WEX Inc. Reports Second Quarter 2018 Financial Results
Aug. 02, 2018
SOUTH PORTLAND, Maine--(BUSINESS WIRE)--Aug 2, 2018--WEX Inc. (NYSE: WEX), a leading provider of corporate payment solutions, today reported financial results for the three months ended June 30, 2018.
Second Quarter 2018 Financial Results
Total revenue for the second quarter of 2018 increased 22% to $370.9 million from $303.9 million for the second quarter of 2017. Of the $67 million increase in the quarter, only $16.6 million was the result of higher fuel prices.
Net income attributable to shareholders on a GAAP basis increased by $22.2 million to $39.3 million, or $0.90 per diluted share, compared with $17.1 million, or $0.40 per diluted share, for the second quarter of 2017. The Company's adjusted net income attributable to shareholders, which is a non-GAAP measure, was $90.8 million for the second quarter of 2018, or $2.09 per diluted share, up 66% per diluted share from $54.2 million or $1.26 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.
“I am pleased to report another strong quarter and a successful first half of the year, highlighted by top and bottom line results above our guidance range with strong contributions from each of our business segments” said Melissa Smith, WEX’s president and chief executive officer. “We remain focused on our sustained ability to leverage our talent and technology to bring compelling business-to-business products to market, which is allowing us to continue to sign new customers, retain and grow our current base and ultimately drive profitable growth.
Smith continued, “In the first half, we built on our performance from last year, with our employees across the world focused on bringing future-based solutions across many B2B markets through the use of technology and capitalizing on our organic growth opportunities. We are also pleased to report some significant contract wins during the quarter, notably the Shell portfolio, one of the most recognized brands in the industry, further indicating that WEX is the trusted partner of choice. We look forward to carrying this momentum through the second half of 2018 and beyond.”
Second Quarter 2018 Performance MetricsAverage number of vehicles serviced was approximately 11.8 million, an increase of 8% from the second quarter of 2017. Total fuel transactions processed increased 7% from the second quarter of 2017 to 139.2 million. Payment processing transactions increased 7% to 115.9 million. U.S. retail fuel price increased 25% to $3.02 per gallon from $2.41 per gallon in the second quarter of 2017. Travel and Corporate Solutions purchase volume grew 16% to $8.9 billion, from $7.7 billion in the second quarter of 2017. Health and Employee Benefit Solutions average number of Software-as-a-Service (SaaS) accounts in the U.S. grew 20% to 10.7 million from 8.9 million in the second quarter of 2017.
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 an indeterminate amount of certain elements that are included in reported GAAP earnings.For the full year 2018, the Company expects revenue in the range of $1.445 billion to $1.475 billion and adjusted net income in the range of $344 million to $355 million, or $7.90 to $8.15 per diluted share. Our assumptions for the full-year include an additional $0.10 per diluted share in costs from the Shell integration. For the third quarter of 2018, WEX expects revenue in the range of $363 million to $373 million and adjusted net income in the range of $88 million to $93 million, or $2.03 to $2.13 per diluted share.
"We are excited to deliver another quarter of impressive growth and build upon the first-quarter's momentum. We expect to sustain this robust level of performance through the balance of the year, allowing us to invest in the Shell implementation and absorb changes in foreign exchange rates" said Roberto Simon, WEX's chief financial officer.
Third quarter 2018 guidance is based on an assumed average U.S. retail fuel price of $2.90 per gallon. Full year 2018 guidance is based on an assumed average U.S. retail fuel price of $2.84 per gallon. The fuel prices referenced above are based on the applicable NYMEX futures price. Our guidance assumes approximately 43.5 million shares outstanding for the third quarter and full year 2018.
The Company's guidance also assumes that third quarter 2018 fleet credit loss will range from 11 to 16 basis points and full year will range from 11 to 16 basis points.
The Company's adjusted net income guidance, which is a non-GAAP measure, excludes unrealized gains and losses on financial instruments, net foreign currency remeasurement gains and losses, acquisition related intangible amortization, other acquisition and divestiture related items, stock-based compensation, restructuring and other costs, debt restructuring and debt issuance cost amortization, similar adjustments attributable to our non-controlling interest 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 derivative instruments and acquisition and divestiture related items, which may have a significant impact on our financial results.
As previously disclosed, beginning in the first quarter of 2018, the Company has modified the presentation of certain line items in its unaudited condensed consolidated statements of income. Under the new presentation, the Company segregates costs of services from other operating expenses and has reclassified its operating expenses into functional categories in order to provide additional detail into the underlying drivers of changes in operating expenses and align its presentation with industry practice. There are no changes to the presentation of revenues, non-operating expenses or other statement of income captions. Additionally, the revised presentation does not result in a change to previously reported revenues, operating income, income before income taxes or net income. Amounts from the prior period have been recast to reflect the new presentation.
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 2, a table illustrating the impact of foreign currency translations and fuel prices for each of our reportable segments for the three and six months ended June 30, 2018 and 2017, and in Exhibit 3, a table of selected non-financial metrics for the quarter ended June 30, 2018 and four preceding quarters. The Company is also providing selected segment revenue information for the three and six months ended June 30, 2018 and 2017 in Exhibit 4.
Conference Call Details
In conjunction with this announcement, WEX will host a conference call today, August 2, 2018, 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 2183139. A replay of the webcast and the accompanying slides will be available on the Company's website.
Powered by the belief that complex payment systems can be made simple, WEX (NYSE: WEX) is a leading provider of payment processing and business solutions 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 3,300 associates around the world. WEX fleet cards offer approximately 12 million vehicles exceptional payment security and control; purchase volume in Travel and Corporate Solutions Segment grew to $8.9 billion; and the WEX Health financial technology platform helps 300,000 employers and more than 25 million consumers better manage healthcare expenses. For more information, visit www.wexinc.com.
This earnings release contains forward-looking statements, including statements regarding: financial guidance; assumptions underlying the Company's financial guidance; future growth opportunities; expectations for customer signings; profitability; technology advances; and, market expansion. 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 ability 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 our 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 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, 2017, filed on Form 10-K with the Securities and Exchange Commission on March 1, 2018. 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.
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