Hello and welcome to the WEX Q1 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I will now turn the conference over to Steve Elder. Please go ahead.

Thank you, operator and good morning, everyone. With me today is Melissa Smith, our Chair, CEO and President, and Jagtar Narula, our CFO. 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 has also been included in an 8-K we filed with the SEC earlier this morning. I’d also want to mention that we are renaming our existing segments in connection with the rebranding initiatives. The Fleet Solutions segment will now be renamed to mobility. The Travel and Corporate Solutions segment will now be renamed to Corporate Payments and the Health and Employee Benefits Solutions segment will now be renamed to benefits. There are no changes to what is included in each segment. 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 and related margin and adjusted free cash flow during our call. please see Exhibit 1 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 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 end of December 31, 2022, filed with the SEC on February 28, 2023, 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.

Thank you, Steve and good morning, everyone. We appreciate you joining us today. WEX is off to a great start in 2023. We’ve continued our long track record of delivering exceptional financial results and performing well across the dynamic macroeconomic environments. Revenue for the first quarter came in at $7 million above the midpoint of our guidance. An adjusted net income per share beat the midpoint of our guidance by $0.11, with revenue growth of 18% and adjusted earnings per share growth of 15%. This quarter represents the eighth consecutive quarter where these metrics each grew 15% or more. Last week, we held our annual SPARK Conference, a customer event, which unites leaders across the mobility, Corporate Payments, and benefits industries to showcase how our platform of specialized solutions can help them overcome complexity and reach their full potential. SPARK has historically been focused on our benefits business, but was held as a joint conference across all of our solutions for the first time this year. This highlighted the ongoing transformation of our business as we discussed unifying product teams around data, payments, and digitization. Our message to customers centered on WEX’s unique ability to address the challenges they see in their businesses. These challenges are experienced across many industry verticals and include personalizing employee benefits, navigating the complexity of mixed fleet features, and removing the friction caused by inefficient payment processes and systems. WEX can help simplify these challenges today as we innovate to anticipate and address those of tomorrow. We had record attendance at SPARK, which shows the importance of our solutions and how they resonate with customers. I am excited by the positive response and the momentum we’re seeing across the business. We continue to invest in our platform to help our customers meet the demands of their markets, employees, and customer base. Our investments in data and advanced analytics, for example, are benefiting customers across our platform and we’re providing critical flexibility that allows them to choose from a suite of customized solutions that best meet the unique needs of their business. At the same time, we’ve been moving aggressively to the cloud, which increases our market of innovation and enhances scalability for our customers. We currently have approximately 85% of our cloud migration completed. We expect to reach our overall cloud goals later this year, allowing us to further leverage shared technologies across product sets. Before jumping into performance for the quarter, I’d like to quickly address the recent disruption in the banking industry. First, it’s worth noting that the failures of Silicon Valley Bank and Signature Bank had very minimal impact on our business. Neither of these banks were customers or partners of WEX and we had minimal deposit exposure. They were not a party to our credit facility, nor counterparties to our hedging relationships. As the banking industry copes with significant movement in deposit flows since the recent bank failures, our custodial HSA cash deposits and certificates of deposit have shown themselves to be extremely stable. This is thanks in part to the contractual limitations to early withdrawals and is also evidenced that the market for these funding vehicles continues to remain strong. Now, let’s turn to the financial results. Turning to our performance in the first quarter, revenue increased 18% year-over-year to $612 million. This increase of $94 million year-over-year was primarily driven by the growth of 36% in both our Corporate Payments and benefits segments. On an organic basis, which excludes the impact of fluctuations in fuel prices and foreign exchange rates, revenue in the quarter grew 19%, compared to the prior year’s period. Once again, we beat our long-term organic growth target of 8% to 12%. Strong quarterly revenue, paired with the scalability of our business model and a superior funding model, resulted in adjusted net income per diluted share of $3.31, an increase of 15%, compared to the same quarter last year. Total volume processed across the organization in the first quarter grew 17% year-over-year to $52.3 billion, driven by strong performance in our Corporate Payments and benefits segments. During the quarter, we repurchased approximately 525,000 shares of