(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-3351864 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
1100 Park Place, 4th Floor San Mateo, California 94403 (Address of principal executive offices, including zip code) |
Large accelerated filer | [X] | Accelerated filer | ||
Non-accelerated filer | (Do not check if a smaller reporting company) | Smaller reporting company | ||
Emerging growth company |
Page No. | ||
June 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | Derived from Audited Financial Statements | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 712,194 | $ | 779,345 | |||
Restricted cash | 332 | 332 | |||||
Short-term investments | 257,095 | 195,534 | |||||
Receivables, net | 87,137 | 107,547 | |||||
Prepaid expenses and other current assets | 23,610 | 29,271 | |||||
Total current assets | 1,080,368 | 1,112,029 | |||||
Property and equipment, net | 78,486 | 68,742 | |||||
Goodwill | 297,409 | 297,409 | |||||
Acquired intangible assets, net | 142,850 | 155,369 | |||||
Deferred tax assets, net | 8,008 | 10,143 | |||||
Other assets | 28,839 | 8,291 | |||||
Total assets | $ | 1,635,960 | $ | 1,651,983 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 89,047 | $ | 89,977 | |||
Customer obligations | 637,489 | 695,368 | |||||
Other current liabilities | 2,459 | 628 | |||||
Total current liabilities | 728,995 | 785,973 | |||||
Long-term debt, net of financing costs | 244,657 | 244,915 | |||||
Other non-current liabilities | 10,721 | 8,845 | |||||
Total liabilities | 984,373 | 1,039,733 | |||||
Commitments and Contingencies (Note 14) | |||||||
Stockholders' Equity: | |||||||
Common stock, par value $0.001 per share (authorized 1,000,000 shares; 40,333 shares issued and 39,853 shares outstanding at June 30, 2018 and 40,251 shares issued and 39,771 shares outstanding at December 31, 2017) | 41 | 41 | |||||
Additional paid-in capital | 573,254 | 562,131 | |||||
Treasury stock at cost (480 shares at June 30, 2018 and December 31, 2017) | (22,309 | ) | (22,309 | ) | |||
Accumulated other comprehensive loss | (1,038 | ) | (354 | ) | |||
Retained earnings | 101,639 | 72,741 | |||||
Total stockholders’ equity | 651,587 | 612,250 | |||||
Total liabilities and stockholders’ equity | $ | 1,635,960 | $ | 1,651,983 |
Three Months Ended June 30, | Six months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Healthcare | $ | 68,104 | $ | 68,202 | $ | 143,361 | $ | 142,876 | |||||||
COBRA | 26,200 | 27,018 | 55,035 | 55,568 | |||||||||||
Commuter | 18,847 | 17,836 | 37,725 | 36,379 | |||||||||||
Other | 3,357 | 4,076 | 7,028 | 8,346 | |||||||||||
Total revenues | 116,508 | 117,132 | 243,149 | 243,169 | |||||||||||
Operating expenses: | |||||||||||||||
Cost of revenues (excluding amortization of internal use software) | 36,143 | 43,319 | 81,386 | 91,407 | |||||||||||
Technology and development | 13,392 | 14,515 | 26,425 | 29,786 | |||||||||||
Sales and marketing | 18,521 | 14,728 | 36,859 | 30,807 | |||||||||||
General and administrative | 18,898 | 18,459 | 44,147 | 31,959 | |||||||||||
Amortization | 10,191 | 9,393 | 20,182 | 18,630 | |||||||||||
Employee termination and other charges | 2,853 | 917 | 2,853 | 1,648 | |||||||||||
Total operating expenses | 99,998 | 101,331 | 211,852 | 204,237 | |||||||||||
Income from operations | 16,510 | 15,801 | 31,297 | 38,932 | |||||||||||
Other income (expense): | |||||||||||||||
Interest income | 1,432 | 95 | 2,703 | 162 | |||||||||||
Interest expense | (2,420 | ) | (1,766 | ) | (4,602 | ) | (3,202 | ) | |||||||
Other income (expense), net | 23 | (9 | ) | 18 | (230 | ) | |||||||||
Income before income taxes | 15,545 | 14,121 | 29,416 | 35,662 | |||||||||||
Income tax (provision) benefit | (4,621 | ) | 6,157 | (7,473 | ) | 673 | |||||||||
Net income | $ | 10,924 | $ | 20,278 | $ | 21,943 | $ | 36,335 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.27 | $ | 0.54 | $ | 0.55 | $ | 0.98 | |||||||
Diluted | $ | 0.27 | $ | 0.53 | $ | 0.54 | $ | 0.94 | |||||||
Shares used in computing net income per share: | |||||||||||||||
Basic | 39,853 | 37,419 | 39,838 | 37,209 | |||||||||||
Diluted | 40,412 | 38,613 | 40,446 | 38,514 |
Three Months Ended June 30, | Six months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 10,924 | $ | 20,278 | $ | 21,943 | $ | 36,335 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized gain (loss) on short-term investments, net of tax | 46 | — | (686 | ) | — | ||||||||||
Other comprehensive income (loss), net of tax | 46 | — | (686 | ) | — | ||||||||||
Total comprehensive income | $ | 10,970 | $ | 20,278 | $ | 21,257 | $ | 36,335 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 21,943 | $ | 36,335 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation | 6,651 | 5,221 | |||||
Amortization | 20,183 | 18,630 | |||||
Amortization of debt issuance costs | 242 | 125 | |||||
Accrued interest on debt securities | (413 | ) | — | ||||
Amortization of commissions | (1,576 | ) | — | ||||
Stock-based compensation expense | 8,881 | 10,812 | |||||
Loss on disposal of fixed assets | 34 | 91 | |||||
(Recoveries from) provision for doubtful accounts | 98 | (141 | ) | ||||
Deferred taxes | — | 593 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables | 20,312 | (56,269 | ) | ||||
Prepaid expenses and other current assets | 10,116 | (12,073 | ) | ||||
Other assets | (14,109 | ) | 809 | ||||
Accounts payable and accrued expenses | (1,772 | ) | 27,792 | ||||
Customer obligations | (57,879 | ) | (42,466 | ) | |||
Other liabilities | 848 | 2,242 | |||||
Net cash provided by (used in) operating activities | 13,559 | (8,299 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (19,834 | ) | (17,534 | ) | |||
Purchases of investments | (122,823 | ) | — | ||||
Proceeds from sales of investments | 4,096 | — | |||||
Proceeds from maturities of investments | 56,665 | — | |||||
Purchases of intangible assets | (209 | ) | (397 | ) | |||
Net cash used in investing activities | (82,105 | ) | (17,931 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from public stock offering, net of underwriting discounts, commissions and other costs | — | 131,177 | |||||
Proceeds from exercise of common stock options | 1,396 | 10,002 | |||||
Proceeds from issuance of common stock under Employee Stock Purchase Plan | 869 | 1,511 | |||||
Payments of debt issuance costs | (500 | ) | (1,852 | ) | |||
Payments of debt principal | — | (2,500 | ) | ||||
Payment of shares withheld related to restricted stock units | (218 | ) | — | ||||
Payment of capital lease obligations | (152 | ) | (147 | ) | |||
Taxes paid related to net share settlement of stock-based compensation arrangements | — | (8,437 | ) | ||||
Net cash provided by financing activities | 1,395 | 129,754 | |||||
Net (decrease) increase in cash and cash equivalents, unrestricted and restricted | (67,151 | ) | 103,524 | ||||
Cash and cash equivalents at beginning of period, unrestricted and restricted | 779,677 | 672,941 | |||||
Cash and cash equivalents, unrestricted and restricted, at end of period | $ | 712,526 | $ | 776,465 | |||
Supplemental cash flow disclosure: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 4,139 | $ | 2,808 | |||
Income taxes | $ | 1,979 | $ | 2,743 | |||
Noncash financing and investing activities: | |||||||
Property and equipment, accrued but not paid | $ | 3,168 | $ | 1,922 | |||
Public stock offering costs, accrued but not paid | $ | — | $ | 402 | |||
Property and equipment financed under capital lease | $ | 142 | $ | 263 |
• | Identification of the contract, or contracts, with the customer; |
• | Identification of the performance obligations in the contract; |
• | Determination of the transaction price; |
• | Allocation of the transaction price to the performance obligations in the contract; and |
• | Recognition of the revenue when, or as, the Company satisfies a performance obligation. |
• | Healthcare and commuter programs include revenues generated from the monthly administration services based on employee participant levels and interchange and other commission revenues. |
• | COBRA revenue is generated from the administration of continuation of coverage services for participants who are no longer eligible for the employer’s health benefits, such as medical, dental, vision and for the continued administration of employee participants’ Health Reimbursement Arrangements (“HRAs”), and certain healthcare Flexible Spending Accounts (“FSAs”). |
• | Other revenue includes services related to enrollment and eligibility, non-healthcare, employee account administration (i.e., tuition and health club reimbursements). |
June 30, 2018 | December 31, 2017 | |||||||
Cash and cash equivalents, unrestricted | $ | 712,194 | $ | 779,345 | ||||
Cash and cash equivalents, restricted | 332 | 332 | ||||||
Total unrestricted and restricted cash and cash equivalents | $ | 712,526 | $ | 779,677 |
• | Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. |
• | Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. |
• | Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. |
• | A significant adverse change in legal factors or in the business climate |
• | An adverse action or assessment by a regulator |
• | Unanticipated competition |
• | A loss of key personnel |
• | A more likely than not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of |
• | The nature and history of current or cumulative financial reporting income or losses; |
• | Sources of future taxable income; |
• | The anticipated reversal or expiration dates of the deferred tax assets; and |
• | Tax planning strategies. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator for basic net income per share: | |||||||||||||||
Net income | $ | 10,924 | $ | 20,278 | $ | 21,943 | $ | 36,335 | |||||||
Denominator for basic net income per share: | |||||||||||||||
Weighted-average common shares outstanding | 39,853 | 37,419 | 39,838 | 37,209 | |||||||||||
Basic net income per share | $ | 0.27 | $ | 0.54 | $ | 0.55 | $ | 0.98 | |||||||
Numerator for diluted net income per share: | |||||||||||||||
Net income | $ | 10,924 | $ | 20,278 | $ | 21,943 | $ | 36,335 | |||||||
Denominator for diluted net income per share: | |||||||||||||||
Weighted-average common shares outstanding | 39,853 | 37,419 | 39,838 | 37,209 | |||||||||||
Dilutive stock options, restricted stock and performance restricted stock units and employee stock purchase plan shares | 559 | 1,194 | 608 | 1,305 | |||||||||||
Diluted weighted-average common shares outstanding | 40,412 | 38,613 | 40,446 | 38,514 | |||||||||||
Diluted net income per share | $ | 0.27 | $ | 0.53 | $ | 0.54 | $ | 0.94 |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Benefit administration services and COBRA | $ | 96,258 | $ | 99,338 | $ | 200,699 | $ | 205,923 | ||||||||
Interchange | 13,555 | 13,915 | 29,300 | 28,952 | ||||||||||||
Other revenue | 6,695 | 3,879 | 13,150 | 8,294 | ||||||||||||
$ | 116,508 | $ | 117,132 | $ | 243,149 | $ | 243,169 |
2018 | 2019 | 2020 | 2021 and thereafter | Total | |||||||||||||
$ | 286 | 571 | 571 | 1,714 | $ | 3,142 |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
As reported | Adjustments | Balance without adoption of ASC 606 | As reported | Adjustments | Balance without adoption of ASC 606 | |||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Sales and marketing | $ | 18,521 | $ | 245 | $ | 18,766 | $ | 36,859 | $ | 294 | $ | 37,153 | ||||||||||||
Total operating expenses | 99,998 | 245 | 100,243 | 211,852 | 294 | 212,146 | ||||||||||||||||||
Income from operations | 16,510 | (245 | ) | 16,265 | 31,297 | (294 | ) | 31,003 | ||||||||||||||||
Income before income taxes | 15,545 | (245 | ) | 15,300 | 29,416 | (294 | ) | 29,122 | ||||||||||||||||
Income tax provision | (4,621 | ) | 73 | (4,548 | ) | (7,473 | ) | 75 | (7,398 | ) | ||||||||||||||
Net income | $ | 10,924 | $ | (172 | ) | $ | 10,752 | $ | 21,943 | $ | (219 | ) | $ | 21,724 | ||||||||||
Net income per share: | ||||||||||||||||||||||||
Basic | $ | 0.27 | $ | 0.27 | $ | 0.55 | $ | 0.55 | ||||||||||||||||
Diluted | $ | 0.27 | $ | 0.27 | $ | 0.54 | $ | 0.54 |
June 30, 2018 | ||||||||||||
As reported | Adjustments | Balance without adoption of ASC 606 | ||||||||||
Assets | ||||||||||||
Other assets | $ | 28,839 | $ | (7,175 | ) | $ | 21,664 | |||||
Total assets | 1,635,960 | (7,175 | ) | 1,628,785 | ||||||||
Liabilities and Stockholders' Equity | ||||||||||||
Retained earnings | 101,639 | (7,175 | ) | 94,464 | ||||||||
Total Stockholders' equity | $ | 651,587 | (7,175 | ) | $ | 644,412 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||
Gross carrying amount | Accumulated amortization | Net | Gross carrying amount | Accumulated amortization | Net | ||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Client / broker contracts and relationships | $ | 237,431 | $ | (96,695 | ) | $ | 140,736 | $ | 237,221 | $ | (84,581 | ) | $ | 152,640 | |||||||||
Trade names | 3,880 | (3,540 | ) | 340 | 3,880 | (3,492 | ) | 388 | |||||||||||||||
Technology | 14,646 | (13,528 | ) | 1,118 | 14,646 | (13,047 | ) | 1,599 | |||||||||||||||
Noncompete agreements | 2,232 | (2,048 | ) | 184 | 2,232 | (2,013 | ) | 219 | |||||||||||||||
Favorable lease arrangements | 1,134 | (662 | ) | 472 | 1,134 | (611 | ) | 523 | |||||||||||||||
Total | $ | 259,323 | $ | (116,473 | ) | $ | 142,850 | $ | 259,113 | $ | (103,744 | ) | $ | 155,369 |
As of June 30, 2018 | |||
Remainder of 2018 | $ | 12,737 | |
2019 | 24,914 | ||
