Wex (WEX) Q1 2023 Earnings Call Transcript

Wex (WEX -1.56%)
Q1 2023 Earnings Call
Apr 27, 2023, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the WEX Q1 2023 earnings call. [Operator instructions] I will now turn the conference over to Steve Elder. Please go ahead.

Steve Elder -- Vice President, Investor Relations

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our chair, CEO and president; and Jagtar Narula, our CFO. The press release we issued earlier this morning 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 has also been included in an 8-K we filed with the SEC earlier this morning.

I also want to mention that we are renaming our existing segments in connection with the rebranding initiatives. The fleet solutions segment will now be renamed to mobility, the travel and corporate solutions segment will now be renamed to corporate payments and the health and employee benefit solutions segment will now be renamed to benefits. There are no changes to what is included in each segment. 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 and related margin; and adjusted free cash flow during our call.

Please see Exhibit 1 of the press release for an explanation and reconciliation of these non-GAAP measures. The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis due to the uncertainty and the indeterminate amount of certain elements that are included in reported GAAP earnings. 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 for the year ended December 31, 2022, filed with the SEC on February 28, 2023, 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.

Melissa Smith -- Chief Executive Officer

Thank you, Steve, and good morning, everyone. We appreciate you joining us today. WEX is off to a great start in 2023. We've continued our long track record of delivering exceptional financial results and performing well across dynamic macroeconomic environment.

Revenue for the first quarter came in at $7 million, above the midpoint of our guidance, and adjusted net income per share beat the midpoint of our guidance by $0.11. Revenue growth of 18% and adjusted earnings-per-share growth of 15% this quarter represents the eighth consecutive quarter these metrics each grew 15% or more. Last week, we held our annual SPARK conference, a customer event which unites leaders across the mobility, corporate payments and benefit industries to showcase how our platform of specialized solutions can help them overcome complexity and reach their full potential. SPARK has historically been focused on our Benefits business, but was held as a joint conference across all of our solutions for the first time this year.

This highlighted the ongoing transformation of our business as we discuss unifying product themes around data, payments and digitization. Our message to customers centered on WEX' unique ability to address the challenges they see in their businesses. These challenges are experienced across many industry verticals and include personalizing employee benefits, navigating the complexity of mixed fleet interests and removing the friction caused by inefficient payment processes and systems. WEX can help simplify these challenges today, and we are innovating to anticipate and address those of tomorrow.

We had record attendance at SPARK, which shows the importance of our solutions and how they resonate with customers. I'm excited by the positive response and the momentum we're seeing across the business. We continue to invest in our platform to help our customers meet the demands of their markets, employees and customer bids. Our investments in data and advanced analytics, for example, are benefiting customers across our platform.

And we're providing critical flexibility that allows them to choose from a suite of customized solutions that best set the unique needs of their business. At the same time, we've been moving aggressively to the cloud, which increases fleet to market of innovation and enhance scalability for our customers. We currently have approximately 85% of our cloud migration completed. We expect to reach our overall cloud goals later this year, allowing us to further leverage shared technologies across product set.

Before jumping into our performance for the quarter, I'd like to quickly address the recent disruption in the banking industry. First, it's worth noting that failures of Silicon Valley Bank and Signature Bank had very minimal impact to our business. Neither of these banks were customers or partners of WEX, and we had minimal deposit exposure. They were not a party to our credit facility nor counterparties to our hedging relationships.

As the banking industry cope with significant movement in deposit flows since the recent bank failures, our custodial HSA cash deposits and certificates of deposit have shown themselves to be extremely stable. This is thanks, in part, to contractual limitations to early withdrawals, and it's also evidence that the market for these funding vehicles continues to remain strong. Now, let's turn to the financial results. Turning to our performance in the first quarter, revenue increased 18% year over year to $612 million.

This increase of $94 million year over year was primarily driven by the growth of 36% in both our corporate payments and benefits segment. On an organic basis, which excludes the impact of fluctuations in fuel prices and foreign exchange rates, revenue in the quarter grew 19% compared to the prior year's period, once again beating our long-term organic growth target of 8% to 12%. Strong quarterly revenue, paired with the scalability of our business model and a superior funding model, resulted in adjusted net income per diluted share of $3.31, an increase of 15% compared to the same quarter last year. Total volume processed across the organization in the first quarter grew 17% year over year to $52.3 billion driven by strong performance in our corporate payments and benefits segments.

During the quarter, we repurchased approximately 525,000 shares of WEX stock for roughly $93 million, resulting in a small EPS benefit in the quarter. Now, I'd like to recap our business highlights in the quarter. On the benefits front, we completed a very positive open enrollment season. We signed one of the largest administrators of multiemployer benefit funds in the Midwest.

This administrator made the move to WEX in order to offer the benefits of our card programs in their longtime client for their health reimbursement arrangement plan. This administrator has more than 100 multiemployer clients, allowing for a large market reach. In corporate payments, we signed a part of one of the largest healthcare systems in the United States. As you may recall, we've added to our direct sales force in this business and are starting to see a positive return with more than 40 deals signed in the first quarter.

We also continue to benefit from a rebound in travel volume globally. Benchmarked against 2019, we're seeing improvement versus Q4 in all regions with the largest gains coming from Europe. Overall travel-related purchase volumes pro forma for the eNett acquisition was up 29% versus 2019 with approximately half of the growth due to the number of transactions and half due to the value of each transaction. And in mobility, we recently signed a renewal with one of the most populous states in the country, demonstrating that our array of products continues to be a leading value proposition.

