WEX Inc. Q3 FY2022 Earnings Call

My name is Chantal, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Q3 2022 Earnings Conference Call. As a reminder, today's conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

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, adjusted operating income and related margins as well as adjustments free cash flow during our call. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to GAAP net loss attributable to shareholders, an explanation and reconciliation of adjusted operating income to GAAP operating income and a reconciliation of adjusted free cash flow to GAAP operating cash flow. 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. Good morning everyone and thank you for joining us today. I'll open up the call with a word that most embodies our company, resiliency. This past year has witnessed significant economic and geopolitical events from war in Ukraine to inflation and rising interest rates at home. Through it all, WEX continues to grow its business and perform well for our customers, our employees and our shareholders. I'll focus my comments this morning on three areas: Q3 financial results, highlights from the quarter across each of our segments and updates on several initiatives. Let me start with Q3 financial results, which we released earlier this morning. I'm pleased to report that WEX had a record quarterly revenue that exceeded our expectations. Revenue in the quarter was $616 million, a year-over-year increase of 28%. This strong Q3 growth, an increase of about $133 million year-over-year, was primarily driven by continued volume growth across the business, the impact of higher fuel prices and normalization of late fees. The majority of revenue growth was due to volume and fee growth. So the benefit of higher fuel prices represented approximately $56 million of the increase. On an organic basis, which excludes the impact of fuel prices, foreign exchange rates and an accounting presentation change, revenue grew 22% compared to the prior year's period. This performance reflects the power of our growth engine and the recurring nature of our business. Total volume processed across the organization in the third quarter grew 41% year-over-year to $57.5 billion driven by strong performance in each of our segments. Record quarterly revenue paired with the scalability of our business model resulted in adjusted net income for diluted share of $3.51, an increase of 43% compared to the same quarter last year. I'm really pleased with our results this quarter. Let me add some color to this success by touching on a few highlights where we continue to gain momentum in the markets we serve. In our Health and Employee Benefit segments, we continue to see strong account growth, including signing the American arm of a leading global consumer electronics company. I'm also pleased with our investment over the past few years to be able to serve as the custodian of our HSA accounts. For an offering that we did not provide in 2020, we're now the sixth largest HSA custodian according to Devenir. Our customers continue to choose our health offerings for our customer focused innovations, the rich data insights and the service we provide our customers' employees along with the breadth of our health ecosystem. Our capabilities span HSAs, FSAs, COBRA, benefit administration, data exchange and billing, all delivered with a strong focus on security, fraud control and compliance. In the global fleet segment, we continue to build on our recent momentum. This past quarter, we won new merchant acceptance at Walmart and Sam's Club, as well as established new partnerships with McPherson and AEG. We're also pleased to have extended our contracts with NFI, a leading third-party logistics firm, and Bimbo Bakeries, one of the largest commercial bakeries in the U.S. We continue to implement and onboard new customers to our electric vehicle and mixed fleet solutions both in the United States and Europe. Customers seek out WEX in our fleet segments for the unique benefits and controls of the WEX proprietary payments network and our specialized expertise applied to the rich data we capture. Turning to the Travel and Corporate Solutions segment, we saw strong volume performance in our corporate payments portfolio as well as post-pandemic rebounds in the busy Q3 summer travel season. That volume growth has translated into strong revenue growth of 25% and even greater scale benefits realized in our operating margins for this segment. Over the past year, we have built a direct sales team, which is selling to mid-market corporate payments customers. It's still in the early stages, but we are pleased with the results today. We're also pleased to announce the First National Bank of Omaha is our next financial institution partner, white labeling our corporate payment solutions. FNBO will join a portfolio of other top commercial card issuers that leverage our payment solutions in the corporate payments market. Now, let me turn to a few updates on topics that affect our enterprise more broadly. Our purpose at WEX is to simplify the business of running a business. Each of our solutions where they are helping with accounts payable, employee healthcare or managing vehicles in the field simplify the running of the businesses we serve. With solutions for any size business that are customized to their industry. We're focused on deepening our wallet share of our current customer set by enabling them to use our full suite of products. We're seeing encouraging results from our over-the-road truck customers. OTR customers have been our initial focus because of the common customer characteristics of trucking fleets and the lack of payment digitization in the sector. We focused on selling our corporate payment solutions to these customers, allowing them to achieve the benefits of digital payments. Today, we have hundreds of OTR customers using corporate payments products, which contributed $7 million of revenue to our quarterly results. Expect us to have hundreds of thousands of customers. We see our ability to enable them to easily gain access to our full suite of products as a key enabler of future growth. Let me switch gears to touch on customer-focused innovation. I want to update you on Flume, which is a new venture we've launched over the past 12 months with the mission to help our small business customers pay and get paid. The primary insight for us was that our smallest customers are demanding more consumer-like user experiences. We have an opportunity to meet them where they want to be met. Our approach is not just an easy UI, but powering it with a digital wallet technology and being able to participate in the funds flow. We recently promoted Flume from beta testing to a full launch and are focusing on bringing this solution to WEX’s more than 450,000 existing small business customers. One of our Flume customers is a general contractor specializing in the preservation of landmark buildings in local communities. This customer has used WEX fleet products for years to power their small fleet of vehicles. With the launch of Flume, they were delighted to find a new avenue to expand their relationship with WEX. Before Flume, keeping track of payments, documents, and invoices for their more than 20 subcontractors was an entirely manual process powered by color-coded binders and filing cabinets. In particular, relying on checks for payments was a constant source of friction with subcontractors. They were drawn to Flume for its speed and transparency. Their subcontractors can now receive payment immediately with full visibility into the process, cutting out the need to chase their money. Additionally, for a business moving from paper to digital, Flume felt accessible and easy to use. Flume is a chassis on which we can provide incremental value to our small business customers. As we look to the future, this product and its modern architecture will help us unlock new revenue opportunities. Now, let me take a moment to update you on our capital allocation priorities and further thoughts on resiliency. WEX generated a significant amount of adjusted free cash flow. Our move to providing an HSA custodial offering has created a buffer against interest rate movements. During times of increasing inflation, our fleet, travel, corporate payments, and healthcare businesses see an increase in purchase volume due to rising prices, which also benefits WEX. These items add to the resiliency of our model. At the same time, we're focused on continuing to squeeze out costs to create an even more profitable and nimble organization with an eye on the use of technology to further automate the business. We expect to deliver $100 million in run rate operating improvements by the end of 2024, and to reinvest probably half of those savings in further growth and optimization opportunities across the business, which supports achievement of our long-term growth targets. As we move forward, our ability to generate strong cash flows combined with the flexibility and diversity of our business model gives us confidence in our capacity to invest in the business and return capital to shareholders. As a reminder, our capital allocation priorities, which we outlined on Investor Day, are: to invest internally for organic growth and scale; execute strategic M&A that expands our customer reach and capabilities with a focus on EV and energy innovation, health, and corporate payments; and return capital to shareholders when conditions are appropriate, all while maintaining a healthy and flexible balance sheet. Earlier today, we announced an amended share repurchase program under which up to $650 million worth of WEX’s common stock may be repurchased. This amended authorization reflects our board and management team's confidence in WEX’s ability to generate strong earnings and free cash flow. To date this year, WEX purchased approximately $225 million of common stock, including approximately $75 million under the now amended plan in Q4. I will share more about our fourth quarter, our resilient cash flow model, and some 2023 insights. But overall, I remain incredibly excited about our path forward. We're leveraging our powerful growth engine to win new customers, expand on relationships with existing customers, and diversify offerings with compelling new solutions that extend our addressable market.

