WEX Inc

WEX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The accompanying condensed consolidated financial statements, which include the accounts of WEX Inc. and its subsidiaries, have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10–Q and Rule 10–01 of Regulation S–X. Accordingly, they exclude certain disclosures required by GAAP for a complete set of financial statements. Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to “WEX,” the “Company,” “we” or “our” refer to WEX Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation in accordance with GAAP have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for any future periods or the year ending December 31, 2024. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements that are included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2023, filed with the SEC on February 23, 2024 (“2023 Annual Report”).

We have applied the same accounting policies in preparing these quarterly financial statements as we did in preparing our 2023 annual financial statements. The Company rounds amounts in the condensed consolidated financial statements to millions and calculates all percentages and per-share data from underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot or recalculate based on reported numbers due to rounding. We have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q within “Acronyms and Abbreviations” in the front of this document.

Change in Reporting Presentation

Previously, realized gains and losses from periodic settlements on our interest rate swap contracts were included within financing interest expense, while the quarterly unrealized gains and losses from the noncash mark-to-market of our swaps were separately presented on the face of the consolidated statement of operations. During the fourth quarter of 2023, the Company made a voluntary change in accounting presentation to reflect the unrealized gains and losses from changes in the value of our swaps within financing interest expense, net of financial instruments. Prior period amounts have been reclassified to conform to the current year presentation.

Certain prior year amounts within cash flows from operating activities in the condensed consolidated statement of cash flows have been aggregated to conform to the current year presentation.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements as of and for the nine months ended September 30, 2024, are consistent with those discussed in “Note 1, Basis of Presentation and Summary of Significant Accounting Policies” to the consolidated financial statements in our 2023 Annual Report.

Recent Accounting Pronouncements

The Company evaluates all ASUs recently issued by the FASB for consideration of their applicability. Any recently issued ASUs not listed in the following table were assessed and determined to either not be applicable, or have not had, or are not expected to have, a material impact on our condensed consolidated financial statements. The Company did not adopt any accounting standards during the nine months ended September 30, 2024.

In accordance with Topic 606, revenue is recognized when, or as, performance obligations are satisfied as defined by the terms of the contract, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services provided.

The following tables disaggregate the Company’s consolidated revenues, substantially all of which relate to services transferred to the customer over time:

Contract Balances

The majority of the Company’s receivables, which are excluded from the table below, are either due from cardholders who have not been deemed our customer as it relates to interchange income, or from revenues earned outside of the scope of Topic 606. The Company’s contract assets consist of upfront payments to customers under long-term contracts and are recorded upon the later of when the Company recognizes revenue for the transfer of the related goods or services or when the Company pays or promises to pay the consideration. The resulting asset is amortized against revenue as the Company satisfies its performance obligations under these arrangements. The Company’s contract liabilities consist of customer payments received before the Company has satisfied the associated performance obligations. The following table provides information about these contract balances:

During the three and nine months ended September 30, 2024, the Company recognized revenue of $6.1 million and $18.6 million, respectively, related to contract liabilities existing as of December 31, 2023.

Remaining Performance Obligations

The Company’s unsatisfied or partially unsatisfied performance obligations as of September 30, 2024 represent the remaining minimum monthly fees on a portion of contracts across the lines of business, deferred revenue associated with stand ready payment processing obligations and contractually obligated professional services yet to be provided by the Company. The total remaining performance obligations below are not indicative of the Company’s future revenue, as they relate to an insignificant portion of the Company’s operations.

The following table includes revenue expected to be recognized related to remaining performance obligations at the end of the indicated reporting period.

(1)The transaction price allocated to the remaining performance obligations represents the minimum monthly fees on certain service contracts, which contain substantive termination penalties that require the counterparty to pay the Company for the aggregate remaining minimum monthly fees upon an early termination for convenience. These obligations will be recognized within account servicing revenue.

(2)Substantially represents deferred revenue and contractual minimums associated with payment processing service obligations. Consideration associated with certain relationships is variable and the measurement and estimation of contract consideration is contingent upon payment processing volumes and maintaining volume shares, among others.

Business Combinations

2023 Payzer Acquisition

On November 1, 2023, the Company closed on the acquisition of Payzer Holdings, Inc. (“Payzer”), a cloud-based, field service management software provider (the “Payzer Acquisition”). The acquisition is expected to advance WEX’s growth strategy of expanding its product suite and creating additional cross-sell opportunities by providing a new, scalable SaaS solution for its Mobility segment customers that operate field service management companies. Pursuant to the terms of the agreement, total initial consideration for the acquisition approximated $250.0 million ($5.5 million of which was deferred), with additional contingent consideration of up to $11.0 million based on certain performance metrics, subject to certain working capital and other adjustments. During the third quarter of 2024, the Company settled the additional contingent consideration for a total of $5.6 million with no further consideration contingently payable.

The table below summarizes the preliminary allocation of fair value to the assets acquired and liabilities assumed on the date of acquisition under the acquisition method of accounting. These fair values continue to be revised during the measurement period as third-party valuations on the intangible assets are finalized, further information becomes available and additional analyses are performed, and those adjustments could have a material impact on the purchase price allocation.

