Ladies and gentlemen, my name is Lance and I will be your operator for today's conference. At this time, I would like to welcome everyone to the WEX 2Q 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the presentation, there will be a question-and-answer session. I would like to introduce our host for today, Mr. Steve Elder. You may begin your conference.

Thank you, Lance, and good morning, everyone. With me today is Melissa Smith, our President and CEO; and our CFO, Roberto Simon. The press release we issued earlier this morning and the slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and the slide deck have also been included in 8-Ks we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, adjusted operating margin and adjusted operating earnings, during our call. Adjustments for this year's second quarter to arrive at these metrics include unrealized gains on financial instruments, net foreign currency remeasurement losses, acquisition-related intangible amortization and other acquisition and divestiture related items, stock-based compensation, restructuring and other costs, debt issuance cost amortization, ANI adjustments attributable to non-controlling interest, and certain tax related items as applicable. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis, as we are unable to predict certain elements that are included in reported GAAP results. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income to GAAP net income and slide 20 of the deck for a reconciliation of GAAP operating margin to adjusted operating income margin. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Annual Report on Form 10-K filed with the SEC on March 1, 2018 and subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa Smith.

Good morning, everyone, and thank you for joining us today. I'm pleased to report another strong quarter that exceeded both our top and bottom line guidance. We continue to execute on our business strategies, while leveraging the success of our products and solutions through all of our segments. Revenue grew 22% compared to last year's second quarter reaching $370.9 million. Net income on a GAAP basis was $0.90 per diluted share, and we generated adjusted net income of $2.09 per diluted share, up 66% relative to last year's second quarter. This was the eighth consecutive quarter of double-digit revenue growth and another quarter where we saw all three of our business segments contribute to our growth. In addition, solid execution and positive macroeconomic factors were the catalysts behind our strong performance this quarter. Turning to slide 4, executing against our strategic pillars allowed us to post a strong year in 2017, and we're seeing excellent results again in the first half of 2018. I am particularly pleased with the underlying strength of our business, as we continue to deliver organic revenue growth, which was 10% in Q2. This figure excludes the positive impacts from higher fuel prices, foreign exchange rates, new revenue recognition standards and M&A activity. In the second quarter, we continued to capitalize on the large number of new business wins and significant contract renewals with long-time partners. We've recently held our partner conferences with major oil merchants and travel and health partners. During each session, I've received positive feedback on our commitment to our people and our products. Our partners and customers are at the core of everything we do, and together we drive innovative products and services for our end users. We continue to see high customer retention rates throughout the business. Our strategy is working…

Good morning, everyone, and thank you, Melissa. As you've heard, we continued to post outstanding financial results this quarter. The strong performance was driven by top line growth from each of our core businesses. Looking down the income statement, we experienced notable improvement in credit losses, reduction in financing interest expense and a lower tax rate. We also benefited from a positive macroeconomic environment. Overall, we are very pleased with the performance in the first half of the year with both top and bottom line results exceeding the high-end of guidance. As you can see on slide number 8, total revenue for the second quarter was $370.9 million, a 22% increase over the prior year period. Non-GAAP adjusted net income was $90.8 million or $2.09 per diluted share. This is up 66% from $1.26 per diluted share for the same period last year. As Melissa just mentioned, slide number 9 shows our strong revenue performance broken down by segments. As you can see, all of the segments had double-digit growth rates led by Travel and Corporate Solutions, which continued to beat expectations by posting 38% revenue growth and 16% volume increase. Additionally, the U.S. Health business had better results than anticipated with 17% growth year-over-year. Before getting to segment results, let's move on to slide number 10 to highlight the new revenue recognition standard. This accounting guidance does not change earnings and reclassifies some rebates and network fees. The revenue impact of these changes is an increase of $11.9 million, which you can see broken down by segment. Now, moving on to the segment results, let me direct you to slide number 11. The Fleet Solutions segment achieved $241.5 million in revenue, an increase of 21% when compared to prior year. Payment processing revenue and finance fee revenue were up…

Thank you everybody for listening to today's prepared remarks. It's been another great quarter, and we've covered a lot of ground so far. Now I'd like to turn the call back over to Lance and open the line to take your questions.

