WEX Inc. Net Income dropped on 346% and Revenue decreased on 9.5%
02/24/2021 • About WEX Inc. (
$WEX) • By InTwits
WEX Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 12.1% in 2020, 37.2% in 2019, 38.9% in 2018, 35.0% in 2017, 29.6% in 2016
- WEX Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.9%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $15m in FY2020, $47m in FY2019, $45m in FY2018, $70m in FY2017, $187m in FY2016
- In the last 5 years the company invested considerably less than D&A: $412m vs. $545m
- The company has unprofitable business model: ROIC is -1.6%
- It operates with high leverage: Net Debt/EBITDA is 12.1x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 9.5%. Annual revenue decline showed slowdown in 20Q4 - revenue decreased on 9.3%. During the last 5 years Revenue growth topped in 2017 at 23.3% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 25.1 pp from 37.2% to 12.1% in 2020. During 2016-2020 EBITDA Margin topped in 2018 at 38.9% and was declining since that time.
Gross Margin decreased on 4.9 pp from 61.7% to 56.8% in 2020. During 2016-2020 Gross Margin topped in 2018 at 63.3% and was declining since that time. SG&A as a % of Revenue increased on 4.7 pp from 31.1% to 35.8% in 2020. During the last 5 years SG&A as a % of Revenue bottomed in 2017 at 27.9% and was growing since that time.
Net Income margin dropped on 21.4 pp from 5.7% to -15.6% in 2020. During the last 5 years Net Income margin topped in 2017 at 12.8% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 5.2% in 2020. WEX Inc.'s CAPEX/Revenue decreased slightly on 1.2 pp from 6.3% in 2017 to 5.2% in 2020. For the last three years the average CAPEX/Revenue was 5.7%.
Return on investment
The company operates at negative ROIC (-1.6%) and ROE (-12.7%). ROIC decreased on 9.7 pp from 8.0% to -1.6% in 2020. ROE dropped on 18.0 pp from 5.3% to -12.7% in 2020. During 2016-2020 ROIC topped in 2018 at 8.9% and was declining since that time. During the last 5 years ROE topped in 2017 at 10.3% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 12.1x and Debt / EBITDA is 16.6x. Net Debt / EBITDA jumped on 8.6x from 3.4x to 12.1x in 2020. Debt increased on 3.7% while cash increased on 5.1%. During 2016-2020 Net Debt/EBITDA bottomed in 2018 at 3.1x and was growing since that time.
WEX Inc. has no short term refinancing risk: cash is higher than short term debt (503.6%).
Management team
WEX Inc.'s CEO is Melissa D Smith. Melissa D Smith has 7 years tenure with the company. Roberto Simon is a the company's CFO. Roberto Simon has spent 5 years at the company.
