UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 001-32426

   

WEX Inc.

(Exact name of registrant as specified in its charter)

Delaware			01-0526993
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1 Hancock St.,	Portland,	ME	04101
(Address of principal executive offices)			(Zip Code)

(207) 773–8171

(Registrant’s telephone number, including area code) 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	WEX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).    

☐ Yes  ☒  No

Number of shares of common stock outstanding as of July 28, 2021 was 44,797,826.

TABLE OF CONTENTS

FORWARD–LOOKING STATEMENTS		3
ACRONYMS AND ABBREVIATIONS		5
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6.	Exhibits	58
SIGNATURE

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Unless otherwise indicated or required by the context, the terms “we,” “us,” “our,” “WEX,” or the “Company,” in this

Quarterly Report on Form 10–Q mean WEX Inc. and all of its subsidiaries that are consolidated under Generally Accepted Accounting Principles in the United States.

FORWARD–LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for statements that are forward-looking and are not statements of historical facts. This Quarterly Report includes forward-looking statements including, but not limited to, statements about management’s plan and goals. Any statements in this Quarterly Report that are not statements of historical facts are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or performance to be materially different from future results or performance expressed or implied by these forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Quarterly Report and in oral statements made by our authorized officers:

•the extent to which the coronavirus (COVID-19) pandemic and measures taken in response thereto impact our business, results of operations and financial condition in excess of current expectations;

•the impact of fluctuations in fuel prices and the resulting impact on our revenues and net income;

•the effects of general economic conditions, including those caused by the effects of COVID-19, on employment, travel, and fueling patterns, as well as payment and transaction processing activity;

•any limitation, reduction, or elimination of interchange fees;

•our failure to comply with the applicable requirements of MasterCard or Visa’s contracts and rules;

•the Company’s ability to successfully obtain new customers and commercial agreements, maintain key commercial agreements, or maintain customer volumes under such commercial agreements;

•breaches of the Company’s technology systems or those of our third-party service providers and any resulting negative impact on our reputation, liabilities or relationships with customers or merchants;

•the effects of the Company’s business expansion and acquisition efforts;

•the Company’s failure to expand our technological capabilities and service offerings as rapidly as the Company’s competitors;

•the failure of corporate investments to result in anticipated strategic value;

•the regulation, supervision, and examination of our business or our entities by domestic and foreign governmental entities and authorities, as well as litigation and regulatory actions which may be initiated by such entities or authorities;

•the Company’s failure to comply with the Treasury Regulations applicable to non-bank custodians;

•potential adverse changes to business or employee relationships, including those resulting from the completion of an acquisition;

•competitive responses to any acquisitions;

•uncertainty of the expected financial performance of the combined operations following completion of an acquisition;

•the failure to complete or successfully integrate and realize anticipated benefits, synergies and cost savings from the Company’s acquisitions;

•the occurrence of any material adverse event to our primary HSA fund depository partner;

•unexpected costs, charges, or expenses resulting from an acquisition;

•the Company’s failure to successfully acquire, integrate, operate and expand commercial fuel card programs;

•the impact and size of credit losses and any fraudulent use of our payment cards or systems;

•the impact of changes to the Company’s credit standards;

•failure to successfully implement the Company’s information technology strategies and capabilities in connection with its technology outsourcing and insourcing arrangements and any resulting cost associated with that failure;

•the legal, regulatory, political, and economic effect of the United Kingdom’s departure from the European Union and the resulting trade agreement;

•the impact of foreign currency exchange rates on the Company’s operations, revenue and income;

•changes in interest rates;

•the impact of the future transition from LIBOR as a global benchmark to a replacement rate;

•the impact of the Amended and Restated Credit Agreement and the Convertible Notes on our operations;

•the impact of increased leverage on the Company’s operations, results or borrowing capacity generally, and as a result of acquisitions specifically;

•the impact of sales or dispositions of significant amounts of our outstanding common stock into the public market, or the perception that such sales or dispositions could occur;

•the possible dilution to our stockholders caused by the issuance of additional shares of common stock or equity-linked securities, whether as a result of the Convertible Notes or otherwise;

•the incurrence of impairment charges if our assessment of the fair value of certain reporting units changes;

•the uncertainties of litigation; as well as

•other risks and uncertainties identified in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 1, 2021.

