Earnings call transcript: Wex Q2 2025 shows steady EPS growth amid revenue decline

Wex Inc. (WEX), a $5.2 billion market cap company, reported its financial results for the second quarter of 2025, showcasing a mixed performance. The company achieved an adjusted earnings per share (EPS) of $3.95, marking a 1% increase year-over-year, while revenue declined by 2.1% to $659.6 million. Despite the revenue drop, the market reacted positively to the EPS growth, with the stock price increasing by 1.01% to $150.6 by the close of trading. However, in premarket trading, the stock dipped slightly by 1.39% to $148.5. According to InvestingPro analysis, WEX is currently trading below its Fair Value, suggesting potential upside opportunity.

Key Takeaways

• Adjusted EPS grew by 1% year-over-year, reaching $3.95.
• Revenue declined by 2.1% to $659.6 million.
• Stock price saw a 1.01% increase to $150.6 post-earnings call.
• Wex launched several innovations, including an AI-powered claims experience.
• The company expects growth in the Corporate Payments segment in the latter half of the year.

Company Performance

Wex’s performance in Q2 2025 demonstrated resilience in earnings despite a decrease in revenue. The company continues to face challenges in its Mobility segment, with local fleet same-store sales experiencing a decline. However, the Benefits segment showed promise, particularly with the expansion of the Health Savings Account (HSA) market. Wex’s strategic initiatives, such as expanding mobile wallet capabilities and signing a long-term agreement with BP for a fleet payment platform, underscore its commitment to innovation and market leadership.

Financial Highlights

• Revenue: $659.6 million, down 2.1% year-over-year
• Adjusted EPS: $3.95, up 1% year-over-year
• Leverage ratio: 3.4x, at the high end of the target range

Outlook & Guidance

Wex has provided a full-year revenue guidance between $2.61 billion and $2.65 billion and an adjusted EPS guidance ranging from $15.37 to $15.77. The company anticipates a return to growth in its Corporate Payments segment in the third and fourth quarters, with expected purchase volume growth of 20% in Q4. Analyst consensus from InvestingPro shows price targets ranging from $165 to $210, reflecting confidence in the company’s growth trajectory. The stock’s beta of 1.26 indicates moderate market sensitivity. The BP portfolio is projected to contribute 0.5-1% revenue growth in its first full year post-conversion.

Executive Commentary

CEO Melissa Smith highlighted the company’s strong financial results, stating, "We delivered stronger financial results in the second quarter than anticipated." She emphasized the company’s ability to win top-tier customers, which underscores the strength of Wex’s offerings. CFO Jagtar Narula added, "We are expecting the second half of the year from a growth perspective to look a lot like the first half."

Risks and Challenges

• Declining same-store sales in the Mobility segment could impact future revenue.
• The transition and normalization in Corporate Payments may pose short-term challenges.
• The slower-than-anticipated transition to electric vehicle (EV) fleets could affect growth in the fleet payments sector.
• Macroeconomic pressures and currency fluctuations remain potential risks.

Q&A

During the earnings call, analysts queried the slower transition to EV fleets and the normalization of travel customer spending patterns. Executives addressed these concerns, highlighting the strong pipeline in Corporate Payments and the opportunities in the expanding HSA market.

Full transcript - Wex Inc (WEX) Q2 2025:

Regina, Conference Operator: Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the WEX Inc. second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star then the number one on your telephone keypad. To withdraw your question, press Star one. Again, we kindly ask that you please limit your questions to 1 and 1 follow-up. I would now like to turn the conference over to Steve Elder, Senior Vice President of Investor Relations. Please go ahead.

Steve Elder, Senior Vice President of Investor Relations, WEX Inc.: Thank you, Operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO, and Jagtar Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk through prepared remarks have been posted to the Investor Relations section of the website at wexinc.com. A copy of the press release and supplemental materials have been included in an 8-K filed with the SEC yesterday afternoon. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted shareholder, adjusted operating income and related margin, as well as adjusted free cash flow during our call. Please see Exhibit 1 of the press release for an explanation and reconciliation of these non-GAAP measures.

The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and the indeterminate amount of certain elements that are included in reported GAAP earnings. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in the press release, the supplemental materials, and the risk factors identified in the most recently filed annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and other subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

With that, I’ll turn the call over to Melissa.

Melissa Smith, Chair and CEO, WEX Inc.: Thank you, Steve, and good morning, everyone. We appreciate you joining us today. We delivered stronger financial results in the second quarter than anticipated, with revenue at the top end of our guidance and adjusted EPS exceeding guidance today. I’m excited to preview some of the underlying positives that we’re seeing from our investments. We had several meaningful customer wins this quarter across each of our segments, including BP in Mobility, the United Auto Workers Retiree Medical Benefits Trust in Benefits, and a large new Corporate Payments customer. I’ll go over these in more detail when I discuss the segments. These important wins come alongside what is shaping up to be a strong pipeline of new business that has been amplified by our increased sales and marketing investments.

Our continued ability to win top-tier customers underscores the strength of our offerings that together enable us to deliver on our purpose of simplifying the business of running a business. Looking ahead, we remain optimistic that each of our segments continue to operate in markets with strong growth potential. We believe that disciplined investment in these opportunities will continue to generate attractive returns for our investors. Now turning to second quarter results, we reported revenue of $659.6 million for the quarter, a decrease of 2.1% year over year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, revenue is flat compared to the prior year. Adjusted net income per diluted share was $3.95, an increase of 1% compared to the same quarter last year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q2 adjusted EPS grew 8%.

