WEX Inc. Announces Preliminary Full-Year 2018 Financial Highlights and Anticipated Delay of Form 10-K Filing

SOUTH PORTLAND, Maine–(BUSINESS WIRE)–WEX
Inc.
(NYSE:WEX), announced today that it anticipates a delayed
filing of its Annual Report on Form 10-K for the fiscal year ended
December 31, 2018. The Company plans to file a Form 12b-25, Notification
of Late Filing, with the Securities and Exchange Commission, which will
provide the Company with a 15 calendar-day extension beyond the March 1,
2019 deadline within which to file the annual report on Form 10-K.

The anticipated delay in filing is due to an ongoing internal review of
a discrepancy related to the balance sheet of the Company’s Brazilian
subsidiary. Although the review is ongoing, to date we have not
identified the periods impacted by this discrepancy, which we currently
believe could be up to $70 million. We have not withdrawn reliance on
previously issued financial statements because we do not have
information suggesting that any are materially misstated. Because we do
not know with confidence what portion, if any, of this discrepancy arose
in 2018, the Company is releasing preliminary financial highlights for
the full-year 2018 excluding any adjustments related to the review.
These preliminary amounts may be impacted by the outcome of our review.

For the full year 2018, total revenue is expected to be $1.49 billion.
Net income attributable to shareholders on a GAAP basis is expected to
be $3.73 per diluted share. Non-GAAP adjusted net income per diluted
share is expected to be $8.18. Please see exhibit 1 for a reconciliation
of GAAP net income to adjusted net income.

These are preliminary results and estimates based on current
expectations and are subject to completion of the internal review,
year-end closing adjustments and completion of auditing procedures.
Actual results may differ materially. We are evaluating the impact of
this issue on our internal controls over financial reporting.

2019 Financial Guidance and Assumptions

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

For the full year 2019, the Company expects revenue in the range of
$1.63 billion to $1.67 billion and adjusted net income in the range of
$385 million to $403 million, or $8.80 to $9.20 per diluted share.

Full year 2019 guidance is based on an assumed average U.S. retail fuel
price of $2.63 per gallon. The fuel price referenced is based on the
applicable NYMEX futures price. Our guidance also assumes that fleet
credit loss for the full year will be in the range of 13 to 18 basis
points. Our guidance assumes approximately 43.8 million shares
outstanding for the year.

The Company’s adjusted net income guidance, which is a non-GAAP measure,
excludes unrealized gains and losses on financial instruments, net
foreign currency remeasurement gains and losses, acquisition-related
intangible amortization, other acquisition and divestiture related
items, stock-based compensation, restructuring and other costs,
impairment charges and asset write-offs, gain on divestiture, debt
restructuring and debt issuance cost amortization, non-cash adjustments
related to tax receivable agreement, similar adjustments attributed to
our non-controlling interest and certain tax related items. We are
unable to reconcile our adjusted net income guidance to the comparable
GAAP measure without unreasonable effort because of the difficulty in
predicting the amounts to be adjusted, including but not limited to
foreign currency exchange rates, unrealized gains and losses on
financial instruments, and acquisition and divestiture related items,
which may have a significant impact on our financial results.

