Good morning. My name is Emma, and I will be your conference operator today. I would like to welcome everyone to the WEX Q2 2023 Earnings Call. Steve Elder, Senior Vice President of Global Investor Relations, you may begin your conference.

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our Chair and CEO; 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. 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 ended December 31, 2022, filed with the SEC on February 28, 2023, and in our quarterly report on Form 10-Q for the quarterly period ended March 31, 2023, filed with the SEC on April 27, 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. I am pleased to share that WEX continued to deliver impressive results in Q2 and ended the first half of 2023 in a strong position. In this dynamic macro environment, we continue to execute against our strategic initiatives, which position us to drive long-term growth throughout the business. I'm proud to again report strong results for both revenue and adjusted net income per share. Revenue for the second quarter came in towards the high end of our guidance, $3 million above the midpoint, and adjusted net income per share exceeded our guidance, beating the midpoint by $0.13. Now let me provide a bit more color on these financial results. Revenue for the quarter increased 4% year-over-year, reaching a record high for the second quarter of $621 million. This increase of $23 million year-over-year was driven by growth of 21% in our Corporate Payments segment and 34% in our Benefits segment. Our revenue growth for the quarter was notable when you consider the 26% year-over-year decline in fuel prices. We saw an anticipated decline in mobility revenue of 10% as a result of the impact of lower fuel prices, which reduced revenue by $53 million. The company's overall growth for the current fuel price headwinds reflects the strong execution and resilient business model that I have discussed on previous earnings calls. This point deserves some emphasis. The year-over-year decline in fuel prices this quarter was one of the largest that we've seen in our history, yet our diverse and resilient business model allowed us to grow top line revenue despite that. In fact, on an organic basis, and excluding the impact of fluctuations in fuel prices and foreign exchange rates, revenue in the quarter grew 13%, a result that continues to underscore our strong momentum. Strong quarterly revenue paired with the scalability of our business model was offset by lower fuel prices versus the prior year highs and resulted in adjusted net income diluted share of $3.63. Total volume processed across the organization in the second quarter declined 2.3% year-over-year to $55.3 billion driven by strong performance in our Corporate Payments and Benefits segment and offset by lower fuel prices. I'll now turn to an update on each of our segments, starting with Benefits. We've had an active couple of months in the Benefits segment. On June 1, we hosted an event to provide the investor community an in-depth understanding of the business, including its product set, opportunity and financial profile. We continue to believe this segment is uniquely positioned for success due to its strong strategic fit in the WEX portfolio, its leading position in a large and fast-growing benefits market, its multiple product offerings and go-to-market channels and its compelling financial profile. I am also pleased to announce that WEX signed a definitive agreement to acquire Ascensus Health and Benefits line of business, a leading tech-enabled provider of employee benefit accounts with a diversified portfolio, including HSAs, FSAs and other benefit accounts. We are excited about this deal as it will both increase our scale in the Benefits segment and expand our benefits product offering by including Ascensus' complementary Affordable Care Act compliance and verification capabilities. Total consideration is expected to be approximately $180 million, subject to certain working capital and other adjustments. We expect the transaction to close before year-end. We will not update guidance for this acquisition until it closes, but we would expect it to be roughly neutral to adjusted net income for the remainder of 2023. We have known the Ascensus team for many years and look forward to welcoming them to the WEX family. We believe our combination will only strengthen and deepen our offerings for employers, consumers and partners alike. In Corporate Payments, we continue to benefit from a strong rebound in travel volume globally, with travel purchase volumes up 44% year-over-year. We are seeing strong growth in all regions with the U.S. leading the way. We're at 149% of 2019 purchase volume for the quarter on a pro forma basis, including eNett, which is better than the 130% we saw in Q1. Across our Corporate Payments segment, we were pleased to sign a number of renewals and expanded relationships with customers, including a large regional banking partner and European online travel agency On the Beach. In mobility, we continue to sign new customers across the portfolio and see the benefit of increased marketing as we continue to add small fleets through digital channels. New signings this quarter include merchant leasing, a competitive leasing company win. Merchants is a major fleet management company and will be using both our mobility and corporate payment solutions. Over-the-road trucking customers continue to work through a slow freight environment and same-store sales were down 1%. We've seen an increase of about 2% compared to our normal attrition rates relating to higher credit standards in our portfolio. We're