WEX Inc. Aktie

All right. Good morning, everyone. I'm very happy that you all made it to the first session of the day. Hopefully, you're enjoying coffee, et cetera. So I'm Nate Svensson, payments and fintech analyst here at DB. Very happy and excited to have Jagtar Narula, the CFO of WEX with us. So Jagtar, thank you so much for being here. Hopefully, the mic gets fixed in. We'll give it. I can do a song and dance while we wait.

All right. Does this work?

Yes. I think we got it. Okay. We got it. We're good. Well, all that to say thank you so much for being here. We're really happy to have you here and then kick off the day.

So maybe we could just start kind of very high level. There's a ton going on at WEX investments, moving pieces across each of the segments of the business, activist involvement. Obviously, the stock has done quite well, which is really nice to see. But I think when you think about the meetings and conversations you have with investors versus how you on the management team view the company, what do you think the biggest disconnects or misunderstandings are? And how would you explain the company to maybe investors that are coming to the story for the first time?

Yes, absolutely. And so first of all, thanks for having me here, Nate. Glad to be here. One of the comments that we get a lot is around the complexity of the WEX business. And when we look at it, we actually think WEX isn't that complicated of a business. At the end of the day, WEX is a payments platform, right, that we utilize across 3 segments of our business, right? In our mobility business, we are providing a payment solution for fuel for commercial customers, right? And they're using that to prevent fraud, to enable their drivers to optimize routes, things like that. In the corporate payments business, we are essentially the backbone for high payment volumes like in the travel industry, right? One of the leading providers of helping process payments for online travel agents, and we're using the platform to move into near adjacent markets.

And then if I go to the benefits business, again, payments platform. Here, we're providing a set of benefit solutions, health savings accounts, COBRA accounts, flexible spending accounts and the like. So the theme across all this is a payments platform tailored for multiple segments, providing mission-critical payment delivery for organizations. We get, like I said, comments about complexity. But when you look at it, it isn't that complicated.

Yes. I think the knee-jerk reaction by a lot of generalists I talked to is, like, it's a mobility business and they're doing OTA payments and benefits, like how does this all fit together. But I think the narrative has really started to come together and you guys are doing a great job. Maybe we'll obviously go through kind of each of the segments here. Maybe just, again, relatively high level talking about macro conditions. And maybe this can focus on the Mobility segment, right? A lot of attention on what's going on with freight activity, same-store sales within mobility.

So is there -- are there any notable trends to call out in that business quarter-to-date? And if you want to expand it to corporate payments, benefits, happy to hear what you have. But just as you look across the fleet economy, where do you think we are in the cycle? And do macro conditions need to improve for you to kind of deliver on your outlook?

Yes. We get a lot of questions on this. And from a trend perspective, nothing has really changed since we had our earnings call in July, we talked a bit about it then. One of the questions we get a lot is folks track some of the indices like the Cass Index is one that a lot of folks track, including us. And they've seen improvement in the Cass index and they start to say, well, how does that translate into what you're seeing in WEX. And where that index improved and where we are seeing improvement is if you look in the trucking sector, which is a material part of our Mobility segment, it's around the supply side of the equation, right?

So the current administration through a series of regulations have reduced the supply of drivers in the market, right? That's reduced supply, reduced trucks. The result of that is spot prices have increased. And that is strength in the trucking industry, right? Truckers are able to move goods profitably, able to be much more profitable. That's good for the industry. It's good for us, right? A strong customer is important. It helps credit statistics, for example.

The other part of the equation is the demand side, right, actual goods moving through the economy. And I think that's where we need to see continued improvement to start to see some of the shift in same-store sales that we're looking for. So we track things like housing starts, manufacturing indexes, et cetera, to start to see progress on those fronts. And I think with continuing strengthening of the economy, you'll start to see that transition to the demand side of the equation, and you'll start to see volumes gradually improve in our Mobility segment. Right now, like, as I said, we're seeing it on the supply side, which helps us from a customer perspective. But I think over time, you'll see on the demand side as well.

Yes, for sure. And we can -- we track a lot of those indices as well, and hopefully, we'll start to get a little bit of improvement there. Touched on a few things within mobility. Maybe we can talk about pricing, right? I feel like over the past several months, seen a ton of slides on pricing potential at WEX, both from you and others. Maybe you can talk about what you're doing on pricing, specifically in the Mobility segment and the benefits you expect to see from pricing later this year and into '27. Any color around the specific opportunities you have to take price, price for value, however, the right way to phrase that is...

Yes, sure. So one thing I would note is we talked a bit about pricing in the last earnings call and got a lot of questions around it. This isn't actually anything new for us, right? We've periodically or regularly evaluate pricing and evaluate the opportunity to optimize how we price. In fact, if you go back to the '23, '24 time frame, we talked a lot about pricing then. I think we implemented about $70 million of pricing actions at the time, predominantly in our Mobility segment. So nothing new for us. What we're doing this time and what we've talked about is about $15 million of pricing improvement or revenue from incremental pricing coming in, in second half of this year, Q3 or Q4.

We haven't talked a lot specifically about what those pricing actions are or what we might do going forward for competitive reasons. But what I would say is that I think pricing will continue to be a focus of the company now and going forward. We continue to see opportunities to optimize looking at what is the value that our product brings, managing customer value, managing attrition, things like that. We still think there's a significant opportunity to enhance pricing, and that's something we'll be doing over the next several years.

Any dynamics to call out on how that relationship on pricing plays out between mobility versus corporate payments or benefits? I think it seems like a lot of the focus has been on mobility.

Yes. Near term, it's been mobility is where we've done, but we've also done quite a bit of work on the benefit side as well. And so I think you'll start to see some pricing actions over time there as well. So I think you see it across all of our businesses.

Yes. Makes sense. Maybe last one that is mobility specific. You've seen some nice trends on the macro adjusted growth, so excluding the impact of fuel prices and FX. So I guess, setting aside those temporary macro dynamics, you know, what's going to happen with war in Iran, fuel prices, et cetera. So could you just go over some of the drivers that give you confidence that mobility can contribute and reach the sort of long-term growth framework that you've laid out for the company as a whole in each of the segments?

Yes. So just for everyone's benefit, we've talked about company as a whole being a 5% to 10% grower. We don't particularly -- that's a company target, although we want each of our segments to get into that target. So when I look at the last quarter in Q2, mobility, excluding the impact of fuel, was about 3%, right. We know we talked about in the earnings call that we had this change in behavior and late fees from higher fuel prices. People paid late less often as a result of the higher fuel. And that was about a 2-point drag to the Mobility segment. So if I say, okay, we grew at 3%, but we had a 2-point drag from late fee instances, we were effectively would have been in the range had there not been this big macro change.

So what we're doing the second half of the year that we just talked about is pricing, right? We -- these are pricing actions that we had planned, but we've accelerated them given the change in dynamics in late fees. So that will basically replace what we are seeing from change of behavior in late fees, and that gives us confidence that we get back in the range. We saw -- if I look at the third quarter -- or second quarter, sorry, I mean, we saw about 1 point of growth coming out of BP coming online, which will continue to be a driver for the second half of the year. We saw about 1 point from pricing in the second quarter and then 1 point from kind of organic growth. So you take those pieces, expect them to continue with a little bit more from pricing in the second half, and we feel pretty comfortable about where we're headed.

Yes. And I think you've talked about some of the new sales that you had toward the end of 2025, early '26, and presumably, those will be coming online as well.

Yes. Exactly. I mean that's been an area of investment for us and we're pleased with what we're seeing.

Yes, definitely. And you brought up late fees, so I may as well just ask, like, I know the guidance assumes that a lot of the behavior that you saw in 2Q kind of continues into the third quarter. Anything to call out with regards to like what's actually played out on the ground? Presumably, that's been the case as you've gone through Q3.

Yes. And I would say, for now, late fees is kind of in line with our expectations. We've seen things moderate a bit. But I would just say it's just early to tell right now. So we're just keeping a close eye on that.

Got it. Got it. Maybe we can move to corporate payments, right? That segment, I do think from our perspective, it appears to be entering sort of a different phase of growth. There was some dynamics of one of your large partners in-sourcing a lot of the work that they did with you. You've got direct AP becoming a larger portion of the business. So I think maybe, again, taking a higher step back or a higher level view, if you look at corporate payments 3 to 5 years from now, what do you think that business looks like between the travel business, between the nontravel business, direct AP versus embedded payments? How do you think that evolves? And kind of what do you think the growth prospects for that segment are?

So we continue to be very excited about the growth prospects. We saw in the last quarter, very strong growth on the direct AP side, 20% volume growth in direct AP. And we basically said second half, we expect mid-teens growth in direct AP as well. Embedded payments is another area that we continue to be excited about, very, very strong pipeline. We've talked about that in some of the earnings calls and past conversations.

So I think what you will see over time, we haven't said specifically how much direct AP or embedded will be of the total. But I think you will see those businesses outpace the growth of the other parts of the business in the Corporate Payments segment. And that should bring nice growth to the overall segment over time. So excited about that.

Yes, for sure. And maybe just to double-click on direct AP. Like again, it was nice to see the reacceleration, the 20% volume growth in the second quarter. Maybe you could just unpack some of the drivers of what caused that reacceleration. Obviously, it's been a key area of investment for you in terms of sales, et cetera. And I know there were some, I guess, lapping or timing dynamics with some, I think, OTR customers that were utilizing that project, and there was seasonality or lumpiness in their volumes. So maybe you could just talk about like what is going right organically fundamentally that's driving the strength and confidence in that business.

Yes. And I think you hit on it, which was the go-to-market, right? So importantly, in the direct AP business in the second quarter, like 2/3 of the volume growth came from new sales. So this was new sales driven. And we've spent the last year plus enhancing the go-to-market in that -- for that offering. We think we've got a great offering. It's resonating with customers, as you can see from the volume growth. And we spent the last year building up the go-to-market motion for that particular offering, hiring salespeople, getting them ramped up, getting them productive.

And now we feel like we're in a spot where the salespeople are producing. We're going after midsized accounts that we can implement relatively quickly. So as these salespeople become productive, we're able to implement the accounts and start the payment processing, which leads to revenue. So everything is going really well in that business, and we're expecting to continue that motion going forward.

Yes. It's great to hear. Maybe last one on corporate payments. I think on the last call, you talked about strong demand for embedded payments, but also at the same time, there's onboarding and integrations that have taken a little bit longer than you've expected. So maybe you can talk about what you have learned from these onboarding and implementation, I guess we'll call them road bumps that have happened. So yes, what did you learn? How does that stand today? Has there been any improvement in terms of sort of converting pipeline into actual live projects?

Yes. What I would say is so the pipeline continues to be strong. Melissa has talked about that quite a few times in some of the earnings calls. It continues to be a product that we -- that resonates well with customers that we talked to about. There have been delays in the implementation side. This is a product that is designed to integrate deeply into the workflows of customers and potential customers to get into that payment processing engine. And the result of that deep integration is that in some cases, it's taken longer than we would have wanted to get the implementation done.

In some cases, it's been on the customer side. In some cases, it's been our side. We've done a lot of work to improve the process. What I would say is the plus of the approach is given that deep integration, it also makes the customer stickier as well, right? So as these customers come online, we expect them to be customers of ours for a while, given the amount of effort that goes into creating these integrations.

Got it. So it sounds like it's more kind of like the technical integration of that rather than like a delayed decision-making cycle or anything like that.

Yes.

Got it. Got it. Super helpful. Maybe we can move to benefits. I want to start with SaaS account growth, right? Again, some lapping timing dynamics there. You lapped the UAW contract. Maybe you can talk about from a high-level perspective, the primary catalyst you see to drive SaaS account growth back to some of the long-term targets you've talked about. I know there was also this dynamic where I think you sunset some legacy products that weren't super contributive to revenue growth. And so again, lots of moving pieces, but high level, what are the main catalysts you see to sort of a step-up in growth in SaaS accounts?

So let me start with the numbers for the second quarter because as you mentioned, there was a little bit of noise there that probably needs to be explained. So SaaS account growth is an important metric for us. In the second quarter, we had about a 3-point drag in SaaS account growth from kind of various items that are not really indicative of the health of the business, right? So the first one was sunsetting, as you mentioned, sunsetting some, call it, legacy low revenue products that we weren't making money on, right? That was about a 2-point drag to reported SaaS account growth. Not really a revenue drag, but the KPI, [indiscernible] KPI was a drag.

The second was the UAW Trust, which we implemented and went live with last year that we started to lap this year. That was about a 1-point drag on growth. So you ex or normalize for those items, you'd say, okay, SaaS account growth was in the mid-5% range, kind of a respectable number, a healthy number. What gets us excited going forward and continuing to maintain or improve on those rates is, number one, the pipeline continues to remain strong, right? We're in the kind of the peak season right now for sales for that product. Q3 and into Q4 is kind of the peak, and we continue to see a good pipeline.

We have continued to enhance the products. We've been investing in enhancements to the products, some of which we've talked about in the past, more sort of consumer capabilities, more data and analytics capabilities. So we're excited about where the product has gone and that seemingly has resonated well with the customers. So I think if you say, okay, we got a great product, we've got a strong pipeline. And going forward, we continue to have very, very strong sales channels, a strong partner network, a strong direct channel. I think that gives us sort of significant confidence that the business will continue its growth momentum going forward.

Yes. Makes sense. This is maybe tangentially related, but I just came to mind as I was listening to you. OBBBA, right, there was some discussion about, hey, there's new accounts that are eligible for some of the benefits offerings that you have was going to be TAM expansionary. So I guess I'm just wondering, has there been any sort of movement or benefit from that to date? Is this something that maybe we could see now that we're going into open enrollment season, maybe we could start to see potential benefits from that TAM expansion as we go through this? Just an update on that.

Yes. So for the benefits of folks who don't know, the One Big Beautiful Bill Act expanded eligibility for HSA for certain kind of retiree-oriented accounts. And so that essentially expands our total addressable market for HSA accounts, which is a big component of our benefits business. Because those are largely individual accounts, those are not accounts that we would sell directly through our direct sales force, right? Our direct sales force is targeted at larger like employers and the like. They're not going after individual customers. So where we expect that to happen is in our partner channel. That is one of the beauties of our business model of having both a strong partner channel and a strong direct channel.

With that market expansion, we expect that to happen out of our partner channel. And our partners are addressing it. They're kind of varying stages of where they are with the incremental accounts that have come for it. I think what you'll see is you'll see that translate into SaaS account growth over time as individual partners kind of address the market opportunity.

Yes. But the takeaway is it's TAM expansionary, but it's over time, right? It will be through the partner channel, not direct channel. Yes, very interesting. Maybe last one specifically on benefits. We get asked a lot about the strategic rationale between -- for having WEX Bank as part of the overall portfolio at WEX. So there are kind of benefits, and you've spent time talking about this on earnings calls and other public forums. So it's lower funding costs, economics with regards to the HSA business, regulatory capabilities, et cetera. But maybe for investors that may not fully appreciate the value of having WEX Bank within the family of assets, can you walk through the advantages it provides you both in the benefits business and maybe other areas of WEX as a whole and why that would be difficult for others to replicate?

Sure. So WEX Bank, for those who don't know, it's a Utah-based industrial bank. It's got a Utah charter, but it's governed regulated by the FDIC as well. And as you mentioned, there's quite a number of benefits that come with owning the bank. So if you look across our lines of business, one that you mentioned was the funding cost, right? We fund the bank through a combination of broker deposits, Federal Home Loan Bank funding, et cetera. These are significantly lower cost of funding sources than things like securitization or using our credit lines or things like that. So the bank gives us a distinct competitive advantage from a funding standpoint that we're able to pass along either into profitability of the company or into pricing for customers, right? So there's a competitive advantage there.

For the benefits business, the bank is also -- we are the nonbank custodian for the deposits that people leave in their HSA accounts, which we utilize the bank to earn float income off of. And we know that if we place those deposits with a third-party bank versus place it with WEX Bank, there's a 50 to 100 basis point difference in what we'll earn because basically, you're cutting out the middleman, right? So that is, again, a distinct competitive advantage that the bank has. But outside of the financial advantages, I think there's other advantages that sometimes folks don't fully understand. So WEX Bank brings a regulatory and compliance infrastructure because it's a regulated entity. That's important for us in delivering our business and important for our customers. So that infrastructure comes with the bank, and it's important.

And then the other really important piece of the bank is we are both the issuer and the processor. When a customer wants to come to us to do a payment business, whether it's travel or something else, right, we are -- embedded payments is a great example of this. We are essentially the vendor that's on the hook for everything, right? If you were kind of one of our competitors, you essentially work with a third-party bank to deliver the business. And whenever you have multiple parties trying to deliver business to a customer, right, there is the -- when something goes wrong, how quickly does it get solved because there's multiple parties involved.

Where when it's WEX, we are the one accountable party. We're bringing all the pieces to the table, and we're working directly with the customer when there's a problem or they need a solution that we can help them solve, et cetera. And that's a distinct advantage that the WEX Bank brings that you don't have if you're a competitor working with a third-party bank.

Yes, I think it's relatively easy to understand. Yes, it helps with funding costs. You get a higher yield on the HSA deposits, but I do think it's underappreciated that there are ancillary benefits in corporate payments in mobility that helps having that.

Exactly.

Okay. So we've -- it's a high-level view of WEX. We went through each of the segments. This is the Deutsche Bank Technology Conference, so you're not going to escape without some questions around AI. I think there's so much focus, at least within my coverage on like what AI is doing in terms of cost savings, right? I think one of the things that I appreciate about the comments that you at WEX have made is there's a lot of focus on the product opportunity associated with AI. So you've talked about Claims AI, Actionable Insights and the list is much longer than that, but I'll just stop at those two.

So maybe you can talk about what you are seeing on the product development side from AI? How you're incorporating it into the development of those products? How clients are seeing that in the delivery of those products and how you think that evolves?

Yes. I think you brought up some great examples. So I think -- so we do believe we'll have significant cost savings opportunity from AI as well. I preface it with that. But when we turn to the product side. One of the things that I think people don't fully appreciate is the amount of data that WEX has access to, right? If I just think across our segments, in mobility, we know exactly how organizations use their vehicles. We know where drivers fill up. We know how much they fill up. We know where they drive. We have a lot of data on that, right? If I turn to the Corporate Payments segment, we know how consumers travel. We know where they travel. We know when they travel. We know how organizations spend their money. We know what they spend their money on. Same thing in benefits, right? We know how employees utilize their benefits, right? We know are they making optimal decisions or not, right?

And so all that data can be utilized to create solutions for organizations or their employees for consumers to help them make better decisions, whether it's tools that provide insights to offer decisions or whether ultimately we get to the point where an Agentic AI tool is actually implementing the decision for you. So I think some of the cases that you have just talked about are the early ways we're doing that, right? We've created an insights tool for our mobility segment to allow mobility customers greater insights utilizing this data. We're creating tools in mobility -- in the benefits segment that allow an employee to better understand benefits utilization, what are the benefits that are offered by my employer? What's the specific situations around me as an employee and the data that we might have about some of your health circumstances and how should you utilize that to make a more informed benefits decision. Claims AI is the other example that you talked about.

So I think you're starting to see us utilizing this data to actually create the solutions that leverage AI that will be real value add that ultimately we'll charge for, right? And we'll create value out of and earn additional revenue on. So I think we're in the beginning stages of this journey, but this is a pretty exciting journey for the next few years.

Yes, for sure. And you preempted my next question on monetization, so I'll skip over it. But now we're finding the product market fit, monetization comes once you found that product market fit, your clients are realizing benefits from these products, et cetera. Maybe the other thing related to sort of AI and product development, I think you had talked about a 50% increase in product innovation velocity due to AI integration. Can you just expand on that a little more? Like what does that mean like product innovation velocity? Is it internally, you're creating -- you used to create 10 new products a year, now you're creating 15 new products again, just making the number up. Like is that what you're saying? What are the benefits you're seeing? Like are you able to roll products out faster to clients? Are you able to test things, get them in beta? Just more color on that would be helpful.

Yes. So product innovation velocity is essentially measure the amount of time it takes from I want to go build something to it's in the hands of the customer, right? That length of time is essentially product innovation velocity, right? And through the use of AI, we've been able to accelerate that. It's whether we've used AI to better gather insights as we're going through a discovery phase of product or a feature or a function, all the way through, we're building the product and now we're using AI to accelerate our build capabilities.

And so through the use of AI, we've been able to go faster. And I think you've actually seen that when you've looked at WEX, right? Like headcount is down in 2026 from where it was in 2023. But yet we are innovating at an accelerated pace. We've announced more products in the market. So you can actually see the impact of that coming through, which we're excited about. And we'll continue to enhance that over time, but we've clearly made progress over the last couple of years.

Yes. Super interesting stuff. So maybe we can bleed AI discussion into more kind of the long-term financial profile of the business. So I think you've talked about WEX being a structurally higher-margin business over the long term than you are now. Part of that is AI. Other parts of that are operating leverage, automation, all the good stuff that we always talk about. So maybe you can talk about like how far we are into this journey between where you are now and where you think the company -- that this structurally higher margin profile WEX is and like where we are in that journey, what else you need to do? Is this just something that will take time as you see the benefits of AI operating leverage? Or what steps do you need to take to accentuate that?

Yes. I think there's a few pieces here. So one, start about -- let's start with where we are today, right? Like if I look at today -- if I look at 2026, we've said we were going to improve operating margin by 75 basis points this year and over 100 basis points in the back half of the year when you look over year-over-year, and we are on track to do that, right? And that's been the result of a number of investments that we've made over the last couple of years that we are continuing to focus on. One is product investments, right? We have a set of products that we've invested in that are built for scale, right? We can add incremental revenues to these products without corresponding incremental costs. And so that creates operating leverage, which you are seeing in the results of the business, right?

And then on top of that, we have the investments that you just talked about in things like AI that will continue to provide cost efficiency for us going forward. And so when I think when you look at those 2 things together, I think we are on the journey, 75 basis points this year, a good part of the journey. But I think you'll continue to see that going forward, both those pieces of it, both the leverage that we've built into the model plus increasing benefits from AI.

Yes. Makes sense. I have a few more questions. I'm going to ask one about the long-term growth framework. I do want to open it up for questions after that. So I'll ask one more question and open it up and then we can wrap up after that. So we talked -- touched on this a little bit earlier, but long-term growth framework, 5% to 10%. As you think about that target over a multiyear period rather than just the next few quarters, can you talk about the main building blocks across each of the segments? And what gives you confidence that you can sustain growth in the 5% to 10% range, both on an aggregate company basis and then within each of the segments?

Yes. This is, like I said, something pretty excited and pretty proud about. And I think when you look at the momentum of the business, like if I just walk through the segments, if you look at mobility, we talked about our -- my thoughts on kind of getting to the range earlier and the visibility we have to it. If we look at what we talked about earlier, pricing, where we are in new customer acquisition, the investments that we're making in retention and the hopeful future benefits we get from improvements in the macroeconomic environment. I think the one theme that you'll hear through this as we talk through how we get there is that there's multiple avenues in each of our segments to get there. And so you just heard that mobility, whether it's pricing, new customer acquisition, retention, we have multiple avenues to get in the range.

If I look at the Corporate Payments segment, we've talked about embedded and direct earlier, right? Those are significant large TAM expansion sort of TAM opportunities. We've got a great product. We are basically taking something that we've built today and expanding into new markets, having success with it. I think that's an exciting value opportunity for us. And then in the Benefits segment, we talked about earlier, we've got a great set of products. We continue to invest and enhance it. I think you'll see us roll out new capabilities in our products over time, combine that with a very, very strong go-to-market model.

And I think that's something that's underappreciated about our benefits business, right? You take our direct sales model, you take our partner channels, which are very tightly integrated partner solutions. So a very sticky set of partners. We have a very strong go-to-market motion combined with a very strong product. So again, that gives us confidence about the market as well. And that's without even mentioning the OBBBA and expansion of the TAM. So I think we see multiple opportunities and multiple paths to continue our growth and be in the target range.

Yes. It feels like we're in a situation where there's good things happening in each of the segments. And it's just -- let's get all those good things working at the same time. So as promised, if anyone has questions, feel free to raise your hand and Jagtar can answer anything you have.

Scott Barishaw from Deutsche Bank. Thanks for coming out to the conference.

Absolutely. Nate did a great job asking a lot of questions on each of the businesses. You spoke about AI. You sort of wrapped it up into a little bit on sort of where the growth is in the segments. I was hoping you could maybe just riff a little bit on like which of the 3 segments you spend the most time on, what you're most excited about going forward? Obviously, mobility is the biggest, probably a little more than 50% of the revenue, benefits, second and then corporate payments, third. But like where do you spend your time? Where do you see the most AI opportunity? Where do you -- from here, like as investors, like where can we get most excited to help drive the story forward?

That's a really good question because when we look at it, we are genuinely excited about investment opportunities across all of our businesses.

All 3 children are great.

It's like asking me which of my children is my favorite, right? Which my wife would shoot me if I ever respond to that question.

Mine too.

Look, honestly, I think the challenge for us is much more along the lines of we see significant investment opportunities and growth opportunities across all of our businesses. Like literally, I sit there in executive meetings and we look through investment options and where we see growth avenues. And it's not like it's all in benefits or it's all in corporate payments. We see it across even mobility, which sometimes the market views as kind of the low growth part of WEX. We have very broad reach, extensive customer relationships. And the result of that is what we consider to be pretty significant TAM expansion opportunities.

So the challenge for us often ends up being we have big desires to pursue many of these investment opportunities. We're trying to balance how much we invest in the year, the organizational capacity to pursue these investments, the financial profile of the company of wanting to manage the financial profile so we can balance growth investments while driving margin expansion at the same time. So I know this isn't sort of saying, hey, benefits is my favorite, but I honestly do think there are significant opportunities across the portfolio.

I mean that's great. I mean I guess the quick follow-up to that then is if -- maybe it's where you operate in -- I mean, all the companies here operate in such competitive businesses. Is there an area where you feel really good about taking advantage of competition maybe being a little bit weaker or -- is there something -- is there an angle from that side where competition -- not to name names, but Corpay is doing something or like where you feel that WEX can really take advantage of the situation in a business or something along those lines? Maybe that's an unfair question, but I figured I'd ask.

Yes. So I would say, if I think across our businesses, we have very, very strong moats across our business. So I think that gives us pretty distinct competitive advantages, right? We have the scale of our mobility business, which is allowing us to move more into kind of parts of the market where maybe our competitors are less focused on right now. We've talked about that in some of our earnings calls, right? In our Benefits segment, again, we have a very, very strong suite of offerings that we are able to sort of bring to our customers, not just point solutions, but a holistic set of solutions that some of our competitors are unable to bring. And I think that's allowing for very robust win rates in that market.

And then I think it's the economic profile of the business as well. We talked about the high incremental margins of our business. We will -- as we talked about pricing earlier, we price to value, right? We think we bring a lot of value, and we think there's pricing opportunities as a result. But we're also mindful of the competitive environment where we need to be, right? And we are able to use the pricing lever to win business when we have to, right? But we've been able to do it while maintaining a strong margin profile. And that's essentially the scale nature that we've built in our business.

I will allow others to ask a question, but one of the things you said just on this move into other parts of the market that competitors haven't focused on historically. So maybe like 2 questions on that. Earlier in this discussion, you had talked about some of the supply side impacts within the mobility business. At the same time, you're also talking about like, hey, let's go focus on smaller fleet. Is there any sort of like inherent conflict in that? Like obviously, you're not going to be focusing on some of those like mom-and-pop fleets that have been impacted by the administrative changes. But like how do we understand that dynamic between the 2?

And then the follow-up question that I get asked all the time by investors is just like opportunities to expand the credit box within mobility, right? And I think a lot of those -- like those discussions are tied to the same. So maybe you can just, one, just talk about like, hey, that move down market, how does that conflict or not conflict with supply side changes? And how do you think about the credit box opportunity within mobility more generally?

Sure. I'll hit both of those. So on the kind of moving down market, what I would say is whenever we've looked at the market, there is a sizable opportunity there, whether you're in the over-the-road segment or whether you're in what we call the local fleet segment, which is not the long-range trucks, there is a sizable unaddressed market opportunity there. And we have spent the last couple of years enhancing our credit granting capabilities, our digital marketing capabilities, all with the desire to be able to attack that segment of the market more efficiently. And so we believe we've done a good job of that.

And so whether it's right, the local fleet side where we believe we're able to capture kind of smaller customers more efficiently with good credit adjudication that maybe we wouldn't have been able to do 5 years ago or it's the over-the-road side where there is a significant segment of that trucking population that's still there even, right, with some of the supply changes that are not customers that we would grant credit to today, maybe in the future, but could utilize our set of solutions outside the credit box and that essentially is what the 10-4 offering is. So it's given us the opportunity to expand who we address because there are sizable opportunities there.

Specific to your question around the credit box, look, this is something -- and we've talked a lot about this with investors. We've enhanced a lot of our credit capabilities over the last couple -- over the last several years, over the last 4 or 5 years. We auto adjudicate like when fuel prices increased this year, we automatically raised credit lines for a large swath of our customers because the enhanced credit monitoring capabilities that we've built. So we think we've gotten really good at that. I think I do get a lot of questions around, do we enhance the credit box? I'll say it's something we look at all the time, right?

We continuously evaluate what's the right level of credit, how do we balance kind of the revenue opportunity that comes from getting more credit with the risk that comes from, right, what's the implications for default. So I think it's something we routinely do, and I think we are good at that increasingly.

Sure. And then the clarification is that what we have seen to date in terms of expanding the credit box for lack of a better term, has been that sort of mechanical or automatic increase associated with higher fuel prices, but anything expanding the credit box beyond that is still something you're evaluating.

Exactly.

Got it. Got it. Yes. Anyone else have additional questions? We have a couple of minutes left. If not, I can wrap up with a few questions. I don't see anything. So I will ask on capital allocation, right? I think Scott in the audience had asked about some of your organic investment priorities. I think you've done a very good job on leverage. You're obviously throwing off a ton of free cash flow. I think the messaging, at least as I've interpreted is that you're going to be focusing on buybacks as the highest priority near-term use of cash. Does that still hold? Obviously, the stock has had a nice little run so far year-to-date. What would need to change either in terms of where the stock price goes or what you're seeing in the M&A market for that -- the debate between buybacks and M&A to change at all?

Yes. So just to remind everybody, we announced kind of last earnings call, we basically did what we said we were going to do. We were planning to get leverage back below 3x, so we would reinitiate stock buybacks. We got there a quarter earlier than we expected. High fuel prices helped. So we have initiated stock buybacks, and we have stated that the vast majority of our adjusted free cash flow will go towards buying back stock. So the stock price has gone up a bit since we announced that. I would say it's still -- from all the work we do, it's still our highest cost return opportunity in terms of deploying capital.

So we will continue to march the plan that we have going forward. I would say that M&A will continue to be something that we evaluate. I would -- what we would want to see from an M&A standpoint is strategic opportunity enhances the strategic capabilities positioning of the company at the same time on a risk-adjusted returns basis, being equal to or better than the stock buyback. That is what we evaluate. And to the extent we view our stock more fairly valued, well, that makes M&A something a bigger part of the equation potentially. But from what we see right now, it's squarely the stock buyback camp.

Yes. Makes sense and very clear. So we have less than a minute here, so we will wrap up with one. Maybe tying it back to the high-level question that we started off with the differences between how investors or management view the company. I think high level, when you are on this stage 2 years, 3 years from now, what do you think is going to be most different about WEX from the WEX of 2026 versus the WEX in 2 to 3 years? And what do you need to do to successfully sort of deliver and execute on your strategy to effectuate that change?

Look, I think WEX is on a good path and a good journey, right? And if you think about all the things that we have talked about over this call or over this conversation, between the capabilities of new products and how AI can be incorporated and the efficiency enhancements that AI will bring to us. And like I said, the new products that we're bringing the scale that's embedded into our model. I think WEX executing along the lines of what we just talked about. You will see a company in 2 or 3 years, which had a crystal ball, but who knows what's going to happen on the world. But in terms of the pieces that we can control, I think you will see a company that more resilient, larger size, higher scale, all the things that the pieces that we've talked about coming into place -- plan of execution.

Yes. And we'll look forward to tracking it along the way. So everyone, join me in thanking Jagtar for his time. I really appreciate it.

Appreciate it.

Hi, everyone. Thanks for joining. Just wanted to come on to welcome everyone to another session at our 2-day SMID Cap virtual event. Very happy to be joined by almost 20 corporates during our 2-day event hosted by our analysts who have really great breadth of coverage of SMID Caps. Our analysts here at BofA cover about 1,000 small and mid-caps in the U.S. So the size segment that's definitely seen more interest in the last 2 years. So thank you so much for joining. If anyone needs the schedule or still wants to sign up for any additional sessions, it's not too late. I've signed up some investors today. So feel free to reach out to me, Jill Hall or to my colleagues, Madison or Ashley in Corporate Access, and we can make sure to get you on that as well as if you need help connecting with any of our analysts after or to get signed up for any research. So thank you so much for joining, and I'll turn it over to Mihir.

Thanks, Jill. Thanks, everyone, for joining, and special thank you to the WEX team, Jagtar and Pedro. I really appreciate you all taking the time and joining. We will go ahead and get started.

I know there's a few folks here who are a little bit newer to the story, Jagtar, so maybe for those who are newer to the story, WEX often gets described as simply a fuel card company. But I think that undersells it a little bit, quite a bit maybe. So maybe just give us the 2-minute version of what WEX actually is today, what the segments are, how the revenue splits just get investors up to speed and also help us understand how everything fits together.

Sure, Mihir. Thank you. So yes, I think calling us a fuel card company does undersell us a bit. So first of all, thank you for having us and having me here today, and thank you for the other folks on the call that are joining us. If we turn to the next slide, I think this is a good way to think about the business and the statement on the top, I think, resonates with me and hopefully, it resonates with others that follow the company. Every day, we're managing payments on behalf of our corporate clients that are not just any payments, but they tend to all have characteristics that are pretty similar. We manage payments that are complex, regulated, generally pretty mission-critical for our customers. And what we do is we bring together sort of proprietary data, technology, controls around those payments, compliance capabilities, vertical knowledge and the infrastructure of our wholly owned industrial bank to basically become very deeply embedded in how customers operate and simplify their ability to manage these payments and provide controls around them.

So if we go to the next slide, let me talk about where we do it. So last year, we were about $2.7 billion in revenue. On the right here shows the makeup of our business. So the first segment, roughly half of our business is our Mobility segment. And that's where people may be when they think of it as a fuel card company. That is our fleet business, right? We're a leader in managing fleet payments on behalf of businesses. Fleet companies have large fleets, fuel-related spend, vehicle movements, they need to manage and track this very closely. And we have tools, payments capabilities, fraud management capabilities that allow them to do that, and we do this very, very efficiently and effectively. Our second business comprising about 30% of our revenue is our benefits business. Here, again, we're also managing effectively mission-critical payments at massive scale. In this particular case, it's payments that are -- it's benefits for employees. So think of health savings accounts, flexible spending accounts, lifestyle accounts, COBRA, right?

These are all payments that are going to insurers, providers, beneficiaries. They require -- they're regulated, they require controls around it. Again, mission-critical, massive scale. And then the last business, about 20% of our revenue is our corporate payments business. And here, we're really helping companies automate business-to-business payments. We've done this in the travel industry. We're doing it outside of travel and increasingly more and more outside of travel. So this is where we're using our virtual card platform and managing things like embedded payments. So this is high-volume payments from a provider, a business that needs to make a lot of payments as well as kind of our direct accounts payable service. So this is going to an organization that is an AP file that needs to process, and we're processing on their behalf. I think the common theme through all of this is our shared infrastructure within all 3 of our segments. We have deep relationships. We have technology. We have strong vertical expertise, regulatory capability, the bank. We bring that all to bear to address these segments.

We go to the next slide. It's a little bit about our strategy. We think about it in 3 buckets: amplifying our core, expanding our reach and accelerating innovation. So when we think about what we're doing, so if you think about things like amplifying our core, this is looking at pricing on a regular basis, signing up new business, customer retention, working on margin expansion, things like that, that continues to expand our core business. But then we're also taking that core business and continuing to expand it. So and expand our reach, I would think of things like what we're doing in corporate payments to take that platform into new markets beyond travel. We've got a long-standing history of being the leader in the travel space, and we've been moving into B2B payments outside of travel. Likewise, in our benefits franchise, we've been expanding our benefits offering, and I would also consider that part of expanding our reach. And then accelerate innovation is where we bring true innovation to bear. So a lot of things we talk about are AI, how do we embed AI in our products, how do we use it to drive more margin enhancement, what are new markets that we can go after that would all fit under kind of accelerate innovation.

If we go to the next slide, let's talk about a little bit about WEX from a capital allocation standpoint. So it's worthwhile noticing -- noting that we are kind of a very high margin, high cash generative business. So our adjusted operating margin in the last quarter was close to 40%, 39.6%. We generated close to $700 million of adjusted free cash flow over the last 12 months. And one of the things we've done recently is get leverage down below our 3x target to 2.9x. So we're within our target range. And as a result, we are now -- and we highlighted this in our last earnings call, we're now devoting the vast majority of our free cash flow towards stock buybacks that we will continue to look at M&A. It will be part of the strategic mix. But at this particular point in time, we think our share price is a great buy, and we continue to devote the vast majority of our free cash flow to that. So if we turn to the next page, if we think over the medium term, we're aiming for 5% to 10% organic revenue growth. 10% to 15% earnings growth. We do believe we have a business with accelerating organic revenue growth, improving margins and a high degree of cash generation that creates -- we're disciplined about capital allocation.

So we think these are all compounding effects to what is a great business model. And I'd be remiss if I didn't say something about artificial intelligence since I know it's on a lot of people's minds these days. We think of AI as a big opportunity for us. We think about it in 2 fronts. So first is the obvious margin enhancement that we have as a company. We spent a lot of money in technology development. We spent a lot of money in customer care, whether that's processing claims or handling calls from employees in our benefits business, for example, depositors in our benefits business. So we think AI is very well proven now from an ROI standpoint, both in customer care and product development, and we think that we will continue to see value add from that. But we also see opportunities on the product side. We essentially operate at the infrastructure layer of payments, right? We are processing those payments and all the regulatory and compliance needs that come with that. But in that, we are collecting a lot of data. We know how businesses use their vehicles. We know how consumers travel.

We know how enterprises -- what they're spending money on. We know how employees use their benefits. That is a tremendous amount of data that we can use to help organizations make better decisions and automate those decisions as they're being made. And so we see that as a power of AI that will be increasingly embedded in our products. So with that, Mihir, hopefully, that was a good overview. And hopefully, people see us as more than a fuel card company.

Yes. No, absolutely. And thanks for that. I think that's a good level set for folks. Now you just reported Q2 results recently, and I think part of your guidance has been to come back within that 5% to 10% revenue range. For Q2, I believe you were at 4% revenue growth on a macro-neutral [ living. ] So bridge that for us. What's going to change in the back half of the year to get you from that 4% to the 5% to 10% guidance?

Yes. So Q2, 4.2%, excluding the impacts of fuel and foreign exchange. So just for folks that are new to the story, right? Obviously, fuel prices will impact revenue. Fuel prices were very high in Q2 because of the Iran war. So we saw a very high revenue growth result of fuel prices, but we look at our business ex fuel to really think about how management is performing. Ex fuel, we were at 4.2%. One of the things that we talked about in the earnings call was the drag that we're seeing on late fees in our fuel card. As fuel prices went up, somewhat counterintuitively, we saw people make faster payments on their fuel cards and reduce the instances of late fees that we typically generate. That had about a 1-point drag from what we would have typically expected. So had late fees been somewhat normalized, we would have been into that 5% range. So we took some actions. We are always looking at price optimization in our business. We had some pricing plans that we intended to implement. We accelerated those to start implementing in the back half of the year.

And those are basically replacing the drag that we're seeing from late fees. So those will start to kick in over the third and the fourth quarter and bring us back into that growth range of 5% to 10%.

Got it. And maybe on that though, in terms of the longer-term guide of 5% to 10%, what gives you confidence that you can consistently deliver 5% to 10% growth rather than, hey, we're going to touch it here in the fourth quarter, maybe keep it at that level for a couple of quarters and then drop back below. So like where is the confidence in the long term coming from?

Yes. So we aim to have that 5% to 10% growth in each of our businesses, right? And in each of our businesses, I think there's a number of levers. I mean we look at the 5% to 10% holistically across our -- across the company, but we have a number of levers in each of our businesses. So if I think of mobility, right, we've talked about just now pricing, our new sales generation has been terrific. We continue to work on retention of new customers. We've expanded the markets that we address. We've worked a lot on our direct marketing capabilities so we can effectively target smaller fleets. We are rolling out capabilities to move beyond just fuel, so enhanced monetization opportunities. And so we see a number of levers there, and that's even without demand recovery that we also expect to see in the Mobility segment over time. If I go to the Benefits segment, we have a very robust partner channel and a direct channel.

So we have broad market coverage of our full suite of benefit offerings, right? That's a market that's benefited from a very strong tailwind over a number of years of employers moving more and more employees to health deductible -- high deductible health plans, which has driven HSA adoption, but we have a number of offerings outside of HSA. And so we've been driving that through our multiple channels, and we continue to see a good opportunity there. And then Corporate Payments, I talked earlier about how we've been a leader in the travel segment. That's been a great growth engine for us for a while. But we've invested heavily outside of travel now. We see in our embedded payments business, nontravel, a really sizable market opportunity. We see that in the direct side. In fact, in the last quarter, we saw a 20% volume growth in our direct AP business. We expect that to continue at double-digit rates, mid-teens rates because of the size of the market opportunity. So we've made a lot of the investments that we needed to make to drive this growth, and now it's a matter of execution and get the scale.

Got it. So maybe we'll dig in for a little while on individual segments. I'm going to start with the largest one, mobility. And before we get to the demand drivers and what's going on there, let's talk a little bit about just fuel prices and level set for us the fuel price sensitivity. I believe you've said $0.10 move in fuel prices is about $0.35 of EPS. I think for the full year, this year, you're assuming $3.91 per gallon for fuel prices versus it was $3.10 in February. So obviously, a big benefit. Fuel added about 25 points of EPS growth, right? So I guess, really, the big question is, as you think about 2027 and fuel prices maybe normalize from here, touch wood, how should we think about that give back into '27? What are the offsets in place that is going to keep fuel growing nicely?

Yes, sure. So I'll preface this by we're not giving out '27 guidance yet. And this war has created uncertainty. So if you would ask me a month ago, I would have thought, right, we're getting to a resolution in prices. I mean, I think all the market thought prices were going to come back down. And in fact, we're still at a standstill. And so who knows where prices are going to head and who knows where the Strait of Hormuz is going to head. So we, as a company, focus on the things we can control, right? We can't control fuel prices, which is why we often talk about the organic growth rate outside of fuel because that's what we can control, especially in this period of high volatility. So we will continue to focus signing up new customers. We will continue to focus on retention. We will continue to focus on expanding the addressable market beyond just fuel to kind of nonfuel-related spend. We think those are all drivers to continued expansion of the business.

I will also say we are implementing the pricing actions that we -- that I talked about earlier, about $15 million in the second half and that's roughly breaking down to 1/3 in Q3 and 2/3 in Q4. So call it $10 million in Q4 that will annualize to a $40 million run rate heading into '27. So that will add additional momentum in '27. And I will say we're not done with pricing, right? This is something that we continuously analyze. I think we've got kind of a road map that will span a couple of years of pricing opportunity as a company. So we feel really good about the opportunity there in the mobility business despite what happens to fuel.

Got it. I think the other big question on fuel that we get a lot is just got to do with the current backdrop. And if I think about what you reported last call -- a couple of weeks ago, you talked about, I think, processing transactions were flat year-over-year. Same-store gallons are still running a little bit I think they're down 1 percentage, 0.8% year-over-year. And I think what investors are really struggling with a little bit is what's happening under the hood? Like is demand truly that soft? Because obviously, all of us see a lot about "trucking recovery," right? So is demand really soft? Like I guess, really, the core question is, is WEX gaining share, holding share, losing share? What statistics or what metrics do you have that can help us answer that question?

Yes, sure. So let me address both pieces of that. The data that says a little bit about what demand is doing and the data that says how is WEX' share doing, which I feel really good about. So let me start with demand, right? A lot of folks come to me and we've talked a lot about the Cass trucking index and folks are looking at and saying, well, the index is increasing like WEX, why aren't you seeing the corresponding increase in volume? And when you look at the Cass trucking index, I think people have to keep in mind there's 2 components of the trucking index. There's what's called the expenditure index, which is essentially what the invoice are of the truckers. And there's a shipment index, which is the volume of the truckers. The invoice has -- the expenditure index has increased, right, because invoice has gone up because small truckers have been taken out of the market from some of the moves the Trump administration has made. So that has been, right, a reduction in supply of trucks, which has increased spot rates, invoice has gone up. That's been good for us, right?

It helps credit losses to have stronger truckers, helps our factoring business to have larger invoices to factor. So that has been good. But then a big chunk of our business is driven by actual volume, miles driven and the shipment index in Cass has still been declining. So there's still evidence that we -- it's better, but it's not on the upswing yet. That's supported by the same-store sales numbers that we talk about, right? When we look at same-store sales, it's a customer that we had last year, corresponding customer this year, how much more or less are they pumping and kind of we've seen them pumping less or it kind of aligns to what we've been seeing with the volumes out of the Cass index. So then let's turn to, well, what evidence do we have of right, WEX continuing to maintain its market share, right? We continue to sign new business at good rates, like we look at how much do we devote to sales and marketing, how much new business we signed.

We continue to be kind of very, very competitive there. I will even say from an anecdotal standpoint, we just held a summit last year -- or last week here in Portland, set of customers, a set of partners. And I hosted a session and heard really resoundingly good feedback from our customers saying, look, you continue to have a leading product in this space. WEX, you promised us a certain set of enhancements last year. You've delivered on those enhancements. We're really pleased by that. We go to a lot of vendors that say they're going to do something and they don't do it, you did what you said you were going to do. So we, by and large, heard that our products continue to be very competitive. So I still feel like we are continuing to hold our market share.

Got it. I do see a hand raised. So why don't I turn it over to -- [ Conor, ] do you want to ask a question?

Yes. Sure. Thanks, Mihir. Just a question on the, I guess, the shipment index and why is that actually declining? And I guess, what would we as investors need to see to have some confidence that you could see that inflection in same-store sales?

