UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
______________________
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported)
August
4, 2014
______________________
WageWorks,
Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
001-35232 |
94-3351864 |
||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer |
1100 Park Place, 4th Floor
San Mateo, California 94403
(Address
of principal executive offices, including zip code)
(650)
577-5200
(Registrant’s telephone number, including area code)
(Former
name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 |
Results of Operations and Financial Condition. |
On August 4, 2014, WageWorks, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2014. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
This information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description |
99.1 | Press release issued by WageWorks, Inc. August 4, 2014 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
WAGEWORKS, INC. | ||||
|
By: |
/s/ Joseph L. Jackson |
||
Joseph L. Jackson |
||||
Chief Executive Officer and Director |
||||
Date: |
August 4, 2014 |
EXHIBIT INDEX
Exhibit No. |
Description |
99.1 |
Press release issued by WageWorks, Inc. dated August 4, 2014 |
4
Exhibit 99.1
WageWorks Reports Second Quarter 2014 Financial Results
SAN MATEO, Calif.--(BUSINESS WIRE)--August 4, 2014--WageWorks, Inc. (the “Company”) (NYSE: WAGE), a leader in administering Consumer-Directed Benefits (CDBs), which empower employees to save money on taxes while also providing corporate tax advantages for employers, today announced the Company's financial results for its second quarter ended June 30, 2014.
“We just finished a very successful quarter and first half of 2014, as demand for Consumer-Directed Benefits continues to grow, and we continue to execute on our stated objectives,” said Joe Jackson, Chief Executive Officer of WageWorks. “Our enterprise selling season is developing extremely well with several new significant signings. We saw an encouraging increase in FSA participation rates for our mid-year start clients who took advantage of the change to the Use-It-Or-Lose-It provision, and are pleased with the continuous progress with onboarding Ceridian clients to the WageWorks platform. Finally, we are thrilled about the acquisition of CONEXIS, a recognized leader in employee benefits administration, as well as our new channel partnership with their former parent company, The Word & Brown Companies, one of the most reputable names in the health insurance and employee benefits space.”
For the second quarter, WageWorks reported total revenue of $58.8 million, compared to $54.6 million for the second quarter of 2013, an increase of 8 percent. Healthcare revenue was $37.6 million, compared to $33.9 million for the second quarter of 2013, an increase of 11 percent. Commuter revenue was $15.1 million, compared to $14.7 million for the second quarter of 2013, an increase of 2 percent. Other revenue was $6.1 million, compared to $6.0 million for the second quarter of 2013, an increase of 2 percent.
GAAP operating income was $7.9 million for the second quarter of 2014, compared to GAAP operating income of $6.7 million for the second quarter of 2013. On a non-GAAP basis, second quarter of 2014 operating income was $14.5 million, compared to non-GAAP operating income of $11.9 million for the second quarter of 2013.
GAAP net income was $4.6 million, or $0.13 per diluted share, for the second quarter of 2014, compared to GAAP net income of $4.0 million, or $0.11 per diluted share, for the second quarter of 2013.
On a non-GAAP net income basis, second quarter of 2014 net income was $8.6 million, or $0.24 per diluted share, compared to non-GAAP net income of $7.1 million, or $0.20 per diluted share, for the second quarter of 2013. Non-GAAP net income for the second quarter of 2013 and 2014 excludes expenses related to stock-based compensation, amortization of acquired intangibles, contingent consideration expense and the related tax impact of these items.
Non-GAAP adjusted EBITDA was $17.5 million for the second quarter of 2014, a 17 percent increase compared to non-GAAP adjusted EBITDA of $14.9 million for the second quarter of 2013.
The reconciliation of the non-GAAP measures to the comparable GAAP measures for the second quarter 2014 and 2013 is detailed in the tables provided in this press release.
As of June 30, 2014, WageWorks had cash and cash equivalents totaling $370.9 million. This compares to cash and cash equivalents totaling $360.0 million as of December 31, 2013.
WageWorks also announced today that Rich Green, Chief Financial Officer (“CFO”), will be leaving the Company to pursue other opportunities. Mr. Green will stay on as CFO over the next few months until a successor is found, in order to ensure an orderly transition. Mr. Green has been instrumental in the Company’s success, guiding WageWorks through a successful IPO, creating a track record of strong financial results, and providing outstanding leadership. The Company has initiated a search for his successor.
