Press release

WEX Inc. Reports Fourth Quarter and Full Year 2020 Financial Results

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WEX Inc. (NYSE: WEX), a leading financial technology service provider, today reported financial results for the three months and year ended December 31, 2020.

Fourth Quarter and Full Year 2020 Financial Results

Total revenue for the fourth quarter of 2020 decreased 9% to $399.0 million from $440.0 million for the fourth quarter of 2019. The $41.1 million decrease in the quarter includes a $16.8 million negative impact from lower average fuel prices and foreign exchange rates.

Net income attributable to shareholders on a GAAP basis for the fourth quarter decreased by $288.6 million to a net loss of $(234.2) million, or $(5.30) per diluted share, due primarily to two nonrecurring charges, compared to net income of $54.4 million, or $1.24 per diluted share for the same period a year ago. The Company’s adjusted net income attributable to shareholders, which is a non-GAAP measure, was $64.8 million for the fourth quarter of 2020, or $1.45 per diluted share, down 45% from $114.7 million, or $2.61 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.

For the full year 2020, revenue decreased 10% to $1.56 billion from $1.72 billion in 2019.Net income attributable to shareholders on a GAAP basis was a net loss of $5.56 per diluted share in 2020 compared to income of $2.26 per diluted share in 2019. On a non-GAAP basis, adjusted net income per diluted share decreased 34% to $6.06 from $9.20 in 2019.

“This year proved to be a year like no other as the world faced a number of challenges. Nevertheless, WEX remained resilient as we continued to advance our strategic objectives. The fourth quarter played out better than expected and we began to see some encouraging trends as customer demand slowly returned despite renewed lockdowns across many parts of the world. Our over-the road, corporate payments and U.S. health businesses remained bright spots, each posting another quarter of top-line growth,” said Melissa Smith, WEX’s Chair and Chief Executive Officer. “We also closed the eNett and Optal transactions at the end of 2020, which increases our flexibility and opportunities going forward. While the travel market will be volatile in the short term, it remains an area of long term opportunity for WEX.”

Ms. Smith continued, “Our solid execution in 2020 underpins the strength and diversification of WEX’s business model. We continued to innovate and advance our products, reflected by the significant number of contract signings and renewals, as well as the achievement of running approximately two thirds of our volume in the cloud. Advancements like this, combined with our customer-centric focus, will continue to differentiate WEX in the marketplace going forward. While the pace of recovery will vary, the anticipated return of volumes from existing customers coupled with new customer additions positions us well to succeed post-pandemic. These factors, bolstered by our continued strategic investments, give me confidence that our next chapter of growth will be our best.”

Fourth Quarter 2020 Performance Metrics

  • Average number of vehicles serviced was 15.8 million, an increase of 6% from the fourth quarter of 2019.
  • Total fuel transactions processed decreased 5% from the fourth quarter of 2019 to 147.7 million.
  • Payment processing transactions decreased 7% to 118.3 million.
  • U.S. retail fuel price decreased to $2.26 per gallon from $2.80 per gallon in the fourth quarter of 2019.
  • Travel and Corporate Solutions’ purchase volume decreased 48% to $5.0 billion from $9.6 billion for the fourth quarter of 2019.
  • Health and Employee Benefit Solutions’ average number of Software-as-a-Service (SaaS) accounts in the U.S. grew 8% to 14.5 million from 13.4 million for the fourth quarter of 2019.

“While fourth quarter and full year results continued to be impacted by the pandemic, we were encouraged by continued sequential improvement across much of the business. As in prior quarters, we successfully executed against our strategic pillars, drove efficiencies, invested in high-growth areas, maintained high retention rates, and signed new business across all segments,” said Roberto Simon, WEX’s Chief Financial Officer. “We are proud of the resilience WEX demonstrated in 2020, and believe we are well positioned to capture future growth as the economy continues to improve.”

Cost Actions and Liquidity Update

In response to COVID-19 uncertainty, the Company implemented a number of actions to reduce capital and operating expenditures, adjust cost structure and preserve financial flexibility and a strong liquidity position. The total operating expense savings resulting from these actions were in excess of $65 million for the year, compared to our original guidance. The Company believes WEX’s balance sheet and liquidity position remain strong. Year end leverage was 3.7x compared to 3.5x for last year.

