Thank you for joining us. My name is Bailey, and I will be your conference operator today. I would like to welcome everyone to the WEX Q3 2023 Earnings Call. I will now hand the call over to Melissa Smith, CEO.

Thanks, Bailey. Before we begin our prerecorded remarks, I want to take a moment to acknowledge the mass shooting that occurred last night in Lewiston, Maine and the ongoing search for the shooter. As a Mainer and leading one of Maine's largest companies, I'm shocked, horrified, and saddened by these events. We have approximately 1,200 employees in Maine, many of whom live in Lewiston or in the vicinity. Our hearts are with those who have lost loved ones in this senseless tragedy. Our hearts are also with those fellow WEXers and our community members who are now sheltering in their own homes, many with young children. We praise the work of those that protect our community and hope that this tragedy comes to an end shortly, allowing us to grieve without fear of it continuing. It serves as a reminder that tragedies happening all over the world today do not escape any corner. We appreciate you lending your heart today to those that are suffering in this corner of the world. Bailey, please begin our prerecorded remarks, and Jagtar and I will open it up for Q&A thereafter.

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, adjusted operating income and related margin as well as 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 reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, filed with the SEC on April 27, 2023, and July 27, 2023, respectively, and subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa.

Thank you, Steve, and good morning, everyone. We appreciate you joining us today. The third quarter marked another strong period of financial results for WEX, along with meaningful progress against our strategic initiatives. In addition, we announced today that we have entered into a definitive agreement to purchase field service management software provider, Payzer, which I'll discuss in more detail momentarily. I'm delighted to share that we were able to deliver record highs for revenue and adjusted net income per share in the third quarter. We beat the top end of our guidance range for both measures and exceeded the midpoint of guidance by $17 million and $0.35, respectively. Our performance this quarter positions us to continue driving growth across the business heading into the end of the year. Now let's discuss our financial results in more detail. Revenue for the quarter increased 6% year-over-year, which marks another record high quarter at $651 million. This increase of $35 million over last year is the result of 19% growth in our Corporate Payments segment and 34% growth in our Benefits segment. Similar to the second quarter, fuel prices declined year-over-year, reducing Mobility revenue by $32 million and more than offsetting underlying growth in the segment, resulting in an overall decline in Mobility revenue of 7%. WEX's ability to drive top line growth despite the continued fuel price headwinds reflects our strong momentum and resilient business model. Revenue in the quarter grew an impressive 10% on a macro-neutral basis, which we continue to find is excluding the impact of fluctuations in fuel prices and foreign exchange rates. Strong volume growth, significantly lower credit losses, and our operational improvement efforts resulted in record high adjusted net income per diluted share of $4.05, an increase of 15% versus last year, even with fuel price headwinds. Total volume processed across the organization in the third quarter increased 7.6% year-over-year to $61.9 billion, which is also a record high led by contributions from our Corporate Payments and Benefits segments. Let me turn to updates on each of our segments. Starting with Benefits. This year marks the 20th anniversary of the health savings account, which is recognized on National HSA Awareness Day on October 15. In 2020, we started serving as custodian of HSA accounts, and our growth this year has now made us the fifth largest HSA custodian in the market according to the Devenir mid-year report. In addition to WEX being a top 10 HSA provider, our Benefits technology is used by 9 of the other top 20 HSA providers. To that point, this quarter, WEX earned the business of a Fortune 500 company in the energy sector. We won this business because we offered a best-in-class HSA experience for their employees with a diverse range of investment choices. In addition to our data integration capabilities with the client's current medical provider, benefit administration platform, and payroll platform. In Corporate Payments, purchase volumes increased 35% year-over-year, driven by strong travel volume in every region of the world. We believe that we are outpacing the OTA market growth, which we estimate is growing in the range of 8% to 10% based on recent market trends. By capitalizing on the shift in the market to settling transactions with virtual cards, we believe we will continue to benefit from this shift as online travel agencies choose WEX due to our differentiated product offering and deep expertise in this space. Across this segment, we're pleased to sign a number of renewals and expanded relationships with customers, including an expanded relationship with business lodging technology company, Hotel Engine. Growth in travel, coupled with the continued growth of our embedded payments product and direct-to-corporate model has set us up with some great momentum. In Mobility, we're pleased to have renewed our contract with the state of Georgia and to be implementing the Canadian heavy truck portfolio of Element Fleet Management, both longtime WEX customers. At the same time, our sales and marketing engine continues to sign new small business customers while balancing with more dynamic credit policies that we put in place last year. During Q3, we added approximately 270,000 new vehicles compared to Q2, with approximately half of our new sales to local fleets coming in through digital channels. We believe the enhanced credit policies that we've put in place resulted in a dramatic reduction in losses over a short period of time. WEX has a long history of balancing our sales and marketing engine and credit policy to drive growth and profitability in this segment. We continue to be pleased with our performance and growth prospects in Mobility. Our superior product and service offering continues to outpace our competitors. Given the strength of our Mobility franchise with more than 600,000 commercial fleet customers worldwide, we believe there's an opportunity to