Thank you for your patience. My name is Alex, and I will be your conference operator today. I would like to welcome everyone to the WEX Q1 2024 Earnings Conference Call. I will now hand the call over to Steve Elder, Senior Vice President of Investor Relations. Please proceed.

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, which we refer to as 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, 2023, filed with the SEC on February 23, 2024, 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. The first quarter marked a strong start to 2024 for WEX. We delivered another quarter of impressive financial results including record high revenue for the first quarter, which is a testament to the resilience of our diversified business model in any economic environment. Earlier this month, we hosted our annual Spark conference where we brought together industry leaders to demonstrate how our cutting-edge solutions can help simplify the business of running a business. At the event, we showcased how our customers and partners can unlock the full potential of WEX's solutions, highlighting the power of our innovative technology across employee benefits, fleet management, and corporate payments. We had record attendance at Spark, which underscores the invaluable role our services played for our customers. Now let's discuss our first quarter results. During the quarter, we achieved revenue of $653 million, an increase of 7% year-over-year. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, Q1 revenue grew 10% year-over-year. Total volume processed across the organization in the first quarter grew 9% year-over-year to $57 billion, driven by strong performance in corporate payments. Adjusted net income per diluted share in Q1 was $3.46, an increase of 5% compared to the same quarter last year, as a result of strong quarterly revenue and share repurchases. Excluding the impact of fluctuations in fuel prices and foreign exchange rates, adjusted EPS grew 14% year-over-year. As a reminder, earnings growth was impacted by exiting our interest rate swaps in December, which Jagtar will discuss later on the call. Each of our business segments demonstrated robust performance during the quarter. Our Corporate Payments segment remains very healthy and continues to grow at a strong pace as purchase volumes increased 29% year-over-year. The Travel business continues to grow at a faster pace than the overall market. We have solidified our virtual card offering as a best-in-class solution and have built strong long-term relationships with our clients. This approach has positioned us as the preferred payment solutions provider to our partners, driving sustained growth and customer loyalty. To that end, we recently signed a new long-term agreement with Booking.com, and this agreement distinguishes WEX as Booking's preferred partner. Booking.com first became a WEX customer in 2013, and we now process payments for Booking.com in more than 20 currencies. We've also renewed our agreement with HBX Group, one of the largest B2B TravelTech ecosystems in the world. HBX Group, and its combination division known as Hotel Beds, has been a WEX customer for many years. Going forward, we expect to serve a larger share of their total volume as they consolidate relationships. The continuation of these long-standing partnerships demonstrates the strength and reliability of WEX's enterprise-grade technology platform, our broad currency offerings, and our deep payments expertise when delivering world-class travel payment solutions globally. Among our more than 800,000 active customer relationships worldwide, we are proud to work with eight of the top ten online travel agencies globally. In the Benefits segment, overall SaaS account growth was lower than normal this quarter, primarily due to the previously mentioned loss of a Medicare Advantage customer. Still, the core business continues to perform well, and we grew accounts excluding the declines in Medicare Advantage accounts, 8% compared to last year. We are now serving 8 million HSA accounts. According to the 2023 year-end report by Devenir, the overall number of HSA accounts grew 5% last year to 37 million, so we continue to perform well compared to the market growth. Based on the overall number of HSA accounts at year-end, this means that approximately 20% of all HSAs in the U.S. run on the WEX platform as of the end of Q1. We also continue to integrate the sensitive health and benefits line of business that we acquired last September. This acquisition positions us for accelerated growth and innovation in the rapidly evolving benefits landscape. Finally, in our Mobility segment, we continue to be a market leader in this space across all of our core markets and are focused on maximizing the value that we provide to our clients. In addition to the many small businesses that signed up with WEX in the quarter, we also renewed our agreement with Shell to manage its portfolio of commercial fleet cars across North America. This represents a continuation of agreements first established in 2018. In our over-the-road truck business, the market continues to be challenged, but over-the-road payment processing gallon volumes increased by 1% in Q1 for the first year-over-year increase in the past five quarters. Our go-to-market engine continues to add vehicles to the platform with an increase of 4% versus Q1 last year. Jagtar will provide you with the details, but we are pleased to see sequential increase in revenue growth this quarter. Now, I'd like to highlight the progress we've made executing against our strategic