2020 | 22,749 | ||
2021 | 19,945 | ||
2022 | 17,509 | ||
Thereafter | 44,996 | ||
Total | $ | 142,850 |
Carrying Amount | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | Level 1 | Level 2 | ||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | 209 | $ | — | $ | — | $ | 209 | $ | 209 | $ | — | |||||||||||
Commercial paper | 20,793 | 1 | (1 | ) | 20,793 | — | 20,793 | ||||||||||||||||
Total cash equivalents | $ | 21,002 | $ | 1 | $ | (1 | ) | $ | 21,002 | $ | 209 | $ | 20,793 | ||||||||||
Short-Term Investments: | |||||||||||||||||||||||
U.S. government securities | $ | 28,970 | $ | — | $ | (141 | ) | $ | 28,829 | $ | 28,829 | $ | — | ||||||||||
U.S. government agency securities | 14,325 | — | (84 | ) | 14,241 | — | 14,241 | ||||||||||||||||
Municipal bonds | 6,981 | (11 | ) | 6,970 | — | 6,970 | |||||||||||||||||
Foreign government securities | 10,505 | — | (27 | ) | 10,478 | — | 10,478 | ||||||||||||||||
Corporate debt securities | 143,209 | 35 | (910 | ) | 142,334 | — | 142,334 | ||||||||||||||||
Commercial paper | 21,661 | 1 | (3 | ) | 21,659 | — | 21,659 | ||||||||||||||||
Certificates of deposit | 1,257 | 1 | — | 1,258 | — | 1,258 | |||||||||||||||||
Asset-backed securities | 31,559 | — | (233 | ) | 31,326 | — | 31,326 | ||||||||||||||||
Total short-term investments | $ | 258,467 | $ | 37 | $ | (1,409 | ) | $ | 257,095 | $ | 28,829 | $ | 228,266 | ||||||||||
Total cash equivalents and short-term investments | $ | 279,469 | $ | 38 | $ | (1,410 | ) | $ | 278,097 | $ | 29,038 | $ | 249,059 |
Carrying Amount | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | Level 1 | Level 2 | ||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | 58,953 | $ | — | $ | — | $ | 58,953 | $ | 58,953 | $ | — | |||||||||||
Commercial paper | 21,930 | — | (3 | ) | 21,927 | — | 21,927 | ||||||||||||||||
Total cash equivalents | $ | 80,883 | — | $ | (3 | ) | $ | 80,880 | $ | 58,953 | $ | 21,927 | |||||||||||
Short-Term Investments: | |||||||||||||||||||||||
U.S. government securities | $ | 17,472 | $ | — | $ | (41 | ) | $ | 17,431 | $ | 17,431 | $ | — | ||||||||||
U.S. government agency securities | 11,540 | — | (30 | ) | 11,510 | — | 11,510 | ||||||||||||||||
Municipal bonds | 6,974 | 2 | (8 | ) | 6,968 | — | 6,968 | ||||||||||||||||
Foreign government securities | 7,499 | — | (27 | ) | 7,472 | — | 7,472 | ||||||||||||||||
Corporate debt securities | 105,144 | 3 | (273 | ) | 104,874 | — | 104,874 | ||||||||||||||||
Commercial paper | 30,798 | 1 | (9 | ) | 30,790 | — | 30,790 | ||||||||||||||||
Certificates of deposit | 1,255 | — | — | 1,255 | — | 1,255 | |||||||||||||||||
Asset-backed securities | 15,310 | — | (76 | ) | 15,234 | — | 15,234 | ||||||||||||||||
Total short-term investments | $ | 195,992 | $ | 6 | $ | (464 | ) | $ | 195,534 | 17,431 | $ | 178,103 | |||||||||||
Total cash equivalents and short-term investments | $ | 276,875 | $ | 6 | $ | (467 | ) | $ | 276,414 | $ | 76,384 | $ | 200,030 |
Amortized Cost | Fair Value | |||||||||||
Due less than one year | $ | 141,212 | $ | 140,904 | ||||||||
Due in one to five years | 138,258 | 137,194 | ||||||||||
Total | $ | 279,470 | $ | 278,098 |
Amortized Cost | Fair Value | |||||||||||
Due less than one year | $ | 157,651 | $ | 157,573 | ||||||||
Due in one to five years | 119,224 | 118,841 | ||||||||||
Total | $ | 276,875 | $ | 276,414 |
June 30, 2018 | December 31, 2017 | ||||||
Trade receivables | $ | 52,974 | $ | 58,067 | |||
Unpaid amounts for benefit services | 36,835 | 52,054 | |||||
Receivables, gross | 89,809 | 110,121 | |||||
Less: allowance for doubtful accounts | (2,672 | ) | (2,574 | ) | |||
Receivables, net | $ | 87,137 | $ | 107,547 |
June 30, 2018 | December 31, 2017 | ||||||
Computers and equipment | $ | 27,496 | $ | 22,702 | |||
Software and software development costs | 132,709 | 120,278 | |||||
Furniture and fixtures | 8,089 | 7,754 | |||||
Leasehold improvements | 28,836 | 25,097 | |||||
$ | 197,130 | $ | 175,831 | ||||
Less: accumulated depreciation and amortization | (118,644 | ) | (107,089 | ) | |||
Property and equipment, net | $ | 78,486 | $ | 68,742 |
June 30, 2018 | December 31, 2017 | ||||||
Payable to benefit providers and transit agencies | 25,533 | 32,469 | |||||
Accounts payable and accrued liabilities | 21,161 | 23,788 | |||||
Accrued compensation and related benefits | 26,172 | 25,921 | |||||
Other accrued expenses | 5,312 | 5,275 | |||||
Deferred revenue | 10,869 | 2,524 | |||||
Accounts payable and accrued expenses | $ | 89,047 | $ | 89,977 |
June 30, 2018 | December 31, 2017 | ||||||
Revolving credit facility used | $ | 249,830 | $ | 249,830 | |||
Less: Outstanding letters of credit | (2,830 | ) | (2,830 | ) | |||
Outstanding revolving credit facility | 247,000 | 247,000 | |||||
Unamortized loan origination fees | (2,343 | ) | (2,085 | ) | |||
Long-term debt | $ | 244,657 | $ | 244,915 |
Three Months Ended June 30, | Six Months Ended June 30, 2018 | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of revenues | $ | 660 | $ | 2,007 | $ | 2,327 | $ | 3,747 | |||||||
Technology and development | 586 | 600 | 1,161 | 1,211 | |||||||||||
Sales and marketing | 772 | 624 | 1,750 | 1,410 | |||||||||||
General and administrative | (430 | ) | 3,802 | 3,643 | 4,444 | ||||||||||
Total | $ | 1,588 | $ | 7,033 | $ | 8,881 | $ | 10,812 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Stock options granted (in thousands) | — | 27 | — | 545 | ||||||||||
Weighted-average fair value at date of grant | $ | — | $ | 26.20 | $ | — | $ | 26.72 |
Shares | Weighted-average exercise price | Remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2017 | 2,478 | $ | 47.24 | 7.22 | $ | 42,324 | ||||||
Granted | — | — | ||||||||||
Exercised | (54 | ) | 26.10 | |||||||||
Forfeited and cancelled | (28 | ) | 53.94 | |||||||||
Outstanding as of June 30, 2018 | 2,396 | $ | 47.63 | 5.43 | $ | 20,948 | ||||||
Vested and expected to vest at June 30, 2018 | 2,327 | $ | 47.27 | 5.40 | $ | 20,835 | ||||||
Exercisable at June 30, 2018 | 1,591 | $ | 41.35 | 4.98 | $ | 19,580 |
(Shares in thousands) | Weighted-average grant date fair value | ||||||||||||
Service- based RSUs | Performance- based RSUs | Service- based RSUs | Performance- based RSUs | ||||||||||
Unvested at December 31, 2017 | 304 | 725 | $ | 61.61 | $ | 60.21 | |||||||
Granted | — | — | — | — | |||||||||
Vested | (57 | ) | (140 | ) | 62.06 | 61.10 | |||||||
Forfeited and cancelled | (10 | ) | (210 | ) | 62.94 | 60.01 | |||||||
Unvested at June 30, 2018 | 237 | 375 | $ | 61.45 | $ | 60.00 |
As of June 30, 2018 | |||
Remainder of 2018 | $ | 4,594 | |
2019 | 9,518 | ||
2020 | 9,720 | ||
2021 | 9,689 | ||
2022 | 6,536 | ||
Thereafter | 7,970 | ||
Total future minimum lease payments | $ | 48,027 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||
(Dollar in thousands) | Amount | Amount | $ Change | % Change | Amount | Amount | $ Change | % Change | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Healthcare | $ | 68,104 | $ | 68,202 | $ | (98 | ) | — | % | $ | 143,361 | $ | 142,876 | $ | 485 | — | % | ||||||||||||
COBRA | 26,200 | 27,018 | (818 | ) | (3 | )% | 55,035 | 55,568 | (533 | ) | (1 | )% | |||||||||||||||||
Commuter | 18,847 | 17,836 | 1,011 | 6 | % | 37,725 | 36,379 | 1,346 | 4 | % | |||||||||||||||||||
Other | 3,357 | 4,076 | (719 | ) | (18 | )% | 7,028 | 8,346 | (1,318 | ) | (16 | )% | |||||||||||||||||
Total revenues | $ | 116,508 | $ | 117,132 | $ | (624 | ) | (1 | )% | $ | 243,149 | $ | 243,169 | $ | (20 | ) | — | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Cost of revenues (excluding amortization of internal use software) | $ | 36,143 | $ | 43,319 | $ | (7,176 | ) | (17 | )% | $ | 81,386 | $ | 91,407 | $ | (10,021 | ) | (11 | )% | ||||||||||||
Percentage of revenue | 31 | % | 37 | % | 33 | % | 38 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Technology and development | $ | 13,392 | $ | 14,515 | $ | (1,123 | ) | (8 | )% | $ | 26,425 | $ | 29,786 | $ | (3,361 | ) | (11 | )% | ||||||||||||
Percentage of revenue | 11 | % | 12 | % | 11 | % | 12 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Sales and marketing | $ | 18,521 | $ | 14,728 | $ | 3,793 | 26 | % | $ | 36,859 | $ | 30,807 | $ | 6,052 | 20 | % | ||||||||||||||
Percentage of revenue | 16 | % | 13 | % | 15 | % | 13 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
General and administrative | $ | 18,898 | $ | 18,459 | $ | 439 | 2 | % | $ | 44,147 | $ | 31,959 | $ | 12,188 | 38 | % | ||||||||||||||
Percentage of revenue | 16 | % | 16 | % | 18 | % | 13 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Amortization | $ | 10,191 | $ | 9,393 | $ | 798 | 8 | % | $ | 20,182 | $ | 18,630 | $ | 1,552 | 8 | % | ||||||||||||||
Percentage of revenue | 9 | % | 8 | % | 8 | % | 8 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Employee termination and other charges | $ | 2,853 | $ | 917 | $ | 1,936 | 211 | % | $ | 2,853 | $ | 1,648 | $ | 1,205 | 73 | % | ||||||||||||||
Percentage of revenue | 2 | % | 1 | % | 1 | % | 1 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Interest income | $ | 1,432 | $ | 95 | $ | 1,337 | 1,407 | % | $ | 2,703 | $ | 162 | $ | 2,541 | 1,569 | % | ||||||||||||||
Interest expense | $ | (2,420 | ) | $ | (1,766 | ) | $ | 654 | 37 | % | $ | (4,602 | ) | $ | (3,202 | ) | $ | 1,400 | 44 | % | ||||||||||
Other income (expense), net | $ | 23 | $ | (9 | ) | $ | 32 | 356 | % | $ | 18 | $ | (230 | ) | $ | 248 | 108 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(Dollar in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Income before income taxes | $ | 15,545 | $ | 14,121 | $ | 29,416 | $ | 35,662 | ||||||||||||||||||||||
Income tax (provision) benefit | $ | (4,621 | ) | $ | 6,157 | $ | (10,778 | ) | (175 | )% | $ | (7,473 | ) | $ | 673 | $ | (8,146 | ) | (1,210 | )% | ||||||||||
Effective tax rate | 29.7 | % | (43.6 | )% | 25.4 | % | (1.9 | )% |
Six Months Ended June 30, | ||||||||||
(in thousands) | 2018 | 2017 | $ Change | |||||||
Net cash provided by (used in) operating activities | $ | 13,559 | $ | (8,299 | ) | $ | 21,858 | |||
Net cash used in investing activities | (82,105 | ) | (17,931 | ) | (64,174 | ) | ||||
Net cash provided by financing activities | 1,395 | 129,754 | (128,359 | ) | ||||||
Net (decrease) increase in cash and cash equivalents, restricted and unrestricted | $ | (67,151 | ) | $ | 103,524 | $ | (170,675 | ) |
(in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||
Long-term debt obligations (1) | $ | 247,000 | $ | — | $ | — | $ | 247,000 | $ | — | |||||||||
Interest on long-term debt obligations (2) | 33,408 | 8,760 | 17,519 | 7,129 | — | ||||||||||||||
Operating lease obligations (3) | 48,027 | 9,285 | 19,470 | 13,028 | 6,244 | ||||||||||||||
Total | $ | 328,435 | $ | 18,045 | $ | 36,989 | $ | 267,157 | $ | 6,244 |
(1) | As of June 30, 2018, maximum borrowings under the revolving credit facility are $400.0 million with a base rate determined in accordance with the credit agreement or, at our option, LIBOR plus a spread of 1.25% to 2.25% per annum, and a maturity date of April 4, 2022. As of June 30, 2018, our outstanding principal of $247.0 million is presented net of debt issuance costs on our condensed consolidated balance sheets. The debt issuance costs are not included in the table above. |
(2) | Estimated interest payments assume the interest rate applicable as of June 30, 2018 of 3.55% per annum on a $247.0 million outstanding principal amount. |
(3) | We lease facilities under non-cancelable operating leases expiring at various dates through 2028. |
a) | the completion of the Audit Committee’s investigation and the substantial resources expended (including the use of external consultants and experts) to respond to the findings and the resulting restatement of certain of our previously issued financial statements; the Audit Committee engaged independent professionals to assist its investigation throughout the process and, the Audit Committee has concluded its investigation; |
b) | our internal review that identified certain accounting errors and control deficiencies, leading to the restatement of certain of our previously issued financial statements for the quarterly periods ended June 30, 2016, September 30, 2016, financial year ended December 31, 2016, and the quarterly periods ended March 31, 2017, June 30, 2017 and September 30, 2017; |
c) | based on the efforts in (a) and (b) above, we have updated, and in some cases corrected, our accounting policies and have applied these to our previously issued financial results and to our fiscal year 2016 and 2017 financial results; and |
d) | certain remediation actions we have undertaken to address the identified material weaknesses, as discussed below. |
• | We did not have processes and controls to ensure there were adequate mechanisms and oversight to ensure accountability for the performance of internal control over financial reporting responsibilities and to ensure corrective actions were appropriately prioritized and implemented in a timely manner. |
• | We did not effectively execute a strategy to attract, develop and retain a sufficient complement of qualified resources with an appropriate level of knowledge, experience, and training in certain areas important to financial reporting. |
• | There was not an adequate assessment of changes in risks by management that could significantly impact internal control over financial reporting or an adequate determination and prioritization of how those risks should be managed. |
