# WEX Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [WEX Inc.](/companies/wex.md) (CIK 1309108)
- Form: 10-Q
- Filed: 2024-10-24
- Accepted by EDGAR: Oct 24, 2024, 14:18 ET
- Period: 2024-09-30
- Accession: 0001309108-24-000201
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1309108/000130910824000201/wex-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1309108/000130910824000201/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $479.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.43bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $249.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $780.2m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $196.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $529.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $38.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $91.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $102.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $245.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $2.52 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $5.89 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $2.56 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $5.95 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 40,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 41,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$157.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $108.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $543.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $535.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $9.11bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $13.96bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $8.72bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $12.28bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $3.14bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $51.7m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2024-09-30 | $1.44bn | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | $1.68bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 63,180 characters.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information that will assist the reader with understanding our financial statements, the changes in key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting estimates affect our financial statements. The discussion also provides information about the financial results of the three segments of our business to provide a better understanding of how those segments and their results affect our financial condition and results of operations as a whole. Additionally, certain corporate costs not allocated to our operating segments are discussed herein.

Our MD&A is presented in the following sections:

- Executive Overview
- Company Highlights
- Results of Operations
- Liquidity and Capital Resources
- Critical Accounting Policies and Estimates
- Recently Adopted Accounting Standards

This discussion should be read in conjunction with our audited consolidated financial statements as of December 31, 2023, the notes accompanying those financial statements and MD&A as contained in our Annual Report on Form 10–K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 23, 2024, and in conjunction with the condensed consolidated financial statements and notes in Part I – Item 1 of this report.

### Executive Overview

WEX’s mission is focused on simplifying the business of running a business. We own and operate a B2B ecosystem that helps our customers overcome highly manual processes and reconciliations, navigate the complexity of consumer driven healthcare benefits, and solve their administrative challenges. We believe that WEX offers the marketplace a unique combination of capabilities to simplify complexity, thereby setting WEX’s offerings apart from those of our competition, including:

- *Global commerce platform.* Our technology is engineered and operated with global scale and reliability. We have invested heavily, and expect to continue to invest, in technology. Using our technology, our customers have trusted us to conduct hundreds of billions of dollars in money movements in more than 20 currencies. We believe that our products and services play integral roles in the infrastructure of businesses.
- *Personalized solutions, seamlessly embedded.* We believe WEX is a leader in our end markets with solutions shaped by customer focused innovation and deep industry expertise. Both in our direct-to-corporate and partner channels, our solutions focus on simplifying the business of running a business by deeply embedding our solutions within our end customer workflows.
- *Insights that power success.* Customers look to WEX for a powerful combination of specialized expertise and rich data to assist them in driving better decisions, moving more quickly, and in dealing with risk. We put control in the hands of our customers.

Leveraging these unique capabilities, WEX offers solutions that organizations use to drive efficiencies and manage risk. These solutions, which share and benefit from our underlying capabilities, are provided across the following three business segments: Mobility, Corporate Payments, and Benefits. Within our Mobility segment, we are a leader in fleet vehicle payment solutions, transaction processing, and information management services specifically designed for the needs of fleets of all sizes from small businesses to federal and state government fleets and over-the-road carriers. Our Corporate Payments segment focuses on the complex payment environment of global B2B payments, enabling customers to utilize our payments solutions to integrate into their own workflows and manage their accounts payable automation and spend management functions. Within our Benefits segment, we provide SaaS software with embedded payment solutions and plan administration services for consumer directed health benefits, COBRA accounts, and benefit enrollment and administration. Additionally, WEX Inc. and WEX Bank provide non-bank custodial and depository services, respectively, with respect to HSAs.

### Company Highlights

The following table presents a summarized view of selected results for the three and nine months ended September 30, 2024, shown comparative to the prior year periods. Net cash (used for) provided by operating activities and adjusted free cash flow are presented on a year to-date basis, and shown comparative to the prior year to-date. The other key metric included below provides enhanced information and data underlying our financial results. A recurring, more extensive list of key performance indicators is included by segment within the *Results of Operations* section later in this MD&A.

*(in millions, except per share data)*

| 2024 GAAP Measures: | Three Months Ended September 30, 2023 | 2024 | Nine Months Ended September 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | **$665.5** | $651.4 | **$1,991.6** | $1,884.7 |
| Net income | **$102.9** | $18.4 | **$245.7** | $181.7 |
| Net income per diluted share | **$2.52** | $0.42 | **$5.89** | $4.18 |
| Net cash (used for) provided by operating activities |  |  | **$(157.0)** | $146.0 |
| **Non-GAAP Measures(1)** |  |  |  |  |
| Adjusted net income | **$177.5** | $176.8 | **$488.1** | $481.9 |
| Adjusted net income per diluted share | **$4.35** | $4.05 | **$11.70** | $10.99 |
| Adjusted free cash flow |  |  | **$392.5** | $335.4 |
| **Other Key Metric:** |  |  |  |  |
| Total volume across the Company(2) | **$62,322** | $61,880 | **$179,268** | $169,479 |

(1) Adjusted net income, adjusted net income per diluted share, and adjusted free cash flow are supplemental non-GAAP financial measures of operating performance. Refer to the sections titled *Non–GAAP Financial Measures That Supplement GAAP Measures* and *Liquidity and Capital Resources* later in this MD&A for more information and a reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

(2) Total volume across the Company includes purchases on WEX-issued accounts as well as purchases issued by others using a WEX platform.

### Results of Operations

The following includes information that our management believes is material to an understanding of our results of operations. Any significant changes, unusual or infrequent events or significant economic changes that materially affect our results of operations are discussed below.

### Mobility

### Revenues

The following table reflects comparative revenue and key operating statistics within Mobility:

*(in millions, except per gallon data)*

| Revenues(1) | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Payment processing revenue | **$183.2** | $176.9 | $6.3 | 4% | **$531.1** | $520.6 | $10.5 | 2% |
| Account servicing revenue | **49.0** | 42.5 | 6.5 | 15% | **145.2** | 123.6 | 21.6 | 17% |
| Finance fee revenue | **70.2** | 76.8 | (6.6) | (9)% | **217.9** | 233.5 | (15.6) | (7)% |
| Other revenue | **54.7** | 53.9 | 0.8 | 2% | **161.4** | 154.9 | 6.5 | 4% |
| Total revenues | **$357.2** | $350.1 | $7.1 | 2% | **$1,055.6** | $1,032.6 | $23.0 | 2% |
| **Key operating statistics** |  |  |  |  |  |  |  |  |
| Payment processing transactions | **146.5** | 144.6 | 1.9 | 1% | **428.3** | 424.5 | 3.8 | 1% |
| Payment processing $ of fuel | **$13,227.5** | $14,945.1 | $(1,717.6) | (11)% | **$40,017.6** | $42,869.2 | $(2,851.6) | (7)% |
| Average price per gallon of fuel – Domestic – ($USD/gal) | **$3.45** | $3.97 | $(0.52) | (13)% | **$3.54** | $3.83 | $(0.29) | (8)% |
| Net payment processing rate(2) | **1.38%** | 1.18% | 0.20% | 17% | **1.33%** | 1.21% | 0.12% | 10% |
| Net late fee rate | **0.45%** | 0.44% | 0.01% | 1% | **0.47%** | 0.47% | —% | (1)% |

(1) Lower domestic fuel prices decreased revenue by $21.2 million and $47.2 million for the three and nine months ended September 30, 2024.