Yes. So the shipment index, it's been declining for a few years now for a couple of different reasons. So during the COVID years, right, everybody -- people were sitting at home ordering lots of goods off of Amazon with the free money the government was handing out, right? I mean I say that a little tongue in cheek, but that's effectively what happened. And we saw a lot of volume growth in shipments. COVID opened up, right? People spent a lot less time buying goods and a lot -- more time on services, right? So you saw, for example, travel come back significantly, and you saw the benefit come to our travel business as a result. While as a result, you saw volume weakness in our -- in the movement of goods. That started to stabilize, call it, late '24. I think we were feeling fairly positive going into '25, and then we had kind of Liberation Day in the tariffs, which further impacted shipments and kind of further weakness.

So I think you're starting to see -- we're hearing signs of improvement like the ITSM indexes improvement -- improving. I think we want to start to see GDP continue to grow, the goods side of the economy continue to grow, new construction increase, those things that actually drive goods to be moved, start to increase. So the goods side of the economy rather than the services side, and that will drive improvement of volume.

All right. Maybe switching -- go ahead.

Just one follow-up. I guess, is it -- I would have thought maybe like with the hyperscaler CapEx build-out and the demand for all this data center capacity, you would have potentially seen that start to trickle down into the freight segment? Or is that potentially too early?

We may be seeing a little bit. It's hard for me to say. If you look at what the vast majority of goods that are shipped in the U.S. from a volume standpoint, it is actually not going to be things like whatever semiconductors or servers are being used for those data centers. Those tend to be large dollar value goods. But from a volume standpoint, they're not actually huge volumes. When we look at what actually drives volumes, it's things like agricultural goods and commodities, things like that. That is what drives the bulk of the volume. So I'll give you an example, right? Like last year, with all the tariff whiplash, we saw a decrease in things like I think was last year with all the tariff whiplash, we saw a decrease in things like I think was soybean shipments to China, which actually is more volume than high-value mechanical goods being shipped around.

So maybe switching gears to benefits for a couple of minutes. I think in benefits, SaaS account growth slowed to 2% in Q2. Now there is a couple of call-outs, I think, there with the UAW, I think it was 150 bps. And then you also said there was some look closing of low-value accounts, which is another couple of hundred bps. Maybe just given all the moving parts, what's the true underlying account growth rate? And where does it settle out for the full -- on a full year basis?

Yes. So we had those 2 items that you mentioned, Mihir. So just for everyone's benefit. Earlier this year, we closed some accounts that essentially were unprofitable for us. These were low dollar value accounts. So there's a lot of accounts, but low dollars associated with them. So that was about a 2-point drag to our SaaS account growth rate. Again, not much of a drag on revenue, but a drag on reported SaaS accounts. Then we had UAW Trust, which was a large customer that we signed last year that we lapped that. So that was another right, 100 basis point drag. So you add those 2 together, we're essentially at 5% account growth. We feel really good about that. I think you should generally expect our account growth range to be in that 5 to mid-single-digit percent range. We've generally grown ahead of the market year after year. We see a good pipeline this year. So we continue to be pretty optimistic about next year. So I think the rates that you've seen like for Q2 will be essentially, I think, where the rates we'll hang for the rest of the year, plus or minus. But really, we're now in the selling cycle.

So what happens is we'll get most of the sales Q3, Q4 with the onboarding in Q1. So the percentages will roughly stay where they are that we saw in Q2 with the next uptick in Q1 of next year.

And are you seeing any impact from the Optum Allegiance deal from a competition standpoint? Any change in partner renewal behavior, pricing competition?

No, we've not seen any negative impacts. I mean our partner relationships tend to be very, very sticky, right? In a number of cases, we've got partners that have done heavy integrations with us. So it's difficult for them to move to begin with. So we typically don't see a lot of impact there. We have heard kind of on the inbound side, some incremental opportunities because of that deal. So I'm hoping we see some positive news outside of that. It's still early days, but it's been pretty status quo with potentially some upside.

Got it. And then just can you just remind us what's the HSA growth assumption embedded in your outlook? And can you withstand a little bit of a tougher partner channel environment?

I mean like I said earlier, I mean, we typically plan for that mid-single-digit growth rate in HSAs and that drives the rest of the business model. I think we feel really confident about that, not expecting a material change in the partner environment.

Got it. Maybe switching then to Corporate Payments, right? Corporate Payments, I think in Q2, we saw volume down a little bit. But -- and again, there's stuff going on between the OTA, and I think there's a minimum based contract. But we did see net interchange rise. Segment margin was also up nicely. So how sustainable is that margin of like I think it was like 46%, 47%. How sustainable should we think of that? And what's the right way to just think about that mix between volumes and margin there?

Yes. So let me point out a couple of things on what you said. So let me start with volume. So volume was down -- purchase volume was down 3.6% in the quarter. One thing that I'd encourage investors to look at is not just purchase volume, but also total volume, right, which was up, I think, about 6%. So we've had some customers migrate where we continue to manage their business from a technology standpoint, but they may be managing their own last mile of the money movement. So that no longer shows up in purchase volume, that shows up in total volume. So in total, sort of volume continues to increase. Specifically in regard to that purchase volume decline, we talked a little bit about it in the earnings call. So we had one particular customer that commits to volume with us on an annual basis. They have been very consistent about meeting their annual commitments to us. But in any particular quarter, we may see some noise from them, and we saw some noise in Q2. We think about it on an annual basis. We continue to work to try to smooth out the noise, but you may see some noise from quarter-to-quarter.

And that's kind of, in fact, what we saw in the quarter. But we feel -- continue to feel very positive about our full year numbers. If I turn over to margin then, so we look at this business as very high contribution margin from incremental revenue. Incremental revenue drops through with very little incremental cost to us. So volume that we drive through here is -- continues to accrete margin for us. So if I think of Q2, I think we had a couple of things, right? So volumes are very good. So that helped the margin. Our credit loss dynamics in the segment were very good as well, and that helped the margin as well. Credit losses improved because of some of the technology improvements we put in place between last year and this year to address specific issues that we were seeing. So while credit losses may not be as good as I saw -- we saw in Q2, I think we will continue to see them at a very good rate because of the technology improvements that we've seen. And then volume, we intend to drive more on the non-travel side as we go into the second half, right? You'll get a little bit more from travel in Q3 and then a little bit more as our embedded payments nontravel products kicks in.

Those tend to drive a lot of volume at kind of lower rate. So you may see the rate tick down a bit, but volumes absent kind of credit loss dynamics should sort of continue to hold quite nicely going into the second half.

Maybe just staying on that on the volumes growth and one piece of the business that you've been investing in and has seen good growth was direct AP. I think it reaccelerated to 20% in the second quarter here, it's up to about 20% of segment revenue with that embedded payments fees building. So I guess, give us the multiyear growth path. Like maybe first, like just what worked in the second quarter, what drove that reacceleration? And then what should we expect from here? Is that 20% growth in direct AP sustainable?

Yes. We were very, very pleased by it. This is a business. We've invested in the product. We delivered a new front end for customers. We've hired a sales team that's going off and selling it. And as you point out, Mihir, we saw really good volume growth the second quarter, 20%. And encouragingly, 2/3 of our volume growth came from kind of new sales as opposed to relying on the back book growing. So very encouraging. We continue to invest in that sales team. I think we've got a sales team that's humming now. They'll continue to sign new business. We continue to evaluate timing of when we continue to add to sales. So I think we should expect kind of mid-teens volume growth in that business in the back half of the year. And I think the size of that market sort of suggests we can sustain this momentum for multiyears. At the same time, we have, as I talked about earlier, our embedded payments product in the non-travel side that will sort of also continue to ramp. This is a business we've had a good sales effort on it. I think Melissa has talked in the past about kind of the tremendous pipeline we've seen, our ability to sign customers here.

I think we've been challenged with the onboarding being more complex than we would have liked by complexity, meaning, right, these are API integrations that we enable with our customers. So the good news is it enables a very sticky customer by doing those integrations. The bad news is it's taken us a little longer to get those done than we'd like. But we're expecting some customer ramps in the back half of the year that we have pretty good visibility to. So I think that will continue to ramp. And so this whole AP, nontravel embedded sort of set of business that we've invested in should continue to grow at those double-digit rates and become a more material part of the overall CPS segment over time.

All right. Maybe I'll switch to overall margins. Your guidance is for another, I think, 100 basis points plus in 2H here of margin expansion. You also -- you mentioned AI right up front. So I suspect some of this is just productivity gains, but I couldn't help but notice like I think your headcount is down versus 2023 despite revenue being up. So as we think about what's happening at WEX, is the business transforming a little bit to become a structurally higher-margin business? And maybe also like use the same opportunity to frame the AI-driven cost opportunity that's still there.

I love this question, Mihir, because I do think that's where we're headed. So if I think of right, our mobility and corporate payments businesses, those are structurally very high-margin businesses, right? Structurally, right, mobility, you sell additional fuel card, it drops through at very, very high margins. Corporate payments, I talked about earlier, right? It's -- the contribution margin of each incremental dollar of revenue is very high. So really where costs have come there is to grow the business, right, whether it's product enhancements or investments in sales and marketing to continue that top line growth because every dollar drops through at a very high rate. So really good businesses. On the benefits side, right, if you think of the 2 pieces of the benefits business, there's the float income piece, call it 1/3 of the revenue, very, very high margins, right? And that's been growing at, call it, the 10%, 11% range, right? Then you've got the core SaaS part of the business and interchange part of the business that has historically been lower margin because there's a large servicing component to that, right?

There is the need to, right, somebody submits a claim, you got to adjudicate that claim. There's a large call center for folks to call in, employees to call in when they have questions about their benefits. There's right, implementation costs of implementing new accounts. So there's a large infrastructure that's required by that business that we've been using AI to structurally transform, right? Melissa talked about in some of the earnings calls, some of the work we've done in claims AI, where we're able to adjudicate those claims and see really high throughput rates. Now we are kind of moving methodically through that business because it's not like a structure you just figure out how to adjudicate a claim and you can roll it out everywhere. You've got to kind of do it kind of partner by partner. But I think the AI investments will see the contribution of the margins of that business materially improve as we're able to push AI through the cost, the biggest piece of that business is the service operations. So I think that will help the overall contribution margin positively going forward with this AI transformation.

Got it. I see we have about 10 minutes left. So if anyone has any questions, you can raise your hand or shoot me, Bloomberg or e-mail. Happy to ask it on your behalf. But if not, I will keep going because I have a fairly long list. I do see a hand up. So why don't we go there?

Today. This has been really helpful. I wanted to ask one on pricing. So definitely good to see kind of the mobility business accelerating in the back half of the year in the fourth quarter from these pricing actions, the $15 million that you talked about. I'm curious, I think in prior years, the comment was for '24 and '25, you guys had also implemented pricing those years as well, something like $70 million, I think, collectively over those years. So I guess my question is like is the -- are you taking more price this year and that's kind of what's driving the acceleration? Or is there kind of something else in the business fundamentally that's like improving that's helping us get to that higher growth rate exiting the year?

So I would say we do pricing, we have a couple of areas we look at because of our 2-sided business model, right? We get interchange essentially from the merchants and then we get fees from the cardholders, right? We go back a couple of years ago, we were heavily focused on merchant interchange. We went through a process of renegotiating a number of our merchant contracts that drove significant pricing improvements. This year, we've been looking at what we get from the fleet holders, the cardholders. We run a number of programs and those programs for various reasons, largely related to history, right, had different fees associated with different programs. We know what the market is. We know what our competitors do, and we can look at kind of what we do across our different programs and how consumers react. So we went to that and said, well, there's an opportunity just by normalizing, right? And so we are kind of normalizing pricing across our programs that's driving an improvement in the second half.

We're also -- we'll be looking at additional levers, whether it's things like risk-based pricing, we'll look at kind of merchants again. So there's a number of levers we're looking at, but that's what's driving kind of the second half.

Okay. Maybe I'll ask one on buybacks and just capital allocation in general, kind of touched on it earlier, but you've delevered ahead of schedule. You reset the guidance range. You've talked about buybacks being the vast majority of free cash flows. Help us frame that opportunity. I think you have like $150 million of M&A payments related to some benefits, M&A rolling off next year. You obviously are generating a lot of cash. So how big can the buyback be here? And when does M&A come back in the picture?

Yes, sure. So I'll start with just reminding like last 12 months, $700 million of adjusted free cash flow almost, right? So we generate a tremendous amount of cash per year. Our goal was to get into below 3x leverage before we resume stock buybacks. We thought it was important to get leverage to a reasonable number. And originally, we had guided to being able to do that in the third quarter, but higher fuel prices helped us, and we got there a little sooner than expected. So we got to [ 2.9 ] in the second quarter, and we had resumed buybacks. We did about $60 million in the second quarter. We have said, as you point out, Mihir, that we will use the vast majority of our cash flow to pursue stock buybacks. And by vast majority, I mean exactly that, the vast majority, right? Like we'll use a little bit for some debt paydown, just anticipating a future when fuel prices come back down. We don't want, right, to pop above 3x and have to stop buybacks. So we're getting ahead of it. We've got a small venture capital fund we started. So there's a little bit for that. But by and large, our cash flow is going to stock buybacks.

We still view the stock even today after the Q2 -- post Q2 call increase, we still view the stock today as a very good buy. And so we continue to allocate our capital there. We will continue to look at M&A. It's not the priority today. Every M&A deal we do does get compared to a stock buyback. And so it's got to clear the stock buyback hurdle. I will say if there was something that we felt was kind of a strategic opportunity that was going to be accretive, add to the growth or margin or what have you of the company, we'll always continue to look at those. But as of right now, it's not the priority for the business in terms of how we grow. We've invested a lot in our organic growth capabilities over the last couple of years. And so that continues to be the focus of growing the business organically. That's why you've seen some of the investments that we've made and focus that avenue and growth and focus on stock buybacks.

The -- you mentioned in your answer, you started a small venture capital fund. What's the thinking there? Like what's the -- like is that return focused? Is it more just market intelligence and future M&A?

I would say it's both. I mean, as a CFO, I still want to return. We started a couple of years ago originally with EV. So EV a few years ago, folks were worried about what's EV going to do to the future of like our business or the market in general. We started developing our own set of EV solutions that we've talked about essentially. But we also didn't want to take the risk of missing something in what essentially could be a fast-moving market. So we decided to stay close to the market by starting a small venture capital fund. And by small, I mean, we're talking investments of $1 million to $2 million in a handful of companies. We started that. That's gone pretty well. We -- our Board expanded that last year to look at innovative payments companies as well. So we are selectively when the occasion warrants, we'll invest in kind of a non-EV company, maybe it's a company doing something with stablecoin or what have you, right, something innovative in payments, just to keep track of where the market is headed.

I think it benefits both us from helping our teams kind of know where markets are headed and making sure we're ready for them, potentially being future in a future M&A pipeline if something is interesting. And ideally as CFO, I'd still like to make money on it. So I think it serves a number of purposes.

No, that makes sense. Okay. I think we're coming close to the end. So let me ask you this. If we're sitting here 2 years from now, Jill host this conference every year. So hopefully, we'll have you back. And in 2 years when we're having this conversation, let's say, WEX stock has really rerated nicely. What do you think will have driven it? Is it going to be organic reacceleration? Is there going to be a big margin step up, huge buyback, some kind of portfolio decisioning where maybe you're simplifying the business a little bit. What do you have the most control over? What do you think is the market is looking the most for?

Yes. So first of all, let's -- your lips to God's ears, right? Let's hope that we're talking in 2 years about the massive rerating in WEX stock that is undoubtedly about to come. So look, I think the levers that you mentioned are mutually reinforcing, right? I think as we talked about accelerating organic growth going in the back half of this year, exiting Q4, I think we've made a number of organic investments that with good execution, we should continue to see that. And we talked earlier about kind of the margin profile of the business and the potentially improved margin profile with AI, right? So as we grow our business, we get incremental revenue that helps us accrete higher margin, while AI also helps us address some of the areas that we see cost in the business. So the result of that is continued margin expansion. And then the last piece of that is, well, with our tremendous cash flow, improving because of the growth, improving because of margin expansion, continuing to do stock buybacks. I think the net of this is there's multiple ways for WEX to be a compounder, right?

We can compound through revenue growth. We can compound through stock buybacks. There's multiple avenues of that, which should lead to a natural rerating of the stock. So we're excited about it. I think we kind of see the path of how that's going to happen. And now it's a matter of executing.

Got it. And I think that brings us to time. So thank you so much, Jagtar. Thanks to all the investors for joining, and thank you, Pedro, Jagtar.

Thank you, Mihir. I appreciate it. Thank you, everyone, for joining. Appreciate the time.

Thank you for standing by, and welcome to the WEX Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Pedro Alvarez, Head of Investor Relations. Sir, please go ahead.

Thank you, operator, and good morning, everyone. With me today are Melissa Smith, our President and CEO; and Jagtar Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk you through prepared remarks have been posted to the Investor Relations section of the website at wexinc.com. A copy of the press release and supplemental materials have been included in an 8-K filed with the SEC yesterday afternoon.

Before we begin, unless otherwise noted, all comparisons discussed during today's call are on a year-over-year basis. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin as well as adjusted free cash flow during our call. Please see the exhibits of the press release and the earnings supplement for an explanation and reconciliation of these non-GAAP measures.

The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and undetermined amount of certain elements that are included in reported GAAP earnings. I would also like to remind you that we will be discussing forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in the press release, the supplemental materials and the risk factors identified in our most recently filed annual report on Form 10-K and subsequent quarterly reports filed on Form 10-Q and other subsequent SEC filings.

While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa.

Thank you, Pedro, and good morning, everyone. We appreciate you joining us. I'm going to start on Slide 4 of our earnings presentation today. The second quarter built on the momentum we established earlier this year. We exceeded the high end of our guidance range for both revenue and adjusted net income per diluted share. Excluding the beneficial impact of fuel prices and FX, we delivered on our expectations with strong execution across the organization. New sales momentum is building, and customers are increasingly focused on controlling expenses by leveraging our industry-leading platforms.

We are progressing across each of our strategic pillars and our organic investments are delivering. Our balance sheet remains strong with leverage back below 3x, and we are prioritizing our strong cash generation towards returning capital to shareholders in the near term. We are repurchasing shares on what we believe are attractive levels, reflecting our confidence in the plan and the value we see in our business and assets. There's a lot to be excited about as we look forward to the second half of the year.

In Corporate Payments, volume growth in our direct AP channel is expected to remain in the mid-teens after reaccelerating to 20% this quarter. In Benefits, our early sales pipeline for 2027 looks healthy, and we have real opportunities in our operations platform to be more efficient with AI. In Mobility, we're seeing a stabilization of transaction trends, near- and long-term pricing opportunities and ongoing opportunities to expand margins. Combined, these factors give us confidence in our investments, strategy and execution as we expect to exit the year within our long-term organic revenue growth range of 5% to 10%.

Let me walk you through the second quarter results and point you to Slide 5. Revenue for the quarter was $753.5 million, an increase of 14.2%. Excluding fuel prices and foreign exchange, revenue grew 4.2%, which was at the midpoint of our guidance for the quarter. Adjusted net income per diluted share was $5.35, up 35.4%. Excluding fuel prices and foreign exchange, adjusted EPS grew 10.1% at the high end of our guidance range, reinforcing our ability to leverage top line growth into even stronger earnings growth.

Cash flow remains a continued source of strength, and we generated $696 million of adjusted free cash flow on a trailing 12-month basis. This allowed us to reduce leverage to 2.9x and resume share repurchases in the quarter ahead of schedule. Turning to Slide 6. Let me remind you of our 3 strategic pillars: amplify our core, expanding our reach and accelerating innovation. These pillars are the foundation that we believe will allow us to deliver sustainable and profitable growth over the long term while remaining laser-focused on our customers.

Each pillar is powered by organic investments, product development and the strength of our sales and marketing efforts. Let me take a moment to highlight how we are progressing against them as we pass the midpoint of the year on Slide 7. Our first pillar, amplifying our core centers on continuing to grow in our core markets by leveraging our strengths, which include proprietary data and technology tools, compliance and regulatory capabilities, including WEX Bank, deep industry expertise, advantaged positioning in the payments ecosystem, scale and deep customer and partner relationships.

Within this pillar, we're focused on executing across the business to delight our customers, accelerate growth and strengthen margins. We measure success by delivering on profitable new growth. In the first half of the year, we saw strong new sales to support this. For example, in Benefits, we're lining up a healthy early pipeline for 2027 after completing an excellent open enrollment season for 2026. In Mobility, we've been executing on fundamental priorities amid challenges in the macro environment. And in Corporate Payments, our pipeline is continuing to build momentum in our direct AP business.

There are 2 important points here. First, we're carefully looking at pricing levers across the portfolio. We plan to continue to thoughtfully execute on opportunities in the back half of the year, including new pricing actions in Mobility that we expect to result in $15 million of additional revenue in 2026. Second, we're balancing those pricing actions with a focus on improving profitable retention across the business by proactively engaging with our customers to keep our value proposition at the forefront.

In Benefits, the first half of the year included 2 enhancements to our core offering driven by customer feedback. First, we introduced the WEX HRA for GLP-1 medications. This is a defined employer-funded benefit that sits outside the core health plan, giving employers greater flexibility and control over GLP-1 benefit costs while maintaining access to weight management options for employees. Additionally, we partnered with DoorDash to enable FSA and HSA participants to add their WEX Benefits cards directly to their DoorDash wallets, allowing them to use pretax dollars for eligible health essentials with same-day delivery.

This makes it easier for consumers to access eligible health care products when they need them while continuing to embed WEX into everyday use. Our second strategic pillar, expanding our reach empowers us to enter new markets where we have a clear right to win and where our differentiated assets allow us to create tangible value. This pillar is foundational to how we accelerate growth as a company, and we're investing in both product development and our go-to-market approach to move deeper into large and profitable markets with ample greenfield opportunities.

Let me touch on our non-travel business and Corporate Payments as a clear example. Within non-travel, we are focused on diversifying the business through both our direct AP offering and continuing to expand our industry-leading embedded payments virtual card offering outside of travel. These 2 growth vectors are core investment priorities in this segment. As I mentioned earlier, direct AP growth accelerated in the quarter and our embedded payments pipeline remains strong.

Outside of Corporate Payments, let me touch briefly on Mobility, where we continue to see success marketing to smaller fleets in our North American business, many of which do not currently have a fuel card solution. In our over-the-road business, 10-4 by WEX has seen significant user growth as fuel prices increased and operators look for easy-to-access fuel discounts. As a reminder, we have positioned 10-4 to play 2 roles to maximize our customer reach. It acts as an on-ramp for some customers to join the WEX platform in the future, but for fleets that are not interested in or not eligible for a fuel card product, it provides another way to monetize those relationships without taking on additional credit risk.

The last pillar in our strategic framework, accelerating innovation enables us to deliver better products at a faster pace while driving efficiency and operating leverage. Here, we focus on initiatives that transform what we offer our customers and how we run our business. This is a pillar I'm especially excited about because of the tremendous potential. We're leveraging customer feedback and AI to drive targeted new product and service development.

AI is deeply integrated in everything we do and has been for several years. We believe we are well positioned and ahead of the curve with a long history of proprietary data to fuel value-added client offerings. Turning to Slide 8, I'll touch on how we're progressing. A recent example of how we're accelerating innovation through AI is in Mobility, where a new premium offering, AI Insights, is currently in beta with customers. By combining WEX's proprietary transaction fleet and payment data with AI, we're delivering actionable recommendations that help customers proactively identify potential misuse, uncover savings opportunities, understand spending trends, coach driver behavior and improve fleet performance.

Our goal here is to help customers move from reactive reporting after an issue occurs to proactive decision-making powered by AI. Another area where our early investments in AI bore tangible fruit in the first half of the year was in our credit adjudication functions within Mobility. As fuel prices rose, credit demand increased across the business, and our AI-powered credit tools allowed us to make faster and smarter decisions for customers in the time of need. These tools allowed us to act quickly without increasing risk, and we saw those results in Q2.

We talked before about how AI is helping to process claims faster, power development and coding and empower our teams to work more efficiently. All of those trends are continuing. Looking ahead to the second half, we're going to continue to tackle parts of the business that would benefit most from automation. We're committed to delivering more than 100 basis points of macro-neutral margin expansion in the back half of the year as part of our plan to deliver 75 basis points for the full year.

To close on our strategic pillars, I'm proud of the work our teams are doing to position WEX for success now and in the future. Turning now to capital allocation on Slide 9. Our approach has not changed, and our near-term priorities reflect our clear focus on maximizing shareholder value. We're continuing to reinvest organically in our business by evaluating opportunities on a risk-adjusted returns basis to prioritize investments with the highest tangible accretion potential.

This includes continuing to strengthen our core offerings to maintain and grow our competitive advantages while also investing in new products and markets that will accelerate growth. Now that we have achieved our leverage goal of less than 3x and did so quicker than anticipated, we're in a stronger position to return more capital to shareholders. Given WEX's current multiple and our confidence in the long-term growth trajectory of our business, we are currently prioritizing buybacks.

In the near term, you should expect us to direct the vast majority of adjusted free cash flow to share repurchases while using the rest to delever, subject to notable changes in market conditions. Between May and July 20, we repurchased approximately $93 million of shares, including approximately $60 million during the second quarter. Finally, I want to briefly touch on our annual meeting in May. I want to take this opportunity to welcome our new Board members and reiterate that the full Board and management team are aligned with a singular focus on maximizing value at WEX.

We're moving forward with that unified purpose. This shared focus is reflected in how we manage the business every day. Our commitment to maximizing shareholder value includes routinely evaluating our portfolio and assessing the near- and long-term potential of each of our businesses and their component parts. This is an important piece of our annual strategic planning process, which is already underway and helps us allocate our resources to opportunities that create the most long-term value.

I'll close by saying that our results would not be possible without our employees. I want to thank our team for their hard work and commitment this quarter. Forbes recently recognized WEX as one of America's Best Employers for company culture, and I believe that recognition reflects the talented team and strong culture that continue to power our strategy, innovation and customer impact.

With that, I'll turn it over to Jagtar to walk through our financial performance, segment results and updated outlook in more detail. Jagtar?

Thank you, Melissa, and good morning, everyone. We delivered both solid revenue and earnings growth in the second quarter, with each of our segments performing well. The momentum we've built in the first half of the year is a great start, and we expect it to continue into the second half as we remain focused on accelerating growth and operational efficiency. Total revenue in the quarter was $753.5 million, up 14.2% and above the top end of the guidance range we provided last quarter. The impact of foreign exchange rates and fuel prices increased revenue growth by 10%.

Excluding those macro impacts, revenue was at the midpoint of the guidance range we provided last quarter. Adjusted earnings per share was $5.35, an increase of 35.4% with 25.4% of that growth driven by the impact of fuel prices and foreign exchange rates. Excluding those factors, adjusted EPS was at the top end of the guidance range we provided last quarter.

I'll add that we restarted repurchasing shares during the quarter and brought back approximately $60 million in shares that added about $0.01 to Q2 EPS. Repurchases continued in July and through the 20th, we have repurchased another approximately $33 million. Moving on to margins. Q2 adjusted operating margin increased approximately 280 basis points, driven primarily by the increase in fuel prices in the quarter.

Credit losses increased from 13.5 basis points to 16 basis points, better than the range we guided you to last quarter. Our expectations from here are that we will see year-over-year margin improvement of more than 100 basis points in the back half of the year on a macro-neutral basis as part of the plan to hit 75 basis points for the full year, and we've embedded that into our guidance. Let me now walk you through the segments.

Starting with Mobility, which delivered a very strong quarter. Revenue increased 22% or 3.1%, excluding FX and PPG. We're pleased to report that the BP portfolio was fully online this quarter following a successful migration. Lower late fee instances reduced growth slightly by approximately 1%, we believe, due in part to changes in customer behavior. We found customers adapting their payment behavior in light of high fuel prices that resulted in larger invoices. Overall, this behavior change was more than offset by the significant fuel price tailwinds in the quarter.

Continuation of this behavior is contemplated in our guidance, and we expect it to be offset by both planned second half pricing changes and continued momentum in the business. We're also encouraged to report that payment processing transactions were flat year-over-year and increased 6.8% sequentially, which is another encouraging indicator of improving activity in the underlying segment.

Touching on credit performance. Credit losses were better than we expected. We planned for loss rates to decline throughout the year, and we're seeing that positive trend slightly faster than we expected. As a reminder, Q2 includes provision increases due to the higher fuel prices driving higher loss dollars per instance. To close Mobility, we are very pleased by the results we delivered this quarter. We are also encouraged to see the supply side recovery taking hold in the trucking sector. This has increased trucking spot rates, which has helped truckers manage the impact of higher fuel prices while also helping revenue in our factoring business and credit overall.

However, as the supply side has improved, the demand side, which impacts our volumes, is still constrained by broader economic conditions. We remain focused on executing on the things we can control and are well positioned to benefit from the future demand side recovery in the trucking sector. In our Benefits segment, total revenue of $206 million rose 5.6%, reflecting the strong open enrollment season Melissa mentioned earlier. Overall, SaaS account growth was 2.2% in the quarter, in line with expectations and reflecting a difficult comparison as we lap the addition of the large UAW portfolio in the second quarter of last year, along with the impact of the previously disclosed Q1 account closures, which were immaterial to both revenue and income.

The Benefits segment continues to capitalize on both the scale we have built and the value derived from our investment portfolio at WEX Bank, which allows us to deliver industry-leading returns on our HSA assets. Average HSA custodial cash assets grew 11.1% in the quarter and custodial investment revenue grew 11.4%. HSA accounts also grew 7%. Overall, we are very pleased with the performance of the segment.

Moving on to Corporate Payments. Revenue of $125.1 million increased 5.8% at the high end of our expectations with our net interchange rate expanding 5 basis points. Total travel volume increased 6.4%, and we're seeing continued strength in our travel customers despite the uncertainty associated with higher fuel prices and the Middle East conflict. Segment purchase volume declined 3.6%, primarily due to quarter-to-quarter timing of travel volumes from a large OTA customer.

As a reminder, 2/3 of revenue from our travel business sits outside of our top 5 OTAs. Beyond our travel business, we continue to see healthy pipelines from both our non-travel embedded payments and direct AP businesses. Growing these products is part of our strategy to accelerate growth by expanding our reach into new markets. As Melissa mentioned earlier, volume growth in our direct AP business reaccelerated to 20% this quarter and is expected to continue to grow in the mid-teens for the remainder of the year.

Direct AP today contributes approximately 20% to segment revenue. With that, let me transition to the balance sheet. WEX is a business that generates strong recurring revenue, which in turn produces reliable free cash flow. On a trailing 12-month basis, we have generated $696 million of adjusted free cash flow, a 22% increase. Our ability to generate strong cash flow across market cycles gives us significant capital deployment capacity. We also benefit significantly from WEX Bank, which provides low-cost funding through deposits and Federal Home Loan Bank lines.

It's important to note that the bank gives us lower cost of funding versus alternatives such as securitizing our receivables. In addition, as we've mentioned before, WEX Bank also helps us drive higher yields in our HSA assets through its investment portfolio. Touching on leverage. We closed Q2 with a leverage ratio of 2.9x, placing us inside our target range of 2.5 to 3x. Let me add a few points to what Melissa talked about earlier regarding capital allocation, a focus of every investment decision we make at WEX. Each step of our disciplined capital allocation process is grounded by a clear objective to maximize long-term shareholder value and every investment decision we make is weighed against returning capital to our shareholders, including internal investments in our segments.

As Melissa noted, we expect to return the vast majority of our adjusted free cash flow to shareholders in the near term through share repurchases. We believe this is currently the best use of free cash flow we are generating after organic investments. To be clear, we remain committed to operating within our 2.5 to 3x leverage range target given the strength and durability of our cash flow, and we'll continue to apply a returns-based rigor to our share repurchase activity.

Should market conditions notably change, we will adapt our strategy accordingly. Now let's move to earnings guidance for the third quarter and the full year. In Q3, we expect to generate revenue in the range of $733 million to $753 million. We expect adjusted net income EPS to be between $5.45 and $5.65 per diluted share. For the full year, we now expect to report revenue in the range of $2.86 billion to $2.9 billion. We expect adjusted net income EPS to be between $19.68 and $20.08 per diluted share.

Compared to the midpoints of the previous ranges, these represent increases of $32 million in revenue and $0.63 in EPS. These increases are largely driven by the outperformance in Q2, share repurchases in the quarter and higher fuel price assumptions for Q3 and the full year. On the interest rate side, we are not assuming any changes for the rest of the year. On an ex-macro basis, we're expecting to exit the year within our long-term organic revenue growth range of 5% to 10%. Lastly, consistent with our past practice, we are not factoring the impact of share repurchases beyond Q2 into our guidance. As I noted, we expect to return the vast majority of adjusted free cash flow through repurchases in the near term that would provide an additional tailwind to EPS in the back half of the year with the magnitude depending on timing.

In closing, we are pleased with our performance in the second quarter and the momentum we are seeing across the business. As we enter the second half of the year, we remain focused on disciplined execution, thoughtful capital allocation and continuing to drive long-term value for our shareholders.

With that, operator, please open the line for questions.

[Operator Instructions]

Your first question comes from the line of Sanjay Sakhrani with KBW.

Melissa, maybe you could talk a little bit about some of the green shoots we see in the trucking indices like the Cass Freight Index. I know, Jagtar, you mentioned you guys saw some improvement there. But maybe you could just talk about how that's progressing and if that's been factored into your expectations for the year.

Sure. Thanks, Sanjay. If you look across the business, one of the things that I want you to keep in mind is our over-the-road business, we represent the whole segment. So really large over-the-road customers as well as some of those mid-market businesses. And so what we've seen is this really nice recovery on the supply side. We've talked about the fact that there's been an oversupply in the space, and that's really worked its way through.

And so what we're seeing is that the larger customers in our base are benefiting from that because they're picking up volume from some of the people that have left the marketplace. But overall, we're not seeing more miles driven. So the way that's coming through in our business right now is that it's a pickup in rates, particularly in the factoring business, which is a really small part of what we do.

Better credit losses are flowing through, which is a combination of the work we've done on the risk side, but also the fact that we're seeing better quality customers in the marketplace, but we're not seeing that impact volume. And so as we've given our guidance for the year, we've assumed that this kind of macro state that we're in right now that that's going to continue through the end of the year and that we're not going to see a rebound. And so to the extent we do, then that's upside to us.

Okay. Great. And then that's great news on the buybacks. I'm just curious, maybe, Jagtar, you can help in terms of free cash flow conversion. Like how should we think about if sort of free cash flow is a marker for how much you'd consider buying back, obviously, to delever as well. Maybe you could just give us some sense of what those numbers look like as we progress annually?

Yes. So we typically generate around $600 million to $650 million of free cash flow annually, Sanjay, a little bit more weighted to Q2 through Q4. And it generally closely tracks adjusted net income. So that's the right way to think about it.

Okay. Wonderful. And then as far as like delevering, like sort of what would your needs be in terms of delevering from here?

Yes. Like I said in my prepared remarks, the vast majority of our adjusted free cash flow is going to go to share buybacks. We'll use a modest amount for deleveraging. And really there, what we're doing is we know fuel prices are an elevated state right now. We know that they're going to decline. And so we just want to do some slight deleveraging, so we're in a position to continue buybacks as fuel prices come down. But the vast majority will really go towards buybacks.

Your next question comes from the line of David Koning with Baird.

In the Corporate Payments business, the vast majority of revenue is driven by volume and yield. Volume was down 4%, like you mentioned, but yield was up really nicely. And just wondering, I think we're past a lot of the volume headwinds or the client headwinds from the past. So it seems like we're in a normalized environment, I believe. But does the volume get better? And then maybe what happens with the yield in coming quarters, just so we kind of understand the balance.

Yes. So there's a couple of things that are happening within the quarter. We talked about one in the prepared remarks that we had one of our larger OTA customers that we know and we feel very confident on the volume of the year, but they moved some of the volume from the second quarter into the second half of the year. So some of that's just timing.

The second one, we talked about another contract that's been in place for a while that we're getting paid minimums, associated with that, so that's affecting volume as well. Those 2 things combined had about a 5% impact in volume from what would have been normal for us in the quarter. And what we benefited from -- we don't talk about that a lot, but 2/3 of our travel business in terms of revenue are customers that are outside of the top 5 OTAs.

And so we've gotten a benefit from just rate mix as a result of who's spending in the course of the quarter. And I would encourage you to look at total volume, too, not just look at funded volume because we've had more of the business move into that unfunded model. The way that we're tracking about it, is thinking about it in totality.

And then just -- just to add a little bit. So from a rate perspective, we would expect -- because as we expect volumes to increase in the back half of the year, purchase volumes we'll see kind of high single-digit to low double-digit rates. And that we would expect the rate to dip slightly as a result of predominantly mix as we move more embedded and more travel customers. We get more travel volume in the third quarter that affects rate and more volume will affect rates. That's really mix related.

Got you. Yes. No, that's good to hear on volumes. And then as my follow-up, just in Mobility, growth was stable on a constant macro basis, but BP helped a little. So underlying, it seems like slightly decelerated. So maybe just talk through that. And then in the back half, it seems like you probably get a 2% lift or re-acceleration from pricing just based on the $15 million you described. Is that all about right?

Yes. Let me start. I'm sure Jagtar will pile in here, too. But if you look at the business, and you're talking about it sequentially, also look at transaction growth. We went from negative 2% to just slightly positive in the quarter. About half of that was related to BP, but the other half was related to the pickup that we're seeing from the investments that we've made. So you're seeing that actually translate into incremental volume growth.

The revenue, as Jagtar was talking about, was impacted based on late fee behavior sequentially. So as fuel prices went up, we saw our customers pay more frequently. Those customers who tended to be slightly late paid on time. And that had a couple of point negative impact on the segment for the quarter. Jagtar said this earlier, but overall, if you think about we're a net benefactor of what happened with fuel prices. So yes, we had this negative on customer behavior. But overall, we had a really big positive within the segment, which allowed us to buy back stock sooner.

Yes, David, just to add in here is the way to think about it. So just what Melissa said, the late fee was about a 1% drag to the total company, 2% to the segment from what we would have expected on a normalized basis and impacted by fuel prices. And the way to think about it is if you look at late fees in the second quarter of last year versus the second quarter of this year, fuel prices increased about 40% to 45%. And our late fees are really pegged off of fuel prices. So you would have expected as a starting point, comparable increases in late fees and the delta between what we saw and actuals is really the instance drag that we saw.

Your next question comes from the line of Tien-Tsin Huang with JPMorgan.

Nice to talk to you. Just on the comment on accelerating organic growth to exit the year at 5% to 10%. Can you just go through the visibility into that? David did mention it, it sounds like pricing is a piece of it. What are the other big factors to that acceleration?

Sure. I think it's an important question. So thanks, Tien-Tsin. We have done a number of things. And so we're really thinking about all the high-quality actions that we've taken throughout the course of this year that we think are going to continue to pay dividends as we roll through the year. First of all, in Mobility, you talked about one of those things, which is pricing. So we have put in place already notified customers of some pricing actions that we're going to make, which will bring $15 million in the second half of the year.

In addition to that, we've stabilized the volume trends in part because we're seeing the benefits of the investments we've made coming through in new sales. We've got the BP conversion that's coming through. And so all of those things are leading us to have confidence within what's happening with the Mobility segment as you go through the course of the next 2 quarters. And then within Corporate Payments, the places we've been making investments, which are the embedded payments outside of travel and AP Direct, we are seeing really strong growth in our pipelines and embedded payments, and those are starting to convert into revenue as well as really strong volume and revenue growth in our AP Direct offerings.

Those are going to become a bigger part of the segment and we will continue to build over time. So we feel really good about what we're doing there. And then Benefits so far, still early, but the pipeline for 2027 continues to look really healthy. And we take all of those things give us a lot of confidence around how we're going to exit the year and be in that 5% to 10% range.

And the fact that it's coming from across all 3 segments. And then I think on top of that, you're starting to see the scale that we have. We had talked about this year being a scaling year, and you're starting to see that operating leverage coming through. And that allows us to compound this incremental revenue growth that we're seeing with earnings leverage. You combine that with the fact that we've got the ability to buy back stock, it's really exiting the year in a pretty good spot.

Perfect. I know you've been focusing on organic growth. You mentioned leverage. So my second question was on just the incremental margins in that Corporate Payments business. It was quite high there. I heard some of the details of the travel, the Direct AP, et cetera. But anything unusual that's driving that step-up in the incremental margin in the second quarter? And how should we consider second half? Because it does seem like it's running on the higher side margin-wise?

Yes, it's really strong. So 2 things happened in the second quarter. The first was the fact that we've talked about as we see incremental volume coming through that, that actually is a positive, and we saw rate positivity, particularly in this quarter. That's flowing through is really high drop-through. And then on top of that, we had some credit losses a year ago that is giving us a benefit when you're looking year-over-year in the comp. But we do expect to continue to have strong margins through the rest of the year.

Your next question comes from the line of Nate Svensson with Deutsche Bank.

Nice to hear about the pricing in Mobility. I did want to ask on another topic within that segment. I think in the prepared remarks, you were talking about the 120,000 customers that have seen proactive credit limit increases due to higher fuel prices. I was wondering if you could talk more about the credit box maybe beyond the impacts of the fluctuation in fuel prices.

Is there more opportunity to continue expanding the credit box regardless of how fuel prices trend? Is there enough positive momentum in the health of your end customers? Or is there more you need to see before you start to contemplate that?

There are 2 pieces of how we're thinking about that. The first for us is when I talked about this kind of automated tool that we have, this AI tool. What that's doing is going through it and extending higher credit to the highest credit quality customers that we have. And so it's really connected into our risk models and going through the mechanics of increasing credit lines when you see these big fluctuations in fuel prices.

And the reverse is true, we see a declining in fuel prices. The second part is more of the art where our risk teams are working with our commercial teams to more surgically go through and extend credit. And that's an active engagement that's happening. And it's really tied into ultimately the financial models.

So as we bring a customer in, we're monitoring how each of those portfolios performing. That's feeding back into the marketing tools that are deciding which customers we want to go after, but also in the credit decisions we're making. So that's a long-winded way of saying the immediate easier parts, we did very quickly and the next level of changes we've been working through systematically across the portfolio.

Understood. The other question I had was just on direct AP volumes. So it was nice to see growth reaccelerate there to 20%. I think you mentioned the expectation for maybe mid-teens for the rest of the year. So maybe 2 questions around direct AP.

So one, just kind of a qualitative update on some of the success you're seeing there, kind of where you're winning accounts maybe outside of travel, like you were talking about where you're going to keep investing, et cetera. And then the second part of that, maybe more for Jagtar, I think some of the slowdown in growth that you had seen in the past couple of quarters was related to lapping some seasonal volumes from larger OTR customers that are within the Direct AP. So I'm wondering if you can kind of disaggregate what is -- what of that reacceleration is coming from better underlying growth versus these lapping dynamics? Any help there would be helpful.

Sure. Sure. So we had -- when we put our guide out at the beginning of the year, we said we expected to have that mid-teens growth in volume with our AP Direct product. And so we're essentially saying the second half of the year, we're going to continue with that expectation. We -- the places that we're seeing benefit -- first, kudos to our sales team. I think they're doing a great job out there bringing new customers, but we also have been using a tool that helps us -- it's an AI-based tool that helps us with lead generation.

We piloted that in our Corporate Payments business. It's been going really well, and we're starting to roll that out through other parts of the company. That's a piece of the success that we saw in the second quarter as well as we're doing an even better job of identification of leads. I wouldn't say that there's any particular vertical in that product offering because what we're doing is fulfilling an AP file on behalf of our customers kind of -- part of what we're able to do is make that offering to pretty much any type of customer.

And so we have not had a vertical specialist across the places that we're selling. On the embedded payment side, though, that we tend to have more verticals that we're going after. And in particular, we've been looking at other fintechs as well as people who are in need of making a payment as kind of a subsection of their business. It may be part of their business model or it could be something that they want to create financial benefit by adding it into their business model. And so that tends to have a little bit more of a vertical focus and particularly with the fintech community.

And then, Nate, on the second part of your question. So I would say the split on the growth that we're seeing in the direct AP business was split roughly 1/3 of the growth is coming from OTR and 2/3 is coming from new business. So on the OTR side, you're correct. We saw a little lightness last year we've seen kind of spend acceleration, volume acceleration from a couple of big clients.

So that was a good outcome in the quarter. And then as you recall, we've invested in new business development. We hired more salespeople last year, and they've ramped up over the course of last year and into this year. And we've seen good new business generation coming out of that ramp. And that's really what the other 2/3 of the growth year-over-year is. And so we're quite pleased with that because that's coming in at very good volumes, very good rates. And as you saw from the credit loss results, very good performance metrics that's dropping through well to the bottom line.

Your next question comes from the line of Madison Suhr with Raymond James.

I wanted to start in the Mobility business just at a very high level. I'm curious, are higher fuel prices driving any acceleration in the sales pipeline for fuel cards, particularly for SMB customers who may be looking to try to offset higher fuel costs and historically have not used fuel cards?

It's an interesting question because we've historically not seen a high correlation between those 2 things. The one place that we are seeing much more demand is -- we talked about our 10-4 product that's in the marketplace. And so 10-4 allows the owner-operator that tends to be smaller fleets access to our discount network, and that has certainly benefited from interest of those type of customers that are looking for fuel discounts.

But in general, I would say the products that we have outside of 10-4 work in pretty much any environment. So there's a slight uptick. But as fuel prices have been lower, we also see demand. So there really isn't as much of a correlation as you might expect.

Okay. Interesting. And then just a follow-up. I did want to ask on the large OTA customer that went through a business model transition. Obviously, we've lapped those changes for a few quarters, and that customer now sits outside of purchase volume. But I was hoping you could just touch on how that relationship is progressing. And maybe any high-level color you can give in terms of how you're growing with that customer now that the business model transition has occurred.

Sure, sure. We have a great relationship with that customer. It's one of the places where we've been working with them we had talked about this a year ago, but we've been actively working on other areas of the world where they have same needs that we can establish the compliance requirements to actually issue and settle in those countries.

And so we've been actively working together in Brazil as one of those examples. In addition, we've been looking at other places within their model that we can meet their needs and have found some of those areas. So I'd say, overall, it's been a real partnership in the respect that continue to support their base needs, but in addition, look for places where we can actually provide services that are helpful to them. And we've seen some of the benefit of that come through.

Your next question comes from the line of Michael Infante with Morgan Stanley.

I just wanted to ask from a competitive perspective, what are you seeing with respect to your key competitor that has seemingly been targeting some of your middle market customers? And then secondly, as full-service fleet management companies increasingly expand within the middle market, how should we be thinking about any potential impact on unit economics and where you sit relative to the fleet management company and how that might impact take rates?

