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(Mark One)
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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94-3351864
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1100 Park Place, 4th Floor
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San Mateo, California
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94403
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.001 par value
per share
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WAGE
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The New York Stock Exchange
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Large accelerated filer
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x
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Accelerated filer
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☐
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Non-accelerated filer
|
☐
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Smaller reporting company
|
☐
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Emerging growth company
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☐
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PART I
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Forward-Looking Statements
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Item 1.
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||
Item 1A.
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||
Item 1B.
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||
Item 2.
|
||
Item 3.
|
||
Item 4.
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||
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PART II
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
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||
Item 8.
|
||
Item 9.
|
||
Item 9A.
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||
Item 9B.
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||
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PART III
|
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Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
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||
Item 14.
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||
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PART IV
|
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Item 15.
|
||
Item 16.
|
||
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•
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our ability to retain acquired employer clients and their associated revenues;
|
•
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diversion of management’s time and focus from operating our business to address integration challenges;
|
•
|
our ability to retain or replace key employees that come to us from acquisitions we acquire;
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•
|
our ability to integrate the combined products, services and technology;
|
•
|
our ability to cross-sell additional CDB programs to acquired employer clients;
|
•
|
our ability to realize expected synergies;
|
•
|
the need to implement or improve internal controls, procedures and policies appropriate for a public company at businesses that, prior to the acquisition, may have lacked effective controls, procedures and policies, including, but not limited to, processes required for the effective and timely reporting of the financial condition and results of operations of the acquired business, both for historical periods prior to the acquisition and on a forward-looking basis following the acquisition;
|
•
|
possible write-offs or impairment charges that result from acquisitions;
|
•
|
unanticipated or unknown liabilities that relate to purchased businesses;
|
•
|
the potential need to implement or improve internal controls relating to privacy, security and data protection;
|
•
|
the need to integrate purchased businesses’ accounting, management information, human resources, and other administrative systems to permit effective management; and
|
•
|
any change in one of the many complex international, federal or state laws or regulations that govern any aspect of the financial or business operations of our business and businesses we acquire, such as state escheatment laws.
|
•
|
to incur additional indebtedness;
|
•
|
to grant liens;
|
•
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to enter into burdensome agreements with negative pledge clauses or restrictions on subsidiary distributions;
|
•
|
to pay dividends or make other distributions in respect of equity;
|
•
|
to make investments, including acquisitions, loans, and advances;
|
•
|
to consolidate, to merge, to liquidate, or to dissolve;
|
•
|
to sell, to transfer, or to otherwise dispose of assets;
|
•
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to engage in certain transactions with affiliates; and
|
•
|
to materially alter the business that we conduct.
|
•
|
the need to educate potential employer clients about the uses and benefits of our CDB programs;
|
•
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the relatively long duration of the commitment clients make in their agreements;
|
•
|
the discretionary nature of potential employer clients’ purchasing and budget cycles and decisions;
|
•
|
the competitive nature of potential employer clients’ evaluation and purchasing processes;
|
•
|
fluctuations in the CDB program needs of potential employer clients; and
|
•
|
lengthy purchasing approval processes of potential employer clients.
|
•
|
loss or delayed market acceptance and sales;
|
•
|
legal claims, including breach of warranty claims;
|
•
|
issuance of refunds or service credits to customers for prepaid and unused subscription services;
|
•
|
loss of customers;
|
•
|
diversion of development and customer service resources; and
|
•
|
injury to our reputation.
|
•
|
responding to unsolicited takeover proposals and other related actions can be costly (resulting in significant professional fees and proxy solicitation expenses) and time-consuming, disrupting operations and diverting the attention of our Board, management and employees which could interfere with our ability to execute our strategic plan;
|
•
|
perceived uncertainties as to the Company’s future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners; and
|
•
|
if completed, a takeover may result in a change-in-control under certain of the Company’s long-term indebtedness agreements, and may require it to repurchase certain outstanding debt securities or result in an acceleration of certain indebtedness.
|
•
|
actual or anticipated fluctuations in our financial results;
|
•
|
a takeover proposal;
|
•
|
changes in the financial projections we provide to the public or our failure to meet these projections;
|
•
|
failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
|
•
|
ratings change by any securities analysts who follow our company;
|
•
|
announcements by us or our competitors of significant technical innovations, acquisitions, strategic relationships, partnerships or capital commitments;
|
•
|
changes in operating performance and stock market valuations of other newly public companies generally, or those in our industry in particular;
|
•
|
changes brought about by health care reform and the emergence of federal, state and private exchanges;
|
•
|
price and volume fluctuations in the overall stock market, including as a result of trends in the global economy;
|
•
|
any major change in our Board or management;
|
•
|
government investigations and lawsuits threatened or filed against us; and
|
•
|
other events or factors, including those resulting from a data security breach, war, incidents of terrorism or responses to these events.
|
•
|
create a classified Board whose members serve staggered three-year terms;
|
•
|
authorize “blank check” preferred stock, which could be issued by the Board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
|
•
|
limit the ability of our stockholders to call and bring business before special meetings;
|
•
|
require advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board;
|
•
|
control the procedures for the conduct and scheduling of Board and stockholder meetings; and
|
•
|
provide the Board with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(in thousands, except per share data)
|
||||||||||||||||||
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
(3) (4)
|
|
$
|
472,184
|
|
|
$
|
476,095
|
|
|
$
|
355,561
|
|
|
$
|
334,316
|
|
|
$
|
267,832
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of revenues (excluding amortization of internal use software)
|
|
154,804
|
|
|
173,661
|
|
|
129,046
|
|
|
117,170
|
|
|
100,226
|
|
|||||
Technology and development, sales and marketing, general and administrative, and employee termination and other charges
|
|
231,540
|
|
|
194,112
|
|
|
163,273
|
|
|
149,587
|
|
|
115,565
|
|
|||||
Amortization
|
|
41,456
|
|
|
37,890
|
|
|
37,175
|
|
|
27,618
|
|
|
20,992
|
|
|||||
Total operating expenses
|
|
427,800
|
|
|
405,663
|
|
|
329,494
|
|
|
294,375
|
|
|
236,783
|
|
|||||
Income from operations
|
|
44,384
|
|
|
70,432
|
|
|
26,067
|
|
|
39,941
|
|
|
31,049
|
|
|||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income
|
|
5,849
|
|
|
1,147
|
|
|
406
|
|
|
153
|
|
|
5
|
|
|||||
Interest expense
|
|
(10,087
|
)
|
|
(7,293
|
)
|
|
(2,717
|
)
|
|
(1,925
|
)
|
|
(1,612
|
)
|
|||||
Other income (expense)
|
|
(31
|
)
|
|
(316
|
)
|
|
1,075
|
|
|
(182
|
)
|
|
743
|
|
|||||
Income before income taxes
|
|
40,115
|
|
|
63,970
|
|
|
24,831
|
|
|
37,987
|
|
|
30,185
|
|
|||||
Income tax provision
(1)
|
|
(14,145
|
)
|
|
(9,583
|
)
|
|
(8,929
|
)
|
|
(15,037
|
)
|
|
(11,943
|
)
|
|||||
Net income
(1)
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
|
$
|
22,950
|
|
|
$
|
18,242
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic
(1)
|
|
$
|
0.65
|
|
|
$
|
1.41
|
|
|
$
|
0.44
|
|
|
$
|
0.64
|
|
|
$
|
0.52
|
|
Diluted
(1)
|
|
$
|
0.64
|
|
|
$
|
1.38
|
|
|
$
|
0.43
|
|
|
$
|
0.63
|
|
|
$
|
0.50
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic
|
|
39,846
|
|
|
38,447
|
|
|
36,404
|
|
|
35,784
|
|
|
35,145
|
|
|||||
Diluted
(1)
|
|
40,434
|
|
|
39,415
|
|
|
37,210
|
|
|
36,595
|
|
|
36,595
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
As of December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents, including restricted cash
(5)
|
|
$
|
898,759
|
|
|
$
|
779,677
|
|
|
$
|
672,609
|
|
|
$
|
500,918
|
|
|
$
|
413,301
|
|
Short-term investments
|
|
222,205
|
|
|
195,534
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Working capital
(2)
|
|
382,212
|
|
|
326,056
|
|
|
104,826
|
|
|
121,781
|
|
|
61,467
|
|
|||||
Total assets
(1) (4)
|
|
1,785,153
|
|
|
1,651,983
|
|
|
1,335,781
|
|
|
888,739
|
|
|
794,715
|
|
|||||
Long-term debt
|
|
244,693
|
|
|
244,915
|
|
|
248,848
|
|
|
78,996
|
|
|
79,219
|
|
|||||
Total liabilities
|
|
1,120,012
|
|
|
1,039,733
|
|
|
938,139
|
|
|
551,770
|
|
|
515,291
|
|
|||||
Total stockholders' equity
(1) (4)
|
|
$
|
665,141
|
|
|
$
|
612,250
|
|
|
$
|
397,642
|
|
|
$
|
336,969
|
|
|
$
|
279,424
|
|
1.
|
For fiscal 2016 and prior years, the amounts do not include the effects of the adoption of Accounting Standard Update No. 2016-09,
Compensation-Stock Compensation: Improvements to Employee Share-Based Payment
(“ASU 2016-09”).
|
2.
|
For fiscal 2015 and prior years, our working capital does not include the effects of the adoption of Accounting Standard Update No. 2015-17,
Balance Sheet Classification of Deferred Taxes
(“ASU 2015-07”), which required all deferred tax assets and liabilities and any related valuation allowance to be classified as non-current on our Consolidated Balance Sheets as the new standard was adopted prospectively starting fiscal 2016.
|
3.
|
On November 28, 2016, the Company completed the Asset Purchase Agreement (“APA”) with ADP to acquire ADP’s COBRA, and direct bill businesses (together defined as the “ADP CHSA/COBRA Business”) for approximately $235.0 million in cash. During the years ended December 31, 2018, 2017 and 2016, the impact on total revenue was approximately $80.0 million, $90.0 million and $9.0 million, respectively.
|
4.
|
For fiscal 2017 and prior years, the amounts do not include the effects of the adoption of Accounting Standard Update No. 2014-09,
Revenue from Contracts with Customers
(Topic 606) (“ASC 606“).
|
5.
|
For fiscal 2016 and prior years, the amounts do not include the effects of the adoption of Accounting Standard Update No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
("ASU No. 2016-18").
|
•
|
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).
