Thank you for joining us. My name is Cheryl, and I will be your conference operator today. I would like to welcome everyone to the WEX Q2 2022 Earnings Conference Call. Steve Elder, Senior Vice President of Global Investor Relations, you may begin.

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO; and our CFO, Jagtar Narula. The press release we issued earlier this morning and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and the slide deck have also been included in an 8-K we submitted to 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 ANI, and adjusted operating income during our call. Adjustments for this year's second quarter GAAP results to arrive at these metrics include unrealized gains on financial instruments, net foreign currency remeasurement losses, change in fair value of contingent consideration, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization and certain tax-related items as applicable. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to GAAP net income attributable to shareholders and an explanation and reconciliation of adjusted operating income to GAAP operating income. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and indeterminate amount of certain elements that are included in reported GAAP earnings. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022, and subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa.

Thanks, Steve, and good morning, everyone. We appreciate you joining us today. I'm pleased to report that in the second quarter, we once again delivered record revenue and adjusted net income per share with organic revenue growth of 22%, driven by strong volume trends across the business. Revenue in the quarter was $598 million, a year-over-year increase of 30%. To put our growth in perspective, Q2 revenue increased approximately $139 million year-over-year. The benefit of higher fuel prices, partially offset by foreign exchange rates, was less than half of the increase or $56 million. In our trailing 4 quarters, we have surpassed $2 billion in revenue, which is a testament to our team's focused execution leveraging our global commerce platform in our large addressable market, where we continue to benefit from digital tailwinds. Total purchase volume processed across the organization in the second quarter grew 77% year-over-year to $37 billion. Each of our segments posted record purchase volume numbers, demonstrating the power of our growth engine, coupled with our solutions designed to simplify benefits, reimagine mobility and pay and get paid. Record quarterly revenue paired with scale efficiencies in our business model resulted in adjusted net income for diluted share at $3.71, an increase of 61% compared to the same quarter last year. The scalability of the business model is reflected in our earnings growth rate. The second quarter of 2022 was another record-setting quarter as we continued to execute well on all fronts. Now let me take a step back to discuss the continued progress we're making against our growth strategy to win new customers, grow share of wallet and expand and diversify our offerings. Let me begin with new customers. Our products and offerings resonate in the market, and we continue to win new customers across the WEX ecosystem. First, in the Health and Employee Benefit segment, we won a major American auto parts distributor as a benefit administration customer. Our breadth of solutions and customer orientation were the key reasons for this win. We continue to see strong execution across the pipelines of our direct partner and benefit administration distribution channels, with success seen in expanded partner referrals. In mobility, we won a large new fleet deal with Spee-Dee Delivery Services, a Midwest shipper with 1,800 employees delivering over 70,000 packages per day. Spee-Dee was utilizing 8 different field card programs with competitors, mobile fuelers and card blocks. By switching to WEX, they will now be able to improve operational efficiencies with a single universal solution and consolidate their fueling to a single bill to ease their administrative burden. They were also able to take advantage of the WEX EDGE fuel discount network for increased savings. In addition to our continued sales execution with large fleets, we're also improving the reach and efficiency of our customer acquisition efforts through investments in our digital marketing channel, which reaches small fleet customers in the U.S. During Q2, we saw a significant increase in new fleet accounts that were acquired via digital channels. We're also constantly leveraging our technology tools and customer knowledge to enhance the sales funnel using AI capabilities to optimize search engine marketing results and create a more personalized customer journey to improve conversion. This has resulted in decreased cost to acquire new accounts and the ability to go further down market. We will continue to learn as we go. Within the Travel & Corporate Payments segment, our outlook continues to be bright. In addition to the rebound in travel, corporate payments volume grew 29% compared to the second quarter 2021. We're pleased with this growth, and we've been expanding our direct sales team over the past couple of quarters. Turning now to our efforts to grow share of wallet. We're seeing cross-channel sales momentum across the WEX ecosystem with new virtual cards and health product sales to some of our existing fleet customers, including a leading provider of global automotive wholesale, financial software and media services and one of the largest truckload carriers in the U.S. We're building out our cross-sell infrastructure, including leveraging our data platform that allows sales to have a single view of the customer as well as cross-sell training programs for our account executives. We expect these investments and programs will yield accelerating growth of share of wallet and further enhance our relationships with our customers. In addition, we're excited to announce that we've agreed to acquire a portfolio associated with one of our major oil company partners, which is comprised primarily of small businesses. Under this