WEX Inc, a provider of corporate payment solutions, operates three business segments: Mobility, Benefits, and Corporate Payments. The Mobility segment, the largest by revenue, offers fleet vehicle payment solutions, transaction processing, and information management services for commercial and government fleets. The Corporate Payments segment provides business-to-business payment processing and transaction monitoring services. The Benefits segment generates revenue from healthcare payment products and its consumer-directed software platform. WEX's largest end market is the United States of America.
Performance Overview
WEX Inc reported a total revenue of $673.5 million for Q2 2024, an 8% increase from $621.3 million in Q2 2023. However, this figure fell short of the analyst estimate of $679.82 million. The revenue increase was driven by a 13% growth in the Benefits segment and an acceleration in the Mobility segment growth rate. The revenue increase included a $5.4 million unfavorable impact from fuel prices and spreads and a $0.8 million unfavorable impact from foreign exchange rates.
GAAP net income for the quarter was $77.0 million, or $1.83 per diluted share, down from $95.3 million, or $2.20 per diluted share, in the same period last year. Adjusted net income, a non-GAAP measure, was $164.0 million, or $3.91 per diluted share, up from $159.3 million, or $3.63 per diluted share, in Q2 2023. This exceeded the analyst estimate of $3.84 per share.
“WEX achieved another quarter of record revenue and delivered adjusted earnings per share above the top end of our guidance range, showcasing our ability to deliver consistently strong financial results even in challenging economic conditions,” said Melissa Smith, WEX’s Chair, Chief Executive Officer, and President.
Financial Achievements and Challenges
WEX Inc's GAAP operating income margin for Q2 2024 was 25.0%, compared to 25.7% in Q2 2023. The adjusted operating income margin was 40.7%, slightly up from 40.3% in the prior year. The company repurchased approximately $100 million worth of shares during the quarter and an additional $70 million in July 2024. WEX also plans to enter into a $300 million accelerated share repurchase agreement in the near future.
Despite the revenue growth, WEX faced challenges such as unfavorable impacts from fuel prices and foreign exchange rates. These factors could potentially affect future performance if they persist.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Revenue | $673.5 million | $621.3 million |
| GAAP Net Income | $77.0 million | $95.3 million |
| Adjusted Net Income | $164.0 million | $159.3 million |
| GAAP EPS | $1.83 | $2.20 |
| Adjusted EPS | $3.91 | $3.63 |
Income Statement Highlights
WEX Inc's payment processing revenue increased to $318.4 million from $300.5 million in Q2 2023. Account servicing revenue rose to $168.6 million from $152.9 million, while finance fee revenue slightly increased to $77.8 million from $76.4 million. Other revenue saw a significant rise to $108.7 million from $91.5 million.
Balance Sheet and Cash Flow
As of June 30, 2024, WEX Inc reported total assets of $14.25 billion, up from $13.88 billion at the end of 2023. Cash and cash equivalents stood at $682.6 million, down from $975.8 million. The company’s total liabilities increased to $12.46 billion from $12.06 billion, while stockholders' equity decreased to $1.78 billion from $1.82 billion.
Cash flows used in operating activities for the first six months of 2024 were $160.3 million, compared to cash flows from operating activities of $99.5 million in the same period last year. Net cash used for investing activities was $402.7 million, while net cash provided by financing activities was $146.7 million.
“We delivered solid financial performance in the second quarter, underpinned by our solid balance sheet, strong cash generation, and low leverage ratio that allow us to invest in the business and return capital to our shareholders,” said Jagtar Narula, WEX’s Chief Financial Officer.
Analysis and Outlook
WEX Inc's performance in Q2 2024 demonstrates its resilience and ability to generate strong financial results despite economic challenges. The company's strategic initiatives, including investments in EV offerings and digital transformation, are expected to drive future growth. However, the unfavorable impacts from fuel prices and foreign exchange rates pose potential risks.
For the third quarter of 2024, WEX Inc expects revenue in the range of $688 million to $698 million and adjusted net income in the range of $4.42 to $4.52 per diluted share. For the full year 2024, the company expects revenue between $2.68 billion and $2.72 billion, with adjusted net income ranging from $15.98 to $16.38 per diluted share.
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