Financial and operational results
FY ended 12/31/2020
WEX Inc. ($WEX) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,012 | 1,249 | 1,493 | 1,724 | 1,560 | -9.5% |
| Gross Profit | 554 | 734 | 945 | 1,064 | 887 | -16.7% |
| SG&A | 316 | 348 | 439 | 536 | 559 | 4.3% |
| EBITDA | 300 | 437 | 580 | 641 | 188 | -70.6% |
| EBIT | 159 | 233 | 381 | | | |
| Tax | 29 | 15 | 69 | | | |
| Net Income | 23 | 160 | 168 | 99 | -244 | -346.1% |
| Stock Based Compensation | 20 | 30 | 34 | | | |
Balance Sheet
|
|---|
| Cash | 191 | 504 | 541 | 811 | 852 | 5.1% |
| Accounts Receivable | 2,055 | 2,456 | 2,584 | | | |
| Accounts Payable | 617 | 843 | 815 | | | |
| Short Term Debt | 0 | 397 | 217 | 262 | 169 | -35.4% |
| Long Term Debt | 2,205 | 2,028 | 2,134 | 2,754 | 2,957 | 7.4% |
Cash flow
|
|---|
| Capex | 62 | 79 | 87 | 103 | 80 | -21.8% |
| Acquisitions | 1,093 | 114 | 163 | | | |
Ratios
|
|---|
| Revenue growth | 18.5% | 23.3% | 19.5% | 15.5% | -9.5% | |
| EBITDA growth | -4.7% | 45.6% | 32.8% | 10.5% | -70.6% | |
|
|---|
| Gross Margin | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% | -4.9% |
| EBITDA Margin | 29.6% | 35.0% | 38.9% | 37.2% | 12.1% | -25.1% |
| EBIT Margin | 15.7% | 18.7% | 25.5% | | |
| SG&A, % of revenue | 31.2% | 27.9% | 29.4% | 31.1% | 35.8% | 4.7% |
| SBC, % of revenue | 1.9% | 2.4% | 2.3% | | |
| Net Income Margin | 2.3% | 12.8% | 11.3% | 5.7% | -15.6% | -21.4% |
| CAPEX, % of revenue | 6.1% | 6.3% | 5.8% | 6.0% | 5.2% | -0.8% |
|
|---|
| ROIC | 5.1% | 5.8% | 8.9% | 8.0% | -1.6% | -9.7% |
| ROE | 1.8% | 10.3% | 9.9% | 5.3% | -12.7% | -18.0% |
| Net Debt/EBITDA | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x | 8.6x |
People
|
|---|
| Insider ownership | 0.8% | 0.8% | 0.8% | | | |
| Employees | 2,600 | 3,300 | 3,700 | | | |
| Revenue/Employee, th. $ | 389 | 378 | 403 | | | |
WEX Inc. ($WEX) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 432 | 347 | 382 | 399 | | 13.0% | -21.4% | -16.9% | -9.3% |
| EBITDA | 140 | 93 | 67 | -130 | | 12.2% | -41.1% | -63.7% | -175.4% |
| Net Income | -16 | 73 | -66 | -234 | | -200.8% | 426.2% | -550.4% | -530.2% |
Balance Sheet
|
|---|
| Cash | 861 | 1,272 | 1,522 | 852 | | 122.4% | 65.5% | 186.3% | 5.1% |
| Short Term Debt | 147 | 119 | 127 | 169 | | -25.1% | -35.7% | -39.2% | -35.4% |
| Long Term Debt | 2,672 | 2,654 | 2,879 | 2,957 | | -7.5% | -6.5% | 3.9% | 7.4% |
Ratios
|
|---|
| Gross Margin | 57.0% | 53.4% | 58.9% | 57.8% | | -2.9% | -10.3% | -5.0% | -1.3% |
| EBITDA Margin | 32.4% | 26.9% | 17.6% | -32.6% | | -0.2% | -9.0% | -22.7% | -71.9% |
| Net Income Margin | -3.8% | 20.9% | -17.2% | -58.7% | | -8.0% | 17.8% | -20.4% | -71.1% |
Peers in Data Processing & Outsourced Services
Below we provide WEX Inc. benchmarking against other companies in Data Processing & Outsourced Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Square, Inc. ($SQ) | - | 29.6% | 49.0% | 42.9% | 101.5% |
| Global Payments Inc. ($GPN) | - | 37.2% | -15.3% | 45.9% | 51.1% |
