Steve Elder - SVP, IR Melissa Smith - President and CEO Roberto Simon - CFO.

Robert Napoli - William Blair Ashish Sabadra - Deutsche Bank Oscar Turner - SunTrust Ramsey El-Assal - Jefferies Thomas McCrohan - Mizuho Sanjay Sakhrani - KBW Glenn Greene - Oppenheimer Tien-Tsin Huang - JPMorgan.

Good morning, my name is Felicia and I'll be your conference operator today. At this time, I would like to welcome everyone to the WEX Inc. Fourth Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] At this time, I will turn the call over to Mr. Steve Elder, Senior Vice President of Investor Relations. Sir, the floor is yours..

Thank you, Felicia, and good morning, everyone. With me today is Melissa Smith, our President and CEO; and our CFO, Roberto Simon. The press release we issued early this morning and a slide deck to our prepared remarks have both has 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 an 8-K we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income during our call.

Adjusted net income for the fourth quarter excludes unrealized gains and losses on derivative instruments, net foreign currency remeasurement gains and losses, non-cash adjustments related to the tax receivable agreement, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, restructuring and other costs, impairment charges and asset write-off, again on the divestiture, debt restructuring and debt issuance cost amortization, ANI adjustments attributable to non-controlling interest and certain tax related items.

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.

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 6, 2017 and subsequent SEC filings.

While we may update forward-looking statements in the future, we disclaim any obligation 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..

Good morning, everyone, and thank you for joining us today. Before we jump in, we are using a new slide deck this quarter and I'd like to turn your attention to slide three. We are pleased to report a strong fourth quarter and close of the 2017 fiscal year, with top and bottom line results above the upper end of our guidance range.

We achieved revenue of over $331 million in the quarter, an increase of 14% year-over-year. Net income on a GAAP basis $1.85 per diluted share, and we generated adjusted net income of $1.49 per diluted share, up 15% from last year.

This was the sixth consecutive quarter of double-digit revenue growth, result of strong execution, spanning our strategic pillars. All three of our business segments experienced double-digit growth in revenue and purchase volume compared to last year; we are well positioned to carry this momentum into 2018.

For the full-year 2017, revenue increased 23% to $1.25 billion, GAAP net income increased151% to $3.72 per diluted share, while adjusted net income per diluted share increased 17% to $5.41 per diluted share.

2017 was a record year for WEX, highlighted by significant new wins in contract renewals as well as outstanding implementation of new technologies that will serve as the foundation for growth in years to come. Turning to slide four, over a year ago now, we introduced strategic pillars that would service the foundation of our company moving forward.

This includes building upon our best-in-class growth engine, leading through superior technology, driving scale through superior execution and leveraging our culture to attract and retain the best employees.

Executing against these pillars has allowed us to post an outstanding year by all accounts, underscored by record revenue in a ray of new products, achieving our full synergy target for EFS well ahead of schedule and being certified as a great place to work on our first mission.

The progress made in 2017 is a testament to our ability to gain market share by deepening existing relationships, building new partnerships and delivering high-quality service and innovative technologies to our expanding customer base. It also opened up future room to grow across corporate payments beyond our three core verticals.

Our track record is of competitive wins and partnership re-signings has been a defining part of 2017. Slide five highlights our success through the year, including a number of impressive wins and contract renewals.

In 2017 revenue generated from customer signed during the year was a record high, but still represented less than 10% of our total revenue, these long-term relationships service the base of recurring revenue to grow the company. In Fleet Solutions, we signed significant contracts with marquee names like Verizon and Chevron and AutoZone.

Our ability to sign Verizon, one of the largest private fleets in the country is a testament to the sophistication of our closed loop network and the trust that our customers have in our products.

We're also very happy to announce, we started on-boarding new Chevron customers on to our platform and we look forward to partnering with them for years to come. While the full conversion timeline is still fluid, we're excited to be adding such a significant partner to our portfolio.

We extended our relationship with the federal government under the GSA SmartPay 3 contract and negotiated contracts with Sunoco, Circle K, Speedway, ARI, Maverick and many more. We remain well positioned internationally to capture new business and foster organic growth.

Overall, our sales and marketing teams are performing at an extremely high level and we continue to capture additional market share which stands at less than 10% worldwide in the markets we serve.

In Travel and Corporate Solutions, we saw impressive growth in purchase volume this year, driven by continued strengthening and refining of our relationship with top tier online travel agencies such as Expedia and HotelTonight.

Despite the slower than normal revenue growth, we saw significant margin improvement in the segment with operating margins up 380 basis points year-over-year on an adjusted basis. Importantly, we continue to drive our growth outside of the U.S., highlighted by 50% purchase volume increase in Europe for the quarter.

Similarly we're accelerating growth in Asia as our products gain traction and grow rapidly in this emerging market. From a domestic perspective, we experienced continued strength in our corporate payments business.

We had a number of key wins in this segment 2017 that we believe will allow us to continue to drive volume growth, highlighted by Uvet, SG Fleet, Lotus Travel and Profit Travel. The travel and corporate payments market is vast even with more than $30 billion in WEX issued purchase volume last year, we still captured less than 2% of the target market.