expanded relationship, WEX will become the owner and issuer of accounts, and we'll be working to transition these accounts to our platform by the fourth quarter of this year. This expansion with our customer is evidence of the strength of our execution that makes us a preferred partner for leading oil companies, but also for travel, corporate payments and health partners. As we outlined at Investor Day, we're also expanding and diversifying our offerings to ensure we remain at the forefront across our ecosystem of solutions, providing our customers with best-in-class simplified experiences. This played out in our Travel & Corporate Payments segment, where our vision is to enable our customers to pay and get paid in the most efficient way possible, reducing friction, streamlining experiences and giving them precious time back to spend on their core business. We address customer needs through 3 solution sets: embedded payments, accounts payable solutions, and extended offerings for small businesses. Let's start first with the progress on the embedded payments offering, where we believe our virtual card capabilities are market-leading, allowing global online travel agencies and technology companies to build payments into the workflow. As you know, we built our own cloud-based transaction processing system resulting in a more resilient and scalable offering to our customers. Our travel customers are experiencing rapid volume increases as travel rebounds. Our products and technology are scaling with our customers, allowing us to successfully capture the rebound in travel happening in North America and Europe, seamlessly integrated into their operations. Next, let's turn to accounts payable solutions, which continues to evolve significantly. At the core of this solution, we are helping businesses streamline their accounts payable processes. Our customers demand intuitive software and they need help ensuring that they can complete payments across all modalities while maximizing the use of virtual cards. Following our in-depth user testing process, we will begin rolling out a new user experience and interface in Q4. We see our accounts payable solutions as an important contributor to growth in the years to come. Now I'd like to take a moment to give you an update on Flume. As a reminder, in consultation with our small business customers, we have built a new financial platform that enables any U.S. business to send, store and receive funds in a WEX digital wallet, transacting via digital check, physical check, ACH or instant Flume transfers. All of this is delivered through a streamlined and intuitive mobile-first interface after a 100% digital onboarding process. We've just started to sign and onboard initial customers on Flume. While it is still early days, we have a customer-informed product feedback loop and initial results are positive. We're rolling out additional updates based on customer feedback to ensure that they are getting the most from this platform. Turning now to our progress supporting our customers' energy innovation. Optimizing fleet fuel consumption is one of the foundations of our business. We provide a range of products and resources to help improve our customers' fuel economy and give them access to controls, business insights and data, in addition to tools such as freight management, route optimization and idle time monitoring. The transportation sector contributes nearly 1/4 of global CO2 emissions. We are uniquely positioned to help fleet operators make the transition to EVs or other forms of efficient transport. We are focused on developing and launching solutions necessary to help fleet operators simplify the complex transition. In Europe, we are currently piloting an integrated on-route and at-home EV charging and payment solutions with select fleet customers. This offering, which helps to bridge the management of mixed EV fleets, is significant for our European customers. This pilot, which leverages our significant customer relationships to understand and address customer needs, puts us in a position to rapidly refine our offering and continue to be a trusted partner to our customers. In the U.S., we continue to build upon the offering we have in the market. I am pleased to see the rapid learning-oriented and innovative approach that we're taking in this highly dynamic and fast-evolving space. Supporting our commercial fleet transition to electric vehicles is a great business opportunity and one component of our broader commitment to energy innovation and efficiency. We encourage you to read more about our initiatives in the comprehensive updated ESG report we published this week. As you can tell, we're excited about the many opportunities ahead for WEX, and we're moving quickly towards realizing them. I'm pleased to be raising our full-year 2022 revenue guidance by $90 million at the midpoint and our adjusted net income guidance by $0.57 per diluted share at the midpoint. The midpoint of our guidance represents revenue and ANI per share growth of 22% and 44% versus last year, respectively. Looking ahead, the current macroeconomic environment is top of mind for all of us. Through July, we continued to see strong customer volume activity across our products, including our mobility and travel customer portfolios. In fact, most trends seem to have reverted back to pre-pandemic behavior patterns. We continue to see tremendous runway ahead, and we are taking advantage of favorable fuel prices to accelerate strategic investments designed to increase our agility and automation, further building out the scalability of the organization. We've learned over the past few years that we must remain nimble to address unanticipated issues that demand our action. With that, I'm pleased to turn things over to Jagtar Narula, who, as you know, joined us as our new CFO just a couple of months ago. Jagtar's background is well aligned with WEX's strategic path forward, and I'm excited to tap his unique experience, successfully executing and integrating acquisitions as well as bringing process discipline to previous organizations, which will benefit WEX as we continue to scale. Jagtar?