Your first question comes from the line of Sanjay Sakhrani from KBW. Your line is open. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Thank you. Good morning. Melissa and Roberto, you guys talked about how next year sets up to be a pretty strong quarter in the Fleet segment, given you've got Chevron and Shell coming on board. Could you help us think through how significant that impact could be for next year? And how much of the run rate of the total contracts do you envision happening in the next year number? Thanks.

Sure. I'll start. I'm sure Roberto will add on here. First of all, really excited about the wins, and then I'd be remiss not to say that it's creating tremendous momentum here at WEX. And if you take them sequentially, so I'll talk a little bit first about Chevron and then about Shell. So Chevron, we have been – if you think about the timing of the contract signing, we signed it way back in December of 2016. So this has been going on for a while. It's an unusual contract for us. We haven't had something structured like this, where we've got three parties involved in the whole conversion process. And so that continues to elongate. And we have the least amount of visibility in terms of the timing of that, just because of the complexity of the relationship. So we've removed anything related to that in our guidance for this year. And we'll continue to keep you updated on that progress. With Shell – and I guess the last couple things I'd say about Chevron is, just a reminder, it's a 10-year contract at least from the point of conversion. So this is just a question of timing of when it happens. So we'll keep you in the loop as that continues to progress. With Shell, it's much more time-bound. And we have a lot of confidence in the timing of that. We've already started, as I said, new sales on some of the portfolios for them. We'll continue to ramp up new sales through the end of this year. And then as other portfolios start to roll in, we expect to begin conversions at the end of Q4 and moving into early next year with all of that completed by mid-year of next year. So you'd expect to see it ramped by the second half of next year, where the ramp process happens through the first half of next year. So there's more specific timing that we can give you right now on that.

So the only thing I will add – I mean, Melissa has been very specific on both programs. I mean, obviously, as we look into next year between – mostly done on Q2 next year on the Shell full conversion and Chevron, we will keep you updated as we move into the next quarters. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Okay. And I'm sorry, congratulations on those two big wins. I'm sure you guys are proud.

Thank you. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: And then I had a second question on the Travel and Corporate business. When we look at the yields on that business, those have done relatively better over the last couple of quarters year-over-year. Is that the run rate to use going forward for that business?

So we've been really pleased with the results of the corporate payment business this year, and you've seen a number of things play out. We've got strong spend volume growth that's happening organically in that business. And Roberto talked about the 16% volume growth. That's organic because the processing we're doing for the financial institutions that came with the AOC acquisition is excluded from that number. So, first of all, we feel good about the volume growth. And then secondly, from a pricing perspective, we had talked about the fact that we had seen one large pricing event occur a couple of years ago, I guess, in the beginning that affected all of last year, and that we will expect that to happen periodically, but not every year as we go through renewal processes just because of the market concentration you see in that space. And so, this year, we had said going into it we expect to see more alignment between revenue growth and the actual volume growth, which is what we've seen. And we do think over time, you see more of a matching of those two. But you can see some periods of time where that's going to be a little bit lumpier than others. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Okay.

And what I will add also is that on this – remember that on this quarter, and we will have this all year along, we have the revenue recognition changes, which in this segment are particularly impactful, because you have the partner rebates is being moved from revenue to expense. And then, you have all the network fees that were before on expenses and now are in contract revenue. So, you have also some noise there. But overall, in those two quarters, both volume and net revenue have grown double-digit.