Forward-Looking Statement Disclaimer

Certain matters discussed in this press release are “forward-looking
statements” intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such by
the context of the statements, including words such as “believe,”
“expect,” “anticipate,” “plan,” “may,” “would,” “intend,” “estimate,”
“guidance” and other similar expressions, whether in the negative or
affirmative, although not all forward-looking statements contain such
words. These forward-looking statements are based on current
expectations, estimates, forecasts and projections about the industry
and markets in which the Company operates and management’s beliefs and
assumptions, as well as information currently known by management
regarding the internal review. There can be no assurance that: the
preliminary full-year 2018 results provided will not require updates as
determined in connection with the completion of the company’s review of
its Brazilian operations and financial results; that the preliminary
financial guidance provided for the full-year 2019 will be as currently
anticipated; or, as to the financial impact resulting from the
completion of the Company’s review of its Brazilian operations and
financial results. The Company cannot guarantee that it actually will
achieve the financial results, plans, intentions, expectations or
guidance disclosed in the forward-looking statements made. Such
forward-looking statements involve a number of risks and uncertainties,
any one or more of which could cause actual results to differ materially
from those described in such forward-looking statements. Such risks and
uncertainties include or relate to, among other things: the ultimate
outcome of the Company’s internal review; the effects of general
economic conditions on fueling patterns as well as payment and
transaction processing activity; the impact of foreign currency exchange
rates on the Company’s operations, revenue and income; changes in
interest rates; the impact of fluctuations in fuel prices; the effects
of the Company’s business expansion and acquisition efforts; potential
adverse changes to business or employee relationships, including those
resulting from the completion of an acquisition; competitive responses
to any acquisitions; uncertainty of the expected financial performance
of the combined operations following completion of an acquisition; the
ability to successfully integrate the Company’s acquisitions; the
ability to realize anticipated synergies and cost savings; unexpected
costs, charges or expenses resulting from an acquisition; the Company’s
failure to successfully operate and expand ExxonMobil’s European and
Asian commercial fuel card programs; the failure of corporate
investments to result in anticipated strategic value; the impact and
size of credit losses; the impact of changes to the Company’s credit
standards; breaches of the Company’s technology systems or those of
third-party service providers and any resulting negative impact on the
Company’s reputation, liabilities or relationships with customers or
merchants; the Company’s failure to maintain or renew key agreements;
failure to expand the Company’s technological capabilities and service
offerings as rapidly as the Company’s competitors; failure to
successfully implement the Company’s information technology strategies
and capabilities in connection with its technology outsourcing and
insourcing arrangements and any resulting cost associated with that
failure; the actions of regulatory bodies, including banking and
securities regulators, or possible changes in banking or financial
regulations impacting the Company’s industrial bank, the Company as the
corporate parent or other subsidiaries or affiliates; the impact of the
Company’s outstanding notes on its operations; the impact of increased
leverage on the Company’s operations, results or borrowing capacity
generally, and as a result of acquisitions specifically; the incurrence
of impairment charges if the Company’s assessment of the fair value of
certain reporting units changes; the uncertainties of litigation; as
well as other risks and uncertainties identified in Item 1A of the
Company’s Annual Report for the year ended December 31, 2017, filed on
Form 10-K with the Securities and Exchange Commission on March 1, 2018.

The Company’s forward-looking statements do not reflect the potential
future impact of any alliance, merger, acquisition, disposition or stock
repurchases. The forward-looking statements speak only as of the date of
this press release and undue reliance should not be placed on these
statements. The Company disclaims any obligation to update any
forward-looking statements as a result of new information, future events
or otherwise.

About WEX

Powered by the belief that complex payment systems can be made simple,
WEX (NYSE: WEX) is a leading financial technology service provider
across a wide spectrum of sectors, including fleet, travel and
healthcare. WEX operates in more than 10 countries and in more than 20
currencies through more than 3,500 associates around the world. WEX
fleet cards offer 11.5 million vehicles exceptional payment security and
control; Purchase volume in its travel and corporate solutions grew to
$30.3 billion in 2017; And the WEX Health financial technology platform
helps 300,000 employers and more than 25 million consumers better manage
healthcare expenses. For more information, visit www.wexinc.com.

Exhibit 1

Reconciliation of Preliminary* GAAP Net Income Attributable to
Shareholders to Adjusted Net Income Attributable to Shareholders (in
thousands, except per share data) (unaudited)

     

 

                 

Year Ended December 31,

2018 per diluted share 2017 per diluted share
 
Net income attributable to shareholders $162,537 $3.73 $160,266 $3.72
 
Unrealized gains on financial instruments (2,579) (0.06) (1,314) (0.03)
 
Net foreign currency remeasurement loss (gain) 38,800 0.89 (29,919) (0.69)
 
Acquisition-related intangible amortization 138,186 3.17 153,810 3.57
 
Other acquisition and divestiture related items 4,143 0.10 5,000 0.12
 
Stock-based compensation 35,103 0.81 30,487 0.71
 
Restructuring and other costs 13,717 0.31 11,129 0.26
 
Impairment charges and asset write-offs 5,649 0.13 44,171 1.02
 
Gain on divestiture (20,958) (0.49)
 
Debt restructuring and debt issuance cost amortization 14,101 0.32 10,519 0.24
 
Non-cash adjustments related to tax receivable agreement 775 0.02 (15,259) (0.35)
 
ANI adjustments attributable to non-controlling interests (1,370) (0.03) (1,563) (0.04)
 
Tax related items (52,835) (1.21) (113,327) (2.63)
 
Adjusted net income attributable to shareholders $356,227 $8.18 $233,042 $5.41
 

* Preliminary results exclude any potential impacts from review of
discrepancy in Brazil

The Company’s non-GAAP adjusted net income excludes unrealized gains and
losses on financial instruments, net foreign currency remeasurement
gains and losses, acquisition-related intangible amortization, other
acquisition and divestiture related items, stock-based compensation,
restructuring and other costs, impairment charges and asset write-offs,
gain on divestiture, debt restructuring and debt issuance cost
amortization, non-cash adjustments related to tax receivable agreement,
similar adjustments attributable to our non-controlling interest and
certain tax related items.

