Good morning. My name is Kyle and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX’s 3Q 2018 Earnings Conference Call. All lines will be placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Steve Elder, you may begin your conference.

Thank you, Kyle, and good morning, everyone. With me today is Melissa Smith, our President and CEO; and our CFO, Roberto Simon. The press release we issued earlier this morning and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our Web site at wexinc.com. A copy of the release and the slide deck have also been included in 8-Ks we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income and adjusted operating margin during our call. Adjustments for this year's third quarter to arrive at these metrics include unrealized gains on financial instruments, net foreign currency remeasurement losses, acquisition-related intangible amortization, other acquisition and divestiture related items, stock-based compensation, restructuring and other costs and impairment charge, debt restructuring and debt issuance cost to amortization, ANI adjustments attributable to non-controlling interest, and certain tax related items as applicable. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis, as we are unable to predict certain elements that are included in reported GAAP results. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income to GAAP net income and Slide 20 of the deck for a reconciliation of GAAP operating income margin to adjusted operating income margin. 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 our press release and the risk factors identified in our Annual Report on Form 10-K filed with the SEC on March 1, 2018 and 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 Smith.

Good morning, everyone, and thank you for joining us today. I’m pleased to report another strong quarter of performance that exceeded our top and bottom line guidance ranges. By executing on our strategies, continuing to innovate, and leveraging our products and services, we continued to win new business and maintain our market leading position within our core verticals. Revenue grew 18% compared to last year's third quarter, our ninth consecutive quarter of double-digit revenue growth, reaching $382.7 million. Net income on a GAAP basis was $1.31 per diluted share and adjusted net income was $2.19 per diluted share, up 53% relative to last year’s third quarter. We had double-digit revenue growth in our Fleet Solutions and Travel and Corporate Solutions segments as well as our U.S. healthcare business. This is the result of solid execution, complemented by favorable macroeconomic conditions. Turning to Slide 4. We carried our momentum into the third quarter following an impressive first half of the year by executing against our strategic pillars and leveraging the underlying strength of their business. We generated solid volume gains which drove organic revenue growth of 8.4% this quarter. This figure excludes the positive impacts from higher fuel prices, foreign exchange rates, the new revenue recognition standard, and M&A activity. I am particularly pleased to see us continue to win new business, deepen existing relationships with our long-time partners, and deliver industry-leading technology to our customers. Our growing market share is proof that our commitment to our strategic pillars is continuing to payoff. Slide 5 highlights a handful of new wins and contract renewals in each of our segments in the third quarter. In Fleet Solutions, revenue growth was 18% relative to the third quarter of 2017, driven by higher volume growth, increased late fees, and strong macroeconomic tailwinds. Our primary…

Good morning, everyone, and thank you, Melissa. As you've heard, we continued to post great financial results this quarter. The strong performance was driven by double-digit top line growth from both the Fleet and Travel and Corporate Solutions segments. Additionally, the U.S. healthcare business also performed better than expected with solid revenue growth. From an earnings point of view, we continued to benefit from macroeconomic trends, a lower tax rate and lower credit losses in the fleet segment both in dollars and basis points. Overall, we are pleased with the third quarter performance with both top and bottom line results exceeding projections. Now, let’s take a look at our results on Slide 8. Total revenue for the third quarter was 382.7 million, an 18% increase over prior year. Non-GAAP adjusted net income was 95.4 million or $2.19 per diluted share. This is an increase of 53% when compared to the same period last year. As Melissa just mentioned, Slide 9 shows our strong overall revenue performance broken down by segments. As in Q1 and Q2 this year, Travel and Corporate Solutions led the growth and continues to beat expectations by posting 36% revenue growth and 11% volume increase. The Fleet segment also had double-digit revenue growth and 7% payment processing transaction growth, building on that momentum we saw in the first half of the year. And finally, the U.S. Healthcare business again had better results than anticipated with 13% growth year-over-year. Before I get into segment results, let’s move quickly onto Slide 10 to highlight the impacts of the new revenue recognition standard. This accounting guidance does not change earnings and reclassified some rebates and network fees. The revenue impact of these changes is an increase of 10.4 million which you can see broken down by each of the segments.…

Thanks everybody for listening in on today's call. It's been another quarter of strong performance and we’re very excited to finish up the year with the same momentum we’ve had so far. Now, I'd like open the line and take your questions.