initiatives, further solidifying our position as market leader. We continue to be focused on supporting our mobility customers as they transition to EV and hybrid solutions and manage their vehicles in a mixed fleet world. We have more than 600,000 mobility customers globally. Our expansive reach, coupled with our expertise and our innovative offerings, positions us as a trusted partner for our customers as they evolve their fleet. While we've all read about the slowdown in consumer EV shipments, we continue to invest in this area and roll out our integrated mixed fleet solutions because customer interest remains steady. In Q1, we launched the general availability of our at-home reimbursement feature set to complement our public charging access, where we have brought acceptance. We believe that a fleet made up of traditional ICE vehicles, hybrids, and EVs will be present for years to come. Our solutions are designed to support these mixed fleets with integrated reporting and data. At our Spark conference, we pulled together our most innovative customers with our product development teams and over a dozen early-stage energy innovation startups. I was left with great confidence that we're helping the industry think critically about how to help customers unlock significant value by integrating EVs properly and how to operate a mixed fleet with WEX as their trusted partner. In Q1, we launched the pilot for an enhanced acceptance offering for our North American Mobility customers that combines the best of WEX's fleet solution with a broad acceptance of the Mastercard network. With this offering, customers can manage all of their vehicle-related purchases, including fuel, parts and services, car washes, parking tools, and roadside assistance, all with the same data, controls, and integrated experience that helps simplify the business of running their business. This helps the small business owner better understand the expenses related to each vehicle while at the same time having the controls of a closed-loop card to closely manage what is able to be purchased. While it's early days, we have hundreds of customers enrolled in the pilot and are actively gathering insights to inform future product features as we continue to expand the program and increase mobility spend beyond fuel. Furthermore, we completed our strategic acquisition of Payzer, a leading cloud-native field service management software in November. As we continue to integrate Payzer into the WEX ecosystem, we remain confident that the platform complements and significantly enhances our existing mobility offerings, supporting our efforts to expand our total addressable market and deliver high value to our customers. During the first quarter, we launched our first marketing efforts with Payzer targeted at current WEX customers, and we're testing different sales techniques to drive the best results. We're focused on both targeting Payzer's customer base and marketing the WEX field service management customers. We continue to be very excited about the long-term prospects and are tracking well with our integration efforts. Last quarter, we announced that we achieved $75 million of cost savings on a run rate basis through the end of 2023. As we start 2024, we remain very confident in our ability to achieve the full $100 million of our run rate cost savings goals this year. As a reminder, roughly half of these savings will be reinvested and have been front-loaded in our year to drive long-term growth in the business in key areas such as digital products, technology, and risk management capabilities and tools, generating sustained cash flows to power our strategic growth investments and maintain our solid balance sheet with low leverage remains a top priority for WEX. We continue to do share repurchases as an important and attractive element of our capital allocation strategy, underscoring our commitment to driving shareholder value. Consequently, during Q1, our Board expanded our share repurchase program by authorizing an additional $400 million in repurchases, reflecting our unwavering commitment to delivering long-term value for our shareholders. Advancing technology innovation through the business remains a priority. As our ongoing efforts in this area continue to drive cost savings in our margins, we demonstrate our commitment to driving long-term sustainable profitability. From an AI perspective, our initial use cases that I updated you on last quarter have yielded positive results, and we're taking steps to accelerate our AI capabilities and support additional use cases in the business. A main area of focus is our customer service operations where we're experimenting with new technologies and driving efficiencies for better customer service. We're currently working on reimagining our IVR systems and flows to enable customers to fulfill payments faster and with more accuracy. The advancements we have made with voice-to-text and text-to-speech technology in this area will enable us to apply our learnings in many other areas going forward, particularly as we work to reinvent our call center experience. One area we're particularly excited about is the application of AI in our Benefit business. We've been able to leverage AI to deliver personalized targeted messaging to HSA account holders. By using predictive analytics, we've helped our customers optimize their HSAs enhancing their ability to pay and save for healthcare. In closing, I want to reiterate that WEX is well positioned to continue driving solid financial performance in any macroeconomic environment as we have proven