Although adjusted net income is not calculated in accordance with U.S.
generally accepted accounting principles (“GAAP”), this non-GAAP measure
is integral to the Company’s reporting and planning processes and the
chief operating decision maker of the Company uses segment adjusted
operating income to allocate resources among our operating segments. The
Company considers this measure integral because it excludes the above
specified items that the Company’s management excludes in evaluating the
Company’s performance. Specifically, in addition to evaluating the
Company’s performance on a GAAP basis, management evaluates the
Company’s performance on a basis that excludes the above items because:

  • Exclusion of the non-cash, mark-to-market adjustments on financial
    instruments, including interest rate swap agreements and investment
    securities, helps management identify and assess trends in the
    Company’s underlying business that might otherwise be obscured due to
    quarterly non-cash earnings fluctuations associated with these
    financial instruments.
  • Net foreign currency gains and losses primarily result from the
    remeasurement to functional currency of cash, receivable and payable
    balances, certain intercompany notes denominated in foreign currencies
    and any gain or loss on foreign currency hedges relating to these
    items. The exclusion of these items helps management compare changes
    in operating results between periods that might otherwise be obscured
    due to currency fluctuations.
  • The Company considers certain acquisition-related costs, including
    certain financing costs, investment banking fees, warranty and
    indemnity insurance, certain integration related expenses and
    amortization of acquired intangibles, as well as gains and losses from
    divestitures, to be unpredictable, dependent on factors that may be
    outside of our control and unrelated to the continuing operations of
    the acquired or divested business or the Company. In addition, the
    size and complexity of an acquisition, which often drives the
    magnitude of acquisition-related costs, may not be indicative of such
    future costs. The Company believes that excluding acquisition-related
    costs and gains or losses of divestitures facilitates the comparison
    of our financial results to the Company’s historical operating results
    and to other companies in our industry.
  • Stock-based compensation is different from other forms of
    compensation, as it is a non-cash expense. For example, a cash salary
    generally has a fixed and unvarying cash cost. In contrast, the
    expense associated with an equity-based award is generally unrelated
    to the amount of cash ultimately received by the employee, and the
    cost to the Company is based on a stock-based compensation valuation
    methodology and underlying assumptions that may vary over time.
  • Restructuring and other costs are related to certain identified
    initiatives to further streamline the business, improve the Company’s
    efficiency, create synergies and to globalize the Company’s
    operations, all with an objective to improve scale and increase
    profitability going forward. This also includes other immaterial costs
    that the Company has incurred and are non-operational and
    non-recurring. We exclude these items when evaluating our continuing
    business performance as such items are not consistently occurring and
    do not reflect expected future operating expense, nor do they provide
    insight into the fundamentals of current or past operations of our
    business.
  • Impairment charges and asset write-offs represent non-cash items,
    which do not reflect recurring costs that would be relevant to the
    Company’s continuing operations. In 2018, impairment charges includes
    a goodwill impairment related to Fleet Solutions operations in Latin
    America and an immaterial write-off of computer software once we
    determined that it had no future value. In 2017, we incurred
    impairment charges of certain prepaid services following a strategic
    decision to in-source certain technology functions and on certain
    payment processing software as part of our ongoing platform
    consolidation strategy. The Company believes that excluding these
    nonrecurring expenses facilitates the comparison of our financial
    results to the Company’s historical operating results and to other
    companies in its industry.
  • Debt restructuring and debt issuance cost amortization are unrelated
    to the continuing operations of the Company. Debt restructuring costs
    are not consistently occurring and do not reflect expected future
    operating expense, nor do they provide insight into the fundamentals
    of current or past operations of our business. In addition, since debt
    issuance cost amortization is dependent upon the financing method
    which can vary widely company to company, we believe that excluding
    these costs helps to facilitate comparison to historical results as
    well as to other companies within our industry.
  • The adjustments attributable to non-controlling interests and to
    non-cash adjustments related to our tax receivable agreement have no
    significant impact on the ongoing operations of the business.
  • The tax related items are the difference between the Company’s U.S.
    GAAP tax provision and a pro forma tax provision based upon the
    Company’s adjusted net income before taxes as well as the impact from
    certain discrete tax items. The methodology utilized for calculating
    the Company’s adjusted net income tax provision is the same
    methodology utilized in calculating the Company’s U.S. GAAP tax
    provision.

For the same reasons, WEX believes that adjusted net income may also be
useful to investors as one means of evaluating the Company’s
performance. However, because adjusted net income is a non-GAAP measure,
it should not be considered as a substitute for, or superior to, net
income, operating income or cash flows from operating activities as
determined in accordance with GAAP. In addition, adjusted net income as
used by WEX may not be comparable to similarly titled measures employed
by other companies.

Contacts

Media: Jessica Roy
[email protected]
207.523.6763

Investors:
Steve Elder
[email protected]
207.523.7769

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