WEX Inc. (NYSE: WEX), the Portland-based provider of financial technology services, announced Thursday that it has acquired ExxonMobil Corp.’s Business Card portfolio. (NYSE: XOM ) and raised financial guidance on the back of better-than-expected second-quarter results.
Terms of the deal, WEX’s first since buying Illinois-based benefitexpress for $275 million in June 2021, were not disclosed.
WEX said total revenue for the second quarter of 2022 increased 30% to $598.2 million from $459.5 million for the second quarter of 2021. The revenue increase in the quarter included a $64.2 million favorable price impact and fuel spreads and an $8.4 million negative impact from foreign exchange rates.
Adjusted net income attributable to shareholders, a non-GAAP measure, was $169.4 million, or $3.71 per diluted share, up 61% per share from $104.9 million, or $2.31 per share with reduced value for the same period last year. The prospect compared with the consensus estimate of $3.42 per share among analysts polled by Zacks Investment Research.
Earnings also topped the Zacks Consensus Estimate by 5.2%, and WEX has topped consensus revenue estimates four times over the past four quarters.
“I am pleased to report that in the second quarter we once again achieved record revenue and adjusted net earnings per share, driven by strong volume trends across the company and favorable fuel prices,” said WEX Chairman and CEO Melissa Smith.
Among the business segments, fleet solutions recorded a 38% increase in revenue compared to a year earlier. Travel and corporate solutions revenue was 23% higher, and health and welfare benefits were up 15%.
“Based on the momentum we had after the first quarter, we delivered a record second quarter in terms of both revenue and adjusted earnings by a wide margin,” said CFO Jagtar Narula. “I am pleased to share that we are increasing our guidance for the full year while making targeted investments in specific areas of strategic focus including cross-selling, further enhancements to our technology, product innovation including EV [electric vehicles] and streamlining the process.”
WEX bought back 520,000 of its shares at a cost of about $81 million.
Updated Guide for 2022
For the third quarter of 2022, WEX expects revenue in the range of $580 million to $590 million and adjusted net income in the range of $152 million to $156 million, or $3.35 to $3.45 per diluted share.
For the full year 2022, the company now expects revenue in the range of $2.25 billion to $2.28 billion, up from a previous forecast of $2.155 billion to $2.195 billion.
Adjusted net income is now expected to be in the range of $592 million to $603 million, or $13.05 to $13.30 per diluted share, up from the previous forecast of $569 million to $588 million, or $12.40 to $12.80 per diluted share.
Guidance for the third quarter and full year 2022 is based on assumed average US retail fuel prices of $4.50 and $4.36 per gallon, respectively.
“I believe we are well positioned as we continue to expand and diversify our offerings that businesses rely on,” Smith said. “We are also making targeted investments that we believe will strengthen our market leadership position, accelerate our strategy and improve our speed to market.”
ExxonMobil deal rationale
WEX said the deal announced Thursday is subject to certain conditions and is subject to closing. Upon completion, ExxonMobil’s entire merchant card portfolio will be consolidated and administered by WEX, the Portland-based company said.
The business maintains a private label revolving credit card offering that can be used at more than 12,000 Exxon and Mobil fueling locations in the United States, plus acceptance in Canada.
WEX noted that the simple interface is designed for small business customers who typically charge at the same stations, close to where they are based.
“Consolidating the Exxon Mobil Business Card into our Exxon Mobil BusinessPro program with WEX will provide a simplified business card offering for prospective customers,” said Austin Johansen, manager of fleet marketing at ExxonMobil. “WEX is a valued partner for ExxonMobil, delivering excellent service and offerings to fleets and small businesses.”