Conference Transcript - WEX 2026-08-27

Nate Svensson, Analyst — Deutsche Bank

All righty. Good morning, everyone. I'm very happy that you all made it to the first session of the day. Hope we're enjoying coffee, et cetera. So I'm Nate Svensson, payments and fintech analyst here at DB. Very happy and excited to have Jagtar Narula, the CFO of WEX, with us. So, Jagtar, thank you so much for being here. Hopefully the mic gets fixed. I can do a song and dance while we wait. if this works? Yeah, yeah. I think we got it. Okay, we got it. We're good. Cool. Well, all that to say, thank you so much for being here. We're really happy to have you here and then kick off the day. So maybe we can just start kind of very high level. There's a ton going on at WEX Investments, moving pieces across each of the segments of the business, activist involvement. Obviously, the stock's done quite well, which is really nice to see. But I think when you think about the meetings and conversations you have with investors versus how you on the management team view the company? What do you think the biggest disconnects or misunderstandings are, and how would you explain the company to maybe investors that are coming to the story? Yeah, absolutely.

Jagtar Narula, CFO

So, first of all, thanks for having me here, Nate. Excited to be here. You know, one of the comments that we get a lot is around the complexity of the WEX business. And, you know, when we look at it, you know, we actually think, you know, WEX isn't that. You know, at the end of the day, WEX is a payments platform. right, that we utilize across three segments. In our mobility business, we are, you know, we are providing a payment solution for fuel for commercial customers, right? And they're using that to prevent fraud, to enable their drivers to, you know, optimize routes, things like that. In the corporate payments business, you know, we are essentially, you know, the backbone for high payment volumes, like in the travel industry, right? One of the leading providers of helping process payments for online travel agents, and we're using the platform to move into near adjacent markets. And then if I go to the benefits business, again, payments platform, here we're providing a set of benefit solutions, health savings accounts, COBRA accounts, flexible spending accounts, and the like. So the theme across all of this is a payments platform tailored for multiple segments providing mission-critical payment delivery for organizations. You know, we get, like I said, comments about complexity, but when you look at it, it isn't that complicated.

Nate Svensson, Analyst — Deutsche Bank

Yeah, I think the knee-jerk reaction by a lot of generalists I talk to, it's like, oh, it's a mobility business, and they're doing OTA payments and benefits, like how does it all fit together? But I think the narrative has really started to come together, and you guys. I think you're doing a great job. That's great. Thank you. We'll obviously go through kind of each of the segments here, maybe just, again, relatively high level talking about macro conditions, and maybe this can focus on the mobility segment, right? A lot of attention on what's going on with freight activity, same-store sales within mobility. So are there any notable trends to call out in that business quarter to date? And if you want to expand it to corporate payments benefits, happy to hear what you have. But just as you look across the fleet economy, I mean, where do you think we are in the cycle? And do macro conditions need to improve for you to kind of deliver on your outlook?

Jagtar Narula, CFO

Yeah, we get a lot of questions from a trend perspective. Nothing has really changed since we had our earnings call in July, and we talked a bit about it then. You know, one of the questions we get a lot is folks track some of the indexes, like the CAS index is one that a lot of folks track, including us, and they see improvement in the CAS index, and they start to say, well, you know, how does that translate into what you're seeing, Lex? And where that index improved and where we are seeing improvement is if you look in the trucking sector, which is a material part of our mobility segment, it's around the supply side of the equation, right? So the current administration, through a series of regulations, have reduced the supply of drivers in the market, right? Right. That's reduced supply, reduced trucks. The result of that is spot prices have increased. And that is strength in the trucking industry. Right. Truckers are, you know, able to move goods profitably, able to be much more profitable. That's good for the industry. It's good for us. Right. A strong customer is important. It helps credit statistics, for example. The other part of the equation is the demand side. Right. Actual goods moving through the economy. And I think that's where we need to see continued improvement to start to see some of the shifts. And so we track things like housing starts, manufacturing indexes, et cetera, to start to see progress on those fronts. And I think with, you know, continuing strengthening of the economy, you'll start to see that transition to the demand side of the equation. You'll start to see volumes continually improved in our mobility segment. Right now, like I said, we're seeing it on the supply side, which helps us from a customer's perspective, but I think over time we'll see it on the demand side as well.

