Payment solutions company Wex's travel and corporate
solutions segment purchase volume increased 21 percent year over year to $8.7
billion, which Wex CFO Roberto Simon attributed to greater volume growth "in
all geographies" outside the U.S., particularly in Europe, where volume
increased 45 percent. A 30 percent increase in corporate payments also
contributed, Wex CEO Melissa Smith said.
Higher purchase volume, however, didn't translate to higher
segment revenue. Revenue for the travel and corporate solutions segment declined
4 percent year over year in the third quarter to $61 million, owing to
interchange rates in Europe that are traditionally lower than in other markets,
Simon said. Wex's net interchange rate decreased from 74 basis points in the
third quarter of 2016 to 51 basis points in the third quarter of 2017. "As
previously discussed, we are benefiting from the agreement signed with
Mastercard a year ago, which is offsetting some of the interchange pressure we
have seen in our travel segment," he said.
Still, Wex sees great opportunity in Europe. While Wex has
operated there since 2010, it obtained
a license in August that allows it to issue credit across the 31 European
Economic Area countries. The Electronic Money Institution license "allows
us to really expand into Europe, into other regions we haven't been able to
operate in," Smith said. "Now that we've gone live with the license,
we have the ability to ramp up there."
During Wex's third-quarter earnings call, William Blair
analyst Bob Napoli noted, "The margins have been impressive despite the
decline in the interchange rates."
Wex acquired "certain assets" from payments provider
AOC Solutions in mid-October that were not reflected in the third quarter
financials. AOC Solutions has provided Wex with virtual card technology for
many years. "Through this acquisition, we gained access to new technology,
while making our virtual card offerings more vertically integrated," Smith
said.
Revenue
for the third quarter increased 13 percent to $324 million. Net income totaled
$33.9 million, up from the $19.2 million recorded for the same quarter last
year. In addition to travel and corporate solutions, Wex has fleet solutions
and health and employee benefit solutions divisions.
RELATED: Wex Q2 earnings