(2) Our net payment processing rate for the three and nine months ended September 30, 2024 has benefited from lower average domestic fuel prices and higher rates earned from merchant contract renewals at favorable terms.

Total Mobility revenue increased $7.1 million for the third quarter of 2024 and increased $23.0 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year. The net increases resulted primarily from higher rates earned under favorable contract renewals and the impact of the Payzer Acquisition. Partly offsetting these increases were lower average domestic fuel prices and a charge for operational issues impacting certain finance fee calculations.

Finance fee revenue, which is comprised of the following components, is discussed below.

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Finance income | **$59.0** | $66.4 | $(7.4) | (11)% | **$186.8** | $202.8 | $(16.0) | (8)% |
| Factoring fee revenue | **11.2** | 10.4 | 0.8 | 8% | **31.2** | 30.7 | 0.5 | 2% |
| **Finance fee revenue** | **$70.2** | $76.8 | $(6.6) | (9)% | **$217.9** | $233.5 | $(15.6) | (7)% |

Finance income primarily consists of late fees charged for receivables not paid within the terms of the customer agreement based upon the outstanding customer receivable balance, and to a lesser degree by finance charges earned on revolving portfolio balances. Late fee revenue is earned when a customer’s receivable balance becomes delinquent and is calculated using the greater of a minimum charge or a stated late fee rate multiplied by the outstanding balance that is subject to a late fee charge. Changes in the absolute amount of such outstanding balances can generally be attributed to: (i) changes in fuel prices; (ii) customer specific transaction volume; and (iii) customer specific delinquencies. Late fee revenue can also be impacted by: (i) changes in late fee rates; and (ii) increases or decreases in customer overdue balances.

Finance income decreased $7.4 million for the third quarter of 2024 and decreased $16.0 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year. The decrease in finance income for the three and nine months ended September 30, 2024 compared to the prior year periods was driven by a decline in the number of late fee instances, reflective of the tighter credit policies we put in place during mid-2023, and by lower domestic fuel prices, offset in part by increases in contractual late fee rates charged during the three and nine months ended September 30, 2024, as compared to the same periods in the prior year. Concessions to certain customers experiencing financial difficulties may be granted and are limited to extending the time to pay, placing a customer on a payment plan or granting waivers of late fees. There were no material concessions granted to customers experiencing financial difficulties during the three and nine months ended September 30, 2024 and 2023.

The primary source of factoring fee revenue is calculated as a negotiated percentage fee of the receivable balance that we purchase. Factoring fee revenue for the third quarter and nine months ended September 30, 2024 remained consistent with that of the same periods in the prior year.

### Operating Expenses

The following table compares line items within operating income and presents segment adjusted operating income and segment adjusted operating income margin for Mobility:

*(in millions)*

| Cost of services | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Processing costs | **$73.4** | $70.1 | $3.3 | 5% | **$225.6** | $208.4 | $17.2 | 8% |
| Service fees | **$1.9** | $1.9 | $— | 1% | **$5.5** | $5.6 | $(0.1) | (2)% |
| Provision for credit losses | **$7.8** | $12.2 | $(4.4) | (36)% | **$47.2** | $78.5 | $(31.3) | (40)% |
| Operating interest | **$24.9** | $21.0 | $3.9 | 19% | **$65.7** | $47.0 | $18.7 | 40% |
| Depreciation and amortization | **$14.4** | $9.9 | $4.5 | 46% | **$40.4** | $29.4 | $11.0 | 37% |
| **Other operating expenses** |  |  |  |  |  |  |  |  |
| General and administrative | **$26.7** | $39.6 | $(12.9) | (33)% | **$90.1** | $100.4 | $(10.3) | (10)% |
| Sales and marketing | **$52.8** | $53.4 | $(0.6) | (1)% | **$171.0** | $156.4 | $14.6 | 9% |
| Depreciation and amortization | **$18.6** | $17.0 | $1.6 | 9% | **$55.1** | $51.4 | $3.7 | 7% |
| **Operating income** | **$136.5** | $125.0 | $11.5 | 9% | **$355.1** | $355.5 | $(0.4) | —% |
| **Segment adjusted operating income(1)** | **$167.1** | $159.6 | $7.5 | 5% | **$452.4** | $448.7 | $3.7 | 1% |
| **Segment adjusted operating income margin(2)** | **46.8%** | 45.6% | 1.2% | 3% | **42.9%** | 43.5% | (0.6)% | (1)% |

(1) Segment adjusted operating income excludes unallocated corporate expenses, acquisition-related intangible amortization, other acquisition and divestiture related items, debt restructuring costs, stock-based compensation, other costs and certain non-recurring or non-cash operating charges that are not core to our operations, as applicable depending on the period presented. See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 2 for a reconciliation of operating income to total segment adjusted operating income. See also Part I – Item 1 – Note 17, Segment Information, to our condensed consolidated financial statements for more information regarding our segment determination.

(2) Segment adjusted operating income margin is calculated by dividing segment adjusted operating income by segment revenue.

### Cost of services

Provision for credit losses, which includes estimates for both credit and fraud losses, decreased $4.4 million and $31.3 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in the prior year. Stabilization in the over-the-road trucking market, tighter credit policies put in place to reduce losses, and lower than expected charge-offs from macroeconomic factors have all contributed to the reduction in the provision for the three and nine months ended September 30, 2024, as compared to the same periods in the prior year. We generally measure our loss performance by calculating fuel-related losses as a percentage of total fuel expenditures on payment processing transactions. This metric for provision for credit losses was 5.8 and 11.6 basis points of fuel expenditures for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023, provision for credit losses was 6.8 and 17.8 basis points of fuel expenditures, respectively.

Operating interest increased $3.9 million for the third quarter of 2024 and increased $18.7 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year, primarily reflective of higher interest rates on operating debt balances in support of working capital needs.

