WEX Inc. (WEX) Earnings Call Transcript & Summary

[Audio Gap] of our annual FinTech and payments conference. Again, my name is Sanjay Sakhrani. I lead the consumer finance and payments research efforts at KBW. I hope you guys found yesterday informative. It was a long day, but we had a lot of different companies and a lot of different topics that we discussed and I at least learned a lot. Next up -- or our first presentation of the day is WEX. I'm joined here with Melissa Smith, who's been in her role as Chair and CEO of WEX since 2013. And next to her, Steve Elder. He's the Head of IR. Melissa has been with the company for over 25 years. Yes?

No, [indiscernible] look young.

No, you look great. And has held a number of leadership positions across the company, including 4 years as CFO.

So maybe Melissa, we start with question number 1 on the economy, right? You guys talked about it on the conference call. You're seeing small pockets of impact. Maybe you can give us an update on how things are panning out?

Sure, love to. When we gave guidance for the year, recall, we said we thought the first quarter, we would continue to see strong volumes and we have continued to see strong volumes. The 1 pocket that we started seeing some weakness in towards the latter half of last year was the over-the-road business, so like in little pocket within our fleet segment. And that has continued to be a little bit softer as we had expected in the quarter. Other than that, travel volumes have continued to rebound nicely. So strength there, strength within our Health segment because we had really strong enrollment season. So we've continued to have really good volume coming through that part of the business and in our fleet business has continued to perform as we had expected. So say -- so far, we're just seeing like a little -- 1 little area in the economy that's more acutely soft.

And I guess like is there any commonality in that small pocket that's causing the impact? Like is it that this cohort is seeing the impact of inflation or the demand is slowing? I'm just curious if there's something specific there.

Yes. Look, what ended up happening towards the end of last year was spot rates within the freight marketplace dropped and that squeezes the smaller players within the marketplace. And so you started to see the shift in who was actually providing the services towards the end of last year to larger carriers. As a result, they had more of the capability to ride through because they're typically not being paid off spot rates, where the smaller carriers started to get squeezed and that just has continued through this year. And so what you're seeing is some of the smaller players, may like 1, 2, 3 vehicle over-the-road fleet customers, are really having a hard time where anything bigger or has been in business for a while is managing to actually make it through this period of time.

Because they have more liquidity.

They have more liquidity.

A lot of them were newer businesses. Newer start-up businesses, and they got into the market because spot rates had gone up so much during the pandemic. They made a lot of money at that point. But then when spot rates came down inevitably, it didn't end well for them.

And is there anything you're doing in terms of your -- I know you've baked it into the guide in terms of how you're managing the business and underwriting these new cohorts. Like is there anything that you've done to change the way you're growing?

Sure, sure. And that is a cyclical business. So think of that part of the business where there's actually quite a bit of fluctuation in how we're extending credit over time. And so we've tightened credit standards, reduced credit lines, particularly focusing on those who are newer business and smaller in size in the over-the-road segment. And then kind of at a macro level, looking across the rest of our fleet business. We actually had started tightening credit standards within our North American fleet business maybe a year ago is we started to see some noise around what might happen with the economy. So we had done that a while ago.

So final question on this topic. You don't think -- this has not been a historical trend where you see this pocket deteriorate and then it starts moving upwards. Like you don't feel like this is a canary in the coal mine or anything like that? It's sort of unique situation.

I think that actually, there was softness in this market a few years ago, so it doesn't always tie into what's happening with the broader economy. It's certainly something we're paying attention to. And again, when we gave out guidance, we did guide to the latter part of the year being a slow growth environment just in case.

And that's just to be conservative.

It is just to be conservative. It's not because we're seeing something that indicates that.

Anything you want to add to that, Steve? I know you talked to a lot of people. I guess maybe just moving on because I also heard on the conference call, the reiteration of the targets. Maybe you could just talk about what gives you the confidence in these targets today. I'm sure like the way the building blocks might be a little bit different than they were before. And obviously, the health care business is doing quite well. Travel has done really well. Corporate payments is growing out. So maybe just talk about the different inputs there.

