WEX (WEX) Q4 2021 Earnings Call Transcript

WEX (WEX 0.01%)
Q4 2021 Earnings Call
Feb 10, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Q4 2021 earnings conference call. [Operator instructions] Steve Elder, vice president of investor relations.

You may begin your conference. 

Steve Elder -- Vice President, Investor Relations

Thank you, operator. Good morning, everyone. With me today is Melissa Smith, our chair and CEO; and our interim CFO and chief accounting officer, Jennifer Kimball. The press release we issued earlier today and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com.

A copy of the release and the slide deck have also been included in 8-Ks we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically, adjusted net income attributable to shareholders, which we refer to as adjusted net income, or ANI, and adjusted operating income. Adjustments for this year's fourth quarter and full year GAAP results to arrive at these metrics include unrealized gains on financial instruments, net foreign currency losses, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, other costs, change in fair value of contingent consideration, debt restructuring, and debt issuance cost amortization, similar adjustments attributable to noncontrolling interests and certain tax-related items as applicable. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis as we are unable to predict certain elements that are included in reported GAAP results.

Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to GAAP net income attributable to the shareholders and a reconciliation of operating income to adjusted operating 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, the risk factors identified in our 2020 annual report on Form 10-K filed with the SEC on March 1, 2021, our quarterly reports on Form 10-Q and subsequent SEC filings. While we may update forward-looking statements in the future, we disclaim any obligations to do so.

You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa Smith.

Melissa Smith -- Chairman and Chief Executive Officer

Thanks, Steve, and good morning, everyone. We appreciate you joining us today. Before diving into our Q4 and full year results, I'd like to share my appreciation for our dedicated team members across the globe who continue to execute admirably with the backdrop of the ongoing pandemic. As a result of their remarkable efforts, 2021 was a very strong year for WEX.

In the fourth quarter, we delivered record revenue of $498 million, a year-over-year increase of 25%, driven by the continued expansion of our platform. Approximately 12% of the increase in revenue was from higher fuel prices, so revenue grew approximately 13% for all other factors. Total purchase volume processed across the organization in the fourth quarter grew 79% year over year to $25 billion, reflecting the strong rebound and momentum we are seeing across each of our businesses. Worth noting that while travel volumes have not yet returned to pre-pandemic levels, we have more than made up for the loss of revenue, powered by the underlying strength across all of our other solutions.

Record quarterly revenue paired with a unique efficiency and scalability of our platform, resulted in adjusted net income per diluted share of $2.58, an increase of 78% compared to the same quarter last year. Before turning to the key drivers of our growth during the quarter, let me quickly touch on our full year 2021 results. On a full year basis, 2021 revenue increased 19% year over year. Approximately 8% of this increase was due to higher fuel prices and some benefit from foreign exchange rates, leaving approximately 11% growth for all other factors.

Full year purchase volume of $88 billion was up 59% compared to 2020 and full year adjusted net income grew 51%, reflecting many of the same benefits of scale and efficiency that I just mentioned. Overall, 2021 was one of the best years in WEX's history with record revenue and near-record adjusted net income per share. We entered 2022 with strong momentum, underpinned by a return to healthy organic growth. Now let me take a step back and discuss the key drivers of our fourth quarter results in more detail.

First, as is the case in the third quarter, most existing customer spend returned to and in many cases, exceeded pre-pandemic levels. Second, and core to our strategy, we're expanding our ecosystem with innovative new solutions to help our customers simplify their businesses. As an example, we recently signed a new agreement with Mastercard that allows us to add their broad merchant acceptance to our proprietary closed-loop fleet cards, enabling our customers to purchase a broader set of products through WEX, but still in a highly controlled manner. In January, we also announced the launch of WEX Fleet Tolls in partnership with Bestpass, a leader in toll management solutions for commercial fleets.

This solution allows our fleet customers to utilize cutting-edge payment technology to improve their mobility needs. Not only does this allow our customers to free up capital by only paying for accrued tolls, it also simplifies account management by reducing the number of accounts held with different tolling authorities across the country. Our compelling suite of solutions like these, underpinned by WEX's global scale and reliability, customer-focused innovation, and specialized focus is leading to wins in the marketplace and helping us expand our existing relationships. To that end, I'm very pleased to announce that we have extended our agreement with one of the largest online travel companies in the world during the fourth quarter.

We look forward to supporting their needs and innovating with them for many years to come. In addition, we continue to ramp our relationship with AvidXchange, which we expect will continue to drive significant volume growth and profitable revenue growth over the coming quarters. Beyond driving growth with our existing clients, I'm also pleased to share that we signed several new customers during the fourth quarter, including the Commonwealth of Kentucky Fleet, Anthem, and UMB Health, and renewed PNC Bank, one of our largest and most important corporate payment partners, just to name a few. We continue to hear from new customers that they are choosing WEX for many of the same reason our existing customers are deepening their relationships because our unique platform allows us to offer tailored solutions that are seamlessly embedded into their workflows with a simple integration.