seeing the benefit of this in our earnings overall. As you've heard, there's a lot to celebrate across each of our segments. Now I'd like to highlight the progress we've made against our strategic initiatives this quarter. I'll start with an update on our electric vehicles initiatives. We're striving to meet our customers where they are on their EV journeys. Our strategy is to create a seamless transition for our customers as they transition to a mixed fleet environment. We continue to build and partner to deliver tools for the mixed fleet world. Our market-leading products can be used alongside and seamlessly with EV capabilities that create flexibility for our customers to charge at work or home as well as fuel and charge while in transit. While it's still early days, pricing is playing out consistently with what we laid out at our Investor Day last year, and we continue to see a significant opportunity to expand our offering. We're also well positioned to capture revenue when the adoption curve accelerates. Initially, this includes continued investments in our products and putting in place Acceptance Agreements with approximately 75% of the publicly available charging networks in the United States and approximately 85% in Europe. We're also in the testing phase of an at-home charging reimbursement product, and we expect to roll out a depot solution by early next year. We're feeling positive about our progress to date as we work towards replicating the ease, acceptance and control that our closed-loop network provides to customers today. We continue to believe that we are well positioned to be our customers' adviser and partner and operating in a mixed fleet environment. Part of our ability to deliver winning solutions to the market will come from both within WEX and through unlocking the great innovation that is happening across the ecosystem. To that end, earlier this morning, we announced that our Board of Directors has authorized our recently formed WEX Venture Capital team to invest up to $100 million through the end of 2025. There's an emphasis on minority investments in early and growth-stage companies that are innovating on how the energy transition impacts corporate mobility, including areas such as fleet electrification, the EV charging ecosystem, energy management and optimization and adjacent technology. We've already executed a set of minority investments with innovators that we believe have the potential to be great partners in providing solutions to our customers. Our experience thus far gives us confidence that our deep knowledge of the mobility industry and relationships with hundreds of thousands of customers makes us an attractive investor to the early-stage companies we are targeting. These investments enable us to bring both internally developed and partnered solutions to the market as we aggressively build our capabilities in this dynamic space. We believe the years ahead are a crucial moment for businesses with mixed fleets and we're proud to lead and help them through the energy transition. The second strategic initiative I want to share an update on is our operational improvement efforts. As a reminder, we're on track to remove $100 million in run rate expenses exiting 2024, with approximately half of the improvements expected to be reinvested in the company. To date, much of the benefits we have seen have been offset by the cost involved in achieving them, but we expect to see margin improvements as we lap those expenses. Before I wrap up, I'd like to talk about how we are applying machine learning and artificial intelligence tools to our processes. Let me give you a few examples. First, on credit adjudication and monitoring we've significantly evolved our tools to provide us much more granularity to adjust credit decisioning based upon risk and profitability. We've invested in our credit adjudication and portfolio management capabilities leveraging machine learning models. These enhanced capabilities have yielded strong initial results at the point of credit decision while also providing improved insights on our portfolio, leading to proactive actions where appropriate. The investments in machine learning position us to manage our existing portfolios with increased precision and support future growth. Second, on software development, we began rolling out large language modeled AI tools for our software engineers earlier this year and implemented this more broadly in the beginning of the second quarter. These tools augment their day-to-day work in useful ways and we've already seen meaningful productivity improvements which we expect to continue into next year. This has the benefit of increasing our speed to market and reducing the cost of developing new products. With these successes and others in place and the returns they have generated, we've launched an AI center of excellence focused on hiring, educating and trading data scientists and analysts on best practices of model development and advancement in AI technologies. The Center of Excellence increases the skill set of data science and data analysis teams across WEX through projects and rapid experimentation, ultimately bringing new products using technology tools to market faster. Finally, I want to share that next week, we plan to publish our third annual ESG report. This report provides an update on WEX's ESG efforts and importantly, demonstrates how our initiatives like supporting our customers' transition to EVs and educating benefit customers at HSA Day are driving business outcomes and making a positive impact. I remain confident in WEX's path forward and long-term growth opportunities as we continue to deliver strong financial results while managing the business through a dynamic economic environment. To that end, I'm pleased that we are raising our full year guidance for both revenue and earnings despite a lower fuel price forecast which Jagtar will discuss further in a moment. 