Nate Svensson, Analyst — Deutsche Bank

Yeah, for sure. And we track a lot of those indices as well, and hopefully we'll start to get a little bit of improvement there. Touched on a few things within mobility. Maybe we can talk about pricing, right? I feel like over the past several months we've seen a ton of slides on pricing potential at WEX, both from you and others. Maybe you can talk about what you're doing on pricing specifically in the mobility segment and the benefits you expect to see from pricing later this year and into 27. Any color around the specific opportunities you have to take price, price for value, however the right way to phrase that is. Yeah, sure.

Jagtar Narula, CFO

So, you know, one thing I would note is, you know, we talked a bit about pricing in the last training's call and got a lot of questions around it. This isn't actually anything new for us, right? We periodically, regularly evaluate pricing and evaluate the opportunity to optimize how we price. In fact, if you go back the 23, 24 timeframe, we talked a lot about pricing then. I think we implemented about $70 million of pricing actions at the time, predominantly in our mobility segment. So nothing new for us. What we're doing this time, what we've talked about, is about $15 million of pricing improvement or revenue from incremental pricing coming in in the second half of this year, Q3 or Q4. We haven't talked a lot specifically about what those pricing actions are or what we might do going forward for competitive reasons. But what I would say is that I think pricing will continue to be a focus of the company now and going forward. We continue to see opportunities to optimize, looking at what is the value that our product brings, managing customer value, managing attrition, things like that. We still think there's a significant opportunity to enhance pricing, and that's something we'll be doing over the next several years.

Nate Svensson, Analyst — Deutsche Bank

Any dynamics to call out on how that relationship on pricing plays out between mobility versus corporate payments or benefits? It seems like a lot of the focus has been on mobility.

Jagtar Narula, CFO

Yeah, near term, and it's been mobility is where we've done quite – but we've also done quite a bit of work on the benefit side as well. And so I think you'll start to see some pricing actions over time there as well. So I think you see it across all of our businesses.

Nate Svensson, Analyst — Deutsche Bank

Yeah, makes sense. Maybe last one that is mobility-specific. You've seen some nice trends on the macro-adjusted growth, so excluding the impact of fuel prices and FX. So I guess setting aside those temporary macro dynamics, who knows what's going to happen with war in Iran, fuel prices, et cetera. So could you just go over some of the drivers that give you confidence that mobility can contribute and reach the sort of long-term growth framework that you've laid out for the company as a whole in each of the segments?

Jagtar Narula, CFO

Yeah, so just for everyone's benefit, we've talked about the company as a whole being a 5% to 10% grower. We don't particularly, that's a company target, although we want each of our segments to get into that target. So when I look at the last quarter in Q2, mobility excluding the impact of fuel was about 3%, right? We know, we talked about in the earnings call, that we had this change in behavior in late fees from higher fuel prices. People paid late less often as a result of the higher fuel, and that was about a two-point drag to the mobility segment. So if I say, okay, we grew at three, but we had a two-point drag from late fee instances, we were effectively would have been in the range had there not been this big macro change. So, you know, what we're doing the second half of the year that we just talked about is pricing, right? These are pricing actions that we had planned, but we've accelerated them given the change of dynamics in late fees. So that'll basically replace what we are seeing from change of behavior in late fees, and that gives us confidence. You know, we saw, you know, if I look at, you know, the third quarter or second quarter, sorry, I mean, we saw about a point of growth coming out of, you know, BP coming online, which will, you know, continue to, you know, be a driver for the second half of the year. We saw about a point from pricing in the second quarter and then a point from kind of organic growth. So you take those pieces, expect them to continue with a little bit more from pricing in the second half, and we feel pretty comfortable where we're headed.

Nate Svensson, Analyst — Deutsche Bank

Yeah, and I think you've talked about some of the new sales that you had toward the end of 2025, early 26, and, you know, presumably those will be coming online as well. That's been an area of investment for us, and we're pleased with what we're seeing. And you brought up late fees, so I may as well just ask. Like, I know the guidance assumes that a lot of the behavior that you saw in 2Q kind of continues into the third quarter. anything to call out with regards to what's actually played out on the ground?

Jagtar Narula, CFO

Presumably that's been the case as you've gone through Yeah, and I would say for now, late fees is kind of in line with our expectations. We've seen things moderate a bit but I would just say it's just keeping a close eye out there.

