WEX Inc.WEX
WEX Inc. Stock Compensation Disclosure
| 21. | Stock-Based Compensation | ||||
On May 15, 2025 our stockholders approved an amendment to the A&R 2019 Plan, which increased the number of shares of the Company’s common stock available for issuance under the A&R 2019 Plan by approximately 3.4 million shares to 4.0 million shares, subject to the provisions in the A&R 2019 Plan. There were approximately 4.0 million shares of common stock available for grant for future equity compensation awards under the A&R 2019 Plan as of December 31, 2025.
Under the A&R 2019 Plan, the Company has regularly granted equity awards in the form of stock options, restricted stock, RSUs and other stock-based awards to certain employees and directors. During 2024, the Company began granting market share units (“MSUs”) to employees in lieu of stock options. In addition, the A&R 2019 Plan allows the Company to grant shares of WEX common stock to employees in lieu of bonus or other compensation earned by such employees.
Subject to the achievement of any performance or market conditions, all equity awards vest over specified terms so long as the employee remains employed by WEX through the vesting dates, as further described below. Notwithstanding the foregoing, all equity awards provide for accelerated vesting in the event of death, upon a change of control (as defined in the A&R 2019 Plan), and beginning with awards granted during 2022, upon retirement (subject to provisions defined in the A&R 2019 Plan).
In lieu of cash compensation payable during 2026 to certain employees under our 2025 short-term incentive plan ("STIP"), the Company expects to award shares of WEX stock in an amount equal to the total STIP compensation payable to each respective employee, divided by the closing price of WEX common stock on the date of grant. These awards are treated as liability-classified equity awards as of December 31, 2025 and the expense associated with them is accrued over the one-year performance period.
Stock-based compensation expense recognized under our equity incentive plans was $100.3 million, $112.2 million and $127.0 million for 2025, 2024 and 2023, respectively. The associated tax benefit related to these costs was $20.3 million, $19.7 million and $23.1 million for 2025, 2024 and 2023, respectively. As of December 31, 2025, stock-based compensation of $14.5 million associated with liability-classified equity awards has been recorded within current liabilities on the consolidated balance sheet. The remaining stock-based compensation for 2025 of $85.8 million has been recorded as a charge to additional paid-in capital within stockholders’ equity on the consolidated balance sheet. There were no liability-classified equity awards and related expense during 2024 or 2023.
Restricted Stock Units
The Company periodically grants RSUs, a right to receive a specific number of shares of the Company’s common stock at a specified date, to non-employee directors and certain employees. RSUs granted to non-employee directors vest 12 months from the date of grant. RSUs issued to employees generally vest in even annual increments over up to three years. The grant date fair value of RSUs is based on the Company’s stock price on the date of grant.
The following is a summary of RSU activity during the year ended December 31, 2025:
| (in millions except per share data) | Restricted Stock Awards | Weighted-Average Grant-Date Fair Value | |||||||||
Unvested at January 1, 2025 | 0.5 | $ | 196.94 | ||||||||
| Granted | 0.4 | 157.16 | |||||||||
Vested, including 0.1 shares withheld for tax(1) | (0.2) | 188.23 | |||||||||
| Forfeited | (0.1) | 186.82 | |||||||||
Unvested at December 31, 2025 | 0.5 | $ | 173.75 | ||||||||
(1)The Company withholds shares of common stock to pay the minimum required statutory taxes due upon RSU vesting. Cash is then remitted by the Company to the appropriate taxing authorities.
As of December 31, 2025, there was $52.7 million of total unrecognized compensation cost related to RSUs. That cost is expected to be recognized over a weighted-average period of 1.3 years. The total grant-date fair value of RSUs granted during 2025, 2024 and 2023 was $57.0 million, $62.2 million and $58.4 million, respectively. The total grant-date fair value of RSUs that vested during 2025, 2024 and 2023 was $45.6 million, $44.9 million and $39.2 million, respectively.