Health and Employee Benefit Solutions had an outstanding year, driven by new partner signings, renewals and expansions with high quality partners like Bank of America, Conduent, Infinisource, Bravo Wellness and Trion MMA.

We also broaden our relationship with Benefit Focus, which is one of the industry's leading benefit administration software companies. Account growth was more than 20% for the year, reflecting these wins and the growing demand for the HSA accounts. Today we capture less than 9% of the U.S.

market for consumer directed healthcare payments, COBRA Administration and premium billing markets that we service. We believe we have the groundwork in place to capture additional growth moving forward.

We're extremely proud of our wins in 2017 and believe it reflects how our products and solutions resonate the marketplace, but also provide us solid foundation for continued momentum and long-term growth.

Turning to slide six, to echo what I said earlier in my remarks, our ability to consistently attract new business stems from our inherent ability to lead through superior technology, our second strategic pillar for 2017.

One of the many features that makes our business unique in the marketplace is the deep technical integration we have with our customers. WEX products are so much more than a single swipe of a card.

For example, in our travel business, the entire product is enabled through APIs, meaning there are no people involved in the transactions in making it highly scalable. In our OTR business customers are able to work in their own native systems to interact with our platform and create work stream.

For instance, when a new employee set up in our customer's native HR system, the new employee is automatically established in our system and a card is created and mailed. In these ways we become part of our customers' operations not just the payments. Within Fleet we continue to enhance and refine our offerings to better serve customers.

This year we further developed our ClearView analytics tool to drive solutions for customers by examining their data. We also added significant new features to our mobile Fleet Approximately, while improving the customer portal experience to fleet managers.

We also rolled out the new WEX Crossroads products, which is a one card close loop solution for both in-town and truck-stop fueling needs. The sophistication and successful implementation of this product is the primary reason that we won the Verizon business.

This is a great example of additional synergies from the EFS acquisition by combining the best pieces of functionality from both parts of the business into one product. In the Travel and Corporate Payment segment, we acquired certain assets of AOC Solutions, which has been a key technology provider for our virtual card product for many years.

Through this acquisition we gained access to new technologies, while making our virtual card offering more vertically integrated by owning interface [ph] with our travel customers. In addition the acquisition brings us supplier portal to our corporate payments product as we look to extend our capabilities. 2017 was a milestone year for our U.S.

Health business where we sit at the intersection of company benefit offerings, health insurance plans and financial service firms. We released new products which added 350 new features and functions to the platform.

Our focus on big data and business intelligence, customer personalization technology tools, HSA advance and post deductible FSA plan drive these innovative features. The cutting edge mobile technology that is integrated into the platform led to an increase of more than 100% in mobile app usage during the year.

Turning to slide seven, while we're consistently making our business more efficient and more synergistic, our most notable example has been the acquisition of VFS, which has had and will continue to have a positive impact on our business.

We're proud to say that we achieved our $25 million run rate target in synergies in 2017 well ahead of our original schedule. We completed nearly all of the integration activities except for the consolidation of the platforms, which is well underway. Our final strategic pillar is around our people and culture.

We believe that the outstanding people working at WEX make a positive difference in our ability to win new business and retain our existing customers. Last year we embarked on the plan to become certified as a great place to work.

Based on the results of our first submission, which included great atmosphere and great project scores above 90%, we became certified. We're proud of this accomplishment and the people of WEX. I believe our culture is a differentiator both in attracting and developing talent as well as in winning and retaining business.

In summary, I'm very pleased by our performance in 2017, highlighted by strong profitable growth and underpinned by solid execution against our strategic objectives. We're encouraged by the contributions of all three of our business segments to our growth engine this year.

Our company is more diverse than ever before with a growing base of long-term customers that provide a strong foundation of re-occurring revenue. Adding impressive wins and expanded partnerships in 2017 on top of this re-occurring revenue bases provides the foundation for sustained growth over the long-term.

We're excited with how we're positioned in 2018 and I look forward to another strong year for WEX. I'd now like to turn the call over to our CFO, Roberto Simon.

Roberto?.

Thank you, Melissa, good morning, everyone. I will begin with quarterly results on slide number nine. For the first quarter of 2017 our total revenue was $331.3 million, a 14% increase over the prior year period. Non-GAAP adjusted net income was $64.5 million or $1.49 per diluted share, up 16% from $1.28 for the same period last year.

I'm pleased to report that both of these numbers are over the high end of our guidance range. This represents another quarter of a strong organic revenue and adjusted net income growth across all our businesses. In addition, we experienced tailwinds in FX rates from fuel prices, which also contributed to the solid performance.

Before we get into the segment level details, I want to pause for a moment on slide 10 to discuss our top-line results for the full year.

We are excited with our 2017 performance, and would like to note that revenue growth was 23% compare to 2016, with about 13% of that coming from the benefits of higher fuel prices, positive FX rates and acquisitions.