• | We did not have adequate management oversight of accounting and financial reporting activities in implementing certain accounting practices to conform to the Company’s policies and GAAP. |
• | We did not have adequate management oversight around completeness and accuracy of data material to financial reporting. |
• | There was a lack of robust, established and documented accounting policies and insufficiently detailed Company procedures to put these policies into effective action. |
• | We were not focused on a commitment to competency as it relates to creating priorities, allocating adequate resources and establishing cross functional procedures around managing complex contracts and non-routine transactions as well as managing change and attracting, developing and retaining qualified resources. |
A. | Accounting Close and Financial Reporting |
B. | Contract to Cash Process |
C. | Risk Assessment and Management of Change |
D. | Review of New, Unusual or Significant Transactions and Contracts |
E. | Manual Reconciliations of High-Volume Standard Transactions |
• | The Company has undergone a leadership transition, and we have a new CEO, CFO and General Counsel. Clear lines of responsibilities have been drawn in new roles to ensure effective controls. |
• | We are establishing regular working group meetings, with appropriate oversight by the Audit Committee and leadership of the Company, to strengthen accountability for performance of internal control over financial reporting responsibilities and prioritization of corrective actions. |
• | We will be enhancing our compensation practices to further incorporate risk and operational goals. |
• | We will be assessing and enhancing adequacy and quality of resources in areas impacting financial reporting including, but not limited to conducting additional training programs for our employees to enhance their skill sets which will complement their work. |
• | We are augmenting accounting staff with additional technical expertise in GAAP to assist with enhanced financial reporting procedures, controls and remediation efforts. |
• | We are establishing senior level oversight and executive reporting around the accounting close and financial reporting process with an enhanced focus on improving process level controls to strengthen the existing control environment around formalizing and documenting accounting policies as well as implementing a robust accounting close process with enhanced review of financial statements. |
• | In addition to enhancing processes and controls over adoption of new accounting standards, we will also be enhancing GAAP expertise within the accounting department. |
• | We are establishing senior level oversight and executive reporting around the contract to cash process with an enhanced focus on improving process level controls to strengthen the existing control environment around the contract to cash process and revenue recognition. This includes but is not limited to enhancing the process for record retention of contracts and agreements, assessment of collectability from customers, analysis of complex contracts as well as automation of select billing processes. |
• | We are developing a plan to implement a periodic risk assessment process, review of control procedures and documentation around impact of changes on accounting processes. |
• | We are developing a plan to enhance documentation and review around accounting estimates, and interpretations with formal approval of the detailed review. |
• | We are developing a plan to proactively design manual controls around implementation of new systems impacting financial reporting. |
• | We have reallocated Company resources to improve the oversight over operational changes across the business and business trends. |
• | We are designing and implementing enhanced internal controls surrounding identification, analysis and governance and monitoring of new, significant or unusual contracts or transactions to ensure that these contracts or transactions are recorded in accordance with Company’s policies and GAAP. This will entail enhanced documentation of analysis, as well as review and cross functional approval of company policies and interpretations. |
• | We are providing leadership oversight to ensure prioritization of funding and resources for the remediation efforts. |
• | We are strengthening the review controls and supporting documentation related to reconciliations of high-volume standard transactions. With an enhanced focus on supporting documentation review, we are implementing a comprehensive review methodology over data, inputs and reports used for the reconciliations. |
Incorporated by Reference | ||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith |
31.1 | X | |||||
31.2 | X | |||||
32.1(1) | X | |||||
10.1 | 8-K | 001-35232 | 10.1 | 4/21/2017 | ||
10.2 | 8-K | 001-35232 | 10.2 | 4/21/2017 | ||
10.10H | 10-Q | 001-35232 | 10.10H | 8/1/2017 | ||
101.INS | XBRL Instance Document | |||||
101.SCH | XBRL Taxonomy Schema Linkbase Document | |||||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | |||||
101.DEF | XBRL Taxonomy Definition Linkbase Document | |||||
101.LAB | XBRL Taxonomy Labels Linkbase Document | |||||
101.PRE | XBRL Taxonomy Presentation Linkbase Document |
(1) | The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of WageWorks, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing. |
WAGEWORKS, INC. | ||
Date: March 18, 2019 | By: | /s/ ISMAIL DAWOOD |
Ismail Dawood | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of WageWorks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: March 18, 2019 | ||
/s/ Edgar O. Montes | ||
Name: | Edgar O. Montes | |
Title: | Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of WageWorks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: March 18, 2019 | ||
/s/ Ismail Dawood | ||
Name: | Ismail Dawood | |
Title: | Chief Financial Officer (Principal Financial Officer) |
1. | Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, to which this Certification is attached as Exhibit 32.1 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: March 18, 2019 | ||
/s/ Edgar O. Montes | ||
Name: | Edgar O. Montes | |
Title: | Chief Executive Officer and President (Principal Executive Officer) |
/s/ Ismail Dawood | ||
Name: | Ismail Dawood | |
Title: | Chief Financial Officer (Principal Financial Officer) |
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Mar. 14, 2019 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | wage | |
Entity Registrant Name | WAGEWORKS, INC. | |
Entity Central Index Key | 0001158863 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 39,852,857 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, issued (in shares) | 40,333,000 | 40,251,000 |
Common stock, outstanding (in shares) | 39,853,000 | 39,771,000 |
Treasury stock, at cost (in shares) | 480,000 | 480,000 |
Condensed Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenues: | ||||
Total revenues | $ 116,508 | $ 117,132 | $ 243,149 | $ 243,169 |
Operating expenses: | ||||
Cost of revenues (excluding amortization of internal use software) | 36,143 | 43,319 | 81,386 | 91,407 |
Technology and development | 13,392 | 14,515 | 26,425 | 29,786 |
Sales and marketing | 18,521 | 14,728 | 36,859 | 30,807 |
General and administrative | 18,898 | 18,459 | 44,147 | 31,959 |
Amortization | 10,191 | 9,393 | 20,182 | 18,630 |
Employee termination and other charges | 2,853 | 917 | 2,853 | 1,648 |
Total operating expenses | 99,998 | 101,331 | 211,852 | 204,237 |
Income from operations | 16,510 | 15,801 | 31,297 | 38,932 |
Other income (expense): | ||||
Interest income | 1,432 | 95 | 2,703 | 162 |
Interest expense | (2,420) | (1,766) | (4,602) | (3,202) |
Other income (expense), net | 23 | (9) | 18 | (230) |
Income before income taxes | 15,545 | 14,121 | 29,416 | 35,662 |
Income tax (provision) benefit | (4,621) | 6,157 | (7,473) | 673 |
Net income | $ 10,924 | $ 20,278 | $ 21,943 | $ 36,335 |
Net income per share: | ||||
Basic (in dollars per share) | $ 0.27 | $ 0.54 | $ 0.55 | $ 0.98 |
Diluted (in dollars per share) | $ 0.27 | $ 0.53 | $ 0.54 | $ 0.94 |
Shares used in computing net income per share: | ||||
Basic (in shares) | 39,853 | 37,419 | 39,838 | 37,209 |
Diluted (in shares) | 40,412 | 38,613 | 40,446 | 38,514 |
Benefit administration services and COBRA | ||||
Revenues: | ||||
Total revenues | $ 68,104 | $ 68,202 | $ 143,361 | $ 142,876 |
Interchange | ||||
Revenues: | ||||
Total revenues | 26,200 | 27,018 | 55,035 | 55,568 |
COBRA | ||||
Revenues: | ||||
Total revenues | 18,847 | 17,836 | 37,725 | 36,379 |
Other Products and Services | ||||
Revenues: | ||||
Total revenues | $ 3,357 | $ 4,076 | $ 7,028 | $ 8,346 |
Condensed Consolidated Statements of Comprehensive Income Statement - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 10,924 | $ 20,278 | $ 21,943 | $ 36,335 |
Other comprehensive loss, net of tax | ||||
Net unrealized loss on investments | 46 | 0 | (686) | 0 |
Other comprehensive loss, net of tax | 46 | 0 | (686) | 0 |
Total comprehensive income | $ 10,970 | $ 20,278 | $ 21,257 | $ 36,335 |
Net Income per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | Net Income per Share The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
Stock options and restricted stock units to purchase common stock are not included in the computation of diluted earnings per share if their effect would be anti-dilutive. The Company excluded 1.8 million and 0.7 million anti-dilutive share equivalents in the calculation of diluted earnings per share for the three months ended June 30, 2018 and 2017, respectively; and 1.6 million and 0.6 million anti-dilutive shares for the six months ended June 30, 2018 and 2017, respectively. |
Summary of Business and Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Business and Significant Accounting Policies | Summary of Business and Significant Accounting Policies Business WageWorks, Inc., (together with its subsidiaries, “WageWorks” or the “Company”) was incorporated in the state of Delaware in 2000. The Company is a leader in administering Consumer-Directed Benefits (“CDBs”), which empower employees to save money on taxes while also providing corporate tax advantages for employers. The Company operates as a single reportable segment on an entity level basis and considers itself to operate under one operating and reporting segment with healthcare, transit and other employer sponsored programs representing a group of similar products lines. The Company believes that it engages in a single business activity and operates in a single economic environment. Basis of Presentation The unaudited interim condensed consolidated financial statements and the related notes have been prepared on the same basis as the audited consolidated financial statements and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results of the interim period presented herein are not necessarily indicative of the results of future periods or annual results for the year ending December 31, 2018. These unaudited interim condensed consolidated financial statements and the related notes should be read in conjunction with the December 31, 2017 audited financial statements and related notes, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K. The December 31, 2017 consolidated balance sheet, included in this interim Quarterly Report on Form 10-Q, was derived from audited financial statements. Certain prior year amounts in the condensed consolidated statements of cash flows have been reclassified to conform to the current year’s presentation. Other than the adoption of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, there have been no material changes to our critical accounting policies and estimates during the three months ended June 30, 2018, as compared to the critical accounting policies and estimates disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2017. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of WageWorks, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Revenue Recognition On January 1, 2018, we adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) as discussed further in Recently Adopted Accounting Pronouncements below. ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs-Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, references to ASC 606 used herein refer to both ASC 606 and Subtopic 340-40. We account for revenue contracts with customers by applying the requirements of ASC 606, which includes the following steps:
Our revenues are derived primarily from benefit service administration, interchange and other commissions and other revenue which includes services related to enrollment and eligibility, non-healthcare, and employee account administration (i.e., tuition and health club reimbursements) and project-related professional services. We account for individual products and services separately if they are distinct-that is, if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. We account for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities. We recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make significant judgments when determining the appropriate timing of revenue recognition. Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated into Healthcare, Commuter, COBRA and Other revenue. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.
