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What changed in WEX Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WEX Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+613 added−625 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-28)

Top changes in WEX Inc.'s 2023 10-K

613 paragraphs added · 625 removed · 436 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

127 edited+47 added−54 removed69 unchanged
Biggest changeWith respect to our healthcare services only, we have certain obligations under the Health Insurance Portability and Accountability Act of 1996, or “HIPAA” and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act (together, HIPAA and HITECH), HIPAA and HITECH impose requirements relating to the privacy, security and transmission of protected health information, including breach notification and reporting requirements.
Biggest changeAdditionally, we are subject to other international and data protection laws in certain jurisdictions, including: • in Canada, the Personal Information Protection and Electronic Documents Act and provincial-level private sector privacy legislation enacted in Alberta, British Columbia, and Québec; • in Australia, the Privacy Act (1988) and the Australian Privacy Principles; and • in Singapore, the Personal Data Protection Act 2012. 19 Table of Contents PART I With respect to our healthcare services only, we have certain obligations under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”).
With a co-branded relationship product, we market our products and services for, and in collaboration with, fuel providers and fleet management companies using their brand names and our logo on a co-branded fleet card. These companies seek to offer our payment processing and information management services as a component of their total offering to their fleet customers.
With a co-branded relationship product, we market our products and services for, and in collaboration with, fuel providers and fleet management companies using their brand names and our logo on a co-branded fleet card. These companies seek to offer our payment processing and information management services as a component of their total offering to their customers.
Distribution We market our Travel and Corporate Solutions segment products and services both directly and indirectly to new and existing customers in a variety of models. Within our embedded payments solutions, we focus on direct sales to leading companies in the travel, fintech, insurance, consumer bill pay, and media verticals.
Distribution We market our Corporate Payments segment products and services both directly and indirectly to new and existing customers in a variety of models. Within our embedded payments solutions, we focus on direct sales to leading companies in the travel, fintech, insurance, consumer bill pay, and media verticals.
In addition, the Federal Trade Commission Act, prohibits unfair or deceptive acts or practices in or affecting commerce for entities including WEX Inc. and its subsidiaries that are not directly regulated by CFPB.
In addition, the Federal Trade Commission Act prohibits unfair or deceptive acts or practices in or affecting commerce for entities including WEX Inc. and its subsidiaries that are not directly regulated by the CFPB.
Money Transmission and Payment Instrument Licensing Regulations We are subject to various U.S. laws and regulations governing money transmission and the issuance and sale of payment instruments relating to certain aspects of our business. In the United States, most states license money transmitters and issuers of payment instruments.
Money Transmission and Payment Instrument Licensing Regulations United States We are subject to various U.S. laws and regulations governing money transmission and the issuance and sale of payment instruments relating to certain aspects of our business. In the United States, most states license money transmitters and issuers of payment instruments.
In addition, on July 1, 2022, WEX Bank became subject to provisions in the Durbin Amendment to the Dodd-Frank Act, which provide that interchange fees that a card issuer or payment network receives or charges for debit transactions will be regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing and settling the transaction.
Interchange Fees On July 1, 2022, WEX Bank became subject to provisions in the Durbin Amendment to the Dodd-Frank Act, which provide that interchange fees that a card issuer or payment network receives or charges for debit transactions will be regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing and settling the transaction.
Revenue from our WEX Europe Services and Go Fuel Card operations is primarily derived from the difference between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. We collect the total purchase price from our North America and international fleet customers, typically within 30 days from the billing date.
Revenue from our WEX Europe Services and Go Fuel Card operations is primarily derived from the difference between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. We collect the total purchase price from our North America and international Mobility customers, typically within 30 days from the billing date.
TRAVEL AND CORPORATE SOLUTIONS SEGMENT Overview Our Travel and Corporate Solutions segment focuses on the complex payment environment of global B2B payments. Our capabilities and solutions broadly fall into two categories: • Embedded Payments. Our primary service offering is to enable customers to utilize our highly scalable and vertically integrated payments solutions to integrate into their own workflows.
Corporate Payments Segment Overview Our Corporate Payments segment focuses on the complex payment environment of global B2B payments. Our capabilities and solutions broadly fall into two categories: • Embedded Payments . Our primary service offering is to enable customers to utilize our highly scalable and vertically integrated payments solutions to integrate into their own workflows.
Our private label programs market our products and services for, and in collaboration with, fuel retailers, using only their brand names. The fuel retailers with which we have formed strategic relationships offer our payment processing and information management products and services to their fleet customers in order to establish and enhance customer loyalty.
Our private label programs market our products and services for, and in collaboration with, fuel retailers, using only their brand names. The fuel retailers with which we have formed strategic relationships offer our payment processing and information management products and services to their customers in order to establish and enhance customer loyalty.
Using our technology, our customers have trusted us to conduct hundreds of billions 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.
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 .
Regulation The Company is subject to a substantial number of laws and regulations, both in the United States and in foreign jurisdictions, which apply to businesses offering financial technology services and payment cards to customers or processing or servicing for payment cards and related accounts.
Regulation and Supervision The Company is subject to a substantial number of laws and regulations, both in the United States and in foreign jurisdictions, which apply to businesses offering financial technology services and payment cards to customers or processing or servicing for payment cards and related accounts.
As fleet owners look to add vehicles powered by alternative energy sources, such as electric vehicles (EV), we are building on our deep experience in fleet and mobility in an attempt to develop and provide solutions to address specific customer needs, including charging, EV transition planning, and tools to successfully manage a mix of vehicle types ranging from connectivity to advanced route planning and carbon emissions reporting.
As fleet owners look to add vehicles powered by alternative energy sources, such as EVs, we are building on our deep experience in fleet and mobility in an attempt to develop and provide solutions to address specific customer needs, including charging, EV transition planning, and tools to successfully manage a mix of vehicle types ranging from connectivity to advanced route planning and carbon emissions reporting.
Our solutions in this space address corporations of all sizes and are sold direct to customers and also white-labeled by leading financial institutions who license our technology. Solution The Travel and Corporate Solutions segment allows businesses to centralize purchasing, simplify complex supply chain processes, and eliminate the paper check writing associated with traditional purchase order programs.
Our solutions in this space address corporations of all sizes and are sold direct to customers and also white-labeled by leading financial institutions who license our technology. Solution The Corporate Payments segment allows businesses to centralize purchasing, simplify complex supply chain processes, and eliminate the paper check writing associated with traditional purchase order programs.
In conjunction with the above, we offer our fleet customers the following additional products and services: • Account activation and account retention: We provide activation and retention services that promote the adoption and use of our products. • Authorization and billing inquiries and account maintenance: We handle authorization and billing questions, account changes, and other issues through our dedicated contact centers, which are available 24 hours a day, seven days a week.
In conjunction with the above, we offer our mobility customers the following additional products and services: • Account activation and account retention : We provide activation and retention services that promote the adoption and use of our products. • Authorization and billing inquiries and account maintenance : We handle authorization and billing questions, account changes, and other issues through our dedicated contact centers, which are available 24 hours a day, seven days a week.
Customers access our capabilities primarily via our proprietary set of application programming interfaces (APIs). We combine wholly-owned and developed cloud-based technology along with our wholly-owned and operated global financial services capabilities, inclusive of WEX Bank and our various electronic money institutions around the world, to satisfy the commercial payments needs of our customer base.
Customers access our capabilities primarily via our proprietary set of application programming interfaces (“APIs”). We combine wholly-owned and developed cloud-based technology along with our wholly-owned and operated global financial services capabilities, inclusive of WEX Bank and our various electronic money institutions around the world, to satisfy the commercial payments needs of our customer base.
Distribution We market our fleet products and services both directly and indirectly to businesses and government agencies with fleets of commercial vehicles, including fleets of all sizes, and over-the-road, long haul fleets. Our direct product suite includes payment processing and transaction processing services, WEX branded fleet cards in North America, and Motorpass/Motorcharge branded fleet cards in Australia.
Distribution We market our Mobility products and services both directly and indirectly to businesses and government agencies with fleets of commercial vehicles, including fleets of all sizes, and over-the-road, long haul fleets. Our direct product suite includes payment processing and transaction processing services, WEX branded fleet cards in North America, and Motorpass branded fleet cards in Australia.
Our AP Automation and Spend Management solutions are also white labeled for financial institutions and we power some of the world’s leading financial institutions offering our white labeled technology to their corporate customers. Competition In general, WEX Travel and Corporate Solutions competes with financial institutions that provide general payment services without the enhanced capabilities of our solution set.
Our AP Automation and Spend Management solutions are also white labeled for financial institutions and we power some of the world’s leading financial institutions offering our white labeled technology to their corporate customers. Competition In general, WEX Corporate Payments competes with financial institutions that provide general payment services without the enhanced capabilities of our solution set.
Regulation - United States General Regulation, Supervision and Examination of WEX Bank As an industrial bank organized under the laws of the State of Utah that does not accept demand deposits that may be withdrawn by check or similar means, WEX Bank currently meets the criteria for exemption as an industrial bank from the definition of “bank” under the Bank Holding Company Act.
General Regulation, Supervision and Examination of WEX Bank As an industrial bank organized under the laws of the State of Utah that does not accept demand deposits that may be withdrawn by check or similar means, WEX Bank currently meets the criteria for exemption as an industrial bank from the definition of “bank” under the Bank Holding Company Act.
Optal Australia Pty Limited holds an intermediary authorization under eNett International (Singapore) Pte. Ltd’s AFSL. Any material failure by us to comply with the rules and regulations to which AFSL holders are subject could result with us incurring sanctions up to and including suspension or relinquishment of our license.
Optal Australia Pty Ltd holds an intermediary authorization under eNett International (Singapore) Pte. Ltd’s AFSL. Any material failure by us to comply with the rules and regulations to which AFSL holders are subject could result with us incurring sanctions up to and including suspension or relinquishment of our license.
Self-service options are also provided through our online tools. • Account management: We assign account managers to customers who operate large fleets. Our account managers have in-depth knowledge of both our programs and the objectives of the fleets they service. • Credit and collections services: We extend short term credit in the majority of Fleet transactions.
Self-service options are also provided through our online tools. • Account management : We assign account managers to customers who operate large fleets. Our account managers have in-depth knowledge of both our programs and the objectives of the fleets they service. • Credit and collections services : We extend short term credit in the majority of Mobility transactions.
In some cases, data regulated by federal law (e.g., HIPAA and HITECH or the GLBA) is carved out of the scope of these state laws. But with respect to all other data, WEX Inc. and WEX Bank must monitor and seek to comply with individual state privacy laws in the conduct of our businesses.
In some cases, data regulated by federal law (e.g., HIPAA and HITECH or the GLBA) is carved out of the scope of these state laws. With respect to all other data, WEX and WEX Bank must monitor and seek to comply with individual state privacy laws in the conduct of our businesses.
We compete against specialized financial technology firms that are focused on delivering processing capabilities to the marketplace, such as I2C, Global Payments, and Marqeta, in partnership with partner banks who provide payments services, such as Cross River Bank, Celtic Bank, MVB Bank, Sutton Bank, or Silicon Valley Bank.
We compete against specialized financial technology firms that are focused on delivering processing capabilities to the marketplace, such as I2C, Global Payments, and Marqeta, in partnership with partner banks who provide payments services, such as Cross River Bank, Celtic Bank, MVB Bank, or Sutton Bank.
Available Information The Company’s principal executive offices are located at 1 Hancock St., Portland, ME 04101. Our telephone number is (207) 773-8171, and our Internet address is www.wexinc.com. The Company’s annual, quarterly and current reports, proxy statements and certain other information filed with the SEC, as well as amendments thereto, may be obtained free of charge from our website.
Available Information Location The Company’s principal executive offices are located at 1 Hancock St., Portland, ME 04101. Telephone Number (207) 773-8171 Internet www.wexinc.com The Company’s annual, quarterly and current reports, proxy statements and certain other information filed with the SEC, as well as amendments thereto, may be obtained free of charge from our website.
These fleets use these products and services to purchase fuel at locations of the fuel retailer with whom we have the private label relationship. Competition In general, our fleet solutions business competes with financial institutions that provide general payment services without the enhanced capabilities of our solution set. We also compete against similar more specialized offerings from Fleetcor, U.S.
These fleets use these products and services to purchase fuel at locations of the fuel retailer with whom we have the private label relationship. Competition In general, our Mobility business competes with financial institutions that provide general payment services without the enhanced capabilities of our solution set. We also compete against similar more specialized offerings from Fleetcor, U.S.
The products that WEX Health’s software and payment solutions support are subject to various state and federal laws, including the Patient Protection and Affordable Care Act (the “ACA”) and the Health Care and Education Reconciliation Act (collectively referred to as “Health Care Reform”), and regulations promulgated by the Internal Revenue Service, the Department of Health and Human Services, the Department of Labor, and the Consumer Financial Protection Bureau, and similar state laws and regulatory authorities.
The products that WEX Health’s software and payment solutions support are subject to various state and federal laws, including the Patient Protection and Affordable Care Act (the “ACA”) and the Health Care and Education Reconciliation Act (collectively referred to as “Health Care Reform”), and regulations promulgated by the Internal Revenue Service, the Department of Health and Human Services, the Department of Labor, and similar state laws and regulatory authorities.
We have developed and implemented compliance programs comprised of policies, procedures, systems and internal controls to monitor and address various legal requirements and developments. 15 Table of Contents Government agencies may impose new or additional requirements on money transmission and sales of payment instruments, and we expect that compliance costs will increase in the future for our regulated subsidiaries.
We have developed and implemented compliance programs comprised of policies, procedures, systems and internal controls to monitor and address various legal requirements and developments. Government agencies may impose new or additional requirements on money transmission and sales of payment instruments, and we expect that compliance costs will increase in the future for our regulated subsidiaries.
Building upon our historical ICE related fleet solutions, we are working on solutions we believe will ease the integration of EVs into mixed fleets. We believe we are uniquely positioned to help our customers transition to an expected mixed-fleet future.
Building upon our historical ICE-related fleet solutions, we are working on solutions we believe will ease the integration of EVs into mixed fleets. We are well positioned to help our customers transition to an expected mixed-fleet future.
Customers for this solution include online travel agencies (OTAs), tour operators, and airlines, as well as non-travel customers such as financial technology firms that focus on spend management, accounts payable automation, insurance payments, and media payments. • Accounts Payable (AP) Automation and Spend Management.
Customers for this solution include OTAs, tour operators, and airlines, as well as non-travel customers such as financial technology firms that focus on spend management, accounts payable automation, insurance payments, and media payments. • Accounts Payable (AP) Automation and Spend Management .
Built on top of our embedded payment capabilities, our AP Automation and Spend Management capabilities provide an enhanced user interface and Enterprise Resource Planning (ERP) software integration points for organizations to manage their AP Automation and Spend Management functions.
Built on top of our embedded payment capabilities, our AP Automation and Spend Management capabilities provide an enhanced user interface and Enterprise Resource Planning (“ERP”) software integration points for organizations to manage their AP Automation and Spend Management functions.
We market our products and services using the WEX brand name globally, as well as other brand names such as FleetOne, EFS, and benefitexpress in the U.S. and eNett, Go Fuel Card and Motorpass internationally, in Europe, and in Australia, respectively.
We market our products and services using the WEX brand name globally, as well as other brand names such as FleetOne, EFS, and benefitexpress in the U.S. and eNett and Go Fuel Card in Europe and Motorpass in Australia.
In October 2021, the FTC updated the GLBA Safeguards Rule to specify new safeguards that financial institutions must include in their information security programs, including limits on who can access consumer data, requiring encryption to secure data, and requiring financial institutions to designate a single qualified individual to oversee their information security program and to report periodically to the entity’s board of directors or a senior officer in charge of information security.
In October 2021, the FTC updated the GLBA Safeguards Rule to specify new safeguards that financial institutions must include in their information security programs, such as setting limits on who can access consumer data, requiring encryption to secure data, and requiring financial institutions to designate a single qualified individual to oversee their information security program and to report periodically to the entity’s board of directors or a senior officer in charge of information security.
Of most significance are: (a) the European Union (Payment Services) Regulations 2018, which implement PSD2, (b) the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended (CJA 2010) which implements 5&6 AMLD, (c) the 17 Table of Contents European Banking Authority’s Outsourcing Guidelines and the Central Bank of Ireland (CBI) Cross-Industry Guidance on Outsourcing and (d) the CBI’s Cross-Industry Guidance on Operational Resilience.
Of most significance are: (a) the European Union (Payment Services) Regulations 2018, which implement PSD2, (b) the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended (CJA 2010), which implements 5 AMLD, (c) the European Banking Authority’s Outsourcing Guidelines and the Central Bank of Ireland (CBI) Cross-Industry Guidance on Outsourcing and (d) the CBI’s Cross-Industry Guidance on Operational Resilience.
Financial institutions, including but not limited to J.P. Morgan, Barclays, Capital One, and Citi, have access to technology solutions coupled with payment capabilities.
Financial institutions, including but not limited to J.P. Morgan, Barclays, Capital One, American Express, and Citi, have access to technology solutions coupled with payment capabilities.
WEX Inc. and WEX Bank are also subject to certain international privacy and data protection laws. For example, in Europe and the United Kingdom, the General Data Protection Regulation (GDPR) applies to all companies processing data of EU residents, regardless of the company’s location.
WEX and WEX Bank are also subject to certain international privacy and data protection laws. For example, in Europe and the United Kingdom, the General Data Protection Regulation (“GDPR”) and the UK GDPR applies to all companies processing data of EU/UK residents, regardless of the company’s location.