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 reported a solid second quarter, achieving attractive top line growth in spite of the headwinds of the decline in fuel prices. As our results show, we continue to deliver with dependable execution that our employees, partners, customers and shareholders have come to expect. Now we'll start with the quarter results. For the second quarter, total revenue exceeded the midpoint of our guidance by $3 million despite lower fuel prices than we anticipated due to a combination of strong corporate payments purchase volume and a continuation of great results in our Benefits segment. Total revenue came in at a Q2 record level of $621.3 million, a 4% increase over Q2 2022, 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, income from custodial HSA cash assets, transaction processing fees and other smaller items. In total, adjusted operating income margin for the company was 40.3%, which is down from 42.3% last year largely driven by higher margins in the corporate payments and benefits offset by lower margins in the mobility segment. From an earnings perspective, on a GAAP basis, we had net income attributable to shareholders of $95.3 million in Q2 or $2.20 per share. Non-GAAP adjusted net income was $159.3 million or $3.63 per diluted share. I would like to underscore that our strong results were in spite of two significant macroeconomic headwinds we experienced over the past year. The first is the significant year-over-year decline in fuel prices that Melissa touched on earlier. The second is the large increase in interest rates year-over-year with a Fed funds rate increasing 350 basis points in that time period. While those rate increases impacted our operating and corporate debt costs, natural hedges in our business, including the HSA custodial cash balances allowed us to mitigate those increases. The diversity of our business creates the resiliency that Melissa has talked about and is a strength of the company. Now let's move to segment results, starting with mobility. Mobility revenue for the quarter was $340.2 million, a 10% decrease from the prior year. Fuel prices have retreated compared to the record highs seen last year after the Russian invasion of Ukraine with a domestic average fuel price in Q2 of $3.68 versus $4.98 in 2022. We estimate the year-over-year 26% fuel price drop decreased segment revenue by approximately $53 million. The lower fuel prices were the primary reason for the Mobility segment revenue decline, reducing revenue growth in the segment by 14% versus last year. We also had a $7.7 million one-time revenue item related to a contract amendment in the prior year, which contributed a further 2% to the revenue decline. Together, the fuel price declines and one-time revenue item from last year combined to result in a $61 million headwind year-over-year. However, at a more fundamental level, revenue this quarter continues to reflect a strong business model with stable volumes year-over-year combined with increased interchange and late fee rates. Payment processing transactions were roughly flat year-over-year which was in line with our expectations for the quarter. Local customers in the U.S. were flat with last year, while we had a small decline in over-the-road transactions due to difficult freight market conditions and the impact on small trucking fleets. In our over-the-road segment, we did see an increase in our direct bill transactions, a model utilized by larger trucking fleets, which is reflected in the other revenue line. We believe this reflects shipping volumes moving from smaller to larger fleets. The freight market is an area we continue to watch closely, and we believe the market has stabilized at low levels for now. Next, let's turn to late fees. As you can see in our metrics, the net late fee rate was up 10 basis points versus the prior year mostly as a result of the timing of the rapid increase in fuel prices last year, which depressed the rate. Finance fee revenue decreased 10%, even with a higher rate earned, the previously mentioned decline in fuel prices this year and a 30% slowdown in our factoring revenue, which is related to the freight market conditions I've just mentioned caused the decline in revenue. The net interchange rate in the Mobility segment was 1.25%, which is up 4 basis points from Q1 and 16 basis points over last year. The higher interchange rate compared to last year reflects benefits from the interest rate escalator clauses contained in various merchant contracts, the rate impact from lower fuel prices and higher rates earned from merchant contract renewals at favorable terms. The one-time item I mentioned earlier was a benefit to the rate in the prior year, offsetting these increases. The segment adjusted operating income margin for the quarter was 44.2%, down from 50.9% in Q2 2022. Decline in margin was due to higher operating interest expense based on higher interest rates and lower fuel prices, partially offset by significantly better credit losses. Let me briefly address the credit losses, which were better than our guidance range of 15 basis points of spend volume. The elevated loss rates in the over-the-road trucking business that we have seen over the past several quarters are abating. The improvement in delinquency rates noted last quarter are reflected in the improved losses we experienced this quarter. Likewise, the