| Fiserv, Inc. ($FISV) | - | 3.5% | 2.2% | 74.9% | 45.8% |
| NIC Inc. ($EGOV) | - | 5.8% | 2.5% | 2.7% | 30.0% |
| StoneCo Ltd ($STNE) | - | 74.3% | 106.0% | 63.1% | 28.9% |
| |
|---|
| Median (39 companies) | 6.7% | 10.1% | 7.4% | 8.9% | -2.7% |
|---|
| WEX Inc. ($WEX) | - | 23.3% | 19.5% | 15.5% | -9.5% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Verra Mobility Corp ($VRRM) | - | 97.4% | 97.5% | 95.7% | 91.5% |
| EVO Payments, Inc. ($EVOP) | - | - | - | 80.2% | 80.8% |
| StoneCo Ltd ($STNE) | 69.7% | 70.8% | 79.5% | 83.4% | 76.8% |
| Sabre Corporation ($SABR) | 32.2% | 30.1% | 27.8% | 56.6% | 56.6% |
| Evertec, Inc. ($EVTC) | 54.9% | 50.7% | 56.6% | 56.2% | 55.6% |
| |
|---|
| Median (31 companies) | 39.2% | 38.9% | 40.9% | 40.3% | 36.5% |
|---|
| WEX Inc. ($WEX) | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Visa Inc. ($V) | 55.6% | 69.2% | 65.8% | 68.1% | 68.5% |
| Mastercard Incorporated ($MA) | 56.9% | 56.5% | 51.8% | 60.9% | 56.6% |
| FleetCor Technologies, Inc. ($FLT) | 52.0% | 50.8% | 55.9% | 57.6% | 52.2% |
| StoneCo Ltd ($STNE) | 31.4% | 26.0% | 53.0% | 62.4% | 52.1% |
| Black Knight, Inc. ($BKI) | 43.0% | 44.6% | 43.3% | 46.0% | 44.9% |
| |
|---|
| Median (38 companies) | 21.2% | 20.6% | 19.2% | 21.7% | 19.1% |
|---|
| WEX Inc. ($WEX) | 29.6% | 35.0% | 38.9% | 37.2% | 12.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| PagSeguro Digital Ltd. ($PAGS) | 6.4% | 4.3% | 1.4% | 5.8% | 22.3% |
| StoneCo Ltd ($STNE) | 7.2% | 18.4% | 8.9% | 12.9% | 11.2% |
| Cardtronics plc ($CATM) | 9.9% | 9.6% | 8.0% | 9.3% | 8.3% |
| Verra Mobility Corp ($VRRM) | - | 11.5% | 7.2% | 6.6% | 6.2% |
| Fiserv, Inc. ($FISV) | 5.3% | 5.0% | 6.2% | 7.1% | 6.1% |
| |
|---|
| Median (38 companies) | 3.2% | 2.9% | 3.0% | 3.0% | 3.0% |
|---|
| WEX Inc. ($WEX) | 6.1% | 6.3% | 5.8% | 6.0% | 5.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 60.6% | 64.7% | 72.7% | 47.6% |
| International Money Express, Inc. ($IMXI) | -1.3% | -1.4% | 12.1% | 36.0% | 31.4% |
| NIC Inc. ($EGOV) | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% |
| Visa Inc. ($V) | 18.1% | 21.9% | 23.0% | 27.2% | 23.2% |
| Western Union Company (The) ($WU) | 10.7% | 11.9% | 27.8% | 21.5% | 22.1% |
| |
|---|
| Median (39 companies) | 11.7% | 10.7% | 12.1% | 8.3% | 6.4% |
|---|
| WEX Inc. ($WEX) | 5.1% | 5.8% | 8.9% | 8.0% | -1.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Exela Technologies Inc ($XELAU) | 8.1x | - | 9.7x | - | 10.7x |
| Alliance Data Systems Corporation ($ADS) | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x |
| Verra Mobility Corp ($VRRM) | - | 10.7x | 6.9x | 3.5x | 4.7x |
| GreenSky, Inc. ($GSKY) | -1.5x | -1.5x | 0.5x | 1.5x | 4.6x |
| Fidelity National Information Services, Inc. ($FIS) | 4.1x | 2.9x | 2.9x | 5.5x | 4.2x |
| |
|---|
| Median (35 companies) | 1.3x | 2.3x | 2.0x | 2.1x | 1.9x |
|---|
| WEX Inc. ($WEX) | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x |