Thank you, Melissa, and good morning everyone. As you just heard from Melissa, we delivered a solid third quarter in which we achieved strong top line growth while continuing to make good progress on our strategic objectives. As with prior quarters, this quarter shows the strength of our global commerce platform, the competitiveness of our offerings, and the power of our business model. Now, let's start with the quarter results. For the third quarter, total revenue exceeded the high end of our guidance by $26 million due to a combination of record high travel and corporate payments purchase volume, fuel price impacts, and a normalization of late fees. Total revenue came in at $616.1 million, a 28% increase over Q3 2021 with more than 80% of revenue for the quarter recurring in nature. As a reminder, we define recurring revenue as payment processing and account servicing revenue, revenue from our factoring business, transaction processing fees, and other smaller items. In total, adjusted operating income margin for the company was 39.1%, which is up from 37% last year, largely driven by the travel and corporate solutions sector. From an earnings perspective, on a GAAP basis, we had a net loss attributable to shareholders of $44.1 million in Q3. I would like to note that our GAAP earnings included a $136 million non-cash charge due to goodwill impairment predominantly related to our European fleet business. Non-GAAP adjusted net income was $157.8 million or $3.51 per diluted share. This represents a 43% increase over the prior year. Now, let's move on to segment results, starting with fleet. Fleet revenue for the quarter was $378.1 million, a 32% increase over the prior year, powered by strong volumes from new customer wins and renewals, higher fuel prices and increase in late fees, and the continued recovery in the existing customer base. Payment processing transactions were up 8% year-over-year, which is in line with our historical growth rate. As you see in our metrics, the net late fee rate normalized following the rapid increase in fuel prices. Overall, finance fee revenue was up 43% due to increases in volume, fuel prices, and an increase in the number of late fee instances. The domestic fuel price in Q3 2022 was $4.54 versus $3.23 in Q3 2021. We estimate the year-over-year impact of higher fuel prices increased fleet revenue by approximately $56 million, including a benefit of approximately $8 million for European fuel price spreads. The net interchange rate in the fleet segment was 1.10%, which is up slightly from the prior year, even with higher fuel prices. We continue to see a transaction mix towards slightly smaller but more frequent transactions as fleet owners cope with higher fuel prices, especially in the over-the-road space. This transaction shift has a slight benefit to our net interchange rate. The segment adjusted operating income margin for the quarter was 46.2%, down from 50.6% in 2021. Let me briefly address the increased credit losses we saw in Q3 that were the primary cause of the decline in margin. Fleet credit losses were above the high end of our range at 30.9 basis points of spend volume, including approximately 11 basis points of fraud losses. While we have a healthy portfolio overall, in the over-the-road trucking business, we are seeing slower payments from newer small customers likely due to declining spot shipping rates after large increases during the pandemic. As a result, we increased our reserves for these customers, including a qualitative reserve based on our economic outlook. This was the primary reason for higher credit losses in Q3 versus the prior quarter. We are very focused on actively managing the portfolio, including hiring additional collections personnel, adjusting our credit models, and reducing credit terms where warranted. Next, onto fraud losses, while we have seen our application fraud rates improve sequentially, transaction fraud rates remain elevated. We are not satisfied with this outcome and we will continue to aggressively attack this problem until it is resolved. Our point of compromise model has determined that the transactional fraud is concentrated in our over-the-road business in a specific set of geographies with a limited number of merchants. Our actions include continuing to enhance our monitoring tools and account policies and updating our product offering with additional fraud controls while working closely with our merchant partners. Turning now to travel and corporate solutions. Total segment revenue for the quarter increased 25% to $114 million. Purchase volume issued by WEX was $20.7 billion, which is an increase of 61% versus last year. The net interchange rate in the segment was down three basis points sequentially, predominantly due to travel customers contributing a larger percentage of total purchase volume. Breaking the segment down further, travel-related customer volume represented approximately 74% of the total spend and grew 70% compared to last year. Revenue from travel-related customers was up 107% versus Q3 2021. This reflects continued strength in consumer travel demand. We are very pleased with these results. Corporate payments customer volume grew 41% versus last year and revenue was down 