|
•
|
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
|
|
Year Ended December 31,
|
|
Change from prior year
|
|||||||||||||||||||||||||
|
2018
|
|
% of Revenue
|
|
2017
|
|
% of Revenue
|
|
2016
|
|
% of Revenue
|
|
2018
|
|
2017
|
|||||||||||||
Revenues:
|
(in thousands)
|
|
|
|
|
|||||||||||||||||||||||
Healthcare
|
$
|
274,861
|
|
|
58
|
%
|
|
$
|
274,815
|
|
|
58
|
%
|
|
$
|
195,108
|
|
|
55
|
%
|
|
$
|
46
|
|
|
$
|
79,707
|
|
COBRA
|
106,161
|
|
|
23
|
%
|
|
111,607
|
|
|
23
|
%
|
|
73,765
|
|
|
21
|
%
|
|
(5,446
|
)
|
|
37,842
|
|
|||||
Commuter
|
75,936
|
|
|
16
|
%
|
|
72,874
|
|
|
15
|
%
|
|
70,215
|
|
|
20
|
%
|
|
3,062
|
|
|
2,659
|
|
|||||
Other
|
15,226
|
|
|
3
|
%
|
|
16,799
|
|
|
4
|
%
|
|
16,473
|
|
|
4
|
%
|
|
(1,573
|
)
|
|
326
|
|
|||||
Total revenues
|
$
|
472,184
|
|
|
100
|
%
|
|
$
|
476,095
|
|
|
100
|
%
|
|
$
|
355,561
|
|
|
100
|
%
|
|
$
|
(3,911
|
)
|
|
$
|
120,534
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Cost of revenues (excluding amortization of internal use software)
|
$
|
154,804
|
|
|
$
|
173,661
|
|
|
$
|
129,046
|
|
|
$
|
(18,857
|
)
|
|
$
|
44,615
|
|
Percentage of revenue
|
33
|
%
|
|
36
|
%
|
|
36
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Technology and development
|
$
|
53,079
|
|
|
$
|
56,362
|
|
|
$
|
44,719
|
|
|
$
|
(3,283
|
)
|
|
$
|
11,643
|
|
Percent of revenue
|
11
|
%
|
|
12
|
%
|
|
13
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Sales and marketing
|
$
|
73,092
|
|
|
$
|
64,111
|
|
|
$
|
57,083
|
|
|
$
|
8,981
|
|
|
$
|
7,028
|
|
Percent of revenue
|
15
|
%
|
|
13
|
%
|
|
16
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
General and administrative
|
$
|
101,577
|
|
|
$
|
72,150
|
|
|
$
|
60,324
|
|
|
$
|
29,427
|
|
|
$
|
11,826
|
|
Percent of revenue
|
22
|
%
|
|
15
|
%
|
|
17
|
%
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Amortization and impairment
|
$
|
41,456
|
|
|
$
|
37,890
|
|
|
$
|
37,175
|
|
|
$
|
3,566
|
|
|
$
|
715
|
|
Percent of revenue
|
9
|
%
|
|
8
|
%
|
|
10
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Employee termination and other charges
|
$
|
3,792
|
|
|
$
|
1,489
|
|
|
$
|
1,147
|
|
|
$
|
2,303
|
|
|
$
|
342
|
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Interest income
|
$
|
5,849
|
|
|
$
|
1,147
|
|
|
$
|
406
|
|
|
$
|
4,702
|
|
|
$
|
741
|
|
Interest expense
|
(10,087
|
)
|
|
(7,293
|
)
|
|
(2,717
|
)
|
|
(2,794
|
)
|
|
(4,576
|
)
|
|||||
Other income (expense)
|
(31
|
)
|
|
(316
|
)
|
|
1,075
|
|
|
285
|
|
|
(1,391
|
)
|
|
Year Ended December 31,
|
|
Change from prior year
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||
Income before income taxes
|
$
|
40,115
|
|
|
$
|
63,970
|
|
|
$
|
24,831
|
|
|
|
|
|
||||
Income taxes provision
|
(14,145
|
)
|
|
(9,583
|
)
|
|
(8,929
|
)
|
|
$
|
(4,562
|
)
|
|
$
|
(654
|
)
|
|||
Effective tax rate
|
35.26
|
%
|
|
14.98
|
%
|
|
35.96
|
%
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
178,655
|
|
|
$
|
217,809
|
|
|
$
|
268,942
|
|
Net cash used in investing activities
|
(60,457
|
)
|
|
(237,203
|
)
|
|
(283,404
|
)
|
|||
Net cash provided by financing activities
|
884
|
|
|
126,130
|
|
|
186,153
|
|
|||
Net increase in cash and cash equivalents
|
$
|
119,082
|
|
|
$
|
106,736
|
|
|
$
|
171,691
|
|
|
Total
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Long-term debt obligations
(1)
|
$
|
247,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247,000
|
|
|
$
|
—
|
|
Interest on long-term debt obligations
(2)
|
31,682
|
|
|
9,601
|
|
|
19,201
|
|
|
2,880
|
|
|
—
|
|
|||||
Operating lease obligations
(3)
|
43,332
|
|
|
9,479
|
|
|
19,346
|
|
|
8,844
|
|
|
5,663
|
|
|||||
Other contractual obligations
(4)
|
175
|
|
|
175
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
322,189
|
|
|
$
|
19,255
|
|
|
$
|
38,547
|
|
|
$
|
258,724
|
|
|
$
|
5,663
|
|
(1)
|
As of
December 31, 2018
, maximum total borrowings under the revolving credit facility is
$400.0 million
with a base interest rate determined in accordance with the Second Amended Credit Agreement terms: LIBOR plus a spread of
1.25%
to
2.25%
per annum. The debt maturity date is April 4, 2022. As of
December 31, 2018
, our outstanding principal of
$247.0 million
is presented net of debt issuance costs on our 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
December 31, 2018
of
3.89%
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.
|
(4)
|
Other contractual obligations consist of vendor obligations related to our data centers.
|
|
Page
|
Reports of Independent Registered Public Accounting Firms
|
|
Consolidated Balance Sheets
|
|
Consolidated Statements of Income
|
|
Consolidated Statements of Comprehensive Income
|
|
Consolidated Statements of Stockholders’ Equity
|
|
Consolidated Statements of Cash Flows
|
|
Notes to Consolidated Financial Statements
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
898,426
|
|
|
$
|
779,345
|
|
Restricted cash
|
333
|
|
|
332
|
|
||
Short-term investments
|
222,205
|
|
|
195,534
|
|
||
Receivables, net
|
101,297
|
|
|
107,547
|
|
||
Prepaid expenses and other current assets
|
23,662
|
|
|
29,271
|
|
||
Total current assets
|
1,245,923
|
|
|
1,112,029
|
|
||
Property and equipment, net
|
76,920
|
|
|
68,742
|
|
||
Goodwill
|
297,409
|
|
|
297,409
|
|
||
Acquired intangible assets, net
|
130,095
|
|
|
155,369
|
|
||
Deferred tax assets, net
|
1,482
|
|
|
10,143
|
|
||
Other assets
|
33,324
|
|
|
8,291
|
|
||
Total assets
|
$
|
1,785,153
|
|
|
$
|
1,651,983
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
99,854
|
|
|
$
|
89,977
|
|
Customer obligations
|
762,100
|
|
|
695,368
|
|
||
Other current liabilities
|
1,757
|
|
|
628
|
|
||
Total current liabilities
|
863,711
|
|
|
785,973
|
|
||
Long-term debt, net of financing costs
|
244,693
|
|
|
244,915
|
|
||
Other non-current liabilities
|
11,608
|
|
|
8,845
|
|
||
Total liabilities
|
1,120,012
|
|
|
1,039,733
|
|
||
Commitments and contingencies (Note 15)
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
||||
Common stock, $0.001 par value (authorized 1,000,000 shares; 40,333 shares issued and 39,853 shares outstanding at December 31, 2018; 40,251 shares issued and 39,771 shares outstanding at December 31, 2017)
|
41
|
|
|
41
|
|
||
Additional paid-in capital
|
582,521
|
|
|
562,131
|
|
||
Treasury stock at cost (480 shares at December 31, 2018 and 2017)
|
(22,309
|
)
|
|
(22,309
|
)
|
||
Accumulated other comprehensive loss
|
(754
|
)
|
|
(354
|
)
|
||
Retained earnings
|
105,642
|
|
|
72,741
|
|
||
Total stockholders’ equity
|
665,141
|
|
|
612,250
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,785,153
|
|
|
$
|
1,651,983
|
|
|
|
Year Ended December 31, 2018
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
|
||||||
Healthcare
|
|
$
|
274,861
|
|
|
$
|
274,815
|
|
|
$
|
195,108
|
|
COBRA
|
|
106,161
|
|
|
111,607
|
|
|
73,765
|
|
|||
Commuter
|
|
75,936
|
|
|
72,874
|
|
|
70,215
|
|
|||
Other
|
|
15,226
|
|
|
16,799
|
|
|
16,473
|
|
|||
Total revenues
|
|
472,184
|
|
|
476,095
|
|
|
355,561
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Cost of revenues (excluding amortization of internal use software)
|
|
154,804
|
|
|
173,661
|
|
|
129,046
|
|
|||
Technology and development
|
|
53,079
|
|
|
56,362
|
|
|
44,719
|
|
|||
Sales and marketing
|
|
73,092
|
|
|
64,111
|
|
|
57,083
|
|
|||
General and administrative
|
|
101,577
|
|
|
72,150
|
|
|
60,324
|
|
|||
Amortization and impairment
|
|
41,456
|
|
|
37,890
|
|
|
37,175
|
|
|||
Employee termination and other charges
|
|
3,792
|
|
|
1,489
|
|
|
1,147
|
|
|||
Total operating expenses
|
|
427,800
|
|
|
405,663
|
|
|
329,494
|
|
|||
Income from operations
|
|
44,384
|
|
|
70,432
|
|
|
26,067
|
|
|||
Other income (expense):
|
|
|
|
|
|
|
||||||
Interest income
|
|
5,849
|
|
|
1,147
|
|
|
406
|
|
|||
Interest expense
|
|
(10,087
|
)
|
|
(7,293
|
)
|
|
(2,717
|
)
|
|||
Other income (expense), net
|
|
(31
|
)
|
|
(316
|
)
|
|
1,075
|
|
|||
Income before income taxes
|
|
40,115
|
|
|
63,970
|
|
|
24,831
|
|
|||
Income tax provision
|
|
(14,145
|
)
|
|
(9,583
|
)
|
|
(8,929
|
)
|
|||
Net income
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
Net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.65
|
|
|
$
|
1.41
|
|
|
$
|
0.44
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
1.38
|
|
|
$
|
0.43
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
39,846
|
|
|
38,447
|
|
|
36,404
|
|
|||
Diluted
|
|
40,434
|
|
|
39,415
|
|
|
37,210
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
||||||
Net unrealized loss on investments, net of tax
|
|
(400
|
)
|
|
(354
|
)
|
|
—
|
|
|||
Other comprehensive loss, net of tax
