WEX Inc. common stock

Ladies and gentlemen, thank you for standing by and welcome to the WREC second quarter 2021 earnings conference call. At this time, our participants lines are in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I will now hand the conference over to your speaker today, Steve Elder, Vice President of Investor Relations. Thank you. Please go ahead, sir. He's horrible, man.

adjusted net income, or AMI during our call. Adjustments for this year's second quarter to arrive at these metrics include unrealized gains on financial instruments, net foreign currency remeasurement losses, change in fair value of contingent consideration, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, ANI adjustments attributable to non-controlling interests, and certain tax-related items. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to gaps of net income attributable to shareholders. I would also like to remind you that we will discuss folders and 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 our press release and the risk factors identified in our annual report on Form 10-K for the year ended December 31, 2020, filed with the FCC on March 1, 2021, and subsequent FCC 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 full written statements. All of us speak only as of today. With that, I'll turn the call over to Melissa.

Thanks, Steve, and good morning, everyone. Thanks for joining us today. I hope all of you and your families are healthy and doing well. I'm pleased to report that Q2 was a very strong quarter as a result of our laser focus on execution against our strategic pillars and continuous innovation across our technology platform. We're successfully building off the strong momentum from earlier this year, supported by our financial and operating results this quarter, which continues to reflect very positive trends across the business and strong demand for our platform and services. Our overall value proposition in the marketplace is to leverage our deep industry knowledge while continuously developing upon a strong set of capabilities This allows us to give our customers a broad range of bespoke services that meet requirements of easy integration into their systems and the ability to scale quickly and securely. Because of this, we're able to deliver significant benefits to our customers, resulting in market share gains and strong customer retention rates. The pandemic sparked an increased wave of digital engagement, and Wex's products and services are uniquely positioned to not only benefit from, but also enable the transition to an increasingly digital economy. We're excited about the acceleration in digital payment adoption. We see this as a significant opportunity for Wex, and as a result, we've increased our focus and investments into accelerating digital transformation across the company. During our results this quarter, we delivered robust year-over-year growth with revenue increasing 32% and adjusted net income up an impressive 91% for Duluth's share. Total purchase volume processed across the organization in the second quarter grew 104% year-over-year to $21 billion. For further perspective, revenue and adjusted earnings were ahead of Q2 2019 in the best second quarter in Wex's history. We have had strong momentum in organic growth this quarter, reflecting spend patterns returning as mobility rebound couples with new customer wins. Solid execution from the Wex team led to favorable margin expansion across the business. Revenue was up 12%. and adjusted net income per share was up 29% compared to Q1 of this year, underscoring the gains we made during Q2 and making us feel very good about the quarter as we look at performance from multiple financial perspectives. We made progress integrating our recent acquisitions, including E-Net and Opto, which contributed to our sequential improvement in performance. Finally, I'd like to point out that during the past two years, we have deepened our revenue capabilities and shifted more of our revenue into a high-quality, fast revenue stream. The mix of our revenue has continued to shift towards account servicing revenue, which primarily represents our fast revenue stream, going from 24% of total revenue in Q2 2019 to 29% this quarter. Now I'd like to discuss a few highlights from the quarter in the innovative solutions we're delivering for our customers. The combination of our technology platform, deep payment expertise, and track record in configuring integrated solutions to meet the needs of industry verticals continues to open the door to new opportunities. This, along with their ability to seamlessly integrate in their customers' operations via API, or to meet and match their level of practical sophistication, bolsters our value proposition, and remains core to our overall strategy. This also leads to very high customer retention rates, as demonstrated by our 95% net revenue retention in the health business in Q2. Our results demonstrate the strength of our many diverse offerings, I'd like to highlight a few notable examples of how our differentiated products and services and multi-channel go-to-market approach have resulted in new wins this quarter. Our house business continues to drive differentiated growth. We set out on a task years ago to create an ecosystem within health and benefits. We began with a focus on providing the payment technology behind tax-deferred accounts, such as HSA and FSA accounts, expanded into COBRA benefits, extended into a broker channel with greater transit and servicing capabilities, and most recently acquired Benefit Express in June, which now gives us enrollment capabilities. I'm excited about this acquisition because it makes WECC the first to form a full-service health and benefits marketplace, bringing together benefit administration, compliance services, and consumer-directed health and lifestyle spending accounts as one offering. Additionally, this transaction meaningfully expands WEX's total addressable market. Benefit Express is another important piece in our capability to serve the needs of this dynamic and growing market. WEX has a proven ability to invest in extending our technology platform functionality, both through internal builds and through acquisitions. We look to offer our existing partners additional opportunities for growth by leveraging technology and services that meet the full set of employer benefit needs. As we further develop our health and benefits