After inking a definitive agreement in January to acquire B2B optimization firm Optal and B2B travel payments company eNett, WEX Inc. said in its Q1 results on Thursday (May 7) that the pandemic, and conditions stemming from it, “have had, and continue to have, a material adverse effect on the businesses.”
The firm said it “has advised eNett and Optal that it is not required to close the transaction pursuant to the terms of the purchase agreement.” WEX was to acquire the U.K.-headquartered Optal from private shareholders, while it would acquire the Australian eNett from Travelport and its owners.
In a Thursday (May 7) statement, eNett, Travelport and Optal said they “intend to vigorously enforce their contractual rights and to hold WEX to its promises under the Purchase Agreement. eNett, Travelport and Optal expect WEX to perform its contractual obligations, including to finalize its financing, obtain the remaining governmental approvals and close the transaction.”
The companies claim that the purchase agreement was executed on Jan. 24 following the time that “COVID-19 had already publicly begun its spread across the globe, [which] expressly excludes the effects of a pandemic from the definition of Material Adverse Effect.”
WEX reported revenue growth of 13 percent in the first quarter versus the prior year quarter, amid outperformance in its corporate payments and U.S. health businesses. The gains were offset in part by lower travel and fleet volumes in the second half of the quarter.
WEX’s Chair and CEO Melissa Smith said in an announcement, “WEX began the year benefiting from favorable execution and building upon the strong momentum coming out of 2019. Despite the challenges and uncertainties caused by the COVID-19 pandemic, we finished strong with top-line growth across all segments and improved operating income by expanding our market share and leveraging our recent strategic acquisitions in the first quarter.”
Among the specific metrics was an increase in the average number of vehicles serviced, which reached roughly 15.1 million – up 15 percent from the first quarter of 2019. Total fuel transactions increased 7 percent from the first quarter of 2019 to 150.7 million, while payment processing transactions increased 5 percent to 121.6 million.
On the travel and corporate solutions side, purchase volume decreased 4 percent to $8 billion, from $8.4 billion in the first quarter of 2019. The average number of Software-as-a-Service (SaaS) accounts in the U.S. of Health and Employee Benefit Solutions grew 14 percent to 14.5 million, up from 12.7 million in the first quarter of 2019.
All in, WEX reported revenues of $431.7 million and adjusted net income attributable to shareholders of $1.81 per diluted share for the first quarter of 2020. Analysts had forecasted revenues of $424.31 million and earnings per share of $2.04. Shares in the company rose approximately 6.3 percent in trading just after 3:15 p.m. EST.