Global Growth Aside, WEX Builds On Domestic Gains

By Jeffrey Green (@epaymentsguy)

WEX Inc.’s efforts to globalize and expand its fleet and other payment segments is paying dividends, as the fleet card processor on April 30 reported a 10.1 percent increase in first-quarter revenues, at the high end of company expectations.

Organic growth and improving volume and fleet income were among the chief drivers of the revenue growth, along with the benefits of new card portfolios coming online, Melissa Smith, WEX president and CEO, said during a conference call with analysts to discuss the quarter’s earnings.

“We are focused on increasing the growth of our business, enhancing scale and globalizing by making targeted international investments to expand our footprint,” she said.

The company saw accelerated growth in in its international businesses, and it announced new partner relationships as it bolsters its efforts more broadly into Europe, Asia and Canada, Smith noted.

WEX has made progress with the integration of ExxonMobil’s European card portfolio during the quarter, securing merger clearance from the European Commission, Smith said, citing the proposed deal as an example of gains internationally. “Esso will be a key strategic addition that we anticipate will build out our fleet presence in Europe, a critical element of our international strategy,” she said on the call.

The company expects the conversion to WEX’s system to begin in 2015 and be completed in 2016, in line with original expectation, Smith said. “Overall, we’re very pleased with the progress of the transaction and the strength of the team working on this effort,” she said.

Last week, WEX subsidiary WEX Europe Ltd. entered into an international agreement with Conferma, a provider of virtual card number technology for corporate travel and expense. The deal will provide Conferma and its clients with WEX’s business benefits internationally, building on WEX’s strengths in virtual credit, debit and prepaid payment solutions, where it is quickly becoming a market leader.

“Our virtual cards continue to penetrate the travel market, with higher global spend volume contributing to our first quarter growth, despite the headwinds … on net interchange rates,” Smith said.

The company in March relaunched its mobile application, formerly known
as Octane, under the newly branded name WEX Connect. The app also added a service station locator that allows users to find service stations in their area based on brand, distance and service type (oil changes, tires, transmissions, etc.).

In March, Smith won the Woman Driving Innovation in Payments award at the 2014 Innovation Project in Cambridge, Mass., the first of its kind to be given at the ceremony.

In terms of company performance, total revenues for the quarter rose 10.1 percent, to $182.1 million from $165.4 million during the same period ended March 31 last year, beating analysts’ estimates by $8 million. Net income also rose 26.2 percent, to $36.1 million from $28.6 million, according to the company’s earnings release.

WEX’s fleet card payment solutions revenues for the quarter totaled $135.4 million, up 7.5 percent from $126 million. Other payment solutions revenues rose 18.6 percent, to $46.6 million from $39.3 million.

In the Fleet Payment Solutions division, fleet-payment processing revenue totaled $85.7 million, up 3 percent from $83.2 million a year earlier. Transaction processing revenue was $4.9 million, up 6.5 percent from $4.6 million.

Total purchases made by fleets that have a payment processing relationship with WEX were 73.3 million, up 6.7 percent from 68.7 million, driven by increased volumes that include vehicles beginning to come online through new customer wins over the past year, including Citgo, Smith said on the call, citing Sinclair as a recent example of a client increasing participation with the company.

The average U.S. fuel price was $3.64, down 3.2 percent from $3.76. The average Australian fuel price was US$5.34, down 7.1 percent from US$5.75. The net payment-processing rate, or the percentage of the dollar value of each payment processing transaction that WEX records as revenue from merchants less any discounts given to fleets or strategic relationships, was 1.36 percent, down two basis points from 1.38 percent.

In the Other Payments Solutions division, payment-processing revenue rose 17.7 percent, to $31.9 million from $27.1 million. Transaction-processing revenue was $1.7 million, up 13.3 percent from $1.5 million.

Purchase sales volume for the quarter, or the total dollar value of all transactions that use corporate charge card products including single use account products, was $3.67 billion, up 39 percent from $2.64 billion. The net interchange rate, or the percentage of the dollar value of each transaction that WEX records as revenue less any discounts given to customers, was 0.82 percent, down 14 basis points from 0.96 percent.