Nate Svensson, Analyst — Deutsche Bank

Got it, got it. Maybe we can move to corporate payments, right? That segment, I do think from our perspective, it appears to be entering sort of a different phase of growth. There of your large partners insourcing a lot of the work that they did with you. You've got direct AP becoming a larger portion of the business. So I think maybe, again, taking a higher step back or a higher level of view, if you look at corporate payments three to five years from now, what do you think that business looks like between the travel business, between the non-travel business, direct AP versus embedded payments? How do you think that evolves, and what do you think the growth prospects for that segment are?

Jagtar Narula, CFO

So we continue to be very excited about the growth prospects. We saw in the last quarter very strong growth of the direct AP side, 20% volume growth in direct AP. We've basically said second half. We expect mid-teens growth in direct AP as well. Embedded payments is another area that we continue to be excited about, very, very strong pipeline. We've talked about that in some of the earning calls or past conversations. So I think what you will see over time, we haven't said specifically how much direct AP or embedded will be of the total, but I think you will see those businesses outpace the growth of the other parts of the business in the corporate payment segment, and that should bring nice growth to the overall segment over time. Yeah, for sure.

Nate Svensson, Analyst — Deutsche Bank

Maybe just a double-click on direct AP. Again, it was nice to see the reacceleration, the 20% volume growth in the second quarter. Maybe you could just unpack some of the drivers of what caused that reacceleration. Obviously, it's been a key area of investment for you in terms of sales, et cetera. And I know there were some, I guess, lapping or timing dynamics with some, I think, OTR customers that were utilizing that project. And there was seasonality or lumpiness in their volume. So maybe you could just talk about, like, what is going right organically, fundamentally, that's driving the strength and confidence in that business.

Jagtar Narula, CFO

Yeah, and I think you hit on it, which was the go-to-market, right? So importantly in the direct AP business in the second quarter, like two-thirds of the volume growth came from new sales. So this was new sales driven. And we've spent the last year plus enhancing the go-to-market for that offering. We think we've got a great offering. It's resonating with customers, as you can see from the volume growth. And we spent the last year building up the go-to-market motion for that particular offering, hiring salespeople, getting them ramped up, getting them productive. And now we feel like we're in a spot where the salespeople are producing. We're going after mid-sized accounts that we can implement relatively quickly. So as these salespeople become productive, we're able to implement the accounts and start the payment processing, which leads to revenue. So everything is going really well in that business, and we're expecting to continue that motion going forward.

Nate Svensson, Analyst — Deutsche Bank

Yeah, it's great to hear. Maybe last one on corporate payments. I think on the last call you talked about strong demand for embedded payments, but also at the same time there's onboarding and integrations that have taken a little bit longer than you've expected. So maybe you can talk about what you have learned from these onboarding and implementation, I guess we'll call them road bumps that have happened. So, yeah, what did you learn? How does that stand today? Has there been any improvement in terms of sort of converting pipeline into actual live projects?

Jagtar Narula, CFO

Yeah, you know, what I would say is so the pipeline continues to be strong. Melissa has talked about that quite a few times in some of the earnings calls. It continues to be a product that resonates well with customers that we talked to about. You know, there have been delays in the implementation side. This is a product that is designed to integrate deeply into the workflows of customers and potentially, you know, get into that payment processing engine. And the result of that deep integration is that in some cases it's taken longer than we would have wanted to get that implementation done. In some cases it's been on the customer side. In some cases it's been our side. We've done a lot of work to improve the process. what I would say is the plus of the approach is given that deep integration, it also makes the customers stickier as well. As these customers come online, we expect them to be customers of ours for a while, given the amount of effort that goes into creating these integrations.

Nate Svensson, Analyst — Deutsche Bank

It sounds like it's more the technical integration of that rather than a delayed decision-making cycle or anything like that. Got it. Super helpful. Maybe we can move to benefits. I want to start with SaaS account growth, right? Again, some lapping timing dynamics there. You lapped the UAW contract. Maybe you can talk about, from a high-level perspective, the primary catalyst you see to drive SaaS account growth back to some of the long-term targets you've talked about. I know there was also this dynamic where I think you sunset some legacy products that weren't super contributive to revenue growth. And so, again, lots of moving pieces, but high level, what are the main catalysts you see to sort of get a step up in growth in SaaS accounts?