Financial Guidance

On May 7, 2020, the Company withdrew all previously-issued full fiscal year 2020 financial guidance due to COVID-19. Given the continued uncertainty related to COVID-19, the Company is not providing any further financial guidance at this time. WEX continues to carefully monitor the pandemic and the impact on its business; however, given the uncertainty regarding the pandemic’s spread, duration, and impact, the Company is currently unable to predict the precise extent to which the COVID-19 pandemic will impact its future operations and 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 1, reconciliations of non-GAAP measures referenced 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 and twelve months ended December 31, 2020 and 2019, and in Exhibit 3, a table of selected non-financial metrics for the quarter ended December 31, 2020 and four preceding quarters. The Company is also providing segment revenue for the three and twelve months ended December 31, 2020 and 2019 in Exhibit 4 and information regarding segment adjusted operating income margin and adjusted operating income margin in Exhibit 5.

Conference Call Details

In conjunction with this announcement, WEX will host a conference call today, February 24, 2021, 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 833-714-0940 or 778-560-2809. The Conference ID number is 1981477 and the passcode is 17620339. 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 (NYSE: WEX) is a leading financial technology service provider 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 5,200 associates around the world. WEX fleet cards offer 15.8 million vehicles exceptional payment security and control; purchase volume in travel and corporate solutions was $20.9 billion in 2020; and the WEX Health financial technology platform helps 408,000 employers and 33.1 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: assumptions underlying the Company’s future financial performance, future operations; future growth opportunities and expectations; expectations for future revenue performance, future impacts from areas of investment, expectations for the macro environment; and, expectations for volumes. 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 extent to which the coronavirus (COVID-19) pandemic and measures taken in response thereto impact our business, results of operations and financial condition in excess of current expectations; 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, including the impact of any continued reductions in fuel price and the resulting impact on our revenues and net income; changes or limitations on interchange fees; failure to comply with the applicable requirements of MasterCard or Visa contracts and rules; 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 complete or successfully integrate the Company’s acquisitions or the ability to realize anticipated synergies and cost savings from such transactions; unexpected costs, charges or expenses resulting from an acquisition, specifically including the recent eNett and Optal acquisitions; the Company’s failure 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 our 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; legal, regulatory, political and economic uncertainty surrounding the United Kingdom’s departure from the European Union and the resulting trade agreement; the impact of the future transition from LIBOR as a global benchmark to a replacement rate; the impact of the Company’s presently 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 impact of sales or dispositions of significant amounts of our outstanding common stock into the public market, or the perception that such sales or dispositions could occur; the possible dilution to our stockholders caused by the issuance of additional shares of common stock or equity-linked securities, as result of our convertible notes or otherwise; 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, 2019, filed on Form 10-K with the Securities and Exchange Commission on February 28, 2020 and Item 1A of our quarterly reports for the quarters ended June 30, 2020 and September 30, 2020, filed on Forms 10-Q with the Securities and Exchange Commission on August 5, 2020 and November 9, 2020, respectively. 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.

WEX INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Three months ended December 31,

 

Year ended December 31,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Payment processing revenue

$

176,316

 

 

$

199,212

 

 

$

698,891

 

 

$

825,592

 

Account servicing revenue

113,720

 

 

110,369

 

 

449,456

 

 

413,552

 

Finance fee revenue

53,578

 

 

71,651

 

 

198,523

 

 

247,318

 

Other revenue

55,376

 

 

58,813

 

 

212,999

 

 

237,229

 

Total revenues

398,990

 

 

440,045

 

 

1,559,869

 

 

1,723,691

 

Cost of services

 

 

 

 

 

 

 

Processing costs

111,889

 

 

111,543

 

 

419,041

 

 

400,439

 

Service fees

12,954

 

 

13,679

 

 

47,289

 

 

57,027

 

Provision for credit losses

11,592

 

 

18,194

 

 

78,443

 

 