drive incrementally higher growth. To that point, I want to give you an update on additional solutions aimed at our Mobility customers. We firmly believe that the convergence of software and payments is a secular trend that informs how we build new products and guide through M&A activity. To that end, I'm excited to announce today that we've entered into a definitive agreement to purchase Payzer, a leading cloud-native field service management software. We expect Payzer to strengthen our relationships with vertical customers in our Mobility segment, allowing us to match our world-class payment capabilities with integrated software that creates durable value to our customer base. This anticipated acquisition is an example of us finding a high-growth market with a customer base that overlaps with our current customer footprint, a great product and service offering to address the needs of these customers, and a strong team that aligns with our purpose of simplifying the business of running a business. Payzer's high-growth, top-tier service offering and feature set, which includes end-to-end business management software and enables a wide range of payment solutions, is at the convergence of SaaS and payments. Payzer has initially focused on HVAC, plumbing, and roofing verticals and has deep relationships and distribution partnerships with key OEMs in these industries, which offer them the privileged position to deliver to small businesses in certain trades. We're excited by the prospect of welcoming Payzer to WEX. We continue to view EV as another exciting opportunity for WEX. As a reminder, we estimate the size of the commercial EV market will be between $1.5 billion and $2 billion of revenue by 2030. Our EV strategy remains focused on meeting our customers where they're at on their EV journey and providing fleet managers with the tools that they need to plan their energy transition, manage their vehicles in a mixed-fleet world, and help ensure their EVs can be conveniently controlled and charged across a distributed environment. We've made progress against many of our initiatives within EV, including our DriverDash mobile app, which we recently expanded to include the EV functionality. This means that through their existing WEX portal, fleet managers can enable their cards for EV charging and use our integrated app, DriverDash, to define, activate, pay for, and track charges all on one credit line invoice dataset and management interface. This simplifies customer workflows while eliminating the need for drivers to have multiple fobs and apps in order to manage their mixed fleet. We've also been in the testing phase of an at-home reimbursement product in the United States. I'm excited to share that we anticipate rolling out the initial phase of this product later this year and expect to roll out depot functionality in early 2024. Overall, our strategy is to ensure the workflow and payment surrounding mixed fleets are simplified. As a reminder, at our Investor Day in March of 2022, we stated that we expected to earn between $5 and $20 per vehicle per month for our EV customers. This compares to an average of about $6 for ICE vehicles today. We are very encouraged by the fact that we are already at the low end of this range with only a small amount of product rolled out to the market. Our research shows that fleet managers are willing to pay for a solution that helps them integrate EVs in their fleet and operate them efficiently, and we're seeing this play out in the market today. I'll shift gears to discuss the progress we've made executing against our other strategic initiatives this quarter. I'm pleased to announce we have accomplished our cloud migration goal with the migration of the Benefits segment in the third quarter. Our core technology is now cloud-based. We've also made significant progress in reducing our dependency on physical data centers and are on track to achieve our data center reduction goal of consolidating from 33 data centers to 7 by the end of 2023. We'll continue our cloud-first development philosophy which enables improved data security, infrastructure resiliency, system availability, and speed to market. Turning to our operational improvement efforts. We remain in a strong position to generate $100 million in run-rate cost savings exiting 2024. Currently, we're on track to achieve $75 million on a run-rate basis by the end of this year, which is ahead of our original expectations. We're reinvesting a portion of these cost savings and enhancing capabilities including our digital products and technology groups, our risk management capabilities and tools, and centers of excellence, and we look forward to continuing these efforts through next year when we expect the benefits to be more visible. Finally, I'd like to speak to our ongoing efforts to modernize the way we operate while enhancing our customer experiences and products. Today, we're taking advantage of enterprise-level tools which have enhanced AI capabilities as well as developing bespoke AI-based approaches internally. We believe an accumulation of many small projects and initiatives will lead to big results over time. This year, we've conducted more than 50 AI experiments across the enterprise, which have driven customer-focused outcomes, uncovered opportunities for workflow efficiencies, and identified many other opportunities for us to continue driving value by leveraging these technologies. Our efforts in using machine learning in credit adjudication and monitoring have helped to reduce delinquencies significantly this year as you can see in our credit loss results. As we head towards the end of 2023, I continue to be confident in our path forward and the long-term growth potential of our business. We continue to execute against our strategic initiatives and drive strong financial results, all while remaining resilient through a variety of macroeconomic and geopolitical environments. Our scale and automation initiatives are paying off, creating a flywheel of strengthened experiences for customers and employees while creating additional earnings for shareholders. We're in the enviable position of deploying capital across a number of fronts, including efforts to grow the business, opportunistically returning capital to our shareholders through stock buybacks, and funding acquisitions that expand our addressable market. Because of the significant amount of cash we generate, we're able to do all of this while maintaining a solid balance sheet with low leverage. To that end, I'm excited to share that we are again raising our full-year guidance to both revenue and earnings.