(1)Weighted average useful life -4.7 years

(2)Weighted average useful life -2.4 years

(3)Weighted average useful life -2.5 years

(4)Weighted average useful life -2.8 years

(5)The weighted average useful life of all amortizable intangible assets acquired in this business combination is 3.9 years

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring the business. The goodwill recognized as a result of the Payzer Acquisition is not expected to be deductible for tax purposes. No pro forma information has been included in these financial statements, as the operations of Payzer for the period that it was not part of the Company is not material to the Company’s revenues, net income or earnings per share.

2023 Ascensus Acquisition

On September 1, 2023, WEX Health completed the acquisition from Ascensus, LLC (the “Ascensus Acquisition”) of certain entities (the “Ascensus Acquired Entities”), which comprised the health and benefits business of Ascensus and are technology-enabled providers of employee health benefit accounts including HSAs, FSAs, and other benefit accounts. The Ascensus Acquisition expands WEX’s footprint in the Benefits segment, while also enhancing and expanding Affordable Care Act compliance and verification capabilities. Pursuant to the terms of the agreement, WEX Health consummated the acquisition for total consideration of approximately $185.5 million, after a $0.9 million working capital adjustment paid by the Company during the first quarter of 2024.

The table below summarizes the final allocation of fair value to the assets acquired and liabilities assumed on the date of acquisition under the acquisition method of accounting.

(1)Weighted average life -5.4 years

(2)Weighted average life -2.2 years

(3)Weighted average life -1.2 years

(4)Weighted average life -4.9 years

(5)The weighted average useful life of all amortizable intangible assets acquired in this business combination is 4.4 years.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring the business. The goodwill recognized as a result of the acquisition is expected to be deductible for tax purposes. No pro forma information has been included in these financial statements, as the operations of the Ascensus Acquired Entities for the period that they were not part of the Company are not material to the Company’s revenues, net income or earnings per share.

Accounts receivable consists of amounts billed to and due from customers across a wide range of industries and other third parties. The Company often extends short-term credit to cardholders by paying the merchant for the purchase price less the fees it retains and records as revenue, then subsequently collecting the total purchase price from the cardholder. The Company also extends revolving credit to certain small fleets. The Company had approximately $127.2 million and $133.3 million in gross receivables with revolving credit balances as of September 30, 2024 and December 31, 2023, respectively.

The allowance for accounts receivable consists of reserves for both credit and fraud losses, reflecting management’s current estimate of uncollectible balances on its accounts receivable. The following tables present changes in the accounts receivable allowances by portfolio segment:

(1)The provision is comprised of estimated credit losses based on the Company’s loss-rate experience and includes adjustments required for forecasted credit loss information. The provision for credit losses reported within this table also includes the provision for fraud losses.

(2)Consists primarily of charges to other accounts. The Company earns revenue by assessing monthly finance fees on accounts with overdue balances. These fees are recognized as revenue at the time the fees are assessed. The finance fee is calculated using the greater of a minimum charge or a stated late fee rate multiplied by the outstanding balance that is subject to a late fee charge. On occasion, these fees are waived to maintain relationship goodwill. Charges to other accounts substantially represent the offset against the late fee revenue recognized when the Company establishes a reserve for such waived amounts.

Concentration of Credit Risk

The receivables portfolio primarily consists of a large group of homogeneous balances across a wide range of industries, which are collectively evaluated for impairment. No individual customer had a receivable balance representing 10 percent or more of the outstanding receivables balance at September 30, 2024 or December 31, 2023. The following table presents the outstanding balance of trade accounts receivable that are less than 30 and 60 days past due, shown in each case as a percentage of total trade accounts receivable:

Under share buyback plans, which may be authorized by our board of directors from time to time, the Company may repurchase up to specified dollar values of shares of its common stock through open market purchases, privately negotiated transactions, accelerated share repurchase programs, issuer self-tender offers or other methods approved by our board of directors.

During the third quarter of 2024, we entered into an ASR agreement with JPMorgan Chase Bank, National Association (“JPMorgan”) to repurchase an aggregate of $300.0 million of the Company’s outstanding common stock (the “2024 ASR”). The Company accounted for the 2024 ASR astwo separate transactions, with the initial delivery of shares accounted for as a treasury stock transaction and the undelivered shares as a forward contract indexed to our common stock.

Under the 2024 ASR, the Company made an initial payment of $300.0 million to JPMorgan for which we received an initial delivery of approximately 1.3 million shares of our common stock, representing approximately 80 percent of the total shares of WEX common stock expected to be repurchased under the ASR agreement. The payment was initially recorded as $240.0 million of treasury stock, based on the 80 percent initial share delivery, and a $60.0 million temporary reduction to additional paid-in capital until final settlement of the 2024 ASR, which is expected to be completed during the fourth quarter of 2024.

During the three and nine months ended September 30, 2024 and 2023, under our existing previously approved and announced repurchase program, the Company repurchased the following shares as treasury stock, inclusive of the settled share repurchases under the 2024 ASR:

1 Reflects the applicable one percent excise tax imposed by the Inflation Reduction Act of 2022 on the net value of certain stock repurchases.

