WEX Q1 2025 slides: Revenue dips amid fuel price headwinds, EPS grows 5.2%

WEX Inc. (NYSE:WEX), a leading financial technology service provider, released its Q1 2025 supplemental materials on April 30, revealing a mixed financial performance with revenue challenges offset by earnings per share growth and strategic capital allocation initiatives.

Quarterly Performance Highlights

WEX reported a total revenue decrease of $16.1 million compared to Q1 2024, primarily driven by unfavorable impacts from fuel prices and spreads ($8.5 million) and foreign exchange rates ($2.5 million). Despite these headwinds, the company achieved 5.2% growth in adjusted earnings per share, demonstrating its ability to manage profitability amid revenue challenges.

As shown in the following financial results summary, underlying revenue growth adjusted for fuel prices and foreign exchange was down 0.8% year-over-year:

The company’s performance varied significantly across its three business segments. The Mobility segment saw a 1.5% revenue decrease, including a 2.9% drag from lower fuel prices. The Benefits segment delivered 4.2% revenue growth, while the Corporate Payments segment experienced a 15.5% decline due to a change in revenue model for a major online travel agency customer.

Segment Analysis

Mobility Segment

WEX’s Mobility segment, which provides fleet payment solutions and transaction processing, faced headwinds from lower fuel prices, with the average domestic fuel price at $3.32 per gallon. Payment processing transactions declined 1.8%, and same-store sales were down 3.9% for local fleets. Despite these challenges, the segment maintained strong profitability with a GAAP operating income margin of 29.8% and an adjusted operating income margin of 39.4%. Credit losses improved to 12 basis points of spend volume.

Benefits Segment

The Benefits segment was a bright spot in WEX’s portfolio, with revenue reaching $199.3 million, up 4.2% year-over-year. Average SaaS accounts increased 6.1% to 21.5 million, and benefits purchase volume grew 10.2%. The segment’s custodial cash assets averaged $4.6 billion, up 9.5%, generating $55.8 million in revenue.

The following chart illustrates how WEX has structured its HSA investment portfolio by maturity and yield, maintaining consistent returns despite downward trends in benchmark interest rates:

Corporate Payments Segment

The Corporate Payments segment faced significant challenges, with revenue decreasing 15.5% to $103.5 million. This decline was primarily attributed to a change in revenue model for a major online travel agency customer. Total (EPA:TTEF) purchase volumes declined 27.8%, while the net interchange rate decreased 2 basis points sequentially. However, Direct Accounts Payable purchase volume increased by approximately 25%, showing strength in certain areas despite overall segment challenges.

Balance Sheet and Capital Allocation

WEX maintained a solid financial position with $770 million of available liquidity at the end of Q1 2025. The company’s leverage ratio stood at 3.5 times, within its long-term target range. The debt maturity profile is well-structured, with no significant maturities until 2028.

The following chart details WEX’s term debt maturities by year:

In terms of capital allocation, WEX completed a significant share repurchase program during the quarter. On March 31, 2025, the company completed a modified "Dutch auction" tender offer, purchasing approximately 4.9 million shares of its common stock at $154 per share for a total of $750 million.

The company continues to generate substantial cash flow, with Q1 2025 adjusted free cash flow of $16.2 million and $587 million over the trailing twelve months, demonstrating financial resilience despite revenue headwinds.

Forward Guidance and Outlook

Looking ahead, WEX provided guidance for Q2 2025 and the full year. For the second quarter, the company expects net revenue between $640 million and $660 million, with adjusted net income per diluted share between $3.60 and $3.80. The guidance reflects a negative impact of $0.53 from fuel prices.

The following table details WEX’s financial guidance for Q2 and full year 2025:

WEX also provided a sensitivity analysis to help investors understand the potential impact of changes in fuel prices and interest rates on its financial results:

The company’s guidance is based on approximately 2% U.S. GDP growth and assumes interest rates in line with market Federal Funds projections. WEX expects to continue executing its long-term growth strategy while navigating near-term challenges in the fuel price environment and certain segment-specific issues.

Strategic Initiatives

Despite revenue challenges, WEX continues to invest in growth initiatives across its business segments. In the Benefits segment, the company is capitalizing on the growth in HSA accounts and custodial assets. The Corporate Payments segment is focusing on Direct Accounts Payable solutions, which showed strong volume growth despite overall segment challenges.

The company’s disciplined capital allocation strategy, including the significant share repurchase completed in Q1, demonstrates management’s confidence in WEX’s long-term prospects and commitment to delivering shareholder value despite near-term headwinds.

As WEX navigates through 2025, investors will be watching closely to see if the company can maintain its earnings growth momentum while addressing revenue challenges across its business segments, particularly in the face of continued fuel price volatility and changing customer relationships in the Corporate Payments segment.

Full presentation:

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