Thanks, Melissa, and good morning, everyone. We reported a strong third quarter with record high revenue and adjusted EPS results that show continued execution against our strategic initiatives even against a year-over-year decline in fuel prices. Now let's start with the quarter results. For the third quarter, total revenue exceeded the top end of our guidance by $17 million due to a combination of higher-than-expected fuel prices and continued strong growth in both our Corporate Payments and Benefits segments. Total revenue for Q3 came in at a record high of $651.4 million, a 6% increase over Q3 2022 with more than 80% of revenue for the quarter recurring in nature. 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 41.8%, which is up from 39.1% last year, driven by a combination of improved credit losses and higher margins in our Corporate Payments and Benefits segments. From an earnings perspective, on a GAAP basis, we had net income attributable to shareholders of $18.4 million in Q3 or $0.42 per share. Non-GAAP adjusted net income was $176.8 million or $4.05 per diluted share, which is an increase of 15% and a record high. Our results were especially impressive as we continue to navigate a significant year-over-year decline in fuel prices as well as a significant increase in our operating and corporate debt costs due to a rise in interest rates. As I mentioned in previous quarters, our HSA custodial cash balances allow us to mitigate those increases. Because of our diverse vertical-focused businesses, strong recurring revenue, and balanced interest rate exposure, we are able to sustain durable through-the-cycle revenue and earnings growth throughout a variety of macroeconomic environments. Now let's move to segment results, starting with Mobility. Mobility revenue for the quarter was $350.1 million, a 7% decrease from the prior year. Fuel prices are strong but have retreated compared to last year with a domestic average fuel price in Q3 of $3.97 versus $4.54 in 2022. The year-over-year 13% fuel price decline decreased segment revenue by an estimated $32 million. This fuel price impact to revenue was greater than our overall Mobility segment revenue decline of $28 million from the prior year. This highlights that lower fuel prices were the primary reason for the Mobility segment revenue decline versus last year, while at a more fundamental level, revenue this quarter continues to reflect a strong core business model with stable volumes year-over-year. Similar to last quarter, payment processing transactions remained roughly flat year-over-year, which was in line with our expectations for the quarter. Local customers in the U.S. were approximately flat compared to last year. And although over-the-road payment processing transactions remained slightly below year-ago levels, the decline was smaller than in Q2. Over-the-road customers had a 4% increase in direct bill transactions, a model utilized by our larger trucking fleets, which is reflected in the other revenue line. Taken together, total transactions for OTR customers were up 1% compared to last year, which we consider a great result in a down market and reflects our strong offerings in the vertical. Next, let's turn to late fees. The net late fee rate decreased 4 basis points versus the prior year, while finance fee revenue decreased 20%. The decline in fuel prices, a 9% decline in the number of late fee instances, and a 22% slowdown in our factoring revenue caused the decline in revenue. We believe the decline in late fee instances reflects the tighter credit policies that we have put in place. While these tighter policies slightly impact our late fee revenue, they have also resulted in significantly lower credit losses and taken holistically are a positive earnings impact to the company. I will touch further on credit losses in a moment. The net interchange rate in the Mobility segment was 1.18%, which is up 8 basis points over the last year. The increase reflects continued benefits from the interest rate escalator clauses contained in various merchant contracts, the rate benefit from lower domestic fuel prices, which is partly offset by negative fuel spreads in Europe and higher rates earned from merchant contract renewals at favorable terms. The segment adjusted operating income margin for the quarter was 45.6%, down from 46.2% in Q3 2022. The decrease in margin was primarily due to the decline in fuel prices and higher operating interest costs, offset by significantly better credit losses. I'll now quickly discuss the credit losses, which decreased $41 million in the Mobility segment versus last year and were better than our guidance range at 70 basis points of spend volume. The guidance we provided incorporated an expectation of lower loss rates based on improving delinquencies and charge-off rates, and we ended up performing even better than expected. The elevated loss rates in the over-the-road trucking business that we saw over the past several quarters moderated. Likewise, local fleet customers in the U.S. had a very low loss rate when compared to historical results. Fraud losses in this segment are back close to a normal range following several quarters of elevated losses. Overall, loss rates were further reduced by the release of reserves based on the improved metrics. Turning now to Corporate Payments. Total segment revenue for the quarter increased 19% to $135.2 million. Purchase volume issued by WEX was $27.9 billion, which is an increase of 35% versus last year. The net interchange rate in the segment was down 4 basis points sequentially. We continue to see strength in consumer travel demand that drove strong results in Corporate Payments. Travel-related customer volume represented approximately 78% of the total spend and grew 43% compared to last year, while revenue from travel-related customers was up 35% versus Q3 2022. The interchange rate for travel-related customers is down slightly from Q2 based on an expectation of higher rebate tiers being achieved by customers, which is reflected in the strong volume growth. We continue to watch global travel trends closely for slight signs of a slowdown, but we have continued to see strong trends to date. Outside of travel, our nontravel customer volumes were up 11%, although nontravel revenue was essentially flat due to an unfavorable mix of product and customers. The Corporate Payments segment delivered an adjusted operating income margin of 61.3%, up from 52.9% in Q3 last year, driven by continued