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock and vested DSUs outstanding during the year. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that diluted earnings per share includes the impact of convertible securities under the “if-converted” method if the effect of such securities would be dilutive and includes the assumed exercise of dilutive options, the assumed issuance of unvested RSUs, performance-based awards for which the performance condition has been met as of the date of determination and contingently issuable shares that would be issuable if the end of the reporting period was the end of the contingency period, using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the average unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase the Company’s common stock at the average market price during the period.

The following table presents net income and reconciles basic and diluted shares outstanding used in the earnings per share computations:

(1)For the three and nine months ended September 30, 2024,0.4 million and 0.3 million, respectively, of outstanding share-based compensation awards were excluded from the computation of diluted earnings per share under the treasury stock method, as the effect of including those shares would be anti-dilutive. For the three and nine months ended September 30, 2023,0.4 million of outstanding share-based compensation awards were excluded from the computation of diluted earnings per share under the treasury stock method, as the effect of including those shares would be anti-dilutive.

(2)Under the “if-converted” method, shares of the Company’s common stock associated with the assumed conversion of the Convertible Notes were excluded from diluted shares for the three and nine months ended September 30, 2023 as the effect of including such shares would have been anti-dilutive. During August 2023, the Company repurchased all of the Company’s outstanding Convertible Notes. For further information regarding the Convertible Notes and their repurchase and cancellation, see Note 10, Financing and Other Debt.

During the third quarter of 2024, the Company entered into an ASR agreement with JPMorgan. During the three months ended September 30, 2024, the Company recorded the initial delivery of shares in treasury stock at cost, which resulted in an immediate reduction of its outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share. Had the 2024 ASR been settled as of September 30, 2024, determined based on the average of the daily volume-weighted average prices of the Company’s common stock per share since its effective date, JPMorgan would have been required to deliver additional estimated shares to the Company. The effect of the potential share settlement under the 2024 ASR was excluded from the computation of diluted earnings per share as its inclusion would have been anti-dilutive. See Note 6, Repurchases of Common Stock, for further information about the 2024 ASR.

Interest Rate Swap Contracts

From time to time, the Company enters into interest rate swap contracts to manage the interest rate risk associated with its outstanding variable-interest rate borrowings. Such contracts are intended to economically hedge the reference rate component of future interest payments associated with outstanding borrowings under the Company’s Amended and Restated Credit Agreement.

The following table presents information on interest rate swap gains and losses incurred and recognized within financing interest expense, net of financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2023. The Company had no interest rate swap contracts outstanding during the three and nine months ended September 30, 2024.

Contingent Consideration Derivative Liability

At September 30, 2024 and December 31, 2023, the Company had a contingent consideration derivative liability associated with its asset acquisition from Bell Bank. See Note 13, Financial Instruments − Fair Value and Concentrations of Credit Risk, for further discussion of this derivative and for more information regarding the valuation of the Company’s derivatives.

WEX Bank’s regulatory status enables it to raise capital to fund the Company’s working capital requirements by issuing deposits, subject to FDIC rules governing minimum financial ratios. See Note 18, Supplementary Regulatory Capital Disclosure, for further information concerning these FDIC requirements.

WEX Bank accepts its deposits through certain customers as required collateral for credit that has been extended (“customer deposits”) and contractual arrangements for brokered and non-brokered certificate of deposit and money market deposit products. Additionally, WEX Bank holds deposits for the benefit of WEX Inc.’s HSA customers subject to the terms of a deposit agreement.

Customer deposits are generally non-interest bearing, certificates of deposit are issued at fixed rates, money market deposits are issued at both fixed and variable interest rates based on the Federal Funds rate and HSA deposits are issued at rates as defined within the consumer account agreements.

The following table presents the composition of deposits, which are classified as short-term or long-term based on their contractual maturities:

(1)As of September 30, 2024 and December 31, 2023, all certificates of deposit and money market deposits were in denominations of $250,000 or less, corresponding to FDIC deposit insurance limits.

(2)Includes certificates of deposit and certain money market deposits, which have a fixed maturity and substantially fixed interest rates.

(3)HSA deposits are recorded within short-term deposits on the condensed consolidated balance sheets as the funds can be withdrawn by the account holders at any time.

The following tables summarize the Company’s total outstanding debt as of September 30, 2024 and December 31, 2023.

**Provided for the total Amended and Restated Credit Agreement borrowings below.

(1)Bears interest at variable rates, at the Company’s option, plus an applicable margin determined based on the Company’s consolidated leverage ratio. Outstanding borrowings under the Revolving Credit Facility are classified as long-term given they can be rolled forward with interest rate resets through maturity.

(2)Bore interest at variable rates, at the Company’s option, plus an applicable margin, which was fixed at 1.25 percent for base rate borrowings and 2.25 percent with respect to Term SOFR borrowings.

(3)Bears interest at variable rates, at the Company’s option, plus an applicable margin, which is fixed at 1.00 percent for base rate borrowings and 2.00 percent with respect to Term SOFR borrowings.

(4)As of September 30, 2024 and December 31, 2023, amounts outstanding under the Amended and Restated Credit Agreement bore a weighted average effective interest rate of 6.6 percent and 7.3 percent, respectively.