[Operator Instructions]. Your first question comes from the line of Sanjay Sakhrani. Your line is open.

Thanks. Good morning and good quarter. Melissa, could you talk about how significant those 800 million gallons of fuel additions next year from those new relationships will be to the bottom line? And I’m also just trying to think about whether or not there will be more leverage as we move forward from next year given there might be some costs related to that. Similar question on Noventis, if we think about the volume statistic you guys gave us, is that a fair assumption to make in terms of economic benefit? Would it be comparable to the existing business or would be any different? Thanks.

Sure. So related to your first question, and as I said earlier, we’re excited to be in this ramp up stage right now. So we’ve got these two really large contracts in the early or middle stages of implementation. And as we think about it, what you said is very right. In the beginning of implementation, you ramp up costs. We talked about doing that for Shell related to the back half of this year which we had included in our guidance last quarter and again this quarter. And so, there’s a period of time we’ve ramped costs and those costs include getting prepared to accept calls, getting prepared to accept the additional volume that can go through our operation centers and then sales and marketing as we make sure that we hit the ground running as we start –we talked about, started with sales but then we’ll start sales across the whole portfolio as we bring it over. So there is a period of time that we’re in right now where we’re ramping costs ahead of revenue. And then as we do the migration over, you start to see that flip and so that will flip over during the course of the first half of next year as we bring revenue in, the revenue will start to off some of those costs. And then by the second half of the year is when you start to move into what would be a more of a normal operating run rate. And then if you look historically, we have a history of being able to grow these portfolios. So once you start with the run rate that will happen in the second half of next year, you’ll see the full momentum of that in 2020 plus growth on the portfolio. So…

Okay, great. And then follow-up questions for Roberto. Those credit loss impact that you talked about related to the OTA and the factoring business, is it fair to assume those are one-time? And maybe could you just explicitly quantify those in dollar terms. And then secondly, in Brazil on the finance fee revenue line, I know there were a lot of impacts there, but when we think about the run rate going forward of that line item, because it’s down a lot, could you just explain sort of how we should think about that going forward? Thanks.

Hi. Good morning. So let me take your questions one by one. On the credit loss side, we got those two – you could consider those as nonrecurring. In both sides, both on the OTA business internationally and on the factoring business, we have been growing really very, very well in the past two, three years. So, it’s normal that from time-to-time you get a one-time pop-up on the credit loss. Specifically to the OTA business, I mean great business expansion and great margins on that international side. We took the one-time reserve, 100% of the reserve, and we are today working with the customer to see what can be recovered. From a dollar point of view, we are talking around $2 million. If you flip to the factoring side, same story; great growth, the margin profile is really very, very high. We took a reserve on certain customers and we are working with all of them to see how much of the receivable balance that is overdue can be collected. So I think as we go into the next quarter, we will see more on the factoring side. And this is also approximately 2 million in credit loss. And then flipping to Brazil side, you have I would say three big factors impacting the quarter. Number one, obviously, the economic conditions in Brazil have been created a devaluation of the Brazilian real quarter-over-quarter of almost 20%. The second thing is that we put in place a new securitization facility. This securitization facility is done for two reasons. Number one to better improve our cash flow position in the country; and second, for some revenue recognition changes that were applied in the country. So obviously you have a one-time adjustment there. And finally, on the third side, obviously the business has been suffering in the past two to three quarters and therefore you have also some lack on the revenue side. And finally between – if you look at the other revenue, there is some geography change between finance fee and other revenue. As you look into the future, obviously, it will depend on how all of these variables operate. But we believe that in the second half of 2019, the Brazilian business should start ramping up on the growth side again.

