WEX's third quarter earnings fall despite increased revenues
File Photo / Tim Greenway
Melissa Smith, WEX president and CEO, with Stephen Crowley, senior vice president of shared services and CIO, at the company's South Portland office in a 2014 file photo.
Lower fuel prices and volatility in foreign currency markets continue to plague WEX Inc. (NYSE: WEX), which reported today that its third quarter net earnings were $32.2 million, compared with $74.4 million for the same period a year ago.
On a non-GAAP basis for the third quarter ended Sept. 30, the company’s adjusted net income decreased by 25% to $49.9 million from $66.2 million for the third quarter in FY 2014.
Total revenue for the third quarter increased 2% to $226.1 million from $222.1 million a year ago.
In early trading activity today, MarketWatch reported WEX’s share price was $83.53, down 7.3% from Tuesday’s closing price of $90.11.
While acknowledging “ongoing pressure from macroeconomic headwinds” resulted in financial results that were below the company’s expectations, WEX President and CEO Melissa Smith said the increase in third quarter revenues shows the company’s “organic growth continues to be strong.”
In a telephone interview with Mainebiz prior to a morning conference call with investors, Smith highlighted the significance of the company’s recent announcements that it plans to acquire Electronic Funds Source LLC, a fleet card provider, for about $1.1 billion in cash plus stock, and Benaissance, a health care billing software firm, for $80 million. Those acquisitions, she said, represent a continued execution of the company’s strategic business plan “to grow, accelerate and scale the business.”
The related merger-and-acquisition costs were another reason the company’s third quarter results were lower than a year ago, she said.
The EFS acquisition, which is subject to regulatory approvals, is the largest to date for WEX and would both expand and diversify its fleet card business by picking up EFS’s customer base of medium-sized and large fleets of over-the-road vehicles such as tractor-trailers. That niche, Smith said, complements WEX’s focus on local fleets of cars, trucks, vans and small over-the-road fleets and will make the combined company’s earnings less sensitive to volatile fuel prices due to the different fee structure of EFS’s fleet payment services in which only 15% of its revenue is “fuel price sensitive.”
“It’s part of the path to diversify our business away from exposure to the macroeconomic headwinds we’ve been experiencing due to unfavorable fuel prices,” she said.
Likewise, she said, the $80 million acquisition of Benaissance extends the company’s footprint in the health payments business sector and adds billing expertise that complements the health care payment services provided by Evolution1, which WEX acquired for $532.5 million in 2014.
“This quarter’s solid operating performance was complemented by the significant progress we made with our targeted investment strategy, which aims to scale, improve functionality or enhance our geographic footprint,” she said.
In its forward-looking statements, WEX expects its fourth quarter revenue to be in the range of $198 million to $207 million and adjusted net income in the range of $39 million to $42 million, or $1.02 to $1.09 per diluted share. For the full year, the company expects revenue in the range of $840 million to $849 million and adjusted net income in the range of $184 million to $187 million, or $4.74 to $4.81 per diluted share.
The South Portland-based company and its various subsidiaries has approximately 2,000 employees worldwide.
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