The Company's Conference Call Information
WageWorks will host a conference call today, August 4, 2014, at 5:00 p.m. ET to discuss the Company’s second quarter ended June 30, 2014 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 866-515-2915 (toll-free) or 617-399-5129, and enter pass code 95095912. 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 888-286-8010 (toll-free) or 617-801-6888 using the pass code 91756186.
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, contingent consideration gain and expense 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 the press release and certain matters to be discussed on the second 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 continuing to provide value to our employer clients and their employees through our consumer-directed benefits solutions, our acquisition of new employer clients, our retention of existing employer clients, the expected benefits of our channel partnerships, the demand for our consumer-directed benefits solutions, the industry trends regarding consumer-directed health plans and exchange opportunities, the expected benefits of the carryover provision, the expected benefits of our investments and the potential impact on our future operating results 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 to employers and employees, our ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets, our ability to raise awareness among employers and employees about the advantages of adopting and participating in consumer-directed benefits programs, our ability to acquire and retain new employer clients and to cross-sell our products to existing employer clients, our ability to identify and execute on channel partner and exchange opportunities, the participation of employees in our employer clients’ consumer-directed benefits programs and whether the carryover provision will have any impact thereon, our ability to compete effectively with current and future competitors, our ability to provide high quality service in a cost efficient manner, our ability to successfully partner with private exchanges, and our ability to enhance our product functionality. For a discussion of these and other related risks, please refer to “Risk Factors” in our most recent report on Form 10-Q, 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 (NYSE: WAGE) is a leader in administering Consumer-Directed Benefits, or CDBs, which empower employees to save money on taxes while providing corporate tax advantages for employers. WageWorks administers and operates a broad array of CDBs, including pretax spending accounts, such as health and dependent care Flexible Spending Accounts (FSAs), as well as Commuter Benefit Services, including transit and parking programs, Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and other employee benefits.
WageWorks is headquartered in San Mateo, California, with offices in major locations throughout the United States. For more information, please visit the website at www.wageworks.com.
WAGEWORKS, INC. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Healthcare | $ | 33,871 | $ | 37,592 | $ | 69,598 | $ | 77,576 | ||||||||
Commuter | 14,722 | 15,050 | 29,429 | 31,093 | ||||||||||||
Other | 5,968 | 6,115 | 11,649 | 12,708 | ||||||||||||
Total revenues | 54,561 | 58,757 | 110,676 | 121,377 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (excluding amortization of internal use software) | 19,932 | 21,157 | 40,545 | 43,954 | ||||||||||||
Technology and development | 5,750 | 5,298 | 11,567 | 10,497 | ||||||||||||
Sales and marketing | 8,409 | 9,332 | 16,924 | 18,699 | ||||||||||||
General and administrative | 9,008 | 10,539 | 18,217 | 20,471 | ||||||||||||
Amortization and change in contingent consideration | 4,725 | 4,549 | 9,187 | 8,969 | ||||||||||||
Total operating expenses | 47,824 | 50,875 | 96,440 | 102,590 | ||||||||||||