Just to add a little bit on that. On Brazil, we are seeing volume growth and we’re talking specifically about the benefits segment which is it’s a really small part of the overall company. But what we ended up doing about a quarter ago, we liked the business, we really liked the growth trends we had been seeing. What we were concerned about was just renewal from customers. So we stepped back and looked at the product and said, what should we do to totally change the product to make sure that it had the same strength of recurring revenue as we were seeing in other parts of the company? And so we re-launched a product down there. And so that kind of crossover we’re seeing really great volume trends but a negative impact on revenue in that segment. And again that segment is a really small part of the company, that part of the segment in the Brazil business. So you’re going to see – I think what you’ll see over the next year is continued volume growth in that business and that will come through reflected in revenue as you lap the year. And then on top of that what Roberto was talking about is just FX weakness and some demand weakness we’re seeing just because of the economy.

Thank you.

Your next question comes from the line of Darrin Peller. Your line is open.

Hi, guys. Thanks. Nice job. Just to start off quickly with transaction growth and fuel, it sustainably has been in a 7% range. A few competitors are still more challenged on that front. Could you just remind us on the dynamic that’s driving that growth rate? And how sustainable you see that being going forward?

So I was just looking at new sales generation that looks at the number of gallons that we’re producing year-to-date from our sales force. It’s up about 25% in North American fleet. As Roberto was talking about some of the growth trends that we’re seeing, just a huge increase in last year was up over 10% from the year before that. So it’s a combination of a bunch of different things that are coming through. I think the investments that we’ve made in our digital channels are paying off. We’ve added to the outbound sales force. But I’d say across the board, almost every channel that we look at is up and up pretty substantially year-over-year.

That’s good to hear. I guess just a quick follow-up question on the travel side. The volume growth rate decelerated a little bit. Maybe you could just elaborate what’s going on there and how we should think about sustainability? And I guess just broadly speaking the wins you’re having there, the revenue growth rate looks very strong. Just maybe talk more about the sustainability on revenue side and on corporate and then the volume trends in travel will be helpful? Thanks, again, guys.

So let me tell you – the quarter was really good with 36% revenue growth. If you look on a like-for-like basis and you exclude FX, revenue recognition and even the AOC acquisition, the growth was almost 20%. And if you look deeper on the volume and in the past four quarters, we have been growing. Excluding FX, that also affects volume. We have been growing between 12.5% and 16.5%. So great growth. It’s coming from everywhere. It’s coming from the corporate payment business in the U.S. that I said it grew 30%, internationally from all the markets where we are operating and also in the U.S. the OTA business is growing very nicely. So the projections we have for Q4 are very similar in volume growth and we are looking forward not to continue that into the upcoming years.

And then just quickly JCB, how does that add to the corporate opportunity? And I’ll hop back to the queue after this. But thanks again.

Yes, so we talked the last couple of quarters about expanding that market. It’s something that we think is important to our global customers. And Asia Pacific is a place where there are a few more holes in some of the network capabilities. And so we think that the addition of JCB is really important to our customers. We also think it’s a differentiator within the marketplace. And so it will be a draw for new customers in that region of the world. So we’re excited about it. It’s going to take a little bit of time to implement. So we’re talking about implementation towards the end of next year. But we think it’s a really good thing.

All right. Thanks, again, guys.

Your next question comes from the line of Bob Napoli. Your line is open.

Thank you. Good morning, Melissa, Steve and Roberto. The healthcare business looking at – I think Roberto looking long term, you talked about high-teens revenue growth in that business and that would be a reacceleration from this year’s level. What gives you the confidence in that reacceleration and the visibility to be able to call that for the medium to long term?

In a medium term one of the things that gives me confidence is if you look at the growth this year, we talked about one customer bringing some services in-house. If you exclude that, it’s been higher than the high-teens growth. And so we feel good. We look at the pipeline of what we’ve brought in, in new deals and what’s happening within the marketplace itself, just continued growth of the market. And all those things lead into our confidence level of the growth rate in that business.

