Wex, which provides card payment services for corporate and government car fleets, benefits from rising fuel prices and doubles its business.
The Portland, Maine-based company, which also provides payment services for business travel needs and employee health care benefits, announced last week that revenues and profits had soared for the company’s second quarter ended June 30. Wex’s net profit for the quarter more than tripled to $34.1 million from the year-ago quarter and revenue rose 30% to $598.2 million, the company said. in a press release. results press release Thursday.
Wex’s fleet segment customers include the federal government as well as oil companies such as Exxon and major construction companies. In other segments of its business, Wex’s activities cover all sectors, from healthcare to banking.
Wex thrives despite a difficult economic environment. We iInflation hit a 40-year high this year, in part due to a rise in gasoline prices, and the Federal Reserve is raising interest rates in an effort to contain rising prices.
Wex rival FleetCor Technologies is expected to report a similar increase in earnings when it reports results on Wednesday. “Although the spike in fuel prices and a potential slowdown in truckload spot rates may dampen sentiment, we continue to favor WEX amid better execution, particularly in the fuel segment,” said Mizuho Securities analysts in a July 27 note on the two companies.
Also on Thursday, Wex announced it would acquire Exxon Mobil’s portfolio of business card programs, buying the receivables of this credit card program primarily used by small business owners in the United States. In an interview, Wex CEO Melissa Smith explained how the company benefits from management. of these card programs.
“The value proposition we have around these wallets is that we can show that under Wex we have a very strong history of wallet growth,” Smith said.
Wex payments volume also increased during the quarter, with payment volumes increasing 60% to $56.6 billion from the year-ago quarter, the company said.
Wex is focused not only on winning new customers, but also on diversifying its service offerings and increasing its share of customer spend. Exxon falls into the latter category. “It’s a mechanism that allows us to increase our share of wallet, which is an important part of our long-term growth,” Smith said of the Exxon transaction. She declined to say what Wex expected to pay for the acquisition.
Wex’s long-term revenue growth target is 10% to 15%, so it easily exceeded that of the current quarter. The company’s scale and its diversification have allowed the company to maintain growth, Smith said.
She sees no warning signs in the current economic environment that could distract the company from its plan. “We can see some trading activity and it remained very strong in July,” she said.
Yet she hears a different story from clients struggling to hire enough employees. “They feel limited in their ability to pursue every opportunity due to the lack of access to talent,” Smith said. “And then on top of that there’s this added cost of energy costs.”