All our core businesses contributed to these robust results, including our Fleet segment, Health and Employee Benefit segment and our International Travel business. This is a result of the strong execution, which I have been highlighting throughout the year. Now, on to the segment results, beginning with the slide 11.

The Fleet Solutions segment achieved $219.8 million in revenues, an increase of 14% compared to prior year. Both payment processing revenue and late fee revenue increase 17% versus last year. Payment processing transactions increased 9% when compared to Q4, last year. Finally, our average domestic fuel price in Q4 was $2.68 versus $2.30.

We see a number of positive trends across the fleet segment. First, we saw solid organic transaction growth. Second, same-store sales were positive at 1.6%. And third, we continue to maintain low attrition rates. EFS posted a very solid quarter again, with fleet revenue up 11% over last year.

We saw solid growth in both volumes and transactions year-over-year. Integration and platform consolidation continue to run smoothly, and we have achieved our targeted run rate synergies of $25 million much earlier than we originally planned.

Finally, in the Fleet segment we had $11.6 million in additional revenue over last year and approximately $3 million when compared to our guidance due to higher fuel prices. Both numbers are net of the spread impact in Europe.

In Travel and Corporate Solutions, on slide number 12, revenue for the fourth quarter increased 13% due to volume growth, higher international settlement fees and the acquisition of AOC. Total purchase volume, which excludes acquisitions reached $7.4 billion. This equates to 17% organic growth, which is coming from all geographies.

AOC revenue for the quarter was $6.7 million, which was in line with our expectations we gave at the beginning of the year. We have very positive trends in revenue diversification with close to 30% growth outside of the U.S. Travel business led by Europe and Brazil.

The net interchange rate in the fourth quarter was 53 basis points, which was up 2 basis points compared to Q3 due to the seasonal decline in Travel volumes at the end of the year. This was in line with expectations we gave at the beginning of the year.

Moving on to slide 13, for Health and Employee Benefit Solutions segment, revenue for the fourth quarter increased 14%. The U.S. Healthcare business again grew more than 20% for the ninth consecutive quarter. This is our long-term growth expectations for the business, impart due to the fast on-boarding of Bank of America.

New business added during the most recent opened enrollment period is solid and the pipeline remains strong. We continue to believe that the fundamentals are in place for a high-teens growth trajectory in the long-term. As expected, we did see a slowdown in our Brazilian Benefits business after a remarkable growth over the last two year.

For the quarter, revenue was down 8%. Even with the result in the quarter, revenue growth for the full year was 51%. Moving down to income statements on a slide number 14, for the fourth quarter total company operating expenses on a GAAP basis were $264.1 million. Salary expense for the company was a $101.7 million, up from $79.5 million.

There is a number of items driving this increase. First, the acquisition of AOC added more than 150 people. Second, we continue to invest in high growth areas. Third, we brought certain technology functions back in-house, which are offset in service fees.

And finally, based on our strong results we are increasing our variable compensation for the full year. I am pleased to report that during the fourth quarter credit loss on a consolidated basis total $13.2 million, which is in line with the prior year.

In the Fleet segment, credit loss was 10.8 basis points of the spend volume, which is significantly lower than last year and much better than our guidance for the quarter. The actions we have taken over the past few quarters have dramatically reduced our fraud related losses.

For the quarter, fraud represented 3.3 basis points down from the pick of nearly 13 basis points in Q2. On top of the investments we have made in peopled and improved processes, our new real-time software is fully operational.

Although we had a onetime operational write-off this quarter in our factoring business, our Fleet portfolio remains in very good shape. Excluding fraud Fleet credit losses declined to 7.5 basis points, which is the lowest Q4 since we became a public company.

Now on to slide 15 to discuss tax, due to the Tax Reform Act in December our GAAP tax rate this quarter ended up negative 44%. It goes without saying this tax is now representative of our ongoing operations.

The change in the rate was driven by our long time tax benefit of more than $50 million as a result of the re-measurement of our deferred tax liabilities and the transition tax on certain and repatriated earnings of foreign subsidiaries.

Our non-GAAP adjusted net income tax rates, which excludes these items and other ANI adjustments was 36% compared to 37% a year ago. I will now be discussing our balance sheet on a slide 16. We ended the quarter with $500 million in cash, up from $191 million at the end of last year. The majority of the increase is timing related at our bank.

At year end we had a total balance of $2.1 billion on the revolving line of credit, term loans and notes. Our leverage ratio, as defined in our credit agreement it stands at approximately 3.7 times, down from 4.5 times at the end of last year, this is better than we anticipated. We have been very active around our debt over the past several quarters.

We completed the pricing of both our Term A and Term B loans back in July, which reduced our spreads by 50 and 75 basis points respectively. This led to the reduction in overall financing interest costs in Q4 compare to last year. In January 2018, we completed another re-pricing of our Term B loan reducing the spread another 50 basis points.

Based on the yearend levels, this will save the company approximately $6 million in 2018. Finally, during the quarter, we enter into new interest rate swaps covering $500 million of finance in debt, which is intended to fix the interest rate for the next five years at a weighted average of 221 basis points.

