WEX Inc. common stock

thank you for standing by my name is cheryl and i will be your conference operator today at this time i would like to welcome everyone to the wex q4 2021 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 followed by the number one on your telephone keypad if you would like to withdraw your question press again the Star 1. Thank you. Steve Elder, Vice President of Investor Relations, you may begin your conference.

Thank you, Operator. Good morning, everyone. With me today is Melissa Smith, our Chair and CEO, and our Interim CFO and Chief Accounting Officer, Jennifer Kimball. The press release we issued earlier today and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and the slide deck have also been included in 8Ks we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income attributable to shareholders, which we refer to as adjusted net income, or ANI, and adjusted operating income. Adjustments for this year's fourth quarter and four-year GAAP results to arrive at these metrics include unrealized gains on financial instruments, net foreign currency losses, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, other costs, change in fair value of contingent consideration, debt restructuring and debt issuance cost amortization, similar adjustments attributable to non-controlling interests, and certain tax-related items as applicable. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis as we are unable to predict certain elements that are included in reported GAAP results. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to GAAP's net income attributable to shareholders and a reconciliation of operating income to adjusted operating income. 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 our press release, the risk factors identified in our 2020 Annual Report on Form 10-K filed with the SEC on March 1, 2021, our quarterly reports on Form 10Q and 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 Smith.