Depreciation and amortization increased $4.5 million and $11.0 million for the three and nine months ended September 30, 2024, respectively, compared to the prior year comparable periods due in part to the amortization of intangible assets obtained as part of the Payzer Acquisition and increased capital expenditures to support growth.

### Other operating expenses

General and administrative expense decreased $12.9 million for the third quarter of 2024 and $10.3 million for the nine months ended September 30, 2024, as compared to the same periods of the prior year, primarily due to a third quarter 2023 write-off of certain costs associated with an abandoned IT development project and higher professional services expense in the prior year periods.

Sales and marketing expenses increased $14.6 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year primarily due to increased employee costs as a result of the Payzer Acquisition along with an increase in costs targeted at driving growth.

### Corporate Payments

### Revenues

The following table reflects comparative revenue and key operating statistics within Corporate Payments:

*(in millions)*

| Revenues | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Payment processing revenue | **$104.8** | $115.8 | $(11.0) | (10)% | **$324.2** | $310.6 | $13.6 | 4% |
| Account servicing revenue | **15.5** | 10.5 | 5.0 | 48% | **35.8** | 31.7 | 4.1 | 13% |
| Finance fee revenue | **0.2** | 0.2 | — | NM | **0.4** | 0.5 | (0.1) | NM |
| Other revenue | **6.4** | 8.7 | (2.3) | (27)% | **23.1** | 19.1 | 4.0 | 21% |
| Total revenues | **$126.9** | $135.2 | $(8.3) | (6)% | **$383.5** | $361.9 | $21.6 | 6% |
| **Key operating statistics** |  |  |  |  |  |  |  |  |
| Purchase volume | **$23,394.4** | $27,860.1 | $(4,465.7) | (16)% | **$73,098.5** | $69,396.0 | $3,702.5 | 5% |
| Net interchange rate(1) | **0.45%** | 0.42% | 0.03% | 7% | **0.44%** | 0.45% | (0.01)% | (1)% |

NM - Not meaningful

(1) Our net interchange rate has increased during the third quarter of 2024 and decreased during the nine months ended September 30, 2024 compared to the same periods of the prior year, primarily due to changes in customer mix.

Total Corporate Payments revenue decreased $8.3 million for the third quarter of 2024 and increased $21.6 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year. The decrease during the third quarter of 2024 as compared to the same period of the prior year was due primarily to a reduction in purchase volume. The increase for the nine months ended September 30, 2024, as compared to the same period of the prior year, was primarily driven by greater purchase volumes in both travel and corporate payments and higher interest revenue earned during the first quarter on restricted cash balances as a result of a rise in interest rates and average balances.

Concessions to certain customers experiencing financial difficulties may be granted and are limited to extending the time to pay, placing a customer on a payment plan or granting waivers of late fees. There were no material concessions granted to customers during the three and nine months ended September 30, 2024 and 2023.

### Operating Expenses

The following table compares line items within operating income and presents segment adjusted operating income and segment adjusted operating income margin for Corporate Payments:

*(in millions)*

| Cost of services | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Processing costs | **$17.7** | $17.8 | $(0.1) | —% | **$59.7** | $57.2 | $2.5 | 4% |
| Service fees | **$2.7** | $3.1 | $(0.4) | (12)% | **$9.7** | $9.8 | $(0.1) | (1)% |
| Provision for credit losses | **$1.7** | $(3.9) | $5.6 | NM | **$5.3** | $(2.5) | $7.8 | NM |
| Operating interest | **$2.2** | $2.7 | $(0.5) | (18)% | **$8.4** | $6.7 | $1.7 | 25% |
| Depreciation and amortization | **$8.3** | $6.2 | $2.1 | 34% | **$24.1** | $17.9 | $6.2 | 35% |
| **Other operating expenses** |  |  |  |  |  |  |  |  |
| General and administrative | **$16.6** | $18.1 | $(1.5) | (8)% | **$44.3** | $53.1 | $(8.8) | (17)% |
| Sales and marketing | **$14.8** | $14.9 | $(0.1) | (1)% | **$43.6** | $41.7 | $1.9 | 5% |
| Depreciation and amortization | **$6.6** | $6.7 | $(0.1) | (1)% | **$20.1** | $19.8 | $0.2 | 1% |
| **Operating income** | **$56.1** | $69.6 | $(13.5) | (19)% | **$168.1** | $158.2 | $9.9 | 6% |
| **Segment adjusted operating income(1)** | **$71.5** | $82.9 | $(11.4) | (14)% | **$210.5** | $198.4 | $12.1 | 6% |
| **Segment adjusted operating income margin(2)** | **56.4%** | 61.3% | (4.9)% | (8)% | **54.9%** | 54.8% | 0.1% | —% |

NM - Not meaningful

(1) Segment adjusted operating income excludes unallocated corporate expenses, acquisition-related intangible amortization, other acquisition and divestiture related items, debt restructuring costs, stock-based compensation, other costs and certain non-recurring or non-cash operating charges that are not core to our operations, as applicable depending on the period presented. See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 2 for a reconciliation of operating income to total segment adjusted operating income. See also Part I – Item 1 – Note 17, Segment Information, to our condensed consolidated financial statements for more information regarding our segment determination.

(2) Segment adjusted operating income margin is calculated by dividing segment adjusted operating income by segment revenue. See below for an explanation of changes to our year over year segment adjusted operating margin.

As a result of owning all of our technology and issuing capabilities, our Corporate Payments segment has a highly scalable and relatively fixed cost base resulting in largely comparable expenses year to year. As a result, changes in revenue similarly impact operating income, segment adjusted operating income and segment adjusted operating income margin. Instances in which our expenses for the third quarter and nine months ended September 30, 2024 did not remain comparable to those of the comparable 2023 periods are described hereafter.

The increases in provision for credit losses during the third quarter and nine months ended September 30, 2024 are not meaningful as such increases were substantially driven by a recovery of provision for credit losses during the prior year comparable periods.

Depreciation and amortization expense increased $2.1 million and $6.2 million during the third quarter and nine months ended September 30, 2024, respectively, due primarily to the depreciation of certain travel-related payments processing assets placed into service during the first quarter of 2024.

General and administrative expenses decreased $1.5 million and $8.8 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in the prior year due primarily to higher professional services expense in the prior year periods.