Jagtar Narula, CFO

So let me start with the numbers for the second quarter because, as you mentioned, there was a little bit of noise there that probably needs to be explained. There's an important metric for us. In the second quarter, we had about a three-point drag in SaaS account growth. So the first one was sunsetting legacy low-revenue products that we weren't making money on, right? That was about a two-point drag to reported SaaS account growth. Not really a revenue drag, but the KPI. The KPI was a drag. The second was the UAW Trust, which we implemented and went live with last year, that we started the lap this year. That was about a one-point drag on growth. So you X or normalize for those items. You'd say, okay, SaaS account growth was in the mid-5% range, kind of a respectable number, a healthy number. What, you know, gets us excited going forward and continuing to maintain or improve on those rates is, number one, the pipeline continues to remain strong, right? You know, we're in kind of the peak season right now for sales for that product, Q3 kind of the peak, and, you know, we continue to see a good pipeline. You know, we have continued to enhance the products. We've been, you know, investing in enhancements of the products, some of which we've talked about in the consumer capabilities, more data and analytics capabilities. So, you know, we're excited about where the product's gone, and that seemingly has resonated well with the customers. So I think if you say, okay, we've got a great product, we've got a strong pipeline, and going forward, we continue to have very, very strong sales channels. You know, a strong partner network, a strong direct channel. I think that gives us sort of significant confidence that the business will continue its growth momentum going forward.

Nate Svensson, Analyst — Deutsche Bank

Yeah, makes sense. This is maybe tangentially related, but it just came to mind as I was listening to you. OBBBA, right, there was some discussion about, like, hey, there's new accounts that are eligible for some of the benefits offerings that you have. It was going to be TAM expansionary. So I guess I'm just wondering, has there been any sort of movement or benefit from that to date? Is this something that maybe we could see now that we're going into open enrollment season? Maybe we could start to see potential benefits from that TAM expansion as we go through this. Just an update on that.

Jagtar Narula, CFO

Yeah, so for the benefits of folks that don't know, the one beautiful bill act expanded eligibility for HSA for certain kind of – so that essentially express will market for HSA accounts, which is a big component of our benefits business. Because those are largely individual accounts, those are not accounts that we would sell Salesforce, right? Our direct Salesforce is targeted at larger, like, employers and the like. They're not going after individual customers. So where we expect that to happen is in our partner channel. That is one of the beauties of our business model of having both a strong partner channel and a strong direct channel. Well, that market expansion, we expect that to happen out of our partner channel. And, you know, our partners are addressing it. They're, you know, they're kind of varying stages that will come for it. I think what you'll see is you'll see that translate into, you know, SaaS account growth over time, address the market opportunity.

Nate Svensson, Analyst — Deutsche Bank

Yeah, but the takeaway is it's TAM expansionary, but it takes time, right? And it will be through the partner channel. Yeah, very interesting. Maybe last one specifically on benefits. We get asked a lot about the strategic rationale for having WEX Bank as part of the overall portfolio at WEX. So there are a ton of benefits, and you've spent time talking about this on earnings calls, other public forums, so it's lower funding costs, economics with regards to the HSA business, regulatory capabilities, et cetera. But maybe for investors that may not fully appreciate the value of having WEX Bank within the family of assets, Can you walk through the advantages it provides you both in the benefits business and maybe other areas of WEX as a whole and why that would be difficult for others to replicate?

Jagtar Narula, CFO

So WEX Bank, for those who don't know, it's a Utah-based industrial bank. It's got a Utah charter, but it's governed, you know, regulated by the FDIC as well. And, you know, as you mentioned, Nate, there's quite a number of benefits that come with owning the bank. So if you look across our lines of business, one that you mentioned was we fund the bank through a combination of broker deposits, federal home loan bank funding, et cetera. These are significantly lower cost of funding sources than things like securitization or using our credit lines or things like that. So the bank gives us a distinct competitive advantage from a funding standpoint that we're able to pass along either into profitability of the company or into pricing for customers, So there's a competitive advantage there. For the benefits business, you know, the bank is also, we are the non-bank custodian for the deposits that, you know, people leave in their HSA accounts, which we utilize the bank to earn floating income off of. And we know that if we place those deposits with a third-party bank versus place it with WexBank, there's a 50 to 100 basis point difference in what we're in, because basically you're cutting out the middleman, right? So that is, again, a distinct... But outside of the financial advantages, I think there's other advantages that sometimes folks don't fully understand. So, you know, WexBank brings a regulatory and compliance infrastructure, because it's a regulated entity, that's important for us in delivering our business and important for our customers. So that infrastructure comes with the bank, and it's important. And then the other really important piece of the bank is we are both the issuer and the processor. When a customer wants to come to us to do a payment business, whether it's travel or something else, embedded payments is a great example of this. We are essentially the vendor. If you were kind of one of our competitors, you'd essentially work with a third-party bank to deliver the business. And whenever you have multiple parties trying to deliver business to a customer, right, there is the when something goes wrong, how quickly does it get solved? Because there's multiple parties involved. Where when it's WEX, we are the one accountable party. We're bringing all the pieces to the table. and we're working directly with the customer when there's a problem or they need a solution that we can help them solve, etc. And that's a distinct advantage that the Wex Bank brings that you don't have if you're a competitor working with a third-party bank.

