- Total revenue in the third quarter 2017 of $115.7 million, a 30 percent increase year-over-year
- Third quarter 2017 GAAP net income of $9.7 million or $0.24 per diluted share
- Third quarter 2017 non-GAAP net income of $18.0 million or $0.45 per diluted shares, a 43 percent increase year-over-year
- Third quarter 2017 non-GAAP adjusted EBITDA of $37.3 million, a 41 percent increase year-over-year
SAN MATEO, Calif., Nov. 08, 2017 (GLOBE NEWSWIRE) -- WageWorks, Inc. (the “Company”) (NYSE: WAGE), a leader in administering Consumer-Directed Benefits, today announced the Company's financial results for its third quarter ended September 30, 2017.
Executive Quotes
“We are very pleased with our strong third quarter performance which was highlighted by a healthy growth rate and impressive financial metrics” said Joe Jackson, Chairman and Chief Executive Officer of WageWorks. “We completed a successful enterprise sales season and our SMB selling season is well underway. We continue to see interest in all of our products and our comprehensive platform of integrated offerings remains a competitive differentiator for us. We recently announced the acquisition of Tango Health’s HSA business and are actively working on a number of other acquisition and channel partner opportunities. We are executing on all of our growth strategies and are well positioned for continued success.”
Third Quarter Financial Highlights
For the third quarter, WageWorks reported total revenue of $115.7 million, compared to $88.9 million for the third quarter of 2016, an increase of 30 percent. Healthcare revenue was $66.2 million, compared to $48.5 million for the third quarter of 2016, an increase of 37 percent. Commuter revenue was $18.0 million, compared to $17.6 million for the third quarter of 2016, an increase of 2 percent. COBRA revenue was $27.5 million, compared to $18.7 million for the third quarter of 2016, an increase of 48 percent. Other revenue was $4.0 million, compared to $4.2 million for the third quarter of 2016.
GAAP operating income was $16.8 million for the third quarter of 2017, an increase compared to GAAP operating income of $9.4 million for the third quarter of 2016. On a non-GAAP basis, third quarter of 2017 operating income was $31.1 million, an increase compared to non-GAAP operating income of $21.2 million for the third quarter of 2016.
GAAP net income was $9.7 million, or $0.24 per diluted share, for the third quarter of 2017, compared to GAAP net income of $5.9 million, or $0.16 per diluted share, for the third quarter of 2016.
On a non-GAAP basis, third quarter of 2017 net income was $18.0 million, or $0.45 per diluted share, an increase compared to non-GAAP net income of $12.5 million, or $0.34 per diluted share, for the third quarter of 2016. Non-GAAP net income for the third quarter of 2017 and 2016 excludes expenses related to stock-based compensation, amortization of acquired intangibles, employee termination and other charges, and the related tax impact of these items.
Non-GAAP adjusted EBITDA was $37.3 million for the third quarter of 2017, an increase of 41 percent as compared to non-GAAP adjusted EBITDA of $26.5 million for the third quarter of 2016.
The reconciliation of the non-GAAP measures to the comparable GAAP measures for the third quarter 2017 and 2016 is detailed in the tables provided in this press release.
As of September 30, 2017, WageWorks had cash and cash equivalents totaling $798.3 million. This compares to cash and cash equivalents totaling $678.3 million as of December 31, 2016.
The Company's Conference Call Information
WageWorks will host a conference call today, November 8, 2017, at 5:00 p.m. ET to discuss the Company’s third quarter ended September 30, 2017 financial results and business outlook.
The live webcast of the conference call can be accessed under “Investor Relations” section of the Company’s website at www.wageworks.com. Those wishing to participate in the live call should dial (844) 778-4142 (toll-free) or (661) 378-9625, and enter pass code 9189569. Following the call, an archived webcast will be available in the “Investor Relations” section of the Company’s website at www.wageworks.com. A telephone replay will be available for one week at (855) 859-2056 (toll-free) or (404) 537-3406 using the pass code 9189569.
Non-GAAP Financial Information
To supplement the Company’s financial statements presented on a GAAP basis, the Company provides non-GAAP financial measure of net income, operating income, adjusted EBITDA and diluted earnings per share. By providing information about both the overall GAAP financial performance and the non-GAAP measures that focus on what management believes to be its ongoing business operations, the Company believes that the additional information enhances investors’ overall understanding of the Company’s business. The Company’s management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes stock-based compensation, amortization of acquired intangibles, employer paid taxes for selling stockholders, employee termination and other charges, and the related tax impact of all of these items on the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of the Company’s business for planning and forecasting in subsequent periods. The Company’s management does not itself, nor does it suggest that investors should consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever the Company uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above. Investors are also encouraged to review the Company’s GAAP financial statements as reported in its SEC filings.