I'm proud of our strong execution this quarter and believe we remain well positioned for the future as we deliver on our strategic priorities. Let me start with an update on our electric vehicle initiatives. We've been listening closely to the evolving needs of our commercial customers. They're asking us for simplified solutions to manage their next fleet and are looking for a single card or app on a single credit line on a single data set, all managed and controlled through a single view.

This feedback has informed our electric vehicle strategy, which consists of giving fleet managers the tools to plan their energy transition, manage their vehicles in a mixed fleet environment and help ensure their EVs can be conveniently controlled and charged across a distributed environment. To this end, our mobility team is currently expanding our DriverDash mobile app, which helps fleet find fueling locations on the go to include EV charging stations in Europe. This furthers our goal of putting tools in the hands of drivers that simplify the process of determining where, when and how to charge. We'll build on this launch by focusing on learnings and rapidly innovating our offering for U.S.-based customers.

More broadly, as we drive our strategy of simplification and convenience in the EV space, the first phase of our EV product rollout is focused on en route charging. We have a solution that is live in Europe and United States. We've also signed acceptance agreements with five of the 10 largest public charging networks in the U.S., all of which are in various stages of implementation. Our objective is to create a universal network of EV charging stations similar to our fuel acceptance network.

We believe these new agreements will be a win-win for WEX and our network partners given the significant relationships we have [Inaudible] with the government and large fleet. Our next phase will turn to at-home reimbursement. We'll be piloting an at-home reimbursement product this quarter and expect to have a broader rollout in the second half of this year. Again, this is consistent with our strategy of ensuring electric vehicles can be charged conveniently while simplifying payments and reimbursement for organizations.

There's a significant pipeline in development beyond that with an overall vision of enabling managers to grow their fleet and have a unified experience using our products no matter how their vehicles are powered. We're also encouraged by early cross-sell conversations as we begin the new year. Our focus on cross-sell continues to gain traction with more than 60 signed contracts during Q1. Most of these expanded relationships are mobility customers to whom we were able to sell a benefits solution.

Next, let me turn to our operational improvement. We remain focused on enhancing the scalability of our platform and are on track to capture $100 million in run rate operating efficiencies by the end of 2024 with approximately half of these savings being reinvested in the business. As part of this initiative, we've been looking closely at a number of areas of our company using improved processes, data and technology. One of the areas I am excited about is the planned improvement in the customer experience by creating a more seamless digital journey, which has the added benefit of saving costs.

We have a dedicated leader for this initiative, with dozens of cross-functional teams inside of WEX who are focused on execution and has the full support of me and my entire management team. Finally, before turning the call over to Jagtar, I want to highlight that we will host an investor event to provide an in-depth understanding of our benefits segment, including the product set, opportunities and financial profile. As you will hear from Jagtar, we had terrific results in benefits this quarter, and we're excited to share more about this sizable, fast-growing and profitable business with you on June 1. Registration for the webcast of the event will be available on the investor relations section of our website in the coming weeks.

With that, I'll turn it over to Jagtar to walk you through this quarter's financial performance in more detail.

Jagtar Narula -- Chief Financial Officer

Thanks, Melissa, and good morning, everyone. We started off the year with a solid first quarter, achieving strong top line growth while delivering with the dependable execution that our employees, partners, customers and shareholders have come to expect. As with prior quarters, this quarter shows the strength of our global commerce platform, the competitiveness of our offerings and the power of our business model. Now, let's start with the quarter results.

For the first quarter, total revenue exceeded the midpoint of our guidance by $7 million due to a combination of strong corporate payments purchase volume and a very good open enrollment season in our benefits segment. Total revenue came in at $612 million, an 18% increase over Q1 2022 with more than 80% of revenue for the quarter recurring in nature. As a reminder, we define recurring revenue as process -- payment processing and account servicing revenue, revenue from our factoring business, transaction processing fees and other smaller items. In total, adjusted operating income margin for the company was 37.6%, which is down from 39.2% last year, largely driven by much higher margins in both the corporate payments and benefits segments offset by lower margins in the mobility segment.

From an earnings perspective, on a GAAP basis, we had net income attributable to shareholders of $68 million in Q1. Non-GAAP adjusted net income was $145.8 million or $3.31 per diluted share. This represents a 15% increase over the prior year. Now, let's move to segment results, starting with mobility.

Mobility revenue for the quarter was $342.3 million, a 7% increase over the prior year powered by solid volume growth from new customer wins and renewals and an increase in the interchange rate earned on payment processing transactions. Payment processing transactions were up 4% year over year. We saw solid mid-single-digit growth from our local customers in the U.S., while we had a small decline in over-the-road transactions due to freight market conditions. The freight market is an area we continue to watch closely.

As you've seen our metrics, the net late fee rate was up slightly versus the prior year mostly as a result of the new ExxonMobil small business portfolio added late last year. We had anticipated the trend of higher late fee rates that we saw at the end of last year to continue in Q1. That did not materialize, and overall, finance fee revenue was up only 3%, which includes a 33% slowdown in our factoring revenue, which is related to the freight market conditions I just mentioned. The domestic fuel price in Q1 2023 was $3.86 versus $3.95 in Q1 2022.