(5)See Note 13, Financial Instruments − Fair Value and Concentrations of Credit Risk for information regarding the fair value of the Company’s debt.

(6)Current portion of long-term debt as of September 30, 2024 and December 31, 2023 is net of$7.3 million and $8.3 million in unamortized debt issuance costs/discounts, respectively.

(1)Primarily collateralizing Corporate Payments processing activity.

(2)Borrowing capacity is contingent on maintaining compliance with the financial covenants as defined in the Company’s Amended and Restated Credit Agreement. As of September 30, 2024, the Company pays a quarterly commitment fee at a rate per annum ranging from 0.25 percent to 0.45 percent of the daily unused portion of the Revolving Credit Facility determined based on the Company’s consolidated leverage ratio. Prior to May 10, 2024, the date of the Fifth Amendment, the quarterly commitment fee ranged from 0.25 percent to 0.50 percent. The quarterly commitment fee in effect as of September 30, 2024 and December 31, 2023 was 0.25 percent.

Amended and Restated Credit Agreement

As of December 31, 2023, under the Amended and Restated Credit Agreement, we had senior secured tranche A term loans (the “Term A Loans”), senior secured tranche B term loans (the “Term B Loans”) and revolving credit commitments under the Revolving Credit Facility.

On January 22, 2024, the Company and certain of its subsidiaries entered into the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”), which amended certain terms of the Amended and Restated Credit Agreement, as in effect prior to January 22, 2024, including without limitation to reprice the Term B Loans existing on January 22, 2024 through the issuance of new senior secured tranche B term loans (the “Term B-1 Loans”) in the same amount. The Term B-1 Loans bear interest at variable rates at the Company’s option, plus an applicable margin, which is fixed at 1.00 percent for base rate borrowings and 2.00 percent with respect to Term SOFR borrowings, representing a reduction from the fixed applicable margins of 1.25 percent and 2.25 percent respectively, for Term B Loans. Additionally, the Fourth Amendment removed the credit spread adjustment applicable to the tranche B term loans. No other substantive changes were made to the Amended and Restated Credit Agreement as part of the Fourth Amendment.

On May 10, 2024, the Company and certain of its subsidiaries entered into the Fifth Amendment to the Amended and Restated Credit Agreement (the “Fifth Amendment”) and First Amendment to U.S. Security Agreement. The Fifth Amendment amended certain terms of the Amended and Restated Credit Agreement, as in effect prior to May 10, 2024, including without limitation to reprice the applicable interest margin, extend the maturity date of the tranche A term loans to May 10, 2029 and increase the size of the tranche A term loan facility to $900.0 million through the issuance of new senior secured tranche A term loans (the “Term A-1 Loans”). Further, the Fifth Amendment increased commitments under the Revolving Credit Facility to $1.6 billion, repriced the applicable interest margin for the Revolving Credit Facility, and extended the maturity date to May 10, 2029 for the Revolving Credit Facility.

Convertible Notes

The Company previously had issued Convertible Notes in an aggregate principal amount of $310.0 million to an affiliate of Warburg Pincus LLC. Interest on the Convertible Notes was calculated at a fixed rate of 6.5 percent per annum, payable semi-annually in arrears on January 15 and July 15 of each year. On August 11, 2023, the Company repurchased all of the outstanding $310.0 million aggregate principal amount of the Company’s Convertible Notes at 119 percent of par for a total purchase price of $370.4 million, inclusive of accrued and unpaid interest. At the time of repurchase, the net carrying

amount of the Convertible Notes was $298.8 million, resulting in a loss on extinguishment of $70.1 million, which was recorded within nonoperating expense on the condensed consolidated statement of operations during the third quarter of 2023. Upon repurchase, the obligations of the Company to Warburg Pincus LLC were satisfied in full and the Convertible Notes were canceled by the trustee at the instruction of the Company.

During the three and nine months ended September 30, 2023, the Company recognized interest expense of $2.6 million and $13.9 million, respectively.

Securitization Facilities

Under securitized debt agreements, each month on a revolving basis, the Company sells certain of its Australian and European receivables to bankruptcy-remote subsidiaries consolidated by the Company, which in turn use the receivables as collateral to issue securitized debt. Amounts collected on the securitized receivables are restricted to pay the securitized debt and are not available for general corporate purposes. The Company pays interest on the outstanding balance of the securitized debt based on variable interest rates plus an applicable margin.

The Company’s securitized debt agreement for the securitization of its European receivables is with MUFG Bank, Ltd., has a maximum revolving borrowing limit of €55.0 million and expires in April 2025, unless otherwise agreed to in writing by the parties. The Company’s securitized debt agreement for the securitization of its Australian receivables is with Australia and New Zealand Banking Group Limited, has a maximum revolving borrowing limit of A$115.0 million, expires in October 2025 and is annually renewable thereafter unless earlier terminated.

Participation Debt

From time to time, WEX Bank enters into participation agreements with third-party banks to fund customers’ balances that exceed WEX Bank’s lending limit to individual customers. Associated unsecured borrowings generally carry a variable interest rate set according to an applicable reference rate plus a margin, which was 2.25 percent as of September 30, 2024. As of September 30, 2024, the Company has an outstanding participation agreement which allows for total borrowings of up to $70.0 million and expires in December 2025, unless otherwise agreed to in writing by the parties. Borrowings under the participation agreement are included in short-term debt given they may be canceled by either party upon 60 days’ advance written notice.