In mobility, this includes our industry-leading products for over-the-road in local vehicles. In travel and corporate payments, we're leading with embedded payments and AP automation solutions in building out a regional sales force in the direct channel to bring these solutions to more customers with fast and simple integration. And in health, we're driving growth in our benefits platform for CDH and COBRA administration as well as our fully outsourced benefit administration platform and services, which is a significant growth opportunity for WEX. From an end-consumer perspective, one in five HSA account holders are on the WEX platform.

This large data pool allows us to reach beyond the product offering and also help educate people on the financial benefits of HSAs. WEX targets educational messages based on where people are in their life plans, from newly employed to people getting ready to retire with the goal of helping people get the most out of money that they set aside in tax-advantaged accounts. And we do this in creative ways through benefit toolkits, open enrollment toolkits, blogs, and podcasts. This helps both our partners with their offering and end consumers.

To that end, I'm very optimistic about the momentum we've seen in health coming out of open enrollment season, which exceeded our expectations and sets us up for a strong 2022. During the quarter, we also successfully moved nearly $1 billion in HSA deposits to WEX Bank, which were invested and we expect to be a significant driver of incremental revenue in 2022. Jen will discuss the details further in a moment, but this is just one of many reasons we see significant value in the health business. WEX has deep experience and is driving growth across each of our three verticals, but I'm even more excited about the opportunity ahead to further integrate our products and services and wrap our customers with an ecosystem of solutions that meet their evolving needs.

To that end, in January, we welcomed Karen Stroup as chief digital officer; and Carlos Carriedo as chief operating officer, international. Both Carlos and Karen will be instrumental as we continue to expand our global footprint and optimize digital solutions for customers around the world. We announced this morning that we will be hosting a virtual investor day on March 23, during which you'll hear more from Karen and Carlos, and we will discuss how our reorganized leadership structure will help WEX unlock the benefits of fully integrated customer relationships across our entire product portfolio. Turning now to our technology platform.

Last quarter, I told you that we have nearly completed our efforts to move WEX's corporate payments card issuing technology to the cloud. I'm very pleased to report that the integration was completed successfully. Today, approximately 80% of WEX's platform is multi-cloud-based, allowing WEX to exceed expectations for scale and reliability while also being able to move quickly on new innovative concepts. Throughout 2021, our technology investments focused on continuing to enhance our cloud data capabilities, digital marketing engine, and artificial intelligence.

As I mentioned last quarter, our digital marketing channels are proving very effective. And we're expanding it to other parts of the business to drive enhanced conversion and customer engagement. For our North American fleet business, these marketing efforts delivered 56% more new accounts in 2021. On the AI front, we continue to take strides to increase automation across the business driving efficiency and improving outcomes.

One example of this is our call centers where we deployed a new AI-powered virtual agent. All of our investments are geared toward creating an intelligent, secure, highly scalable, and resilient infrastructure, enabling our customers to access a full suite of capabilities in ways that can be seamlessly embedded in their business, including cutting-edge digital experiences. We believe these technology investments will further enable us to help our customers solve increasingly complex challenges, key among them the expected transition to hybrid and electric vehicles. With our leadership position in providing fleet management solutions, combined with new offerings like the partnership we announced with ChargePoint last quarter, we're uniquely positioned to help our customers with their mixed fleet needs.

These efforts also closely align with our commitment to environmental innovation, which includes identifying near- and long-term opportunities to support our customers in improving their environmental sustainability. As fleets become increasingly electric, we will be ready with new solutions to help our customers make that transition. We look forward to sharing more on this topic at investor day. Looking ahead to 2022 and beyond, the future for WEX is incredibly bright.

We entered this year with significant momentum, underscored by strong new sales and a robust open enrollment season in our health business that exceeded our expectations. Our digital marketing channels continue to deliver and we are well-positioned to capitalize on that success. We continue to make great strides in improving efficiency, driven by our investments to make our platform more flexible and scalable. All of these trends give me confidence in our ability to deliver on our financial targets, including revenue growth within our long-term guidance range for 2022.

Before I conclude, I'm sure you all saw the news that Roberto Simon will be leaving WEX in April. He will be helping us work through a successful transition. I'd like to extend my sincere thanks to Roberto for his many contributions to WEX since joining in 2016 and wish him well in his future endeavors. I'm pleased to be joined on today's call by Jen Kimball, our chief accounting officer, and interim chief financial officer.

Jen has done a great job of leading our finance and accounting teams while we conduct the search for Roberto's replacement. I'll now turn it over to Jen to walk you through our results in more detail. Jen? 

Jennifer Kimball -- Interim Chief Financial Officer and Accounting Officer

Thanks, Melissa, and good morning, everyone. While I haven't had the opportunity to meet many of you, I'm really excited to join Melissa and be here with you today. First, I'll provide an overview of our strong fourth quarter results. We will then shift to our outlook for the first quarter and full year '22.

We raised our fourth quarter and full year guidance in early January, and our results played out even better than expected, feeding on both top line and adjusted earnings. To put this into perspective, this is one of the best quarters in WEX's history. As Melissa mentioned, we ended 2021 with a great deal of momentum, which demonstrates the strength of our organic business and gives us a nice tailwind coming into this year. Let's start with the results for the full year on Slide 11.