Bob, good morning. I will add to what Melissa said. If you recall in 2017 on the second half, we brought Bank of America which is a large portfolio. And therefore it has created a bit of a lapping in 2018. But as we look into next year, our confidence on the high teens, as Melissa said, it’s very clear. As a reminder, we bought the business Evolution1 in 2014. For more than three years we outperformed the high teens at around 20% growth on those three prior years. And if we exclude those two items; the Bank of America that is a great win for us and a significant win plus the customers that brought some services in-house, we have been growing still at that 20%. So we have good confidence on the next year on that.

And then you did an acquisition of Noventis and I was wondering if you could comment on the growth rate. But you have – what are your thoughts on additional M&A with Noventis adding to your leverage? The healthcare business seems like an area you want to add but really haven’t done an acquisition for some time. You were rumored to be a bidder for Alegeus, however.

So when we look at where we want to deploy capital, we’re interested in spaces that diversify against fuel, that have high growth profiles in the business. And so both corporate payments – you talked about health. We’re interested in both of those markets or anything that fits that profile. We liked Noventis for a number of reasons. Right now if you look at the B2B payables market, it’s a $9 trillion market. It’s growing. It’s got excellent growth profile. The place that Noventis plays in which is consumer online bill payments, the fulfillment of that has been their historical space, that in itself is $1.4 trillion worth of spend. So it’s just a really large market opportunity which is places that we like to play. We like to spend our capital there. We think that this in itself is a good business. But beyond what they’re doing now, we think there’s capability of attaching it to the integrated payables offering that we have in our business. And so we like the multiplier effect of it. And that’s what we’re looking for more broadly, a marketplace we’re looking for where we can take on plus one and make it into something even greater. If that’s in health, then we are definitely interested in that. If that’s in corporate payments or travel, that’s a place we’re interested as well. And so that’s kind of like the underlying thesis that we’re trying to drive. And at the end of the day we’re also very conscious of the fact that we have to buy things at prices that make sense. And so we’re pretty disciplined about that from – just going through our process perspective. And so we have a lot more things running through the pipeline this year because of just pricing in the market than we normally would. We’re interested in deploying capital but doing it very thoughtfully.

Bob, the only thing I will add is we closed the quarter at 3.3x in terms of leverage ratio. When we closed EFS, we went up to 4.7. So we have come a long way down. Noventis is going to, as I said before, 0.4 of a turn and that will be closer early in 2019. So by the end of the year we expect to close probably around 3.1. So we have room. We have made a ton of changes to our credit facility improving covenants and we believe that if the right transaction is available, as Melissa mentioned, we have the room to do that.

Thank you. I appreciate it.

Your next question comes from the line of James Schneider. Your line is open.

Good morning. Thanks for taking my question. Maybe first of all, a macro question for you, Melissa. Clearly there’s a lot of confirmation in the equity markets but I’m curious about what you’re seeing from a vertical perspective? You talked about marginally positive same-store sales. Are there any verticals that you see out there that are showing significant signs of weakening such that we might be kind of headed into a downturn in any of those verticals that you touch?

Yes, actually what we’re seeing when you look at the U.S. across the different FICs [ph] that we do business and it’s pretty flat. It was up 0.3 which was fairly comparable to last quarter. So we’re not seeing any major changes. It’s just you don’t see growth really anywhere with the exception of construction. It was the only one that was positive and that was less than 1% positive. And the rest of the universe was flat to maybe slightly negative. So from what we’re seeing in the business I would say there’s really no change in the underlying economic environment from what we’re viewing from our customers.

And that’s the same view when we look at the regular credit loss on the health of our portfolio. We don’t see anything different now from what Melissa is saying.

That’s helpful color. Thank you. And then maybe Melissa you quoted a number about U.S. gallons of fuel sales up to 25% year-over-year for this year. Can you kind of clarify for us whether that includes the effect of both Chevron and Shell contracts, larger contracts and some of the corporate contracts you talked about? And then if that’s the total contract value number and if so, how that will kind of tether into the model as we kind of model 2019 growth and beyond?

