Business Overview WEX Inc. (WEX) is the global commerce platform that simplifies the business of running a business. The company has a long history of providing innovative payment and technology solutions to a diverse range of industries, helping its customers streamline operations, optimize workflows, and focus on core business priorities.
WEX was founded in 1983 as Wright Express Corporation, providing payment processing and information management services to the commercial and government vehicle fleet industry. The company started by offering a proprietary closed-loop payment network for fuel purchases, which provided enhanced data and controls for fleet operators.
In the early 2000s, WEX began expanding beyond its fleet payment origins, launching corporate payment solutions and entering the employee benefits administration market through the acquisition of Evolution1 in 2014. These strategic moves diversified the company's revenue streams and customer base.
Over the years, WEX has faced various challenges, including the 2008 financial crisis, which impacted its fleet customers, as well as increased competition in its core markets. The company responded by investing in technology, expanding its product offerings, and pursuing strategic acquisitions.
In 2005, WEX transitioned from a private company to a publicly traded one, listing its shares on the New York Stock Exchange. This move provided access to capital that enabled further growth and expansion. Today, WEX operates in three main business segments: Mobility, Benefits, and Corporate Payments, serving a diverse customer base of businesses and government agencies worldwide.
The company operates through three reportable segments: Mobility, Corporate Payments, and Benefits. The Mobility segment provides payment solutions, transaction processing, and information management services to a diverse fleet customer base globally. The Corporate Payments segment delivers global B2B payment solutions, including virtual card capabilities and accounts payable automation tools. The Benefits segment simplifies employee benefit plan administration through SaaS software integrated with payment solutions, serving a wide range of employers.
Financial Performance WEX has demonstrated a strong track record of financial performance, even amidst macroeconomic headwinds. In the full year 2024, the company reported total revenues of $2.63 billion, a 3% increase from the prior year. This growth was achieved despite a 3% headwind from fluctuations in fuel prices and foreign exchange rates. Excluding these impacts, the company's revenue grew 6% year-over-year.
The company's adjusted net income per share grew 3% in 2024 compared to 2023. Excluding the impact of lower fuel prices and foreign exchange rate differences, adjusted net income per share grew 11% year-over-year. WEX's strong profitability is reflected in its adjusted operating income margin, which was 37.9% in the fourth quarter of 2024.
WEX has consistently generated robust cash flow, with operating cash flow of $481.4 million and free cash flow of $562.0 million in 2024. The company's balance sheet remains strong, with a leverage ratio of 2.6 times at the end of 2024, at the low end of its long-term target range of 2.5 to 3.5 times.
In the most recent quarter (Q4 2024), WEX reported revenue of $636.5 million, a 4% decrease year-over-year, driven by the impact of lower fuel prices and foreign exchange rates, which reduced revenue growth by 4.2%. Net income for the quarter was $63.9 million. Adjusted earnings per share was $3.57, down 6.5% year-over-year, including a 12% reduction from lower fuel prices and foreign exchange rates.
Segment Performance Mobility Segment The Mobility segment, WEX's largest business unit, reported revenue of $1.40 billion in 2024, a 1.3% increase year-over-year. This segment was impacted by a 7.6% headwind from lower fuel prices and foreign exchange rates, which was partially offset by pricing optimization efforts and the acquisition of Payzer in 2023.
The company's proprietary closed-loop payments network in the U.S. covers more than 90% of fuel and 80% of EV charging locations, providing enhanced data capture, custom controls, and tailored economics between fleets and merchants. WEX is also focused on developing new products, such as the 10-4 by WEX offering for independent owner-operators and small businesses, to drive growth in this segment.
The Mobility segment consists of three main business units: North American Mobility, Over-the-Road, and International Mobility. In 2024, the segment processed a total volume of 79.54 million vehicles, with 566.8 million payment processing transactions and $52.02 billion in payment processing of fuel. The segment's net payment processing rate was 1.34% and the net late fee rate was 0.49% in 2024.
Segment adjusted operating income for Mobility was $598.5 million in 2024, with a segment adjusted operating income margin of 42.7%. This represented a slight decrease from the prior year, primarily due to higher processing costs, operating interest expense, and depreciation and amortization, partially offset by a decrease in the provision for credit losses.
Corporate Payments Segment The Corporate Payments segment reported revenue of $487.8 million in 2024, a 2.0% decrease year-over-year. This decline was primarily driven by a renegotiation of a contract with a large travel customer, as well as temporary volume reductions from two other larger customers.
However, WEX is making strategic investments to strengthen its competitive position in this segment. The company is broadening its corporate card capabilities, providing customers with greater flexibility in funding their accounts, and enabling expanded issuance and settlement in local currencies. Additionally, the company's direct-to-customer accounts payable automation solution has seen strong growth, with purchase volume increasing more than 25% year-over-year in the fourth quarter of 2024.
The Corporate Payments segment has two main offerings: Embedded Payments and Direct to Corporate. In 2024, the segment processed a total volume of $138.71 billion, with a net interchange rate of 0.46%. Segment adjusted operating income for Corporate Payments was $256.2 million in 2024, with a segment adjusted operating income margin of 52.5%. This represented a decrease from the prior year, primarily due to an increase in the provision for credit losses and higher depreciation and amortization expense, partially offset by a decrease in general and administrative costs.