Operationally, revenue performance was consistent with our expectations across all segments. We also benefited from higher than anticipated fuel prices. From an earnings perspective, we realized additional benefits by tightly managing our cost structure, including overall headcount. We remain laser focused on the factors within our control. We continue to execute a focused strategy designed to drive durable revenue growth, margin expansion, and long-term shareholder value through intelligent payment and workflow solutions. Our customer-first approach continues to drive value by helping us win new customers, support our existing ones, and build integrated, intuitive solutions that drive their success. Next, let’s turn to an overview of our segments and how they performed in Q2. WEX operates in three large and growing markets, Mobility, Benefits, and Corporate Payments, each of which we believe offers significant long term secular growth opportunities where we hold distinct competitive advantages.

Mobility, our largest segment at approximately 50% of total revenue, delivers fleet payment solutions, transaction processing, and data driven insights to fleet operators and managers globally. Our proprietary closed-loop payments network provides customers with enhanced data capture, custom controls, and tailored economics and covers approximately 90% of fuel stations and 80% of EV charging locations in the U.S. These capabilities help fleet managers optimize costs, detect misuse, improve operational efficiency, and support the complexity of operating a mixed energy fleet. This segment has two primary categories. The first category, comprising roughly 70% of segment revenue, is local fleets. The remaining 30% is driven by our over the road or OTR trucking customers with more than 600,000 fleet customers globally. Our competitive moat is built upon being data rich, capital efficient, and deeply embedded in our customers’ daily operations, delivering both functional value and long term stickiness.

Q2 results from the Mobility segment were in line with our expectations. Excluding the benefit from higher fuel prices, transaction levels were down slightly from the prior year, similar to Q1 and within our range of expectations. Same store sales growth for local fleets in the U.S. declined in line with Q1 results while the over the road customers saw a modest decline of less than 1%. We continue to believe that this measure reflects underlying economic activity across our customer base when evaluating short term changes. As a reminder, the same store sales metric represents approximately 75% of the payment processing volumes and is calculated on our gallons purchase basis, not revenue earned. We noted in Q1 that there had been some tariff related pull forward of volume with our OTR customers which appears to have normalized for now.

We’re pleased with our continued momentum in new sales and renewals in this segment. The investments we’re making in digital marketing targeted at small businesses are bearing the fruit we expected. We have high confidence in our ability to close new sales based on the results seen year to date as we’re tracking ahead of our new sales expectations. In Q2 we successfully extended long-standing relationships with several of the most respected names in the industry and signed new relationships including a large publicly traded construction company. As I mentioned earlier, we’re also very pleased to announce that we have signed BP to a long-term agreement for their U.S. business. BP was one of the few remaining major fuel retailers not utilizing WEX’s commercial fleet platform.

By choosing WEX, they’re now able to offer a card solution that will serve the entire BP family of brands linked with their loyalty program. This exemplifies WEX’s purpose of simplifying the business of doing business for our customers. We’re able to provide this important feature to BP because of the product investments we’ve made to expand the reach of our network to support both closed and open loop solutions. This integrated solution provides BP with the tools to enhance control, elevate the customer experience, and expand their reach across key sealing segments. The addition of BP cements our place as the most trusted brand within this segment, driven by our industry-leading capabilities and proven track record of growth. There will be two phases to this implementation.

In the first phase, we will sell BP branded cards to new customers and in the second phase we’ll convert the existing BP portfolio to the WEX platform. We expect to begin new sales to customers of the BP branded product in the fourth quarter. We’re finalizing a purchase agreement for the existing customer base and we currently anticipate converting this book of business at some point in 2026. We expect it will add between 0.5% to 1% to company revenue in the first full year after conversion. We look forward to working with BP for many years to come. Turning now to our Benefits segment, which simplifies the complex world of employee benefits administration and represents approximately 30% of total company revenue.

Here we offer a comprehensive platform that spans HSAs, FSAs, HRAs, COBRA, and benefit enrollment and administration, enabling both employers and partners to help their employees make more informed benefit decisions and facilitate benefit payments. As in our Mobility business, our Benefits business involves processing hundreds of thousands of transactions across thousands of endpoints every day in real time, verifying eligibility for purchase and authenticating the customer while preventing fraud and providing detailed records of usage to our customers for compliance and operational purposes. WEX serves nearly 60% of the Fortune 1000 in this segment and WEX Technologies powers over 20% of the total HSA market through both our Direct and Partner offerings. In total, we manage more than 21 million SaaS accounts. The customer base in this segment is sticky due to the deeply embedded nature of our offering. For partners, it’s integrated into their platforms.

For direct customers, it serves as a critical employee benefit solution for both customer sets. Switching providers is complex, time consuming, and disruptive. The embedded nature of the platform, combined with high retention and predictable SaaS and custodial investment revenue streams, leads to attractive margins and long-term customer value. Overall SaaS account growth was 6% for the quarter. Within this, we grew HSA accounts on the WEX Benefits platform by 7% in Q2, bringing us to more than 8.7 million HSA accounts. The breadth of product and integration capabilities of our technology platform, combined with our multi-account expertise supporting a wide range of account types on a single tech stack, continues to resonate strongly with both direct customers and channel partners.