65,664

 

Operating interest

3,659

 

 

10,150

 

 

23,810

 

 

41,915

 

Depreciation and amortization

28,477

 

 

26,519

 

 

104,592

 

 

94,725

 

Total cost of services

168,571

 

 

180,085

 

 

673,175

 

 

659,770

 

General and administrative

94,677

 

 

69,732

 

 

292,109

 

 

275,807

 

Sales and marketing

78,566

 

 

49,230

 

 

266,684

 

 

259,869

 

Depreciation and amortization

38,427

 

 

37,140

 

 

157,334

 

 

142,404

 

Legal settlement

162,500

 

 

 

 

162,500

 

 

 

Impairment charges

53,378

 

 

 

 

53,378

 

 

 

Loss on sale of subsidiary

 

 

 

 

46,362

 

 

 

Operating (loss) income

(197,129

)

 

103,858

 

 

(91,673

)

 

385,841

 

Financing interest expense

(55,267

)

 

(33,378

)

 

(157,080

)

 

(134,677

)

Net foreign currency gain (loss)

6,190

 

 

12,822

 

 

(25,783

)

 

(926

)

Net unrealized gains (losses) on financial instruments

5,079

 

 

4,424

 

 

(27,036

)

 

(34,654

)

Non-cash adjustments related to tax receivable agreement

491

 

 

932

 

 

491

 

 

932

 

(Loss) income before income taxes

(240,636

)

 

88,658

 

 

(301,081

)

 

216,516

 

Income tax (benefit) provision

(16,745

)

 

23,871

 

 

(20,597

)

 

61,223

 

Net (loss) income

(223,891

)

 

64,787

 

 

(280,484

)

 

155,293

 

Less: Net income (loss) from non-controlling interests

184

 

 

(797

)

 

3,466

 

 

(1,030

)

Net (loss) income attributable to WEX Inc.

(224,075

)

 

65,584

 

 

(283,950

)

 

156,323

 

Change in value of redeemable non-controlling interest

(10,125

)

 

(11,138

)

 

40,312

 

 

(57,317

)

Net (loss) income attributable to shareholders

$

(234,200

)

 

$

54,446

 

 

$

(243,638

)

 

$

99,006

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to shareholders per share:

 

 

 

 

 

 

 

Basic

$

(5.30

)

 

$

1.26

 

 

$

(5.56

)

 

$

2.29

 

Diluted

$

(5.30

)

 

$

1.24

 

 

$

(5.56

)

 

$

2.26

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

44,210

 

 

43,367

 

 

43,842

 

 

43,316

 

Diluted

44,210

 

 

43,931

 

 

43,842

 

 

43,769

 

WEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

December 31,

 

2020

 

2019

Assets

 

 

 

Cash and cash equivalents

$

852,033

 

$

810,932

Restricted cash

477,620

 

170,449

Accounts receivable

1,993,329

 

2,661,108

Securitized accounts receivable, restricted

93,236

 

112,192

Prepaid expenses and other current assets

86,629

 

87,694

Total current assets

3,502,847

 

3,842,375

Property, equipment and capitalized software

188,340

 

212,475

Goodwill and other intangible assets

4,240,150

 

4,016,251

Investment securities

37,273

 

30,460

Deferred income taxes, net

17,524

 

12,833

Other assets

197,227

 

184,024

Total assets

$

8,183,361

 

$

8,298,418

Liabilities and Stockholders’ Equity

 

 

 

Accounts payable

$

778,207

 

$

969,816

Accrued expenses

362,472

 

315,642

Restricted cash payable

477,620

 

170,449

Short-term deposits

911,395

 

1,310,813

Short-term debt, net

152,730

 

248,531

Other current liabilities

58,429

 

34,692

Total current liabilities

2,740,853

 

3,049,943

Long-term debt, net

2,874,113

 

2,686,513

Long-term deposits

148,591

 

143,399

Deferred income taxes, net

220,122

 

218,740

Other liabilities

164,546

 

106,422

Total liabilities

6,148,225

 

6,205,017

Commitments and contingencies

 

 

 