We delivered total revenue $1.85 billion, up 19% over prior year. GAAP earnings per share attributable to shareholders was breakeven. Adjusted net income per diluted share was $9.14, up 51% comparatively. Fuel prices and favorable foreign exchange rates added $124 million of revenue versus prior year.

I'm pleased to report that each of our segments outperformed expectations. Full year revenue was a record high and above 2019 pre-pandemic levels by more than $125 million. Our fleet segment led the way with 21% growth over last year. followed by mid to high teen growth in travel and corporate payments and health.

Now let's move on to the quarter results, starting on Slide 12. Total revenue came in just above the high end of our range, up 25% compared to prior year, reflecting healthy volume increases across each of our segments, acquisitions, and higher fuel prices. From an earnings standpoint, on a GAAP basis, Q4 had net loss attributable to shareholders of $11.8 million or $0.26 per diluted share. Non-GAAP adjusted net income grew 78% to $116 million or $2.58 per diluted share.

This reflects both volume-led top-line growth, and significant adjusted operating income margin improvement. Turning to Slide 13. Let's break down the revenue by segment. Fleet grew 30%, travel and corporate payments reported a 9% increase, and health delivered 23% growth.

Moving to segment results. Let's start with fleet on Slide 14. Fleet achieved $306.8 million in revenue, up 30% from the prior year led by higher fuel prices, new wins, and renewals, and the gradual recovery in local fleet. Payment processing transactions were up 12% year over year.

Over-the-road continued their strong growth, up over 21%. North America fleet was up 12% and international fleet was up 8%. The net payment processing rate in Q4 was 116 basis points, up 7 basis points sequentially reflecting better spreads in Europe and some favorable mix. Our net late fee rate this quarter was 48 basis points up slightly from the 45 basis points we reported in Q3.

As customer payments haven't returned to normal, we expect to see modest increases in this rate. Finance fee revenue was up 42% on significantly higher volume and fuel prices. The average domestic fuel price in Q4 was $3.42, up some $2.26 in 2020, leading to an increase in fleet revenue of $48 million. Turning to the travel and corporate solutions segment on Slide 15.

We recorded total revenue up 9% to $81.5 million. You'll recall, we had a contract change beginning in the fourth quarter for a corporate payments customer that required a shift from gross revenue presentation with no impact to operating income. If the fourth quarter of last year had been reported on this basis, revenue would have been $16.1 million lower. For additional transparency, we've added Slide 22, which lays out revenue, operating margin, rate, and volume trends by quarter for travel and corporate payments to show the impact of the change on a consistent basis.

I'll walk through the segment results, assuming this contract was recorded on a net basis for each period, which is reconciled in the appendix of the slide deck. Breaking down revenue, corporate payments was up 13% led by continued strength in the partner channel. The election cycle in 2020 contributed $3 million in revenue last year. So the growth this year would have been even higher.

Revenue from travel-related customers was up 127%, which reflects growing demand and significant contributions from eNett and Optal. Purchase volume issued by WEX is also a really good story at $11 billion, up 120% over prior year. Travel-related customer volume was up nearly 400% over last year, and represented over 60% of the total. We continue to be well-positioned to capture future upside as travel recovers.

Corporate payments-related volume was up 13%, consistent with revenue growth. The net interchange rate was 63 basis points, up sequentially from the previous quarter of 52 basis points. The fourth quarter generally includes true-ups to reflect actual volume performance. Otherwise, the rate would have been similar to the third quarter.

We continue to benefit from our strong card network relationships and signed a new contract in the quarter. Finally, let's take a look at health on Slide 16. We posted another quarter of meaningful growth with reported revenue up 23% over prior year, powered by Benefit Express and strong organic growth. The number of SaaS accounts was up 12% over last year and as expected, there was a sequential decrease from temporary COBRA accounts being closed at the start of the quarter, which had no impact on fourth quarter revenue.

Now let's move to Slide 17. For the company overall, we delivered an adjusted operating income margin of 37.1%. Fleet margin has now exceeded 50% for three consecutive quarters. The increase reflects revenue growth, higher fuel prices, and scale in our cost base.

Our fleet credit loss continues to be low at 9.6 basis points, but as expected, is picking up from the 6.9 basis points we reported last year during the pandemic. Travel and corporate payments delivered a margin of 38.8%. Despite a seasonal decline in travel volumes, we were able to hold the margin relatively flat to Q3 adjusted for the accounting change to provide a consistent comparison and significantly better than Q2 and Q1. We continue to see high drop-through on incremental revenue, which reflects our ability to cost effectively scale and capitalize on $30 million of eNett and Optal run rate synergies.

The remaining $10 million of the $40 million target relates to platform consolidation and back-end processing, which has a longer tail. In the health segment, adjusted operating income margin for the quarter was 19.2%, down 1.3% from 2020, mostly due to the acquisition of Benefit Express and some expense timing. Generally speaking, Q4 is the lowest margin quarter for the health business as expenses ramp up during open enrollment season, while the related revenue comes in the following year. Changing gears to taxes on Slide 18.