Following up on a successful open enrollment season, we are very pleased to announce the United Auto Workers Retiree Medical Benefits Trust as a new HRA customer starting in Q2. The UAW Trust provides health care coverage for United Auto Worker retirees. Our extensive experience with spending accounts put us in a position to successfully win the trust. We also have some encouraging developments on the legislative front. Recent legislation that passed in July will increase the number of people eligible for a Health Savings Account beginning next year. Certain plans offered on the public health care exchanges will be classified as high deductible plans, making them HSA qualified. This equates to an increase in the TAM of more than 7 million people or 3 to 4 million accounts using our existing product functionality.

While this is a positive development with the potential for increased awareness and adoption, we’re taking a thoughtful approach to how we address this opportunity. We look forward to sharing more on its contribution to our Benefits segment results. The custodial cash balances that are part of HSAs are a meaningful revenue source for the segment. As a reminder, the interest income we earn in this segment is less sensitive to changes in interest rates as it is invested predominantly in fixed rate products with maturities that vary and extend over several years. One of the strengths of the company is how we’re able to leverage the core value proposition of WEX bank across multiple segments.

Our Benefits segment is able to achieve returns on HSA assets that far exceed those of our peers because we can leverage WEX bank to invest HSA funds into stable, high grade investments that deliver meaningful returns across interest rate cycles. From a product perspective, we continued investing in smarter, customer-centric solutions with the launch of an AI-powered claims experience that dramatically simplifies FSA reimbursement, reducing processing time from days to minutes, improving accuracy, and easing the burden on HR teams during peak enrollment. This new technology lowers our cost to serve and increases customer satisfaction. Moving now to our Corporate Payments segment, which represents approximately 20% of our revenue and includes two major offerings: embedded payments and direct accounts payable. Embedded payments represents the majority of revenue in the Corporate Payments segment, including all of our travel-related customers.

With this solution, we integrate virtual card payment capabilities into our customers’ existing workflows. We combine highly customizable reconciliation benefits with a wide range of card products and currencies, more than 180 possible combinations, which is an order of magnitude larger than most competitors. These capabilities are coupled with deep industry-specific knowledge and experience, as well as a best-in-class service approach. Our embedded payments offering has high operating leverage because the investment in the technology platform and our global compliance infrastructure represents the majority of cost. It’s a largely fixed cost business, and most incremental volume is accretive to our margins and cash flow. Our ability to compete and win here is built on our technical and domain expertise strength and our economic strength that stems from scale within our embedded payments offering. Q2 purchase volume was down in line with our expectations.

The large travel customer we’ve mentioned in recent quarters has completed their transition to a new operating model with us, and we will lap this headwind in large degree in Q3. We will fully lap this headwind in Q4 and continue to expect a return to revenue growth in the second half of 2025. The platform investments we’re making to diversify from travel have started to bear fruit. We’re seeing strength in our new customer pipeline and new customer signings and embedded payments. We expect this healthy pipeline will continue to broaden out the customer base, and we look forward to them contributing to growth in the back half of the year. We’re pleased to note that we have implemented a large publicly traded FinTech to use our virtual card issuing technology.

Switching gears to talk about the Direct AP product within our Corporate Payments segment, which accounts for approximately 20% of segment revenue, this solution automates accounts payable by integrating our enterprise resource planning systems and accounting workflows to maximize virtual payment usage. During the quarter, Direct AP volume grew more than 25% compared to last year. We’re feeling very good about the outlook as we currently have the best new business pipeline we’ve ever had for this product. Our new account growth included more than 140 new customers year to date, which only bolsters our confidence that additional sales, marketing, and product investments we discussed last quarter have started to bear fruit and will lead to strong returns in the future. We increased the size of this sales force by more than 50% since the beginning of the year, and our new sales resources are ramping as expected.

On the product side, we continue to invest in expanding our embedded payments offering beyond our core travel vertical, launching new funding capabilities now live in three geographies and 10 currencies in our direct channel. We’ve extended our mobile wallet capabilities and enabling broader customer spend on our market leading processing platform. These enhancements will be paired with deeper data integration and automation across all three of our segments. The incremental investments we’re making in product capabilities and sales and marketing resources are working. We believe that the investments will deliver strong ROIs and contribute to a re-acceleration of growth. The majority of our incremental sales and marketing investment continues to be in the Mobility segment where we’re deploying a multi-channel marketing strategy targeted at small business customers and seeing encouraging results.

Historically, every dollar we spent on marketing earned a return of $4 in revenue over the first two years following the customer acquisition date. These results build on the confidence we have in our investment thesis, and I’m excited about how they position us to accelerate growth going forward. The remaining investments we’re making in other segments are also showing early signs of success. As I noted earlier, the pipeline of new customers in the Corporate Payments segment has never been better, and we expect the segment to reaccelerate growth in the back half of this year. This growth is in part driven by the product investments we’ve been making that strengthen our offerings outside of travel, many of which have recently come online with additional features in the pipeline.

It is exciting to see the fruits of our product investments delivered not only in Corporate Payments, but also in Mobility and Benefits. In closing, I am most excited about the momentum we’re building by actively investing in accelerating growth for the business. Our industry-leading products, service, and reliability drive our ability to win customers of all sizes across each of our segments as we enter the second half of the year. Our robust new customer pipeline gives me confidence that the investments we’re making in sales and marketing are paying off. We’re also seeing our investments to innovate and enhance our product offerings directly deliver meaningful new customers like BP. We’re in a great position to continue to win in the market across each of our segments, and I want to thank our teams for their hard work and commitment.

There is more to do, and we’re entering the second half of the year with momentum and clear focus. With that, I’ll turn it over to Jagtar to walk you through our financial performance in more detail.