local fleet customers in the U.S. have a low loss rate when compared to historical norms. Fraud losses in this segment are also back close to a normal range following several quarters of elevated losses. As you will see in our guidance, we believe we will be back to normalized loss levels for the remainder of the year. Now turning to Corporate Payments. Total segment revenue for the quarter increased 21% to $121.9 million. Purchase volume issued by WEX was $22.9 billion, which is an increase of 34% versus last year. The net interchange rate in the segment was down 2 basis points sequentially, predominantly due to travel customers contributing a larger percentage of total volume versus Q1. Breaking this segment out further. Truck-related customer volume represented approximately 76% of the total spend and grew 44% compared to last year. Revenue from travel-related customers was up 50% versus Q2 2022. This reflects continued strength in consumer travel demand, and we are very pleased with these results. The Corporate Payments segment delivered an adjusted operating income margin of 54.4%, up from 50.8% in Q2 last year. There continues to be 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 look at the Benefits segment. We continue to drive strong growth, resulting in Q2 revenue of $159.2 million. The $40.6 million increase represents 34% over the prior year. SaaS account growth was up 11% in Q2 versus the prior year. Benefits segment purchase volume increased 13%, leading to an 11% increase in payment processing revenue. We also realized approximately $42 million in revenue from the custodial HSA cash deposits that were invested by WEX Bank and funds held at third-party banks compared to $10.2 million last year. Approximately $27 million of the revenue increase in this segment is due to the average interest rate earned on these balances increasing from 1.57% last year to 4.33% this year. As I mentioned in the beginning of my remarks, this income makes us less sensitive to interest rates as a company as the revenue offsets higher interest expense in other parts of our 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 37.2% compared to 23.9% in 2022. The custodial revenue from the invested HSA cash deposits is the primary driver of the increase in margin. But if it's excluded from both periods, the core operating margin would still have increased 1%. Shifting gears now, I will provide an update on the balance sheet and our liquidity position. We remain in a healthy financial position and ended the quarter with $901 million in cash. We have $893 million of available borrowing capacity and corporate cash of $194 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 $2.6 billion. During Q2, we began accessing the Federal Reserve bank term funding program as part of our accounts receivable funding strategy due to flexibility and low cost of the funds available to us. You will see this on the balance sheet as a $500 million increase in short-term debt, and it is included in our leverage ratio, but it is effectively being used as a replacement for broker deposits as part of our funding strategy. The leverage ratio, as defined in the credit agreement stands at 2.8x, which is within our long-term target of 2.5 to 3.5x. Our increase in leverage from Q1 is due to the use of the Fed bank term funding program, but this increased leverage is not expected to have any impact on our cost of or access to capital in the future because of our ability to quickly unwind the program and revert to brokered deposits. Next, I would like to turn to cash flow. WEX generates a significant amount of cash each year, using our adjusted free cash flow was $131 million through Q2, which is an increase of $265 million compared to 2022. Our primary use of free cash flow so far this year has been to repurchase shares. When the Ascensus transaction closes, we would expect to use some of our available borrowing capacity to close the deal. We will continue to manage capital allocation between organic investment and M&A and returning capital to shareholders. Finally, let's move to revenue and earnings guidance for the third quarter and full year. The second 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. Starting with the third quarter, we expect to report revenue in the range of $629 million to $639 million. We expect ANI EPS to be between $3.65 and $3.75 per diluted share. For the full year, we expect to report revenue in the range of $2.5 billion to $2.52 billion. We expect ANI EPS to be between $14.15 and $14.35 per diluted share. For the full year, these updated ranges represent an increase of $35 million in revenue and $0.20 of EPS compared to the midpoint of our previous guidance. The major moving pieces compared to our prior guidance are increasing our expectations around travel volumes to match the environment we are seeing, including the assumption of reaching higher incentive tiers at the end of the year and further improvements in expected credit loss rates as a result of the actions we've taken over the last several quarters. We are providing this improved outlook despite our expectations of lower fuel prices which we expect to result in a $5 million to $10 million lower revenue and $0.15 of EPS in the back half of the year versus our prior fuel price assumption. As I complete my prepared remarks, I would like to emphasize how pleased we were with our Q2 results. We are also very pleased to be able to increase guidance despite a significant drop in fuel prices. We continue to execute well on both growing revenue and becoming more efficient serving our customers. With that, operator, please open the line for questions.