acceleration in volume. Our business model here is very strong, and the revenue drop-through for this segment is high given our relatively fixed cost base. For example, compared to Q2, the revenue drop-through was more than 100%. Revenue grew $13 million while adjusted operating income grew $16 million. Although this includes a one-time benefit from a credit loss reserve release, our revenue drop-through was still strong, excluding this benefit, and we were pleased with the performance. Finally, let's look at the Benefits segment. We again achieved strong results in this segment with Q3 revenue of $166.1 million, which is an increase of $42 million or 34% over the prior year. SaaS accounts grew 9% in Q3 versus the prior year. Benefits segment purchase volume increased 11%, leading to a 9% increase in payment processing revenue. We also realized approximately $44 million in revenue from the custodial HSA cash deposits that were invested by WEX Bank and funds held at third-party banks compared to $16 million last year. Approximately $21 million of the revenue increase in this segment is due to the average interest rate earned on these balances increasing from 2.37% last year to 4.50% this year. With the closing of the Ascensus transaction in September, we continue to expect that it will be roughly neutral on an adjusted net income for the remainder of 2023 and add approximately $10 million of revenue in Q4. The Benefits segment adjusted operating income margin was 35.4% compared to 24.4% in 2022. The custodial revenue from the invested HSA cash deposits has very high incremental margins and is the primary driver of the increase in margin. 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 $958 million in cash. We have $925 million of available borrowing capacity and corporate cash of $170 million as defined under the company's credit agreement at quarter end. The total outstanding balance on our revolving line of credit and term loans was $2.7 billion. You will see the bank term funding program borrowings from Q2 on the balance sheet as a $500 million increase in short-term debt compared to the end of last year. This balance is no longer included in our leverage calculation after agreeing to this change with our bank group. Additionally, in August, we repurchased all of our outstanding convertible notes for approximately $370 million from an affiliate of Warburg Pincus. This transaction will fully remove the potential conversion of the convertible notes into 1.6 million shares from our adjusted EPS calculation, which we believe was an attractive use of capital given our long-term growth aspirations. Last month, we amended our credit agreement to increase the size of our revolving line of credit by $500 million. This restores most of the revolver capacity used to repurchase the convertible notes and close the Ascensus acquisition. There were no other significant changes to the credit agreement as part of this amendment. I'd like to emphasize that even with the investments we have made in the convertible notes, share repurchases, and Ascensus acquisition, the leverage ratio as defined in the credit agreement stands at 2.4x, which is just below our long-term target of 2.5x to 3.5x. Our ability to invest in the business, return capital to shareholders while also maintaining conservative debt levels puts us in an enviable position. Next, I would like to turn to cash flow. WEX generates a significant amount of cash each year. Using our definition, adjusted free cash flow was $392 million year-to-date through Q3. Our primary use of free cash flow so far this year has been to repurchase shares, repurchase the convertible note, and close the Ascensus transaction. Year-to-date, we have purchased 804,000 shares at a total cost of $146 million, including $50 million during Q3. Since restarting our share repurchase program in 2022, we have repurchased approximately 2.7 million shares at a cost of $437 million, which equates to an average cost of $161 per share. Looking forward, 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 fourth quarter and full year. The third quarter was another very good quarter for us, and as a result, I am pleased to share that we are raising our guidance for 2023 to reflect those results and trends. Starting with the fourth quarter, we expect to report revenue in the range of $650 million to $660 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 $2.53 billion to $2.54 billion. We expect ANI EPS to be between $14.64 and $14.74 per diluted share. For the full year, these updated ranges represent an increase of $35 million in revenue and $0.44 of EPS compared to the midpoint of our previous guidance. The major moving pieces compared to our prior guidance are the results of Q3 and updated fuel price assumptions, further improvements in our credit loss assumptions, the impacts of the share repurchases completed through September, and including the Ascensus acquisition for the full quarter. In addition, we are very excited about the anticipated Payzer transaction for the new market it opens up and the growth potential. We entered into a definitive agreement for WEX to acquire Payzer for approximately $250 million, subject to additional contingent considerations and certain working capital and other adjustments. The transaction is expected to close in the fourth quarter of this year, subject to customary closing conditions. We expect the acquisition to be slightly dilutive through 2024 as we expand sales and marketing investments to further drive growth. We anticipate these investments will yield positive results and the acquisition will be accretive beginning in 2025. Finally, while we are not yet providing a 2024 outlook, I did want to highlight interest rate swaps that are outstanding and will mature in the course of the next year. As of the end of the latest quarter, the collective notional amount of our interest rate swaps was $1.1 billion. We do have $200 million maturing in December of this year and another $300 million that will mature in May of 2024. These maturities will increase our interest expense in 2024, barring any unforeseen changes in reference rates. In conclusion, we delivered impressive financial results this quarter, and I'm especially proud that we again beat our previous quarterly guidance and have increased full-year guidance every quarter this year. Our performance in Q3 positions us well to continue driving revenue growth and serving our customers efficiently in the quarters ahead.