Thank you, Melissa, and good morning, everyone. As you just heard from Melissa, we delivered a strong second quarter, building on the momentum we had after first quarter results. We delivered yet another record-breaking quarter in terms of both revenue and adjusted earnings and by a wide margin, a solid quarter that shows both the strength and the resiliency of our business model. Now let's start with the quarter results on Slide 6. For the second quarter, total revenue exceeded the high end of our guidance by more than $30 million due to a combination of record high travel and corporate payments purchase volume and higher fuel prices. Total revenue came in at $598.2 million, a 30% increase over Q2 2021 with more than 80% of revenue for the quarter recurring in nature. As a reminder, we define recurring revenue as payments processing and account servicing revenue, revenue from our factoring business, transaction processing fees and other smaller items. From an earnings perspective, on a GAAP basis, we had net income attributable to shareholders of $34.1 million in Q2. Non-GAAP adjusted net income was $169.4 million or $3.71 per diluted share. This represents a 61% increase over the prior year as we saw the power of our business model and the benefit of higher revenue dropping through to our margins. Turning to Slide 7 and breaking down the revenue by segment. Fleet grew year-over-year by 38%. Travel and Corporate Solutions posted a 23% increase. And finally, Health was up 15%. You will recall that for the last 3 quarters, we've discussed a change in revenue presentation for a specific customer contract in the Travel and Corporate Solutions segment that will impact the comparisons in this segment through Q3. You will see the details of the change in the appendix of the presentation we filed this morning. On a comparable basis, after adjusting for the accounting change, revenue growth in this segment was 64% and revenue growth for the total company was 36%. Now let's move to segment results starting with Fleet on Slide 8. Fleet revenue for the quarter was $379.2 million, a 38% increase over prior year powered by strong volumes from new customer wins and renewals, record high fuel prices and a continued recovery in the existing customer base. Payment processing transactions were up 10% year-over-year, which is in line with our historical growth rate. As expected, growth in the over-the-road transactions moderated some at 19% while North American fleet was up 11%. As you saw in our metrics, the net late fee rate stayed relatively flat to the prior year, which is still lower than historical rates due to the rapid increase in fuel prices. Overall, finance fee revenue was up 44% due to significant increases in volume, fuel prices and an increase in the number of late fee instances. We saw record high fuel prices in the quarter with an average domestic fuel price in Q2 2022 of $4.98 versus $3.04 in Q2 2021. We estimate the year-over-year impact of higher fuel prices increased fleet revenue by approximately $64 million, including a benefit of approximately $2.4 million for European fuel price spreads. The net interchange rate in the Fleet segment was 1.09%, which is down slightly from the prior year. The decline is due to the increase in fuel prices this quarter offset by a one-time benefit in Europe related to an amendment of a large customer contract. We are seeing our transaction mix move to slightly smaller but more frequent transactions as fleet owners close with higher prices, especially in the OTR space. This transaction shift has a slight benefit to our net interchange rate. Turning now to Travel and Corporate Solutions on Slide 9. Total segment revenue for the quarter increased 23% to $100.4 million. Purchase volume issued by WEX was $17.1 billion, which is an increase of 96% versus last year. The net interchange rate in the segment was down 3 basis points sequentially, and as travel customers were a larger percentage of total purchase volume. Breaking down this segment further. Travel-related customer volume represented approximately 70% of the total spend and grew 150% compared to last year. Revenue from Travel-related customers was up 174% versus Q2 2021. This reflects a strong rebound in customer travel demand. We are very pleased with these results and are well positioned to capture future growth as we expect the travel industry to continue its recovery. Corporate Payments customer volume grew 29% versus last year, and revenue was down 18% as reported but up 21% after adjusting for the previously mentioned accounting presentation change led by continued strength in the partner channel. Finally, let's look at the Health segment on Slide 10. We continued to drive strong growth, resulting in Q2 revenue of $118.6 million. This represents a 15% increase over the prior year. I would also like to remind you that we had approximately $7 million of revenue and 1 million SaaS accounts last year that were associated with our COBRA offering that were one-time in nature. SaaS account growth was 7% in Q2 versus the prior year, building off a strong open enrollment season and including the accounts related to Benefit Express. Adjusting for the temporary COBRA accounts last year, the growth rate was in line with what we reported in Q1. Health segment purchase volume increased 15%, leading to a 14% increase in payment processing revenue. We also realized approximately $5 million in revenue from the HSA deposits that were invested by WEX Bank starting late last year. Now let's move on to adjusted operating income margins on Slide 11. In fleet, adjusted operating income margin for the quarter was 50.9%, up from 50.2% in 