Sure, sure. So I would describe this has been a competitive environment for a long time. The places that we really emphasize is around our closed-loop proprietary network. And what that enables us to do is create higher quality tools for our customers and manage misuse, help them optimize the decisions that they're making.

It's part of what we're leaning into with this new AI product that we're putting into the marketplace that we have in a beta form right now. And if you look at where we sit, we have a lot of customers that sit in that very large end of the marketplace. We have quite a few in mid-market. But also if you look across our portfolio, we have a number of small accounts. And like on average, our customer is about a 15-vehicle fleet.

And some of that comes through the relationships that we have with our co-branded partners. And so we see competition kind of across all those categories, including the mid-market. We've been keenly focused on retention in that space, continue to grow in that space. As well as growth in the small end of the marketplace, which we have seen come through. And it's part of why you're seeing a pickup sequentially in our transaction volume is the fact those places we've been paying attention have been yielding positive results.

That's helpful, Melissa. And then Jagtar, maybe just a quick follow-up for you on the Benefits business. The average SaaS account growth is around 2%. I think when I sort of back out the UAW drag and sort of how you were previously communicating that segment, I guess, was that sort of in line with your expectations? I know there was a competitor that's obviously investing heavily in the partner channel that was acquired recently. So I'm just curious what might be impacting account growth beyond UAW and if you expect that 2% figure to accelerate throughout the balance of the year?

Yes. Thanks for the question, Michael. So it was in line with our expectations. So there was a couple of things I think we communicated last quarter. The first one was the UAW point that you mentioned, and that was about 150 basis point quarter-over-quarter drag in account growth. And then we also talked about the closure of some low-value accounts that we closed. I think I said something in my prepared remarks that really didn't impact revenue, but it did impact the account number, and that was about a 200 basis point drag as well.

So once you net those things out, the account growth really did do what we expected. Now we generally expect accounts to increase here modestly over the course of the year. So we will see some increase both on an absolute and a slight percentage basis. And then obviously, we're busy into the selling season, getting ready for the open enrollment period for next year.

Your next question comes from the line of Mihir Bhatia with Bank of America.

I wanted to start with Mobility. And look, I hear you that trends have improved, and we see that, right, in Mobility, whether it's transactions, local fleets, OTR, trends are certainly improving. Yet Mobility volumes, I think, have generally remained a little below what some of the external trucking metrics or indicators would suggest. You talked a little bit about supply side looking better and demand side improvement still to come.

I guess what I would like to understand is, is there anything beyond that? Are there any specific weaknesses in certain sectors, customer segments where you may be a little over-indexed versus what like some of the bigger freight indices would be reporting. Just trying to understand that disconnect a little bit more. And really, what I think a lot of people are trying to understand is, do current trends reflect only end market weakness? Or is there a share movement story under the hood? Like to put it bluntly, like is WEX gaining share, holding share or losing share in Mobility today?

Yes. Yes. That's a good question. And let me talk about the over-the-road business because you're kind of -- you're zeroing on that. In the over-the-road business, what we have seen is -- and again, I'll point back to we do business across many different segments in the over-the-road space. It's not just kind of the large accounts. And so what we've seen is that those large accounts are benefiting from the fact that you've had more supply leave the marketplace.

And so again, to held there -- and even with the smaller customers, Spot rates have improved. And so that customer base is healthier than it has been. What we're not seeing is on the demand side across more miles driven, meaning that housing starts and manufacturing numbers and all the things that actually drive total goods getting moved hasn't improved. And so we're not seeing that translate into additional volume.

But what we do is look across that portfolio compared to -- in this case, there are a few people that control the truck stop networks where people fuel. And so we have some pretty good insight in what's happening to our volume trends compared to those, and we feel very confident that we continue to take market share in that spaces.

In the North American Mobility business, we continue to see some same-store sales weakness that I would say is pretty consistent -- sorry, across the portfolio. And so the fact that we are seeing benefit of new customers coming in is largely getting offset by a combination of those same-store sales weakness and just normal attrition that we see across the portfolio. So net of all of that, I would say, across the business, we feel really confident, and we have much more insight in the over-the-road space that we are actually continuing to take market share.

Got it. That's quite helpful. Maybe switching gears a little bit to margins. I think you called out 100 basis points or more than 100 basis points of macro-neutral margin expansion in the back half. You've also talked about the growing AI-driven efficiencies across the organization. Maybe just take a step back and take a little bit of a big picture view, maybe a couple of years down the line as you look beyond 2026. Do you see a path towards a structurally different margin profile for WEX over the next several years? Like are we going to continue to see continued margin improvements from here?

It's a great question and one that we talk about a lot. If you look at our headcount actually over the last few years, we're actually down in FTEs from 2023. So we've grown revenue, and we have actually reduced our number of employees. And so we continue to believe that there are ways that we can use AI to create margin expansion across the enterprise.

And we've seen the benefit of that so far in our development and product teams. We have been really proactively working across our operations areas, which are places that we do believe that you can create even better customer experiences at lower cost. And we've got some pretty good evidence of that, although a lot of those are still in early stages. And so we do believe that there's benefit that is already accreting into the margins that we're projecting this year and will continue to accrete into the future. So yes, we do believe that, that will be a big part of the margin expansion story that we're going to have going forward.

Your next question comes from the line of Darrin Peller with Wolfe Research.

Can we just clarify a little bit more on the Mobility segment for a minute and just to follow up. I'm trying to understand what the puts and takes are versus first quarter specifically. I understand you saw about a 2-point headwind to revenues from lower-than-expected late fees. But just from our math, it looks like year-over-year revenue growth decelerated sequentially, excluding late fees and even with some of the transaction growth accelerating a little bit. So was this just because of less miles -- the less miles driven dynamic? Or any other color would be helpful.

Yes. Darrin, really, as I mentioned earlier, I mean, it really was late fee driven. Late fees was a sort of 2-point drag to the segment. So if I look at what we got out of the second quarter, 3 points of growth, about 1 point of it was pricing, point was BP and a point was sort of underlying growth in the business. So the underlying growth was kind of doing what we expected. And really, the drag came out of late fees.

Okay. All right. We'll have to follow up a little more on it. All right. And then just when we look at the Corporate Payment side, I just want to ask you more of an industry dynamic. Virtual card acceptance, obviously, it's become a larger debate, just changes by Meta and Amazon. Any other -- any broader changes in acceptance behavior you're seeing? Is there any potential impact embedded in your outlook for this? Or does it even need to be? Just maybe a little bit more color on the underlying dynamics and drivers of that piece of the business.

Yes. So this has been -- it's been an industry conversation for a number of years. We do see in very small parts of our business where you have issues with vendor suppression, and that's been true for a long time. It's a minor to us compared to other companies in part because a lot of the applications where we're using virtual card payments are to merchants that are quite accustomed to receiving a credit payment or debit payment depending on the case.

But they're used to paying interchange. And so for us, the places that we will see it, we have a smaller bill pay business, come through there occasionally. We also see it occasionally with our AP Direct business. It is something we've factored into our guidance. It's not for us been a big headwind in any given period of time. But I think that has as much to do with the type of customers that we have and the mix within our portfolio.

That concludes our question-and-answer session. I will now turn the call back over to Pedro Alvarez for closing remarks.

Thank you. We'd like to thank everyone for your time and participation in today's call. I'm available afterwards for any questions you may have that we didn't get to. Thank you very much, and have a great day.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

My name is Dave Koning. I'm a senior research analyst at Baird covering payments and services. Thrilled to have WEX along with us, CFO, Jagtar Narula; and new IR, Pedro Alvarez, over here. You probably all know Steve. Steve was at WEX for probably 15 years, and Pedro just stepped in about, what, a month or 2 ago? Is that -- yes, as new IR.

So with that, I know Jagtar is going to give a little review of WEX, and then we'll jump into Q&A.

Yes. Great. Thanks, David. I appreciate you having me. Forward-looking statement. Going a little bit about WEX.

So for those of you who don't know WEX, we are a payments company. And this slide, I love because it presents simply, what we do. Right? We manage business-to-business payments. And not every type of business-to-business payment, but business-to-business payments that have certain characteristics. They tend to be payments that are highly complicated. That's true of every one of our businesses. They tend to be payments that are mission-critical, and they're often highly regulated. And that's where we bring our unique value add, and we do this really well.

This slide shows a little bit about WEX. We are about $2.7 billion in revenue last year, $16.10 of adjusted EPS with operating margins of about 37.5% last year. We operate in 3 different segments, and I'll just go to those really quickly. Our largest segment is Mobility segment. It's about 45% of our revenue.

And that segment, if you think about the core of that solution at the end of the day, it's a fuel card. We offer a fuel card that comes with a lot of controls, a lot of reporting. It helps whether you're running what we call local fleets, which -- think of the electrician or the cable company. Or if you're an over-the-road trucker in long-haul trucking, it helps you manage your business and understand how your fuel spend is occurring.

Our Benefits segment is our second largest segment. It's about 30% to 35% of company revenues. And this is where we are providing -- we have a benefits platform, benefits administration, as well as the actual provision of benefits. This is in things like health savings accounts, flexible spending accounts, lifestyle spending accounts. We offer those solutions. We also manage float income associated with it. We handle the payments that occur with it. We are 1 of the 5 largest HSA providers in the country, something like 60% of the Fortune 1000 use our solution.

Our last segment, which is the remainder of the business, is our Corporate Payments segment. And this is where we're processing business-to-business payments for corporations. This could include what we call wholesale or embedded payment solution, where we're processing high-volume transactions integrated heavily with our end customer or we're doing what we call our direct AP business, which is processing AP accounts for our corporate clients.

This page is a little bit on our strategy, 3 core strategies. We've got amplify our core, which this, in my mind, is execute, right? We have the 3 segments that I just talked about earlier. We are leaders in those segments, and we continue to expand by doing what we've historically done well.

We then have expand our reach, which is we take our solutions and move into new markets, right, provide our solutions to new customers. A perfect example of this is our embedded payment solution. We have historically sold these to travel customers. We've increasingly sold these to non-travel customers. That same platform is used in our direct AP business. It's a slightly different front end, but the back end is all identically the same. So we are expanding our TAM, which provides a growth tailwind to the company.

And the third piece is accelerating innovation. This is where we are developing new solutions for our clients, getting into new markets, but also within existing markets, providing solutions that are incremental value add. So we introduced a product fairly recently called 10-4, which is a solution that helps the low end of the trucking market. This is both a product segment expansion for us as well as a new product solution, and that's core to our strategy.

A lot of questions I get are about AI and what's the impact of AI to us. We think of AI as an opportunity, right? We operate at the core infrastructure layer in payments processing, right? So this is heavily regulated core payments processing. And with it, we generate a lot of data, right? We capture a lot of data.

So whether it's in our Mobility segment, understanding how vehicles are being used by our clients; our Benefits segment, understanding how employees are actually spending the benefits dollars that are given to them; or in our Corporate Payments segment, which is understanding how companies are spending their money, right? That generates a lot of data. And that data allows us to enhance our value proposition. So we can use that data to provide insights for our clients, automate things like control so that we can help them with their spending.

In addition, AI gives us an opportunity to enhance our margins as a company, right? We spend lots of money doing things like processing claims, developing technology. And so some of the things we've seen over the last year is using AI to make improvements in those areas. We've increased the pace of product innovation. We've cut down in claims processing times, all through the use of AI.

We have a strong track record of growth. If you look over the last 10 years, we've grown about 10% -- north of 10% revenue CAGR, about 17% earnings CAGR. So we've got a strong track record of growth, and we're excited about the path forward.

Last thing I will touch on is capital allocation. We generate a lot of cash annually, north of about $650 million of adjusted free cash flow. Two things I will point out on this slide. First thing is the balance sheet and leverage. So we've been on a march towards -- to be below 3x levered. And we are updating our near-term guidance to say that we'll be between 2.5x to 3x levered. We think that gives us an optimal -- a very strong balance sheet with optimal flexibility.

The other thing I'll mention is our Board recently authorized a $1 billion stock buyback program. We've said that once we got below 3x levered, we would start buying back stock. So we are now in that place. We are now below 3x levered, and we've begun stock buybacks. So this is an update that I want to provide to everyone.

That's good news.

Yes, exactly. And then just what we expect. We continue to expect long-term, 5% to 10% revenue growth, 10% to 15% earnings growth. And we've provided that guidance for some time.

And then just to summarize it, we view ourselves as a differentiated company. We are highly innovative, and we will continue to bring new products to market. We feel really good about our growth prospects, and we feel good about the path forward for the company.

Yes. That's great. You did it in about 5 minutes.

Which is what I promised you.

Yes. Nice. And I guess, let's just start off since you just talked about -- you started the buyback again, that's good. We had expected that more to start in Q3, not Q2. So that's good to hear.

You could buy back about 1 million shares a quarter, just with your cash flow, the next 6 quarters, and that would use up the $1 billion. If you did that, that's 3% every quarter, that's 12% buybacks in the year. So you could get to 10% to 15% EPS growth with 0 revenue and 0 margin expansion. So it feels like there's a chance you could be a little outside the range if you do grow revenue and margins a little bit in the next couple of years. Is that a fair point if that all adds?

No, that's a fair point. I'm not going to raise our guidance right now, but look, I think we will balance between -- we gave a 2.5x to 3x range on leverage. We will balance within that range. I think I'd like to continue to pay down debt a bit, but not as aggressively as we have over the past year.

So we'd like to be prudent. I think our approach to share buybacks will be highly methodical. Like I think you've seen over the past few years, we've bought $2 billion worth of stock buyback, but you saw some quarters where we bought more, some quarters where we bought less. I think we're taking a more methodical approach to this, so it's a bit more predictable. But I think you will see a reasonable amount of share buybacks.

Okay. Well, that's great to hear. And the one other one that just impacts things so much right now is fuel price. I know that guidance is kind of a constant fuel price guidance. But right now, fuel has been massively in your favor. How do you think about that? Like maybe just give us a little context on how fuel impacts the business and how you even think about it now that it's stayed higher than you probably thought?

Yes. So we did take up guidance at the end of Q1 because of the impact of fuel prices. We've given out publicly, we provide supplemental materials on our Investor Relations site so you can think about our rule of thumb for how fuel prices impact our business. And we -- if you go and look at it, you'd see a $0.10 increase in fuel prices at the pump on an annual basis would be about $20 million of revenue and $0.35 of earnings per share. So that's at the top level, how fuel prices impact us.

Now I know in the first quarter, we had a rapid increase in fuel prices. And some of what we showed, I don't think it matched what people might have expected. And the biggest impact to that to us was in our European business, where we have this dynamic of European fuel spreads. That -- it's a smaller part of our business, but it operates in a slightly different model than the bulk of our business in the Americas.

So in Europe, we price fuel to the end user on a Friday, and then we purchase from the retailers as you go through the week. And because you had such a rapid increase in fuel price, we were actually kind of underwater on the spread for part of the quarter. That created a large negative revenue for us.

That -- now that we are at this higher fuel price level and the volatility is not there, we don't expect to see that similar dynamic of the negative spreads. In fact, through Q2, it's been more in line with historical. I think there's been 2 periods in the company's history where we had that like sizable negative spread occurrence. I think what you're starting to see now is more normalized than what you would expect according to our rule of thumb.

Got you. All right. That's all helpful. Let's turn back to really the core business. So in Mobility, the backdrop seems to be getting better. About 1/3 of your revenue, I believe, is over-the-road trucking.

Correct.

And the [ CAS ] data and ISM data are both getting better or less bad. They were pretty bad for a while, they're getting better. How do you see that impacting the business?

So we've been cautiously optimistic, right? We've been in this environment for the last couple of years where every time we think that the freight recession is ending, it has not ended, but this one seems to be a little bit more real than the past couple of years of false dawns.

I'd say a couple of data points for us. So if I look at the first quarter, we did have a negative compare in over-the-road from sort of tooling transactions, but we also had a very tough compare. So in the first quarter of last year, right, we had what we call a pull forward. So last year, we all remember that we had tariffs that went into place at the beginning of April. And so a lot of shippers got ahead of that by moving goods really early to get ahead of tariffs. So we saw big volumes in the first quarter last year, so that made a really tough compare this year.

On the bright side of what we've seen is same-store sales within the over-the-road trucking segment. That improved in the first quarter. It wasn't positive, but it was an improvement over what we've seen in prior quarters. So that gave some sense that things are improving. So we're watching it closely. We're cautiously optimistic, but the data from the external side does point to there may be some improvements coming in the trucking segment.

Sounds good. And what about local and international? Does macro -- pretty stable? Or how do you see that -- those?

Yes. We've been operating in this sort of volatile macro environment. Higher rates have slowed down some segments like construction and the like. So we've seen some negative same-store sales drags. I think with high fuel prices, it's created some macro uncertainty.

The good news is volumes have held up kind of to our expectations, in line with our expectations. So we feel good about that. And also good news, right, credit has held up. The big concern is high fuel prices, what's that mean for the economy, what's that mean for your AR and credit. And that has performed in line with expectations. So we feel really good about that.

Yes. And then ancillary products, Payzer, 10-4, some of those, should those be accretive to revenue growth, next several quarters?

Yes. I mean that's the idea, right? So we're really excited about the 10-4 product. That's something we introduced, I think, a couple of quarters ago. So this product is intended to target the low end of the trucking market. So this is think about single owner operators, a market we historically have shied away from because they just didn't qualify for a WEX fuel card. They didn't have the credit for it.

With the WEX fuel card, you get access to our discount network. And this was a way to say, okay, come into the WEX fold, bring your own credit, but you can access our discount network. And that brings truckers into our fold. And then we have ancillary products that we can sell to them, ancillary solutions. And over time, as they build up credit, they can graduate to a WEX fuel card.

So with these high fuel prices, what we've seen is a lot of interest in the product. We can see within our data, an acceleration of adoption by truckers of the solution after fuel prices increased because of the value proposition. So we feel really excited about that.

And then on the Payzer side, which we now call field service management, we've had good growth of that in Q1. That was a little slower start than we would have liked, but we saw really good double-digit growth in the first quarter. And what I'd say is we have a product that is really well targeted kind of at that small to mid-market service organization. And we've seen -- when we've looked at kind of our data, we see not only a good greenfield opportunity there, but we've had some good competitive takeaways over the last quarter. So that gives us increasing optimism that there's a really good solution, that we've got a really good solution and customers are buying it.

That's great to hear. And then the BP contract comes on in the back half to kind of help accelerate growth, too. How much again does that help year-over-year, kind of the next 4 quarters starting in Q3?

Well, what we've said is on an annualized basis, it's about 50 basis points to 100 basis points in this segment in terms of growth volume or revenue for that segment. We started to see initial BP in Q1. So we'll see the BP impact here in Q2, and that will continue over the course of the year.

We were really excited about that when we won it on the basis of new product innovation. We introduced this new dual loop card that allows you to run on both the WEX rails, but also an open loop rail. And BP really liked that solution, which is one of the reasons they chose us, and we're really excited about it.

Nice. So I guess wrapping up Mobility, can this be a mid-single-digit growth business going forward if you get a little better, just the macro of the ISM data, et cetera, the BP contract, et cetera, Payzer?

Yes, that's our aspiration. I mean, we see market growth in kind of that low to mid-single-digit range. We feel we should be -- take share, be ahead of that market growth. We got a great set of solutions that customers like, so we should do at or better than market. And then you add on top of that, that we continue to add new solutions to the market, whether it be field service management or 10-4 or other solutions, that should help us continue to grow in that mid-single range.

Yes. Okay. And if we move to Benefits, there's 3 revenue drivers here, the account fees, the interchange, the float revenue. How do you see the whole business and kind of each of those being impacted right now?

Sure. Benefits has been a great business for us. It's been a really, really steady grower. If I walk through each of those pieces, so account growth, we see steady account growth over time. HSA continues to get adopted. There continues to be good tailwinds to that adoption. Our benefit administration solution gets adopted.

When folks adopt our solution, they tend to drag additional solutions along with it. If you're an HR manager, you don't want to go to one place for HSA, one place for FSA, one place for COBRA, et cetera. You want one provider. And since we have such a broad set of benefit offerings, we see like things like HSA will drag other parts of the portfolio. So we feel really good about that. We are, as I mentioned in my prepared remarks, 1 of the top 5 HSA providers in the country, 60% of the Fortune 1000. So we continue to see good momentum there.

With that good momentum comes good momentum on the float income side, the nonbank custodial income. Right? That tends to grow faster than account servicing revenue for the simple fact that people put money into account, they don't completely send/spend at all. And the following year, they start the cycle again. So when you look at balances by age of account, they tend to be higher as the account ages. And so that just makes the growth of that segment faster than the overall.

The maturities in that segment, because we take the balances invested into investment securities, the maturities in that are very good. The bulk of our maturities aren't until 2033, so -- or beyond. So we sort of see a long runway towards good float income, and even the stuff that we have maturing earlier tends to -- we'll see an uptick. Assuming rates stay around where they are today, we'll see an uptick as we roll over those maturities. So we feel really good there.

And then the interchange revenue, that's people spending money from their accounts. That tends to grow in line with account growth. So overall, it's a really good business.

Yes. Anything coming up, either regulatory, like allowance to invest more in HSA? Any fear of like what if AI means there's 20% less employment in the U.S.? What are kind of those background factors?

Yes. So on the first side of it, so on the regulatory side, we're in a good position that I think there is consensus in Congress, in Washington that HSAs are a good thing, right? More consumer control helps control healthcare spending. So there's been a desire to expand the use of HSAs. And we saw that earlier this year or last year with the One Big Beautiful Bill, which expanded eligibility to HSAs. We think that provides us incremental opportunity.

We go to market through both a direct channel and a partner channel. Our partners are very good at sort of picking up that incremental opportunity that came through things like One Big Beautiful Bill. So we view that as an additional tailwind to our business.

On the AI side, we view it as an opportunity. Right? We operate at kind of the core infrastructure layer across all of our businesses, including Benefits. So as I mentioned earlier, we capture a lot of data in the Benefits segment. And we've been using AI with that data to provide information to employees to better utilize either the selection of their benefits or the utilization of their benefits. And that's good for the employee, which makes the employer happy, which helps us as an organization. And so we think -- we continue to think there's a good opportunity from AI there.

And there's a good opportunity in the AI -- from AI on the cost side. Processing claims is a reasonable expense of ours. And as I mentioned in my prepared remarks, we've rolled out automated claim solutions into that organization, where we have seen a significant reduction in the amount of time and cost that it takes us to process a claim. So as we continue to expand that through our claims processing, customer support in the call center, we should continue to see benefits from AI there.

Yes. Okay. And you said 5% to 10% revenue growth, total company. Mobility sounds like close to mid-single digits. Benefits, what would that be, mid- to high single digits?

Yes. We've guided kind of 5% to 10% across each of our segments. We think there's sort of significant opportunity. For this year, we've said Mobility is at the lower end of that. So Mobility is 1% to 3%. Corporate Payments is 5% to 7%. But over time, we see each of our businesses having the capability to grow in that 5% to 10% range.

Yes. Okay. And then moving to Corporate, that's travel and then just B2B, right? The travel segment of that, is there any impacts right now from the Iran conflict that you see?

We've had some impacts, smaller than people may think. So we have a very low exposure to the Middle East, right? Our exposure was about $3 million of revenue a quarter. So that's relatively small. And as you can expect, nobody is really traveling to the Middle East right now.

But overall, in our book of business, I think one thing that people don't appreciate is that our book of business is heavily skewed towards hotel bookings. So when we have environments like this where you have this rapid increase in energy prices, jet fuel goes up, people may start flying less, right? And that maybe impact airlines. But generally, people -- like if you had a vacation plan and you don't fly to your vacation, people will still drive, right?

So hotel bookings tend to be more resilient than airline bookings. And that's what we've seen as we've looked at volume through the year, things have held up. So we're pretty optimistic. Obviously, right now, we're entering that peak summer travel period. So right now, we've got a close eye on that. Things have so far held up well, but we're keeping a close eye.

Yes. Okay. And what about stablecoins? A lot of people think B2B payments like big chunky payments, big payment files, stablecoins. What do you see -- could you use them? Is it a risk, et cetera?

So I think there's two or three pieces to this. So when you think about us, right, where people ask about stablecoins for us the most is in our travel business because you've got all these kind of international travelers and money going to your hotels around the world.

One, I think you got to remember the value proposition of our offering, right? We help with controls. We help with fraud protection, with chargebacks, with reconciliation, with integrating to the OTA, online travel agencies, back-end systems, all something that just stablecoin by itself doesn't do. That's a big value proposition of our solution, which is critically important.

The other thing you have to remember is that, right, when we -- when you do a hotel booking and use our platform, we're issuing in local currency. We issue around the globe. So we're issuing local and processing local. So there isn't really an FX transaction going on there. That point of sale at the hotel isn't really designed today for stablecoin. It's designed for a solution like ours.

So today, we haven't seen a lot of demand from stablecoin. I would say that if in the future, if hotels were suddenly able to accept stablecoin, you could add a new payment rail on top of what we do today. And so we could look at stablecoin as a solution. Where you do see sort of stablecoin opportunities, I think, in the areas that you talked about, which is there's -- it's kind of wholesale. It's like that high-volume flow, which is more of a treasury operation than that point-of-sale operation of handling the hotel booking.

Got you. Yes. And then what about yields on volume in the corporate business? A couple of years ago, it was down a little bit. People got nervous. But lately, it's been pretty stable. How do you see that over time?

Yes. I think that's kind of one of the misconceptions that a lot of people spend a lot of time looking at the yields. And it's not that yields aren't important, but we tend to think of it as driving as much volume as we can through the platform, as much revenue.

That business is a high margin drop-through business, right? It doesn't cost us a lot incrementally to process additional volume. So our core mantra at the end of the day is drive more volume through the platform. That volume drives incremental revenue. That incremental revenue drops through at a very high rate to operating income. So that's how we tend to think about it.

So when you think about the mix of the business, right, we've got this direct AP business that tends to be at kind of very high take rates. Our -- what we call our wholesale business, our embedded payments business. There, you're trying to go after a lot of volume, which means you're offering pricing incentives to drive the volume from the client over to our platform. And that mix overall impacts the overall take rates that you see. But we tend to manage that by trying to drive as much volume as we can.

Yes. Yes. I understand. Maybe one last question. The activist got involved, and now Dave Foss is Chairman of the Board. Many people know them from Jack Henry. Some people had kind of pushed for the segments to be broken up, the activist pushed for that. What's, I guess, your thought on the segments staying intact or being broken up? And maybe where are we at now with the activist?

Yes. So we've settled with the activist. We've got some new Board members now, which is our first Board meeting. It was a great Board meeting.

And what I'd say is we've looked at this in the past. As we've mentioned before, we had 2 banks look at it, Bank of America, JPMorgan. They came to a clear conclusion, and both of them separately, that WEX is better as one company. There are dis-synergies from breaking apart the businesses, things like the bank, where we earn -- we fund at better rates in the Mobility segment. We earn float income at a significantly higher rate in our Benefits segment. That could potentially go away if you were to break up the businesses. So we continue to see -- we continue to look at what JPMorgan and Bank of America had said.

But as we've said, we always look at this, right? This is not a onetime -- like we've looked at it every year since I've been at WEX. We will continue to look at it. So it's always something that's open for discussion, but the latest data I have is the latest analysis we've ran.

Yes. Got you. Well, that's all the time that we have, but thanks so much.

Well, thanks, David. I really appreciate it.

Yes.

Thank you for standing by, and welcome to the WEX virtual fireside chat. I'd now like to turn the call over to Steve Elder, Senior Vice President of Investor Relations. You may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us. With me today are Melissa Smith, the WEX Chair and CEO; and Dave Foss, the incoming Vice Chair and Lead Independent Director.

During today's call, we'll be referring to a presentation we issued on April 16. That presentation has been posted to the Investor Relations section of our website at wexinc.com, and on votewithwex.com, and has also been filed with the SEC. Except as otherwise noted, any references to the presentation issued on April 16, including the information contained therein is as of the dates indicated in that presentation, and does not reflect events or developments occurring after such dates.

As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin, adjusted EBITDA and return on invested capital measurements as well as adjusted free cash flow during our call. Please see the appendix of the presentation we issued on April 16 and our Q1 2026 earnings materials, which can be found on the Investor Relations section of our website at wexinc.com. For an explanation and reconciliation of these non-GAAP measures to their most directly comparable GAAP measures.

The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and the indeterminant amount of certain elements that are included in reported GAAP earnings.

I would also like to remind you that we'll discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in the press release announcing our recent quarterly financial results and the risk factors identified in our most recently filed annual report on Form 10-K and in our subsequent quarterly reports on Form 10-Q and other subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

So with that, I'll turn the call over to Dave to begin.

Thank you, Steve. Good afternoon, everybody. By introduction, my name is Dave Foss. I am, as Steve mentioned, the incoming Lead Independent Director for WEX. I joined the Board in November. I'm currently a member of the Nominating Governance Committee and the Audit Committee. And previously, as some of you may know, I was CEO of Jack Henry & Associates, and I'm currently the Board Chair at Jack Henry. I'm also the Chair of the Nominating Governance Committee at CNO Financial, which is a public insurance provider.

So for today's call, what I'd like to do is start out by giving you a little bit of background on our business, and then I'm going to turn it over to Melissa and ask her to talk about recent developments, recent momentum at the company and also share some thoughts about our engagement with Impactive and what kind of the evolution of the board in recent history. And then I'll wrap it up with some commentary on Impactive and its nominees and then we'll have some question and answer at the end.

So to begin, I'd like to start on Page 8 in the deck that you've been providing, and just give a high-level overview of the company and essentially what the business does. So first off, WEX is a global financial technology company. And I think that's important to note that we do business all over the globe. And we've really operated under three primary segments, and they're listed kind of in the middle of the page there. The first is Mobility, the second is Benefits and the third is Corporate Payments.

Okay. What do those three segments do? Let's start with Mobility. So Mobility is kind of the heritage of WEX. In Mobility, we do a lot of different things. But just to kind of boil it down to the key piece of that business, it is offering fleet cards. So let's say that you own a fleet of trucks, whether you're a big carrier or a smaller regional carrier, and you want your drivers when you have to refuel, you want them to have control over that process. You can contract with WEX. We issue you a set of cards that you give to your drivers. So when the driver pulls into, well say, a Chevron station, they have a Chevron branded card and they pay using that card. What's the advantage to the fleet owner. First off, they can manage their spend because WEX has prenegotiated discounts on that fuel. So the fleet owner is getting a deal there.

Secondly, the fleet owner can control who's spending and where and when are they spending. Thirdly, there are built-in fraud protections because in this model, WEX operates what's called a closed loop network where the transaction never leaves WEX. It is managed completely by WEX. And so the fleet owner has control over fraud and also insurance of compliance. And again, lots of other things we do in the Mobility segment, but that's kind of the primary business of that piece of the business.

Second segment is Benefits. So the Benefits business, here, too, to give an example, lots of things we do in benefits, but the primary piece is around HSAs, health spending accounts. So let's say you own a business. You want your employees to have the ability to manage a health savings account, you contract with WEX. WEX enables your employees to make deposits to their HSAs. And then WEX provides the tools. So when the employee has a legitimate medical expense, they can make those payments out of those HSA accounts to a legitimate medical provider.

WEX provides, not only the platform to the deposits, which, of course, is WEX Bank. But WEX provides all of the tools to ensure compliance so that the employee isn't paying for things out of their HSA accounts that aren't allowed given the rules around HSA accounts. So we're gathering the deposits. We're managing the account for the depositor. We're enabling those transactions. We're ensuring compliance. And of course, we have fraud tools built in there as well.

And then the third segment is Corporate Payments. So in Corporate Payments, lots of different things here as well that we can do. But primarily, this is about moving money from one commercial customer to another commercial customer. So let's say, you own a commercial business. Many commercial businesses when they pay other commercial businesses, they're cutting checks, paper checks, even today in 2026, sadly. But WEX enables that functionality where you can move transactions electronically. This is not payroll, so it's not the employer or the commercial business paying an employee. This is all about the commercial business paying other businesses. And so it's a broad suite of solutions all built on this foundation of moving money in a compliant fashion and providing the fraud tools and the reporting back to whoever the business is regarding the movement of that money and the movement of those transactions.

So let's quickly flip to Slide 9, and let me just highlight who the competitors are for these three segments. So first off, under Mobility. You will note that when you listen to Impactive, Corpay as always highlighted and certainly, they are the largest competitor in this segment, but there are a number of other competitors that has demonstrated on this slide below Corpay. In the Benefits segment, same thing. HealthEquity, #1 competitor, but a whole bunch of different competitors there. And then in Corporate Payments, a wide variety of competitors. The thing that I'll point out to here is note that most of those competitors are banks. So down in the bottom corner, MVB is a bank, Cross River is a bank, Capital One. Many of these are banks.

Why does that happen? Because it's very common for a commercial customer, when they want to move money more efficiently, they go to their banker and say, hey, help me move this money. And so lots of banks have created similar technology. The advantage, of course, that WEX has is we are a bank, but primarily, we are a technology company. And so we have a leg up, I think, on most of those banks as far as offering a more well-rounded offering and a well-rounded service.

So with that, let me turn it over to Melissa to talk about some aspects of the business and like I mentioned, recent momentum and where we are today.

Thanks, Dave. As you can see on Slide 11, we're really proud of the long-term growth profile of the company. Over the last 10 years, we've grown revenue 11% and EPS 17%. We've also delivered solid long-term growth across each of the business segments. And it's really important to us that we're doing that competitively in the marketplace.

And you can see on Slide 12 how we are outperforming our peers over a long period of time, both in Mobility and in Benefits. We also executed well in 2025, and our financial results reflect that. You can see in 2025, we recorded record revenue and record earnings. In fact, in 2025, our adjusted EBITDA even surpassed the upside model projections that Impactive has set for the company 3 years earlier. You can see that on Slide 15.

Despite Impactive's claims to the contrary, we are also generating better returns on capital than Corpay, which you can see on Slide 16. We spent a lot of time analyzing our business and returns. And one thing to keep in mind is because we own a bank, it makes the ROIC calculation more complicated than our peers. For example, we've got billions of dollars of HSA accounts where we earn returns on that money, but there's really modest cost associated with that interest income. So there are customer funds, not corporate capital. Likewise, the bank funding that supports our receivables requires relatively modest corporate operating capital. So when we measure ROIC, we look at corporate capital. That is the actual capital that we're invested in working in our business, and we exclude customer deposits and other bank funding.

I'd remind you that there are strategic benefits we get from WEX Bank, including really low cost of funding of our receivables and higher interest that we're earning on our HSA deposits compared to what you'd see from a third-party bank.

Looking at the company as a whole, we returned to growth in the third quarter of 2025, and that growth accelerated into the fourth quarter. As you can see on Slide 19, when you think about the third quarter was a really important inflection point for us. And you can see that growth has just continued. In fact, last week, we announced earnings for the first quarter of 2026, and we delivered year-over-year increases in revenue and adjusted earnings, both exceeded the high end of our guidance range.

Some of the things to highlight, if you look across the picture of our segments, we saw a strong performance in Mobility revenue performance improved. We had revenue increases of 3.2% year-over-year. We did have some tailwinds with higher fuel prices in the U.S., but that was actually offset by international fuel price spreads, really is a story of improving execution and it's still a challenging market that we're in, and we feel good about the results there.

In Benefits, we delivered a really strong open enrollment season which, as you know, that position us well for the rest of the year. HSA accounts were up 8% year-over-year to more than $9.4 million. And then Corporate Payments, and if you look at our growth compared to prior year, revenue was up 9.3% in the quarter, and that was driven based on volume growth. We expect this momentum to continue in 2026. Remember, we just raised our guidance. We expect to have another record year of both revenue and adjusted net income per share at the midpoint of that guidance. We've really spent the last few years investing in our platform, which is an important point for us, the product set, the go-to-market engine, the team that we have, and we've moved to this phase of scaling our investments. And when we think about last year was an investment year, this year was a scaling year. We now expect to see increased operating leverage and that's going to drive meaningful margin improvement. In fact, at the midpoint of our guide, we're assuming 75 basis points of margin improvement in 2026, macro neutralized.

If you look at Slide 21, we think that our fundamental business performance has driven improved shareholder returns. We've outperformed our current and previous set of performance peers year-to-date since our third quarter 2025 earnings release, and over the last year on a TSR basis. And if you look over the long term, our shareholder returns have been broadly in line or even ahead of those performance peers. That said, even with the stock up nearly 20% in the last 12 months, we're not satisfied with the current stock price. We have more work to do to deliver the returns that you expect and that we expect. And we are taking decisive action in order to make sure that we strengthen the business and position WEX for the long term.

So let me talk through some of the things that we are actively doing right now. In Mobility, we've launched new solutions. We increased investments in sales and marketing, and that has led to a 1% improvement in the first quarter this year in new sales coming in. We're seeing really good success in product market fit with the products that we have in the marketplace and 10-4 being one of them.

We've also implemented targeting price increases over the last several years. Between '24 and '25, we implemented $70 million worth of price increases in our Mobility business and continue to do that through 2026. In our EV business, we've rolled out integrated EV offerings, market-leading solutions in the Mobility space, and we're really excited about how those products are fitting in the marketplace, albeit not as much adoption in the U.S. as it was -- we would like. And then in Corporate Payments, we went through this transition with our large online travel agency customer. We've gone through that. And you can see it in our results in the first quarter, really strong performance, post-cycle where we're finding new areas of spend across the business and finding ways that we can use our solutions to co-innovate with our customer set. We're also selling our Corporate Payments, Embedded Payment Solutions outside of travel in a way to continue to diversify the business and seeing really good product market fit there.

The other thing we've been really big believers in is AI. It's been a really big topic in our boardroom over the last couple of years, it's something that we've used in a very focused way, starting with our risk tools a couple of years ago, which has enabled us to do the work we're doing right now and extending into small business. And then more recently, we focused on product and technology, and it's really changing the way that we're moving products into the marketplace. It's accelerating the speed. We talked about the fact that we have a 50% improvement and product innovation velocity in 2025.

We're able to prototype faster, test ideas with customers more rapidly, and we're able to do that with less people. We actually have 8% less employees now than we did in 2023. So we're able to get more done with fewer people by reimagining the way that work is getting done.

And the result of that is WEX is just more focused, we're more resilient and we're better positioned than we've ever been before. And we're really excited about how we're executing against our strategic plan and how that's translating into customer benefit and ultimately will translate into share price performance. Now I want to talk a little bit about the engagement we've had with Impactive. As a Board, we've had constructive engagement with investors, and it's really important to us.

Our Board does a lot of investor outreach. I spend a lot of time with investors as well. We welcome constructive feedback. We make sure that we have those open dialogues. And we've done our best to be responsive to Impactive. Over the last 5 years, our management team, our directors, we've engaged extensively with Impactive principles. We've had dozens of meetings. We spent hundreds of hours, we're viewing Impactive analysis and evaluating its recommendations. And we've taken action in areas where Impactive's feedback was consistent with our perspective. And you can see examples of that on Slide 23.

Impactive has presented ideas to the full board. And many of our directors have met with Impactive principles in smaller groups as well.

Now in our recent discussions Impactive is advocated primarily for two things: a spin-off of the sale of the Benefits business; and the mega stock grant. Now we carefully evaluated both of these proposals. As you can see on Slide 24, including with the assistance of outside experts. So with respect to the Benefits segment separation, One of the things we do each year at the Board is we look at business configuration and have for a number of years. We also, during our strategic planning meeting, bring in outside parties, either investors or analysts that come in and speak to the Board as well as investment bankers.

And so for years, we've looked at business configuration. This year, the Board went deeper. We engaged not only JPMorgan, but Bank of America. So we worked with both parties to look at the proposal of breaking the company up. The finance committee went particularly deep over a series of months, evaluating a sale, a spend, a joint venture, really any scenario that could be value creating to our shareholders. And ultimately, they decided that -- and I would say both investment banks worked independently. They both had access to all the same information and both independently concluded that the businesses are stronger together.

Our Benefits business aligns with our strategy, our technology base, our customer focus, our organizational strengths that shares common infrastructure with other businesses. If we were to divest the Benefits business, the RemainCo would actually have lower growth, greater customer concentration, more exposure to fuel prices. And so there were RemainCo valuation issues and as importantly, significant dissynergies when you actually started to strip out the benefits that we have with our bank that made the idea of pulling the pieces apart, not attractive.

Alternatively, the Board also, in this case, it was the Compensation Committee, our Leadership Development Committee evaluated Impactive's mega grant idea. They conducted an in-depth review. They had an independent compensation consultant look at a range of factors, some of the things that they were looking at was internal pay equity, the investor and proxy adviser policies, they've looked at a history of stock performance where mega grants have been used both the for the grant and then and post-grant. And ultimately decided that the compensation framework that we had was more appropriate to creating long-term shareholder valuation.

And one thing of note is, I'm sure you've seen in the proxy, the Leadership Development Committee have been moving anyway to increase emphasis on share price and my total compensation and it's become a bigger piece over the last several years. And so they just instead continue to push for more TSR representation in the stock and turned down the idea of a mega grant.

And then I'm going to turn it back to you, Dave, to talk more about the recent engagement with Impactive.

Okay. Thank you, Melissa. Maybe before I move forward, I do want to offer a little commentary on these items that Melissa was just sharing. So I mentioned at the outset here that I just joined the Board in November, so I'm the new guy, on the WEX board. One of the things that really struck me when I first joined the Board and started to come up to speed on what had been happening was the level of engagement that the Board has had with Impactive. So this isn't just over the past month or two, and this has been going on for years. And it appeared to me to have been really constructive engagement, as Melissa highlighted, several of the ideas were implemented by the leadership team and then a couple with thorough investigation, and the Board decided not to pursue.

Specifically on the spinout of benefits, so you may find it interesting that when I started to learn about that from Melissa asked, okay, who were the bankers? I knew that it was BofA and JPMorgan who had done the analysis, but who are the bankers, the people who actually did that analysis because I've been in this game a long time. I know a lot of bankers and sure enough, one of them was somebody that I've worked with us a lot. So I shortly after that discussion, arranged a meeting to go through the analysis, just one-on-one, help me understand why you arrived at this decision as an investment banker.

And I think it's important for you all to remember that if you are an investment banker, the way you make money is in doing a deal, right? It's not doing this analysis. And it's certainly not showing up and saying, yes, we don't think you should do a deal. The way investment bankers make money is by finding a way to get a deal done. And so to have two world-class investment banks come back and say, there is not an opportunity here. I think that spoke volumes to me that the idea was certainly creative, but not the right one at the right time. So that was my initial analysis when I joined the Board.

So let's talk about what we've been doing here in the recent past. I'll flip you to Page 26 in our deck. We had a lot of engagement since February, of course, February was when Impactive submitted their notice of nomination and since that time, we've engaged regularly with Impactive. I personally have been having those conversations. And so you see on 26, kind of the progression of the the settlement offers that we've made. We at the Board level, have been very focused on trying to come to a reasonable settlement with Impactive and ensure that we did the right thing for the company and for the shareholders. It's -- our proposals have been rejected. And of course, there's this focus, not only on removing our Chair and CEO from the Board, but also the chairs of two of our committees to replace with two Impactive candidates. And so it's a very disruptive proposal that's been made by Impactive.

And with that in mind, we've really been trying to be constructive about coming up with something that might be mutually agreeable. If you slide forward to Page 27, this is something too that impressed me about this board when I first joined I didn't realize the level of refresh that the Board has gone through in the last several years. So you'll see several people that have been added in the last 5, 6 years and then those that have rolled off, through normal retirement generally. I think it's a really healthy progression that this Board has been through over the last several years to ensure a strong board going forward, to ensure that there is not entrenchment at the Board level people protecting their jobs and that kind of thing. I think it's been a really healthy initiative by the Governance Committee and by the Board overall to ensure that we're doing the right things at the governance level.

I would also like to point out, so if you move to Slide 29, we -- as a part of this process in engaging with Impactive, we did the normal interview process with the 3 candidates that were proposed. So as opposed to just saying no, we ran through our normal governance process. We had -- we do team interviews. So one team was Nancy Altobello, who is our Governance Chair; the other team was Melissa with Susan, who is on the Governance Committee. And we conducted full interviews of all of the candidates just to make sure that we knew who they were and how they might be as a fit on our Board.

And I think those were good solid conversations. The challenge was that Kurt and Ellen, who, of course, for the other proposed candidates and are currently on the slate for Impactive, they were essentially additive to what we already had on the board are duplicative to what we had on the board already, both good people, I think, good potential board members, but not additive or some really extensive skill set that we didn't already have.

I think it's also important to point out, there's been this idea that Ellen because of her strong banking background. And of course, my entire career was in service of banks, so I knew of Ellen and had worked with her bank, CIT Bank in New York, extensively. I think there's this idea that, Ellen, because of her banking background is going to be additive to the bank board. And I think we need to be clear about the fact that the bank board is a separate entity. The corporate Board is an entirely separate entity from the bank board. And if you sit on the corporate board, you don't sit on the bank board, and we have to comply with FDIC rules and regulations around that. So I think that's an important distinction that I want to make sure we're clear on.

But -- so in an effort to try and resolve all of this, we talk to Impactive about potentially adding one of the independent directors shortly after because Impactive wasn't amenable to that idea. We went back and said we'll add two of the independent directors. Again, Impactive wasn't amenable to that. And so we are where we are today.

So I think it's important for you to know why then for Lauren, in particular, why there has been this position that we didn't want to add Lauren to the Board. And we tried to highlight that in the deck on Page 30. I'm not going to go through this in a lot of detail. But I think it is important for you all to know that we took this very seriously. We know that this is a public debate, and we took this very seriously. This is not, we don't like you campaign, this was a thoughtful analysis of Lauren as a Board member and we tried to be diligent in ensuring that if we were to recommend to the shareholders that Lauren to join the Board, it was a recommendation that would be made the way we would do that with any other potential candidate.

So let me take you to Slide 31 and just do a little summarization of where we stand. So I think it's important, if you listen to what Melissa was just talking about, it's important to recognize that our strategy is delivering results today. We have just discussed record revenue, record net income per share. Our product innovation is faster than it's been. Melissa has highlighted that. We're executing on strategic initiatives today. We're exceeding the projections that Impactive have made in 2022 for us as a company in 2025, 2026. And so I think the company is executing well. Certainly, we're not satisfied with the stock price. We understand that. But I think it's also important to recognize that in our sector, the payment sector, many companies have been kind of going sideways here for a little while. And so I think the company is performing well. And so the thing I would highlight is this is not a broken company. This is a company that is functioning well with terrific leadership and is delivering for our customers and long term for our shareholders.