With that, operator, please open the line for questions.

It's great to see growth in the Benefits and travel sectors. However, I want to focus on a question from investors regarding the decline in macro-adjusted Mobility growth rates. While credit management is improving, we observed a 1% macro-adjusted growth, which is lower than expected. Could you explain this trend and what opportunities might exist in that business, particularly if the freight market outlook improves?

Sure. Happy to. So first of all, if you look at our growth in the fleet segment, there are a couple of things that are impacting it this quarter. One, there are fewer business days year-over-year. It's about 2% less year-over-year, so that affects comparability between last year and this year and with effect if you're looking trend lines from Q2 to Q3. The things that are the same are what you saw last quarter, which indicates a negative 3% same-store sales coming through in the over-the-road marketplace. So that freight recession is continuing to have an impact on the business. We're still down about 2% from attrition compared to historical norms based on some of the credit actions that we took last year. So those 2 things are continuing. We're also seeing a shift in activity in the over-the-road marketplace, similar to what we've seen earlier this year, where there's more movement to the larger over-the-road trucking companies, which affects mix. We're seeing more volume coming through that's unfunded versus funded. Just a few things that I would say, some of which we do expect to continue for a period of time. We are seeing great sales. From a sales perspective, our sales pipelines are very full. Closures are very strong. We've continued to modify the digital marketing apparatus that we have to bring in even higher-quality leads in keeping with the changes that we're making on the credit side. So from a long-term perspective, the things that we are looking at look really good. We feel really good about sales, customers coming in, and the quality of the customers that are coming in are higher quality than in the prior year. A lot of the work that we're doing is optimizing the idea of profitability for the customers that we are approving. We do expect that you'll see some incremental benefit of that going forward in the future too, with both higher approval rates and limited impact on credit loss.