WEX’s stock for roughly $93 million, resulting in a small EPS benefit in the quarter. Now, I’d like to recap our business highlights in the quarter. On the benefits front, we completed a very positive open enrollment season. We signed one of the largest administrators of multi-employer benefit funds in the Midwest. This administrator made the move to WEX in order to offer the benefits of our card programs to their long-time clients for their health reimbursement arrangement plan. This administrator has more than 100 multi-employer clients, allowing for a large market reach. In Corporate Payments, we signed a partnership with one of the largest healthcare systems in the United States. As you may recall, we’ve added to our direct sales force in this business and are starting to see a positive return with more than 40 deals signed in the first quarter. We also continue to benefit from a rebound in travel volume globally. Benchmarking against 2019, we are seeing improvement versus Q4 in all regions, with the largest gains coming from Europe. Overall travel-related purchase volumes pro forma for the eNett acquisition were up 29% versus 2019, with approximately half of the growth attributed to the number of transactions and half to the value of each transaction. In mobility, we’ve recently signed a renewal with one of the most popular states in the country, showcasing that our array of products continues to be a leading value proposition. I’m proud of our strong execution this quarter and believe we remain well-positioned for the future as we deliver on our strategic priorities. Let me start with an update on our electric vehicle initiatives. We’ve been listening closely to the evolving needs of our commercial customers. They’re asking us for simplified solutions to manage their mixed fleets and are looking for a single card or app on a single credit line, managed and controlled through a single view. This feedback has informed our electric vehicle strategy, which consists of providing fleet managers the tools to plan their energy transition, manage their vehicles in a mixed fleet environment, and help ensure their EVs can be conveniently charged across a distributed environment. To this end, our Mobility team is currently expanding our DriverDash mobile app, which helps fleets find charging locations on the go to include EV charging stations in Europe. This furthers our goal of putting tools in the hands of drivers that simplify the process of determining where, when, and how to charge. We’ll build on this launch by focusing on learnings and innovating our offering for the U.S. customers. More broadly, as we drive our strategy of simplification and convenience in the EV space, the first phase of our EV product rollout is focused on en-route charging. We have a solution that is live in both Europe and the United States. We also signed acceptance agreements with five of the ten largest public charging networks in the U.S., all of which are in various stages of implementation. Our objective is to create a universal network of EV charging stations similar to our fuel acceptance network. We believe these new agreements will benefit WEX and our network partners, given the significant relationships we have with the government and large fleets. Our next phase will turn to at-home reimbursement. We’ll be piloting an at-home reimbursement product this quarter and expect to have a broader rollout in the second half of this year. Again, this is consistent with our strategy of ensuring electric vehicles can be charged conveniently while simplifying payments and reimbursement for organizations. There’s a significant pipeline in development beyond that with an overall vision of enabling managers to grow their fleets and have a unified experience using our products, regardless of how their vehicles are powered. We’re also encouraged by early cross-sell conversations as we begin the new year. Our focus on cross-sell continues to gain traction with more than 60 signed contracts during Q1. Most of these expanded relationships are mobility customers to whom we were able to sell a benefit solution. Next, let me turn to our operational improvement. We remain focused on enhancing the scalability of our platform and are on track to capture $100 million in run-rate operating efficiencies by the end of 2024, with approximately half of these savings being reinvested in the business. As part of this initiative, we’ve been looking closely at a number of areas of our company using improved processes, data, and technology. One of the areas I am excited about is the planned improvement in customer experience by creating a more seamless digital journey, which has the added benefit of saving costs. We have a dedicated leader for this initiative with dozens of cross-functional teams inside of WEX, who are focused on execution and have the full support of me and my entire management team. Finally, before turning the call over to Jagtar, I wanted to highlight that we will host an investor event to provide an in-depth understanding of our benefits segment, including the product set, opportunity, and financial profile. As you will hear from Jagtar, we had terrific results in benefits this quarter and we’re excited to share more about this sizable, fast-growing, and profitable business with you on June 1st. Registration for the webcast of the event will be available on the Investor Relations section of our website in the coming weeks. With that, I’ll turn it over to Jagtar to walk you through this quarter’s financial performance in more detail.