Nate Svensson, Analyst — Deutsche Bank

It's relatively easy to understand. It helps with funding costs. You get a higher yield on the HSA deposit, but I do think it's underappreciated that there are ancillary benefits in corporate payments and mobility that it helps having that. Okay, so we've It's a high-level view of WEX. We went through each of the segments. This is the Deutsche Bank Technology Conference, so you're not going to escape without some questions around AI. I think there's so much focus, at least within my coverage, on what AI is doing in terms of cost savings. I think one of the things that I've appreciated about the comments that you at WEX have made is there's a lot of focus on the product opportunity associated with AI. So you've talked about claims AI, actionable insights, and the list is much longer than that, but I'll just stop at those two. So maybe you can talk about what you are seeing on the product development side from AI, how you're incorporating it into the development of those products, how clients are seeing that in the delivery of those products, and how you think that evolves going forward.

Jagtar Narula, CFO

Yeah, I think you brought up some great examples. So I think we do believe we'll have significant cost savings options on AI as well. So I'll preface it with that. But when we turn to the product side, You know, one of the things that I think people don't fully appreciate is the amount of data that, right, if I just think across our segments and mobility, we know exactly how, you know, organizations use their vehicles. We know where drivers fill up. We know how much they fill up. We know where they drive. We have a lot of data on that, right? If I turn to the corporate payment segment, we know how consumers travel. We know where they travel. We know when they travel. We know how organizations spend their money. We know what they spend their money on. Same thing in benefits, right? We know how employees utilize their benefits, right? We know are they making optimal decisions or not, right? And so all that data can be utilized to create solutions for organizations or their employees or consumers to help them make better decisions, whether it's tools that provide insights to offer decisions or whether ultimately we get to the point where an agentic AI tool is actually implementing the decision for you. So I think some of the cases that you've just talked about are the only ways we're doing it. For a mobility segment to allow mobility customers greater insights utilizing this data, we're creating tools in the benefits segment that allow an employee to better understand benefits utilization. What are the benefits that are offered by my employer, what's the specific situations around me as an employee and the data that we might have about some of your health circumstances and how should you utilize that to make a more informed benefits decision. Claims AI is the other example that you talked about. So I think you're starting to see us utilizing this data to actually create the solutions that leverage AI that will be real value add that ultimately we'll charge for. and we'll create value out of and earn additional revenue on. So I think we're in the beginning stages of this journey, but this is a pretty exciting journey for the next few years.

Nate Svensson, Analyst — Deutsche Bank

And you preempted my next question on monetization, so I'll skip over. But now we're finding the product market fit. Monetization comes once you've found that product market fit. Your clients are realizing actual benefits from these products, et cetera. Maybe the other thing related to sort of AI and product development, I think you had talked about a 50% increase in product innovation velocity due to AI integration. Can you just expand on that a little more? What does that mean, product innovation velocity? Is it internally you're creating, you used to create 10 new products a year, now you're creating 15 new products again, just making the numbers up? Is that what you're seeing? What are the benefits you're seeing? Are you able to roll products out faster to clients? Are you able to test things, get them into beta? Just more color on that would be helpful.

Jagtar Narula, CFO

Yeah, so product innovation velocity is essentially measuring the amount of time it takes from I want to go build something. That length of time is essentially product innovation velocity, right? And through the use of AI, we've been able to accelerate that. It's whether we've used AI to better gather insights as we're going through a discovery phase of a product or a feature or a function, all the way through we're building the product and now we're using AI to accelerate our build capabilities. And so through the use of AI, we've been able to go faster, and I think you've actually seen that when you've looked at WEX, right? Like headcount is down in 2026 from where it was in 2023, but yet we are innovating at an accelerated pace. We've announced more products in the market, so you can actually see the impact of that coming through. which we're excited about. We'll continue to enhance that over time, but we've clearly made progress over the last couple of years.