Deferred Stock Units
Non-employee directors may elect to defer their cash fees and RSUs in the form of DSUs. These awards are distributed as common stock 200 days immediately following the date upon which such director’s service as a member of the Company’s board of directors terminates for any reason.
There were approximately 0.1 million DSUs outstanding as of both December 31, 2025 and 2024. DSU activity is not included in the RSU table above. Unvested DSUs as of December 31, 2025 and 2024 were not material.
Performance-Based Restricted Stock Units
Performance-based restricted stock units
The Company periodically grants PBRSUs to employees, which is a right to receive stock based on the achievement of performance goals and continued employment during the vesting period. PBRSU awards generally have performance goals spanning to three years, depending on the nature of the goal, and the ultimate number of shares earned can vary dependent on final performance attainment levels. The grant date fair value of PBRSUs is based on the Company’s stock price on the date of grant.
Performance-based restricted stock units with a market condition
The Company has periodically granted employees PBRSUs with a TSR market condition either as a sole performance condition or as a modifier to scale another performance condition’s attainment payment up or down by +/- 15 percent. The TSRs’ performance periods generally span three years and the ultimate performance calculation is based on the Company’s TSR relative to the TSR of the companies included in a defined peer group. No material PBRSUs with market conditions were granted during 2025, 2024 and 2023.
Rollforward of PBRSUs
The following is a summary of PBRSU activity during the year ended December 31, 2025:
| (in millions except per share data) | PBRSU Awards | Weighted-Average Grant-Date Fair Value | |||||||||
Unvested at January 1, 2025 | 0.7 | $ | 185.08 | ||||||||
| Granted | 0.3 | 159.73 | |||||||||
| Forfeited | (0.1) | 179.16 | |||||||||
Vested, including 0.1 shares withheld for tax(1) | (0.3) | 163.20 | |||||||||
Performance adjustment(2) | (0.1) | NM | |||||||||
Unvested at December 31, 2025 | 0.6 | $ | 174.24 | ||||||||
NM - Not meaningful
(1)The Company withholds shares of common stock to pay the minimum required statutory taxes due upon PBRSU vesting. Cash is then remitted by the Company to the appropriate taxing authorities.
(2)Reflects adjustments to the number of shares of PBRSUs expected to vest based on the change in estimated performance attainments during the year ended December 31, 2025. This adjustment does not include the impact on awards as a result of expected market condition attainments until the attainment measurement period concludes.
As of December 31, 2025, there was $27.5 million of unrecognized compensation cost related to PBRSUs, which is based on the expected achievement of each award’s underlying performance goals as of December 31, 2025. Such cost is expected to be recognized over a weighted-average period of 1.9 years, however, we assess the likelihood of achieving the predetermined financial metrics associated with each award on a quarterly basis and the expense recognized, if any, will be adjusted accordingly. The total grant-date fair value of PBRSUs granted during 2025, 2024 and 2023 was $46.9 million, $48.2 million and $42.4 million, respectively. The total grant-date fair value of PBRSUs that vested during 2025, 2024 and 2023 was $45.9 million, $49.5 million and $16.3 million, respectively.
Market Share Units
The Company periodically grants MSUs, which are market-based equity awards that represent a right to receive shares of the Company’s common stock at specified future dates if certain WEX stock price performance and vesting conditions are met. The number of MSUs that will be eligible to vest will be based on the performance of our stock price over the vesting period. The MSUs are designed to vest in three tranches with the target quantity for each tranche equal to one-third of the total MSU grant. The first tranche vests based on a one-year performance period; the second tranche vests based on a two-year performance period; and the third tranche vests based on a three-year performance period. Performance is measured based on a payout factor resulting from dividing the 10-day volume weighted average price immediately preceding the vest date by the 10-day volume weighted average price immediately preceding the grant date. If the payout factor is below 60 percent, no MSUs shall vest on the applicable vesting date. The payout factor is capped at 200 percent.