We estimate the year-over-year impact of fuel prices increase segment revenue by approximately $1 million, including a benefit of approximately $6 million for European fuel price spreads. The net interchange rate in the mobility segment was 1.21%, which is up 10 basis points from Q4 of last year. We saw higher rates earned from a number of merchants due to renewals at favorable terms, the impact of interest rate escalator clauses contained in various merchant contracts and the rate impact from a reduction in fuel prices versus Q4. The segment adjusted operating income margin for the quarter was 40.5%, down from 50.2% in Q1 2022.

Higher credit losses versus the prior year were the primary reasons for the lower margin. Let me briefly address the increased credit losses, which were within our guidance range of 32 basis points of spend volume, including approximately 4 basis points from fraud losses. The elevated loss rate in the over-the-road trucking business that we have seen over the past two quarters are starting to abate. The delinquency rates are improving, and we expect loss rates to trend down going forward.

The local fleet customers in the U.S. continue to have marginally elevated loss rates compared to the last couple of years but are in a relatively normal range. Delinquencies here also continued to improve. Fraud losses in the segment, which we've spoken about a bit in prior quarters, were down 39% from Q4 of last year and continued to improve.

The fraud remediation activities that I've spoken about in prior quarters, which include working with the truck stop operators, continuing to enhance our fraud detection tools and releasing fraud-focused product enhancements appear to be delivering a fraud reduction impact as intended. We are pleased with this result and are working diligently to continue on this track. Turning now to corporate payments. Total segment revenue for the quarter increased 36% to $104.8 million.

Purchase volume issued by WEX was $18.6 billion, which was an increase of 58% versus last year. The net interchange rate in the segment was down 10 basis points sequentially, predominantly due to the timing of incentives for the networks in Q4 last year, as well as travel customers contributing a larger percentage of total purchase volume in Q1. Breaking down the segment further, travel-related customer volume represented approximately 71% of the total spend and grew 84% compared to last year. Revenue from travel-related customers was up 87% versus Q1 2022.

This reflects continued strength in the consumer travel demand, and we are very pleased with these results. Nontravel-related corporate payments customer volume grew 17% versus last year, and revenue was up 4%. This was led by continued growth in the partner channel. We also saw volume growth in our direct channel, and we are pleased to sign more than 40 new direct corporate payment customers in the quarter.

The corporate payments segment delivered an adjusted operating income margin of 46.9%, up from 36.7% in Q1 last year. There has been significant improvement in these margins as volume accelerates.  Our business model here is very strong and revenue drop-through for this segment is high given our relatively fixed cost base. Finally, let's take a look at the benefits segment. We continue to drive strong growth, resulting in Q1 revenue of $164.9 million.

The $43.8 million increase represents 36% over the prior year. We were very pleased with our SaaS accounts growth, which was up 14% in Q1 versus the prior year. A reminder that we view this as an important metric since it represents the underlying growth in usage of the platform and drives other areas of the business, such as payment processing and HSA deposit growth. benefits segment purchase volume increased 18%, leading to an 18% increase in payment processing revenue.

We also realized approximately $37 million in revenue from the custodial HSA cash deposits that were invested by WEX Bank and funds held at third-party banks compared to $9.5 million last year. Approximately $26 million of the revenue increase in this segment is due to the average interest rate earned on these balances increasing from 1.24% last year to 3.9% this year. This income makes us less sensitive to interest rates of the company as the revenue offsets higher interest expense in other parts of the business and serves as a natural hedge. The revenue is highly accretive to earnings, enabling us to perform well across a range of interest rate environment and providing some stability to navigate economic cycle.

The benefits segment adjusted operating income margin was 39.1% compared to 29.3% in 2022. The custodial revenue from the invested HSA cash deposits is the primary driver of the increase in margin. But if this is excluded from both periods, the core operating margin would still have increased nearly 1%. Shifting gears now, I will provide an update on the balance sheet and our liquidity position.

We remain in a very healthy financial position and ended the quarter with $922 million in cash. We have $776 million of available borrowing capacity and corporate cash of $149 million as defined under the company's credit agreement at quarter end. At the end of the quarter, the total outstanding balance on our revolving line of credit, term loans and convertible notes was $2.7 billion. The leverage ratio, as defined in the credit agreement, stands at two and a half times, which is at the bottom end of our long-term target of two and a half to three and a half times.

Next, I would like to turn to cash flow. WEX generates a significant amount of cash each year with Q1 typically being the lowest due to seasonality. Using our definition, adjusted free cash flow was negative $61 million through Q1, which is $16 million better than 2022. The beginning of each year is typically a weak time for cash flow due to the timing of some payments.

Also, as we noted last quarter, our deposit balances and, as a result, our reported adjusted free cash flow were about $150 million to $175 million more than we would normally expect, which were reversed during Q1. Our primary use of free cash flow this year has been to repurchase shares. We will continue to manage capital allocation between organic investment, M&A and returning capital to shareholders. Finally, let's move to revenue and earnings guidance for the second quarter and the full year.

The first quarter was a very good quarter for us. And as a result, I am pleased to share that we are raising our guidance for 2023 to reflect those results, as well as the benefit of share repurchases completed to date. Other than macro factors like fuel prices and interest rates, we are largely maintaining our previous guidance for everything else. Starting with the second quarter, we expect to report revenue in the range of $613 million to $623 million.