Jagtar Narula, CFO, WEX Inc.: Jagtar, thank you Melissa, and good morning everyone. In an effort to shift the focus of these earnings calls to our most strategic items, we have published a supplemental information deck with commentary that would historically have been included during my prepared remarks. Since the detail is already available on our website, I will keep my remarks brief. Total revenue in the quarter was $659.6 million, which is down 2% versus last year. The impact of foreign exchange rates and lower fuel prices decreased revenue growth by 2.1% year over year. Revenue was at the top end of the guidance range we provided last quarter. Adjusted EPS of $3.95 was an increase of 1% year over year, including a decrease of 6.7% due to lower fuel prices and foreign exchange rates.

Adjusted EPS was above the high end of the guidance range we provided in April due to higher than expected fuel prices with a contribution from lower expenses, including tightly managing our headcount. In our Mobility segment, revenue declined 3.7% during Q2 compared to last year. This includes a drag of 4.2% due to lower fuel prices and foreign exchange rates. Our payment processing rate of 1.31% increased 2 basis points year over year. In our Benefits segment, total revenue of $195.1 million rose 8.5% on a year over year basis. SaaS account growth of 6% was in line with our expectations. Custodial investment revenue, which represents the interest we earn on custodial cash balances we hold, rose 11.4% and was $57.8 million. This interest rate we earned has remained fairly steady with the yield rising 1 basis point from Q2 last year.

Turning to our Corporate Payments segment, revenues of $118.3 million decreased 11.8% year over year, which was in line with our expectations. Purchase volume in Corporate Payments declined on a year over year basis, primarily due to the large customer transition we’ve been discussing in recent quarters. The transition to a new operating model is complete and we will lap most of this headwind next quarter. We will fully lap this headwind in Q4. There are a number of positive trends in the segment this quarter that give us optimism as we enter the second half of the year. First, our direct AP volume grew more than 25% versus last year. This is the third consecutive quarter of 25% growth rates. This is one of our key investment areas and provides a less volatile revenue stream when compared to our embedded offering.

Since the beginning of this year, we have increased the size of the sales force by more than 50% with plans to continue growing. Second, as Melissa mentioned, we’re encouraged by the strengthening pipeline in our embedded payments offering, driven in part by prior product investments that are helping us further diversify our customer base beyond travel. For the remainder of the year, we expect to see the continuation of significant volume growth for direct accounts payable customers, a ramp up in volume from a new publicly traded fintech win that has already been implemented, lapping the negative comparisons for the large OTA client transition and an easing of temporary spending timing from two other large customers over the back half of the year.

Taking all these factors into consideration, we are confident that the revenue in the segment will turn to growth in the second half of the year, starting in Q3 and accelerating in Q4. Let me transition now to the balance sheet. Our balance sheet and the ability to generate cash flow reliably remain a source of strength for us, especially in periods of economic uncertainty. Our leverage ratio ended the quarter at 3.4 times, which is the high end of our long term range of 2.5 to 3.5 times, primarily due to our share repurchase activity in Q1. For the remainder of this year, we will prioritize using available cash flow to pay down debt and reduce leverage. As a result, you shouldn’t expect any additional share repurchases or material M&A in the near term.

Historically, we have been able to delever about a half a turn per year based on cash generated and earnings growth. Now let’s move to earnings guidance for the third quarter and full year. It is important to note that we are updating our full year 2025 guidance to account for the Q2 results and the macro related impacts of fuel prices, FX and interest rates with all other changes minor in nature. To be clear, we’ve only included revenue related to new sales from the BP contract in guidance and none related to the accounts. Once converted, we have included the costs we expect to incur this year as part of the conversion. In Q3 we expect to report revenue in the range of $669 million to $689 million. We expect adjusted net income EPS to be between $4.30 and $4.50 per diluted share.

For the full year, we expect to report revenue in the range of $2.61 billion to $2.65 billion. We expect adjusted net income EPS to be between $15.37 and $15.77 per diluted share. In closing, we remain focused on what we can control during a period of elevated macro uncertainty and are enthusiastic about the progress we’ve already made this year in helping WEX realize its full potential to drive long term returns and accelerated growth. With that, operator, please open the.

Melissa Smith, Chair and CEO, WEX Inc.: Line to questions at this time.

Regina, Conference Operator: Like to remind everyone in order to ask a question, press star followed by the number one on your telephone keypad. We kindly ask that you please limit your questions to one and one follow-up. Our first question comes from the line of Ramsey El-Assal with Barclays. Please go ahead.

Hi, this is Shreyan from Ramsey. Thanks for taking my questions. Starting off in Corporate Payments, you mentioned that WEX was investing in new product capabilities and additional sales and marketing specifically also within the Direct AP business. I was wondering if you could talk about the initiatives within Direct AP and any early traction or trends that you’re seeing.

Melissa Smith, Chair and CEO, WEX Inc.: Sure, happy to. Actually, when we think about the investments we’re making in product, we last year worked on a product that we rolled out at the beginning of this year, which allowed our customers to move money much more efficiently across the globe. We did that to support not just our travel customers, but it extended our CAM into some new markets outside of travel. A lot of that functionality is a base of what we’re doing with our AP customers as well. With those customers, we’re focused on increasing mobile capability and just making it more seamless for them to use. There is a lot of synergy across both the embedded payments products and the AP products in the places that we’re making investments.

