WEX Inc.

S&P Global Ratings' stable outlook on WEX Inc. reflects our expectation of meaningful organic growth in revenues and EBITDA. We expect that net debt to EBITDA to be between 5.0x and 6.0x, funds from operations (FFO) to debt to be between 10% and 20%, and interest coverage to be between 3.0x and 5.0x. We could lower the rating over the next 12 months if net debt to EBITDA rises above 6.0x because of either higher leverage or a decline in EBITDA. Debt-based acquisitions could lead to downgrade, all else equal. We could raise the rating if debt to EBITDA improves to below 4.0x on a sustained basis and we expect earnings growth to continue. We expect the U.S. economy to

...WEX's revenue and EBITDA have grown steadily over the past five years through both routine acquisitions and organic growth. WEX is active in the mergers and acquisition (M&A) market looking for payment-related companies to expand its market position in fleet, travel, health care, and corporate payment solutions. The company has a history of increasing leverage for acquisitions, deleveraging through earnings, and then repeating the process. We believe the company has a track record of managing such M&A and leverage cycles judiciously. WEX Bank provides cheap financing for the company's working capital, and we take a favorable view of the prudential regulation and oversight by the Federal Deposit Insurance Corp. (FDIC). WEX's fleet management business unit created a $2.8 billion account receivables balance as of first-quarter 2019. WEX funds receivables, in part, through $1.1 billion of bank deposits where the cost of funds was around 2.5%. We also take a favorable view that the bank is subject...

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