Likewise, I would emphasize, this is not a broken board. So the Board and management have engaged constructively with Impactive for a significant period of time. And I think it's important to note that the Board is not entrenched. They are not trying to protect their jobs, as I pointed out, with all the refreshment that's happened here in the past few years. This is a board that is trying to practice good governance, and make sure that we're managing the company or providing oversight that is proper for this company.

And I would again highlight what I said earlier, both for the Impactive candidates removes not only our CEO from the Board, but it removes two of our Chairs from the Board. And I think that's very significant to remember, very disruptive to the Board for people who really have done a pretty good job for the shareholders over time and people that are engaged with the company and trying to ensure proper oversight for this terrific company.

So with that, I think we'll end the prepared remarks, and I know we have some Q&A to run through, and so I'll turn it back to Steve.

Yes. Thanks, Dave. So we just kind of gathered up some questions here that investors have been asking. So first one, Melissa, why don't you use your proxy peers in any of the TSR comparisons like Impactive did?

Yes. Actually, like many publicly traded companies, we actually have two peer groups, and we use them for different reasons. We use our compensation benchmarking peers, and that's what Impactive was referring to as our proxy peers. We use that to benchmark executive compensation. So we think of that as those are companies where we compete for talent, but it's not intended to be used to measure performance. We also have a separate set of peers, which we call our performance peers, which are listed in our proxy statement. This group includes companies that we compete in the marketplace for investor capital. So -- and some of the companies also have similar macroeconomic forces. We think that's a better benchmark. And what we have used historically as a comparison.

Just to note, we actually started using the Performance Peer Group in 2021. So we used a group that we had put together and talking to investors years ago, we used it in '21, '22, '23, '24. And then in '25, we engaged an outside firm to come up and professionalize that to come up with their list of performance peers to be -- to use and use that to consider our TSR performance against. And so we have altered it, but only to make it that much more reflective of the company and those that either we compete with on shareholder money or have similar market dynamics as we do.

Excellent. The second one here, also, I guess, for you, Melissa, why do you think your return on invested capital calculations are so different from Impactive's?

Well, it's a great question. Our ownership of the bank makes the rate calculations more complicated than our peers. And I said this earlier, but we've got billions of dollars in deposits and HSA accounts, and we earn right now about 5% returns on that money that we have very little costs associated with the interest income. So they're customer funds, they're not corporate capital.

If you look at how Impactive calculates ROIC for Corpay, they exclude interest costs and the costs associated with their securitization facility that funds their working capital. We don't use a securitization facility. We use our bank because the funding cost is lower. So if you exclude the bank that makes the comparison to Corpay apples-to-apples, Impactive is just not properly accounting for the WEX Bank, and that boosts break when done correctly.

Impactive things to the bank is a drag on ROIC, and frankly, it's just wrong. You actually don't see ROICs as a measure in banks for that reason. And so what we're doing is stripping that out. But the other thing I'd say is when Impactive presented at the Sohn Conference in 2022, they agreed with us that we generate great returns on capital. They -- Impactive they pegged their ROICs at that point in time at 20% plus. And the other thing that we thought, I think a lot of is how does our WACC compare as well as ROIC. And when you look at our WACC according to Bloomberg, it's lower than Corpay's. So we're actually creating greater economic value for our shareholders. So ROIC actually doesn't need to be as high because we've got a better spread. However, the ROIC is comparable and our WACC is lower.

The other adjustments we make to EBITDA are stock-based compensation and foreign exchange. Those are really common. And when we present ROIC analysis using new path, which includes stock-based comp and amortization, the conclusion is similar. So we've done this a couple of different ways. We're showing it to give you a comparison to Corpay because that's where Impactive has made the comparison. And we compare well.

Great. Dave, let's get you involved here. Is Ramp really a competitor? And if they are a competitor, why were they not identified in our most recent 10-K? And does the fact that Lauren's Husband or spouse run a VC fund that owns a stake in Ramp, does that really disqualify her from serving on the board?

Yes. So Ramp is definitely a competitor. This is not some tactics. So let me just tell the story a little bit about Ramp. The company was aware of Ramp, but Ramp is a start-up company, right? So it's a small company, but it is growing very quickly. And so when it comes to the topic of why didn't you disclose this in your 10-K. For any company of any size, it's almost impossible to disclose every single company. I know that we had that challenge in my company when I was running, trying to identify every single possible little company start-ups that oftentimes begin business and then they're gone. But we were aware of Ramp. And I think the significant thing here to note is that Ramp, on their website, identifies WEX as a competitor. So whether it was in our 10-K or not, they believe we're a competitor and they have sent mailers out e-mail solicitation to WEX customers indicating that they have a history of displacing WEX customers with their solutions. So they freely admit that WEX is a competitor.

Okay. So then how big is this competitive stake? Of course, we don't know exactly how much the investment is. We believe it's one of Lux's largest, most profitable investments. Lux, of course, is a VC firm co-founded by Ms. Taylor Wolfe's Spouse. And right now, we estimate the stake to be more than $300 million. So it's a significant stake if our estimation is correctly that the family has in this company. I think what's notable about Ramp, again, we knew about Ramp, but what's notable here is that it was another one of our investors who came to us and said, this seems concerning that one of the two partners at Impactive is so heavily invested in this competitor. And this investor said that we think you need to get more serious about this. So it's very interesting to me that an investor had that level of concern that they would come to Melissa and myself and want us to make sure that we were being sensitive to this.

So why does this matter? Well, if you've ever been in the corporate board room, of course, you know that there is sensitive information, highly sensitive information being discussed all the time regarding competitive strategy and pricing and product roadmaps and all of that type of information. And so that's something that it's a heightened level of concern for us to have somebody in the boardroom who has such a significant economic investment in a rising competitor as the situation is with Ramp today. So that's why we took the position we did. It is not that we're trying to be petty about something. We believe this is a significant competitive concern and something that we needed to raise to the level of awareness.

So Dave, I'll stick with you for a second. We did offer -- you did offer to 2 of Impactive nominees, Kurt and Allen, to the Board. So wouldn't that kind of imply that you think that they would be additive to the Board? And why do we think they aren't the right fit now?

We did that move, as I alluded to earlier, we did that move in the spirit of trying to be cooperative, productive with conversations with Impactive. Trying to bring this to a resolution. As I said, we think there's a lot of duplication in the skills, having another person on the board with the same skills is that detrimental to the Board. I would say not, particularly with Ellen. She's an accomplished director. She has a lot of experience. So having somebody like her in the boardroom, that's not a negative. But what really is concerning is the idea of replacing our existing directors and especially our CEO, who is on the board, the idea of replacing our CEO on the board with somebody who doesn't bring the experience that the directors that we have today to the Board, that's where the concern is. So we offered in the spirit of being constructive and trying to resolve this. We offered to put those two folks on the board. As I mentioned earlier, that offer was rejected by Impactive.

All right. Dave, I'm going to go back to you for one more, and then I'll give you a break. But we say that the Impactive's nominees, their experience largely overlaps with other directors. But wouldn't you say something is also similarly true with Nancy Altobello?

I wouldn't. So Nancy, if you read through her CV, she has extensive experience that is different from either of those candidates. She was Global Vice Chair at Ernst & Young, brings audit accounting experience, CPA credentials and human capital perspective because of a role at EY over the years. And so she has an entirely different and more expansive CV, I think, than the candidates that we have -- that Impactive has proposed. She's also on the Board of two other multibillion-dollar public companies and is chairing other committees on her other Board.

So she brings a lot of experience in a lot of desirable areas, things where we really need that experience on our board. So we think that replacing Nancy with one of the Impactive nominees is a loss of critical expertise and continuity and introduces risk at a time where we don't need risk, we are building momentum, and we think that Nancy is doing a great job.

All right. So Melissa, it seems like there's a lot of directors from New England that are on the board. Doesn't that kind of suggest it's a little bit insular, for example, Steve Smith, is he only on the board because he lives in Maine or happens to be a friend?

When the Board started, it was mostly New England-based. But now the majority of our directors actually reside outside of New England. Dave is a great example of that. And each director goes through a really thoughtful process. We start with creating a spec of what we want for the next board member, and that's driven based on the Governance Committee. And then based on that spec, we go into the marketplace and find somebody who has the appropriate skills and background, and it has nothing to do with their geography.

And if you look at the profiles across our board, they've lived and worked across the country. Some of them have lived and worked outside of the United States and really great mix of experience. In respect to Steve, who is -- ironic as Steve moved to Maine from China, he is originally from New York, he was approached in 2018 by WEX's then Chair. So Mike Dubyak and Vice Chair Row Moriarty to join the Board in 2019. He was invited by the entire board at the time, and he had a lot of global experience and had moved to Maine to go through a transformation at L.L. Bean and has been really successful as their CEO over the last 10 years.

So his experience is unique and he is a really great contributor to the Board. And has made a number of changes in this period of time since 2023, when he spent compensation share which are quite shareholder-friendly. And so I think it's interesting to have someone say that. It's actually quite insulting.

That's all we have for right now. But if any shareholders have anything that they want to ask further, they can please just feel free to e-mail me. Thank you all for attending.

And this concludes today's conference. Thank you for your participation. You may now disconnect.

Thank you for standing by, and welcome to the WEX First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

I'd now like to turn the call over to Steve Elder, Senior Vice President of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. With me today are Melissa Smith, our Chair and CEO; Jagtar Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk through prepared remarks have been posted to the Investor Relations section of the website at wexinc.com. A copy of the press release and supplemental materials have been included in an 8-K filed with the SEC yesterday afternoon.

As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin as well as adjusted free cash flow during our call. Please see Exhibit 1 of the press release for an explanation and reconciliation of these non-GAAP measures. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty in the indeterminant amount of certain elements that are included in reported GAAP earnings. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in the press release, the supplemental materials and the risk factors identified in the most recently filed annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and other subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa.

Thank you, Steve, and good morning, everyone. We appreciate you joining us. The first quarter marked a strong start to the year for WEX. We exceeded the high end of our guidance range for both revenue and adjusted net income per diluted share, and we did that with strong execution across the organization. After record revenue and adjusted net income per diluted share in 2025, we continue to build on our momentum in the first quarter of 2026. Revenue for the quarter was $673.8 million, an increase of 5.8% year-over-year. Excluding fuel prices and foreign exchange, revenue grew 5.4%, which was above the midpoint of our prior guidance. Adjusted net income per diluted share was $4.15, up 18.2% year-over-year, excluding fuel prices and foreign exchange adjusted EPS grew 19.4%. Importantly, these results were not driven by just one segment. Benefits in corporate payments continue to perform well, and we delivered better-than-expected results in mobility amid a still challenging market. We're seeing the benefits of our scale, our increasing productivity and the strength of WEX's operating model. At WEX, we simplified the business of running a business. Every day, our customers manage payments and workflows that are complex, regulated and mission-critical. Too often, they still have to stitch together disconnected systems across spending, payments, reimbursement, reporting and controls. That makes decisions slower, oversight harder, and risk more difficult to manage. That complexity is only increasing, and that's exactly why we believe WEX is well positioned to thrive.

What makes our model powerful is that across mobility, benefits and corporate payments, our businesses share common technology, data, compliance and financial infrastructure, including WEX Bank that allows us to uniquely solve customer problems in vertically specialized ways while also scaling capabilities across the enterprise. It is why our strategy is focused on the customer and driven by 3 priorities: amplify our core, expanding our reach and accelerating innovation. The work we've done over several years to strengthen that shared operating foundation is translating into tangible business results. In 2025, we increased product innovation velocity by more than 50%. And in 2026, we are focused on converting that velocity into better experiences and outcomes for our customers and stronger productivity, growth and operating leverage for WEX. A large part of our accelerated product innovation is being driven by AI, which is helping us in 2 ways. First, it enables us to deliver better products and make smarter and faster decisions. We're able to use our data, workflows and domain expertise to improve things like claims, spend visibility, service, credit and payment outcomes. Second, is helping us redesign how things get done inside WEX by both automating routine work and improving speed and accuracy allowing our teams to focus on higher value decisions for customers.

AI is not a separate initiative but something that is being integrated into our operations to improve customer outcomes and increase efficiency. In 2026, we plan to deliver $50 million in cost-saving actions including savings from automation and modernization with a portion of the proceeds to be reinvested in the business and the remainder to flow through to margins. Let me spend a few minutes on the momentum we're seeing across the business and how that momentum reflects the strategy we were executing, starting with mobility. Within mobility, which represents roughly half of our revenue. We are executing well and delivering improved results even as the market and macroeconomic environment remains challenging. While our outlook does not anticipate a macro recovery, we are making progress in the areas we can control, pricing, sales productivity, product expansion and customer execution. That strong execution is reflected in our financial results in the first quarter. Mobility revenue increased 3.2% year-over-year. Higher U.S. fuel prices were a tailwind, but that benefit was offset by international fuel spreads. Payment processing transactions were down 3%, so this is not a story of the market suddenly snapping back, rather it's a story of improving execution.

We are closely monitoring energy price volatility related to the Middle East complex. At this point, we have not seen a meaningful impact on customer demand or volumes in mobility. We are seeing a small impact to travel volume trends leading into the second quarter that we are reflecting in our guidance. We are confident in the progress of our growth levers. We're encouraged by the early traction in 10-4 by WEX where we are growing active users and have earned very high ratings in both the Apple and Google app stores. This product expands our reach into a large and underpenetrated part of the market while creating a path to deepen relationships over time. Lastly, on mobility, I'm proud of our team for completing the complex BP conversion, which will create a small benefit in the second quarter. Most importantly, it solidifies the BP contribution we expect in the second half of 2026 and into 2027. As a reminder, we won this important contract from the strength of our enhanced acceptance product. Let me now shift to benefits, which represents approximately 30% of our revenue. In benefits, our momentum continued during the first quarter. We came through a strong open enrollment season, and that positions us well for the remainder of the year. Benefits revenue increased 8.5% in the quarter. HSA accounts on our platform were up 8% year-over-year to 9.4 million HSA accounts in Q1.

Here, WEX Bank continues to be an important differentiator, allowing us to earn attractive yields on HSA assets. Benefits is one of the clearest examples of how our technology investments are creating value for customers. We've talked before about our early results and reducing claims reimbursement times by more than 98%, and we continue to increase integration and automation across the platform. We are leveraging technology to create better customer and partner experiences and drive durable growth. Finally, let me turn to corporate payments, which represents approximately 20% of our revenue. Corporate Payments revenue increased 9.3% in the quarter. In Corporate Payments, we are strengthening the core while continuing to expand the reach of the business across industries, geographies and workflows. We continue to bring in new customers onto our platform and our pipeline is building momentum. We're excited to announce today that we entered into a long-term renewal with a large and strategically important travel customer. This renewal reinforces the value proposition of our platform, reliability, compliance, workflow integration and the ability to handle complex payment flows at scale. Consistent with what we said on our fourth quarter call, the economics of the renewal are already contemplated in our guidance and are fully reflected in our Q1 results.

At the same time, we continue to see progress outside of travel. Our direct accounts stable solution leverages our corporate payments platform and has focused on the underserved mid-market, enabling it to deliver outsized growth. Direct accounts payable purchase volume increased in line with last quarter, and this book of business represents approximately 20% of annual segment sales. Broadening our opportunity set outside of travel represents attractive long-term growth opportunities for the segment. We entered 2026 with momentum and our first quarter results reinforce that our strategy is working. In the third quarter of last year, I mentioned we have reached an inflection point. Since then, we have seen both revenue and adjusted EPS grow as we illustrate on Slide 5 of our earnings presentation. This momentum is driven by the strength of our pipeline, improving productivity, and from the pace of product innovation. Our investments over the last several years are producing results, and we are now moving to a phase of scaling those investments to deliver increasing operating leverage and drive meaningful margin expansion over time. We are combining our increased efficiency and scale with a disciplined capital allocation framework.

As we illustrate on Slide 14 of our earnings presentation today, our returns on invested capital have been increasing on a NOPAT basis as a result of our strong execution and thoughtful capital deployment. As the environment has changed, we have shifted our capital allocation priorities accordingly, pivoting from accretive M&A to share repurchases. Today, we are prioritizing debt reduction until our leverage ratio is below 3x while continuing to invest in the business. I know some of you may have questions regarding the proxy contest. I will be discussing this in more detail with the lead Independent Director Designee Dave Foss, during a webcast fireside chat on Monday, April 27. I hope you will be able to join us for that discussion. In the meantime, you can read more about our strategy and progress and our thoughts on the proxy contest in the comprehensive investor presentation that we have published on our Investor Relations website last week.

With that, I'll turn it over to Jagtar to walk through our financial performance and updated outlook in more detail. Jagtar?

Thank you, Melissa, and good morning, everyone. Before I begin, I want to remind you that unless otherwise noted, all comparisons are year-over-year. We delivered solid revenue growth and strong earnings performance in the first quarter while continuing to build momentum and strengthen the operational foundation that positions us for accelerating growth and profitability in 2026. Total revenue for the quarter was $673.8 million, up 5.8% and above the top end of the guidance range we provided last quarter. The impact of foreign exchange rates and fuel prices increased revenue growth by 0.4%.

Excluding these macro impacts, revenue was slightly above the midpoint of the guidance range we provided last quarter. Adjusted earnings per share was $4.15, an increase of 18.2%, partially offset by a decrease of 1.2% related to the net negative impact from fuel prices and foreign exchange rates. Excluding these macro impacts, adjusted EPS was above the high end of the guidance range we provided in February. Let me walk you through the macro impacts in the quarter in more detail and how they may have deviated from your expectations given the sensitivities we provide. There are 3 key things to remember when we talk about sensitivities and fuel price guidance, especially in periods of high price volatility like we saw in Q1. First, the European market we operate in tends to move opposite of our U.S. fuel price exposure. Extreme price volatility in Q1 led to an unfavorable $7.6 million revenue impact from these spread movements that offset the favorable $5.5 million revenue impact from U.S. fuel prices. Second, the sensitivity we provide assumes that gasoline and diesel prices move in tandem.

In Q1, diesel prices moved much higher than unleaded gasoline prices, so the sensitivity was not as accurate. Our OTR customers, primarily by diesel fuel where our revenue stream is more tied to fixed fees per transaction. Our local customers are primarily buying unleaded gasoline, which is predominantly tied to percentage-based fees and is, therefore, more sensitive to changes in fuel prices. When there is a large disconnect in the price between diesel and unleaded gasoline, as we saw in Q1, the sensitivity is less accurate. Finally, there is a timing factor with late fees in our sensitivities. As we recognize late fee revenue, it is based on balances in prior months at prior fuel prices. This means when prices rise rapidly, the benefit to late fees will trail by about a month. Overall, we did not see the fuel price impact that we would have normally expected in Q1 because of the very sudden increase in the timing at the end of the quarter. However, we are confident that we will see this normalize as we anticipate fuel price volatility levels out for the remainder of the year.

One last point on the macro is regarding FX. We also had a favorable $5.1 million revenue impact from FX gains in the quarter. Overall, this is a very noisy quarter in the macro. But the real story is the solid performance across the business that is positioning us well for the remainder of 2026. Before I move on to the segments, I want to update you on our sales and marketing efforts broadly where we are seeing encouraging results. In the first quarter, new business added about 1% to our revenue growth rate versus last year. Our returns are coming in as planned, and we continue to expect new business growth to outpace last year. Turning now to the segments. Mobility revenue increased 3.2% driven by our strategic initiatives taking hold, and a small benefit of 0.2% related to fuel prices and changes in foreign exchange rates. This exceeded our expectations and demonstrates the momentum we're building through both new sales and pricing increases that you can see coming through our account servicing revenue. Our payment processing rate was 1.23%, a decrease of 10 basis points sequentially. The sequential decrease in the net interchange rate is due primarily to the impact of European market movements, which I mentioned earlier and the higher fuel price in the U.S.

As a reminder, last year, gallons in OTR were pulled forward into Q1 due to territories, which created a tougher comp for Q1 this year that we were able to overcome. I would add that the local fleet side of the business, we also saw a quarter-over-quarter improvement in same-store sales, which is another encouraging sign. In our Benefits segment, total revenue of $216.2 million rose 8.5%, reflecting the strong open enrollment season, Melissa mentioned earlier. Overall, SaaS account growth was 3.8% in the quarter. While this was slightly lower than what we guided, it was due to shutting down a noncore product that was not delivering the returns we expected that added a 2% drag to account growth in the quarter. The impact is immaterial to both revenue and income. Importantly, this deliberate action aligns with our strategic focus to amplify our core by investing in products that deliver appropriate returns for the business. The Benefits segment continues to capitalize on both the scale we have built and the value derived from our investment portfolio at WEX Bank which allows us to deliver industry-leading returns on our HSA assets.

Average HSA custodial cash assets grew 11.8% in the quarter and custodial investment revenue grew 14.2%. HSA accounts also grew 8%, as Melissa noted earlier. Overall, we are very pleased with the performance of the segment. Finally, in Corporate Payments. Revenue of $113 million increased 9.3% at the high end of our expectations with our net interchange rate expanding 3 basis points year-over-year. Purchase volume also increased 3.6%, reflecting continued strength in our travel customers. Travel-related revenue grew approximately 12% in the quarter, supported by the strength of our partnerships. Revenue from non-travel customers grew in the mid-single digits. Within that, our direct AP business grew in line with Q4. We are still in early innings here. And while there is higher volatility in growth rates given the size of the portfolio, seasonal trends from customers and impacts of legacy businesses included in the mix, we remain excited by the long-term opportunity. Moving to margins. Year-over-year, Q1 adjusted operating income margin declined 50 basis points driven primarily by an increase in credit losses from 12 basis points to 19 basis points within the range we guided you to last quarter.

Normalizing for the unfavorable 200 basis point impact of higher credit loss and fuel price differences, our adjusted operating margin was at expanded 130 basis points as a result of efficiency gains through technology and AI, pricing actions and the operating leverage we are seeing from higher organic growth by the investments we have made in innovation in 2025. For 2026, we are expecting margin expansion of approximately 75 basis points on a macro-neutral basis, and that is embedded in the midpoint of our guide. With that, let me transition to the balance sheet. WEX is a business that generates strong recurring revenue, which in turn produces reliable free cash flow. On a trailing 12-month basis, we have generated $671 million of adjusted free cash flow, a 14% increase over the same period last year. This is a strength in all periods, but especially in times of economic uncertainty. It gives us significant capital deployment optionality. We also benefit significantly from WEX Bank which provides low-cost funding through deposits and federal home loan bank lines. It's important to note that the bank gives us lower cost of funding versus alternatives such as securitizing our receivables.

In addition, as we've mentioned before, WEX Bank also helps us drive higher yields in our HSA assets through its investment portfolio. Touching on leverage. We ended Q1 with a leverage ratio of 3.1x, flat from the end of Q4 as expected and within our long-term range of 2.5 to 3.5x. We remain on trajectory to reach the midpoint of our leverage range in the second half of the year. Let me shift to capital allocation. A focus of every investment decision we make at WEX. Each step of our disciplined capital allocation process is grounded by a clear objective to maximize long-term shareholder value, every investment decision we make is weighted against returning capital to our shareholders, including internal investments in our segments. As we think about deploying capital externally through M&A or share repurchases, we start by prioritizing a safe and strong balance sheet as measured by maintaining leverage ratio below the midpoint of our target range at 3x. Because of that, we expect to continue to reduce leverage through Q2. While M&A is not at the forefront today, we will assess opportunities to strengthen our strategic position.

I also want to point you to our new disclosure on return on invested capital that Melissa mentioned earlier. We calculate this by looking at our equity and corporate debt, excluding working capital funding at WEX Bank that includes deposits and borrowings from the Federal Home Loan Bank against our net operating income after tax. We exclude WEX Bank for ROIC because its funding sources aren't comparable to operating capital. As Melissa mentioned, we are very pleased to see this important metric continue to improve. You can find more detail on the calculation in the earnings presentation we posted today. One final point on capital allocation. Our strategy remains consistent, and you should expect any excess cash from higher fuel prices to drop through to reduce leverage near term.

Now let's move to earnings guidance for the second quarter and the full year. In Q2, we expect to generate revenue in the range of $727 million to $747 million. We expect adjusted net income EPS to be between $4.93 and $5.13 per diluted share. For the full year, we now expect to report revenue in the range of $2.82 billion to $2.88 billion. We expect adjusted net income EPS to be between $18.95 and $19.55 per diluted share. Compared to the midpoint of the previous ranges, these represent increases of $120 million in revenue and $1.70 in EPS. You should think of these increases as largely driven by updating our fuel price assumption to $4.30 per gallon in Q2 and $3.70 per gallon for the full year. Lastly, on the interest rate side, we are no longer assuming any rate cuts for the rest of the year in guidance. This change had an immaterial impact to full year guidance.

In closing, our first quarter results underscore the strength of our diversified model and the discipline of our execution. We remain focused on executing our strategy to deliver results that drive sustainable, long-term shareholder value. With that, operator, please open the line for questions.

[Operator Instructions]

Your first question comes from the line of Dave Koning from Baird.

Good job. And when I look at probably the most important metric, right, the mobility acceleration was really good in the quarter. I mean 3% growth on an organic constant currency, constant macro basis, best in 5 quarters. But you called out tariff impacts were still a headwind and some things are emerging. I guess I'm wondering between tariffs going away, BP coming on late fees, getting a lagged benefit, ISM getting better, are all those kind of emerging benefits that growth actually accelerates from Q1 after a good Q1?

Well, first of all, thank you. We're really proud of the execution we had in the quarter. And you're right, you're putting a bunch of factors. Last year, we had the pull forward, as you mentioned, that affected some of the growth rate comparisons in the over-the-road business. And we've rolled on BP. We've done a bunch of pricing work. We're feeling good about the trajectory that we're on. when we actually contemplated the guide, we ran through the benefit that we saw in the first quarter. And we held the rest of the year to what we had previously guided. But I think that's really just more to reflect. There's a lot of factors are happening in the world right now, and we just want to be cautious about it. But you're right to point out, we have a number of really positive things that are going our way right now, and we feel really good about the trajectory we have of the business.

And maybe just as a follow-up, Mobility's EBIT was actually down year-over-year. And I guess I'm wondering, is that mostly just sales and marketing? And maybe Jagtar could kind of put some numbers around it a little bit, like how much of that was simply sales and marketing going up and maybe core EBIT actually grew. But maybe talk through that a little bit.

Yes, Dave. So the 2 pieces year-over-year are sales and marketing and credit losses. Remember, credit losses have gone up year-over-year in this segment. We talked a little bit about that last quarter in the Q4 call. It was related to kind of new offers we had put in the market and tested pull those offers away, but we saw higher credit losses coming through associated with them, which is why we pulled the offers away, but we saw that roll through in the quarter. That actually added about 2 percentage points to, as Melissa, I think mentioned in the prepared remarks, about 200 basis points to margin impact, operating margin impact in the quarter.

So if you adjust for that piece, margins would have actually been up quarter-over-quarter for the sorry, I'm talking about for the company. For the mobility segment, it was about 360 basis points in this segment. So if you adjusted for that, you would have been roughly flat year-over-year.

Your next question comes from the line of Ramsey El-Assal from Cantor Fitzgerald.

I have 2 questions I'll ask you both at once, both of them are about fuel prices. I guess the first 1 is, are you seeing any downstream impact on -- or do you anticipate any downstream impact on credit performance because of higher fuel prices? Are you seeing that pressuring your customers in any notable way? And then the second part of the question is just what are you seeing in terms of fuel spreads and as we enter the second quarter here, I was a little surprised that spreads were as impactful as they were given that's a smaller part of your business. I'm just curious, are spreads settling down? Or is there still a risk that you could see some fuel price spread volatility that impacts -- offset some of the benefit of higher retail prices, if that makes sense?

Yes, it does. Let me start with the first part of your question. So in 2022, we actually had fuel prices were just under $4.50. So we've seen spikes in fuel prices before we're not seeing it impact credit quality, but we are paying attention to that. And actually, we're not seeing it affect customer behavior patterns with the exception of the fact we see people more interested in ways to create efficiency. And we think that's drawing them into our tools.

We certainly see more demand for our 10-4 cap. And so we've seen really strong demand for that. So on the kind of the fringe, you'd see more behavior patterns where they're looking for efficiency, but not really having much of an impact overall in the portfolio. And then the spread question. I can start with that. But like spreads, so you know our business in Europe operates off spreads. That's the predominant model there. When you have rapid changes in prices is when you actually see these kind of meaningful changes in spreads because it was a rapid movement and it happened so fast in the first quarter, it had a sizable impact in Q1. We expect the rest of the year and the way that the fuel prices we're forecasting that we're not going to have a similar type of thing.

And just to kind of note when we snap fuel prices, as you might guess, they've been moving around quite a bit. And so we took kind of a mid view of the features curve knowing that it's been moving up and down, we took on the midpoint.

Your next question comes from the line of Mihir Bhatia from Bank of America.

Maybe I just wanted to start with adjusted operating margin and just to understand what -- exactly what is embedded in your guide for the year on adjusted operating margin relative to last year?

So we're expecting for the year, adjusted margins to increase about 130 basis points. A piece of that is the fuel price change that we made in the current quarter for the full year. So if you exclude the fuel price impact, you're getting about a 75 basis point improvement in operating income margin for the full year.

Got it. That's helpful. And then just sticking with mobility. You have -- and the organic growth, right, your 3% organic growth year-over-year. Can you talk about some of the factors that are driving that? Was it because our transactions are still down -- you obviously have the interchange effect this year. So what is driving the organic growth? And then just related to that, like as we think about the next few quarters, what should the interchange rate, should it bounce back up? Like is the fuel price impact -- are we through that, like the European spreads impacted, will that reverse in 2Q? I think that was 6 of the 10 basis points decline. And what's the good interchange rate to think about for the rest of the year?

Okay. I had to start. So when we think about managing the business, we think about new customers we're bringing on retention rates as well as pricing. So if you look at the mobility business itself, we -- Jagtar talked about the fact we saw a 1% increase in new sales coming through. So new sales are better and across the portfolio, but also in mobility, driven by the work we did in our sales and marketing investments, you can actually see that coming through pretty rapidly.

The second thing retention looks similar than it did last year. Pricing is up. And so pricing has had an impact and a positive impact in revenue growth and probably the primary driver. And then the last thing, Jagtar mentioned that same-store sales improved slightly. It's still negative, but it is getting a little bit better, which is a positive, we think, for the course of the year.

And then Mahir, I'll answer your question on the payment processing rate. So you're right. We did see a roughly 10 basis point reduction quarter-over-quarter from the market move in predominantly and then fuel price changes. So as we go into next quarter, you'll see the full quarter impact. So our interchange rate and fuel prices are inversely related because of the fixed fee component of how we charge customers. So as you go into the second quarter, you'll get the full quarter impact of the higher fuel prices -- so you should expect to see interchange rates roughly remain flat to the first quarter. And then as we go through the year, we are assuming that fuel prices decline as we go through the year. In the third and fourth quarters, you'll start to see interchange rates start to rise again as fuel prices decline.

Your next question comes from the line of Rayna Kumar from Oppenheimer.

So I just want to go back to mobility for a second. So it obviously came in better than you were expecting. So I just want to understand exactly what came in better than you were anticipating? And how sustainable is that going forward?

It was a little bit of everything. If you go across the volume came in pretty much actually as we expected. Late fees were a little bit better and pricing was a little bit better. So it's a little bit across the portfolio that were slightly better than we expected.

Understood. That's helpful. And then just on the Benefits segment operating margin, like what exactly drove that increase? And how sustainable is that expansion for the remainder of 2026?

Yes. Let me talk about operating margins just at a macro level and then sure [indiscernible] right now. One of the things that Jagtar mentioned earlier is that if you look at our operating margins in the first quarter, reported they're down and there was a really big impact on margins for the company because of credit losses, which is a bit of a timing issue that will play out more favorably as you go through the course of the year. But underneath that, there's 130 basis points of improvement in operating margin, which is really tied to the work we've been doing over the last few years around using AI to modernize the way that we're operating as a company. And you can see that really coming through with benefits is a piece of that.

But overall, we actually have 8% less employees at the end of '25 than we did at the end of 2023. And so we're really reimagining how work can get done. AI has been a huge tool that we're using associated with that. But we have a disproportionate number of employees dedicated in our benefits business. And so that's part of why you actually see that benefit coming through and looking like it's quite scalable.

And then Rayna, on your operating margin question as we go through the year, really, the impacts as we go through the year are really going to be related to rates. So while we are no longer assuming any rate reductions, the year-over-year compares will get more difficult as you go through the year. Somewhat related to maturities in the portfolio and reinvestment. So you'll start to see some moderation of operating margin as you go through the year related to that. But we still feel pretty good about where we are as a company. We've been executing well as Melissa mentioned.

Your next question comes from the line of Nate Svensson from Deutsche Bank.

Hoping you can discuss pricing opportunities within the mobility business. Clearly, lots of ongoing discussion about this. It feels like we've seen hundreds of slides on that topic in the last couple of weeks. Melissa, I think you briefly alluded to pricing in your prepared remarks and a couple of the answers here in Q&A. So hoping you could just put a finer point around pricing. Maybe both from a philosophical point of view, how you think about pricing generally? And then more tactically, if and how you plan to improve pricing in mobility going forward?

Yes, sure. So pricing is actually one of the levers that we've been using over the last decade, but certainly, over the last few years, we had about $70 million worth of pricing actions that we took in '24 and '25. And more that are coming through this year. The way that we think about it is we -- as we're looking at pricing, we're balancing the effect to customer attrition with pricing actions, and we look at both of those things to the extent that we can increase on price because of the value that we're providing to our customers and not create a customer attrition issue. We are doing that. And we've done it in different ways. We've looked at our merchant contracts and renegotiated those. We've increased late fees and customer fees across the portfolio. And so it's really just an embedded part of how we operate now. But we've had actually some pretty sizable increases over the last 3 years.

Yes, helpful. The other thing I wanted to ask on in your prepared remarks, Melissa, you talked about the impact of travel on the guide for the rest of the year. So hoping for some more color on that. I think you have a few million dollars in quarterly revenue in corporate payments from Middle Eastern travel specifically. One, is that correct? Two, anything beyond that direct exposure that you're calling out either with regards to the impact for March numbers or, I guess, for the outlook for the rest of the year in 2Q and beyond?

Well, you nailed it. So it really is Middle East travel that we're seeing soft. If you look at Q1, volume was very normal. If you look at our overall growth in corporate payments, we feel really good in travel volume growth was really quite strong across the portfolio. And so what we saw starting in April is that the Middle East corridor was starting to look softer. It's an order of about $3 million a quarter. for us, we reflected that in our Q2 guide. And so we think it's a very narrow sliver of travel volume. But just to be thoughtful, it is a trend that we're seeing in our portfolio. The rest of the portfolio looks like it's operating as normal, and that's what we reflected in our guide.

Your next question comes from the line of Tien-Tsin Huang from JPMorgan.

Just a follow-up on that last point there, most in time. Just on the segment outlook. Have that changed at all between corporate payments and mobility, given what you saw in April in the comments there?

No, Tien-Tsin. I would say we're continue to hold to the guidance that we've sort of given earlier this year. We don't adjust sort of segment level guidance quarter-by-quarter. So we continue to maintain where we started the year.

Okay. Perfect. Just want to make sure. And then just I know the prior full year outlook embedded the $50 million in the cost savings, some of which you said would be reinvested. So I'm curious, a quarter in now as -- has that investing -- have you started that process now? Has that changed at all in terms of magnitude or timing? I'm just trying to get a sense if that's creating a little bit of flexibility for you on the margin.

The $50 million hasn't changed. It's still embedded in our guidance. And actually, we've seen really good progress in that. And I'm going to point back to the fact that we saw 130 basis points of margin expansion in Q1, excluding some of the noise we have in credit losses. So all the work that we've done over the last few years, we're actually seeing that come through in terms of productivity across the organization, and it's reflecting in our numbers already. And we talked about the fact that we're reinvesting a portion of that, but we're dropping through 75 basis points at the midpoint of our guide on a macro-neutral basis and operating margin expansion. So we talked about last year being this investment year, and we saw that come through in this year being a scaling year, and you can actually see the scale of the investments are coming through in revenue and the scale is coming through in our operating margins.

Your next question comes from the line of Sanjay Sakhrani from KBW.

I guess first question is on mobility. I think, Melissa, you said same-store sales still slightly negative. And I guess, through the quarter and year-to-date, we've heard some like cautious optimism on over the road and it's coming back. I'm just curious, is that what you guys see or hear? And like is that not just cycling through your numbers? Or is it just still quite volatile there? And then maybe just to tag along on that. David's first question talked about improving trends over the course of the year. Maybe you could just give us a little bit more on what's on the come as we move through the year?

Sure. Over-the-road marketplace, we're hearing from our customers, the smaller customers are certainly getting pinched by fuel prices. On the positive side, they are seeing increases in thought rates. And so they're earning more as they're making deliveries, but that's really getting eaten up in large -- the increase in fill prices. The mid and large customers are able to actually tack on fuel price surcharges and so are less impacted by the overall fuel price environment. They are, in general, there's been less operators in the marketplace. There have been more people that have left the market. And so that is creating an overall better environment in terms of just profitability of those who are surviving in thriving in this environment. And so we are seeing changes in the over-the-road market. We're not seeing a big increase in demand yet, which is when we will start to see more of a benefit, but we are seeing dynamics that are hopeful, but at least make the marketplace look like it's improving from a financial perspective.

And then, Sanjay, your question about growth trends. I'm not sure if you're referring specifically to mobility of the total company, I'm assuming mobility. So I would say we expect kind of within what we've guided to. I'd say in the early part of the year, we expanded our factoring portfolio last year. We've gotten some growth benefit from that. We'll lap that as we go through the year. But other than that, the trends, as Melissa talked about, we're not assuming any change in the macroeconomic environment. So we're expecting current trends to continue.

Okay. Maybe just one follow-up on travel. I think that weakness in April, you mentioned it was sort of isolated to the Mid East, American Express talked about how they were seeing it more broadly and refunds were up. I'm just curious like if you guys haven't seen it now, is some of that sort of factored into your outlook? And then just secondly, on the renewal of that large partner, I know it's in the guidance number. Is there any like take rate optics that we need to be thinking about? And is there a greater impact next year versus this year? I'm just curious, I just want to make sure we're tied on the optics of it.

Yes, sure. Let me talk about that renewal first of all, super excited. It's a renewal with a customer that we've been co-innovating with for years on embedded payments. I think it's just validation of the value prop that we have, the ability to do workflow integration have complicated payments at scale and have that industry expertise. It's a multiyear agreement and fully reflected in the first quarter results. It should not have an incremental impact to next year. You see it -- it's already baked into the first quarter results.

In terms of like broader travel trends, I can tell you what we're seeing right now is very isolated in terms of the specific customers that we're working with that are seeing weakness or those that have exposure in the Middle East. So we're not seeing something that's broad-based across our portfolio right now. And so what we've reported is some softness in that second quarter related to what we're seeing but not broad softness because that is not what we're seeing right now.

In terms of your question -- so your question on take rates. I would kind of refer to what we talked about last quarter. We're expecting take rates for the year to be roughly flat to last year with some slightly down in travel, slightly down nontravel, more mix of travel. And so all the dynamics of that renewal are baked into the guide we gave previously.

Your next question comes from the line of Madison Suhr from Raymond James.

I wanted to start just on the SMB strategy. Just -- any color on SMB sales trends for the quarter? And I guess, bigger picture, how do you think about scaling that business over the medium term to become a bigger part of mobility?

So SMB is interesting because it's a relatively unpenetrated part of the marketplace. And so we've been on this multiyear journey to focus on it. First, starting with our risk tools. And we talked a couple of years ago about all the work we, did adjusting the tools using AI and then went into marketing and really make changes the way that we're marketing and adjusted the tools as well. So we've had to do a lot of foundational work before we started going after this space. And we've seen really good results. The customers are coming in our LTD to CAC calculations are holding to what we expected them to, and we're monitoring.

There's 2 key assumptions that come into this portfolio, it's -- what happens to the credit and what happens with lifetime value of the accounts, and we continue to monitor those. But so far, everything is actually coming in pretty much on the models. And so where we continue to dip focus is how we can refine the motions that we're making, learn about how we're bringing those customers and to become more efficient at that. And I would say we are having success of that each quarter. We get a little bit better. and then continuing to scale the business, and that's in the North American mobility portfolio. So we feel like we've got a good pipeline. That pipeline will continue to build. We're learning from that, and we're getting better.

And then the second part for us, when we thought about the small business arena, the 10-4 app that we rolled out last year, we've rolled out really with that same idea. It's an underpenetrated part of the marketplace. These are under operators that we're not going to extend credit to. So they're not going to be capable of really buying into our core products, but we're exposing to them our discount network for fuel. So they're downloading it out. They're using that application to buy fuel at a discount, which is really important to them, particularly right now. They're saving money. They're happening a good user experience we're seeing those users come back month after month. And we think of that as a community that we can continue to build and then sell more into over time. And so we think a small business is an area that we can continue to build and mature and are seeing success so far.

And then I want to switch gears to the direct AP business. You mentioned volumes in line with 4Q at about 15%. So obviously, good to see some steady trends there, but hoping you could maybe just put a finer point on your expectations for volume growth there for the year? And if double digits is still kind of the right way to think about it.

Yes. On the AP direct side, which is about 20% of the business, as you know, we're going after the bid market. We continue to build out the sales team there. It has operated really pretty much according to plan. And so those salespeople are bringing new customers. They implement actually quite rapidly. We're expecting through the course of the year to stay in that 15% range on the AP Direct spend volume. It's about 20% of the segment. And then the other part of note, Jagtar mentioned the fact that there are some parts of the business in that -- in corporate payments that aren't growing as fast. Our FI business and our bill pay business or slower growers.

And then we've been focused also on embedded payments outside of travel. We have had a number of customer signings. Those are longer implementations. So we expect that volume to be coming through more weighted to the second half of the year. So kind of the net of all of that is you should expect outside of travel volume growing throughout the course of the year and more back-end weighted as the embedded payments customers kick in.

Your next question comes from the line of Daniel Krebs from Wolfe Research.

This is Daniel on for Darren. Just wanted to ask a quick one on the full year EPS guide. It seems like you chose not to pass through the 1Q beat and are only raising based on fuel prices. Could you maybe walk through that decision and any potential sources of conservatism you've embedded there?

Daniel, that's actually incorrect. We passed through the 12. So I know what you're looking at, we passed through the first quarter beat as well as changes in fuel prices interest rates.

Okay. Got it. I just saw raised by 170 at the midpoint, and that was the fuel price adjustment as well. But I can do it more.

Your next question comes from the line of Michael Infante from Morgan Stanley.

Just on the mobility same-store sales front, can you just provide a little bit more color on why local fleet same-store sales have been structurally weaker than OTR? And then given what I assume is an improving exit rate within mobility, what's your expectation on gallons and volumes from here? And does that spot rate improvement in the freight market sort of give you an opportunity to open up the credit box?

Yes. Actually, the same-store sales is rather over both for OTR and North American mobility over the last quarter. said you're right, historically, the last probably year, NAM same-store sales were a little bit worse than OTR. And it's gotten a little bit better and OTR had gotten a little bit worse. And so those 2 things have kind of come in line. When we think about the -- as we build out the course of the year, we have -- we will have more positive comp next quarter in terms of volume because of the pull forward activity that's negatively affecting us this quarter.

And so we'd expect to see volume naturally get better because of that. And we're continuing to see no strong sales. So that should help as well and the BP coming on. So all of those things should help build our transaction and gallon growth going from negative in the first quarter to moving to a positive as you go through the year.

That's helpful. And then just a quick follow-up on benefits and some of the deposit economics. You obviously called out the deposit migration from the third-party banks. Can you just remind us on the differential in unit economics for sort of a dollar held at WEX Bank versus a third party? And how much runway there still is for that migration.

Yes, we will typically get about 50 to 100 basis points better if we move it from third-party banks to WEX Bank. We've got roughly -- I mean, we've moved a lot of the money that we expected to move over from third-party banks, WEX Bank. We still have kind of $400 million-ish that a third-party banks, but a lot of that is used for operational purposes. So I wouldn't expect sort of continued movement to that to be a tailwind for us for the rest of the year.

And that concludes our question-and-answer session. I will now turn the call back over to Steve Elder for closing remarks.

Thank you, Rob. Just appreciate everyone's time today, and the company look forward to chatting with you again at the end of the second quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, everyone. We're going to go ahead and get started. My name is Madison Suhr. I'm the payments and fintech analyst here at Raymond James. I'm happy to be joined by Melissa Smith, the CEO of WEX. Today's format, Melissa is going to run through a little bit of a presentation, and then we're going to transition to a fireside. So with that.

All right. Well, thank you for having me here today. I'm really excited to be here. Just for those of you who don't know actually, first of all, my name is Melissa Smith. I've been the CEO for WEX for about 13 years and was the CFO when we went public in 2005. I'm excited to be here. And if you don't know the WEX story, WEX sits in the mission-critical parts of spend and what we really focus on is where we can create payment intelligence and combine that with the workflow solutions. So we're going to be deeply integrated in the operations of our customers. We want to make sure that we're thinking about what challenges businesses have and how we can solve those challenges and primarily focused across 3 different markets. We're focused on mobility. We're focused on benefits and we're focused on corporate payments.

So if you think about every day, people are making millions and millions of payments, and they're doing it in a very complex regulated environment. And we believe our solutions help them have more confidence in the decisions that they're making. They're able to do it in a compliant way, and they're able to do it in a way that allows them to focus on what they do best in their business. We're really focused around how we can simplify the transactions, how we can enrich the data associated with those transactions and how our customized controls can create more confidence across their businesses so that they can save money, they can save time and they can eliminate misuse.

So if you look across everything we do, our core purpose is to simplify the business of running a business. That's how we think about the solutions that we bring into the marketplace on behalf of our customers. So if you look at the markets we're in, we are across 3 large and growing markets. In the mobility market space, we're really focused on vehicle-related payments and how we can help simplify those payments and benefits for looking at places where we can help create more control around the payments that are getting made and help make more intelligent decisions on benefit enrollment options.

And then accounts payable, we're focused on embedded payments, which are highly technical and then accounts payable automation. All of these products operate across our technology stacks. So think about we have a payments platform that powers all of this. We're really focused around how that payments platform can create a more intuitive experience for our customers, and we're really focused on how we can optimize both our growth and our profitability across this broad spectrum of customers. Our strategy, if you look at the strategy of the company, we're focused on 3 different things.

First of all, we want to make sure that we have a foundation in place in order to grow the company. Number one, we want to amplify our core. So when I think about our motions around this is we want to make sure that we're acutely focused on bringing in new customers, retaining our existing customers and making sure we're doing that at the optimal price point. And as we look at solutions that we're bringing into this marketplace for making sure that those solutions are enabling our customers to simplify their business or running their business. We're in a leadership position across each of the markets we're in, and we're focused on retaining that leadership position.