Within our Healthcare and Commuter service lines, we have determined that our administration services are a single continuous service. These services are consumed as they are received and the Company recognizes service revenue over time on a monthly basis as it satisfies its performance obligations. As such, the Company recognizes revenue in each month for the administration services provided in that month using the variable consideration allocation exception. The Company applies this exception because it concluded that the nature of its obligations and the variable payment terms are aligned and the uncertainty related to the consideration is resolved on a monthly basis as the Company satisfies its obligations. The administration services are typically billed in the period in which services are performed. COBRA requires employers to make health coverage available for terminated employees for a period of up to 36 months post-termination. Similar to our Healthcare and Commuter service lines, our COBRA administration services are a single continuous service. These services are consumed as they are received and the Company recognizes service revenue over time on a monthly basis as it satisfies its performance obligations. As such, the Company recognizes revenue in each month for the COBRA administration services provided in that month using either the as-invoiced practical expedient or the variable consideration allocation exception. The administration services are typically billed in the period in which services are performed. We also recognize revenues that are generated from the use of debit cards used by employee participants related to the distribution, management and monitoring of such cards and used in connection with our benefits administration services for Healthcare and Commuter service lines. These related fees are known as interchange fees and are based upon a percentage of the amounts transacted on each card. We have determined that our performance obligation for interchange is a single continuous service, which is satisfied over time each month. Therefore, we recognize interchange revenue on a monthly basis based on the services provided and use the variable consideration allocation exception. The interchange revenues are typically billed in the period in which services are performed. Contract Assets Contract assets include amounts related to our enforceable right to consideration for completed performance obligations not yet invoiced. The contract assets are transferred to the receivables balance when the rights become unconditional. Contract Liabilities Contract liabilities are recorded as deferred revenues and include payments received in advance of performance under the contract. We generally invoice our customers for services as they are provided on a monthly basis, however in limited instances we may invoice in advance of services to be provided. Contract liabilities are recognized as revenue when the services are provided to the customer. Contract liabilities that are anticipated to be recognized during the succeeding twelve-month period are recorded as current deferred revenue and the remaining portion is recorded as noncurrent. Contract Costs ASC 606 requires the recognition of an asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs. Incremental costs are costs that would not have been incurred if the contract had not been obtained. Examples of contract costs are commissions paid to sales personnel. Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that has been determined to be six years. The Company determined the period of benefit by taking into consideration length of customer contracts, useful life of developed technology, regulatory oversight the Company is subject to, and other factors. Amortization expense is included in Sales and marketing expenses on the condensed consolidated statements of income. Use of Estimates In preparing the Consolidated Financial Statements and related disclosure in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”), including all adjustments as a result of the Company's restatement, and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), the Company must make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for, but not limited to revenue recognition, allocation of purchase consideration to acquired assets and liabilities from business combinations, allowances for doubtful accounts, useful lives for depreciation and amortization, loss contingencies, income taxes, the assumptions used for stock-based compensation including attainment of performance-based awards, the assumptions used for software and web site development cost classification, and recoverability and impairments of goodwill and long-lived assets and average customer life. Actual results may be materially different from those estimates. In making its estimates, the Company considers the current economic and legislative environment. Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds, stated at cost, as well as commercial paper with an original maturity of less than 90 days as further described under Marketable Securities below. To the extent the Company’s contracts do not provide for any restrictions on the Company’s use of cash that it receives from clients, the cash is recorded as cash and cash equivalents. The majority of the Company’s cash and cash equivalents represent funding and pre-funding balances received from customers for which the Company has a corresponding current obligation. In all cases where we have collected cash from a customer but not fulfilled services (the payment of participant healthcare claims and commuter benefits), the Company recognizes a related liability to its customers, classified as customer obligations in the accompanying consolidated balance sheets. Restricted cash represents cash used to collateralize standby letters of credit which were issued to the benefit of a third party to secure a contract with the Company. The following table summarizes the Company's cash and cash equivalents as at June 30, 2018 and December 31, 2017 (in thousands):
Marketable Securities The Company determines the classification of its investments in marketable securities at the time of purchase and accounts for them as available-for-sale. Marketable securities of highly liquid investments with stated maturities of three months or less when purchased are classified as cash equivalents and those with stated maturities of between three months and one year as short-term investments. Marketable securities with maturities beyond twelve months are also included in short-term investments within current assets as the Company intends for its investments to support current operations and other strategic initiatives. These securities are reported at fair value, which includes the accrued interest of interest-bearing securities. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive loss as a component of stockholders' equity, except for unrealized losses determined to be other-than-temporary which will be recorded within other income (expense). Realized gains and losses on the sale of marketable securities are recorded in other income (expense). Receivables Receivables represent both trade receivables from customers in relation to fees for the Company’s services and unpaid amounts for benefit services provided by third-party vendors, such as transit agencies and healthcare providers for which the Company records a receivable for funding and a corresponding customer obligations liability until the Company disburses the balances to the vendors. The Company provides for an allowance for doubtful accounts by specifically identifying accounts with a risk of collectability and providing an estimate of the loss exposure. The Company reviews its allowance for doubtful accounts on a quarterly basis. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Write-offs for the six months ended June 30, 2018 and 2017 were not significant. The Company offsets on a customer by customer basis unpaid amounts for benefit services and customer obligation balances for financial reporting presentation. Additionally, the Company offsets outstanding trade and non-trade receivables, including any debit or credit memos, against any prefund balances after plan year close or upon termination of services both based on the completion of a full reconciliation with the customer. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on computer and equipment and furniture and fixtures is calculated on a straight-line basis over the estimated useful lives of those assets, ranging from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful life or the lease term. When events or circumstances suggest an asset’s life is different than initially estimated, management reassesses the useful life of the asset and recognizes future depreciation prospectively over the revised life. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation / amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in operating expenses. Maintenance and repairs are expensed as incurred. Expenditures that substantially increase an asset’s useful life are capitalized. Software and Web Site Development Costs Costs incurred to develop software for internal use are capitalized and amortized over the technology’s estimated useful life, generally four years. When events or circumstances suggest an asset’s life is different than initially estimated, management reassesses the useful life of the asset and recognizes future amortization prospectively over the revised life. Costs incurred related to the planning and post implementation phases of development are expensed as incurred. Costs associated with the platform content or the repair or maintenance, including transfer of data between existing platforms are expensed as incurred. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and we consider counterparty credit risk in our assessment of fair value. Carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate their fair values as of the balance sheet dates because of their short maturities. The carrying value of the Company’s debt under the credit facility is estimated to approximate fair value as the interest rate approximates the market rate for debt securities with similar terms and risk characteristics. The determination of the fair value of the Company’s marketable securities is further explained in Note 5 Investments and Fair Value Measurements. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Impairment of Long-lived Assets The Company reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. An impairment of long-lived assets exists when the carrying amount of a long-lived asset group, exceeds its fair value. Such impairment arises in circumstances when such assets are assessed and determined to have no continuing or future benefit. Impairment losses are recorded when the carrying amount of the impaired asset group is not recoverable. Recoverability is determined by comparing the carrying amount of the asset or asset group to the undiscounted cash flows which are expected to be generated from its use. If the carrying amount of the asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds its fair value. Acquisitions, Goodwill and Definite lived Intangible Assets The cost of an acquisition is allocated to the tangible assets and definite lived intangible assets acquired and liabilities assumed based on their fair value at the date of acquisition. Goodwill represents the excess cost over the fair value of net assets acquired in the acquisition and is not amortized, but rather is tested for impairment. Definite lived intangible assets, consisting of client/broker contracts and relationships, trade names, technology, noncompete agreements and favorable lease arrangements, are stated at cost less accumulated amortization. All definite lived intangible assets are amortized on a straight-line basis over their estimated remaining economic lives, generally ranging from one to ten. Amortization expense related to these intangible assets is included in amortization expense on the consolidated statements of income. The Company performs a goodwill impairment test annually on December 31st and more frequently if events and circumstances indicate that the asset might be impaired. The following are examples of triggering events that could indicate that the fair value of a reporting unit has fallen below the unit’s carrying amount:
An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. When reviewing goodwill for impairment, the Company assesses whether goodwill should be allocated to operating levels lower than the Company’s single operating segment for which discrete financial information is available and reviewed for decision-making purposes. These lower levels are referred to as reporting units. The Company’s chief operating decision maker, the Chief Executive Officer, does not allocate resources or assess performance at the individual healthcare, commuter, COBRA or other revenue stream level, but rather at the operating segment level. Discrete financial information is therefore not maintained at the revenue stream level. The Company’s one reporting unit was determined to be the Company’s one operating segment. Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill impairment. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance, Company specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The goodwill impairment analysis is a two-step process: first, the reporting unit’s estimated fair value is compared to its carrying value, including goodwill. If the Company determines that the estimated fair value of the reporting unit is less than its carrying value, the Company moves to the second step to determine the implied fair value of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of the reporting unit in a manner similar to a purchase price allocation. If impairment is deemed more likely than not, management would perform the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. Income Taxes The Company reports income taxes using an asset and liability approach. Deferred tax assets and liabilities arise from the differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under current enacted tax law. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. The Company records a valuation allowance to reduce the deferred tax assets to the amount that the Company believes is more likely than not to be realized based on its judgment of all available positive and negative evidence. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which the strength of the evidence can be objectively verified. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:
The Company takes a two-step approach to recognizing and measuring the financial statement benefit of uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement of the audit. The Company classifies interest and penalties on unrecognized tax benefits as income tax expense or benefit. Customer Obligation Liability Many of our customer agreements include provisions whereby our customers remit funds to us which represent prefunds of employer / client and employee participant contributions related to FSA, HRA and commuter programs. The agreements do not represent restricted cash and accordingly the amounts received are included in cash and cash equivalents on our consolidated balance sheets with a corresponding liability recorded as customer obligations. Our customers generally provide us with prefunds for their FSA and HRA programs based on a percentage of projected spending by the employee participants for the plan year and other factors. In the case of our commuter program, at the beginning of each month we receive prefunds based on the employee participants’ monthly elections. These prefunds are maintained throughout the year by our FSA, HRA and commuter clients as benefits are provided under these programs. The Company offsets on a customer by customer basis non-trade accounts receivable and customer obligation balances for financial reporting presentation. Additionally, the Company offsets outstanding trade and non-trade receivables, including any debit or credit memos, against any prefund balances after plan year close or upon termination of services both based on the completion of a full reconciliation with the customer. Recent Accounting Pronouncements Recently Adopted Accounting Guidance In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASC 606"), amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for public companies effective for annual and interim reporting periods beginning after December 15, 2016. We adopted ASC 606 on January 1, 2018 by applying the modified retrospective approach to all contracts that were not completed as of January 1, 2018. Results for the reporting period beginning January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We recorded an increase in total assets of $9.3 million and an increase in retained earnings of $6.9 million (net of tax effect) as of January 1, 2018 attributed to the deferral of commission cost. The tax impact resulted in an increase in deferred tax liabilities in the amount of $2.4 million with an offset to retained earnings upon adoption. See Note 3 Revenue for more details. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU No. 2016-18 addresses diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing or financing activities or as a combination of those activities in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories are no longer be presented in the Statement of Cash Flows. The Company adopted this standard on January 1, 2018 using the retrospective method. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new guidance, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income (loss) for equity securities with readily determinable fair values. The Company adopted this standard on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In March 2016, the FASB issued Accounting Standard Update No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). The new guidance creates an exception under ASC 405-20, Liabilities-Extinguishments of Liabilities, to derecognize financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. The Company adopted this update on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash flows: Classification of Certain Cash Receipts and Cash Payments. The update provides specific guidance on a number of cash flow classification issues including contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, proceeds from settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees and separately identifiable cash flows and application of the predominance principle. The Company adopted this update on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting ("ASU 2017-09"). The update amends the scope of modification accounting for shared-based payment arrangements to specify that modification accounting would not be applicable if the fair value, vesting conditions and classification of the shared-based awards are the same immediately before and after the modification. The Company adopted this update on January 1, 2018. This update did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. Recently Issued Accounting Pronouncements In February 2016, the FASB, issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The Company will adopt the standard effective in the first quarter of 2019 and will not restate comparative periods upon adoption. The Company will elect a package of practical expedients for leases that commenced prior to January 1, 2019 and will not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. The Company will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company will recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. The Company currently expects that our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and total liabilities that were reported relative to such amounts prior to adoption. Refer to Note 14 for further information on operating lease commitments. The Company plans to adopt Topic 842 using the alternative modified retrospective approach with the cumulative effect of adoption recognized to retained earnings on January 1, 2019. The Company does not believe the new standard will have a material impact on the consolidated statements of income, nor will it have a notable impact on liquidity. The standard will also have no material impact on debt-covenant compliance under our current agreements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 360)", which amends the FASB's guidance on the impairment of financial instruments. The ASU adds to GAAP an impairment model (known as the "current expected credit loss model") that is based on expected losses rather than incurred losses. ASU 2016-13 is effective for annual reporting periods ending after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard is expected to be effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects and will be effective for the Company beginning January 1, 2019 and should be applied either in the period of adoption or retrospectively. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in this standard are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses." ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption. |
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue On January 1, 2018, we adopted ASC 606, applying the modified retrospective method to all contracts that were not completed as of that date. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period results are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for our accounting policies applied to revenue recognition prior to adoption of ASC 606. We generally invoice our customers at the beginning of the term on a monthly basis with a term of net 30-60 days. We applied the practical expedient provided by ASC 606 and did not evaluate contracts of one year or less for the existence of a significant financing component. Our policy is to exclude sales and other indirect taxes when measuring the transaction price of its subscription agreements. The primary impact of adopting ASC 606 relates to the deferral of incremental costs of obtaining customer contracts and the amortization of those costs over the period of benefit. We recorded an increase in total assets of $9.3 million and an increase in retained earnings of $6.9 million (net of tax effect) as of January 1, 2018. The tax impact resulted in an increase in deferred tax liabilities in the amount of $2.4 million with an offset to retained earnings upon adoption. The adoption of the preceding standard did not have a material impact on the Company's revenue for the three and six months ended June 30, 2018. Disaggregation of Revenue The Company's primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the condensed consolidated statements of income. The following table provides information about disaggregated revenue from contracts with customers by the nature of the products and services (in thousands):
Contract Balances We generally do not recognize revenue in advance of invoicing our customers, however, we record a receivable when revenue is recognized prior to payment and we have unconditional right to payment. Alternatively, when payment precedes the related services, we record a contract liability, or deferred revenue, until our performance obligations are satisfied. Our deferred revenue as of June 30, 2018 and December 31, 2017 was $12.5 million and $3.4 million, net of $1.0 million of contract assets, respectively. The balances related to cash received in advance for a certain interchange revenue arrangement, other up-front fees and other commuter deferred revenue. The Company expects to satisfy its remaining obligations for these arrangements. Contract Costs Contract costs relate to incremental costs of obtaining a contract with a customer. Contract costs, which primarily consist of deferred sales commissions, were $9.6 million and $9.3 million as of June 30, 2018 and March 31, 2018, respectively and are included in other assets on the condensed consolidated balance sheets. Amortization expense for the deferred costs was $0.7 million and $1.4 million for the three and six months ended June 30, 2018. There was no impairment loss in relation to the costs capitalized for the periods presented. Deferred contract costs are amortized on a straight-line basis over the period of benefit, which is consistent with the pattern of transfer of the good or service to which the asset relates. The Company has applied the practical expedient which allows an entity to account for incremental costs of obtaining a contract at a portfolio level. Performance Obligations During the three and six months ended June 30, 2018, the Company recognized revenue of ($0.5) million and ($0.3) million attributable to changes in the estimated transaction price allocated to performance obligations satisfied in prior periods. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period, in thousands. The Company applies the practical expedient to not disclose information about contracts with original expected durations of one year or less, amounts of variable consideration attributable to the variable consideration allocation exception, or contract renewals that are unexercised as of June 30, 2018 (in thousands):
Impacts on Financial Statements In accordance with Topic 606, the disclosure of the impact of adoption to our unaudited condensed consolidated statements of income and balance sheets and statements of cash flows was as follows (in thousands, except per share amounts):
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill There is no change in the carrying amount of goodwill for the three and six months ended June 30, 2018. Intangible Assets Acquired intangible assets at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
Amortization of intangible assets totaled $6.3 million and $6.5 million for the three months ended June 30, 2018 and 2017, respectively. For the six months ended June 30, 2018 and 2017, amortization expense of intangible assets was $12.7 million and $13.0 million, respectively. Acquired intangible assets are amortized on a straight-line basis generally over one to ten years. The estimated amortization expense in future periods at June 30, 2018 is as follows (in thousands):
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Investments and Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments and Fair Value Measurements | Investments and Fair Value Measurements The following table summarizes the Company's investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as at June 30, 2018 (in thousands):
The following table summarizes the Company's investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as at December 31, 2017 (in thousands):
As of June 30, 2018, the Company had no investments that were in an unrealized loss position for a period of twelve months or greater and have determined that the gross unrealized losses on investments are temporary in nature. Realized gains and losses on marketable securities are included in other income (expense) on the Company's consolidated statements of income. Gross realized gains and losses on marketable securities for the three and six months ended June 30, 2018 were not significant. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments. There were no transfers between Level 1 and Level 2 fair value categories during the periods presented. The following table summarizes the estimated amortized cost and fair value of the Company's marketable securities by the contractual maturity date as of June 30, 2018 (in thousands):
The following table summarizes the estimated amortized cost and fair value of the Company's marketable securities by the contractual maturity date as of December 31, 2017 (in thousands):
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Accounts Receivable |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Receivables Receivables at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Property And Equipment |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property And Equipment | Property and Equipment Property and equipment at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
As of June 30, 2018 and December 31, 2017, total assets under capital lease obligations were $1.8 million and $1.7 million respectively, and were classified as computers and equipment. Accumulated depreciation for assets under capital lease obligations was $1.3 million and $1.1 million as at June 30, 2018 and December 31, 2017 respectively. The Company capitalized software development costs of $5.9 million and $5.5 million for the three months ended June 30, 2018 and 2017, respectively; and $11.6 million and $9.6 million for the six months ended June 30, 2018 and 2017, respectively. Amortization expense related to capitalized software development costs was $3.8 million and $2.9 million for the three months ended June 30, 2018 and 2017, respectively; and $7.4 million and $5.6 million for the six months ended June 30, 2018 and 2017, respectively. These costs are included in amortization and change in contingent consideration in the condensed consolidated statements of income. At June 30, 2018, the unamortized software development costs included in property and equipment in the condensed consolidated balance sheets were $38.7 million. Total depreciation expense plus amortization of software and capitalized software development costs for the three months ended June 30, 2018 and 2017 was $7.3 million, $5.6 million, respectively. Total depreciation cost, including amortization of software and capitalized software development costs, for the six months ended June 30, 2018 and 2017, was $14.1 million and $10.9 million, respectively. |
Accounts Payable and Accrued Expenses |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Account Payable and Accrued Expenses | Accounts Payable and Accrued Expenses Accounts payable and accrued expenses at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Long-term Debt |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Long-term debt As of June 30, 2018 and December 31, 2017, long-term debt consisted of the following (in thousands):
On April 4, 2017, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with MUFG Union Bank, N.A., as administrative agent (“Agent”). The Credit Agreement amends and restates the Company’s existing Amended and Restated Credit Agreement, and increased the Company's borrowing capacity under the revolving credit facility to $400.0 million, with a $15.0 million letter of credit sub-facility. The Credit Agreement contains an increase option permitting the Company, subject to certain conditions and requirements, to arrange with existing lenders and/or new lenders to provide up to an aggregate of $100.0 million in additional commitments. Loan proceeds may be used for general corporate purposes, including acquisitions permitted under the Credit Agreement. The Company may prepay loans under the Credit Agreement in whole or in part at any time without premium or penalty. The fees incurred in connection with the Credit Agreement are classified as a direct deduction from long-term debt in the condensed consolidated balance sheets. The loans bear interest, at the Company’s option, at either (i) a London Interbank Offered Rate (LIBOR) determined in accordance with the Credit Agreement, plus a margin ranging from 1.25% to 2.25%, or (ii) a base rate determined in accordance with the Credit Agreement, plus a margin ranging from 0.25% to 1.25%, in either case with such margin determined based on the Company’s consolidated leverage ratio for the preceding four fiscal quarter period. Interest is due and payable in arrears quarterly for base rate loans and at the end of an interest period for LIBOR rate loans. Principal, together with all accrued and unpaid interest, is due and payable on April 4, 2022. The Company elected option (i) and, as of June 30, 2018, the interest rate applicable to the revolving credit facility was 3.55%. The Company’s obligations under the Credit Agreement are secured by substantially all of the Company’s assets. All of the Company’s existing and future material subsidiaries are required to guarantee its obligations under the Credit Agreement. The guarantees by future material subsidiaries are and will be secured by substantially all of the assets of such subsidiaries. The Credit Agreement contains financial and non-financial covenants including debt ratio and interest coverage ratio requirements. The Company is currently in compliance with all the covenants under the credit facility. On April 5, 2018, the Company's Board of Directors concluded the previously issued financial statements for (i) the quarterly periods ended September 30, June 30 and March 31, 2017, (ii) the annual period ended December 31, 2016 and (iii) the quarterly periods ended September 30 and June 30, 2016 (collectively, the “Non-Reliance Periods”) should be restated and should no longer be relied upon. On March 22, 2018 the Company entered a “First Reporting Extension” Agreement and on June 25, 2018 entered a “Second Reporting Extension” Agreement. These agreements are amendments to the Credit Agreement dated April 4, 2017 and provide credit accommodations to the Company in the form of modification of the reporting and Compliance Certificates. In 2018, the Company paid the Agent $0.8 million to extend the delivery date of the delinquent financial statements to March 16, 2019 pursuant to the Reporting Extension Agreement. In March 2019, the Company entered into a Third Reporting Extension Agreement and paid the Agent $0.1 million to extend the delivery date of any remaining delinquent financial statements to May 10, 2019. As of June 30, 2018, the Company had $247.0 million outstanding under the revolving credit facility and $150.2 million unused revolving credit facility still available to borrow under the Credit Agreement. The credit facility contains customary events of default including, among others, payment defaults, covenant defaults, inaccuracy of representations and warranties, cross-defaults to other material indebtedness, judgment defaults, a change of control default and bankruptcy, and insolvency defaults. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the loan agreement at a per annum rate of interest equal to 2.00% above the applicable interest rate. Upon an event of default, the lenders may terminate the commitments, declare the outstanding obligations payable by the Company to be immediately due and payable, and exercise other rights and remedies provided for under the credit facility. |
Organizational Efficiency Plan |
6 Months Ended |
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Jun. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Organizational Efficiency Plan | Organizational Efficiency Plan During the second quarter of 2015, the Company integrated operations and consolidated certain positions resulting in employee headcount reductions. The Company continually evaluates ways to improve business processes to ensure that operations align with its strategy and vision for the future. During the three and six months ended June 30, 2018, the Company recorded a charge of $2.9 million for employee termination costs primarily related to severance costs. During the three and six months ended June 30, 2017, the Company recorded a charge of $0.9 million and $1.6 million, respectively, for employee termination costs primarily related to severance costs. |