With these swaps in place, we now have only $400 million of financing debt at floating rates. Before we move to our guidance, I would like to spend a minute addressing two additional topics. The revenue recognition is standards, and a change to our reporting that we are planning to make in Q1.

Moving to slide 17, I would like to discuss the new standards for reporting revenue that take effect beginning in 2018. The impact to it are not material. We have two areas, where we will have to reclassify revenues and expenses.

First, rebates paid to certain partners which historically have been netted in revenue will be shown as an expense going forward. Second, network fees we pay to Master Card and Visa, which historically have been shown as an expanse will be reclassified to contra revenue.

The net impact of these changes is expected to be an increase to revenue of about $20 million in 2018, although they vary by segments. Most of these changes will impact the net interchange rates that we report each quarter. There is no impact to earnings.

We are also planning changes to the presentation of our income statement beginning with the first quarter earnings release in 2018. We will be moving to a more traditional income statement view similar to how our peers quarterly report, including cost of sales and SG&A expenses.

We are not making any changes to the way our revenues presented, but we will be making changes to some cost allocations within our current segments. Now, let's look at our guidance on slide 18. Note, that these expectations reflect our views as of today and are made on a non-GAAP basis with respect to adjusted net income.

Before we get into the numbers, I want to give you some puts and takes that should be considered when modeling 2018. First and most important, the guidance is within the long-term target of 10% to 15% growth in revenue and 15% to 20% growth in earnings, even when you exclude the benefits of fuel prices and lower taxes.

In the Fleet segment, we expect to maintain the strong transaction growth rates we have seen recently and expect Chevron portfolio to come to our platform during the second half of the year. We also look forward to continue making progress in our international fleet businesses, including Europe and Asia.

We will continue to benefit from higher fuel prices. In the Travel and Corporate Payment segment, revenues expected to return to historical rates growth, fueled by strong volume growth from our travel, corporate payments and the AOC acquisition.

The net interchange rate will come down marginally, compared to this year mainly due to volume growth and mix. Regarding the Health and Employee Benefit segment, over the long-term we expect our U.S. Healthcare business to grow revenue in the high-teens.

We had a very rapid conversion of the Bank of America portfolio, which pull forward some revenue into 2017 that we expected in 2018 and we have one customer bringing some back office services in-house. So for this year we expect revenue growth in the low to mid double-digits.

In the Brazil Benefits business we have seen two years of outsize revenue performance, with 100% revenue growth in 2016 and over 50% revenue growth in 2017. Looking forward, we are expecting growth to normalize and we anticipate capitalizing on the investments we have made over the past two years.

On the financing side, interest rates continued to rise and we are anticipating LIBOR to increase approximately 75 basis points on average for the year. As I mentioned before, this increase will only impact our $400 million in floating rate financing debt.

In addition, we have approximately $1.3 billion in the deposits with different maturity dates, which will delay the impact of the higher rates. Finally, the tax act is highly complex and we continue to assess the impact of the various changes to our business.

The company expects its 2018 adjusted net income tax rate for the full year to be between 25% and 27%. The assumed reduction in the tax rate is adding $0.90 to $1.10 per share to our EPS guidance.

For the full year, we expect revenue to be in the range of $1.40 billion to $1.44 billion and adjusted net income in the range of $315 million to $332 million. On an EPS basis, we expect adjusted net income to be $7.30 to $7.70 per diluted share.

For the first quarter we expect revenue to be in the range of $333 million to $343 million and adjusted net income to be in the range of $72 million to $75 million or $1.66 to $1.74 per diluted share. We assume that domestic fuel prices will average $2.70 in the first quarter and $2.65 per gallon for the full year. These assumptions for the U.S.

is based on the applicable NYMEX future price from this week. This guidance is based on exchange rates at the end of January. We assume that our fleet credit loss will be between 12 and 17 basis points for the first quarter and between 11 and 16 basis points for the full year. This includes 2 to 4 basis points related to fraud.

Finally we're assuming that there will be approximately 43 million shares outstanding. And now, we are opening the line for questions..

[Operator Instructions] And your first question comes from the line of Bob Napoli of William Blair..

Thank you and good morning. Nice job on the quarter and the outlook, appreciate the presentation.

The outperformance one of the areas of outperformance this quarter was on the fuel card business, the payment processing transaction growth look like organically accelerated, what is driving that are you expecting high single-digit payment processing transaction growth in 2018?.

Well good morning. I'll start here, its Melissa..

Thanks, Melissa..

So the outperformance in growth, we talked about this year, meaning 2017 the sales and marketing teams have really outperformed and it's been consistent and as we make our way through the year we're starting to see some of those portfolios may go through and actually get implemented.

And so seeing the momentum of new customer wins come through we had a little bit of benefit in same-store sales, but it was pretty comparable to Q3, was up 1.6%.

So overall we think it has more to do with just sales engines and we're bringing on new business, we still continue to feel good about the pipelines that we have out there we are continuing to deliver in a pretty systematic way. And we still have to go through the implementation of Chevron.