|
|
(400
|
)
|
|
(354
|
)
|
|
—
|
|
|||
Total comprehensive income
|
|
$
|
25,570
|
|
|
$
|
54,033
|
|
|
$
|
15,902
|
|
|
|
Common stock
|
|
Additional paid-in capital
|
|
Treasury stock at cost
|
|
Accumulated other comprehensive loss
|
|
Retained earnings (accumulated deficit)
|
|
Total
stockholders’ equity
|
|||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
Balance at Balance at December 31, 2015
|
|
35,936
|
|
|
$
|
36
|
|
|
$
|
343,166
|
|
|
$
|
(5,003
|
)
|
|
$
|
—
|
|
|
$
|
(1,230
|
)
|
|
$
|
336,969
|
|
Exercise of stock options
|
|
926
|
|
|
1
|
|
|
16,069
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,070
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
|
53
|
|
|
—
|
|
|
2,194
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,194
|
|
||||||
Issuance of restricted stock units, net of shares withheld for employee taxes
|
|
213
|
|
|
—
|
|
|
(6,108
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,108
|
)
|
||||||
Tax benefit from the exercise of stock options
|
|
—
|
|
|
—
|
|
|
14,806
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,806
|
|
||||||
Treasury stock acquired
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
(9,371
|
)
|
|
—
|
|
|
—
|
|
|
(9,371
|
)
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
27,180
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,180
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,902
|
|
|
15,902
|
|
||||||
Balance at December 31, 2016
|
|
36,902
|
|
|
$
|
37
|
|
|
$
|
397,307
|
|
|
$
|
(14,374
|
)
|
|
$
|
—
|
|
|
$
|
14,672
|
|
|
$
|
397,642
|
|
Exercise of stock options
|
|
810
|
|
|
2
|
|
|
14,267
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,269
|
|
||||||
Public stock offering, net of issuance costs
|
|
1,955
|
|
|
2
|
|
|
130,787
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130,789
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
|
48
|
|
|
—
|
|
|
2,681
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,681
|
|
||||||
Issuance of restricted stock units, net of shares withheld for employee taxes
|
|
191
|
|
|
—
|
|
|
(9,019
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,019
|
)
|
||||||
Treasury stock acquired
|
|
(135
|
)
|
|
|
|
—
|
|
|
(7,935
|
)
|
|
—
|
|
|
—
|
|
|
(7,935
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
25,649
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,649
|
|
||||||
Capitalized stock-based compensation
|
|
—
|
|
|
—
|
|
|
459
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
459
|
|
||||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(354
|
)
|
|
—
|
|
|
(354
|
)
|
||||||
Excess tax benefit cumulative-effect adjustment - adoption ASU 2016-09
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,682
|
|
|
3,682
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,387
|
|
|
54,387
|
|
||||||
Balance at December 31, 2017
|
|
39,771
|
|
|
$
|
41
|
|
|
$
|
562,131
|
|
|
$
|
(22,309
|
)
|
|
$
|
(354
|
)
|
|
$
|
72,741
|
|
|
$
|
612,250
|
|
Exercise of stock options
|
|
54
|
|
|
—
|
|
|
1,395
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,395
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
|
18
|
|
|
—
|
|
|
869
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
869
|
|
||||||
Issuance of restricted stock units, net of shares withheld for employee taxes
|
|
10
|
|
|
—
|
|
|
(281
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(281
|
)
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
18,088
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,088
|
|
||||||
Capitalized stock-based compensation
|
|
—
|
|
|
—
|
|
|
319
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
319
|
|
||||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(400
|
)
|
|
—
|
|
|
(400
|
)
|
||||||
ASC 606 cumulative-effect adjustment (Note 2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,931
|
|
|
6,931
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,970
|
|
|
25,970
|
|
||||||
Balance at December 31, 2018
|
|
39,853
|
|
|
$
|
41
|
|
|
$
|
582,521
|
|
|
$
|
(22,309
|
)
|
|
$
|
(754
|
)
|
|
$
|
105,642
|
|
|
$
|
665,141
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation
|
|
14,011
|
|
|
11,384
|
|
|
8,696
|
|
|||
Amortization and impairment
|
|
41,456
|
|
|
37,889
|
|
|
37,175
|
|
|||
Amortization of debt issuance costs
|
|
578
|
|
|
418
|
|
|
159
|
|
|||
Amortization of contract costs
|
|
2,844
|
|
|
—
|
|
|
—
|
|
|||
Provision for doubtful accounts
|
|
1,034
|
|
|
558
|
|
|
947
|
|
|||
Stock-based compensation expense
|
|
18,088
|
|
|
25,649
|
|
|
27,180
|
|
|||
Loss on disposal of fixed assets
|
|
306
|
|
|
123
|
|
|
273
|
|
|||
Accrued interest on debt securities
|
|
(493
|
)
|
|
(237
|
)
|
|
—
|
|
|||
Deferred taxes
|
|
6,408
|
|
|
9,336
|
|
|
(5,853
|
)
|
|||
Excess tax benefit related to stock-based compensation arrangements
|
|
—
|
|
|
—
|
|
|
(14,806
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable
|
|
5,216
|
|
|
(14,692
|
)
|
|
(22,088
|
)
|
|||
Prepaid expenses and other current assets
|
|
5,609
|
|
|
(9,514
|
)
|
|
7,901
|
|
|||
Other assets
|
|
(18,558
|
)
|
|
(3,145
|
)
|
|
(699
|
)
|
|||
Accounts payable and accrued expenses
|
|
8,276
|
|
|
17,387
|
|
|
9,488
|
|
|||
Customer obligations
|
|
66,732
|
|
|
86,988
|
|
|
207,559
|
|
|||
Other liabilities
|
|
1,178
|
|
|
1,278
|
|
|
(2,892
|
)
|
|||
Net cash provided by operating activities
|
|
178,655
|
|
|
217,809
|
|
|
268,942
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
|
(33,535
|
)
|
|
(36,787
|
)
|
|
(28,319
|
)
|
|||
Purchases of short-term investments
|
|
(157,672
|
)
|
|
(208,656
|
)
|
|
—
|
|
|||
Proceeds from sales of short-term investments
|
|
16,049
|
|
|
5,398
|
|
|
—
|
|
|||
Proceeds from maturities of short-term investments
|
|
114,910
|
|
|
7,500
|
|
|
—
|
|
|||
Cash consideration for business acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(233,965
|
)
|
|||
Purchases of intangible assets
|
|
(209
|
)
|
|
(4,658
|
)
|
|
(21,120
|
)
|
|||
Net cash used in investing activities
|
|
(60,457
|
)
|
|
(237,203
|
)
|
|
(283,404
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from long-term debt
|
|
—
|
|
|
—
|
|
|
169,900
|
|
|||
Proceeds from public stock offering
|
|
—
|
|
|
135,387
|
|
|
—
|
|
|||
Payment of underwriting discounts, commissions and other costs associate with the public offering
|
|
—
|
|
|
(4,598
|
)
|
|
—
|
|
|||
Proceeds from exercise of common stock options
|
|
1,395
|
|
|
14,267
|
|
|
16,070
|
|
|||
Proceeds from issuance of common stock under Employee Stock Purchase Plan
|
|
869
|
|
|
2,681
|
|
|
2,194
|
|
|||
Payment of debt issuance / amendment costs
|
|
(800
|
)
|
|
(1,851
|
)
|
|
(207
|
)
|
|||
Payments of debt principal
|
|
—
|
|
|
(2,500
|
)
|
|
—
|
|
|||
Payment of contingent consideration
|
|
—
|
|
|
—
|
|
|
(750
|
)
|
|||
Payment for treasury stock acquired
|
|
—
|
|
|
(7,935
|
)
|
|
(9,371
|
)
|
|||
Payment of capital lease obligations
|
|
(299
|
)
|
|
(302
|
)
|
|
(381
|
)
|
|||
Taxes paid related to net share settlement of stock-based compensation arrangements
|
|
(281
|
)
|
|
(9,019
|
)
|
|
(6,108
|
)
|
|||
Excess tax benefit related to stock-based compensation arrangements
|
|
—
|
|
|
—
|
|
|
14,806
|
|
|||
Net cash provided by financing activities
|
|
884
|
|
|
126,130
|
|
|
186,153
|
|
|||
Net increase in cash and cash equivalents, unrestricted and restricted
|
|
119,082
|
|
|
106,736
|
|
|
171,691
|
|
|||
Cash and cash equivalents, unrestricted and restricted, at beginning of the year
|
|
779,677
|
|
|
672,941
|
|
|
501,250
|
|
|||
Cash and cash equivalents, unrestricted and restricted, at end of the year
|
|
$
|
898,759
|
|
|
$
|
779,677
|
|
|
$
|
672,941
|
|
Supplemental cash flow disclosure:
|
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
|
||||||
Interest
|
|
$
|
8,859
|
|
|
$
|
6,462
|
|
|
$
|
1,825
|
|
Taxes
|
|
$
|
2,412
|
|
|
$
|
2,958
|
|
|
$
|
5,534
|
|
Noncash financing and investing activities:
|
|
|
|
|
|
|
||||||
Property and equipment, accrued but not paid
|
|
$
|
4,472
|
|
|
$
|
2,325
|
|
|
$
|
2,412
|
|
Property and equipment purchased under capital lease obligations
|
|
$
|
142
|
|
|
$
|
263
|
|
|
$
|
835
|
|
Capitalized stock-based compensation
|
|
$
|
319
|
|
|
$
|
459
|
|
|
$
|
—
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents, unrestricted
|
|
$
|
898,426
|
|
|
$
|
779,345
|
|
Cash and cash equivalents, restricted
|
|
333
|
|
|
332
|
|
||
Total unrestricted and restricted cash and cash equivalents
|
|
$
|
898,759
|
|
|
$
|
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.
|
•
|
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).