Nate Svensson, Analyst — Deutsche Bank

Yeah, super interesting stuff. So maybe we can bleed AI discussion into more kind of the long-term financial profile of the business. So I think you've talked about WEX being a structurally higher margin business over the long term than you are now. Part of that is AI. Other parts of that are operating leverage, automation, all the good stuff that we always talk about. So maybe you can talk about, like, how far we are into this journey between where you are now and where you think the company, that this structurally higher margin profile WEX is, and, like, where we are in that journey. What else do you need to do? Is this just something that will take time as you see the benefits of AI operating leverage? Or what steps do you need to take to accentuate that transition?

Jagtar Narula, CFO

Yeah, I think there's a few pieces here. So, one, let's start with where we are today, right? If I look at today, if I look at 2026, we've said we were going to improve operating margin by 75 basis points this year and over 100 basis points in the back half of the year, when you look over year over year. And we are on track to do that. And that's been the result of a number of investments that we've made over the last couple of years that we are continuing to focus on. One is product investments. We have a set of products that we've invested in that are built for scale. We can add incremental revenues to these products without corresponding incremental costs. And so that creates operating leverage, which you are seeing in the results of the business. And then on top of that, we have the investments that you just talked about and things like AI that will continue to provide cost efficiency for us going forward. And so what I think when you look at those two things together, I think we are on the journey, 75 basis points this year, a good part of the journey, but I think you'll continue to see that going forward, both those pieces of it, both the leverage that we've built into the model plus increasing benefits from AI.

Nate Svensson, Analyst — Deutsche Bank

Yeah, makes sense. I have a few more questions. I'm going to ask one about the long-term growth framework. I do want to open it up for questions after that. So I'll ask one more question, open it up, and then we can wrap up after that. So we touched on this a little bit earlier, but long-term growth framework, 5% to 10%. As you think about that target over a multi-year period rather than just the next few quarters, can you talk about the main building blocks across each of the segments and what gives you confidence that you can sustain growth in the 5% to 10% range, both on an aggregate company basis and then within each of the segments?

Jagtar Narula, CFO

Yeah, you know, this is, like I said, something pretty excited and pretty proud about, you know, and I think when you look at the momentum of the business, like if I just walk through the segments, if you look at mobility, we talked about, you know, my thoughts on kind of getting to the range earlier and the visibility we have to it. You know, if we look at what we talked about earlier, pricing, where we are in new customer acquisition, the investments that we're making in retention and the hopeful future benefits we get from improvements in the macroeconomic environment. I think the one theme that you'll hear through this as we talk through how we get there is that there's multiple avenues in each of our segments to get there. And so you just heard that mobility, whether it's pricing, new customer acquisition, retention. We have multiple avenues to get in the range. If I look at the corporate payment segment, we've talked about embedded and direct earlier. Those are significant, large TAM opportunities. We've got a great product. We are basically taking something that we've built today and expanding it into new markets, having success with it. I think that's an exciting value opportunity for us. And then in the benefits segment, you know, we talked about earlier, we've got a great set of products. We continue to invest and enhance it. I think you'll see us roll out new, you know, capabilities in our products over time. Combine that with a very, very strong go-to-market model. And I think that's something that's underappreciated about our benefits business. Right, you take our direct sales model, you take our partner channels, which are very tightly integrated partner solutions, so a very sticky set of partners. We have a very strong go-to-market motion combined with a very strong product. So again, that gives us confidence about the market as well, and that's without even mentioning the OBVA and the expansion of the TAM. So I think we see multiple opportunities and multiple paths to continue our growth and be in the target range.

Nate Svensson, Analyst — Deutsche Bank

It feels like we're in a situation where there's good things happening in each of the segments, and it's just let's get all those good things working at the same time. So as promised, if anyone has questions, feel free to raise your hand, and Jack Tarkin can answer anything you have.