over the last several quarters. We expect to deliver strong revenue and adjusted earnings growth this year. We remain focused on delivering accretive EPS, driven by the high marginal contribution of incremental revenue to our business. Our reengineering efforts that are delivering efficiencies across the enterprise and pricing optimization initiatives that yield strong drop-through to our bottom line. Finally, we are in a privileged position to make strategic growth investments in our business while also buying back shares to deliver the most value to our shareholders. This is supported by a solid balance sheet with low leverage. As we look ahead to the rest of 2024, I remain confident in WEX's ability to drive growth across the business in the near and long term, backed by our strong position in the market and strategic initiatives in place. 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 strong first quarter with record high Q1 revenue. Our adjusted EPS results 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 first quarter, total revenue was $652.7 million, a 7% increase over Q1 2023, with more than 80% of revenue for the quarter recurring in nature. We had strong contributions from both Corporate Payments and Benefits, while lower fuel prices impacted reported growth in the Mobility segment. 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 38.5%, which is up from 37.6% last year, driven by margin increases in both Corporate Payments and Benefits segments. From an earnings perspective, on a GAAP basis, we had net income of $65.8 million in Q1 or $1.55 per share. Non-GAAP adjusted net income was $146.7 million or $3.46 per diluted share, which is an increase of 5% over last year. Our first quarter results were solid and set us up well for the remainder of the year as we continue to navigate a year-over-year decline in fuel prices as well as a significant increase in debt costs due primarily to higher interest rates. Like we have discussed in previous quarters, our HSA custodial cash balances allow us to mitigate the impact of higher rates. As a reminder, we also exited our interest rate hedge positions in December, leading to an increase in interest costs this quarter. Exiting our interest rate swaps in December resulted in an $11 million cash impact to interest expense and a 7% drag on earnings per share. In addition, the foreign exchange rates and lower fuel prices resulted in a negative $20 million impact on revenue this quarter versus last year, or an approximate 9.5% drag on earnings per share. Our ability to continue to grow earnings per share despite the drag from exiting the swaps and lower fuel prices is a testament to our diverse vertical-focused businesses, strong recurring revenue, and balanced interest rate exposure, allowing us to sustain durable through-the-cycle revenue and earnings growth. Now let's move to segment results, starting with Mobility. Mobility revenue for the quarter was $339 million, a 1% decrease from the prior year. Fuel prices are strong, but have retreated compared to last year, with the domestic average fuel price in Q1 of $3.56 versus $3.86 in 2023. The Q1 fuel price was slightly higher than our guidance, but the benefit we received in the U.S. was almost entirely offset by $2 million of negative spreads in Europe versus our expectation. While Mobility revenue declined approximately $3 million year-over-year, fuel prices had a large impact. The year-over-year 8% fuel price decline and reduced spreads in Europe decreased segment revenue by an estimated $21 million or 6%, while the underlying business continued to perform well. As we expected, excluding the change in fuel prices, revenue growth accelerated from Q4. Similar to last quarter, payment processing transactions remained roughly flat year-over-year, which was in line with our expectations. Local customers in the U.S. were approximately flat compared to last year, and over-the-road payment processing transactions were slightly above year-ago levels. As Melissa noted, this is the first quarter in some time that OTR transactions have increased, reflecting stabilization in that business. Note that despite the fact that this was a leap year, we actually had one less business day in Q1 than last year. Overall, we were pleased that both payment processing transactions and total transaction growth rates improved from Q4 2023. Next, let's turn to late fees. The net late fee rate decreased 4 basis points versus the prior year. Finance fee revenue decreased $10 million or 13%, which reduced segment revenue in total by 3%. The previously mentioned decline in fuel prices, a 20% decline in the number of late fee instances, and a 7% slowdown in our factoring revenue caused the decline in finance fee revenue. We believe the decline in late fee instances reflects the tighter credit policies that we have put in place. While these tighter policies reduce our late fee revenue, they have also resulted in significantly lower credit losses and taken holistically our 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 1.31%, which is up 8 basis points over our 2023 net interchange rate. The increase reflects continued benefits from the interest rate escalated causes contained in various merchant contracts, the rate benefit from lower domestic fuel prices, and higher rates earned from merchant contract renewals at favorable terms. The Mobility segment adjusted operating income margin for the quarter was 38.6%, down from 40.5% in Q1 2023. The decline in fuel price this year is the primary reason for the lower margins. Moving on, credit