Redeemable non-controlling interest

117,219

 

156,879

Stockholders’ Equity

 

 

 

Total WEX Inc. stockholders’ equity

1,904,895

 

1,926,947

Non-controlling interest

13,022

 

9,575

Total stockholders’ equity

1,917,917

 

1,936,522

Total liabilities and stockholders’ equity

$

8,183,361

 

$

8,298,418

Exhibit 1

Reconciliation of Non – GAAP Measures

Reconciliation of GAAP Net (Loss) Income Attributable to Shareholders to Adjusted Net Income Attributable to Shareholders

(in thousands, except per share data)

(unaudited)

Three Months Ended December 31,

 

 

2020

 

2019

 

 

per diluted share

 

 

 

per diluted share

Net (loss) income attributable to shareholders

$

(234,200

)

 

$

(5.30

)

 

$

54,446

 

 

$

1.24

 

Unrealized (gains) losses on financial instruments

(5,079

)

 

(0.11

)

 

(4,424

)

 

(0.10

)

Net foreign currency (gain) loss

(6,190

)

 

(0.14

)

 

(12,822

)

 

(0.29

)

Acquisition-related intangible amortization

43,297

 

 

0.98

 

 

42,929

 

 

0.98

 

Other acquisition and divestiture related items

21,782

 

 

0.49

 

 

12,971

 

 

0.30

 

Legal settlement

162,500

 

 

3.68

 

 

 

 

 

Stock-based compensation

20,782

 

 

0.47

 

 

12,555

 

 

0.29

 

Restructuring and other costs

5,575

 

 

0.13

 

 

12,192

 

 

0.28

 

Impairment charge

53,378

 

 

1.21

 

 

 

 

 

Debt restructuring and debt issuance cost amortization

30,074

 

 

0.68

 

 

2,804

 

 

0.06

 

Non-cash adjustments related to tax receivable agreement

(491

)

 

(0.01

)

 

(932

)

 

(0.02

)

ANI adjustments attributable to non-controlling interest

9,191

 

 

0.21

 

 

9,161

 

 

0.21

 

Tax related items

(35,788

)

 

(0.81

)

 

(14,158

)

 

(0.32

)

Dilutive impact of stock awards1

 

 

(0.03

)

 

 

 

 

Adjusted net income attributable to shareholders

$

64,831

 

 

$

1.45

 

 

$

114,722

 

 

$

2.61

 

 

Year Ended December 31,

 

2020

 

2019

 

 

per diluted share

 

 

 

per diluted share

Net (loss) income attributable to shareholders

$

(243,638

)

 

$

(5.56

)

 

$

99,006

 

 

$

2.26

 

Unrealized losses (gains) on financial instruments

27,036

 

 

0.62

 

 

34,654

 

 

0.79

 

Net foreign currency loss

25,783

 

 

0.59

 

 

926

 

 

0.02

 

Acquisition-related intangible amortization

171,144

 

 

3.90

 

 

159,431

 

 

3.64

 

Other acquisition and divestiture related items

57,787

 

 

1.32

 

 

37,675

 

 

0.86

 

Legal settlement

162,500

 

 

3.71

 

 

 

 

 

Stock-based compensation

65,841

 

 

1.50

 

 

47,511

 

 

1.09

 

Restructuring and other costs

13,555

 

 

0.31

 

 

25,106

 

 

0.57

 

Loss on sale of subsidiary

46,362

 

 

1.06

 

 

 

 

 

Impairment charge

53,378

 

 

1.22

 

 

 

 

 

Debt restructuring and debt issuance cost amortization

40,063

 

 

0.91

 

 

21,004

 

 

0.48

 

Non-cash adjustments related to tax receivable agreement

(491

)

 

(0.01

)

 

(932

)

 

(0.02

)

ANI adjustments attributable to non-controlling interests

(42,910

)

 

(0.98

)

 

53,035

 

 

1.21

 

Tax related items

(108,086

)

 

(2.47

)

 

(74,743

)

 

(1.71

)

Dilutive impact of stock awards1

 

 

(0.06

)

 

 

 

 

