Q3 2023 WEX Inc Earnings Call

Thank you for standing by my name is Bailey and I will be your conference operator today.

At this time I would like to welcome everyone to the works Q3 2023 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a Q question and answer session. Please limit your questions to one initial and one follow up if you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question again press star and the number one.

I will now hand, the call over to Melissa Smith CEO.

Thanks Bailey.

Before we began our pre recorded remarks I wanted to take a moment and acknowledge the mass shooting that occurred last night in Lewiston, Maine, and the ongoing search for the shooter.

As a mainer and leading wanted maine's largest companies.

I'm shocked horrified and saddened by these events.

We have approximately 200 employees in Maine.

Many of whom live in Lewiston or in the vicinity.

Our hearts are with those who have lost loved ones in the sense of the strategy.

Our Hearts are also with the stellar work service and our community members that are now sheltering in their own homes, many with young children.

We praise the work of those that protect our community and hope that this tragedy comes to an end shortly and we can move toward breathing without fear of it continuing.

It's a reminder, that the tragedy that happens all over the world today doesn't escape any corner.

We appreciate you letting your heart's today to those that are suffering in this corner of the world.

Bailey. Please begin our pre recorded remarks, and Jack and I will open it up for Q&A thereafter.

Okay.

Thank you operator, and good morning, everyone.

With me today is Marty Smith, our chairman and CEO and Jack turning to <unk> our CFO.

The press release, we issued earlier this morning, a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at <unk> Dot com.

Copy of the release has also been included in an 8-K, we filed with the SEC earlier this morning.

As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income attributable to shareholders, which we refer to as adjusted net income or NII.

Adjusted operating income and related margin as well as adjusted free cash flow during our call. Please.

Please see exhibit one 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 1095.

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 for the year ended December 31 2022.

Filed with the SEC on February 28, 2023.

And in our quarterly reports on Form 10-Q for the quarters ended March 31, 2023, and June 32023 filed with the SEC on April 27, 2023, and July 27 2023, respectively.

And 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, Steve and good morning, everyone. We appreciate you joining us today.

Third quarter marked another strong period of financial results for works, along with meaningful progress against our strategic initiatives.

In addition, we announced today that we have entered into a definitive agreement to purchase field service management software provider Peyser, which I'll discuss in more detail momentarily.

I'm delighted to share that we were able to delivered record highs for revenue and adjusted net income per share in the third quarter.

We beat the top end of our guidance range for both measures and exceeded the midpoint of guidance by $17 million and 35, respectively.

Our performance this quarter positions us to continue driving growth across the business heading into the end of the year.

Now, let's discuss our financial results in more detail.

Revenue for the quarter increased 6% year over year, Bruce marks another record high quarter at $651 million.

This increase of $35 million over last year with a result of 19% growth in our corporate payments segment and 34% growth in our benefit segment.

Similar to the second quarter fuel prices declined year over year, reducing mobility revenue by $32 million and more than offsetting underlying growth in this segment, resulting in an overall decline in mobility revenue of 7%.

<unk> ability to drive top line growth. Despite the continued fill price headwinds reflects our strong momentum and resilient business model.

Revenue in the quarter grew an impressive 10% on a macro neutral basis, which we continue to find is excluding the impact of fluctuations in fuel prices and foreign exchange rates.

<unk> volume growth significantly lower credit losses, and our operational improvement efforts resulted in record high adjusted net income per diluted share of $4 five.

An increase of 15% versus last year, even with fuel price headwinds.

Total volume processed across the organization in the third quarter increased seven 6% year over year to $61 9 billion, which is also a record high led by contributions from our corporate payments and benefit segments.

Turn to updates on each of our segments.

Starting with benefits this year marks the 20th anniversary of the health savings account, which was recognized on national HSA awareness day on October 15.

In 2020, we started serving as custodian of HSA accounts and our growth. This year is now made us the fifth largest HSA custodian in the market. According to the Devon are mid year report.

In addition to works being a top 10, HSA provider or benefits technology is used by nine of the other top 20 HSA providers.

To that point this quarter works earned the business of a fortune 500 company in the energy sector. We won this business because we offered a best in class HSA experience for their employees with a diverse range of investment choices. In addition to our data integration capabilities for the client's current medical provider.

Benefit administration platform and payroll platform.

In corporate payments purchase volumes increased 35% year over year, driven by strong travel volume in every region of the world.

We believe that we are outpacing the OTA market growth, which we estimate and growing in the range of 8% to 10% based on recent market trends.

By capitalizing on the shift in the market to settling transactions with virtual cards.

We believe we will continue to benefit from this shift is online travel agencies choose wax due to our differentiated product offering and deep expertise in this space.

Across the segment were pleased to sign a number of renewals and expanded relationships with customers, including an expanded relationship with business lodging technology Company Hotel engine.

Growth in travel coupled with the continued growth of our embedded payments product and director corporate model has set us up with some great momentum.

And mobility, we're pleased to have renewed our contract with the state of Georgia into the implementing the Canadian heavy truck portfolio of element fleet management, both longtime <unk> customers at.

At the same time, our sales and marketing engine continues to sign new small business customers, while balancing with more dynamic credit policies that we put in place last year.

During Q3, we added approximately 270000, new vehicles compared to Q2 with approximately half of our new sales to local fleets coming in through digital channels.

Thank you for standing by.

Bailey: My name is Bailey and I will be your conference operator today. At this time I would like to welcome everyone to the WEX Q3 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a Q question and answer session. Please limit your question to one initial and one follow up. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

We believe the enhanced credit policies that we put in place resulted in a dramatic reduction in losses over a short period of time.

<unk> has a long history of balancing our sales and marketing engine and credit policy to drive growth and profitability in this segment.

We continue to be pleased with our performance and growth prospects and mobility, our superior product and service offering continues to outpace our competitors.

Melissa Smith: If you would like to withdraw your question, again, press star and the number one, I will now hand the call over to Melissa Smith CEO. Thanks Bailey.

Given the strength of our mobility franchise with more than 600000 commercial fleet customers worldwide. We believe there is an opportunity to drive incrementally higher growth.

Melissa Smith: Before we begin our prerecord of remarks, I want to take a moment and acknowledge the mass shooting that occurred last night in Lewis and Maine and the ongoing search for the shooter. As a minor and leading one of Maine's largest companies, I'm shocked, horrified and saddened by these events. We have approximately 12 hundred employees in Maine, many of whom live in Lewston or in the vicinity. Our hearts are with those who have lost loved ones in the senseless strategy.

To that point I wanted to give you an update on additional solutions aimed at our mobility customers.

We firmly believe that the convergence of software and payments is a secular trend that informs how we build new products and guide through our M&A activity.

To that end I'm excited to announce today that <unk>.

We've entered into a definitive agreement to purchase Peyser, a leading cloud native field service management software.

Melissa Smith: Our hearts are also with those fellow wexers in our community members that are now sheltering in their own homes, many with young children. We praise the work of those that protect our community and hope that this tragedy comes to an end shortly and we can move toward grieving without fear of it continuing. It's a reminder that the tragedy that happens all over the world today doesn't escape any corner. We appreciate you lending your heart today to those that are suffering in this corner of the world.

We expect pacer to strengthen our relationships with vertical customers in our mobility segment, allowing us to match our world class payment capabilities with integrated software they create durable value to our customer base.

<unk> anticipated acquisition is an example of us finding a high growth market with a customer base that overlaps with our current customer footprint, a great product and service offering to address the needs of these customers and a strong team that aligns with our purpose of simplifying the business of running a business.

Melissa Smith: Bailey, please begin our prerecorded remarks and Jack Tara and I will open it up for Q&A thereafter. Thank you, operator, and good morning, everyone.

Paper is high growth top tier service offering and feature set which includes end to end business management software and enables a wide range of payment solutions is at the convergence of SaaS and payments.

Steven Elder: With me today is Melissa Smith, our chair and CEO and Jaguar and Rua, our CFO. The press release we issued earlier this morning, the slide deck to walk through our prepared remarks have been posted to the investor relations section of our website at Wexink.com. A copy of the release has also been included in an AK we filed with the SEC earlier this morning. As a reminder, we will be discussing non-gap metrics specifically adjusted net income attributable to shareholders which we refer to as adjusted net income or A and I adjusted operating income and related margin as well as adjusted free cash flow during our call.

<unk> has initially focused on HVAC plumbing, and roofing verticals and has deep relationships and distribution partnerships with key Oems in these industries, which offer them the privileged position to deliver to small businesses and certain trades. We're excited by the prospect of welcoming peyser to wax.

We continue to view EV as another exciting opportunity for works as a reminder, we estimate the size of the commercial EV market will be between one five and $2 billion of revenue by 2030 are.

Steven Elder: Please the exhibit one of the press release for an explanation and reconciliation of these non-gap measures. The company provides revenue guidance on a gap basis and earnings guidance on a non-gap basis due to the uncertainty and the indeterminate amount of certain elements that are included in reported gap 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 our press release and the risk factors identified in our annual report on form 10K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

<unk> strategy remains focused on meeting our customers, where they're at on their EV journey, and providing fleet managers with the tools that they need to plan their energy transition manage their vehicles in a mixed fleet world and help ensure their evs can be conveniently controlled and charged across a distributed environment.

We've made progress against many of our initiatives within EV, including our driver Dash mobile App, which we recently expanded to include the <unk> functionality.

This means that through their existing works portal fleet managers can enable their cards for EV charging and use our integrated app driver dash defined activate pay for and track charges. All on one credit line invoice dataset and management interface.

Steven Elder: And in our quarterly reports on form 10Q for the quarters ended March 31, 2023 and June 30, 2023, filed with the SEC on April 27, 2023 and July 27, 2023, and Subsequent SEC Filing. While we may update forward looking statements in the future, we just claim any obligation to do so. You should not place undue reliance on these forward looking statements, all of which speak only as of today.

This simplifies customer workflows, while eliminating the need for drivers to have multiple fabs and apps in order to manage their mix fleet.

We've also been in the testing phase of an at home reimbursement product in the United States.

Im excited to share that we anticipate rolling out the initial phase of this product later this year.