2021. This is the fifth consecutive quarter that these margins exceeded 50%. Before I continue with the other segments, let me briefly address the increased credit losses we saw in Q2. Fleet credit losses were above the high end of our range at 23.6 basis points of spend volume and included approximately 11 basis points of fraud losses. We saw a significant increase in both application and transactional fraud that we believe is related to higher fuel prices. We have invested heavily in our fraud monitoring infrastructure, which enabled us to respond quickly to increasing fraud attempts and expect fraud losses to decline over the next 1 to 2 quarters. On the credit loss side, we continue to see a very healthy portfolio overall. Now moving on to Travel and Corporate Solutions. The segment delivered an adjusted operating income margin of 50.8%, up from 21% in Q2 last year. There has been a significant improvement in these margins as travel volume accelerated and drove much of the margin improvement we saw on a total company basis. Our business model here is very strong and revenue drop-through for this segment is high given our relatively fixed cost base. In Health, adjusted operating income margin was 23.9% compared to 28.1% in 2021. The revenue and associated income from the temporary COBRA accounts last year are the primary driver of the decline in margin. In total, adjusted operating income margin for the company was 42.3%, which is up from 36.3% last year, largely driven by the Fleet and Travel & Corporate Solutions segment. Shifting gears now to Slide 12, I will provide an update on the balance sheet. We remained in a healthy financial position and ended the quarter with $439 million in cash. We had over $718 million of available borrowing capacity and corporate cash of $143 million, both as defined under the company's credit agreement. As we expect, we saw a sizable $1.6 billion increase in our accounts receivable versus year-end from higher fuel prices and more volume. Our invested HSA deposits at WEX Bank ended the quarter at $1.4 billion. There is an additional $530 million of HSA deposits held at WEX Bank that we are currently using as replacement funds for certificates of deposits. We continue to evaluate opportunities to optimize earnings from the remaining roughly $1 billion of HSA deposit assets that we have custody over but are not held at WEX Bank. At the quarter end, the total outstanding balance on our revolving line of credit, term loans and convertible notes was $2.8 billion. The leverage ratio, as defined in the credit agreement stands at 3.0x, which is well within our long-term target of 2.5x to 3.5x and down from the end of 2021 due to strong earnings. Benefits of higher fuel prices and our strong cash flow generation position us well and gives us flexibility through a broad range of economic scenarios. Finishing off the balance sheet, you will see that we repurchased approximately $81 million of WEX shares during Q2, or 520,000 shares. Finally, let's move over to revenue and earnings guidance for the third quarter and full year on Slide 13. The second quarter was a very good quarter for us and I'm pleased to share that we are significantly increasing our guidance for 2022. Starting with the third quarter, we expect to report revenue in the range of $580 million to $590 million and adjusted net income in the range of $152 million to $156 million. We expect ANI EPS to be between $3.35 and $3.45 per diluted share. For the full year, we expect to report revenue in the range of $2.25 billion to $2.28 billion and adjusted net income in the range of $592 million to $603 million. We expect ANI EPS to be between $13.05 and $13.30 per diluted share. For the full year, these updated ranges represent an increase of $90 million of revenue and $0.57 of EPS at the midpoint from our previous guidance. As Melissa alluded to earlier, I'd also like to point out that embedded in our full-year guidance are some modest incremental investments in the back half of the year, which will allow us to accelerate specific areas of strategic focus, including cross-sell, additional enhancements to our technology, product innovation, including EVs and process simplification. It's important to emphasize that we are making these investments from a position of strength, taking advantage of the current favorable fuel price environment to ensure we maintain our market leadership across our ecosystem and position WEX for our bright future. Now let me talk you through a few more assumptions. Exchange rates are as of the end of June 2022. We estimate domestic fuel prices will average $4.50 per gallon in the third quarter and $4.36 per gallon for the full year. Both are based on the NYMEX futures price from last week. The adjusted net income tax rate is expected to be between 25% and 26% for the third quarter and the full year. And finally, we are assuming approximately 46.5 million shares outstanding, including the assumption that share count will continue to include 1.6 million shares associated with the convertible notes. As a result of including the shares, approximately $3.8 million of interest expense each quarter, net of tax, will be added back to net income to calculate EPS. As I complete my prepared remarks, I would like to emphasize how pleased we were with our Q2 results. Our business has performed well and benefited from higher processing volumes in the Fleet, Travel and Corporate Payment, and Health spaces. Our strong business model resulted in solid margin expansion from the higher revenue. As we continue to integrate our business, we are well positioned to capture more revenue and the benefits of scale in our model.

