Off-Balance Sheet Arrangements

6 Months Ended

Jun. 30, 2023


11.			Off-Balance Sheet Arrangements

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. Losses on factoring, which were $2.6 million and $4.5 million for the three and six months ended June 30, 2023 and immaterial for the same periods in 2022, are 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 June 30, 2023. The Company sold $142.9 million and $283.4 million of accounts receivable during the three and six months ended June 30, 2023, respectively, and sold $159.6 million and $304.6 million of accounts receivable during the three and six months ended June 30, 2022, respectively, under this arrangement.

The WEX Bank agreement extends through July 2023, after which the agreement can be renewed for successive one-year periods assuming WEX Bank provides advance written notice that is accepted by the purchaser. The Company sold $3.3 billion and $5.2 billion of trade accounts receivable during the three and six months ended June 30, 2023 and $1.6 billion and $2.4 billion during the three and six months ended June 30, 2022, respectively, under this arrangement.

Benefits Securitization

In April 2023, WEX Health, through a wholly-owned special purpose entity (“SPE”), entered into a receivable securitization facility with an unrelated financial institution. Under the facility, WEX Health sells eligible trade accounts receivables to the SPE, which is a bankruptcy-remote subsidiary. The receivables, once sold to the SPE, are no longer available to satisfy creditors of the Company or its subsidiaries in the event of bankruptcy.

In turn, the SPE sells undivided ownership interests in certain of these receivables to the financial institution in exchange for cash equal to the gross receivables transferred. The receivables sold are fully guaranteed by the SPE, which also pledges any unsold receivables as collateral for such obligation.

While WEX Health continues to service the receivables sold to the financial institution under the facility, WEX does not retain effective control of the transferred receivables, derecognizes the assets and accounts for these transfers as sales. The revolving limit of the facility is $35.0 million, with an initial term through April 2026, which can be extended for an additional period of up to three years. The SPE can voluntarily terminate the facility at any time, subject to 30 days’ notice. The SPE pays interest on the amount funded by the financial institution based on variable interest rates, which is reflected within operating interest on the condensed consolidated statements of operations.

The third-party financial institution has a first priority security interest in all assets of the SPE, and the SPE has not granted a security interest to any other parties. In addition, WEX Inc. has provided a performance guarantee to the third-party financial institution with respect to WEX Health’s obligations as originator and servicer under the facility.

The Company sold approximately $82.2 million of receivables under the securitization facility for the three and six months ended June 30, 2023.

Non-Bank Custodial HSA Cash Assets

As a non-bank custodian, we contract with depository partners to hold custodial cash assets on behalf of individual account holders. As of June 30, 2023 and December 31, 2022, we were custodian to approximately $3.8 billion and $3.45 billion in HSA cash assets, respectively. Of these custodial balances, $1.1 billion and $1.4 billion at June 30, 2023 and December 31, 2022, respectively, were deposited with or 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 balances of $2.8 billion and $2.1 billion in HSA assets as of June 30, 2023 and December 31, 2022, respectively, are deposited with and managed by WEX Bank and are 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.