### Benefits

### Revenues

The following table reflects comparative revenue and key operating statistics within Benefits:

*(in millions)*

| Revenues | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Payment processing revenue | **$21.9** | $20.6 | $1.3 | 6% | **$75.0** | $70.7 | $4.3 | 6% |
| Account servicing revenue | **110.0** | 108.5 | 1.5 | 1% | **335.5** | 319.8 | 15.7 | 5% |
| Finance fee revenue | **0.1** | 0.1 | — | NM | **0.3** | 0.2 | 0.1 | NM |
| Other revenue | **49.4** | 36.9 | 12.5 | 34% | **141.8** | 99.5 | 42.3 | 42% |
| Total revenues | **$181.5** | $166.1 | $15.4 | 9% | **$552.5** | $490.2 | $62.3 | 13% |
| **Key operating statistics** |  |  |  |  |  |  |  |  |
| Purchase volume | **$1,645.7** | $1,501.3 | $144.4 | 10% | **$5,625.6** | $5,145.6 | $479.9 | 9% |
| Average number of SaaS accounts | **20.3** | 19.9 | 0.4 | 2% | **20.2** | 19.9 | 0.3 | 1% |
| Average HSA custodial cash assets | **4,315.0** | 3,908.5 | 406.5 | 10% | **4,252.0** | 3,821.0 | 431.0 | 11% |

NM - Not meaningful

Total Benefits revenue increased $15.4 million for the third quarter of 2024 and increased $62.3 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year. A rise in average HSA deposit balances held by WEX Bank and interest rates earned on the investment of such balances, as reflected within other revenue, coupled with increased revenues due to the Ascensus Acquisition, substantially contributed to the increase in total revenues for the three and nine months ended September 30, 2024 as compared to the prior year comparable periods.

### Operating Expenses

The following table compares line items within operating income and presents segment adjusted operating income and segment adjusted operating income margin for Benefits:

*(in millions)*

| Cost of services | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Processing costs | **$64.8** | $68.5 | $(3.7) | (5)% | **$203.6** | $186.1 | $17.5 | 9% |
| Service fees | **$16.0** | $13.5 | $2.5 | 19% | **$47.2** | $39.3 | $7.9 | 20% |
| Provision for credit losses | **$0.1** | $1.1 | $(1.0) | NM | **$0.1** | $1.5 | $(1.4) | NM |
| Operating interest | **$1.2** | $1.6 | $(0.4) | (27)% | **$3.4** | $3.9 | $(0.5) | (12)% |
| Depreciation and amortization | **$11.8** | $9.4 | $2.4 | 26% | **$34.1** | $28.6 | $5.5 | 19% |
| **Other operating expenses** |  |  |  |  |  |  |  |  |
| General and administrative | **$8.4** | $13.1 | $(4.7) | (36)% | **$30.2** | $39.5 | $(9.3) | (23)% |
| Sales and marketing | **$12.7** | $14.5 | $(1.8) | (13)% | **$44.8** | $43.5 | $1.3 | 3% |
| Depreciation and amortization | **$21.3** | $17.9 | $3.4 | 19% | **$64.5** | $52.0 | $12.5 | 24% |

45

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| **Operating income** | **$45.2** | $26.5 | $18.7 | 71% | **$124.5** | $95.8 | $28.7 | 30% |
| **Segment adjusted operating income(1)** | **$78.4** | $58.8 | $19.6 | 33% | **$229.0** | $182.6 | $46.4 | 25% |
| **Segment adjusted operating income margin(2)** | **43.2%** | 35.4% | 7.8% | 22% | **41.4%** | 37.3% | 4.1% | 11% |

NM - Not meaningful

(1) Segment adjusted operating income excludes unallocated corporate expenses, acquisition-related intangible amortization, other acquisition and divestiture related items, debt restructuring costs, stock-based compensation, other costs and certain non-recurring or non-cash operating charges that are not core to our operations, as applicable depending on the period presented. See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 2 for a reconciliation of operating income to total segment adjusted operating income. See also Part I – Item 1 – Note 17, Segment Information, to our condensed consolidated financial statements for more information regarding our segment determination.

(2) Segment adjusted operating income margin is calculated by dividing segment adjusted operating income by segment revenue. Revenue earned on HSA assets is highly accretive to earnings and is the primary driver of the increase in segment adjusted operating income margin for the three and nine months ended September 30, 2024 as compared to the prior year comparable periods.

### Cost of services

Processing costs increased $17.5 million for the nine months ended September 30, 2024 as compared to the same period in the prior year, primarily due to increased employee costs as a result of the Ascensus Acquisition, along with higher technology costs incurred in support of volume growth.

Service fees increased by $2.5 million for the third quarter of 2024 and increased $7.9 million for the nine months ended September 30, 2024, as compared with the same periods in the prior year, in conjunction with the associated growth in revenues.

Depreciation and amortization for the nine months ended September 30, 2024 increased $5.5 million as compared to the same period in the prior year primarily due to software assets recently placed into service.

### Other operating expenses

General and administrative expense decreased $4.7 million for the third quarter of 2024 and decreased $9.3 million for the nine months ended September 30, 2024 as compared to the same periods in the prior year, due primarily to higher professional services expense in the prior year periods.

Depreciation and amortization increased $3.4 million for the third quarter of 2024 and increased $12.5 million for the nine months ended September 30, 2024 as compared to the prior year periods, primarily due to the amortization of intangible assets obtained as part of the Ascensus Acquisition.

### Unallocated corporate expenses

Unallocated corporate expenses represent the portion of expenses relating to general corporate functions, including acquisition and divestiture expenses, certain finance, legal, information technology, human resources, administrative and executive expenses, and other expenses not directly attributable to a reportable segment.

The following table compares line items within operating income for unallocated corporate expenses:

*(in millions)*

| Other operating expenses | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative | **$40.4** | $45.8 | $(5.4) | (12)% | **$117.0** | $118.7 | $(1.7) | (1)% |
| Depreciation and amortization | **$0.4** | $0.4 | $— | NM | **$1.2** | $2.2 | $(1.0) | NM |

NM - Not meaningful

During the three months ended September 30, 2024, unallocated corporate expenses decreased $5.4 million as compared to the same period of the prior year due primarily to a reduction in variable compensation and higher professional costs incurred in the prior year period in connection with the Ascensus Acquisition.