So if you look at the year and what we have ahead of us we feel good about the overall growth rate of that part of the business..

Thank you..

Yes, this is Roberto. The only thing I will add as I said on the call is that we're expecting the growth to be next year in the same - in the safety performance we have seen in 2017 just to emphasis that to..

Thank you. And just one follow-up question if I could, page five of your presentation where you show your market shares by segment the Travel and Corporate segment stands out a bit as far as how low the market share is today suggesting the opportunity.

Is that - are you making incremental invest - what are you expecting out of that segment and which of these segments do you expect to have the most opportunity to gain share?.

Yes, we looked at all of our market share data recently we did that because we realized we've gone through a whole series of acquisitions and we've entered new markets and we hadn't really updated the data to reflect that.

So with travel and corporate payments specifically, what we did with the acquisition of EFS that put us into a product with integrated payables in a way that we really hadn't been in before. And we've got a relatively small business now, but it's growing rapidly.

And so when we step back and look to the market, we look at travel data globally in the markets that we're in, as well as corporate payment information where we're looking at mid-tier companies, and we aggregated those two things together. And that's where you get 2% market share.

So as we do believe that we have an opportunity to grow in travel, but beyond travel and corporate payments. And we're seeing some of those wins through - coming through the business now..

You're not losing any share in travel.

One of your competitors reported yesterday that they were adding a lot of share with the largest online travel companies?.

We continue to see really significant growth across the travel sites doing well, it's actually no, it's not a statement that we're declining in travel. It's more that we've opened up more market opportunity for us. And so when I look across to each of the parts of business and part of what gets me excited is we have a lot of room to grow.

And we feel like we're just getting started in any part of the business. And as we continue to add onto the business and rollout new products we keep incrementally adding new spaces that we can plan, and we're finding successes as we enter these new spaces.

And a lot of them at this point are relatively small in size, but they're starting to see really significant growth rates..

And sorry, just real quickly the interchange rate in travel for 2018 you're expecting?.

So Bob, this is Roberto as I said on the call, we are not expecting any major change. I mean, obviously as you keep growing the business and you keep diversifying, your mix is going to be changing between U.S. and international. And therefore there will be a small compression, but we do not expect any material change..

Thank you..

Your next question comes from the line of Jim Schneider of Goldman Sachs..

Hello..

And your line is open. Please go ahead with your question. Okay, and your next question comes from the line of Ashish Sabadra of Deutsche Bank..

Congrats on the solid results. My question was about the health segment, the SaaS account average, SaaS account grew 29% in the quarter. I understand there is Bank of America win there.

But as we think about the SaaS accounts growth going forward, can you help us understand what are the drivers for the growth going forward?.

Sure and I'll start and sure Roberto will add on here, it's Melissa. So on the Health business, we added an extra indicator, we did that so you can see what's happening in terms of spend volume growth, but also SaaS volume growth which are two of the big drivers in terms of revenue for that part of our business.

Roberto talked about the fact that he gave you some indicator what growth would look like overall for health this year. And it kind of step back we bought the business in 2014, by the end of 2018 we think we'll have doubled that. And so that seems really significant growth with nine quarters of over 20% growth.

We indicated when we bought that it would be a high-teens grower. And so that you see some lumpiness in that like we do with other parts of the business as you add in big portfolios, which really did this last couple of the years. So in 2018 overall, he said we are expected to be in the low double-digits to mid-double digits growth rate.

And that's overall so it's a blend of what we're expecting to see both in terms of payment processing revenue, but also SaaS revenue. And the difference between the two is customers that are more FI so more a Financial Institutions, the revenue is coming more from the SaaS base.

If there are customers that are in some other parts of the business like with our Healthcare business as an example within insurance companies then you get a more of a blended mix. And so you could depending on what customers are getting on-boarded during the course of the year, you could a skewing from one to the other.

But overall we've got an indicator what we expect it to grow this next year. And again it will hit our long-term growth objectives we are over that so far. So we're really happy about the performance of that and the diversification it's given our business..

That's helpful. Thanks, Melissa.

And then quickly on the Fleet side, can you talk about the prospect pipeline there, I believe USPS is an opportunity, can you just talk about how that opportunity is shaping up? And anything on the international forefront particularly on the Asia Pacific side where you've had a number of new wins, anything going on there?.

Yes, on the U.S postal service, so with the GSA SmartPay contract that we announced what that allows us to do is essentially bid on government business. And there is a limited number people that can bid is those that sit under that umbrella of being contracted by the SmartPay contract.

And so we are in active bidding process now with public and we expect to get response back sometime in the next couple of quarters. So excited about the potential opportunity for us that would be if it came to us it would be a win.

And then beyond that internationally I'd say we continue to have pipelines that we are working through processing deals on a global basis and we talked about a number of them last year.

And I would still say the Asian marketplace has been a place that we have seen move faster, where we have been able to add incremental business and we went through a lot of the implantation process for a number of those in 2017.

So we continue to see prospects and then as probably we said this forever, but I think of that market particularly in Europe is just being slower in moving and - but still active..