14% as reported, but it is up 9% after adjusting for an accounting presentation change. This growth was led by continued strength in the partner channel. The segment delivered an adjusted operating income margin of 52.9%, up from 34.1% in Q3 last year. There has been significant improvement in these margins as travel-related volume accelerated. Our business model here is very strong, and revenue drop-through for this segment is high given our relatively fixed cost base. Finally, let’s take a look at the Health segment. We continued to drive strong growth resulting in Q3 revenue of $124.1 million. This represents an 18% increase over the prior year. SaaS account growth was 8% in Q3 versus the prior year, adjusting for approximately 1 million temporary COBRA accounts last year, account growth was 13% in Q3. Health segment purchase volume increased 15%, leading to a 16% increase in payment processing revenue. We also realized approximately $16 million in revenue from the HSA deposits that were invested by WEX Bank starting late last year and funds held at third-party banks. The Health segment adjusted operating income margin was 24.4%, compared to 22.6% in 2021. The revenue from the invested HSA deposits is the primary driver of the increase in margin. Shifting gears now, I will provide an update on the balance sheet and our liquidity position. We remain in a healthy financial position and end of the quarter with $759 million in cash. We have $811 million of available borrowing capacity and corporate cash of $129 million as defined under the company’s credit agreement at quarter-end. As you’d expect, we saw a sizeable $615 million decrease in our accounts receivable versus last quarter as fuel prices moderated. At the end of the quarter, the total outstanding balance on our revolving line of credit, term loans and convertible notes was $2.7 billion. The leverage ratio is defined in the credit agreement stands at 2.7 times, which is nearing the bottom end of our long-term target of 2.5 times to 3.5 times and down from the end of 2021 due primarily to the strong earnings. Next, I would like to turn to cash flow. WEX generates a significant amount of cash. We have included the graph with a summary of adjusted free cash flow, which is how we view the cash generation performance of the company. Using our definition, adjusted free cash flow is $407 million through Q3. As Melissa discussed, our primary use of free cash flow this year has been to repurchase shares. We will continue to manage capital allocation between organic investment, M&A and returning capital to shareholders. Finally, let’s move to revenue and earnings guides in the fourth quarter and full year. The third quarter was a very good quarter for us, and I’m pleased to share that we are again increasing our guidance for 2022. Starting with the fourth quarter, we expect to report revenue in the range of $570 million to $580 million. We expect ANI EPS to be between $3.15 and $3.25 per diluted share. For the full year, we expect to report revenue in the range of $2.30 billion to $2.31 billion. We expect ANI EPS to be between $13.24 and $13.34 per diluted share. For the full year, these updated ranges represent an increase of $42 million in revenue and $0.12 of EPS compared to the mid-point of our previous guidance. You can find additional assumptions for guidance on the slides. As I complete my prepared remarks, I would like to emphasize how pleased we were with our Q3 results and to take a moment to reflect on our 2023 expectations. At the top of everyone’s mind is the macro economy. Let me start with fuel prices which have been volatile; we may continue to see movement heading into next year. As of last week, the NYMEX futures curve is showing an average fuel price of $3.87 for next year. We will obviously update our fuel price assumptions when we give formal guidance in February. Next, I will turn to interest rates, which have increased significantly over the past year. We think the impact of higher interest rates on WEX is more balanced than is generally understood. Obviously, we have some floating rate debt today and $750 million of interest rate hedges that will expire between Q4 and Q1 next year, increasing the effective amount of floating debt that we have unless we add to our hedges. We also have an income stream from $1.4 billion of HSA deposits that are invested, another billion dollars of HSA assets held at third-party banks, including $500 million monetized at floating rates. Interest rates have also risen to the point where we will see some benefit from interest rate escalator clauses in our fuel new merchant interchange rates and the low rate environment that we’ve been in for the last few years. We have not talked much about this lever, but we have the contractual ability to raise interchange rates as interest rates go higher once we hit a negotiated floor level in rates. Given all of this over the long term, we see the impacts of interest rate changes as more balanced. Finally, we have great confidence in our ability to win new customers, expand with existing customers, and bring new products to market, leading to long-term growth targets for the company. With that operator, please open the line for questions.