Income from operations | 6,737 | 7,882 | 14,236 | 18,787 | ||||||||||||
Other income (expenses): | ||||||||||||||||
Interest income | 6 | 1 | 13 | 2 | ||||||||||||
Interest expense | (369 | ) | (254 | ) | (747 | ) | (511 | ) | ||||||||
Other income | 14 | 11 | 33 | 24 | ||||||||||||
Income before income taxes | 6,388 | 7,640 | 13,535 | 18,302 | ||||||||||||
Income tax provision | (2,396 | ) | (3,053 | ) | (4,907 | ) | (7,271 | ) | ||||||||
Net income | 3,992 | 4,587 | 8,628 | 11,031 | ||||||||||||
Basic net income per share | $ | 0.12 | $ | 0.13 | $ | 0.26 | $ | 0.32 | ||||||||
Diluted net income per share | $ | 0.11 | $ | 0.13 | $ | 0.25 | $ | 0.30 | ||||||||
Shares used in basic net income per share calculations | 33,473 | 35,117 | 32,853 | 34,975 | ||||||||||||
Shares used in diluted net income per share calculations | 35,047 | 36,340 | 34,448 | 36,323 | ||||||||||||
STOCK-BASED COMPENSATION EXPENSE | ||||||||||||||||
Total stock-based compensation expense included in the Consolidated Statements of Income is as follows: | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||
(unaudited) | ||||||||||||||||
Cost of revenues | $ | 285 |
$ |
594 |
$ |
398 | $ | 826 | ||||||||
Technology and development | 192 | 287 | 342 | 495 | ||||||||||||
Sales and marketing | 301 | 570 | 486 | 899 | ||||||||||||
General and administrative | 1,707 | 2,789 | 2,332 |
4,058 |
||||||||||||
$ | 2,485 | $ | 4,240 | $ | 3,558 | $ | 6,278 | |||||||||
WAGEWORKS, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
December 31, 2013 | June 30, 2014 | |||||||
(unaudited) | ||||||||
(in thousands, except per share amounts) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 359,958 | $ | 370,894 | ||||
Restricted cash, current portion | 331 | 332 | ||||||
Accounts receivable, less allowance for doubtful accounts of $467 and $813 at December 31, 2013 and June 30, 2014, respectively |
32,863 | 38,899 | ||||||
Deferred tax assets - current | 1,985 | 2,027 | ||||||
Prepaid expenses and other current assets | 10,135 | 10,971 | ||||||
Total current assets | 405,272 | 423,123 | ||||||
Property and equipment, net | 26,532 | 27,691 | ||||||
Goodwill | 97,636 | 97,591 | ||||||
Acquired intangible assets, net | 42,786 | 43,764 | ||||||
Deferred tax asset | 10,666 | 10,624 | ||||||
Other assets | 16,763 | 13,672 | ||||||
Total assets | $ | 599,655 | $ | 616,465 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 49,419 | $ | 43,205 | ||||
Customer obligations | 281,153 | 280,186 | ||||||
Short-term contingent payment | 4,265 | 3,111 | ||||||
Other current liabilities | 1,592 | 577 | ||||||
Total current liabilities | 336,429 | 327,079 | ||||||
Long-term debt | 29,448 | 29,486 | ||||||
Long-term contingent payment, net of current portion | 3,802 | 1,806 | ||||||
Deferred tax liability | - | 837 | ||||||
Other non-current liabilities | 1,844 | 1,153 | ||||||
Total liabilities | 371,523 | 360,361 | ||||||
Stockholders' equity: | ||||||||
Common stock, $0.001 par value. Authorized 1,000,000 shares; issued 34,746 shares at December 31, 2013 and 35,185 shares at June 30, 2014 |
35 | 36 | ||||||
Additional paid-in capital | 270,519 | 287,459 | ||||||
Accumulated deficit | (42,422 | ) | (31,391 | ) | ||||
Total stockholders' equity | 228,132 | 256,104 | ||||||
Total liabilities and stockholders’ equity | $ | 599,655 | $ | 616,465 | ||||
WAGEWORKS, INC. | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
Six Months Ended June 30, | ||||||
2013 | 2014 | |||||
(unaudited) |
||||||
(in thousands) |
||||||
Cash flows from operating activities: | ||||||
Net income | $ | 8,628 | $ | 11,031 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation | 1,831 | 1,621 | ||||
Amortization and change in contingent consideration | 9,187 | 8,969 | ||||
Stock-based compensation | 3,558 | 6,278 | ||||
Loss on disposal of fixed assets | 82 | 14 | ||||
Provision for doubtful accounts | (15) | (342) | ||||
Deferred taxes | 4,372 | 6,288 | ||||