I’ll say on the embedded payment side, there’s a real hunger that we’re seeing in the marketplace right now for someone who can do that end-to-end processing. The fact that we actually own a bank and can provide all of the services with our strong technology stack, our deep integration capability that we have, and the experience we have managing complex transactions is playing really well in the marketplace. We’re seeing that result in a bigger and bigger pipeline each quarter that we look at it and in conversion starting to happen.

Got it, thanks. As a follow up for me, looking towards the back half of the year, how should we think about the reacceleration timeline in Mobility, and was just wondering if you could provide if you’re seeing any early signs or traction that indicate that inflection.

Yeah, if you look at the first half of this year, we have had some headwinds associated with same store sales. We’re assuming that the macro environment that we saw in Q2 will continue through the course of this year. That same store sales negative has been pretty consistent this year in our local fleet business. When we talk to those customers, what we hear is a combination of the fact that they’re really clamping down on costs within the organization, particularly in the mid market, as well as some fuel efficiency. We’re assuming that’s going to continue in the over the road marketplace. We did see this step down which we had anticipated. We knew that there was a pull forward because of the tariff activity. We saw same store sales gulp and reposited 2.6 in the first quarter to just a little under negative one.

We’re assuming that that’s going to continue. It’s what we’ve seen so far in the trends throughout this month.

Got it, thank you.

Regina, Conference Operator: Our next question comes from the line of Nick Cremo with UBS. Please go ahead.

Hey, good morning and congrats on the BT portfolio win in the U.S. First, I just wanted to go back to the Mobility segment because I think there’s a few moving pieces that I wanted to go back to. I mean, just to understand the underlying trajectory of that business. I understand that the same store sales weakness that you saw in North America begins to lap next month in August. The next 2 months of Q3, effectively, you should start to lap that broad-based negative 3% to 5% same store sales. That should be a relative benefit in Q3 and Q4, or will the same store sales weakness compound on the weakness from last year? I believe there was a $10 million late fee reversal in Q3 of last year. I think it was a three point hit to growth.

Do those things, all else equal, support an acceleration in the Mobility segment in the back half, or do we still kind of expect this business to be in the 1% macro neutral range?

Thank you.

Yeah, Nick, a couple things on that. We did start to see some of the same sort of sales weakness in Q3 last year. Remember, it was a little bouncy at the end of last year, so we saw some ups and downs going in Q3 and Q4. There will be some pluses and minuses for that. I don’t think it was all kind of one trend line. The second piece of that is, you are correct on the reversal that we saw last year, $10 million. I think what we’re seeing right now is, we’ve had kind of the incremental headwinds that Melissa talked about in terms of tariffs, that in the OTR going from positive to more flat or slightly negative in the second quarter. We’re expecting those trends to continue given the uncertainty around tariffs and things like that.

So.

We are expecting the second half of the year from a growth perspective to look a lot like the first half.

Jagtar Narula, CFO, WEX Inc.: Of the year in the Mobility segment.

Understood. Thanks for the color there. Next, on the BP portfolio win, can you just help us think through how long it will take to convert the portfolio once you actually complete the purchase agreement, and also just provide any color on the level of costs involved in implementing and converting that portfolio.

Thanks.

Melissa Smith, Chair and CEO, WEX Inc.: Let me start with the timing of that. Remember there’s two pieces of it. There’s the first part where we’re going to start selling the program that’s going to happen in the fourth quarter this year, and that activity is well underway. The second part, where we’re actually purchasing the portfolio and going through a conversion, at this point in time what we would say is we believe it will happen at some point in 2026. It is less clear in terms of the exact date of when it’s going to happen. We are working on that, obviously it’s important, and as we know more we’ll make sure that you’re aware of it. On the cost side,

Yeah, we are expecting some costs this year, Nick. That’s been embedded in the guide, so that’s reflected in the guide we’ve put out there.

The only other thing I’d say on your first question on Mobility, we are seeing benefit in the investments we’re making in sales and marketing. As we think about as we go through a period of time, it’s really important to us to reaccelerate the growth of that segment. We think it’s going to take some time for that to happen because there’s so much revenue that comes from the annuity in the base, and at the same time, we’re seeing actually good momentum, particularly in the small end of the marketplace with the investments we’re making.

Got it. Thank you very much.

Regina, Conference Operator: Our next question comes from the line of Nate Svensson with Deutsche Bank. Please go ahead.

Hi guys.

Nice results.

Wanted to ask about the outlook for Corporate Payments.

Melissa Smith, Chair and CEO, WEX Inc.: It’s going to be nice that we’re.

Start finally lapping the OTA client impact here in 3Q. Jack Darwin, was good to hear. Sort of the return to growth in 3Q on a revenue basis. Little acceleration in 4Q, but any more color on the puts and takes we should be incorporating across some of the other key KPIs, whether that’s purchase volume, take rate, et cetera. I think thinking about that sort of back half run rate as we move into a more normalized growth profile, is that kind of the right place to start as we think about growth going forward or anything else we should keep in mind as we model that segment.

I’m going to start and I’m sure Jagtar will jump in here, but when we think about the second half of the year, we had a negative comp in that segment in the first half of the year. Remember we have one travel customer that we’ve migrated to more equal spend volume per quarter this year, and that was not true last year. The front-ended spend has been a negative for us in the first half of the year, but that will become a positive for us in the second half of the year. As we go through the process of lapping this migration, the insourcing, it’s about half the impact in Q3 that it was in Q2, and it starts to clean up in the fourth quarter.