Back to roll out depot functionality in early 2024.

Melissa Smith: With that, I'll turn the call over to Melissa. Thank you, Steven. Good morning, everyone. We appreciate you joining us today. The third quarter marked another strong period of financial results for Wex along with meaning full progress against our strategic initiatives.

Overall, our strategy is to ensure the workflow and payment surrounding mixed fleets are simplified.

As a reminder, at our Investor day in March of 2022, we stated that we expected to earn between $5 and $20 per vehicle per month for our <unk> customers.

Melissa Smith: In addition, we announced today that we have entered into a definitive agreement to purchase field service management software provider, PASER, which I'll discuss in more detail momentarily. I'm delighted to share that we were able to deliver record highs for revenue and adjusted net income per share in the third quarter. We beat the top end of our guidance range for both measures and exceeded the midpoint of guidance. By $17 million and $35 cents respectively. Our performance this quarter positions us to continue driving growth across the business, heading into the end of the year.

This compares to an average of about $6 for ice vehicles today.

We're very encouraged by the fact that we are already at the low end of this range with only a small amount of product rolled out to the market.

Our research shows that fleet managers are willing to pay for a <unk> solution that helps them integrate evs in their fleet and operate them efficiently and we're seeing this play out in the market today.

I'll shift gears to discuss the progress we've made executing against our other strategic initiatives this quarter.

I am pleased to announce we've accomplished our cloud migration goal with the migration of the benefits segment in the third quarter.

Melissa Smith: Now let's discuss our financial results in more detail. Revenue for the quarter increased 6% year-over-year, which marks another record high quarter at $651 million. This increase of $35 million over last year with the results of 19% growth in our corporate payment segment and 34% growth in our benefit segment. Similar to the second quarter, field prices declined year-of-year, reducing mobility revenue by $32 million, a more than offsetting underlying growth in the segment, resulting in an overall decline in mobility revenue of 7%.

Our core technology is now cloud based <unk>.

We've also made significant progress in reducing our dependency on physical data centers and are on track to achieve our datacenter reduction goal of consolidated from 33 data centers two seven by the end of 2023.

We will continue our cloud first development philosophy, which enables improved data security infrastructure resiliency.

System availability and speed to market.

Turning to our operational improvement efforts, we remain in a strong position to generate $100 million and run rate cost savings exiting 2024.

Melissa Smith: Wex's ability to drive top-lying growth despite the continued fill price headwind reflects our strong momentum and resilient business model. Revenue in the quarter grew an impressive 10% on a macro-neutral basis, which we continue to find is excluding the impact of fluctuations in field prices and foreign exchange rates. Strong volume growth significantly lower credit losses and our operational improvement efforts resulted in record high adjusted that income per diluted share of $4.5 in increase of 15% versus last year, even with fill price headwinds.

Currently we are on track to achieve $75 million on a run rate basis by the end of this year, which is ahead of our original expectations.

We are reinvesting a portion of these cost savings and enhancing capabilities, including our digital product and technology groups, our risk management capabilities and tools and centers of excellence and we look forward to continuing these efforts for next year, when we expect the benefits to be more visible.

Finally, I'd like to speak to our ongoing efforts to modernize the way, we operate while enhancing our customer experiences and products.

Melissa Smith: Total volume process across the organization in the third quarter increased 7.6% year-over-year to $61.9 billion, which is also a record high led by contributions from our corporate payments and benefits segments.

We're taking advantage of enterprise level tools, which have enhanced AI capabilities as well as developing bespoke AI based approaches internally.

We believe an accumulation of many small projects and initiatives will lead to big results over time.

Melissa Smith: Let me turn to updates on each of our segments. Starting with benefits, this year marks the 20th anniversary of the Health Savings account, which was recognized on National HSA Awareness Day on October 15th. In 2020, we started serving as custodian of HSA accounts, and our growth this year has now made us the fifth largest HSA custodian in the market, according to the Devaneer Midyear report. In addition to WEX being a top 10 HSA provider, our benefits technology is used by nine of the other top 20 HSA providers.

This year, we've conducted more than 50, AI experiments across the enterprise, which have driven customer focused outcomes uncovered opportunities for workflow efficiencies and identified many other opportunities for us to continue driving value by leveraging these technologies.

Our efforts and using machine learning and a credit adjudication and monitoring have helped to reduce delinquencies significantly. This year as you can see in our credit loss results.

As we head towards the end of 2023 I continue to be confident in our path forward in the long term growth potential of our business.

Melissa Smith: To that point, this quarter wexed earned the business of a Fortune 500 company in the energy sector. We went this business because we offered a best-in-class HSA experience for their employees with a diverse range of investment choices. In addition to our data integration capabilities with a client's current medical provider, benefit administrations platform, and payroll platform.

We continue to execute against our strategic initiatives and drive strong financial results all.

All while remaining resilient through a variety of macroeconomic and geopolitical environment.

Our scale and automation initiatives are paying off creating a flywheel of strengthen experiences for customers and employees, while creating additional earnings to shareholders.

Melissa Smith: In corporate payments, purchase volumes increased 35% year over year driven by strong travel volume in every region of the world. We believe that we are outpacing the OTA market growth, which we estimate and growing in a range of 8 to 10% based on recent market trends. By capitalizing on the shift in the market to settling transactions with virtual cards, we believe we will continue to benefit from this shift as online travel agencies choose WEX due to our differentiated product offering and deep expertise in the space.

We're in the enviable position of deploying capital across a number of fronts, including efforts to grow the business.

Opportunistically, returning capital to our shareholders through stock buybacks and funding acquisitions that expand our addressable market.

Because of the significant amount of cash we generate we're able to do all of this while maintaining a solid balance sheet with low leverage.

To that end I'm excited to share that we are again, raising our full year guidance to both revenue and earnings with that I'll turn it over to <unk> to walk you through this quarters financial performance in more detail.

Melissa Smith: Across this segment, we're pleased to sign a number of renewals in expanded relationships with customers, including an expanded relationship with business lodging technology company Hotel Engine. Growth in travel coupled with a continued growth of our embedded payments product and direct to corporate model has set us up with some great momentum.

Thanks, Melissa and good morning, everyone.

We reported a strong third quarter with record high revenue and adjusted EPS results that show continued execution against our strategic initiatives, even against a year over year decline in fuel prices.

Melissa Smith: In mobility, we're pleased to have renewed our contract with the state of Georgia and to be implementing the Canadian Heavy Truck portfolio of element sleep management, both a long-time WEX customers. At the same time, our sale in market engines continues to sign new small business customers, while balancing with more dynamic credit policies that we put in place last year. During Q3, we added approximately 270,000 new vehicles compared to Q2 with approximately half of our new sales to local fleets coming into digital channels.

Well, let's start with the quarter results.

Third quarter total revenue exceeded the top end of our guidance by $17 million due to a combination of higher expected fuel prices.

<unk> strong growth in both our corporate payments and benefit segments.

Total revenue for Q3 came in at a record high of $651 4 million or <unk>.

A 6% increase over Q3 2022 with more than 80% of revenue for the quarter recurring in nature.

Melissa Smith: We believe the enhanced credit policies that we put in place resulted in a dramatic reduction in losses over a short period of time. WEX has a long history of balancing our sales and marketing engine and credit policy to drive growth and profitability in the segment. We continue to be pleased with our performance and growth prospects in mobility. Our superior product and service offering continues to outpace our competitors, given the strength of our mobility franchise with more than 600,000 commercial fleet customers worldwide, we believe there's an opportunity to drive incrementally higher growth.

As a reminder, we define recurring revenue.

<unk> processing and account servicing revenue revenue from our factoring business.

Income from custodial HSA cash assets transaction processing fees and other smaller items.

In total adjusted operating income margin for the company was 41, 8%, which is up from 39, 1% last year driven by a combination of improved credit losses, and the higher margins in our corporate payments and benefit.

<unk>.

From an earnings perspective.

GAAP basis, we had net income attributable to shareholders of $18 4 million in Q3 or <unk> 42 per share.

Melissa Smith: To that point, I want to give you an update on additional solutions aimed at our mobility customers. We firmly believe that the convergence of software and payments is a secular trend that informs how we build new products and guides our M&A activity.

non-GAAP adjusted net income was $176 8 million.

Or $4.05 per diluted share, which is an increase of 15% at a record high.

Melissa Smith: To that end, I'm excited to announce today that we've entered into a definitive agreement to purchase PASER, a leading cloud-made-of-field service management software. We expect PASER to strengthen our relationships with vertical customers in our mobility segments, allowing us to match our world-class payment capabilities with integrated software that creates durable value to our customer base. This anticipated acquisition is an example of us finding a high growth market with a customer base that overlaps with our current customer footprint, a great product in service offering to address the needs of these customers and a strong team that aligns with our purpose of simplifying the business of running business.

Our results were especially impressive as we continued to navigate the significant year over year decline in fuel prices.

As well as the significant increase in our operating and corporate costs due to a rise in interest rates.

As I've mentioned in previous quarters, our HSA custodial cash balances flow us to mitigate those increases.

Because of our diverse vertical focus businesses strong recurring revenue bells interest rate exposure.

We're able to sustain durable through the cycle revenue and earnings growth through a variety of <unk>.

But the environment.

Now, let's move to segment results starting with mobility.

Mobility revenue for the quarter was $350 1 million.

A 7% decrease from the prior year.

Melissa Smith: And it enables a wide range of payment solutions is that the convergence of staff and payments. Pazer has initially focused on HVAC, plumbing and roofing verticals and has deep relationships and distribution partnerships with key OEMs in these industries, which offer them the privileged position to deliver to small businesses in certain trades. We're excited by the prospect of welcoming Pazer to Wex.

Fuel prices are strong, but definitely treated compared to last year with a domestic average fuel price in Q3 of $3 97.

This $4 50 for 2022.

The year over year, 13% fuel price decline decreased segment revenue by an estimated $32 million.

This fuel price impact to revenue was greater than our overall mobility segment revenue decline of $28 million from the prior year.