It also enables technology companies and innovators across the globe to streamline their payment needs with a single, integrated technology and issuing partner. At the core of our Travel and Corporate Solutions product set is a virtual card.
It also enables technology companies and innovators across the globe to streamline their payment needs with a single, integrated technology and issuing partner. At the core of our Corporate Payments product set is a virtual card.
Addresses the needs of businesses that utilize primarily light and medium duty vehicles central to the operation of the service economy outside of North America inclusive of our Fleet portfolios in Europe and Asia-Pacific. As of December 31, 2022, more than 18 million vehicles used our solutions for fleet management.
Addresses the needs of businesses that utilize primarily light and medium duty vehicles central to the operation of the service economy outside of North America inclusive of our Fleet portfolios in Europe and Asia-Pacific. As of December 31, 2023, more than 19 million vehicles used our solutions for fleet management.
We also alert customers of unusual transactions or transactions that fall outside of pre-established parameters. Customers can access their account information through our website including account history and recent transactions and download the related details.
We also alert customers of unusual transactions or those that fall outside of pre-established parameters. Customers can access their account information through our platform including account history and recent transactions and download the related details.
Solution We believe our key source of differentiation in the Fleet Solutions segment is the enhanced data and controls we provide fleet operators based on our proprietary closed loop payments network. This proprietary closed-loop network enables us to capture rich data, deploy custom controls, and establish the economics between buyers and merchants.
Solution We believe our key source of differentiation in the Mobility segment is the enhanced data and controls we provide fleet operators based on our proprietary closed loop payments network. This proprietary closed-loop network enables us to capture rich data, deploy custom controls, and establish the economics between fleets and merchants.
Optal Financial Europe Limited (OFEL) is an authorized electronic money institution, under the European Communities (Electronic Money) Regulations 2011, as amended (EMR) (which implements 2EMD). A pertinent requirement of such authorization is to safeguard customer funds against the firm’s insolvency.
Optal Financial Europe Limited (“OFEL”) is an Irish authorized electronic money institution, authorized under the European Communities (Electronic Money) Regulations 2011, as amended (which implements 2EMD). A pertinent requirement of such authorization is to safeguard customer funds against the firm’s insolvency.
We provide non-bank custodial services for Health Savings Accounts, with consumer balances placed at a variety of bank depositories including WEX Bank. • COBRA Administration. We provide a software platform for the administration of COBRA plans. In addition, we collect and process consumer premium payments. • Enrollment and benefits administration.
We provide non-bank custodial services for HSAs, with consumer balances placed at a variety of bank depositories including WEX Bank. • COBRA administration . We provide a software platform for the administration of COBRA plans. In addition, we collect and process consumer premium payments. • Enrollment and benefits administration .
The GDPR imposes stringent privacy protections and provides EU and UK residents with extensive rights in their personal data (such as rights to delete, obtain access to, and correct their personal data) and requires the establishment of certain legitimate bases for collecting, using, and disclosing personal data.
The GDPR and the UK GDPR impose stringent privacy protections and provide EU and UK residents with extensive rights in their personal data (such as rights to delete, obtain access to, and correct their personal data) and requires the establishment of certain legitimate bases for collecting, using, and disclosing personal data.
Healthcare Regulation The federal and state governments in the U.S. continue to enact and consider many broad-based legislative and regulatory proposals that could materially impact various aspects of our health-related business. The plans that our partners and clients administer feature consumer accounts that pay for out-of-pocket expenses incurred by employees and qualified 13 Table of Contents dependents.
Healthcare Regulation The federal and state governments in the U.S. continue to enact and consider many broad-based legislative and regulatory proposals that could materially impact various aspects of our benefits-related business. The plans that our partners and clients administer feature consumer-directed accounts that pay for out-of-pocket expenses incurred by employees and qualified dependents.
As a result, we have established anti-money laundering compliance programs that include: (i) internal policies and controls; (ii) designation of a compliance officer; (iii) ongoing employee training; and (iv) an independent review function.
As a result, we have established anti-money laundering compliance programs that include: (i) internal policies and controls; (ii) designation of a compliance 20 Table of Contents PART I officer; (iii) ongoing employee training; and (iv) an independent review function.
Under the Financial Services Modernization Act of 1999, also referred to as the Gramm-Leach-Bliley Act (GLBA), and certain state laws, WEX Inc. and WEX Bank are required to maintain a comprehensive written information security program that includes administrative, technical and physical safeguards relating to consumer information.
Under the Financial Services Modernization Act of 1999, also referred to as the Gramm-Leach-Bliley Act (“GLBA”), and certain state laws, WEX Bank is required to maintain a comprehensive written information security program that includes administrative, technical and physical safeguards relating to consumer information.
Our talent strategy includes a focus on retention and we regularly monitor employee turnover and engagement to identify opportunities to strengthen our approach to human capital management. During 2022, our overall voluntary turnover rate was approximately 17 percent, while our voluntary turnover among global employees who generally have managerial responsibilities (“leadership roles”) approximated 10 percent.
Our talent strategy includes a focus on retention and we regularly monitor employee turnover and engagement to identify opportunities to strengthen our approach to human capital management. During 2023, our global voluntary turnover rate was approximately 10 percent, while our voluntary turnover among global employees who generally have managerial responsibilities (“leadership roles”) was approximately 6 percent.
In November 2021, U.S. federal banking regulators including the Office of the Comptroller of the Currency, Treasury, the Board of the Governors of the Federal Reserve Board and the FDIC issued a final rule effective April 1, 2022, that requires banking organizations to notify their primary federal regulators of any “computer-security incident” that rises to the level of a 14 Table of Contents “notification incident,” as soon as possible but no later than 36 hours after the banking organization determines that the incident has occurred.
A final rule issued by U.S. federal banking regulators including the Office of the Comptroller of the Currency, Treasury, the Board of the Governors of the Federal Reserve Board and the FDIC in April 2022 requires banking organizations to notify their primary federal regulators of any “computer-security incident” that rises to the level of a “notification incident,” as soon as possible but no later than 36 hours after the banking organization determines that the incident has occurred.
Our virtual payments capability is used for transactions where no physical card is presented, including transactions that are increasingly completed online in a digitally connected world, but can also be used over the telephone, by mail, by email, or by fax.
Our virtual payments capability is used for transactions where no physical card is presented, including transactions that are increasingly completed online in a 13 Table of Contents PART I digitally connected world, but can also be used over the telephone, by mail, by email, or by fax.
Addresses the needs of businesses that utilize primarily light and medium duty vehicles central to the operation of the service economy in North America. • Over-the-Road. Addresses the needs of businesses that utilize primarily medium and heavy duty vehicles central to the operation of the freight economy in North America. • International Fleet.
Addresses the needs of businesses that utilize primarily medium and heavy duty vehicles central to the operation of the freight economy in North America. • International Fleet .
Any material failure by us to comply with these requirements could result with us incurring sanctions up to and including suspension or relinquishment of our authorization. United Kingdom WEX’s operations in the United Kingdom are subject to applicable laws and regulations in this jurisdiction.
Any material failure by us to comply with these requirements could result with us incurring sanctions up to and including suspension or relinquishment of our authorization. United Kingdom WEX’s operations in the United Kingdom are also subject to applicable laws and regulations governing payment services.
Optal Financial Limited (OFL) is authorized as an electronic money institution under, and must comply with, the Electronic Money Regulations 2011 (EMRs) and the Payment Services Regulations 2017 (PSRs). It is supervised by the Financial Conduct Authority (“FCA”) and is subject to the FCAs “Principles for Business”.
Optal Financial Limited (“OFL”) is authorized as an electronic money institution under, and must comply with, the Electronic Money Regulations 2011 (“EMRs”) and the Payment Services Regulations 2017 (“PSRs”). It is supervised by the Financial Conduct Authority (“FCA”) and is subject to the FCAs “Principles for Business”.
The statute also requires maintenance of appropriate books and records and maintenance of adequate internal controls to prevent and detect possible FCPA violations. Non-Bank Custodian Regulations As a U.S.
The statute also requires maintenance of appropriate books and records and maintenance of adequate internal controls to prevent and detect possible FCPA violations. 22 Table of Contents PART I Non-Bank Custodian Regulations As a U.S.
In addition to tax-related regulation, the Health Care Reform law imposes coverage standards affecting insured and self-insured health benefit plans that impact our current business model, including our relationships with current and future customers, producers and health care providers, products, services, processes and technology. Health Care Reform left many details to be established through regulations.
In addition to tax-related regulation, the Health Care Reform law imposes coverage standards affecting insured and self-insured health benefit plans that impact our current business model, including our relationships with current and future customers, producers and health care providers, products, services, processes and technology.
WEX is unique in our space as we couple wholly owned market leading technology with a global issuing and funding capability. Our wholly owned subsidiary, WEX Bank, currently funds the majority of our Fleet and Travel and Corporate Solutions operations, provides us with credit adjudication services, and is a depository institution for certain custodial HSA cash assets.
WEX is unique in our space as we couple wholly owned market leading technology with a global issuing and funding capability. Our wholly owned subsidiary, WEX Bank, currently funds the majority of our Mobility and Corporate Payments operations, provides us with a number of services, including credit adjudication, and is a depository institution for certain HSA cash assets.
The Company’s Audit Committee Charter, Leadership Development and Compensation Committee Charter, Finance Committee Charter, Corporate Governance Committee Charter, Technology Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics are available without charge through the “Governance” portion of the Investor Relations page of the Company’s website.
The Company’s Audit Committee Charter, Leadership Development and Compensation Committee Charter, Finance Committee Charter, Corporate Governance Committee Charter, Technology and Cybersecurity Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics are available without charge through the “Governance” portion of the Investor Relations page of the Company’s 24 Table of Contents PART I website.
Solution Our products simplify the process of navigating and managing employee benefits for plan administrators, employers, and plan participants and their families. Our solutions power a variety of benefit plans, including Health Savings Accounts, Flexible Spending Accounts, Health Reimbursement Arrangements, Lifestyle Spending Accounts, COBRA accounts, Wellness Incentives, Medicare Advantage supplemental benefits, commuter benefits, and other account-based benefit plans.
Solution Our products simplify the process of navigating and managing employee benefits for plan administrators, employers, and plan participants and their families. Our solutions power a variety of benefit plans, including HSAs, FSAs, HRAs, Lifestyle Spending Accounts, COBRA accounts, wellness incentives, Medicare Advantage supplemental benefits, commuter benefits, and other account-based benefit plans.
Payment processing transactions are the primary revenue source in the Fleet Solutions segment. Revenue is earned based on a percentage of the aggregate dollar amount of the customer’s purchase, a fixed amount per transaction, or a 6 Table of Contents combination of both.
Payment processing transactions are the primary revenue source in the Mobility segment. Revenue is earned based on a percentage of the aggregate dollar amount of the customer’s purchase, a fixed amount per transaction, or a combination of both.
We believe that maintaining our anticipated growth and position as a leading global commerce platform that simplifies the business of running a business requires a strategy focused on attracting, developing, and retaining exceptional talent. The satisfaction, development, and well-being of our people has always been and will always be among our top priorities.
We believe that achieving our growth goals and maintaining our position as a leading global commerce platform requires a strategy focused on attracting, developing, and retaining exceptional talent. The satisfaction, development, and well-being of our people will always be among our top priorities.
We serve more than half of the Fortune 1000 companies in the United States. 4 Table of Contents • Travel and Corporate Solutions. WEX is both one of the largest commercial payment companies in the world as well as a trusted technology partner for some of the largest organizations in the world.
We serve more than half of the Fortune 1000 companies in the United States. Corporate Payments WEX is both one of the largest commercial payment companies in the world as well as a trusted technology partner for some of the largest organizations in the world.
Internal Revenue Service approved passive non-bank custodian for health savings accounts, we are subject to the provisions of Treasury Regulations Section 1.408-2(e) (the “Treasury Regulations”), including the net worth, surety bond, recordkeeping, audit, and administration of fiduciary duties requirements, among other requirements.
Internal Revenue Service approved passive non-bank custodian for HSAs, WEX Inc. is subject to the provisions of Treasury Regulations Section 1.408-2(e) (the “Treasury Regulations”), including the net worth, surety bond, recordkeeping, audit, and administration of fiduciary duties requirements, among other requirements.
As business models evolve, we seek to adapt our solution suite to stay relevant, and at the forefront of serving our customers’ needs. • Deepen Global Presence. As a global business, we have an established footprint around the world.
We continuously seek to identify, experiment and launch products in new solution spaces. As business models evolve, we seek to adapt our solution suite to stay relevant, and at the forefront of serving our customers’ needs. • Deepen Global Presence . As a global business, we have an established footprint around the world.
As a result, WEX Inc. is generally not subject to the Bank Holding Company Act. WEX Bank is, however, subject to examination and supervision by the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions (UDFI). Regular examinations are conducted and ratings are issued based on the FDIC’s examination policies and composite ratings framework.
As a result, WEX Inc. is generally not subject to the Bank Holding Company Act. WEX Bank is, however, subject to examination and supervision by the FDIC and the UDFI. Regular examinations are conducted and ratings are issued based on the FDIC’s examination policies and composite ratings framework.
The Internal 16 Table of Contents Revenue Service exercises authority over our operations related to the non-bank custodian designation and, as part of this authority, subjects us to periodic examinations, which may include a review of our operational practices, policies and procedures, net worth and related records, and other matters related to our business.
The Internal Revenue Service exercises authority over WEX Inc.’s operations related to the non-bank custodian designation and, as part of this authority, subjects WEX Inc. to periodic examinations, which may include a review of its operational practices, policies and procedures, net worth and related records, and other matters related to such business.
We also provide the software that enables employees to choose and enroll in their benefits and manage those benefits throughout the plan year. In addition, we are an IRS-designated non-bank custodian of Health Savings Account assets.
We also provide the software that enables employees to choose and enroll in their benefits and manage those benefits throughout the plan year. In addition, WEX Inc. is an IRS-designated non-bank custodian of HSA assets.
Competitors in this segment include companies such as HealthEquity, Alight Technologies, Businessolver, and PayFlex. We believe we compete favorably against these competitors through the combination of the breadth of our solution, the feature-richness of our platform and the fact that our offerings can be deployed flexibly, from software-only to full benefit administration, with a wide range of options in between.
We believe we compete favorably against these competitors through the combination of the breadth of our solution, the feature-richness of our platform and the fact that our offerings can be deployed flexibly, from software-only to full benefit administration, with a wide range of options in between.
We care deeply about employee engagement and satisfaction and capture employee feedback through an annual employee survey and pulse surveys throughout the year, which measure cultural and engagement indicators. We utilize the survey results to guide our decisions throughout the organization.
We care deeply about employee engagement and satisfaction and capture employee feedback through an annual employee survey and pulse surveys throughout the year, which measure cultural and engagement indicators. We utilize the survey results to guide our decisions throughout the organization. We are dedicated to cultivating a diverse, equitable and inclusive business culture.
If WEX Inc. or WEX Bank intend to share nonpublic personal information about consumers with affiliates and/or nonaffiliated third parties, WEX Inc. and WEX Bank must provide customers with a notice and a reasonable period of time for each customer to “opt out” of any such disclosure.
If WEX Bank intends to share nonpublic personal information about consumers with affiliates and/or nonaffiliated third parties, WEX Bank must provide customers with a notice and a reasonable period of time for each customer to “opt out” of any such disclosure. The GLBA also regulates certain activities of WEX Inc., with respect to privacy and information security practices.
For our AP automation and spend management solution, these capabilities include: (i) customizable integrations with different ERPs, (ii) enhanced AP data analysis and supplier enablement teams focused on increasing card acceptance, (iii) a wide variety of different virtual card products with each of the card associations to optimize card acceptance and interchange yield, (iv) bank transfer and check issuance capabilities allowing WEX to fulfill full AP file needs, and (v) different user interfaces oriented toward more simple small business needs as well as complex corporate needs. 9 Table of Contents The vast majority of the segment’s revenue is derived from net interchange revenue, which is the gross interchange created by the issuance, authorization, settlement, and clearing of card network spend less rebates paid to customers.
For our AP automation and spend management solution, these capabilities include: (i) customizable integrations with different ERPs, (ii) enhanced AP data analysis and supplier enablement teams focused on increasing card acceptance, (iii) a wide variety of different virtual card products with each of the card associations to optimize card acceptance and interchange yield, (iv) bank transfer and check issuance capabilities allowing WEX to fulfill full AP file needs, and (v) different user interfaces oriented toward more simple small business needs as well as complex corporate needs.
Through the scalability of our platform, we seek to leverage capabilities across geographies to continue growing our international business. • Strategic M&A. Along with our organic growth, we expect to seek to achieve growth through strategic acquisitions, which brings further scale and diversification to our offerings.
Through the scalability of our platform, we seek to leverage capabilities across geographies to continue growing our international business. • Strategic M&A . Along with our organic growth, we view growth through strategic acquisitions as an attractive use of capital to bring further scale and diversification to our offerings.
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.
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.
Our current strategy is a simplified articulation of our approach to growing our business and more specifically outlines how we expect to continue to meet the needs of an evolving landscape. • Global Commerce Platform. A key foundation to the solutions we deliver to our customers is our platform, through which we deliver the solutions that serve our customers’ businesses.
Our current strategy is a simplified articulation of our approach to growing our business and more specifically outlines how we expect to continue to meet the needs of an evolving landscape. • Global Commerce Platform .
Employers are continuing to use CDH approaches to manage the rate of increase in healthcare expenditures and to enable employees to make decisions about the use of their healthcare savings. CDH programs provide consumers with visibility into and control over payment for healthcare expenses.