Thanks, Melissa..

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

Hey, good morning..

Good morning..

So, my first question just on margin, we are trying to get a better idea of puts and takes there. So you got several margin tailwinds it seems this year from lower credit losses, fuel prices and the pricing tailwinds.

And we're just wondering if there is any call outs from areas you expect to see incremental investment spend this year? And then is the $100 million or around $100 million in 4Q 2017 salaries expense indicative of your expected 2018 quarterly run rate?.

Hi, good morning. This is Roberto. Let me give you some color on the operating margins, because on an adjusted basis we are actually pretty flat in the last four quarters of 2017 between 37%, 37.5% and we feel pretty good about that.

Compared to last year our operating margins are about 1.5% better, even though we have been observing round $20 million on the fraud losses. So obviously as we moving to next year we are seeing or we are expecting margin increases for 2018. And let me give you some color on that, our midpoint net revenue growth for 2018 is around 12%.

On the other side our ANI growth excluding the impact of the tax reform is around 121%. So there is almost 9 points difference between revenue and ANI. So, obviously as we look into next year we expect also margin expansion..

Okay, thanks for that color, it's very helpful. And then second question just on the Chevron migration I realize the timing there is still fluid.

But we are just wondering what kind of revenue contribution you are assuming in this year's guide? And is there any step up in costs associated with bringing that portfolio on board?.

So, we started doing the on board of new customers. So we did ramp up some costs at the end of 2017 probably midyear actually related to that, which were already included in our run rate.

And on a go forward basis we are still working through the process of going through the portfolio conversion it is a complicated process because you have multiple parties involved. What we presumed in our guidance is that that conversion would happen in the second half of the year. I don't know if you want to add anything Roberto..

No, the only thing I will add is that we expect not be a significant number based on our guidance at the midpoint, that's the only thing I would say..

Okay, thanks a lot. It's very helpful..

Your next question comes from the line of Ramsey El-Assal of Jefferies..

Hi guys, thanks for taking my question. I wanted to ask about the credit and fraud loss guidance, it looks like in Q4 the result is a bit below your Q1 range and it's very low end of your full year range.

I'm just trying to understand that this is kind of just reflects healthy caution or do you have any kind of visibility to a cadence there or an uptick or just any comments you could make about your kind of 2018 expectations around fraud and the cadence would be appreciated..

Absolutely, good morning, this is Roberto. So let me give you a bit of a color on the - on how we get on the - for the guidance. So the full year 2017 we ended at 1 [ph] basis point on the fraud losses and our guidance for the full year 2018 as I said is between 2 and 4 basis points.

Q1 last year was around 4 basis points and again for Q1 we're guiding also 2 to 4 basis points. So overall we feel very comfortable on the ranges that we have provided for the full year. And we expect our credit loss on fraud to go down between 50% and 75% versus the full year 2017..

Okay.

As a follow-up to that question, now that you've rolled in a lot of incremental technology and put a lot of effort in investment into controlling fraud, could we expect that historical for specific fraud obviously not credit, the fraud loss level to decline overtime or is there just an elevated level of interest in the fraudsters in WEX that would might prevent that?.

So what I would say obviously and we said that during all 2017, the numbers that historically had around 1 basis points 1.5 basis points are not going to be in the next couple of years. But obviously to be in the range of 2 to 4 basis points is clearly on the direction of reducing fraud..

And until we get to the point where there actually is tipped options, I think that what you're going to see is increased interest in this particular area.

So there is now at the same time our detection gets better and better and the more time that we spend these tools because they're essentially learning from the behavior patterns get improved with more information that we have.

So we do feel really good about the difference that we have in place that we do also think that because this is the part of the market that's lagging in terms of chip and pin adoption that we're going to see more interest in the space for a couple of more years..

Okay, great. That's helpful, thanks so much..

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

Hi, everyone.

Melissa you've mentioned that revenue from newly signed customers was at an all-time high just wanted to drill down a little bit on that is that revenue that's currently recognized or is that a revenue that's signed but yet to convert can you just give us a little more color on that?.

It's actually if we look at what was brought in for new business. So if you look at the customers that were signed, that was made its way through the pipeline through last year 2017 in aggregate that that's what I'm referring to.

Some of it has been implemented, some of it's in the process of being implemented, but all of it was included in our guidance..

And was that kind of across all the segments kind of that characteristic or was that more kind of a fleet statement?.

It is across the business true, if you aggregate everything it would be true, I'd say there were a couple of callouts in terms of new signings in the Fleet business in particular, new signings were really quite impressive in terms of what we had coming through the pipelines in aggregate.

But I wouldn't characterize it just a fleet I just think that if you kind of compare year-on-year where you saw that the biggest ramp that was in that part of the business..

Okay, great. And just one last question just on the tax rate and that was complex, and fluid and lot of moving parts to the extent that there are some adjustments and tweaks.

Going forward I would assume if anything the guidance of mid-20s could go lower there's probably less possibility that after the tweaks it goes higher right just want to confirm that..

