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WEX Inc. (WEX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue $636.5M, down 4% YoY; adjusted EPS $3.57, down 6.5% YoY. Headwinds were a net $26.6M fuel price/spread drag and $1.3M FX drag; underlying revenue was flat YoY excluding fuel/FX .
  • Segment mix: Benefits grew 4.9% to $186.9M with margin expansion; Corporate Payments fell 22.7% to $104.3M on two large-customer volume reductions and an OTA model change; Mobility dipped 1.4% on fuel price pressure but saw improved net payment processing rate .
  • Management reset long‑term targets: organic revenue growth to 5–10% (from 8–12%) and long‑term adjusted EPS growth to 10–15%, while committing to incremental 2025 investments (~$25M higher sales/marketing) to reaccelerate growth by 2026 .
  • Guidance: Q1’25 revenue $625–$640M; FY’25 revenue $2.60–$2.66B; Q1’25 adjusted EPS $3.35–$3.50; FY’25 adjusted EPS $14.65–$15.25, with 25% tax and fuel price assumptions ($3.26/$3.25 per gallon) that cut FY’25 revenue/EPS by ~$44M/$0.68 vs 2024 .
  • Capital return: repurchased 0.773M shares ($106M) in Q4; $650M for FY’24; $964M remains authorized as of Q4’24—an ongoing catalyst if buybacks continue .

What Went Well and What Went Wrong

  • What Went Well

    • Benefits margin inflected: adjusted AOI margin rose to 41.7% (from 33.2% YoY), driven by custodial HSA income; custodial investment revenue rose to ~$53.4M in Q4 and ~$209.5M for FY’24, with yields stable given fixed-rate ladders .
    • Direct AP momentum: management highlighted >25% YoY growth in direct purchase volume in Q4; expects higher-yielding, lower-volatility direct business to scale with new product capabilities .
    • Pricing and credit discipline in Mobility: net payment processing rate improved to 1.36% (+10 bps YoY); credit losses came in at 11 bps of spend, below guidance (14–19 bps) .
    • Quote: “Our expectation is that these investments will help drive an acceleration in WEX’s top-line growth rate over time” — CFO Jagtar Narula .

  • What Went Wrong

    • Corporate Payments contraction: revenue fell 22.7% to $104.3M on temporary large-customer volume reductions and a major OTA revenue model transition; segment adjusted margin down to 43.9% (from 58.4%) .
    • Macro headwinds: lower fuel prices reduced Q4 revenue by ~$26.6M and hurt adjusted EPS by ~12% YoY; FX was also unfavorable ($1.3M revenue) .
    • Mobility same-store sales softness persisted (though improved sequentially): NA local fleets −2.8% YoY; OTR −<1%; management suggests stabilization but acknowledges trucking recession impacts .
    • Analyst concern: long-term growth reset reflects saturated travel and moderated HSA adoption; management aims to outgrow market via product/sales investments .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$673.5 $665.5 $636.5
GAAP EPS ($)$1.83 $2.52 $1.60
Adjusted EPS ($)$3.91 $4.35 $3.57
GAAP Operating Margin (%)25.0% 29.5% 24.7%
Adjusted Operating Margin (%)40.7% 44.0% 37.9%
SegmentQ4 2023 Revenue ($M)Q4 2024 Revenue ($M)YoY (%)Q4 2023 Adj AOI Margin (%)Q4 2024 Adj AOI Margin (%)
Mobility$350.1 $345.2 (1)% 43.0% 42.3%
Corporate Payments$135.0 $104.3 (23)% 58.4% 43.9%
Benefits$178.2 $186.9 +5% 33.2% 41.7%
Total Adjusted Operating Income ($M)$262.5 $241.5 (8)%——
KPIQ2 2024Q3 2024Q4 2024
Mobility Net Payment Processing Rate (%)1.29% 1.38% 1.36%
Late Fee Revenue ($M)$67.3 $59.0 $68.4
Corporate Payments Purchase Volume ($M)$25,756.2 $23,394.4 $16,541.3
Corporate Payments Net Interchange Rate (%)0.45% 0.45% 0.52%
Benefits Avg SaaS Accounts (M)20.0 20.3 20.4
Avg HSA Custodial Cash Assets ($M)$4,231 $4,315 $4,366
Q4 2024 Actual vs Prior Quarter and GuidanceQ3 2024Q4 2024 Guidance (Oct)Q4 2024 Actual
Revenue ($M)$665.5 $630–$640 $636.5 (near midpoint)
Adjusted EPS ($)$4.35 $3.51–$3.61 $3.57 (near midpoint)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Revenue Growth Target (%)Long-term8–12% 5–10% Lowered
Adjusted EPS Growth Target (%)Long-termN/A disclosed10–15% Set/Updated
Revenue ($M)Q1 2025N/A$625–$640 New
Adjusted EPS ($)Q1 2025N/A$3.35–$3.50 New
Revenue ($B)FY 2025N/A$2.60–$2.66 New
Adjusted EPS ($)FY 2025N/A$14.65–$15.25 New
Adjusted Net Income Effective Tax RateFY 202525% (policy began FY’24) 25% Maintained
Diluted Shares (M)Q1/FY 2025N/A39.5 / 39.0 New
Fuel Price Assumption ($/gal)Q1/FY 2025N/A$3.26 / $3.25; FY impact −$44M revenue, −$0.68 EPS New
Sales & Marketing ExpenseFY 2025N/A+~$25M vs baseline Raised
Q4 Revenue ($M)Q4 2024$630–$640 Actual $636.5 Met (midpoint)
Q4 Adjusted EPS ($)Q4 2024$3.51–$3.61 Actual $3.57 Met (midpoint)