Most of these accounts are tax-advantaged under the appropriate law. 18 Table of Contents PART I Employers are continuing to use CDH approaches to manage the rate of increase in healthcare expenditures and to enable employees to make decisions about the use of their healthcare savings. CDH programs provide consumers with visibility into and control over payment for healthcare expenses.
Competition In our partner channel, we compete with other specialized providers of similar benefit solutions, such as Alegeus Technologies and DataPath, providers of core banking platforms, such as FIS, Fiserv, and Jack Henry, as well as proprietary technology solutions developed and maintained in-house by plan administrators. 8 Table of Contents In our direct channel, we compete with providers of consumer-directed benefit and COBRA administration as well as providers of benefit enrollment and administration software and services.
Competition In our partner channel, we compete with other specialized providers of similar benefit solutions, such as Alegeus Technologies and Nations Benefits, providers of core banking platforms, such as FIS, Fiserv, and Jack Henry, as well as proprietary technology solutions developed and maintained in-house by plan administrators.
We have established a growth engine in large end markets and we believe we are leaders in the markets in which we participate. Seasonality Certain parts of our business are affected by seasonal variations. For example, in a typical year, fuel prices are typically higher during the summer and online travel sales are typically higher during the third quarter.
Seasonality Certain parts of our business are affected by seasonal variations. For example, in a typical year, fuel prices are typically higher during the summer and online travel sales are typically higher during the third quarter.
Email and Text Marketing Laws We use direct email marketing and text-messaging to reach out to current or potential customers and therefore are subject to various statutes, regulations, and rulings, including the Telephone Consumer Protection Act (TCPA), the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act) and related Federal Communication Commission (FCC) orders.
Email and Text Marketing Laws We use direct email marketing and text-messaging to reach out to current or potential customers and therefore are subject to various statutes, regulations, and rulings, including the Telephone Consumer Protection Act, the Controlling the Assault of Non-Solicited Pornography and Marketing Act and related Federal Communication Commission orders as well as similar international legislation such as Canada’s Anti-Spam Legislation, which regulates the sending of commercial electronic messages.
In Singapore, WEX Finance Inc. and Optal Singapore Pte Ltd are licensed under the Banking (Credit Card and Charge Card) Regulations 2013 and must comply with the Banking Act 1970 and the applicable sections of the Payment Services Act 2019 (“PSA”). These entities are supervised by the Monetary Authority of Singapore (“MAS”).
Singapore In Singapore, WEX Finance Inc. and Optal Singapore Pte Ltd are licensed to carry on the business of issuing credit cards and/or charge cards and must comply with the Banking Act 1970 and the applicable sections of the Payment Services Act 2019 (“PSA”). These entities are supervised by the MAS.
Restrictions on Intercompany Borrowings and Transactions Sections 23A and 23B of the Federal Reserve Act (FRA) and the implementing regulations limit the extent to which the Company can borrow or otherwise obtain credit from or engage in other “covered transactions” with WEX Bank.
WEX Bank complies with the applicable United States regulations for services provided to those countries from the United States. 16 Table of Contents PART I Restrictions on Intercompany Borrowings and Transactions Sections 23A and 23B of the FRA and the implementing regulations limit the extent to which the Company can borrow or otherwise obtain credit from, or engage in, other “covered transactions” with WEX Bank.
In addition to the above regulations applicable to entities operating in the European Union, we are subject to the local laws of EU member state of Ireland in which we are an authorized electronic money institution.
In addition to being subject to the regulations under the above directives, the Company is also subject to the local laws of the EU member state of Ireland in which we are an authorized electronic money institution.
Section 29 of the Federal Deposit Insurance Act (FDI Act) restricts the acceptance of brokered deposits by an insured depository institution unless the institution is “well capitalized.” For insured depository institutions that are “less than well capitalized,” certain interest rate cap restrictions are imposed.
Potential changes could also include clearing and execution methodology of our derivatives transactions. 17 Table of Contents PART I Brokered Deposits Section 29 of the Federal Deposit Insurance Act restricts the acceptance of brokered deposits by an insured depository institution unless the institution is “well capitalized.” For insured depository institutions that are “less than well capitalized,” certain interest rate cap restrictions are imposed.
Through our platform, we deliver a suite of solutions specifically tailored to help our customers tackle some of their most complex pain points. With our deep industry expertise we try to differentiate ourselves from the market through customer-focused innovation, working alongside customers to ensure our solutions are relevant to their specific needs.
With our deep industry expertise we try to differentiate ourselves from the market through customer-focused innovation, working alongside customers to ensure our solutions are relevant to their specific needs.
Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. We have implemented, and will continue to implement, measures designed to comply with these sanctions.
Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf any of the following risks occurs, our business, financial condition, and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements. • A significant portion of our revenues are related to the amount of gasoline and diesel fuel purchased by or through our customers and from our fuel retailer partners, and, as a result, a reduction in the demand for or supply of gasoline or diesel fuel and other vehicle products and services, whether due to an increase in usage of alternative fuel vehicles or otherwise and/or volatility in fuel prices, could have a material adverse effect on our business, financial condition, and operating results. • A decline in general economic conditions, including any potential recession and the strength and sustainability of any subsequent recovery, may lead to a decrease in overall spending in the economy and on the services that we provide, which could substantially affect our business, both in the U.S. and internationally. • We process transactions through the Mastercard and Visa networks through the financial services of WEX issuers and other third party licensed institutions.
Biggest changeOur Business and Industry • A reduction in the demand for or supply of gasoline and/or diesel fuel, and/or volatility in such fuel prices, could have a material adverse effect on our business, financial condition, and operating results. • A decline in general economic conditions, and in particular, a decline in demand for fuel, travel related services or health care services could significantly affect our business, operating results, and financial condition. • We process transactions through the Mastercard and Visa networks through the financial services of WEX issuers and other third party licensed institutions.
You should carefully review and consider this summary along with the risks described more fully in Item 1A, “Risk Factors” of Part I of this Annual Report and other information included in this Annual Report. The risks and uncertainties described below are not the only risks and uncertainties we face.
You should carefully review and consider this summary along with the risks described more fully in this Item 1A, “Risk Factors” of Part I of this Annual Report and other information included in this Annual Report. The risks and uncertainties described below are not the only risks and uncertainties we face.
Also, with respect to certain transactions with our counterparties, we bear, contractually or otherwise, the risk of substantial losses due to fraudulent use of our payment cards or payment systems. We also face risk of losses as a result of fraudulent acts of employees, merchants, or contractors.
With respect to certain transactions with our counterparties, we bear, contractually or otherwise, the risk of substantial losses due to fraudulent use of our payment cards or payment systems. We also face risk of losses as a result of fraudulent acts of employees, merchants, or contractors.
Finally, we believe the COVID-19 pandemic has, in many respects, resulted in transformational change in business and consumer behavior, as well as the implementation by authorities and businesses around the world of numerous measures aimed at containing the virus, at various times, such as travel bans and restrictions, quarantines, shelter in place orders, business shutdowns, vaccination requirements, and mask mandates, among others.
We believe the COVID-19 pandemic has, in many respects, resulted in transformational change in business and consumer behavior, as well as the implementation by authorities and businesses around the world of numerous measures aimed at containing the virus, at various times, such as travel bans and restrictions, quarantines, shelter in place orders, business shutdowns, vaccination requirements, and mask mandates, among others.
Any of these potential changes or failures in our technology strategies may also divert management’s attention and have a material adverse effect on our business, financial condition and operating results. Our business is dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions.
Any of these potential changes or failures in our technology strategies may also divert management’s attention and have a material adverse effect on our business, financial condition and operating results. Our business is dependent on electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions.
In addition, the purchase agreement by which WEX Inc. purchased certain contractual rights to serve as custodian or sub-custodian to certain HSAs from HealthcareBank includes certain potential additional consideration payable annually that is calculated on a quarterly basis and is contingent, and based, upon any future increases in the Federal Funds rate.
In addition, the purchase agreement by which WEX Inc. purchased certain contractual rights to serve as custodian or sub-custodian to certain HSAs from HealthcareBank includes additional consideration payable annually that is calculated on a quarterly basis and is contingent, and based, upon any future increases in the Federal Funds rate.
This requirement generally does not extend to information about companies or about individuals who obtain financial products or services for business, commercial, or agricultural purposes. The GLBA also requires us and WEX Bank to provide initial and annual privacy notices to customers that describe in general terms our information sharing practices.
This requirement generally does not extend to information about companies or about individuals who obtain financial products or services for business, commercial, or agricultural purposes. The GLBA also requires WEX Bank to provide initial and annual privacy notices to customers that describe in general terms our information sharing practices.
WEX Bank's ILC enables it to issue certificates of deposit, accept money market deposits and borrow on federal funds lines of credit from other banks, which we believe provides us access to lower cost funds than many of our competitors, thus helping us to offer competitive products to our customers.
WEX Bank's ILC charter enables it to issue certificates of deposit, accept money market deposits and borrow on federal funds lines of credit from other banks, which we believe provides us access to lower cost funds than many of our competitors, thus helping us to offer competitive products to our customers.
If we fail to timely or effectively integrate an acquired business, its technology or other assets, this failure may lead to us not achieving certain or all of the desired benefits of the acquisition or may otherwise expose us to any shortcomings or risks of the acquired business, its technology systems or assets prior to their integration into our established systems.
If we fail to timely or effectively integrate an acquired business, its employees, its technology or other assets, this failure may lead to us not achieving certain or all of the desired benefits of the acquisition or may otherwise expose us to any shortcomings or risks of the acquired business, prior to their integration into our established systems.
Increasing scrutiny and changing expectations from investors, customers and our employees with respect to our environmental, social and governance (ESG) practices may negatively affect our business and result in the decline of gasoline or diesel fuel use, result in additional costs or expose us to new or additional risks.
Increasing scrutiny and changing expectations from investors, customers and our employees with respect to our environmental, social and governance practices may negatively affect our business and result in the decline of gasoline or diesel fuel use, result in additional costs or expose us to new or additional risks.
Continued licensing and federal deposit insurance are subject to ongoing satisfaction of compliance and safety and soundness requirements. Adverse changes to its ILC could impact WEX Bank’s ability to operate and/or attract funds or limit our ability to provide competitive offerings to our customers.
Continued licensing and federal deposit insurance are subject to ongoing satisfaction of compliance and safety and soundness requirements. Adverse changes to its ILC charter could impact WEX Bank’s ability to operate and/or attract funds or limit our ability to provide competitive offerings to our customers.
Our substantial indebtedness currently outstanding, or as may become outstanding if we incur additional indebtedness, and the terms and conditions of such indebtedness, could, among other things: • lead to difficulty in our ability to generate enough cash flow to satisfy our indebtedness obligations under our credit facilities, and if we fail to satisfy these indebtedness obligations, an event of default could result; • require us to dedicate a substantial portion of our cash flow to repaying our indebtedness, thus reducing the amount of funds available to execute on our corporate strategy, to fund working capital or capital expenditures or for other general corporate purposes; 34 Table of Contents • limit our ability to borrow additional funds necessary for working capital, capital expenditures or other general corporate purposes; • increase our vulnerability to adverse general economic or industry conditions; • place us at a competitive disadvantage relative to our competitors that have less indebtedness or better access to capital, by, for example, limiting our ability to enter into new markets, upgrade our assets or pursue acquisitions or other business opportunities; and • limit our flexibility in planning for, or reacting to changes in, our business.
Our substantial indebtedness currently outstanding, or as may become outstanding if we incur additional indebtedness, and the terms and conditions of such indebtedness, could, among other things: • lead to difficulty in our ability to generate enough cash flow to satisfy our indebtedness obligations under our credit facilities, and if we fail to satisfy these indebtedness obligations, an event of default could result; • require us to dedicate a substantial portion of our cash flow to repaying our indebtedness, thus reducing the amount of funds available to execute on our corporate strategy, to fund working capital or capital expenditures or for other general corporate purposes; • limit our ability to borrow additional funds necessary for working capital, capital expenditures or other general corporate purposes; • increase our vulnerability to adverse general economic or industry conditions; • place us at a competitive disadvantage relative to our competitors that have less indebtedness or better access to capital, by, for example, limiting our ability to enter into new markets, upgrade our assets or pursue acquisitions or other business opportunities; and • limit our flexibility in planning for, or reacting to changes in, our business.
In addition, at the time of any future disposition of these financial instruments, the price that WEX Bank ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value.
In addition, at the time of any future disposition of these financial instruments, the price that WEX Bank ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than current fair value.
Unpredictable events in the locations in which we or our customers operate, or elsewhere, including events such as the COVID-19 pandemic, may adversely affect our ability to conduct business and could impact our financial condition and operating results.
Unpredictable or catastrophic events in the locations in which we or our customers operate, or elsewhere, including events such as the COVID-19 pandemic, may adversely affect our ability to conduct business and could impact our financial condition and operating results.
WEX Bank’s inability to accept brokered deposits, or a loss of a significant amount of its brokered deposits, could adversely affect its liquidity and therefore its ability to support and fund the Company’s operations it currently supports and funds.
WEX Bank’s inability to accept brokered deposits, or a loss of a significant amount of its brokered deposits, could adversely affect its liquidity and therefore its ability to support and fund the Company’s operations that it currently supports and funds.
In addition to the risk that we fail to adequately assess and monitor credit risks posed by our counterparties and the risk that volatility or adverse conditions in the economy or credit or other financial markets may negatively impact us, the value of WEX Bank’s investment of custodial cash assets in securities and other financial instruments can be materially affected by market fluctuations, which could affect our business, financial position or results of operations.
In addition to the risk that we fail to adequately assess and monitor credit risks posed by our counterparties and the risk that volatility or adverse conditions in the economy or credit or other financial markets may negatively impact us, the value of WEX Bank’s investment of custodial cash assets in securities and other financial instruments can be materially affected by market and interest rate fluctuations, which could affect our business, financial position or results of operations.
For further information on how the increase in usage of alternative fuels in vehicles affects our business, please see Item 1A - Risk Factors - “ A significant portion of our revenue is generated by the purchase and sale of gasoline and diesel fuel by or through our customers and from our fuel retailer partners, and, as a result, a reduction in the demand for or supply of gasoline and/or diesel fuel and/or volatility in such fuel prices could have a material adverse effect on our business, financial condition, and operating results .” Risks Related to our Dependence on Technology We regularly experience cyberattacks and expect they will continue in the future.
For further information on how the increase in usage of alternative fuels in vehicles affects our business, please see Part I – Item 1A – Risk Factors – “A significant portion of our revenue is generated by the purchase and sale of gasoline and diesel fuel by or through our customers and from our fuel retailer partners, and, as a result, a reduction in the demand for or supply of gasoline and/or diesel fuel and/or volatility in such fuel prices could have a material adverse effect on our business, financial condition, and operating results.” Risks Related to our Dependence on Technology We regularly experience cyberattacks and expect they will continue in the future.
We have been and will be undertaking certain cost and organizational operational efficiencies, which are designed to streamline our organization, improve internal collaboration models, processes and automation, and enhance customer experiences, while supporting our productivity and business results. Our expectation is to capture $100 million in run rate operating cost efficiencies by the end of 2024.
We have been and will be undertaking certain cost and organizational operational efficiencies, which are designed to streamline our organization, improve internal collaboration models, processes and automation, and enhance customer experiences, while supporting our productivity and business results. Our expectation is to capture $100 million in run rate cost savings by the end of 2024.
There can be no assurance that the outcomes from these examinations will not materially adversely affect our financial condition and operating results. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
There can be no assurance that the outcomes from these examinations will not materially adversely affect our financial condition and operating results. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in or holding our common stock.
We may be subject to contractual damages and civil or criminal penalties if we are found to violate these privacy, security and breach notification requirements. An amendment to the HITECH Act enacted in January 2021 require consideration of a company’s implementation of recognized security standards in assessing administrative fines and penalties under the HIPAA security standards.
We may be subject to contractual damages and civil or criminal penalties if we are found to violate these privacy, security and breach notification requirements. An amendment to the HITECH Act enacted in January 2021 requires consideration of a company’s implementation of recognized security standards in assessing administrative fines and penalties under the HIPAA security standards.
Because our business is currently heavily reliant on the level of transactions involving gasoline and diesel fuels, existing or future laws or regulations or business actions related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if any of the same serve to reduce demand for gasoline and diesel fuels 40 Table of Contents and we do not or are unable to develop products or relationships to adapt to such potential events.
Because our business is currently heavily reliant on the level of transactions involving gasoline and diesel fuels, existing or future laws or regulations or business actions related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if any of the same serve to reduce demand for gasoline and diesel fuels and we do not or are unable to develop products or relationships to adapt to such potential events.
In addition, we are subject to risks from operating internationally, some of which we may not typically encounter in the United States, including: • fluctuation in foreign currencies; • changes in the relations between the United States and foreign countries; • actions of foreign or United States governmental authorities affecting trade and foreign investment; • increased expense due to the introduction of our corporate policies and controls in our international operations; • increased expense related to localization of our products and services, including language translation and creation of localized agreements; • increased infrastructure costs, burdens and complexities with respect to legal, tax, accounting and information technology laws, matters, and treaties; • interpretation and application of local laws and regulations, including, among others, those impacting anti-money laundering, bribery, financial transaction reporting, privacy, licensing, and positive balance or prepaid cards; • enforceability of intellectual property and contract rights; • potentially adverse tax consequences due to, but not limited to, the value added tax systems, the repatriation of cash, and any adverse consequences from changes in tax rates and changes or interpretations of tax laws; • competitive pressure on products and services from companies based outside the U.S. that can leverage lower costs of operations; • terrorist attacks and security concerns in general; • increased expense to comply with U.S. laws that apply to foreign operations, including the FCPA and OFAC regulations; • political, social, and economic instability and war; and • local labor conditions and regulations.