Your first question comes from Mihir Bhatia with Bank of America.

To begin, I wanted to highlight the increase in guidance, which is clearly a positive development. Despite the decline in fuel prices, could you elaborate on that? You mentioned travel; is that the only area where you're seeing improved momentum? Are there other segments, perhaps trucking, performing better than anticipated? I'm trying to understand the overall situation. Additionally, if you could provide an update on trends for the July quarter-to-date, that would be helpful.

Yes, Mihir. I'm glad to address that. We are very happy to raise our guidance, as the business is performing well, which is evident in our results. Looking ahead to the second half of the year, travel continues to do well, as we observed in Q1 and Q2, and this trend has continued into July, which is reflected in our guidance. For other segments, the trends remain consistent with what we've experienced in the first half of the year. Additionally, we identified a couple of areas with improvements in the guidance. With the increasing volumes, we anticipate reaching some pricing tiers related to our network contracts, and we have also seen improved credit losses. This encapsulates what we're observing in the guidance. Regarding your second question, as we move through July, we are on track with the guidance we released.

And then just switching gears, I wanted to talk about the acquisition. You could just add a little bit more color on what that brings to WEX. You're also going to get the deposits associated with some of those health accounts moved over, just the capabilities that you're adding? How soon is that an important for your customers? Should we think of it more as a bolt-on, should we think of it last year when you had the Benefits Express clearly doing well, highlighted how much it increased the TAM and things like that. So what about this one? How should we think of that more like, just more color on this one.

Sure. This plays into what we talked about in our Benefit Day. We're really excited about the Benefits segment of our business and the ability to continue to grow our TAM. There are really two primary things that we were focused on with Ascensus. The first is the expansion of our footprint, the majority of their revenue that they'll be bringing on our SaaS fees and so it extends the number of SaaS fees that we have in total for the company. So we look at reliable revenue stream that has been really instrumental in all economic environment so far; we've seen that business continue to grow. The second thing is rounding out some of the offerings that we have on the compliance side, particularly their Affordable Care Act compliance and verification products. This were something that we will be able to offer to our existing customers, and we see that as an added benefit as well. And so if we look at this business, we give guidance long-term, we said that we would grow 15% to 20%, this year 25% to 30%. So obviously, having a really strong year. And it's a place we want to continue to invest.

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

Can we just touch on the mobility organic revenue growth rate for a moment for that segment? And just thinking about it, we noticed the obvious. There was about a 3-point deceleration from Q1 to Q2. So just thinking about the moving parts there and how we should think about that for the second half of the year? And maybe just higher level, what you see driving the different moving parts right now would be helpful.

Sure. If you look at the segment, our Mobility segment, excluding fuel prices in the quarter grew 4%. So considering the backdrop of what's happening within the freight marketplace, we felt good about the fact we're within our long-term guidance range. Payment processing transactions, as you mentioned, were down 1%, and there's really two primary reasons for that. The first, we talked about in our prepared remarks, actually both of these things, but the attrition increased about 2% across mobility, which was driven by the decisions that we made to pull back on some of our credit standards. We've seen the benefit of that and the guide that we're giving with credit loss that we saw in this quarter. So we believe that these are really strong decisions. We're going to have a little bit of a headwind lapping that for the next couple of quarters. And the second thing was in our over-the-road segment, you saw this mix change where we had more volume coming through with larger fleets, we've seen this mix shift within the marketplace and kind of as a whole. And as a result, that volume came through as transaction processing transactions that just came through in a different line. Those two things were the primary drivers in this quarter's number. Overall, if you look at our sales pipeline, it's really strong. We think of that as a bit of a machine for us. We're out there in the marketplace. We continue to bring on both large customers and smaller customers, and we've made and continue to make enhancements in our marketing capability, which has allowed us to be even more refined about the type of customers that we're bringing in.

And so Melissa, thinking about the cadence for the second half of the year in Mobility, I mean, I don't know if there's anything you can give us now, but I may have missed it earlier, if you did.

Well, Jagtar has mentioned the fact that we're assuming similar trends in our business, particularly in mobility through the back part of the year as we lap the credit decisioning and so we expect to see the freight environment continue to be challenged through the second half of the year, which is what we're hearing from our customers and what we're seeing playing out in our trends. We'll continue to bring on new business, which will offset some of what's happening within the existing marketplace. And then we expect to have a little bit less volume coming in because of the heightened credit standards. But again, we're seeing the benefit of that coming through with credit losses.

Okay. And then just very quickly on Jagtar, on the corporate payments yields, would you say we are stabilizing on that front now? I think there was about a 2 basis points sequential decline likely due to travel. Is the growth from AvidXchange volume ramp complete or are there any other inputs or moving parts we should consider?