Employee Benefit Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans Stock-based compensation Stock-based compensation is classified in the condensed consolidated statements of income in the same expense line items as cash compensation. Amounts recorded as expense in the condensed consolidated statements of income were as follows (in thousands):
(a) Employee Stock Option Plan In May 2010, the Company adopted the 2010 Equity Incentive Plan ("2010 Plan"). Under the 2010 Plan, the Company can grant share-based awards to all employees, including executive officers, outside consultants and non-employee directors. Options under 2010 Plan generally has a term of 10 years and vest over 4 years with 25% vesting after one year of service and monthly vesting over the remaining period. As of June 30, 2018, the 2010 Plan has a total of 5.1 million common stock shares available for issuance. The following table summarizes the weighted-average fair value of stock options granted:
Stock option activity for the six months ended June 30, 2018 was as follows (shares in thousands):
As of June 30, 2018, there was $13.7 million of total unrecognized stock-based compensation expense associated with stock options which will be recognized over a weighted-average period of approximately 2 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. (b) Restricted Stock Units The Company grants restricted stock units ("RSU") to certain employees, officers, and directors under the 2010 Plan. Restricted stock units vest upon performance-based, market-based, or service-based criteria. In the second quarter of 2017 and 2018 the Company granted no performance-based restricted stock units. During the first quarter of 2017, the Company granted a total of 343,000, of performance-based restricted stock units to certain executive officers. Performance-based restricted stock units are typically granted such that they vest upon the achievement of certain revenue growth rates and other financial metrics during a specified performance period for which participants have the ability to receive up to 200% of the target number of shares originally granted, depending on terms of the grant agreement. Stock-based compensation expense related to restricted stock units was $(1.1) million and $4.1 million for the three months ended June 30, 2018 and 2017, respectively; and $3.0 million and $4.9 million for the six months ended June 30, 2018 and 2017, respectively. Total unrecorded stock-based compensation expense at June 30, 2018 associated with restricted stock units was estimated at $15.9 million, which is expected to be recognized over a weighted-average period of approximately 2 years. The following table summarizes information about restricted stock units issued to officers, directors and employees under the 2010 Plan (shares in thousands):
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Stockholders' Equity |
6 Months Ended |
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Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Share Repurchase Program On August 6, 2015, the Company's Board of Directors authorized a $100 million stock repurchase program for 3 years which commenced on November 5, 2015 and expires on November 4, 2018. Repurchases made under this program may be made in the open market as the Company deems appropriate and market conditions allow. There were no shares of common stock repurchased during the three and six months ended June 30, 2018 and 2017. In August 2017, the Company repurchased 134,900 shares of its common stock at an average price of $58.82 per share for a total cost of $7.9 million. As of June 30, 2018, the Company had $77.7 million available for future purchases under the stock repurchase program. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company reports income taxes using an asset and liability approach, under which deferred income taxes are provided based upon enacted tax laws and rates applicable to periods in which the taxes become payable. The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Presently, there are no income tax examinations on-going in the jurisdictions where the Company operates. The Company's effective tax rate was 29.7% and 43.6% for the three months ended June 30, 2018 and 2017, respectively and 25.4% and 1.9% for the six months ended June 30, 2018 and 2017, respectively. The income tax provision for the three months ended June 30, 2018 was $4.6 million and the income tax benefit for the three months ended June 30, 2017 was $6.2 million. The income tax provision for the six months ended June 30, 2018 was $7.5 million and the income tax benefit for the six months ended June 30, 2017 was $0.7 million. As of June 30, 2018, the Company remains in a net deferred tax asset position. The realization of the Company’s deferred tax assets depends primarily on its ability to generate sufficient U.S. taxable income in future periods. The amount of deferred tax assets considered realizable may increase or decrease in subsequent quarters as management reevaluates the underlying basis for the estimates of future domestic taxable income. |
Commitments And Contingencies |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies | Commitments and Contingencies (a) Capital Lease Obligations The Company leases equipment under capital lease obligations that expire at various expiration dates through 2020. Future minimum lease payments under capital lease obligations as of June 30, 2018 are $0.6 million. The Company recorded current and long-term portions of capital lease obligations under other current liabilities and non-current liabilities, respectively, in the consolidated balance sheets. The Company has no future minimum lease payments under capital lease obligations extending beyond 2020. (b) Operating Leases The Company leases office space and equipment under noncancelable operating leases with various expiration dates through 2028. Future minimum lease payments under noncancelable operating leases, excluding the contractual sublease income of $9.2 million, are as follows (in thousands):
Rent expense for the three months ended June 30, 2018 and 2017 was $1.9 million and $1.9 million, respectively, and $3.9 million and $3.9 million for the six months ended June 30, 2018 and 2017, respectively. Sublease income for the three and six months ended June 30, 2018 was $0.5 million and $0.9 million, respectively. There was $0.5 million and $0.8 million sublease income recognized for the same periods in 2017, respectively. (c) Legal Matters The Company is pursuing affirmative claims against the OPM to obtain payment for services provided by the Company between March 1, 2016 and August 31, 2016 pursuant to our contract with OPM for the Government’s Federal Flexible Account Program (“FSAFEDS”). The Company initially issued its invoice for these services in February 2017. On December 22, 2017, the Company received the Contracting Officer’s “final decision” refusing payment of the invoiced amount and otherwise denying the Company’s Certified Claim. As a result of this decision, and a related Certified Claim that OPM subsequently denied, on February 8, 2018, we filed an appeal to the Civilian Board of Contract Appeals (“CBCA”) against OPM for services provided by the Company between March 1, 2016 and August 31, 2016. On August 3, 2018, we filed an appeal to the CBCA of OPM’s June 21, 2018 denial of a Request for Equitable Adjustment for extra work associated with a contract modification imposing new security and other requirements not part of the original scope of FSAFED’s contract work. The aggregate amount of our claims is approximately $9.1 million. The cases have been consolidated and discovery is ongoing. There have been multiple discovery motions, as well as motion to dismiss the claim we filed on August 3, 2018 which has been fully briefed and is awaiting a decision by the CBCA. The cases have been set for a hearing on the merits on April 24, 2019. However, because of the recent partial Government shutdown, the trial date has been postponed and has been tentatively scheduled for mid-June 2019. In connection with the Company’s claims against OPM, OPM has also claimed that an erroneous statement in a certificate signed by a former executive officer constituted a violation of the False Claims Act, and has moved to dismiss part of our claim against OPM as a result. As with all legal proceedings, no assurance can be provided as to the outcome of these matters or if we will be successful in recovering the full claimed amount. On March 9, 2018, a putative class action - captioned Government Employees’ Retirement System of the Virgin Islands v. WageWorks, Inc., et al., No. 4:18-cv-01523-JSW - was filed in the United States District Court for the Northern District of California (the “Securities Class Action”) against the Company, our former Chief Executive Officer, and our former Chief Financial Officer. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on behalf of persons and entities that acquired WageWorks securities between May 6, 2016 and March 1, 2018, and alleges, among other things, that the defendants issued false and misleading financial statements. The plaintiffs seek unspecified damages, fees, interest, and costs. The Company believes that the claims are without merit. On August 7, 2018, the Court entered an order granting the motion of the Public Pension Group, consisting of Public Employees’ Retirement System of Mississippi, the Government Employees’ Retirement System of the Virgin Islands, and the New Mexico Public Employees Retirement Association of New Mexico, to be lead plaintiff. Under the schedule stipulated by the parties, and approved by the Court, lead plaintiff will file its consolidated amended complaint no later than forty-five (45) days following issuance of the Company’s Restatement. On June 22, 2018 and September 6, 2018, two derivative lawsuits were filed against certain of our officers and directors and the Company (as nominal defendant) in the Superior Court of the State of California, County of San Mateo. Pursuant to the parties’ stipulation, which was approved by the Superior Court, the actions were consolidated. On July 23, 2018, a similar derivative lawsuit was filed against certain of our officers and directors and the Company (as nominal defendant) in the United States District Court for the Northern District of California (together, the “Derivative Suits”). The Derivative Suits purport to allege claims related to breaches of fiduciary duties, waste of corporate assets, and unjust enrichment. In addition, the complaint in District Court includes a claim for abuse of control, and the complaint in Superior Court includes a claim to require the Company to hold an annual shareholder meeting. The allegations in the Derivative Suits relate to substantially the same facts as those underlying the Securities Class Action described above. The plaintiffs seek unspecified damages and fees and costs. In addition, the complaint in the Superior Court seek for us to provide past operational reports and financial statements, to publish timely and accurate operational reports and financial statements going forward, to hold an annual shareholder meeting, and to take steps to improve its corporate governance and internal procedures. Under the schedule stipulated by the parties, and approved by the Superior Court, the plaintiff in the Superior Court action will file its Consolidated Complaint within 45 days from the date we issue our Restatement. As stipulated by the parties, and approved by the District Court, the District Court action is stayed. The parties in the District Court action are to notify the District Court within 15 days of (1) the dismissal of the Securities Class Action, (2) the denial of defendants' motion(s) to dismiss, or (3) a party giving notice that they no longer consent to the voluntary stay. From time to time, the Company may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. The Company voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the restatement and independent investigation. The Company is providing information and documents to the SEC and will continue to cooperate with the SEC’s investigation into these matters. The U.S. Attorney’s Office for the Northern District of California also opened an investigation. The Company has provided documents and information to the U.S. Attorney’s Office and will continue to cooperate with any inquiries by the U.S. Attorney’s Office regarding the matter. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information, the Company does not believe that any additional liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable. However, litigation is subject to inherent uncertainties and the Company's view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company's financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent events | Subsequent Events The Company’s former Chief Executive Officer Joe Jackson resigned from his position as Executive Chairman of the Company effective September 6, 2018. Mr. Jackson executed a release of claims with the Company as part of his resignation providing him with certain compensation and benefits, as described in the Form 8-K filed with the U.S. Securities and Exchange Commission on September 12, 2018. On October 15, 2018, Mr. Ismail Dawood was appointed Chief Financial Officer of the Company after previously serving as the Interim Chief Financial Officer and principal financial officer since April 9, 2018, and on January 14, 2019, Mr. John G. Saia joined the Company as Senior Vice President, General Counsel and Corporate Secretary. |
Summary of Business and Significant Accounting Policies (Policy) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
Business | Business WageWorks, Inc., (together with its subsidiaries, “WageWorks” or the “Company”) was incorporated in the state of Delaware in 2000. The Company is a leader in administering Consumer-Directed Benefits (“CDBs”), which empower employees to save money on taxes while also providing corporate tax advantages for employers. The Company operates as a single reportable segment on an entity level basis and considers itself to operate under one operating and reporting segment with healthcare, transit and other employer sponsored programs representing a group of similar products lines. The Company believes that it engages in a single business activity and operates in a single economic environment. |
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Basis of Presentation | Basis of Presentation The unaudited interim condensed consolidated financial statements and the related notes have been prepared on the same basis as the audited consolidated financial statements and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results of the interim period presented herein are not necessarily indicative of the results of future periods or annual results for the year ending December 31, 2018. These unaudited interim condensed consolidated financial statements and the related notes should be read in conjunction with the December 31, 2017 audited financial statements and related notes, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K. The December 31, 2017 consolidated balance sheet, included in this interim Quarterly Report on Form 10-Q, was derived from audited financial statements. Certain prior year amounts in the condensed consolidated statements of cash flows have been reclassified to conform to the current year’s presentation. Other than the adoption of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, there have been no material changes to our critical accounting policies and estimates during the three months ended June 30, 2018, as compared to the critical accounting policies and estimates disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2017. |
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Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of WageWorks, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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Revenue Recognition | Revenue Recognition On January 1, 2018, we adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) as discussed further in Recently Adopted Accounting Pronouncements below. ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs-Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, references to ASC 606 used herein refer to both ASC 606 and Subtopic 340-40. We account for revenue contracts with customers by applying the requirements of ASC 606, which includes the following steps:
Our revenues are derived primarily from benefit service administration, interchange and other commissions and other revenue which includes services related to enrollment and eligibility, non-healthcare, and employee account administration (i.e., tuition and health club reimbursements) and project-related professional services. We account for individual products and services separately if they are distinct-that is, if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. We account for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities. We recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make significant judgments when determining the appropriate timing of revenue recognition. Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated into Healthcare, Commuter, COBRA and Other revenue. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.