And the last thing I'd add is just if you look at the portfolio now from versus a year ago, there is much more diversification. So, it's not, where we've got great strength in travel and that's still the majority of the spend portfolio. We have a number of customers that are outside of travel. And so, that also gives us confidence when we talk longer term about the growth trajectory of the business in terms of both revenue and spend volume. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: All right, thank you very much.

Your next question comes from the line of Jim Schneider from Goldman Sachs. Your line is open. James Schneider - Goldman Sachs & Co. LLC: Good morning. Thanks for taking my question and congratulations on the good results. I was wondering if you can maybe talk a little bit about the kind of opportunities you're seeing from the GSA contracts which are pending across various agencies. Maybe you could – I think you talked about Homeland Security, but maybe you can handicap how you view your chances of announcements over the next few months, including U.S. Postal Service and others and when you would expect a little bit more clarity on those.

Sure. So, I said in the last call that we have one more business. We came through so far with more than what we went into the bid. So, we feel good about the whole bidding process and how we've done competitively. And as we progress through, the biggest agency that's still out there or biggest part of the government contract that's out there is the U.S. Postal Service. And right now, we're still in that waiting process, where they wait to award the final bidder. It's been a highly competitive process, as you might imagine going through this. It's a big chunk of business that's sitting with the competitors. I'm sure that they will be fighting to retain it as much as we are working really hard to win the business. But so far, we've landed in a better spot after the process than we were going into it. James Schneider - Goldman Sachs & Co. LLC: Helpful. Thanks. And then, maybe kind of following on the earlier question, congratulations on the Chevron and Shell wins. But in terms of the – helpful color on the revenue. But in terms of the margin impact, as you think about 2019 margins and the impact of kind of puts and takes on incremental revenue and some of the offsetting investments in IT programs, how do you think about kind of how that nets to your operating margin impact as you head into 2019? Is it positive, negative or neutral?

So, the oil companies on the global Fleet segment or on the Fleet segment will always have lower margins from a percentage point of view. But the first thing I would say, obviously, we are going to have incremental revenue and incremental dollars of operating income. But from a margin point of view, there will be an erosion in the margin because the oil companies' margins are lower than the regular small fleets. James Schneider - Goldman Sachs & Co. LLC: Great. Thank you very much.

Your next question comes from the line of Darrin Peller from Wolfe Research. Your line is open.

All right. Thanks, guys. Could we just touch first on the overall outlook? When we think about the guidance and the read-through to the second half of the year, there's a lot of moving parts. You had a nice trend. Is there anything that was sort of in the current quarters that wouldn't necessarily transition through to the second half, any type of one-time items that wouldn't have flowed through to a greater raise? And then, just I guess I have a follow-up on the Corporate Solutions side, which maybe I can ask right after this.

Okay. So, I will take your first question and then we go from there. So, what I would say to you is it's real important to keep in mind that for the first half, we have performed very well and the business is operating really well, and we have outperformed expectations. So, this has led us to increase our midpoint guidance both in revenue by $5 million and on an EPS ANI basis by $0.07. Now, if we strip that – those numbers, from a revenue point of view, if you are looking on a like-for-like basis – and this obviously we're trying to exclude the noise on fuel prices, which have been positive versus last year, and FX rates, we are raising revenue by approximately $10 million and it's all related to the better performance of the business.

Right.

When you look at ANI EPS and also excluding the noise from fuel prices and the FX, but in this case also we have to take into consideration the Shell win, which is a great win for us and a great problem to have this year, we are also raising our midpoint almost $0.20 of EPS. Now, obviously, Shell is a short-term investment with a mid to long-term benefit for WEX.

Okay. That's really helpful, guys. Let me just touch now quickly on corporate payments, an area that we're pretty excited about still for you guys. And when we think about the performance of that maybe outside of travel, if you can give us maybe just a little more color on how that's going, the strategy around other verticals. And just another attachment to that question has to do with the Visa partnership. Just discuss the rationale around that and how that works given the partnership with Visa and Mastercard now. Thanks again, guys.