Adjusted net income attributable to shareholders

$

268,324

 

 

$

6.06

 

 

$

402,673

 

 

$

9.20

 

1 As the Company reported net losses for the fourth quarter of 2020 and year ended December 31, 2020, the diluted weighted average shares outstanding equal the basic weighted average shares outstanding for those periods under U.S. Generally Accepted Accounting Principles (“GAAP”). The non-GAAP adjustments described above resulted in adjusted net income attributable to shareholders (versus a loss on a GAAP basis) for the fourth quarter of 2020 and the year ended December 31, 2020. Therefore, dilutive common stock equivalents have been included in the calculation of adjusted diluted weighted average shares outstanding to arrive at adjusted per share data.

Reconciliation of GAAP Operating Income to Total Segment Adjusted Operating Income and Adjusted Operating Income

(in thousands)

(unaudited)

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2020

 

2019

 

2020

 

2019

Operating income

$

(197,129

)

 

$

103,858

 

 

$

(91,673

)

 

$

385,841

 

Unallocated corporate expenses

17,625

 

 

15,847

 

 

62,938

 

 

67,982

 

Acquisition-related intangible amortization

43,297

 

 

42,929

 

 

171,144

 

 

159,431

 

Other acquisition and divestiture related items

26,680

 

 

12,971

 

 

57,787

 

 

37,675

 

Legal settlement

162,500

 

 

 

 

162,500

 

 

 

Loss on sale of subsidiary

 

 

 

 

46,362

 

 

 

Stock-based compensation

20,782

 

 

12,555

 

 

65,841

 

 

47,511

 

Restructuring and other costs

5,575

 

 

12,192

 

 

13,555

 

 

25,106

 

Debt restructuring costs

10

 

 

422

 

 

535

 

 

11,062

 

Impairment charge

53,378

 

 

 

 

53,378

 

 

 

Total segment adjusted operating income

$

132,718

 

 

$

200,774

 

 

$

542,367

 

 

$

734,608

 

Unallocated corporate expenses

(17,625

)

 

(15,847

)

 

(62,938

)

 

(67,982

)

Adjusted operating income

$

115,093

 

 

$

184,927

 

 

$

479,429

 

 

$

666,626

 

The Company’s non-GAAP adjusted net income excludes unrealized gains and losses on financial instruments, net foreign currency gains and losses, acquisition-related intangible amortization, other acquisition and divestiture related items, legal settlement, stock-based compensation, restructuring and other costs, loss on sale of subsidiary, impairment charges, debt restructuring and debt issuance cost amortization, non-cash adjustments related to the tax receivable agreement, similar adjustments attributable to our non-controlling interests and certain tax related items.

The Company’s non-GAAP adjusted operating income excludes acquisition-related intangible amortization, other acquisition and divestiture related items, legal settlement, loss on sale of subsidiary, stock-based compensation, restructuring and other costs, debt restructuring costs and impairment charges. Total segment adjusted operating income incorporates these same adjustments and further excludes unallocated corporate expenses.

Although adjusted net income, adjusted operating income and total segment adjusted operating income are not calculated in accordance with GAAP, these non-GAAP measures are 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 these measures integral because they exclude 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. Additionally, the non-cash mark-to-market adjustments on financial instruments are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate.
  • Net foreign currency gains and losses primarily result from the remeasurement to functional currency of cash, accounts receivable and accounts 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.
  • Legal settlement represents the consideration paid to the sellers of eNett and Optal in excess of the businesses’ fair values. Management has elected to exclude this item as the charge is nonrecurring and does not reflect future operating expenses resulting from this acquisition.
  • The loss on sale of subsidiary relates to the divestiture of the Company’s former Brazilian subsidiary as of the date of sale, September 30, 2020, and the associated write-off of its assets and liabilities. As previously discussed, gains and losses from divestitures are considered by the Company to be unpredictable and dependent on factors that may be outside of our control. The exclusion of these gains and losses are consistent with the Company’s practice of excluding other non-recurring items associated with strategic transactions.
  • 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.
  • We exclude restructuring and other costs 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. This also includes costs related to certain identified initiatives, including technology initiatives, to further streamline the business, improve the Company’s efficiency, create synergies, and globalize the Company’s operations, all with an objective to improve scale and efficiency and increase profitability going forward. For the twelve months ended December 31, 2020, other costs include certain costs incurred in association with COVID-19, including the cost of providing additional health, welfare and technological support to our employees as they work remotely.
  • Impairment charges represent non-cash asset write-offs, which do not reflect recurring costs that would be relevant to the Company’s continuing operations. The Company believes that excluding these nonrecurring expenses facilitates the comparison of our financial results to the Company’s historical operating results and to other companies in its industry.
  • 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 and non-cash adjustments related to the tax receivable agreement, 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.
  • The Company does not allocate certain corporate expenses to our operating segments, as these items are centrally controlled and are not directly attributable to any reportable segment.