You start to see a more normalized quarter in the fourth quarter, with the exception of the factors, get some benefits and spend trends with that other OTA. We also have customers that we’re bringing online. Jagtar talked about one of them that we’ve already implemented, which is a larger one, and that will continue to grow in the course of the year. We’ve got more in pipeline both from AP and our embedded payments products that we’re in the process of converting right now. We’ve got a bunch of different things that are accumulating that go from negative in the first half of the year to positive in the second half.

Nate, I think you asked a question about KPIs. When you think about purchase volume, we’re expecting kind of low mid single digits the third quarter, accelerating to call it 20% in the fourth quarter. Keep in mind a lot of that is still the OTA migration where it flips from purchase volume to unfunded volume. When you look at it on a total volume basis, we’re expecting kind of low single or low double digits, both Q3 and Q4.

That’s super helpful detail and nice to see the momentum in that segment. The other thing I wanted to ask on it was nice to see the HSA account growth of 7%. I know we talked about some slowdown in the overall market, but you’re still outpacing the market at 5%. Could you talk about what specific strategies or investments are driving this outperformance? Is it some of this investment in sales and marketing? Is it strengthening the partner channel? Anything else? I guess moving forward, are there any barriers or anything that might prevent or slow you down from continuing to capture even more market share on the HSA side of the business?

The second quarter we did get the benefit of the United Auto Workers Retiree Medical Benefits Trust getting implemented. That had a full quarter of revenue associated with that, not a full quarter of accounts. That was certainly a benefit and that will continue throughout the rest of the year. What we’re hearing in the marketplace is that deep expertise that we have in managing the complex reimbursement accounts, the scale of our platform, the fact that you can have multi account types that sit across the portfolio, all of those things are playing well into the marketplace. It’s less to do with the sales and marketing investments. In our Benefits business, we have seen a win in the marketing category pretty early in the year. Most of those investments have been ramping in throughout the course of the year.

We expect to see more to the benefit of that into next year’s open enrollment cycle.

Jagtar Narula, CFO, WEX Inc.: Thanks, Melissa.

Regina, Conference Operator: Our next question comes from the line of Sanjay Sakhrani with KBW. Please go ahead.

Thank you. Good morning and congratulations on all these deals. My question is sort of a combination of some of the questions that were asked before. Obviously a lot of these new wins and such and the lapping of the OTA relationship sort of further feed or fuel next year. I’m just trying to think about what the revenue growth potential is as we exit 2025 into 2026. If I’m doing the math right, you’re forecasting about 4% revenue growth in the back half of the year. Ex fuel. How do we think about the starting point in 2026?

For starting point, we’re not giving 2026 guidance yet. What I would say is, mobility, the trends have been the trends. We’ll see more as we go through the rest of the year on does the impact of some of the weakness in the economy continue. What’s the impact of tariffs. I think kind of where we are today is a good starting point. I think same thing for Benefits is what we’re seeing is good outpacing of the market in terms of HSA account growth. Again, not giving a 2026 outlook, but I would think we would still continue to outpace the market. If I turn to Corporate Payments, you were right, Sanjay. As a company we’re kind of going from flattish growth in the first half of the year to 4% growth second half of the year.

A lot of that is coming in the Corporate Payments segment where we call it decline 15% first half that are expecting kind of flat for the year. That kind of implies a 30 point swing. I would say there’s a couple of pieces in that. We’ve talked about the OTA transition, we’ve talked about timing differences for certain spending patterns with certain customers. That’s 70% of what we’re seeing in terms of that 30 point swing. The other 30% is the things that Melissa has talked about. The new fintech customer, the great pipeline and signings we’re seeing in the Corporate Payments business, especially non travel, the backlog of implementations we have and the great pipeline we have. I think that’s the piece that we feel good about. As a result, we feel good about kind of the long term guidance.

Jagtar Narula, CFO, WEX Inc.: Numbers that are out there.

Ability to achieve them.

Cool. Maybe just to dig a little bit deeper on BP and the new TAM and HSA DP, you guys said like that 0.5% to 1%, like is that an annualized number or is it just your best guess based on the timing you’re using? Maybe midpoint of the year. I’m just curious sort of how to think about that number and then just when you could actually start monetizing on some of the increased TAM in the HSA program.

Thanks.

Melissa Smith, Chair and CEO, WEX Inc.: Yeah, two different questions. The first question on BP, the half a point to 1% is the first 12 months after implementation. Think of that and the way that these implementations work. They happen actually pretty quickly. You typically are moving the portfolio in one or two tranches. The question that’s outstanding is when does that implementation start? What they said is that we expect it to be at some point in 2026 right now, but we don’t know exactly when. Once it implements, after the first full year, we expect it to be that half a point to a point of growth to the company. Is that clear? Yeah, yeah, I know you model it, but that’s, but that’s. Those are the specifics of it. Your second question was on the market.

The HSA market, you know, it’s interesting with the HSA market expansions because what this is allowing people to do is have plans that are on the public exchanges. They now have access to HSA accounts in a way that they didn’t before. That is the biggest part of the market expansion. There are a couple other things as well that allow things that weren’t allowed in the past, like some of the telemedicine expenses. There’s nothing we have to do from a product perspective. Really what we’re focused on right now and thoughtfully working through is the plan to most effectively address this during this next open enrollment season, because it’s making sure that the people who now have access understand that and that they can get into these programs. We know that we’ll be a net benefactor.

The amount that we are is less clear at this point in time. We’re really focused around making sure that we maximize this expansion.

Got it. Thank you.

Regina, Conference Operator: Our next question comes from the line of Raina Kumar with Oppenheimer. Please go ahead.