Grant-date fair value of MSUs
The fair value of each tranche of the 2025 and 2024 annual MSU awards was estimated at the date of grant using the Monte-Carlo simulation model, assuming no expected dividends and the following assumptions:
| Grant date | 3/15/2025 | 3/15/2024 | |||||||||
Stock price(1) | $ | 158.06 | $ | 232.20 | |||||||
Risk-free interest rate(2) | 3.95 | % | 4.49 | % | |||||||
Expected stock price volatility(3) | 33.71 | % | 33.45 | % | |||||||
| Weighted-average fair value per share | $183.96 - $210.85 | $269.90 - $311.29 | |||||||||
(1)Closing stock price at the date of grant.
(2)The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the period matching the vesting term of the awards.
(3)The Company estimates expected stock price volatility based on historical volatility of the Company’s common stock over a period matching the vesting term of the awards.
We amortize the compensation expense over the performance and service periods on a ratable basis. As of December 31, 2025, there was $7.2 million of unrecognized compensation cost related to MSUs that is expected to be recognized over a weighted-average period of 1.4 years. The total grant-date fair value of MSUs granted during 2025 and 2024 was $18.8 million and $19.5 million. The total grant-date fair value of MSUs that vested during 2025 was $3.7 million. No MSUs vested prior to 2025.
Rollforward of MSUs
The following is a summary of MSU activity during the year ended December 31, 2025:
| (in millions except per share data) | MSU Awards | Weighted-Average Grant-Date Fair Value | |||||||||
Unvested at January 1, 2025 | 0.1 | $ | 292.20 | ||||||||
| Granted | 0.1 | 198.17 | |||||||||
| Forfeited | — | 247.62 | |||||||||
Vested, including an immaterial number of shares withheld for tax(1) | — | 269.35 | |||||||||
Performance adjustment(2) | — | NM | |||||||||
Unvested at December 31, 2025 | 0.1 | $ | 223.78 | ||||||||
(1)The Company withholds shares of common stock to pay the minimum required statutory taxes due upon MSU vesting. Cash is then remitted by the Company to the appropriate taxing authorities.
(2)This adjustment will not include the impact on awards as a result of expected market condition attainments until the attainment measurement period concludes.
Stock Options
Service-Based Stock Options
Through 2023, the Company periodically granted stock options to certain officers and employees, which generally become exercisable over three years (with approximately 33 percent of the total grant vesting each year on the anniversary of the grant date) and expire 10 years from the date of grant. All service-based stock option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant as reported by the NYSE. The fair value of options were estimated on the grant date using the Black-Scholes-Merton option-pricing model, assuming no expected dividends and the following assumptions:
| 2023 | |||||
| Weighted average grant date fair value | $ | 81.65 | |||
Weighted average expected term (in years)(1) | 6 | ||||
| Weighted average exercise price | $ | 173.56 | |||
Expected stock price volatility(2) | 43.64 | % | |||
Risk-free interest rate(3) | 3.55 | % | |||
(1)Based on the Company’s limited history of option exercises and its granting of service-based stock options with “plain vanilla” characteristics, the Company uses the simplified method to estimate the expected term of its employee stock options. The expected term assumption represents the period of time that options granted are expected to be outstanding.
(2)The Company estimates expected stock price volatility based on historical volatility of the Company’s common stock over a period matching the expected term of the options granted.
(3)The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the period matching the expected term of the option.
The following is a summary of all stock option activity during the year ended December 31, 2025:
| (in millions, except per share data or as otherwise indicated) | Option Awards | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||||||||
Outstanding at January 1, 2025 | 0.6 | $ | 160.68 | ||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | — | 126.77 | |||||||||||||||||||||
| Forfeited or expired | — | 183.49 | |||||||||||||||||||||
Outstanding at December 31, 2025 | 0.6 | $ | 160.20 | 5.1 | $ | 6.2 | |||||||||||||||||
Exercisable at December 31, 2025 | 0.5 | $ | 158.90 | 4.9 | $ | 6.2 | |||||||||||||||||
Expected to vest at December 31, 2025 | 0.1 | $ | 173.56 | 7.2 | $ | — | |||||||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.