The first question is from Sanjay Sakhrani of KBW.

This first question is on the higher fraud losses. Can you just maybe flesh that out a little bit more for us in terms of what happened? Where the blind spots were? And why you don't expect it to reoccur.

Sure, Sanjay. It's Melissa. There were a couple of areas where we saw increased fraud in the second quarter, both on transactional fraud and on application fraud. As you know, we've got an infrastructure in place at the authorizer, which really limits the exposure that we have. But we saw a lot more volume of activity coming through. So over the last couple of months, we've been working with law enforcement and our merchants on the transactional side, where we've been able to help identify card skimming that’s happening, which ultimately leads to arrests. As a result of that activity, you can actually see a drop in the volume of activity that's been happening in July. On the application fraud side, again, it's just more of a volume thing. As fuel prices escalated, we've always had application fraud, but you're seeing the volume of that coming through bots. We've made changes in the way that we're doing our digital processes to account for the fact that you're seeing that emerging environment. All of that activity together gives us confidence around what we're providing from a guidance perspective. You can see, in real time, as I said on transaction fraud, how the actions that we've taken have reduced the amount of inbound activity that we're receiving.

Okay. And just to be clear, you've not seen any signs of credit stress. This is all about everything that escalated was fraud related?

Yes. Jagtar said in his prepared remarks, but the overall portfolio really looks strong. We continue to be pleased with both the volumes that we're seeing with our customers and what's happening within our accounts receivable portfolio.

Okay. And just one quick follow-up on the Exxon portfolio. Congratulations on that win. Maybe you could just talk about the size and scope of that portfolio? And how, strategically, if we think about it, it's a little bit different, right? Because it's more of a commercial card portfolio, I believe. So how does that factor into the mix of the cards that you do? Like how much of your portfolio is now commercial card?

Yes. If you look across the portfolios we have with the major oil companies, there is a mix in there. So we've got customer portfolios that are revolving in nature, which are primarily newly focused on really small businesses like this portfolio. We're excited about the fact that we're just continuing to expand the relationships that we have with these oil merchants. And as you might imagine, we go through a competitive process in order to win the business. So we're excited about this expansion. We're excited about the fact that we're bringing it on. It's going to be about 1% of the total new fleet business that we have now. But these customers don't fuel as frequently as we'd see in the base portfolio. So it's a little bit less than 1% of revenue.

Your next question is from Ramsey El-Assal of Barclays.

I wanted to first ask about your perspective on the sustainability of the travel recovery. What stage do you think we are in? Which parts of your portfolio are performing at or above 2019 levels, and what does the online aspect look like? I'm particularly interested in the Asia segment from the eNett and Optal acquisition.

Sure, I can provide more insight into what we're observing in that segment of the business. We are very pleased with the travel recovery we've experienced thus far. In the second quarter, our performance exceeded the 2019 pro forma figures as if we had owned eNett and Optal. There have been some shifts in our portfolio overall. Currently, about 70% of the volume is occurring in EMEA, while APAC accounts for only about 10% of the volume, compared to a historical figure of 20%. The APAC region has not recovered at the same pace as the rest of the world. Analyzing transaction volumes across our portfolio, we are currently at approximately 85% of the transaction volume we experienced in 2019. This is offset by higher average rates, which are about 20% above what they were. Consequently, we are observing a slight decrease in transaction volume but at higher rates, resulting in spending volume surpassing 100% of what we recorded in 2019.

Okay. I have a follow-up question regarding M&A. Could you provide an update on your thoughts about the opportunities you are observing? Clearly, there has been a significant reset in valuations. Are you identifying any new opportunities? More specifically, do you believe there is potential to enhance your strategy by acquiring additional assets that would facilitate cross-selling?

Yes. Regarding mergers and acquisitions, I will address both aspects. In terms of cross-selling, I've mentioned our focus on developing the necessary infrastructure. We believe there is potential for cross-selling within our portfolio. Currently, among our customer base, only nine customers are not utilizing our products across the ecosystem, and one is. This highlights our opportunity. I also noted that we plan to enhance our infrastructure to automate this process more effectively than we currently do. We have seen strong evidence of success in this area, particularly with Benefit Express, where we've successfully cross-sold that product to our existing customers following its acquisition. From an M&A standpoint, we have had success in cross-selling after product extensions. Thus, we see potential for further cross-selling opportunities. Additionally, in terms of M&A, we are seeking scale, geographic expansion, or product extensions. We are particularly focused on areas where we can introduce new products, as we believe this will enhance our cross-selling capabilities. Regarding market multiples, as they decrease, it presents opportunities for us. We will continue to assess potential acquisitions rigorously, as we have in the past, focusing on those that offer both strategic and financial advantages.