Within our Healthcare and Commuter service lines, we have determined that our administration services are a single continuous service. These services are consumed as they are received and the Company recognizes service revenue over time on a monthly basis as it satisfies its performance obligations. As such, the Company recognizes revenue in each month for the administration services provided in that month using the variable consideration allocation exception. The Company applies this exception because it concluded that the nature of its obligations and the variable payment terms are aligned and the uncertainty related to the consideration is resolved on a monthly basis as the Company satisfies its obligations. The administration services are typically billed in the period in which services are performed. COBRA requires employers to make health coverage available for terminated employees for a period of up to 36 months post-termination. Similar to our Healthcare and Commuter service lines, our COBRA administration services are a single continuous service. These services are consumed as they are received and the Company recognizes service revenue over time on a monthly basis as it satisfies its performance obligations. As such, the Company recognizes revenue in each month for the COBRA administration services provided in that month using either the as-invoiced practical expedient or the variable consideration allocation exception. The administration services are typically billed in the period in which services are performed. We also recognize revenues that are generated from the use of debit cards used by employee participants related to the distribution, management and monitoring of such cards and used in connection with our benefits administration services for Healthcare and Commuter service lines. These related fees are known as interchange fees and are based upon a percentage of the amounts transacted on each card. We have determined that our performance obligation for interchange is a single continuous service, which is satisfied over time each month. Therefore, we recognize interchange revenue on a monthly basis based on the services provided and use the variable consideration allocation exception. The interchange revenues are typically billed in the period in which services are performed. Contract Assets Contract assets include amounts related to our enforceable right to consideration for completed performance obligations not yet invoiced. The contract assets are transferred to the receivables balance when the rights become unconditional. Contract Liabilities Contract liabilities are recorded as deferred revenues and include payments received in advance of performance under the contract. We generally invoice our customers for services as they are provided on a monthly basis, however in limited instances we may invoice in advance of services to be provided. Contract liabilities are recognized as revenue when the services are provided to the customer. Contract liabilities that are anticipated to be recognized during the succeeding twelve-month period are recorded as current deferred revenue and the remaining portion is recorded as noncurrent. Contract Costs ASC 606 requires the recognition of an asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs. Incremental costs are costs that would not have been incurred if the contract had not been obtained. Examples of contract costs are commissions paid to sales personnel. Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that has been determined to be six years. The Company determined the period of benefit by taking into consideration length of customer contracts, useful life of developed technology, regulatory oversight the Company is subject to, and other factors. Amortization expense is included in Sales and marketing expenses on the condensed consolidated statements of income. |
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Use of Estimates | Use of Estimates In preparing the Consolidated Financial Statements and related disclosure in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”), including all adjustments as a result of the Company's restatement, and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), the Company must make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for, but not limited to revenue recognition, allocation of purchase consideration to acquired assets and liabilities from business combinations, allowances for doubtful accounts, useful lives for depreciation and amortization, loss contingencies, income taxes, the assumptions used for stock-based compensation including attainment of performance-based awards, the assumptions used for software and web site development cost classification, and recoverability and impairments of goodwill and long-lived assets and average customer life. Actual results may be materially different from those estimates. In making its estimates, the Company considers the current economic and legislative environment. |
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Cash, Cash Equivalents, and Restricted Cash | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds, stated at cost, as well as commercial paper with an original maturity of less than 90 days as further described under Marketable Securities below. To the extent the Company’s contracts do not provide for any restrictions on the Company’s use of cash that it receives from clients, the cash is recorded as cash and cash equivalents. The majority of the Company’s cash and cash equivalents represent funding and pre-funding balances received from customers for which the Company has a corresponding current obligation. In all cases where we have collected cash from a customer but not fulfilled services (the payment of participant healthcare claims and commuter benefits), the Company recognizes a related liability to its customers, classified as customer obligations in the accompanying consolidated balance sheets. Restricted cash represents cash used to collateralize standby letters of credit which were issued to the benefit of a third party to secure a contract with the Company. |
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Marketable Securities | Marketable Securities The Company determines the classification of its investments in marketable securities at the time of purchase and accounts for them as available-for-sale. Marketable securities of highly liquid investments with stated maturities of three months or less when purchased are classified as cash equivalents and those with stated maturities of between three months and one year as short-term investments. Marketable securities with maturities beyond twelve months are also included in short-term investments within current assets as the Company intends for its investments to support current operations and other strategic initiatives. These securities are reported at fair value, which includes the accrued interest of interest-bearing securities. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive loss as a component of stockholders' equity, except for unrealized losses determined to be other-than-temporary which will be recorded within other income (expense). Realized gains and losses on the sale of marketable securities are recorded in other income (expense). |
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Receivables | Receivables Receivables represent both trade receivables from customers in relation to fees for the Company’s services and unpaid amounts for benefit services provided by third-party vendors, such as transit agencies and healthcare providers for which the Company records a receivable for funding and a corresponding customer obligations liability until the Company disburses the balances to the vendors. The Company provides for an allowance for doubtful accounts by specifically identifying accounts with a risk of collectability and providing an estimate of the loss exposure. The Company reviews its allowance for doubtful accounts on a quarterly basis. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Write-offs for the six months ended June 30, 2018 and 2017 were not significant. The Company offsets on a customer by customer basis unpaid amounts for benefit services and customer obligation balances for financial reporting presentation. Additionally, the Company offsets outstanding trade and non-trade receivables, including any debit or credit memos, against any prefund balances after plan year close or upon termination of services both based on the completion of a full reconciliation with the customer. |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on computer and equipment and furniture and fixtures is calculated on a straight-line basis over the estimated useful lives of those assets, ranging from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful life or the lease term. When events or circumstances suggest an asset’s life is different than initially estimated, management reassesses the useful life of the asset and recognizes future depreciation prospectively over the revised life. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation / amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in operating expenses. Maintenance and repairs are expensed as incurred. Expenditures that substantially increase an asset’s useful life are capitalized. |
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Software and Web Site Development Costs | Software and Web Site Development Costs Costs incurred to develop software for internal use are capitalized and amortized over the technology’s estimated useful life, generally four years. When events or circumstances suggest an asset’s life is different than initially estimated, management reassesses the useful life of the asset and recognizes future amortization prospectively over the revised life. Costs incurred related to the planning and post implementation phases of development are expensed as incurred. Costs associated with the platform content or the repair or maintenance, including transfer of data between existing platforms are expensed as incurred. |
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Fair Value Of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and we consider counterparty credit risk in our assessment of fair value. Carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate their fair values as of the balance sheet dates because of their short maturities. The carrying value of the Company’s debt under the credit facility is estimated to approximate fair value as the interest rate approximates the market rate for debt securities with similar terms and risk characteristics. The determination of the fair value of the Company’s marketable securities is further explained in Note 5 Investments and Fair Value Measurements. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
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Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. An impairment of long-lived assets exists when the carrying amount of a long-lived asset group, exceeds its fair value. Such impairment arises in circumstances when such assets are assessed and determined to have no continuing or future benefit. Impairment losses are recorded when the carrying amount of the impaired asset group is not recoverable. Recoverability is determined by comparing the carrying amount of the asset or asset group to the undiscounted cash flows which are expected to be generated from its use. If the carrying amount of the asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds its fair value. |
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Acquisitions, Goodwill and Definitive lived Intangible Assets | Acquisitions, Goodwill and Definite lived Intangible Assets The cost of an acquisition is allocated to the tangible assets and definite lived intangible assets acquired and liabilities assumed based on their fair value at the date of acquisition. Goodwill represents the excess cost over the fair value of net assets acquired in the acquisition and is not amortized, but rather is tested for impairment. Definite lived intangible assets, consisting of client/broker contracts and relationships, trade names, technology, noncompete agreements and favorable lease arrangements, are stated at cost less accumulated amortization. All definite lived intangible assets are amortized on a straight-line basis over their estimated remaining economic lives, generally ranging from one to ten. Amortization expense related to these intangible assets is included in amortization expense on the consolidated statements of income. The Company performs a goodwill impairment test annually on December 31st and more frequently if events and circumstances indicate that the asset might be impaired. The following are examples of triggering events that could indicate that the fair value of a reporting unit has fallen below the unit’s carrying amount:
An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. When reviewing goodwill for impairment, the Company assesses whether goodwill should be allocated to operating levels lower than the Company’s single operating segment for which discrete financial information is available and reviewed for decision-making purposes. These lower levels are referred to as reporting units. The Company’s chief operating decision maker, the Chief Executive Officer, does not allocate resources or assess performance at the individual healthcare, commuter, COBRA or other revenue stream level, but rather at the operating segment level. Discrete financial information is therefore not maintained at the revenue stream level. The Company’s one reporting unit was determined to be the Company’s one operating segment. Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill impairment. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance, Company specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The goodwill impairment analysis is a two-step process: first, the reporting unit’s estimated fair value is compared to its carrying value, including goodwill. If the Company determines that the estimated fair value of the reporting unit is less than its carrying value, the Company moves to the second step to determine the implied fair value of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of the reporting unit in a manner similar to a purchase price allocation. If impairment is deemed more likely than not, management would perform the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. |
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Income Taxes | Income Taxes The Company reports income taxes using an asset and liability approach. Deferred tax assets and liabilities arise from the differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under current enacted tax law. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. The Company records a valuation allowance to reduce the deferred tax assets to the amount that the Company believes is more likely than not to be realized based on its judgment of all available positive and negative evidence. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which the strength of the evidence can be objectively verified. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:
The Company takes a two-step approach to recognizing and measuring the financial statement benefit of uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement of the audit. The Company classifies interest and penalties on unrecognized tax benefits as income tax expense or benefit. |
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Customer Obligation Liability | Customer Obligation Liability Many of our customer agreements include provisions whereby our customers remit funds to us which represent prefunds of employer / client and employee participant contributions related to FSA, HRA and commuter programs. The agreements do not represent restricted cash and accordingly the amounts received are included in cash and cash equivalents on our consolidated balance sheets with a corresponding liability recorded as customer obligations. Our customers generally provide us with prefunds for their FSA and HRA programs based on a percentage of projected spending by the employee participants for the plan year and other factors. In the case of our commuter program, at the beginning of each month we receive prefunds based on the employee participants’ monthly elections. These prefunds are maintained throughout the year by our FSA, HRA and commuter clients as benefits are provided under these programs. The Company offsets on a customer by customer basis non-trade accounts receivable and customer obligation balances for financial reporting presentation. Additionally, the Company offsets outstanding trade and non-trade receivables, including any debit or credit memos, against any prefund balances after plan year close or upon termination of services both based on the completion of a full reconciliation with the customer. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Guidance In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASC 606"), amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for public companies effective for annual and interim reporting periods beginning after December 15, 2016. We adopted ASC 606 on January 1, 2018 by applying the modified retrospective approach to all contracts that were not completed as of January 1, 2018. Results for the reporting period beginning January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We recorded an increase in total assets of $9.3 million and an increase in retained earnings of $6.9 million (net of tax effect) as of January 1, 2018 attributed to the deferral of commission cost. The tax impact resulted in an increase in deferred tax liabilities in the amount of $2.4 million with an offset to retained earnings upon adoption. See Note 3 Revenue for more details. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU No. 2016-18 addresses diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing or financing activities or as a combination of those activities in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories are no longer be presented in the Statement of Cash Flows. The Company adopted this standard on January 1, 2018 using the retrospective method. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new guidance, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income (loss) for equity securities with readily determinable fair values. The Company adopted this standard on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In March 2016, the FASB issued Accounting Standard Update No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). The new guidance creates an exception under ASC 405-20, Liabilities-Extinguishments of Liabilities, to derecognize financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. The Company adopted this update on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash flows: Classification of Certain Cash Receipts and Cash Payments. The update provides specific guidance on a number of cash flow classification issues including contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, proceeds from settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees and separately identifiable cash flows and application of the predominance principle. The Company adopted this update on January 1, 2018. This amendment did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting ("ASU 2017-09"). The update amends the scope of modification accounting for shared-based payment arrangements to specify that modification accounting would not be applicable if the fair value, vesting conditions and classification of the shared-based awards are the same immediately before and after the modification. The Company adopted this update on January 1, 2018. This update did not have a material impact on the Company's condensed consolidated statements of income, balance sheet or cash flows. Recently Issued Accounting Pronouncements In February 2016, the FASB, issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The Company will adopt the standard effective in the first quarter of 2019 and will not restate comparative periods upon adoption. The Company will elect a package of practical expedients for leases that commenced prior to January 1, 2019 and will not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. The Company will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company will recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. The Company currently expects that our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and total liabilities that were reported relative to such amounts prior to adoption. Refer to Note 14 for further information on operating lease commitments. The Company plans to adopt Topic 842 using the alternative modified retrospective approach with the cumulative effect of adoption recognized to retained earnings on January 1, 2019. The Company does not believe the new standard will have a material impact on the consolidated statements of income, nor will it have a notable impact on liquidity. The standard will also have no material impact on debt-covenant compliance under our current agreements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 360)", which amends the FASB's guidance on the impairment of financial instruments. The ASU adds to GAAP an impairment model (known as the "current expected credit loss model") that is based on expected losses rather than incurred losses. ASU 2016-13 is effective for annual reporting periods ending after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard is expected to be effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects and will be effective for the Company beginning January 1, 2019 and should be applied either in the period of adoption or retrospectively. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in this standard are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses." ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption. |