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
AI/Technology initiativesEmphasized AI capabilities and digital transformation; introduced plan for ASR; EV investment continuing Deployed AI “Benefit Assistance” to improve UX; AI to reduce cost-to-serve and aid retention Using AI/data to tailor HSA engagement; goal to drive higher participation/funding Building, moving from ops efficiency to revenue engagement
Mobility (pricing/volume)Mobility revenue accelerated; pricing initiatives; credit losses moderating Same-store sales softness emerged; fuel price declines pressured revenue; net rate up; credit losses below guide Sequential SSS improvement; net rate sustained; lower fuel prices remain a drag Stabilizing volumes; pricing discipline intact
Corporate Payments (travel vs non-travel)Growth; expanding APAC offerings; wider virtual card variety OTA model transition began; total platform volume +6% incl fee-based flows Two large customers had temporary volume reductions; direct AP growth >25% YoY; anticipate H2’25 reacceleration Near-term contraction; recovery expected H2’25
Benefits (custodial income/HSA)13% segment growth; custodial yields rising 9% growth; fixed-rate laddered investments ~80% of portfolio stabilize income 5% revenue growth; margins up; avg HSA assets $4.366B; yields steady vs Q3 Moderating account growth; strong custodial income supports margins
Macro (fuel/FX/trucking)Fuel/FX mild drags Fuel price decline; OTR softness; SSS deceleration Fuel/FX drags continue; SSS normalization; trucking recession persists Headwinds easing sequentially but still present
Capital allocation~$100M Q2 buybacks; ASR planned $370M Q3 buybacks; lowest share count in decade $106M Q4 buybacks; $650M FY; ~$964M authorization remaining Consistent repurchases; potential ongoing support

Management Commentary

  • Strategic focus on product and go-to-market: “We have already begun adding additional sales and marketing resources… payback periods are 2 years or fewer, and strong LTV to CAC” — Melissa Smith .
  • Long-term targets reset to reflect market realities: “We’re adjusting our long‑term organic revenue growth target from 8–12% to 5–10%… updating long‑term adjusted EPS to 10–15%” .
  • Corporate Payments outlook: “Revenue to contract slightly in 2025… declines in H1, return to growth in H2; reaccelerate in 2026 as we lap headwinds” .
  • EV opportunity and mixed-energy fleets: “We’re very bullish about the EV transition… products resonate and unit economics can improve over time” .
  • Benefits engagement initiatives: “By applying advanced technology like AI to our rich data assets… drive higher participation, greater funding levels and stronger outcomes” .

Q&A Highlights

  • Long-term growth reset drivers: saturation in travel and moderated HSA adoption; management aiming to outgrow market via product/sales investments rather than segment-level targets .
  • Investment returns and OpEx: incremental ~$25M sales/marketing in 2025; expected payback ≤2 years; high LTV/CAC supported by mid‑90s retention .
  • Corporate Payments dynamics: temporary large-customer volume shifts (one in travel, one non-travel), OTA model change; confidence in recoveries and recent contract extension .
  • Mobility volumes and macro: same-store sales normalizing (NA local −2.8% YoY; OTR −<1%); trucking recession persists; pricing discipline continues .
  • Margins trajectory: down in 2025 due to investments, with expectations to accrete over time as growth reaccelerates .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable due to access limits at time of analysis. As a proxy, actuals were near prior company guidance midpoints: Q4 revenue $636.5M vs $630–$640M guided; adjusted EPS $3.57 vs $3.51–$3.61 guided .
  • Q1’25 and FY’25 guidance provided (revenue and adjusted EPS ranges) should anchor updated models; note the explicit 25% non‑GAAP tax and fuel price assumptions materially impact revenue/EPS .

Key Takeaways for Investors

  • Near-term earnings pressure is primarily macro (fuel/FX) and segment-specific (Corporate Payments OTA/model shifts); Q4 delivered near guided midpoints, suggesting execution discipline despite headwinds .
  • Benefits’ custodial income stability (fixed-rate laddering) and margin expansion provide a defensive earnings pillar while HSA account growth moderates mid‑term .
  • Corporate Payments contraction should abate through H2’25, with 2026 reacceleration targeted; monitor direct AP growth mix and large-customer volumes to gauge trajectory .
  • Mobility fundamentals (pricing, net processing rate, credit) are sound; watch same-store sales normalization and fuel spreads for revenue sensitivity (±$20M per $0.10/gal; EPS ~±$0.30) .
  • Strategic pivot (5–10% long‑term organic revenue growth; 10–15% adjusted EPS growth) plus ~$25M incremental 2025 S&M spend frames a “invest now, reaccelerate later” setup—expect margin dip in 2025 with improvement as growth returns .
  • Buybacks remain a tangible capital return lever ($650M FY’24; ~$964M authorization remaining), potentially supporting EPS and share count tailwinds through 2025 .
  • Trading lens: watch H1’25 for Corporate Payments trough and Mobility SSS stabilization; catalysts include new customer wins in embedded payments, Direct AP scale, and continued Benefits custodial yield resilience .