Number two, expand our reach, so this is where we're looking at places where we can extend into new profit pools, new areas of functionality that we haven't been able to provide in the past and where we have a unique right to win. And a couple of examples of that, that are live in the marketplace right now. We have products that we've created called 10-4, which allows owner operators in the over-the-road space to download through an app or access to our closed loop network, which allows them to buy fuel at a discounted rate. When that happens, they actually pay us a fee associated with that. And so it's tapping us into a marketplace that we haven't been able to reach in the past and allowing those customers to grow into some of our more mature products. The same thing is true if you look at some of the embedded payments products that we've rolled out into the marketplace. We've taken functionality that we have within the travel space and are now using it to solve payment flows across other categories where people have a need to fulfill a workflow through a payment.

And then the last thing for us is to accelerating innovation, and this sits across everything that we do. We are acutely focused and have been for the last couple of years of how we can use technology and specifically artificial intelligence to create a more intuitive experience for our customers and do that at a lower cost. Last year, we were able to increase our product innovation velocity, which is something we pay a lot of attention to. So how can we increase the speed of organic innovation. We increased it 50% in 2025, and we did it with over 400 less people that sit within our product and technology group. So we think of this as a huge accelerant for us because it's allowing us to bring more products into the marketplace, to solve more problems for our customers and do it faster and faster. And at the same time, we're taking that same expertise and applying it to our overall operational cost structure and in finding ways to accrete margin which we think are also creating a better customer experience but doing it at a lower cost.

So if you go through each of these different areas, mobility represents about 50% of their overall business. And the problem that we're solving for our customers is using our closed-loop proprietary network. We're allowing our customers to have the most amount of control over what spend happens across the enterprise. Whether that happens with an EV vehicle or if that happens with the gas powered vehicle, we want to be in the front and center of that. And we're using our proprietary data to help fleets either upfront control or at the end of the day, they prefer to detect behavior that is out of a normal pattern.

The advantage that we have in this space is a, our close loop network; and b, the fact that we operate at scale. This is a business we've been in for a long time, and we're able to at scale, predict both fraud and just misuse within our customer base. If you're a really large customer, what you're interested in is the ability to look through a huge amount of data and understand where there's an outlier. If you're a really small customer, think of that as like a local fleet that maybe as a contractor.

What they're interested in is the piece of buying that people are purchasing old fuel, and so having the ability to lock down what is purchased is really important to that customer base. We go to market here, both through partners. BP being the most recent one. BP will roll on to our platform this year. BP came to us because of the enhanced acceptance product offering that we have in our space where we can lock down not just what people purchase within our closed-loop network, but we've extended the capability to do things like tolling and parking. And so they can have a very specific use case but extended beyond what we've been doing in the fuel arena. So really excited about what we're doing in this space. It continues to be an important part of the growth story and highly cash generative part of the business.

So if we turn to our benefits business with this customer base, so think of -- actually, anybody in the room enrolled recently in benefits? There has to be a few here. So if you look across this, we have a unified platform that has the most amount of functionality. So we can enroll someone from a benefits administration perspective, go all the way through to then open up an HSA and FSA health care retirement account, a lifestyle savings account. Any type of functionality that sits across one technology stack. So when people come to us, they're looking at our ability to manage that life cycle and to use the proprietary data that we have in order to make better informed choices. This is a product road map that is filled with AI capability and something that we're super excited about because we're seeing a lot of interest, really good open enrollment seasons because of the type of products that we're bringing into the marketplace.

We're a top 5 HSA provider in the space, and we do business with over 60% of the Fortune 1000. A lot of expertise in deep integration, white labeling or directly with their customer base, and a lot of complexity and switching costs. High margin. If you look at this business, we're earning SaaS fees and custodial revenue, which I'll talk more about in a minute. They're in WEX Bank. And then on Corporate Payments. Corporate Payments for us is part of -- about 20% of the business, and we have 2 primary offerings here. We have an embedded payments product, which is what we offer in travel and our travel-related customers, highly technical, very much API-driven. So think of this as their technology stack of our customers is interfacing with our virtual card technology stack, which is operating at massive scale, at highly predictable and people will embed our workflow into their workflow in order to kick off a payment.

We provide data and reconciliation capabilities, so people can at scale really understand what's happening with their system and reconcile it back into their operations. And then on the Direct AP side, we are fulfilling customers' AP needs. They are actually giving us their AP file. We're fulfilling that on their behalf. It's been a very predictable grower and part of our business. Last quarter, we grew spend volume 15%, so it's about 20% of the segment and an important part of the growth of the business. This is an area that we've intentionally invested in the product. We've seen a huge TAM, and we have a unique right to win with our -- the size and scale of our technology stack that enables us to go into these new spend columns and do it at a scale that few others can do. So really excited about the growth of this part of the business.

And then if you look across the business, one of the things that sits behind everything we do is WEX Bank. WEX Bank gives us the structural advantage of being able to have low cost of funding and a unified compliance structure in the United States. It also gives us the advantage of being the custodian with their benefits business. And each of those cases, we're able to accrete higher economics than if we were to do it outside of our banking structure.

To look at our track record, over time, WEX's 10-year CAGR on revenue growth has been 10%. Our CAGR on EPS, adjusted EPS has been 14%. And -- when I think back in 2025, we think of 2025 was for us an investment year. We were very focused around how we could, based on the analysis we've done, invest incremental dollars that yielded high returns. 2026, we view as a scaling year. Embedded in our guidance and our long-term guide is 5% to 10% organic revenue growth, excluding macro, and 10% to 15% EPS growth. we're in this range in 2026. So if you exclude fuel prices, FX and interest rates, the midpoint of revenue guide is 5%, midpoint of EPS guide is 13%.

And so we're really proud of the history that we have of consistently delivering both revenue growth and earnings growth. And sitting behind that is an expectation that -- and I talked about '26 being a scaling year that we've started to see that scale coming through from investments, they're paying off. That's -- we had incrementally better quarter improvement each throughout 2025. We set a plan, we delivered against the plan. We've done that same thing in '26. And we're really excited about the tangible progress that we've made around expanding our margins and how we're using technology to make that a very sustainable approach into the marketplace.

So when we think about 2026, we entered the year with more momentum. We hit this inflection point towards the end of 2025 and are excited of how that is progressing through the course of '26 so far. One of the things people talk a lot about is how much cash we generate. So WEX is a strong, consistent cash generator, $638 million in 2025. So if you look at where we've been placing our cash flow, we've been really focused around keeping within that leverage range of 2.5 to 3.5x. You can see that we are in that 3.1x range right now. We're very focused on delevering and continue to move down into that range.

And if you look at how we continue to gear the businesses with this eye towards how can we maximize the cash flow generation that we have across the enterprise, it's a great cycle that we have because we can reinvest a portion of that which I'll talk about in a minute. So if you think about capital allocation, the last few years, we've been particularly focused around how we can deploy capital and been acutely focused on share buyback. We've returned $2 billion to shareholders since 2022, including $790 million this last year. As we think about deployment in the moment we're in right now, first, we're focusing on continuing to strengthen the balance sheet.

So moving cash to pay down debt until we get below the midpoint of our leverage range. So as we dip below that 3%, then we would look at other uses of capital. Internal reinvestment has been a high focus of ours recently. And so we continue to make sure that we're delivering the right amount of investment for what we see as a really significant opportunity. We're satisfied with that. And then next order has been when we think about risk-adjusted return, that's our North Star. So really focused, again, recently has been share buyback. It's been the place that we've been deploying capital. In this environment, I would expect that to continue through 2026.

So when we look at the business, these long-term growth targets for us are, again, they're organic. So we're looking at 5% to 10% organic revenue growth, 10% to 15% EPS growth. We gave out a guide on February 5 of $2.7 billion to $2.76 billion in revenue and EPS of $17.25 to $17.85. So again, at the midpoint when you exclude fuel prices, FX and interest rates, that puts us at 5% revenue growth and that puts us at 13% EPS growth. So very much in the range and marks clear acceleration from 2025 into 2026. And I think more importantly, we feel like we're on a really great path of increasing our organic innovation and that that's a cycle that will continue to be much more predictable for us in the next few years.

So for me, the big takeaways is we operate in really complicated payment streams where we're able to take friction out of complicated workflows. We're able to do that with a highly recurring revenue model and increasingly, the organization has been innovation led in the way that we're thinking about that. So we put the customer in the center of what we do. We've been really thoughtful about creating new and emerging products with customer in mind. It's solving problems for them in a way that is -- where we are uniquely positioned. And we have a long track record of compounding both earnings growth and revenue growth. And so we're excited about the path we're on. We feel really committed to the strategy that we have and looking forward to any questions.

Okay. Awesome. Thank you for that. So I did want to start here with, obviously, what's been the most topical, not only at this conference, but also in the market. And obviously, that's AI. Can you just talk at a high level, you gave some interesting stats, but maybe just dive a little bit into more detail on how you believe WEX is positioned as AI adoption grows and where you see potential opportunities and where you're assessing potential risks?

Yes. I love that question. You know I love that question. So 2 years ago, one of the things that we decided that one of the places we want to make a big bet was around AI. We decided to unify our product teams. We brought in a new leader in product and brought in a CTO who had experience in this field. And we ended up replacing about 1/3 of our technology group with people who had artificial intelligence, data science skills in their background. And and started to introduce more early career hiring into our pipeline. We had like a really clear focus around the fact that we wanted to increase our product innovation velocity. So we wanted to be able to use the tools and technology to bring products into the marketplace quicker for our customers because we felt like we were in an environment where we would be doing less M&A and we wanted to be able to bring products into the marketplace organically. And that has been -- it's a great snowball as you can see that our teams are co-creating faster.

We've got AI embedded in both product discovery all the way through to 40% of our code is being written by AI right now. And so -- and it is this exponential curve where we're getting faster about the way that we're approaching that. So we're able to do more with less on the technology and product side. Part of what we're able to do when we talk about going into the small customer base in mobility is because we had invested that same type of rigor in our risk and fraud tools a couple of years ago, really step back and said, how do we advance the capability that we have there. And that foundationally and then have moved that into our marketing capability.

And so as you look across the business, risk, tech, product, it's been really reimagined the experience and we're just doing that now in our operations areas where we're starting with what's possible and thinking about from a customer perspective, how do we solve solutions, how do we solve the problems our customers have, and we do it in a much more intuitive way. So I'm really excited about the -- I think of this offense and defense. But on the offense side, our product road maps are strung together with a lot of artificial intelligence capabilities for our customers. On the defense side, it's thinking about how you reimagine the company in a way that makes it that much more cost effective. And so I just feel like we're in a really great spot of ability to see that happen at scale faster and faster.

Yes. No, that's very helpful color. And then I did want to ask just on kind of macro quarter-to-date trends. You reported about a month ago, I believe, just anything to call out around macro or quarter-to-date that's changed or...

Obviously, fuel prices are higher. Yes, I'd say like in terms of volume trends have looked pretty much playing out as we had expected despite the fact actually we had a negative with the storms, but overall volume has come through pretty predictably. I know there's been a lot of talk in the conversations today about the over-the-road space. And we're definitely seeing like good indicators around spot rates and things like that. But we haven't seen that translate into like more miles driven coming through our customer base yet. But I think there's some like hopeful signs in the overall industry itself. And so I'd say the kind of the most remarkable thing that has changed is fuel prices are higher than they were.

Yes, certainly. And I would say one of the things that I've kind of noticed over the last few quarters is that really feels like the sales momentum is starting to pick up. So can you touch on some of the recent wins they've been pretty broad-based. I mean what's driving kind of this acceleration here?

Yes. I think it's a combination of things. In our benefits business, our product road map is very compelling, and that strong more interest than we probably have had in recent years. We've had a really good service cycle and that also instills confidence. But I would say like people are really excited about where we're going, the pace by which we're going and the confidence that they give them that we're on the right path, and that's -- so that's accelerated what we've seen in that part of the business.

With mobility, we've increased the capability that we have in our marketing engine, and we put more money into it, put about $50 million more into it. And so we're seeing the benefit of that coming through in more sales. And we've gotten much better at tuning who we're going after. And I would say it's one of those things where it gets better and better because the risk tools are talking to the marking tools and so we're targeting better customers along the way. We've also got more productive in the outside sales group, and so we've seen a benefit of that. And in Corporate Payments, we've added more bodies into that. So it's a combination, I would say, of better product and excitement around that and a little bit more people and a little bit more productivity.

Okay. And then I wanted to switch gears into kind of your segments here, starting with mobility. You touched on SMB a little bit. It's an area you guys have invested in. How do you think about the market opportunity within SMB? Who are you taking share from? And do you think this is sustainable over the next few years?

Yes. Yes. Actually, so if you kind of go across the small business is the place that's least penetrated. It's only about 10% of the revenue that we have. And so why you've seen us gear so much towards that is because that's -- it's a huge part of the open marketplace. And so -- and we think we are uniquely positioned to win because of all the work we did on our risk tools, so we can be more intelligent about who we're actually picking through to come through to the -- to become customers of ours.

And so we're excited about that, both in our local business, but also in over-the-road trucking, it's just inherently got more risk associated with that customer base. So what we're doing with 10-4 is to do it in a way where we're not extending credit. So we like both of those because one gives us a model of access without the risk and the other one is actually just being more intelligent about how we're approaching the risk.

Okay. And then you guys have a guide out there for 1% to 3% organic growth for the segment. It does imply a bit of an acceleration. So one of the questions I often get from investors is just, can you help us bridge how we accelerate from here, understanding that macro has been a little bit volatile, not great recently. So how do we kind of accelerate from here?

Yes. So 2 of the big levers, BP coming on. So we expect them to come on, and we had said second half of the year is where we would see the benefit of that. And the money that we spent on customer acquisition, like increasing that, we're seeing that coming through in actual sales and onboarding. It just takes a little while for that to come through the results, but you start to see that in '26 coming through the results. And there's a little bit just better comps, too, because you've had a period of negative same-store sales that has been lasting for a while. But overall, we're assuming a continued pretty soft environment in our guide for '26.

Okay. And then transitioning here to corporate payments. Obviously, this can mean a lot of different things to a lot of different investors. So can you just double-click on what exactly you do within corporate payments?

Yes. So in embedded payments, we are connecting to technology to technologies. They come in, they'll connect through an API to our virtual card technology stack and we'll initiate a payment on their behalf. So like if you're a travel company, if Steve makes a payment to an online travel agency, then there's a one-for-one relationship between that payment that they're logging and a payment that needs to get made to a hotel. That payment to the hotel gets fired off when it is due. And -- but it gets tracked with that consumer -- original consumer payment. And the magic of that is there, as you might imagined, quite a bit of chargeback activity that happens across that portfolio. And so if Steve objects to his stay and wants his money back then we're able to actually trace it all the way through the system and it can reconcile back automatically into the online travel agency records.

And so there's a huge volume that's going through, but there are also a lot of chargeback activity and is happening globally in many different currencies. And so there's a lot of complexity that surrounds those transactions. When we've take it outside of travel, it's that same idea. So if you're a customer that is -- that has a payment flow needed in their work stream. They're going to do the same thing. They're going to connect through an API and we'll kick off a payment on their behalf. And what they care about is the payments made, it's reliably made and the data is reconciled back so that they can close their books and they have confidence on the fact that the right payments were made.

Okay. And I did want to transition to benefits just because we're running low on time. This has been I'd say the bright spot of the company over the last few years. I mean, maybe just talk about the strategy there. You've kind of consistently grown accounts above market. I mean how sustainable is that and what's enabling you to take share?

Yes. People are really excited about the products that we're putting out in the marketplace, and we're doing it at a greater pace. And when you think about in the benefit space because there's a consumer at the end, there's 20 million consumers that ultimately are using the products. The fact that we can AI enable them actually creates a much more intuitive experience. So it is ripe for reimagining how a customer decides what benefits they roll in. It helps them decide how much money to put into what account type. It helps them decide whether or not they should invest that money. So all these decision paths along the way that we can take our proprietary data and create like an assist along the decision points.

And it's created a lot of excitement in the space of not just what we're doing now, but we're going to be able to do. And it's a pretty long sales cycle. So what you're doing next actually matters quite a bit to that customer base. So we feel like we have a great sales team. We have great products and they're just getting better, frankly.

Yes. And then you do have a target for 5% to 7% top line growth in that business. You do have a bit of a float headwind...

2 points.

2 points of floats headwind. So can you just double-click on the actual revenue growth drivers for just a quick 30 seconds here? I know we're running out of time...

We're getting the hand wave, yes. okay. It starts with accounts. So more accounts we get SaaS revenue associated with that. Custodian balances tend to grow much higher than the account base because people -- their account balances ripen. And so we'll get like an incremental benefit for that. And then because health care costs go up, payment processing revenue also tends to track higher than account growth.

Okay. And we'll stop there. Thank you so much for being here.

Thank you. Yes, thanks.

My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Q4 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Steve Elder, Senior Vice President of Investor Relations. Steve, please go ahead.

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO; and Jagtar Narula, our CFO. The press release and supplemental materials we issued yesterday, and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and supplemental materials have been included in an 8-K filed with the SEC yesterday afternoon.

As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin as well as adjusted free cash flow during our call. Please see Exhibit 1 of the press release for an explanation and reconciliation of these non-GAAP measures. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and the indeterminate amount of certain elements that are included in reported GAAP earnings.

I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in the press release, the supplemental materials and the risk factors identified in our most recently filed annual report on Form 10-K and in our subsequent quarterly reports on Form 10-Q and other subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

With that, I'll turn the call over to Melissa.

Thank you, Steve, and good morning, everyone. We appreciate you joining us. Let me start today with how we think about our strategy and why we believe our business model is so durable. WEX serves customers in mission-critical areas where reliability, compliance and control matter most. Our focus on and expertise in these areas has allowed us to earn long-lasting customer trust, win market share over time and generate strong recurring cash flow.

Today, we're modernizing our platforms to reduce friction, deepen workflow integration and expand customer lifetime value, all while executing with discipline to deliver durable growth and expanding margins. Before I go further, I want to connect back to what we said on our Q3 call. We described WEX as reaching an inflection point where the investments we have made in product velocity, go-to-market execution and cost discipline were beginning to translate into stronger performance. In the fourth quarter, we saw that inflection point take hold.

Earnings growth accelerated, operating leverage improved and we made tangible progress towards the margin expansion we expect as our investments continue to scale. We're confident in our ability to build upon this progress. Our strategy remains anchored in 3 pillars, amplifying our core, expanding our reach and accelerating innovation. Each of these pillars is designed to turn customer trust into durable growth margin expansion and consistently strong free cash flow.

Now turning to the quarter. Our fourth quarter results reflect the momentum we're building as execution improves across product, sales and customer experience. In the fourth quarter, we delivered revenue of $672.9 million, an increase of 5.7% year-over-year or 4.5%, excluding the impact of fluctuations in fuel prices and foreign exchange rates. Adjusted net income per diluted share was $4.11, and an increase of 15.1% year-over-year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q4 adjusted EPS grew 12.1%. For the full year 2025, we delivered record revenue of $2.66 billion, up 1.2% year-over-year with improving performance as the year progressed. Adjusted net income per share was $16.10, up 5.4% year-over-year. Excluding the impact of lower fuel prices and foreign exchange rates, revenue increased 2% with adjusted net income per share up 7.7% year-over-year.

A few years ago, we started the journey to reimagine and accelerate how we organically invest in technology and new products. Part of that journey included bringing on a new tech and new product leader, who have enhanced our foundational capabilities in technology and augmented our team's expertise in AI and data science. We've been modernizing our architecture, strengthening execution bigger and increasing accountability for delivery. The result is that we're building faster, scaling more efficiently and lowering our long-term cost to serve. By combining operational discipline with an AI-first approach to product development, we increased product innovation velocity by more than 50% year-over-year. These investments are already improving customer outcomes and delivering efficiency.

As we move through 2026, we plan to shift from an investment phase to a scaling phase with operating leverage driving meaningful margin expansion over the medium term. Let me give you a few examples of how this is showing up across the business. In mobility, we continue to invest in our industry-leading fuel card solutions for fleets of all sizes. Targeted marketing investments in 2025 drove a 13% year-over-year increase in new small business customers. On the product side, we've introduced innovative offerings like fleets, which combines the power of our proprietary closed-loop fuel card with open loop flexibility. That translates into superior controls and data creates a product experience that is difficult to replicate at scale and increases revenue per customer in our mobility business.

In the Benefits segment, investments in both sales and product helped drive another strong open enrollment season. A great example is our use of AI to streamline health care claim reimbursement. Our AI-powered solutions has reduced processing times from days to minutes with 98% accuracy, supporting our goal of improving participant satisfaction, reducing friction and lowering our cost to serve. We also launched a modernized brokerage experience that enables real-time trading and provide seamless access to HSA cash and investments and is designed to drive higher balances and asset retention. These are key drivers of long-term value creation in the HSA market.

Our direct accounts scalable product continues to grow rapidly, and our investments in expanding the sales force are delivering as expected with Q4 volumes up approximately 15% year-over-year. The momentum in our direct AP is complemented by early success in our embedded payments offering, with a growing pipeline of prospects and customers to support sustained growth in 2026 and beyond. We're deliberately extending our reach and extending addressable use cases across verticals. Our product investments continue to help us differentiate ourselves across this business. For example, we recently launched a global funding engine that enables customers to issue virtual cards in multiple currencies and execute on-demand currency conversions without incurring FX costs. This expands our product capability to better serve customer needs, strengthens our value proposition beyond travel, and sports continued operating leverage as volume scale.

Looking ahead, we see the potential for additional upside from geographic expansion in travel as well as new digital tools that accelerate onboarding and improve customer productivity. By balancing growth acceleration with operational efficiency, we've built a stronger and more agile WEX that is well positioned to capitalize on market opportunities, scale efficiently and strengthen our long-term competitive advantages.

Now let's turn to our segment results for Q4, beginning with mobility. Mobility is our largest segment and a great example of how we are amplifying our core by protecting profitable share in a down cycle while we continue to invest to drive long-term value. Despite ongoing market softness, fourth quarter mobility revenue was flat year-over-year as we focused on capturing profitable market share. Transaction volumes declined modestly, consistent with our expectations, broader market trends and the patterns we saw in the third quarter. It's also important to address what we're seeing in the over-the-road trucking market. The over the ed market remains in a cyclical down cycle with muted freight demand and pressure on small operators. We've seen this pattern before. These cycles are historically temporary. We're executing on what is in our control by protecting profitable market share, maintaining high retention and continuing to invest in differentiated capabilities so that when volumes recover, we exit this cycle with stronger economics and greater operating leverage.

As I mentioned earlier, we've been directing sales and marketing investments towards smaller fleets, which we believe represent a large and underserved market with significant potential. 10-4 by WEX extend our reach by bringing new small trucking fleets into the ecosystem while creating a pathway to amplify the core over time through deeper relationships. The discounts that we've negotiated with truck stop chains save the typical user on versus dollars each month, helping drive adoption. Momentum has been strong, with December again for more than half of the total Q4 volume on the platform. Finally, WEX Field Service Management, formerly Taser, continues to build momentum, delivering healthy double-digit revenue growth in the fourth quarter. Since acquiring this business 2 years ago, we have updated and aligned the brand, refined our cross-sell profits, improved retention made key product enhancements and updated private. We remain energized by this opportunity as we deepen our presence in this attractive adjacent market where we believe we can generate up to 10x more revenue per field service management customer than for a traditional small fleet.

Now turning to benefits, which simplifies the cost of employee benefits administration and comprises approximately 30% of annual revenue. Benefits is where our accelerate innovation and expand our reach strategic priorities intersects clearly. In 2025, we extended our track record of consistently growing HSA accounts faster than the underlying market as reported by Devenir. Our diversified portfolio expanding benefits administration, consumer-driven benefits and HSA custodial services positions us to sustain market leadership as we continue to further strengthen our competitive edge. Overall SaaS account growth was 6% in the quarter, in line with previous quarters last year.

Following a strong open enrollment season, we now have more than 9.4 million HSA accounts on our platform. We remain a top 5 HSA provider, powering more than 20% of all HSA accounts in the country and serving approximately 60% of the Fortune 1000 companies. We're very pleased with the results of our 226 open enrollment season with a direct new sales exceeding expectations and continued strength across our partner channels. As a result, we expect account growth to be in the range of 6% to 7% year-over-year in Q1. Our benefits business continues to outperform the market and we're confident in its long-term growth trajectory.

Finally, let's turn to Corporate Payments, which is the clearest example of how we're expanding our reach, expanding our core capability across industries, geographies and workflow, representing approximately 20% of annual revenue. This segment helps businesses pay their partners faster and more securely while simplifying the workflow. Fourth quarter performance for this segment improved meaningfully from the first half of the year, in line with our expectations. Purchase volume profit by WEX increased 16.9% year-over-year reflecting the continued strength in travel customers. Traveler-related revenue grew more than 30% in the quarter, supported by high existing customer activity in the onboarding of a meaningful new customer in Asia. Revenue from non-travel customers grew in the mid-single digits.

The adjusted operating margin for corporate payments increased by 450 basis points, reflecting the strong operating leverage in the model as volume scale. Our direct accounts payable product continues to scale rapidly. New customer wins fall within the construction and health care verticals alongside retail and media this growing book of business now represents 20% of segment revenue.

Before I turn it over to Jagtar, I want to highlight a governance update we announced last month. As part of our multiyear Board refreshment plan, and reflecting input from our ongoing engagement with shareholders, we announced the next phase of the Board's planned evolution. Under this plan, newly appointed Director, David Foss, will assume the role of Vice Chair and Lead Independent Director effective as of our 2026 Annual Meeting of Stockholders. We also announced that Shekar Gosh and Jackson Workum will retire from the Board at that time. We're grateful to Shekar and Jack for their dedicated stewardship, and we look forward to Dave's leadership as we remain focused on long-term shareholder value creation.

Stepping back, we entered 2026 with strong momentum. We expect to deliver the strongest new sales year yet based on our current pipeline, improving sales productivity and greater customer demand across all 3 segments. Together, the strength of our platform, the resilience of our model and the returns from our targeted investments give us confidence we're on the right path as these investments continue to scale we expect operating leverage to support margin expansion while sustaining strong free cash flow generation.

With that, I'll turn the call over to Jagtar to walk you through our financial performance and our 2026 guidance in more detail.

Thank you, Melissa, and good morning, everyone. Before I begin, I want to remind you that unless otherwise noted, all comparisons are year-over-year. Overall, we delivered solid revenue growth and strong earnings performance while also continuing to lay the foundation for accelerating both top line growth and profitability in 2026. .

Total revenue in the quarter was $672.9 million, up 5.7%. The impact of foreign exchange rates and fuel prices increased revenue growth by 1.2%. Notably, revenue exceeded the guidance range we provided last quarter primarily as a result of higher-than-anticipated fuel prices and a strong quarter in the Benefits segment. Without the fuel price benefit, revenue came in at the high end of our guidance range of $646 million to $666 million. Adjusted earnings per share of $4.11 were up 15.1%, including a 3.1% favorable impact of fuel prices and foreign exchange rates. Adjusted EPS was $0.25 above the midpoint of the guidance range we provided in October, of which $0.18 was attributable to higher-than-anticipated fuel prices and the remainder due to execution.

In our Mobility segment, revenue was $345.1 million which is flat the prior year. This includes a favorable impact of 1.4% due to fuel prices and foreign exchange rates and a negative impact of 1% from lower interest rates. The market softness that we had highlighted throughout the year persisted in the fourth quarter, in line with our expectations. Our payment processing rate of 1.33% was down approximately 3 basis points primarily due to the decline in interest rates. In our Benefits segment, revenue of $204.9 million rose 9.6%. SaaS account growth of 6% continues to be above recent industry trends according to Devenir. Custodial investment revenue, which represents the income we earn on custodial cash balances rose 14.2% to $61 million due to the increase in both average asset levels and higher rates. Earned interest yield increased 11 basis points to 5%.

Turning to our Corporate Payments segment. Revenue of $122.9 million increased 17.8%. Purchase volume increased 16.9% with particular strength from travel-related customers, benefiting from both underlying growth and a favorable comparison to last year. Results also benefited from our incentive contract with our primary provider. Direct accounts payable purchase volume grew more than 15%. The addressable AP market remains very large and relatively unpenetrated. Our virtual card products are resonating with customers, and our sales force remains productive. This continues to be one of our key focus areas going forward and where we plan to invest more in the future.

Turning now to the balance sheet. Our business continues to generate strong recurring revenue and reliable free cash flow. That cash flow provides the flexibility to enhance shareholder value through our disciplined capital allocation strategy. Last year, we generated $638 million of adjusted free cash flow compared to $562 million in the prior year. I want to note that as of the end of the first quarter in 2026, we'll have substantially completed our deferred and contingent M&A payments related to our benefits business, which will free up approximately $150 million of cash flow starting in 2027. When it comes to deploying capital, our priorities haven't changed, and we delivered last year in line with the commitments we set. First, we focus on preserving financial strength and flexibility by maintaining a strong balance sheet and appropriate leverage, ensuring we can operate effectively under both normal and stress conditions.

We ended Q4 with a leverage ratio of 3.1x, down from 3.25x at the end of Q3 and continue to operate within our long-term target range of 2.5 to 3.5x. We will continue to prioritize debt reduction until leverage is below 3x, which we expect to achieve in Q2 or Q3 of this year. Second, we invest our core businesses where we see attractive returns and opportunities to strengthen our competitive position. This is aligned with our focus on amplifying our core and accelerating innovation, tied to what Melissa said earlier about our plan to accelerate revenue growth. This will be driven by innovating and investing more in product development. We are taking a balanced and disciplined approach to margins by driving efficiencies and reducing costs in other areas of the company and reallocating resources towards our growth initiatives. We are planning a rigorous return threshold to every potential investment with clear accountability for growth, retention and margin impact. This is a core of our financial algorithm.

Disciplined cost actions fund high return growth investments and as revenue scales, we expect margins to expand over the medium term. After addressing these 2 priorities, we evaluate deploying our remaining capital towards accretive M&A opportunities, which must meet strict financial and strategic criteria or returning capital to shareholders through share repurchases. Every step of our disciplined capital allocation process is underpinned by a clear objective to maximize long-term shareholder value. I also want to briefly touch on the important financial advantage we gained from having WEX Bank on our platform. The bank provides greater access to liquidity for our balance sheet at a lower cost than funding solely through capital markets. It also allows us to earn higher yields on our HSA portfolio. The bank is an important differentiator for the business that improves our bottom line.

Now let's turn to 2026 revenue and earnings guidance for the first quarter and the full year. Starting with the first quarter. We expect revenue in the range of $650 million to $670 million, which represents a growth of 4% at the midpoint. This growth includes a 2% net drag from fuel prices, FX and interest rates. We expect adjusted net income EPS to be between $3.80 and $4 per diluted share, which represents growth of 11% at the midpoint. For the full year, we expect revenue in the range of $2.70 billion to $2.76 billion. We expect adjusted net income EPS to be between $17.25 and $17.85 per diluted share. At the midpoint, full year guidance reflects revenue growth of 5% and EPS growth of 13% when excluding the impact of fuel prices, FX rates and interest rates. These growth rates are accelerating into the long-term target ranges we set last year.

Let me touch on some key factors driving guidance this year. Note that you can find the complete list of assumptions in their supplemental materials. In mobility, excluding the impact of fuel price changes in FX, we are expecting full year revenue growth of 1% to 3%, which includes a headwind of approximately 1% due to the impact of lower interest rates on merchant contracts that include pricing escalators. We are also prudently assuming no improvement in the macro environment. As for quarterly cadence, recall that Q1 last year had a pull forward of gas and OTR due to terrifies which creates a tougher comp for Q1 this year, followed by an easier comp in Q2. Also note that the incremental BP contribution will be weighted to the second half of the year and then continue to ramp into 2027.

Credit losses in mobility are expected to be between 12 to 17 basis points for the full year and between 17 and 22 basis points in Q1. In Benefits, we are expecting full year revenue growth of 5% to 7%, which includes approximately a 2-point headwind from lower interest rates on the floating rate portion of our nonbank custodial assets. As a reminder, over 75% of our portfolio is in fixed rate instruments and therefore, not rate sensitive. Note, Q1 SaaS account growth is expected to be higher than the rest of 2026 as we lap the benefit of the UAW contract that began in Q2 of last year. In Corporate Payments, we are expecting full year revenue growth of 5% to 7%. As I mentioned earlier, we are investing more in innovation and product development to drive future growth. Embedded in our guidance is $50 million of cost savings actions. A portion of these savings will be reinvest in the business and a portion will drop to margins. The expected lower fuel prices this year impact adjusted operating margins negatively by approximately 75 basis points. As a result, for 2026, we expect the adjusted operating income margin to be flat with 2025.

Our guidance does not assume any future M&A activity or share repurchases and last year's tender offer will continue to benefit EPS growth through Q1 before annualizing. Finally, our guidance assumes average fuel price per gallon of $3.10 for the year, and 2 interest rate cuts in line with market expectations. As outlined in our earnings supplement, with sensitivities to these factors are for each $0.10 increase in price per gallon, revenue increases by approximately $20 million and adjusted EPS increases by approximately $0.35 with symmetrical impacts in the event of a decrease. For interest rates, 100 basis points higher than our outlook would translate to approximately $30 million higher revenue and $0.35 lower adjusted EPS, while a 100 basis point lower rates would decrease revenue by approximately $30 million while increasing EPS by $0.45.

Let me take a moment to review our revenue and earnings trajectory. 2025 was a transition year with muted revenue growth in the first half that accelerated in the second half, while earnings growth benefited from stock buybacks. As we look to 2026, we anticipate continued revenue growth as momentum builds. At the same time, we are actively managing our levers to invest in the business while also driving earnings growth. In closing, our results underscore our disciplined financial execution and the strength of WEX's operating model. We are energized by the momentum we are driving across the business, and the tangible progress we are making toward our long-term growth and margin expansion goals. We remain firmly focused on operational excellence maintaining financial resilience and allocating capital strategically to support sustainable, long-term value creation for our shareholders. As we enter 2026, we're well positioned to capitalize on improving market conditions and to continue executing against our strategic and financial priorities.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of David Koning with Baird.

Good job. I guess my first question, the cadence of the corporate business through 2026, both kind of volumes and yields, just kind of thinking about it seems like the first half had much easier comps. So Q4 growth was really good. I assume the first half will continue to be good on easy comps. So that's on the growth side. And then on the yield side, just understanding yield was really good in '25. Some of that was the mix more towards B2B. Is mix going to stay -- I know you have the new Asia client that was big that came on, can yields stay flat to even maybe up in '26?

Let me start and give a little bit of context around that because you're right, we had really strong growth in the fourth quarter. Some of that, as you pointed out, because we had a favorable comp so the prior year, we saw more volatility in our OTA spend quarter-to-quarter. So that was a headwind in the first half of the year, and it's been a tailwind in the second half of the year. What -- part of what we're really excited about is now that we've successfully got our transition to that major OTA behind us that we're entering a period where volume is just going to be cleaner. And we think the ability is better. So that puts us in a position where you're going to be able to see more normalized growth in the course of next year. So think of the quarter should play out more evenly year-over-year than what you've seen historically. But we did get a bit of a benefit in the fourth quarter because of the comp year-over-year.

And then, David, I'll address your questions on the yield rates. So we're expecting yield overall to be flat to slightly down and slightly, I mean, like a basis point. When you look at it, travel, it will be down 1 basis point or 2, nontravel will be down 2 to 3, 2 to 4, but you'll mix more to nontravel so that will stabilize our overall yield.

Your next question comes from the line of Sanjay Sakhrani with KBW.

I wanted to drill down a little bit on mobility. Melissa, you talked about over the road, still seeing choppiness. I guess when we think about sort of organic growth assumptions in 2026, could you just sort of outline what you're expecting? What are the key variables there that can maybe help it outperform, underperform? And then I know, Jagtar, you mentioned in BP is sort of more of a second half contributor. So maybe you can just give us like sort of what the first half versus second half contribution might be in terms of total mobility and growth.

Yes. Sure. Sure, happy to. In our Mobility business, when we think about the business, about 40% of the volume comes from over-the-road customers. So I'll split the business in those 2 pieces. The way that we've approached this part of the business, and we're thinking about amplifying our core, it's been really leveraging the benefit of our closed loop network make sure that we're acquiring customers, retaining customers, the lighting customers throughout the course of the year. And our actual retention rates have remained strong, our acquisition rates have gone up, year-over-year, as you might imagine, in part because we invested more in marketing in the small end of the marketplace but also because we've seen productivity in the large end of the marketplace. And so we're going into the year feeling really good about how we're positioned.

And part of the question, I think the underlying point is, the macro itself is something that we know historically has been transient. We know in the over-the-road marketplace, that we're seeing some good signs, although there's still volume weakness in the course of what we're seeing play out right now. But there's tightening of drivers, which is creating spot rates to go up, which we think is overall good for the industry, and we'll make it healthier, more vibrant. The assumption we have in our guidance is that we're going to be in a similar macro environment in '26 is what we've been in, in '25. We'll have continued acceleration in new sales. We'll have strong retention of customers. And so the things that could play out that are different, the macro environment could improve from what we expect. From a sales perspective, we have a pretty good line of sight, but always an opportunity to outperform there as well.

And Sanjay, I'll address your question on the guidance bridge and the guidance of '26. So just to think about the guide that we've given for mobility, if you look at mobility in 2025, ex fuel prices and FX, we grew about 1% in mobility. So when you think about 2026, you take that run rate and you say, okay, with with new products that are coming online and with sales and marketing investments last year, you can understand the the increase in growth rates that we have going into '26.

From a cadence standpoint, we really expect the growth rate to be even -- roughly even over the course of the year, but there's some puts and takes with that. So obviously, we have BP coming online in the second half, which helps growth in mobility. But we're also assuming interest rates decrease over the course of the year, especially in the second half of the year. And so that puts an overall drag in mobility and hence when you look at those 2 together, you get to the cadence of roughly even growth over the course of the year.

Okay. Great. Maybe a follow-up question on Corporate Payments. From a similar vein, as we think about the organic growth assumptions there, I know you're talking to is relative to the previous question that there'd be more balanced it over the course of the year for the travel, but how about sort of non-travel, I know you guys have some share, some wins there. I saw the announcement with [indiscernible]. Just trying to make sure I understand sort of how to think about that and after that in -- and then even in the direct payables business, sort of what the assumptions are there? Because I know you guys were making some investments there. Do you see an acceleration there as a result of some of these investments? Maybe you can give us -- just elaborate a little bit more on corporate payments and the building blocks there?

Sure. We're really confident in the trajectory of Corporate Payments. I just to start with that, we're seeing some really great trends across the board, strong volume coming through with our travel customers as well as -- if you look at the functionality that we've rolled out, so we took the core capability that we have with our travel customers and made enhancements to that so that we've been selling it in the course of this year outside of travel to other embedded payments customers. And really, the core offering that we have for that customer base is leveraging the bank and being able to take really complicated payment flows that are often have quite a bit of regulatory oversight and doing that in one shop. And so we're using our world-class virtual card platform, but we've got our bank combined in that. And so that product in the marketplace continue to have really good product market fit. We're continuing to add new customers. We're going through implementation cycles now. And so we're really bullish about how that product will continue to build in the course of the year.

On the direct side, I think that it's a great engine. We've continued to add salespeople in that those salespeople are ramping. We're seeing really good production from that. And so we expect to continue to have double-digit growth in 2026 relating to sales in that. It's coming off a growing base and so we expect the growth rates to look pretty similar. So if you kind of take all of that in and factor in any contract renewals we have across the portfolio. We are expecting to see a build in the course of the year. So spend on travel will look pretty consistent in the course of the year from everything we know outside of travel in these new customer implementations. We see that spend volume lift and increase over the course of the year. And so there will be a little bit of an increase in growth, but I would say travel is still a large part of the business. And our embedded payments and our EP direct products are still the minority of the segment. So places we're super excited because we're building on that. We think they're going to become a bigger part of the segment. It will drive growth rate acceleration over time. But it's going to have less of an impact in terms of like being a huge ramp from a quarter-to-quarter perspective.

Your next question comes from the line of Ramsey El-Assal with Cantor Fitzgerald.

I want to ask a question about benefits and whether you're seeing any impacts, probably tailwinds from any political or policy-related stuff that's going on out there? I'm thinking the big beautiful bill lapsing of some Affordable Care Act coverage. Just curious if there's any kind of political overlay to the performance in that segment that you're seeing or expect to see?

Yes. Yes. It's interesting times, right? I would say there's a lot of interest and pretty much every month, we hear different ideas of how these tax deferred assets can be further utilized and specifically focusing around the construct of an HSA. There's still a lot of details that need to make their way through. So I believe we're in an environment that is really positive, likely something that we will benefit from not something that we factored into our guidance. And I would say we had a really strong open enrollment season. But we don't think we saw much of an impact from the big beautiful bill in part because the consumers are going through these exchanges. So consumer education takes some time. We do believe that this will continue to be a headwind -- I mean, a tailwind for us. in this part of the business. And so we're excited about not just what has happened already in terms of legislative changes, but the conversations that are happening and where we think this is going, but nothing that we factored into our guidance.

Okay. One quick follow-up. And forgive me if I missed you guys commented on this a little more. Jag, I wanted to ask about the elevated credit losses in the first quarter versus the rest of the year. Is there anything that you had already called out? Or any kind of finite reasons why that is occurring?

Ramsey, great question. Thanks for the question. Really, 2 pieces for us. So first, let me say overall, we feel really good about the quality of our portfolio. We've made investments that we've talked about in the past and our ability to use AI and heavy analytics and managing the credit quality portfolio, and we still feel really good and really confident about that. Relative to Q1, there's really 2 reasons. So first, just recall that it takes about 6 months for something to DLA payment that eventually doesn't get paid and goes into being written off. So when we're talking about receivables that are now 6 months old, when fuel prices were higher. So with fuel prices coming down, but the higher value of those receivables that are being written off, just the simple math of the write-offs against the spend levels with lower PPG just causes an increase in the basis points.

A second smaller reason as we went into market in the second half of last year, we were testing a couple of offers those offers are no longer market, but we saw a little bit of elevated credit losses associated with them. Like I said, we've pulled those offers, but those were taken Q1 to work through. But overall, we feel really good about where we are.

Your next question comes from the line of Mihir Bhatia with Bank of America.

I wanted to go back to the direct payables business? You called out making some investments in it, the growth has slowed, I think, from like 25% in the first half of this year to 20%, I think, in 3Q and now 15% plus, I think you said this quarter. Some of it perspective are just growing off a larger base. But maybe just talk a little bit more about that, like given the investments you're making or what's driving that? And what do you expect that to look like for 2026?

Yes. We do expect to see double-digit growth in 2026. Part of why you're seeing that decelerate, there's some lumpiness around when the customers have been implementing when they actually spend. So I wouldn't read too much into it. It's still prone to having some mix in there. From a -- just what we're adding to the business, I'd say it's a very consistent motion of adding salespeople, those sales people were out there soliciting customers. Those customers are going through actually a pretty quick implementation process, very high retention rates with that underlying customer base. And so very, very consistent with the investment thesis that we've laid out, and we think that will continue to play out really well into 2026 and beyond.

Got it. Okay. And then maybe turning to benefits, and I just want to make sure I heard correctly. I think, Melissa, you said 6% to 7% account growth in 1Q for benefits. Does that include the UAW benefit in there? So like it would be a step down after that. Is that the way to think about it, just given you're just assuming like through enrollment season at this point, but just trying to understand what we should think about on growth for the full year.

So just to correct, Q1, we expect 5% to 7% account growth. I think I said that in my prepared remarks. Then in terms of UAW, no, we don't expect a step down in Q1. Those accounts will continue. We typically have a step down from Q1 to Q2 just in the number of accounts. We see that year after year just because new onboarding happens in Q1 and then customers that are leaving the system tend to happen in Q2. So you do see a step down. But UAW is continuing, nothing to be worried about that. It's just the year-over-year the growth rate that UAW becomes a year-over-year comparison going in the second half of the year, but not [ capitalizing ].

Right. So -- so the growth rate will step down though just to platform.

Correct.

Your next question comes from the line of Rayna Kumar with Oppenheimer.

So I just want to ask something about free cash flow. I think your free cash flow conversion this year was a bit below 55%. Any call out there? And how should we think about free cash flow for '26? And then separately, could you just call out the same-store sales growth for your local fleets and mobility?

Sure. So free cash flow, I mean, nothing in particular to call out. We were very pleased with free cash flow in '25 had $638 million. We view that as pretty strong. keep free cash flow and an improvement over the $500 million and change we did in 2024. For 2026, we are continuing to expect north of $600 million. We expect to further increase from the 2025 levels. So we continue to feel confident with regard to same-store sales. I think what we said overall is that we saw similar trends to what we saw in Q3. I'd say local fleets was a slight improvement over what we saw in Q3.

And OTR was slightly worse.

Yes.

Your next question comes from the line of Nate Svensson with Deutsche Bank.

I was hoping to ask about some of the moving pieces for operating margins in '26. I guess for the full year, how should we think about each of the segments and how that builds up to total company margins being flat I know it benefits will have the impact of float headwinds, corporate payments, we're exiting the year a little north of 48% and then hopefully, the operating leverage as that normalizes? Mobility, we have BP coming on lower interest rates offsetting. And then on top of all of that, you have the investment. So I was just hoping you could put all that together, maybe talk about margin cadence for the year by each of the segments.

Yes. And let me start actually just talking about margins overall because it's something that we think a lot about. Jagtar talked about some of the cost actions that we're taking and have been taking the course of this year. Those are setting us up whilst if you exclude the impact of macro in the midpoint of our guidance, we're assuming 75 basis points of improvement in margins. So margin improvement that's coming -- when I talked about product innovation velocity, one of the things that we've really focused on is how to get more through using AI and advanced tools than we have in the past. So we're getting work through and we're doing it at a lower cost. So that 50% improvement had about 400 less people in our technology group. And you can see that coming through with lower CapEx in the course of 2025. And so we're seeing some material improvements of how we're bringing products into the marketplace from a redesign all the way from a development perspective. We've taken that same philosophy, had started to deploy it in our operations group. We talked about the fact that we have a new tool that we put out there within our benefits business, which is claims automation. A great tool because it relieves one of the pain points from our customer and submitting the claim, does it more accurately and quicker than what we were able to do before, and we think of that as just the tip of the iceberg. And so we're really focused on how we can continue to use these use cases, amplify that through increasing our innovation. And those are things that we're factoring in when we're thinking about margin expansion. So as Jagtar said, we're moving -- we're really focused on how we can invest at the same time how we can create scale in the business.