service ecosystem, we expect to create new and exciting opportunities. While we have strong new customer and partner growth and hypertension rates, we continue to see a lag in employment growth with our existing partners and customers, which is a trend that we believe will return to mobile over time. In the meantime, we're focused on innovating and outperforming competitively in the marketplace, and we are reiterating our expected organic growth target this year of 8% to 12%. In our existing health business, we continue to see the power of the health ecosystem that we have developed. For example, together with one of our key partners, we were able to cross-sell cohort services to a large benefit and payroll providers small business group. This shows the strength of our extended offerings for our partner base, the ease of integrating with WAC, our ability to successfully integrate new acquisitions on the tech platform, and our ability to quickly scale our offerings through API. I'm also excited to announce that we're continuing the strong momentum in corporate payments, including the recent renewal of our agreement with American Express for an additional five years. American Express has brought its payable program into billions of annual spend in just a few years using our H&M technology. With this agreement, WEX and Amex combine each partner's core strength to provide a best-in-class, customizable, account-stable automation solution for Amex corporate customers. By working with businesses' existing accounting systems to streamline the AP process, WEX technology allows Amex business and corporate card customers to make supplier payments via single and multi-use virtual cards, increasing the ease and efficiency for Amex clients to pay their suppliers. We're excited about continuing our partnership with Amex and delivering best-in-class payment automation solutions to their corporate customer base. For our largest customers, our deep payment expertise allows us to develop bespoke solutions and expanded global currency capabilities, all delivered with easy-to-integrate APIs and built upon enterprise-grade cloud-based solutions that allow us to win and retain key brands. This is another piece of the large and growing B2B payments market. We have committed to continue to develop upon our capabilities to capture additional market share. Before I conclude, I'd like to talk about ESG. We published our inaugural ESG report at VEX earlier this year, which has set a baseline that we will continue to build upon. Our goal is to further integrate our ESG program into our overall business strategy, and I'd like to update you on some of our ESG-related activities, which are part of our overall strategy. A great example is the work we're doing around RECSUS electric vehicle or EV strategy, and how we're working with our customers and partners to meet their evolving needs. Our customers' and partners' goals are expanding. They now often include sustainability targets in compliance with future government mandates. We believe our expanded EV products will support WEX's future growth and benefit the environment. We've been providing EV payment solutions such as data capture, seamless integration, and secure payment solutions to customers for several years, including the General Services Administration, or GSA. GSA Fleet is the largest public fleet in the United States, and they've been using our integrated EV payment and reporting solutions for the past two years. Looking forward, we're planning on helping our customers meet their needs with mixed fleets comprised of both internal combustion engines and EVs. Our product roadmap includes options for broader access to public charging locations, on-site or depot charging, enhanced data capabilities, We invert the tools for employees that target homes in integrated reporting and insights. Our customers transition to ED, will progress over time, and less will be ready to meet their needs. We're also keeping in mind possibilities for future products as the industry evolves. We've also made progress on the diversity, equity, and inclusion front, following the most recent election of our board of directors. Our belief is that our boards embody a diverse set of skills, experiences, and backgrounds, which provides us an informed approach to governance and strategy. With the election of new directors at our annual meeting in June, our gender diversity at Wexford's Board of Directors is now five women and seven men, and 25% of our members come from ethnically diverse backgrounds. These individuals bring decades of experience and leadership in areas that are critical to our future. I'll continue to update you on our ESG journey along the way. As I look back on the quarter, I'm extremely proud of Wex's performance in this dynamic and fluid environment. Keeping the customer at the center of all we do allows us to win in the marketplace. Our customers and partners value the power of our differentiated products and services They experience what springs to the table to meet their needs and to provide seamless integration with their systems. Our new customer assignments and pipeline remains robust and will continue to drive innovative solutions that meet the dynamic needs of our customers. These results are only possible due to the talent, passion, and focus of our employees. I'd like to thank them for their hard work and dedication in delivering another excellent quarter. As you've heard me talk about before, we believe direct culture is a significant competitive differentiator, and this is more relevant than ever as we navigate the ever-changing effects of the pandemic. For example, as we begin the transition back into the office, we're listening to the needs of our employees and fostering a flexible work environment, which allows our talent to best focus on customer needs. This collaborative process has allowed us to maintain our strong employee retention rate and add new talent. We're proactively positioning WEX to continue to scale and capture additional profit and volume increases. We're seeing strong momentum across our sales channels with significant new wins and renewals, and we are successfully integrating acquired businesses. Our combination of innovative technology and talented people with deep industry expertise differentiates us in the market and we remain well positioned for future growth. With that, I'll turn the call over to our CFO, Roberto Simón. Roberto?