Yes. So our -- just to reiterate our long-term targets are a revenue growth of 10% to 15% earnings growth, the 15% to 20% fuel price, FX neutral. Part of the confidence is because we have a good history of delivering on those. And if you kind of go through the pieces, we parsed out in our Investor Day our growth strategy of how we're going to get to those numbers, and we actually talked about how we did for the year last year compared to that. So we have strong markets there and we're going to grow 4% to 5% from our existing customer base. We overdelivered that last year. It was 14% growth, so significantly higher. Then if you kind of keep going across that, we have a really strong sales engine, and we have a history of bringing in new business. And if you can look across our portfolios last year, we had 14% growth of our Health business. We brought in 1.7 million new vehicles during the course of the year within our fleet business. We had exponential growth within our travel and corporate payments business. And so we said that that's going to contribute 3% to 5% of our growth annually. And last year, that was 4%. So that's net of attrition. So new customers coming in, net of those that are leaving us. And then on top of that, we're going to deliver new products. We've been ramping up what we're doing from a product perspective. And we've got some great new product offerings that are in the mix. That's going to deliver 1% to 2% growth. Last year, that was 2%, on the high end of that range. And then finally, M&A, which is 2% to 3%. So my confidence as you go across each of those areas is that we're in large markets, those are growing, so you get a tailwind associated with that. We're doing a great job bringing in new business and retaining customers once they come in. And then on top of that, we're going to continue to work on delivering new product offerings into the marketplace.

And I guess how much of a cross-sell opportunity is there inside the business? Maybe you can just talk about that.

Yes. So as you know, we reorganized the business a little over a year ago, where we created geographic areas. So we have a COO internationally and a COO of the Americas. And that was really to start taking advantage of all the work that we've done on the underlying technology, where we're starting to share the platform and technology base across the different products that we have. And so it's also offering the ability for us to cross-sell. And so it's early for that. So we've said in the call that we have -- we had 100 new customers that came through cross-selling. And I think about that coming through with infrastructure light. So we've been building out the infrastructure related to that so that that can happen with larger customers much more fluidly. And then we're really focusing on the digital experience with our smaller customers. So digital first. As we bring new customers in, let's say they come in our fleet business, then we have the ability to then start cross-selling them other offerings. And so it's early. We see this as actually a large opportunity for us, and we'll talk more about it as we go, but we're I would say right now still in that building phase.

Right. You talked about being on track to deliver the $100 million in savings on OpEx. Maybe you could just talk about some of the areas you're targeting to get those savings. And just broader comments on operational efficiency because I mean it seems like you have a pretty leverageable business model.

Yes. So $100 million worth of run rate savings exiting 2024. And so we -- and we said that we would have half to 2/3 of that by run rate as you exit 2023, and we're on track for that. So as you kind of step back and look at that, I talked about a lot of the work that we've done on the underlying technology. That's really enabling us to start to look across the platform and say where are there things where we're doing multiple ways or using multiple systems, creating efficiencies associated with that. We've also been using technology. So things that have been done historically, we might be able to replace with robotics automation or machine learning or artificial intelligence depending on what the subject is. And so it's really allowing us to tap into this platform that we've created using new tools and technology, and that's creating efficiency. So I'm super excited about this because I think that we can create a better customer experience through the use of technology and a better employee experience and you can do it at a lower cost. And so I think that this is a -- it's been a big focus of ours because we see this as a great opportunity to increase Net Promoter Score and play satisfaction and in our costs. And so feel really good about where we are.

And then just long term, maybe just talk about how much leverageability there is in the model beyond the $100 million.