FHLB Advances

WEX Bank is a member of the Federal Home Loan Bank (FHLB) of Des Moines, which provides WEX Bank short-term funding collateralized by investment securities. FHLB short-term advances bear interest at variable rates. WEX Bank was eligible to borrow up to $393.8 million from the FHLB as of September 30, 2024 based on collateral provided,$370.0 millionof which was borrowed and outstanding at that date.

Borrowed Federal Funds

The BTFP, which provided liquidity to U.S. depository institutions through the offering of bank loans for up to one year in length collateralized by the par value of qualifying assets, ceased extending new loans on March 11, 2024. As of September 30, 2024, WEX Bank had $710.0 million in outstanding borrowings under the BTFP due in January of 2025 with an interest rate of 4.76 percent. As of December 31, 2023, WEX Bank had $775.0 million in outstanding borrowings under the BTFP with an interest rate of 4.84 percent.

WEX Bank borrows from short-term uncommitted federal funds lines of credit extended by various financial institutions to supplement the financing of the Company’s accounts receivable. Under these federal funds lines of credit as of September 30, 2024 and December 31, 2023, WEX Bank had $150.0 million and $70.0 million in outstanding borrowings, respectively.

Other Short Term Borrowings

Under an uncommitted borrowing facility, WEX Australia can be advanced up to A$21.3 million from Bank of America in short-term funds. Interest accrues on any advances at a rate fixed for each interest period of 1.80 percent above the

Australian Bank Bill Buying Rate for that interest period. The Company hadno borrowings outstanding on this facility as of September 30, 2024 and December 31, 2023.

Other

As an additional source of liquidity, WEX Bank had pledged$227.6 million as of September 30, 2024 of customer receivables held by WEX Bank to the Federal Reserve Bank as collateral for potential borrowings through the Federal Reserve Bank Discount Window. Amounts that can be borrowed are based on the amount of collateral pledged and were $167.0 million as of September 30, 2024. WEX Bank hadno borrowings outstanding on this line of credit through the Federal Reserve Bank Discount Window as of September 30, 2024 and December 31, 2023.

WEX Europe Services and WEX Bank Accounts Receivable Factoring

WEX Europe Services and WEX Bank are each party to separate accounts receivable factoring arrangements with unrelated third-party financial institutions to sell certain of their accounts receivable balances. Each subsidiary continues to service these receivables post-transfer with no participating interest. The Company obtained true-sale opinions from independent attorneys, stating that each respective factoring agreement provides legal isolation upon bankruptcy or receivership under local law. As such, transfers under these arrangements are treated as a sale and are accounted for as a reduction in trade accounts receivable because effective control of the receivables is transferred to the buyers. Proceeds received, which are recorded net of applicable costs or negotiated discount rates, are recorded in operating activities in the condensed consolidated statements of cash flows. For the three and nine months ended September 30, 2024, cost of factoring was $2.5 million and $8.9 million, respectively, while cost of factoring was $3.0 million and $7.4 million for the three and nine months ended September 30, 2023, respectively. Cost of factoring is recorded within cost of services in the condensed consolidated statements of operations.

The WEX Europe Services agreement automatically renews each January 1 unless either party gives not less than 90 days written notice of their intention to withdraw. Under this agreement, accounts receivable are sold without recourse to the extent that the customer balances are maintained at or below the credit limit established by the buyer. The Company maintains the risk of default on any customer receivable balances in excess of the buyer’s credit limit, which were immaterial as of September 30, 2024. Under this arrangement, the Company sold $123.8 million and $391.5 million of accounts receivable during the three and nine months ended September 30, 2024, respectively, and sold $139.6 million and $422.9 million of accounts receivable during the three and nine months ended September 30, 2023, respectively.

The WEX Bank agreement, which was renewed during July 2024, has no set expiration date, however, either party can terminate the agreement with 30 days’ notice. Under this arrangement, the Company sold $3.4 billion and $13.2 billion of trade accounts receivable during the three and nine months ended September 30, 2024, respectively, and sold $4.0 billion and $9.1 billion of trade accounts receivable during the three and nine months ended September 30, 2023, respectively.

Benefits Securitization

In April 2023, WEX Health, through a wholly-owned special purpose entity (“SPE”), entered into a receivable securitization facility with a revolving limit of $35.0 million and an initial term through April 2026, which can be extended for an additional period of up tothree years and can be voluntarily terminated by the SPE at any time, subject to 30 days’ notice. During December 2023, the Company signed an amendment to the initial receivable securitization agreement, which suspends activities under the facility until such time as the parties agree in writing to reactivate it (the “Health Facility Amendment”). During this suspension period, the revolving limit of the facility iszero.