Our GAAP effective tax rate this quarter was 50% compared to 7% for the fourth quarter of 2020. On an ANI basis, the tax rate was 25.3%, up 290 basis points from a year ago, reflecting the shift in the geographic mix of profits. Turning now to Slide 19. We continue to generate strong cash flow, driven by record earnings, which enabled strategic investments to support future growth and pay down debt of $109 million.

We ended the year with $589 million in cash, of which $153 million was corporate cash as defined in the credit agreement. We ended the year with $759 million of liquidity available under our credit agreement and debt of $2.8 billion. The leverage ratio, as defined in our credit agreement came in at 3.4 times, which is within our long-term target of 2.5 times to 3.5 times. We will continue to take a flexible and opportunistic approach to deploying capital.

You may have noticed this quarter, we added nearly $950 million in investment securities to our balance sheet, which will be a nice revenue stream for us going forward. You'll recall that in the second quarter, we acquired the rights to certain health savings account assets. We moved some of those accounts to WEX Bank and invested them to unlock a higher yield, which is around 1.5% currently. In addition to creating a new revenue stream within other revenue as the investment portfolio matures, this will make the company less sensitive to future changes in interest rates and create a natural hedge with spending levels in the health segment.

Finally, I want to close with some thoughts on our outlook for '22. We are emerging from the depth of the pandemic in a position of strength and expect the tailwind from 2021 to drive further growth. We continue to deliver profits consistent with our long-term guidance range when removing the benefit of higher fuel prices and expect 2022 will play out in a similar manner. Starting with the first quarter, we expect to report revenue in the range of $495 million to $505 million.

On an EPS basis, we expect adjusted net income to be between $2.55 and $2.65 per diluted share. For the full year, we expect to report revenue in the range of $2.05 billion to $2.09 billion. As a reminder, this includes the impact of the accounting change we discussed last quarter, which moved the revenue presentation for one customer from gross to net. In the appendix, you can see the impact of the change on revenue for full year 2021 was $52 million.

And on an EPS basis, we expect adjusted net income to be between $11.20 and $11.60 per diluted share. For the fleet segment, we expect revenue growth to be toward the top end of our long-term guidance range of 4% to 8% with fuel prices pushing growth rates higher. We will continue to benefit from the new wins and renewals that we signed during the year. We expect the late fee revenue and credit losses to trend higher than 2021 levels and generally offset each other.

For the travel and corporate payments segment, we also expect revenue growth when adjusted for the accounting change to be within the long-term guidance range of 10% to 15% with a high flow-through to operating income. Total volume is expected to grow in the mid-20s. The health segment is a highly recurring revenue business for us. Another strong year is expected after an encouraging open enrollment season.

We expect health to deliver revenue growth in the high teens, which includes a full year of Benefit Express and revenue from the HSA deposits that are now on our balance sheet. Now let me walk you through a few more assumptions. Exchange rates are as of the end of December 2021. We estimate domestic fuel prices will average $3.52 per gallon for the first quarter and $3.55 for the full year, consistent with last week's NYMEX futures price.

The adjusted net income tax rate is expected to be between 25% and 26% for the first quarter and the full year. And finally, based on the projected earnings, we are assuming that the shares related to our convertible debt will be included in the share count, resulting in approximately 47.5 million shares outstanding. This means that approximately $20 million of interest expense for the year related to the debt will not be included in the earnings per share calculation. As Melissa mentioned, we enter 2022 with momentum and believe the future is incredibly bright.

We look forward to sharing more with you at investor day. And with that, operator, please open the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Your first question is from Ramsey El-Assal of Barclays. Please go ahead. Your line is open. 

Ramsey El-Assal -- Barclays -- Analyst

Hi. Thanks so much for taking the question. Good morning You mentioned out that if you signed that new agreement with Mastercard had broader acceptance proprietary programs --

Melissa Smith -- Chairman and Chief Executive Officer

Ramsey, I'm sorry, can you hear me?

Ramsey El-Assal -- Barclays -- Analyst

I can hear you. Can you hear me OK?

Melissa Smith -- Chairman and Chief Executive Officer

You're cutting in and out. I heard you ask -- it's Melissa. I heard you ask about MasterCard, but you were cutting in and out.

Ramsey El-Assal -- Barclays -- Analyst

OK. Let me try to change my [inaudible] here. Hold on. Is that any better?

Melissa Smith -- Chairman and Chief Executive Officer

Much better. Thank you.

Ramsey El-Assal -- Barclays -- Analyst

OK. Let me -- that's exactly right. I was asking about Mastercard and that new arrangement and whether you could help us think through the size of it and also kind of the distribution strategy, how does it roll out?

Melissa Smith -- Chairman and Chief Executive Officer

Yes, sure. So we find that when our customers come on to the fleet program, part of the attraction for them is the ability to lock down their controls. They really particularly like the idea that they can lock down to very specific things like fuel moves. And then we find over time with that customer base, they are interested as they build trust with us to be able to actually purchase more readily.

And so this arrangement we have with MasterCard is really allowing the best of both worlds, where we'll embed the open-loop capability where our proprietary network doesn't extend. And so customers, if they want, would be able to actually use our proprietary network in our locations and then purchase on top of that. And where we find that to be particularly interesting is with our smaller fleet customers who have a desire to then continue to have more capability with us. They want to have it integrated within their systems within one point.