Yes, you can see when we bring in revenue across the business, it is highly scalable, and they dropped through a different rate, but they're -- across the board, you're dropping through at very high rates. And our goal is to make sure that we're setting up the platform in a way that can continue to increase that drop through. We've done a lot of work. I'd say like a great example is our Travel and Corporate Payment segment, right where we -- yes. So we did a lot of work a number of years ago within that segment to work on the underlying technology so that as we bring new spend volume in, particularly on our embedded payments product, you can see that it has a very high drop-through rate associated with that. And so feel good about the fact that we have the ability to create that leverage across the platform. And at the same time, part of what we said we're going to do with these savings is reinvest half of them. And so it's like a flywheel. You get these savings, you have an ability to actually reinvest it, then you can get more value. And we're seeing that live right now is we're starting to see the benefit of the work that we've done. We have an ability to then take that work on a different type of digital experience or in our -- like some of the -- our finance group, as an example, you can actually go through and look at some of the back-end processes that we have and create automation from that and use that money to create a better customer experience. So I'm really excited about where this is going. And at the end of this, what we want is this global commerce platform that is something that we can use across all of the services that we provide. And each year, we get closer and closer to that.

Got it. So maybe we dig into fleet. And maybe just want to level set sort of where fleet is right now before we go into like some specific questions. Obviously, EV is a big discussion topic. The core business seems to be doing quite well, nonetheless. So maybe just talk about the push and pull there.

Our fleet business is -- it's been a great growth vector for us. It's an ability for us to bring in small customers. If you look across that portfolio, we talked about the fact that we added over 100,000 new customers last year. Some of those coming within our fleet business. We have this marketing machine that is out there digitally marketing into the marketplace. And we're bringing customers on a very regular cadence as a result. And so we feel good about our ability to continue to bring in new customers, both in the U.S. and then internationally. You talked about EV. So when I think about this segment, the growth is largely coming from in the short term, new customers coming in. We get a little bit of pickup from our existing customer base, but I'd say that the bulk of the growth comes from just new customer acquisition. On top of that, we see EV increasingly as an opportunity for us. And what we're hearing from our customers is that what they definitively want is the ability to be able to integrate their gas-powered vehicles with what they're going to have for electric vehicles into 1 product offering so that they can understand the total cost of ownership for their fleet. So want an integrated experience where they're getting 1 bill where they're using 1 payment product. And so that's just creating a huge opportunity for us. And we have 18 million commercial vehicles that are going through this transaction that will happen over an extended period of time. And so the offerings that we've entered in, both in the U.S. and in Europe, are allowing people to purchase fuel -- I'm sorry, purchase electricity as they travel. And then our short-term goal is to be able to purchase fuel as you go, also use depot charging in order to -- think of it as a fleet who's out there moving around. Do you want to be able to charge on the fly. You want to be able to reimburse people as they're charging at home and you want to be able to reimburse for depot charging and then integrate that with all what's happening with their gas-powered vehicles. And so that's been our short-term product approaches. It allows us to shift our revenue stream as part of this migration. So we can go from the interchange that we're receiving, we would receive less interchange going forward, but you start to earn subscription fees. And when we've looked at this, we've talked about the fact that we believe that we have an ability to increase the revenue opportunity that we have. We talked about the $1.5 billion to $2 billion of TAM associated with just these initial product offerings. And so our focus in the short term has been building up those products. The customers that we have on are still small, about 200 customers that are using our products right now, which is up 100% to the end of the year, but still very small. And they are paying us fees in the range that we expected. And so right now, everything we're seeing is that this is a positive product.

[ Wouldn't it ] be 1 platform that does both?

They wanted to have the ability to -- yes. So think of this as...

Have you built that out? Or is that in development?

So pieces of it are built out. So obviously, we have the ability to pay for the gas-powered vehicles. We have the ability to charge as you travel. And then the pieces that we're focused on continuing to build is reimbursement at home and then depot charging.

That'll be the longer-term opportunities. There's all kinds of complexity around these transactions as well. So think about energy management. It's a lot cheaper to charge a vehicle in the middle of the night than it is in the middle of the day. And how can you have an effect on that? There's, for public companies, ESG reporting. There's all kinds of complexities around this. What does that driver do for the half an hour that they're charging the vehicle in the middle of the day, right? So things that our customers are going to need to figure out from their operational standpoint, but also things that -- value that we can bring that gives us that kind of sense of this is as much opportunity as anything for us.

And what we're hearing from our customers is they're generally going out. They're buying vehicles and then they're saying, I don't know what to do, can you help me? And so again, it's just -- it's creating an opportunity for us to provide even more value to that.