For the same reasons, WEX believes that adjusted net income, adjusted operating income and total segment adjusted operating income may also be useful to investors when evaluating the Company’s performance. However, because adjusted net income, adjusted operating income and total segment adjusted operating income are non-GAAP measures, they 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, adjusted operating income and total segment adjusted operating income as used by WEX may not be comparable to similarly titled measures employed by other companies.

Exhibit 2 below shows the impact of certain macro factors on reported Revenue and Net Income:

Exhibit 2

Segment Revenue Results

(in thousands)

(unaudited)

 

 

Fleet Solutions

Travel and Corporate

Solutions

Health and Employee

Benefit Solutions

 

Total WEX Inc.

 

 

Three months ended December 31,

 

 

2020

 

2019

2020

2019

2020

2019

 

2020

 

2019

Reported revenue

$

235,379

 

 

$

260,773

 

$

74,690

 

$

95,700

 

$

88,921

 

$

83,572

 

$

398,990

 

 

$

440,045

FX impact (favorable) / unfavorable

$

(2,269

)

 

$

 

$

151

 

$

 

$

 

$

 

$

(2,118

)

 

$

PPG impact (favorable) / unfavorable

$

18,896

 

 

$

 

$

 

$

 

$

 

$

 

$

18,896

 

 

$

 

Year ended December 31,

 

2020

 

2019

 

2020

2019

 

2020

2019

 

2020

 

2019

Reported revenue

$

918,310

 

 

$

1,038,395

 

$

277,840

 

$

367,826

 

$

363,719

 

$

317,470

 

$

1,559,869

 

 

$

1,723,691

FX impact (favorable) / unfavorable

$

(600

)

 

$

 

$

752

 

$

 

$

1,622

 

$

 

$

1,774

 

 

$

PPG impact (favorable) / unfavorable

$

61,423

 

 

$

 

$

 

$

 

$

 

$

 

$

61,423

 

 

$

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, exclusive of revenue derived from 2019 acquisitions for one year following the acquisition dates.

To determine the impact of price per gallon of fuel (“PPG”) on revenue, revenue subject 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, exclusive of revenue derived from 2019 acquisitions for one year following the acquisition dates. For the portions of our business that earn revenue based on margin spreads, revenue was calculated utilizing the comparable margin from the prior year.

Segment Estimated Earnings Impact

(in thousands)

(unaudited)

 

Fleet Solutions

 

Travel and Corporate Solutions

 

Health and Employee Benefit

Solutions

 

Three months ended December 31,

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

FX impact (favorable) / unfavorable

$

(880

)

 

$

 

$

326

 

 

$

 

$

 

 

$

PPG impact (favorable) / unfavorable

$

12,507

 

 

$

 

$

 

 

$

 

$

 

 

$

 

Year ended December 31,

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

FX impact (favorable) / unfavorable

$

(528

)

 

$

 

$

(5,538

)

 

$

 

$

(304

)

 

$

PPG impact (favorable) / unfavorable

$

38,957

 

 

$

 

$

 

 

$

 

$

 

 

$

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, amounts were translated using the weighted average exchange rates for the same period in the prior year, net of tax, exclusive of revenue and expenses derived from 2019 acquisitions for one year following the acquisition dates.