Melissa Smith: We continue to view EV as another exciting opportunity for Wex. As a reminder, we estimate the size of the commercial EV market will be between 1.5 and 2 billion of revenue by 23. Our EV strategy remains focused on meeting our customers where they're at on their EV journey and providing fleet managers with the tools that they need to plan their energy transition, manage their vehicles in a mixed fleet world and help ensure their EVs can be conveniently controlled and charged across a distributed environment.

This highlights the lower fuel prices were the primary reasons for the mobility segment revenue declined versus last year, while at a more fundamental level revenue. This quarter continues to reflect a strong core business model with stable volumes year over year.

Similar to last quarter payment processing transactions remained roughly flat year over year, which was in line with our expectations for the quarter.

Local customers in the U S were approximately flat compared to last year, although over the road payment processing transactions remained slightly below year ago levels. The decline was smaller than Q2.

Melissa Smith: We've made progress against many of our initiatives within EVs including our driver dash mobile app, which we recently expanded to include the EV functionality. This means that through their existing Wex portal, fleet managers can enable their cards for EV charging and use our integrated app, driver dash, defined, activate, pay for, and track charges all on one credit line invoiced data set and management interface. This simplifies customer workflows while eliminating the need for drivers to have multiple fogs and apps in order to manage their mixed fleet.

Over the road customers had a 4% increase in direct bill transactions Ah model utilized by our larger trucking fleets, which is reflected in the other revenue line.

Taken together total transactions for OTR customers were up 1% compared to last year, which we consider a great result in a down market and reflects our strong offerings of the vertical.

Melissa Smith: We've also been in the testing phase of an at home reimbursement product in the United States. I'm excited to share that we anticipate rolling out the initial phase of this product later this year and expect to roll out depot functionality in early 2024. Overall, our strategy is to ensure the workflow and payments surrounding mixed fleet are simplified. As a reminder at our investor day in March of 2022, we stated that we expected to earn between $5 and $20 per vehicle per month for our EV customers.

Next let's turn to <unk>.

Net late fee rate decreased four basis points versus the prior year, while finance fee revenue decreased 20%.

The previously mentioned decline in fuel prices.

A 9% decline in number of Blue C.

And a 22% slowdown in our factory revenue caused the decline in revenue.

We believe the decline in the instances.

Instances reflects the tighter credit policies that we have put in place.

While these tighter policies slightly impact our late fee revenue. These policies have also resulted in significantly lower credit losses.

Melissa Smith: This compares to an average of about $6 for ice vehicles today. We're very encouraged by the fact that we're already at the low end of this range with only a small amount of product rolled out to market. Our research shows that fleet managers are willing to pay for a solution that helps them integrate EVs in their fleet and operate them efficiently and we're seeing this play out in the market today.

Taken holistically are a positive earnings impact to the company.

Touch further on credit losses in a moment.

The net interchange rate in mobility segment was $1, one, 8%, which is up eight basis points over the last year.

The increase reflects continued benefits from the interest rate escalator clauses contained in various merchant contracts.

Melissa Smith: I'll shift gears to discuss the progress we've made executing against our other strategic initiatives this quarter.

The rate benefit from lower domestic fuel prices, which is partly offset by negative fuel spreads in Europe and higher rates earned from merchant contract renewals at favorable terms.

Melissa Smith: I'm pleased to announce we've accomplished our cloud migration goal with the segregation of the benefit segment in the third quarter. Our core technology is now cloud based. We've also made significant progress in reducing our dependency on physical data centers and are on track to achieve our data center reduction goal of consolidating from 33 data centers to seven by the end of 2023.

The segment adjusted operating income margin for the quarter was 45, 6% down from 46, 2% in Q3 2022.

The decrease in margin was primarily due to the decline in fuel prices and higher operating interest costs offset by significantly better credit losses.

I'll now quickly discuss the credit losses, which decreased $41 million in the mobility segment versus last year.

Melissa Smith: The system availability and speed market. Turning to our operational improvement efforts, we remain in a strong position to generate $100 million in run rate cost savings, exiting 2024. Currently, we're on track to achieve $75 million on a run rate basis by the end of this year, which is ahead of our original expectations. We're reinvesting a portion of these cost savings and enhancing capabilities, including our digital products and technology groups, our risk management capabilities and tools and centers of excellence, and we look forward to continuing these efforts for next year when we expect the benefits to be more visible.

And were better than our guidance range at seven basis points of spend volume.

The guidance, we provided incorporated an expectation of lower loss rates based upon improving delinquencies and charge off rates.

And we ended up performing even better than expected.

The elevated loss rates in the over the road trucking business that we saw over the past several quarters moderated.

Likewise, the local fleet customers in the U S had a very low loss rate when compared to historical results.

Fraud losses in this segment are about close to a normal range following several quarters of elevated losses.

Melissa Smith: Finally, I'd like to speak to our ongoing efforts to modernize the way we operate while enhancing our customer experiences and products. Today, we're taking advantage of enterprise level tools, which have enhanced AI capabilities, as well as developing the spoke AI based approaches internally. We believe an accumulation of many small projects and initiatives will lead to big results over time. This year, we've conducted more than 50 AI experiments across the enterprise, which have driven customer focused outcomes, uncovered opportunities for workflow efficiencies, and identified many other opportunities for us to continue driving value by leveraging these technologies. Our efforts in using machine learning and accredited education and monitoring have helped to reduce delinquency significantly this year, as you can see in our credit loss results.

Overall loss rates were further reduced by the release of reserves based on the improved metrics.

Turning now to corporate payments.

Total segment revenue for the quarter increased 19% to $135 2 million.

<unk> volume issued by works was 27 9 billion.

Which is an increase of 35% versus last year.

Interchange rate in this segment was down four basis points sequentially.

We continue to see strength Sumer travel demand that drove strong results in the corporate payments 12.

Travel related customer volume represented approximately 78% of the total spend grew 43% compared to last year.

While revenue from travel related customers was up 35% versus Q3 2022.

Melissa Smith: As we head towards the end of 2023, I continue to be confident in our path forward and the long-term growth potential of our business. We continue to execute against our strategic initiatives and drive strong financial results, all while remaining resilient through a variety of macroeconomic and geopolitical environments. Our scale and automation initiatives are paying off, creating a flywheel of strength and experiences for customers and employees, while creating additional earnings to shareholders.

The interchange rate for travel related customers is down slightly from Q2 based on an expectation of higher rebate tiers being achieved by customers, which is reflected in the strong volume growth.

We continued to watch global travel trends closely for slot signs of a slowdown, but we have continued to see strong trends to date.

Outside of travel our non travel customer volumes were up 11%, although non travel revenue was essentially flat due to an unfavorable mix of products and customers.

Melissa Smith: We're in the enviable position of deploying capital across a number of fronts, including efforts to grow the business, opportunistically returning capital to our shareholders through stock buybacks, and funding acquisitions that expand our adjustable market. Because of the significant amount of cash we generate, we're able to do all of this while maintaining a solid balance sheet with low leverage.

The corporate payments segment delivered an adjusted operating income margin of 61, 3% up from 52, 9% in Q3 last year driven by continued acceleration in volume.

Our business model here is very strong in revenue dropped through for this segment.

Jagtar Narula: To that end, I'm excited to share that we are again raising our full year guidance to both revenue and earnings. With that, I'll turn it over to Jaghtar to walk you through this quarter's financial performance in more detail. Thanks, Melissa, and good morning, everyone. We reported a strong third quarter with a record high revenue and adjusted EPS results that show continued execution against our strategic initiatives, even against a year-over-year decline in fuel prices.

Given our relatively fixed cost base.

For example, <unk>.

Here to Q2, the revenue drop through was more than a 100% revenue grew $13 million, while adjusted operating income grew $16 million.

This includes a one time benefit from a credit loss reserve release, our revenue drop through was still strong excluding this benefit and.

We were pleased with the performance.

Finally, let's look at the business segment.

Jagtar Narula: Now, let's start with the quarter results. For the third quarter, total revenue exceeded the top end of our guidance by $17 million due to a combination of higher expected fuel prices and continued strong growth in both our corporate payments and benefit segments. Total revenue for Q3 came in at a record high of $651.4 million, a 6% increase over Q3 2022 with more than 80% of revenue for the quarter recurring in nature.

We again achieved strong results in this segment with Q3 revenue of $166 1 million.

Which is an increase of $42 million or 34% over the prior year.

SaaS accounts grew 9% in Q3 versus the prior year.

This is the segment purchase volume increased 11% leading to a 9% increase in payment processing revenue.

We also realized approximately $44 million in revenue from the custodial HSA cash deposits that were invested by Westpac.

Jagtar Narula: As a reminder, we defined recurring revenue as payment processing and account servicing revenue, revenue from our factory business, income from custodial HSA cash assets, transaction processing fees, and other smaller items. In total, adjusted operating income margin for the company was 41.8%, which is up from 39.1% last year, driven by a combination of improved credit losses and higher margins in our corporate payments and benefit segments. From an earnings perspective, on a gap basis, we had net income attributable to shareholders of $18.4 million in Q3 or 42 cents per share.

Funds held at third party beds compared to $16 million last year.

Approximately $21 million of the revenue increase this segment is due to the average interest rates earned on these balances increasing from $2 three 7% last year to $4 five zero percent this year.

With the closing of the census transaction in September we continue to expect that it will be roughly neutral on an adjusted net income for the remainder of 2023.

The approximately $10 million of revenue in Q4.

The benefits segment adjusted operating income margin was 35, 4% compared to 24, 4% in 2022.

Jagtar Narula: Non-gap adjustment income was $176.8 million or $4.5 per diluted share, which is an increase of 15% in a record high. Our results were especially impressive as we continued to navigate a significant year-over-year decline in fuel prices, as well as a significant increase in our operating corporate debt costs due to our rise in interest rates. As I mentioned in previous quarters, our HSA custodial cash balances allow us to mitigate those increases. Because of our diverse vertical focus businesses, strong recurring revenue, and balanced interest rate exposure, we are able to sustain durable through the cycle revenue and earnings growth throughout a variety of macroeconomic environments.

The custodial revenue from the invested HSA cash deposits, that's very high incremental margins and is the primary driver of the increase in margin.