Thanks, Melissa, and good morning, everyone. We started off the year with a solid first quarter, achieving strong top-line growth while delivering dependable execution that our employees, partners, customers, and shareholders have come to expect. As with prior quarters, this quarter showed 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 first quarter, total revenue exceeded the midpoint of our guidance by $7 million due to a combination of strong Corporate Payments purchase volume and a very good open enrollment season in our benefits segment. Total revenue came in at $612 million, an 18% increase over Q1 2022, with more than 80% of revenue for the quarter recurring in nature. As a reminder, we define recurring revenue as payment processing, account servicing revenue from our factoring business, transaction processing fees, and other smaller items. In total, adjusted operating income margin for the company was 37.6%, which is down from 39.2% last year, largely driven by much higher margins in both the Corporate Payments and benefit segments, offset by lower margins in the mobility segment. From an earnings perspective, on a GAAP basis, we had net income attributable to shareholders of $68 million in Q1. Non-GAAP adjusted net income was $145.8 million, or $3.31 per diluted share. This represents a 15% increase over the prior year. Now, let’s move to segment results, starting with mobility. Mobility revenue for the quarter was $342.3 million, a 7% increase over the prior year, powered by solid volume growth from new customer wins and renewals and an increase in the interchange rate earned on payment processing transactions. Payment processing transactions were up 4% year-over-year. We saw solid mid-single-digit growth from our local customers in the U.S. while we had a small decline in over-the-road transactions due to freight market conditions. This is an area we continue to watch closely. As you’ve seen in our metrics, the net late fee rate was up slightly versus the prior year, mostly due to the new ExxonMobil small business portfolio added late last year. We had anticipated the trend of higher late fee rates that we witnessed at the end of last year to continue in Q1, but that did not materialize. Overall, finance fee revenue was up only 3%, which includes a 33% slowdown in our factoring revenue, which is related to the freight market conditions I just mentioned. The domestic fuel price in Q1 2023 was $3.86 versus $3.90 in 2022. We estimate the year-over-year impact of fuel prices increased segment revenue by approximately $1 million, including a benefit of approximately $6 million for European fuel price spreads. The net interchange rate in the mobility segment was 1.21%, which is up 10 basis points from Q4 of last year. We saw higher rates earned from a number of merchants due to renewals at favorable terms. The impact of interest rate escalator clauses contained in various merchant contracts and the rate impacts from a reduction in fuel prices versus Q4. The segment adjusted operating income margin for the quarter was 40.5%, down from 50.2% in Q1 2022. Higher credit losses versus the prior year were the primary reasons for the lower margin. Let me briefly address the increased credit losses, which were within our guidance range at 32 basis points of spend volume, including approximately 4 basis points for fraud losses. The elevated loss rates in the over-the-road trucking business that we have seen over the past two quarters are starting to abate. The delinquency rates are improving and we expect loss rates to trend down going forward. The local fleet customers in the U.S. continue to have marginally elevated loss rates compared to the last couple of years, but are in a relatively normal range. Delinquencies here are also continuing to improve. Fraud losses in the segment, which we’ve spoken about in prior quarters, were down 39% from Q4 of last year and continued to improve. The fraud remediation activities that I’ve spoken about in prior quarters, which include working with truck stop operators, continuing to enhance our fraud detection tools and releasing fraud-focused product enhancements, appeared to deliver the fraud reduction impact as intended. We are pleased with this result and are working diligently to continue on this track. Turning now to Corporate Payments. Total segment revenue for the quarter increased 36% to $104.8 million. Purchase volume issued by WEX was $18.6 billion, which is an increase of 58% versus last year. The net interchange rate in the segment was down 10 basis points sequentially, predominantly due to the timing of incentives for the networks in Q4 last year, as well as travel customers contributing a larger percentage of total purchase volume in Q1. Breaking down the segment further, travel-related customer volume represented approximately 71% of the total spend and grew 84% compared to last year. Revenue from travel-related customers was up 87% versus Q1 2022. This reflects continued strength in consumer travel demand and we are very pleased with these results. Non-travel-related Corporate Payments customer volume grew 17% versus last year, and the revenue was up 4%. This was led by continued growth in the partner channel. We also saw volume growth in our direct channel, and we are pleased to have signed more than 40 new direct Corporate Payments customers in the quarter. The Corporate Payments segment delivered an adjusted operating income margin of 46.9%, up from 36.7% in Q1 last year. There has been significant improvement in these margins as volume accelerates. 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 benefits segment. We continue to drive strong growth resulting in Q1 revenue of $164.9 million. The $43.8 million increase represents 36% over the prior year. We were very pleased with our SaaS account growth, which was up 14% in Q1 versus the prior year. A reminder that we view this as an important metric since it represents the underlying growth and usage of the platform and drives other areas of the business, such as payment processing and HSA deposit growth. The benefits segment purchase volume increased 18%, leading to an 18% increase in payment processing revenue. We also realized approximately $37 million in revenue from the custodial HSA cash deposits that were invested by WEX Bank and funds held at third-party banks, compared to $9.5 million last year. Approximately $26 million of the revenue increase in the segment is due to the average interest rate earned on these balances increasing from 1.24% last year to 3.98% this year. This income makes us less sensitive to interest rates as a company, as the revenue offsets higher interest expense in other parts of the business and serves as a natural hedge. The revenue is highly accretive to earnings, enabling us to perform well across a range of interest rate environments and providing some stability to navigate economic cycles. The benefits segment adjusted operating income margin was 39.1%, compared to 29.3% in 2022. The custodial revenue from the invested HSA cash deposits is the primary driver of the increase in margin, but if this is excluded from both periods, the core operating margin would still have increased nearly 1%. Shifting gears now, I will provide an update on the balance sheet and our liquidity position. We remain in a very healthy financial position and ended the quarter with $922 million in cash. We have $776 million of available borrowing capacity in corporate cash of $149 million as defined under the company’s credit agreement at quarter end. 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, as defined in the credit agreement, stands at two and a half times, which is at the bottom end of our long-term target of two and a half to three and a half times. Next, I would like to turn to cash flow. WEX generates a significant amount of cash each year, with Q1 typically being the lowest seasonality. Using our definition, adjusted free cash flow was negative $61 million through Q1, which is $16 million better than 2022. The beginning of each year is typically a weak time for cash flow due to the timing of some payments. Also, as we noted last quarter, our deposit balances and, as a result, our reported adjusted free cash flow were about $150 million to $175 million more than we would normally expect, which were reversed during Q1. 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 guidance for the second quarter and the full year. The first quarter was a 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, as well as the benefit of share repurchases completed to-date. Other than macro factors like fuel prices and interest rates, we are largely maintaining our previous guidance for everything else. Starting with the second quarter, we expect to report revenue in the range of $613 million to $623 million. We expect ANI EPS to be between $3.45 and $3.55 per diluted share. For the full year, we expect to report revenue in the range of $2.45 billion to $2.49 billion. We expect ANI EPS to be between $13.85 and $14.25 per diluted share. These updated ranges represent an increase of $20 million in revenue and $0.25 in EPS, compared to the midpoint of our previous guidance. As I complete my prepared remarks, I would like to emphasize how pleased we were with our Q1 results. We have allowed these results to flow through to our guidance increase for the year while largely maintaining our previous guidance for the remainder of the year. We continue to execute well on both growing revenue and becoming more efficient in servicing our customers. With that, operator, please open the line for questions.