### Non-operating income and expense

The following table reflects comparative results for certain amounts excluded from operating income:

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Dollar Change | Effect of Change on Net Income 2024 | Nine Months Ended September 30, 2023 |  | Absolute Dollar Change | Effect of Change on Net Income |
| --- | ---: | ---: | ---: | --- | ---: | ---: | ---: | --- |
| Financing interest expense, net of financial instruments | **$(58.4)** | $(49.4) | $9.0 | Reduction | **$(178.5)** | $(142.5) | $36.0 | Reduction |
| Change in fair value of contingent consideration | **$(0.1)** | $(3.2) | $3.1 | Increase | **$(3.5)** | $(6.2) | $2.7 | Increase |
| Loss on extinguishment of Convertible Notes | **$—** | $(70.1) | $70.1 | Increase | **$—** | $(70.1) | $70.1 | Increase |
| Net foreign currency gain (loss) | **$3.2** | $(7.8) | $11.0 | Increase | **$(9.7)** | $(9.4) | $0.3 | Reduction |
| Income tax provision | **$38.2** | $26.0 | $12.2 | Reduction | **$91.6** | $78.7 | $12.9 | Reduction |

During the three and nine months ended September 30, 2023, the Company benefited from net gains on interest rate swap financing instruments. In addition, increased borrowings under our Revolving Credit Facility, coupled with higher interest rates, offset in part by a reduction in interest due to the repurchase and cancellation of our Convertible Notes during the third quarter of 2023, further contributed to the increase in expense during the three and nine months ended September 30, 2024, as compared to the same periods in the prior year.

During August 2023, we repurchased all of the outstanding aggregate principal amount of the Company’s Convertible Notes at a premium resulting in a loss on extinguishment of $70.1 million.

Our foreign currency exchange exposure is primarily related to the remeasurement of our cash, receivable and payable balances, including intercompany transactions that are denominated in foreign currencies. Losses incurred during the nine months ended September 30, 2024 resulted from the weakening of certain foreign currencies in which we transact, including the Euro, and the Australian and Canadian dollars, relative to the U.S. dollar over the course of the year. However, during the three months ended September 30, 2024, we experienced a gain attributable to the rebound of certain foreign currencies, particularly the Euro and Canadian dollar, relative to the U.S. dollar.

The increase in income tax provision for the three and nine months ended September 30, 2024 as compared to the prior year comparable periods is due primarily to an increase in the Company’s taxable income, offset in part by a decrease in our effective tax rates. The Company’s effective tax rates for the three and nine months ended September 30, 2024 were 27.1 percent and 27.2 percent, respectively, compared to 58.6 percent and 30.2 percent for the three and nine months ended September 30, 2023, respectively. See Part I – Item 1 – Note 14, Income Taxes, to our condensed consolidated financial statements for more information regarding the drivers behind our effective tax rates.

### Non–GAAP Financial Measures That Supplement GAAP Measures

### Total Segment Adjusted Operating Income and Adjusted Net Income

In addition to evaluating the Company’s performance on a GAAP basis, Company management uses particular non-GAAP financial measures, which exclude the impact of certain costs, expenses, gains and losses, to evaluate our overall operating performance, including comparison across periods and with competitors. Our management team believes these non-GAAP measures are integral to our reporting and planning processes and uses them to assess operating performance because they generally exclude financial results that are outside the normal course of our business operations or management’s control. These measures are also used to allocate resources among our operating segments and for internal budgeting and forecasting purposes for both short- and long-term operating plans.

**Total segment adjusted operating income** excludes unallocated corporate expenses, acquisition-related intangible amortization, other acquisition and divestiture related items, debt restructuring costs, stock-based compensation, other costs and certain non-recurring or non-cash operating charges that are not core to our operations, as applicable depending on the period presented.

**Adjusted net income**, which similarly excludes the impact of all items excluded in total segment adjusted operating income except unallocated corporate expenses, further excludes unrealized gains and losses on financial instruments, net foreign currency gains and losses, debt issuance cost amortization, tax related items, and certain other non-operating items, as applicable depending on the period presented.

For the periods presented herein, the following items have been excluded in determining one or more non-GAAP measures for the following reasons:

- Exclusion of the non-cash, mark-to-market adjustments on financial instruments, including interest rate swap agreements and investment securities, helps management identify and assess trends in the Company’s underlying business that might otherwise be obscured due to quarterly non-cash earnings fluctuations associated with these financial instruments. Additionally, the non-cash, mark-to-market adjustments on financial instruments are difficult to forecast accurately, making comparisons across historical and future periods difficult to evaluate;
- Net foreign currency gains and losses primarily result from the remeasurement to functional currency of cash, accounts receivable and accounts payable balances, certain intercompany notes denominated in foreign currencies and any gain or loss on foreign currency economic hedges relating to these items. The exclusion of these items helps management compare changes in operating results between periods that might otherwise be obscured due to currency fluctuations;
- The change in fair value of contingent consideration, which is related to the acquisition of certain contractual rights to serve as custodian or sub-custodian to HSAs, is dependent upon changes in future interest rate assumptions and has no significant impact on the ongoing operations of the Company. Additionally, the non-cash, mark-to-market adjustments on financial instruments are difficult to forecast accurately, making comparisons across historical and future periods difficult to evaluate;
- The Company considers certain acquisition-related costs, including certain financing costs, investment banking fees, warranty and indemnity insurance, certain integration-related expenses and amortization of acquired intangibles, as well as gains and losses from divestitures to be unpredictable, dependent on factors that may be outside of our control and unrelated to the continuing operations of the acquired or divested business or the Company. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. The Company believes that excluding acquisition-related costs and gains or losses on divestitures facilitates the comparison of our financial results to the Company’s historical operating results and to other companies in our industry;
- Stock-based compensation is different from other forms of compensation as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to the Company is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time;
- Other costs are not consistently occurring and do not reflect expected future operating expense, nor do they provide insight into the fundamentals of current or past operations of our business. This also includes non-recurring professional service costs, costs related to certain identified initiatives, including restructuring and technology initiatives, to further streamline the business, improve the Company’s efficiency, create synergies and globalize the Company’s operations, all with an objective to improve scale and efficiency and increase profitability going forward.
- Impairment charges represent non-cash asset write-offs, which do not reflect recurring costs that would be relevant to the Company’s continuing operations. The Company believes that excluding these nonrecurring expenses facilitates the comparison of our financial results to the Company’s historical operating results and to other companies in its industry;
- Debt restructuring and debt issuance cost amortization, which for the three and nine months ended September 30, 2023 includes the loss on extinguishment of Convertible Notes, are unrelated to the continuing operations of the Company. Debt restructuring costs are not consistently occurring and do not reflect expected future operating expense, nor do they provide insight into the fundamentals of current or past operations of our business. In addition, since debt issuance cost amortization is dependent upon the financing method, which can vary widely company to company, we believe that excluding these costs helps to facilitate comparison to historical results as well as to other companies within our industry;
- The tax related items are the difference between the Company’s GAAP tax provision and a non-GAAP tax provision. Beginning in fiscal year 2024, the Company utilizes a fixed annual projected long-term non-GAAP tax rate in order to provide better consistency across reporting periods. To determine this long-term projected tax rate, the Company performs a pro forma tax provision based upon the Company’s projected adjusted net income before taxes. The fixed annual projected long-term non-GAAP tax rate could be subject to change in future periods for a variety of reasons,

including the rapidly evolving global tax environment, significant changes in our geographic earnings mix including due to acquisition activity, or other changes to our strategy or business operations; and

- The Company does not allocate certain corporate expenses to our operating segments, as these items are centrally controlled and are not directly attributable to any reportable segment.