losses decreased $24 million in the Mobility segment versus last year and were in line with our guidance range at 15 basis points of spend volume, which compares to 32 basis points last year. Loss improved significantly compared to last year as expected. The year-over-year decline of 17 basis points in credit loss rates more than makes up for the 4 basis point decline in our net late fee rate and underscores the positive overall impact from the credit changes we made a year ago. Turning now to Corporate Payments. Total segment revenue for the quarter increased 17% to $122.5 million. Purchase volume issued by WEX was $23.9 billion, which is an increase of 29% versus last year. The net interchange rate in the segment was down 9 basis points sequentially, related to the timing of revenue recognition for network incentives earned in Q4 of last year. We continue to see strength in consumer travel demand that drove strong results in Corporate Payments. Travel-related customer revenue grew 30% compared to last year. The interchange rate for travel-related customers is down from Q4 due to the timing of incentive recognition. Outside of Travel, our Non-Travel customer revenue was up 7%, driven by a 26% increase in purchase volume, showing some reacceleration in our partner channel and continued positive growth in our direct channel revenue. Similar to last quarter, over half our Non-Travel corporate payment revenue growth came from our direct channel. The Corporate Payments segment delivered an adjusted operating income margin of 52.7%, up from 46.9% in Q1 last year, driven by continued acceleration in volume. Finally, let's look at the Benefits segment. We again achieved strong results in this segment with Q1 revenue of $191.2 million, which is an increase of $26.3 million or 16% over the prior year. As we expected, SaaS accounts were flat in Q1 versus the prior year with the loss of the Medicare Advantage customer that we mentioned last quarter. Core market dynamics of this business continue to be strong, as exemplified by the underlying SaaS account growth excluding the declines in Medicare Advantage accounts, which was 8% year-over-year. The Benefits segment purchase volume increased 10%, leading to a 6% increase in payment processing revenue. We also realized approximately $51 million in revenue from the custodial HSA cash deposits that were invested by WEX Bank and from funds held at third-party banks compared to $37 million last year. Approximately $8 million of the revenue increase in the Benefits segment is due to the average interest rate earned on these balances, increasing from 4% last year to 4.8% this year. The Benefits segment adjusted operating income margin was 41.5% compared to 39.1% in 2023. The custodial revenue from the invested HSA cash deposits has very high incremental margins and is the primary driver of this increase. 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 $780 million in cash. We have $463 million of available borrowing capacity and corporate cash of $176 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 $3.2 billion. The leverage ratio, as defined in the credit agreement, stands at 2.6x, which is near the low end of our long-term target of 2.5 to 3.5x. Leverage generally increases slightly in the first quarter of each year. Our ability to invest in the business and 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 negative $205 million in Q1. The first quarter of each year is seasonally low for us, and the timing of the end of the quarter falling on a weekend resulted in an estimated $190 million cash flow impact and caused an even larger negative number than normal for the quarter. We expect this will reverse in Q2. Our primary discretionary use of cash so far this year has been to repurchase shares. We repurchased 353,000 shares at a total cost of $74 million during Q1. Since restarting our share repurchase program in 2022, we have repurchased approximately 3.9 million shares with an average cost of $169 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 second quarter and full year. The first quarter was another good quarter for us and as a result of improvement in some macro factors, I'm pleased to share that we are raising our guidance for 2024 to reflect those factors and trends. Starting with the second quarter, we expect to report revenue in the range of $675 million to $685 million. We expect ANI EPS to be between $3.75 and $3.85 per diluted share. For the full year, we expect to report revenue in the range of $2.73 billion to $2.77 billion. We expect ANI EPS to be between $16.10 and $16.60 per diluted share. For the full year, these updated ranges represent an increase of $30 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 updated fuel price and interest rate assumptions and the impact of share repurchases completed. Consistent with our prior guidance, we expect Mobility revenue growth to accelerate through the year, as we lap credit changes that caused higher attrition and lower finance fee revenue. As we noted last quarter, we are also implementing a number of pricing changes that will help in the second half of the year. We also expect corporate payments revenue growth to slow as we progress through the year. In addition, we expect a greater proportion of our cost savings program to flow through to net income as we have front-loaded the reinvestment we intended to make. In conclusion, we delivered another quarter of growth in our financial results, and I'm especially proud that we were able to do this in the uncertain economic environment that we are operating in.