In addition, we are subject to risks from operating internationally, some of which we may not typically encounter in the United States, including: • fluctuation in foreign currencies; • changes in the relations between the United States and foreign countries, including those affecting trade and foreign investment; • increased expense due to the introduction of our corporate policies and controls in our international operations; • increased expense related to localization of our products and services, including language translation and creation of localized agreements; • increased infrastructure costs, burdens and complexities with respect to legal, tax, accounting and information technology laws, matters, and treaties; • interpretation and application of local laws and regulations, including, among others, those impacting anti-money laundering, bribery, financial transaction reporting, privacy, licensing, and positive balance or prepaid cards; • enforceability of intellectual property and contract rights; • potentially adverse tax consequences due to, but not limited to, the value added tax systems, the repatriation of cash, and any adverse consequences from changes in tax rates and changes or interpretations of tax laws; • competitive pressure on products and services from companies based outside the U.S. that can leverage lower costs of operations; • increased expense to comply with U.S. laws that apply to foreign operations, including the FCPA and OFAC regulations; • political, social, and economic instability and war, including as a result of terrorist attacks and security concerns; and • local labor conditions and regulations.
Our ability to attract new customers, increase net revenue from existing customers and create new, or replace existing, sources of revenue as trends such as EV develop, will depend in significant part on our ability to adapt to industry standards, anticipate trends and the magnitude at which such trends affect the market, and continue to enhance our platform and introduce new products and capabilities on a timely and secure basis to keep pace with technological developments and customer expectations.
Our ability to attract new customers, increase net revenue from existing customers and create new, or replace existing, sources of revenue as technologies such as EVs develop, will depend in significant part on our ability to adapt to industry standards, anticipate trends and the magnitude at which such trends affect the market, and continue to enhance our platform and introduce new products and capabilities on a timely and secure basis to keep pace with technological developments and customer expectations.
Any of these factors could cause a decline in the value of WEX Bank’s financial instruments, which may have an adverse effect on WEX Bank’s business, financial conditions, results of operations, cost of capital, capital requirements, and ability to fund customer’s withdrawal of depository assets.
Any of these factors could cause a decline in the value of WEX Bank’s financial instruments, which may have an adverse effect on WEX Bank’s business, financial condition, results of operations, cost of capital, capital requirements, and ability to fund a customer’s withdrawal of depository assets.
In addition, there is a trend toward the development by vehicle manufacturers, and adoption by our fleet customers and others, of vehicles with greater fuel efficiency or alternative fuel sources, such as electric, hydrogen, or natural gas powered vehicles, including hybrid vehicles.
In addition, there is a trend toward the development by vehicle manufacturers, and adoption by our Mobility customers and others, of vehicles with greater fuel efficiency or alternative fuel sources, such as electric, hydrogen, or natural gas powered vehicles, including hybrid vehicles.
For a further discussion of certain regulatory matters affecting WEX Bank’s ability to make cash available to WEX Inc., see, Part I - Item 1. Business - Regulation - United States - General Regulation, Supervision and Examination of WEX Bank; Restrictions on Intercompany Borrowings and Transactions; and Restrictions on Dividends.
For a further discussion of certain regulatory matters affecting WEX Bank’s ability to make cash available to WEX Inc., see, Part I – Item 1 – Business – Regulation and Supervision – General Regulation, Supervision and Examination of WEX Bank; Restrictions on Intercompany Borrowings and Transactions; and Restrictions on Dividends.
In addition, the Amended and Restated Credit Agreement requires that we meet certain financial covenants, including a consolidated EBITDA to consolidated interest charge coverage ratio and a consolidated leverage ratio, as described in Item 8, Note 16, Financing and Other Debt.
In addition, the Amended and Restated Credit Agreement requires that we meet certain financial covenants, including a Consolidated EBITDA to consolidated interest charge coverage ratio and a consolidated leverage ratio, as described in Part II – Item 8 – Note 16, Financing and Other Debt.
Because many of our standing arrangements and agreements with customers or other partners contain no minimum purchase, 27 Table of Contents sale or volume obligations and may be terminable by either party upon no or relatively short notice, customers or other partners may not be required to use the services that we provide to a specific degree or at all, even though we are under contract with them.
Because many of our standing arrangements and agreements with customers or other partners contain no minimum purchase, sale or volume obligations and may be terminable by either party upon no or relatively short notice, customers or other partners may not be required to use the services that we provide to a specific degree or at all, even though we are under contract with them.
Even now that restrictions relating to the COVID-19 pandemic have substantially subsided within the regions in which we operate, we may continue to experience impacts to our business as a result of the virus’s global economic impact and its potential effect on the ways people and businesses conduct themselves, including fluctuations in demand for worldwide travel, workforce effects (such as difficulty recruiting, training, motivating and developing employees due to evolving health and safety requirements and protocols, changing worker expectations and talent marketplace variability regarding flexible work models), the availability of credit, impacts on our liquidity, continued governmental restrictions in certain geographies, and continued volatility in fuel demand and prices.
Even now that restrictions relating to the COVID-19 pandemic have substantially subsided within the regions in which we operate, we may continue to experience impacts to our business as a result of the virus’s global economic impact and its lasting effects on the ways people and businesses conduct themselves, including fluctuations in demand for worldwide travel, impacts to the supply chain, workforce effects (such as difficulty recruiting, training, motivating and developing employees due to evolving health and safety requirements and protocols, changing worker expectations and talent marketplace variability regarding flexible work models), the availability of credit, impacts on our liquidity, continued governmental restrictions in certain geographies, and continued volatility in fuel demand and prices.
Shutdowns may be caused by a number of sources, many of which are beyond our control, including, without limitation: cyberattacks, unexpected catastrophic events such as natural disasters or acts of terrorism, software or hardware defects, network environmental disruptions such as computer viruses or hacking, theft or vandalism of equipment, and/or actions or events caused by or related to third party vendors.
Shutdowns may be caused by a number of sources, many of which are beyond our control, including, without limitation: cyberattacks, unexpected catastrophic events such as natural disasters or acts of terrorism, software or hardware defects, network disruptions such as computer viruses or hacking, theft or vandalism of equipment, employee error and/or actions or events caused by or related to third party vendors.
The continued adoption of alternative fuel and hybrid vehicles by our customers or others, an increase in the speed at which such adoption occurs, or any material increase in the use of alternative fuel vehicles in heavier 23 Table of Contents duty vehicle fleets, such as over-the-road truck fleets, would lead to less gasoline or diesel fuels being sold and affect our financial performance.
The continued adoption of alternative fuel and hybrid vehicles by our customers or others, an increase in the speed at which such adoption occurs, or any material increase in the use of alternative fuel vehicles in heavier duty vehicle fleets, such as over-the-road truck fleets, would lead to less gasoline or diesel fuels being sold and affect our financial performance.
If we do not comply with a network’s requirements, as the case may be, we could face additional costs, license suspensions or termination. Any 24 Table of Contents suspension of relevant licenses could limit or eliminate our ability to provide Mastercard or Visa payment services, which would materially affect our operations and revenues.
If we do not comply with a network’s requirements, as the case may be, we could face additional costs, license suspensions or termination. Any suspension of relevant licenses could limit or eliminate our ability to provide Mastercard or Visa payment services, which would materially affect our operations and revenues.
If industrial loan charters were eliminated or if changes to such charters limited or effectively prohibited us from operating as we currently operate, without our operations being “grandfathered”, we would either need to outsource our credit support activities or perform these activities ourselves, which would subject us to the credit laws of each individual state in which we conduct business.
If ILC charters were eliminated or if changes to such charters limited or effectively prohibited us from operating as we currently operate, without our operations being “grandfathered”, we would either need to outsource our credit support activities or perform these activities ourselves, which would subject us to the credit laws of each individual state in which we conduct business.
A single, significant incident or a series of incidents of fraud or theft could 25 Table of Contents lead to, among other things, increased overall levels of fraud; direct financial losses as a result of fraudulent activity; reputational harm; decreased desirability of our services; greater regulation; increased compliance costs; the imposition of regulatory sanctions; or significant monetary fines.
A single, significant incident or a series of incidents of fraud or theft could lead to, among other things, increased overall levels of fraud; direct financial losses as a result of fraudulent activity; reputational harm; decreased desirability of our services; greater regulation; increased compliance costs; the imposition of regulatory sanctions; or significant monetary fines.
This action potentially heightens enforcement risks if we fail to adequately implement the recognized security standards, while mitigating such risks if the recognized measures are successfully implemented. Our efforts to comply with existing and future health and financial data laws and regulations, both in the U.S. and abroad, are costly and time-consuming.
This action potentially heightens enforcement risks if we fail to adequately implement the recognized security standards, while mitigating such risks if the recognized measures are successfully implemented. Our efforts to comply with existing and future privacy and financial data protection laws and regulations, both in the U.S. and abroad, are costly and time-consuming.
Risks Related to WEX Bank The loss or suspension of WEX Bank's industrial loan charter or changes in applicable regulatory requirements could be disruptive to certain of our operations, increase costs and increase competition. WEX Bank is a Utah industrial bank that operates under an industrial loan charter (ILC). WEX Bank is also an FDIC-insured depository institution.
Risks Related to WEX Bank The loss or suspension of WEX Bank's industrial loan company charter or changes in applicable regulatory requirements could be disruptive to certain of our operations, increase costs and increase competition. WEX Bank is a Utah industrial bank that operates under an industrial loan company (“ILC”) charter. WEX Bank is also an FDIC-insured depository institution.
Additional legislation or regulation by these states and regions, the U.S. Environmental Protection Agency, and/or any international agreements to which the U.S. may become a party, that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our partners’ and our merchants’ operations.
Additional legislation or regulation promulgated by states, geographic regions, the U.S. Environmental Protection Agency, and/or any international agreements to which the U.S. may become a party, that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our partners’ and our merchants’ operations.
Additionally, such circumstances could require WEX Bank to raise deposit rates in an attempt to attract new deposits, or to obtain funds through other sources at higher rates, which would affect the Company’s ability to offer competitive products to our customers in our 32 Table of Contents segments served by WEX Bank and would have a material adverse effect on our business, financial condition, and operating results.
Additionally, such circumstances could require WEX Bank to raise deposit rates in an attempt to attract new deposits, or to obtain funds through other sources at higher rates, which would affect the Company’s ability to offer competitive products to our customers in our segments served by WEX Bank and would have a material adverse effect on our business, financial condition, and operating results.
An acquisition may also subject us to additional regulatory burdens that may significantly affect our business in unanticipated and negative ways. Further, an acquisition may require us to incur other charges, such as severance expenses, restructuring charges or change of control payments, and substantial debt or other liabilities, which may affect our financial condition.
An acquisition may also subject us to additional regulatory burdens that may significantly affect our business in unanticipated and negative ways. Further, an acquisition may require us to incur other charges, such as severance expenses, restructuring charges or change of control payments, and substantial debt or other liabilities.
WEX Bank operates under a uniform set of state lending laws, and its operations are subject to extensive state and federal regulation. WEX Bank’s primary regulators are the Utah DFI and the FDIC; however WEX Inc. is not currently subject to the federal Bank Holding Company Act due to WEX Bank’s status as an industrial bank.
WEX Bank operates under a uniform set of state lending laws, and its operations are subject to extensive state and federal regulation. WEX Bank’s primary regulators are the UDFI and the FDIC; however WEX Inc. is not currently subject to the Federal Bank Holding Company Act due to WEX Bank’s status as an industrial bank.
Legal proceedings are inherently uncertain and there is no guarantee that we will be successful in defending ourselves in any such proceedings, or that our assessment of the materiality of these matters 30 Table of Contents and the likely outcome or potential losses and established reserves will be consistent with the ultimate outcome of such matters.
Legal proceedings are inherently uncertain and there is no guarantee that we will be successful in defending ourselves in any such proceedings, or that our assessment of the materiality of these matters and the likely outcome or potential losses and established reserves will be consistent with the ultimate outcome of such matters.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could result in the imposition of fines or penalties and other serious legal and reputational consequences, including restrictions on regulated subsidiaries’ ability to take on new business, which may impact our business, financial condition, and operating results.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could result in the imposition of fines or penalties, severe criminal or civil sanctions and other serious legal and reputational consequences, including restrictions on regulated subsidiaries’ ability to take on new business, which may impact our business, financial condition, and operating results.
In addition, any cybersecurity incident, any incident involving our handling of protected and sensitive information, failure to comply with applicable breach notification and reporting requirements, or any violation of international, federal or state privacy laws could consume significant financial and managerial resources, expose us to liability in excess of any applicable insurance policies, litigation, regulatory scrutiny, and/or cause damage to our reputation, which may discourage customers from using, renewing, or expanding their use of our services or cause us to be in breach of our contracts with them.
In addition, any cybersecurity incident, any incident involving our handling of protected and sensitive information, failure to comply with applicable breach notification and reporting requirements, or any violation of international, federal or state privacy laws could consume significant financial and managerial resources, expose us to liability in excess of any applicable insurance policies, litigation, regulatory scrutiny, and/or cause damage to our reputation, which may discourage customers from using, renewing, or expanding their use of our services or cause us 46 Table of Contents PART I to be in breach of our contracts with them.
We experience fuel price related revenue contraction when the merchant’s cost of fuel increases at a faster rate than the fuel price we charge to our fleet customers, or the fuel price we charge to our fleet customers decreases at a faster rate than the merchant’s cost of fuel.
We experience fuel price related revenue contraction when the merchant’s cost of fuel increases at a faster rate than the fuel price we charge to our mobility customers, or the fuel price we charge to our mobility customers decreases at a faster rate than the merchant’s cost of fuel.
In addition, the process of integrating and operating any acquired business, technology, service or product requires significant management attention and resources and integration may take longer than desired.
In addition, the process of integrating and operating any acquired business, technology, service or product requires significant resources, and integration may take longer than desired.
If the technologies we use in operating our business and interacting with our customers fail, are unavailable, or do not operate to expectations, or we fail to successfully implement technology strategies and capabilities in connection with our outsourcing arrangements, our business and results of operations could be adversely impacted.
If the technologies we use in operating our business and interacting with our customers fail, are unavailable, or do not operate to expectations, or we fail to successfully implement technology strategies and capabilities in connection with our third-party technology arrangements, our business and results of operations could be adversely impacted.
While we take commercially appropriate 41 Table of Contents steps to safeguard data used by and contained on the systems of our partners, customers and vendors, we cannot control all access to those systems and they are therefore subject to the risk of cyberattacks and fraud.
While we take commercially appropriate steps to safeguard data used by and contained on the systems of our partners, customers and vendors, we cannot control all access to those systems and they are therefore subject to the risk of cyberattacks and fraud.
Upon a default, our lenders could accelerate the indebtedness under the facilities (except only the requisite lenders under the revolving credit facility and the tranche A term loan facility may accelerate the revolving credit facility due to a breach of the financial covenants), foreclose against their collateral or seek other remedies, which could trigger a default under the Convertible Notes and would jeopardize our ability to continue our current operations.
Upon a default, our lenders could accelerate the indebtedness under the facilities (except only the requisite lenders under the revolving credit facility and the tranche A term loan facility may accelerate the revolving credit facility due to a breach of the financial covenants), foreclose against their collateral or seek other remedies, which could jeopardize our ability to continue our current operations.
Our services are currently focused on the fleet, travel, corporate payments, and health businesses. Some of our competitors are larger than we are and have successfully garnered significant share in these businesses. To the extent that our competitors are regarded as leaders in specific businesses, they may have an advantage over us as we attempt to further penetrate these businesses.
Our services are currently focused on the mobility, travel, corporate payments, and benefits businesses. Some of our competitors are larger than we are and have successfully garnered significant share in these businesses. To the extent that our competitors are regarded as leaders in specific businesses, they may have an advantage over us as we attempt to further penetrate these businesses.
Unfavorable changes in economic conditions, which are typically beyond our control and include declining consumer confidence, increasing unemployment, a restructured or reduced workforce and business patterns, inflation, recession, changes in the political climate, war (including the war between Russia and Ukraine) or other changes, are generally characterized by reduced commercial activity and may lead to a reduction or plateau in spending by those whose spending directly or indirectly contributes to our revenues, resulting in reduced or stagnant demand for, or use of, our products and services, including fuel, travel related services, health care services, CDH accounts, accounts payables services, and other business related products and services by our customers or partners and our customers’ or partners’ customers.
Unfavorable changes in economic conditions, which are typically beyond our control and include declining consumer confidence, increasing unemployment, a restructured or reduced workforce and business patterns, inflation, recession, changes in the political climate, war (including the wars in Europe and the Middle East) or other changes, are generally characterized by reduced commercial activity and may lead to a reduction or plateau in spending by those whose spending directly or indirectly contributes to our revenues, resulting in reduced or stagnant demand for, or use of, our products and services, including fuel, travel related services, health care services, CDH accounts, accounts payables services, and other business related products and services by our customers or partners and our customers’ or partners’ customers.
Furthermore, institutional, individual, and other investors, proxy advisory services, regulatory authorities, consumers and other stakeholders continue to focus on sustainability practices with regard to the oil and gas industry, including practices related to greenhouse gases (GHG) and climate change.
Furthermore, institutional, individual, and other investors, proxy advisory services, regulatory authorities, consumers and other stakeholders continue to focus on sustainability practices with regard to the oil and gas industry, including practices related to GHG emissions and climate change.