Your next question is from Darrin Peller of Wolfe Research.

I want to discuss the investments in the business that you're making. Could you provide more details on where you are focusing most of those investments and what excites you the most? Additionally, in the event of any macroeconomic changes that require flexibility, how would you manage expenses? If there were a significant downturn, what kind of flexibility do you have and how willing are you to protect the bottom line?

I think this is an interesting point. We have the ability to make investments now. These investments are aimed at either accelerating our revenue opportunities or enhancing scalability within the enterprise, which enables us to manage future challenges more effectively. The example I mentioned on the call was related to infrastructure for cross-selling. Additionally, across the enterprise, we are identifying areas where we can leverage technology to create automation. We believe that this not only improves the experience for both employees and customers but also reduces costs. Our investments are focused on initiatives that have a clear potential for revenue growth or cost savings. When considering cost savings, we want to ensure it also enhances the customer experience.

Darrin, this is Jagtar. I'll just add that much of what we're considering for the back half of the year, we're really looking at as one-time in nature. So it does give us some flexibility from a cost perspective to deal with market dynamics.

Right. Okay. All right. And so I guess to follow on to that, I mean, in terms of your willingness to really pull levers where necessary and what you'd consider somewhat discretionary in terms of where you can pull back on. If you could just give us a sense of what kind of potential areas there are. And then I just had one quick follow-up on your fuel segment. I mean when I look at the transaction growth and the underlying back row just the normalized, there are concerns over trucking recession and other variables. It doesn't seem like we're seeing that. So I'm curious if you think the current trends underneath the hood and the business are really representative of what you'd expect longer term.

Yes, why don't I start with the latter part of that. We would pile on to the first part of that. On the latter part of your question, from a trend perspective, the over-the-road business, what we're seeing is that it has really reverted back to behavior patterns and growth rates like we saw pre-pandemic. They had an accelerated growth rate period within that business, and it's really reverted back. Within that mix of customer base, the larger customers right now are faring better than some of the smaller ones in the broad marketplace. But overall, they're still seeing a need to move products, and they're seeing backlogs in doing so. It remains quite healthy. On the North American fleet customer base, we saw a pretty nice pop in the second quarter from same-store sales, where I think we've really benefited from the economy continuing to reopen, specifically in mobility. They're continuing to reopen. The growth rates that we assumed in the second half of the year in a more normalized environment than what we've seen in the last couple of quarters is still strong.

And then Darrin, I think the first part of your question was around how we think about protecting EPS through the economic environment change. To the extent we have discretionary investments in the back half of the year, like we talked about and other discretionary items that the company has, we would absolutely continue to focus on the profitability of the company. Obviously, we have a very scalable business model here, and you get the benefit of that in good times. We'll have to watch them in downturns, but I think we've got a number of levers to pull to ensure that we maintain profitability.

I think just across the model too, if you look at the business, 20% now of our revenues comes from Health, which is a SaaS-based model. It has been incredibly resilient for us. When I think about where the business is now much more diversified, it gives us a lot of confidence going into any different markets. Over the last several years, we have evidence of that. Our last 5 years, we've grown revenue 13% and EPS 20% in a really difficult market.

Your next question is from Mihir Bhatia of Bank of America.

I actually wanted to just continue and just follow up from where we ended the last one. Maybe just talk about the recession resiliency of your business. How has that changed over the last few years? I understand you probably can't give that. I mean, it depends on how deep a recession it is. But just in general, when we think of the various businesses and the businesses within just the segments, are there particular areas which are maybe more vulnerable? Like I'm thinking could travel maybe as a little more. But just talk about the recession resiliency of the business.

Yes, sure. If we look across the business, we do business with over 800,000 customers globally, and they are in many different SICs. Foundationally, it's an incredibly diverse customer base. If you look at WEX, it has become quite resilient over many different economic cycles. About 20% of our revenue comes from our Health customer base, which has been resilient even through the pandemic for pretty much any environment. It's part of the attraction for us. That part of the business is the fact that it is resilient to many different markets, but it's also a really complicated market that we think that we can continue to play well in, complicated and growing. If you look at other parts of the business, both our fleet business, the over-the-road customers would be a place that you could see some slowdown if something happens from an economic perspective. Our North American fleet customers tend to be more resilient because of their diversity across many different businesses. For Travel and Corporate Payments, part of the interesting thing about travel for us is that it is global. Even if you had an issue with one particular marketplace, it typically doesn't happen across the world all at once. We really feel good about the ability of the company to be nimble and to react to different economic cycles. We've shown that we can do that historically. We've been focused on our balance sheet, as Jagtar said, as we reduced our leverage ratio. We think that positions us well with what's happening in the market from a multiple perspective to be an acquirer.