We expect ANI EPS to be between $3.45 and $3.55 per diluted share. For the full year, we expect to report revenue in the range of $2.45 billion to $2.49 billion. We expect ANI EPS to be between $13.85 and $14.25 per diluted share. These updated ranges represent an increase of $20 million in revenue and $0.25 of EPS compared to the midpoint of our previous guidance.

As I complete my prepared remarks, I would like to emphasize how pleased we were with our Q1 results. We have allowed these results to flow through to our guidance increase for the year while largely maintaining our previous guidance for the remainder of the year. We continue to execute well on both growing revenue and becoming more efficient servicing our customers. With that, operator, please open the line for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Sanjay Sakhrani with KBW. Please go ahead.

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

Thank you. Good morning. Melissa, appreciate all of the color on business development. Just listening to you and Jagtar talk about the business generally in the first quarter trends, it seems like you're not really seeing any appreciable signs of slowing outside of the over-the-road sort of freight area.

Is that a fair statement when we not only look across mobility, but just across WEX? And then, maybe you could just remind us what you guys are incorporating into the guidance?

Melissa Smith -- Chief Executive Officer

Sure. If you look across the business, I would agree, the over-the-road customers, we're hearing from them certainly continued weakness within their marketplace as spot rates are continuing to be lower. They're not talking about driver shortages in the way that they have in the past inferring, but there's a slowdown within that customer base. And we saw a negative 2% same-store sales within the over-the-road business.

But then when you migrate across the rest of the portfolio, our fleet mobility customers in our North American fleet business was actually up 2.5%. And so, we continue to see -- and that's across multiple categories. The biggest piece of that is some of the larger customers. I think some of that is continued rebound of people going back into the office, sales fleets being out and moving.

And so, I think we're continuing to get a little bit of benefit of that. But even the construction trades within our portfolio were up a couple of percent. So we're continuing to see strength within the North American fleet business. And as you talk to our customers that are in travel, this continues to be an area of rebound where we see strength there continuing, as well as if you go into our benefits business.

In benefits, primarily, the conversation is around still employee retention and how we're making sure we're offering benefits within the marketplace that are attractive and continue to evolve in the way that the marketplace expects. So really, really strong still conversations within our customer base. And then, we continue to have the assumption within our guidance that we'd have a slow growth environment in the second half of the year. So again, not necessarily because we're seeing that trend within our portfolio, but consistent with what we had said in the last quarter.

We just held that same assumption.

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

OK. Great. And just one follow-up question for Jagtar. Inside of mobility, I think you mentioned the slowdown in factoring revenue being a big driver of that finance and late fee yield.

Should we think about that as being the predominant sequential change in that yield? I know there's seasonality to the yield likely, but maybe you could just help us think through that. And how should we think about the rebound in terms of this factoring revenue on a go-forward basis?

Jagtar Narula -- Chief Financial Officer

Yes, thanks, Sanjay. Thanks for the question. So I said there were some puts and takes in that finance fee revenue. We've got some benefit from the ExxonMobil portfolio that we had purchased last year.

I think that was about $5 million. And then, on the negative side was the factoring item that you mentioned. That we expect. There's been the ongoing slowdown in the freight industry with spot rates declining.

That's brought down both the number of instances on which we factor the number of invoices, as well as the average dollars per invoice. That's brought the whole sort of factoring item down, and we're expecting that to continue at least for the next couple of quarters. There seems to be some ongoing spot rate stabilization in the freight industry, but we're expecting these kind of rates going forward.

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Tien-Tsin Huang of J.P. Morgan. Please go ahead.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

Hi. Good morning. Good results here. I wanted to ask on corporate payments, if that's OK, just thinking about rest of the year.

Any callouts with respect to volume and -- as well as yield? I'm asking because I'm just always trying to learn the difference between the volume growth and the revenue growth. I know the net interchange piece was down a little bit from incentives. Any clarity on how that spread might behave here in the next couple of quarters?

Jagtar Narula -- Chief Financial Officer

Yes, sure. Thanks, Tien-Tsin, for the question. So yes, you're correct. The take rate was down over last quarter primarily because of the scheme fees that we called out last quarter.

Within that segment, what we'd expect is the normal puts and takes between travel and our nontravel business. We'd expect kind of normal seasonality going into Q2 and Q3 on the travel side. It tends to be a higher quarter for travel. And overall, as you can see from the chart in the appendix that we posted to our website, travel does have a lower take rate.

So we expect some volume impacts from that as we go through the next couple of quarters.

Melissa Smith -- Chief Executive Officer

And in terms of what we're assuming from a volume perspective, we are assuming that idea of having a slow growth environment. We are assuming that you see a trail off in travel growth in the second half of the year. So still decent growth we have in our underlying assumption because we know that there's still pent-up demand, but coming off the highs that we're seeing in first and second quarters.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

Got it. No, that's prudent and makes sense. Just my quick follow-up. I know both of you talked about a little bit, just the stresses on the banking system and all the banking turmoil and deposit activity, it sounds like you managed it well.

I just want to make sure I understood that no impact on deposit funding from a WEX Bank standpoint. And also from a risk management standpoint, any change in operations, either on the benefit side or the corporate payment side, given all the cash flow activity that happens naturally there?

Melissa Smith -- Chief Executive Officer

Yes. But I'm going to start, and I'm sure Jagtar will add on to this. We have about $4.5 million worth of deposits that sit on our balance sheet. And so, those are a combination of CDs, which we used to fund the business, and then HSA deposits are the two largest pieces of that.