The Avid volume we've basically lapped. We're at kind of stable volumes for them. So really, the downtick this quarter was travel-related, right? Travel was up, I think, 30% quarter-over-quarter sequentially. And so because travel is at a lower take rate that naturally compresses the take rate overall slightly. And so that will be the primary dynamic going through the rest of the year, is with the ups and downs in travel, as you know, Q2 and Q3, I think they are highest quarters for travel.

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

Congrats on the strong results. I wanted to just ask about the corporate payment business. It looks like the volume growth decelerated a little bit quarter-over-quarter. It sounds like some of that might be related to Avid lapping, but any color on what drove the deceleration and what you guys are expecting for the remainder of the year with regards to this business?

If you look at the segment overall, again, really strong growth. Thank you for recognizing that, 21% growth for the segment. From a volume perspective, we did see some deceleration in growth within particular travel customer segment and still great growth, but you're starting to see it normalize a bit more. And if you look at within the travel customers itself, the America piece is really strong and continues to be strong. We started to see some of the flattening in growth in Europe.

I'll just add to that. Just talk about sequential deceleration. Remember, if we go back to last year, we were still in COVID Q1 last year, travel really hadn't come back yet. Q2, you had a very strong travel rebound. So you're basically lapping tougher compares. So we have been having growth in volume so significantly over a tougher compare, we were pretty pleased with that.

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

And I guess my first question, travel being so strong, I think, relative to expectations, just up a lot sequentially, that clearly drove margin up a lot in the segment. Is margin sustainable here as long as travel keeps growing sequentially, would margins stay in that 54% or so range.

Dave, yes, so we've talked about this a bit in previous calls, right? So we view that business as having a fairly fixed cost base. And so with travel where it is and to the extent that travel continues at these volumes, you would expect margins to stay in that range.

Yes. Okay. That's great. And then on B2B, I mean, the last question too, that looked a little weaker was revenue actually down a little bit year-over-year? And maybe can you just give what the growth or decline in revenues and volumes were in that? I mean, we can kind of back into them, but not precisely.

Yes. If you look at the quarter, we talked a lot about travel. The corporate payments, excluding travel, was down. The biggest driver of that was a year ago, if you recall, a bunch of ships that were sitting offshore and our customers were using our corporate payments products in order to pay demurrage fees and so we had some benefit a year ago related to that, that we're lapping, and that was the biggest impact year-over-year. Our bill pay business was a little bit lighter than it was in Q1, but that was more timing related. So nothing significant. And again, if you look at those when we think about the segment, the segment grew 21% in the area that we're saying the long-term guidance range of 10 to 15.

Yes, the normalized growth this quarter was about right, excluding the one-time event in Q2.

Yes. When we say 10 to 15, it's for the segment, which would include both travel and corporate payments. And I said that we expect corporate payments outside of travel to grow in the single digits this year. And I think I said that last quarter and would say that again right now, because of the timing and size of the customers that we're ramping right now. We're out in the marketplace. We're winning business in our direct products. Those customers are onboarding and that is going to take some time to accumulate. And so as a result of that, where we are in that cycle, we expect that this year will be more of a single-digit growth in corporate payments, excluding travel.

Your next question comes from the line of Tien-Tsin Huang with JPMorgan.

Good results here. Just on the Benefit side. I know, Jagtar, you decomposed the 34% growth for us nicely across the accounts and the rate stuff. But just honing in on the account growth piece and the volume growth, I think 11% and 13%. Is there a way to break that down as well across new sales, same-store growth with higher inflation and utilization pricing, that kind of thing? Just trying to better understand that just to build a better model out for it.

Yes. When we model it, we have more insight into this. We are examining all components and considering the target we set for ourselves regarding what we expect to bring in, net of attrition. When we aggregate this to our long-term guidance range, we anticipate growth of 3% to 5% across the business, and each business unit is aligning with that. Additionally, we have growth coming from our existing customer base and new product revenue. You can observe elements of both in that segment. Our sales team continues to acquire new accounts. There can be questions about the transition between Q1 and Q2, but this is typically a normal decline because customers with expiring FSA accounts will fully utilize their funds in the first quarter before closing those accounts. Consequently, we usually see a slight decrease from Q1 to Q2 due to this. Nevertheless, from a sales perspective, we are consistently bringing in new business, both directly and through our partners. Overall, it appears to be a standard year for us.