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Our forward-looking statements and these factors do not reflect the potential future impact of any alliance, merger, acquisition, disposition or stock repurchases. The forward-looking statements speak only as of the date of the initial filing of this Quarterly Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

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ACRONYMS AND ABBREVIATIONS

The acronyms and abbreviations identified below are used in this Quarterly Report, including the condensed consolidated financial statements and the notes thereto. The following is provided to aid the reader and provide a reference point when reviewing this Quarterly Report.

2016 Credit Agreement	Credit agreement entered into on July 1, 2016, as amended from time to time, by and among the Company and certain of its subsidiaries, as borrowers, WEX Card Holding Australia Pty Ltd., as designated borrower, and Bank of America, N.A., as administrative agent on behalf of the lenders.
Adjusted net income or ANI	A non-GAAP measure that adjusts net income attributable to shareholders to exclude unrealized gains and losses on financial instruments, net foreign currency remeasurement gains and losses, change in fair value of contingent consideration, acquisition-related intangible amortization, other acquisition and divestiture related items, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, similar adjustments attributable to our non-controlling interests and certain tax related items.
Amended and Restated Credit Agreement	The 2016 Credit Agreement, as amended and restated on April 1, 2021.
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
ASU 2020-06	Accounting Standards Update 2020-06-Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
B2B	Business-to-business
benefitexpress	Benefit Express Services, LLC, a provider of highly configurable, cloud-based benefits administration technologies and services, and its indirect and direct parents, which were acquired as part of the benefitexpress Acquisition as defined in Note 4, Acquisitions to Item 1 - Financial Statements
CODM	Chief operating decision maker
Company	WEX Inc. and all entities included in the consolidated financial statements
Convertible Notes	Convertible senior unsecured notes due on July 15, 2027 in an aggregate principal amount of $310 million with a 6.5 percent interest rate, issued July 1, 2020
COVID-19 or (“coronavirus”)	An infectious disease caused by the SARS-CoV-2 virus. The World Health Organization declared the coronavirus outbreak a global pandemic on March 11, 2020
Discovery Benefits	Discovery Benefits, LLC, an employee benefits administrator that was acquired by the Company in March 2019 and was merged with and into WEX Health, Inc. effective March 31, 2021, with WEX Health being the sole surviving entity
DSUs	Deferred stock units
EBITDA	A non-GAAP measure that adjusts income before income taxes to exclude interest, depreciation and amortization
eNett	eNett International (Jersey) Limited
European Fleet business	WEX Fleet Europe (Go Fuel Card) and WEX Europe Services, collectively
European Securitization Subsidiary	Gorham Trade Finance B.V., a special purpose entity consolidated by the Company
FDIC	Federal Deposit Insurance Corporation
Federal Reserve Bank Discount Window	Monetary policy that allows WEX to borrow funds on a short-term basis to meet temporary shortages of liquidity caused by internal or external disruptions
GAAP	Generally Accepted Accounting Principles in the United States
HSA	Health Savings Accounts
Legal settlement	The settlement of legal proceedings and appeals related to the acquisition of eNett and Optal.
NAV	Net asset value
Net payment processing rate	The percentage of the dollar value of each payment processing transaction that the Company records as revenue from merchants less certain discounts given to customers and network fees
Notes	$400 million senior notes with a 4.75 percent fixed rate, issued on January 30, 2013, which were redeemed in full by the Company on March 15, 2021
NYSE	New York Stock Exchange
Optal	Optal Limited
Over-the-road	Typically, heavy trucks traveling long distances
Payment processing fuel spend	Total dollar value of the fuel purchased by fleets that have a payment processing relationship with the Company
Payment processing transactions	Total number of purchases made by fleets that have a payment processing relationship with the Company, where the Company maintains the receivable for the total purchase
Payment solutions purchase volume	Total dollar value of all WEX-issued transactions that use WEX corporate card products and virtual card products
Purchase volume	Total U.S. dollar value of all transactions in the Travel and Corporate Solutions and Health and Employee Benefit Solutions segments where interchange is earned by the Company
Redeemable non-controlling interest	The portion of the U.S. Health business’ net assets owned by a non-controlling interest subject to redemption rights held by the non-controlling interest
SaaS	Software-as-a-service