Now I will provide an update of the balance sheet and our liquidity position, we remain in a healthy financial position and ended the quarter with $958 million in cash.

We have $925 million of available borrowing capacity and corporate cash of $170 million as defined under the company's credit agreement at quarter Ed.

The total outstanding balance on our revolving line of credit and term loans was $2 7 billion.

You will see the been termed funding program borrowings from Q2 on the balance sheet.

A $500 million increase in short term debt compared to the end of last year.

Jagtar Narula: Now, let's move to segment results starting with mobility. Mobility revenue for the quarter was $350.1 million, a 7% decrease from the prior year. Fuel prices are strong, but have retreated compared to last year with a domestic average fuel price in Q3 of $3.97 versus $4.54 in 2022. The year-over-year 13% fuel price decline decreased segment revenue by an estimated $32 million. This fuel price impact to revenue was greater than our overall mobility segment revenue decline of $28 million from the prior year.

This balance is no longer included in our leverage calculation after agreeing to this change with our bank group.

Additionally in August we repurchased all of our outstanding convertible notes for approximately $370 million from an affiliate of Warburg Pincus.

This transaction will fully removed the potential conversion of the convertible notes into one 6 million shares from our adjusted EPS calculation, which we believe was an attractive use of capital to the to our long term growth aspirations.

Last month, we amended our credit agreement to increase the size of our revolving line of credit by $500 million.

Jagtar Narula: This highlights that lower fuel prices were the primary reason for the mobility segment revenue decline versus last year. While at a more fundamental level, revenue this quarter continues to reflect a strong core business model with stable volumes year-over-year. Similar to last quarter, payment processing transactions remained roughly flat year over year which was in line with our expectations for the quarter. Local customers in the US were approximately flat compared to last year and although over the road payment processing transactions remained slightly below year ago levels, the decline was smaller than in Q2.

This restores most of the revolver capacity used to repurchase the convertible notes and closed the <unk> acquisition.

There were no other significant changes to the credit agreement as part of this amendment.

I'd like to emphasize that even with the investments we have made in the convertible notes share repurchases Ed.

Sensus acquisition, the leverage ratio as defined in the credit agreement stands at two four times, which is just below our long term target of two and a half to three five times.

Jagtar Narula: Over the road customers had a 4% increase in direct build transactions, a model utilized by our larger trucking fleets which is reflected in the other revenue line. Taken together, total transactions for OTR customers were up 1% compared to last year which we consider a great result in the down market and reflects our strong offerings of the vertical.

Our ability to invest in the business return capital to shareholders. While also maintaining conservative debt levels puts us in an enviable position.

Next I would like to turn to cash flow.

<unk> generates a significant amount of cash each year.

Using our definition of adjusted free cash flow was $392 million year to date through Q3.

Jagtar Narula: Next, let's turn to late fees. The net late fee rate decreased 4 basis points versus the prior year while finance fee revenue decreased 20%. The previously mentioned decline in fuel prices, a 9% decline in number of late fees and a 22% slow down in our factory revenue cost to decline in revenue. We believe the decline in late fee instances reflects the tighter credit policies that we have put in place. While these tighter policies slightly impact our late fee revenue, these policies have also resulted in significantly lower credit losses and taken holistically are a positive earnings impact to the company.

Our primary use of free cash flow. So far this year has been to repurchase shares we purchased the convertible note and close the census transaction.

Year to date, we have purchased 804000 shares at a total cost of $146 million.

Including $50 million during Q3.

Since restarting our share repurchase program in 2022, we have repurchased approximately two 7 million shares at a cost of $437 million.

Which equates to an average cost of $161 per share.

Looking forward, we will continue to manage capital allocation between organic investment M&A and returning capital to shareholders.

Jagtar Narula: I will touch further on credit losses in a moment. The net interchange rate in mobility segment was 1.18%, which is up 8 basis points over the last year. The increased reflects continued benefits from the interest rate escalator clauses contained in various merchant contracts, the rate benefits from lower domestic fuel prices which is partly offset by negative fuel spreads in Europe, and higher rates earn from merchant contract renewals at favorable terms. The segment adjusted operating income margin for the quarter was 45.6% down from 46.2% in Q3 2022.

Finally, let's move to revenue and earnings guidance for the fourth quarter and full year.

Third quarter was another very good quarter for us and as a result, I am pleased to share that we are raising our guidance for 2023 to reflect those results and trends.

Starting with the fourth quarter, we expect to report revenue in the range of $650 million to $660 million.

We expect.

EPS to be between $3 65.

Is $3 75 per diluted share.

Jagtar Narula: The decreasing margin was primarily due to the decline in fuel prices and higher operating interest costs offset by significantly better credit losses. I will now quickly discuss the credit losses which decreased $41 million in the mobility segment versus last year and were better than our guidance range at 7 basis points of spend volume. The guidance we provided incorporated an expectation of lower loss rates based on improving delinquencies in charge of rates and we ended up performing even better than expected.

For the full year, we expect to report revenue in the range of 253 to 254 billion.

We expect EPS to be between $14 64.

$14 74.

Per diluted share.

For the full year. These updated ranges represented an increase of $35 million in revenue and 44 cents of EPS compared to the midpoint of our previous guidance.

The major moving pieces compared to our prior guidance or the results of Q3.

Jagtar Narula: The elevated loss rates in the over the road trucking business that we saw over the past several quarters moderated. Likewise, the local fleet customers in the US had a very low loss rate when compared to historical results. Fraud losses in the segment are back closed in a normal range following several quarters of elevated losses. Overall, loss rates were further reduced by the release of reserves based on the improved metrics.

Updating our fuel price assumption.

Further improvements in our credit loss assumptions.

<unk> of the share repurchases completed through September and including the Sensus acquisition for the full quarter.

In addition.

We are very excited about the anticipated peyser transaction for the new market opens up and the growth potential.

We entered into a definitive agreement for west to acquire peyser for approximately $250 million.

Jagtar Narula: Turning now to corporate payments, total segment revenue for the quarter increased 19% to $135.2 million purchase volume issued by WEX was $27.9 billion, which is an increase of 35% versus last year.

Subject to additional contingent considerations and certain working capital and other adjustments. The transaction is expected to close in the fourth quarter of this year subject to customary closing conditions.

We expect the acquisition to be slightly dilutive through 2024 X, we expand sales and marketing investments to further drive growth.

Jagtar Narula: It was down four basis points sequentially. We continue to see strength in consumer travel demand that drove strong results in the corporate payments. Travel related customer volume represented approximately 78% of the total spend and we're 43% compared to last year, while revenue from travel related customers was up 35% versus Q3 2022. The interchange rate for travel related customers is down slightly from Q2 based on an expectation of higher rebate tiers being achieved by customers, which is reflected in the strong volume growth.

We anticipate these investments will yield positive results.

Acquisitions will be accretive beginning in 2025.

Finally, while we are not yet providing a 2020 for outlook.

I did want to highlight interest rate swaps that are outstanding and will mature in the course of the next year.

As of the end of the latest quarter the collective notional amount of our interest rate swaps was $1 1 billion.

We do have $200 million.

Maturing in December of this year and another $300 billion that will mature in may of 2024.

Jagtar Narula: We continue to watch global travel trends closely for slide signs of a slowdown, but we have continued to see strong trends to date. Outside of travel, our non-travel customer volumes were up 11% although non-travel revenue was essentially flat due to an unfavorable mix of product and customers.

These maturities will increase our interest expense is 2020 for borrowing any unforeseen changes in reference rates.

In conclusion, we delivered impressive financial results this quarter.

Especially proud that we again beat our previous quarterly guidance and have increased full year guidance every quarter of this year.

Jagtar Narula: The corporate payments segment delivered an adjusted operating income margin of 61.3% up from 52.9% in Q3 last year, driven by continued acceleration and volume. Our business model here is very strong and revenue drops through for this segment is high given our relatively fixed cost base. For example, compared to Q2, the revenue drop through was more than 100%, revenue growth 13 million while adjusted operating income brews 16 million. Although this includes a one-time benefit from a credit loss reserve release, our revenue drop through was still strong, excluding this benefit, and we were pleased with the performance.

Our performance in Q3 positions us well to continue driving revenue growth and serving our customers efficiently in the quarters ahead.

Operator, please open the lines for questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Please limit your questions to one initial and one follow up.

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

Yeah.

Thanks, guys look it's really nice to see the growth and the benefits in the travel side.

I don't want to hold even though on a question we're getting from investors around the decline in macro adjusted mobility growth rates just understanding the credit management is better there, but just I think it was 1% macro adjusted we're getting to you.

Jagtar Narula: Finally, let's look at the benefit segment. We again achieved strong results in the segment with Q3 revenue of $166.1 million, which is an increase of $42 million or 34% over the prior year. SAS accounts through 9% in Q3 versus the prior year. Benefit segment purchase volume increased 11%, leading to a 9% increase in payment processing revenue. We also realized approximately $44 million in revenue from the custodial HSA cash deposits that were invested by Wets Bank and funds held at third-party bens compared to $16 million last year.

It was a bit lower than we thought so maybe just touch on on that trend line and what do you think we should consider and look at for the opportunity on that business, especially if the outlook if the outlook on the freight market could turnaround also thanks guys.

Sure happy to.

So first of all if you look at our growth in the fleet segment. There is a couple of things that are impacting it this quarter.

One there is less business days year over year is about 2% last year over year. So the FX comparability between last year and this year and would affect if youre looking trend line from Q2 to Q3.

Jagtar Narula: Approximately $21 million for the revenue increase this segment is due to the average interest rate earn on these balances increasing from 2.37% last year to 4.50% this year. With the closing of the extensive transactions of September, we continue to expect that it will be roughly neutral on an adjusted debt income for the remainder of 2023 and add approximately $10 million of revenue in Q4. The benefit segment adjusted operating income margin was 35.4% compared to 24.4% in 2022. The custodial revenue from the invested HSA cash deposits has very high incremental margins and is the primary driver of the increasing margin.

The things that are the same as what you saw last quarter, there's a negative 3% same store sales coming through in the over the road marketplace. So that freight recession is continuing to happen.