There's a power of incumbency here in your [ mind ].

There is, yes. In part, part of the mode is the fact that this transition will take some time. So the ability to have an offering that serves both their existing customer base and as they transition to EV is really important.

And is this happening more outside the U.S. than in the U.S.?

Europe is definitely faster, yes. Yes. In the U.S., there's interest, and people are making orders. But I would say they're largely either driven by a really large company and ESG reporting requirements or I'm a public entity like the new business with the federal government more than half the states. And so there have been kind of the first movers in the United States where there's certainly more pressure in Europe.

Okay. Maybe we just drill down a little bit. You talked about this micro segment that has seen some pressure. But just any other trends large versus small in fleet even thinking about growth, not just credit. Like if we think about the opportunity, large versus small, I mean, over the road has been a big push over the last, I don't know, many years and that's been obviously a great growth vector. As we look ahead, how different does that look?

So let me talk a little bit about how we acquire business, like if you go across our go-to-market channels. So across every part of the business, we go to market both directly and directly through partners. And so in the fleet business, specifically the partners that we're doing business with are think of most of the major oil companies are customers of ours, so we go to market as if we're them. Those offerings tend to be geared towards smaller companies. And we also go to market for a number of midsized oil companies and then directly. And so we're canvassing the marketplace with a number of different offerings. And so if you look at the acquisition engine that we have, the larger customer base we're going with people that are in the field that are directly going after customers. And then the bulk of what we're doing is happening focused on the smaller customer base. And so if you look at the growth opportunity, we still are winning business, both on the over-the-road customers and the local fleets with larger-sized vehicles. But the majority of the wins are happening within the smaller customer base. And that's just because if you look at the marketplace, it's like a pyramid. And so we've continued to see a huge amount of opportunity to bring in new customers in that small end of the marketplace. And so if you look at our forward growth, it will be geared towards smaller customers just because of the size of the market.

And a lot of that is singles and doubles type things.

Yes, exactly right. Yes.

It's not -- there's not a lot of aggregation happening there by other parties.

No. Well, the aggregation is happening through our partners. And so we do business with some of those. And specifically in the over-the-road marketplace, there are some people that are active aggregators, but they send -- they're partners of ours.

Okay. But you don't see that as a bigger trend because I'm going to assume that like that becomes a little bit marginalizing.

No. No. Actually, even where you're seeing that as a trend, I wouldn't actually describe it as margin-wise. I mean, the offering that we have is integrated into what -- so think of it as like a sales engine associated with bringing in new customers, but we're actually providing the product.

Right. Just that they would have like the customer -- like the customer relationships. Sometimes they -- the intermediary wants more for that customer relationship.

Yes. But that is still very strong economics.

Okay. Got it. Maybe just a little bit more on international. Like I know Europe has been a push. We've been sort of waiting on Asia a little bit more for the big fuels to come around and switch. I mean, where are we with all of that?

Yes. We have not focused as much on providing the technology as a service with -- internationally. So as people come to us because they're interested, then we have been certainly responsive to that, and particularly with the largest companies in the world that are interested in having global partnerships. And I say that because as we offered our technology globally, typically, what we're finding when we go into a number of those marketplaces, there's a lot of -- you're working with somebody who has a lot of complexity on their underlying technology base. So it's not as simple as I'm going to connect to your API. And so it's actually a lot of build we end up doing for each of these parties. And so we have done it. We'll continue to do it, but we're increasingly selective of where we provide that type of service because it's hard to actually create scale out of that model. And so we've talked about OMV as the most recent customer in Europe that we're providing services for. So again, we have the underlying product and the technology. We provide professional services globally from a technology perspective, but it has not been a huge focus of our growth. We've been more focused around how we can build out the direct and partner channels that we have, both in the United States and Europe and in Australia.

Great. I'm going to shift gears and talk about travel. Obviously, volumes still remain below 2019 levels. Asia being one area. Maybe you could just talk about the opportunities for growth in Asia and just broadly?