Forward-Looking Statements
Statements in this press release and certain matters to be discussed on the third quarter conference call regarding WageWorks, Inc., which are not historical facts, are “forward-looking statements” within the meaning the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as believe, expect, will, provide, should and the negative of these terms or other similar expressions. These statements, including statements relating to our acquisition of new employer clients, the expected benefits of our acquisitions, channel partnerships, and carrier relationships, the demand for our consumer-directed benefits solutions, market trends for the industries in which we compete, the expected benefits of our investments and the potential impact on our future operating results and are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those we anticipate as a result of various factors, including the continued availability of tax-advantaged consumer-directed benefits, our ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets, our ability to acquire and retain new employer clients, and our ability to identify and execute on channel partner and carrier opportunities. For a discussion of these and other related risks, please refer to “Risk Factors” in our most recent report on Form 10-K, which is available on the SEC’s website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date made and we disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.
About WageWorks
WageWorks, Inc. (NYSE: WAGE) is a leader in administering Consumer-Directed Benefits (CDBs). WageWorks is solely dedicated to administering CDBs, including pre-tax spending accounts, such as Health Savings Accounts (HSAs), health and dependent care Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), as well as Commuter Benefit Services, including transit and parking programs, wellness programs, COBRA, and other employee benefits. WageWorks makes it easier to understand and take advantage of Consumer-Directed Benefits for more than 100,000 employers and approximately 6.5 million people. WageWorks is headquartered in San Mateo, California, with offices in major locations throughout the United States. For more information, visit www.wageworks.com.
| WAGEWORKS, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: | ||||||||||||||||
| Healthcare | $ | 66,203 | $ | 48,478 | $ | 210,187 | $ | 146,918 | ||||||||
| Commuter | 17,966 | 17,580 | 54,376 | 52,339 | ||||||||||||
| COBRA | 27,540 | 18,670 | 83,581 | 51,955 | ||||||||||||
| Other | 4,037 | 4,196 | 12,483 | 12,439 | ||||||||||||
| Total revenues | 115,746 | 88,924 | 360,627 | 263,651 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenues (excluding amortization of internal use software) | 38,805 | 30,566 | 129,410 | 90,237 | ||||||||||||
| Technology and development | 13,949 | 11,668 | 43,852 | 32,656 | ||||||||||||
| Sales and marketing | 16,401 | 14,012 | 47,244 | 42,317 | ||||||||||||
| General and administrative | 20,220 | 16,130 | 63,410 | 47,875 | ||||||||||||
| Amortization and change in contingent consideration | 9,698 | 6,944 | 28,920 | 26,084 | ||||||||||||
| Employee termination and other charges | (148 | ) | 162 | 1,500 | 475 | |||||||||||
| Total operating expenses | 98,925 | 79,482 | 314,336 | 239,644 | ||||||||||||
| Income from operations | 16,821 | 9,442 | 46,291 | 24,007 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 340 | 117 | 502 | 300 | ||||||||||||
| Interest expense | (1,987 | ) | (465 | ) | (5,047 | ) | (1,279 | ) | ||||||||
| Other income (expense) | (25 | ) | 22 | (246 | ) | 24 | ||||||||||
| Income before income taxes | 15,149 | 9,116 | 41,500 | 23,052 | ||||||||||||
| Income tax provision | (5,464 | ) | (3,222 | ) | (1,613 | ) | (8,509 | ) | ||||||||
| Net income | $ | 9,685 | $ | 5,894 | $ | 39,887 | $ | 14,543 | ||||||||
| Basic net income per share | $ | 0.24 | $ | 0.16 | $ | 1.05 | $ | 0.40 | ||||||||
| Diluted net income per share | $ | 0.24 | $ | 0.16 | $ | 1.02 | $ | 0.39 | ||||||||
| Shares used in basic net income per share calculations | 39,641 | 36,605 | 38,028 | 36,312 | ||||||||||||
| Shares used in diluted net income per share calculations | 40,264 | 37,454 | 39,106 | 37,078 | ||||||||||||
| STOCK-BASED COMPENSATION EXPENSE | ||||||||||||||||
| (in thousands) (unaudited) | ||||||||||||||||
| Total stock-based compensation expense included in the Condensed Consolidated Statements of Income is as follows: | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Cost of revenues | $ | 1,824 | $ | 1,581 | $ | 5,554 | $ | 4,549 | ||||||||
| Technology and development | 527 | 671 | 1,794 | 1,815 | ||||||||||||
| Sales and marketing | 719 | 789 | 2,166 | 2,287 | ||||||||||||