For additional information of how the loss of our status as an industrial bank could affect our business, please see Item 1A - Risk Factors - “The loss or suspension of WEX Bank's industrial loan charter or changes in applicable regulatory requirements could be disruptive to certain of our operations, increase costs and increase competition.” 33 Table of Contents We are subject to limitations on transactions with WEX Bank, which may limit our ability to engage in transactions with and obtain credit from it.
For additional information of how the loss of our status as an industrial bank could affect our business, please see Part I – Item 1A – Risk Factors – “The loss or suspension of WEX Bank's industrial loan company charter or changes in applicable regulatory requirements could be disruptive to certain of our operations, increase costs and increase competition.” We are subject to limitations on transactions with WEX Bank, which may limit our ability to engage in transactions with and obtain credit from it.
Fewer gallons sold equates to a lower total purchase price of fuel on which our negotiated percentage revenue is determined. Our revenues, particularly in the over-the-road business, are also dependent, in part, on a flat fee derived from each fuel purchase transaction.
Fewer gallons sold equates to a lower total 27 Table of Contents PART I purchase price of fuel on which our negotiated percentage revenue is determined. Our revenues, particularly in the over-the-road business, are also dependent, in part, on a flat fee derived from each fuel purchase transaction.
Under the Change in Bank Control Act of 1978, as amended (“CIBC Act”), the FDIC’s regulations thereunder, and similar Utah banking laws, any person, either individually or acting through or in concert with one or more other persons, must provide notice to, and effectively receive prior approval from, the FDIC and the Utah DFI before acquiring “control” of us.
Under the Change in Bank Control Act of 1978, as amended (“CIBC Act”) and the FDIC’s regulations thereunder, any person, either individually or acting through or in concert with one or more other persons, must provide notice to, and effectively receive prior approval from, the FDIC before acquiring “control” of us.
As a result, a sustained decline in general economic conditions in the U.S. or internationally could have a material adverse effect on our business, financial condition, and operating results. We process transactions through the Mastercard and Visa networks through the financial services of WEX issuers and other third party licensed institutions.
As a result, a sustained decline in general economic conditions in the U.S. or internationally could have a material adverse effect on our business, financial condition, and operating results. 28 Table of Contents PART I We process transactions through the Mastercard and Visa networks through the financial services of WEX issuers and other third party licensed institutions.
Unauthorized parties attempt to gain access to our systems or facilities through various means, including, among others, targeting our systems or facilities or our third-party vendors or customers, or attempting to fraudulently induce our employees, partners, customers or others into disclosing user names, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems.
Unauthorized parties attempt to gain access, and in some instances have gained access, to our systems or facilities through various means, including, among others, targeting our systems or facilities or our third-party vendors or customers, or attempting to fraudulently induce our employees, partners, customers or others into disclosing user names, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems.
Our ability to maintain compliance with these standards and 38 Table of Contents satisfy these audits will affect our ability to attract and maintain business in the future. If we fail to comply with these regulations, we could be exposed to suits for breach of contract or to governmental enforcement proceedings.
Our ability to maintain compliance with these standards and satisfy these audits will affect our ability to attract and maintain business in the future. If we fail to comply with these standards, we could be exposed to suits for breach of contract or to governmental enforcement proceedings.
In addition, while we believe that the expected future cash flows to the Company resulting from the use of our definite-lived intangible assets exceeds the carrying value of such assets, material changes in business strategy, customer attrition in excess of expectations, or technological obsolescence could result in impairment losses and/or an acceleration of amortization expense.
In addition, while we believe that the expected future cash flows resulting from the use of our other intangible assets exceeds the carrying value of such assets, material changes in business strategy, customer attrition in excess of expectations, or technological obsolescence could result in impairment losses and/or an acceleration of amortization expense.
Many auto and truck manufacturers have announced plans to electrify large portions of their fleet over the next decade and the trend toward use of hybrid electric vehicles continues to grow.
Many auto and truck manufacturers have announced plans to electrify large portions of their fleet over the next decade and the trend toward use of hybrid EVs continues to grow.
In addition to our outstanding debt, as of December 31, 2022, we had outstanding letters of credit of $31.1 million issued under our Amended and Restated Credit Agreement. We have additional indebtedness in the form of deposits held by WEX Bank and other liabilities outstanding.
In addition to our outstanding debt, as of December 31, 2023, we had outstanding letters of credit issued under our Amended and Restated Credit Agreement. We have additional indebtedness in the form of deposits held by WEX Bank and other liabilities outstanding.
We may not be able to adequately protect our information systems, including the data we collect, which could subject us to liability and damage our reputation.
We may not be able to adequately protect our information systems, including the data we collect, which could subject us to, among other things, liability and damage to our reputation.
The Tax Cuts and Jobs Act of 2017, CARES Act of 2020, and the Inflation Reduction Act of 2022 significantly changed the U.S.
The 2017 Tax Act, CARES Act of 2020, and the Inflation Reduction Act of 2022 significantly changed the U.S.
Finally, private businesses, including vehicle manufacturers, are increasingly taking proactive steps to control or limit GHG emissions, including by producing and/or purchasing and using for their businesses vehicles that operate fully using alternative fuels or hybrid electric vehicles.
Finally, private businesses, including vehicle manufacturers, are increasingly taking proactive steps to control or limit GHG emissions, including by producing and/or purchasing vehicles that operate fully using alternative fuels or hybrid EVs.
Unpredictable events, including events such as pandemics and public health crises like the COVID-19 pandemic, political unrest, war, including the war between Russia and Ukraine, terrorist attacks, power or technological failures, natural disasters or catastrophes (such as wildfires or hurricanes) and severe weather, including conditions arising from climate change, could interrupt our operations by causing disruptions in global markets, economic conditions, fuel supply or demand, travel and tourism, and the use of health care services.
Unpredictable events, including events such as pandemics and public health crises like the COVID-19 pandemic, political unrest, war, including the ongoing wars in Europe and the Middle East, terrorist attacks, power or technological failures, natural disasters or catastrophes (such as wildfires or hurricanes) and severe weather, including conditions arising from climate change, could interrupt our operations by causing disruptions in global markets, economic conditions, fuel supply or demand, travel and tourism, and the use of health care services.
Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well 34 Table of Contents PART I as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
As a non-bank custodian WEX Inc. is subject to regulation and noncompliance could render it unable to maintain its non-bank custodian status. As of December 31, 2022, WEX Inc. is the passive non-bank custodian, under designation by the U.S.
As a non-bank custodian WEX Inc. is subject to regulation and noncompliance could render it unable to maintain its non-bank custodian status. WEX Inc. is a passive non-bank custodian, under designation by the U.S.
Our Fleet Solutions segment is our largest segment by total revenue and our customers and fuel retailer partners in this segment primarily purchase or sell gasoline or diesel fuel.
Our Mobility segment is our largest segment by total revenue and our customers and fuel retailer partners in this segment primarily purchase or sell gasoline or diesel fuel.
An acquisition may also cause adverse tax consequences or substantial depreciation and amortization or deferred compensation charges, may include substantial contingent consideration payments or other compensation that could reduce our earnings during the quarter in which incurred, or may not generate sufficient financial return to offset acquisition costs.
An acquisition may also cause adverse tax consequences or substantial depreciation and amortization or deferred compensation charges, may include substantial contingent consideration payments or other compensation that could reduce our earnings during the quarter in which incurred, or may not generate sufficient financial return to offset acquisition costs. These expenses, charges or payments may adversely affect our operating results.
The applicable rules also require that we engage in such transactions with WEX Bank only on terms and under circumstances that are substantially the same, or at least as favorable to WEX Bank, as those prevailing at the time for comparable transactions with nonaffiliated companies.
The applicable rules also require that we engage in such transactions with WEX Bank only on terms and under circumstances that are substantially the same, or at least as favorable to WEX Bank, as those 38 Table of Contents PART I prevailing at the time for comparable transactions with nonaffiliated companies.
Accordingly, a failure to adequately manage our credit risks, or if economic conditions affect the businesses of our counterparties or of their customers, credit defaults could increase or if we experience material fraud losses our provision for credit losses on the statement of operations could be significantly higher, all of which could have a material adverse effect on our business, financial condition and operating results.
Accordingly, if we fail to adequately manage our credit risks, if economic conditions affect the businesses of our counterparties or of their customers, or if we experience material fraud losses our provision for credit losses on the statement of operations could increase, which could have a material adverse effect on our business, financial condition and operating results.
These factors include, but are not limited to: • domestic and foreign supply and demand for oil and gas, and market expectations regarding such supply and demand; • investor speculation in commodities; • actions by major oil exporting nations, including members of the Organization of Petroleum Exporting Countries, and the ability of the same to maintain oil price and production controls; • level of domestic and foreign oil production; • advances in oil production technologies; • excess, or alternatively, lack of adequate, infrastructure; • geo-political conditions, including revolution, insurgency, environmental activism, terrorism, or war, such as, the ongoing conflict between Russia and Ukraine; • oil refinery capacity and utilization rates; • weather, including climate change and natural disasters; • the value of the U.S. dollar (or other relevant currencies) versus other major currencies; • unexpected events such as global pandemics like the COVID-19 pandemic; • general local, regional, or worldwide economic conditions; and • governmental regulations, taxes and tariffs.
These factors include, but are not limited to: • domestic and foreign supply and demand for oil and gas, and market expectations regarding such supply and demand; • the demand for trucking and freight hauling services; • investor speculation in commodities; • actions by major oil exporting nations, including members of the Organization of Petroleum Exporting Countries, and the ability of the same to maintain oil price and production controls; • level of domestic and foreign oil production; • advances in oil production technologies; • excess, or alternatively, lack of adequate, infrastructure; • geo-political conditions, including revolution, insurgency, environmental activism, terrorism, or war, such as, the ongoing conflicts between Russia and Ukraine and Israel and Hamas; • oil refinery capacity and utilization rates; • weather, including climate change and natural disasters; • the value of the U.S. dollar (or other relevant currencies) versus other major currencies; • unexpected events such as global pandemics like the COVID-19 pandemic; • general local, regional, or worldwide economic conditions; • taxes and tariffs; and • governmental regulations and legislation, including those pertaining to greenhouse gases (“GHG”) and fuel efficiency standards.
For example, WEX Bank has entered into the Consent Order with the FDIC and the UDFI, which requires WEX Bank to strengthen its Bank Secrecy Act/anti-money laundering compliance program and to address related matters, including with respect to controls.
For example, WEX Bank entered into the 2022 Order with the FDIC and the UDFI, which required WEX Bank to strengthen its Bank Secrecy Act/anti-money laundering compliance program and to address related matters, including with respect to controls.
We may also experience some attrition in the number of clients serviced by the acquired business, causing us to not 28 Table of Contents achieve the forecasted revenues and profits from an acquisition or to not achieve the level of synergies that we anticipated when entering into an acquisition.
For instance, we may experience some attrition in the number of clients serviced by the acquired business, causing us to not achieve the forecasted revenues and profits from an acquisition or to not achieve the level of synergies that we anticipated when entering into an acquisition.
Deposits issued by WEX Bank are currently used to support and fund substantially all of the U.S. and Canadian operations in our Fleet Solutions segment and a substantial portion of the global operations of our Travel and Corporate Solutions segment.
Deposits issued by WEX Bank are currently used to support and fund substantially all of the U.S. and Canadian operations in our Mobility segment and a substantial portion of the global operations of our Corporate Payments segment.
We have experienced and could continue to experience substantial credit and fraud losses and other adverse effects if we fail to adequately assess and monitor credit risks posed by our counterparties or if there continues to be fraudulent use of our payment cards or systems.
We have experienced and may in the future experience substantial credit and fraud losses and other adverse effects if we fail to adequately assess and monitor credit risks posed by our counterparties or if there continues to be fraudulent use of our payment cards or systems.
We are subject to the FCPA and the United Kingdom’s Bribery Act 2010 (“UKBA”), as we own subsidiaries organized under UK law, which serve as holding companies for other subsidiaries. The FCPA generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.
We are subject to the FCPA and the UKBA, as we own subsidiaries organized under UK law, which serve as holding companies for other subsidiaries. The FCPA generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.
Our operations are subject to substantial regulation both domestically and internationally. In addition, there are often new regulatory efforts, which could result in significant constraints and may impact our operations. These existing and emerging laws and regulations can make the expansion or operations of our business very difficult and negatively impact our revenue or increase our compliance costs.
In addition, there are often new regulatory efforts, which could result in significant constraints and may impact our operations. These existing and emerging laws and regulations can make the expansion or operations of our business very difficult and negatively impact our revenue or increase our compliance costs.
These requirements vary throughout the markets in which we operate, and have increased over time as the geographic scope and complexity of our payments product services have expanded.
These requirements vary throughout the markets in which we operate, and have increased over time as the geographic scope and complexity of our payments product 43 Table of Contents PART I services have expanded.
Our efforts to acquire and maintain these licenses could result in significant management time, effort, and 39 Table of Contents cost, and may still not guarantee compliance given the constant state of change in these regulatory frameworks.
Our efforts to acquire and maintain these licenses could result in significant management time, effort, and cost, and may still not guarantee compliance or our ability to maintain such licenses given the constant state of change in these regulatory frameworks.
Demand for our services has in the past been, and may in the future be, correlated with general economic conditions and the amount of business activity in the regional economies in which we operate, particularly in the U.S., Europe, the United Kingdom, Asia, Australia, and New Zealand.
Demand for our services has in the past been, and may in the future be, at least partially correlated with general economic conditions and the amount of business activity in the regional economies in which we operate, particularly in the U.S., Europe, and the United Kingdom.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−0 removed4 unchanged
Biggest changeIssuer Purchases of Equity Securities The following table presents the Company’s common stock repurchases during the fourth quarter of the year ended December 31, 2022, reflected on a trade date basis: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 1 October 1 - October 31 536,566 $ 139.80 536,566 $ 574,989,380 November 1 - November 30 — $ — — $ 574,989,380 December 1 - December 31 410,119 $ 161.46 410,119 $ 508,770,394 Total 946,685 $ 149.18 946,685 1 Under a share buyback plan approved by our board of directors and announced on August 23, 2022, the Company was authorized to repurchase up to $150.0 million in shares of its common stock in the open market and through various other means pursuant to the share buyback plan, through August 23, 2026.
Biggest changeIssuer Purchases of Equity Securities Under a share repurchase plan approved by our board of directors and announced on August 23, 2022, the Company was authorized to repurchase up to $150.0 million in shares of its common stock in the open market and through various other means pursuant to the share repurchase plan, through August 23, 2026.
The Company has certain restrictions on the dividends it may pay under its Amended and Restated Credit Agreement, including pro forma compliance with a consolidated leverage ratio, testing consolidated funded indebtedness less (i) an amount up to $400.0 million of consolidated funded indebtedness due to permitted securitization transactions, (ii) the amount of consolidated funded indebtedness constituting the non-recourse portion of permitted factoring transactions, and (iii) an amount up to $400.0 million of unrestricted cash and cash equivalents denominated in U.S. dollars or other lawful currencies (provided that such other currencies are readily convertible to, and deliverable in, U.S. dollars) held by the Company and its subsidiaries) to consolidated EBITDA of less than 2.75:1.00 for the most recent period of four fiscal quarters.
The Company has certain restrictions on the dividends it may pay under its Amended and Restated Credit Agreement, including pro forma compliance with a consolidated leverage ratio, testing consolidated funded indebtedness less (i) an amount up to $400.0 million of consolidated funded indebtedness due to permitted securitization transactions, (ii) the amount of consolidated funded indebtedness constituting the non-recourse portion of permitted factoring transactions, and (iii) an amount up to $400.0 million of unrestricted cash and cash equivalents denominated in U.S. dollars or other lawful currencies (provided that such other currencies are readily convertible to, and deliverable in, U.S. dollars) held by the Company and its subsidiaries (other than bank regulated subsidiaries) to Consolidated EBITDA of less than 2.75:1.00 for the most recent period of four fiscal quarters.
On October 27, 2022, the Company announced that our board of directors approved an increase of $500.0 million to the share buyback plan, resulting in a total repurchase authorization of $650.0 million, and shortened the duration of the plan to December 31, 2025.
On October 27, 2022, the Company announced that our board of directors approved an increase of $500.0 million to the share repurchase plan, resulting in a total repurchase authorization of $650.0 million, and shortened the duration of the plan to December 31, 2025.
In addition, repurchases are subject to the availability of shares of stock for purchase, prevailing market conditions, the trading price of the Company’s stock and the Company’s financial performance. The repurchase program does not obligate WEX to acquire any specific number of shares and may be modified, discontinued or suspended at any time.
In addition, repurchases are subject to the availability of shares of stock for purchase, prevailing market conditions, the trading price of the Company’s stock and the Company’s financial performance. The repurchase program does not obligate WEX to acquire any specific number of shares and may be modified, discontinued or suspended at any time. ITEM 6. [RESERVED]
As of February 10, 2023, the closing price of our common stock was $201.27 per share, there were 43,132,743 shares of our common stock outstanding and there were 11 holders of record of our common stock.
As of February 15, 2024, the closing price of our common stock was $224.14 per share, there were 41.7 million shares of our common stock outstanding and there were 10 holders of record of our common stock.
Added
The following table presents the Company’s common stock repurchases during each month of the fourth quarter of 2023: Total Number of Shares Purchased Average Price Paid per Share (1),(2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) October 1 - October 31, 2023 145,301 $ 165.19 145,301 $ 339,457,234 November 1 - November 30, 2023 681,100 $ 173.43 681,100 $ 221,335,032 December 1 - December 31, 2023 43,718 $ 180.53 43,718 $ 213,442,771 Total 870,119 $ 172.41 870,119 (1) Includes commissions paid on stock repurchases. 52 Table of Contents PART II (2) The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible one percent excise tax on the net value of certain stock repurchases made after December 31, 2022.