And so we see this as just a nice extension of the product capability we have right now. And in terms of revenue opportunity, this is -- we'll see better as we go into the marketplace. What we're hearing from customers and what we're seeing for demand, we think this will actually give us a nice little lift.

Ramsey El-Assal -- Barclays -- Analyst

OK. And my second question is about the take rate in travel and corporate payments. There's a lot of moving parts. I guess, the first question I wanted to ask on that was, will we see any incremental kind of yield compression from the large new travel renewal you called out? And I guess, you also talked about some renewal with the networks.

And I'm just wondering if that creates sort of an offset. So how should we think about that take rate sort of trending over the next stretch with these inputs?

Melissa Smith -- Chairman and Chief Executive Officer

Yeah, yeah. Look, on Page 22 in the deck, we actually added in some detail around this because we know that the change would -- that one customer going from gross to net adds a little bit complexity. So we showed that on a comparable basis on both Page 22 and Page 23. And what you can see is that travel and corporate payments volume was up 120% over Q4 of last year.

And then we also showed the rate. So the net rate went from 52 basis points when you adjust it for that gross to net change to 63 basis points in the fourth quarter. So it went up actually 11 basis points. That's largely due to true-up adjustments that we make in the normal course at the end of the year.

So what I would say is if you parse the rate out and you were to look at it split between travel and corporate payments, we expect the travel rate to look pretty consistent to the average of the full year for 2021. And we expect the corporate payments rate as we bring on more embedded payments customers to trend that rate down through the course of 2022. And that you can see the margin on there as well. So we're showing the margin adjusted by quarter for movement of that customer from gross to net.

And you can see we've seen some pretty significant margin improvement with a 39% operating margin in the fourth quarter. So we expect to see a continued nice drop-through in terms of profitability as we bring on that additional volume. And Jen had talked about that when we gave our guidance expectations for this segment, we expect revenue to be in our long-term range of 10% to 15%. And spend to come in around the mid-20s.

Ramsey El-Assal -- Barclays -- Analyst

Got it. That was all very helpful. Thanks so much.

Operator

Your next question is from Sanjay Sakhrani of KBW. Please go ahead. Your line is open.

Sanjay Sakhrani -- KBW -- Analyst

Thanks. Good morning. I'm curious if there's a way to think about where the key segments are across the business relative to pre-pandemic levels. I know there's been a lot of mix differences.

Some parts of the business have come back and others haven't. Maybe, Melissa, is there a way to sort of parse through that? And then when we think about the guidance, how much of a rebound are you assuming inside those specific verticals?

Melissa Smith -- Chairman and Chief Executive Officer

Yeah. Let me talk about guidance for a minute, too, just to make sure that that's clear. So if you look at our guidance for 2022, the midpoint, we're guiding up revenue growth of 12% and ANI EPS growth of 25%. Some of the things that affect comparability from year to year.

We mentioned the fact that we have the customer that's going from gross to net, which would have brought down our 2021 revenue number by $52 million to make it comparable. And then we added in between $60 million and $65 million for additional fuel prices year over year and a little bit of offset in FX. I mean, we kind of take that all into account, you had to manufacture in the same place. We have about 12% revenue growth at the midpoint when you adjust it out for all of those factors.

If you look within our guidance itself, we have an expectation that we have a really strong sales tail going into 2022. And that's one of the things as we look at what our growth is going to be, how much would we actually sign up for customers that are just in the implementation phase. We feel pretty strongly about that. And that's part of why we're leading to that midpoint guide.

There's probably about a 1% pickup to your original question around what's happening from just additional volume that's untapped from pre-pandemic levels. You could see across the business, our North American fleet business volume is now higher than it was in the fourth quarter of 2019. The over-the-road business has been higher for a while. You kind of run across the business and see that we've had a lot of volume pick up gradually over the last year and a half, and that's been reflected in the numbers today. 

Sanjay Sakhrani -- KBW -- Analyst

OK. And I guess just to follow up on Ramsey's question. I think you answered this, but just to be clear. That travel renewal shouldn't have a meaningful impact on the travel part of the yield, and you mentioned sort of the scale and efficiency gains.

How do we dimensionalize that -- the efficiency gains on a go-forward basis, specifically in the segment and maybe broadly speaking, for the company?

Melissa Smith -- Chairman and Chief Executive Officer

Yeah. Again, if you go back and look at the rate, what we're saying is we expect to see rate stability within the travel segment -- I shouldn't say segment, but within the travel customer base of the travel and corporate payments segment for 2022 compared to the full year rate for 2021. And so I guess, it's one way of saying, yes, we don't expect to have a material change net-net of what we're seeing across that customer base. And in terms of how we dimensionalize the volume, you can actually see on Page 22, you can see margin improvement each period as volume has increased through the business.

So I think actually, we've got -- that graph gives you a pretty good sense of how much drop-through we're seeing as we have incremental volume. And then the broader of set -- yes, and that should continue. Yeah, yeah. OK.

Yeah.

Sanjay Sakhrani -- KBW -- Analyst

The nature of that should continue to go up.

Melissa Smith -- Chairman and Chief Executive Officer

It will continue. Yes.