Scott Barishaw, Analyst — Deutsche Bank

Thanks. Scott Barishaw from Deutsche Bank, thanks for coming out to the conference. Nate did a great job asking a lot of questions on each of the businesses. You spoke about AI. You sort of wrapped it up into a little bit on sort of where the growth is in the segments. You know, I was hoping you could maybe just riff a little bit on, like, which of the three segments, you know, you spend the most time on, what you're most excited about going forward. Obviously, mobility is the biggest, probably a little more than 50% of the revenue, benefits second, and then corporate payments third. But, like, where do you spend your time? Where do you see the most AI opportunity? Where do you, you know, from here, like, as investors, like, where can we get most excited to help drive the story forward?

Jagtar Narula, CFO

That's a really good question because, you know, when we look at it, we are genuinely excited about investment opportunities across all of our businesses. All children, all three children are great. You know, it's like asking which my children is my favorite, right? Which my wife would shoot me if I ever responded to that question. Look, honestly, I think the challenge for us is much more along the lines of we see significant investment opportunities and growth opportunities across all of our businesses. Like literally, you know, I sit there in executive meetings and we look through investment options and where we see growth avenues. and it's not like it's all in benefits or it's all in corporate payments. We see it across even mobility, which sometimes the market uses kind of the low-growth part of WECS. We have very broad reach, extensive customer relationships, and the result of that is what we consider to be pretty significant 10 expansion opportunities. So the challenge for us often ends up being we have big desires to pursue many of these investment opportunities. We're trying to balance how much we invest in a year, the organizational capacity to pursue these investments, the financial profile, the company of wanting to manage the financial profile so we can balance growth investments while driving margin expansion at the same time. um so i'm no i know this isn't i honestly do think there are significant opportunities across the portfolio i mean that's great i mean i guess the quick follow-up to that then is you know if the way maybe it's where you're operating i mean all the companies here operate in such competitive businesses you know is there is there an area where you know you feel really

Scott Barishaw, Analyst — Deutsche Bank

good about taking advantage of competition maybe being a little bit weaker or something you know Is there something, you know, is there an angle from that side where, you know, competition, you know, not to name names, but, you know, Corpay's doing something or they're like where you feel that WEX can really take advantage of the situation in a business or something along those lines. Maybe that's an unfair question, but I figured I'd ask.

Jagtar Narula, CFO

So I would say if I think across our businesses, we have very, very strong modes across our business. So I think that gives us purchase, right? We have the scale of our mobility business, which is allowing us to move more into parts of the market where maybe our competitors are less focused on right now. We've talked about that in some of our earnings calls. In our benefit segment, again, we have a very, very strong suite of offerings that we are able to first not just point solutions, but a holistic set of solutions that some of our competitors are unable. And I think that's allowing for, you know, very robust win rates of that market. And then, you know, I think it's the economic profile of the business as well. We talked about the high incremental margins of our business. You know, we will, as we talked about pricing earlier, we are, you know, we price to value, right? We think we bring a lot of value and we think there's pricing opportunities as a result. But we're also mindful of the competitive environment where we need to be, right? And, you know, we are able to use the pricing lever to win business when we have to, right? But we're able to do it while maintaining a strong margin profile. And that's essentially the scale nature that we've built of our business.

Nate Svensson, Analyst — Deutsche Bank

I will allow others to ask questions, but one of the things you said just on this move into other parts of the market that competitors haven't focused on historically. So maybe like two questions on that. Earlier in this discussion, you had talked about some of the supply side impacts within the mobility business. At the same time, you're also talking about like, hey, let's go focus on smaller fleets. Is there any sort of like inherent conflict in that? Like obviously you're not going to be focusing on some of those like mom and pop fleets that have been impacted by the administrative changes. But like how do we understand that dynamic between the two? And then the follow-up question that I get asked all the time by investors is just, like, opportunities to expand the credit box within mobility, right? And I think a lot of those, like, those discussions are tied the same. So maybe you can just, one, just talk about, like, hey, that move-down market, how does that conflict or not conflict with supply-side changes? And then how do you think about the credit box opportunity within mobility more generally?

