring and other costs

12,192

 

 

5,443

 

 

25,106

 

 

13,717

 

Debt restructuring costs

422

 

 

627

 

 

11,062

 

 

4,425

 

Impairment charge

 

 

3,225

 

 

 

 

5,649

 

Total segment adjusted operating income

$

200,774

 

 

$

164,188

 

 

$

734,608

 

 

$

639,956

 

Unallocated corporate expenses

(15,847

)

 

(15,717

)

 

(67,982

)

 

(58,095

)

Adjusted operating income

$

184,927

 

 

$

148,471

 

 

$

666,626

 

 

$

581,861

 

The Company’s non-GAAP adjusted net income excludes unrealized gains and losses on financial instruments, net foreign currency gains and losses, acquisition-related intangible amortization, other acquisition and divestiture related items, stock-based compensation, restructuring and other costs, impairment charges, debt restructuring and debt issuance cost amortization, non-cash adjustments related to the tax receivable agreement, similar 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, restructuring and other costs, debt restructuring costs and impairment charges. 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 U.S. generally accepted accounting principles (“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.
  • 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 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.

Contacts

News media contact:
WEX Inc.

Jessica Roy, 207-523-6763

Jessica.Roy@wexinc.com
or

Investor contact:
WEX Inc.

Steve Elder, 207-523-7769

Steve.Elder@wexinc.com

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