And then just a question on the Health business. I appreciate that there's a few one-time things last quarter that kind of dropped out. But you had a deceleration in the SaaS account growth this quarter. How are you thinking about that SaaS account growth for the full year? If you can also just comment on the Benefits Express acquisition integration and just how it's going to help this year. I think last year, the timing-wise, the acquisition was late and offset you really didn't get benefits from synergies, if you will, from it. Are you expecting some of that to come through this year? Just talk about those two topics.

Sure. We had about 1 million SaaS accounts last year related to some legislation that allowed us to support our COBRA customer base. So they came in during the second quarter of last year. So if you normalize that, our growth rate on SaaS accounts in Q2 looks very similar to what we had in Q1. So really, you didn't see a deceleration. We see a normal cycle happen each year where you see a ramp in customers in the first quarter. You see some of that true-off a little bit in the second quarter, and we saw a very normal cycle happen this year related to that. With Benefit Express, we've continued to accelerate their sales pipeline. Bringing that into our customer base allowed us to provide the strength of our sales channels to help support that business. That was really the primary focus of that acquisition. We didn't intend to have cost synergies; it was more a revenue synergy play. We have been able to accelerate the growth that they had seen historically, and that's what we've realized so far.

Your next question is from Nik Cremo of Credit Suisse.

Wanted to ask about the cross-sell plans for Flume to the 50,000 SMB free customers. Is there a particular cohort or particular customer segments that WEX is going to be targeting for the next year? Or is it going to be more broad-based? And then what does the incremental revenue opportunity look like for your average fuel customer just in terms of capturing a greater portion of their non-payroll B2B spend?

Sure. So Flume, we're excited about Flume and I’m particularly excited about Flume because of the product capability that we've created and also the way that we've done it in a rapid customer-informed way. Our first focus has been very much on our initial customers, making sure that they're really happy. We're listening to what they want. We've been rolling out and will continue to roll out new features and functionality based on that customer feedback. Post-Labor Day, we intend to do much more of a full launch of the product set. We will be going into our broader customer base with the product offering and will test many different ways of doing that. From an economic perspective, I think again, it's really early. We're excited about that. We're excited about rapid learning, and most of the revenue we see longer term associated with that is from monthly subscription fees. We will also continue to test the pricing and the pricing model, and we'll have more to say about that in the future.

Got it. And then just for a brief follow-up. There are a few moving pieces in the fuel payment processing rate. Just based upon your guidance fuel prices coming down in the next two quarters. How should that move sequentially relative to the 109 basis points in Q2?

Yes. Nik, this is Jagtar. The 109 basis points were higher than we typically would have expected with the higher fuel prices, and that was helped by a few items in the quarter. As I mentioned in my prepared remarks, we had a one-time revenue impact from an amended fuel contract in Europe, that was probably worth about 4 basis points on the rate. We're seeing higher transactions, especially on the OTR side, and I think I mentioned that in my prepared remarks as well. That we think is related to higher fuel prices and people filling up sort of more often at smaller gallons in the OTR space. That also helped the rate, about 4 basis points. We had a benefit from the market movement rate in Europe in Q2, which was probably worth about a basis point. If I add it all up, it's probably 9 basis points. Fuel prices are expected to come down in Q3, so we'll get a little bit of that back. So I net that out between 5 to 9 basis points impact from going from Q2 to Q3.

Your next question is from Jeff Cantwell of Wells Fargo.

Nice results. On the 2022 guidance raise, I was hoping you could add some more about the outlook and Fleet. What are the assumptions that reflect there going forward in the updated guidance? Is there any sort of color you can give us there. And maybe tell us what you're seeing ahead of yourselves in terms of macros.

All right. I'll start, and Jagtar might want to add on here. If I look across the business, we've assumed in the second half of the year from a fleet volume perspective that we would return to more normalized growth rates. We did assume that in the over-the-road business that that would trail off a little bit from what we've historically seen in the fourth quarter. So I'd say we were cautious, but if you look overall at our growth rates, we're still pretty strong. On travel, we assumed volume trends similar to the second quarter. So over 100% of 2019 levels, we assume that in the back half of the year. Overall, really just looking at what we're seeing right now and just to add on to what you were asking about from a macro perspective, it’s interesting because as we talk to our customers, they are really continuing to do well in the marketplace. Their biggest tension points are around labor shortages, which is causing some challenges in their growth ability. We continue to see a convenient opportunity within their respective markets. The short-term conversation we're having with them is positive, and we continue to play well in this market. The products and tools that we offer are valuable. We're seeing increased demand for different reasons across each of the product sets. Some of it is the desire for more automation, while some relates to cost control and working capital. All of that is coming across in our sales pipeline.