Total segment adjusted operating income and adjusted net income may be useful to investors as a means of evaluating our performance. However, because total segment adjusted operating income and adjusted net income are non-GAAP measures, they should not be considered as a substitute for, or superior to, operating income or net income as determined in accordance with GAAP. Total segment adjusted operating income and adjusted net income as used by WEX may not be comparable to similarly titled measures employed by other companies.

The following table reconciles net income to adjusted net income and related per share data:

*(in millions except per diluted share data)*

|  | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| **Net income** | **$102.9** **$2.52** | $18.4 $0.42 |
| Unrealized (gain) loss on financial instruments | **(0.9)** **(0.02)** | 7.8 0.18 |
| Net foreign currency (gain) loss | **(3.2)** **(0.08)** | 7.8 0.18 |
| Change in fair value of contingent consideration | **0.1** **—** | 3.2 0.07 |
| Acquisition-related intangible amortization | **50.4** **1.24** | 45.2 1.04 |
| Other acquisition and divestiture related items | **2.4** **0.06** | 5.1 0.12 |
| Stock-based compensation | **29.8** **0.73** | 31.9 0.74 |
| Other costs | **12.6** **0.31** | 15.1 0.35 |
| Debt restructuring and debt issuance cost amortization | **4.3** **0.11** | 74.4 1.71 |
| Tax related items | **(20.9)** **(0.51)** | (32.1) (0.74) |
| Dilutive impact of convertible debt1 | **—** **—** | — (0.02) |
| **Adjusted net income** | **$177.5** **$4.35** | $176.8 $4.05 |
|  | **Nine Months Ended September 30,** |  |
|  | **2024** | **2023** |
| **Net income** | **$245.7** **$5.89** | $181.7 $4.18 |
| Unrealized (gain) loss on financial instruments | **(0.6)** **(0.01)** | 20.1 0.46 |
| Net foreign currency loss | **9.7** **0.23** | 9.4 0.22 |
| Change in fair value of contingent consideration | **3.5** **0.08** | 6.2 0.14 |
| Acquisition-related intangible amortization | **151.9** **3.64** | 133.6 3.07 |
| Other acquisition and divestiture related items | **9.3** **0.22** | 7.6 0.17 |
| Stock-based compensation | **89.8** **2.15** | 94.5 2.17 |
| Other costs | **37.8** **0.91** | 28.6 0.66 |
| Debt restructuring and debt issuance cost amortization | **12.0** **0.29** | 83.9 1.93 |
| Tax related items | **(71.1)** **(1.70)** | (83.7) (1.92) |
| Dilutive impact of convertible debt2 | **—** **—** | — (0.09) |
| **Adjusted net income** | **$488.1** **$11.70** | $481.9 $10.99 |

(1) The dilutive impact of the Convertible Notes was calculated under the ‘if-converted’ method for the periods through which they were outstanding. Under the ‘if-converted’ method, interest expense, net of tax, associated with our Convertible Notes of $1.8 million and $9.5 million was added back to adjusted net income for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2023, 0.7 million and 1.3 million shares of the Company’s common stock associated with the assumed conversion of the Convertible Notes (prior to repurchase and cancellation) was included in the calculation of adjusted net income per dilutive share, respectively, as the effect of including such adjustments was dilutive. For further information about the Convertible Notes and their repurchase and cancellation, see Note 10, Financing and Other Debt. The total number of shares used in calculating adjusted net income per diluted share for the three and nine months ended September 30, 2024 was 40.8 million and 41.7 million, respectively. The total number of shares used in calculating adjusted net income per diluted share for the three and nine months ended September 30, 2023 was 44.1 million and 44.7 million, respectively.

The following table reconciles operating income to total segment adjusted operating income and adjusted operating income:

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Operating income | **$196.4** | $174.9 | **$529.0** | $488.6 |
| Unallocated corporate expenses | **24.1** | 29.1 | **73.8** | 76.8 |
| Acquisition-related intangible amortization | **50.4** | 45.2 | **151.9** | 133.6 |
| Other acquisition and divestiture related items | **1.6** | 5.1 | **5.4** | 7.6 |
| Stock-based compensation | **29.8** | 31.9 | **89.8** | 94.5 |
| Other costs | **14.8** | 15.1 | **42.0** | 28.6 |
| Total segment adjusted operating income | **$317.1** | $301.3 | **$891.9** | $829.7 |
| Unallocated corporate expenses | **(24.1)** | (29.1) | **(73.8)** | (76.8) |
| Adjusted operating income | **$293.0** | $272.2 | **$818.1** | $752.9 |

### Adjusted Free Cash Flow

The Company’s non-GAAP adjusted free cash flow has historically been calculated as cash flows from operating activities adjusted for net purchases of current investment securities, capital expenditures, net Funding Activity, and certain other adjustments including contingent and deferred consideration paid to sellers in excess of acquisition-date fair value. Such calculation has historically been based on the principle that the net activity in accounts receivable, accounts payable, and investment of HSA deposits would be offset by WEX Bank Funding Activity, however, due to the nature of WEX Bank cash balances, they may be increased or decreased for reasons other than matching operating activity. As a result, beginning with the third quarter of 2024, adjusted free cash flow also includes an adjustment to reflect the change in WEX Bank cash balances and the applicable prior periods have similarly been adjusted to conform to the current presentation.

Although non-GAAP adjusted free cash flow is not calculated in accordance with GAAP, WEX believes that adjusted free cash flow is a useful measure for investors to further evaluate our results of operations because (i) adjusted free cash flow indicates the level of cash generated by the operations of the business, which excludes consideration paid on acquisitions, after appropriate reinvestment for recurring investments in property, equipment and capitalized software that are required to operate the business; (ii) net Funding Activity includes fluctuations in deposits and other borrowings primarily used as part of our accounts receivable funding strategy; (iii) purchases of current investment securities are made as a result of deposits gathered operationally; and (iv) WEX Bank cash balances may be increased or decreased for reasons other than matching operating activity. However, because adjusted free cash flow is a non-GAAP measure, it should not be considered as a substitute for, or superior to, operating cash flow as determined in accordance with GAAP. In addition, adjusted free cash flow as used by WEX may not be comparable to similarly titled measures employed by other companies.