That's a good outcome for sure. And then just my quick follow-up on the WEX venture capital piece that you guys announced this morning, just a very smart way to get close to what's happening on the ground in terms of development. Is the mandate or the mission there to incubate ideas and potentially have that be a source of M&A? I'm just trying to think about what return you're expecting beyond financial returns?

Yes. The way that we thought about that is up to $100 million. It's been over several years. So we're investing in mostly Series A and Series B rounds with smaller companies. A lot of the companies that are out there are pre-revenue or early stage from a revenue perspective. And there's a lot globally. And so this gave us an opportunity to, as you said, get closer to what's happening in the marketplace, get a front row seat and then to be able to expose these customers to these end products to our existing customers. And one of the things that we think our job is to create the fabric where people can connect into and we've got these initial products that we're rolling out of the marketplace, which is very focused around one bill, one set of data where you can integrate an ICE vehicle with an EV vehicle. That's the initial set of offerings, which is really important to our existing customers. But then there's a lot of innovation that's happening within the space. And this enables us to expose that innovation to our customers in a way that we get to learn and some of those may end up as ultimately being acquisitions. But I think from our perspective, being able to learn and allow our customers to benefit from this innovation is a real advantage.

Your next question comes from the line of Sanjay Sakhrani with KBW.

I've got a follow-up on the strong travel volumes. I guess as we look through the remainder of the year, what's the baseline you guys are using in terms of the growth there because it seems quite strong. I'm just seeing some of the decelerating trends elsewhere in cross-border and T&E growth. Just trying to figure out sort of how you guys think about it understanding the strength there. Also, is there opportunity to take share inside of the OTA relationships you have? Or are those contributing as well?

Sanjay. I'll address the first part of the question and then turn it to Melissa for the second part. So we're basing our travel forecast, triangulating through a few different data points, obviously, in conversations with our customers and what they're seeing from a bookings perspective for the rest of the year and factor that into our travel forecast. We also look at what did we see on, obviously, Q2, Q3 tend to be the highest quarters for travel. So we look a bit at what did we see in 2019 from Q1 to Q2, Q2 to Q3, right, Q3 to Q4 sequentially and factor that into what have we seen so far this year, what would that imply for the rest of the year. We use those both customer data and that analysis to triangulate to what we expect for the back half of the year. And like I mentioned earlier, we look at July results and see that we're pretty on track to what we think is going to happen. So that's how we're getting to the volume forecast. I'll let Melissa talk about the second part of your question.

Yes. Our teams are regularly engaging with customers to identify potential volume increases, whether it's something they're managing internally or related to competitors. This is a key aspect of how we build relationships with our customers. The sales cycle has been lengthy, particularly as we expand from focusing mainly on hotels to other segments within online travel agencies, especially air travel. We have noticed increased interest in this area, which presents an opportunity to capture more volume. We have made some progress in Europe, and managing these relationships actively is essential. Over the long term, we aim to be the trusted partner for our customers and work closely with them to increase the volume directed to our platform.

And it's not clear if the share gain is significantly contributing to the growth at this point or if it's primarily due to the rebound in travel.

It is helping, certainly. And I said the rebound in travel is a bigger number of what we're seeing from a volume perspective, but it's certainly part of what we're seeing. When we look at our long-term guidance range, we factored in the fact that this marketplace itself is typically growing in a normal environment at a high single-digit rate. And so our objective would be and always is to try to outgrow what's happening from a market perspective in any of the segments we're in. Okay.

Just one quick follow-up question on the acquisition. I noticed that the Ascensus offers some products that you may not be offering presently. So should we expect those would be extended to your existing customers and over what time? And then is there any client overlap here?

Ascensus is primarily utilizing our platform at the moment, and they are distributing, mainly with our technology. We have the capacity to further develop the products they offer alongside our existing customer base over time. This won't happen immediately, but they possess compliance product offerings that will enhance our marketplace offerings and generate additional revenue. This year, Ascensus is also growing within our long-term guidance range of 15% to 20%, which should benefit our long-term growth strategy.

Your next question comes from the line of Dan Dolev with Mizuho.

Great results. I really only have one question. I was going to ask a question about the guide, but I think it's kind of fully addressed. But just long-term strategic, as we think about the value proposition of EV, like what are your clients, what are the needs for your clients and like how are those conversations? Because we're getting a lot of pushback from our clients, our investors about sort of like assessing the value proposition of WEX and your competitor in the EV world. So I was wondering how those conversations are going.