Sorry, just the only thing I'd add to that is, as I mentioned in my prepared remarks, late fees were down as well. And we've talked and most talked about the improving quality of the portfolio. I mentioned in my prepared remarks that late fees are down, but that reflects our focus on quality applications and the improving quality of the portfolio. We more than made up for that in credit losses. So I think from an earnings bottom line perspective, it's a very good result but you see a little bit of the top-line impact.

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

We feel really good about it. We've given long-term guidance of 4% to 8% for that segment. And we're gearing towards that. At the top of the house, we're gearing the company to the 10% to 15% macro-adjusted long-term guidance range that we have out there, the 15% to 20% on ANI EPS. That's really in the forefront of our minds and how we're making choices. In this segment, as I said in my remarks, we're actually looking at ways that we can increase that over time in this Mobility segment. We're really excited about Payzer and how that creates a cross-sell opportunity. We are really excited about where we're positioned with our EV functionality, which we also think are new markets and new TAMs that are adding on to the existing TAMs. I feel really good about the engine we have right now within the company of driving future sales.

Just very quickly, does Payzer wrap into Corporate Payments? Or is that just a cross-sell or an upsell to the fleets? I'm just trying to make sure I understand where it fits.

So our intention is that it's a synergy with the Mobility segment because there are approximately 150,000 fleet service companies in the Mobility segment that we think we can tap into. We haven't made a determination of where it will go from a segment reporting standpoint; we'll do that in conjunction with initially the 8-K in Q4.

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

Yes. So just to give a little bit more context, and thanks, Bob. The U.S. field services software market, looking at broadly the bigger marketplace, has a TAM of $5 billion. Payzer addresses a section of that. The market itself is growing 20% to 30%. Part of what we like about Payzer, and we liked a lot of things, is the intersection it has between software and payments. From a customer perspective, what Payzer does is really integrated to offer scheduling, dispatching, communications, pricing, invoicing, and parts ordering. I think of that as the operating system for that end customer that you can integrate with the services we provide. For example, if you're an HVAC operator and you are out on a job, you can book an appointment in the system. The system reminds the homeowner of the appointment ahead of time and dispatches the HVAC to address on the day of the job. The HVAC shows up at the address and can present a mobile proposal with real-time inventory and pricing information. If the homeowner accepts the proposal, they can schedule and manage within the system. So envision a very integrated experience within the workflow of the customer. And we have 150,000 customers within our fleet portfolio that are in field services management. What we're really focused on is how we can take the relationships we have, the knowledge that we have, and what customer need is, and then create an even better customer experience with our products. Payzer itself is growing 30%, and it's generating $25 million to $30 million of revenue while growing at 30%.

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

Yes, in the TAM we estimated just based on the existing initial product offerings needed within the marketplace. We've talked about being very focused around an integrated experience with our customers, so that if they're buying en route, if they're buying at home, or if they're buying at a depot, we have an integrated offering with their ICE vehicles. That's been really the focus. We've rolled out the en route charging, and we talked about at-home charging, which we're in a test stage and anticipate rolling out into full production by the end of the year here in the United States. Depot charging will launch in early 2024. We've also added functionality on our app, DriverDash, which allows an integrated offering of purchasing, simplifying the way that fleets are able to purchase using some of these multiple fobs. When we look at our opportunity, as you pointed out, there's a lot of complexity. We have the opportunity to remove that. For charging fees associated with that, they're subscription-based fees. We are in the range of $5 to $20 per month per vehicle, which we discussed at Investor Day. We feel we've got a great opportunity to introduce new products, meeting our customers with what they need, and changing the revenue dynamics of the company into more and more subscription or SaaS-based fees, which are playing out to be very true in the marketplace. We're really excited about this. We think this could be another opportunity to increase the growth profile of our Mobility business.