| General and administrative | 5,002 | 4,490 | 15,582 | 13,722 | ||||||||||||
| Total | $ | 8,072 | $ | 7,531 | $ | 25,096 | $ | 22,373 | ||||||||
| WAGEWORKS, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except per share amounts) | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 798,266 | $ | 678,300 | ||||
| Restricted cash | 332 | 332 | ||||||
| Short-term investments | 94,087 | — | ||||||
| Accounts receivable, net | 183,237 | 92,888 | ||||||
| Prepaid expenses and other current assets | 21,410 | 19,422 | ||||||
| Total current assets | 1,097,332 | 790,942 | ||||||
| Property and equipment, net | 69,963 | 56,902 | ||||||
| Goodwill | 297,409 | 297,409 | ||||||
| Acquired intangible assets, net | 161,281 | 176,489 | ||||||
| Deferred tax assets | 16,562 | 16,309 | ||||||
| Other assets | 7,009 | 5,300 | ||||||
| Total assets | $ | 1,649,556 | $ | 1,343,351 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 90,961 | $ | 72,966 | ||||
| Customer obligations | 702,432 | 603,842 | ||||||
| Other current liabilities | 223 | 467 | ||||||
| Total current liabilities | 793,616 | 677,275 | ||||||
| Long-term debt | 244,791 | 248,848 | ||||||
| Other non-current liabilities | 10,468 | 9,131 | ||||||
| Total liabilities | 1,048,875 | 935,254 | ||||||
| Stockholders' Equity: | ||||||||
| Common stock, par value $0.001 per share (authorized 1,000,000 shares; 40,095 shares issued and 39,616 shares outstanding at September 30, 2017 and 37,247 shares issued and 36,902 shares outstanding at December 31, 2016) | 41 | 37 | ||||||
| Additional paid-in capital | 563,893 | 403,459 | ||||||
| Treasury stock at cost (480 shares at September 30, 2017 and 345 shares at December 31, 2016) | (22,309 | ) | (14,374 | ) | ||||
| Accumulated other comprehensive loss | (35 | ) | — | |||||
| Retained earnings | 59,091 | 18,975 | ||||||
| Total stockholders’ equity | 600,681 | 408,097 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,649,556 | $ | 1,343,351 | ||||
| WAGEWORKS, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) (unaudited) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 39,887 | $ | 14,543 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 7,941 | 6,202 | ||||||
| Amortization and change in contingent consideration | 28,920 | 25,986 | ||||||
| Amortization of debt issuance costs | 294 | 111 | ||||||
| Stock-based compensation expense | 25,096 | 22,373 | ||||||
| Loss on disposal of fixed assets | 98 | 185 | ||||||
| Provision for doubtful accounts | 4,299 | 1,238 | ||||||
| Deferred taxes | — | (424 | ) | |||||
| Other | (99 | ) | — | |||||
| Excess tax benefits related to stock-based compensation arrangements | — | (8,824 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (94,648 | ) | (14,102 | ) | ||||
| Prepaid expenses and other current assets | (2,488 | ) | 919 | |||||
| Other assets | (1,709 | ) | (50 | ) | ||||
| Accounts payable and accrued expenses (1) | 14,615 | 6,076 | ||||||
| Customer obligations | 98,590 | 148,495 | ||||||
| Other liabilities | 1,093 | (688 | ) | |||||
| Net cash provided by operating activities | 121,889 | 202,040 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (28,489 | ) | (20,529 | ) | ||||
| Purchases of short-term investments | (99,445 | ) | — | |||||
| Proceeds from sales of short-term investments | 5,398 | — | ||||||
| Purchases of intangible assets | (2,107 | ) | (20,777 | ) | ||||
| Net cash used in investing activities | (124,643 | ) | (41,306 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from public stock offering, net of underwriting discounts, commissions and other costs | 130,832 | — | ||||||
| Proceeds from exercise of common stock options | 10,834 | 10,705 | ||||||
| Proceeds from issuance of common stock under Employee Stock Purchase Plan | 2,172 | 1,672 | ||||||
| Payments of debt issuance costs | (1,851 | ) | (200 | ) | ||||
| Payments of debt principal | (2,500 | ) | — | |||||
| Payments of contingent consideration | — | (653 | ) | |||||
| Payment for treasury stock acquired | (7,935 | ) | (9,371 | ) | ||||
| Taxes paid related to net share settlement of stock-based compensation arrangements(1) | (8,832 | ) | (5,995 | ) | ||||
| Excess tax benefits related to stock-based compensation arrangements | — | 8,824 | ||||||
| Net cash provided by financing activities | 122,720 | 4,982 | ||||||
| Net increase in cash and cash equivalents | 119,966 | 165,716 | ||||||
| Cash and cash equivalents at beginning of period | 678,300 | 500,918 | ||||||
| Cash and cash equivalents at end of period | $ | 798,266 | $ | 666,634 | ||||
(1) Reflects retrospective reclassification for the nine months ended September 30, 2016, due to the adoption of ASU 2016-09 during the first quarter of 2017, for employee taxes on withheld shares.