Added
All dollar amounts presented exclude such excise taxes, as applicable. (3) Values based on the share repurchase plan authorization in place as of December 31, 2023. See Part II – Item 8 – Note 28, Subsequent Events for information regarding an increase to the share repurchase plan authorization made during 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table compares line items within operating income for unallocated corporate expenses: Twelve Months Ended December 31, Increase (Decrease) (In thousands) 2022 2021 Amount Percent Other operating expenses General and administrative $ 124,697 $ 120,435 $ 4,262 4 % Depreciation and amortization $ 2,000 $ 2,100 $ (100) (5) % Increased stock and other compensation expense during 2022 was substantially offset by a reduction in professional fees, including legal and arrangement fees incurred in connection with the amendment and restatement of our 2016 Credit Agreement during 2021, resulting in general and administrative expense remaining relatively consistent with that of 2021. 55 Table of Contents Non-operating income and expense The following table reflects comparative results for certain amounts excluded from operating income: Twelve Months Ended December 31, Change (In thousands) 2022 2021 Amount Percent Financing interest expense $ (130,690) $ (128,422) $ 2,268 2 % Change in fair value of contingent consideration $ (139,088) $ (40,100) $ 98,988 247 % Other income $ — $ 3,617 $ (3,617) (100) % Net foreign currency loss $ (22,702) $ (12,339) $ 10,363 84 % Net unrealized gain on financial instruments $ 83,184 $ 39,190 $ 43,994 112 % Income tax provision $ 93,085 $ 67,807 $ 25,278 37 % Net income from non-controlling interests $ 268 $ 846 $ (578) (68) % Change in value of redeemable non-controlling interest $ 34,245 $ (135,156) $ 169,401 NM NM - Not meaningful Financing interest expense in 2022 remained consistent with that of 2021.
Biggest changeThe following table compares line items within operating income for unallocated corporate expenses: Twelve Months Ended December 31, Increase (Decrease) (in millions) 2023 2022 Amount Percent Other operating expenses General and administrative $ 157.1 $ 124.7 $ 32.4 26 % Depreciation and amortization $ 2.6 $ 2.0 $ 0.6 29 % General and administrative expenses increased $32.4 million during 2023 as compared to the prior year, primarily due to increased headcount and related compensation expense, including stock compensation, coupled with an increase in costs incurred in connection with business acquisitions. 62 Table of Contents PART II Non-Operating Income and Expense The following table reflects comparative results for certain amounts excluded from operating income: Twelve Months Ended December 31, Absolute Dollar Change Effect of Change on Net Income (in millions) 2023 2022 Financing interest expense, net of financial instruments $ (204.6) $ (47.5) $ 157.1 Reduction Change in fair value of contingent consideration $ (8.5) $ (139.1) $ 130.6 Increase Loss on extinguishment of Convertible Notes $ (70.1) $ — $ 70.1 Reduction Net foreign currency gain (loss) $ 4.9 $ (22.7) $ 27.6 Increase Income tax provision $ 102.2 $ 93.1 $ 9.1 Reduction Net income from non-controlling interests $ — $ 0.3 $ 0.3 NM Change in value of redeemable non-controlling interest $ — $ 34.2 $ 34.2 NM NM - Not meaningful Due primarily to substantial increases in the LIBOR forward yield curve during 2022, we recognized significant unrealized gains on our interest rate swap financial instruments during 2022, which reduced financing interest expense, net of financial instruments for that year.
Additionally, other third-parties are utilized in performing services directly related to generating revenue. • Provision for credit losses - Changes in the reserve for credit loss are the result of changes in management’s estimate of the losses in the Company’s outstanding portfolio of receivables, including losses from fraud. • Operating interest - The Company incurs interest expense on operating debt and deposits, which provide liquidity to fund short-term receivables or is used to purchase fixed income securities. • Depreciation and amortization - The Company has identified those tangible and intangible assets directly associated with providing a service that generates revenue and records the depreciation and amortization associated with those assets under this category.
Additionally, other third-parties are utilized in performing services directly related to generating revenue. • Provision for credit losses - Changes in the reserve for credit loss are the result of changes in management’s estimate of the losses in the Company’s outstanding portfolio of receivables, including losses from fraud. • Operating interest - The Company incurs interest expense on operating debt and deposits, which provide liquidity to fund short-term receivables or are used to purchase fixed income securities. • Depreciation and amortization - The Company has identified those tangible and intangible assets directly associated with providing a service that generates revenue and records the depreciation and amortization associated with those assets under this category.
The GPCM requires us to identify a population of publicly traded companies with similar operations and key attributes to those of our reporting units (GPCs), which involves a certain degree of judgment as no two companies are entirely alike. Various revenue and earnings based multiples from these GPCs are then used in our fair value calculation.
The GPCM requires us to identify a population of publicly traded companies with similar operations and key attributes to those of our reporting units (“GPCs”), which involves a certain degree of judgment as no two companies are entirely alike. Various revenue and earnings based multiples from these GPCs are then used in our fair value calculation.
The contingent payment period began on July 1, 2021 and extends until the earlier of (i) the year ending December 31, 2030, or (ii) the date when the cumulative amount paid as contingent consideration equals $225 million. Contingent payments are calculated quarterly and are paid and settled annually .
The contingent payment period began on July 1, 2021 and extends until the earlier of (i) the year ending December 31, 2030, or (ii) the date when the cumulative amount paid as contingent consideration equals $225.0 million. Contingent payments are calculated quarterly and are paid and settled annually.
Our Travel and Corporate Solutions 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.
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.
This 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.
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.
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.
Concessions to certain customers experiencing financial difficulties may be granted and are generally limited to extending the time to pay, placing a customer on a payment plan or granting waivers of late fees.
These amounts may increase or decrease during 2023 as we increase or decrease credit to customers, subject to appropriate credit reviews, as part of our lending product agreements. Many of these commitments are not expected to be utilized. We can adjust most of our customers’ credit lines at our discretion at any time.
These amounts may increase or decrease during 2024 as we increase or decrease credit to customers, subject to appropriate credit reviews, as part of our lending product agreements. Many of these commitments are not expected to be utilized. We can adjust most of our customers’ credit lines at our discretion at any time.
Consequently, cash flows from operations are impacted significantly by increases or decreases in fuel prices, driving changes in accounts receivable and accounts payable balances, which directly impact our capital resource requirements.
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.
Our annual goodwill impairment test indicated excesses of estimated fair value over the respective carrying values of our other reporting units ranging from approximately 100 percent to greater than 200 percent.
Our annual goodwill impairment test indicated excesses of estimated fair value over the respective carrying values of our other reporting units ranging from approximately 130 percent to greater than 200 percent.
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 2022 or 2021.
Concessions to certain customers experiencing financial difficulties may be granted and are generally 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 2023 or 2022.
Also included are corporate facilities expenses, certain third-party professional service fees, and other corporate expenses. • Sales and marketing - The Company’s sales and marketing expenses relate primarily to compensation, benefits, sales commissions, and related expenses for sales, marketing, and other related activities. 48 Table of Contents • Depreciation and amortization - The depreciation and amortization associated with tangible and intangible assets that are not considered to be directly associated with providing a service that generates revenue are recorded as other operating expenses.
Also included are corporate facilities expenses, certain third-party professional service fees, and other corporate expenses. • Sales and marketing - The Company’s sales and marketing expenses relate primarily to compensation, benefits, sales commissions, and related expenses for sales, marketing, and other related activities. • Depreciation and amortization - The depreciation and amortization associated with tangible and intangible assets that are not considered to be directly associated with providing a service that generates revenue are recorded as other operating expenses.
Earnings outside of the United States are accompanied by certain financial risks, such as changes in foreign currency exchange rates. Changes in foreign currency exchange rates may reduce the reported value of our foreign currency revenues, 65 Table of Contents net of expenses and cash flows.
Earnings outside of the United States are accompanied by certain financial risks, such as changes in foreign currency exchange rates. Changes in foreign currency exchange rates may reduce the reported value of our foreign currency revenues, net of expenses and cash flows.
The Company does not allocate foreign currency gains and losses, financing interest expense, unrealized gains and losses on financial instruments, change in fair value of contingent consideration, other income, income taxes, and adjustments attributable to non-controlling interests to our operating segments as management believes these items are unpredictable and can obscure a segment’s operating trends and results.
The Company does not allocate foreign currency gains and losses, financing interest expense, net of financial instruments, change in fair value of contingent consideration, loss on debt extinguishments, other income, income taxes, and adjustments attributable to non-controlling interests to our operating segments as management believes these items are unpredictable and can obscure a segment’s operating trends and results.
Year Ended December 31, 2021, Compared to the Year Ended December 31, 2020 Discussion and analysis of the year ended December 31, 2021 compared to the year ended December 31, 2020 is included under the heading “Item 7.
Year Ended December 31, 2022, Compared to the Year Ended December 31, 2021 Discussion and analysis of the year ended December 31, 2022 compared to the year ended December 31, 2021 is included under the heading “Item 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below focuses on the factors affecting our consolidated results of operations for the years ended December 31, 2022 and 2021, financial condition at December 31, 2022 and 2021 and, where appropriate, factors that may affect our future financial performance, unless stated otherwise.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below focuses on the factors affecting our consolidated results of operations for the years ended December 31, 2023 and 2022, financial condition at December 31, 2023 and 2022 and, when appropriate, factors that may affect our future financial performance, unless stated otherwise.
We were in compliance with these covenants and restrictions at December 31, 2022. Commitments to extend credit We have entered into commitments to extend credit in the ordinary course of business. We had approximately $9.2 billion of unused commitments to extend credit at December 31, 2022, as part of established customer agreements, which are off-balance sheet arrangements.
We were in compliance with these covenants and restrictions at December 31, 2023. Commitments and Contingencies Commitments to Extend Credit We have entered into commitments to extend credit in the ordinary course of business. We had approximately $9.4 billion of unused commitments to extend credit at December 31, 2023, as part of established customer agreements, which are off-balance sheet arrangements.
The Amended and Restated Credit Agreement also requires, solely for the benefit of the lenders of the Tranche A Term Loan and lenders under the Revolving Credit Facility, that the Company maintain at the end of each fiscal quarter the following financial ratios: • a consolidated interest coverage ratio (as defined in the Amended and Restated Credit Agreement) of no less than 3.00 to 1.00; and • a consolidated leverage ratio (as defined in the Amended and Restated Credit Agreement) of no more than 5.00 to 1.00 for the quarters ending December 31, 2022 through September 30, 2023, and 4.75 to 1.00 thereafter.
The Amended and Restated Credit Agreement also requires, solely for the benefit of the lenders of the Tranche A Term Loan and lenders under the Revolving Credit Facility, that the Company maintain at the end of each fiscal quarter the following financial ratios: • a consolidated interest coverage ratio (as defined in the Amended and Restated Credit Agreement) of no less than 3.00 to 1.00; and • a consolidated leverage ratio (as defined in the Amended and Restated Credit Agreement) of no more than 4.75 to 1.00 as of December 31, 2023 and thereafter.
In the DCFM, as the WACC increases, fair value decreases because market participants would require a higher rate of return. Therefore, for example, if the current economic environment were to deteriorate, and as a result the WACC were to increase, the fair value of our reporting units would decrease.
In the DCFM, as the 68 Table of Contents PART II WACC increases, fair value decreases because market participants would require a higher rate of return. Therefore, for example, if the current economic environment were to deteriorate, and as a result the WACC were to increase, the fair value of our reporting units would decrease.
Our Fleet Solutions segment is 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.
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.
For the year ended December 31, 2021, other costs additionally include a penalty incurred on a vendor contract termination; • Impairment charges represent non-cash asset write-offs, which do not reflect recurring costs that would be relevant to the Company’s continuing operations.
For the year ended December 31, 2021, other costs additionally include a penalty incurred on a vendor contract termination; 64 Table of Contents PART II • Impairment charges represent non-cash asset write-offs, which do not reflect recurring costs that would be relevant to the Company’s continuing operations.
Upon distribution of the foreign subsidiaries’ earnings in which the Company continues to assert indefinite reinvestment, which approximates $129.1 million at December 31, 2022, the Company would be subject to withholding taxes payable to foreign countries, where applicable, but would generally have no further federal income tax liability.
Upon distribution of the foreign subsidiaries’ earnings in which the Company continues to assert indefinite reinvestment, which approximates $203.5 million at December 31, 2023, the Company would be subject to withholding taxes payable to foreign countries, where applicable, but would generally have no further federal income tax liability.
Financing Activities Financing cash flows generally consist of the issuance and repayment of debt, deposits and proceeds from employee exercises of stock options, changes in restricted cash payable and purchases of treasury shares.
Financing Activities Financing cash flows generally consist of the issuance and repayment of debt, deposits and proceeds from employee exercises of stock options, changes in restricted cash payable and purchases of our common stock.
While the final amount to be paid by WEX through 2030 could change significantly from our estimations, given the $225 million payment ceiling, the actual liability cannot exceed our current estimate as of December 31, 2022 by more than $18.6 million.
While the final amount to be paid by WEX through 2030 could change significantly from our estimations, given the $225.0 million payment ceiling, the actual liability cannot exceed our current estimate as of December 31, 2023 by more than $10.0 million.
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 Utah DFI.
(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.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is presented in the following sections: • 2022 Highlights and Year in Review • Our Segments • Results of Operations • Application of Critical Accounting Estimates • Recently Adopted and New Accounting Standards • Liquidity and Capital Resources 2022 Highlights and Year in Review Company Highlights The following table presents a comparative, summarized view of our financial results for 2022.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is presented in the following sections: • 2023 Highlights and Year in Review • Our Segments • Results of Operations • Application of Critical Accounting Estimates • Recently Adopted and New Accounting Standards • Liquidity and Capital Resources 2023 Highlights and Year in Review Company Highlights The following graphs present a comparative, summarized view of selected results.
Operating Activities We fund a customer’s entire receivable in the majority of our fleet and travel payment processing transactions, while the revenue generated by these transactions is only a small percentage of that amount.
Operating Activities We fund a customer’s entire receivable in the majority of our Mobility and Corporate Payments processing transactions, while the revenue generated by these transactions is only a small percentage of that amount.
The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including projected financial information, effective income tax rates, present value discount factors and long-term growth expectations. Goodwill is not amortized but is instead reviewed for impairment.
The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including projected financial information, effective income tax rates, present value discount factors and long-term growth expectations.
Impairment charges consisted of non-cash goodwill impairment charges of $136.5 million to two of our international reporting units within our Fleet Solutions segment. No impairment to any of our reporting units was identified during the year ended December 31, 2021. See Item 8 – Note 9, Goodwill and Other Intangible Assets, of our consolidated financial statements for more information.
Impairment charges during 2022 consisted of non-cash goodwill impairment charges of $136.5 million for two of our international Mobility reporting units. No impairment to any of our reporting units was identified during the year ended December 31, 2023. See Part II – Item 8 – Note 9, Goodwill and Other Intangible Assets, of our consolidated financial statements for more information.
Customer deposits are generally non-interest bearing, certificates of deposit are issued at fixed rates, money market deposits are issued at both fixed and variable rates based on LIBOR or the Federal Funds rate and HSA deposits are issued at rates as defined within the consumer account agreements.
Customer deposits are generally non-interest bearing, certificates of deposit are issued at fixed rates, money market deposits are issued at both fixed and variable rates based on the Federal Funds rate and HSA deposits are issued at rates as defined within the consumer account agreements. Certificates of deposit and certain fixed term money market deposit products have fixed contractual maturities.
An increase or decrease to the 2022 reserve by 0.5 percent of the total gross accounts receivable balance would increase or decrease the provision for credit losses by $16.9 million.
An increase or decrease to the 2023 reserve by 0.5 percent of the total gross accounts receivable balance would increase or decrease the provision for credit losses by $17.6 million.
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 after appropriate reinvestment for recurring investments in property, equipment and capitalized software that are required to operate the business; (ii) changes in net deposits occur on a daily basis as a regular part of operations; and (iii) purchases of current investment securities are made as a result of deposits gathered operationally.
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 certain non-recurring transactions, after appropriate reinvestment for recurring investments in property, equipment and capitalized software that are required to operate the business; (ii) changes in net deposits occur on a daily basis as a regular part of operations; (iii) borrowings under the BTFP and borrowed federal funds are primarily used as a replacement for brokered deposits as part of our accounts receivable funding strategy; and (iv) purchases of current investment securities are made as a result of deposits gathered operationally.
As of December 31, 2022, we have an estimated reserve for credit losses that is 3.2 percent of the total gross accounts receivable balance as compared to December 31, 2021, when our estimated reserve for credit losses was 2.2 percent of gross accounts receivable.
As of December 31, 2023, we have an estimated reserve for credit losses that is 2.6 percent of the total gross accounts receivable balance as compared to December 31, 2022, when our 67 Table of Contents PART II estimated reserve for credit losses was 3.2 percent of gross accounts receivable.
Under the arrangements, the factored receivables have been transferred without recourse. Available capacity is dependent on the level of our trade accounts receivable eligible to be sold and the financial institution’s willingness to purchase such receivables. However, the Company is not dependent on them to maintain its liquidity and capital resources.
Available capacity is generally dependent on the level of our trade accounts receivable eligible to be sold and the financial institution’s willingness to purchase such receivables. However, the Company is not dependent on them to maintain its liquidity and capital resources.