Net Income per Share (Tables) |
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Computation Of Basic And Diluted Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
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Summary of Business and Significant Accounting Policies (Tables) |
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Schedule of Cash and Cash Equivalents | The following table summarizes the Company's cash and cash equivalents as at June 30, 2018 and December 31, 2017 (in thousands):
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Revenue (Tables) |
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Disaggregation of Revenue | The Company's primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the condensed consolidated statements of income. The following table provides information about disaggregated revenue from contracts with customers by the nature of the products and services (in thousands):
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period, in thousands. The Company applies the practical expedient to not disclose information about contracts with original expected durations of one year or less, amounts of variable consideration attributable to the variable consideration allocation exception, or contract renewals that are unexercised as of June 30, 2018 (in thousands):
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | In accordance with Topic 606, the disclosure of the impact of adoption to our unaudited condensed consolidated statements of income and balance sheets and statements of cash flows was as follows (in thousands, except per share amounts):
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Goodwill and Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Acquired Intangible Assets | Acquired intangible assets at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Schedule Of Estimated Expected Amortization Expense | The estimated amortization expense in future periods at June 30, 2018 is as follows (in thousands):
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Investments and Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring | The following table summarizes the Company's investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as at June 30, 2018 (in thousands):
The following table summarizes the Company's investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as at December 31, 2017 (in thousands):
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Investments Classified by Contractual Maturity Date | The following table summarizes the estimated amortized cost and fair value of the Company's marketable securities by the contractual maturity date as of June 30, 2018 (in thousands):
The following table summarizes the estimated amortized cost and fair value of the Company's marketable securities by the contractual maturity date as of December 31, 2017 (in thousands):
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Accounts Receivable (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable | eceivables at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Property And Equipment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Property And Equipment | Property and equipment at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Accounts Payable and Accrued Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued expenses at June 30, 2018 and December 31, 2017 were comprised of the following (in thousands):
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Long-term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | As of June 30, 2018 and December 31, 2017, long-term debt consisted of the following (in thousands):
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Employee Benefit Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Stock-based compensation is classified in the condensed consolidated statements of income in the same expense line items as cash compensation. Amounts recorded as expense in the condensed consolidated statements of income were as follows (in thousands):
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Summary Of Weighted-Average Fair Value Of Stock Options Granted | The following table summarizes the weighted-average fair value of stock options granted:
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Summary Of Stock Option Activity | Stock option activity for the six months ended June 30, 2018 was as follows (shares in thousands):
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Summary Of Restricted Stock Units | The following table summarizes information about restricted stock units issued to officers, directors and employees under the 2010 Plan (shares in thousands):
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Commitments And Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Future Minimum Lease Payments | Future minimum lease payments under noncancelable operating leases, excluding the contractual sublease income of $9.2 million, are as follows (in thousands):
|
Net Income per Share (Computation Of Basic And Diluted Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator for basic and diluted net income per share: | ||||
Net income | $ 10,924 | $ 20,278 | $ 21,943 | $ 36,335 |
Denominator for basic net income per share: | ||||
Weighted-average common shares outstanding (in shares) | 39,853 | 37,419 | 39,838 | 37,209 |
Basic net income per share (in dollars per share) | $ 0.27 | $ 0.54 | $ 0.55 | $ 0.98 |
Denominator for diluted net income per share: | ||||
Diluted weighted-average common shares outstanding (in shares) | 40,412 | 38,613 | 40,446 | 38,514 |
Diluted net income per share (in dollars per share) | $ 0.27 | $ 0.53 | $ 0.54 | $ 0.94 |
Stock Options And Restricted Stock Units | ||||
Denominator for diluted net income per share: | ||||
Dilutive stock options and restricted stock units (in shares) | 559 | 1,194 | 608 | 1,305 |
Net Income per Share (Narrative) (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Stock Options And Restricted Stock Units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive shares (in shares) | 1.8 | 0.7 | 1.6 | 0.6 |
Summary of Business and Significant Accounting Policies (Narrative) (Details) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018
USD ($)
segment
|
Jan. 01, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Number of reportable segments | segment | 1 | ||
Increase in total assets | $ 1,635,960 | $ 1,651,983 | |
Increase in retained earnings | $ 101,639 | $ 72,741 | |
ASU 2014-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Increase in total assets | $ 9,300 | ||
Increase in retained earnings | 6,900 | ||
Increase in deferred tax liabilities | $ 2,400 | ||
Minimum | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Definite-lived intangible asset, useful life | 1 year | ||
Maximum | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Definite-lived intangible asset, useful life | 10 years |
Summary of Business and Significant Accounting Policies (Schedule of Cash and Cash Equivalents) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents, unrestricted | $ 712,194 | $ 779,345 | ||
Restricted cash | 332 | 332 | ||
Total unrestricted and restricted cash and cash equivalents | $ 712,526 | $ 779,677 | $ 776,465 | $ 672,941 |
Revenue (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Total assets | $ 1,635,960 | $ 1,635,960 | $ 1,651,983 | ||
Retained earnings | 101,639 | 101,639 | 72,741 | ||
Contract balances, deferred revenue | 12,500 | 12,500 | $ 3,400 | ||
Contract assets | 1,000 | 1,000 | |||
Deferred revenue, revenue recognized | (500) | (300) | |||
Contract costs | 9,600 | 9,600 | $ 9,300 | ||
Amortization expense, deferred costs | $ 700 | $ 1,400 | |||
ASU 2014-09 | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Total assets | $ 9,300 | ||||
Retained earnings | 6,900 | ||||
Deferred tax liabilities | $ 2,400 |
Revenue (Impact on Income Statement) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Operating expenses: | ||||
Sales and marketing | $ 18,521 | $ 14,728 | $ 36,859 | $ 30,807 |
Total operating expenses | 99,998 | 101,331 | 211,852 | 204,237 |
Income from operations | 16,510 | 15,801 | 31,297 | 38,932 |
Income before income taxes | 15,545 | 14,121 | 29,416 | 35,662 |
Income tax (provision) benefit | (4,621) | 6,157 | (7,473) | 673 |
Net income | $ 10,924 | $ 20,278 | $ 21,943 | $ 36,335 |
Basic (in dollars per share) | $ 0.27 | $ 0.54 | $ 0.55 | $ 0.98 |
Diluted (in dollars per share) | $ 0.27 | $ 0.53 | $ 0.54 | $ 0.94 |
Balances without adoption of ASC 606 | ||||
Operating expenses: | ||||
Sales and marketing | $ 18,766 | $ 37,153 | ||
Total operating expenses | 100,243 | 212,146 | ||
Income from operations | 16,265 | 31,003 | ||
Income before income taxes | 15,300 | 29,122 | ||
Income tax (provision) benefit | (4,548) | (7,398) | ||
Net income | $ 10,752 | $ 21,724 | ||
Basic (in dollars per share) | $ 0.27 | $ 550.00 | ||
Diluted (in dollars per share) | $ 0.27 | $ 540.00 | ||
Adjustments | ASU 2014-09 | ||||
Operating expenses: | ||||
Sales and marketing | $ 245 | $ 294 | ||
Total operating expenses | 245 | 294 | ||
Income from operations | (245) | (294) | ||
Income before income taxes | (245) | (294) | ||
Income tax (provision) benefit | 73 | 75 | ||
Net income | $ (172) | $ (219) |
Revenue (Impact on Balance Sheet) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Assets | |||
Other assets | $ 28,839 | $ 8,291 | |
Total assets | 1,635,960 | 1,651,983 | |
Liabilities and Stockholders' Equity | |||
Other current liabilities | 2,459 | 628 | |
Retained earnings | 101,639 | 72,741 | |
Shareholders' equity | 651,587 | $ 612,250 | |
ASU 2014-09 | |||
Assets | |||
Total assets | $ 9,300 | ||
Liabilities and Stockholders' Equity | |||
Retained earnings | $ 6,900 | ||
Balances without adoption of ASC 606 | |||
Assets | |||
Other assets | 21,664 | ||
Total assets | 1,628,785 | ||
Liabilities and Stockholders' Equity | |||
Retained earnings | 644,412 | ||
Shareholders' equity | 94,464 | ||
Adjustments | ASU 2014-09 | |||
Assets | |||
Other assets | (7,175) | ||
Total assets | (7,175) | ||
Liabilities and Stockholders' Equity | |||
Retained earnings | (7,175) | ||
Shareholders' equity | $ (7,175) |
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense for acquired intangible assets | $ 6.3 | $ 6.5 | $ 12.7 | $ 13.0 |
Minimum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 1 year | |||
Maximum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 10 years |
Goodwill and Intangible Assets (Schedule Of Estimated Expected Amortization Expense) (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2018 | $ 12,737 |
2019 | 24,914 |
2020 | 22,749 |
2021 | 19,945 |
2022 | 17,509 |
Thereafter | 44,996 |
Total | $ 142,850 |
Investments and Fair Value Measurements - Maturity of Marketable Securities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized Cost | ||
Due less than one year | $ 141,212 | $ 157,651 |
Due in one to five years | 138,258 | 119,224 |
Total | 279,470 | 276,875 |
Fair Value | ||
Due less than one year | 140,904 | 157,573 |
Due in one to five years | 137,194 | 118,841 |
Total | $ 278,098 | $ 276,414 |
Accounts Receivable (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | $ 89,809 | $ 110,121 |
Less allowance for doubtful accounts | (2,672) | (2,574) |
Accounts receivable, net | 87,137 | 107,547 |
Trade receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | 52,974 | 58,067 |
Unpaid amounts for benefit services | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | $ 36,835 | $ 52,054 |
Property And Equipment (Schedule Of Property And Equipment) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 197,130 | $ 175,831 |
Less accumulated depreciation and amortization | (118,644) | (107,089) |
Property and equipment, net | 78,486 | 68,742 |
Computers and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 27,496 | 22,702 |
Software and software development costs | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 132,709 | 120,278 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 8,089 | 7,754 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 28,836 | $ 25,097 |
Property And Equipment (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Property, Plant and Equipment [Line Items] | |||||
Capitalized software development costs | $ 5.9 | $ 5.5 | $ 11.6 | $ 9.6 | |
Computers and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Capital leased assets, gross | 1.8 | 1.8 | $ 1.7 | ||
Capital leased assets, accumulated depreciation | 1.3 | 1.3 | $ 1.1 | ||
Software and software development costs | |||||
Property, Plant and Equipment [Line Items] | |||||
Amortization expense related to capitalized software development | 3.8 | 2.9 | 7.4 | 5.6 | |
Unamortized software development costs | 38.7 | 38.7 | |||
Depreciation expense including amortization of capitalized software development costs | $ 7.3 | $ 5.6 | $ 14.1 | $ 10.9 |
Accounts Payable and Accrued Expenses (Schedule Of Accounts Payable And Accrued Expenses) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Payables and Accruals [Abstract] | ||
Payable to benefit providers and transit agencies | $ 25,533 | $ 32,469 |
Accounts payable and accrued liabilities | 21,161 | 23,788 |
Accrued compensation and related benefits | 26,172 | 25,921 |
Other accrued expenses | 5,312 | 5,275 |
Deferred revenue | 10,869 | 2,524 |
Accounts payable and accrued expenses | $ 89,047 | $ 89,977 |
Long-term Debt (Schedule Of Line Of Credit Facilities) (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
Apr. 04, 2017 |
---|---|---|---|
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility used | $ 400,000,000 | ||
Letter Of Credit | |||
Debt Instrument [Line Items] | |||
Revolving credit facility used | $ 15,000,000 | ||
Less: Outstanding letters of credit | $ (2,830,000) | $ (2,830,000) | |
Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility used | 249,830,000 | 249,830,000 | |
Outstanding revolving credit facility | 247,000,000 | 247,000,000 | |
Unamortized loan origination fees | (2,343,000) | (2,085,000) | |
Long-term debt | $ 244,657,000 | $ 244,915,000 |
Organizational Efficiency Plan (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restructuring and Related Activities [Abstract] | ||||
Employee termination and other charges | $ 2,853 | $ 917 | $ 2,853 | $ 1,648 |
Employee Benefit Plans (Summary Of Weighted-Average Fair Value Of Stock Options Granted) (Details) - $ / shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Stock options granted (in shares) | 0 | 27 | 0 | 545 |
Weighted average fair value at date of grant (in dollars per share) | $ 0.00 | $ 26.20 | $ 0.00 | $ 26.72 |
Stockholders' Equity (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Aug. 06, 2015 |
Aug. 31, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Equity [Abstract] | ||||||
Stock repurchase program, authorized amount | $ 100,000,000 | |||||
Stock repurchase program, period in force | 3 years | |||||
Shares repurchased (in shares) | 134,900 | 0 | 0 | 0 | 0 | |
Average sale price (in dollars per share) | $ 58.82 | |||||
Cost of shares repurchased | $ 7,900,000 | |||||
Stock repurchase program, remaining authorized repurchase amount | $ 77,700,000 | $ 77,700,000 |
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 29.70% | 43.60% | 25.40% | 1.90% |
Income tax provision | $ 4,621 | $ (6,157) | $ 7,473 | $ (673) |
Commitments And Contingencies (Narrative) (Details) |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Aug. 07, 2018 |
Sep. 06, 2018
lawsuit
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Feb. 08, 2018
USD ($)
|
|
Debt Instrument [Line Items] | |||||||
Future minimum capital lease payments due | $ 600,000 | $ 600,000 | |||||
Operating leases expiration year | 2028 | ||||||
Contractual sublease income | 9,200,000 | $ 9,200,000 | |||||
Rent expense | 1,900,000 | $ 1,900,000 | 3,900,000 | $ 3,900,000 | |||
Sublease income | $ 500,000 | $ 500,000.0 | $ 900,000 | $ 781,000.000 | |||
OPM Claims Denial | Positive Outcome of Litigation | |||||||
Debt Instrument [Line Items] | |||||||
Gain contingency, unrecorded amount | $ 9,100,000 | ||||||
Scenario, Forecast | |||||||
Debt Instrument [Line Items] | |||||||
Term in which consolidated amended complaint must be filed following restatement | 45 days | ||||||
Number of derivative lawsuits | lawsuit | 2 | ||||||
Term needed to notify court of dismissal of Securities Class Action, denial of defendants' motions to dismiss, party giving notice to vacate stay | 15 days |
Commitments And Contingencies (Future Minimum Lease Payments) (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2018 | $ 4,594 |
2019 | 9,518 |
2020 | 9,720 |
2021 | 9,689 |
2022 | 6,536 |
Thereafter | 7,970 |
Total future minimum lease payments | $ 48,027 |
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