So, hi this is Roberto. Obviously you know we have provided the guidance of 25% to 27%. You know that the new tax reform is very complex as I have said, but we feel very comfortable with the guidance that we have provided..

Okay, thank you..

Your next question comes from the line of Sanjay Sakhrani of KBW..

Thank you. I like the new presentation of the quarter, also congratulations on the fraud cost decline. Maybe just starting with Chevron, I know you guys talked about it coming on the second half at it not being a material number at the midpoint of your guidance.

But maybe when does this full run rate of Chevron affect the numbers over the next couple of years, I guess? And maybe you could talk about the upside from that?.

Yes, we were talking last night actually about, we started to get really excited about 2019, not to get ahead of ourselves, but with Chevron coming in, as we said we're presuming that the conversion is in the second half of the year now. We would exit the year with a run rate that's impactful into 2019.

And so it's something that is exciting for us because just the share sizes of that part of the business in that particular win..

So do you think it would be at the full run rate at the beginning of 2019 spend?.

You are talking which seems like forever out in terms of timing right now. But yes, I mean, as we go through the path, we still have to go through the final pieces of the portfolio purchase and then the technical conversion and migration of customers.

So we still have some work to do ahead of us until you get to the point where you see a full run rate..

Okay. And when we think about the pipeline of partnerships and possible M&A, where do you think we see the most likely material addition understanding you are working through Chevron this year and early next..

Where do we see the most likely, can you say that again?.

Like material addition, so would it be a large partnership or M&A transaction next after Chevron?.

I think, we have been long interested in both, frankly as we look at our business, we are not the company that feels like we have to own everything.

And so we've grown significantly through partner channels, we do that within WEX Health, we did that in the Fleet business, we are doing it increasingly too in the corporate payments, and Travel business. And so we see that as an avenue of organic growth and we'll continue to add to that.

And then on the M&A front as we have delevered it makes us more interested in what's in the marketplace. Although we've been active all along in the places that we're particularly interested in our consolidation plays, we're just sitting in geographic expansions and then new product additions that we can add into the portfolio.

So I wouldn't narrow to ones but I would say that we have different parts of the company that are highly focused on both of those things the lines of the business are really very focused on partner channel expansion.

And then in the corporate functions we're highly focused on making sure that we're looking at M&A very thoughtfully and strategically and making sure that fit what we want to be as we go through the next several years..

Okay. Final question, I know you guys talked a little bit about Europe and Asia, and I heard Roberto say you're expecting more progress there.

I assume that means doing more with what you have and I guess how does Chevron Asia play into that?.

So Chevron Asia has been a great customer signing and they've been a really good partner to work with both in the U.S. and in Asia. And then I talked about the Asian marketplace is being quicker to move they typically don't have huge portfolios that they are converting. And so there isn't the same level complexity in that marketplace.

And the interesting thing about us getting involved in that part of the business is a lot of the old companies see a significant amount of growth in the future. And it's a way that we can enter into markets through our technology, that doesn't will require the compliance of us being [indiscernible].

And so it's an interactive model for us as we expand into certain geographies.

And then within European market, because they are massive portfolios and typically setting on some pretty older technology it's a longer process that they go through and they are making their decision it's much more complex in terms of the - at the end of the day the level of technical integration has to occur and so it's more costly.

And so I think that's impart why we are saying different behaviors in the different markets. And then we think that the business that we have in Europe, we've continued to enhance we've seen significant scale in the period of time that we've taken that over. And we'll continue to grow that business organically.

And so we feel good about the growth opportunities even with the base that we have that will continue to add on that overtime..

Thank you..

Your next question comes from the line of Glenn Greene of Oppenheimer..

Thank you. Good morning and congratulations on the year. The first question, I just wanted to talk a little bit more about the Healthcare business, and maybe just get an update on enrollment season. It sounded like you suggest that it was okay not great. And then I also wanted - or maybe that's wrong.

And then I just want to get better expectation for how you're thinking about the volume based growth versus the SaaS based growth not only in 2018 but over the intermediate term?.

So let me show you - I'll clarify with the Healthcare business. When they're signing a partner they go through conversion process typically. And so you see a spike in account growth, which is beyond what you would see in just a normal enrollment process.

So I separate those two things as they're adding new partners that's where you see oversized growth particularly if there are larger partners like what we saw with Bank of America. We feel really good about the pipeline that we have, the prospects we have for adding new partners into the mix.

The enrollment season so far has been good; there is no concern over the enrollment season. But it's early in the process still; we have another couple of months before you really see the full scope of that as you go through the April period of time. So we feel good about enrollment, and we think it's very solid.

And when we talked about the guidance for 2018 specifically, we're trying to give a little bit more color of what we expect to have in each part of the business. With the Healthcare business we said there is two things that we think that are going to factor into this.

We just went through this really kind of oversized spike with the implementation of Bank of America, which Roberto said we got a little bit of extra revenue in 2017 as a result of that. So that's having a little bit of a negative effect into 2018, so it's the first thing. So it's just a comparability issue.