On the business and where it's still down about 2% from attrition compared to historical norms based on some of the credit actions that we took.

Last year.

Those two things are continuing we're also seeing.

A shift in activity in the over the road marketplace similar to what we've seen earlier this year, where there's more movement to the larger over the road trucking companies, which effects mix, we're seeing more volume coming through this unfunded versus funded so just a few things that I would say some of which we.

We do expect to continue for a period of time.

Jagtar Narula: Now, I will provide an update of the balance sheet in our liquidity position. We remain in a healthy financial position and end of the quarter with $958 million in cash. We have $925 million of available borrowing capacity and corporate cash of $170 million is defined under the company's credit agreement at quarter end. The total outstanding balance in our revolving line of credit in term loads was $2.7 billion. You will see the bank term funding program borrowings from Q2 on the balance sheet as a $500 million increase in short term debt compared to the end of last year.

We are seeing great sales and from a sales perspective, our sales pipelines are very full closures are.

Very strong and we've continued to modify the digital marketing apparatus that we have.

To bring in even higher quality leads in keeping with the changes that we're making on the credit side. So from a long term perspective, the things that we're looking at.

Look really good.

Feel really good about sales, we feel really good about customers coming in the quality of the customers that are coming in are higher quality then.

Prior year and a lot of the work that we're doing is optimizing.

The idea of profitability for the customers that we are improving.

Jagtar Narula: This balance is no longer included in our leverage calculation after agreeing to this change with our bank group. Additionally, in August, we repurchased all of our outstanding convertible notes for approximately $370 million from an affiliate of Warburg Pinkus. This transaction will fully remove the potential conversion of the convertible notes into 1.6 million shares from our adjusted EPS calculation, which we believe was an attractive use of capital given our long term growth aspirations.

So we do expect that Youll see some incremental benefit of that going forward in the future to with with both higher approval rates and limited impact on credit loss.

Yes, so the only thing.

Okay, sorry got sorry to ask this to say the only thing I'd add to that is as I mentioned in my prepared remarks late fees were down as well.

We've talked and mostly talked about the improving quality of the portfolio and I mentioned in the prepared remarks Lee.

Pieces down, but yes that reflects our focus on quality applications.

Jagtar Narula: Last month, we amended our credit agreement to increase the size of our revolving line of credit by $500 million. This restored most of the revolver capacity used to repurchase the convertible notes and closed the assensus acquisition.

Proving quality of the portfolio.

We more than made up for that.

Credit losses, So I think from a earnings bottom line perspective.

It's very good result that you see a little bit on the topline and perfect.

Understood.

When you think about the medium term I mean is the mid single or mid to high single digit growth in the segment still very much in your mind reasonable to think about for the next few years, obviously, putting aside a couple of quarters here and there.

Jagtar Narula: There were no other significant changes to the credit agreement as part of this amendment. I would like to emphasize that even with the investments we have made in the convertible notes, share repurchases and assensus acquisition, the leverage ratio as defined in the credit agreement stands at 2.4 times, which is just below our long term target of 2.5 to 3.5 times. Our ability to invest in the business, return capital to shareholders, while also maintaining conservative debt levels, puts us in an enviable position.

And we feel really good about it we've given long term guidance of 48% for that segment in.

We're gearing towards that I would say just kind of at the top of the house, we're gearing the company to the 10% to 15% macro adjusted long term guidance range that we have out there the 15% to 20% on Eni EPS I mean, thats really in the forefront of our minds and how we're making choices in this segment.

<unk>.

Jagtar Narula: Next, I would like to turn to cash flow. Wex generates a significant amount of cash each year. Using our definition, adjusted free cash flow was $392 million year-to-date through Q3. Our primary use of free cash flow so far this year has been to repurchase shares, repurchase the convertible notes and close the assensus transaction. Year-to-date, we have purchased 804,000 shares at a total cost of $146 million, including $50 million during Q3 Since restarting our Sheri Purchase Program in 2022, we have repurchased approximately 2.7 million shares at a cost of $437 million, which equates to an average cost of $161 million. Looking forward, we will continue to manage capital allocation between organic investment, M&A, and returning capital to shareholders.

As I said in my remarks, we're actually looking at ways that we can increase that over time in the mobility segment.

We're really excited about pays are and how that creates a cross sell opportunity. We are really excited about where we're positioned with our <unk> functionality.

They also things are new markets, new teams that are adding onto the existing terms and I feel really good about.

There is the engine that we have right now within the company of driving future sales.

Just very quickly these are reps into corporate payments or is that just the cross sell and upsell into the to the fleets I'm just trying to make sure I understand where it fits.

So.

Our intention is that.

It's a synergy with the mobility segment because there is.

As most of the mentioned in her prepared remarks, roughly 150000 fleet service companies. The mobility segment that we think we can cross sell to.

We haven't made a determination of where it'll go from a segment reporting standpoint, we will do that in conjunction with issuing the 8-K in Q4 correct.

Michael This is Jeff.

Okay.

Yes.

Great Alright, well congrats on that deal thanks, guys.

Jagtar Narula: Finally, let's move to revenue and earnings guidance for the fourth quarter in full year. The third quarter was another very good quarter for us, and as a result I am pleased to share that we are raising our guidance for 2023 to reflect those results in trends. Starting with the fourth quarter, we expect to report revenue in the range of $650 to $660 million. We expect ANI EPS to be between $3.65 and $3.75 per deluded share.

Yes.

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

Jagtar Narula: For the full year, we expect to report revenue in the range of $2.53 to $2.54 billion. We expect ANI EPS to be between $14.64 and $14.74 per deluded share. For the full year, these updated ranges represent an increase of $35 million in revenue and $44 cents of EPS compared to the midpoint of our previous guidance.

Alright, Thank you and good morning, I'd like to follow up on Pes or what is the.

The Tam of that and then I guess, just adding broader services I think.

<unk> has developed clear view.

Yes, we hear really good things about your cross selling two it's actually your product, but just the thoughts around adding additional services the Tam with Taser.

Maybe the growth rate I think that's a really interesting acquisition.

Yes, so just to give a little bit more context men. Thanks, Bob.

The U S field services software market, so kind of broadly the bigger market players the tam of that $5 billion.

And this pays or addresses in a section of that the market itself is growing 20% to 30%.

Part of what we'd like about peso and we liked a lot of things.

We like the intersection that it has between software and payments and you get that as you move up into the workflow and so from a customer perspective, what Taser does.

Is it.

Jagtar Narula: The major moving pieces compared to our prior guidance are the results of Q3, an updated fuel price assumption, further improvements in our credit loss assumption, the impacts of the share repurchases completed through September, and including the Assensus acquisition for the full quarter. In addition, we are very excited about the anticipated PASER transaction for the new market it opens up and the growth potential.

It's really integrated with the customer to offer scheduling dispatching communications pricing.

Invoicing parts ordering so think of that as like the operating system.

To that end customer and you can integrate that with the services that we provide.

Is that if you're an Eva and pitch back operators as an example, and you are out on a job you can book the appointment in the system. The system remains the whole number of the appointment ahead of time and dispatches the HVAC to address on the day of stage fact shows up at the address and can present, a mobile proposal.

Jagtar Narula: We entered into a definitive agreement for WEX to acquire PASER for approximately $250 million, subject to additional contingent considerations and certain working capital and other adjustments. The transaction is expected to close in the fourth quarter of this year, subject to customer and closing conditions.

With real time inventory and pricing information. They can then get.

I'd say the homeowner accepting proposals they can schedule and manage within the system.

If you can just envision of very integrated experience within the workflow of the customer and as Jack said, we've got 150000 customers within our fleet portfolio that sit within.

Jagtar Narula: We expect the acquisition to be slightly deluded through 2024 as we expand sales and marketing investments to further drive growth. We anticipate these investments will yield positive results and the acquisition will be a creative beginning in 2025.

Within field services management, and so we're really focused on is how we can take the relationships we have.

The knowledge that we have with customer need is and then create an even better customer experience with our products.

Jagtar Narula: Finally, while we are not yet providing a 2024 outlook, I did want to highlight interest rate swaps that are outstanding and will mature in the course of the next year. As of the end of the latest quarter, the collective national amount of our interest rate swaps was $1.1 billion. We do have $200 million maturing in December of this year and another $300 million that will mature in May of 2024. These maturities will increase our interest expense of 2024 barring any unforeseen changes in reference rates.

Great.

Hey, Sarah.

30%, just again, a little bit more context, it's $25 million to $30 million of revenue and growing at 30%.

Great. Thank.

Thank you Mike.

My follow up question on just the Tam of VB, one $5 billion to $2 billion.

And obviously you have your venture fund you've made an investment a team there, but just your thoughts on <unk>.

<unk> I know you're going to have a charge at home product I think the EV payments market is a lot more complicated than people understand and just maybe your thoughts around.

Jagtar Narula: In conclusion, we delivered impressive financial results this quarter and I'm especially proud that we again beat our previous quarterly guidance and have increased full-year guidance every quarter of this year. Our performance in Q3 positions us well to continue driving revenue growth and serving our customers efficiently in the quarters ahead.

The Tam of BB, how you attack it in.

And then any update on what Youre seeing.

Yes.

We estimated just based on the existing and initial product offerings that are needed within the marketplace. We've talked about being very focused around an integrated experience with our customers that if they are buying and root as are buying at home or they're buying a depot that we have an integrated offering with their ice vehicles.

Bailey: With that operator, please open the line for questions. At this time I would like to remind everyone in order to ask a question, press star to number one on your telephone keypad. Please limit your question to one initial and one follow up.

And thats been really that.

Very much the focus that we've had we've pulled out the en route charging we talked about at home charging that we're in a test stage.

Anticipating rolling that out into full production by the end of the year.

Darren Peller: Our first question comes from the line of Darren Peller. Your line is open. Thanks, guys. Look, it's really nice to see the growth and the benefits and the travel side. I do want to hone in though on a question we're getting from investors around the decline in macro adjusted mobility growth rates. Just understanding the credit management is better there but just why I think it was 1% macro adjusted we're getting to was a bit lower than we thought.

Here in the United States and then.

Depot charging in the beginning of next year.