Under the facility, and prior to the Health Facility Amendment, WEX Health sold eligible trade accounts receivables to the SPE, which is a bankruptcy-remote subsidiary, and in turn, the SPE sold undivided ownership interests in certain of these receivables to the financial institution in exchange for cash equal to the gross receivables transferred. WEX Health continued to service receivables sold to the financial institution, however, WEX did not retain effective control of transferred receivables, derecognized the assets and accounted for these transfers as sales. During the three and nine months ended September 30, 2023, the Company sold approximately $43.9 million and $126.1 million of receivables under the securitization facility, respectively.

Non-Bank Custodial HSA Cash Assets

As a non-bank custodian, WEX Inc. contracts with depository partners to hold custodial cash assets on behalf of individual account holders. As of September 30, 2024, WEX Inc. was custodian to approximately $4.3 billion in HSA cash assets. Of these custodial balances, approximately $0.8 billion of HSA cash assets at September 30, 2024 were deposited with and managed by certain third-party partners and not recorded on our condensed consolidated balance sheets. Such third-party depository partners are regularly monitored by management for stability. The remaining balance of $3.5 billion in HSA cash assets as of September 30, 2024 is deposited with and managed by WEX Bank and is therefore reflected on our condensed consolidated balance sheets. See Note 9, Deposits, for further information about HSA deposits recorded on our condensed consolidated balance sheets.

The Company’s amortized cost and estimated fair value of investment securities as of September 30, 2024 and December 31, 2023 are presented below. Accrued interest on investment securities of $31.9 million and $24.7 million, respectively, as of September 30, 2024 and December 31, 2023, is excluded from total investment securities and recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets.

(1)The Company’s methods for measuring the fair value of its investment securities are discussed in Note 13, Financial Instruments − Fair Value and Concentrations of Credit Risk.

(2)As of September 30, 2024, the Company has pledged debt securities with a fair value of $85.5 million as collateral against recurring settlement obligations owed in conjunction with its transactions processed through licensed card networks, $420.5 million as collateral for FHLB advances and $663.4 million as collateral against borrowings under the BTFP, as further discussed in Note 10, Financing and Other Debt.

(3)Substantially comprised of municipal bonds.

(4)Excludes $16.3 million and $13.7 million in equity securities as of September 30, 2024 and December 31, 2023, respectively, included in prepaid expenses and other current assets and other assets on the condensed consolidated balance sheets.

The following table presents estimated fair value and gross unrealized losses of debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security category. There are no expected credit losses that have been recorded against our investment securities as of September 30, 2024 and December 31, 2023.

The above table includes 324 investment positions at September 30, 2024, where the current fair value is less than the related amortized cost. Unrealized losses on the Company’s debt securities included in the above table are primarily driven by the elevated interest rate environment and are not considered to be credit-related based upon an analysis that considered the extent to which the fair value is less than the amortized basis of a security, adverse conditions specifically related to the security, changes to credit rating of the instrument subsequent to Company purchase, and the strength of the underlying collateral, if any. Additionally, the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.

The following table summarizes the contractual maturity dates of the Company’s debt securities.

Equity Securities

During the three and nine months ended September 30, 2024 and 2023, unrealized gains and losses recognized on equity securities still held as of those dates were immaterial.

Other Investments

The Company’s other investments at September 30, 2024 and December 31, 2023, which include Federal Home Loan Bank stock and certain investments for which there is no readily determinable fair value, were $29.6 million and $11.7 million, respectively.

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s financial instruments that are measured at fair value on a recurring basis, as classified within the three-level fair value hierarchy:

(1)The fair value is recorded in cash and cash equivalents.

(2)The fair value of this security is measured at NAV as a practical expedient and has not been classified within the fair value hierarchy. The amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

(3)The fair value is recorded as current or long-term based on the timing of the Company’s executive deferred compensation plan payment obligations. At September 30, 2024, $1.6 million and $14.7 million in fair value is recorded within prepaid expenses and other current assets and other assets, respectively. At December 31, 2023, $1.7 million and $12.0 million in fair value is recorded within prepaid expenses and other current assets and other assets, respectively.

(4)The fair value is recorded as current or long-term based on the timing of expected payments. At September 30, 2024, $62.0 million and $63.2 million in fair value is recorded within accrued expenses and other current liabilities and other liabilities, respectively. At December 31, 2023, $64.5 million and $121.7 million in fair value is recorded within accrued expenses and other current liabilities and other liabilities, respectively.

Money Market Mutual Funds

A portion of the Company’s cash and cash equivalents are invested in money market mutual funds that primarily consist of short-term government securities, which are classified as Level 1 in the fair value hierarchy because they are valued using quoted market prices for identical instruments in an active market.

U.S. Treasury Bills

From time to time, a portion of the Company’s cash and cash equivalents are invested in U.S. treasury bills with maturities of 30 days or less, which are classified as Level 2 in the fair value hierarchy because they are valued using quoted market prices for similar or identical instruments in a market that is not active.

Debt Securities

The Company determines the fair value of U.S. treasury notes using quoted market prices for similar or identical instruments in a market that is not active. For corporate and sovereign debt securities, municipal bonds, and asset-backed and mortgage-backed securities, the Company generally uses quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally valued using Level 2 inputs to the fair value hierarchy.

Pooled Investment Fund

The pooled investment fund maintains individual capital accounts for each investor, which reflect each individual investor’s share of the NAV of the fund. As of September 30, 2024, the Company hadno unfunded commitments with respect to the fund. Investments in the fund may be redeemed monthly with 30 days’ notice.