And then, Nate, just how to think about margins per segment. I would say we're pleased because within our guide, all of our segment margins are improving before you include the effects of macro and so we're pleased with that. Obviously, with macro effects that impacts a couple of our segments, some ability and benefits will be a bit more flattish because of the macro impacts, while corporate payments will continue to improve from the higher revenue and relatively fixed cost base.

So makes sense. I appreciate the detail. And then Jagtar, maybe this is one for you. You mentioned it in the prepared remarks, and there were some comments in the supplemental. Just about the incentive with your scheme provider in corporate payments. Maybe I'm wrong, but it seems like maybe incentives were a little bit higher than normal this year, maybe a little more weighted to 4Q. I guess if that's right, what were the reasons for that? And then is there any way to think about incentives as the scheme partner in '26? Are there pump considerations we have to keep in mind with regards to that specifically?

Yes. We negotiated a new scheme relationship in the second half of the year. We were really pleased with that. It helped us in the second half, saw a little bit in Q3, a little bit more in Q4, will continue on into next year. So you'll have good comps on that in the first half of the year and then while we're in the second half.

Your next question comes from the line of Trevor Williams with Jefferies.

I want to start with the bigger picture question on mobility, just given the sales focus on the lower end of the market. Melissa, maybe you can give us a sense for how much of that segment you think is still up for grabs at the low end and how you'd frame any of the competitive dynamics with some of the open loop providers?

Sure, sure. actually, if you look at the market, we are continuing to -- when you think about the marketplace itself, we have a sales force that's dedicated towards going after larger accounts at a place that we've had a lot of success in our business model. We've continued to win those new accounts. And then when we thought about where is the kind of broader open market opportunity, it's in the smaller account arena. We spent a lot of time refining first our credit tools and fraud tools and making sure that we're in a position that we felt really good about opening of our marketing channels. We've opened those up. We're having success in bringing customers through digitally and seeing that continue to be quite profitable for the business. And so the focus for us is continue to build market leadership in the mid- and upside upward part of the marketplace. .

But we're also keenly focused on how can we increase the market share, which is largely unpenetrated in that smaller end of the marketplace, both for our North American mobility business, but also with our over-the-road business, this 10-4 offering that we have out there, we're really excited about because it allows us to extend into a new part of the marketplace that we historically haven't played in, and that's owner operators. And what they're doing is downloading an application, they're accessing our fuel network. They're doing that at a discount. Fuel prices are their largest operating costs. And so we're saving the meaningful money, but also introducing them into our set of products where they're building relationship with us, which as they grow, they can continue to mature until -- the other products we have, if we don't, we have an extended credit to them. And so across the board, we think of the small fleet opportunity is a place that we're going to continue to penetrate.

Okay. Great. And then maybe for Jagtar on quarter-to-date trends, I'm just wondering how same-store sales in mobility are looking relative to Q4 between the comps and assuming there's been some weather impact from the last couple of weeks? And then just to clarify to make sure we're hearing you right on the ex fuel growth cadence for mobility. Is the message that Q1 should be the low point of the year because of the comps and then growth should look pretty similar for the balance of '26? I just want to make sure we have that.

Yes. Let me address the second one first. So Q1 is slightly lower because we have -- remember, we had the pull forward last year in the OTR business. So that will impact Q1 a little bit. And then growth, yes, correct. It's pretty similar over the balance of the year for the reasons I talked about earlier, BP coming online that you get bringing up the drag from interest rates. On the KPIs, what we saw from same-store sales has embedded in the guidance. that we've given you. And what we're seeing from KPIs right now is on track for the guidance we've put out there. We did have some weather impacts, what was that a week or 2 ago, but that's embedded in the guidance so far, things are looking like they're on plan.

Your next question comes from the line of Darrin Peller with Wolfe Research.

I want to start off just I saw the changes with David Fass. We're big fans of his. I mean it's good to see him take an active role on the Board. But more importantly, just curious what the -- I know you could have released out about the changes on the board a bit more bringing down a couple of positions to 10, I think. Help us understand what the thought process is there? What you think the Board wants to see strategically? Has anything changed from a strategic direction standpoint over the last couple of quarters as this has gone on as well? Obviously, you had a process going on. I'm curious looking out of that more with the new board.

Yes. Yes. Great question. I think if anything, it has reinforced the strategy that we have in place and we talk about the 3 pillars of how we are really focused on driving strategy and driving growth across the company. Both the process of bringing in the external bankers, which just validated the fact that we know the business is better off together and execution should be our focus, execution of our strategy. And I would say that, that same thing has been true as we've gone through a refreshment process over a number of years. Bringing Dave on is part of that refreshment process of bringing in a new lead independent director. He's great. I'm excited to have them for. I'm sure he will have his own perspective. But so far, it's just reinforcing the strategy that we have.

Okay. And no change from your perspective, to capital allocation decisions versus what maybe we would have thought about a year ago? And maybe just remind us what you're hoping for and looking for from the mix between M&A and buybacks? I know you talked a bit about it in the presentation, but anything that's really changed to be helpful in terms of thought process.

Yes. It's a great question. When we think about capital allocation, risk-adjusted return is our North Star. And so for quite a period of time, that moved us into M&A. Over the last few years, we've spent $2 billion in buying back stock. And it actually kind of leads in the path when I talked about in my prepared remarks that a couple of years ago, we started on this journey of really focusing on increasing organic innovation. It's really in mind to the fact we're in an environment where we've been doing less M&A and therefore, we're really focused on how we can continue to go faster and bring new products into the marketplace and commercialize them. And we've seen some really good success in that. So we're actually really excited and the path we're on because we're seeing new products coming in. We're seeing them commercial success we feel really bullish on how we're going to continue to increase the pace of that and where that's going to bring the company over time. So from a capital allocation perspective, I would say stay North Star is risk-adjusted return and we're going to evaluate share buyback versus looking at M&A for the near term, we're very focused on paying down debt. And with the multiple we're trading at right now, we'll continue to buy back stock.

Your next question comes from the line of Michael Infante with Morgan Stanley. .

There's obviously been a lot of noise around agentic travel booking, potentially reshaping OTA workflows. And over time, the economics and the routing of travel payments. So I'm curious how you are thinking about that and what you're doing to be positioned for that shift. And as you contemplate the medium term, how should we be thinking about sort of where any potential impact would show up first across volumes take rates or just changes in channel mix.

Yes. Yes, sure. We -- obviously, we think a lot about the agentic AI across our whole customer segment. When you talk specifically about travel, when we think about the search to book the pay journey, it's evolved for decades, and it's going to continue to do that. So that what we think about and what we see actually when we're working with is that they're structurally embedded in that journey. The large OTAs are effectively partnering with the platforms like OpenAI, like Google, and the smaller ones are differentiating through curated experiences. And so there's a lot of adoption that's happening right now within the OTA space. What we know is that virtual card payments are really important in the space because it's this unique ability to have buyer seller protections, they have global acceptance, automated reconciliation whole wealth of data that's put in there. So what we're seeing right now is that what we have, the capabilities that we have are becoming, if anything, more important and kind of the way that is happening is changing, but the OTA is still deeply embedded in that process. And you can see that coming through in our volume growth. We've had really strong volume growth.

That's helpful. And then just one housekeeping follow-up. Melissa, you alluded to this in some of your commentary on Corporate Payments. And I know it's a fairly small part of the portfolio on both an absolute and a relative basis. But have you directly incorporated any impact from a potential renewal of a key OTA customer within the guide this year?

Yes, Michael, we've factored that into our guidance. Our guidance includes everything that we're thinking about for the Corporate Payments business, including potential pricing tax, et cetera.

That concludes our question-and-answer session. I will now turn the call back over to Steve Elder for closing remarks.

I appreciate everyone joining us today, and in a couple of minutes over here, but thank you for all the questions and interest, and we look forward to sharing our progress next quarter.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

All right. Let's get started. My name is Chris, and I'm an analyst as part of the UBS Payments and Fintech team. We're very excited to have Melissa Smith here with us from WEX. And I think this -- so it's your first time in quite a few years, and good to have you and heard your third quarter update. I guess maybe just to kick it off, it would be great to hear your key priorities, what's on top of your head heading into 2026.

Sure. Happy to be here. to say it's the first time it's been -- I think I was back in...

In a couple of years. Great to have you.

I was here for a long time, but it's been a few years. So the key priorities for us going into next year, we have 3 strategic priorities. We want to make sure that we continue to build on our core. So enhancing our core, we want to extend our reach, and we want to accelerate innovation. And if I think about each of those things, enhancing our core is really about making sure that we're bringing in sales we're retaining customers across our portfolio. And a great example of that for us as we go into next year is BP. So as BP makes their migration over, we think of that as a wonderful way of just continuing to build on the core that we have.

As we're extending our reach, the places that we've been really focused is where we can take our product and extend it into new TAMs. 10-4 is a great example of that, we're extending into the owner-operator marketplace and breathing new life into some of these products. Same thing with BP came on board because of an enhanced acceptance product. And we have built an ability to sell outside of travel, our embedded payments capability.

So when you think about, those are new products, that are something that's really important for us to continue to build on in 2026. And then when we think about innovation and accelerating innovation, we're thinking about how you can deploy AI and other sources of technology to really reimagine customer experiences. And so those are -- when we think about next year, the things that we're really focused on.

All right. Awesome. Thanks for the overview. And I guess maybe just looking back at this year and especially in the fourth quarter, it's almost a month ago and -- but it's been over a month since you reported Q3. Maybe can you give us an update on how the business has been versus your expectations in the fourth quarter?

Happy to. Yes, I'm happy to. So if you look at our spend volume and the way that we think about business and what we had projected forth for revenue, we're seeing trends coming in pretty similar to what we had expected, so kind of largely in line. And if you look across the portfolio, we've continued to see really strong sales. And so one of the things that we're excited about is how -- not only just we're ending 2024, but how that will project into -- not 2024, 2025 and how that will project into 2026.

All right. Awesome. And just -- yes, as you mentioned, just exiting 2025, right, what are some of the maybe moving pieces or incremental moving pieces we're getting really granular here, that moving pieces that will make you feel more encouraged or more cautious about next year?

Yes. I'll start on the things that I'm really bullish about. So when I talked about the new sales momentum, that's something you don't typically see a lot of benefit of in the year in, and you start to see the incremental benefits of that going into the next year. And so as we've had a strong sales year this year, that will benefit 2026.

We also -- I talked about the fact that we've got new products that we're moving into the marketplace. I'm really excited about this, not just in the products that we're rolling out right now, but the idea that we have enabled our ability to create products and commercialize them in the markets that we're in, and we're doing that at greater velocity. So that's something that I'm really excited about.

The BB migration that will happen during 2026, that will be an incremental benefit for us as well. The sales that we're seeing specifically in AP Direct in our embedded payments products as we're going through implementation cycles, that's -- I'm excited about that as well. And so far, we're still -- we're about a month into open enrollment, but open enrollment has gone as we would have expected and is looking positive for us as well.

And so those are things I would put in the, I'm excited about category. And I think that the biggest thing that I'm still -- on my watch list is what's happening from a macro perspective. We've seen tension against same-store sales across our mobility business, and that's been true through the course of this year. And so that's not something that we've seen improve. And so that's -- I would say the thing that I have the most on my watch list and what we're really focused on the things that we can control. So new sales, customer retention and making sure that we're delivering these new products in the market.

All right. Awesome. That's an amazing overview of some of the topics we're going to dive into. So maybe that's great. Diving into the segments. Well, let's start with mobility. As you start to see momentum in the SMB side of mobility, maybe can you remind us or maybe provide some sizing for the potential customer TAM with the SMBs and the current level of penetration relative to the other fleet segments that are potentially more penetrated?

Yes. So if you look at the mobility market itself, you'll see when you get into vehicle sizes above 250 vehicles, it's much more penetrated. And so as we're winning business, those are typically competitive takeaways. When you get under 25 vehicles, you get into a really open marketplace. There are millions of small businesses that have fleets. And as we're looking at areas to -- for us to continue to grow, this has been an area that we've been really focused on because we have the ability to extend credit in a way that we have proven to be quite secure.

And we know that there are customers that are looking for the controls capability that we can provide as well as the credit extension and all of the ability to save, which is part of the value proposition for us is when they use our products, they have to -- they don't have to worry about misuse, but also they're saving. And so as we've extended the product in that space, we're seeing a really great uplift.

We know that when we spend $1 in marketing, we get $4 back within a 2-year period of time. And so we have been putting more money into that marketing channel. We've seen a 12% increase in new sales with small businesses year-over-year. And so this is part of the marketplace, we're really excited about. We think it's big. It's -- there's a lot of opportunity for us. And so far, we're playing well in that.

All right. That's awesome. And then on the -- I guess, on the portfolio win side, I think you mentioned BP. And I guess beyond BP, right, after the spin, there may not be as many field label retailers that remain that are not using the commercial platform, but maybe how do you think about the opportunities beyond the spin and maybe some of the share gain opportunities in the segment?

Yes. So BP is -- that puts all 10 of the largest oil companies in the United States that will be private labeling for. And so you're right. We're excited about BP coming on. We think it's a great win. They came to us in large part because of the enhanced acceptance product that we have in the marketplace. And so they'll be the first to test a new product with us, and we're really excited about that.

In terms of beyond that, we have added new private label relationships outside the United States. They're typically not as large in size, but we will continue to look at that as an area of growth. And as we talked about earlier, really our biggest focus has been around the small business segment is in the untapped part of the marketplace and then adding a new product capability into the existing customer base.

All right. Awesome. And as mentioned, some of the opportunities you're seeing outside of the U.S., maybe can you just give us some of the sizing of your business or what's the current mix right now?

Yes. So 85% of the business is in the United States. So the rest of the business, we're in mobility specifically, we're in Europe and Australia. And both of those places, Australia, we have a great business. We continue to grow that -- in that marketplace. I would say, think of that as a relatively small market.

Europe, we're a much smaller player in the European marketplace, and we're representing largely Esso's brand in the European marketplace. And so it's an area for us that it's not been the highest area of focus for us. When we think about incremental dollars we're going to invest, we've largely invested them in the United States.

Understood. That's very helpful. And maybe just looking beyond next year and kind of longer-term building blocks of the growth in this segment. Maybe can you just, I guess, maybe just looking ahead -- yes, I guess maybe let's just talk about maybe the longer-term building blocks first, and then I'll have a follow-up on 2026.

Yes. When I think about the growth algorithm for our mobility business, the way that we have historically grown the business is we're bringing new customers, retain existing customers. We accrete a little bit on price each year. And then typically, we get a little positive for same-store sales. So I think about the world we're in right now, we're doing really well in selling. We're doing well in retention. We are accreting a little bit on price and same-store sales have been really the thing that's deviated from what I would say is our normal growth algorithm.

We think of that as a transient issue. So we think of that as historically in the 20-plus years that we've been in the business, we've seen periods of time where macro has affected the mobility business. If you focus on retention of the customers, that's something that kind of cycles its way through. And so we think of that as kind of a temporary thing.

And then we've really been focusing on adding in new growth levers beyond what has been our traditional growth algorithm, and that's where we've been adding in new product capability, which we think will become more meaningful over time, a combination of -- we talked about 10-4, the enhanced acceptance product in mobility as well as field service management, which are places that we're -- that we've invested money that we're seeing a benefit of those investments, and we think will accrete to the overall growth rate over time.

All right. That's awesome. And a lot of things to look forward to. I guess maybe for 2026, just on the -- some of the assumptions, what are you thinking from a macro or the same-store sales perspective at this point relative to 2025?

Yes. That's a really hard question, right? What I will say is, typically, we don't try to make a big guess around this. We tend to project forward what we're seeing. And so I would say like my operating assumption right now is that we're going to assume that you're going to have some macro headwinds, at least in the first half of next year, just kind of because that's what we're seeing happening within the portfolio.

And I -- and there are 2 different components of the business. Third, the business is over-the-road market. That's been in this rolling recession for quite a long period of time, and it's a matter of having excess supply work its way through. the cycle, which has been happening over a long period of time.

And then on the local business, that has more to do with if our customers have deliveries to make or service calls to make or it could be a sales rep that's driving around. If business activity returns more to normal, then that would be something we would see as a benefit. But I will say like it will be a conversation, I'm sure that we're going to have every time that we're out as we do our Q4 earnings release, I'm sure we'll be talking about this as well.

Of course. Yes, it definitely will follow the updates. And I guess maybe moving along to the Benefits segment. WEX has a strong 20% share of all the HSA accounts in the country and continues to outpace the market growth in the segment. Can you talk about what's driving this from a product differentiation standpoint and maybe longer term, how we can drive incremental volume in the segment?

Yes. So we -- there are 3 things that cause us to be winning and to be outgrowing the marketplace. The biggest you talked about products. So when we first entered this market a number of years ago, we had single point solutions. What we've built over time has been a solution that is -- covers HSA accounts, FSA accounts, lifestyle benefit accounts, health retirement accounts, COBRA benefit administration. And so it is a really strong value proposition to the end customer because of the total capability that we have. That actually sells really well into the marketplace. That's number one and probably the most important thing.

The second thing for us is around the distribution channel. So one of the things that makes us unique is that we go into the marketplace directly to an employer, but also go through partners, which is a really important part of how we go into the marketplace. We're a partner with 7 of the 10 largest HSA holders. And so that just gives us a lot more reach into the marketplace. So there's many different ways that people can find their way to X.

And then the last thing for us is service is really important on this part of the business. And we think of service is something that we're continuing to focus on how can we remove the shave to a customer through the use of technology. And so it's an increasingly important part of the value that we're offering into that customer segment. And so when we look at this, we think of this as we want to continue to outgrow the marketplace. We think that's important to us. We're going to do a combination of our product capability and just our ability to sell into the marketplace and do that in a very thoughtful way.

All right. That's amazing. And I guess if you look at the SaaS account growth in the segment, it was 6% in the third quarter and HSA accounts are up 7%. And then you mentioned at your last earnings call that the pipeline was looking very strong in open enrollment sales cycle. And again, it's been a little bit. And maybe can you just provide an update there and what you're seeing in the open enrollment. We definitely heard some of the more recent commentary at other conferences, but just if you can give us an update and looking to 2026, what's your expectations?

Yes. So we're a month in. It goes into mid-January. So we still get quite a bit of time. I would say it is progressing as we would have expected it to. It's looking like a strong open enrollment season. The counts come through 2 ways. They come through both directly from us, but they're coming through our partner channels. The one thing we get a lot of questions around the Big Beautiful Bill expanded eligibility for about 7 million consumers, which we would say is about 3 million accounts. That part is a little bit more opaque to us is how much of that will come in.

We think it will come in over time, as opposed to having it come in like all at once, but we do believe that you're going to get some benefit of the bill expansion that will happen over a period of time. And so far, I would say what we're seeing is what we would expect to see coming through in open enrollment. We think it's going to be a good open enrollment cycle and kind of the thing that we think is a good long-term trend is the expansion that's happened within the Big Beautiful Bill, BBB.

Right. Awesome. So basically, in summary, things are progressing well and in line with what you had expected when you discussed at the earnings call. it's more up...

Yes. And we'll be actually through the cycle then, so we'll be able to give a more definitive update.

Yes. Awesome. Awesome. Maybe let's look at Corporate Payments. With the segment is now largely lapping the headwinds, including OTA customer pricing model transition and return to the positive organic growth in Q3. You mentioned various investments in product capabilities in the segment as well as the AP Direct product offering where you had ramped salespeople and we're seeing strong volume growth. Maybe can you discuss some of the product investments you have made and how these are resonating in the market?

Yes. So we're really pleased to have the headwind of the OTA lapse in the third quarter because I think that, that puts us in a position of having much more normalized growth going forward. And so that in itself is exciting. We have invested in 2 ways in the products. So think of the product itself, we have -- in the AP Direct product, we've worked on supplier enablement. We've also worked in some of the user interface work, making it just more seamless to our customers.

And then on our embedded payments product, we've taken the functionality that we've created with travel customers, and we kind of made it more user-friendly for those people who sit outside of travel. So we've made some very targeted investments across the portfolio. And then as you pointed out, we've added in sales and marketing. In this case, actually, in Corporate Payments, it's been sales. So we've added new salespeople into our direct business. The embedded payment sales team is new. It's something that we've been selling just this year.

And I would say in both cases, there are different models. But in the AP Direct product, we've seen like a really great, very repeatable model of we've added salespeople, and you can see that, that actually is delivering. Embedded payments because it's earlier, we're seeing really great customer signings, and we're in implementation phases right now and really excited about the fact we're seeing really strong product market fit and the products that we have in the market.

All right. Awesome. Awesome color in the recast we've heard in the -- I think, it's definitely, I think, a lot of the progress that we've been seeing then just related or -- well, not quite related. But I guess you mentioned, on the other hand, I think it's been a very -- a slightly slower onboarding cycle in the segment. And then how do you think about the paybacks from an investment standpoint, especially as it relates to the sales force investment?

Yes. So on the direct side of the business, those -- so there's a ramp period between you bring a salesperson on. It takes them a few months to become like fully ramped. And then customer implementations are typically a 2- to 3-month cycle. So those payback periods are typically less than 2 years. So it's not immediate, but it's actually pretty fast. When you get into the embedded payments product, the implementation cycles tend to be more like 6 months right now. And so because in that case, the customers coding to our API, beautiful, sticky model once they decide up, but there's a little bit longer implementation cycle.

And everything we're saying is that, that has also a very strong payback. But I would say we're still like early in the process with that to be able to -- we have not increased the number of people that are selling there until we actually see more and more of that come through. And we're really focused around how can we reduce the time to first dollar because we know the products are resonating. We know they're selling. We know we're signing customers that we would like to ramp as quickly as we can, those new customer signings.

All right. Awesome. So basically, as you kind of ramp up this motion, first, you have the sales kind of bring to onboard and to train, get them up to speed. And then I think there's also like a sales motion for the implementation. And what's the sales cycle typically like...

The AP Direct is actually pretty fast, in part because the type of salespeople that we're bringing on are seasoned salespeople. They typically are coming in with their own Rolodex. They're able to actually make contact pretty quickly. And so they ramp pretty fast. And we're seeing a pretty quick payback associated with that. So again, it's less than 2 years. It's not immediate, but it's pretty quick.

Understood. That's very helpful. I guess, lastly, on the travel side, what are you seeing in terms of the broader demand environment there?

Travel demand has continued to stay strong. I think in part, like if you look at our business model, our business is global. And that really benefited us this year because we saw changes in patterns. We saw some of the travel move from the United States, which has traditionally come into the U.S. and move into other areas of the world.

And so for us, we just -- the volume continued, it just continued in different regions. We've seen rates continue to go up slightly and transaction volume continue to grow across the model. And so it's been a really strong, I would say, just a volume year in terms of what we're seeing in the business. And in the conversations we're having with our customers, it looks like that is a continued trend.

All right. That's very awesome. So I'll probably just wrap up the segments here and move to the corporate level. From a strategic standpoint, you announced that earnings call and also discussed since then, the decision that your various business segments are stronger together. Maybe can you just recap the benefits for us of having these various segments working in tandem and where you see the greatest opportunities to cross-sell?

Yes. Yes. Yes. I think it's a great question is why we brought in 2 independent investment banks because we wanted to really step back and say what is going to create the most amount of shareholder value and is there -- and look across the portfolio. So we brought in Bank of America and JPMorgan. They each independently came back with the same perspective. And when you come right down to it, there's a lot of integration that happens across the different parts of our segments.

From the technical infrastructure to the compliance structure to the bank itself, which is pretty meaningful. And so when you start to pull one part apart, it actually has an impact. In addition, you talked about the fact we've had over 200 cross-sells across the portfolio. And one of the places actually we see cross-selling activity is between our mobility customers and our benefit customers. And so for a whole combination of reasons, each of them independently came back and said, if you're going to accrete more value by continuing to focus on the whole of the business and just continue to deliver from an execution perspective.

All right. That's awesome. And I'm sure you've had a ton of conversations with investors over the last month -- past month or so. What are some of the key points you'd like to emphasize after the conversations and maybe what aspects of the business or strategy that you think are still being relatively misunderstood by the investment community?

Yes. I think that the fact that we have turned the corner with the online travel agency and that we're going to be much more in a more normalized growth period, I think that is one of the things is important for us to talk about. I think that there is growing, I would say, conversation around our Corporate Payments business and the fact that we're actually starting to see some of these things like are while still smaller parts of the segment that we're seeing benefit of that, and you can actually start to see that coming through in the reported numbers now. So that has been part of the conversation that we're having with investors, which I would say that's like a growing interest.

I think that one of the -- I don't know if I'd call it misunderstood, but one of the things that we think about pretty deeply is the fact that we have really strong moats across our business, and we generate a significant amount of cash flow, like 80% to 90% of our adjusted net income drop through to cash. And so not only does the company grow, but it accretes a tremendous amount of cash. And I think sometimes that gets lost and just like the sheer amount of cash-on-cash return that the company generates. And so it's another point of emphasis for us.

All right. I think that's a great segue to the next topic on capital allocation. I think you ended -- exited Q3 at 3.25 leverage within the range of your longer-term target. How are you thinking about the capital allocation heading into next year?

Yes. So we've been really focused on delevering, and we'll continue to focus. Really, what we're thinking about is we want to make sure that we get below that midpoint. So our range is 2.5 to 3.5x. We want to get below 3. We should get there in this next year. And then as we think about this, we look at risk-adjusted returns in the North Star and where do we think it's going to have the highest impact. You can see that we have bought back a significant amount of stock over the last few years because we felt like that had the highest risk-adjusted return.

And we're big believers in the company, and so that's where we put the majority of our money. And I would say that will be a continued bias of ours is making sure that we're utilizing cash and where we think it's got that highest return.

All right. That's great. And then in terms of spending some of the cash flow -- free cash flow generating, I know you're looking to delever at this point. But if there are attractive M&A opportunities come along or maybe some of the tuck-in opportunities, how would you think of that or prioritize that versus share buybacks? And maybe what's the M&A pipeline looking right now?

Yes. So when we've historically looked at M&A, we've looked at scale plays. We've looked at product extensions and then we've looked at international expansion. Scale -- when I think of scale plays, again, that would directly compete with share buyback. Those are -- so what's got the highest return associated with that. Product expansion will become a question of can we build it? Do we partner or do we want to buy it? And so there may be places we think that, that's an important strategic move for us to make competitively.

But I would again say that we have more of a bias to building where we can. And international expansion is that's -- you have to have something that's really right down the sweet spot before we'd actually say, okay, that's the place that we want to put -- that we want to deploy capital because typically, it has to have a higher return to have it make sense risk adjusted. And so I would put that further down the list. It would have to fit some other criteria and therefore, we would do it as opposed to just because it's moving us outside the United States.

All right. Awesome. Makes total sense. And as a reminder, investors can -- or anyone here can submit the questions via the app or -- let's see. We don't have a question so far. But if there's any, please feel free to submit and then I'll just follow up with -- like last parting thoughts, I guess I ask you about the investor questions, I guess, maybe just a year from now, hopefully, again, you're sitting here speaking with us. What will be on top of mind or what do you think we should be talking about a year from now?

What I'm really excited about is we have, over the last couple of years, really focused on how to increase our ability to bring product into the marketplace. So it's really focused on the organic growth engine and how to add another lever to that. We're seeing the benefit of that coming through right now. So a year from now, I hope we're talking about the fact that BP has been implemented that we're seeing really great benefit from the new products that we put out into the marketplace and that we are seeing the benefits of the increased acceleration and innovation on -- particularly on the use of AI within our benefits business.

And so -- and all of that, when I think about it is what we're trying to do is hit that intersection between data, software, and payments so that we're really helping our customers manage their workflows better. So like a year from now, that's what I'm hoping we're talking about.

All right. Amazing. We definitely look forward to it. And I think with that, please join me in thanking Melissa here. It's been great having you, and we definitely look forward to following your progress.

Thanks. That's great.

So welcome to Citi's 14th Annual FinTech Conference. My name is Aditi Balachandran and I'm with Citi Research, and I have the pleasure to introduce Melissa Smith, Chair and CEO of WEX. Welcome, Melissa, and thank you so much for coming. I think just before we get started, can you just give us a little background information about WEX and just introduction toyourself?

Sure. I'd love to. So WEX has been around 40 years and we are very focused. Our purpose is to simplify the business of running a business. When we think about our business, we're really at the intersection of payment intelligence and workflow optimization. We do that across a number of different industries. And when we think about our platforms are there to reduce a lot of the friction that our customers experience in their day-to-day work lives and we have over 600,000 customers across the world.

Amazing. Perfect starting. So before we dive into SMB Mobility, there's been overall segment headwinds from a same-store perspective. Firstly, with the challenged backdrop, related to volatility in the freight arena. And more recently, we're seeing some macro-related headwinds in WEX's local fleet business. So from your perspective, what's WEX's expectation on the glide path for these 2 areas, and we believe we've hit a trough?

Yes. So about 50% of our revenue is in this mobility arena. If you look at CrossRoads business, the over-the-road customers, which is about 1/3 of the portfolio, had been in this rolling recession for actually quite a while now for a couple of years. And you can see that reflected in the cash index and in pretty much any of the freight indexes. And so we have seen headwinds in terms of macro for a bit of time. The way that we think about this is we're really focused on the things that we can control. So we're focused on sales, some new sales that we're bringing in, which we are having a really great year and then customer retention. You asked about some of the trends we're seeing.

Over the last month, we've seen more stability in that last quarter. So when we reported Q3, we reported the fact that same-store sales were down, but they were down pretty consistently with what was in Q2. So I believe that if a quarter makes pattern, they were seeing more stability in that. We're very confident in the medium term. We're very confident in the actions we're taking and it really just in our past, what we've been focused on is if we continue to retain customers and we focused on bringing in new accounts, and these things are cycles that we just have to transition through.

Yes. So I guess can you talk about some more of the success that we're seeing on the go-to-market side and perhaps how some of the new products are resonating in that category.

Yes, love to. One of the places that we're seeing really great momentum and really excited about is in the small business arena. We've seen 12% or accounts coming in year-to-date in that small. And if you look at the mobility marketplace, a disproportionate number of customers sit in that small arena and think of that as fleets that have less than 25 vehicles. So we're really excited the momentum we have there. We think it's a flywheel. We perfected the marketing that we're seeing. Those customers are on board. At the same time, we've seen really good momentum in the large end of the marketplace as well. We continue to have a really strong sales year, bringing in new accounts and larger size, and we're really excited about the win of BP, which will be rolling into our portfolio next year. So really strong momentum across each of these things.

Also, one of the things that we're really focused on is how we can expand our reach and some of the areas where we've added new product into the mix or our 10-4 product, which is geared towards owner operators of over-the-road vehicles. There's about 500,000 of them out there. We have a product that allows them to get access to our network, and they can purchase fuel at a much lower rate than they could on their own. So they're saving on average about $300 a month, which is wonderful and also a customer base that's still -- so new sales are going strong. We're seeing some nice product extension capabilities and all of that, we feel like it's a pretty strong flywheel.

Yes, the trends are just really improving. So I guess, how should investors, I guess, frame that improving performance? And is it just really a function of WEX having more control in driving SMB growth versus the local fleet go-to-market, which is hardly move the needle?

Yes. The way that we think about this is we are very focused around the levers that we can control. So that's new sales. And for us, new sales motions are really very specific based on the segment of the marketplace. Going after the small business market has been very much market digitally driven. And so we've done a lot of work around perfecting that motion. We see -- when we actually spend the $1 in that arena, we get $4 worth of revenue in 24 months.

And so really, really strong returns. And so we've been really focused around how we can continue to refine that motion. It's a large part of the marketplace and having a lot of success there. When you get into the mid- and larger customers and those are more feet on the street, people that were actually making contact with customers bringing them in and part digitally, but much more human involved in that motion.

And so when we look across the enterprise, we're really focused around each of those things and at the same time, making sure we are retaining customer relationships. The macro element of the business is something that we say, okay, we're reporting on it. We're going to tell you what's happening with that part of the business. That's going to move over time, but we're highly focused around the things that we can affect. And that you can control.

Yes, exactly. Perfect. So I wanted to switch gears a little to corporate payments. The segment is nearly upon lapping Booking.com transaction transition, which resulted in a decline of 2% approximately of high-margin revenue. So first, can you discuss some of the underlying trends that you're seeing in the travel payments business outside of the transition portion? And I guess, how should investors think about forward growth here after lapping some of the tougher comps?

Yes. So just to reiterate, it's really good to have this behind us. So largely completed the lapping in Q3 of this year of that large online travel customer. If you look at the performance outside of that, you talked about the 2% negative, that's 2% of the company, right? So it's been pretty meaningful. And if you exclude that, you've seen really good growth within our travel customer base. So now that we've gone through that lapping period, we feel pretty excited about the future. And what we're focused on, specifically in travel, we're really focused on how we continue to integrate heavily within those customers. So think of this as these products are very automated. And so if they're highly integrated in their customer systems, there's an API call that's happening. It's facilitating a payment.

It's happening in a really seamless way. But that's been facilitated by all the work we've done in creating the technology, the global compliance structure. And now we're focused on how we can continue to integrate in those customers, add in new sources of spend volume for those customers. And for us, those are extension into other forms of payment like airfare and car rental extension into geos that we're not in right now. And so there are markets that we've been working with online travel agencies to extend our compliance capabilities so that we have a product in all of the geographies that they want to span.

Got it. And was there some of those geographies that you can -- if you can talk about that?

Yes. Like an example is Brazil. And so it's a marketplace. And if -- so with the online travel agencies, we're facilitating largely hotel payments, but other sources of payments on their behalf. And because their models are so global in nature that they are very keen on us being in every market they're in. We have really strong global capabilities, but there are some markets that we need to set up the compliance infrastructure in order to actually meet their needs. Once we do, there's -- their volume is there, we just actually need system. And so we've been working with them to prioritize what are the highest and most important markets and then adding those in.

Got it. And how should investors and how should we think about revenue retention and pricing trends in the travel payments going forward?

Yes. So I'm going to exclude what happened with this large travel agent, I'm just going to say that, that's a bit of an anomaly. If you look at our customer base, we have incredibly high revenue retention across the customers. We tend to have particularly in spend volume where there's a lot of complication, which is a lot of the global spend volume, a really high customer retention rates. And across actually all of corporate payments really focused around how can we continue to build on that. You're going to see some mix in terms of what happens in rate. We tend to be a little bit less rate focused because it's such a scalable part of our model that what we are trying to do is drive long-term profitable growth.

And because it's such a highly automated product, because we have largely the compliance structure set in place, our objective function is to move more spend volume into the product. And you're going to see mix can affect the rate when we go up to large customer renewals that can affect the rate. And at the same time, you see a very highly profitable new source of revenue as we add more spend volume.

Got it. So the direction of virtual card unit economics remains also an important topic that we've discussed. So we're going to get into the nontravel payment side of the segment shortly. So just curious to hear what your longer-term view on the direction of travel payment unit economics are. And what are some of the levers that WEX can toggle to improve unit economics in the travel payments business?

Yes. So unit economics in the travel business is a very high incremental drop-through rate. So again, when we think about the unit economics here, what we're focused on is are we going to be able to continue to add new volume into the base. We do business with 8 of the 10 largest online travel agencies in the world. And continuing to add more volume in drives huge incremental margin. And so that's, I would say, the biggest focus for us. We've actually seen pretty good rate stability though in the course of this year. And I think that is -- you've seen this one customer migration that's happened in the course of the year. But within the rest of the base, some of that's mix depending on what size customer is spending, you're going to see a little bit of a mix difference in terms of the blended rate.

But overall, we've seen some pretty good rate stability. And so when we think about this going forward, the machine in our mind is adding more incremental volume, do that and have that drop through at a very high incremental rate. We'll see some rate degradation that will happen over time. And we're okay with that because we think that at the end, you're seeing really high incremental margins.

Got it. So now to as promised, the nontravel payment side. So that makes up 40% to 50% of the business. So can you discuss some of WEX's initiatives here and particularly focused on the partnership side.

So I'm really excited about this part of the business for many reasons. But one of them is that it continues to diversify what we have in our corporate payments business. So as we continue to add outside of travel, it actually reduces the exposure we have to travel itself. And so really excited about that. The 2 places that we've been really focused on, first has been extending the product that we have in travel outside of travel. So there is an embedded payments product. We did work around creating very flexible funding model so that when customers come on, they can minimize the amount of credit exposure they have to us, but also cash that they have tied up that product is selling really well in the market. It's a U.S.-based product.

We have had really strong sales. We're in this implementation phase right now. And what I like about that is you actually see new look glide path into 2026 because we have customers signed and now we're just in the implementation phase. And so that is continuing to show growth. The second part for us has been an AP direct product that we have. It's about 20% of the Total segment that we grew spend volume last quarter, 20%. This is something we started maybe 3 years ago, and it has continued to perform really well. We ramped more salespeople into it this year. We're seeing really strong return associated with that. And so over time, what you will see is that we're seeing higher growth in those 2 parts of the business. There's a little bit of legacy volume that sits there. So think of products that we sold into our mobility customers that are growing much slower.

But as these newer parts of the business become bigger and bigger, you are going to start to see the whole, the whole segment up. So what we'd like about this is just creating greater diversification in the customer base. It's also going to continue to grow and evolve that segment up in terms of revenue growth. And so far, the investments we're making, both in terms of new product and in terms of salespeople are playing out really, really quite well, we're excited about that.

That's really great to hear. Super excited to see that going forward as well. So again, switching gears. So WEX's benefits business continues to enjoy solid positioning amongst admits the secular tailwinds from rising health care costs and also for more people opting for the high deductible coverage complemented by HSAs. So how does WEX think about the secular runway from here?

Yes. So there's some really great tailwinds in this business. There continues to be this move to consumer-directed health care. So HSA accounts are still growing 5-ish itself. And we do that through just strong sales motions that we have out in the marketplace. In addition to that, we've got -- we became a custodian, again, probably 3 or 4 years ago. And that added a new source of revenue for us, highly profitable. We've been able to add that in. And so when you look at this part of the market, you've got really great macro tailwinds associated with that. Our products continue to resonate really well in this marketplace. And the biggest differentiator that we have here is the idea that you can have multi accounts that sit on one technology stack.

So if you're an employer like we are that has both traditional health care plans and a high deductible plan. So you have both HSA and FSA accounts, you can actually have all of that sitting together. If you have COBRA capability, if you have a benefit administration need, we can meet all of those needs. And so think of that as kind of a one-stop for our customers. We also go into the marketplace both directly and with partners. And so distribution channels come from either our partner relationships or our salespeople that are going to the marketplace directly. And so we look at this part of the business, it is a really great, reliable grower for us.

Yes. And then I think going along with that, so are there -- so 7 of the 10 HSA providers rely on WEX's tech solutions. So do you think there's some market share opportunities outside of the top 10? How are you thinking about that to drive growth.

Yes. So we love being in the partnership business. We do it across everything that we do at WEX. So in that case, as you said, we are the technology provider. So they're in the marketplace selling. We're providing the technology that they're selling. It's great because we actually get growth with those partners. So as they grow, we grow with them, and that's an important relationship. And then we have salespeople that are out in the marketplace bringing in customers directly to us. And so when you think about growth, typically, we're growing faster with that direct channel because we have more control over it.

But we value all of the relationships that we have because I think all of them are an important part of the growth that we have as a company, and it gives us more paths to WEX. Frankly, if you think about what we do across the company, we have multi-version, multichannel distribution, and we do that because it gives more ways for people to come into the company. And it's a very scalable model.

Yes. So I know you mentioned the custodial business. So I want to dive a little more into that. It continues to be a strong contributor for WEX, where you've also been active on the M&A front there. So can you discuss WEX's strategy towards growing the custodian asset growth?

Yes. Yes. Well, when we started in the business, we acquired an asset in 2014, I think it was quite a long time ago, but that's when we actually started in the benefits business, and we bought a company called Evolution1, relatively small company, but that was the foundation of what we -- when we started in this space. And then as we built this over time, we went into the direct channel through an acquisition as well. And then on our own, not through an acquisition, became the custodian. And as we became a custodian, what it enabled us to do was just reap much better economics than what we were doing through a third-party relationship. It's really important because it allows us to leverage our bank.

And so when we established the bank, it was for the purpose of financing for our mobility business. Largely, it was easier compliance structure, but also really great way to low-cost finance the needs that we had in the mobility business. We're leveraging that bank also in the benefits business, which gives us premium economics. And so when we became a custodian, it allowed us to accrete more economics in part because of our bank. And so as we think about this business, when we bring on a customer, if they're coming through a partner channel, often it's a SaaS fee. And so they're keeping the custodian revenue often but not always because often they're a bank themselves.

If they are coming in directly to us, then we are typically the custodian as well. And so just another source of revenue, highly profitable revenue. And so when we look at this business, we went back to our customers and migrated them into our custodian accounts. So we saw this big pop in growth associated with that. Now as customers come on, it kind of naturally goes to either us as the custodian or if they're a partner to a third-party bank. And the net of all that is quite profitable.

Got it. And how are you thinking about M&A in the future? Is that something that you're thinking about?

Yes, it's a really great question. When we have looked at M&A, historically, we had done quite a bit of M&A. Over the last couple of years, we've been much more geared towards moving money into share buyback. When we think about capital allocation, first, what we think about is how much should we be investing internally. And I would say like that -- we've seen some really great returns in investing in sales and marketing and product first order.

Second order for us is kind of -- think of the North Star as what is the highest risk-adjusted return for us. And in some periods of time, that has been M&A. In some period of time, that has been share buyback. Right now, when we think about our leverage, we generate about 80% to 90% of our adjusted net income drops through to cash flow. So this company throws up for a tremendous amount of cash. We've used that to buy back stock. We're about 3.25x levered right now.

Your target is 2.5x.

2.5x, right. Yes. So we're -- in the moment we're in, where our first order has been pay down debt. And then second order has been internal investment. And then third order for us has been let's look at what's going to have the highest risk-adjusted return as that share buyback...

Okay. Got it. And if you are -- what types of companies are you looking at?

So historically, the places we've looked has been either a scale play. So something that we think is just going to have high accretion rates because you're going to bring it in absorb it and have significant synergies associated with that. We've also looked at product extension. So things we would either buy or build, we can look at buying. We've had more of an emphasis on building, I would say, over the last few years, but that is an area of investment. And then for us, geographic expansion. So areas that we felt like it would be easier to extend our reach through a purchase than those have been places we've looked. And that we've had more of a bias between our benefits business and corporate payments in terms of what you think of those segments.

And I -- what about the geographic expansion, I know you mentioned like the compliance surrounding it. Just talk us through how that works and everything. I know it's probably tough?

It's actually -- when we think about one of the core value differentiations that we offer to our customers, compliance actually is a really pretty big deal. Any segment you're in, you care a lot about that. But when we started our Corporate Payments business, -- we -- our customers were global. And so we very quickly marched around the world. And when you're an issuer in other countries, you have to be recognized by the Central Bank in that country. And so if you look across the world, we have a pretty intricate set of regulatory entities that have been set up to meet our customers' needs. right?

Yes. And so it also has allowed us to move money cross-border for our OTA customers in a way that's very affordable for them. And so when we talk about being really good at the very complex transactions, it's a combination of the global scale that we have. Within our virtual card engine, we have hundreds of products. So think of -- if you're sitting in some country, you might pick a certain Mastercard or Visa product that you want to use within that country. And that will help maximize whatever your use case is. And so a combination of the product capability that we have, the compliance structure we have and the stability that we have has enabled us to really leverage this with our global accounts and now extend that capability into areas outside of travel.

Got it. That's really great. So there's been some outside pressure calling for WEX to consider splitting the business from core WEX and this is in relation to the health benefits. We got a track there -- but management and Board have come to the conclusion that it's better to be together. So can you elaborate more on this rationale and how WEX Bank is a key factor in this decision?

Sure. Yes, happy to. So each year on the things the Board has done is look at business configuration. This year, we went deeper. And so this year, we brought in 2 independent investment banks running -- sorry to say this -- and they went actually really quite deep and looked at a number of different combinations -- to the company. We started with no sacred cows. And they came back and said, the company is better together. If you look across the business, we are leveraging the same technology infrastructure. The bank is a huge part because there's an advantage of using the bank across every part of the business, the global compliance structure, fraud, all the various kind of back-end systems.

We're also cross-selling across the portfolio, surprisingly more between benefits and mobility than you might think.

Okay. Interesting.

And as well as we've been on this multiyear journey to continue to streamline our technology with a focus on looking across the enterprise and saying, where do you have like-for-like and creating best-in-class systems. And each year that we do that, it further integrates the systems together.

Okay. Can you talk more about those cross-sell opportunities that you mentioned a little bit? Really curious to hear more.

Yes. The cross-sell opportunity, happy to. Actually, like one of the -- when we first started, there was a cross-sell between a mobility customer and corporate payments. I think of that as kind of like your original sell. Over time, what we found across the enterprise, our COBRA capability, is something that we are selling often into our mobility customers as well as we talked about our field risk management systems. That's something that we're cross-selling into our mobility customer, which is actually kind of amazing because you have -- I would say this took us a little bit a while to get it right.

But it's 10x the revenue per customer that you get with a mobility customer itself. So it's like a meaningful upsell capability for us. And so if you look across the enterprise, what we're focused around is where are there use cases that are helpful to that end customer and exposing those to the customer. And so they're happening kind of like all across the business.

Got it. How does your partnership pipeline look for each of the segments?

Yes. So sales pipelines this year have been really very strong, both in terms of partner and in terms of direct. So I can walk through each of those. Mobility for us -- so mobility, we sell on behalf of now 10 of the largest oil companies in the world with BP coming on. That's something that when customers come to us, they come to us because we have an ability to sell better than they're going to be able to sell their products because we have marketing expertise. We can look at what's unique to that customer that's going to resonate in the marketplace. And so that's why they come to us that those continue to -- and I would say across both OTR and our North American mobility business, we've been strong sales as well on the direct side.

Corporate Payments is more -- it is more direct. Where we have a partner channel, I would say that, that is when I talk about the things that are bringing down some of the growth rate in our Corporate Payments segment that's one of the places like you're selling around it and much more effectively on the direct side, which is where you see that 20% spend volume increase.

On benefits, we are in the heart of open enrollment. Things are going very well in open enrollment, both in terms of service, but also in terms of sales. It's still early. But so far, what we're seeing coming in the partner channels is what we would have expected coming through those partners. And we've had a strong sales year in terms of our direct business. And so when I think about one of the things that I feel has gone particularly well for us this year, we've had really strong sales.

Awesome. I think that's it. I think would you like to just give like a little BP explanation of I know it's really exciting.