And your first question comes from Ramsey El-Assal with Barclays. Ramsey?

Yes. This is Sheriq. So on the Benefits side, I believe your guidance still remains around 10% to 15% for 2024. Given the potential pipeline of HSAs and even the interest rate dynamics and potential pricing impact, can you help us understand the cadence for the full year? How should we think about the drivers for growth in 2025? Do you think that we could be able to maintain these levels? Or would there be some tougher comps in 2025?

Let me start by providing some context. This year, one factor affecting us is the loss of the Medicare Advantage account. When we disregard that loss, our total accounts grew by 8%, and we anticipate this trend to continue throughout the year, influencing our growth rate. Despite this, we are optimistic about our account growth when compared to the overall market conditions. As we move into next year, we expect to maintain strong account growth, bolstered by increased custodian revenue and additional ancillary fees from our portfolio. We have previously mentioned our long-term guidance range of 15% to 20% for this segment, and we anticipate some anomalies this year that will impact that guidance.

Sheriq, I'll just add regarding your question about 2024. We came roughly a little ahead of our guidance range for the year. So we just expect Benefits growth to be sort of balanced over the course of the year for the precisely the reasons that Melissa said. We saw good benefit from census and HSA accounts in the first quarter going through the rest of the year. We should see an uplift from the normal midyear onboarding that we see if HSA accounts and the continued good performance of the HSA assets.

One follow-up on the EV side. Is there any color that you could provide on the economics or any potential dilution that we could expect? Or if you see that? And secondly, on the competitive dynamics, where do you see WEX stand at this point in time? Are you thinking that you are ahead of the curve in terms of investments? Or do you see that there is still some patch-up that you need to do versus other peers out in the market?

We continue to be very bullish about the impact of electric vehicles in our portfolio for a couple of reasons. First of all, we see this as a new revenue opportunity. And so far, that has proved out to be true. So we're earning subscription fees for access to the networks that we've created, both in the United States and Europe. You've talked about the fact that we've rolled out at-home reimbursement capability, which we think is market-leading and earning subscription fees associated with that. And then as we continue to build additional functionality, which we have in our product roadmap, we think that gives us the ability to continue to add in future subscription fees. So, the net of that, we talked about this between $1.5 billion and $2 billion additional total addressable market. From what we've seen so far, we believe that this is going to be additive, and it's a great way to transition the portfolio into a different source of revenue over time. From a competitive perspective, we feel really good about where we sit competitively, in part because what we're hearing from our customers is that as they are going through this migration, you've got government fleets that are going through the migration, some of the largest fleets that have sustainability requirements. There are a bunch of other people that are testing in this marketplace. What we know from talking to our customers is that when they are having these mandates, they're not really sure what to do next. So we're working in much more of a consultative fashion than probably what we had anticipated, and I think that's just indicative of the fact that they're on the commercial side, people are looking for options, and we feel really good about the capability that we've built.