Those are gallons that have been implemented. So it’s actually not – it does not include in the new contracts that we just talked about with Chevron and Shell. So we feel pretty good. If you look at the pipeline of what we’ve got signed but not yet implemented on top of what – this represents more signed and implemented, we feel good about where we are right now in terms of the growth that we have in the underlying business just by going through and operationalizing what we’ve already captured, I think we feel really good about the position we’re in. And fleet, particularly North American fleet are having a really strong year this year. And Roberto talked about corporate payments and we’ve seen really strong growth there. In the U.S. healthcare business, we feel good about the underlying pipeline and the ramp into next year. So across the portfolio we believe that the technological investments that we’re making and the products we’re bringing in the marketplace that that’s resonating with new contract wins.

Thank you. And then maybe in terms of a clarification to that, if we look at the back half of next year or the end of 2019 when you expect to have both those two large contracts fully ramped. Is there anything that we should think about that why the gallons of fuel growth rate shouldn’t kind of equilibrate to what you just gave us on the U.S. metric plus the size of those two new portfolios coming online, any one-time headwinds or other things to think about.

If you’re talking about in the fleet business --

Yes.

Our goal is to make sure we go through the conversion process and keep our sales force focused on bringing on new business. That’s the goal. It’s a huge amount of effort to just kind of go through just to new volume conversion that’s coming in but we do believe that you’re going to see incremental growth that’s one-time step up that’s coming from the Chevron and Shell contract business.

Thank you.

Your next question comes from the line of Oscar Turner. Your line is open.

Hi, guys. Good morning.

Good morning.

First question on the Fleet segment. I was wondering if you can discuss some of the factors that drove higher finance fees this quarter and also just wondering what kind of growth rate there is sustainable given we’ve seen 20% or better growth for a while now?

This is Roberto. Good morning. We have been very consistent in the past quarters not only on the finance fee but in general on the growth rates for the Fleet segment. As you know, we put some price modernizations in place awhile ago and obviously that were -- that was not in the past two, three years obviously is capitalizing as we move into 2018. But overall the growth rates of both of the finance fee and the payment processing are very similar and obviously they are also affected by higher fuel prices in the year.

And the only thing I’d add is certainly the growth – we’re definitely benefiting in growth from fuel prices but we have strong volume growth. I look at the volume growth and say that it’s an underlying driver that we feel we’re going to continue to deliver on.

Okay, all right. Thanks for that. And then second question just a high-level question on travel. I know last quarter you talked about developing FI channel partnerships. I was wondering if you can give an update on that initiative. And then what could the FI channel distribution contribute to that segment’s growth long term?

Yes, so we continue to develop the pipeline on FIs and we do have interest. So I think you will hear us announce names in the near future, I can’t right now. But there’s interest in that. And what we like about that is again it’s just a huge market. We do well in multichannel environments. We think this is an environment right for multichannel. What we bring to the FI is technology that we have developed over a number of years, both what we’ve developed and than what we’ve acquired over time, which we believe is best in class. And I’d say we’re getting confirmation of that as we’ve gone into the marketplace to look for partners in this space. So we believe that we’re going to add new FIs into the mix. We intend to leverage their sales force for the benefit of both of us so that they get a new source of revenue, something that’s sticky for their customers and we would play a piece of that role being more the technology provider in the back end.

Okay. Thanks for that color. And one last question. I think you guys mentioned that Chevron decided to extend its contract to 13 years. Can you remind us of what the initial term was and what do you think are some of the factors that drove the decision to extend? Thanks.

So the initial term was 10 years which was originally supposed to be converted. So we added on a number of years. It’s part of an overall negotiation with them and they clearly wanted to convert and they were willing to bridge the distance to make sure that that happened.

Okay. Thank you.

I would now like to turn the call back over to Steve Elder. You may continue.

Thank you. I think that's all the time we have for questions today. But we thank you for joining us and we look forward to speaking to you again in February.