Sure. I'm going to start with the Visa partnership and I'll end on the rest of the business. So, the relationship with Visa, we said we've had one for a while. It was smaller, and the reason why we decided to really build upon that is we wanted to create optionality for our customers and partners. We think that it's important to have as many different options in network, which includes for us, if you think about our business, we have a combination of proprietary networks that we've built which are closed loop and then these open loop networks. And what that does is you build the business internationally. In certain regions of the world, the acceptance really does make a difference depending on what network you're using, and also interchange rates are affected based on regionality. And so, we feel like, from a customer perspective, what we're doing is novel. We're creating something that gives them payment modality, but also network optionality. And so, we like that from a market perspective, but we also think that it gives us more financial flexibility over time that we can build upon. And then, in terms of the corporate payments business overall beyond travel, we've seen really great strength in corporate payments outside of that. We talked about just our core corporate payments offering on the AP side grew over 20% year-over-year in the quarter. So, we've seen really good momentum in that both on a direct basis, but also through partner channels, where we've seen even more momentum with partners that are really technology-enabled, where they're taking our offering and combining with something else that they're doing in the space, and they can create an even more robust offering for a specific market. And so, it's – we like about the market, it's massive. First of all, we talk about it being $1.9 trillion just in the parts that we're in. And so, we think of this as a place we want to have as many hooks in the water as you can. And so, we've got these channel partner relationships. The relationships that we have with the FIs is another area that we're continuing to invest in, because we see this as another place, where we're used to going to market through both partner and direct channels, and we like that in the corporate payment space.

Okay. That's great to hear. Thanks, guys.

Your next question comes from the line of Oscar Turner from SunTrust. Your line is open.

Hey, good morning. Thanks for taking my questions. So, first question is just on the Travel segment. I think Melissa mentioned share gains at large customers being a material source of the revenue growth upside this quarter. And I was just wondering is this volume that you won away from competitors or that the OTAs previously processed themselves? And then, how – and can you talk about the remaining long-term share gain opportunity there?

Part of what gives us confidence in this part of our business, we have relationships with some really great marquee names. And as they continue to grow their business, we've also found that we're still underpenetrated in the amount of spend volume opportunity they have in their businesses. So, we're continuing to look – work with them to tap into either processing that they've been doing internally or additional programs that they have outside of hotel payments. And so, we've had success in both of those places and continuing to build products with our existing customers. And at the same time, we are bringing in new business, and we've seen the benefits of that. I talked about growth in Asia and Europe and in Brazil. That's a combination of both of those things as well as what's happening in the United States.

So, the diversification that Melissa said on channels and regions, when you think about we grew 20% on a like-for-like basis in Europe, to give you an example. In Asia, we doubled the business. In Brazil, we multiplied by four times. And as Melissa said before, on the corporate payments side in the U.S., we are growing over 20%. So, all those pieces together give us the confidence for the long-term growth on that space.

Okay. Thanks for that color. And then, my second question is just on the Fleet segment. Can you provide some insight into other large Fleet contracts up for RFP over the next few years outside of the GSA opportunities that you discussed?

On a regular basis – if you look at how we think about the marketplace, we look at it in both these direct and partner channels. And so, if you look at the direct channel, we continue to have really good pipelines that are sitting (00:51:16) with our large account salespeople. And so, that's one of the things that we think about from a rigor perspective. We continue to fill those pipelines, move them through contract and then go through an implementation stage. And so, that gives us confidence in that large end of the market both on the Over-the-Road space and the North American Fleet business. And then beyond that, there's a lot of names that we're signing on a regular basis we're not going to talk about because they're smaller in nature, which is – the significant amount of the market opportunity is just continuing to build upon small business. Part of why I talk about Snap and some of the work we're doing on the mobile front, we think it's really important to that customer base. And part of what we've been working on is I talked about introducing a bot. What that allows us to do is offer functionality to that small customer base in an affordable way that we can create a product for them and roll it into the marketplace in a manner that we wouldn't have been able to do in the past because it's just new tools and technology. So, we're tapping into both, thinking about this in terms of really large customer prospects that continue to make their way through the pipeline and making sure that we're continuing to work on the products, what we have is appealing to that customer base. And that tends to be really looking at a combination of integration within their operational systems and business intelligent tools that we've been modifying. And then, we get to the small fleet marketplace, it's more around simplicity and doing things that make it easier and easier for us – or for them to do business with us. And so, those have been areas of focus for us. And we feel good about both of those things. We continue to ramp salespeople into that small fleet market as well.