Thank you. We will now begin the question-and-answer session. Your first question comes from the line of Sanjay Sakhrani with KBW. Please go ahead.

Thank you. Good morning. Melissa, appreciate all of the color on business development. Just listening to you and Jagtar talk about the business generally in the first quarter trends, it seems like you’re not really seeing any appreciable signs of slowing outside of the over-the-roads or freight area. Is that a fair statement when we look across Mobility, but just across WEX? And then maybe, you could just remind us of what you guys are incorporating into the guidance.

Sure. Good morning, Sanjay. If you look across the business, I would agree. The over-the-road customers are showing continued weakness within their marketplace as spot rates continue to be lower. They’re not talking about driver shortages in the way that they have in the past, inferring that there’s a slowdown within that customer base and we saw negative 2% same-store sales within the over-the-road business. But when you migrate across the rest of the portfolio, our fleet mobility customers and our North American fleet business were actually up 2.5%. And so we continue to see strength within the North American fleet business. Our customers in travel continue to rebound, and we see strength there as well as if you go into our benefits business. In benefits, the conversation is around employee retention and how we’re ensuring we’re offering benefits in the marketplace that are attractive and continue to evolve in the way that the marketplace expects. So, overall, we are still having strong conversations within our customer base. We continue to assume a slow growth environment in the second half of the year in our guidance.

Okay, great. And just one follow-up question for Jagtar. Inside mobility, I think you mentioned the slowdown in factoring revenue being a driver of that finance and the late fee yield. Should we think about that as being the predominant sequential change in that yield? I know there’s seasonality to the yield likely. Maybe, you could just help us think through that and how we should think about the rebound in terms of this factoring revenue on a go-forward basis? Thanks.

