WEX Inc. Reports First Quarter 2019 Financial Results

WEX Inc. (NYSE:WEX), a leading provider of corporate payment solutions,
today reported financial results for the three months ended March 31,
2019.

First Quarter 2019 Financial Results

Total revenue for the first quarter of 2019 increased 8% to $381.9
million from $354.0 million for the first quarter of 2018. The $27.8
million revenue increase in the quarter includes a $4.5 million negative
impact as a result of lower fuel prices.

Net income attributable to shareholders on a GAAP basis decreased by
$35.8 million to $16.1 million, or $0.37 per diluted share, compared
with $52.0 million, or $1.20 per diluted share, for the first quarter of
2018. The Company’s adjusted net income attributable to shareholders,
which is a non-GAAP measure, was $74.8 million for the first quarter of
2019, or $1.72 per diluted share, down 9% per diluted share from $82.0
million or $1.89 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.

“WEX delivered another quarter with strong execution and exceeded our
revenue and earnings targets,” said Melissa Smith, WEX’s President and
Chief Executive Officer. “On the heels of a record 2018, we continue to
drive growth while executing the conversions of the Shell and Chevron
portfolios and integrating our recent acquisitions within corporate
payments and health. As we gain increasing benefit from the
contributions of these activities, we expect to see our growth and
profitability ramp as we progress through 2019. We have set a strong
foundation for growth this quarter and look forward to continuing this
momentum through the remainder of the year and beyond.”

First Quarter 2019 Performance Metrics

• Average number of vehicles serviced was approximately 13.1 million, an
  increase of 14% from the first quarter of 2018.
• Total fuel transactions processed increased 7% from the first quarter
  of 2018 to 140.5 million. Payment processing transactions increased 5%
  to 115.4 million.
• U.S. retail fuel price decreased 4% to $2.67 per gallon from $2.78 per
  gallon in the first quarter of 2018.
• Travel and Corporate Solutions purchase volume grew 6% to $8.4 billion
  from $7.9 billion in the first quarter of 2018.
• Health and Employee Benefit Solutions average number of
  Software-as-a-Service (SaaS) accounts in the U.S. grew 18% to 12.7
  million from 10.8 million in the first quarter of 2018.

“The first quarter results have set a strong foundation for 2019. As we
progress through the year, I am confident that we will continue to
capture greater opportunities in fleet, corporate payments, and
consumer-directed healthcare to further drive solid organic growth
throughout the year and beyond,” said Roberto Simon, WEX’s Chief
Financial Officer.

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. The updated full year guidance below has been increased
to reflect higher average fuel prices projected by the market.

• For the full year 2019, the Company expects revenue in the range of
  $1.705 billion to $1.745 billion and adjusted net income in the range
  of $399 million to $416 million, or $9.10 to $9.50 per diluted share.
• For the second quarter of 2019, WEX expects revenue in the range of
  $438 million to $443 million and adjusted net income in the range of
  $97 million to $100 million, or $2.22 to $2.28 per diluted share.

Second quarter 2019 guidance is based on an assumed average U.S. retail
fuel price of $2.85 per gallon. Full year 2019 guidance is based on an
assumed average U.S. retail fuel price of $2.78 per gallon. The fuel
prices referenced above are based on the applicable NYMEX futures price.
The Company’s guidance also assumes that second quarter 2019 fleet
credit loss will range from 11 to 16 basis points and full year fleet
credit loss will range from 13 to 18 basis points. Our guidance also
assumes approximately 43.8 million shares outstanding for the second
quarter and full year 2019.

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 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 and acquisition and divestiture related items,
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 2, a table
illustrating the impact of foreign currency rates and fuel prices for
each of our reportable segments for the three months ended March 31,
2019, and in Exhibit 3, a table of selected non-financial metrics for
the quarter ended March 31, 2019 and four preceding quarters. The
Company is also providing selected segment revenue information for the
three months ended March 31, 2019 and 2018 in Exhibit 4.

Conference Call Details

In conjunction with this announcement, WEX will host a conference call
today, May 2, 2019, 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 1586638. 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 Inc. (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 approximately 4,800 associates around
the world. WEX fleet cards offer 13.1 million vehicles exceptional
payment security and control, purchase volume in its Travel and
Corporate Solutions segment grew to $8.4 billion in the three months
ended March 31, 2019 and the WEX Health financial technology platform
helps approximately 343,000 employers and more than 28 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; 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 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 disclosed in Item 9A of the Company’s annual report
on Form 10-K for the year ended December 31, 2018 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.

The Company’s non-GAAP adjusted net income 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
interests and certain tax related items.

