WEX Inc. 2026 Q3 Earnings Call

Pedro, please go ahead. Thank you, operator, and good morning, everyone.

With me today are Melissa Smith, our President and CEO, and Jagtar Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk you 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. Before we begin, unless otherwise noted, all comparisons discussed during today's call are on a year-over-year basis. 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 share, adjusted operating income, and related margin, as well as adjusted free cash flow during our call.

Please see the exhibits of the press release and the earnings supplement 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 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, 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 obligation to do so as a result of new information, future events, or otherwise. 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.

Thank you, Pedro, and good morning, everyone. We appreciate you joining us. I am going to start on slide four of our earnings presentation today. We delivered another strong quarter, and our teams continue to execute against both our near and long-term objectives. Results benefited from tailwinds from higher fuel prices, but the real story is the actions we have taken to strengthen execution, expand our competitive advantages, and deliver sustainable growth. This year, we have focused on pricing and margin expansion, winning new business, elevating our customer experience, and innovating across the platform. We have delivered on each of these fronts. At the same time, we are leveraging our strong cash generation, including the benefit from higher fuel prices, to create long-term shareholder value through disciplined capital allocation. This includes investing prudently to accelerate organic growth while fulfilling our commitment to return capital to shareholders.

We are making measurable progress in building meaningful momentum for the future. Turning to the financial results, we delivered record quarterly revenue of $780.1 million, an increase of 12.8%. Adjusted operating income grew 21.6% to $332.5 million, and adjusted EPS grew 33.6% to $6.13. Organically, excluding the impact of fuel prices and foreign exchange, revenue grew 4.4%. Adjusted operating income grew 6.7%, and adjusted EPS grew 14.3%. We exceeded our guidance ranges for revenue and adjusted EPS, with both metrics coming in above the midpoint of guidance, even after excluding PPG and FX. This strong performance demonstrates the operating leverage we are building in the business. Part of that operating leverage comes from our ability to build capabilities in AI, data, and infrastructure once, and then deploy them across all three segments.

Strong cash generation continues to provide meaningful strategic flexibility, and we generated $764.1 million of adjusted free cash flow on a trailing 12-month basis. In turn, we deployed 85% of our quarterly adjusted free cash flow towards repurchasing $200 million worth of shares, delivering on our promise to return the vast majority of our cash flow back to shareholders in the near term in illustrating our disciplined capital allocation approach. Turning to slide five of our presentation, let me remind you of our three strategic pillars: amplify our core, expand our reach, and accelerate innovation. Our strategy is designed to drive sustainable and profitable growth in each of our segments over the long term. These pillars are powered by organic investments in both product innovation and our sales and marketing engine.

We continue to see opportunities in both new and existing markets, which makes us excited about the future. At WEX, our decades of experience have earned us a trusted position within our customers' workflows. This allows us to deliver a simpler, more integrated experience for our customers and positions us to take on more mission-critical financial work on their behalf. Let me give you an example. In Mobility, we are testing new AI-powered capabilities as part of our intelligence portfolio for fleets. These offerings are designed to go beyond a dashboard to provide recommendations that help customers cut costs, prioritize performance opportunities, and run their operations more efficiently. This moves us from simply reporting data to driving action for our customers. Touching more broadly on AI, we are building it into our product experiences and deploying use cases across WEX.

This includes recently launching a pilot in our Mobility space that allows us to scale our account management functions. Historically, only our largest fleets could have a dedicated account manager. We're piloting an AI-driven program that reaches every customer at the moments that matter most in their experience with WEX, effectively extending sophisticated account management at scale to small fleets that couldn't previously afford that investment. Building on the great strides we've made in AI-assisted software development last year, the pilots we have launched this year to identify our software development lifecycle are delivering promising results. These pilots have taken us to a new level. With humans in the loop providing context and evaluation, we've built an in-house solution aimed at shortening development time and maximizing team capacity. We're now preparing to scale these efforts, which we believe will materially change our speed of innovation over time.

Beyond how we build our products, we believe AI becomes even more valuable when applied alongside the proprietary data our network generates. The decades of expertise earned inside our customers' industries and the infrastructure we've built to move money and manage risk. Together, these capabilities create a combination that is very hard to replicate. An example of this is how we use AI in combination with our bespoke credit tools to dynamically increase more than 215,000 customers' credit lines year to date, helping them navigate higher fuel prices while managing risk. Let me now take a few minutes to update you on our segments before turning it over to Jagtar, who will provide more detail on our quarterly results and updated outlook. Starting with Mobility, we continue to see strong tailwinds from higher fuel prices in the quarter.

More importantly, we're seeing tangible progress in the areas we directly control. Organic growth increased to 4.4% year over year, accelerating from 3.1% in the first half of the year. This outperformance reflects the impact of our pricing actions and product investments. We believe we will continue to have opportunities to further improve pricing and margin as we step into 2027. We also continue to win in the market. This quarter, we renewed our largest direct OTR customer by gallons processed, a global leader in parcel delivery and logistics. We believe this renewal reflects what sets us apart, our technology, our service, and the deep understanding of our customers' operations that we've built over years of partnership. Let me close on Mobility by emphasizing that we have deep moats that we continue to strengthen through smart investments.

Simply put, we're combining the strength of our network with continued innovation to make what we believe is already the best solution for fleets of all sizes, even better for our customers. Moving on to Benefits, we're well into our sales cycle for 2027, and customers have been particularly excited about the investments we're making to modernize our platforms. There's more to come as we continue to integrate AI into our solutions to take more of their critical work off their plates. For example, we've recently expanded our AI-powered claims adjudication tool to support additional account types, further strengthening the value proposition of this offering. Our strong competitive position is also reflected in industry data. According to the 2026 Devenir Midyear report, WEX remained the nation's fifth largest HSA custodian, and our technology powers eight of the top 10 custodians listed in the report.

This demonstrates the breadth of our reach across the HSA ecosystem and the important role our technology plays in supporting the industry. To drive long-term volume growth, we will continue to build HSA awareness through industry leadership and national programs. With our established market position, broad technology reach, and continued focus on driving HSA adoption, we believe we are positioned to benefit as the HSA market expands, both as a top 5 custodian and as the technology provider powering 8 of the top 10. With that said, there's still work to be done to close the 2027 cycle, and we look forward to updating you next quarter as our sales cycle concludes. Moving on to Corporate Payments, we're pleased to report another strong quarter of improved profitability and strengthened Direct AP.