|
|
|
Year ended December 31,
|
||||||
(in thousands)
|
|
2018
|
|
2017
|
||||
Benefit Administration Service and COBRA
|
|
$
|
401,340
|
|
|
$
|
407,476
|
|
Interchange
|
|
50,907
|
|
|
50,229
|
|
||
Other revenue
|
|
19,937
|
|
|
18,390
|
|
||
Total
|
|
$
|
472,184
|
|
|
$
|
476,095
|
|
Revenue recognized in the period for:
|
|
Year Ended December 31, 2018
|
||
Amounts included in contract liabilities at the beginning of the period:
|
|
|
||
Performance obligations satisfied
|
|
$
|
571
|
|
Changes in the period:
|
|
|
||
Changes in the estimated transaction price allocated to performance obligations satisfied in prior periods
|
|
(1,100
|
)
|
|
Performance obligations satisfied from new activities in the period - contract revenue
|
|
472,713
|
|
|
Total revenue
|
|
$
|
472,184
|
|
|
|
As of December 31, 2018
|
||
2019
|
|
$
|
571
|
|
2020
|
|
571
|
|
|
2021
|
|
571
|
|
|
2022 and thereafter
|
|
1,143
|
|
|
Total
|
|
$
|
2,856
|
|
|
|
Year Ended December 31, 2018
|
||||||||||
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||
Operating expenses:
|
|
|
|
|
|
|
||||||
Sales and marketing
|
|
$
|
73,092
|
|
|
$
|
(543
|
)
|
|
$
|
72,549
|
|
Total operating expenses
|
|
427,800
|
|
|
(543
|
)
|
|
427,257
|
|
|||
|
|
|
|
|
|
|
||||||
Income from operations
|
|
44,384
|
|
|
543
|
|
|
44,927
|
|
|||
Income before income taxes
|
|
40,115
|
|
|
543
|
|
|
40,658
|
|
|||
Income tax provision
|
|
(14,145
|
)
|
|
(190
|
)
|
|
(14,335
|
)
|
|||
Net income
|
|
25,970
|
|
|
353
|
|
|
26,323
|
|
|||
|
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.65
|
|
|
$
|
0.01
|
|
|
$
|
0.66
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
0.01
|
|
|
$
|
0.65
|
|
|
|
December 31, 2018
|
||||||||||
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||
Assets
|
|
|
|
|
|
|
||||||
Other assets
|
|
$
|
33,324
|
|
|
$
|
(8,776
|
)
|
|
$
|
24,548
|
|
Total assets
|
|
1,785,153
|
|
|
(8,776
|
)
|
|
1,776,377
|
|
|||
Deferred tax assets, net
|
|
1,482
|
|
|
2,198
|
|
|
3,680
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
—
|
|
|||||
Retained earnings
|
|
105,642
|
|
|
6,578
|
|
|
99,064
|
|
|||
Total stockholders’ equity
|
|
$
|
665,141
|
|
|
$
|
6,578
|
|
|
$
|
658,563
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator for basic net income per share:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
Denominator for basic net income per share:
|
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding
|
|
39,846
|
|
|
38,447
|
|
|
36,404
|
|
|||
Basic net income per share
|
|
$
|
0.65
|
|
|
$
|
1.41
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
||||||
Numerator for diluted net income per share:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
25,970
|
|
|
$
|
54,387
|
|
|
$
|
15,902
|
|
Denominator for diluted net income per share:
|
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding
|
|
39,846
|
|
|
38,447
|
|
|
36,404
|
|
|||
Dilutive stock options, restricted stock and performance restricted stock units and employee stock purchase plan shares
|
|
588
|
|
|
968
|
|
|
806
|
|
|||
Diluted weighted-average common shares outstanding
|
|
40,434
|
|
|
39,415
|
|
|
37,210
|
|
|||
Diluted net income per share
|
|
$
|
0.64
|
|
|
$
|
1.38
|
|
|
$
|
0.43
|
|
Cash consideration
|
$
|
235,000
|
|
Less: Fair value of net identifiable assets acquired
|
(94,700
|
)
|
|
Goodwill
|
$
|
140,300
|
|
|
Weighted
|
|
|
||
|
Average
|
|
|
||
|
Useful Life
|
|
Amount
|
||
|
(in years)
|
|
(in thousands)
|
||
Cash
|
|
|
$
|
1,035
|
|
Accounts payable and accrued expenses
|
|
|
(1,035
|
)
|
|
Intangible assets subject to amortization:
|
|
|
|
||
Customer relationships
|
10
|
|
93,900
|
|
|
Existing technology - CHSA
|
3
|
|
500
|
|
|
Existing technology - COBRA
|
3
|
|
300
|
|
|
Total fair value of net identifiable assets acquired
|
|
|
$
|
94,700
|
|
|
Year Ended December 31,
|
||
|
2016
|
||
|
(In thousands, except per share data) (Unaudited)
|
||
Total revenue
|
$
|
469,119
|
|
Net income
|
$
|
28,543
|
|
Net income per share:
|
|
||
Basic
|
$
|
0.78
|
|
Diluted
|
$
|
0.77
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gain
|
|
Gross Unrealized Loss
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
|
$
|
41,027
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41,027
|
|
|
$
|
41,027
|
|
|
$
|
—
|
|
Commercial paper
|
|
10,436
|
|
|
1
|
|
|
—
|
|
|
10,437
|
|
|
—
|
|
|
10,437
|
|
||||||
Municipal bonds
|
|
7,781
|
|
|
—
|
|
|
—
|
|
|
7,781
|
|
|
—
|
|
|
7,781
|
|
||||||
Total cash equivalents
|
|
$
|
59,244
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
59,245
|
|
|
$
|
41,027
|
|
|
$
|
18,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government securities
|
|
$
|
22,534
|
|
|
$
|
—
|
|
|
$
|
(94
|
)
|
|
$
|
22,440
|
|
|
$
|
22,440
|
|
|
$
|
—
|
|
U.S. government agency securities
|
|
14,346
|
|
|
—
|
|
|
(56
|
)
|
|
14,290
|
|
|
—
|
|
|
14,290
|
|
||||||
Municipal bonds
|
|
3,548
|
|
|
—
|
|
|
(4
|
)
|
|
3,544
|
|
|
—
|
|
|
3,544
|
|
||||||
Foreign government securities
|
|
2,504
|
|
|
—
|
|
|
(6
|
)
|
|
2,498
|
|
|
—
|
|
|
2,498
|
|
||||||
Corporate debt securities
|
|
134,003
|
|
|
37
|
|
|
(685
|
)
|
|
133,355
|
|
|
—
|
|
|
133,355
|
|
||||||
Commercial paper
|
|
12,954
|
|
|
—
|
|
|
(4
|
)
|
|
12,950
|
|
|
—
|
|
|
12,950
|
|
||||||
Certificates of deposit
|
|
1,258
|
|
|
—
|
|
|
—
|
|
|
1,258
|
|
|
—
|
|
|
1,258
|
|
||||||
Asset-backed securities
|
|
32,054
|
|
|
—
|
|
|
(184
|
)
|
|
31,870
|
|
|
—
|
|
|
31,870
|
|
||||||
Total short-term investments
|
|
$
|
223,201
|
|
|
$
|
37
|
|
|
$
|
(1,033
|
)
|
|
$
|
222,205
|
|
|
$
|
22,440
|
|
|
$
|
199,765
|
|
Total cash equivalents and short-term investments
|
|
$
|
282,445
|
|
|
$
|
38
|
|
|
$
|
(1,033
|
)
|
|
$
|
281,450
|
|
|
$
|
63,467
|
|
|
$
|
217,983
|
|
|
|
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
|
|
(In thousands)
|
|
Fair Value
|
|
Gross Unrealized Loss
|
||||
Short-term investments:
|
|
|
|
|
||||
U.S. government securities
|
|
$
|
22,440
|
|
|
$
|
(94
|
)
|
U.S. government agency securities
|
|
14,290
|
|
|
(56
|
)
|
||
Municipal bonds
|
|
3,544
|
|
|
(4
|
)
|
||
Foreign government securities
|
|
2,498
|
|
|
(6
|
)
|
||
Corporate debt securities
|
|
125,192
|
|
|
(685
|
)
|
||
Commercial paper
|
|
12,950
|
|
|
(4
|
)
|
||
Asset-backed securities
|
|
31,870
|
|
|
(184
|
)
|
||
Total short-term investments in unrealized loss position
|
|
$
|
212,784
|
|
|
$
|
(1,033
|
)
|
(In thousands)
|
|
Fair Value
|
|
Gross Unrealized Loss
|
||||
Cash equivalents:
|
|
|
|
|
||||
Commercial paper
|
|
$
|
19,982
|
|
|
$
|
(3
|
)
|
Total cash equivalents in unrealized loss position
|
|
$
|
19,982
|
|
|
$
|
(3
|
)
|
|
|
|
|
|
||||
Short-term investments:
|
|
|
|
|
||||
U.S. government securities
|
|
$
|
17,431
|
|
|
$
|
(41
|
)
|
U.S. government agency securities
|
|
11,510
|
|
|
(30
|
)
|
||
Municipal bonds
|
|
5,767
|
|
|
(8
|
)
|
||
Foreign government securities
|
|
7,472
|
|
|
(27
|
)
|
||
Corporate debt securities
|
|
103,869
|
|
|
(273
|
)
|
||
Commercial paper
|
|
27,930
|
|
|
(9
|
)
|
||
Asset-backed securities
|
|
15,234
|
|
|
(76
|
)
|
||
Total short-term investments in unrealized loss position
|
|
$
|
189,213
|
|
|
$
|
(464
|
)
|
Total cash equivalents and short-term investments in unrealized loss position
|
|
$
|
209,195
|
|
|
$
|
(467
|
)
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
Due less than one year
|
|
$
|
219,057
|
|
|
$
|
218,394
|
|
|
$
|
157,651
|
|
|
$
|
157,573
|
|
Due in one to five years
|
|
63,388
|
|
|
63,056
|
|
|
119,224
|
|
|
118,841
|
|
||||
Total
|
|
$
|
282,445
|
|
|
$
|
281,450
|
|
|
$
|
276,875
|
|
|
$
|
276,414
|
|
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Trade receivables
|
|
$
|
52,525
|
|
|
$
|
58,067
|
|
Unpaid amounts for benefit services
|
|
52,380
|
|
|
52,054
|
|
||
Receivables, gross
|
|
104,905
|
|
|
110,121
|
|
||
Less: allowance for doubtful accounts
|
|
(3,608
|
)
|
|
(2,574
|
)
|
||
Receivables, net
|
|
$
|
101,297
|
|
|
$
|
107,547
|
|
|
|
Balance at
Beginning of Fiscal Year |
|
Charged to
Operations |
|
Recoveries
(Deductions) |
|
Balance at
End of Fiscal Year |
||||||||
Year ended December 31, 2018
|
|
$
|
2,574
|
|
|
$
|
1,034
|
|
|
$
|
—
|
|
|
$
|
3,608
|
|
Year ended December 31, 2017
|
|
$
|
2,016
|
|
|
$
|
558
|
|
|
$
|
—
|
|
|
$
|
2,574
|
|
Year ended December 31, 2016
|
|
$
|
1,071
|
|
|
$
|
947
|
|
|
$
|
(2
|
)
|
|
$
|
2,016
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Computers and equipment
|
|
$
|
27,519
|
|
|
$
|
22,702
|
|
Software and software development costs
|
|
144,260
|
|
|
120,278
|
|
||
Furniture and fixtures
|
|
8,123
|
|
|
7,754
|
|
||
Leasehold improvements
|
|
28,883
|
|
|
25,097
|
|
||
Property and equipment, gross
|
|
208,785
|
|
|
175,831
|
|
||
Less: accumulated depreciation and amortization
|
|
(131,865
|
)
|
|
(107,089
|
)
|
||
Property and equipment, net
|
|
$
|
76,920
|
|
|
$
|
68,742
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
|
||||||||||||
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Client/broker contracts & relations
|
$
|
237,430
|
|
|
$
|
(108,834
|
)
|
|
$
|
128,596
|
|
|
$
|
237,221
|
|
|
$
|
(84,581
|
)
|
|
$
|
152,640
|
|
Trade names
|
3,880
|
|
|
(3,587
|
)
|
|
293
|
|
|
3,880
|
|
|
(3,492
|
)
|
|
388
|
|
||||||
Technology
|
14,646
|
|
|
(14,009
|
)
|
|
637
|
|
|
14,646
|
|
|
(13,047
|
)
|
|
1,599
|
|
||||||
Noncompete agreements
|
2,232
|
|
|
(2,084
|
)
|
|
148
|
|
|
2,232
|
|
|
(2,013
|
)
|
|
219
|
|
||||||
Favorable lease arrangements
|
1,134
|
|
|
(713
|
)
|
|
421
|
|
|
1,134
|
|
|
(611
|
)
|
|
523
|
|
||||||
Total
|
$
|
259,322
|
|
|
$
|
(129,227
|
)
|
|
$
|
130,095
|
|
|
$
|
259,113
|
|
|
$
|
(103,744
|
)
|
|
$
|
155,369
|
|
2019
|
$
|
24,914
|
|
2020
|
22,749
|
|
|
2021
|
19,945
|
|
|
2022
|
17,509
|
|
|
2023
|
14,721
|
|
|
Thereafter
|
30,257
|
|
|
Total
|
$
|
130,095
|
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Accounts payable and accrued liabilities
|
$
|
32,771
|
|
|
$
|
23,788
|
|
Payable to benefit providers and transit agencies
|
30,148
|
|
|
32,469
|
|
||
Accrued compensation and related benefits
|
28,594
|
|
|
25,921
|
|
||
Other accrued expenses
|
5,834
|
|
|
5,275
|
|
||
Deferred revenue
|
2,507
|
|
|
2,524
|
|
||
Accounts payable and accrued expenses
|
$
|
99,854
|
|
|
$
|
89,977
|
|
|
December 31, 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 debt financing fees
|
(2,307
|
)
|
|
(2,085
|
)
|
||
Long-term debt
|
$
|
244,693
|
|
|
$
|
244,915
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
$
|
3,270
|
|
|
$
|
7,686
|
|
|
$
|
6,213
|
|
Technology and development
|
2,185
|
|
|
2,391
|
|
|
2,448
|
|
|||
Sales and marketing
|
3,000
|
|
|
2,936
|
|
|
3,004
|
|
|||
General and administrative
|
9,633
|
|
|
12,636
|
|
|
15,515
|
|
|||
Total
|
$
|
18,088
|
|
|
$
|
25,649
|
|
|
$
|
27,180
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Stock options granted (in thousands)
|
632
|
|
|
825
|
|
||
Weighted-average fair value at date of grant
|
$
|
26.22
|
|
|
$
|
18.38
|
|
|
Shares
|
|
Weighted-average
exercise price
|
|
Remaining
contractual term
(years)
|
|
Aggregate intrinsic
value (dollars in
thousands)
|
|||||
Outstanding at December 31, 2017
|
2,478
|
|
|
$
|
47.24
|
|
|
7.22
|
|
$
|
42,324
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(54
|
)
|
|
26.10
|
|
|
|
|
|
|||
Forfeited
|
(205
|
)
|
|
60.70
|
|
|
|
|
|
|||
Outstanding as of December 31, 2018
|
2,219
|
|
|
$
|
46.50
|
|
|
5.11
|
|
$
|
4,321
|
|
Vested and expected to vest at December 31, 2018
|
2,187
|
|
|
$
|
46.30
|
|
|
5.08
|
|
$
|
4,323
|
|
Exercisable at December 31, 2018
|
1,849
|
|
|
$
|
43.74
|
|
|
4.61
|
|
$
|
4,323
|
|
|
Year Ended December 31,
|
||||
|
2017
|
|
2016
|
||
Expected volatility
|
39.79
|
%
|
|
42.63
|
%
|
Risk-free interest rate
|
1.86
|
%
|
|
1.17
|
%
|
Expected term (in years)
|
4.74
|
|
|
4.87
|
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
|
|
|
Weighted-average grant date fair value
|
|||||||
|
Service-based RSUs
|
Performance-based RSUs
|
|
Service-based RSUs
|
Performance-based RSUs
|
||||||
|
(shares in thousands)
|
|
|
|
|||||||
Unvested at December 31, 2017
|
304
|
|
725
|
|
|
$
|
61.61
|
|
$
|
60.21
|
|
Granted
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||
Vested
|
(105
|
)
|
(257
|
)
|
|
60.40
|
|
58.98
|
|
||
Forfeitures
|
(35
|
)
|
(268
|
)
|
|
64.38
|
|
61.57
|
|
||
Unvested at December 31, 2018
|
164
|
|
200
|
|
|
$
|
61.79
|
|
$
|
59.76
|
|
•
|
1%
of the outstanding shares of the Company’s common stock as of the last day of its immediately preceding fiscal year; or
|
•
|
such other amount as may be determined by the board of directors.