Jagtar Narula, CFO

I'll hit both of those. So on the kind of moving down market, what I would say is whenever we've looked at the market, there is a sizable opportunity there. Whether you're in the over-the-road segment or whether you're in what we call the local fleet segment, which is not the long-range trucks, there is a sizable, unaddressed market opportunity there. And we have spent the last couple of years, you know, enhancing our credit granting capabilities, our digital marketing capabilities, all with the desire to be able to attack that segment of the market more efficiently. And so, you know, we believe we've done a good job of that. And so whether it's the local fleet side where we believe we're able to capture kind of smaller, smaller customers more efficiently with good credit adjudication that maybe we wouldn't have been able to do five years ago, or it's the over-the-road side where there is a significant segment of that trucking population that's still there even, right, with some of the supply changes that, you know, are not customers that we would grant credit to today, maybe in the future, but could utilize our set of solutions outside the credit box, and that essentially is what the 10-4 offering is. So, you know, it's given us the opportunity to expand who we address because there are sizable opportunities there. Specific to your question around the credit box, this is something, and we've talked a lot about this with investors, we've enhanced a lot of our credit capabilities over the last several years, over the last four or five years. We auto-adjudicate, like when fuel prices increased this year, we automatically raise credit lines for a large swath of our customers. because of monitoring capabilities that we've built. So we think we've gotten really good at that. I think I do get a lot of questions around, you know, do we enhance the credit box? I'll say it's something we look at all the time, right? We continuously evaluate what's the right level of credit, how do we balance kind of the revenue opportunity that comes from giving more credit with a risk that comes from, right, what's the implications for default? default. So I think it's something we routinely do and I think we are good at that increasingly. Yeah, for sure.

Nate Svensson, Analyst — Deutsche Bank

And then the clarification is that what we have seen to date in terms of expanding the credit box, for lack of a better term, has been that sort of mechanical or automatic increase associated with higher fuel prices, but anything, you know, expanding the credit box beyond that is still something you're evaluating. Exactly. Got it. Got it. Yeah, does anyone else have additional questions? We have a couple minutes left. If not, I can wrap up with a few questions. Don't see anything. So I will ask on capital allocation, right? I think Scott in the audience had asked about some of your organic investment priorities. I think you've done a very good job on leverage. You're obviously throwing off a ton of free cash flow. I think the messaging, at least as I've interpreted, is that you're going to be focusing on buybacks as the highest priority near-term use of cash. Does that still hold? Obviously, the stock has had a nice little run so far year to date. what would need to change either in terms of where the stock price goes or what you're seeing in the M&A market for that debate between buybacks and M&A to change at all?

Jagtar Narula, CFO

Yeah. So just to remind everybody, we announced kind of last earnings call. You know, we basically did what we said we were going to do. We were planning on getting leveraged back below three times, and we would reinitiate stock buybacks. We got there a quarter earlier than we expected. High fuel prices helped. So we have initiated stock buybacks, and we have stated that the vast majority of our adjusted free cash flow will go towards buying back stock. So, you know, the stock price has gone up a bit since we announced that. I would say it's still, you know, from all the work we do, it's still, you know, a highest cost, you know, return opportunity in terms of deploying capital. So we will, you know, we will continue to marshal the plan that we have going forward. I would say that M&A will continue to be something that we evaluate. What we would want to see from an M&A standpoint is strategic opportunity enhances the strategic capabilities positioning of the company at the same time on a risk-adjusted returns basis equal to or better than the stock buyback. Right. That is what we evaluate. And, you know, to the extent, you know, we view our stock more fairly valued, well, you know, that makes M&A something a bigger part of the equation, potentially. But from what we see right now, it's squarely in the stock buyback camp.

Nate Svensson, Analyst — Deutsche Bank

Yep. Makes sense. And very clear. So we have less than a minute here, so we will wrap up with one, maybe tying it back to the high-level question that we started off with, the differences between, you know, how investors or management view the company. I think high-level when you are on this stage two years, three years from now, what do you think is going to be most different about WEX from the WEX of 2026 versus the WEX in two to three years? And what do you need to do to successfully sort of deliver and execute on your strategy to effectuate that change?

Jagtar Narula, CFO

Look, I think WEX is on a good path and a good journey, right? And if you think about all the things that we have talked about over this call or over this conversation, between the capabilities of new products and how AI can be incorporated and the efficiency enhancements, like I said, the new products that we're bringing, the scale that's embedded into our model. I think WECS executing along the lines of what we just talked about, you know, you will see a company in two or three years, you know, which had a crystal ball, but who knows what's going to happen out in the world. But in terms of the pieces that we can control, I think you will see a company that, you know, more resilient, larger size, you know, higher scale, you know, all the things that the pieces that we've talked about. and we'll look forward to tracking it along the way so everyone join me in thanking Jagtar for his time really appreciate it