WEX Inc. (WEX) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong growth prospects, especially in Corporate Payments and Benefits segments, with double-digit growth expectations. The Q&A session supports this with positive outlooks for 2026, despite some macro challenges. However, management's reluctance to provide specific details on certain aspects like agentic travel booking and direct payables growth suggests some uncertainty. Overall, the strategic focus on growth, strong free cash flow projections, and a stable strategic direction post-board changes indicate a positive sentiment, likely leading to a stock price increase in the short term.
Key Financial Performance
Q4 2025 Revenue $672.9 million, an increase of 5.7% year-over-year or 4.5% excluding the impact of fluctuations in fuel prices and foreign exchange rates. The increase was driven by higher-than-anticipated fuel prices and strong performance in the Benefits segment.
Q4 2025 Adjusted Net Income Per Diluted Share $4.11, an increase of 15.1% year-over-year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, adjusted EPS grew 12.1%. The growth was attributed to execution and higher-than-anticipated fuel prices.
Full Year 2025 Revenue $2.66 billion, up 1.2% year-over-year. Excluding the impact of lower fuel prices and foreign exchange rates, revenue increased 2%. The growth was supported by improving performance as the year progressed.
Full Year 2025 Adjusted Net Income Per Share $16.10, up 5.4% year-over-year. Excluding the impact of lower fuel prices and foreign exchange rates, adjusted net income per share increased 7.7%. The increase was driven by operational improvements and scaling investments.
Mobility Segment Q4 2025 Revenue $345.1 million, flat year-over-year. The segment faced market softness and a decline in transaction volumes, but maintained profitability through high retention and targeted investments in smaller fleets.
Benefits Segment Q4 2025 Revenue $204.9 million, an increase of 9.6% year-over-year. Growth was driven by a 6% increase in SaaS accounts and a 14.2% rise in custodial investment revenue due to higher average asset levels and rates.
Corporate Payments Segment Q4 2025 Revenue $122.9 million, an increase of 17.8% year-over-year. Growth was driven by a 16.9% increase in purchase volume, particularly from travel-related customers, and strong performance in direct accounts payable products.
Adjusted Free Cash Flow for 2025 $638 million, up from $562 million in the prior year. The increase was attributed to strong recurring revenue and reliable cash flow generation.
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Operating Highlights
Product Innovation Velocity: Increased by more than 50% year-over-year due to an AI-first approach to product development.
Fleet Plus Offering: Introduced a new product combining closed loop fuel card with open loop flexibility, enhancing controls, data, and revenue per customer.
AI-powered Healthcare Claim Reimbursements: Reduced processing times from days to minutes with 98% accuracy, improving participant satisfaction and lowering costs.
Modernized Brokerage Experience: Launched real-time trading and seamless access to HSA cash and investments, driving higher balances and asset retention.
Global Funding Engine: Launched a product enabling virtual cards in multiple currencies and on-demand currency conversions without FX costs.
Small Business Fleet Expansion: Targeted marketing investments led to a 13% year-over-year increase in new small business customers.
Geographic Expansion in Travel: Potential for growth in travel markets and new digital tools to improve onboarding and productivity.
Direct Accounts Payable Growth: Q4 volumes up approximately 15% year-over-year, with new customer wins in construction, healthcare, retail, and media.
Operational Leverage: Shift from investment phase to scaling phase expected to drive meaningful margin expansion over the medium term.
Cost Savings Actions: $50 million in cost savings planned for 2026, with a portion reinvested in growth initiatives.
WEX Bank Advantage: Provides access to liquidity at lower costs and higher yields on HSA portfolio, improving bottom line.
Board Refreshment Plan: Newly appointed Director David Foss to assume Vice Chair and Lead Independent Director role in 2026.
Focus on Small Fleets: 10-4 by WEX platform expands reach to small trucking fleets, driving adoption and deeper relationships.
Field Service Management Growth: Healthy double-digit revenue growth in Q4, with potential to generate up to 10x more revenue per customer than traditional small fleet.
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Risk or Challenges
Market Softness in Mobility Segment: The ongoing market softness in the Mobility segment, including a cyclical down cycle in the over-the-road trucking market, has led to flat revenue growth and modest transaction volume declines. This could impact profitability and growth in this segment.
Pressure on Small Operators in Trucking: The over-the-road trucking market is experiencing muted freight demand and pressure on small operators, which could affect WEX's ability to grow its customer base and revenue in this area.