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, exclusive of revenue and expenses derived from 2019 acquisitions for one year following the acquisition dates. 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.

 

Exhibit 3

Selected Non-Financial Metrics

 

Q4 2020

 

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

Fleet Solutions:

 

 

 

 

 

 

 

 

 

Payment processing transactions (000s) (1)

118,287

 

 

120,900

 

 

103,086

 

 

121,591

 

 

126,666

 

Payment processing gallons of fuel (000s) (2)

3,265,927

 

 

3,247,507

 

 

2,830,265

 

 

3,123,066

 

 

3,218,466

 

Average US fuel price (US$ / gallon)

$

2.26

 

 

$

2.23

 

 

$

2.07

 

 

$

2.57

 

 

$

2.80

 

Payment processing $ of fuel (000s) (3)

$

7,767,530

 

 

$

7,609,098

 

 

$

6,135,265

 

 

$

8,412,642

 

 

$

9,417,278

 

Net payment processing rate (4)

1.27

%

 

1.35

%

 

1.47

%

 

1.35

%

 

1.10

%

Payment processing revenue (000s)

$

98,954

 

 

$

102,419

 

 

$

90,147

 

 

$

113,323

 

 

$

103,831

 

Net late fee rate (5)

0.54

%

 

0.48

%

 

0.57

%

 

0.56

%

 

0.65

%

Late fee revenue (000s) (6)

$

41,901

 

 

$

36,232

 

 

$

35,071

 

 

$

46,740

 

 

$

61,587

 

Travel and Corporate Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (7)

$

4,968,321

 

 

$

4,699,737

 

 

$

3,168,064

 

 

$

8,041,112

 

 

$

9,635,211

 

Net interchange rate (8)

1.26

%

 

1.13

%

 

1.37

%

 

0.87

%

 

0.84

%

Payment solutions processing revenue (000s)

$

62,376

 

 

$

53,239

 

 

$

43,261

 

 

$

70,268

 

 

$

80,986

 

Health and Employee Benefit Solutions:

 

 

 

 

 

 

 

 

 

Purchase volume (000s) (9)

$

1,074,977

 

 

$

1,120,786

 

 

$

1,017,318

 

 

$

1,592,313

 

 

$

1,047,939

 

Average number of SaaS accounts (000s) (10)

14,502

 

 

14,599

 

 

14,487

 

 

14,458

 

 

13,391

 

Definitions and explanations:

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

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

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

(4) 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.

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

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

(7) Purchase volume represents the total dollar value of all WEX issued transactions that use WEX corporate card products and virtual card products.

(8) 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.

(9) Purchase volume represents the total US dollar value of all transactions where interchange is earned by WEX.

(10) 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.

Exhibit 4

Segment Revenue Information

(in thousands)

(unaudited)

 

Three months ended

December 31,

 

Increase (decrease)

 

Year ended

December 31,

 

Increase (decrease)

Fleet Solutions

2020

 

2019

 

Amount

 

Percent

 

2020

 

2019

 

Amount

 

Percent

Payment processing revenue

$

98,955

 

$

103,831

 

$

(4,876

)

 

 

(5

)%

 

$

404,843

 

 

$

457,244

 

 

$

(52,401

)

 

 

(11

)%

Account servicing revenue

38,571

 

41,953

 

(3,382

)

 

 

(8

)%

 

153,823

 

 

164,735

 

 

(10,912

)

 

 

(7

)%

Finance fee revenue

53,373

 

71,015

 

(17,642

)

 

 

(25

)%

 

197,307

 

 

245,082

 

 

(47,775

)

 

 

(19

)%

Other revenue

44,480

 

43,974

 

506

 

 

 

1

%

 

162,337

 

 

171,334

 

 

(8,997

)

 

 

(5

)%

Total revenues

$

235,379

 

$

260,773

 

$

(25,394

)

 

 

(10

)%

 

$

918,310

 

 

$

1,038,395

 

 

$

(120,085

)

 

 

(12

)%

 

Three months ended

December 31,

 

Increase (decrease)

 

Year ended

December 31,

 

Increase (decrease)