Sanjay Sakhrani -- KBW -- Analyst

Yes. And is there a way to sort of range that? Like is it just a complete drop-through? Or there's some offsets to that? Yeah.

Melissa Smith -- Chairman and Chief Executive Officer

That segment, the pre-pandemic operating margin was in the 40s. We're approaching that. So we do feel like we're going to continue to see drop-through of incremental revenue that goes through our operating margin. But we've seen huge step improvements during the course of 2021.

We think you'll see incremental improvements as you go through 2022. And then the last big part that we talked about is that we still have significant synergy remaining for the integration of eNett and Optal as we consolidate the platforms together. We've talked about the fact that we have $30 million worth of run rate synergies that we've recognized so far, and we have another $10 million hanging out there that will come in 2023.

Sanjay Sakhrani -- KBW -- Analyst

Great. Thank you so much.

Operator

Your next question is from Bob Napoli of William Blair. Please go ahead. Your line is open.

Bob Napoli -- William Blair -- Analyst

Thank you. Good luck to Roberto, and welcome, Jen, to the calls here. I guess congratulations on the performance and the execution, I guess, to the WEX team. Really nice to see.

On the margin improvements, what exactly is -- I mean, very impressive margin improvements. What is driving that? I know you've been making significant investments in your tech stack, but what are incremental margins for that business? And what have you done to improve incremental margins, if you would?

Melissa Smith -- Chairman and Chief Executive Officer

Within the travel and corporate payments segment, this is Melissa, the improvements came from three different things that came together during the course of 2021. The first was the synergy realization that we had with eNett and Optal. As we went through that process, if you recall, we closed the business at the beginning of the period. And so we rapidly went through a process of making sure that we can rationalize what those two businesses should look like together.

And so you can see the benefit of that throughout the course of the year. The second thing is we saw volume increase through the course of the year. And that leads to my third point, which we've done a lot of work over the last several years around the platform, making sure that it was scalable. You saw the negative of that happen in the middle of the pandemic, but we're seeing the positive of that.

We really had done a lot of work to set up the cost structure so that it could be highly scalable. We know the embedded payments product in the marketplace that having a best-in-class product, having high reliability is really important to our customers. But also being able to make sure that we can participate in the market at the appropriate cost structure makes sense because it's more of an infrastructure play, where a lot of what we're doing on top of that is embedding other services and other capabilities at more of a premium price.

Bob Napoli -- William Blair -- Analyst

Thank you. To follow up on the healthcare business, very nice growth in the SaaS accounts. The revenue growth is growing faster than accounts, the revenue per account going up as well. And nice to see the $900 million -- the benefit -- starting to benefit from the investment income.

But if you can comment on the revenue per account, the improvement in revenue per account. The $900 million, is that the full -- so is there more to go? And does that -- will your interest income go up in step with Fed rate increases on that investment portfolio?

Melissa Smith -- Chairman and Chief Executive Officer

This is Melissa. I'll answer the first part and Jen will answer the second part of that. The revenue increase is a combination of the fact that we continue to offer other services to our customers. So as they come on, we are offering the ability to provide their undetermined technology.

We earn a recurring revenue stream in SaaS fees, and that's still 70% of the revenue -- 70%, 75% of the revenue in that part of the business. But on top of that, we provide services where our customers are interested in having us doing some of their outsourced services for them. And on top of that is the new revenue that we're getting from our deposits. Jen, if you want to elaborate on that.

Jennifer Kimball -- Interim Chief Financial Officer and Accounting Officer

Yeah. So there is opportunity. There's certainly additional deposits that we could bring into WEX Bank, just keeping in mind kind of the regulatory capital requirements that we have there, but certainly going to continue to look at that opportunity as we move forward.

Bob Napoli -- William Blair -- Analyst

Great. Thank you.

Operator

Your next question is from James Faucette of Morgan Stanley. Please go ahead. Your line is open.

James Faucette -- Morgan Stanley -- Analyst

Thanks a lot . Good morning, everybody. I wanted to follow up on the margin question there. And just wondering how you're kind of thinking about your opex and investment going forward and particularly the trade-off between investing for growth versus maximizing profits, particularly given that we've seen other players in the space indicate that they're planning to increase their opex.

Just wondering like how you're trying to walk that very fine line.

Melissa Smith -- Chairman and Chief Executive Officer

No, it's a great question. If you look again at the midpoint of our guidance range, when you exclude the impact of fuel prices, FX, and this movement -- some customer from gross to net, then you'll see midpoint revenue guidance is 12%, midpoint ANI EPS guidance is about 15%. So I feel like actually we are balancing those things. We are intending to spend about 6% of our revenue in capex.

And keep in mind that we've been on a journey for a number of years of transforming the company. And so we're not in a position that we have to pivot or play catch-up. We're actually just building on the momentum that we've created. And you can see that, actually, we've got products now that we're able to put in the marketplace where we're going into beta launches really quickly.

And that's really the power of the movements we've made over many years into the cloud. So I feel actually very comfortable about the fact that we are balancing both the need to invest and have over a number of years with the ability to actually do that profitably.

James Faucette -- Morgan Stanley -- Analyst

Yeah, yeah. No. I think that's pretty clear. And then another investment-related question.