Although adjusted net income is not calculated in accordance with U.S.
generally accepted accounting principles (“GAAP”), this non-GAAP measure
is 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 this measure integral because it excludes 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, receivable and 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. The Company believes that excluding acquisition-related
  costs and gains or losses of divestitures facilitates the comparison
  of our financial results to the Company’s historical operating results
  and to other companies in our industry.
• Stock-based compensation is different from other forms of compensation
  as it is a non-cash expense. For example, a cash salary generally has
  a fixed and unvarying cash cost. In contrast, the expense associated
  with an equity-based award is generally unrelated to the amount of
  cash ultimately received by the employee, and the cost to the Company
  is based on a stock-based compensation valuation methodology and
  underlying assumptions that may vary over time.
• Restructuring and other costs are related to certain identified
  initiatives to further streamline the business, improve the Company’s
  efficiency, create synergies and to globalize the Company’s
  operations, all with an objective to improve scale and increase
  profitability going forward. This also includes other immaterial costs
  that the Company has incurred and are non-operational and
  non-recurring. We exclude these items when evaluating our continuing
  business performance as such items are not consistently occurring and
  do not reflect expected future operating expense, nor do they provide
  insight into the fundamentals of current or past operations of our
  business.
• Debt restructuring and debt issuance cost amortization are unrelated
  to the continuing operations of the Company. Debt restructuring costs
  are not consistently occurring and do not reflect expected future
  operating expense, nor do they provide insight into the fundamentals
  of current or past operations of our business. In addition, since debt
  issuance cost amortization is dependent upon the financing method
  which can vary widely company to company, we believe that excluding
  these costs helps to facilitate comparison to historical results as
  well as to other companies within our industry.
• The adjustments attributable to non-controlling interests, including
  adjustments to the redemption value of a non-controlling interest,
  have no significant impact on the ongoing operations of the business.
• The tax related items are the difference between the Company’s U.S.
  GAAP tax provision and a pro forma tax provision based upon the
  Company’s adjusted net income before taxes as well as the impact from
  certain discrete tax items. The methodology utilized for calculating
  the Company’s adjusted net income tax provision is the same
  methodology utilized in calculating the Company’s U.S. GAAP tax
  provision.

For the same reasons, WEX believes that adjusted net income may also be
useful to investors as one means of evaluating the Company’s
performance. However, because adjusted net income is a non-GAAP measure,
it should not be considered as a substitute for, or superior to, net
income, operating income or cash flows from operating activities as
determined in accordance with GAAP. In addition, adjusted net income as
used by WEX may not be comparable to similarly titled measures employed
by other companies.

The table below shows the impact of certain macro factors on reported
revenue:

To determine the impact of foreign exchange translation (“FX”) on
revenue, revenue from entities whose functional currency is not
denominated in U.S. dollars, as well as revenue from purchase volume
transacted in non-U.S. denominated currencies, were translated using the
weighted average exchange rates for the same period in the prior year.

To determine the impact of price per gallon of fuel (“PPG”) on revenue,
revenue variable to changes in fuel prices was calculated based on the
average retail price of fuel for the same period in the prior year for
the portion of our business that earns revenue based on a percentage of
fuel spend. For the portions of our business that earn revenue based on
margin spreads, revenue was calculated utilizing the comparable margin
from the prior year.

The table below shows the impact of certain macro factors on Adjusted
Net Income:

To determine the estimated earnings impact of FX on revenue and expenses
from entities whose functional currency is not denominated in U.S.
dollars, as well as revenue and variable expenses from purchase volume
transacted in non-U.S. denominated currencies, were translated using the
weighted average exchange rates for the same period in the prior year,
net of tax.

To determine the estimated earnings impact of PPG, revenue and certain
variable expenses impacted by changes in fuel prices were adjusted based
on the average retail price of fuel for the same period in the prior
year for the portion of our business that earns revenue based on a
percentage of fuel spend, net of applicable taxes. For the portions of
our business that earn revenue based on margin spreads, revenue was
adjusted to the comparable margin from the prior year, net of
non-controlling interests and applicable taxes.

Definitions and explanations:

Payment processing transactions represents the total number of purchases
made by fleets that have a payment processing relationship with WEX.

Payment processing gallons of fuel represents the total number of
gallons of fuel purchased by fleets that have a payment processing
relationship with WEX.

Payment processing dollars of fuel represents the total dollar value of
the fuel purchased by fleets that have a payment processing relationship
with WEX.

Net payment processing rate represents the percentage of the dollar
value of each payment processing transaction that WEX records as revenue
from merchants less certain discounts given to customers and network
fees.

Net late fee rate represents late fee revenue as a percentage of fuel
purchased by fleets that have a payment processing relationship with WEX.

Late fee revenue represents fees charged for payments not made within
the terms of the customer agreement based upon the outstanding customer
receivable balance.

Purchase volume in the Travel and Corporate Solutions segment represents
the total dollar value of all WEX issued transactions that use WEX
corporate card products and virtual card products.

Net interchange rate represents the percentage of the dollar value of
each payment processing transaction that WEX records as revenue from
merchants, less certain discounts given to customers and network fees.

Purchase volume in the Health and Employee Benefit Solutions segment
represents the total US dollar value of all transactions where
interchange is earned by WEX.

Average number of Health and Employee Benefit Solutions accounts
represents the number of active Consumer Directed Health, COBRA, and
billing accounts on our SaaS platforms in the United States.

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