Benefits Segment The Benefits segment reported revenue of $739.5 million in 2024, an 11.0% increase year-over-year. This growth was driven by a rise in average HSA deposit balances held by WEX Bank and higher interest rates earned on the investment of such balances, as well as the contribution from the Ascensus acquisition in 2023.
While the company has seen a moderation in growth in this segment, reflecting industry-wide trends in HSA-eligible plan enrollment, WEX remains well-positioned with its robust portfolio of benefit administration, consumer-driven benefit offerings, and HSA custodial services. The company is investing in new products and capabilities to drive greater consumer engagement and higher participation in its benefit offerings.
In 2024, the Benefits segment processed a total volume of $13.6 billion, with purchase volume of $7.24 billion. The average number of SaaS accounts on the platform was 20.3 million, and the average HSA custodial cash assets were $4.28 billion. Segment adjusted operating income for Benefits was $307.0 million in 2024, with a segment adjusted operating income margin of 41.5%. This represented a significant increase from the prior year, driven by higher revenues from growth in average HSA custodial cash assets and interest rates earned on those balances.
Growth Initiatives To accelerate growth, WEX is making significant investments in product development and sales and marketing across its business segments. The company believes these investments will strengthen its competitive position and drive sustainable long-term revenue growth.
In the Mobility segment, WEX is focused on expanding its solutions into the emerging electric vehicle (EV) market, recognizing that the transition to EVs will present opportunities to enhance its unit economics within its customer base. The company is also leveraging its experience with the Payzer acquisition to refine its cross-sell and go-to-market strategies.
Within the Corporate Payments segment, WEX is enhancing its embedded payments offering to serve a broader range of industries, while also investing in its direct accounts payable automation solution to capture more of the substantial market opportunity in the mid-market segment.
In the Benefits segment, WEX is applying advanced technologies like AI to its rich data assets to provide more personalized support and guidance to consumers, driving higher participation and funding levels in its benefit offerings.
Risks and Challenges While WEX has demonstrated resilience and adaptability, the company faces several risks and challenges that warrant consideration:
1. Macroeconomic factors: Volatility in fuel prices, interest rates, and foreign exchange rates can significantly impact the company's financial performance.
2. Competitive landscape: WEX operates in highly competitive markets, and the company's ability to maintain its competitive edge and market share is crucial.
3. Regulatory environment: As a financial services provider, WEX is subject to a complex and evolving regulatory landscape, which could increase compliance costs and limit operational flexibility.
4. Integration and execution risks: The company's growth strategy, which includes both organic initiatives and strategic acquisitions, carries integration and execution risks that could impact financial and operational performance.
5. Cybersecurity and data privacy: As a technology-driven company, WEX must continually invest in and maintain robust cybersecurity measures to protect its systems and customer data.
Financials WEX's financial performance has been strong, with total revenues of $2.63 billion in 2024, representing a 3% increase from the previous year. The company's adjusted net income per share grew 3% in 2024 compared to 2023, and excluding the impact of lower fuel prices and foreign exchange rate differences, it grew 11% year-over-year. WEX's adjusted operating income margin was 37.9% in the fourth quarter of 2024, demonstrating strong profitability.
For the full year 2024, WEX reported annual net income of $309.6 million. The company's Debt/Equity ratio was 0.868 as of December 31, 2024. WEX's current ratio and quick ratio were both 1.02 as of December 31, 2024, indicating a healthy short-term liquidity position.
Liquidity WEX has maintained a strong liquidity position, generating robust cash flow with operating cash flow of $481.4 million and free cash flow of $562.0 million in 2024. The company's balance sheet remains strong, with a leverage ratio of 2.6 times at the end of 2024, which is at the low end of its long-term target range of 2.5 to 3.5 times. This strong financial position provides WEX with the flexibility to navigate near-term challenges and invest in long-term growth opportunities.
As of December 31, 2024, WEX had cash and cash equivalents of $595.8 million. The company also had $655.2 million in remaining borrowing capacity under its Revolving Credit Facility, further enhancing its financial flexibility.
Geographic Performance WEX operates globally, with a presence in over 20 countries. However, the majority of its revenue comes from the United States and Canada. The company's International Mobility business, part of the Mobility segment, addresses the needs of businesses that utilize primarily light and medium duty vehicles central to the operation of the service economy outside of North America, including the company's fleet portfolios in Europe and Asia-Pacific.
Outlook and Conclusion WEX is well-positioned to capitalize on the substantial growth opportunities in the markets it serves. The company's strategic investments in product innovation, sales and marketing, and data-driven capabilities are expected to enhance its competitive differentiation and drive sustainable long-term growth.
For the first quarter of 2025, WEX expects to report revenue in the range of $625 million to $640 million and adjusted net income EPS between $3.35 and $3.50 per diluted share. For the full year 2025, WEX provided revenue guidance in the range of $2.6 billion to $2.66 billion and adjusted net income per share guidance between $14.65 and $15.25. While these expectations reflect a slowdown in the near-term as the company ramps up its growth initiatives, the company remains confident in its ability to deliver on its refreshed long-term organic revenue growth target of 5% to 10% and adjusted earnings per share growth of 10% to 15%.
WEX's strong financial position, with a healthy balance sheet and robust cash flow generation, provides the company with the flexibility to navigate near-term challenges and invest in long-term growth opportunities. As the company continues to simplify the business of running a business for its diverse customer base, WEX remains well-positioned to create value for its shareholders.