Excess tax benefit from the exercise of stock options | (4,908) | (6,428) | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (8,868) | (5,767) | ||||
Prepaid expenses and other current assets | (2,185) | (723) | ||||
Other assets | 215 | (2,318) | ||||
Accounts payable and accrued expenses | 1,594 | (7,292) | ||||
Customer obligations | 18,212 | (967) | ||||
Other liabilities | (2,045) | (640) | ||||
Net cash provided by operating activities | 29,658 | 9,724 | ||||
Cash flows used in investing activities: | ||||||
Purchases of property and equipment | (7,421) | (7,067) | ||||
Cash consideration for business acquisitions, net of cash acquired | (751) | - | ||||
Cash paid for acquisition of client contracts | (1,219) | - | ||||
Change in restricted cash | 3,248 | (1) | ||||
Net cash used in investing activities | (6,143) | (7,068) | ||||
Cash flows from financing activities: | ||||||
Proceeds from follow-on offering net of underwriters commissions and discounts | 11,550 | - | ||||
Proceeds from exercise of common stock options |
8,825 | 3,797 | ||||
Proceeds from issuance of common stock (Employee Stock Purchase Plan) | 1,132 | 1,363 | ||||
Payment of contingent consideration | - | (3,308) | ||||
Excess tax benefit from the exercise of stock options | 4,908 | 6,428 | ||||
Net cash provided by financing activities | 26,415 | 8,280 | ||||
Net increase in cash and cash equivalents | 49,930 | 10,936 | ||||
Cash and cash equivalents at beginning of period | 305,052 | 359,958 | ||||
Cash and cash equivalents at end of period | $ | 354,982 | $ | 370,894 | ||
GAAP to Non-GAAP Reconciliations | ||||||||||||
(In millions, except per share data) | ||||||||||||
(unaudited) | ||||||||||||
The following tables detail the reconciliation of GAAP financial measures to non-GAAP financial measures included in this release: | ||||||||||||
Operating income: | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||
GAAP income from operations | $ | 6.7 | $ | 7.9 | $ | 14.2 | $ | 18.8 | ||||
Stock-based compensation | 2.5 | 4.2 | 3.6 | 6.3 | ||||||||
Amortization of acquired intangibles | 2.3 | 2.3 | 4.6 | 4.4 | ||||||||
Contingent consideration | 0.4 | 0.1 | 0.8 | 0.2 | ||||||||
Non-GAAP income from operations | $ | 11.9 | $ | 14.5 | $ | 23.2 | $ | 29.7 | ||||
Non-GAAP income from operations as a percentage of total revenue | 21.9% | 24.6% | 21.0% | 24.5% | ||||||||
Net income: | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||
GAAP net income | $ | 4.0 | $ | 4.6 | $ | 8.6 | $ | 11.0 | ||||
Stock-based compensation | 2.5 | 4.2 | 3.6 | 6.3 | ||||||||
Amortization of acquired intangibles | 2.3 | 2.3 | 4.6 | 4.4 | ||||||||
Contingent consideration | 0.4 | 0.1 | 0.8 | 0.2 | ||||||||
Tax effect of above adjustments * | (2.1) | (2.6) | (3.6) | (4.4) | ||||||||
Non-GAAP net income | $ | 7.1 | $ | 8.6 | $ | 14.0 | $ | 17.5 | ||||
Weighted average shares outstanding used in computing Non-GAAP per share amounts (diluted) | 35.0 | 36.3 | 34.4 | 36.3 | ||||||||
Non-GAAP diluted net income per share | $ | 0.20 | $ | 0.24 | $ | 0.41 | $ | 0.48 | ||||
* Tax effect adjustment assumes a 40% tax rate | ||||||||||||
Reconciliation of GAAP net income to Non-GAAP Adjusted EBITDA: | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||
GAAP net income | $ | 4.0 | $ | 4.6 | $ | 8.6 | $ | 11.0 | ||||
Interest income | (0.0) | (0.0) | (0.0) | (0.0) | ||||||||
Interest expense | 0.4 | 0.3 | 0.7 | 0.5 | ||||||||
Income tax provision | 2.4 | 3.1 | 4.9 | 7.3 | ||||||||
Depreciation | 0.9 | 0.8 | 1.8 | 1.6 | ||||||||
Amortization and change in contingent consideration | 4.7 | 4.5 | 9.2 | 9.0 | ||||||||
Stock-based compensation expense | 2.5 | 4.2 | 3.6 | 6.3 | ||||||||
Adjusted EBITDA | $ | 14.9 | $ | 17.5 | $ | 28.8 | $ | 35.7 |
CONTACT:
Investor Contact:
ICR
Staci Mortenson,
203-682-8273
Staci.mortenson@icrinc.com
or
Media
Contact:
WageWorks, Inc.
Britta Meyer, 650-577-5208
Britta.Meyer@wageworks.com