Thanks, Steve, and good morning, everyone. We appreciate you joining us today. Before diving into our Q4 and full year results, I'd like to share my appreciation for our dedicated team members across the globe who continue to execute admirably with the backdrop of the ongoing pandemic. As a result of their remarkable efforts, 2021 was a very strong year for WEX. In the fourth quarter, we delivered record revenue of $498 million, a year-over-year increase of 25%, driven by the continued expansion of our platform. Approximately 12% of the increase in revenue was from higher field prices, so revenue grew approximately 13% for all other factors. Total purchase volume processed across the organization in the fourth quarter grew 79% year over year to $25 billion, reflecting the strong rebound in momentum we were seeing across each of our businesses. Worth noting that while travel volumes have not yet returned to pre-pandemic levels, we have more than made up for the loss of revenue, powered by the underlying strength across all of our other solutions. Record quarterly revenue paired with a unique efficiency and scalability of our platform resulted in adjusted net income for diluted share of 258, an increase of 78% compared to the same quarter last year. Before turning to the key drivers of our growth during the quarter, let me quickly touch on our full year 2021 results. On a full year basis, 2021 revenue increased 19% year over year. Approximately 8% of this increase was due to higher fuel prices and some benefit from foreign exchange rates, leaving approximately 11% growth for all other factors. Full year purchase volume of $88 billion was up 59% compared to 2020. in full year adjusted net income grew 51 percent reflecting many of the same benefits of scale and efficiency that i just mentioned overall 2021 was one of the best years in wex's history with record revenue and near record adjusted net income per share we entered 2022 with strong momentum underpinned by a return to healthy organic growth Now let me take a step back and discuss the key drivers of our fourth quarter results in more detail. First, as was the case in the third quarter, most existing customer spend returned to, and in many cases exceeded, pre-pandemic levels. Second, and core to our strategy, we're expanding our ecosystem with innovative new solutions to help our customers simplify their businesses. As an example, we recently signed a new agreement with MasterCard that allows us to add their broad merchant acceptance to our proprietary closed-loop fleet cards, enabling our customers to purchase a broader set of products through WEX, but still in a highly controlled manner. In January, we also announced the launch of WEX Fleet Tolls in partnership with BestPass, a leader in toll management solutions for commercial fleets. This solution allows our fleet customers to utilize cutting edge payment technology to improve their mobility needs. Not only does this allow our customers to free up capital by only paying for accrued tolls, it also simplifies account management by reducing the number of accounts held with different tolling authorities across the country. Our compelling suite of solutions like these, underpinned by WEX's global scale and reliability, Customer-focused innovation and specialized focus is leading to wins in the marketplace and helping us expand our existing relationships. To that end, I'm very pleased to announce that we have extended our agreement with one of the largest online travel companies in the world during the fourth quarter. We look forward to supporting their needs and innovating with them for many years to come. In addition, we continue to ramp our relationship with Avid Exchange, which we expect will continue to drive significant volume growth and profitable revenue growth over the coming quarters. Beyond driving growth for their existing clients, I'm also pleased to share that we signed several new customers during the fourth quarter, including the Commonwealth of Kentucky and Fleet, Anthem and UMB and Health, and Renewed PNC Bank, one of our largest and most important corporate payment partners, just to name a few. We continue to hear from new customers that they are choosing WEX for many of the same reasons our existing customers are deepening their relationships, because our unique platform allows us to offer tailored solutions that are seamlessly embedded into their workflows with a simple integration. In mobility, this includes our industry-leading products for over-the-road and local vehicles. In travel and corporate payments, we're leading with embedded payments and AP automation solutions and building out a regional sales force in the direct channel to bring these solutions to more customers with fast and simple integration. And in health, we're driving growth in our benefits platform for CDH and corporate administration, as well as our fully outsourced benefit administration platform and services, which is a significant growth opportunity for WACS. From an end consumer perspective, one in five HSA account holders are on the WEX platform. This large data pool allows us to reach beyond the product offering and also help educate people on the financial benefits of HSAs. WEX targets educational messages based on where people are in their life plans. from newly employed to people getting ready to retire, with the goal of helping people get the most out of money that they set aside in tax-advantaged accounts. And we do this in creative ways, through benefit toolkits, open enrollment toolkits, blogs, and podcasts. This helps both our partners with their offering and end consumers. To that end, I'm very optimistic about the momentum we've seen in health coming out of open enrollment season, which has exceeded our expectations and sets us up for a strong 2022. During the quarter, we also successfully moved nearly $1 billion in HSA deposits to Wex Bank, which were invested and we expect to be a significant driver of incremental revenue in 2022. Again, we'll discuss the details further in a moment, but this is just one of many reasons we see significant value in the health business. WEX has deep experience and is driving growth across each of our three verticals, but I'm even more excited about the opportunity ahead to further integrate our products and services and wrap our customers with an ecosystem of solutions that meet their evolving needs. To that end, in January, we welcome Karen Stroop as Chief Digital Officer and Carlos Carrieto as Chief Operating Officer International. Both Carlos and Karen will be instrumental as we continue to expand our global footprint and optimize digital solutions for customers around the world. We announced this morning that we will be hosting a Virtual Investor Day on March 23rd during which you'll hear more from Karen and Carlos, and we will discuss how our reorganized leadership structure will help WEX unlock the benefits of fully integrated customer relationships across our entire product portfolio. Turning now to our technology platform. Last quarter, I told you that we had nearly completed our efforts to move WEX's corporate payments card issuing technology to the cloud. I'm very pleased to report that the integration was completed successfully. Today, approximately 80% of WEX's platform is multi-cloud based, allowing WEX to exceed expectations for scale and reliability, while also being able to move quickly on new innovative concepts. Throughout 2021, our technology investments focused on continuing to enhance our cloud native capabilities, digital marketing engine, and artificial intelligence. As I mentioned last quarter, our digital marketing channels are proving very effective. We're expanding it to other parts of the business to drive enhanced conversion and customer engagement. For our North American fleet business, these marketing efforts delivered 56% more new accounts in 2021. On the AI front, we continue to take strides to increase automation across the business, driving efficiency and improving outcomes. One example is that all of our investments are geared towards creating an intelligent, secure infrastructure, enabling our capabilities in ways that can be seamlessly embedded in their business, including cutting edge. We believe these. enable us to help our customers solve increasingly complex challenges key among them the expected transition to hybrid and electric vehicles with our leadership position in providing fleet management solutions combined with new offerings like the partnership we announced with chargepoint last quarter we're uniquely positioned to help our customers with their mixed fleet needs these efforts also closely which includes identifying near and long-term opportunities to support our customers in improving their environmental sustainability. As fleet's becoming increasingly electric, customers make the transition. Looking ahead at 2022 and beyond, the future for WECC, we entered this year with significant momentum ...underscored by strong new sales and a robust... ...open enrollment season in our health business that exceeded our expectations. Our digital marketing channels continue to deliver, and we are well-positioned to capitalize on that success. We continue to make great strides in improving efficiency, driven by our investments to make our platform more flexible and scalable. All of these trends give me confidence in our ability to deliver on our financial targets, including revenue growth, within our long-term guidance range for 2022. Before I conclude, I'm sure you all saw the news that Roberta Simone will be leaving Wex in April and will be helping us work through a successful transition. I'd like to extend my sincere thanks to Roberto for his many contributions to WEX since joining in 2016 and wish him well in his future endeavors. I'm Chief Financial Officer. Jen has done a great job of leading our finance and accounting teams while we conduct this search for Roberto's replacement. I'll now turn it over to Jen to walk you through our results.