I wanted to ask Melissa about your comments regarding the travel volumes outpacing OTA and the shift in the market to settle with virtual cards. Can you talk about what's driving that shift and how sustainable you think it will prove to be?

Yes. Earlier, when we were coming out of the pandemic, a lot of volume we would have attributed to the fact that you're seeing this rebound. But we're beyond that point in time. We're at 154% of volume from 2019. The trends we have are really positive here across all regions. We believe that what we're experiencing is in part because we're working actively with our customers to ensure that we're providing relevant offerings. We're also benefiting from the shift to the merchant model, particularly in Europe, as online travel agencies have migrated from the agency model to the merchant model, where we're more relevant. We're capturing more of a benefit associated with that. That's going to play out over some time. So we think that in the midterm you will continue to see the benefit of these shifts. We expect the rate to go down from this year's growth, but we do think that we're going to continue to outpace market growth.

Okay. And one follow-up from me. I wanted to ask again about Payzer and just to make sure I'm understanding it correctly. Is Payzer a way that you kind of deepen engagement and/or monetize existing customers? Or is it also a customer acquisition channel for your products, like Payzer bringing you customers that maybe then you become fuel card customers? I guess that's one part of the question. The other one is there a broader opportunity to kind of verticalize your business?

Yes. Great question. Payzer itself, on a stand-alone basis, is growing 30%. They're doing a great job with customer acquisition. When we looked at our model of the acquisition, it was with the idea that the asset we're acquiring is already growing at that rate. We think we can supplement that growth through exposure to our existing customers that are in their verticals of focus. The intention is to continue to have them sell independently and then also expose our customers to their sales solutions. They have an opportunity to increase their growth profile, less about us selling into their customers initially just because our customer segment size is much larger than theirs. Over time, maybe that will happen.

I wanted to ask about the Benefits side. Any comments on just early sign-up season and what you're seeing? It sounds like you had a nice win in the segment with the energy company. But I was just more curious about just generally the drivers of growth in that segment. Is it more employees signing up for HSAs? Is it mostly client wins and bringing more clients onto the platform? What's the main driver of growth there? And with some forecasts calling for a little bit of an uptick in unemployment next year, is that something that could be a bit of a headwind you have to grow through next year?

The growth in the segment is 15% to 20%. This year, we've seen very strong results. Some benefits are from interest rate increases, but we assume custodial assets will outpace accounts, getting some benefits from that. The primary drivers for us include the addition of accounts, which comes through supporting our partners to grow in the marketplace. Historically, there are more assets per account as those accounts get filled, which leads to custodial revenues. We anticipate some interest rate benefits continuing next year due to timing when those assets were placed this year. These are the key drivers, along with the fact that healthcare costs keep rising, which leads to increased spends year-over-year.

Got it. Switching to the Corporate Payments segment, I have a two-part question. First, regarding the third-party volume in that segment, it appears to have slowed significantly this year. Is there a specific reason for this? Did you lose any customers or experience any other issues? Secondly, concerning travel volume, have you noticed any decline linked to the recent situation in the Middle East or any related softness from airlines? Are these factors reflected in your early data?

In Corporate Payments on the travel side, we're not seeing an impact at this point in time, but we do tend to lag with our data because we're booking revenue when people are staying on location instead of when they're upfront making the bookings. The EMEA region is a small part of our overall portfolio, just a couple of percentage points. Regarding the other part of Corporate Payments, a few things have impacted spend year-over-year. The biggest one is that during the peak last year of some shipping issues, our Mobility customers were using Corporate Payments products to pay demurrage fees, which had a relatively high rate. You're seeing an impact both in terms of volume and rate, affecting the mix. But nothing notable from a customer loss perspective. There were some smaller one-time noises, which is the biggest impacting factor.

I do want to emphasize that the nontravel volume was up pretty substantially, 11% year-over-year. So I think you made reference to volumes declining, and I just wanted to clarify that the volumes were up.

Sorry, what I was referring to there was the third-party volume within Corporate Payments, where you all are doing it for the bank partners, etc. That's what I was talking about. I do think it's down. I think it's only up like 1%, like if we do the math, but it looks like that's slowed down. That's what I was talking about. But I think you answered my question in general.