And then the second one is we have the customers bringing some back office functions in-house. So none of those things have anything to do with how we feel about new business coming in, the existing growth of the customers that we have as they go through the enrollment season. And we still expect it to have double-digit growth.

And so we feel good about the business. And over the period of time that we've been in this, we've seen nine quarters over 20% growth. And so it's been phenomenal. So it's not - don't think in any way that we are indicating anything negative, because we're not..

Okay, great. Thanks for the clarification. And then on the Travel business, you're obviously getting - or at least in 2017 you had some outsized growth in international relative to domestic.

Could you just comment on what your expectations are relatively domestic international in 2018 and what the key drivers are?.

So on the business, Roberto gave a little bit of color around also the Travel business. I would say, overall we've seen oversized growth outside the United States. And we've seen really good growth in United States, and we're highlighting the fact that we've seen higher growth outside the U.S.

just more around the diversification as the business continues to evolve. That we added a few years ago we made an investment and added more sales people into other markets, and we continue to see benefit of making that choice. Spend volume growth in United States is continue to be strong, and we're projecting that to be true through 2018..

And just real quick, it sounds like there is no incremental investment tied to tax reform you are basically just letting it flow to the bottom line, is that the correct assumption?.

We've been talking about that - we make incremental investments every year.

I don't tie it to that I guess at - as they're tied into the tax reform, but the concept of making incremental investments, we still have a number of things we're doing in CapEx and we'll have somewhere in the order of $100 million in CapEx that we'll spend in 2018, which relate to the work that we're doing on developing new products, some of the innovation work we're doing in data analytics.

And really across the portfolio on the technical side it's a pretty big investment for us. And at the same time if you look at what we're doing within the business from an employee standpoint, we focus heavily on make sure that we're investing in the culture of the company and having benefits that are market leading.

And so we don't feel the need to do anything specific because of the tax reform, but if you look underlying the base we are making a number of incremental investments in the business that's included in our guidance..

Understood, thanks..

Yes, the only think I will add, I mean, just to reaffirm what Melissa said, on the near-term, I mean, we feel very good about what we have been doing and the tax reform didn't prevent us from doing that.

Obviously as we look on the long-term the tax reduction we allow us to compete more effectively across the globe and the free cash flow generation will allow us to have more open options on what do we want to do with our capital allocation..

Sure, understood. Thank you..

And your final question comes from the line of Tien-Tsin Huang of JPMorgan.

Thank you, thanks for the presentation as well.

Just on the Healthcare, so just a follow to couple of questions that were already asked, just around the healthcare side, has the appetite for outsourcing changed at all I heard the comment around taking some pieces of analysis, it sounds like it's mostly back office, but I am curious going forward just the outsourcing demand relative to what you see in the past.

And also from a new win perspective is it going to be more larger deals or should we look for more mid-market type wins going forward?.

From an appetite to outsource, I think that there is anything the appetite is growing, the level of complexity it is growing in the healthcare market and the idea that someone can go to one provider that can provide multiple account types continues to resonate the marketplace. And so, I think that's continues to be true in that business.

The parts that fluctuate in our part of the business is there is a little bit we do that's more BPO-ish in the business and so there is a piece of the technology play and there is piece that's more of a service play. And there tend to be more volatility in the service side of that and that's probably what we're indicating here.

But in terms of level of interest there continues to be that in the pipelines, in the pipelines there are both midsize partners in the pipeline as well as large ones which is normal.

So I would characterize what we have going through the pipeline process is consistent of what we've seen over the last couple of years in terms of new customer prospects..

Got it, okay, understood.

And then on the credit loss side, good progress I know, you mentioned I think an operational write-down, I'm curious if that did you disclose the size of that?.

Yes, hi, this is Roberto. So what I said is in the past two years on the factoring business, which is one of our line of businesses we have in the U.S. we have been experiencing tremendous growth. And obviously like any business with the growth on - when you grow so fast sometimes now you cut as more cleanup to do.

So what we had was a smaller onetime write-off, but we do not expect this to continue in 2018..

Okay. And then last one I promise just Brazil coming back down I think you guys have been signaling that, what is the normalized growth again, can you remind us for 2018, what the assumption is? And did I hear correctly that fourth quarter Brazil was down 8%, I may have written that down incorrectly but….

I think the idea of normalized growth in Brazil in the same kind of is - we've seen really big swings in the overall growth rate of the business and right now what's happening is that we're seeing this pivot from a product prospective where there is more interest and growth in the Travel products that we have in that space.

So we've seen kind of a not as much of a ramp and kind of a decline in the benefit product offering, but a significant ramp on the Travel side and the Fleet side of the business.

And so I think the growth will look different in 2018 than it has the last several years, which is why we're not giving a specific number of what that looks like and it's still relatively small but growing part of the business..

Understood, thanks..

And now I'll turn the call back over to Mr. Steve Elder for closing remarks..

Just want to thank everyone once again joining us this quarter, and we'll look forward to showing our progress with you next quarter..

And this concludes today's conference. You may now disconnect at this time..