Our significant accounting policies are described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information on credit losses, see Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Our valuation allowance at December 31, 2022 increased to $131.4 million from $95.0 million at December 31, 2021, resulting in deferred tax liabilities, net, of $128.8 million as of December 31, 2022. Changes in the expectations regarding the realization of deferred tax assets could materially impact income tax expense in future periods.
Our valuation allowance at December 31, 2023 decreased to $100.7 million from $131.4 million at December 31, 2022, resulting in deferred tax liabilities, net, of $115.8 million as of December 31, 2023. Changes in the expectations regarding the realization of deferred tax assets and liabilities could materially impact income tax expense in future periods.
As of December 31, 2022, we had cash and cash equivalents of $922.0 million, including Corporate Cash of $171.5 million, and remaining borrowing availability of $898.9 million under the Revolving Credit Facility (as defined below) along with access to various sources of funds, including uncommitted federal funds lines of credit from other banks.
As of December 31, 2023, we had cash and cash equivalents of $975.8 million, including Corporate Cash of $171.9 million, and remaining borrowing availability of $731.2 million under the Revolving Credit Facility along with access to various sources of funds, including uncommitted federal funds lines of credit from other banks.
Therefore, we do not believe total unused credit available to customers and customers of strategic relationships represents future cash requirements. We believe that we can adequately fund actual cash requirements related to these credit commitments through the sources of cash described above.
Therefore, we do not believe total unused credit available to customers and customers of strategic relationships represents future cash requirements. We believe that we can adequately fund actual cash requirements related to these credit commitments through the sources of cash described above. Deferred Payments on Acquisition We have deferred cash payments and additional consideration owed pursuant to previously completed acquisitions.
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 are unrelated to the continuing operations of the Company.
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 year ended December 31, 2023 includes the loss on extinguishment of Convertible Notes, are unrelated to the continuing operations of the Company.
During 2022, net foreign currency loss was $22.7 million, as compared to $12.3 million in 2021. The increased losses resulted from the further weakening of certain foreign currencies in which we transact, including the Australian dollar, the Euro and the British Pound sterling, relative to the U.S. dollar.
During 2023, net foreign currency gain was $4.9 million, as compared to a loss of $22.7 million in 2022. The gain in 2023 resulted from the strengthening of certain foreign currencies in which we transact, including the Euro and the British Pound sterling, relative to the U.S. dollar.
Undistributed Earnings Undistributed earnings of certain foreign subsidiaries of the Company amounted to $159.9 million at December 31, 2022. The Company continues to maintain its indefinite reinvestment assertion for its investments in foreign subsidiaries except for any historical undistributed earnings and future earnings for WEX Australia.
The Company continues to maintain its indefinite reinvestment assertion for its investments in foreign subsidiaries except for any historical undistributed earnings and future earnings for WEX Australia.
(6) Deferred payments on acquisition – Relates to deferred cash payments and additional consideration owed pursuant to previously completed acquisitions. The asset purchase agreement with Bell Bank includes the potential for additional consideration payable annually by WEX that is calculated on a quarterly basis and is contingent, and based, upon any future increases in the Federal Funds rate.
The asset purchase agreement with Bell Bank also includes the potential for additional consideration payable annually by WEX that is calculated on a quarterly basis and is contingent, and based, upon any future changes in the Federal Funds rate.
The Company had $110.6 million of securitized debt under these facilities as of December 31, 2022. In addition, 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 $39.0 million borrowed against these participation agreements as of December 31, 2022.
(3) 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 $39.1 million borrowed against these participation agreements as of December 31, 2023.
Although no reporting units are deemed at risk of impairment as of December 31, 2022, unforeseen events, changes in circumstances and market conditions and differences in estimates of future cash flows could adversely affect the fair value of our assets and could result in future impairment charges.
Unforeseen events, changes in circumstances and market conditions and differences in estimates of future cash flows could adversely affect the fair value of our assets and could result in future impairment charges.
Our short-term cash requirements consist primarily of funding the working capital needs of our business, payments on maturities and withdrawals of deposits, payments on borrowed federal funds, required capital expenditures, repayments and interest payments on the credit facilities under our Amended and Restated Credit Agreement and Convertible Notes and other operating expenses.
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 Health and Employee Benefit Solutions segment provides SaaS software with embedded payment solutions and plan administration services for consumer directed health benefits, COBRA accounts, and benefit enrollment and administration. Additionally, the Company provides custodial and depository services for HSAs.
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 custodial and depository services, respectively, with respect to HSAs.
Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a non-GAAP basis that excludes the items specified above for the reasons discussed below: • 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.
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.
At December 31, 2022, approximately 98 percent and 99 percent of the outstanding balance of total trade accounts receivable was less than 30 days and 60 days past due, respectively. • Net cash provided by operating activities for 2022 increased $722.0 million as compared to the prior year, primarily attributable to a decreased change in accounts receivable, net of a corresponding increased change in accounts payable, as well as higher net income adjusted for non-cash items. 64 Table of Contents • Net cash provided by operating activities for 2021 decreased $779.4 million as compared to the prior year, substantially due to an increase in accounts receivable balances, which was partially offset by a corresponding increase in accounts payable and accrued expense balances.
At December 31, 2023, approximately 98 percent and 99 percent of the outstanding balance of total trade accounts receivable was less than 30 days and 60 days past due, respectively. • Net cash provided by operating activities for 2023 increased $228.5 million as compared to the prior year, primarily attributable to the favorable impact on working capital resulting from a decrease in fuel prices during 2023 relative to the prior year. • Net cash provided by operating activities for 2022 increased $722.0 million as compared to the prior year, primarily attributable to a decreased change in accounts receivable, net of a corresponding increased change in accounts payable, as well as higher net income adjusted for non-cash items.
In addition, adjusted free cash flow as used by WEX may not be comparable to similarly titled measures employed by other companies. 59 Table of Contents The following table reconciles GAAP operating cash flow to adjusted free cash flow for the years ended December 31, 2022, 2021 and 2020: ( In thousands ) Year ended December 31, 2022 2021 2020 Operating cash flow, as reported $ 679,425 $ (42,579) $ 736,804 Adjusted for certain investing and financing activities: Increases (decreases) in net deposits 801,592 1,620,284 (396,065) Less: Purchases of current investment securities, net of sales and maturities (585,754) (956,221) — Less: Capital expenditures (112,875) (86,041) (80,471) Adjusted free cash flow $ 782,388 $ 535,443 $ 260,268 Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments about certain items and future events that affect reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities at the date of the financial statements.
In addition, adjusted free cash flow as used by WEX may not be comparable to similarly titled measures employed by other companies. 66 Table of Contents PART II The following table reconciles GAAP operating cash flow to adjusted free cash flow for the years ended December 31, 2023, 2022 and 2021: Year ended December 31, (in millions) 2023 2022 2021 Operating cash flow, as reported $ 907.9 $ 679.4 $ (42.6) Adjustments to cash flows from operating activities: Other (124.5) — — Adjusted for certain investing and financing activities: Increases in net deposits 593.1 801.6 1,620.3 Increases in borrowings under the BTFP 775.0 — — Increases in borrowed federal funds 70.0 — — Less: Purchases of current investment securities, net of sales and maturities (1,561.0) (585.8) (956.2) Less: Capital expenditures (143.6) (112.9) (86.0) Adjusted free cash flow $ 516.9 $ 782.4 $ 535.4 Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments about certain items and future events that affect reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities at the date of the financial statements.
As a result of owning all of our technology and issuing capabilities, our Travel and Corporate Solutions segment has a highly scalable and relatively fixed cost base resulting in largely comparable expenses year to year.
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, the significant increase in 2023 revenues has also significantly increased operating income, segment adjusted operating income, and segment adjusted operating income margin in 2023.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income (loss) before income taxes.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income before income taxes. See also Part II – Item 8 – Note 24, Segment Information, of our consolidated financial statements for more information regarding our segment determination.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income (loss) before income taxes.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income before income taxes. See also Part II – Item 8 – Note 24, Segment Information, of our consolidated financial statements for more information regarding our segment determination.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income (loss) before income taxes.
See “Non-GAAP Financial Measures That Supplement GAAP Measures” later in this Item 7 for a reconciliation of total segment adjusted operating income to income before income taxes. See also Part II – Item 8 – Note 24, Segment Information, of our consolidated financial statements for more information regarding our segment determination.
For additional information regarding the accounting for past acquisitions, see Note 4, Acquisitions, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. For additional information regarding the accounting for our acquisitions, see Note 4, Acquisitions, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
WEX Bank accepts its deposits through certain customers as required collateral for credit that has been extended (“customer deposits”) and contractual arrangements for brokered and non-brokered certificate of deposit and money market deposit products. Additionally, beginning in October 2021, WEX Bank holds HSA deposits transferred from third-party depository partners.
WEX Bank accepts its deposits through certain customers as required collateral for credit that has been extended (“customer deposits”) and contractual arrangements for brokered and non-brokered certificate of deposit and money market deposit products. Additionally, WEX Bank holds deposits for the benefit of WEX Inc.’s HSA customers subject to the terms of a deposit agreement.
For the two reporting units for which we recognized impairment during the third quarter of 2022, one had no remaining goodwill and the other had $95.4 million of goodwill as of December 31, 2022. Future impairment of this reporting unit may occur if financial results or macroeconomic conditions deteriorate versus our current expectations.
Our annual goodwill impairment test performed as of October 1, 2023 identified no impairments. One of our reporting units, for which we took an impairment during 2022, had $95.3 million of goodwill as of December 31, 2023. Future impairment of this reporting unit may occur if financial results or macroeconomic conditions deteriorate versus our current expectations.
During March 2022, the Company purchased the remaining non-controlling interest in PO Holding from SBI, reducing the carrying value of the redeemable non-controlling interest to zero. The transaction resulted in a $34.2 million gain, net of tax expense. See Part II – Item 8 – Note 4, Acquisitions, to our consolidated financial statements for further information.
See Part II – Item 8 – Note 14, Income Taxes of our consolidated financial statements for more information regarding the drivers behind our effective tax rates. During March 2022, the Company purchased the remaining non-controlling interest in PO Holding from SBI, reducing the carrying value of the redeemable non-controlling interest to zero.
See Part II – Item 8 – Note 16, Financing and Other Debt, in this report for more information regarding our applicable interest rates on our Amended and Restated Credit Agreement.
See Part II – Item 8 – Note 16, Financing and Other Debt, in this report for more information regarding this borrowing arrangement.
In selecting appropriate multiples to apply to each 61 Table of Contents reporting unit, we perform a comparative analysis between the reporting units and GPCs, considering revenue growth, profitability and the size of the reporting unit compared to the GPCs.
In selecting appropriate multiples to apply to each reporting unit, we perform a comparative analysis between the reporting units and GPCs, considering revenue growth, profitability and the size of the reporting unit compared to the GPCs. Significant increases or decreases in these multiples would result in an increase or decrease, respectively, in the fair value of the reporting unit.
Adjusted Free Cash Flow The definition of adjusted free cash flow, 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 $246.9 million during 2022 from 2021 reflecting a significant increase in operating cash flows and decrease in purchases of current investment securities, offset in part by the reduction in cash provided by net deposits as compared to the prior year. • Adjusted free cash flow increased $275.2 million during 2021 from 2020, reflecting a significant increase in net deposits, offset in part by the investment of such deposits in current investment securities, coupled with a significant decrease in operating cash flows.
Adjusted Free Cash Flow The definition of adjusted free cash flow, 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 decreased $265.5 million during 2023 from 2022 reflecting an increase in net purchases of available-for-sale debt securities, partially offset by borrowings under the BTFP and increasing cash inflows from operating activities. • Adjusted free cash flow increased $246.9 million during 2022 from 2021 reflecting a significant increase in operating cash flows and decrease in purchases of current investment securities, offset in part by the reduction in cash provided by net deposits as compared to the prior year. 72 Table of Contents PART II Undistributed Earnings Undistributed earnings of certain foreign subsidiaries of the Company amounted to $231.6 million at December 31, 2023.
Such accounts are also subject to late fees and interest charges based on a revolving balance. The Company had approximately $157.8 million and $93.7 million of receivables with revolving credit balances as of December 31, 2022 and 2021, respectively. The receivables portfolio consists of a large group of homogeneous smaller balances across a wide range of industries.
Such accounts are also subject to late fees and interest 71 Table of Contents PART II charges based on a revolving balance. The Company had approximately $133.3 million and $157.8 million of receivables with revolving credit balances as of December 31, 2023 and 2022, respectively.
Repurchases of our common stock may vary based on management’s evaluation of market and economic conditions and other factors. • Net cash provided by financing activities during 2022 decreased $915.0 million as compared to the prior year, primarily resulting from lower relative deposit issuances and purchases of treasury shares. • Net cash provided by financing activities during 2021 increased $1,655.3 million as compared to the prior year due primarily to higher relative deposit issuances, offset in part by the early redemption of the Company’s $400.0 million of Notes, as further described within Part II – Item 8 – Note 16, Financing and Other Debt.
Repurchases of our common stock may vary based on management’s evaluation of market and economic conditions and other factors. • Net cash provided by financing activities during 2023 increased $892.0 million as compared to the prior year, due primarily to net borrowings under the newly available BTFP and under our Revolving Credit Facility, offset in part by the repurchase of our Convertible Notes. • Net cash provided by financing activities during 2022 decreased $915.0 million as compared to the prior year, primarily resulting from lower relative deposit issuances and purchases of our common stock.
See Part II – Item 8 – Note 16, Financing and Other Debt, in this report for more information regarding these facilities. We utilize two off-balance sheet factoring 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.
We also utilize off-balance sheet factoring and receivable securitization facilities to sell certain of our accounts receivable to unrelated third-party financial institutions in order to accelerate 70 Table of Contents PART II the collection of the Company’s cash and reduce internal costs.
The other key metric included below is considered by Management to be of particular importance to our overall performance in 2022 as it 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.
The “Other Key Metric” included below is considered by Management to be of particular importance to our overall performance in 2023 as it provides enhanced information and data underlying our financial results.
The primary source of factoring fee revenue is calculated as a negotiated percentage fee of the receivable balance that we purchase. A secondary source of factoring fee revenue is a flat rate service fee to our customers that request a non-contractual same day funding of the receivable balance. Factoring fee revenue for 2022 decreased $2.2 million, as compared to 2021.
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 2023 decreased $11.4 million as compared to 2022.
The letters of credit are issued by us in favor of third-party beneficiaries and primarily related to facility lease agreements and virtual card and fuel payment processing activity at our foreign subsidiaries. These irrevocable letters of credit are secured and are renewed on an annual basis unless the Company chooses not to renew them.
The letters of credit are issued on our behalf in favor of third-party beneficiaries and primarily collateralize Corporate Payments processing activity. Subject to the terms of the Amended and Restated Credit Agreement, these irrevocable letters of credit are secured and are renewed on an annual basis unless the Company chooses not to renew them.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10–K for the year ended December 31, 2021, as filed with the SEC on March 1, 2021 and is incorporated by reference herein. 56 Table of Contents Non-GAAP Financial Measures That Supplement GAAP Measures Segment Adjusted Operating Income and Adjusted Net Income In addition to evaluating the Company’s performance on a GAAP basis, Management of the Company uses segment adjusted operating income, a non-GAAP measure, to allocate resources among our operating segments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10–K for the year ended December 31, 2022, as filed with the SEC on February 28, 2023 and is incorporated by reference herein. 63 Table of Contents PART II Non-GAAP Financial Measures That Supplement GAAP Measures 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.
No one customer receivable balance represented 10 percent or more of the outstanding receivables balance at December 31, 2022 or December 31, 2021.
The receivables portfolio consists of a large group of homogeneous smaller balances across a wide range of industries. No one customer receivable balance represented 10 percent or more of the outstanding receivables balance at December 31, 2023 or December 31, 2022.
As of December 31, 2022, the fair value of our contingent liability includes $28.7 million of liability related to calendar 2022, no longer subject to estimation and payable during January 2023.
As of December 31, 2023, the fair value of our contingent liability includes $64.5 million of liability related to calendar 2023, no longer subject to estimation and payable during January 2024. For additional information on the contingent consideration derivative liability, see Part II – Item 8 – Note 18, Fair Value.
The following table reconciles net income (loss) attributable to shareholders to adjusted net income attributable to shareholders and related per share data: Year ended December 31, (In thousands) 2022 2021 2020 Net income (loss) attributable to shareholders $ 201,438 $ 4.50 $ 137 $ — $ (243,638) $ (5.56) Unrealized (gain) loss on financial instruments (83,184) (1.86) (39,190) (0.86) 27,036 0.62 Net foreign currency loss 22,702 0.51 12,339 0.27 25,783 0.59 Change in fair value of contingent consideration 139,088 3.11 40,100 0.88 — — Acquisition-related intangible amortization 170,500 3.81 181,694 4.01 171,144 3.90 Other acquisition and divestiture related items 17,874 0.40 36,916 0.81 57,787 1.32 Legal settlement — — — — 162,500 3.71 Loss on sale of subsidiary — — — — 46,362 1.06 Stock-based compensation 100,694 2.25 76,550 1.70 65,841 1.50 Other costs 38,434 0.86 23,171 0.52 13,064 0.30 Impairment charges 136,486 3.05 — — 53,378 1.22 Debt restructuring and debt issuance cost amortization 17,333 0.39 21,768 0.48 40,063 0.91 ANI adjustments attributable to non-controlling interests (34,587) (0.77) 132,030 2.91 (42,910) (0.98) Tax related items (115,781) (2.59) (71,458) (1.58) (108,086) (2.47) Dilutive impact of stock awards 1 — — — — — (0.06) Dilutive impact of convertible debt 2 — (0.13) — — — — Adjusted net income attributable to shareholders $ 610,997 $ 13.53 $ 414,057 $ 9.14 $ 268,324 $ 6.06 58 Table of Contents 1 As the Company reported a net loss attributable to shareholders for 2020, the 2020 diluted weighted average shares outstanding equaled the basic weighted average shares outstanding under GAAP.
