Coming Off A Strong Q1, WEX Looks To Expansion

WEX beat analysts’ projections, with Q1 revenue up 11 percent to $202.3 million from $182.1 million for the first quarter of 2014. That beats analyst predictions for the Portland, Maine-based firm – as the Street was expecting declining fuel prices to take a larger bite out of WEX’s bottom line.

And those lower fuel prices certainly did some damage. The company’s earnings statement for the three months of 2015 indicated fuel prices were down 29 percent from their $3.64 average priced during Q1 2014. According to WEX CEO Melissa Smith, had fuel prices been at their 2014 levels, WEX’s first quarter revenue would have been up 26 percent over 2014, as opposed to 11 percent.

“It clearly had an impact on our business,” Smith noted in a call with PYMNTS shortly after earnings were announced. Smith, however was quick to note that the overall effect of the revenue decline was effectively hedged by the company’s continued expansion into other verticals. While at one time Fleet represented 70 percent of the business  – these days that has declined to a little under 40 percent. And, as WEX looks to match and perhaps beat its Q1 performance in Q2 and beyond, Smith says the company will keep ahead with it aggressive focus on growth.

“When I think about the rest of the year it is really about doing things that are setting the company up for accelerating growth,” Smith said. “We’re continuing to look for ways to invest money – both in terms of CapEx but also in terms of acquisition opportunities that will also help really fit the growth profile of the company.”

In recent history that expansion has been marked by a foray into travel and health care payments – both areas in which Smith says WEX’s history in the complicated world of fleet is a huge asset.

“When we step back, one of the things we’ve learned that we’re good at is really understanding complicated markets and simplifying them for partners and customers. We’re known for fleet but we’ve been [active in] online travel payments for over a decade now. And when we stepped back and said we want to take that competency into a new marketplace, what’s big and complicated … well U.S health care is right up there,” Smith noted.

WEX enhanced its expansion into the health care arena last July with the purchase of Evolution1 – which offers cloud-based SaaS solutions for health care.

“As health care costs have risen, more and more firms are moving towards plans that really alter the economics of health care payments, so that the end consumer has more responsibility for how their health care is purchased. So that’s moved to more HSA accounts and FSA accounts and now companies are moving to more defined contribution plans where employees get to pick from a bunch more defined options,” Smith explained. “Evolution1 is sitting in the background of that and providing the technologies to help consumers really understand where their spending is going.”

It also helps that Evolution1 – other than a slightly different SaaS distribution plan – like their new parent, WEX, are essentially providing a partnership model that provides the underlying technology in ways that work for the partner/user’s needs. And, Smith notes, it is an area that she anticipates will see more strong growth, noting that so far the team at Evolution1 has performed more strongly than forecasted, as they have continued to grow the business. “It’s been a new market for us, but there are many more similarities both culturally and the way that they approach the market then there are things that are different.”

Going forward, Smith says the firm will look to push that growth agenda between verticals, but also beyond national borders as it continues to attempt to widen its international footprint. The company has doubled the number of nations it is operating in and says it hopes to see more consolidated growth throughout the rest of 2015.

“We had a pretty dramatic shift in our global interests,” Smith said.

WEX is also continuing to push into the SMB marketplace – yesterday announcing the launch of the WEX FlexCard, its first revolving payment fleet fuel card for small businesses.

The card provides smaller merchants operating on tighter margins some advantages of WEX fleet service such as revolving credit, wide acceptance and smart management tools.