Our first question comes from Ramsey El-Assal with Barclays. Your line is open.

Hi, thanks for taking my question and nice to see super strong numbers this quarter. Could you give us any read that you have on whether you’re seeing sort of macro stress in the portfolio? It sounded like the credit deterioration fleet was a little more due to changes in shipping spot rates. Are you seeing any broader macro impacts and I guess how the same story sales look in that context?

Yes. Hey, Ramsey. Thanks for the words on the quarter. This is Jagtar. Let me address the – what we’re seeing on the macro side. Obviously, we talked about credit and fraud losses being up this quarter. I’ll break that down into two parts. On the credit loss side, that was 20 basis points of the 11 point, the 31 point movement that I talked about. What we’re seeing there really came down to a judgmental reserve that we took. What we saw – it’s limited to our over the road part of our business, where we’re seeing spot rates declining, and as a result, that’s putting some pressure on smaller fleet cost customers, mostly owner operators. We haven’t seen specifically an increase in losses, but we did see some delayed payments as I talked about. And as a result, we took a judgmental reserve on that just accounting for the higher rates of delinquent payments. So we’re seeing overall things are pretty balanced; the overall quality of the fleet portfolio, the North American fleet portfolio is still good. So we feel generally good about things. But we saw some parts in certain areas that we addressed.