The only other thing I'd add on the fleet side is I think Melissa said it with expectations going forward that were a return to more normalized volume growth rates, etc. I would say we saw fairly low late fee rates in Q2, mostly due to higher gas prices and the denominator effect. We expect that to revert to what we saw last year.

Your next question is from Sheriq Sumar of Evercore ISI.

On the buybacks, I just wanted to get your philosophy. How should we think about for the full year 2022? Given the choppiness of the market and supposedly there are no big acquisitions that you would want to pursue, can we expect the share repurchases to materially pick up? Or would it stay at similar levels?

When you think about capital allocation, we start with first, organic growth. We want to make sure that the company is tuned, and that's the first lever we hit. We've had a bias towards moving money towards growth and will continue to have an M&A pipeline that supports that growth in our long-term framework. We assume that we're going to have 2% to 3% growth from M&A. And then opportunistically, we have a $150 million share repurchase program in plan. We talked about the fact that we bought $81 million, and so we have more to go.

Understood. My follow-up is on the interchange rate within Travel and Corporate. A nice pickup on the corporate side this quarter. Can you help us understand what drove that? And how should we think about the interchange rate for the full year?

When we started the year, we mentioned that we have included disclosures to illustrate the separation between Travel and Corporate Payment rates. For the travel segment, we anticipated that the rate would closely align with last year's full-year rate, and this quarter was quite similar, indicating stability. On the Corporate Payment side, we expected the rate to gradually decrease throughout the year as we onboard more embedded payment customers. In Q2, we experienced strong growth not only from our embedded payment customers but also from our AP Direct customers, which have a higher rate, leading to an actual increase in the quarter. We believe that as the year progresses and we add more embedded customers, the rate should decrease. From a profitability standpoint, the results were very favorable, with margins rising from 21% last year to 51% this year. We observed significant scalability: if the embedded payments product increases, the rate may decline but remains highly profitable. Conversely, as the AP Direct product grows, revenue and rate also increase, albeit with slightly higher costs. Both trends are very positive for us. Our expectation for the year is that the corporate payments rate will decrease slightly as we move forward due to the mix of business.

Your last question is from James Faucette of Morgan Stanley.

Just a couple of follow-ups. Travel and Corporate margins were really strong in the quarter and now seem to be outpacing where they had been pre-pandemic. You're obviously benefiting from a travel recovery right now. I know you've talked about some near-term investments, but how should we think about the trajectory over the longer term? Absent a recession, have we taken a structural step change higher? Or is this transient? Just wondering how to think about that.

A number of years ago, one of the things that we thought was important competitively was to bring in-house processing capability. We built a cloud-native processor, which has created tremendous scale for the business. We saw the downside of that during the pandemic, but we continue to see the upside now. We created a better experience for our customers because the processor we created is highly reliable. Simplification in the way we interface with our customers allowed us to create a better experience and scalability from a financial perspective. We feel really good about that capability. It's a product that we're selling not just in the travel space, but also to other fintech companies where they embed this payment within their workflow. We're looking at where we can continue to sell that and our AP capability. The investments we make will continue to look at other areas for expanding the market we're addressing. We think the infrastructure we built out offers great scalability for growth in this segment.

That's great to hear. And then separately, how should we think about the pipeline on health and employee benefits? I think last quarter, you mentioned that you had signed up one of the country's largest rehab programs. In this quarter, you mentioned a major auto parts distributor. What's your line of sight right now on adding additional clients to the business over the medium-term? What does the sales cycle look like, especially given the economic uncertainty right now?

Yes. We found that, during the pandemic, there was less bias to make changes. Now, as we've moved past that, we have a really strong sales pipeline. We feel good about how we're going to enter 2023. Many of the implementations will occur at the end of this year, leading into the first quarter of next year. We’re quite bullish about next year.

We have completed the allotted time for questions. I will now turn the call over to Steve Elder for closing remarks.

Thank you, Cheryl. Again, I just wanted to say thank you to everyone for listening in, and we'll look forward to speaking with you again in about 3 months. Thank you.

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