The following table reconciles net income attributable to shareholders to adjusted net income attributable to shareholders and related per share data: Year ended December 31, (in millions) 2023 2022 2021 Net income attributable to shareholders $ 266.6 $ 6.16 $ 201.4 $ 4.50 $ 0.1 $ — Unrealized loss (gain) on financial instruments 30.4 0.70 (83.2) (1.86) (39.2) (0.86) Net foreign currency (gain) loss (4.9) (0.11) 22.7 0.51 12.3 0.27 Change in fair value of contingent consideration 8.5 0.20 139.1 3.11 40.1 0.88 Acquisition-related intangible amortization 184.0 4.25 170.5 3.81 181.7 4.01 Other acquisition and divestiture related items 6.6 0.15 17.9 0.40 36.9 0.81 Stock-based compensation 131.6 3.04 100.7 2.25 76.6 1.70 Other costs 45.6 1.05 38.4 0.86 23.2 0.52 Impairment charges — — 136.5 3.05 — — Debt restructuring and debt issuance cost amortization 89.4 2.06 17.3 0.39 21.8 0.48 ANI adjustments attributable to non-controlling interests — — (34.6) (0.77) 132.0 2.91 Tax related items (112.1) (2.59) (115.8) (2.59) (71.5) (1.58) Dilutive impact of convertible debt (1) — (0.10) — (0.13) — — Adjusted net income attributable to shareholders $ 645.8 $ 14.81 $ 611.0 $ 13.53 $ 414.1 $ 9.14 (1) The dilutive impact of the Convertible Notes has been calculated under the ‘if-converted’ method for the periods through which they were outstanding.
In addition to cash consideration paid by WEX upon closing, the purchase agreement also includes potential additional consideration that is contingent upon any future increases in the Federal Funds rate post closing.
Contingent Consideration Derivative Liability In April 2021, we completed the acquisition of certain contractual rights to serve as custodian or sub-custodian to certain HSA assets. In addition to cash consideration paid by WEX upon closing, the purchase agreement also included additional consideration that is contingent upon any future increases in the Federal Funds rate post closing.
Assuming no further changes to the Federal Funds rate as of December 31, 2022, however, the Company expects that it will incur the full $225.0 million in contingent consideration, payable in annual increments of approximately $54.2 million over the next three years with any remaining balance payable during 2027. See Item 8 – Note 4, Acquisitions, for more information.
Assuming no further changes to the Federal Funds rate as of December 31, 2023, however, the Company expects that it will incur the full $225.0 million in contingent consideration, the remainder of which is payable over the next two years in average annual increments of approximately $66 million based on the Federal Funds rate in effect as of December 31, 2023.
Investing Activities Investing cash flows generally consist of capital expenditures, cash used for acquisitions and investment of eligible custodial cash assets. • Net cash used for investing activities for 2022 decreased $884.5 million as compared to the prior year, primarily resulting from a reduction in payments made for acquisitions as well as a reduction in net purchases of available-for-sale debt securities. • Net cash used for investing activities for 2021 increased $1,272.0 million as compared to the prior year, primarily resulting from the purchase of available-for-sale debt securities and payments made for acquisitions, including the acquisition of certain contractual rights to serve as custodian or sub-custodian of HSAs from Bell Bank and the benefitexpress Acquisition.
Investing Activities Investing cash flows generally consist of capital expenditures, cash used for acquisitions and investment of eligible custodial cash assets. • Net cash used for investing activities for 2023 increased $1,421.6 million as compared to the prior year, primarily resulting from an increase in net purchases of available-for-sale debt securities and cash paid for acquisitions.
The total number of shares used in calculating adjusted net income per diluted share for 2020 was 44.3 million. 2 Under the ‘if-converted’ method, approximately 1.6 million shares of the Company’s common stock associated with the assumed conversion of the convertible notes as of the beginning of the period was included in the 2022 calculation of adjusted net income per diluted share, as the effect of including such adjustments was dilutive.
For the year ended December 31, 2022, approximately 1.6 million shares of the Company’s common stock associated with the assumed conversion of the Convertible Notes as of the beginning of the period was included in the calculation of adjusted net income per diluted share, as the effect of including such adjustments was dilutive. 65 Table of Contents PART II GAAP operating income was $647.1 million, $469.8 million and $342.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Certificates of deposit and certain fixed term money market deposit products have fixed contractual maturities. Money market deposits without fixed terms may be withdrawn by the holder at any time, although the allowed number of transactions may be limited and notification may be required.
Money market deposits without fixed terms may be withdrawn by the holder at any time, although the allowed number of transactions may be limited and notification may be required. Customer deposits are released at the termination of the relationship, net of any customer receivable, or upon reevaluation of the customer’s credit in limited instances.
See Part II – Item 8 – Note 4, Acquisitions, of our consolidated financial statements for more information. • Impairment charges - Represents non-cash goodwill impairment charges.
Such assets include corporate facilities and information technology assets, and acquired intangible assets other than those included in cost of services. • Impairment charges - Represents non-cash goodwill impairment charges. See Part II – Item 8 – Note 9, Goodwill and Other Intangible Assets, of our consolidated financial statements for more information.
In addition, 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.
In addition, 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. 55 Table of Contents PART II Results of Operations Year Ended December 31, 2023, Compared to the Year Ended December 31, 2022 The following includes information that our management believes is material to an understanding of our results of operations.
Travel and Corporate Solutions total revenue increased $77.4 million for 2022, as compared to 2021. The increase was primarily driven by continued strength in consumer travel demand, which doubled travel-related purchase volumes during 2022 compared to 2021, and volume growth in the corporate payments partner channel.
(2) Changes in customer and product mix, including the significant growth in travel-related purchase volumes, has reduced our net interchange rate from 2022 to 2023. Corporate Payments total revenue increased $94.6 million for 2023, as compared to 2022. The increase was primarily driven by continued strength in global consumer travel demand.
WEX believes that adjusted net income, which similarly excludes all items discussed in the paragraph above except unallocated corporate expenses, and further excludes unrealized gains and losses on financial instruments, net foreign currency gains and losses, change in fair value of contingent consideration, debt issuance cost amortization, other adjustments attributable to non-controlling interests and tax related items, is also integral to the Company’s reporting and planning processes.
Adjusted net income , which similarly excludes the impact of all items excluded in 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.
Under the ‘if-converted’ me thod, $15.1 million of interest expense associated with our convertible notes, net of tax, was added back to adjusted net income. The total number of share used in calculating adjusted net income per diluted share for 2022 is 46.3 million.
Under the ‘if-converted’ method, $9.5 million and $15.1 million of interest expense, net of tax, associated with the Convertible Notes was added back to adjusted net income for the years ended December 31, 2023 and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+9 added−6 removed4 unchanged
Biggest changeIn thousands Estimated Impact on Interest Expense Amended and Restated Credit Agreement $ 10,971 Contractual deposits 1 3,594 Money market deposits 1,572 Securitized debt 2 1,106 1 For purposes of this table, we have assumed that contractual deposits with maturity dates during 2023, which include certificates of deposit and certain money market deposits that have a fixed maturity and interest rate, would be replaced at the same principal amount, but with a fixed interest rate one percent higher than the rate in effect at maturity. 2 Under the terms of the Company’s securitized debt agreements with MUFG Bank, Ltd., the Company sells certain of its Australian and European receivables to its Australian and European securitization subsidiaries, respectively.
Biggest change(in millions) Estimated Impact on Interest Expense Amended and Restated Credit Agreement $ 28.8 Contractual deposits (1) $ 4.4 Money market deposits $ 2.3 Deferred acquisition liabilities $ 1.3 Short term debt (2) $ 2.1 (1) For purposes of this table, we have assumed that contractual deposits with maturity dates during 2024, which include certificates of deposit and certain money market deposits that have a fixed maturity and/or interest rate, would be replaced at the same principal amount, but with an interest rate one percent higher than the rate in effect at maturity.
Accordingly, a significant part of our overall revenue is derived from fuel purchases, making our revenues in this segment subject to historically volatile fuel prices. As of December 31, 2022, the Company is not hedged for changes in fuel prices, though Management continually monitors the market and our alternatives to hedge these fluctuations.
Accordingly, a significant part of our overall revenue is derived from fuel purchases, making our revenues in this segment subject to historically volatile fuel prices. As of December 31, 2023, the Company is not hedged for changes in fuel prices, though Management continually monitors the market and our alternatives to hedge these fluctuations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk, including changes to interest rates, foreign currency exchange rates and commodity prices. From time to time, the Company enters into derivative instrument arrangements to manage these risks. Commodity Price Risk Customers and fuel retailer partners in our Fleet Solutions segment primarily purchase or sell fuel.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk, including changes to interest rates, foreign currency exchange rates and commodity prices. From time to time, the Company enters into derivative instrument arrangements to manage these risks. Commodity Price Risk Customers and fuel retailer partners in our Mobility segment primarily purchase or sell fuel.
The following table presents the effect of a 1 percent hypothetical increase or decrease in interest rates on our corporate debt, deposits and deferred acquisition liability, assuming that borrowings outstanding, notional amounts of our interest rate swap agreements, and contractual deposit maturities in place as of December 31, 2022 remain the same during 2023.
The following table presents the effect of a 1 percent hypothetical increase or decrease in interest rates on our corporate debt, deposits and deferred acquisition liabilities, assuming that borrowings and deferred acquisition liabilities outstanding and contractual deposit maturities in place as of December 31, 2023 remain the same during 2024.
As of December 31, 2022, we had $1.4 billion invested in current available-for-sale debt securities at fair value. The weighted-average coupon rate on these securities was 2.97% as of December 31, 2022.
As of December 31, 2023, we had $3.0 billion invested in current available-for-sale debt securities at fair value. The weighted-average coupon rate on these securities was 4.1 percent as of December 31, 2023.
As of December 31, 2022, consumer interest rates payable on HSA deposits ranged from 0.01 percent to 0.20 percent while the average rate payable during 2022 and 2021 was 0.04 percent and 0.03 percent, respectively. Accordingly, it is unlikely that the interest rate could change by 1 percent over the next twelve months.
As of December 31, 2023, consumer interest rates payable on HSA deposits ranged from 0.05 percent to 0.40 percent while the average rate payable during 2023 and 2022 was 0.11 percent and 0.04 percent, respectively. Accordingly, it is unlikely that the interest rate could change by 1 percent over the next twelve months. 76 Table of Contents PART II
We estimate that each one cent decline in average domestic fuel prices below the assumed average U.S. retail fuel price of $3.83 per gallon during 2023 would result in a $1.8 million decline in 2023 revenue.
We estimate that each one cent decline in average domestic fuel prices below our assumed average U.S. retail fuel price per gallon during 2024 would result in a $2.0 million decline in 2024 revenue.
Dollar versus the Euro, Australian dollar, Canadian dollar and British pound sterling. Our results of operations can be materially affected depending on the volatility and magnitude of foreign exchange rate changes. We currently do not utilize hedging instruments to mitigate these risks.
Dollar versus the Euro, Australian dollar, Canadian dollar and British pound sterling. Our results of operations can be materially affected depending on the volatility and magnitude of foreign exchange rate changes.
The majority of the Company’s HSA deposits are deposited with, managed and invested by WEX Bank through an investment manager. Such custodial assets are generally invested in fixed income securities. We attempt to limit our exposure to credit risk by establishing strict investment policies as to minimum investment ratings, diversification of our portfolio and setting risk tolerance levels.
The HSA funds over which WEX Inc. serves as custodian that are deposited with, managed and invested by WEX Bank are generally invested in fixed income securities. We attempt to limit our exposure to credit risk by establishing strict investment policies as to minimum investment ratings, diversification of our portfolio and setting risk tolerance levels.
Assuming a hypothetical increase in interest rates of 25 basis points, the resulting potential decrease in fair value of our portfolio of securities as of December 31, 2022 would be $16.4 million. Conversely, a corresponding decrease in interest rates would result in a comparable increase in fair value.
Assuming a hypothetical increase in interest rates of 25 basis points, the resulting potential decrease in fair value of our portfolio of securities as of December 31, 2023 would be less than 2 percent.
We periodically review the projected borrowings under our Amended and Restated 67 Table of Contents Credit Agreement and the current interest rate environment in order to ascertain whether interest rate swaps should be used to reduce our exposure to interest rate volatility. See Item 8 – Note 12, Derivative Instruments, for more information.
We periodically review the projected borrowings under our Amended and Restated Credit Agreement and the current interest rate environment in order to ascertain whether interest rate swaps should be used to reduce our exposure to interest rate volatility. On December 12, 2023, the Company unwound and terminated all of its outstanding swap agreements.
Interest Rate Risk Sensitivity Analysis for Corporate Debt, Deposits and Deferred Acquisition Liability The Company is party to interest rate swap contracts to manage interest rate risk and economically hedge the LIBOR component of future interest payments associated with outstanding variable-interest rate borrowings under the Company’s Amended and Restated Credit Agreement.
Conversely, a corresponding decrease in interest rates would result in a comparable increase in fair value. 75 Table of Contents PART II Interest-Bearing Liabilities From time to time, the Company is party to interest rate swap contracts to manage interest rate risk and economically hedge the applicable reference rate component of future interest payments associated with outstanding variable-interest rate borrowings under the Company’s Amended and Restated Credit Agreement.
Such interest is benchmarked to the 12-month SOFR, determined at future dates, plus a stated interest rate spread. See Item 8 – Note 4, Acquisitions for more information.
The Company has deferred payments on acquisition of $234.0 million, plus any interest accruing pursuant to the terms of the Share Purchase Agreement, related to the purchase of SBI’s remaining 4.53 percent interest in PO Holding. Such interest is benchmarked to the 12-month SOFR, determined at future dates, plus a stated interest rate spread.
Removed
As of December 31, 2022, the Company had variable-interest rate borrowings of $2.3 billion under the Amended and Restated Credit Agreement and interest rate swap contracts with a notional amount of $1.6 billion, leaving unhedged borrowings under the Amended and Restated Credit Agreement of $759.6 million.
Added
If all currencies in which we earned revenue had weakened or strengthened by 10 percent against the U.S. dollar, the Company’s 2023 revenues and operating income would each have correspondingly decreased or increased by approximately 2 percent or less. We currently do not utilize hedging instruments to mitigate these risks.
Removed
At December 31, 2022, WEX Bank had deposits outstanding of $3.5 billion, which the Company uses to fund working capital needs in our fleet and travel businesses where we fund a customer’s entire receivable. The deposits are generally short-term in nature, though certain certificates of deposit and fixed term money market deposits are issued in up to five-year maturities.
Added
Interest Rate Risk In the ordinary course of our operations, we have interest rate risk from the possibility that changes in interest rates will impact our operating and debt costs, however, the income earned on HSA custodial cash balances, allows us to help offset that risk.
Removed
Upon maturity, the deposits will likely be replaced by issuing new deposits to the extent they are needed. See Item 8 – Note 11, Deposits, for more information. WEX Inc. purchased SBI’s remaining 4.53 percent interest in PO Holding for a purchase price of $234.0 million plus any interest accruing pursuant to the terms of the Share Purchase Agreement.
Added
Interest-Earning Assets WEX Inc. and WEX Bank provide custodial and depository services, respectively, with respect to HSAs. As a non-bank custodian, WEX Inc. contracts with our depository partners, which currently include WEX Bank, to hold custodial cash assets on behalf of individual account holders. Income earned on HSA assets is impacted by fluctuations in the prevailing interest rate environment.
Removed
These subsidiaries use the receivables as collateral to issue variable interest rate securitized debt. See Item 8 – Note 16, Financing and Other Debt for more information.
Added
A sustained decline in prevailing interest rates may negatively affect our business by reducing the yield earned on HSA assets. Conversely, a sustained increase in prevailing interest rates can increase the yield on HSA assets.
Removed
Unrealized gains and losses on the Company’s available-for-sale debt securities are generally recorded within accumulated other comprehensive loss on the consolidated balance sheets unless 1) determined to be credit-loss related, 2) the Company expects to sell or has made a decision to sell the security or 3) the Company expects to have to sell the security before recovery of its cost basis.
Added
However, we may be required to increase the interest retained by account holders or fees paid to our partners in a rising prevailing interest rate environment, though caps exist within most of our current partner contracts. Changes in prevailing interest rates are driven by macroeconomic trends and government policies over which we have no control.
Removed
To date, any changes in fair value have not had a material impact on our results of operations. 68 Table of Contents
Added
See Part II – Item 8 – Note 12, Derivative Instruments, for more information. At December 31, 2023, the Company had approximately $1.1 billion of outstanding deposits that were used to fund working capital needs in our Mobility and Corporate Payment businesses where we fund a customer’s entire receivable in the majority of our processing transactions.
Added
The deposits are generally short-term in nature, though certain certificates of deposit and fixed term money market deposits are issued in up to five-year maturities. Upon maturity, the deposits may be replaced by issuing new deposits to the extent they are needed. See Part II – Item 8 – Note 11, Deposits, for more information.
Added
See Part II – Item 8 – Note 4, Acquisitions for more information.
Added
(2) Includes impacts from applicable participation debt, securitized debt and borrowed federal funds (excluding borrowings from the BTFP as they are at fixed rates through December 2024).

Other WEX 10-K year-over-year comparisons