The CDs, it's interesting, even in '08 when there was a real freeze in the banking marketplace, people moved money into the CD market, and so it's a really stable source of funding. It's also, if you look across the whole deposit portfolio, we have over 95% of our deposits are FDIC-insured.

Jagtar Narula -- Chief Financial Officer

Yes. Let me add a couple of comments there. So one thing I would point out, just at a top level, you'll see that our deposits increased about $1 billion from the end of Q4 to the end of Q1 this year. And that's split roughly evenly between HSA deposits and non-HSA deposits.

So I think that provides evidence that our funding sources remain quite strong. When we look at our deposit base and a lot of the banking turmoil that we've seen has been basically people worried about non-FDIC-insured deposits. In our case, greater than 95% of our deposits are FDIC-insured. So I think that gives a lot of comfort to depositors with us.

And we've seen, as Melissa has mentioned, pretty robust demand for funding sources. In terms of operational changes, we are closely monitoring the banks that we work with. We've looked at a range of metrics around the banks we look at -- we work with, from what's the ratio of insured to uninsured deposits, credit default swaps, things like that, just to make sure that we're prudently managing money and moving it around where appropriate to banks that we're more comfortable with.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

Perfect. That's great color. Thank you both.

Operator

Your next question comes from the line of Dave Koning with Baird. Please go ahead.

Dave Koning -- Robert W. Baird and Company -- Analyst

Yeah. Hey, guys. Thanks so much. I guess in the mobility segment, the payment processing rate was really high.

And I guess I'm wondering if that's sustainable. And then, it seems like you also talked about the late fee impacts and then maybe a little bit of just macro on the fleet business. When you put all that together, can you still get the low end of the 4% to 8% that you're kind of talking about for the full year?

Jagtar Narula -- Chief Financial Officer

Yes. So our interchange rate was up nicely this quarter. I talked about some of the reasons for it in our prepared remarks. So we do have some escalator clauses that are built into our contracts.

And so, with the rise of interest rates, we saw the impact of that. We've also had some renewals come through, and we've been very pleased with the renewal rates we're getting, which has been up in certain cases, which also drove the higher interchange rate. There was really -- the onetime item in the quarter was really market movement in Europe, which was worth about 4 basis points of that interchange rate. The rest of it, I would largely expect to be recurring in nature.

So we should see these kind of interchange levels as we flow through the year. And so, our expectation right now is that we will continue to grow ex PPG, ex FX at our target growth rate of 4% to 8%.

Dave Koning -- Robert W. Baird and Company -- Analyst

Got you. And then, I guess, secondly, travel volume, per your charts, look like -- whatever it was, it was big. It was maybe 70%, 80% or whatever it looked like. What's it like in April? And kind of how do you think that is going to go through the year? I assume just the natural progression is not going to stay quite that strong.

Jagtar Narula -- Chief Financial Officer

Yes. We continue to see travel volumes in April in line with our forecast. So we -- this is something we watch closely, given the overall discussion about the macro economy. But so far, in April, things are trending well for us.

Dave Koning -- Robert W. Baird and Company -- Analyst

Gotcha. Thanks guys. Great job.

Operator

Your next question comes from the line of Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller -- Wolfe Research -- Analyst

Hey, guys. If we could touch on the benefits segment for a minute, the account growth there obviously has been, strong mid-teens-type growth, and now you're adding the Midwest manager as well. So how do we think about -- first of all, just if you could reiterate what's really driving that, what the strategy is for that business going forward and the kind of growth profile we can assume into the second half of the year, especially as this Midwest manager comes out as well.

Melissa Smith -- Chief Executive Officer

Yes. So as Jagtar said, we had a really strong open enrollment season. And so, when you think about that business, you do a lot of your onboarding before you start the year. So it gives you really good visibility in terms of what's going to play out in the course of the year.

And so, we feel good about how we've gone through open enrollment, the combination of the products that we have in the marketplace, the distribution channels that we have. And we work across a number of different partners supporting them and growing their business and then also directly, and you can see the benefit of that coming through. We also had a period of time where people were less likely to make changes because of what was happening -- a bit of an overhang from the pandemic. So I think that we've gotten the benefit of that.

We have pipelines that are continuing to fill and feel good about the close rates we have this year, which will more largely impact revenue next year. And we've talked about 25% to 30% growth for the year for the benefits segment.

Darrin Peller -- Wolfe Research -- Analyst

OK. I mean, that's obviously impressive. I mean, I think you guys have an investor event coming up around that, right, which we'll go into more detail.

Jagtar Narula -- Chief Financial Officer

Yes.

Melissa Smith -- Chief Executive Officer

Yes. We're excited to be able to really go a bit deeper in that business, make sure that people have the visibility and can really understand the products we have in the marketplace, how we compete. We're excited to do that highlight.

Darrin Peller -- Wolfe Research -- Analyst

Just -- if you don't mind, just a quick follow-up on the corporate payments side also. I mean, I know that this has been asked a bit, but I just want to understand a little bit more on the strategy of the business outside of the OTAs. Obviously, travel has been strong, but moving beyond the travel side again in terms of what you're doing to really invest there to differentiate it, where we see that headed.

Melissa Smith -- Chief Executive Officer

Sure. We have two primary products that we have within the corporate payments space. One, is the embedded payments product, which is what is used within our travel customer base. Think of that as a customer, typically someone who is highly sophisticated, is embedding an API payment stream within their workflow, and they are taking advantage of either our virtual card technology or other payment modalities.