The following table reconciles GAAP operating cash flow to adjusted free cash flow:

*(in millions)*

| 2024 | Nine Months Ended September 30, 2023 |  |
| --- | ---: | ---: |
| **Operating cash flow, as reported** | **$(157.0)** | $146.0 |
| Adjustments to operating cash flow: |  |  |
| Change in WEX Bank cash balances | **383.8** | (58.8) |
| Other | **67.1** | 1.5 |
| Adjusted for certain investing and financing activities: |  |  |
| Net Funding Activity | **792.0** | 1,652.6 |
| Less: Purchases of current investment securities, net of sales and maturities | **(584.8)** | (1,304.2) |
| Less: Capital expenditures | **(108.6)** | (101.7) |
| Adjusted free cash flow | **$392.5** | $335.4 |

50

### Liquidity and Capital Resources

We fund our business operations primarily via cash on hand, cash generated from operations, the issuance of deposits, and borrowings under our Amended and Restated Credit Agreement. As of September 30, 2024, we had cash and cash equivalents of $535.4 million, including Corporate Cash of $123.2 million, and remaining borrowing availability of $606.3 million under the Revolving Credit Facility along with access to various sources of funds, including uncommitted federal funds lines of credit from other banks.

Our short-term cash requirements consist primarily of funding the working capital needs of our business, payments on maturities of deposits, current principal and interest payments on the credit facilities under our Amended and Restated Credit Agreement, and payments on other short-term debt. Our long-term cash requirements consist primarily of amounts owed under our Amended and Restated Credit Agreement and various facilities lease agreements.

We believe that our current cash and cash equivalents, cash generating capabilities, financial condition and operations, and access to available funding sources will be adequate to fund our cash needs for the next 12 months and the foreseeable future. The table below includes a more comprehensive list of frequent sources and uses of cash:

| Sources of cash | Uses of cash |
| --- | --- |
| •Cash generated from operations •Borrowings and availability on our Amended and Restated Credit Agreement1 •Deposits2 •Accounts receivable securitization and factoring arrangements3 •Participation debt4 •Borrowed federal funds and other short-term borrowings5 | •Payments on our Amended and Restated Credit Agreement •Payments on maturities of deposits •Payments on borrowed federal funds and other short-term borrowings •Working capital needs of the business •Capital expenditures •Repurchases of common stock •Merger and acquisition activity |

(1) During May 2024, the Company entered into the Fifth Amendment to the Amended and Restated Credit Agreement, which increased commitments under the Revolving Credit Facility to $1.6 billion, increased the size of the tranche A term loan facility to $900.0 million, repriced the applicable interest margin for the tranche A term loans and Revolving Credit Facility and extended the maturity date to May 2029 for both the tranche A term loans and Revolving Credit Facility. Under our Amended and Restated Credit Agreement, as of September 30, 2024 the Company had outstanding term loan principal borrowings of $2,269.3 million, borrowings of $954.3 million on the Revolving Credit Facility and letters of credit of $39.4 million drawn against the Revolving Credit Facility. See Part I – Item 1 – Note 10, Financing and Other Debt, to our condensed consolidated financial statements for more information regarding our Amended and Restated Credit Agreement.

(2) WEX Bank’s regulatory status enables it to raise capital to fund the Company’s working capital requirements by issuing deposits, subject to various regulatory capital requirements administered by the FDIC and the UDFI. Additionally, WEX Bank holds deposits for the benefit of WEX Inc.’s HSA customers subject to the terms of a deposit agreement. As of September 30, 2024, we had $4,461.5 million in total deposits. See Part I – Item 1 – Note 9, Deposits, to our condensed consolidated financial statements for more information regarding our deposits.

(3) The Company utilizes securitized debt agreements to finance a portion of our receivables, lower our cost of borrowing and more efficiently utilize capital. The Company had $96.5 million of securitized debt under these facilities as of September 30, 2024. We also utilize off-balance sheet factoring and securitization arrangements to sell certain of our accounts receivable to unrelated third-party financial institutions in order to accelerate the collection of the Company’s cash and reduce internal costs. Available capacity is dependent on the level of our trade accounts receivable eligible to be sold and the financial institutions’ willingness to purchase such receivables. However, the Company is not dependent on them to maintain its liquidity and capital resources. See Part I – Item 1 – Notes 10, Financing and Other Debt and 11, Off-Balance Sheet Arrangements, to our condensed consolidated financial statements for further information about the Company’s securitized debt and off-balance sheet arrangements.

(4) From time to time, WEX Bank enters into participation agreements with third-party banks to fund customers’ balances that exceed WEX Bank’s lending limit to individual customers. There was $57.2 million borrowed against these participation agreements as of September 30, 2024.

(5) WEX Bank borrows from short-term uncommitted federal funds lines of credit from time to time to supplement the financing of the Company’s accounts receivable. There were $150.0 million of outstanding borrowings under these lines of credit as of September 30, 2024. The Bank is also a member of the FHLB of Des Moines, which provides them collateralized short-term funding. As of September 30, 2024, WEX Bank had $370.0 million of advances outstanding, secured by $420.5 million in fair value of investment securities. See Part I – Item 1 – Note 10, Financing and Other Debt, to our condensed consolidated financial statements for more information regarding these facilities.

### Additional Sources of Cash Available

On March 12, 2023, the Federal Reserve Board announced the BTFP, which provided liquidity to U.S. depository institutions. This program allowed bank loans for up to one year in length, collateralized by the par value of qualifying assets, including U.S. treasuries and mortgage-backed securities. Advances were available for a one-year period until March 11, 2024, at which time the BTFP ceased making new loans. WEX Bank accessed $710.0 million of temporary, low-cost capital under the BTFP as of September 30, 2024, pledging held investment securities with a par value of $721.1 million and market value of $663.4 million as collateral.

WEX Bank has the ability to borrow funds from the Federal Reserve Bank Discount Window. Borrowing limits fluctuate based on pledged assets, and as of September 30, 2024, the Company could borrow up to a maximum amount of $167.0 million. WEX Bank had no borrowings outstanding on this line of credit as of September 30, 2024. See Part I – Item 1 – Note 10, Financing and Other Debt, to our condensed consolidated financial statements for more information regarding this borrowing arrangement.