We also added in functionality on our App, which is called drive our dash, which allows an integrated offering.

Purchasing which simplifies the way that.

Fleets are able to actually purchase using historically some of these multiple fob.

Darren Peller: So maybe just touch on on that trend line and what you think is we should consider and look at for the opportunity on that business especially if outlook if they look on the freight market could turn around also. Thanks, guys. Sure. Happy to.

And so when we look at our opportunity you pointed out there's a lot of complexity, we have an opportunity to remove that are charging fees.

Associated with that their subscription based fees.

And we are in that range of $5 to $20 per month per vehicle that we talked about in Investor day, and so we feel like we've got this great opportunity to introduce new products are really meeting our customers, where they are at and what they need and also change the revenue dynamics of the company and into more and more subscription or SaaS.

Melissa Smith: So first of all, if you look at our growth and the fleet segment, there's a couple of things that are impacting at this quarter. One, there's less business day is year over year. There's about 2% last year over year so that effects compare ability. Between last year and this year and in with effect, if you're looking for online from 2 to 2 to 3. The things that are the same is what you saw last quarter.

Base fees.

Our so far playing out to be very true and what we've seen in the marketplace.

Melissa Smith: There's negative 3% same source sales coming through in the over the road marketplace so that freight recession is continuing to have an impact on the business and we're still down about 2% from attrition, you know, compared to historical norms based on some of the credit actions that we took last year. And so those 2 things are continuing. We're also seeing a shift in activity in the over the road marketplace similar to what we've seen earlier this year where there's more movement to the larger over the road tracking companies which affects next.

Really excited about this we think this could be.

Another opportunity, we talk about the way to increase the growth profile of our mobility business.

Great. Thank you I appreciate it.

Your next question comes from the line of Ramsey El Paso. Your line is open.

Hi, good morning, and thanks for taking my question.

I wanted to ask more about your comments about the travel volumes outpacing hotelier in the sort of shift in the market to settle with virtual cards can you talk about what's driving that shift and how sustainable you think it will it will prove to be.

Melissa Smith: We're seeing more volume coming through this unfunded versus funded. So just a few things that I would say some of which we do expect to continue for a period of time. We are seeing great sales and from a sales perspective, our sale pipelines are very full closures are, you know, very strong. And we've continued to modify the digital marking apparatus that we have to bring in even higher quality leads in keeping with the changes that we're making on the credit.

Yes, when you earlier, when we're coming out of the pandemic.

Lot of volume, we would have attributed to the fact that youre seeing this rebound, but clearly we are beyond that point in time.

154% of the volume from 2019.

And you can see.

The trends that we have are really positive cross sell all regions.

We believe that what we're experiencing is is in part because of the fact, we're working actively with our customers to.

Melissa Smith: So from a long term perspective, the things that we are looking at look really good. So we feel really good about sales. We feel really good about customers coming in the quality of the customers that are coming in are higher quality than prior year. And a lot of the work that we're doing is optimizing the idea of profitability for the customers that we are approving. So we do expect that you'll see some incremental benefit of that going forward in the future too with with both higher approval rates and, you know, limited impact on.

To make sure that we're providing offerings that are relevant to them. We also believe that we're benefiting from this shift.

The merchant model, particularly in Europe as online travel agencies have migrated from the agency model to the merchant model, where we're more relevant.

So we're capturing more of the benefit associated with that and Thats going to play out over some time, that's not done yet. So we think in the kind of in the mid term that you will continue to see the benefit of those things. They were also probably seeing some.

Melissa Smith: I guess the only thing I'd add to that is, as I mentioned in my prepared remarks, late fees were down as well, and we talked and most talked about the improving quality of the portfolio, and I mentioned the prepared remarks that late fees is down, but that reflects our focus on quality applications and the improving quality of the portfolio. We're more than enough for that credit losses, so I think from a earnings bottom line perspective, it's very good result, but you see a little bit in the top line in perfect.

Rebound, particularly in the beginning of this year. So we would expect.

Rate would go down from this year's rate of.

Of growth.

But we do think that we're going to continue to outpace the market growth.

Okay.

And one follow up for me I wanted to ask again about peyser and just make sure I'm understanding it correctly is peyser away that you've kind of deepen engagement <unk> monetize existing customers or is it or is it also a customer acquisition channel for your products like do you just pay as you bring your customers that maybe than you.

<unk> become fuel card customers or.

I guess, that's one part of the question. The other one is there a broader opportunity to kind of vertical is your business.

Melissa Smith: Understood. Just when you think about the median term, I mean, it is the mid-single or mid-single or the high-single, the growth in the segment, still very much in your mind reasonable to think about for the next few years, obviously putting aside a couple of quarters here and there. We feel really good about, we've given long-term guidance to 48 percent for that segment, and we're gearing towards that, and say just kind of at the top of the house, we're gearing the company to the 10 to 15 percent macro-adjusted long-term guidance range that we have out there as a 15 to 20 percent on A&I EPS.

Yes, great question.

<unk> itself on a standalone basis is growing 30%, so they're doing a great job with customer acquisition.

Can a paradigm stopped and so when we looked at our model of the acquisition that was with the idea of that.

The asset that we're acquiring is already growing at that rate, we think that we can supplement that growth through.

Through exposure to our existing customers.

That are in their verticals that they're paying attention to and so it is the intention is to continue to have them sell to sell independently and then also expose our customers into their sales motions that we have an opportunity to increase.

Melissa Smith: I mean, that's really in the forefront of our minds and how we're making choices. In this segment, you know, as I said in my remarks, we're actually looking at ways that we can increase that over time in the mobility segment. We're really excited about PASER and how that creates a cross-style opportunity. We're really excited about world position with our EV functionality, which you also think are new markets, new tams that are adding onto the existing tams.

The growth profile of the business less about us selling into their customers at least initially just because our our customer segment size. There's just so much bigger than theirs over time, maybe that would happen.

Melissa Smith: And I feel really good about the, there's the engine that we have right now within the company of thriving future sales. Just very quickly, PASER wraps into corporate payments or is that just a cross-sell or an upsell into the, to the fleets? I'm just trying to make sure I understand where it fits. So, our intention is that it is a, you know, it's a synergy with the mobility segment because there's as most mentioned in our prepared remarks, roughly 150,000 fleets service companies in the mobility segment that we think we can help do. We have, we haven't made a determination of where it'll go from a segment recording standpoint. We'll do that, you know, in conjunction with the ACA, so thank you for. Great.

Got it thank you.

Okay.

Your next question comes from the line of Macquarie. Your line is open.

Hi, Thank you for taking my question I wanted to ask about the benefit side any comment just early sign up season on what Youre seeing it sounds like you had a nice win in the segment with the energy company.

But I was just walk here as budgets are generally the drivers of growth in that segment also is it more employees signing up for HSA is it mostly client wins and bringing more clients onto the platform, but what's the main drybulk growth.

With some forecast calling for a little bit of an uptick in unemployment next year is that something that could maybe be a bit of a headwind do you have to go through next year.

Alright.

Darren Peller: All right, we'll congrats on how do you?

There's a bunch of questions I think embedded in there.

Bob Nupoli: Your next question comes from the line of Bob Nupoli. Your line is open. Thank you.

The growth from this segment, we said is 15% to 20% and clearly we're way above that this year.

Bob Nupoli: And good morning. I'd like to follow up on PASER. What is the, the, the, the TAM of that? And I guess just adding broader services, I think, wax has developed clear view, that we hear really good things about, that you're cross-selling to, well, it's actually your product, but just the thoughts around adding additional services, the TAM of PASER, maybe the growth rate, I think that's a really interesting acquisition.

Some of that some of that we're benefiting because of interest rate increases, but what we do in our 15% to 20% growth, we're assuming that youre going to see custodial assets.

Hey.

Accounts that youre going to get some benefit from that.

So as you go through the primary drivers for us.

First is the addition of <unk>.

Which comes through supporting our partners.

For them to grow and growing directly in the marketplace.

Melissa Smith: Yeah, so just to give a little bit more context, man, thanks Bob. The, um, the U.S. Field Services software markets are kind of broadly the bigger marketplace. The TAM of that is five billions. Um, in this PASER addresses, you know, a section of that, that the market itself is growing 20 to 30%. Part of what we'd like about PASER, and we like the lot of things, um, we like the intersection that it has between software and payments, and you get that as you move up into the workflow.

Historically there is also more.

Assets per account that growth over time, because those accounts build so you should get some leverages. The fact that the account size gets bigger.

And so we get hysteria revenue associated with that we will have some interest rate benefit continuing through next year.

Because of the timing of when those assets when.

We will place this year.

Bob Nupoli: And so from a customer perspective, what PASER does, um, is.., is really integrated within the customer to offer scheduling, dispatching, communications pricing, invoicing, part to ordering, so I think of that as like the operating system for that end customer, and you can integrate that with the services that we provide, so that if you're an A-Bat and H-Back operators as an example and you are out on a job, you can book the appointment in the system, the system reminds the homeowner of the appointment ahead of time and dispatches the H-Back to address on the day of, the H-Back shows off that they address and can present a mobile proposal with real-time inventory and pricing information, they can then get, if they say the homeowner accepts proposals, they can schedule and manage within the system, so if you can just envision a very integrated experience within the workload of the customer and as Jagtar said, we've got 150,000 customers within our fleet portfolio that within Field Services management, and so what we're really focused on is how we can take the relationships we have, the knowledge that we have, what customer need is, and then create an even better customer experience with our products. Great. Thank you. Okay. So, it's also showing 30%, just to again, a little bit more context, it's 25 to 30 million of revenue and growing 30%. Great. Thank you.

And and.

Those are really the big drivers for the third one is just the fact that health care costs keep going up and so from a spend perspective.

Historically see spend increase.

Year over year as well.

Got it. Thank you and then just switching gears maybe to the corporate payments segment and again apologize just going to ask you. A two part question here. One is on the third party volume in that segment. It looks like it's been slowing down pretty dramatically.

<unk> dramatically.

Through the through the year.

Is that a driver there.

Was there any customer will also anything happened there.

Sure.