|
|
Amount
|
||
Beginning balance as of January 1, 2016
|
$
|
183
|
|
Employee termination and other charges
|
1,147
|
|
|
Releases
|
(1,330
|
)
|
|
Ending balance as of December 31, 2016
|
$
|
—
|
|
Employee termination and other charges
|
1,489
|
|
|
Releases
|
(1,489
|
)
|
|
Ending balance as of December 31, 2017
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
(4,791
|
)
|
|
$
|
(159
|
)
|
|
$
|
(13,290
|
)
|
State
|
(2,946
|
)
|
|
(925
|
)
|
|
(1,501
|
)
|
|||
|
(7,737
|
)
|
|
(1,084
|
)
|
|
(14,791
|
)
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(6,437
|
)
|
|
(8,389
|
)
|
|
5,175
|
|
|||
State
|
29
|
|
|
(110
|
)
|
|
687
|
|
|||
|
(6,408
|
)
|
|
(8,499
|
)
|
|
5,862
|
|
|||
Total provision for income taxes
|
$
|
(14,145
|
)
|
|
$
|
(9,583
|
)
|
|
$
|
(8,929
|
)
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Tax provision at U.S. statutory rate
|
21
|
%
|
|
35
|
%
|
|
35
|
%
|
State income taxes, net of federal benefit
|
6
|
|
|
2
|
|
|
2
|
|
Permanent items - other
|
1
|
|
|
1
|
|
|
2
|
|
Research and development credits
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
Stock-based compensation
|
9
|
|
|
(22
|
)
|
|
1
|
|
Other
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Change in tax rate
|
1
|
|
|
1
|
|
|
—
|
|
Provision for tax
|
35
|
%
|
|
15
|
%
|
|
36
|
%
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
443
|
|
|
$
|
1,716
|
|
Stock-based compensation
|
12,092
|
|
|
11,778
|
|
||
Research and development and other credits
|
2,170
|
|
|
6,961
|
|
||
Reserves
|
6,952
|
|
|
5,417
|
|
||
Intangible assets
|
2,141
|
|
|
947
|
|
||
Gross deferred tax assets
|
23,798
|
|
|
26,819
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(4,644
|
)
|
|
(3,874
|
)
|
||
Goodwill
|
(17,672
|
)
|
|
(12,802
|
)
|
||
Gross deferred tax liabilities
|
(22,316
|
)
|
|
(16,676
|
)
|
||
Net deferred tax assets
|
$
|
1,482
|
|
|
$
|
10,143
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
$
|
5,078
|
|
|
$
|
4,765
|
|
|
$
|
4,429
|
|
Increase in tax positions for prior years
|
130
|
|
|
—
|
|
|
201
|
|
|||
Increase in tax positions for current year
|
370
|
|
|
313
|
|
|
271
|
|
|||
Other decreases
|
—
|
|
|
—
|
|
|
(136
|
)
|
|||
Balance, end of year
|
$
|
5,578
|
|
|
$
|
5,078
|
|
|
$
|
4,765
|
|
|
|
As of
December 31, 2018 |
||
2019
|
|
$
|
9,479
|
|
2020
|
|
9,685
|
|
|
2021
|
|
9,661
|
|
|
2022
|
|
6,536
|
|
|
2023
|
|
2,308
|
|
|
Thereafter
|
|
5,663
|
|
|
Total future minimum lease payments
|
|
$
|
43,332
|
|
|
|
Fiscal Quarter Ended
|
||||||||||||||||||||||||||||||
|
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
|
(in thousands, except per share amounts)
|
||||||||||||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Healthcare
|
|
$
|
65,376
|
|
|
$
|
66,125
|
|
|
$
|
68,104
|
|
|
$
|
75,256
|
|
|
$
|
66,046
|
|
|
$
|
65,893
|
|
|
$
|
68,202
|
|
|
$
|
74,674
|
|
COBRA
|
|
26,045
|
|
|
25,081
|
|
|
26,200
|
|
|
28,835
|
|
|
29,142
|
|
|
26,897
|
|
|
27,018
|
|
|
28,550
|
|
||||||||
Commuter
|
|
19,426
|
|
|
18,785
|
|
|
18,847
|
|
|
18,878
|
|
|
18,508
|
|
|
17,987
|
|
|
17,836
|
|
|
18,543
|
|
||||||||
Other
|
|
4,218
|
|
|
3,980
|
|
|
3,357
|
|
|
3,671
|
|
|
4,384
|
|
|
4,069
|
|
|
4,076
|
|
|
4,270
|
|
||||||||
Total revenues
|
|
115,065
|
|
|
113,971
|
|
|
116,508
|
|
|
126,640
|
|
|
118,080
|
|
|
114,846
|
|
|
117,132
|
|
|
126,037
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of revenues (excluding amortization of internal use software)
|
|
39,533
|
|
|
33,886
|
|
|
36,143
|
|
|
45,242
|
|
|
43,223
|
|
|
39,031
|
|
|
43,319
|
|
|
48,088
|
|
||||||||
Technology and development, sales and marketing, general and administrative, and employee termination and other charges
|
|
59,802
|
|
|
61,454
|
|
|
53,664
|
|
|
56,620
|
|
|
49,547
|
|
|
50,365
|
|
|
48,619
|
|
|
45,581
|
|
||||||||
Amortization
|
|
10,772
|
|
|
10,502
|
|
|
10,191
|
|
|
9,991
|
|
|
9,858
|
|
|
9,402
|
|
|
9,393
|
|
|
9,237
|
|
||||||||
Total operating expenses
|
|
110,107
|
|
|
105,842
|
|
|
99,998
|
|
|
111,853
|
|
|
102,628
|
|
|
98,798
|
|
|
101,331
|
|
|
102,906
|
|
||||||||
Income from operations
|
|
4,958
|
|
|
8,129
|
|
|
16,510
|
|
|
14,787
|
|
|
15,452
|
|
|
16,048
|
|
|
15,801
|
|
|
23,131
|
|
||||||||
Other, net
|
|
(1,317
|
)
|
|
(1,071
|
)
|
|
(965
|
)
|
|
(916
|
)
|
|
(1,443
|
)
|
|
(1,749
|
)
|
|
(1,680
|
)
|
|
(1,590
|
)
|
||||||||
Income before income taxes
|
|
3,641
|
|
|
7,058
|
|
|
15,545
|
|
|
13,871
|
|
|
14,009
|
|
|
14,299
|
|
|
14,121
|
|
|
21,541
|
|
||||||||
Income tax (provision) benefit
|
|
(1,738
|
)
|
|
(4,934
|
)
|
|
(4,621
|
)
|
|
(2,852
|
)
|
|
(5,020
|
)
|
|
(5,236
|
)
|
|
6,157
|
|
|
(5,484
|
)
|
||||||||
Net income
|
|
$
|
1,903
|
|
|
$
|
2,124
|
|
|
$
|
10,924
|
|
|
$
|
11,019
|
|
|
$
|
8,989
|
|
|
$
|
9,063
|
|
|
$
|
20,278
|
|
|
$
|
16,057
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.27
|
|
|
$
|
0.28
|
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
$
|
0.54
|
|
|
$
|
0.43
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.27
|
|
|
$
|
0.27
|
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
39,853
|
|
|
39,853
|
|
|
39,853
|
|
|
39,823
|
|
|
38,447
|
|
|
39,641
|
|
|
37,419
|
|
|
37,025
|
|
||||||||
Diluted
|
|
40,340
|
|
|
40,492
|
|
|
40,412
|
|
|
40,480
|
|
|
39,415
|
|
|
40,264
|
|
|
38,613
|
|
|
38,441
|
|
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)
|
the completion of the Special Committee’s investigation. The Board had formed a Special Committee of directors independent from the Audit Committee to carry out an independent investigation and review the procedures, scope and findings of the Audit Committee’s investigation as well as the additional allegations, and the Special Committee has concluded its investigation.
|
c)
|
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;
|
d)
|
based on the efforts 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 2018 financial results; and
|
e)
|
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
|
F.
|
Information Technology General Controls (ITGC)
|
•
|
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 the 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.
|
•
|
We are enhancing the expertise in the area of IT control management. In addition, an outside service provider has been engaged to assist with the remediation efforts in the areas of weakness.
|
•
|
We are developing a training program addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on those related to logical access and change-management over IT systems impacting financial reporting.
|
•
|
We are developing and maintaining documentation underlying ITGCs to promote knowledge transfer upon personnel and function changes.
|
•
|
We are developing enhanced risk assessment procedures and controls related to changes in business and impact on related IT systems.
|
•
|
continued payment for 12 months of his base salary in effect immediately before his termination (or if the termination is due to a resignation for good reason based on a material reduction in base salary, then as of immediately before such reduction); and
|
•
|
Company payment of the monthly premium for the executive officer and his eligible dependents to continue health coverage pursuant to COBRA continuation coverage for up to 12 months following his termination date (or monthly taxable payments to him for the same period in lieu of our payment of such premiums).
|
•
|
a lump-sum payment equal to 100% of his annual base salary as of immediately before his termination (or if the termination is due to a resignation for good reason based on a material reduction in base salary, then as of immediately before such reduction) or, if such amount is greater, as of immediately before the change in control;
|
•
|
a lump-sum payment equal to 100% of his target annual bonus (for the year of his termination);
|
•
|
company payment of the monthly premium for the executive officer and his eligible dependents to continue health coverage pursuant to COBRA continuation coverage for up to 12 months following his termination date (or monthly taxable payments to him for the same period in lieu of our payment of such premiums); and
|
•
|
100% accelerated vesting of all outstanding equity awards, and, with respect to equity awards with performance-based vesting, unless otherwise specified in the award agreements governing such equity awards, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels.