Yes. Thanks, Sanjay. I think that’s a good question. So, I’d say there were some puts and takes in that finance fee revenue. We’ve got some benefit from the ExxonMobil portfolio that we had purchased last year, which was about $5 million. On the negative side was the factoring item that you mentioned. There has been an ongoing slowdown in the freight industry with spot rates declining. That’s brought down both the number of invoices we factor and the average dollars per invoice. That has brought the whole factoring item down, and we’re expecting that to continue at least for the next couple of quarters. But there seems to be some ongoing spot rate stabilization in the freight industry.

Great. Thank you.

Your next question comes from the line of Tien-tsin Huang of JPMorgan. Please go ahead.

Hi. good morning. Good results here. I wanted to ask about Corporate Payments, if that’s okay. Just thinking about the rest of the year, any callouts with respect to volume and as well as yield? I’m asking, because I’m just always trying to learn the difference between the volume growth and the revenue growth. I know the net interchange piece was down a little bit from incentives, and any clarity on how that spread might behave here in the next couple of quarters?

Yes, sure. Thanks, Tien-tsin, for the question. So yes, you’re correct. The take rate was down compared to last quarter primarily because of the scheme fees we called out last quarter. Within that segment, what we’d expect is normal puts and takes between travel and our non-travel business. We’d expect kind of a normal seasonality going into Q2 and Q3 on the travel side, it tends to be a higher quarter for travel. Overall, as you can see from the charts in the appendix we posted to our website, travel does have a lower take rate. So, we expect some volume impacts from that as we go through the next couple of quarters.

In terms of what we’re assuming from a volume perspective, we are assuming a slow growth environment, with a potential trail-off in travel growth in the second half of the year, still with decent growth in our underlying assumption.

Yes.

We're aware that there's still pent-up demand, but growth will come off the highs that we’re seeing in the first and second quarters.

Got it. That’s prudent and makes sense. Just my quick follow-up, I know both of you talked about a little bit just with the stresses on the banking system and all the banking turmoil and deposit activity. It sounds like you managed it well. Just want to make sure I understood that there was no impact on deposit funding from a WEX bank standpoint and also from a risk management standpoint, any change in operations either on the benefit side or the corporate payments side, given all the cash flow activity that happens naturally there. Thanks.

Yes, but I’m going to start and I’m going to let Jagtar add onto this. We have about $4.5 million worth of deposits that sit on our balance sheet. Those are a combination of CDEs, which we used to fund the business, and then HSA deposits, which are the two largest pieces of that. Interestingly, even in the financial crisis in ‘08, people moved money into the CDE market for stability. So it’s a very stable source of funding. Moreover, looking across our entire deposit portfolio, over 95% of our deposits are in FDIC insured accounts.

Yes. Let me add a couple of comments there. One thing I would point out is that our deposits increased by about $1 billion from the end of Q4 to the end of Q1 this year, roughly split evenly between HSA deposits and non-HSA deposits. So that provides evidence that our funding sources remain strong. The banking turmoil we’ve witnessed has essentially worried people about non-FDIC insured deposits, but more than 95% of ours are FDIC insured, which gives comfort to our depositors. We’ve seen robust demand for funding sources. In terms of operational changes, we are closely monitoring the banks that we work with. We’ve looked at a range of metrics around the banks we work with, such as their ratio of insured to uninsured deposits, credit default swaps, to ensure we are prudently managing money and moving it around where appropriate.

Perfect. That’s great color. Thank you, both.

Your next question comes from the line of Dave Koning with Baird. Please go ahead.

Yes. Hey, guys. Thank you so much. In the mobility segment, the payment processing rate was really high. I’m wondering if that’s sustainable, and it seems like the offset you talked about, the late fee impacts, and maybe just some macro on the fleet business. Can you still get to the low end of the 4% to 8% that you’re talking about for the full year?

Yes. Our interchange rate was up nicely this quarter. I talked about some of the reasons for it in our prepared remarks. We have some escalator clauses that are built into our contracts. With the rise of interest rates, we’ve seen the impact of that. We’ve had some renewals come through, and we’ve been pleased with the renewal rates, which have been up in certain cases, which also drove the higher interchange rate. The only one-time item in the quarter was market movement in Europe worth about four basis points of that interchange rate. The rest of it I would largely expect to be recurring in nature. So, we should see these interchange levels flow through the year. Our expectation is that we will continue to grow ex-PPG, ex-FX at our target growth rate of 4% to 8%.