Interest Rate Impact on Mobility Revenue: Lower interest rates have negatively impacted the payment processing rate in the Mobility segment, reducing revenue growth potential.
Headwinds from Lower Interest Rates in Benefits Segment: The Benefits segment faces a 2-point revenue headwind from lower interest rates on the floating rate portion of nonbank custodial assets, which could limit growth.
Fuel Price Volatility: Fluctuations in fuel prices have a direct impact on revenue and earnings, creating uncertainty in financial performance.
Credit Losses in Mobility Segment: Expected credit losses in the Mobility segment are projected to be between 12 to 17 basis points for the full year, which could impact profitability.
Macroeconomic Uncertainty: The guidance assumes no improvement in the macroeconomic environment, which could pose risks to achieving revenue and earnings targets.
Execution Risks in Scaling Investments: The company is transitioning from an investment phase to a scaling phase, which involves execution risks in achieving operating leverage and margin expansion.
Dependence on Fuel Prices and Interest Rates: Revenue and earnings are highly sensitive to changes in fuel prices and interest rates, which could lead to financial volatility.
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Guidance & Outlook
Revenue Growth: For 2026, revenue is expected to be in the range of $2.70 billion to $2.76 billion, representing a growth of 5% at the midpoint. Quarterly revenue growth is projected at 4% for Q1, with a full-year growth of 5% excluding the impact of fuel prices, FX rates, and interest rates.
Earnings Growth: Adjusted net income EPS for 2026 is projected to be between $17.25 and $17.85 per diluted share, reflecting a 13% growth at the midpoint when excluding the impact of fuel prices, FX rates, and interest rates. Q1 adjusted EPS is expected to be between $3.80 and $4 per diluted share, representing an 11% growth at the midpoint.
Mobility Segment: Revenue growth for the Mobility segment is expected to be 1% to 3% for 2026, excluding the impact of fuel price changes and FX. The segment assumes no improvement in the macro environment and anticipates incremental BP contributions weighted to the second half of the year.
Benefits Segment: Revenue growth for the Benefits segment is projected at 5% to 7% for 2026, with a 2-point headwind from lower interest rates on nonbank custodial assets. SaaS account growth is expected to be higher in Q1 compared to the rest of the year.
Corporate Payments Segment: Revenue growth for the Corporate Payments segment is expected to be 5% to 7% for 2026. The company plans to invest more in innovation and product development to drive future growth.
Cost Savings and Margins: The company plans $50 million in cost savings actions for 2026, with a portion reinvested in the business and the rest contributing to margins. Adjusted operating income margin is expected to remain flat with 2025 due to lower fuel prices impacting margins negatively by approximately 75 basis points.
Capital Allocation: The company plans to prioritize debt reduction until leverage is below 3x, expected by Q2 or Q3 of 2026. Approximately $150 million of cash flow will be freed up starting in 2027 as deferred and contingent M&A payments are completed.
Market Conditions and Assumptions: Guidance assumes average fuel price per gallon of $3.10 for 2026 and two interest rate cuts in line with market expectations. Sensitivities include a $0.10 increase in fuel price translating to $20 million higher revenue and $0.35 higher adjusted EPS, while 100 basis points higher interest rates would increase revenue by $30 million but lower adjusted EPS by $0.35.
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Shareholder Return Plan
Share Repurchase: Our business continues to generate strong recurring revenue and reliable free cash flow. That cash flow provides the flexibility to enhance shareholder value through our disciplined capital allocation strategy. Last year, we generated $638 million of adjusted free cash flow compared to $562 million in the prior year. When it comes to deploying capital, our priorities haven't changed, and we delivered last year in line with the commitments we set. After addressing these 2 priorities, we evaluate deploying our remaining capital towards accretive M&A opportunities, which must meet strict financial and strategic criteria or returning capital to shareholders through share repurchases. Our guidance does not assume any future M&A activity or share repurchases, and last year's tender offer will continue to benefit EPS growth through Q1 before annualizing.
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Key Q&A
Q:What is the expected cadence of corporate business growth and yields through 2026?
A:Management expects more normalized growth year-over-year in 2026, with yields overall expected to be flat to slightly down by a basis point. Travel yields will decrease by 1-2 basis points, non-travel yields by 2-4 basis points, but the mix shift to non-travel will stabilize overall yields.
Q:What are the organic growth assumptions for the Mobility segment in 2026?