|
Name
|
Age
|
Position
|
Stuart C. Harvey, Jr.
|
57
|
Executive Chairman of the Board
|
Edgar O. Montes
|
58
|
President, Chief Executive Officer and Director
|
Ismail “Izzy” Dawood
|
47
|
Chief Financial Officer
|
Scott R. Rose
|
50
|
Chief Operating Officer
|
John G. Saia
|
46
|
Senior Vice President, General Counsel and Corporate Secretary
|
Name
|
Age
|
Position
|
Class
|
Term Expiration Year
|
Stuart C. Harvey, Jr.
|
57
|
Executive Chairman
|
Class III
|
2021
|
Thomas A. Bevilacqua
(2)(3)
|
62
|
Lead Independent Director
|
Class III
|
2021
|
Bruce G. Bodaken
(1)
|
67
|
Director
|
Class III
|
2021
|
Carol A. Goode
(2)(3)
|
65
|
Director
|
Class II
|
2020
|
Jerome D. Gramaglia
(2)(3)
|
63
|
Director
|
Class I
|
2022
|
Robert L. Metzger
(1)
|
51
|
Director
|
Class I
|
2022
|
George P. Scanlon
(1)
|
61
|
Director
|
Class II
|
2020
|
Edgar O. Montes
|
58
|
President, Chief Executive Officer and Director
|
Class I
|
2022
|
•
|
reviewing and approving the selection of our independent registered public accounting firm, and approving the audit and non-audit services to be performed by our independent registered public accounting firm;
|
•
|
monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
|
•
|
reviewing the adequacy and effectiveness of our internal control policies and procedures;
|
•
|
discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year-end operating results; and
|
•
|
preparing the Audit Committee report that the SEC requires in our annual Proxy Statement.
|
•
|
overseeing our compensation policies, plans and benefit programs;
|
•
|
reviewing and approving for our Chief Executive Officer and executive officers: the annual base salary, the annual incentive bonus, including the specific goals and amount, equity compensation, employment agreements, severance arrangements and change in control arrangements, and any other benefits, compensations or arrangements;
|
•
|
preparing the Compensation Committee report that the SEC requires to be included in our annual Proxy Statement; and
|
•
|
administering our equity compensation plans.
|
•
|
assisting our Board in identifying prospective director nominees and recommending nominees for each Annual Meeting of Stockholders to the Board;
|
•
|
evaluating director compensation, consulting with outside consultants and/or with our human resources department when appropriate, and making recommendations to our Board regarding director compensation;
|
•
|
reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board;
|
•
|
reviewing the succession planning for our executive officers;
|
•
|
overseeing the evaluation of our Board, its committees and management; and
|
•
|
recommending members for each Board committee to our Board.
|
•
|
The Nominating and Corporate Governance Committee will consider candidates recommended by stockholders in the same manner as candidates recommended to the Nominating and Corporate Governance Committee from other sources;
|
•
|
In its evaluation of director candidates, including the members of the Board eligible for re-election, the Nominating and Corporate Governance Committee will consider the following:
|
•
|
The current size and composition of the Board and the needs of the Board and the respective committees of the Board;
|
•
|
Without assigning any particular weighting or priority to any of these factors, such factors as character, integrity, judgment, diversity of experience, diversity of perspective, independence, area of expertise, corporate experience, length of service, potential conflicts of interest, other commitments and the like; and
|
•
|
Other factors that the Nominating and Corporate Governance Committee may consider appropriate;
|
•
|
The Nominating and Corporate Governance Committee requires the following minimum qualifications, which are the desired qualifications and characteristics for Board membership, to be satisfied by any nominee for a position on the Board:
|
•
|
The highest personal and professional ethics and integrity;
|
•
|
Proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment;
|
•
|
Skills that are complementary to those of the existing Board;
|
•
|
The ability to assist and support management and make significant contributions to the Company’s success; and
|
•
|
An understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities;
|
•
|
If the Nominating and Corporate Governance Committee determines that an additional or replacement director is required, the Nominating and Corporate Governance Committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search firm to gather additional information, or reliance on the knowledge of the members of the Nominating and Corporate Governance Committee, the Board or management; and
|
•
|
The Nominating and Corporate Governance Committee may propose to the Board a candidate recommended or offered for nomination by a stockholder as a nominee for election to the Board.
|
•
|
Edgar O. Montes, our President and Chief Executive Officer, or CEO;
|
•
|
Stuart C. Harvey, Jr., our Executive Chairman of the Company;
|
•
|
Ismail (Izzy) Dawood, our Chief Financial Officer, or CFO;
|
•
|
Joseph L. Jackson, our former Chairman of the Board and Chief Executive Officer and former Executive Chairman of the Company;
|
•
|
Colm M. Callan, our former Chief Financial Officer; and
|
•
|
Kimberly L. Wilford, our former Senior Vice President, General Counsel and Corporate Secretary.
|
•
|
A
$3.9 million
decrease
in total revenue year-over-year (from
$476.1 million
in
2017
to
$472.2 million
in
2018
);
|
•
|
GAAP net income of
$26.0 million
or
$0.64
(
40,434 thousand
shares) per diluted share, as compared to GAAP net income in
2017
of
$54.4 million
or
$1.38
(
39,415 thousand
shares) per diluted share;
|
•
|
A
16.8%
decrease
in non-GAAP Adjusted EBITDA year-over-year (from
$146.6 million
in
2017
to
$122.0 million
in
2018
);
|
•
|
Maintained high customer and participant satisfaction and retention scores; and
|
•
|
Maintained a greater than 90% annual renewal rate for enterprise clients (based on annual revenue).
|
•
|
Mr. Jackson resigned from his position as Chief Executive Officer, and was appointed Executive Chairman of the Company, a position he held until his resignation on September 6, 2018;
|
•
|
Mr. Montes was appointed President and Chief Executive Officer, and appointed to serve as a member of the Board;
|
•
|
Mr. Callan resigned from his position as Chief Financial Officer, and continued his employment with us to effect a seamless transition to the incoming interim chief financial officer, followed by the termination of his employment on July 4, 2018; and
|
•
|
Ms. Wilford resigned from her position as Senior Vice President, General Counsel and Corporate Secretary of the Company, and continued employment with us to effect a seamless transition, followed by the termination of her employment on July 4, 2018.
|
New Employment Arrangements
|
Edgar Montes
|
We entered into an at-will employment agreement with Mr. Montes in connection with his promotion in April 2018 that provided him with increases to his base salary and annual performance-based incentive compensation opportunity and severance and change in control benefits, which were market competitive and designed to recognize his increased role and responsibilities in his new position as CEO.
A summary of Mr. Montes’ at-will employment agreement is provided under the “2018 NEO Compensation” below. |
Stuart C. Harvey, Jr.
|
We entered into at-will employment offer letters with Messrs. Harvey and Dawood in September 2018 and October 2018, respectively, in connection with their hiring providing for market-competitive compensation opportunities, including salary, annual performance-based incentive compensation opportunity, equity award opportunities, and limited perquisites and one-time payments that we believe were necessary to have them join us.
A summary of these agreements is provided under the “2018 NEO Compensation” discussion below.
|
|
Ismail (Izzy) Dawood
|
||
Transition and New Arrangements
|
Joseph Jackson
|
We entered into new employment agreement with Mr. Jackson and transition agreements with each of Mr. Callan and Ms. Wilford in April 2018 in connection with our Announced Restatement that honored their contractual severance obligations and provided them with additional cash compensation if they remained with us and assisted with the filings related to our Announced Restatement and the related investigations and litigations, and entered into an effective release of claims with us.
For Mr. Jackson, we also reduced his base salary and annual performance-based incentive compensation opportunities downward to reflect his new role as Executive Chairman. A summary of these agreements is provided under the “2018 NEO Compensation” discussion below. |
Colm Callan
|
||
Kimberly Wilford
|
||
No Executive Bonus Plan
|
We did not implement a formal financial-metric-based executive bonus plan in 2018 due to the uncertainties arising from the Announced Restatement, including the unreliability of historical financial performance resulting from the Announced Restatement. Instead, the Compensation Committee, in making its decisions on 2018 bonuses, focused on the new management team's ability to complete the financial restatement and promote operational stability, as described in greater detail below.
Following the end of 2018, we approved bonuses to each of Messrs. Montes, Harvey and Dawood as described under the "2018 NEO Compensation Decisions" discussion below.
|
•
|
Annual cash bonus opportunities under the 2017 bonus plan and for 2018 plan year were forfeited for Messrs. Jackson and Callan and Ms. Wilford;
|
•
|
Performance-based equity awards for which the performance period had not yet been completed were forfeited in their entirety by Mr. Callan and Ms. Wilford, and in part by Mr. Jackson; and
|
•
|
Unvested time-based equity awards were forfeited in their entirety by Mr. Callan (other than with respect to his remaining unvested new hire awards) and Ms. Wilford, and in part by Mr. Jackson.
|
Name
|
Year
|
Salary
($)
|
Bonus
($)
|
Non-equity Incentive Plan Comp
($)
|
Stock Awards
|
Option Awards
|
Realizable Stock / Option Awards
($)
(1)
|
All Other Comp
($)
|
Total
($)
|
Total Realized / Realizable Compensation
($)
(2)
|
|||||||||
Joseph Jackson
|
2018
|
456,058
|
|
300,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
276,904
|
|
1,032,962
|
|
1,032,962
|
|
2017
|
742,308
|
|
700,000
|
|
—
|
|
7,230,000
|
|
2,663,560
|
|
2,439,360
|
|
14,780
|
|
11,350,648
|
|
3,896,448
|
|
|
2016
|
689,680
|
|
—
|
|
875,000
|
|
3,272,250
|
|
1,661,670
|
|
2,907,630
|
|
13,509
|
|
6,512,109
|
|
4,485,819
|
|
|
Edgar Montes
|
2018
|
546,924
|
|
180,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,600
|
|
733,524
|
|
733,524
|
|
2017
|
486,462
|
|
—
|
|
613,500
|
|
5,422,500
|
|
2,663,560
|
|
3,267,000
|
|
13,530
|
|
9,199,552
|
|
4,380,492
|
|
|
2016
|
403,926
|
|
—
|
|
386,250
|
|
2,181,500
|
|
1,246,253
|
|
2,178,000
|
|
11,279
|
|
4,229,208
|
|
2,979,455
|
|
|
Colm Callan
|
2018
|
199,500
|
|
180,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
251,220
|
|
630,720
|
|
630,720
|
|
2017
|
383,877
|
|
—
|
|
—
|
|
4,338,000
|
|
1,997,670
|
|
—
|
|
6,480
|
|
6,726,027
|
|
390,357
|
|
|
2016
|
343,337
|
|
—
|
|
262,650
|
|
2,181,500
|
|
1,246,253
|
|
—
|
|
6,360
|
|
4,040,100
|
|
612,347
|
|
|
Kimberly Wilford
|
2018
|
201,692
|
|
160,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
253,803
|
|
615,495
|
|
615,495
|
|
2017
|
373,831
|
|
—
|
|
—
|
|
4,338,000
|
|
1,997,670
|
|
—
|
|
6,480
|
|
6,715,981
|
|
380,311
|
|
|
2016
|
333,239
|
|
—
|
|
254,925
|
|
1,745,200
|
|
830,835
|
|
—
|
|
5,679
|
|
3,169,878
|
|
593,843
|
|
(1)
|
Represents the amount realizable with respect to stock awards (PSUs) and options granted in the year, calculated based on $43.56 per share (and for options reduced by applicable exercise price) multiplied by number of shares vested as of December 31, 2018, except as provided in the last sentence of this footnote. All options are out-of-the-money based on this assumption. For 2016 PSUs and 2017 PSUs, represents the target number of shares and, in the case of Mr. Jackson, pro-rated based on the number of days he was employed during the applicable performance period (89% for 2016 PSUs and 56% for 2017 PSUs)
|
(2)
|
Represents sum of cash amounts paid or earned, plus “Realizable Stock/Option Awards” and “All Other Compensation.”
|
•
|
Adopted a Compensation Recoupment Policy (“Recoupment Policy”) that both expanded and clarified the previous policy that was incorporated into our executive cash incentive compensation plan. The new Recoupment Policy applies to all cash and equity performance-based incentive awards to our executive officers going forward. If we are required under the federal securities law to restate our financials to correct an error and the compensation recognized from any executive officer’s cash or equity performance-based incentive awards covered by the Recoupment Policy is based on a materially inaccurate financial or operating measure, then the Recoupment Policy applies to any compensation recognized from these awards within the three-year period preceding the announced restatement. See “Compensation Recovery (“Clawback”) Policy discussion below for more details.
|
•
|
Adopted new stock ownership guidelines that provided more rigorous ownership requirements for directors and executive officers. See “Stock Ownership Guidelines” discussion below for more details.
|
|
What We Do
|
|
What We Don’t Do
|
ü
|
Pay-for-Performance Philosophy.