And that product itself, highly tech-enabled, really important that has strong uptime. We have the ability to settle throughout the world in a number of different -- over 20 currencies. So there's a number of things that are really important to that customer base. And we've had good success in selling that into the fintech community, ultimately in the United States.

And we talked about AvidXchange from the customers that we had added more recently. The second product that we have is an AP direct product, where we have just started ramping a direct sales force. Historically, we've sold that product through a partner channel. And we've started ramping salespeople.

I talked about the fact that we've had 40 signings in the quarter. We feel good about considering the amount of capital that we're deploying into that sales force results that we've seen so far, and it's an area that we expect we'll continue to ramp. And so, those are really the predominant products we have in the corporate payments space.

Darrin Peller -- Wolfe Research -- Analyst

Understood. Thanks guys.

Operator

Your next question comes from the line of Nik Cremo with Credit Suisse. Please go ahead.

Nik Cremo -- Credit Suisse -- Analyst

Hey, guys, congrats on the strong results and thanks for taking my question. Can you discuss your 2023 growth expectations for travel-related revenue and corporate payments related revenue separately to arrive at the 7% to 11% guide? Should we expect the corporate payments to kind of trend in the 4% range and, I guess, travel to decelerate materially just from where it's at relative to the guide?

Melissa Smith -- Chief Executive Officer

Yes. So the second half of the year, because we assume that's going to be a slow growth environment, again, as we're going from really accelerated growth rates in Q1, dropping a little in Q2 but still some really strong growth rates in Q2 and our expectation in travel, with that trailing off into more of what, I would say, kind of the traditional growth environment. A little bit elevated still knowing that there's pent-up demand. And then, on the corporate payments space, we are anticipating continuing at that single-digit growth rate in the course of this year, which is a combination of where we are with ramping up customers and starting this process of adding new customers with the ramp of our direct sales force.

Jagtar Narula -- Chief Financial Officer

Yes. I would say -- I would just add that -- a reminder that we project -- we gave guidance of 10% to 15% growth rate for the travel and corporate payments or the corporate payments segment overall. And I would say that travel will be the higher of that, and corporate payments would be on the lower side.

Nik Cremo -- Credit Suisse -- Analyst

Thank you.

Operator

Your next question comes from the line of Bob Napoli with William Blair. Please go ahead.

Bob Napoli -- William Blair and Company -- Analyst

Thank you. Good morning. Just within the -- changing the name to mobility solutions at this point, Melissa, just is there a deeper strategic meaning behind that?

Melissa Smith -- Chief Executive Officer

Well, when we talk about the segment internally in the businesses, we think of it as more mobility plays, and as we continue to expand what we're doing, even with our traditional fleet customers as we're moving into this mixed fleet environment, it migrates you into new offerings in that space. So it's really indicative of how we're running the business, where we think it's going strategically.

Bob Napoli -- William Blair and Company -- Analyst

OK. And then, just on your B2B payments business, I mean, as you had called out, I know with Flume and any progress what you're seeing with the SMB customers. And I think -- I mean, related, but you had called out weakness in smaller customers within mobility last quarter. Is that weakness the same on the smaller versus the larger? So I guess two questions.

Melissa Smith -- Chief Executive Officer

Yes. And so, just to be specific, last quarter, we talked about weakness in the over-the-road customer segment, smaller.

Bob Napoli -- William Blair and Company -- Analyst

Right. That's the SMB. Right.

Melissa Smith -- Chief Executive Officer

Yes. Jagtar talked about the fact we've seen that stabilize within our portfolio. So we saw this kind of runoff of customers that -- where we think it had kind of this acute issue of a big ramp within that marketplace, where a bunch of people added new vehicles, and that went down. Spot rates went down.

And so, the people that were newer in business and smaller in size, we've had a very targeted issue within that part of the portfolio. We have, again, seen stability within the portfolio. And as we -- it looks like that has largely run its course. We are aware in monitoring what's happening within the marketplace.

And we have made changes with our credit approval processes, both for the over-the-road business and our traditional retail business, to tighten credit standards in keeping with this idea that we're anticipating or planning for a slow-growth environment in the second half of the year. And so, I think we're getting some of the benefit of those earlier moves that we've made and what we're seeing in the portfolio right now.

Bob Napoli -- William Blair and Company -- Analyst

And as for Flume or that effort?

Melissa Smith -- Chief Executive Officer

Yes. So Flume is still -- I'd say, still early days, and we've had -- we started this about 15 months ago. We have hundreds of customers that are using the product. We continue to add to the product set that we have in the marketplace.

And so, I'd say, so far so good in what we're seeing with that business, and it's something we're going to continue to learn and evolve. And it should play into the 1% to 2% growth we have slated for new product revenue and our long-term growth framework.

Bob Napoli -- William Blair and Company -- Analyst

Thank you.

Operator

Your next question comes from the line of Ramsey El-Assal with Barclays. Please go ahead.

Ramsey El-Assal -- Barclays -- Analyst

Hi. Thanks for taking my question. I wanted to ask about the corporate payments segment. I know you mentioned a few times building out the direct sales force, inking 40 new deals.

I guess can you help us think through the timing and impact of not only implementing those deals kind of more tactically but also the degree over the longer term, whether we should expect more of a mix shift to direct and whether that could have an impact on segment yields over time, a positive impact?