A:Management expects similar macro conditions in 2026 as in 2025, with continued acceleration in new sales and strong customer retention. Growth is expected to be roughly even throughout the year, with BP contributing more in the second half and interest rates potentially decreasing in the latter half of the year.
Q:What is the outlook for Corporate Payments in 2026?
A:Management is confident in the trajectory of Corporate Payments, expecting double-digit growth driven by strong travel volumes, new customer implementations, and investments in AP direct. Travel will remain a large part of the business, while embedded payments and AP direct products are expected to grow and drive future growth acceleration.
Q:Are there any political or policy-related impacts on the Benefits segment?
A:Management sees potential tailwinds from legislative changes, such as HSA-related policies, but has not factored these into guidance. They had a strong open enrollment season and expect continued benefits from legislative discussions.
Q:Why are credit losses elevated in Q1 compared to the rest of the year?
A:Elevated credit losses in Q1 are due to higher fuel prices six months ago affecting receivables and some elevated losses from offers tested in the second half of the previous year, which have since been pulled.
Q:What is the growth outlook for the direct payables business in 2026?
A:Management expects double-digit growth in 2026, with some lumpiness due to customer implementation timing. Investments in salespeople and high retention rates are expected to drive consistent growth.
Q:What is the expected account growth for the Benefits segment in Q1 and the full year?
A:Management expects 5-7% account growth in Q1. Growth rates will step down after Q1 due to typical seasonal patterns, but UAW accounts will continue contributing.
Q:What is the free cash flow outlook for 2026?
A:Management expects free cash flow to exceed $600 million in 2026, an increase from $638 million in 2025.
Q:What are the same-store sales trends for local fleets in Mobility?
A:Local fleets showed slight improvement in Q4 compared to Q3, while over-the-road (OTR) was slightly worse.
Q:What are the operating margin expectations for 2026?
A:Management expects segment margins to improve before macro effects, with Mobility and Benefits being flat due to macro impacts, and Corporate Payments improving due to higher revenue and a relatively fixed cost base.
Q:What is the impact of the new scheme relationship in Corporate Payments?
A:The new scheme relationship negotiated in the second half of the year contributed to higher incentives in Q3 and Q4, which will continue into the first half of 2026 before normalizing in the second half.
Q:What is the market opportunity for the lower end of the Mobility segment?
A:Management sees significant opportunity in the smaller account arena, focusing on digital customer acquisition and extending into new markets like owner-operators through offerings like the 10-4 application.
Q:What are the quarter-to-date trends for same-store sales in Mobility?
A:Same-store sales trends are on track with guidance, with Q1 expected to be slightly lower due to prior year pull-forward in the OTR business. Growth is expected to be similar for the rest of the year.
Q:What is the strategic direction of the company following Board changes?
A:The strategy remains focused on execution and growth across the company, with no significant changes. The company continues to prioritize risk-adjusted returns for capital allocation, balancing M&A and share buybacks.
Q:What is the potential impact of agentic travel booking on the OTA workflows and travel payments?
A:Management believes OTAs remain structurally embedded in the travel booking process, with virtual card payments becoming more important due to their unique capabilities. They see strong volume growth in this area.
Q:Has the potential renewal of a key OTA customer been factored into guidance?
A:Yes, the guidance includes potential pricing impacts and other considerations related to the renewal of a key OTA customer.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the potential impact of agentic travel booking on OTA workflows and travel payments, using general statements about OTAs being structurally embedded and virtual card payments being important. Additionally, they did not provide detailed breakdowns of the expected growth rates for specific segments or products, such as the direct payables business or embedded payments, beyond general positive outlooks.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI approach
AI health
AI science
AI solution
AP success
Director
HSA market
Jagtar
Vice President
account product
core
cost discipline
currency
customer trust
demand
digit
enrollment season
example
expansion cash
friction
fuel card
inflection point
journey
leverage margin
margin expansion
market share
onboarding customer
pattern
phase
pillar
product velocity
productivity
progress
rate income
reach
record
term value
use
value creation
vertical
workflow segment
WEX Transcript
WEX Inc. (WEX) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call summary highlights strong growth prospects, especially in Corporate Payments and Benefits segments, with double-digit growth expectations. The Q&A session supports this with positive outlooks for 2026, despite some macro challenges. However, management's reluctance to provide specific details on certain aspects like agentic travel booking and direct payables growth suggests some uncertainty. Overall, the strategic focus on growth, strong free cash flow projections, and a stable strategic direction post-board changes indicate a positive sentiment, likely leading to a stock price increase in the short term.
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