And to expand on that, yes, but same store sales. It’s Melissa. On the North American fleet business in the quarter, we saw upside percent in same store sales, so a real strength, over-the-road business was flat in same store sales. So what we’re seeing within the portfolio as Jagtar talked about the smaller over-the-road customers that are losing some share because of what’s happened with spot rates. But so far for us that volume’s been picked up with some of the larger guys. And you can see that continuing through in what we’re seeing for results in October as well. So if you look kind of across the portfolio of WEX overall you’ve seen really strong trends, which factored through to the volumes that you saw us post in Q3.

Great. Let me sneak one last one in here. In the slide deck, I think you talked about expanding product set usage in the OTR segment and a $7 million contribution, I think that’s cross sell. If that’s the case, can you give us more color on what is working there, where you’re seeing success and should we expect that number to grow as we move forward?

Yes. We’ve done actually a lot over the last quarter. So we talked about the $7 million of revenue that we had specifically of increasing wallet share between the over-the-road customers and our corporate payments products. We have over the last quarter segmented the portfolio. So we’ve gone across and built a qualified sales lead list. And so if you think about the portfolio, the smaller customers we intend to really go after more digitally. The larger customers are where we’ve created this qualified lead list that we are working our way through. So we feel really bullish about the ability to extend the wallet share that we have with our customers. The way that we think about that is on Investor Day, we had framed in our long-term growth framework 4% to 5% growth that should come from existing customers, and this is one of the mechanisms we intend to hit that.

Yes. Good morning and thanks for taking my question. First I just wanted to get more color on the $100 million run rate efficiency improvements by the end of 2024. And how much of those benefits could WEX realize next year in 2023? And also related operating expenses in 2023. I know that there were some more one-time investments in the back half of this year, so I did on the last call. And I was just curious if we could ballpark the size of those investments.

Yes. Why don’t I start and Jagtar probably will fill in a little bit here. But when we were looking last quarter, we started talking about the fact that we were making investments. We’ve been focused on is where we can use technology to create automation that increases the customer experience. I think that is the two-fold benefit. We have the ability to actually have a better customer experience at a lower cost and more scalability. When we first started down this path, we were really thinking about how to derisk growth because of just what we’re seeing where labor shortages in the marketplace. So that was really our primary focus. But as we got into this, we think it just builds into the resiliency of the model, and a lot of this work has pretty quick payback periods. So again, what we’re looking at is that end-to-end experience. You’ve heard us talk a lot about how we’ve transformed our technology stack and moved into the cloud, how we’ve increased the digital marketing capabilities that we have. And so this is just taking that thread in pulling it all the way through that customer experience.

I’ll jump in and just answer a couple of questions on how we expect it to ramp and what we’re seeing from the investment side this quarter. So on the ramping, as we said in the prepared remarks, we’re expecting $100 million of run rate savings by the end of 2024. We’re still working through our 2023 budget, so I’m not going to kind of get into a guidance discussion. But we do expect that to kind of ramp through 2023. So we’ll exit 2023 with half to two-thirds of that from a run rate basis. And then on the investments that we’re seeing, so we talked I think last call about $5 million to $10 million a quarter that we expected to see in the back half of the year from the investments we were making. And you can see that in the sequential results. If you look at Q2 versus Q3, you can see the $5 million to $10 million; it’s roughly $6 million laying in Q3 results.

Got it. Thanks so much for all the incremental color. If I could just sneak in a quick follow-up on the corporate payments yield. I know it was expected to taper down in the back half of this year related to a large customer. It looks like it came in like low to mid 70s, like 73%. Like how should we think about that yield into Q4 in 2023, if that’s like a good run rate to use or if it should come down a little more? Thank you.