Thanks. And just a quick follow-up on that one, has your share gains in the small fleet space been largely takeaways? Or are those companies that previously didn't use fleet cards before?

It's a combination. When you look at that small fleet market, because it's so large that we are taking business from people that are using general purpose credit cards, cash and then competitive takeaway. It's a little bit of each. When you get into the larger end of the market, where it's much more likely to be – in almost all cases, it's a competitive takeaway.

Okay. Thanks.

Your next question comes from the line of Pete Christiansen from Citi. Your line is open.

Thank you. Good morning. Thanks for the question. Two quick ones. As it relates to the Visa partnership, should we think of that as a tailwind to the higher margin cross-border business kind of going forward? And then as a follow-up, I realize that SaaS accounts in WEX Health are up big year-over-year. But I noticed a small sequential decline. Should we think of that as, I guess, natural churn? Or is there something else factoring into that? Thank you.

Yeah. It is normal for that part of our business to go through a cycle, where Q1 you go through an enrollment season and you see a ramp up. And then Q2, think of that as consumers are starting to – they make choices at that point in time typically around the April timeframe that then draws that down a little bit. It's a normal trend that we see in that business. And so when we talk about growth, we look at it year-over-year. And we're pleased with the 20% growth that we saw year-over-year.

And the other thing I would say is if you're – and I mentioned that on today's call. Last year, we implemented Bank of America. And therefore, this year, all the metrics within some given quarters can be a bit distorted, because it was a large portfolio that we converted.

And then on the Visa acceptance?

Yes, yeah. So Visa, the first and foremost thing is around optionality from a product perspective. We do think over time, it does create a financial benefit for us. But I'd say think of that as over time as opposed to immediate.

That's helpful. Thank you.

Your next question comes from the line of Tien-Tsin Huang from JPMorgan. Your line is open. Tien-Tsin Huang - JPMorgan Chase & Co.: Thank you. Good morning. So lots of good wins, obviously. So you'll be busy with transitions. I'm curious if you still have the bandwidth or the appetite to do larger deals, either M&A or other portfolio, what have you? Is there an appetite or the capacity to do that, Melissa?

Yeah. We are continuing to be active in the marketplace like we normally would be. And I think you've found over time, we're pretty disciplined about that. You've seen that come through in the results of the performance of the assets that we have ultimately acquired. We're interested in looking at anything that builds upon scale in the markets that we're in, geographic expansion and then technology product extensions in our business. And so when you think about our capacity as an enterprise, a lot of what you're doing on the M&A front has more to do with corporate resources and the work that's happening on the conversions that are happening within the Fleet business specifically. So I don't think of those two things as really overlapping in terms of our capacity. At the same time, what I love about where we are right now is we're seeing really strong organic growth across the business, and we feel good about the profile, the opportunity, the markets we're in, because of some of the plays that we've made in the past. So M&A is something that we're looking at as to supplement that as opposed to something we need to do. Tien-Tsin Huang - JPMorgan Chase & Co.: Okay. And then on the – just a quick follow-up. The digital investments and some of the things you talked about there, I'm just curious, is the idea there primarily to drive better retention and win share? Or are these new opportunities to reprice those value-added products or individual one-offs? Just curious what the overall strategy is around digital.