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SBI	SBI Investments, Inc., which is owned by State Bankshares, Inc, and is a minority interest holder in PO Holding, Inc., a subsidiary of WEX Inc. and the direct parent of WEX Health.
SEC	Securities and Exchange Commission
Segment adjusted operating income	A non-GAAP measure that adjusts operating income to exclude specified items that the Company’s management excludes in evaluating segment performance, including acquisition and divestiture related expenses and adjustments including the acquisition related intangible amortization, stock-based compensation, other costs, debt restructuring costs and unallocated corporate expenses.
Topic 606	Accounting Standards Codification Section 606, Revenue from Contracts with Customers
TSR	Total shareholder return
U.S. Health business	(i) from June 1, 2021, WEX Health, Inc. and benefitexpress, collectively, and (ii) prior to March 31, 2021, WEX Health, Inc. and Discovery Benefits, LLC., collectively
WEX	WEX Inc., unless otherwise indicated or required by the context
WEX Europe Services	A fleet business in Europe acquired by the Company from ExxonMobil
WEX Fleet Europe (Go Fuel Card)	A fleet business in Europe acquired from EG Group
WEX Health	WEX Health., Inc. the Company’s healthcare technology and administration solutions provider/business.
WEX Latin America	UNIK S.A., the Company’s Brazilian subsidiary, which is branded WEX Latin America. This subsidiary was sold on September 30, 2020.

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PART I

Item 1. Financial Statements.

WEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
Payment processing revenue	$	213,426	$	147,461	$	401,815	$	351,498
Account servicing revenue	132,997		109,479		251,620		223,319
Finance fee revenue	59,499		42,711		111,652		98,638
Other revenue	53,561		47,433		105,153		105,308
Total revenues	459,483		347,084		870,240		778,763
Cost of services
Processing costs	116,208		99,991		225,970		204,908
Service fees	13,759		9,700		24,905		23,454
Provision for credit losses	12,962		20,581		18,021		54,568
Operating interest	2,271		6,504		4,895		14,889
Depreciation and amortization	26,451		25,124		55,645		49,913
Total cost of services	171,651		161,900		329,436		347,732
General and administrative	79,543		62,265		165,974		124,301
Sales and marketing	85,605		54,744		163,952		123,526
Depreciation and amortization	40,406		39,393		78,059		79,593
Operating income	82,278		28,782		132,819		103,611
Financing interest expense	(32,473)		(28,832)		(65,757)		(60,863)
Change in fair value of contingent consideration	(47,700)		—		(47,700)		—
Net foreign currency gain (loss)	1,342		(2,462)		(1,413)		(31,189)
Net unrealized gain (loss) on financial instruments	6,013		(3,842)		13,046		(35,889)
Income (loss) before income taxes	9,460		(6,354)		30,995		(24,330)
Income tax benefit	(746)		(19,747)		(2,416)		(25,454)
Net income	10,206		13,393		33,411		1,124
Less: Net income from non-controlling interests	239		675		965		2,038
Net income (loss) attributable to WEX Inc.	9,967		12,718		32,446		(914)
Change in value of redeemable non-controlling interest	(43,823)		59,940		(68,867)		57,316
Net (loss) income attributable to shareholders	$	(33,856)	$	72,658	$	(36,421)	$	56,402
Net (loss) income attributable to shareholders per share:
Basic	$	(0.76)	$	1.67	$	(0.82)	$	1.30
Diluted	$	(0.76)	$	1.66	$	(0.82)	$	1.28
Weighted average common shares outstanding:
Basic	44,788		43,574		44,566		43,495
Diluted	44,788		43,779		44,566		43,896

See notes to the unaudited condensed consolidated financial statements.

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WEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	10,206	$	13,393	$	33,411	$	1,124
Foreign currency translation	(2,682)		23,344		(9,559)		(18,060)
Comprehensive income (loss)	7,524		36,737		23,852		(16,936)
Less: Comprehensive income attributable to non-controlling interests	239		896		647		1,790
Comprehensive income (loss) attributable to WEX Inc.	$	7,285	$	35,841	$	23,205	$	(18,726)

See notes to the unaudited condensed consolidated financial statements.