Travel and Corporate Solutions

2020

 

2019

 

Amount

 

Percent

 

2020

 

2019

 

Amount

 

Percent

Payment processing revenue

$

62,376

 

$

80,986

 

$

(18,610

)

 

(23

)%

 

$

229,144

 

$

303,385

 

$

(74,241

)

 

(24

)%

Account servicing revenue

10,717

 

11,274

 

(557

)

 

(5

)%

 

41,927

 

43,293

 

(1,366

)

 

(3

)%

Finance fee revenue

179

 

588

 

(409

)

 

(70

)%

 

1,079

 

2,086

 

(1,007

)

 

(48

)%

Other revenue

1,418

 

2,852

 

(1,434

)

 

(50

)%

 

5,690

 

19,062

 

(13,372

)

 

(70

)%

Total revenues

$

74,690

 

$

95,700

 

$

(21,010

)

 

(22

)%

 

$

277,840

 

$

367,826

 

$

(89,986

)

 

(24

)%

 

Three months ended

December 31,

 

Increase (decrease)

 

Year ended

December 31,

 

Increase (decrease)

Health and Employee Benefit Solutions

2020

 

2019

 

Amount

 

Percent

 

2020

 

2019

 

Amount

 

Percent

Payment processing revenue

$

14,985

 

$

14,395

 

$

590

 

 

4

%

 

$

64,904

 

$

64,963

 

$

(59

)

 

%

Account servicing revenue

64,432

 

57,142

 

7,290

 

 

13

%

 

253,706

 

205,524

 

48,182

 

 

23

%

Finance fee revenue

26

 

48

 

(22

)

 

(46

)%

 

137

 

150

 

(13

)

 

(9

)%

Other revenue

9,478

 

11,987

 

(2,509

)

 

(21

)%

 

44,972

 

46,833

 

(1,861

)

 

(4

)%

Total revenues

$

88,921

 

$

83,572

 

$

5,349

 

 

6

%

 

$

363,719

 

$

317,470

 

$

46,249

 

 

15

%

Exhibit 5

Segment Adjusted Operating Income and Adjusted Operating Income Margin Information

(in thousands)

(unaudited)

 

Segment Adjusted Operating Income

 

Segment Adjusted Operating Income Margin(1)

 

Three Months Ended December 31,

 

Three Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

Fleet Solutions

$

99,438

 

$

136,639

 

42.2

%

 

52.4

%

Travel and Corporate Solutions

$

15,036

 

$

46,205

 

20.1

%

 

48.3

%

Health and Employee Benefit Solutions

$

18,244

 

$

17,930

 

20.5

%

 

21.5

%

Total segment adjusted operating income

$

132,718

 

$

200,774

 

33.3

%

 

45.6

%

 

 

 

 

 

 

 

 

 

Segment Adjusted Operating Income

 

Segment Adjusted Operating Income Margin(1)

 

Year Ended December 31,

 

Year Ended December 31,

 

2020

 

2019

 

2020

 

2019

Fleet Solutions

$

383,502

 

$

485,539

 

41.8

%

 

46.8

%

Travel and Corporate Solutions

$

62,096

 

$

168,786

 

22.3

%

 

45.9

%

Health and Employee Benefit Solutions

$

96,769

 

$

80,283

 

26.6

%

 

25.3

%

Total segment adjusted operating income

$

542,367

 

$

734,608

 

34.8

%

 

42.6

%

(1) Segment adjusted operating income margin is derived by dividing segment adjusted operating income by the revenue of the corresponding segment (or the entire Company in the case of total segment adjusted operating income). See Exhibit 1 for a reconciliation of GAAP operating income to total segment adjusted operating income.

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2020

 

2019

 

2020

 

2019

Adjusted operating income

$

115,093

 

 

$

184,927

 

 

$

479,429

 

 

$

666,626

 

Adjusted operating income margin (1)

28.8

%

 

42.0

%

 

30.7

%

 

38.7

%

(1) Adjusted operating income margin is derived by dividing adjusted operating income by total revenue. See Exhibit 1 for a reconciliation of GAAP operating income to adjusted operating income.