I've got a question on the health and employee segment as well. When I look at some of the account growth and the volume growth, those have decelerated, but the revenues remain strong. Is that a census? Or is there something else that drove sort of the outperformance on revenues?

I'd say there were a few impacts, Sanjay, into the growth this year. The nonbank custodian side of the business has grown quite robustly. We had the benefit of year-over-year account growth. We had about $3.2 billion of assets last year, closer to $3.7 billion this year, and we also benefited from higher interest rates. That was about a $21 million impact year-over-year. We did have about $3 million of revenue from expenses in the quarter. So a minor impact, but it had an impact as well.

Got it. Got it. And then, Jagtar, you mentioned the swaps for next year; I understand this year probably won't have as big an impact. Is there an impact that we need to think about next year?

Yes. The swaps on average are about 1.8%. If you take our reference rate, 30-day SOFR, you're looking at about a $15 million impact next year.

Okay. And is that mitigated with anything? Or just...?

I expect that $15 million will be reflected in the P&L next year. We aim to keep our overall interest rate risk neutral by balancing the HSA assets on our balance sheet with the commercial debt. In this case, with the swaps expiring, we anticipate a $15 million impact on the P&L.

And Sanjay, we're sharing that just to ensure people have picked that up in their models. We are still gearing the company to the 10% to 15% top-line growth and 15% to 20% bottom-line growth price, FX, and price adjusted. We just want to ensure people are factoring that piece into their model.

Got it. Could I ask one last question on Payzer? I know you have a lot of them. You mentioned the use cases being HVAC, plumbing, and roofing. Are the 150,000 clients you identified in those verticals? Can the use cases for Payzer be expanded?

The 150,000 includes everyone in field services management, which covers a wide range of areas, such as lawn care, construction, specialty trades, machine repairs, and pest control. Our current focus is on introducing Payzer to customers within their specific targeted specialty trades. Once we achieve success in this area, we may consider expanding the product for broader uses. Right now, we are concentrating on the specific segment of our customers that align with their product capabilities. The long-term goal remains to reach those 150,000 customers.

And I'm going to ask another Payzer question, Melissa. Appreciating the commentary around the intersection of software and payments, could you elaborate a little bit on how WEX plans to monetize payments at Payzer? Is it going to be largely V-card issuance? I'm just trying to understand the mechanics and maybe the selling motion around that.

Yes. So I'll start with the opportunity for us as we've modeled it right now is to take the customers that we have and expose them to Payzer to increase the growth rate of their existing product set. I would say that's kind of like a phase 1. What you're talking about is that we do also believe that there's an opportunity to monetize payments in their workflow stream, largely through virtual card payments. So it's a secondary synergy in our mind, the first being taking this sales motion that's already working and exposing it to customers we have within our existing customer base. Yes, the two key products that we have within our Corporate Payments are the embedded payments product, which we're using with our travel customers and with other fintech companies. We've got a sales pipeline associated with that, and we've had some contract signings associated with that this year. The second one is an AP-direct product, where we are and have been adding to our sales force; admittedly, we have a smaller sales force on the AP-direct side, but we do have a sales force that is out there selling that product directly and indirectly through mostly financial institutions. Growth for us is going to come in both those categories. We have not been really focused on adding through M&A into that capability right now among the other priorities we have.

I want to follow up on the Corporate Payments side, within the nontravel segment. Just wanted to get a sense of what's the outlook over here in terms of like Q4 and even in 2024? I mean in terms of more strategic priorities, because I think the growth obviously is kind of pacing off. So just wanted to get a sense as to how do we think about once, I guess, the travel laps the tougher comps in '24.

When we look at this segment, we've set long-term guidance for this segment of 10% to 15%. We've been focusing on outpacing the growth in travel within the travel marketplace, which has historically been a high single-digit number. We've built a pipeline both in the direct and the embedded payments side of our business, with the expectation that growth would come from both categories, with the embedded payments being the larger growth opportunity given its size.

And I will now hand it back over to Steve Elder for closing remarks. Great. Thank you, operator, and thank you, Bailey. I appreciate everyone joining us today, and we look forward to updating you again with our fourth quarter earnings early next year. Thank you.

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