Yes, sure. Pre-pandemic, Asia was about 20% of our portfolio. It's been around 10%, maybe 12% of our portfolio most recently. And for us, Asia is travel that's happening outside of China. And so -- but it is certainly impacted by what happens in China. So we do continue to see that as an opportunity for us to seek further rebound. What has happened in the travel marketplaces that you've seen, as you said, volumes are -- transaction volumes are below 2019, but rates are higher. So we've seen kind of a nice pickup from a rate perspective. And those rates have moved around over the last few quarters, which is I think normal. So when we think about the opportunity to grow, we still think that there's continued rebound from the pre-pandemic levels in transactional volumes in part -- in big part because of what's happening in Asia, but even more broadly. And then we think there's a continued benefit of what's happening from a -- and this is where we do benefit from an inflation perspective. As rates go up, we get -- we are a net benefactor of that. And then just in general, that marketplace has historically grown in the high single digits. And so we think that you'll get market growth even beyond the rebound that's happening from the pandemic.

Are there share gain opportunities like inside the OTA volumes and such?

There are, yes. It's not just within the OTAs that's offering different type of services. So the primary offering that we have within the travel marketplace is paying for hotels, and that's because hotels are largely franchised. And so insert our offering allows us to eliminate a lot of complexity related to travel spend. So this is -- so just to kind of back up, if you're going to go and book a hotel room with an online travel agency, you're going to pay with your consumer card. And our technology integrates into their system to then facilitate the payment to the hotel and it gets matched one for one. So the beauty of that is that it works with -- if you're a startup OTA, they can actually use our technology and it scales as that business grows. And so really frictionless, highly integrated. And then we get involved globally on cross currency. So as we are settling an issue in a number of currencies globally, we have the compliance structure to do that globally, which eliminates a lot of complexity that they have from a treasury perspective. And so that hotel payment is incredibly complex, which is why that was the -- really the starting point for us. We're also involved with airlines more in Europe. But increasingly, we think that's an opportunity in the U.S. as well. And so as you continue to penetrate not just with the OTA, but also as you get this migration to look at other sources of spend, we do think that's an opportunity. And then in Europe, you've got this migration of moving more and more to a model where they're expecting that customer to make that prepayment. That's where we get involved. And as that migration to the merchant model continues to evolve, we also get market pickup from that. So we do -- there's a number of different opportunities here.

And is there any other use cases for the virtual card product outside of the OTA travel?

Yes. Well, we use it in a number -- like we use it with insurance payments. So think of like aftermarket warranties, so there's a number of different...

Nothing big enough to really...

I mean, they are overshadowed by the -- just the size of the travel marketplace, but we are involved and continue to bring in new business and not just with the virtual card payment. Sometimes it's using the underlying technology that we have to facilitate the card programs kind of all the way through to the virtual payment. This embedded payment concept that we use at travel companies, we've also deployed with FinTechs and say they're going into the marketplace, they're doing something else. They're taking our technology, embedding a virtual payment associated with that through the use of an API, a highly again, highly scalable model that we have, where we can provide those services to our customers. And what they're interested in and part of why they come to us is a, the reliability. That's really important because they're operating 24/7 as their brand and the technology is incredibly scalable and has worked really well.

It's done really well. Maybe we shift gears, talk about corporate payments. Can you just like level set for us right now what corporate payments is and then maybe just the competitive dynamics there? Because there's so many different players doing different things, and you work with many of those players that we know.

Yes, yes. So the corporate payments for us, we would split into 2 different product offerings. One is embedded payments, which is travel is actually a use case of that. So beyond travel, we just talked about the fact that we embed our payments into a number of different workflows. And as a result, we're earning revenue associated with that. So we're earning largely interchange revenue and are sharing a piece back with our partner. And then beyond that, we have an AP direct product offering, which we are -- where we're taking and fulfilling people's AP needs electronically on their behalf. And so that is something we do both with partners. And so with the partners or people, think like American Express, where we're providing the technology to them and they're going into the marketplace and selling or directly where we are with our own direct sales force, which is still relatively small for us. We have been ramping it, but it's been -- we've focused mostly on those partner channels first and providing the offering and it's been a source of growth for us.

And it's mainly the mid-market companies?

Yes.