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WEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited) 

	June 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	425,322	$	852,033
Restricted cash	576,209		477,620
Accounts receivable (net of allowances of $57,771 in 2021 and $59,147 in 2020)	2,861,445		1,993,329
Securitized accounts receivable, restricted	132,549		93,236
Prepaid expenses and other current assets	98,397		86,629
Total current assets	4,093,922		3,502,847
Property, equipment and capitalized software (net of accumulated depreciation of $444,364 in 2021 and $402,406 in 2020)	180,049		188,340
Goodwill	2,925,583		2,688,138
Other intangible assets (net of accumulated amortization of $919,679 in 2021 and $835,163 in 2020)	1,738,570		1,552,012
Investment securities	36,931		37,273
Deferred income taxes, net	34,166		17,524
Other assets	218,389		197,227
Total assets	$	9,227,610	$	8,183,361
Liabilities and Stockholders’ Equity
Accounts payable	$	1,247,995	$	778,207
Accrued expenses	384,306		362,472
Restricted cash payable	574,934		477,620
Short-term deposits	1,109,222		911,395
Short-term debt, net	146,470		152,730
Other current liabilities	52,832		58,429
Total current liabilities	3,515,759		2,740,853
Long-term debt, net	2,867,270		2,874,113
Long-term deposits	401,440		148,591
Deferred income taxes, net	196,032		220,122
Other liabilities	264,250		164,546
Total liabilities	7,244,751		6,148,225
Commitments and contingencies (Note 15)
Redeemable non-controlling interest	187,937		117,219
Stockholders’ Equity
Common stock $0.01 par value; 175,000 shares authorized; 49,224 shares issued in 2021 and 48,616 in 2020; 44,796 shares outstanding in 2021 and 44,188 in 2020	491		485
Additional paid-in capital	808,701		872,711
Retained earnings	1,252,531		1,286,976
Accumulated other comprehensive loss	(94,459)		(82,935)
Treasury stock at cost; 4,428 shares in 2021 and 2020	(172,342)		(172,342)
Total WEX Inc. stockholders’ equity	1,794,922		1,904,895
Non-controlling interest	—		13,022
Total stockholders’ equity	1,794,922		1,917,917
Total liabilities and stockholders’ equity	$	9,227,610	$	8,183,361

See notes to the unaudited condensed consolidated financial statements.

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WEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Common Stock Issued			Additional Paid-in  Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Non-Controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2020	47,749	$	477	$	675,060	$	(115,449)	$	(172,342)	$	1,530,614	$	9,385	$	1,927,745
Stock issued	189	2		1,950		—		—		—		—		1,952
Share repurchases for tax withholdings	—	—		(8,817)		—		—		—		—		(8,817)
Stock-based compensation expense	—	—		12,533		—		—		—		—		12,533
Change in value of redeemable non-controlling interest	—	—		—		—		—		(2,624)		—		(2,624)
Foreign currency translation	—	—		—		(40,935)		—		—		(469)		(41,404)
Net income (loss)	—	—		—		—		—		(13,632)		1,221		(12,411)
Balance at March 31, 2020	47,938	$	479	$	680,726	$	(156,384)	$	(172,342)	$	1,514,358	$	10,137	$	1,876,974
Stock issued	5	—		184		—		—		—		—		184
Share repurchases for tax withholdings	—	—		(76)		—		—		—		—		(76)
Stock-based compensation expense	—	—		14,219		—		—		—		—		14,219
Change in value of redeemable non-controlling interest	—	—		—		—		—		59,940		—		59,940
Foreign currency translation	—	—		—		23,123		—		—		221		23,344
Net income	—	—		—		—		—		12,718		576		13,294
Balance at June 30, 2020	47,943	479		695,053		(133,261)		(172,342)		1,587,016		10,934		1,987,879
Balance at December 31, 2020	48,616	$	485	$	872,711	$	(82,935)	$	(172,342)	$	1,286,976	$	13,022	$	1,917,917
Cumulative effect adjustment1	—	—		(41,982)		—		—		1,976		—		(40,006)
Balance at January 1, 2021	48,616	485		830,729		(82,935)		(172,342)		1,288,952		13,022		1,877,911
Stock issued under share-based compensation plans	394	4		22,555		—		—		—		—		22,559
Share repurchases for tax withholdings	—	—		(21,062)		—		—		—		—		(21,062)
Stock-based compensation expense	—	—		17,886		—		—		—		—		17,886
Change in value of redeemable non-controlling interest	—	—		—		—		—		(25,044)		—		(25,044)
Foreign currency translation	—	—		—		(6,558)		—		—		(319)		(6,877)
Net income	—	—		—		—		—		22,479		374		22,853
Balance at March 31, 2021	49,010	$	489	$	850,108	$	(89,493)	$	(172,342)	$	1,286,387	$	13,077	$	1,888,226
Stock issued under share-based compensation plans	214	2		20,479		—		—		—		—		20,481
Share repurchases for tax withholdings	—	—		(884)		—		—		—		—		(884)
Stock-based compensation expense	—	—		20,629		—		—		—		—		20,629
Acquisition of non controlling interest	—	—		(81,631)		(2,284)		—		—		(13,077)		(96,992)
Change in value of redeemable non-controlling interest	—	—		—		—		—		(43,823)		—		(43,823)
Foreign currency translation	—	—		—		(2,682)		—		—		—		(2,682)
Net income	—	—		—		—		—		9,967		—		9,967
Balance at June 30, 2021	49,224	491		$	808,701	$	(94,459)	$	(172,342)	$	1,252,531	$	—	$	1,794,922