Melissa Smith, Chair and CEO, WEX Inc.: Good morning. Thanks for all the details and congrats on a great quarter for your Corporate Payments business. Can you talk about what travel trends you’re seeing so far and what your expectations are for the third quarter? Sure. Travel actually came in very consistently with what we expected it to. There continues to be growth in volume overall across that portfolio. We’ve seen a change in some of the board, which hasn’t had a huge impact on us because just as a reminder, two thirds of our spend originates and is settled outside of the U.S. We have less exposure to the U.S., but we have seen a shift of less travel inbound into the U.S. and more that’s happening in other corridors, both in Europe and Asia. From a net net perspective, it hasn’t really had an impact on us.

The average ticket rate went up a little bit, about 4%. Overall, what we’re finding is that the environment continues to be quite stable, which is what we have projected forward in our guidance through the end of the year. Got it. Very helpful. Just as a follow up, is there any color you can provide for your expectations for adjusted operating margin for the rest of the year? You showed some great cost discipline during the quarter. Should we anticipate that to continue through the rest of the year?

I would say adjusted operating margin, we kind of expect to be in line with what we saw in the second quarter. I wouldn’t assume that costs will remain where they were in the second quarter. We got some good news in the second quarter. We’ve been working on a number of efficiency items that was baked into our second half guidance. We actually benefited from getting some of those efficiency items earlier than we expected, hence the good news in the second quarter. As we talked about in previous calls, we’re making investments into the business. We’ve been using some of those cost efficiency savings to make some of the investments we’ve talked about, whether it’s products or sales and marketing in a few areas. The ramp in headcount has been a little slower than we planned for, so that provided a double benefit.

In Q2, we got efficiency that was ahead of plan while some of the spending was behind plan. Right now within our guide, we’re expecting a catch up on some of those investment savings. I don’t think that the OpEx savings that you saw in Q2 will continue, but we should have margins that are pretty comparable to what we saw in the second quarter.

Makes sense. Thanks for the color.

Regina, Conference Operator: Our next question comes from the line of Dave Koning with Baird, please go ahead.

Melissa Smith, Chair and CEO, WEX Inc.: Yeah.

Hey guys, thank you.

Nice job.

I guess a couple questions. First of all, the processing rate within Mobility very consistent with last year. The first half of last year, about 1.3% yield. The first half of this year, 1.3%. The back half of last year, I think some of the pricing moved that up to the higher 1.3, 1.37%, something like that in the back half. Do you think you’ll see the same? Is it seasonality or was that something pricing? Will that happen again this second half, yeah.

Jagtar Narula, CFO, WEX Inc.: We had a couple items.

That hit the processing rate this quarter that were kind of one time in nature. I think you should expect that.

To tick up over the course of the year.

We also have the other thing to think about is interest rates within our mobility segment, within the total plan, we’re expecting kind of two 25 basis point cuts.

In the back half of the year.

That impacts revenue in Mobility. I’ve given some numbers in the past where each 100 bps is about $15 million of revenue impact to the Mobility segment. That will impact rate as well.

Going to the back half of the year.

Yup, Gotcha.

Okay.

In the Benefits segment, if we just look at our processing and account servicing revenue, it was about 3% growth, the best in, I think, 3, 4 or 5 quarters. I guess A is, is this sort of acceleration sustainable and maybe I guess B, should that really over time be 5% plus? What kind of gets it?

Gets it there.

Melissa Smith, Chair and CEO, WEX Inc.: When we’re looking at the growth of that, we actually would say the custodian accounts are a piece of that growth. It doesn’t have to be interest rate related, but the size of the custodian balances tends to increase after you add a customer on. We saw that in this quarter over time. We’re getting a benefit not just in account servicing and payment processing revenue, but we also get some of the custodial revenue that is not interest rate adjusted. If you accumulate all those things, we would be in that range.

Gotcha.

Thanks.

Interest rates, right?

Thank you.

Regina, Conference Operator: Our next question comes from the line of Trevor Williams with Jefferies. Please go ahead.

Thanks. Good morning for Melissa. I was just hoping to get your latest thinking on the portfolio of assets that you have today. It has come across on the call just how upbeat you guys are on the outlooks for each of the three segments. I’m just curious how that feeds into your appetite to potentially explore any strategic action within the portfolio. Thanks.

Melissa Smith, Chair and CEO, WEX Inc.: Yeah, I talked about this last quarter, but just to reiterate it, our board looks at the composition of our business portfolio regularly, and they do these reviews with a lot of objectivity. They bring in outside bankers to support that process. The things that we’re looking at as part of that are what are the strategic advantages of applying our knowledge, the diverse end market across all those diverse end markets that we’re part of, where there’s common IP, where there’s efficiencies around shared infrastructure, technology, talent, things like that. They look at what are the opportunities in order to acquire or dispose of businesses and what are the valuations or the hard costs associated with it. There’s a really in-depth view, and along that way, what they’re really making sure of is that we’re using our best judgment in order to deliver the best returns for our shareholders.

Yes, we’re very upbeat right now, and at the same time, I’d say our board is very much engaged in making sure that we’re thinking about that as well.

Okay, thanks. Going back to Corporate Payments, the total volume growth improved quite a bit from 2Q. I don’t know if you guys could unpack where that improvement came from. Any update on how you’re expecting wallet share with some of your biggest customers to trend from here? It sounds like there’s been some improved visibility with some of the other big OTA clients, but any more color there would be helpful. Thank you.