Got you. Thank you for that. And then, I guess, secondly, travel volume looked big, maybe 70% or 80% or whatever it looked like. What’s it like in April, and how do you think that is going to go through the year? I assume the natural progression’s not going to stay quite that strong.

Yes, we continue to see travel volumes in April, in line with our forecast. So, this is something we watch closely, given the overall discussion about the macroeconomy. But so far in April, things are trending well for us.

Got you. Thanks, guys. Great job.

Your next question comes from the line of Darrin Peller with Wolfe Research. Please go ahead.

Hey, guys. If we could touch on the benefits segment for a minute, the account growth there obviously has been strong mid-teens, and now you’re adding the Midwest manager as well. So, how do we think about, first of all, just if you could reiterate what’s really driving that, what the strategy is for that business going forward, and the kind of growth profile we can assume into the second half of the year, especially as this Midwest manager comes on as well?

Yes. As Jagtar said, we had a really strong open enrollment season. So when you think about that business, a lot of your onboarding occurs before you start the year. It gives you good visibility in terms of what’s going to play out throughout the course of the year. We feel good about our performance during open enrollment, and we believe that the combination of the products we have in the marketplace, the distribution channels, and our partnerships will support growth. The pipelines continue to fill, and we feel good about the close rates we have this year, which can lead to growth next year, having talked about 25% to 30% growth for the year for the benefits segment.

Okay. I mean, it’s obviously impressive. Is there an investor event coming up around that, right, where you’ll go into more detail?

Yes, yes. We’re excited to provide a deeper dive into this business. We want to ensure that people have visibility and truly understand the products we have in the marketplace and how we compete.

If you don’t mind, just a quick follow-up on the Corporate Payments side also. I know that this has been asked a bit, but I just want to understand a little bit more about the strategy of the business outside of the OTAs. Obviously, travel has been strong, but moving beyond the travel side, in terms of what you’re doing to really invest there to differentiate and where we see that headed.

Sure. We have two primary products within the Corporate Payments space; one is the embedded payments product, which is used within our travel customer base. This product typically serves highly sophisticated customers who embed an API payment stream within their workflow, utilizing either our virtual card technology or other payment modalities. This tech-enabled product has strong uptime with the ability to settle globally across multiple currencies. We have been successful in selling this product into the fintech community in the United States. The second product is an AP direct product, which we have just started ramping up with a direct sales force. Historically, we sold this through a partner channel, but we are starting to ramp salespeople, and we’ve seen positive results with more than 40 signings in the quarter. We feel optimistic about this investment, and we expect this area to continue to grow. Those are the predominant products we have in the Corporate Payments space.

Understood. Thanks, guys.

Your next question comes from the line of Nik Cremo with Credit Suisse. Please go ahead.

Hey, guys. Congrats on the strong results and thanks for taking my question. Can you discuss your 2023 growth expectations for travel-related revenue and Corporate Payments revenue separately to arrive at the 7% to 11% guide? Should we expect Corporate Payments to trend in the 4% range? And I guess travel to decelerate materially just from where it’s at relative to the guide?

Yes. Through the second half of the year, we assume a slow growth environment, so we anticipate that travel growth may decelerate. However, we still expect a different growth environment, perhaps elevated, considering pent-up demand. For Corporate Payments, we are expecting to maintain at a single-digit growth rate during this year, supported by our efforts to ramp up customers and enhance our direct sales force.

Yes, I would just add that we have projected guidance of 10% to 15% growth rate overall for the travel and Corporate Payments segments. Travel will likely be the higher contributor, and Corporate Payments will be on the lower side.

Thank you.

Your next question comes from the line of Bob Napoli with William Blair. Please go ahead.

Thank you. Good morning. Just within the rebranding to Mobility Solutions at this point, Melissa, is there any deeper strategic meaning behind that?

When we talk about the segments internally and the businesses, we think of it as more mobility plays. As we continue to expand what we’re doing, even with our traditional fleet customers, we’re moving into the mixed fleet environment, thus opening new offerings in that space. It aligns with the strategic direction we envision for the business.