I think it’s really important to – sorry. Let me start and then you can go. I think it’s really important when you actually look at that segment to parse it into two pieces. So think about and we’ve actually been disclosing for probably four quarters now the split between the two. So you can see with our Travel business there’s been a lot of stability in the rate in the course of this year. We said that going into the year and that’s what we’ve experienced. And then with the Corporate Payments business, it has been really about mix shift to the extent that we’re seeing more of a mix into our embedded payments products that mixes that rate down. We said we expected that to happen during the course of this year and it has. And so there’s a lot of nicks that play out. You can see from a profitability perspective that we’ve seen significant drop through revenue, which has increased our margin profile. So while some of the take rates in some of the products may be lower, there are less costs associated with those as well. And that all factors into how we think about it from a pricing perspective. So going forward, Jagtar said we’re still working through the budget and some of this will depend on the mix of what we expect to see next year. But we’ve seen a lot of stability in the overall travel rates. And again, when it gets to the Corporate Payments business, it really depends on mix. We have had great success with our embedded payment products in the marketplace, which again have that lower take rate. So, I would expect to see that continue to factor into that rate declining a little bit going into 2023.

Good morning. Thank you for taking my question. Maybe I wanted to start with travel volumes. Came nicely this quarter and a little bit more than we expected, but just can you talk about where the improvement came from quarter-over-quarter in 3Q and any geographies worth calling out? And then just staying with travel into 4Q, is there more recovery tailwind to come? Just thinking between holidays in the U.S., summer in Australia, that can maybe contribute some outsized growth again in 4Q there? Thanks.

Yes. With travel, what we’ve been doing is comping it back to 2019, so pre-pandemic and then pro forma as if we owned eNett and Optal. And Q3 was about 107% of Q3 volume in 2019. But the thing I would say that stands out and it was true last quarter, even more so this quarter, is that there are definitely price increases that are coming through in that. So when we talk about some of the resilience that we have against inflation, this is a great example of that. Even sequentially from Q2 to Q3, the average ticket that we saw went up 8%. So the volume is still below the 2019 levels, but spend volume is above and that has a lot to do with pricing increases or mix change that’s happened within the portfolio, but it’s a higher average ticket price. From a geography perspective, I’d say similar trends to what we saw in the last quarter, great growth in Europe still – we’re still down in Asia, which is a smaller part of the portfolio.

Got it. And then maybe just on Flume, appreciate some of the anecdotal and other details that you provided in the prepared remarks. But off 450,000 customers that you’re targeting, what’s a realistic target for how many you can sign up in, let’s say the next year or so? Are there any mile markers you can share for us, which you’ll be using to judge if Flume is performing in line with expectations and the growth is coming through? Thank you.

Yes, it’s an interesting question. When we think of our existing small customer base, 450,000 customers is an opportunity for us to increase market share. And we’ve had some evidence of that with the products that we’ve rolled out and specifically with Flume so far. I think that we’re still early. We went from beta launch to this quarter. We had told you last quarter was that we would go into full launch in the third quarter, which we did. And that we were going to learn from this full launch of – what that looks like from an actual take rate across the portfolio. So, I think you need to give us a little bit more time and get more experience behind us, but we feel really bullish around a bunch of things here. First of all, it just the ability to bring product into the marketplace. I talked earlier about all the work done on the technology side over many years. This is, you can see the benefit of that as we’re moving product into the market. It’s part of why we added in a whole digital team at the beginning of the year; it’s that ability to actually take advantage of the technology. The ability to move the product, the ability to rapidly introduce new features into the product, and the ability to integrate through APIs across our portfolio so that you can share technologies, just in a totally different place. So I think we’re going to learn a lot, not just how we sell this into the marketplace, but how we use, I talked about using this as the chassis for us in small business because there are a lot of pieces that we’ve developed that we will deploy in other parts of the company.

Yes, I’ll address that one. So the impairment charge was largely macro-related. We’re seeing rising interest rates, which impact the discount rate we use in our impairment analysis. Market valuations have changed, which also impact the impairment analysis. And then the economic environment, Europe is impacting the free cash flow of the business in the near term. So, we factor that all together. It’s largely macro related, and we determined that the impairment charge was necessary.

Thank you everyone. I know we went a few minutes over, but appreciate everyone’s attention and time for the call today and we’ll look forward to speaking with you again for our fourth quarter earnings.

This concludes today’s conference call. You may now disconnect.