### Cash Flows

The table below summarizes our cash activities and adjusted free cash flow:

*(in millions)*

| Net cash provided by (used for) | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | **$(157.0)** | $146.0 |
| Investing activities | **$(724.0)** | $(1,571.4) |
| Financing activities | **$(41.1)** | $1,705.3 |
| **Non-GAAP financial measure:** |  |  |
| Adjusted free cash flow1 | **$392.5** | $335.4 |

(1) The Company’s non-GAAP adjusted free cash flow has historically been calculated as cash flows from operating activities adjusted for net purchases of current investment securities, capital expenditures, net Funding Activity, and certain other adjustments including contingent and deferred consideration paid to sellers in excess of acquisition-date fair value. Such calculation has historically been based on the principle that the net activity in accounts receivable, accounts payable, and investment of HSA deposits would be offset by WEX Bank Funding Activity, however, due to the nature of WEX Bank cash balances, they may be increased or decreased for reasons other than matching operating activity. As a result, beginning with the third quarter of 2024, adjusted free cash flow also includes an adjustment to reflect the change in WEX Bank cash balances and the applicable prior periods have similarly been adjusted to conform to the current presentation. For an updated definition of adjusted free cash flow and a reconciliation to net cash provided by operating activities, the most closely comparable GAAP measure, and the reasons why we believe this is an important financial measure, please refer to the section titled *Non-GAAP Financial Measures That Supplement GAAP Measures.*

### Operating Activities

We fund a customer’s entire receivable in the majority of our Mobility and Corporate Payment processing transactions, while the revenue generated by these transactions is only a small percentage of that amount. Consequently, cash flows from operations are impacted significantly by increases or decreases in fuel prices and purchase volumes, driving changes in accounts receivable and accounts payable balances, which directly impact our capital resource requirements.

Cash provided by operating activities for the nine months ended September 30, 2024 decreased $303.0 million as compared to the same period in the prior year. The decrease year over year was primarily the result of a reduction in accounts payable, coupled with $64.5 million in contingent consideration paid to Bell Bank during the nine months ended September 30, 2024.

### Investing Activities

Investing cash flows generally consist of capital expenditures, cash used for acquisitions and the investment of custodial cash assets.

Cash used for investing activities for the nine months ended September 30, 2024 decreased $847.4 million as compared to the same period in the prior year, primarily resulting from lower investment of HSA deposits in available-for-sale debt securities during the nine months ended September 30, 2024 as compared to the prior year comparable period. Costs expended on acquisitions were also lower during the nine months ended September 30, 2024 compared to the prior year as a result of the Ascensus Acquisition, which closed on September 1, 2023.

### Financing Activities

Financing cash flows generally consist of the issuance and repayment of debt and deposits, changes in restricted cash payable and purchases of our common stock. Repurchases of our common stock may vary based on management’s evaluation of market and economic conditions and other factors.

Cash provided by financing activities for the nine months ended September 30, 2024 decreased $1,746.4 million, due primarily to a decrease in our restricted cash payable and net deposits, along with increased share repurchases. During the nine months ended September 30, 2024, the Company expended $543.6 million toward the return of capital to shareholders through the repurchase of approximately 2.5 million shares of our common stock subject to an authorized and outstanding share repurchase program. Such shares are exclusive of any shares expected to be delivered during the fourth quarter of 2024 upon settlement of our previously announced ASR.

During September 2024, the Company’s board of directors authorized an amended share repurchase program under which up to an additional $1.0 billion worth of WEX’s common stock may be repurchased by the Company through December 31, 2025, expanding the total authorization from $1.05 billion to $2.05 billion. As of September 30, 2024, there was $1,069.8 million worth of common stock available to be purchased pursuant to the repurchase plan authorization.

### Adjusted Free Cash Flow

The definition of adjusted free cash flow, which beginning with the third quarter of 2024 also includes an adjustment to reflect the change in WEX Bank cash balances, and the reasons why we believe it to be an important financial measure, can be found in the section titled *Non-GAAP Financial Measures That Supplement GAAP Measures.*

Adjusted free cash flow increased $57.1 million during the nine months ended September 30, 2024 as compared to the same period in the prior year, consistent with the increase in adjusted operating income for the same periods.

### Financial Covenants

The Amended and Restated Credit Agreement contains various affirmative and negative covenants that, subject to certain customary exceptions, limit the Company and its subsidiaries’ (including, in certain limited circumstances, WEX Bank and the Company’s other regulated subsidiaries) ability to, among other things (i) incur additional debt, (ii) pay dividends or make other distributions on, redeem or repurchase capital stock, or make investments or other restricted payments, (iii) enter into transactions with affiliates, (iv) dispose of assets or issue stock of restricted subsidiaries or regulated subsidiaries, (v) create liens on assets, or (vi) effect a consolidation or merger or sell all, or substantially all, of the Company’s assets. The Amended and Restated Credit Agreement also contains customary financial maintenance covenants, including a consolidated interest coverage ratio and a consolidated leverage ratio. As of September 30, 2024, we were in compliance with applicable covenants. See Part II – Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources and Part II – Item 8 – Note 16, Financing and Other Debt, in our Annual Report on Form 10-K for the year ended December 31, 2023 for more information regarding these covenants.

### Other Commitments, Contingencies and Contractual Obligations

There were no material changes to our contractual obligations from the information previously provided in Item 7 of our Annual Report on Form 10–K for the year ended December 31, 2023.

### Regulatory Matters

WEX Bank is subject to a consent order issued by the FDIC on September 20, 2023 (the “2023 Order”), which requires WEX Bank to make certain improvements, which include corrections of certain issues identified in the 2023 Order and general enhancements to WEX Bank’s compliance management program. Customer impact and any resulting harm from the violations detailed in the 2023 Order have been identified and steps have been taken to remediate any such impact and harm. The terms of the 2023 Order will remain in effect and be enforceable until they are modified, terminated, suspended or set aside by the FDIC. The matters identified in the 2023 Order have not had, nor are they expected to have, a material effect on WEX Bank’s operations or the Company’s results of operations, financial condition or cash flows.

### Critical Accounting Estimates

We have no material changes to our critical accounting estimates discussed in our Annual Report on Form 10–K for the year ended December 31, 2023.

### Recently Adopted Accounting Standards

See Note 2, Significant Accounting Policies, to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10–Q.

## Market risk

As filed, 156 characters.

As of September 30, 2024, we have no material changes to the market risk disclosures in our Annual Report on Form 10–K for the year ended December 31, 2023.

## Controls and procedures

As filed, 1,590 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the principal executive officer and principal financial officer of WEX Inc., evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024. “Disclosure controls and procedures” are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 827 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10–K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risk factors disclosure in our Annual Report on Form 10-K for the year ended December 31, 2023 is qualified by the information that is described in this Quarterly Report on Form 10-Q. The risks described in our Annual Report on Form 10–K for the year ended December 31, 2023 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

Filed Oct 24, 2024.
Source: SEC EDGAR, the filing index for accession 0001309108-24-000201. Last ingested by Listed: Nov 6, 2026, 18:51 ET. No prices; not investment advice.