Well, they're – it depends a little bit in the market we're in. When you get into some of the smaller end markets, it actually enhances the product offering. So for us, we think that we – both through the use of technology and because of the various products that we have, that we can create something even more compelling with small businesses. And so that is one specific strategy for us. But also when you get into some of the other areas of the business, it's a combination of bringing something to market that is incrementally more compelling to our customers, but also doing it in a way that is less expensive. And I'll give you like a simple example for us. If you look at the leads that are coming into our business on the Fleet side of our business, we have by far more coming through our digital channel than we have in the past. We've done work on our online systems that allowed that to move through much more readily and easily into an application. And then we've done work on the backside of that to move from an application to have that processed faster, meaning that you can actually physically get cards in hand quicker. And if you combine that with what we're doing with our DriverDash, you can actually circumvent using a card in totality. So you can go from someone who's applying online to being able to use a mobile app really quickly. And while that may not sound like a big deal, because you're shaving days, if not maybe a week, off that, what it does is increase activation rates. And you actually get the product in somebody's hand, and the experience because of the ability to use something on your mobile device, which is appealing to smaller fleets in particular, makes it a better product offering. So we like kind of the combination of all of those things combined. And if you look at some of the other industries that we're in, already what we're doing in virtual is digital by nature. And in the health part of our business, it started from a place of working from mobile. And so that's just an area we just continue to build upon. Tien-Tsin Huang - JPMorgan Chase & Co.: Great. That's helpful to hear. Thanks so much.

Your next question comes from the line of Tom McCrohan from Mizuho. Your line is open.

Hi. Just wanted to get a sense for how much of the top line growth going forward kind of will fall to adjusted operating income. So, you had really good conversion this year relative to last year, and I'm assuming the pricing renewal might have been part of play last year. So, what should we be modeling in terms of the conversion of your revenue growth to adjusted operating income on a pre-tax basis?

So, let me start from the top. You know that our long-term goals are to grow revenue 10% to 15%, excluding noise from fuel prices, and ANI EPS 15% to 20%. And as I said today, we have been meeting or exceeding those targets in the past several years, and this year is not going to be different either. So, this implies obviously that on the long-run, there should be and there has been margin expansion. But I would say two things. Number one is – and we respond to that question before. For next year, these two big portfolio conversions like Shell and Chevron will have a negative mix impact in operating margins, not in dollars. And the other thing is that we want to manage appropriately gross margin expansions. So, there will be years or quarters where margins will be better and others that will be worse from a percentage point of view. But it's all related to the growth of the company. And as Melissa said before, we feel very well positioned for the next couple of years with the organic growth that we have.

Okay, great. Thank you. And congrats again on Shell and Chevron. And apologies, if I missed it. Last question on the European kind of build-out, you were going through a series of conversions country-by-country. Can you give us an update on that?

Sure. So, you're talking specifically about our Fleet business. Just to kind of hit what Roberto said, we also – we have multiple products in Europe, which is part of our diversification play. And our corporate payments product has been growing, we said last quarter over 20% FX-adjusted. On the Fleet side of the business, we had looked at that business as being a high single-digit grower, it was our goal for that, and it hit that this last quarter as well, FX, fuel price adjusted, so like-for-like. And as we continue to build upon the business, we've done a number of different things over time, going from some of the replatforming work, but also around redesigning where salespeople are, what type of people sit externally and what type of people are co-located that create scale. And so, that business looks drastically different now than it did when we first acquired it several years ago. In terms of the technology, we've gone through a series of migrations. So, we have a number of countries that are working on our internal platform now, and we have some that we continue to use third-party platform which – largely some of the smaller regions. And so, we like where the business is, we like how it's performed, and it's really done what we thought it would.

Great. Thank you.

Presenters, you may continue.

I think that's all the time we have for today. So, thank you for hanging with us a little over – a little past the hour, and we'll look forward to updating you again next quarter.