The majority of our executives’ compensation is directly linked to corporate performance; we also structure their target total direct compensation opportunities with a significant long-term equity component, thereby making a substantial portion of each executive’s target total direct compensation aligned with stockholder interests.
|
û
|
No “Golden Parachute” Tax Reimbursements.
We do not provide any tax reimbursement payments (including “gross-ups”) on any tax liability that the NEOs might owe as a result of the application of Sections 280G or 4999 of the IRC.
|
ü
|
Independent Compensation Committee.
The Compensation Committee is comprised solely of independent directors and has established effective means for communicating with stockholders regarding their executive compensation ideas and concerns.
|
û
|
No Special Retirement Plans.
We do not offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements exclusively to our executive officers.
|
ü
|
Independent Compensation Committee Advisor.
The Compensation Committee engaged its own independent compensation consultant to assist with compensation decisions. This consultant performed no other consulting or other services for the Company.
|
û
|
No Special Health or Welfare Benefits.
Our executive officers participate in the same company-sponsored health and welfare benefits programs as our other full-time, salaried employees.
|
ü
|
Annual Executive Compensation Review.
The Compensation Committee conducts an annual review and approval of our compensation strategy.
|
û
|
No Hedging and Pledging.
We prohibit our employees, including our executive officers, and directors from pledging our securities or engaging in hedging transactions with respect to our securities.
|
ü
|
Multi-Year Vesting/Performance Requirements.
Historically, the equity awards granted to our executive officers vest or are earned over multi-year periods, consistent with market practice and our retention objectives.
|
û
|
No Fixed Term Employment Agreements or Guarantees of Employment or Compensation.
We do not currently have any fixed term employment agreement with any employees or provide for any guaranteed payments of future compensation.
|
ü
|
Compensation At-Risk.
Our executive compensation program is designed so a significant portion of compensation is “at risk” based on our performance through our short-term cash and long-term incentive compensation opportunities.
|
û
|
No Stock Option Repricing or Exchange.
Our 2010 Plan does not permit us to offer an option repricing or exchange program without the prior consent of our stockholders.
|
ü
|
Limited Perquisites.
We do not provide perquisites or other personal benefits to our executive officers, except where they serve a legitimate business purpose.
|
û
|
No Single-Trigger Change in Control Cash Payments or Acceleration of Time-Based Equity Awards.
Change in control cash payments and change in control equity acceleration for time-based equity awards require both an involuntary termination and change in control, commonly referred to as a “double-trigger.” Due to the difficulty in assessing performance against targets through a multi-year performance period that is truncated by occurrence of a change in control, our performance-based equity awards provide that on a change in control they are treated as though they were time-based awards that vested over the multi-year, performance period. The result of this structure is that upon a change in control, there will naturally be some vesting of these awards because of the time-served since grant.
|
ü
|
Compensation Recovery Policy.
In May 2019, we adopted a compensation recovery (“clawback”) policy that provides that, if we are required to prepare an accounting restatement to correct an error and an executive recognizes compensation from cash or equity performance-based compensation based on a materially inaccurate financial or operating measure, we may recover from the executive officer any such incentive compensation covered by the policy during the three-year period preceding the announced restatement, and generally based on erroneously received amounts. Prior to the adoption of this policy, we maintained similar policy that applied to cash incentive awards erroneously paid or awarded under our executive bonus plan due to an accounting restatement. See “Compensation Recovery (“Clawback”) Policy discussion below for more details.
|
|
|
ü
|
Stock Ownership Guidelines.
In May 2019, we adopted robust stock ownership guidelines in order to encourage stock ownership among our directors and executive officers. These ownership guidelines replaced the prior ownership and retention guidelines we had in place since 2014. See “Stock Ownership Guidelines” and “Equity Retention Guidelines for Non-Employee Directors” sections below.
|
|
|
ü
|
Succession Planning.
We review the risks associated with our key executive officer positions to ensure adequate succession plans are in place. In particular, the Nominating and Corporate Governance Committee reviews the short- and long-term strategies and interests of WageWorks to determine what current and future skills and experience are required of the Board in exercising its oversight function.
|
|
|
ü
|
Conduct an Annual “Say-on-Pay” Vote.
We conduct an annual “say-on-pay” vote on the compensation of our NEOs at our annual meeting. In April 2017, we conducted a “say-on-pay” vote, at our Annual Meeting of Stockholders. Our stockholders approved on an advisory basis the compensation of the NEOs, with more than 99% of the votes cast in favor of our executive compensation program. We intend to conduct our next “say-on-pay” vote at our annual meeting this year.
|
|
|
•
|
attract and retain talented executives, who possess the proven experience, knowledge, skills, and leadership criteria critical to our success
|
•
|
motivate these executives to achieve our business objectives and uphold its core values;
|
•
|
reward executives who can directly influence overall performance by linking a greater portion of their target total direct compensation opportunity to short-term and long-term incentives than most other employees;
|
•
|
promote teamwork within the executive team, while also recognizing the unique role each executive plays in our success; and
|
•
|
ensure alignment of the interests of executives and stockholders to promote the short-term and long-term growth of the business, and increase shareholder value.
|
ACI Worldwide
athenahealth
Bottomline Technologies
Cornerstone OnDemand
Envestnet
Fair Isaac
|
|
Financial Engines
Guidewire Software
HealthEquity, Inc.
MarketAxess Holdings
Medidata Solutions
NIC
|
|
Paycom Software
The Ultimate Software Group
TriNet Technologies
Tyler Technologies
WEX
|
Compensation Element
|
|
Reason for Providing Element
|
Base Salary
|
|
To attract and retain the NEOs and compensate them for their day-to-day contributions based on demonstrated experience, competencies and performance
|
Annual Cash Incentive Compensation
|
|
To motivate and reward achievement of annual strategic goals and to better align the NEOs interests with stockholders’ interest by promoting strong, annual financial and business results
|
Long-Term Equity Incentive Compensation
|
|
To align the NEOs interests with the long-term interests of stockholders and to achieve our retention objectives through multi-year vesting requirements and through performance-based vesting requirements linked to the Company’s long-term strategic goals
|
Retirement, Welfare and Health Benefits
|
|
To provide for the safety and wellness of the NEOs through a competitive benefits package
|
Post-Employment Compensation
|
|
To allow the NEOs to focus on their job duties and the Company’s performance
|
•
|
Continued payment of his base salary as then in effect for 24 months;
|
•
|
Reimbursement of COBRA premiums on a tax-neutral basis for Mr. Jackson and his qualified dependents for 18 months;
|
•
|
A lump sum amount equal to 200% of the annual target bonus in effect for him for the year in which his involuntary termination occurs; and
|
•
|
Accelerated vesting as to 100% of his unvested equity awards that are outstanding immediately prior to the NEO’s involuntary termination.
|
•
|
Continued payment of his base salary as then in effect for 18 months; and
|
•
|
Reimbursement of COBRA premiums on a tax-neutral basis for Mr. Jackson and his qualified dependents for 18 months; and
|
•
|
Equity acceleration equal to:
|
◦
|
An additional 18 months of vesting for all stock options that are outstanding on the date of his involuntary termination that are subject solely to time-based vesting; and
|
◦
|
With regard to equity awards that (i) are eligible to vest, in whole or in part, based on the achievement of one or more performance metrics and (ii) were granted more than 12 months before his involuntary termination, Mr. Jackson will be eligible to vest in each award as to (x) the portion of such award that otherwise would be eligible to vest based on actual achievement of the relevant performance metrics during the full performance period multiplied by (y) a fraction where the numerator is the total number of calendar days between the beginning of the applicable performance period and the date of the involuntary termination and the denominator is the total number of days in the performance period.
|
Executive Officer Subject to Ownership Policy
|
Minimum Required Level of Stock Ownership
|
Chief Executive Officer
|
Three times current annual base salary
|
Other Executive Officers
|
One times current annual base salary
|
Summary Compensation Table
|
||||||||||||||
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
(1)
($)
|
Stock
Awards
(2)
($)
|
Option Awards
(2,3)
($)
|
Non-equity Incentive Plan Compensation
(4)
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||
Edgar O. Montes
President and
Chief Executive Officer
|
2018
|
546,924
|
|
180,000
|
|
—
|
|
—
|
|
—
|
|
6,600
(5)
|
733,524
|
|
2017
|
486,462
|
|
—
|
|
5,422,500
(6)
|
|
2,663,560
|
|
613,500
|
|
13,530
(7)
|
9,199,552
|
|
|
2016
|
403,926
|
|
—
|
|
2,181,500
(8)
|
|
1,246,253
|
|
386,250
|
|
11,279
(9)
|
4,229,208
|
|
|
Stuart C. Harvey, Jr.