Melissa Smith -- Chief Executive Officer

Yes. So there's a couple of things that are happening within that segment. So we are continuing to build the direct sales force. We are also continuing to work with the customers that we have on board to make sure that we are continuing to meet the needs that they have in the marketplace and to look for areas that we can further ramp that customer segment.

And so, when we think about growth within that part of the business, it's a combination of growth from the existing customer base that we already have, ramping on the direct side and then continued benefit from the existing partners that we have in the marketplace. And we think of that with multiple levers. And the team is focused on each of those areas. So when we talk about that segment, kind of the long-term growth rate that we've had for that segment is 10% to 15%.

And that's really -- what we're working toward is we're architecting both the way that we're thinking about go-to-market but also the products stuff. And you also asked about rate.

Jagtar Narula -- Chief Financial Officer

Yes. So Ramsey, I mean, I think you asked a longer-term question. So those direct accounts would come in at a higher rate, which is one of the reasons we go direct there. So to the extent that that becomes a larger mix of the total, you would expect that to be a positive benefit to the rate.

But as Melissa just mentioned, we also expect the other segments to continue to grow as well.

Ramsey El-Assal -- Barclays -- Analyst

Got it. And then, a follow-up for me is, could you provide just an update on the broader market opportunity in the mobility segment? I mean, for a good reason, you're prioritizing electric vehicles. Is that where you see the largest future growth opportunity? Is there an ex EV opportunity, I don't know, internationally, and even in the U.S. ex EV, where are there still compelling opportunities in the market?

Melissa Smith -- Chief Executive Officer

Yes. It's been a great part of our business. It is an area that we continue to take market share. And you can see that in the growth of vehicles that we've had within our base, and so we start with that.

As we think even within the existing customer portfolio of products that we have, we will continue to take market share and build on that position. A lot of focus that we've had has been on building out digital capability, and we've talked about that a lot over the last couple of years. We brought in our chief digital officer, first time we've had one, a little over a year ago. And she's doing some amazing work with our technology and commercial teams and really looking at how we can, from an end-to-end perspective, look at that customer experience and even greater digitize that experience, which has a super benefit.

It's a better customer experience. We lose less customers coming through but also at a lower cost. So I feel good about the path that we're on because not only would we have the ability to continue to use the sales channels we have now but to enhance that with further digital capability. So we start with that because I think that there's still meaningful opportunity there, both in the United States and outside the United States.

On top of that, within the mobility space, this conversion to EV, increasingly, we see this as an opportunity. The products in the marketplace right now, I talked about in the prepared remarks, or the ability to move our customers letting them by as they are on the go, having this charging network, reimbursement capability and then eventually depot capability, those are really, for us, the starting points because we know, from talking to our customers, they want one integrated bill, one system of record. They want all that data so that they can really understand the total ownership -- cost of ownership for their fleet. We've seen lots of opportunities behind that.

There's many different use cases that are emerging even now in this early part of this process that we think that we can help facilitate. So we do believe that not only do we have this opportunity nascent within the existing customer base, with the products they have but we're building in the future, both through digital capability and through this migration to a mixed fleet offering that's going to create opportunity for us.

Ramsey El-Assal -- Barclays -- Analyst

Very helpful. Thank you.

Operator

Your next question comes from the line of Mihir Bhatia of Bank of America. Please go ahead.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Hi. Thank you for taking my question. I wanted to maybe just start with just your intraquarter volume trends. Particularly, I think you mentioned some weakness in OTR.

But I was curious, are you seeing macro weakness anywhere else? Like I understand your guidance is for a slowdown in the back half, but have you seen any actual slowdown yet across your businesses?

Melissa Smith -- Chief Executive Officer

The only place that we've seen a slowdown is in that of the over-the-road customer base, and I talked about same-store sales being negative 2%. That was a place where we're seeing positive same-store sales during the bulk of the pandemic. And so, it's been negative for a few quarters now. The rest of the portfolio, some of the growth rates are slowing within same-store sales, and I talked about the fact that a lot of the benefit that we received in the quarter came from some of the larger customers.

But when you look into the individual SIC code, like construction still grew same-store sales 2% year over year. And so, I wouldn't describe it as weakness, I would say, more slowing of the growth instead.

Jagtar Narula -- Chief Financial Officer

Yes. Mihir, I would just add, like I said, the travel trend into April continues as expected, and we've seen the same thing with fleet gallons as well has continued into April, in line with our expectations. So we're just seeing good.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

OK. The other question I had was, Melissa, you mentioned a couple of big customer signings in your remarks. I think the multiemployer administrator in benefits, the large health system in corporate payments. But I wanted to understand how fast do these signings contribute to revenues? Like are we thinking that's like second quarter or back half of 2023 thing? Or is this more likely 2024 contributors? I'm just trying to understand the onboarding process, the ramp when you do some of these big customer signings in different businesses.

Melissa Smith -- Chief Executive Officer

Yes. When we plan the year, we look at what do we have for existing customers to the kind of the run rate of revenue that come into the year. Included in that, we look at what do we have for contracts that have been signed but not yet implemented and what -- so what do we need to actually push through from an implementation perspective? And then, what do we need to go get in the course of the year? So some of that impacts 2023. Some of that will impact 2024.

And in each of our areas of our business, we're really focused on each of those things, making sure that we retain our existing customers and are maximizing from that, implementing and then signing new customers. So any of these individual contracts are relatively small in terms of the contribution to 2023. But they -- it cumulatively become quite meaningful for 2024.