So one of the things we do in our mobility business is we will go out and operate on a white label basis for other -- for oil companies. We do it for -- think of all the top 9 now oil companies. The one that we were missing was BP. BP is going to be onboarding next year. That's where in the marketplace at the end of this year selling. But then we will move the portfolio over [indiscernible] next year. It's going to add between 0.5 and 1 point of growth in the 12 months following the conversion. So very excited about that.

Congrats for that. I think with that, I think we're good for the session. Thank you so much, is for joining us and enjoy the rest of the conference.

Thanks a lot.

Thank you. Okay. So we're going to get started with our next panel, which is empowering beneficiaries through consumerism.

So I'm going to invite everybody to come up here. First, Daniel Barasa, who is a portfolio manager with us at Gabelli Funds. Then we have Brad Bennion, EVP, Strategy and Corporate Development at HealthEquity; Chris Byrd, SVP, Health and Benefits at WEX; Jill Dailey, VP, Commercial Product at Aetna; and finally, we have Jesse Horowitz, SVP, Member Experience at Oscar Health.

So thank you all for being here, and looking forward to hearing your panel.

Thank you, Kevin, for the introduction, and thank you to all our panelists for being here today. We'll dive right into our conversation today, exploring how we can empower consumers to take a more active role in their health care decisions and spending and hopefully help address some of the high rising cost of health in the U.S.

Brad was hoping to start with you, consumer-driven health care and empowering individuals to make cost conscious decisions. That's been a focus for the industry for about 20 years now. Despite that focus, as we saw in the slides earlier, U.S. health care spending continues to increase, now approaching about 20% of GDP.

What do you think is happening. Where do you think that focus has not produced meaningful reductions in the spending on U.S. Health Care?

Yes. Great question to start this panel with Daniel. Well, I think we've made a lot of progress and advancements in aligning consumer incentives with things like HSA's transparency of value, meaning quality over cost as well as enhanced consumer education.

At the same time, there's been significant advances in the cost of medical technology as well as there's an increased cost burden that's been placed on the United States with aging population, with obesity with a number of significant things along the lines of neurodegenerative diseases. All of those things have contributed to the fact that it's difficult to keep pace with the cost of health care going up.

And the United States health care system has been very, very quick to innovate and create solutions that are really focused on a pound of cure versus an ounce of prevention, and those solutions and the associated cost with those solutions have outpaced and outstripped the ability for a more consumer-focused health care environment to be able to keep pace.

Now the good news is that we are seeing some green shoots, I believe, in the market with things like LASIK for eyes, now lower-cost GLP solutions available as well as the ability for consumers to actually go out and see the cost and price of different solutions, things like muscular skeletal physical therapy that's now available via a virtual environment.

All of these things, I believe, point to the fact that if a consumer has correct information, if they have timely information, if they're properly incented to act, then they can actually take and drive behavior that brings down the cost of health care. But we need to get a lot more people into accounts similar to health savings accounts to align that financial incentive so that consumers actually are motivated to help make those decisions and bring down the cost of health care.

Jill, Jesse, any insurance perspective?

Yes. Maybe I'll just build on that for a minute. Agree with everything you've said, I think the one thing is we haven't made it easy. It is so hard to have health care be a shoppable experience. So we are moving in this direction, but we have transparent pricing, but you go to a provider and all of a sudden, they do an additional test and what you thought it was going to be going in isn't that or you're in there and you see what the list price might be, but you have to understand what that might mean if you have insurance and what that out-of-pocket responsibility is.

So while we are starting to move in the right direction, I mean, this system is so complex, and I think we all have -- see plenty of opportunities to simplify.

So it's fair to say that the results have not matched the ambition One of the ways that the industry has tried to push consumers is through pushing more of the cost towards the individual through plan designs. And one of the examples, obviously, is the high deductible plan.

Jesse you've seen these plan designs in action. Why do you think -- to what extent do they actually reduce the cost? Or do they actually just introduce more complexity for the consumer?

Yes. Look, it's a great question. I think you kind of have to look at 2 parts of the equation. The first is the kind of theoretical does aligning the consumer's wallet with their care, help drive down cost. And the answer is almost certainly, yes, that's just how economics work. And so if you make a market where consumers are directing their dollars, that's going to drive different behaviors.

The other side of it, however, is that there is extraordinarily limited choice. And so for the vast majority of Americans who get an insurance to their employer, you're buying -- you have a very finite set of products that probably have a broad national network, have very generic coverage. It's one-size-fits-all for a population that happens to work together. And so maybe you have more skin in the game, but the cost of that is just like the baseline is much higher than it ought to be.

And so I do think that it's the right levers. We need to create those levers. We need to have the price transparency as you mentioned, we need to have the simplicity of understanding not just this is what it meant to cost and then if something totally different happens after your EOB comes 2 months later. That's how health insurance works right now.

I was thinking about this, but on the way in here, you can literally buy a Tesla on your phone, right? Like you -- consumers expect to be able to do not just the basics, but significant purchases. You can't do that with health care. And I do think that the alignment of I got to pay for this care, I need to pay for more of this care works only when everything else underneath that lines up.

And speaking of price transparency and simplicity. Obviously, on the policy side, the federal government has stepped in with several policies such as price transparency requirements for hospitals, surprise building protections and even more recently with the Trump administration announcing TrumpRx, where we could potentially have a bit more transparency on drug pricing.

Chris, how do you see these policies affecting consumers?

So I think we are making progress, but I think it's gradual. And there's a lot in that question, and I'll try to unpack it as quickly as I can. I want to start on transparency because we started to talk about that.

And if you think about it in a very holistic sense, anywhere else in the economy where you have a truly functioning consumer economy, you have information. It's not just data, it's information. What the early Trump 1.0 transparency initiative did, it began to break down silos of information that exist in health care. Everybody thinks that they own the data. The reality is that, we own that data as consumers. That's the law, but the bottom line is the PBM wants to silo the data, the health insurer wants the silo the data. The pharmaceutical manufacturer want to silo the data and the provider system wants to silo the data.

And so we're trying to break down those walls, but it's not enough to have data because the average consumer can't read data. I mean data in a machine-readable format. How is that consumer-friendly. And so what we -- I think we'll begin to see increasingly is tools that actually will allow you to go in and they will turn that data into information that the average consumer can actually understand and used to make reasonable and informed health care decisions about where they want to get their care and what their financial responsibility is going to be.

With respect to surprise medical billing, I mean, it's amazing to, I think, all of us that it took as long as it did to recognize the fact that if you go into facility for a surgery and suddenly the anesthesiologist turns out not to be in network. You have no idea that, that is taking place. And all of a sudden, you get this huge bill because you have a $5,000 deductible and you're still responsible for it. And the difference between in-network and out-network is this.

What we found in reality so far, I think, and I would invite you guys to say something about this is that there's all these fights, right? There's fights between insurers and providers about, okay, what should you get paid. And the consumers kind of call in the middle of that, we're not where we need to be.

And in drugs, I think everybody recognizes that drug pricing because of all these numerical drugs that have come out is a real challenge for the entire economy in terms of cost. But I think we're also seeing some chipping away of that.

One thing that I would say from the policy perspective is I've always felt as though drug pricing in the U.S. is less a health care issue than it is a trade issue. And what I mean by that is that the rest of the Western world is benefiting from us subsidizing 100% plus of the global pharmaceutical research development.

And so, what you're seeing is a very aggressive push on a part of the current administration to recognize that fact with most favored nation pricing and sort of trying to put pressure back on the pharmaceutical manufacturers to say, hey, you guys figure it out, right? It's a zero-sum game, and you're going to have to go back to Germany, France and Switzerland and get a little bit more, and we're going to we're going to take our share of the savings or some share the savings out.

So, Jill, how much responsibility falls on the industry to proactively simplify choices and educate the public.

A lot. But also, like we are the industry. It's not this other thing over there that needs to go and simplify. And I will say even with Aetna being part of CVS Health, we have a refreshed purpose that was recently introduced, which is to make health care simpler one individual, one family and one community at a time.

So to have a Fortune 10 company saying that's a primary focus to bring simplicity to this environment. And it's not going to be like any one player has the ability to do it for the whole industry, not at all. There has to be a lot of work happening together, just to build off the point you were making, Chris, around the provider and the health insurer and kind of it's an AI arms race nobody is going to win that in the end, right? If you look at, hey, my algorithm is better than yours today on rev cycle management, oh, no, I'm going to find something in my payment integrity program.

And so we're actually really trying to change the dynamic. We have focused on what providers think our NPS should look like, right? What do they actually think about how we work together. And that's coming from the top of the organization. So it's together that we can start to drive more simplicity.

Building on the transparency points. It's cost transparency. I mean, I'm sure there are people in this room who have gone out to dinner and the special sounded really great. And you ordered the special. And then the check came and you were like, it wasn't twice as good as the thing that I was thinking about that was on the regular menu, but I didn't know how much it costs. I mean, that happens with health care every single day.

So how can we chip away at that transparent pricing? But it's not just pricing. I mean we want really good quality of care, right? No one's going to say, well, I save $10, but I had crappy care, you want those to go together. So part of it is how can we use tools and insights to help consumers find high-quality, cost-effective care and not have to do a lot of work around it.

So for example, if you have certain tools where a member can be searching in a digital app, and you can say, well, look, here are 3 providers we recommend for you not based on your ZIP code, but based on the fact that we know these things about you. We know that you only go to this particular system. We know that you like to go to a Spanish-speaking doctor. How do we -- we know that you're maybe a middle-aged woman with a knee-problem versus a high school sports industry, like injury, that matches up differently, right? So how can that get served up in a way that is easy and just kind of no one has to actually put all that information in.

But still, again, I'm sure I wouldn't be the first person to say, people don't always trust what their health insurer tells them about where to go. So we did some consumer research and said, well, if we go through this process and we do this intelligent matching, and then we have a button that literally says, well, why, like why did you make this recommendation and list that out. That consumers actually then start to trust the data.

Now in all fairness, they're still going to go ask their neighbor, hey, do you know Dr. so-and-so what do you think? But it's really one of the first times that we're starting to see that level of trust be reflected in consumer behavior because we're making it that easy to find the answers they're looking for.

So it's clear policy has a role, the industry has a role, but there's still some debate about whether health care control function like other consumer markets.

Brad, I was wondering if information asymmetry and just the urgency of medical care when you needed. Are those unique barriers to the health care industry? Or is are there lessons that we can learn from other sectors?

Yes. Just before I answer that, just -- I think we're at this inflection point, right, with technology, generative AI. We see HealthEquity the way that it's changing the interactions that the consumers have simple things from just being able to, hey, I lost my card and being able to reorder a card in a human voice, simple interaction, being able to submit claims and have them auto substantiated and generated, it's really improving the consumer experience. But going to the question that you asked, I would first start by saying we have to recognize that in the world and in particular, in the United States, there has been asymmetric information for over a century.

And I'm going to propose a couple of reasons for that. The first reason is that physicians have the power of the pen. They write orders. They write prescriptions and therefore, they dictate the therapy that patients are receiving. Now this has served patients really well for many, many, many years, right? And it's been a good thing. It keeps them from homegrown solutions, homespun solutions as well as it ensures that health care is really based on science-based decisions, and that's been a positive thing.

The second thing is that the third-party payer system is really been designed much like life and auto to be able to aggregate risk and to really protect the individual from unexpected and high-cost events, or disease states, right? And that does also serve the consumer really well, right? But this model of the doctor-driven medicine as well as the third-party payer system, that has really led to unempowered and uninformed consumer. And that may have worked in an acute environment where it's difficult to self-manage the illness, things like maybe a complicated pregnancy, appendicitis, trauma and cancer and things of those -- of that nature.

But an uninformed, unempowered consumer is a bad recipe when you're talking about other type of conditions, such as obesity or diabetes or maybe even elective kind of lifestyle therapies such as a knee replacement. And so we really believe that if we want to change kind of the non-acute I totally believe in the acute environment, the third party payer system as well as the doctor-driven medicine is beneficial, but we need to bring consumerism to the forefront. And the way to do that is to be able to include the financial incentive for people to make proper decisions.

I think we also have to give them information, right? Because clearly if you're going to go to ER and you need to go to the ER, you should go to the ER. But there's a decision that's made that is, do I need to? And there are as much as there are many necessary visits, they are just as not unnecessary visits. Now those are driven by a ton of thing, right, the financial component. Also just do you have access to the information you need to determine if that's your next best step.

So I think it comes back to how are we going into that kind of natural, we have a plan sponsor who's actually so an employer, who said what we've had such trouble with over -- or unnecessary utilization of the ER, that they're starting to tier their ER benefit. So what does that mean? Well, I'm just -- this is illustrative. These are actual numbers, right? But for your first two visits, your cost share is $100. Your third and fourth visit, your cost share is $300. If you have a fifth or sixth visit, it's going to go up even more. And they're trying to draw attention to that decision-making process before you go.

And by the way, if you get admitted, all of that gets -- like it doesn't count, right, doesn't count as a visit because it's appropriate use. So just some really interesting models to think about how can you intervene in a decision-making before you're at the point.

So AI has come up multiple times a discussion today. I was wondering, maybe you could just dig a little bit deeper into how your different companies are using air models to maybe unlock insights that could potentially help consumers make the right decisions.

Maybe Jesse we can start with you.

Yes. Well, I think I'll talk about it in the context of this conversation right now. My opinion on this, I think what we're seeing is you got to go way upstream, way upstream to influence what's happening in that acute care moment. So -- and so at Oscar, we think about our product more like any consumer technology experience, not like a health insurance experience.

And so you got to think about what's the best UX design, data principles to kind of engage people into the experience. How do you gamify it. Right now, we've recently launched a program called Oscar Unlocks, which gives people a custom avatar if they do certain things, right? It gives them a different call center experience. These are not expensive things for us to do.

And that allows people to come back to the experience and so they can identify, well, maybe there's a cost differential, if I go to the ER again, maybe there's a -- oh, I can use my virtual urgent care benefits to tie into AI, we're also figuring out -- I think the -- there are a lot of -- there's a long list of very obvious back-office opportunities. I'm not going to spend time on those now because I think that we've probably heard about them. I think on the member and patient-facing side is where we're now looking.

And so we recently launched a new application called Oswell, it's a chatbot. And really it's hooked into what we know about the member has access to their claims history, their drugs history, what doctors they go see, what's their demographic and so they can ask questions about, hey, is this ERs or is it not? It's plugged in to our virtual medical practice of it needs to have an instant escalation, it can. And so I think, again, if you look at this whole thing, I'll go back to my Tesla example, like Airbnb or Amazon, people -- I think people do want to access to information and data. I think it's incumbent upon the company to aggregate it, make it useful, so that when you have a need. I can go find out who's the right doctor, what kind of care be getting, what drug should be on? Is there a lower-cost drug? I mean these are all questions people may not even have [ where will ] to ask.

And historically, they need to pick up the phone, we do hold, know to ask. I think AI creates opportunities to push information to consumers or just make it more easy any time of day, any day of the week to say, oh, you know what, I need to get a drug? Is this the right drug for me? Where should I get it? Are there alternatives? Should I go to the ER? Should I go to urgent care? Should I sleep it off? I mean that's the type of stuff that AI can do decently well already.

Jill?

I would just -- I agree. But no, I mean, because I do think that kind of what I was talking about with that matching component before too. It's like how do you use the information in the moments that matter and in an intelligent way that makes it super easy for the individual. And I think that's what some of these tools will enable us to do.

So at WEX, we use AI in a couple of ways. The most important and impactful for the purposes of this conversation is really, what are we doing with AI to help people move good decisions, okay? We have a benefit administration business. That's where people are shopping for their employee benefits for the coming year.

And so that is focused on how do I make the right health plan choice among the 3 or 4 or 5 choices that some employers will give. There's a traditional plan. There's a couple of HSA qualified plans, et; cetera. What's the right decision for that individual. And it takes into consideration not only financial factors, but also risk tolerance factors because I think that's really important. We cannot lose sight of the fact that there's an emotional component to all of this, this entire conversation.

I mean, we exist -- we all exist at the intersection of people's emotional health, their physical health and their financial health. It doesn't get much more challenging in that in terms of emotion. But with regard to the HSA piece of it is how much money should I be putting into my HSA. And we find that when people go through our HSA plan, they actually will increase their contributions by about 25%. That is very good for them. They're finding ways to put more money away because they're going to need that money at some point, whether it's this year, next year or in retirement.

But I think what we believe is the most important and powerful AI development is our road map, we are working hard on the Agentic AI, and we will release a concierge. And so this goes back to this whole idea of transparency. We think about it on a continuing and there's transparency. There's navigation, which kind of sits next to transparency. And then actual care management, which we are not at our company can go into.

But if you think about transparency moving into navigation, people do need their handheld. I said that we have to provide information to people. We also have to understand that these are emotions, and these are decisions that are very impactful to people and a lot of people are going to feel that they need to have their handheld. The first part of that handholding can be an AI agent. And if it's developed correctly, but we also, I think, have to recognize the limits of AI. And at some point, you're going to have to have the ability for a human to take over that navigation function.

Well, if the AI gets it wrong, it matters a lot more than booking your trip to Europe, right?

Absolutely. So I would just be parroting a lot of what was already said. I think Agentic AI is changing the way in which we deliver the experience at HealthEquity in very, very meaningful ways from kind of how people choose their benefits to how they use their benefits. And I think the really important factor here is kind of meeting the consumer where they're at. The consumer needs to be able to ask human-based questions be able to have that experience served up to them in an easy-to-understand fashion. And like I said, we're at this inflection point where technology actually allows us to be able to deliver on that promise now.

So one area where cost-conscious decisions would be especially challenging with specialty drugs. They are among the fastest-growing components of U.S. health care spending I was wondering, just from an insurance perspective, Jesse and Jill, are there innovations that could be used to help beneficiaries make more informed decisions around those specific class of drugs.

Look, I think the main thing is going to be fairly consistent with the conversation. It's better -- starts with better engagement upfront so that we can provide better education so we can help direct people to the thing that's in their best interest. And so again, we can use that. And that could be multimodality, I don't care they're calling me for that because this is an extensive interaction and are the more expensive and more impactful on the phone call a day for that.

We could also serve it with AI with other chat tools, but I think having the information, packaging it up, serving recommendations. It all starts with somebody thinking, let me check what Oscar has to today, what Aetna has to say, that I think is actually the -- that, in some respect, is the biggest CASM because people want -- they'll go to Facebook before they go to Oscar, right? Or they'll go to their neighbor before they go to Aetna. And so you need to pull them in serve up information in a useful way so that you can drive a decision. I'd be curious to hear what you have to say on this.

Yes. I think when we look at specialty drugs, and to be clear on the medical side, so it crosses into that, but it is not all pharmacy. We have to look at a couple of different things. One is where there are substitutes, what's the actual product on the formulary that you have access to. And that is not about denying access to things. But if we look at last year, we removed HUMIRA from our formulary and replace it with biosimilar. We did it in a way that it was seamless to remember because it was through engaging with the physician. It was all highly automated, so they didn't have to create a lot of work. And the product is basically the same product, just the biosimilar version of it.

We moved like 95% of the scripts in 1 month, and that was more than the entire industry moved in the whole year. So you can use formulary, but you have to obviously have the comparable solution but also available in things like the intensity of the solution, the vial sizes, all this kind of stuff that gets pretty specific to what a prescription might entail.

Another component is where you can use network and benefit design. So network, like, where can you go for this service and benefit design what will get paid for if you go there. Now that's not common across all therapeutic areas. But if you think about where we've been going with gene therapy, like those are, generally speaking, intended to be one and done. They're incredibly expensive. And the frequency level is such that it's not like every provider on every corner has done these.

So you actually want to go to an expert. And if it's a one and done, you're willing to perhaps even travel for that. So you can use benefit design to say these are the best people to go to at the best price with the best member responsibility.

And the last thing that really drives a tremendous amount of cost in the specialty space, it's just site of care. So for example, KEYTRUDA is a drug that's been on -- like a cancer drug has been on the rise, there are multiple indications for it and continues to grow. If there first few administrations of KEYTRUDA is in a hospital setting and you have no adverse impacts, do you need the next 16 treatments to be in a hospital setting. Now in a certain circumstances somebody has other comorbidities, the answer might be yes. In a lot of cases, it's no. And so how do you facilitate that awareness, that transition where it makes sense to do so to help manage the specialty spend.

So we've covered a lot of ground before I open it up to questions from the audience. One last question for all of you. If you could enact one change to accelerate real health care consumers in over the next 5 years, what would that be? Jesse we will well just start with you and then go to the others.

Yes. I mean, I think for me, the answer would be ICRA, and I think that's how you expand the access to individualized, personalized products to a much broader group of people. And so you're not -- I don't need to buy a product that has a network for my colleagues in Texas and California, if I live here in New York. And I don't need to buy coverage for my colleagues, you need to have a certain level of care that I just don't need. I think ICRA to me right the forefront of this...

Maybe just defining what ICRA is?

Oh, ICRA. I always forget not everyone talks about ICRA everyday. ICRA...

Rolls of your...

Individual -- now I'm blanking on it. Individual Contribution Health Reimbursement Arrangement, which effectively means my employer can give me tax-free dollars to go buy an individual product. And so the premiums for products in the individual markets are often 20%, 30% lower cost than for employer products.

And as -- you can have Oscars does recently launched a plan design called HelloMeno. It's a menopause design plan for people who want to have -- first all the benefits in that part of their life. You're going to have a diabetes care plan, which has first dollar benefits for their needs there. You can buy the product that works for you, it's lower cost. That, to me, would be the kind of biggest innovation.

Maybe to build on that, I would really focus on personalization. The World Economic Forum has about 3% of data that's in the health care system is actually effectively deployed. So when I say personalization, too, that it doesn't have to mean that we know thousand things about 1 person. It could be with the profile of a person you keep narrowing it down. And in order for -- to generate change in behavior at an individual level, they have to feel like it's relevant to them.

I'm going to go a little bit broader. And I'm going to come back to the first question that you asked, Daniel, which is because I think we're really here to talk as well about how do we control costs.

And I think it's more holistic. And I'm actually going to pick up on some comments that Jesse's boss made yesterday on Squawk Box, you might have seen that interview. And there was a sort of a profound question, Dan, which was, okay, if you're going to put pressure on the system to hold down costs, what's going to happen to the margin, right? And this is a group of investors and business school students. So you'd be interested in that.

And I want to kind of pick up on that and say from the perspective of the insurance layer, there needs to be more information that empowers consumers to make better decisions. So I love the ICRA idea, because it allows people to go out and shop for the insurance plan that makes the most sense for them. What will that do? That will then cascade down to insurers are going to have to get more intensely competitive in how they control costs because people do shop for value.

And then that's going to put pressure back down on the delivery system and the delivery system is simply going to have to get more efficient. And if you put pressure that comes from the payer, which increasingly is going to be the consumer through the insurer and in some cases, directly to the provider because be ready for conversations down the road at some point to be between a provider and their patient about what am I going to pay for the service. It's going to force the delivery system to get a lot more efficient to protect its margin.

And those who are really good at that are going to be the ones that survive and thrive and are going to find a way to preserve their margin. Because at the end of the day, you think about it from the perspective of the Affordable Care Act is now 12 years old. It did a lot to try to reform how we finance care, but it did nothing to reform the actual cost of delivering the care itself, and that pressure is going to have to come from the top down.

Yes. Building on what Chris said, how do you align incentives for the consumer to apply that pressure? And I think the way to do that is you've got to open the market for accounts that allow people to build a nest egg, a security blanket, an account like a health savings account, and we need to open that up for more Americans.

The recent legislation did make that available to people on bronze plans, which is fantastic. We need to open that up so that every American can have a health savings account to bring that aligned incentive. I think what Jesse is talking about people getting into the plans that work best for them. So I guess my answer would be open up so that every American can have a financial account like a health savings account to save for medical and align those incentives so that people will apply pressure in the system to drive the change that is necessary.

Questions from the audience?

I'm the first. Okay.

Go ahead.

So [ Jacqueline ] [indiscernible], I come from the health, wealth and well-being on the employer side. So I love the panel. Thank you.

When I think -- when I hear medical inflation, raising up and cost containment. And then I think there was a comment, for example, an employer that's adding additional tiers to get access to here. I want to shift a little bit. Reality is, even if you're employed, you cannot afford health care. And that has been just creating that beautiful snowball impact on I cannot afford medicine. I end up in ER. I'm being simplistic here.

But have you seen something that's different that would truly look into root cause and prevention, something that's way more proactive than what we see our health care plans working today. In a way that you could create an inflammatory wake place. So that's my...

Maybe I'll kick it off. Thank you so much for the question.

I have to imagine, given the context of this room that there are some folks who are following what's going on in the longevity space, whether that's Peter Attia, Mark Hyman or Function Health. And I see that -- I'm very interested in whether that space can impact what you've just described right? And now let's be clear. It's kind of like the fancy modern way of saying, let's actually do preventive care and like -- but we're only going to see this continued ballooning if we continue to treat it as you had said at the beginning, is like the health -- the sick system, not the how do you help people stay healthier.

So I do think that one of the challenges in that space in general is when you say expanded diagnostic testing, like that can go off the rails pretty quickly. So it has to be, obviously, with intention, appropriate, et cetera, paired with consultation on what do I go do with this information paired with incentive to actually take action on what the consultation with the doctor led to. And if you bring all of that together, I do think that there's potential to start to shift.

There were a lot of hands for questions, I want to add one thing on this, which is the average term of someone's time with a health insurer is like, what, 18 months, 20 months, it's really short. And that payer has no incentive to invest in long-term wellness just because they're going to turn over to go to the next one. So I do think if we could find a way to keep somebody you have your Oscar plan, your Aetna plan or whatever for extended periods of time, those health insurance companies can invest in longer-looking wellness in preventive care, which today that whole economic model doesn't align for that.

Go ahead.

Well, thank you for the panel. So my recent CBS alarm and so one of the greatest benefit of the HSA is that the triple tax vantage investment opportunity, right? But across the board, we see barely 10% of the 40 million Americans investing in their HSAs. And at HealthEquity, it's about 7.8%.

So some of your competitors like Fidelity, they have an investment first platform. I guess the question is more on how do you align your incentive premier business model to incentivize more people to become investors and their health to build wealth for their future?

Let me take that one to start, Brad.

Go ahead, Chris.

First of all, our incentives from a business perspective are actually quite aligned. So little transparency into the business model that Brad and I operate under. We typically, in most rate environments will make a bit more money on the deposits than we will on the investments. So you would expect that, that would be a perverse incentive to get people not to invest. But the other side of the coin is that the average consumer who has an investment account has 2.5 to 3x as much actually in deposits as the ASH consumer who doesn't.

And the reason for that is and research -- really firm this is, people want to cover their deductible. $500 to $5,000 deductible. I want that in cash or cash-like instrument I don't want to take market risk on that.

The reason why only 10% of people invest today is because if you look across the spectrum, over 2/3 of people who have an HSA are -- have an estimated hold income of less than $100,000. Now in our research, 60% of people say my HSA is an important part of my retirement planning, but only 10% of them invest. So there is an aspiration to get there, but we also have to realize that not all people can get there today. And in that sense, we're no different than the retirement community.

I mean the retirement plan companies wring their hands over and over and over again over why aren't more people in a 401(k). And if they are, why aren't they contributing more? Why aren't they maxing? And all -- so this is not a new issue. But we do have ways of getting them there. It's speaking to them in the right language, it's educating them I mean it's giving them tools to understand how they can build financial wealth through their HSA.

Yes. I don't have much to add to that other than we're focused on helping people better save, spend and invest. And you have to remember, as Chris so well stated that the minority of people are living paycheck to paycheck. And they need to be able to cover their medical expenses. And so of the $55 billion that go into an HSA every year, roughly about $42 billion of that is being spent, right? And it's being spent because people need to cover their health care expenses.

And so investment options are there. We want to meet the member where they're at. Generative AI and technology is allowing us to be able to do that more and more effectively each and every day. But we have to remember that, first and foremost, people need to receive the care. And the good news is they are receiving their care because they have money in the account.

Henry [indiscernible] again. This a question for Jill Dailey from Aetna.

Let's imagine that Sam Altman in the next 24 months and has Nate Gross over their build basically chatGPT MD, and it costs about, I don't know, $10 a month out of the $20 subscription and your membership actually wants access to this. You could argue, you have to go through the FDA, get it approved as a digital therapeutic. We're going to build our own sort of like app for benefits or something. But here's something, and then let's imagine just for sake of argument, there's a cohort study showing it actually prevents emergency room visits, almost like a triage tool that you would get.

Is there a mechanism that even for Aetna, administering self-insured employer plans to even pay for something like that as consumers start to shift their preferences towards AI-driven tools?

I mean I don't think there is in today's model, but it's absolutely something that everyone should be looking at. I will say I'm not sure that, that's the organization that I would say we -- like I want to know what's feeding the LLM, right? Like what's going into the answers that are given? Because realistically, there's probably like one out of every two people here has used ChatGPT or a like solution to ask a medical question, right? At some point, you may not have acted on the answer, but that is not -- like that's pulling data from a lot of different places and some are validated and some are not at this stage.

But to your point, I do expect that that's going to continue to get better and better and better. And if it's where human behavior is, then we have to figure out how that connects. So for example, CBS Enterprise has three geographic locations where we're testing an AI-first provider rate.

And that's -- we can't see it it's in Florida, Texas and Colorado. So unless somebody is going there, sorry. But that's the kind of test and learn. We've got to see how do things work, how to consume, and are they accurate? Because going back to the earlier point, you hear a lot more about the health outcome than you do if you book the wrong hotel.

I'm 85 year old. So I probably consume more health care than the rest of the room. But there are three -- you mentioned virtual health care. First of all, urgent care. And I recently had an opportunity to use virtual urgent care. I didn't even know it existed. And then, of course, during the shutdown, they took it away, but now it's back. I think it's an absolutely wonderful program. But I don't think too many people know about it.

The second thing is I have an Apple Watch. And I think everybody who buys a phone would to be given a watch for free because together, it's a wonderful health care device. So I'm told by the doctors -- my doctors. And then the third thing is the SilverSneakers program, which anybody over the age of 60 can participate in.

And what can you do about getting more people to do it? Because I tell everybody about it, people goes in one or not the other. Nobody does anything. What can we do to get more consumers to do what I do.

Look, I think it'll sound like a bit of a broken record. I think you have to stop thinking about health insurance as its own beast and think about it as any other consumer product.

Oscar has been giving away free virtual urgent care since we launched our first product in 2014, that's been a part of the offering. It's fully integrated with the experience. And in super convenient, as you mentioned, I use it all the time. I think it's both a great cost-saving tool. It can be used for ER divergence. It could be for convenience, it kind of runs the gamut.

Not everyone uses it. And I see this less about -- we don't want to educate people on virtual urgent care. That is so narrow. It's about driving awareness that there is value. If you have a health care need, you open up Oscar app, you open up your Aetna app. There are things in there that are useful. It could be a silver sneakers program anything else.

But go hire some people who are designing Airbnb and Spotify and all these like highly consumer-oriented products, have them built for health care and you'll get better usability. And the usability will result in people not understanding how to use these kind of capabilities.

We have time for one more question.

She's been waiting forever.

[ Sunny Win ], I'm a strategy transformation consultant. My question is really linking back to what you were talking about personalization. So that's what consumers are asking for. We're interesting consumer to pick with the right program plan for them.

But now as you're going on this journey, what are you doing to measuring tracking on the actual house outcome after they pick a specific plan for them. And then the long-term financial impact when you think about 5, 10 years from now, what's the total cost?

Yes. So it's a great question because at the end of the day, it is that mix of quality and cost. And so I started to talk a little bit earlier about kind of that matching thing, right? And so we know that if someone goes to a high-quality, cost-effective clinician that from a PCP level, they save a couple hundred bucks a year. If it's an ortho, it's $1,000, right? So there's a delta that we match and monitor and say, okay, well, if that increases, then there's more savings for the individual as well as who member is paying for their coverage.

So I think, being able to track that. And we spent a lot of time as an industry talking about like what's the solution for diabetes? What's the solution for weight management? You name your chronic condition and a lot less time focused on the very question of how do you engage the right people in those solutions. And I think that's why we're seeing point solution fatigue in the industry overall. We're seeing consolidation. It's not because the solutions I'm being very generic here, right, but aren't good. It's that if each time you use it, you save $200 and 5 people in a population use it, that's not material enough for an employer to cover that. So it's interesting times.

I saw a lot of hands up, please connect to the panelists.

I think we can do one more, Daniel, if there's a final question.

Okay. Go ahead.

Thank you, everyone. I heard a lot of good interesting ideas, very focused on the consumer really, really, I think, driving decisions once they're diagnosed with something. I think that's definitely something that needs to continue to happen. I guess my question is more along the lines of what are we thinking about with respect to the consumer on the preventative health side where we not get more traction there from a cost standpoint.

And then two, what are we doing from a payer perspective to drive, I guess, better decision-making and pushing some of that on the provider and how the provider gets reimbursed to make -- to influence the provider in those decisions.

I'll take the first part of that question. On the ounce of prevention, we do see a lot of employers now using incentives to drive people to get their preventive services to close their gaps in care to use telemedicine to make right decisions, mail order for pharmacy, things of that nature that really do kind of bring down cost, but also are an ounce of prevention. And we're seeing more and more of that as people have a financial account where there's the incentive aligned where the employer can actually put money in and fund.

Now the challenge is, is that we don't have that alignment broadly enough in the market, right? So we need to make these types of accounts the gentleman, the 85, I believe, congratulations, 85 years old. Unfortunately, there isn't that financial account to incentivize people that are in Medicare to take advantage of the ounce of prevention. So I think there's a lot of opportunity there as we bring alignment with incentives.

And I would say the wellness market is a $500 billion market. It's growing at 4% to 5% a year. What I think is fascinating about that spend is that the younger population in that mix is like -- and I think it's like an up to 35 age range is spending more than their percent representation of the population.

So I'm trying to make a complex things sound really harder, but it really just people who are of a younger mindset and age are actually spending more on wellness when you look at the data. So at least that's a glimmer of hope looking ahead.

We'll take a quick 15-minute break and be back here for the third funnel on aging in place. Thank you so much for attending.

Up next, we're joined by Jagtar Narula, CFO of WEX. Jagtar took on the role of CFO in May of 2022. He brings 2 decades of financial leadership, experience. Prior to WEX, he served as CEO of 3D Systems and held senior roles at Blackbaud, Xerox, GE and other global firms.

Jagtar, thank you for being with us today. Appreciate it.

Thanks for having me.

So maybe we start with mobility. The macro environment remains pretty choppy. OTR volumes softened a little bit further this quarter. Are you seeing any signs of stabilization?

Thanks, Sanjay. That's a good question. So what we saw in Q3, it's been a choppy year for mobility, from a same-store sales perspective. We saw negative volume growth in Q3. We had said it was pretty similar to Q2, where we also saw negative volume growth.

That's reflective of challenges we've seen in the OTR segment, especially. We've had the challenges of a tough environment. We've seen the effects of tariffs and things like that. The good news is that Q3 was similar to Q2. So while we haven't seen an improvement in the macro year-over-year yet, what we are seeing is stabilization. So things aren't getting worse, but it's something we continue to keep an eye on.

And when we think about like what's driving sort of the weakness, do you think it's just -- is it tariff-related uncertainty, is it just a macro softness? Like what do you think is driving...

I think it's a combination of both. So if I take the Mobility segment, divide it up into 2 segments. Just a reminder for everybody, about 1/3 of the segment is what we call over-the-road, think of it as kind of the larger long-haul carrier trucks; and 2/3 of the segment is the local fleets, think of the electrician, plumber, sales guy, things like that.

If I take the over-the-road segment first, that segment has been challenged for a couple of years now. We had kind of the run-up into COVID with a lot of shipping volumes. We're all sitting at home ordering things from Amazon and the like that drove a lot of volume in the over-the-road segment. And since sort of post COVID, we've seen overcapacity in that market, we've seen weakness there.

We've seen that for going on a couple of years from now. This year, I think a lot of market participants is expected going into the year that we were going to start to see a turn in that segment. And then we were all surprised by Liberation Day and the weakness that ensued. So that's what's been going on the over-the-road space.

On top of that and what you've seen in the kind of the local fleet space, I think is more indicative of a macro weakness. When we measure their same-store sales, so what we look at is how much is the -- how much volume did a customer, how many gallons that they pump in the prior year versus how many gallons that same identical customer is pumping this year?

And we've seen sort of a decline, which when we've seen in the past is more indicative of macroeconomic weakness. So I would expect over time, things would improve. But for where we are -- where we sit right now, it's definitely a macroeconomic weakness there. So there's been a couple of pieces, but they're both hitting at the same time.

Got it. So you've highlighted the SMB segment is one where you see share gain potential. Can you quantify how much SMB contributes to Mobility revenues today? And how big it could become over the next 2 to 3 years?

Yes. SMB is actually a pretty large segment today. If you think of our customers today, we have about 600,000 customers in the Mobility segment. So customer size that large, a lot of those customers are, in fact, small and medium businesses. And that is, from a market perspective, a relatively unpenetrated segment, and that's where we continue to see a large area of opportunity.

So one of the things we've done this year is invest in -- more in digital marketing in the Mobility front to drive additional volume into that segment. And we're seeing really good uptick on that. One of the things we've talked about in the last earnings call is that if you look at new business volume, new business that have signed up with WEX, that has increased, SMBs increased 12% year-over-year.

So that's indicative of the positive momentum we're seeing there. And on top of that, I'd say we've had a number of initiatives that are also additive to the SMB focus on the segment and should provide a good tailwind going forward. So one of the ones we talked about in the last earnings call, is 10-4. This is a product that we just introduced that's targeted at the owner operator in those kind of long-haul trucking fleets. So think about the one -- the person that owns one truck and drives it around, that's historically not been a customer of WEX.

But we've developed a solution now that provides them additional value. Someone that's using our 10-4 product, what we saw in our initial slate of customers, they're savings on the order of $300 in fuel. So there's a big value proposition to them.

It requires no credit underwriting in our part. So it's really -- it allows us to serve a segment that we haven't served before. They're on the order of 500,000 owner operators out there. So it's a sizable opportunity. And so we're really, really excited about that one.

The other one is Payzer. We've talked about that in the past. We did that acquisition, I don't know, 18 months ago. That one was a little slower to get going than maybe we would have liked. It took us a while to get in the sales motions that we wanted it up and running. But we feel really good about where we are now that -- we think that's a long runway for WEX.

A lot of kind of market participants have talked about the tie between payments and software. And this one gives us a really strong payments -- or sorry, software capability with payments functionality at -- starting with HVAC customers is a large small business-focused segment where we even today, we have over 20,000 customers. So I think when you look at it together, and you say, okay, there's a large fuel card opportunity in Mobility that's relatively untapped where we have proven today we can go after it because we've got hundreds of thousands of customers today.

When you look at the new products that we've introduced, like 10-4 and then doubling down on things like Payzer, I think there is a very large, very sizable SMB opportunity that we're pretty excited about.

That's fabulous. I guess when we think about the competitive backdrop for fleet cards, how do you see it sort of today? And how do you see it maybe evolving over time? And maybe you could talk about your value prop and your moat in the industry?

Yes. So in the fuel card segment today, we have a very strong value proposition, right? Let's start with sort of the recent evidence of a very large customer win in BP. We now have, with the win of BP, 10 of the top -- all 10 of the top 10 kind of fuel brands in the U.S. are on the WEX platform.

And that's indicative of the value proposition we provide and the fact that we've proven time and again our ability to take ownership of a branded fuel program and grow it. And I think that reflects a number of pieces. One, it reflects the value proposition of the product, the ability to provide fraud controls, to provide analytics for customers.

These are all things that are very important to fleet managers and WEX Solution offers that. We provide the volume to merchants, which they view as incredibly valuable. So that in itself creates a moat for us, both in having the kind of the buyers and sellers of fuel plus all the value-added services we bring on top of that. I think when you bring those pieces together, it's really, really a strong value proposition for the market. And I think we continue to be in a very, very strong competitive position as a result.

And then in the non-big fuel side, like the small business side, like do you think there's a lot of fintechs that are sort of creating value props that might be...

On the mobility side?

On the mobility side.

Well, I certainly think there are some fintechs that are trying. Where there's some smaller customers that are -- Visa has got their sort of fleet 2.0, which they've tried to create a solution to provide kind of a value proposition to customers that rides on the Visa network.

I would point out a couple of things. So when you talk about the value proposition we provide with the controls and the analytics, I mean, we're years ahead of the competition because we've been doing this for decades. We know how to bring a fleet manager onto our platform, provide them the tools and capabilities they need to run an effective card program.

So that inherently gives us kind of a leg-up. And then on top of that, we're not standing still from innovation. So we just talked about BP a second ago. One of the reasons that BP chose us is in addition to our sort of closed-loop fuel card capabilities, which because we run our own closed-loop, we're able to provide data that other networks historically have not been able to provide it.

On top of that, we've developed the capabilities to also ride on an open-loop network. So somebody that goes into a BP station that's pumping fuel that also wants to go buy lunch at the convenience store can go in and use a card to buy items from the convenience store. And that was something that was pretty exciting to BP, one of the reasons they chose us.

And so I think that's additional value proposition that we now put on top of the card. And this program will be launching once we get the BP onboarded, and we'll see how it goes. But my expectation would be that as we see success in that program, some of our other fuel merchants may start to say, we'd like to be on a similar card program as well.

Got it. So as we think about -- if we pull up and we think about the growth targets for this segment, 5% to 10%, I'm sure you feel pretty comfortable in that range. I'm just curious like what leads to an outcome that's sort of at the midpoint or higher of that range?

Yes. I think it's a number of fronts. So one is new business, right? We've invested more in new business this year because we saw pretty high returns on it. When I joined WEX, one of the things we did is look at our LTV to CAC across our business. And those of you involved in software are very familiar with this metric, and what we saw is a high LTV to CAC across all WEX's lines of business, including the Mobility.

And we looked at that and said, well, you have a large untapped market opportunity, especially on small business; you have a high LTV to CAC, shouldn't we be investing more there? And so that's -- and that's one of the things we did this year was then take up investment there. We expect -- Melissa talked about it in the last earnings call, every dollar that we put in sales and marketing, in mobility or in marketing mobility, we would expect kind of $4 return over the first 2 years that a customer onboards. That's a pretty high return.

So with the dollars we're putting in, we expect higher return that will drive up growth. We have very high retention rates in the segment, but we continue to invest there to improve retention rates. So I would expect the delta between new business and retention to expand over time. I would expect on the order of 1 to 2 points there.

We then have the new products that we're investing, whether it's 10-4, more aggressiveness in Payzer, things like that, those new products will then add incremental additional growth, that should push us up further in the range. And then the big one now is the macro, right? You referenced the macro in the initial of the conversation.

Right now, from a planning perspective, we're not changing our expectations of the macro. We're sort of expecting it to continue as we've seen for the last several quarters. But with changes in the macro environment, we're not going to be in this macro environment forever. Trucking isn't going away. There will be a turn in the trucking market at some point.

So as we start to see that change in the macro, we'll go from where we are today, which is maybe the base growing at 1% to 2%, we should see that grow at incrementally higher. So I think when you add up those pieces, you start to get to, okay, I can see how we get Mobility further and further up into the targeted range.

And these new areas that you're sort of targeting and taking share into, like what are you displacing there, like a competitor or is it, I mean, cash and check. What is it?

Yes. I think it depends on the area. So when we go after SMB, by and large, those customers will use a general purpose card. So without the controls that we provide, without the analytics that we provide, so we're largely doing that. When you look at 10-4 owner operators, what we're providing essentially is a fuel discount network, something that they don't have access to.

Fuel is the largest component of their operating expense outside of the cost of paying for the truck. So if you can provide meaningful fuel savings, that's very, very important to the [indiscernible] operator. So in that case, we're providing something incrementally new that they're not necessarily coming from somewhere else today.

And then Payzer, by and large, you're displacing them from using Excel or Google Sheets or pen and paper. I mean these folks are -- sometimes you're taking away from competitors. We know there's competitors out in the market that don't exactly touch the segment that we're going after, and as a result, we provide a more tailored solution or you're taking away from historically running their business essentially manually and you're providing a meaningful automation solution.

And so I think in each case, we're taking away from something that where they're not getting the level of quality and capability that WEX is now coming in and providing to them.

Got it. Okay. So we're going to pause on Mobility and move to Corporate Payments. Obviously, that's been another segment that's been going through its own set of ups and downs with -- maybe we focus on the virtual card business and then we sort of migrate to the other part. But with Booking and Expedia headwinds now largely in the rearview mirror, how should we think about the baseline growth of corporate payments? And then maybe just walk us through the long-term building blocks.

Yes, sure. So we've talked about a lot about Booking and Expedia over the last year, right? The transition of Booking to kind of a new model with us was sort of a revenue drag over the last several quarters. We're now at the tail end of that. And you saw with Corporate Payments returning to growth in the last quarter.

Expedia was also a challenge because we had some sort of seasonality in Expedia or timing in Expedia going to '24 to '25 that provided some sort of difficult compares when we were looking at year-over-year that we're now kind of largely past that. So as we move past that on the travel segment of Corporate Payments, I would expect that -- which is about half the business today, I would expect that to move towards more kind of in line with overall OTA growth, travel -- online travel agency growth, so that's half the business.

The other half of the business, we have sort of -- this is a business that we're also pretty excited about. We've invested in capabilities that I think provide meaningful kind of upside and growth opportunity in the business, leveraging the platforms that we have today. So the first is embedded payments.

So the way I like to characterize embedded payments, you talked about me joining WEX in '22. At the time, one of the biggest questions I got was, hey, WEX, you're really successful in travel, what are you doing outside of travel? What are your next verticals outside of travel?

That in essence is what embedded payments is. It's basically taking what we've built in travel. We've built additional functionality that the product needed and now we are moving it outside the travel vertical, starting with other fintechs. We're very excited about the pipeline there and the growth opportunity as a result of that.

You then take the direct AP part of the business, which is about 20% of the segment today. That's also taking the same platform. And what we've done with that platform is provided a new front end that it now can be used by corporate customers to process payments. And we've been seeing the last 2 quarters, we've seen 20% volume growth in direct AP.

So that provides evidence that it's having resonance in the market and the strategy is working. So I think when you put all those pieces together, I think you're looking at a Corporate Payments segment that will grow in the mid-single digits range. I think we've got the building blocks and pieces in place, and we're pretty excited about it.

And just to clarify, like the travel growth, industry growth, what do you think that growth rate is? Like how would you define that growth rate?

Yes, I would call that kind of the mid-single digits range in line with Booking, Expedia and the others.