Okay. And then as we think about the growth potential from here, is it more on the smaller end with Flume? Or do you continue to see like great opportunity growing with your partners and...

Yes. So within the space, we've created a digital offering. So think of this as a digital wallet where you can pay and get paid, which is branded Flume into the marketplace, which is giving us this entry into that small end of the marketplace. It's a huge market. We think, I mean, honestly, we're going to be canvassing, looking at many different opportunities here. But we're excited about Flume. We think of that as like it's a great chassis that we've built. We have the ability to use that in many different ways. And I think of that as when I talked about the 1% to 2% growth in products, Flume or Flume-like offerings are part of a number of different shots on that goal that we're going to have. So I would say within corporate payments, we're focused on the product offerings that we have, which are the Medi product offerings and the AP direct offerings. Flume is a digital component of that and we'll continue to build out functionality, focusing on both our existing customers, which is really focused on how do you take an existing fleet customer and digitally offer them something more. So we'll have that continued focus. And then as you get into the mid-market, that's where we're going to go into the market much more directly.

Okay. I think there was a question on your conference call just talking about like your learnings up until now, I mean, so far, so good in your mind?

Yes. Learnings for...

For Flume as you've rolled it out.

Yes. I think part of what I get super excited about is -- you asked a technology question a while ago. Like we have evolved so much over the last 5 years that the ability to take an idea, have a team segregated to work on it, spin it up and bring it to the marketplace rapidly and then go through a prototype to a beta to an alpha beta test. It's just -- it's incredible. And so our learnings have been a number of different things, but one, segregating a team to work on innovation is something that's been highly successful for us. Doing things that are customer-focused innovation, which has been 1 of our core strengths, is also really important to us. So we're not innovating just to innovate. We're actually -- we have a huge customer base. And so we're taking advantage of that to listen to what are their needs, what type of problems do they have that we can actually solve. And we spend a lot of time not just on them telling us what do they want, but us really kind of digging in and saying, what inherent need do you have that we can actually solve and then watching their behavior patterns associated with that. So I feel like we have this ability to rapidly prototype and move into the marketplace. And we will learn a lot of things. Some of these things are going to fail. Some of the things are going to do great and like rapid cycle is an important component of that.

Absolutely. Absolutely. I'm going to move on to health and employee benefits, and then we can open up to the audience if they have any questions. Obviously, that segment has done quite well. You've seen some acceleration there. Maybe you could just talk about some of the components of that and what the long-term strategy is.

It's been great.

It's been excellent.

So when we entered this space in 2014, it was about $85 million in revenue. And last year, we're over $500 million. So I'd say it has gone really well for us. The focus that we've had is within the space of thinking of if any of you have an HSA account or an FSA account or any type of tax deferred account, we provide the technology to make sure that you're buying things that are appropriate and from a tax perspective. And then more recently, we became a custodian, so we can take on account -- we can take in accounts, which gives us a nice buffer with our fleet business, which is more interest rate sensitive. So it's a great model. It is a model that's going to continue to build because consumers continue to move to consumer-directed health care accounts as employers are providing more and more incentive to move to high deductible plans. And so as a result, when employers move to high deductible plans, they typically are funding HSA accounts associated with that, which provides a triple tax benefit to a consumer. So there's an inherent benefit from a consumer perspective, and there's a benefit from an employer perspective because they're focusing on buffering increased health care costs. We -- what we do is provide the underlying technology for those account types. So think of us as almost like an administrator that sits in the background to that. And so you've got a benefit of this continued move to HSA accounts. Health care costs do keep going up despite all that. And so again, we are a net benefactor of that. And so this part of our business has continued to grow. We had a really strong enrollment season. You saw that coming through the account growth that we had in the fourth quarter. And so this part of the business will see market growth. We continue to add new partners. We continue to add business directly. And so you get this accumulative effect. You're seeing that come through in, plus now the income that we're getting from our custodian assets. And so we had talked about this having a growth rate of 15% to 20%. And this year, certainly going to be doing well.

So I guess you've also been expanding inside of HSA, FSA to do more for the employer. Maybe you can just talk about that a little bit more and what the opportunity is from the addressable market standpoint.