That's driving it and then just on the travel side of this volume question have you seen any softness from the rising I guess the situation in the middle east or anything like that.

Turning to you a little bit of softness from the airlines are you seeing any of those.

Impacts coming through in your early data. Thank you.

So in corporate payments.

On the travel side, we're not seeing an impact.

At this point in time that we do tend to lag with our data because we're booking revenue when people are staying on location as opposed to when they are in upfront, making the bookings.

The EMEA region. This is a pretty small part though of our overall portfolio. It's in a couple of percentage points, that's pretty small.

And then relating to the other part of corporate payments.

Melissa Smith: My follow-up question on, it's just at the time of EV, 1.5 to 2 billion, and obviously have your venture fund, you've made an investment or two there, but just your thoughts on attacking them. I know you're going to have a charge of home product. I think the EV payments market is a lot more complicated than people understand, and just maybe your thoughts around the TAM of EV, how you attack it, and any update on what you're seeing.

There's a couple of things that have impacted.

The spend year over year that the biggest one is that we during the.

Peak last year of some of the shipping issues are.

Mobility customers were using corporate payments products to pay demurrage fees.

Melissa Smith: Yeah. And the TAM, we estimated just based on the existence and the initial product offerings that are needed within the marketplace. We've talked about being very focused around an integrated experience with our customers so that if they're buying and root, if they're buying at home, or if they're buying at DFO, that we have an integrated offering with their ICE vehicles. And that's been really the, you know, the very much the focus that we've had.

Which had actually a pretty high rate associated with that so you are seeing an impact both in terms of volume and rate.

Affecting mix this year comparatively to last year.

But nothing notable from a customer loss perspective.

Some smaller <unk>.

One time noise type of things, that's probably the biggest one.

Got it.

That said the non travel volume was up.

Pretty substantially 11% year over year. So I think you made reference to.

Volumes declining and I just want to emphasize the volumes were up.

Melissa Smith: We've rolled out the en route charging, we've talked about at home charging that we're in a test stage, anticipating rolling that out into full production by the end of the year, here in the United States, and then depot charging in the beginning of next year. You know, we also added in functionality on our app, which is called driver dash, which allows an integrated offering of purchasing, which simplifies the way that police are able to actually purchase using any historically sending these multiple fobs.

Well I'm, sorry, what I was referring to that was the put body volume within corporate within the corporate payments segment I guess your other stuffs.

You all are doing great you are digging for your bank partners et cetera, that's what I'm talking about I don't think it's Don I think it's only up like 1% like if we do the math, but it looks like that slowed down and that's what I was talking about it but I think you answered my question in general Thank you.

Yes.

Your next question comes from the line of Sanjay <unk>. Your line is open.

Thanks, Good morning.

I've got a question on the health and employee segment as well when I look at some of the account growth.

Melissa Smith: And so we look at our opportunity, and you point out there's a lot of complexity. We have an opportunity to remove that or charging fees associated with that, their subscription based fees, and we are in that range of $5 to $20 per month per vehicle that we talked about in industrial day. And so we feel like we've got this great opportunity to introduce new products to really meeting our customers with where they're at and what they need, and also change the revenue dynamics of the company into more and more subscription or SaaS bases, which are so far playing out to be very true in what we've seen in the marketplace. So we're really excited about this. We think this could be another opportunity we talk about the way to increase the growth profile of our mobility.

Bob Nupoli: Great. Thank you. Appreciate it.

And the volume growth decelerated, but the revenues remained strong is that is that a census or is there something else in that drove sort of the outperformance on revenue.

So I'd say there was a few impacts so I would say to the growth. This year. So we did.

The nonbank custodian side of the business has been growing quite robustly, we had benefit from.

Year over year comp growth with above $3 2 billion of assets last year closer to $3 7 billion. This year.

Also have the benefit of higher interest rates that was about $21 million impact year over year.

Then we did have about $3 million of revenue from a census in the quarter, So muhtar impact, but the FX as well.

Ramsey El: Your next question comes from the line of Ramsey El Assault. Your line is open. Hi, good morning and thanks for taking my question. I wanted to ask Melissa about your comments about the travel volumes outpacing OTA and the sort of shift in the market to settle with the virtual cards. Can you talk about what's driving that shift and how sustainable you think it'll prove to be? When we were coming out of the pandemic, a lot of volume we would have attributed to the fact that we were seeing this rebound but clearly we're beyond that point in time.

Got it got it and then I thought you had mentioned the swaps for next year understanding like this year, probably not as big and then is there an impact that we need to think about next year.

Yes. So if you take I think the swaps on average are about one 8%.

Well if you take then going over to to our reference rate 30 day sofa.

<unk> got about $15 million impact next year.

Okay and is that mitigated with anything or.

Ramsey El: We're 154% of volume from 2019 and you can see the trends that we have are really positive and across all regions. We believe that what we're experiencing is in part because of the fact we're working actively with our customers to make sure that we're providing offerings that are relevant to them. We also believe that we're benefiting from this shift to the merchant model, particularly in Europe, as online travel agencies have migrated from the agency's model to the merchant model.

Alright.

Well, we I would expect that $15 million to flow into the P&L next year.

Do from an overall perspective.

Talk through.

<unk>, we try to manage our overall interest.

Risk rate risk to be close to neutral with with HSA.

Sei assets on our balance sheet against the against the commercial debt, but in this particular case fluids with the swaps rolling off we do expect that to be a $15 million impact.

In Sunday.

You bet.

Matt I would just to make sure people had to pick that up in their models. We are still just to reiterate what I said in the beginning of our during.

Ramsey El: We're more relevant and so we're capturing more of the benefit associated with that and that's going to play over some time that's not done yet. So we think in the midterm that you will continue to see the benefit of those things. Now we're also probably seeing some rebound particularly in the beginning of this year, so we'd expect the rate would go down from this year's rate of growth, but we do think we're going to continue to outpace the market growth.

During the companies of the 10% to 15%.

Top line growth and 15% to 20% bottom line growth.

Okay.

Price adjusted now like so.

So we just want to make sure people are picking up that piece in their model.

Got it can I just add one.

Ask one last question on pay there I know you've got a lot of them.

Just in terms of you mentioned the use cases being H back plumbing roofing.

I guess like.

Ramsey El: Okay, and one follow-up for me, I wanted to ask again about PASER and just make sure I'm understanding it correctly, is PASER a way that you kind of deepen engagement and or monetize existing customers or is it also a customer acquisition channels for your product for you? Does PASER bring you customers that maybe then you become fuel card customers or I guess that's one part of the question, everyone, is there a broader opportunity to kind of verticalize your business?

Inside your.

That identified clients that you mentioned the 150000 I guess are those in those verticals and can they use cases be expanded for peyser.

So the 150000 includes everybody in field services management.

<unk> is more expensive to think lawn care to manage some of the construction specialty trades machine repairs pest control.

And.

And so we are very much with you, but the peyser. They are focused more on HVAC and some of the initial.

Ramsey El: Yeah, great question. So PASER itself on a standalone basis is growing 30 percent, so they're doing a great job with customer acquisition, kind of pure adenstops, and so when we looked at our model of the acquisition, it was with the idea that the asset that we're acquiring is already growing at that rate. We think that we can supplement that growth through exposure to our existing customers that are in their verticals that they're paying attention to, and so the intention is to continue to have them sell to sell independently and then also expose our customers into their sales motions, so they have an opportunity to increase the growth profile of the business. Less about us selling into their customers, at least initially, just because our customer segment size is just so much bigger than there's over time, maybe that would happen. Got it. Thanks. Thank you.

Verticals are more specialized.

Our focus right now is around explosion taser.

The customers that are in their specific specialty trades that they are targeting right now.

And then once we see success in that than we made.

The product to have broader application.

And so and to your point, where we're hyper focused on that in a specific sub section of our customers that are.

Overlapping with there.

Their product capability right now but from a.

The either price that we're targeting long term is 150000 customers that we have.

Got it alright, perfect. Thank you very much.

Your next question comes from the line of Andrew Jeffrey Your line is open.

Mihir Bhatia: Your next question comes from the line of Mihir Bhatia. Your line is open. Hi, thank you for taking my question. I wanted to ask about the benefits side. Any comments just from early sign up season on what you're seeing? It sounds like you had a nice win in the segment with the energy company, but I was just more curious by just generally the drivers of growth in that segment also. Is it more employees signing up for HFA?

Hi, Good morning appreciate you taking the question.

Mihir Bhatia: Is it mostly client wins and bringing more clients onto the platform? Like what's the main driver of growth there and with some forecast calling for a little bit of an uptick and unemployment next year? Is that something that could maybe be a bit of a headwind you have to grow through next year? I'm going to give a bunch of questions that I think embedded in there. The growth along the growth of the segment was said is 15-20% and clearly we're way above that this year.

I'm going to ask another question.

Question Melissa.

Appreciating the commentary around.

The opportunity for us as we've modeled that right now is to take the customers that we have and expose it to pay their debt.

We're increasing the growth rate of their existing product set and so that's kind of like baseline.

What you are talking about is that we do also believe that there's an opportunity to monetize payments in their workflow stream largely through virtual card payments, that's a secondary synergies, though interline and the FERC is takes us sales motion that's already.

Mihir Bhatia: Some of that were benefiting because of interest rate increases, but we do in our 15-20% growth, we're assuming that you're going to see custodial assets that will outpace the growth of the account since we're going to get some benefits from that. As you go through the primary drivers for us, first is the addition of accounts which comes through supporting our partners for them to grow and growing directly in the marketplace. Historically, there's also more assets per account that grows over time because those accounts dold so you should get some leverage of the fact that the account size gets bigger.

Working and exposing them to customers that we have.

Within our existing.

Within our existing customer base.

Okay understood and then just a question on the corporate payments.

Is that an area outside of travel.

So non travel corporate payments is that an area, where you are still focused on.

Building out or acquiring technology around bill pay or full stack AP automation.

Mihir Bhatia: And so we get custodial revenue associated with that. We will have some interest rate benefits continuing through next year because of the timing of when those assets will be placed this year. And those are really the big drivers. The third one is the fact that health care costs keep going up. And so from a spend perspective, we have historically spent increased year-to-year as well. Got it.