Jagtar Narula -- Chief Financial Officer

Yes. Mihir, I would say that the contracts that Melissa talked about are factored into the guidance we've given out. So for example, the benefits contract that you mentioned, I mean, we've talked about the 25% to 30% growth in our guidance. And I'd say those contract expectations would have been built into that.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

OK. And then, my last question, just on capital allocation. Given this more challenging fundraising environment, are you seeing more interesting opportunities on the M&A side? Can you just talk a little bit about where you are focusing on the M&A side right now? Is it in benefits? Is it corporate payments? Is it finding some kind of adjacency expansion capabilities? Like how are you thinking about M&A right now?

Melissa Smith -- Chief Executive Officer

Sure. Sure. And M&A is something, obviously, we're always active. And the -- when we think about opportunities, what we're looking at is either product extensions that we go through an analysis of do we want to build, partner or buy as we're doing our product evaluation.

So that's an area where we look at product or product adjacencies across really in any part of the business. We look at scale plays, so the assets that are larger in size, which are more just financially accretive, less about the product. And then, we look at geographic expansion capabilities, and so there's an active mix across those categories. We have also been very focused around EV innovation.

And so, we have a whole separate work stream that we've added over the last year. Those assets tend to be much smaller in size. And so, working through those, looking at assets we want to invest in. In terms of what we're seeing from a multiple perspective, there still is a disconnect between what we're seeing in private multiples and public multiples.

Specifically in the corporate payments space, I'd say it's more acute there than some of the other areas of the business. And we keep that in mind as we're working through all of this. And so, we continue to look at assets, move assets through our pipeline, sort of the same rigor that we have historically.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Thank you. Thank you for taking my questions.

Operator

Your next question comes from the line of Andrew Jeffrey with Truist. Please go ahead.

Andrew Jeffrey -- Truist Securities -- Analyst

Hi. I appreciate you squeezing me in. Melissa, I like the color on the direct corporate payments offerings. Can you elaborate a little bit -- I guess, it's also on lines of M&A.

Do you feel like you have the capabilities internally at this point that you need to grow that direct business? Or do you need to invest at an elevated rate and/or go out and buy technology to really ramp up that direct -- I'm thinking about the AP automation and remittance piece specifically?

Melissa Smith -- Chief Executive Officer

Yes. We've definitely looked at this business similar to the way that we look at everything else. We are looking at where do you want to continue to build, and we've had a bias of buildings just again because of what's happening with multiples. So we have ramped the investments that we've made in that part of the business over the last couple of years.

And we're fine doing that if we see an opportunity within that space. And we'll continue to look at where should we build, where should we partner, where should we buy. So we're continuing to sell in the marketplace. We have a product road map of what we intend to deliver into the marketplace.

And we will evaluate whether or not we should continue to do that from a build perspective or if there are opportunities to buy. And I would say that's true across every part of the business, so that's the vetting process.

Andrew Jeffrey -- Truist Securities -- Analyst

OK. But it doesn't sound like you have to go out, in your mind, and buy something to have success there?

Melissa Smith -- Chief Executive Officer

No, I think it's a market that will continue to evolve. So we want to make sure that we are continuing to invest in that space. We do feel good about the products that we have. Flume is something that we think is really interesting in this space, and it's something we continue to build upon as well, with that being much more of a down market play within the marketplace.

And so, an area that we will continue to invest and evolve. I guess, is probably the way I'd say it as opposed to -- I don't think you can feel like we're done. But we feel like we have a good foundation that we continue to build upon.

Andrew Jeffrey -- Truist Securities -- Analyst

OK. And if I could just ask one follow-up to that. Just in the benefits business, you've had a couple of really strong open enrollment seasons, and obviously, these new wins. Is that -- are we still early enough in the secular shift to consumer-paid HSA that we can continue to expect big open enrollment seasons that provide momentum and visibility sort of year in and year out in your benefits business?

Melissa Smith -- Chief Executive Officer

Yes. When we've talked about the long-term growth rate of that being 15% to 20%, a piece of that comes from this continued shift to consumer-directed healthcare. A piece of that is also coming from this anticipation that we'll continue to benefit from the custodial deposits that we have. And so, the growth with movement to HSAs has slowed, but it is still a strong grower.

And one of the things that we find interesting about that part of the business is it's also really resilient. So it would be growth in most any environment because you get the benefit of this movement to consumer-directed healthcare, you've got benefit costs continuing to go up, and then we continue to build upon our distribution channel. And so, those things, combined, have been a really great contribution to the overall business.

Andrew Jeffrey -- Truist Securities -- Analyst

OK. Thanks. Appreciate it.

Operator

This concludes the question-and-answer session. I will turn the call to Steve Elder.

Steve Elder -- Vice President, Investor Relations

I just wanted to thank everyone again for hanging with us as we go a couple of minutes long here, and we look forward to speaking with you again in about three months. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Steve Elder -- Vice President, Investor Relations

Melissa Smith -- Chief Executive Officer

Jagtar Narula -- Chief Financial Officer

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

Dave Koning -- Robert W. Baird and Company -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Nik Cremo -- Credit Suisse -- Analyst

Bob Napoli -- William Blair and Company -- Analyst

Ramsey El-Assal -- Barclays -- Analyst

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Andrew Jeffrey -- Truist Securities -- Analyst

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