Yes. So originally, what we were doing was extending account types and so HSA, FSA, COBRA, benefit accounts, lifestyle accounts now, which has been an important addition. And so as those account types, we've included and extended our technology capabilities. We also purchased a benefit administration provider. And what that allows us to do is connect with an initial point with an employer who is interested in providing benefits so that we can actually start from that first point of what offerings should you have to your employees and how can we use the data that we have to help your consumers make more informed choices. And so this is -- again, another 1 of those flywheels or the fact that because we have such a large database, we could use that information associated with when someone is signing up of how much money should you fund. Like which type of account should you use. And so that's just allowing us to provide more information to the end user, which in this world where people are trying still to focus on retention, it's a net benefit for an employer as well.

It's really a hidden gem inside the business, it feels. Hopefully, get more credit for it in the valuation.

Yes. I think as it becomes a bigger part of our business, like it's certainly drawing more interest, which is good. It is a -- it's also an incredibly resilient part of the business. It grew through the pandemic. And so we're very bullish about this.

Yes. Absolutely. Sorry, I'm going to stop here, see if there's any questions in the room. Otherwise, I've got a couple more. Any questions? Raise your hand. There's 1 back there.

The benefits administration payments and payments intelligence associated with that. What are the competitive dynamics of that side of the business versus the core? And is that significantly different or same core competition?

Yes. So that part of our business, we're competing with a couple of different people. In particular, HealthEquity is one of the direct competitors we have in that space as well as a company called Alegeus, which is owned by Vista. And so the benefit administration component of it allows us actually a little bit more competitive strength because not only we're providing just the technology stack to the employer, we can provide the benefit administration capabilities. So actually, for us, it's a competitive advantage within the space of where we're more broadly competing.

There's a -- yes, there's 1 over there, too. Back there, sorry. I should have pointed better.

I know you said the growth was in the benefit space as well. Is there an equivalent to an HSA or something over in Europe? Is there equivalent sort of the health care space and opportunity for growth there?

They don't have -- their whole health care system is obviously different than we have here. So there's not something quite as equivalent. We are finding those in Australia. There are opportunities within some international markets because they have not exactly the same type of offering that we have in the United States, but enough similarity that we're exploring the opportunity to move. I mean, honestly, I would say our primary focus because of the opportunity we have in the United States has been -- with this segment has been much more U.S. focused. But as we see opportunities globally, we are exploring them to see if it makes sense to extend.

All right. Last question because you alluded to M&A. I didn't ask a question on that yet. Last 1. Maybe you can just talk about what the opportunities are right now? Are they going to be bolt-on type acquisitions? Or do you see an opportunity for something more sizable?

So just capital allocation in general, 1 of the things that we started doing more aggressively towards the latter part of last year was also buying back stock. And so...

Good timing.

Yes. Yes. And so as we've been thinking about capital allocation, 1 of the things that we've looked at is we generate a significant amount of cash. And so we have the ability to do both M&A and think about other ways of deploying capital. And so we've reduced our leverage. And so we are in a pretty strong position right now from an M&A perspective. In the marketplace, I'd say, if you look across the categories, we've said we like scale plays. We like things that continue to increase the margin capability and the strength of the business. We like product extensions as well. So those areas that either we're going to build or we're going to buy. We've done both. If you think back over time and then geographic extension through M&A, we've been really focused around energy innovation. And in that case, we're making smaller investments in companies as opposed to it may not be M&A because you've got a lot of really early-stage companies. We're really focused around our Health and Benefits segment, and we're really focused around corporate payments. The multiples, specifically in corporate payments, still are actually pretty rich despite the fact that they've contracted. And so what we're seeing, at least early on, is a lot of the assets that were hitting the marketplace were not the most attractive ones to purchase, but we feel like we're really patient. We have pipelines. We continue to work through those pipelines. And we're pretty rigorous around making sure they hit their financial criteria as well as strategic criteria. So we -- I think we're really well positioned for what is happening in the marketplace right now.

Okay. We're going to stop right there. Thank you so much, Melissa, Steve. Appreciate it.

Thank you.