Mutual Fund

The Company determines the fair value of its mutual fund using quoted market prices for identical instruments in an active market; such inputs are classified as Level 1 of the fair value hierarchy.

Executive Deferred Compensation Plan Trust

The investments held in the executive deferred compensation plan trust, which consist primarily of mutual funds, are classified as Level 1 in the fair value hierarchy because the fair value is determined using quoted market prices for identical instruments in active markets.

Contingent Consideration

As part of an asset acquisition from Bell Bank during 2021, the Company is obligated to pay additional consideration to Bell Bank contingent upon increases in the Federal Funds rate. The Company determines the fair value of this contingent consideration derivative liability based on discounted cash flows using the difference between the baseline Federal Funds rate in the purchase agreement with Bell Bank and future forecasted Federal Funds rates over the agreement term. The forecasted Federal Funds rates represent a Level 3 input within the fair value hierarchy. The resulting probability-weighted contingent consideration amounts were discounted using a rate of 3.52 percent as of September 30, 2024 and 3.84 percent as of December 31, 2023. Due to significant increases in the Federal Funds rate since we completed the acquisition, the fair value of the Company’s contingent consideration derivative liability at September 30, 2024 is effectively measured at the present value of the maximum remaining contingent consideration payable under the arrangement and accordingly, the fair value could not materially increase. A significant decrease in the Federal Funds rate could result in a material decrease in the derivative liability.

The Company records changes in the estimated fair value of the contingent consideration in the condensed consolidated statements of operations. Changes in the contingent consideration derivative liability are measured at fair value on a recurring basis using unobservable inputs (Level 3 in the fair value hierarchy) and are as follows for the periods indicated:

(1)The Company has presented $27.2 million of the payment made during the nine months ended September 30, 2023, which represents the fair value of the contingent consideration at acquisition date, within net cash provided by financing activities in the condensed consolidated statement of cash flows. The remainder of the prior year payment, as well as the entirety of the current year payment, has been included in net cash (used for) provided by operating activities (specifically within net change in operating assets and liabilities, net of effects of business acquisitions).

Financial Instruments Measured at Carrying Value, for which Fair Value is Disclosed

The fair value of the Company’s financial instruments, which are measured and reported at carrying value, is as follows for the periods indicated:

**Fair value approximates carrying value.

(1)The Company determines the fair value of borrowings on the Revolving Credit Facility and Term Loans based on market rates for the issuance of the Company’s debt, which are Level 2 inputs in the fair value hierarchy.

(2)The Company determines the fair value of its contractual deposits with maturities in excess of one year using current market interest rates for deposits of similar remaining maturities, which are Level 2 inputs in the fair value hierarchy.

Other Assets and Liabilities

The carrying value of certain of the Company’s financial instruments, other than those presented above, including cash, cash equivalents, restricted cash and restricted cash payable, short-term contractual deposits and HSA deposits, accounts receivable and securitized accounts receivable, accounts payable, accrued expenses and other current liabilities and other liabilities, approximate their respective fair values due to their short-term nature or maturities. The carrying value of certain other financial instruments, including interest-bearing money market deposits, securitized debt, participation debt, borrowed federal funds and deferred consideration associated with our acquisitions approximate their respective fair values due to stated interest rates being consistent with current market interest rates.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, investment securities and trade receivables. Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically and industry diverse customers make up our customer base. See Note 5, Accounts Receivable, Net, for further information.

The Company’s cash and cash equivalents and restricted cash are transacted and maintained with financial institutions with high credit standing. Cash balances at many of these institutions regularly exceed FDIC insured limits; however,

management regularly monitors the financial institutions and the composition of the Company’s accounts. We have not experienced any losses in such accounts and management believes that the financial institutions at which the Company’s cash is held are stable. We attempt to limit our exposure to credit risk with our investment securities by establishing strict investment policies as to minimum investment ratings, diversification of our portfolio and setting risk tolerance levels.

The Company’s effective tax rate was 27.1 percent and 27.2 percent for the three and nine months ended September 30, 2024, respectively, and 58.6 percent and 30.2 percent for the three and nine months ended September 30, 2023, respectively. Income tax expense is based on an estimated annual effective rate, which requires the Company to make its best estimate of annual pretax income or loss. The Company’s effective tax rate for the nine months ended September 30, 2024 was adversely impacted by a first quarter discrete tax item of $3.7 million primarily associated with an uncertain tax position related to state income taxes, however, the vast majority of such impact was offset by excess tax benefits arising from stock-based compensation. The Company’s effective tax rate for the three and nine months ended September 30, 2023 was adversely impacted by the loss on extinguishment of Convertible Notes of $70.1 million, which was disallowed for tax purposes. This was partially offset for the nine months ended September 30, 2023 by a release in valuation allowance largely attributable to foreign tax credits and net operating losses in the U.K. recorded during the second quarter of 2023.