1 Reflects the impact of the Company’s modified retrospective adoption of ASU 2020-06 (See Note 2, Recent Accounting Pronouncements).

See notes to the unaudited condensed consolidated financial statements.

10

WEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net income	$	33,411	$	1,124
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Net unrealized (gain) loss	(10,578)		55,032
Change in fair value of contingent consideration	47,700		—
Stock-based compensation	38,515		26,752
Depreciation and amortization	133,704		129,506
Debt restructuring and debt issuance cost amortization	10,576		3,895
Deferred tax benefit	(15,778)		(31,712)
Provision for credit losses	18,021		54,568
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable and securitized accounts receivable	(925,792)		645,123
Prepaid expenses and other current and other long-term assets	14,158		2,914
Accounts payable	474,469		(115,031)
Accrued expenses and restricted cash payable	87,871		(48,315)
Income taxes	(13,050)		6,164
Other current and other long-term liabilities	(15,209)		(4,074)
Net cash (used for) provided by operating activities	(121,982)		725,946
Cash flows from investing activities
Purchases of property, equipment and capitalized software	(37,040)		(41,458)
Purchases of investment securities	(175)		(250)
Maturities of investment securities	81		99
Acquisitions, net of cash and restricted cash acquired	(558,273)		—
Net cash used for investing activities	(595,407)		(41,609)
Cash flows from financing activities
Repurchase of share-based awards to satisfy tax withholdings	(21,946)		(8,893)
Proceeds from stock option exercises	43,040		2,136
Net change in deposits	451,291		(34,675)
Net activity on other debt	(20,000)		(87,016)
Borrowings on revolving credit facility	719,800		300,000
Repayments on revolving credit facility	(454,800)		(300,000)
Borrowings on term loans	112,819		—
Repayments on term loans	(31,988)		(32,305)
Redemption of Notes	(400,000)		—
Debt issuance costs	(8,934)		(4,273)
Net change in securitized debt	9,497		(38,802)
Net cash provided by (used for) financing activities	398,779		(203,828)
Effect of exchange rates on cash, cash equivalents and restricted cash	(9,512)		(12,197)
Net change in cash, cash equivalents and restricted cash	(328,122)		468,312
Cash, cash equivalents and restricted cash, beginning of period(a)	1,329,653		981,381
Cash, cash equivalents and restricted cash, end of period(a)	$	1,001,531	$	1,449,693
Supplemental disclosure of non-cash investing and financing activities
Capital expenditures incurred but not paid	$	1,979	$	2,400
Non-cash contribution from non-controlling interest	12,457		—
Deferred cash consideration as part of asset acquisition	47,408		—
Contingent consideration as part of asset acquisition	27,200		—

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our condensed consolidated balance sheets to amounts within our condensed consolidated statements of cash flows.

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Table of Contents

	Six Months Ended June 30,
	2021		2020
Cash and cash equivalents at beginning of period	$	852,033	$	810,932
Restricted cash at beginning of period	477,620		170,449
Cash, cash equivalents and restricted cash at beginning of period	$	1,329,653	$	981,381
Cash and cash equivalents at end of period	$	425,322	$	1,271,523
Restricted cash at end of period	576,209		178,170
Cash, cash equivalents and restricted cash at end of period	$	1,001,531	$	1,449,693

See notes to the unaudited condensed consolidated financial statements.