Obviously, EVs have been a topic for quite a while. You mentioned during the call, a partnership. But how are you thinking about the investment strategy, particularly into that segment? And what are the things that you're looking at to determine where, when and how much you should invest to increase capabilities there?

Melissa Smith -- Chairman and Chief Executive Officer

Sure. The concept of expanding our solutions is one of our key concepts as we go into 2022 and EV is certainly a very important part of that. I reminded the fact that we had extended our relationship with ChargePoint because that gives us access to over 200,000 ChargePoints over the U.S. and in Europe.

And so it extends our network capability. We already have customers that are using the product that we have in the marketplace now. We announced last quarter that we've extended that with a relationship with Element. We're learning as our customers are using that product and we built out our expectation of what we're going to deliver into the marketplace.

And we talked about the fact we want to have a home charging model, in-the-wild charging model, and then a depot charging model. And so our product teams are working in earnest to continue to build up functionality. You'll see us deliver that incrementally as we do other products through the course of the year. And we think that this creates a great opportunity for us.

We're in this unique position with our customers who have 17 million vehicles who are coming to us as they go through this transition period and looking for us to help satisfy some of the needs that get created that weren't there before, just because of the increased complexity that comes with having a mixed fleet. So I feel like our ability to continue to build into this marketplace is something that we're already active in the marketplace on, that we're continuing to build upon and that creates opportunity for us. To the extent that we saw an ability to do more here, we would not be shy to move more money into this category. It's clearly important to us.

James Faucette -- Morgan Stanley -- Analyst

That's good. Thanks for all the color there, Melissa. 

Operator

Your next question is from Nik Cremo of Credit Suisse. Please go ahead. Your line is open. 

Nik Cremo -- Credit Suisse -- Analyst

Great. Thanks for taking my question. So would it be possible to get the breakout of what's embedded in the 2022 mid-'20s travel and corporate payments volume guidance between travel and corporate individually? It looks like travel is implied to be about 30% below 2019 levels approximately.

Melissa Smith -- Chairman and Chief Executive Officer

So I will tell you, in the fourth quarter, what we saw for split about 60% of the volume was travel and about 40% of the revenue is travel [ distillate ]. And in terms of what's going to happen in the course of the year, next year, we do expect to continue to see growth in both areas, both in travel and in corporate payments. And I talked about the fact that we intend to -- or are in the process of implementing Avid. The pace of that implementation will affect what you see from a volume perspective sequentially.

And then on the travel side, what we saw is we go into the fourth quarter of this year was a little bit of dip that happened at the very end of the year. You can see that on the graph, which was Omicron. We've seen a little bit of impact in the first quarter of 2022, but still significant growth year over year.

Nik Cremo -- Credit Suisse -- Analyst

Great. Thank you very much for the color. And then would it be possible just to get a sense of how you're thinking about like the various like growth components of the corporate payments business between like the various channels, just like directionally between like FI, partner, direct? Or should they grow generally similar?

Melissa Smith -- Chairman and Chief Executive Officer

No. Historically, for us, the FI channel has been a slower goer -- lower grower, sorry. The embedded payments products that we have in the marketplace have been the highest growth in terms of -- from a volume perspective. And then that being said, we've been ramping our sales force.

So the direct side of the business, it will -- if you kind of play out the course of the year, that will become a more important part of the business as we exit 2022. But we do anticipate that the largest amount of growth is coming from the embedded payments products in 2022.

Nik Cremo -- Credit Suisse -- Analyst

Great. Thank you very much.

Operator

Your next question is from Trevor Williams of Jefferies. Please go ahead. Your line is open.

Trevor Williams -- Jefferies -- Analyst

Thanks. Good morning. Melissa, I just want to ask on the strategy within corporate payments specifically. I mean you've had some good wins in the partner channel this year.

But if we think of how the business is positioned, just give us a sense for where you feel best competitively about the assets you have, how you get comfort around virtual card issuance, particularly in the partner channel, not becoming commoditized longer term. And correct me if I'm wrong, it sounds like for '22, you're expecting the take rate on corporate pay volume to come down, which I'm assuming has to do with the ramp in AvidXchange. But any color you can give us just on how you're balancing volume growth against pricing longer term would be really helpful. Thanks. 

Melissa Smith -- Chairman and Chief Executive Officer

Yeah, sure. And when we think about our corporate payments business, we do lump it in two different categories of products. One is embedded payments, which -- the beauty of embedded payment is that you can give an API to a partner, they can embed it in a workstream and as their business grows, they're benefiting from the infrastructure that we have, from the product capability we have. And what we benefit from is a partner channel that can have some really nice growth rates associated with that.

When we do -- when we are utilizing the embedded payment, this comes from the technology conversation we had earlier. We've done a lot of work to make that technology highly scalable. And so the incremental costs when we enabled that product were actually really quite low. And so it is highly profitable even though it has a lower take rate.

Then if you go to the other side of our product set, where we're doing AP automation, a lot of that work we're doing directly with our customers. And as a result, there's just more book that we're doing on behalf of that customer. It tends to be a little bit more individualized. And so it's got a higher take rate.

