Item 2.02 Results of Operations and Financial Condition.
Expected Impact of Restatement
As previously disclosed,
WageWorks, Inc.s (the Company) review of the necessary adjustments to the Companys financial statements for fiscal year 2016 is expected to result in an estimated aggregate decrease in revenue (which was previously
reported as $364.7 million) in the approximate range of $6.5 million to $9.5 million, an estimated aggregate decrease in net income (which was previously reported as $20.2 million) in the approximate range of $3.5 million to
$5.5 million, and an estimated aggregate decrease in the non-GAAP financial measure adjusted EBITDA (which was previously reported as $108.0 million) in the approximate range of $6.0 million to
$9.0 million. Although the Companys review of 2017 is ongoing, to date, the Company has not identified any adjustments to its financial statements that would be expected to cause revenue for fiscal year 2017 to differ materially from the
Companys previous guidance.
The Company has not yet completed its final determination and review of its financial statements and internal controls
over financial reporting for the fiscal year ended December 31, 2017. As previously announced, the Companys Board of Directors (the Board) concluded that certain financial statements for periods in 2016 and 2017 should
be restated and should no longer be relied upon. Therefore, the amounts described above and the periods to which they relate are preliminary, unaudited estimates that are subject to change. There can be no assurance that the final amounts and
adjustments will not differ materially from the estimated amounts described above, or that additional adjustments will not be identified, the impact of which may be material.
Initiates Full Year 2018 Financial Guidance
to prior disclosure on full year 2017 operating results, the Company currently expects full year 2018 year-over-year revenue growth of 1% to 4% and adjusted EBITDA margin of 28% to 32%, excluding the impact of costs associated with the restatement
efforts and any accounting adjustments. Full year 2018 revenue growth is expected to be driven by strong growth in the HSA product offering, partially offset by lower revenue from FSA and COBRA products.
The Company is continuing to assess the
adjustments to its financial statements and assessment of its control environment. As previously disclosed, the Company expects to report material weaknesses in its internal control over financial reporting as of December 31, 2017 related to
managing change and assessing risk in the areas of non-routine and complex transactions, tone at the top, and commitment to competencies in the areas of non-routine and
The Company is working to complete the preparation of its financial statements for the fiscal quarter ended June 30, 2018, the
fiscal quarter ended March 31, 2018, as well as its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, including the restated 2016 financial statements, as soon as practicable.
Non-GAAP Financial Information
To supplement the financial information the Company presents on a GAAP basis, the Company provides adjusted EBITDA as
a non-GAAP financial measure. Adjusted EBITDA is intended to focus on what management believes to be its ongoing business operations. The Companys management believes it is useful for itself
and investors to review, as applicable, both GAAP information that includes interest income, interest expense, income tax provision, depreciation, amortization and change in contingent consideration, stock-based compensation and employee termination
and other charges, and adjusted EBITDA, which excludes such information, in order to assess the performance of the Companys business for planning and forecasting in subsequent periods. The Companys management does not itself, nor does it
suggest that investors should, consider adjusted EBITDA in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
No reconciliation of the forecasted range for adjusted EBITDA margin for 2018 is included in this Form 8-K because the
Company is unable to quantify certain amounts that would be required to be included in the corresponding GAAP measure without unreasonable efforts and the Companys management believes such reconciliation would imply a degree of precision that
would be confusing or misleading to investors. In particular, the Company is not able to provide a reconciliation for the forecasted range of adjusted EBITDA margin because of the uncertainty and variability of the nature and amount of certain
components thereof including (i) stock-based compensation, (ii) income tax provision and (iii) amortization. As such, any associated estimate and its impact on adjusted EBITDA margin could vary materially.