12

WEX INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

Basis of Presentation

    The accompanying condensed consolidated financial statements 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 do not include all information and notes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statements that are included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2020, filed with the SEC on March 1, 2021. In the opinion of management, all adjustments considered necessary for a fair presentation, which are of a normal recurring nature, have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results for any future periods or the year ending December 31, 2021.

With the exception of the accounting policy over convertible debt, which was impacted by the early adoption of ASU 2020–06 effective January 1, 2021 (refer to Adoption of a New Accounting Standard later within this Note and Note 2, Recent Accounting Pronouncements), we have applied the same accounting policies in preparing these quarterly financial statements as we did in preparing our 2020 annual financial statements.

The Company rounds amounts in the condensed consolidated financial statements to thousands and calculates all per-share data from underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot or recalculate based on reported numbers due to rounding.

Adoption of a New Accounting Standard

The Company early adopted ASU 2020-06 on January 1, 2021, utilizing the modified-retrospective approach, recognizing the cumulative adjustment to retained earnings as of the effective date, without restatement of prior period amounts. ASU 2020-06 simplifies accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. This standard eliminates the bifurcation of the equity component associated with the cash conversion feature for convertible notes, which were previously recorded within equity. As a result of adoption, the Convertible Notes and its conversion feature are now accounted for as a single unit of account.

The following table illustrates the adoption impact of ASU 2020-06:

	January 1, 2021
(In thousands)	Prior to adoption		Impact of adoption		As reported
Long-term debt, net	$	2,874,113	$	52,115	$	2,926,228
Deferred income taxes, net (within total liabilities)	$	220,122	$	(12,109)	$	208,013
Additional paid-in capital	$	872,711	$	(41,982)	$	830,729
Retained earnings	$	1,286,976	$	1,976	$	1,288,952

The Company continues to apply the if-converted method to calculate the impact of the Convertible Notes on the diluted earnings per share as required by ASU 2020-06. See Note 6, Earnings per Share, for more information.

13

WEX INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2. Recent Accounting Pronouncements

The following table provides a brief description of accounting pronouncements adopted during the six months ended June 30, 2021 and recent accounting pronouncements not yet adopted that could have a material effect on our financial statements:

Standard	Description	Date/Method of Adoption	Effect on financial statements or other significant matters
Adopted During the Six Months Ended June 30, 2021
ASU 2020–06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –Contracts in Entity's Own Equity (Subtopic 815-40)	This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity. Among other changes, this standard removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible debt instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. The standard also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share.	The Company early adopted ASU 2020–06 effective January 1, 2021, using the modified-retrospective approach.	Refer to Note 1, Basis of Presentation, for a summary of the financial statement effects as a result of this ASU adoption. Additionally, interest expense related to the amortization of the debt discount on our Convertible Notes is expected to decline approximately $5.5 million during the year ending December 31, 2021 as a result of the adoption of this ASU.
Not Adopted as of June 30, 2021
ASU 2020–04, Reference Rate Reform and ASU 2021–01, Reference Rate Reform: Scope	These standards provide optional guidance for a limited period of time to ease the potential financial reporting burden in accounting for (or recognizing the effects of) the discontinuation of LIBOR resulting from reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts and other transactions impacted by reference rate reform. If certain criteria are met, an entity will not be required to remeasure or reassess contracts impacted by reference rate reform.	Election is available through December 31, 2022.	The Company is currently evaluating the implications of these amendments to its current efforts for reference rate reform implementation and any impact the adoption of these ASUs would have on its financial condition and results of operations.

3. Revenues

    In accordance with Topic 606, revenue is recognized when, or as, performance obligations are satisfied as defined by the terms of the applicable 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:

	Three Months Ended June 30, 2021
(In thousands)	Fleet Solutions		Travel and Corporate Solutions		Health and Employee Benefit Solutions		Total
Topic 606 revenues
Payment processing revenue	126,450		$	68,282	$	18,694	$	213,426
Account servicing revenue	4,336		11,222		79,482		95,040
Other revenue	22,422		1,656		5,109		29,187
Total Topic 606 revenues	$	153,208	$	81,160	$	103,285	$	337,653
Non-Topic 606 revenues	121,180		602		48