And then just on your B2B payments business, any progress on the Flume effort, especially with SMB customers? Also, was the weakness you called out earlier the same among smaller customers?

Yes. In the previous quarter, we discussed weakness among over-the-road customer segments, particularly with smaller clients. Jagtar mentioned that we’ve since seen stability in our portfolio. We attribute this to an acute issue where a large number of new vehicles were added, leading to a decline as spot rates got lower. The number of customers who were newly in business and smaller in size faced more difficulties, but we are seeing that stabilize now. We are monitoring what’s happening in this space and have adjusted our credit approval standards accordingly.

And how is Flume performing?

Yes. Flume is still on track for growth. We started this about 15 months ago and now have hundreds of customers using the product. We continue to enhance the product set in the marketplace, and so far, the early results have been favorable. We’re eager to keep learning and evolving, contributing to our long-term growth framework.

Your next question comes from the line of Ramsey El-Assal with Barclays. Please go ahead.

Hi, thanks for taking my question. I wanted to ask about the corporate payments segment. You mentioned several times building out the direct sales force and inked 40 new deals. Can you help us think through the timing and impact of these implementations tactically, and whether we should expect more of a mix shift to direct that could positively impact segment yields over time?

Yes. There are multiple aspects driving growth in that segment. We continue to build the direct sales force while working with existing customers to address their needs. When we think about growth in this part of the business, it stems from both the current customer base and the new direct side. Our long-term growth expectation for that segment aligns with a target growth rate of 10% to 15%, and we are focusing our efforts towards it.

Thank you. And could you provide an update on the broader market opportunity in the mobility segment? Is EV the largest future growth opportunity, and are there other compelling opportunities in the market?

Yes. The mobility segment has great potential. We continue to capture market share, and you can see that in the growth of vehicles within our base. A lot of focus has been on enhancing our digital capability through a dedicated digital team that focuses on the customer experience. We believe we can bolster not just our existing sales channels but also meet future needs around the transition to EVs through robust digital capabilities. We see not only nascent opportunities within existing customers but also in the broader market for our products.

Hi, thank you for taking my questions. I wanted to get insights on your interquartile volume trends. I understand the weakness in OTR, but are you sensing macro weakness elsewhere? Your guidance suggests a slowdown in the back half, but have you seen any slowdowns yet across your businesses?

The only place we observed a slowdown has been in the over-the-road customer base, with negative 2% same-store sales. Previously, we saw positive same-store sales during the bulk of the pandemic. However, the rest of our portfolio is showing growth; construction, for example, has shown a 2% year-over-year growth in same-store sales. So, I would describe that as overall strength, though we are watching market conditions closely.

In April, the travel trend continues as expected alongside fleet gallons, both in line with our forecasts.

Got it. The other question I had was Melissa, you mentioned a few significant customer signings, the multi-employer administrator in benefits, and the large health system in Corporate Payments. I’d like to understand how quickly these signings contribute to revenue. Are they going to impact Q2, or will they be more 2024 contributors?

When we plan the year, we look at the revenue run rate coming in. Some contracts are signed but not yet implemented that will impact 2023, while others will contribute in 2024. Each area focuses on retaining existing customers, maximizing implementation, and signing new customers. Therefore, any individual contract contributes relatively small revenue in 2023. However, collectively they are meaningful for 2024.

The contracts mentioned by Melissa are factored into the growth guidance we’ve communicated, particularly the benefits contract that drives our 25% to 30% growth expectation.

Lastly, regarding capital allocation, given the challenging fundraising environment, are you spotting more opportunities in M&A? Can you hint at where you’re focusing your M&A efforts right now? Is it in benefits, Corporate Payments, or finding adjacency expansion capabilities?

M&A is something we’re always active in. We look at opportunities for product extensions and evaluate whether we should build, partner, or buy based on our product analysis. We also consider scale plays that are financially accretive and geographic extension capabilities, so there’s a mix of assets in those categories. We are focusing on EV innovation and seeking smaller assets to invest in. While there’s a disconnect between private and public multiples, we maintain the same rigorous approach towards potential asset acquisitions as in the past.

This concludes the question-and-answer session. I will turn the call to Steve Elder.

I just wanted to thank everyone again for hanging with us as we went a couple of minutes long here, and we’ll look forward to speaking with you again in about three months. Thank you.

This concludes the conference call. You may now disconnect your lines.