But from a profitability perspective, both of us -- both are good for us from a business perspective. And where we see this going -- I talked a lot earlier about the fact that we are exposing more of our capability across the business, and it's one of the benefits of going to our new org structure is this idea that not only we're looking at bringing in new customers, but how can we create more wallet share across the portfolio and do more for our customers. And corporate payments is a great example of that. We have been cross-selling that product into our fleet customers.

We're starting to do that in a much more digital way now, and it's early but are interested in that as a model as well. So I think that the way that we have historically gone with the market has been thinking about this as two discrete products. As we go through 2022, you'll see that becoming much more of a digital offering into our customer base with the ability to actually think about this across the whole portfolio of customers we have.

Trevor Williams -- Jefferies -- Analyst

Got it. OK. No, that's really helpful color. Thanks.

And then just as a quick follow-up on your capital allocation priorities for 2022, now that you're sitting within the longer-term leverage targets. I mean how are you thinking about the balance of capital allocation this year between M&A, potentially starting to buy back stock or just continuing to pay down debt? Just any color there on how you're kind of stack ranking priorities for this year would be great. Thanks. 

Melissa Smith -- Chairman and Chief Executive Officer

Sure. Yes. First priority for us has been internal use of capital. And as I said before, we've actually increased the allocation.

And so we are intending to spend about 6% of our revenue in capex. And then beyond that, you continue to have a very strong orientation toward long-term growth. And type of assets that we continue to look for are those that extend our scale, extend geographic capability or give us product extensions and in that we've been very disciplined about when we utilize the capital to acquire other businesses. And so we have financial criteria and hurdles that we need to hit as well as obviously making sure that it meets our strategic criteria.

And then we have a $150 million share repurchase program in place, which we intend to use opportunistically to buy back stock.

Trevor Williams -- Jefferies -- Analyst

OK, very clear. Thanks. 

Operator

Your next question is from Darrin Peller of Wolfe Research. Please go ahead. Your line is open.

Darrin Peller -- Wolfe Research -- Analyst

Nice, guys. Can I just follow up on the corporate and travel side for a minute. When we think about really, the assets you've added and built into the travel side in particular, I think the -- between eNett and Optal and even your extensions in the corporate side, your arsenal moving into a better reopening especially on travel should be pretty robust. So can you talk about the strategy now having all those assets in place, what the difference is today and what you can do as we get more travel resume versus what you were able to do in 2018 and '19 before? And what that can mean for both revenue growth rates and profitability for the segment, let's call it, medium term?

Melissa Smith -- Chairman and Chief Executive Officer

Sure. Yeah, yeah, sure. As you said, the fact that we're embedded within our customers is really important as you see rebounds from a spend perspective. The offering that we have within our travel base is a combination of an embedded payment trend, the bunch of currency capability.

These are global customers that are interested in their ability to be able to settle and issue all over the world, [ the geography ] that comes with that that we eliminate. We do that in a very integrated way that allows them to think about things like charge backs in a highly automated way. All of that is really important from a future growth perspective and it's a place that we will continue to build upon. So as you mentioned, we will benefit, as you see travel come back.

And -- so we do expect that we'll continue to see nice both revenue growth and volume growth that comes as the travel market rebounds. And our ability to build upon that really gets at this idea of thinking about a product set as an ecosystem. So the ability to actually extend our capability and offer more to that sort of customer just like any of our other customers is part of the embedded strategy that they have. So when we think about long-term growth rates, we've talked about 10% to 15% is the long-term growth rate in that segment.

I mean that's just thinking about the long-term growth rate coming from a normalized period of time.

Darrin Peller -- Wolfe Research -- Analyst

Both sides, right? Just to remind us, I mean, if we were to get to, let's call it, 100%, 120% of 2019 levels from a travel standpoint. Can you just -- any way you can give us a sensitivity of what you would expect to see pass through in terms of revenue and earnings potential for the company overall?

Melissa Smith -- Chairman and Chief Executive Officer

Well, I think -- again, you can look at the operating margins that we've had in that business have been in the 40s. And so the expectation longer term is that we've given you the actual take rate that we're seeing within that business and that that would drop through somewhere around that 40-ish percent rate, maybe a little higher.

Darrin Peller -- Wolfe Research -- Analyst

OK. So I guess, just normalizing there.

Operator

We have completed the allotted time for questions. I will now turn the call over to Steve Elder for closing remarks.

Steve Elder -- Vice President, Investor Relations

Yes. Thank you, Cheryl. I just want to thank everyone for joining us once again, and we look forward to speaking with you with our first quarter earnings release.

Operator

[Operator signoff]

Duration: 62 minutes

Call participants:

Steve Elder -- Vice President, Investor Relations

Melissa Smith -- Chairman and Chief Executive Officer

Jennifer Kimball -- Interim Chief Financial Officer and Accounting Officer

Ramsey El-Assal -- Barclays -- Analyst

Sanjay Sakhrani -- KBW -- Analyst

Bob Napoli -- William Blair -- Analyst

James Faucette -- Morgan Stanley -- Analyst

Nik Cremo -- Credit Suisse -- Analyst

Trevor Williams -- Jefferies -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

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