You talk about total volume growth in Corporate Payments. That was 3% in the quarter. It was a slight improvement from the first quarter. It was predominantly in the travel segment. We’ve now hit kind of the summer travel season and we’re seeing.

Jagtar Narula, CFO, WEX Inc.: Kind of strong growth in travel. Is there a follow-up on that?

Does that answer the question?

The other part of the question was just around wallet share trends with some of your biggest customers. It sounds like you’ve improved some of the visibility with the other big OTA clients. I’m just curious if you have any more color to share there. Thanks.

Melissa Smith, Chair and CEO, WEX Inc.: I actually wouldn’t describe it as wallet share trends. What we have done is worked with them to have a more consistent pattern of the spend volume so that, you know, there’s always going to be some seasonality in travel. What had happened last year was a large front loading and then, you know, not as much spend in the second half of the year. That just has created some comp issues for us. We have been working with that customer to have it become much more normalized, which will create comp issues through the course of this year, but should then make it much more predictable in the future.

Jagtar Narula, CFO, WEX Inc.: Another question.

Melissa Smith, Chair and CEO, WEX Inc.: Your next question comes from the line of Andrew Jeffrey with William Blair. Please go ahead.

Hi, good morning. Thank you for taking the question.

Melissa.

I wanted to drill down a little bit in Mobility. Obviously, good new signings, momentum, which is encouraging. Can you talk a little bit about some of the secular trends? I don’t mean, you know, necessarily short term demand. I’m thinking about sort of fuel efficiency and things like that, and maybe update on EV mix and whether or not that’s something that sort of materially can move the needle here over the next year or two.

Great questions on the EV. Let me start with the EV side. Our products are resonating in the marketplace. We continue to have a really good pipeline. Most of the customers in that pipeline continue to be government related. There are other people in this space that continue to be interested. I would say in most cases what they’re trying to do is test and really understand the total cost of ownership. That is still happening. It is happening at a slower pace than what we had originally anticipated because the market is moving. We feel really well positioned with the products that we have. The offering we have to that customer base allows them to take all of the different types of activity they have, whether they’re charging at a depot, whether they’re charging at home, whether they’re charging on the road.

As they have a consolidated fleet offering which includes their ICE vehicles, they have all of that information together. We feel really good about that. In addition to that, some of the offerings that we have with the fleet leasing companies that we have partnerships with, we’re exposing them to our EV offerings as well. We do think this is a great long term play. The economics are holding up. We just think it’s going to take a slower migration path in terms of the secular trends within Mobility over time. We’ve done this for a while. We’ve always assumed that there’s going to be some headwind associated with fuel efficiency. Now that’s been played out over the years. Regardless of what’s happening with EV migration, vehicles that come out in production tend to be more efficient than the ones that are getting replaced.

We embed that in our view of growth within that segment. The second part, the macro tends to be a little bit bumpier. Sometimes we’re a benefactor of a, sometimes, that’s working against us and what we’re really focused on is making sure that we retain the customer. As you go through these cycles, it’s just a question of when you see that volume come back on. Net net, when we think about this, part of the business is a part we continue to be really excited about. It throws a tremendous amount of cash off which allows us to invest in other areas of the business as well.

Okay, I appreciate that. This is a quick follow-up in embedded finance. You mentioned virtual card offering for fintech. Can you just sort of describe a little bit the competitive environment and what you think your right to win is in that space? That’s a relatively new business for WEX, I think.

Yeah. It is a similar product offering to what we’re doing in travel. We just had added in functionality that made it more applicable outside of travel. The places that we’re having success are AP Automation, media tech, expense management, E-commerce, areas like that where we’re finding you’ve got often new fintech players that are in the space that want to extend their capabilities to include payments. This, similar to our travel product, is an API-enabled payment stream. You embed it in the workflow of the customer and it gives them another tool for them to be able to compete in the marketplace.

What we’re finding in the market, and I would say yes, we had this great win and we’re really excited about it, and a lot of what’s in the pipeline, or what I call singles, there are a large number of customers that are sitting there and every time that we’ve looked at this pipeline, and again these products are new this year, it’s expanded smaller in size and in a way I like that because it creates that much more diversification across the portfolio that we have in Corporate Payments. Part of why us is because we have such a strong history managing these complex transactions and travel on the B2B side, that gives us a lot of market credibility.

We have a really strong virtual card technology stack, which is at the best, and we have a lot of experience with these deep integrations through API automation within that part of our business. We’re also hearing a lot of interest in providers right now in the marketplace that can execute end to end. This is where owning a bank in this particular moment is even more important to our customers, and all of those things combined, it’s resulting in a very strong pipeline, a lot of interest, and we continue to add features in this product. It’s a place we’re excited about and we do think that that will help create momentum within our Corporate Payments segment, which is important to us obviously.

Steve Elder, Senior Vice President of Investor Relations, WEX Inc.: Okay.

It sounds like a TAM expansion initiative.

Melissa Smith, Chair and CEO, WEX Inc.: Yes.

Okay awesome.

Thank you.

Yeah, I would say TAM expansion where we’ve already expanded it, and as we add into the product, we will continue to expand that TAM.

Regina, Conference Operator: That will conclude our question and answer session. I’ll turn the call back over to Steve Elder for any closing comments.

Steve Elder, Senior Vice President of Investor Relations, WEX Inc.: Thank you, Regina.

Like usual.

Just want to say thank you to everyone for listening in, and we’ll look forward to speaking with you at the end of the third quarter.

Regina, Conference Operator: This concludes today’s call. Thank you all for joining. You may now disconnect.

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