| WAGEWORKS, INC. | ||||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||
| (in thousands, except for percentage and per share data) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| The following tables detail the reconciliation of GAAP financial measures to non-GAAP financial measures included in this release: | ||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| (1) | (1) | |||||||||||||||||
| Operating income: | ||||||||||||||||||
| GAAP income from operations | $ | 16,821 | $ | 9,442 | $ | 46,291 | $ | 24,007 | ||||||||||
| Stock-based compensation expense | 8,072 | 7,531 | 25,096 | 22,373 | ||||||||||||||
| Amortization of acquired intangibles | 6,376 | 4,105 | 19,375 | 16,967 | ||||||||||||||
| Employer paid taxes for selling stockholders | — | — | 363 | — | ||||||||||||||
| Employee termination and other charges | (148 | ) | 162 | 1,500 | 475 | |||||||||||||
| Non-GAAP income from operations | $ | 31,121 | $ | 21,240 | $ | 92,625 | $ | 63,822 | ||||||||||
| Non-GAAP income from operations as a percentage of total revenue | 26.9 | % | 23.9 | % | 25.7 | % | 24.2 | % | ||||||||||
| Net income: | ||||||||||||||||||
| GAAP net income | $ | 9,685 | $ | 5,894 | $ | 39,887 | $ | 14,543 | ||||||||||
| Stock-based compensation expense | 8,072 | 7,531 | 25,096 | 22,373 | ||||||||||||||
| Amortization of acquired intangibles | 6,376 | 4,105 | 19,375 | 16,967 | ||||||||||||||
| Employer paid taxes for selling stockholders | — | — | 363 | — | ||||||||||||||
| Employee termination and other charges | (148 | ) | 162 | 1,500 | 475 | |||||||||||||
| Tax effect of above adjustments * | (6,017 | ) | (5,144 | ) | (33,033 | ) | (16,638 | ) | ||||||||||
| Non-GAAP net income | $ | 17,968 | $ | 12,548 | $ | 53,188 | $ | 37,720 | ||||||||||
| Weighted-average shares outstanding used in computing GAAP and Non-GAAP per share amounts (diluted) | 40,264 | 37,454 | 39,106 | 37,078 | ||||||||||||||
| Non-GAAP diluted net income per share | $ | 0.45 | $ | 0.34 | $ | 1.36 | $ | 1.02 | ||||||||||
| * Tax effect adjustments assume a 40% tax rate plus stock excess tax benefits recorded in income tax benefit (provision). | ||||||||||||||||||
| Reconciliation of GAAP net income to Non-GAAP Adjusted EBITDA: | ||||||||||||||||||
| GAAP net income | $ | 9,685 | $ | 5,894 | $ | 39,887 | $ | 14,543 | ||||||||||
| Interest income | (340 | ) | (117 | ) | (502 | ) | (300 | ) | ||||||||||
| Interest expense | 1,987 | 465 | 5,047 | 1,279 | ||||||||||||||
| Income tax provision | 5,464 | 3,222 | 1,613 | 8,509 | ||||||||||||||
| Depreciation | 2,872 | 2,389 | 7,941 | 6,202 | ||||||||||||||
| Amortization and change in contingent consideration | 9,698 | 6,944 | 28,920 | 26,084 | ||||||||||||||
| Stock-based compensation expense | 8,072 | 7,531 | 25,096 | 22,373 | ||||||||||||||
| Employer paid taxes for selling stockholders | — | — | 363 | — | ||||||||||||||
| Employee termination and other charges | (148 | ) | 162 | 1,500 | 475 | |||||||||||||
| Adjusted EBITDA | $ | 37,290 | $ | 26,490 | $ | 109,865 | $ | 79,165 | ||||||||||
(1) Prior period non-GAAP results have been adjusted to present in thousands.
Investor Contact:
Staci Mortenson
ICR
203-682-8273
Staci.mortenson@icrinc.com
Media Contact:
Elizabeth Anderson
WageWorks, Inc.
972-984-0800
Elizabeth.anderson@wageworks.com