It's an interesting question because a year ago, we were optimistic about the situation. In our current discussions with customers, it's clear that they prefer one integrated source of data. They want a convenient way to understand their spending on electric vehicles alongside gas-powered vehicles, which places us in a favorable position in the market. We are increasingly confident that this presents an opportunity for us, especially considering the limited products we have available that allow for en route charging. We also have prototypes in the market that support at-home charging. We previously anticipated earning between $5 to $20 per month per vehicle, and we are currently achieving that with our limited offerings. As we expand our product range, we foresee even greater opportunities. The complexity introduced by electric vehicles gives us the chance to continue providing products to the market. We are optimistic about the opportunities this creates and how we can assist our customers during this transition. Many customers are facing difficulties in accessing vehicles, and fulfilling their interest is taking considerable time. We expect this to be a lengthy conversion process.

Your next question comes from the line of Trevor Williams with Jefferies.

Jagtar, on the guide, if you could just put a finer point on the network incentive. I'm assuming it's in travel that you're now building in, I think, last year in Q4, you had about a $10 million benefit. So just looking for how much of the raise for the full year is coming from the incentive in particular and if all of that we should expect to come in the fourth quarter.

Yes. So it's in the Travel and Corporate Payments segment broadly. And it will be comparable, slightly larger than what we saw last year. Last year wasn't quite $10 million, but we did see a Q4 benefit. And so we're expecting that benefit as we hit our volumes this year and that will all come in Q4.

Okay. Great. And then maybe just as a follow-up to Darrin's question on the Mobility segment and growth for the rest of the year, I think you guys had been talking about for the full year being kind of around the 4% level on the ex-fuel growth rate. Obviously, you're above that in the first couple of quarters or at least for the first half of the year. The comps in the back half gets tougher, especially on the late fee rate kind of where your gallon volumes are now. So just maybe if you could give us a sense for the 4% still a reasonable level to kind of anchor to full year and we kind of back into what makes sense then for 3Q and 4Q so long as we're still going to have 4% for all.

Yes. I think we're in the ballpark of what we've previously guided to. Like I said in that guidance mostly what we've raised is travel volumes and scheme fees. The rest of it is largely what we've previously guided to.

Your next question comes from the line of Nate Svensson with Deutsche Bank.

Just following up on something Tien-Tsin asked about earlier in the Benefits segment. So he asked about accounts. And so I think maybe in the Benefit segment, can you talk about growth in the HSA custodial cash assets? So I think it's a few quarters now consecutively growing in the mid-20%. So I guess just directionally, how should we think about growth in HSA custodial cash assets going forward? Is that going to decelerate? Are we going to lap anything specific? Any color, that would be very helpful.

Yes. I would say for the balance of the year and our guidance, we don't typically expect cash assets to increase a lot during the course of the year. We tend to see that late in the year and going into next year. So we'll provide more guidance about 2024 and beyond once we get into our Q4 earnings call next year, but I would say for the balance of the year, we don't expect big increases in that baked into our guide.

Got it. That makes sense. And then I guess just a follow-up on Darrin's question earlier. So he asked about electric vehicles. And I guess maybe just thinking about the broader opportunity within mobility ex-electric vehicles. So maybe you can talk about potential market share gain opportunities or international growth opportunities within mobility that can help drive organic revenue going forward beyond the sort of strategic steps you're taking on the EV side?

Yes, I would say that's our bread and butter. We've a history of continuing to take market share and we take it from several places, what you would perceive as traditional competitors, but it's also coming from the cash market still continues to be a place that we're pulling customers in as well as general purpose credit card. And increasingly, we are getting more sophisticated in how we market to those customers. So we feel good about our continued ability to feed our sales engine, which is highly predictable about closing those leads. And so if you look at how our business is structured, the majority is small customers. While we have products that work really well with very large mobility customers, and we work with some of the largest ones in the world. We also have products that we're offering to smaller customers, which might be a local landscaper or contractor, and we're gearing our sales engines to both of those things. And so we feel really good and very bullish about our ability to continue to take market share both in the over-the-road business and our local businesses.

This concludes our Q&A for today. I now turn the call back to Steve Elder for closing remarks.

Thank you, Emma. Appreciate everyone hopping on the call with us today, and all the interest in WEX, and we'll look forward to sharing our results again in probably late October from the third quarter. Thank you.

This concludes today's conference call.