Can you guys hear me now?

Hello. Yes.

Yes, you can. Sorry about that. If you can hear me, I think you can. You mentioned that the net interchange rate in the Corporate segment, I think, fell due to the timing of revenue recognition from network incentives from last year. Can you elaborate on that, and also just help us think through how interchange rates should trend for the next couple of quarters?

Yes, sure. So what I was referring to was the decrease we saw from Q4 of 2023 to Q1 of 2024. You'll recall from the last earnings call in Q4, we had revenue recognition related to the volume incentives that we have with the associations, and that caused the interchange rate to increase in Q4 and then back coming down to Q1, it normalized. Going through the balance of the year, we expect interchange rates to be flat to slightly tick up from the first quarter. There'll be some dynamics with the booking contract, but we expect flat to slightly tick up as we go through the year.

Okay. And then a quick follow-up. It looks like in the Q2 guidance, you're expecting credit loss to be a bit higher than it was in Q1 and also for the full year. I'm just curious what the dynamics there are in terms of maybe a bit of an uptick in credit losses in Q2?

Yes. We've built some pretty sophisticated models that help us forecast where we think credit losses are going. We're looking at slightly higher charge-offs in the second quarter. Based upon recent trends, nothing too alarming, but we expect as a result of those charge-offs that we'll be raising reserves in the quarter. As you can see from the forecast of the guide, we expect that to trend down over the course of the year. We've put into place some new functionality in Q1; we had a new credit adjudication model. In Q2, we've got a new automated credit line monitoring system that's going into place. So we expect credit losses to be relatively contained as we go through the year, but we do expect an uptick in Q2.

Yes, congratulations on the renewals with Booking and HBX. As we consider the potential impact on yields and other factors, perhaps you could clarify how this might affect the profit and loss statements, particularly regarding volumes and take rates as we move through this year and into the next.

Yes. Let me start by discussing the contracted booking. There will be some short-term challenges, but there are also long-term opportunities connected with the new contract. We are extremely pleased to have signed the contract with Booking.com, the largest online travel agency globally, which is a uniquely sophisticated partner. We will continue to be their main virtual card partner. Moving forward, they will rely on WEX's top-tier payments technology platform while transitioning some activities related to the virtual card program in-house. We have factored this into our guidance, and Jagtar will elaborate on it shortly. I want to emphasize that this is a positive outcome for both companies. The partnership has enabled us to grow together, and we are very excited about the long-term opportunities ahead.

Sanjay, I'll talk a little bit about what this means for interchange rate in the Corporate Payments business. Just a reminder, right, I've said that we've included this in our guide for the year. I think I previously said in the last earnings call that we expect our Corporate Payments revenue to grow in the high single digits this year, and this new contract has not changed our expectations. If you look at what we did in the first quarter, we grew 16% year-over-year in Corporate Payments. As I said in my prepared remarks, this implies that we expect to trend down over the course of the year. This Booking contract doesn't change that expectation that's embedded in that outlook. Today, Booking volume is recorded as payment processing revenue and will continue to be under the existing contract. As it transitions to the new program, we expect a portion of that volume to transition to this new program. In this new program, it will no longer be recorded as payment processing revenue and instead, it will be recorded as account servicing revenue.

Okay. And just to clarify, you guys see this as net accretive to the growth rate on a go-forward basis? I know there's transitory stuff this year. But as we look out 2025 onwards, is this renewal net accretive, stable, or dilutive to sort of revenue growth in that segment? And then I have one quick follow-up on just something you said, Jagtar.

It's a headwind in the short term. We think it's a benefit over the long term.

And when you say short term, is that even into next year or just mainly this year?