Got it. All right. And then I guess the industry -- so maybe just one last one around Corporate Payments, the direct AP business. Maybe just elaborate a little bit more on that because I know that's an area you're investing in. Sort of where are we in the journey of that and sort of what's your growth path expected for the next couple of years?

Yes. I think there's a pretty sizable opportunity. So this is a market segment that's pretty unpenetrated from an automation perspective and from the perspective of utilizing virtual cards to process payments. And we provide meaningful capabilities to corporate customers to be able to automate their payments and to streamline their process.

You move customers away from check, ACH, things like that to we'll take your payment file and we'll automate it through the virtual card, and we'll also give you the benefits of a portion of the interchange. So I think we're in pretty early days there. As I mentioned a minute ago, we've seen 20% volume growth the last couple of quarters.

We've hired up a sales team that we've expanded this year. We track that pretty closely in terms of the performance of the sales team, and they are building really good pipelines, closing really good deals. So we continue to see momentum and volume build there. And so I continue to see that going forward.

Got it. And then when we think about like who you're displacing again there? Like is it the competitors in that -- or the competition in that business that does this or is it businesses that just don't use that?

Today, it's largely businesses that don't use that. So when you think about the AP process, usually, there's some software process, ERP or something that results at the end of the day in a payment file that's ready to be paid. And that payment file today would be paid through a check, through an ACH, through some other mechanism that where now we can take that AP file and say, "We'll process the payments and handle this for you."

So it provides meaningful automation to the customer where they didn't have that today. So in addition to potentially reducing the size of their AP team or something, they'll get a more streamlined process, they'll also get meaningful rebate to the extent that we move some of the volume to virtual card. So there's multiple value propositions for the customer coming out of that.

Got it. All right. We're going to shift gears and talk about Benefits. The industry for HSA and FSA has matured. As that has matured, what are you guys focusing on to sort of sustain the above-market growth in the Benefits segment?

Yes. We grow typically above market. And I think we grow above market. So just a reminder to kind of everyone that's maybe new to the WEX story: About 20% or more of the HSAs in the United States run on the WEX platform, and we go to market through a couple of different channels.

We have a direct business. So we will go to employer and sell direct. We will also -- we also have a very, very extensive partner network where we will have partners resell our product or they will actually offer our product as part of the bundled offering that they're offering to their customers.

So we have multiple routes to market, which basically means that we typically see a deal from multiple angles. And so the combination of having a market-leading product is evidenced by the large market share we have, the scale of that platform, as well as the broad market coverage provides us kind of a very, very meaningful way to be very competitive in this market.

And as a result, if you look at this last year, market growth is estimated about 5%. We've grown HSA, our market has grown about -- we've grown about 7% in terms of HSA accounts. So we've beat the market by a couple of percentage points. And we've done that pretty consistently over the past couple of years.

I would say on top of that, we continue to invest in the product. We have multiple products that we can sell. We've got HSAs, we've got FSAs, we've got flexible spending discounts, we've got lifestyle accounts. So we're able to continue that -- to grow that business by expanding wallet share with the customer.

We're also able to grow that business by more effectively cross-selling. That's one of the strategy of the business. Mobility customers are a big opportunity for us. We continue to focus on that. And then we layer on top of that continued innovation. So things that we're doing now like a new investment product, today, we outsource that functionality.

We're actually building the capability so that if you're an employee, you have a sizable HSA account, you want to invest a portion of that, not just keep it in cash, we've got capability for you to do that as well. So I think it's the combination of market coverage, multiple products and continued innovation that sustains the growth in that segment.

So The Big Beautiful Bill is expanding HSA eligibility and contribution limits. Maybe you could just help us frame the size and scale of the benefit to WEX and sort of how you intend to capitalize on this opportunity?

Yes. So with The Big Beautiful Bill, it opened up about 7 million accounts -- or 7 million individuals that will now be eligible for HSAs. And we translate that 7 million individuals into about 3 million or 4 million accounts. So a sizable increase in the number of accounts.

The good news here is that we don't need to do anything to the product. This product is ready to sell to customers, it's the same product that we sell today. It -- we've already got the routes to market, so we will continue to get our fair share of this expanded market.

Now it won't all happen -- this will go into effect 1/1/'26 in terms of eligibility. I wouldn't expect all 3 million to 4 million to sign up on day 1. There'll been an education period. Also, our partners will work to get these customers signed up and moving forward with HSA accounts. But I would expect over time that you'll see that -- those 3 million to 4 million, you'll see a substantial portion to move on to an HSA account of some sort.

Okay. Great. So we're in open enrollment season now. Any early reads or updates on how it's going?

So I feel good about where we are. So 2 pieces to how it goes. So one is how are we doing with selling new customers onto the WEX platform? Obviously, that's something that goes on all year. We feel really, really good about -- today, we know what deals we've signed that will be going live, it's gone live now or will be going live in the new year. The sales signings from where we stand from a signing standpoint is pretty much on top of where we expected to be for the year. So that's going really well.

The second piece of it is the open enrollment piece, which is, I'm an employee, I'm making benefit elections, am I signing up for an HSA today? So we are right in the thick of it. All indications are positive. It's been a pretty consistent growth over the last few years. There's nothing that suggests that this year will be any different than any other.

So we feel really good. Obviously, we'll get more data as we go through the open enrollment period. But from where we stand right now, all indications are positive and that we should see consistency with what we've seen in the last few years.

So it seems like when you add it all up, right, the Benefits segment can be sort of at the mid to higher end of the range that you guys have talked about over the long term. Would you agree with that? Or maybe what else needs to be done for the growth to be faster because it has been historically?

Well, so I think doing what we said -- what I just said is what's going to drive growth. We need to continue to sell and earn our fair share or more than our fair share of the market. That's signing up new partners, new employers, hence, why we've added sales resources to that business.

Historically, that business grew heavily through the partner channel, which is kind of less in our control because it's dependent on what partners sell. We supplemented that with direct and then we added meaningful sales resources on top of that. So that gives us more control over how much is sold and therefore, how fast that business grows.

Second piece of that is getting people to sign up for HSA accounts. What we've done there is to invest meaningfully in front-end capabilities so that we can help employees understand what's best for them. And oftentimes, what is best for them is an HSA account. So for example, we have a benefits admin platform, that's front-end capability.

That's the platform that employers use to help employees sign up for benefits. We've added analytics and AI capabilities on top of that to take employee data and help them make the right decisions for them. And I think as we expand that platform, that will help the market grow.

And then on top of that is the things that I talked about: continued new innovation, new capabilities that -- and expanding cross-sell share of wallet because we have so many different products we can sell, the more that we can sell into an existing account or more accounts that we can get to take multiple products provides meaningful growth on top of what we're doing today.

And what you just alluded to was sort of doing more inside of benefits enrollment, like are there areas inside benefits enrollment that you'd still want to be part of that you aren't part of now?

I think our biggest focus right now is that, that front and benefit administration capability, continuing to enhance the tool that we have today to make it a very, very critical piece for an employer to say, "I want a good experience for my employee. I want them to come in and be able to make -- being able to understand what the benefit options are and to make good benefit elections that will be good for them, and that'll help me as the employer understand what my employees are doing and provide me meaningful data." So enhancing our capabilities to do that, I think is a critical piece of the puzzle.

Okay. Maybe shifting gears and talking about investments. And I feel like 2025 was an investment year that put pressure on your margins. On the third quarter call, you mentioned margins will stay stable year-over-year versus expansion. Maybe you could just clarify or provide more color on the drivers influencing your outlook.

Yes, sure. And let me clarify one thing because I've learned since there was some confusion of what I said during the call. I think I said some of the effect of I expect '26 to be similar to '25. And some people thought that to mean that margin trajectory in '25 is lower than '24. Maybe I'm saying that '26 is going to be lower than '25, which is not the case.

What I was trying to signal is kind of exactly what you just said, which is -- and keep in mind, we're still in the budgeting process here, but from where I sit right now, at the very least, we're going to be kind of margin flat next year to this year. Now obviously, still working on what do we need to do to make that better.

So the puts and the takes. So by and large, let me start with the puts. By and large, our business is characterized by high incremental margins as we grow. Incremental margins in Mobility, typically very strong. Incremental margins on our Corporate Payments segment, when you think about that business, we run a platform, more volume runs through the platform, not necessarily incremental costs, so a very good margin profile of that business.

In the Benefits segment, obviously, the float piece of this, very high incremental margins. The non-float side of it, the traditional side, does come with some cost as you grow revenue, but it's also an area where we've been investing heavily to get cost down. Things like AI that Melissa talked about in the last earnings call, the claims automation capability that we've built.

So to the extent we are able to drive that into our claims operation or employee call centers, that improves the margin profile of that business. So the puts of the business is that revenue grow, the margin profile is very, very good. So then is what's the takes. Why aren't we seeing that next year?

A couple of pieces. So we just talked about the innovation. Investing in innovation has been an important capital allocation priority for WEX. If you look at the numbers for the last couple of years, CapEx has been up. We capitalized software development. That's resulted in kind of higher depreciation like this year versus last year, and we're expecting one more year of that before it starts to flat line.

And that's just reflective of us driving innovation so we can hit the revenue opportunities we talked about. Also, earlier this year, I think it was on the Q4 earnings call, I had indicated that as we thought about investments this year, and this year was a meaningful year of investments, we wanted to get those investments in place while protecting as much of the P&L as possible.

So we took some cost actions this year that were kind of onetime in nature. And I'd indicated that there's some savings this year that are going to come back next year. And so we're now into next year and those -- some of those costs are going to come back. we're doing it in a fashion where we can at least keep margins flat year-over-year.

And the idea is continue to drive momentum in the business, get the incremental margins as the revenue grows. In a period where we're reinvesting a portion of that in the business that will continue to help drive revenue growth going forward. But then as we move out of '26, I would expect to see that momentum that the business has of, we've got the new products, we're growing the business, it flows through at high margins, and we see margin expansion as a result. So some takes and -- puts and takes in '26, but that builds us momentum in future years.

And just generally, like what kind of margin profile do you think WEX is, like in terms of margin expansion story annually? Any thoughts on that?

Yes. If I were to look next year, well if I were to look into...

Past next year.

Past next year. I would say in the order of -- I mean, we would expect a 50 basis point improvement every year. It's going to be dependent on how do we think about reinvestment versus take it to the bottom line. But I think a 50 basis point margin improvement every year is very doable.

Got it. Obviously, all else equal with fuel prices and such.

Yes. I mean, exactly. I would say and these are all macro -- excluding macros, so you got fuel prices, interest rates, things like that, but macro neutral.

Okay. I got a couple more. First is you guys completed the strategic review and the verdict was you're going to -- it's best to keep the business together. So maybe you could just talk about what the argument is to keep it together because it seems like some of your pieces could be valued higher relative to where your peers trade, right? I mean I'll use Benefits as an example, right? So maybe you could just talk about the rationale a little bit -- broaden out sort of the explanation around that.

Yes. So just in terms of what we did. So we did the strategic review or portfolio review, whatever you want to call it. And just a reminder, it's something we do, and we pretty much have done it every year. It's good hygiene for the company to consistently look at its portfolio and say, "Are we doing the right thing for the business and for our shareholders?"

This year, we bought 2 investment banks and Melissa mentioned them on the earnings call, Bank of America and JPMorgan. Didn't tell each of them about the other one. So analysis were completely independent. This was heavily supervised by the Board. The Board, a lot of access to the bankers, lots of questions, lots of follow-up.

In each case, both those banks came to almost exactly -- not almost, exactly the same conclusion. And they looked -- both those banks looked at kind of multiple scenarios for the business. And the conclusion they came to was the one that you just highlighted, which is WEX for you right now, it doesn't make sense to break up the business. The value creation is not necessarily there because, one, you get a lot of synergies being together as a business.

You leverage the bank, you leverage common technology, you leverage the compliance infrastructure we've built, the regulatory infrastructure we've built. There's a benefit to -- we've got a business that's subject to fuel price swings being stabilized to a business that doesn't have that effect.

So when you look at it all together, the conclusion from these banks was the value creation wasn't there. They provided a lot of numbers and data behind their analysis. Now I would also say it will continue to be something we look at in the future. The portfolio composition today, I think, like I said, it's something we've looked at every year. I would expect that it's something we will always keep a more open mind to. But for where we are right now and the analysis we've done, it does not make sense to divest the benefits or any other part of the business.

Fair. So last question, capital allocation. Maybe you could just talk a little bit about sources and uses of capital, sort of what you expect to do in terms of priorities short term?

Yes. So we generate a lot of cash, north of $500 million every year. We have, as I just mentioned, increased CapEx the last couple of years because we view organic growth as the highest and best use of cash. Beyond that, so for the moment of time that we're in now, we ended the quarter 3.25x levered, a little bit above the midpoint of the range that we put out there of 2.5x to 3.5x.

We would like to get at least to the midpoint of that range. And so we are focused for the time now on paying down debt. And I estimate it will take us until second half of next year, call it, Q3 before we're down to about 3x. So short-term capital allocation, pay down debt.

Once you move beyond that, I think that's when we start talking about, okay, reinitiating a buyback program, M&A. We will continue to look at those options. I think we will be much more programmatic on the buyback front going forward. I know we've done a couple of sizable buybacks with an ASR in '24 and then a Dutch tender this year. I think going forward, it will be a bit more programmatic. But I would expect that to be how it plays out over the next, call it, 12 months -- 12 to 18 months.

Perfect. We've run out of time. Thank you so much. Appreciate it.

Thank you, Sanjay, appreciate it. Thanks for time. All right, take care.

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Third Quarter the 2025 Earnings Call. [Operator Instructions] Thank you. I would like to turn the call over to Steve Elder. Please begin.

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO, and Jagtar Narula, our CFO. The press release and supplemental materials issued yesterday and a slide deck to walk through prepared remarks have been posted to the Investor Relations section of our website at wexinc.com.

A copy of the press release and supplemental materials have been included in an 8-K filed with the SEC yesterday afternoon. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, which we sometimes refer to as ANI, adjusted net income per diluted share, adjusted operating income and related margin as well as adjusted free cash flow during our call.

Please see Exhibit 1 of the press release for an explanation and reconciliation of these non-GAAP measures. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and the indeterminate amount of certain elements that are included in reported GAAP earnings.

I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these forward-looking statements as a result of various factors, including those discussed in the press release, the supplemental materials and the risk factors identified in the most recently filed annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and other subsequent SEC filings.

While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

With that, I'll turn the call over to Melissa

Thank you, Steve, and good morning, everyone. We appreciate you joining us. Today, I'll provide an overview of our financial results and then shared key takeaways from our annual strategic planning process, which included a deeper assessment of our portfolio in segments.

Q3 marked a turning point with acceleration in revenue growth. We're excited about the path ahead and confident in our ability to deliver sustainable growth in the markets we serve, expand profitability and generate strong free cash flow. I'll start with our third quarter results. I'm pleased to report that we delivered strong performance, delivered primarily by the Mobility segment, with both revenue and adjusted EPS exceeding the high end of our guidance range.

Revenue for the third quarter was $691.8 million, an increase of 3.9% year-over-year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Revenue was up 4.4%. This return to growth reflects the actions we've taken over the past few quarters, the strength of the underlying business and moving past the OTA customer headwind in corporate payments.

With our actions translating into improved top line performance, we have our sights set on our long-term revenue growth target of 5% to 10%. And importantly, we're also focused on expanding margins through efficiencies, which will be further supported as volume returns. Adjusted net income per diluted share was $4.59 and an increase of 5.5% year-over-year.

Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q3 adjusted EPS grew 7.2%. We remain committed to delivering double-digit long-term adjusted EPS growth. Although the macro backdrop remains dynamic, we're now moving past the headwind from the OTA transition and our strategic investments are already yielding results.

We've been laying the foundation for this return to growth, and we are confident that the uptick we showed in Q3, particularly in corporate payments, sets us up well as we finish out 2025 and beyond. With that, I'd like to spend a few minutes on our strategy as well as how our businesses work together the opportunities ahead in the pillars guiding us forward.

Our purpose is clear: to simplify the business of funding business by delivering a differentiated value proposition to our customers, we believe we can generate above-market revenue growth, sustainable profitability, robust free cash flow and long-term value for our shareholders. Our strategy comprises 3 strategic pillars: these guide our people, their efforts and how we allocate capital.

First, we are amplifying our core by continuing to strengthen our leadership positions and deepen customer loyalty with targeted investments best-in-class sales execution and operational discipline. Second, we're expanding our reach by extending our platform into adjacent workflows and new use cases unlocking additional growth vectors while building customer value.

Finally, we're accelerating innovation, allowing us to get more productivity out of our investments and delivering operating leverage in our model. Our approach to capital allocation is grounded in our strategy, and we will remain disciplined as we balance investments in growth with a sharp focus on efficiency, free cash flow generation and returns.

As we execute our strategy and position WEX for the future, we are leveraging AI to reimagine how we operate and serve our customers. Our use of AI in customer discovery prototyping, coding, QA, infrastructure management and security has helped drive a 20% increase in product innovation velocity.

We're also using AI to harness our proprietary data to make smarter, faster decisions from fraud prevention and credit management, the claims processing and customer support. Our use of AI creates direct value for our customers and differentiates our product.

In our Benefits segment, AI has reduced claims processing time from days to minutes and customer service, human in the loop generative AI is boosting productivity and lowering our cost to serve. In Q3, we introduced AI insights and field service management, pioneering a shift from our reports to real-time intelligence and action, helping customers get the answers they need.

With AI increasingly embedded across our platforms and operations, we believe it will help us scale the business accelerate innovation and strengthen WEX's long-term competitive advantage. Let me now move to our portfolio review and outcomes. On our last call, I spoke about the unique strengths of our 3 segments.

Each year, we review these segments and update our enterprise strategy as part of our planning process. This year, the Board also conducted a comprehensive portfolio assessment drawing on both internal expertise in 2 independent top-tier global investment banks, Bank of America and JPMorgan.

This was a rigorous process guided by our responsibility to be thoughtful stewards of shareholder capital and our commitment to pursue the most value-accretive opportunities. As part of this process, we took a hard look at our portfolio to ensure each business we own meets our criteria for returns, margins and strategic focus. Based on this comprehensive assessment, we have determined that our businesses are stronger together.

Collectively, our mobility benefits in Corporate Payments segments give us an exposure to large, growing and operationally complex markets where we believe our scale, payments intelligence and proprietary data provide us with a strong competitive advantage. We also benefit from cross-selling various products, and we can point to more than 200 discrete examples so far this year.

Our businesses provide necessary balance supporting financial resilience through different macroeconomic cycles. Importantly, they all share a common backbone, including Wex Bank, a global compliance function, risk and regulatory management intelligent spend controls, our technology infrastructure and advanced fraud prevention, which creates operating leverage, lower unit costs and it accelerates innovation across segments.

We believe each of our segments will contribute meaningfully to our growth and profitability over the long term and that our unified platform will maximize shareholder value. We are also always open to considering alternative approaches to strategy and business configuration that advance this goal, and we'll continue to evaluate opportunities to refine the portfolio. With that, I would like to outline our 4 foundational competencies that enable us to execute against our strategic pillars and are the engine behind our competitive advantage.

They extend across our portfolio are difficult to replicate and power our customer value proposition. The first core competency is payment intelligence. We integrate payments proprietary data and banking services to deliver actionable insights that help customers make faster, better informed decisions. This is not easy to do. but WEX excels at managing complexity.

For example, in mobility, the insights we provide enable real-time fleet management, helping customers control spend, optimize routing and improve efficiency across millions of daily transactions. Our second core covency is workflow optimization. WEX has a long history of combining payments and workflow, to create differentiated customer value.

For example, in benefits, we offer a complete platform that integrates payments into the broader workflows that employers and employees rely on daily. This is a key differentiator, deepening our role within customers' operations. Our third core competency is scale and infrastructure.

We leverage our global scale, proprietary technology in risk and compliance expertise to reduce friction, offer enhanced control and deliver measurable efficiency gains. For example, in Corporate Payments, our global infrastructure enables us to process high volumes of virtual card transactions securely and seamlessly across markets, delivering reliability, speed and compliance that sets the industry standard.

Finally, our fourth core competencies, industry expertise. We have established ourselves as experts within the markets we serve, and we apply our deep industry expertise to our customers' toughest challenges developing customized solutions that address their needs. With that, I'll shift gears and review our Q3 segment results beginning with mobility.

Mobility remains our largest segment, representing roughly half of revenue. Its competitive strengths come from our closed loop network, which directly connects fuel buyers and sellers and from our scale which allows us to serve the largest and most complex organizations. This is demonstrated by our BPM last quarter. Our data-rich solutions are deeply embedded in our customers' daily operations delivering functional value and creating long-term stickiness.

Our global fraud, credit and compliance capabilities underpin our offerings, benefiting businesses ranging from local contractors to major oil companies. Excluding the benefit from higher fuel prices, Q3 results from the mobility segment were in line with our expectations. Transaction levels were down slightly from the prior year, consistent with the overall market trends.

We continue to operate in a challenging macroeconomic environment with same-store sales in the over-the-road market softening during Q3 and while North American mobility same-store sales mirrored trends seen earlier this year. Amid the dynamic macro, we're focused on maintaining our high retention rates and gaining market share while operating efficiently.

One market where we see opportunity to expand share is small businesses, which we define as fleets with '25 or fewer vehicles. These businesses have historically relied on general purpose credit cards by using our fuel card, they can save on fuel costs, access discounts, manage fraud and better control their expenses. Small businesses have been a core customer segment since Flexus founding, and we believe this segment of the market has tremendous value potential.

Year-to-date, our targeted marketing investments here have resulted in a 12% year-over-year increase in new small business customers. At the same time, we're building on our differentiated offerings to extend our reach and bring in new opportunities including the BP win we announced last quarter.

The conversion of the existing BP portfolio continues to be on track for some time next year with sales to new customers beginning at the end of this year. We're also broadening our opportunity set in mobility through innovation. An example of this is the 104xWEX app, which is designed to help small trucking businesses, a large but underserved part of the market.

This year, those customers have saved more than $300 per month in fuel costs on average by using our app. We're excited to expand our technological reach through our new partnership with Tracker Path a leading mobile app used by more than 1 million professional truck drivers, which we announced earlier this week. We're also excited about the trajectory of Pacer acquired in November 2023 in which we recently rebranded as WEX Field Service Management or WEX FSM.

Although it took longer than we planned to establish momentum, revenue grew a healthy double digits in Q3 and we remain energized by this opportunity as we deepen our position in this attractive adjacent market. Overall, mobility continues to generate strong free cash flow and will remain a consistent growth engine for WEX as we drive expanded and new value-added product and service offerings to customers.

Turning now to benefits which simplifies the complex world of employee benefits administration. For the last decade, the business has grown consistently, now representing approximately 30% of company revenue. Its products and services are deeply embedded in our customers' administration processes, creating strong customer retention and predictable SaaS and custodial revenue streams.

Overall, SaaS account growth was 6% in the quarter, with HSA accounts on our platform, up 7% in Q3, bringing us to more than 8.8 million HSA accounts. This represents more than 20% of all HSA accounts in the country. We're currently in our open enrollment sales cycle and the pipeline remains strong. According to the 2025 Devenir mid-year report WEX retained its position as the fifth largest HSA custodian in the market.

Notably, we serve as a technology partner to 7 of the top 10 custodians listed in the report. Over the long term, we will continue to drive volume by elevating awareness of HSAs across the industry, including through leadership and national HSA awareness programs. We remain well positioned for continued growth in the evolving HSA landscape, which offers an expanding TAM.

As we discussed last quarter, we see an opportunity in 2026 with new legislation which will expand HSA eligibility across public health exchanges for the first time in more than a decade. We estimate this could expand the TAM by 3 million to 4 million new accounts and believe we are well positioned to benefit given our unique partner-focused distribution approach.

Our strategy and benefits is to continue to outpace market growth by delivering a compelling product portfolio. Wex Bank provides a distinct advantage here, allowing us to generate higher yields on custodial balances, which supports targeted investments in customer relationships in new business opportunities.

Finally, let me discuss corporate payments, which represents approximately 20% of our revenue and includes 2 major offerings: embedded payments and direct accounts payable solutions. Embedded Payments offers high operating leverage with incremental volumes largely falling to the bottom line due to our scalable technology platform and global compliance infrastructure. We're seeing broad-based adoption across industries, including tech companies offering AP automation, health care payments and expense management.

Our Direct AP solution, which leverages our corporate payments platform is focused on the underserved mid-market and continues to deliver outsized growth with Q3 volumes up more than 20% year-over-year. Customers in industries such as construction, retail, manufacturing and health care choose WEX for our in-house supplier enablement capabilities, which allows us to deliver virtual card adoption with detailed reconciliation data.

As we anticipated, corporate payments returned to revenue growth in Q3 as underlying market performance has improved and we have largely lapped the large OTA transition. Our enhanced platform and disciplined investments in sales are resonating in the market, driving a robust pipeline of new customer opportunities. We're now focused on converting that pipeline into spend volume which will support sustained growth into 2026 and beyond.

From a strategic perspective, we're building on our leadership in embedded payments which is anchored by our travel customers and driven by our industry-leading virtual card issuing engine and expanding into new use cases and markets. At the same time, we're scaling direct AP as a central part of our investment plan, tapping into large expanding addressable market where we're still in the early innings.

Before I hand the call over to Jagtar, yesterday, we announced the appointment of Dave Foss to our Board of Directors effective November 3. This is the result of an extensive search process with the assistance of a leading independent recruiting firm. Dave serves as President of Jack Henry from 2014 to 2022 and Chief Executive Officer; from 2016 until his retirement from the role in 2024.

In addition, he's a Director at CNO Financial, where he shares the Governance and Nominating Committee; His experience across financial services and technology, coupled with his tenure as a public company executive and Board Director will be invaluable as we enter our next phase of profitable growth.

We're confident that the expertise and fresh perspective that Dave brings will yield immediate contributions to our Board and company. On behalf of WEX, I want to extend a warm welcome to Dave. Across the business, our teams are executing with discipline, expanding our competitive advantages and converting our targeted investments into tangible results.

Q3 marked a turning point with acceleration in revenue growth, and we are confident in the opportunities ahead. Our focus remains on delivering sustainable growth, strong margins, attractive returns and robust free cash flow while creating long-term value. With that, I'll turn it over to Jagtar to walk you through our financial performance and updated outlook in more detail. Jagtar?

Thank you, Melissa, and good morning, everyone. As a reminder, in an effort to provide greater transparency into our business and segments, we began publishing a supplemental material stack this year. which can be accessed on the IR section of our website.

Also, comparisons are year-over-year unless otherwise noted. Total revenue in the quarter was $691.8 million, up 3.9%. The impact of foreign exchange rates and fuel prices decreased revenue growth by 0.5%. The revenue was above the top end of the guidance range we provided last quarter. Adjusted earnings per share was $4.59, an increase of 5.5% and partially offset by a decrease of 1.6% related to lower fuel prices and foreign exchange rates.

Adjusted EPS was also above the high end of the guidance range we provided in July. Although fuel prices were lower than last year, they were higher than our guidance assumed, contributing most of the outperformance in addition to some underlying expense benefits. In our Mobility segment, revenue increased 1% despite a drag of 1.4% related to lower fuel prices and foreign exchange rates.

Our payment processing rate was 1.33%, an increase of 2 basis points sequentially. The sequential increase in the net interchange rate is due primarily to merchant pricing and mix. In our Benefits segment, total revenue was $198.1 million, which rose 9.2%. The SaaS account growth of 6% was consistent with the performance in the first half of this year, contributing the majority of the revenue growth.

Custodial investment revenue which represents the interest we earn on custodial cash balances increased 14.9% to $61.7 million earned interest yield increased 15 basis points year-over-year. The Benefits segment continues to capitalize on both the scale we have built and the value derived from our investment portfolio at WEX Bank, which allows us to deliver industry-leading returns on our HSA assets.

Finally, in corporate payments, revenue of $132.8 million increased 4.7%. The Purchase volume in corporate payments declined 0.9% on a year-over-year basis, a notable sequential improvement. The decline in volume was more than offset by an increase in the net interchange rate leading to the revenue growth. We have largely lapped the headwind on created by the large OTA customer transitioning to a new operating model with us and will fully lap this impact in Q4.

In addition, there was a substantial volume decrease for a legacy non-travel embedded payments customer, where we are now earning contractual minimums. Despite the recent volume pressures, the scale of our Corporate Payments segment continues to support a strong margin profile for the business.

With that, let me transition to the balance sheet. Our business operates at attractive margins as a result of the scale and competitive advantages that Melissa talked about earlier. WEX is a business that generates strong recurring revenue which in turn produces reliable free cash flow. This is a strength in all periods, but especially in periods of economic uncertainty and gives us significant capital deployment optionality.

In deploying capital, our approach is guided by 2 core principles. First, we are committed to maintaining a strong balance sheet and ensuring we have the right resources to operate effectively under both normal and stressed conditions, which we do by maintaining appropriate leverage. We ended Q3 with a leverage ratio of 3.25x down from 3.5x at the end of Q1 and within our long-term range of 2.5x to 35x We have historically reduced leverage by about half a turn per year and we'll continue to focus on debt reduction.

Following that, our priority is to strategically invest in our core businesses by targeting investments where we can fortify our competitive positioning deliver attractive returns and capture growth. After addressing these 2 core priorities, we evaluate deploying our remaining capital towards accretive M&A opportunities which must meet strict financial and strategic criteria or returning capital to shareholders through share repurchases.

Every step of our disciplined capital allocation process is grounded by a clear objective to maximize long-term shareholder value. Now let's move to earnings guidance for the fourth quarter and the full year. In Q4, we expect to generate revenue in the range of $646 million to $666 million. We expect adjusted net income EPS to be between $3.76 and $3.96 per diluted share.

For the full year, we expect to report revenue in the range of $2.63 billion to $2.65 billion. We expect adjusted net income EPS and to be between $15.76 and $15.96 per diluted share. Compared to the midpoint of the previous ranges, these represent increases of $19 million in revenue and $0.29 in EPS. The increase represents the outperformance in Q3 and a continuation of the positive revenue trends and expense savings we have seen over the past 2 quarters and a higher fuel price assumption.

Before I conclude my prepared remarks, let me take a moment to share my perspective on the business today. Despite a challenging macro environment, especially in our mobility segment. Combined with the short-term customer transition headwinds in corporate payments, our business continues to demonstrate resiliency and we are seeing sequential improvements.

This momentum has helped offset headwinds from ongoing softness in certain markets, specifically trucking. As we approach 2026 we remain cognizant of the macro uncertainty, but are encouraged by the building blocks we've established this year. In corporate payments, we're excited to move past the customer headwind.

In mobility, where we currently expect the sluggish trends to persist in the near term, we believe our targeted sales and marketing efforts, including the recent DP win will contribute to improved results in 2026 and beyond. Finally, we continue to win new business and benefits and enter the open enrollment period from a position of strength.

While it is too early to forecast account growth for 2026, we expect payment processing revenue and interest income, excluding changes in the rate environment, to again outpace account growth as they have historically. Through strategically investing to amplify our core and expand our reach we are well positioned to continue to drive growth and further benefit from the eventual turn in the macro environment.

In closing, our third quarter results underscore the strength of our diversified model and the discipline of our execution. We remain focused on executing our strategy to deliver results that drive sustainable, long-term shareholder value.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Sanjay Sakhrani with KBW.

Melissa, I appreciate all the commentary at the beginning about the review that you guys did. And I can't say I disagree that the businesses work well together. I'm just curious sort of what the conclusion was with the stock and sort of how to get investors to sort of appreciate how all of those factors come together. Was that part of the analysis?

Yes. We talked before the fact that the Board has gone through a strategic review annually. This year, we went even deeper, and we brought in 2 independent investment banks. We talked about that in the call, but both Bank of America and JPMorgan part of that work was to really dig in and look at each of our segments and understand the businesses with their view from an independent perspective, I think that the Board conducted this really thoughtfully with discipline, with objectivity, and they will look through that, really the focus came out of continuing to deliver and execute against our strategic plan.

We talked about the pillars that we have in our plan. And we're now beyond this period of time, we're relapsing the OTA transition, which has had a pretty heavy impact on the stock. So we're excited about how we are growing the business, how are coming out of the third quarter and how that positions us in the future. And that was really the counsel that we had from the investment banks as well.

Got it. Okay. Great. And then just a follow-up question on mobility. I think, Melissa, you mentioned over the road saw some softening during Q3 and -- could you just talk a little bit about that and sort of how that sets up relative to your expectations?

Because I do think you guys were talking a little bit about a pull forward, but is the deterioration a little bit more than expected? And then -- just another one on the financing fee rates. That kind of went up. Was there a price in there or something else?

I'll take the first -- so just from a macro perspective in our mobility business, I'll talk about both the impact to over the road in the rest of the business. And the over-the-road business, which is, as you know, 30% of the business, we saw a pull forward related to the tariffs at the beginning of the year and then some softening in second and third quarter.

When I say it got worse, it got about 0.5 point worse in the third quarter. So not significant. But what we are seeing within that part of the marketplace, it's been in a rolling recession for a number of years. Our sales teams have done an amazing job of selling through that and we continue to do that this year. We're focused on sales. We're focused on retention and think of this as a transient issue that will work its way through eventually.

And then with the rest of the business, what we have seen, we believe, relates to the uncertainty that's happened related to the tariffs where we've seen about negative 4% same-store sales within our local business, that's been pretty consistent in the course of the year. It got maybe a pitch worse in the course of the year. But I would say it's been a bit of a slog.

I think to use that word, getting through this year. And again, we've done a really strong job of selling through that. We've talked about the incremental investments we've made in marketing. We've got 10% more new accounts that have come through that small business channel this year, which is directly related to those investments. And we are really focused on customer retention and again expect this to be transient.

We don't know exactly when it's going to turn. But in our history, we go through these periods of time. And as long as we focus on retaining the customer and building the portfolio, then that works its way through eventually. And then on top of that, we know next year, we've got the conversion of BP that's happening at some point in the year, and that will add between 0.5 to 1 point in revenue in the 12 months after that.

So we have a lot of things that we're working on, where we feel like we're pulling levers of things that we can affect waiting for the macro to evolve.

And then, Sanjay, on your question regarding the financing fee rates. So rates this quarter were pretty comparable to what we've been seeing in the last couple of quarters. It's a big bump when you look at it year-over-year. And there's a couple of reasons for that. So one, we did make some pricing changes last year that went into this year. So that was part of the bump in the rate.

And also, I'd remind you that this quarter last year, you'll recall that there was kind of a onetime event that brought down the financing fee number and the rates as a result -- so when you look at the year-over-year compare, that looks a little odd. But if you look over the last couple of quarters sequentially, you'll see that we're kind of in line with where we've been.

Your next question comes from the line of Darrin Peller with Wolfe Research.

Can we touch a little more on the trends in corporate payments for a minute, just given I know we're now kind of lapping, as you said, some of the headwinds we've been dealing with, which is great to see. But in terms of the overall underlying drivers, anything you're seeing that surprised you either direction around volumes or across travel or B2B.

And maybe you could just buy and reiterate again what you see that business doing and performing really over the next 18 months when we think about the opportunity there? Because it does look like it's someone that should truly reaccelerate as we exit the year again.

Yes. Thank you for the question. So if you look at our core payments business, we're excited about hitting this inflection point. It was important to us to return that segment over the business to growth. we've largely lapped the OTA business model transition in the third quarter. So we've largely got that behind us.

On top of that, we're seeing really good momentum a couple of places that we have made and or extending the product capability across embedded payments. So extending the capability of what we're doing in travel and applying it to other industries that has gone really well in the marketplace.

We're selling we're onboarding. It's a slower onboarding cycle. And so it's good and bad because it gives us visibility into next year, but it takes a little bit of time to move those customers on to our portfolio. but we feel really good about how the products are resonating in the marketplace, how they're selling the customer signings and how they're onboarding.

And also in our AP direct product offering, we've talked about the fact that we had ramped our salespeople there. That has been just a beautiful model where as we've added people, we've actually seen strong production and more than 20% volume growth in this last quarter. So those 2 things give us a lot of confidence as we think about the growth trajectory going forward.

About half the business is travel. So we know that, that will be some of the growth over time, we should be able to grow through that because travel become a smaller part of the model. But as we think about that segment, we talked about our long-term range of 5% to 10%, and we're feeling really good about where we are right now.

Okay. That's helpful. Maybe just my quick follow-up would be on when I think about the benefit side and the OBV and whether that can accelerate benefits in '26, maybe just help us understand your thought process around potentially trying to gain some of those 3 million to 4 million incremental HSC accounts we might see.

Yes. We think of it as a really nice long-term tailwind. These are customers or potential customers that are largely getting access through the public exchanges. So it's a little over 7 million people, which we think is about 3 million to 4 million accounts. We have access to those customers largely through our partner channel, which is -- we think of it as a distinct advantage for us because we're going into the marketplace, not just directly, but through financial institutions and TPAs and people who are health insurance companies as well that sit in that portfolio.

And so -- we believe that we will get our fair share of that. It's going to happen over time. We don't think it's all going to happen immediately. And the nice thing about this is there's nothing we have to do. The platform itself is ready. This is more education and onboarding.

Your next question comes from the line of Mihir Bhatia with Bank of America.

Wanted to start with maybe the mobility segment and the trucking backdrop. Mostly you mentioned, it remains quite challenged. At the same time, you are investing in marketing and growing in that segment. So maybe just spend a few minutes just talking about the underwriting, how you're thinking about underwriting, how you're managing that underwriting? Are you tightening reducing days to pay, things like that. Just trying to understand how you keep credit in check in that segment?

And if you have any concerns about maybe bankruptcy rising same-store sales trends don't start improving?

Yes. Thanks again. So if you go across that segment, 30% is over-the-road business, which you're largely talking about there. We actually had tightened credit standards a while ago, and we've been in this rolling recession for quite some time. And over that period of time, we've spent a lot of time and investment around our risk models.

We feel like we've seen the benefit of that work so that as we're making credit decisions, we're making them in an even more informed way, it's a lot of where we had our initial applications of AI within the company. So, so far, we've seen really good performance in our mobility business, even though we've seen that weakness that's happened over the last few years.

The asset quality continues to look good as well. So we feel really comfortable about the fact that we're extending the right amount of credit to the right customers. And we've done more work around also introducing new payment options, particularly in our North America mobility business, which allows us to have access to customers on more of a prepaid basis, which is part of why we're seeing some success bringing on smaller businesses.

So if you look across the basin, I don't feel like that we're changing the credit quality. We're just being thoughtful about where we're adding new customers, and that's largely because of how we've refined our models. The investments that we've made have been in the North American mobility business, which has a very strong LTV to CAC.

We're seeing that come through right now. We've talked about the fact that over the 2 years following the investments we earned back 4x what we spend in terms of revenue, and so far, that's holding through.

Okay. And maybe just switching a little bit for a second to just fuel interest rate sensitivity, Jagtar maybe if you can just comment a little bit on the -- remind us of the fuel price sensitivity of the business, both on the top and bottom line. And just how quickly does that come through?

Does the -- you -- we talked about the financing pricing changes earlier in response to Sanjay's question. Does that impact that fuel price sensitivity and also just the sensitivity of the business to interest rates as interest rates decline over the next year?

Yes. So on the fuel prices, I just remind you -- we put in a supplemental deck beginning of this year, and we update that sensitivity on a quarterly basis. So that's another area you could look for, roughly speaking, for fuel prices, that one hasn't changed since the beginning of this year, a $0.10 change per gallon in fuel prices on an annualized basis, up or down, will be about $20 million of revenue up or down and that would translate to about $0.35 of EPS.

In terms of speed there, that would be a pretty quick flow through to both revenue and EPS because that sort of directly affects interchange in finance fees that we earn and that would flow through both the processing line as well as the finance fee line because our finance fees to some degree are dependent on the size of the bill, which does fluctuate with fuel prices.

On interest rates, that one has moved a little bit, but still within close to the range that we had talked about last quarter. So 100 basis point change in interest rates up or down would move revenue plus or minus $40 million with $100 million increase, increasing revenue, $40 million, again, on an annualized basis and 100 basis point decrease, decrease revenue, $40 million on an annualized basis.

The difference here is when you get to EPS, it actually flips because of the liabilities in our balance sheet. So a $100 million increase in interest rates would decrease EPS by about $0.30 and minus 100 million -- 100 basis points on interest rate would actually increase EPS by $0.35.

Your next question comes from the line of David Koning with Baird.

Yes, nice job. A couple of questions on mobility. One is, I know you had a tougher comp in Q3 or basically of a tough comp this quarter because Q3 '24 can get a couple of extra days and yet you still accelerated underlying growth.

So I guess, a, are you seeing really pretty good underlying momentum in mobility; and b, was your comment about better growth going forward? Do you mean better organic growth in '26 than $25 million? I'll answer the second part.

[indiscernible] can take the first part that on the second part. Yes, from an organic growth perspective next year, I'm going to put aside macro case and say, we know that we're operating in a difficult macro environment, particularly in our mobility business right now. And we also know that we are having a very strong sales year this year and overall retention rates look comparable to the prior year.

And so all of those things are a positive as you think about rolling into your next year because you get the benefit typically of those sales or these are long-term investments that we're making, and it does take time for that to actually show up in our P&L.

So we do think that, that's going to create some momentum as you go into next year.

And Dave, I'll address your first question on the comp. So looking '24 to '25, days fueling was actually pretty comparable. I know when we went back to 24 million the 24 to 23 compare had some days, if you went a noise in it. This year, it's actually pretty comparable year-to-year. I'd also kind of remind you what I said. I think it was in response to Sanjay or Darren's question around we had some onetime remediation last year, a onetime event that impacted the numbers a little bit and that made it an easier compare this year that added roughly 1 point to 2% of growth. Ex fuel.

Yes. That makes sense. And then I guess for my follow-up, you talked a lot about corporate revenues. Obviously, that's hitting a much easier comp. But on a sequential basis, historically, volume has been down sequentially as people don't travel quite as much in Q4, but yield has been up sequentially and revenues have been -- ended up flat sequentially. And in most historic Q4, are we back to that sort of cadence? Is that kind of how to think of it?

Yes. I think we're back to the cadence where volumes will be down because of travel. We will see interchange processing rates up. Part of that is mix and part of that is we typically have revenue recognition when we hit certain thresholds related to schemes with associations and we'd expect that in the fourth quarter well.

I wouldn't say revenues are flat quarter-over-quarter sequentially. We do typically tend to see some decrease in the Corporate Payments segment from Q3 to Q4.

Okay. Great. Well, nice job, guys.

Your next question comes from the line of James Faucette with Morgan Stanley.

It's Michael [indiscernible] on for James. I just wanted to ask about your perspective on the implications of Visa's new commercial enhanced data program and how you think about the interchange and data implications associated with that.

So great question. As you know, we actually use both schemes. So in our mobility business, it's our own proprietary network with our mobility business where we've extended our scheme, it's been through MasterCard and then in corporate payments, benefits there's a blend of both that are used from an acceptance standpoint, we think of each of those schemes is there's something that's beneficial about each in the different markets and nuances that we use, and we'll continue to think about that going forward with any new product rollouts that are happening.

That's helpful. And maybe, Jagtar, just a quick housekeeping 1 for you on the Benefits SaaS ARPU side. It looks like the year-over-year trend there. continues to improve. But how are you thinking about the exit rate for this year and the potential for that line item to inflect positively in 2016?

Yes. I would say that ARPU. So when you do the math, go to the supplemental schedule for modeling and make sure you're backing out interest that's showing up on the account servicing online to look at kind of ARPU. ARPU has been basically flat, I think, quarter-over-quarter.

I would expect it to roughly remain the same. It will be dependent somewhat on mix and what we ended up selling during selling season. From a modeling standpoint, I wouldn't expect significant increases going into '26 at this point.

Your next question comes from the line of Nate Svensson with Deutsche Bank.

Accelerated trading across the business is very encouraging to see. But I did want to ask again about the end health in the U.S. trucking sector maybe in a little different light. I wanted to know where we're at in terms of the overall capacity reduction across the sector and how you're maybe thinking about the potential impact of the removal of certain CDL holders, which I know has been a big piece of discussion in the media recently.

Yes. Well, actually, when you think about what's happened in the over-the-road space, there has been -- there was a huge oversupply that came from the pandemic, and they've been working through that oversupply issue for the last several years.

You can still see -- if you look at some of the broader indexes like the cash rate and ATA truck tonnage, they're still showing year-over-year volume pressure so to the extent that you're going to see some of that supply continues to come out of the marketplace for that reason or honestly other reasons, I think that the market still needs that to happen to get to more of a normalized rate. We haven't seen any dramatic shift in terms of volume or volume activity. As I said, we went down about half in terms of same-store sales from Q2 to Q3. And I think everybody in this marketplace has been wanting this to change and it hoped it would at the what happened from a tariff perspective, at least within our portfolio, put a little bit more pressure not a lot more, but only about 9% of goods that are moved in the United States are coming from outside the United States, but we've seen some softness in quarters, particularly from Canada to the U.S.

And so you got a couple of things that are combining, I think, this year. You've got the oversupply issue with some tariff noise added on top of that. So continued reduction in supply, I think, is a benefit to this space.

That's super helpful, Melissa. I appreciate it. I did want to follow up with maybe a 2-parter on corporate payments. So the first is, I know last quarter, we talked about a large public fintech company in embedded payment status. I'm just wondering any update on the ramping there? Any early learnings or takeaways from that relationship and then the other question, just on the direct account volume, still strong at 20%.

I think I saw, but it did decelerate a little bit from 25% last quarter. I know it's been a big focus area for investments in your sales force. So just wondering if there's anything going on with macro or underlying trends that might explain the slowdown relative to the increased investments?

Sure. So on both of those things. First, the new customer is onboarded. They're in the process of ramping right now. And so a large amount of that was already in the third quarter, but there's a little bit more as it continues to ramp through the end of the year, which we've assumed in our guidance. Relating to your second question was?

Direct...

Direct. Yes, actually, the direct business did what we thought it was going to do in this quarter. as we have continued to add salespeople, it's been remarkably consistent what we've seen for output from that sales organization. And so anything that's happening there is not related to sales activity. We are seeing a little bit of same-store sales softness within that base customers it's just a few points.

But I would say, similar trends that we're seeing in some of the mobility customer base. There's a little bit less spending year-over-year.

And then I would say that we look at cohort by cohort, how customers are ramping and how that volume goes and is it moving like expectations. So to Melissa's point, I think things are going as expected. And there might be some noise quarter-to-quarter, but we're not seeing any deceleration from expectations.

Your next question comes from the line of Rayna Kumar with Oppenheimer.