Undistributed earnings of certain foreign subsidiaries of the Company amounted to $278.8 million and $231.6 million at September 30, 2024 and December 31, 2023, respectively. The Company continues to maintain its indefinite reinvestment assertion for its investments in foreign subsidiaries except for any historical undistributed earnings and future earnings for WEX Australia. The total amount of our foreign subsidiaries’ earnings in which the Company continues to assert indefinite reinvestment approximates $265.4 million at September 30, 2024. Upon distribution of these earnings, the Company would be subject to withholding taxes payable to foreign countries, where applicable, but would generally have no further federal income tax liability. It is not practicable to estimate the unrecognized deferred tax liability associated with these undistributed earnings; however, it is not expected to be material.

The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, which generally provide for a minimum effective tax rate of 15 percent, are intended to apply for tax years beginning in 2024. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbor rules that effectively extend certain effective dates to January 1, 2027. The Company is closely monitoring developments and evaluating the impact of these new rules, including eligibility to qualify for these safe harbor rules. We do not expect the impact of these new rules to have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

Litigation and Regulatory Matters

From time to time, the Company is subject to legal proceedings, claims and regulatory matters in the ordinary course of business, including but not limited to: commercial disputes; contract disputes; employment litigation; disputes regarding our intellectual property rights; alleged infringement or misappropriation by us of intellectual property rights of others, and, matters relating to our compliance with applicable laws and regulations. As of the date of this filing, the current estimate of a reasonably possible loss contingency from all legal or regulatory proceedings is not material to the Company’s consolidated financial position, results of operations, cash flows or liquidity.

Commitments

Significant commitments and contingencies as of September 30, 2024 are consistent with those discussed in Note 20, Commitments and Contingencies, to the consolidated financial statements in the Company’s Annual Report on Form 10–K for the year ended December 31, 2023.

The Company has regularly granted equity awards in the form of stock options, restricted stock, restricted stock units and other stock-based awards under its stockholder-approved Amended and Restated 2019 Equity and Incentive Plan to certain employees and directors.

The Company began granting market share units (“MSUs”) to employees in lieu of stock options during 2024. MSUs are market-based equity awards that represent a right to receive shares of the Company’s common stock at specified future dates if certain WEX stock price performance and vesting conditions are met. The number of MSUs that will be eligible to vest will be based on the performance of our stock price over the vesting period. The fair value of the MSUs was estimated using a Monte-Carlo valuation model and will be recognized as expense over each award’s requisite service period.

Stock-based compensation expense was$28.7 million and $90.2 million for the three and nine months ended September 30, 2024, respectively, and $30.5 million and $91.7 million for the three and nine months ended September 30, 2023, respectively.

The Company determines its operating segments and reports segment information in accordance with how our Chief Executive Officer, the Company’s CODM, allocates resources and assesses performance. The Company has both three operating segments andthree reportable segments, as described below.

•Mobility provides payment processing, transaction processing, and information management services specifically designed for the needs of fleets of all sizes from small businesses to federal and state government fleets and over-the-road carriers.

•Corporate Payments focuses on the complex payment environment of global B2B payments, enabling customers to utilize our payments solutions to integrate into their own workflows and manage their accounts payable automation and spend management functions.

•Benefits provides a SaaS platform for consumer directed healthcare benefits and a full-service benefit enrollment solution, bringing together benefits administration, certain compliance services and consumer-directed and benefits accounts. Additionally, WEX Inc. serves as the non-bank custodian to certain HSA assets.

The following tables present the Company’s reportable segment revenues:

The CODM evaluates the financial performance of each segment using segment adjusted operating income, which excludes unallocated corporate expenses, acquisition-related intangible amortization, other acquisition and divestiture related items, debt restructuring costs, stock-based compensation, other costs and certain non-recurring or non-cash operating charges that are not core to our operations, as applicable depending on the period presented.

The following table reconciles total segment adjusted operating income to income before income taxes:

The Company’s subsidiary, WEX Bank, is subject to various regulatory capital requirements administered by the FDIC and the UDFI. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, WEX Bank must meet specific capital guidelines that involve quantitative measures of WEX Bank’s assets, liabilities and certain off-balance sheet items. WEX Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could limit business activities and have a material effect on the Company’s business, results of operations and financial condition.

Quantitative measures established by regulation to ensure capital adequacy require WEX Bank to maintain minimum amounts and ratios as defined in the regulations. The most recent FDIC exam report categorized WEX Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events subsequent to that examination report that management believes have changed WEX Bank’s capital rating.

The following table presents WEX Bank’s actual and regulatory minimum capital amounts and ratios:

In connection with an initiative to streamline our organizational structure to support the achievement of our strategic and executional imperatives, during June 2024, the Company initiated a restructuring initiative consisting primarily of employee separation costs, which the Company determined were probable and reasonably estimable.

During the nine months ended September 30, 2024, costs incurred under this initiative were $12.3 million. Of this total cost, $7.0 million was included within cost of sales, $3.2 million was included within general and administrative expense and the remainder was included within sales and marketing expense on the condensed consolidated statements of operations. The initiative impacted allthree of our reportable segments, with approximately $6.2 million being charged to Mobility and the remaining amount divided evenly between Corporate Payments and Benefits. Accrued but unpaid charges related to this initiative as of September 30, 2024 were immaterial. The remaining accrual balance is expected to be paid within 2024.