As they go through the migration, so there's going to be a period of time. Again, this is a piece of the portfolio that they're going to bring in-house. The timing of that is uncertain. We're giving you our current expectations. So it's really going to depend on how much transitions and when it transitions. We're giving you our current thoughts right now.

Got it. Got it. And then just one of the questions I've gotten is just that back-end EPS guide. It seems like the revenues and EPS sort of delinking a little bit. Jagtar, you mentioned you sort of front-ended the investment and front-loaded the investments, but the back end, you get the cost saves. So that's more you have a decent amount of visibility into that EPS trajectory in the back end, assuming the revenues are correct, is that right?

That's right, Sanjay. If you look at the back end, it's roughly based upon what we guided in Q2 and the full year, you talked about a $75 million increase in revenue in the second half, and that's related to the things we've talked about, pricing, volume, etc. And then you've got the cost reductions that we have talked about repeatedly that we expect to start flowing through in the second half, whereas we front-loaded the cost reductions we've seen with some of the investments that we've talked about before.

We also had the step-up in credit loss we were anticipating in the second quarter.

Correct.

Great. I wanted to ask just how we should be thinking about the mix between Travel and Non-Travel revenue and Corporate Payments over the near to medium term, especially with some of these model transitions, etc.?

Currently, approximately 55% to 60% of our revenue comes from travel, and about 70% of our spend volume is related to travel, with the remainder being non-travel. We anticipate that total spend will remain stable over time, and although we have seen a significant increase in travel spending as a result of the pandemic recovery over the past few years, we expect this to normalize as the year progresses. Jagtar has discussed how these changes will reflect in our profit and loss statement, allowing for clearer calculations of our current expectations.

I would just add that I provided our expectations for total purchase volume for the year. I would expect that the rates of Non-Travel purchase volume will remain fairly stable throughout the year. The key factor influencing the total volume number I mentioned is the Booking transition.

I actually wanted to start by going back to following up on Sanjay's question. You mentioned some of the short-term headwinds from the Booking renewal. But can you just talk about the longer-term opportunity there? Is there additional volume you'll be getting from them longer term? I just trying to understand the benefit for WEX from the renewal beyond obviously locking up such a large customer, but what is the opportunity side of that contract renewal look like?

Yes. Let me talk about a couple of things here. First of all, I think it's important to distinguish Booking because it is a highly sophisticated customer. They have a unique capability set in this marketplace. We feel like it's a great partnership; we're bridging them to their capability. In terms of the opportunity for us, again, this long-term relationship, we are the primary provider over that long term. We are continuing to work with them on other areas across their portfolio, which we do believe will create opportunities.

Okay. And then maybe switching to guidance a little bit, right? Just trying to understand big picture, right? What's changed here? The fuel price assumption increased like $0.09, which based on the framework you gave last quarter should be about $0.27 of EPS, but EPS only going up $0.20. It looks like revenue guide is increasing more than just the fuel price tailwinds from that framework. So it looks like you're maybe getting a little bit better revenue than you expected at the start of the year. But costs may be coming in higher. Is that the right way to think about it? I'm just trying to understand what's changed really if I remove the macro or the fuel impact?

Yes. So what I would say, Mihir, two items. If I start with the revenue; two macro items are impacting revenue. One is fuel prices. The other one is interest rates. As we said in the last call, I assumed originally five rate reductions this year. Now we're assuming less than that. So that has a revenue impact because of merchant contracts and HSA assets. So the fuel-related changes you see flow through to earnings; the interest rate-related changes you see in the revenue line. As we've talked about before, we managed our business to be interest rate neutral at the EPS level. You don't see those flow through to changes because they're basically counteracted by interest cost increase we expect in the corporate debt. The fuel's flowing through. We had in the first quarter market movement that impacted our first quarter number. That was about a $2 million impact. That's largely the delta you see between the $0.27 you'd expect and what you're seeing in the actual EPS increase.

Thank you, operator, and thank you, everyone, for joining us today. We'll look forward to sharing our progress in the second quarter coming up soon. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.