Mihir Bhatia: Thank you.

Or purchase order workflow just trying to think about how that business evolves over the next couple of years.

Yes, the two key products that we have within our corporate payments is embedded payments product, which.

Is what we're using with our travel customers.

And also with other Fintech companies and so we've got a sales pipeline associated with that we've actually had some contract signings associated with that this year and then the second one is an AP direct product, where we are and have been adding to our sales force admittedly, we have a smaller sales or hedged on the direct side.

Mihir Bhatia: And then just switching gears maybe to the corporate payment segment.

Mihir Bhatia: And again, Paul, I'm just going to ask you a two-part question here. One is on the third party volume in that segment. It looks like it's been slowing down pretty dramatically. Well, my word dramatically this year through the year. Is there a driver there? Is there any customer also anything happened there that that that that's driving it? And then just on the travel side of this volume question, have you seen any softness from the rising, I guess, you know, the situation in the Middle East or anything like that, where, you know, you're trying to do a little bit of softness from the airlines? Are you seeing any of those impacts coming through in your early data?

But we do have a sales force that is out there selling that product both directly and indirectly through.

Mostly financial institutions.

And so growth for us is going to come in both those categories.

Have not been.

Really focused around how we're going to add through M&A into that capability right now amongst the other priorities that we have.

I appreciate it thank you.

And our final question will come from <unk> Kumar Your line is open.

Hey, thanks.

I want to start off on the corporate payment side within the non travel.

Mihir Bhatia: Thank you. And corporate payments on the travel side, we're not seeing an impact at this point in time, but we do tend to lag with our data because we're booking revenue when people are staying on location as opposed to when they're, you know, making the booking. You know, the immediate region is a pretty small part, though, of our overall portfolio. It's, you know, it's a couple of percentage points. It's pretty small.

Travel segment, just wondering if you could extend vessel, what's the outlook with your in terms of like.

Q4, and even growing at 24, I mean in terms of more like strategic priorities.

The growth obviously.

Kind of taking off so I just wanted to get a sense as to how do we think about one I guess the crowd.

Lap.

Tougher comps in 2004.

Mihir Bhatia: And then relating to the other part of corporate payments, there's a couple of things that have impacted the spend year, year, the biggest one is that we during the peak last year of some of the shipping issues. Our mobility customers were using corporate payments products to pay to marriage fees, which had to actually pretty high rate associated with that. So you're seeing an impact both in terms of volume and rate. Or, you know, one time noise type of things that's probably the biggest one. I got an emphasize that the non travel volume was up pretty substantial 11% year over year. So I think you made reference to volumes declining and I just want to emphasize the volumes.

Yes, so when we look at this segment so we've got.

Long term guidance for the segment of 10% to 15%.

And it is split that into two so first of all I'd say, we think about it as a segment guidance includes everything thats in there, but from a sales motion perspective.

We're focusing on outpacing the growth in travel that's happening within the travel marketplace, which has historically been a high teen I'm, sorry high single digit number.

And then on top of that we've been building pipeline, both on the draft and embedded payments side of our business with the idea of that.

Growth would come from both of those although it largely probably more on the embedded payments just given the size of the embedded payments business.

And that's how we're putting together the pieces to get to the 10% to 15% growth.

Alright. Thank you so much that's helpful.

Mihir Bhatia: Rob. Well, sorry, when I was referring to there was the third party volume within corporate within the corporate payments segment, I guess you know the stuff where you're doing it, where you're doing it for your bank partners, etc. That's what I was talking about. I don't think it's down. I think it's only up like 1% like if we do the math, but it looks like that's slowed down. That's what I was talking about.

Mihir Bhatia: But I think you answered my question in general. Thank you.

And I will now hand, it back over to Steve elder for closing remarks.

Great. Thank you operator, thank you Billy <unk>.

Appreciate everyone joining us today and we will.

Look forward to speaking to you again with our fourth quarter earnings early next year. Thank you.

And this concludes today's conference call you may now disconnect.

Please wait the conference will begin shortly.

Sanjay Sakrani: Your next question comes from the line of Sanjay Sakrani. Your line is open. Thanks.

Sanjay Sakrani: Good morning. I've got a question on the health and employee segment as well. You know, when I look at some of the account growth and the volume growth, those decelerated, but the revenues remain strong. Is that a census or is there something else in bed drove sort of the out performance on revenues? So I said there was a few impacts on saying to the growth this year. So we did, you know, the non-bank custodian side of the business has been growing quite robustly.

Okay.

Yes.

Okay.

Sanjay Sakrani: We had benefit from year over year account growth. We had about 3.2 billion of assets last year, closer to 3.7 billion this year. Also had the benefit of higher interest rates. That was about a $21 million impact year over year. And then we did have about $3 million of revenue from expenses in the quarter. So a minor impact, but that had an impact as well. Got it. And then just thought you mentioned the swaps for next year, understanding like this year, probably not as big an impact.

Sanjay Sakrani: Is there an impact that we need to think about next year? Yes, so if you take, I think the swaps on average are about 1.8%. Well, if you take then going over to our reference rate, 30 days over, you've got about a $15 million impact next year. Okay. And is that mitigated with anything or just? Well, we, you know, I would expect that $15 million to flow into the P&L next year.

Sanjay Sakrani: You know, we do from an overall perspective, which I've talked through a few times we tried to made our overall interest rate risk to be, you know, close to neutral with with HSA. The HSA asks us what our balance sheet against the commercial debt. But in this particular case, with the swaps rolling off, we do expect that to be a $15 million impact. That out just to make sure people had picked that up in their models.

Sanjay Sakrani: We are still, you know, just to reiterate what I said in the beginning, we're gearing the companies to the 10 to 15% top line growth and 15 to 20% bottom line growth effects and price adjusted. Now, like so, so, so we just want to make sure people are picking up that piece in their model. Got it.

Sanjay Sakrani: Could I just ask one last question on Paiser? I know you got a lot of them. Just in terms of you mentioned the use cases being HVAC, plumbing, roofing. I guess like is inside your, you know, that identified clients that you mentioned the 150,000 I guess are those in those verticals and can the use cases be expanded for Paiser? So the 150,000 includes everybody and feels there was this management, which is more expansive to think long care to, you know, some of the construction specialty trades, machine repairs, past control.

Sanjay Sakrani: And so we are very much to look at Paiser, they are focused more on HVAC, so some of the initial verticals or more specialized are focused right now is around exposure Paiser to the customers that are in their specific specialty trades that they are targeting right now. And then once we see success in that, then we may adopt the product to have broader application. And so in two point where we're hyper focused on the specific subsection of our customers that are overlapping with their products capability right now. But from the either price that we're targeting long term is 150,000 customers that we have. Got it. All right, perfect.

Sanjay Sakrani: Thank you very much.

Andrew Jeffrey: Your next question comes from the line of Andrew Jeffrey. Your line is open. Hi. Good morning. Appreciate you taking the question. And I'm going to ask another Paiser, Paiser question. Melissa, appreciating the commentary around the intersection of software and payments. Could you elaborate a little bit on how wax plans to monetize payments at Paiser? Is it going to be largely the card issuance or I'm just trying to understand the mechanics and maybe the selling motion around that.

Andrew Jeffrey: Yes, so it's start with the opportunity for us as we've modeled it right now is to take the customers that we have and expose it to Paiser that we're increasing the growth rate of their existing products up. They say that's kind of like that's phase one. What you're talking about is we do all to believe that there's an opportunity to monetize payments in their workplace stream largely through virtual card payments. That's a secondary synergy though in our mind. The first is take this sales motion that's already working and exposing it to customers that we have within our existing within our existing customers.

Andrew Jeffrey: Okay, understood. And then just a question on the corporate payments. Is that an area, I mean, outside of travel, not some non-travel corporate payments? Is that an area where you're still focused on building out or acquiring technology around bill pay or full stack AP automation or, you know, purchase order workflow? Just trying to think about how that business evolves over the next couple of years. Yeah, the 2T products that we have within our corporate payments is embedded payments product, which, which is what we're using with our travel customers in and also with other Fintech companies.

Andrew Jeffrey: And so we've got a sales pipeline associated with that. We've actually had some contract signings associated with that this year. And then the second one is an AP direct product where we are and have been adding to our Salesforce. Admittedly, we have a smaller Salesforce on the AP direct side, but we do have a Salesforce that is out there selling that product both directly and directly through mostly financial institutions and so growth for us is going to come in both those categories. We have not been really focused around how we're going to add through M&A into that capability right now amongst the other priorities that we have. Appreciate it.

Andrew Jeffrey: Thank you.

Sharik Sumar: And our final question will come from Sharik's tomorrow. Your line is open. Hey, thank you everyone. I want to follow up on the corporate payment side within the non-travel segment. Just wanted to get a sense as to what's the outlook over here in terms of like Q4 and even 24. I mean, in terms of more like strategic priorities, but I think the growth obviously is kind of facing off. So just wanted to get a sense as to how do we think about one. I guess the travel laughs the stuff accounts in 24.

Sharik Sumar: Yes, so when we look at the segment, so we've got long term guidance to the segment of 10 to 15%. And if you split that into two. So first I say we think about it as a segment guidance. So it includes everything that's in there. But for my sales motion perspective. We're focusing on outpacing the growth in travel that's happening within the travel marketplace, which is historically been a high team. I'm sorry, a high single digit number.

Sharik Sumar: And then on top of that, we've been building high-flying bolts in the draft and the embedded payments side of our business with the idea that growth would come from both of those, although largely probably more on the embedded payments just given the size of the embedded payments business. And and that's how we're putting together the pieces to get to the 10 to 15% growth. Oh, yeah, thank you so much.

Steven Elder: And I will now hand it back over to Steve Elder for closing remarks.

Steven Elder: Great. Thank you, operator. Thank you, Bailey.

Steven Elder: Appreciate everyone joining us today. And you know, we look forward to speaking to you again with our fourth quarter earnings early next year. Thank you.

Bailey: This concludes today's conference call. You may now disconnect. Please wait.

Bailey: The conference will begin shortly.