(10)
Executive Chairman
|
2018
|
86,538
|
|
100,000
|
|
—
|
|
—
|
|
—
|
|
2,081
(11)
|
188,619
|
|
Ismail (Izzy) Dawood
(12)
Chief Financial Officer
|
2018
|
76,923
|
|
250,000
|
|
—
|
|
—
|
|
—
|
|
738
(13)
|
327,661
|
|
Joseph L. Jackson
(14)
Former Chairman of the Board and
Former Chief Executive Officer
|
2018
|
456,058
(15)
|
|
300,000
|
|
—
|
|
—
|
|
—
|
|
276,904
(16)
|
1,032,962
|
|
2017
|
742,308
|
|
700,000
|
|
7,230,000
(17)
|
|
2,663,560
|
|
—
|
|
14,780
(18)
|
11,350,648
|
|
|
2016
|
689,680
|
|
—
|
|
3,272,250
(19)
|
|
1,661,670
|
|
875,000
|
|
13,509
(20)
|
6,512,109
|
|
|
Colm M. Callan
(21)
Former Chief Financial Officer
|
2018
|
199,500
|
|
180,000
|
|
—
|
|
—
|
|
—
|
|
251,220
(22)
|
630,720
|
|
2017
|
383,877
|
|
—
|
|
4,338,000
(23)
|
|
1,997,670
|
|
—
|
|
6,480
(24)
|
6,726,027
|
|
|
2016
|
343,337
|
|
—
|
|
2,181,500
(25)
|
|
1,246,253
|
|
262,650
|
|
6,360
(26)
|
4,040,100
|
|
|
Kimberly L. Wilford
(27)
Former Senior Vice President
General Counsel and Corporate Secretary
|
2018
|
201,692
|
|
160,000
|
|
—
|
|
—
|
|
—
|
|
253,803
(28)
|
615,495
|
|
2017
|
373,831
|
|
—
|
|
4,338,000
(29)
|
|
1,997,670
|
|
—
|
|
6,480
(30)
|
6,715,981
|
|
|
2016
|
333,239
|
|
—
|
|
1,745,200
(31)
|
|
830,835
|
|
254,925
|
|
5,674
(32)
|
3,169,873
|
|
(1)
|
Amount represents (i) annual performance bonus for 2018 of $180,000 for Mr. Montes, (ii) annual performance bonus for Mr. Harvey of $100,000, (iii) annual performance bonus for 2018 of $150,000 for Mr. Dawood and sign-on bonus for Mr. Dawood of $100,000, (iv) retention bonus for 2018 pursuant to the amended and restated employment with Mr. Jackson (“Jackson Employment Agreement”) entitling Mr. Jackson to a $300,000 retention bonus upon remaining employed with the Company through December 31, 2018 or upon involuntary termination, (v) $700,000 annual performance bonus for 2017 for Mr. Jackson pursuant to the Jackson Employment Agreement, (vi) annual performance bonus for 2018 of $180,000 for Mr. Callan, and (vii) retention bonus for 2018 entitling Ms. Wilford to a $160,000 retention bonus upon remaining employed with the Company through the transition period.
|
(2)
|
No long-term incentive equity awards were granted in 2018. In addition, as a result of the Announced Restatement, performance RSUs granted in 2016 and 2017, in each case, for which the performance period had not yet been completed as of an NEO’s termination date were forfeited in part by Mr. Jackson, or in their entirety by Mr. Callan, and Ms. Wilford.
|
(3)
|
Amounts represent the aggregate fair market value of options granted in the fiscal years ended December 31, 2016, 2017 and 2018 to the NEOs calculated in accordance with ASC Topic 718 without regard to estimated forfeitures. See Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for a discussion of assumptions made in determining the grant date fair value and compensation expense of our stock options.
|
(4)
|
Amounts represent the total performance-based bonuses earned for services rendered in 2016 and 2017 under our Executive Bonus Plan. A formal executive bonus plan was not implemented in 2018 due to the uncertainties arising from the Announced Restatement. In addition, as a result of the Announced Restatement, performance-based bonus opportunities under the 2017 Executive Bonus Plan and for 2018 plan year were forfeited by Mr. Jackson, Mr. Callan, and Ms. Wilford in connection with their termination of employment in 2018.
|
(5)
|
Amount represents $6,600 in 401(k) matching contribution by us.
|
(6)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2017 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2017 through December 31, 2019. If performance targets are met or exceeded, amounts vested can be increased up to 200% of the initial targeted RSU award, which would result in a grant date aggregate fair market value of $10,845,000.
|
(7)
|
Amount represents (i) $6,480 in 401(k) matching contribution and (ii) $7,050 in expenses associated with the use of advisors for financial and tax preparation and planning.
|
(8)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2016 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2016 through December 31, 2018. If performance targets are met or exceeded, amounts vested can be increased up to 200% of the initial targeted RSU award, which would result in a grant date aggregate fair market value of $4,363,000.
|
(9)
|
Amount represents (i) $5,674 in 401(k) matching contribution; (ii) $105 in gift card tax gross up and (iii) $5,500 in expenses associated with the use of advisors for financial and tax preparation and planning.
|
(10)
|
Mr. Harvey joined us on September 10, 2018 as Executive Chairman and therefore his salary set forth in the table above was prorated for the portion of 2018 in which he was employed with us.
|
(11)
|
Amount represents $2,081 in 401(k) matching contribution by us.
|
(12)
|
Mr. Dawood joined us on October 15, 2018 as full-time Chief Financial Officer and therefore his salary set forth in the table above was prorated for the portion of 2018 in which he was employed with us. The amount does not include compensation paid to Mr. Dawood for his service as a consultant prior to his appointment as full-time Chief Financial Officer.
|
(13)
|
Amount represents $738 in 401(k) matching contribution by us.
|
(14)
|
Mr. Jackson served as our Chief Executive Officer until April 5, 2018, and as our Executive Chairman and Chairman of the Board until September 6, 2018 and therefore his salary set forth in the table above was prorated for the portion of 2018 in which he was employed with us.
|
(15)
|
Amount represents (i) $201,923 for Mr. Jackson’s role as Chief Executive Officer and (ii) $254,135 for his role as Executive Chairman.
|
(16)
|
Amount represents (i) $6,600 in 401(k) matching contribution by us, (ii) $5,472 for reimbursement of COBRA premiums, (iii) $168,077 for severance payments, and (iv) $96,755 for the payout of accrued paid time off.
|
(17)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2017 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2017 through December 31, 2019. If performance targets are met or exceeded, amounts vested can be increased up to 200% of the initial targeted RSU award, which would result in a grant date aggregate fair market value of $14,460,000. In connection with his termination of employment and execution of release of claims, Mr. Jackson will be eligible to receive a pro-rata portion of the achieved award, and the remaining amount is forfeited.
|
(18)
|
Amount represents (i) $6,480 in 401(k) matching contribution and (ii) $8,300 in expenses associated with the use of advisors for financial and tax preparation and planning.
|
(19)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2016 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2016 through December 31, 2018. If performance targets are met or exceeded, amounts vested can be increased up to 200% of the initial targeted RSU award, which would result in a grant date aggregate fair market value of $6,544,500. In connection with his termination of employment and execution of release of claims, Mr. Jackson will be eligible to receive a pro-rata portion of the achieved award, and the remaining amount is forfeited.
|
(20)
|
Amount represents (i) $5,674 in 401(k) matching contribution and (ii) $7,835 in expenses associated with the use of advisors for financial and tax preparation and planning.
|
(21)
|
Mr. Callan served as our Senior Vice President, Chief Financial Officer until April 5, 2018 and thereafter was employed with us for a three-month transition period, and therefore his salary set forth in the table above was prorated for the portion of 2018 in which he was employed with us.
|
(22)
|
Amount represents (i) $6,600 in 401(k) matching contribution by us, (ii) $9,120 for reimbursement of COBRA premiums, (iii) $183,000 for severance payments, and (iv) $52,500 for the payout of accrued paid time off.
|
(23)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2017 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2019 through December 31, 2019. If performance targets are met or exceeded, then the amounts vested can be increased up to 200% of initial targeted RSU award, which would result in a grant date aggregate fair market value of $8,676,000. This award was forfeited in in its entirety in connection with his transition and termination of employment.
|
(24)
|
Amount represents $6,480 in 401(k) matching contribution.
|
(25)
|
Amount represents the aggregate fair market value of price-vested RSUs granted in the fiscal year ended December 31, 2016 and calculated in accordance with ASC Topic 718. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2016 through December 31, 2018. If performance targets are met or exceeded, then the amounts vested can be increased up to 200% of initial targeted RSU award, which would result in a grant date aggregate fair market value of $4,363,000. This award was forfeited in in its entirety in connection with his transition and termination of employment.
|
(26)
|
Amount represents $6,360 in 401(k) matching contribution.
|
(27)
|
Ms. Wilford served as our Senior Vice President, General Counsel and Corporate Secretary until April 5, 2018 and thereafter was employed with us for a three-month transition period, and therefore her salary set forth in the table above was prorated for the portion of 2018 in which she was employed with us.
|
(28)
|
Amount represents (i) $6,600 in 401(k) matching contribution by us, (ii) $4,953 for reimbursement of COBRA premiums, (iii) $178,308 for severance payments, and (iv) $63,942 for the payout of accrued paid time off.
|
(29)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2017 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2019 through December 31, 2019. If performance targets are met or exceeded, then the amounts vested can be increased up to 200% of initial targeted RSU award, which would result in a grant date aggregate fair market value of $8,676,000. This award was forfeited in in its entirety in connection with his transition and termination of employment.
|
(30)
|
Amount represents $6,480 in 401(k) matching contribution.
|
(31)
|
Amount represents the aggregate fair market value of performance RSUs granted in the fiscal year ended December 31, 2016 and calculated in accordance with ASC Topic 718 assuming that the target performance objectives are met. Performance RSUs will vest based on achievement of performance objectives during the performance period from January 1, 2016 through December 31, 2018. If performance targets are met or exceeded, amounts vested can be increased up to 200% of the initial targeted RSU award, which would result in a grant date aggregate fair market value of $3,490,400.
|
(32)
|
Amount represents $5,674 in 401(k) matching contribution by us.
|
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||
Name
|
Grant Date
|
Number of Securities Underlying Unexercised Options:
(#) Exercisable |
Number of Securities Underlying Unexercised Options:
(#) Unexercisable
|
Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price
($/Sh)
|
Option Expiration Date
|
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
|||||||||
Joseph L. Jackson
|
3/6/2013
(1)(2)
|
125,000
|
|
—
|
|
—
|
|
23.76
|
|
3/6/2023
|
|
|
|
|
||||
|
2/24/2014
(1)(2)
|
62,500
|
|
—
|
|
—
|
|
57.10
|
|
2/24/2024
|
|
|
|
|
||||
|
2/18/2015
(3)
|
|
|
|
|
|
|
60,000
|
|
$
|
1,629,600
|
|
||||||
|
2/11/2016
(1)(2)(4)
|
100,000
|
|
—
|
|
—
|
|
43.63
|
|
2/11/2026
|
|
|
75,000
|
|
$
|
2,037,000
|
|
|
|
2/17/2017
(1)(2)(5)
|
100,000
|
|
—
|
|
—
|
|
72.30
|
|
2/17/2027
|
|
|
100,000
|
|
$
|
2,716,000
|
|
|
Edgar O. Montes
|
2/9/2012
(2)
|
40,000
|
|
—
|
|
—
|
|
9.59
|
|
2/9/2022
|
|
|
|
|
||||
|
3/6/2013
(1)(2)
|
50,000
|
|
—
|
|
—
|
|
23.76
|
|
3/6/2023
|
|
|
|
|
||||
|
2/24/2014
(1)(2)
|
25,000
|
|
—
|
|
—
|
|
57.10
|
|
2/24/2024
|
|
|
|
|
||||
|
2/18/2015
(3)
|
|
|
|
|
|
|
40,000
|
|
$
|
1,086,400
|
|
||||||
|
2/11/2016
(1)(4)
|
53,124
|
|
21,876
|
|
—
|
|
43.63
|
|
2/11/2026
|
|
|
50,000
|
|
$
|
1,358,000
|
|
|
|
2/17/2017
(1)(5)
|
45,833
|
|
54,167
|
|
—
|
|
72.30
|
|
2/17/2027
|
|
|
75,000
|
|
$
|
2,037,000
|
|
|
Ismail (Izzy) Dawood
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|||
Colm M. Callan
|
9/2/2014
(1)(2)(6)
|
50,000
|
|
—
|
|
—
|
|
40.80
|
|
9/2/2024
|
|
|
8,544
|
|
$
|
232,055
|
|
|
|
2/18/2015
(3)
|
|
|
|
|
|
|
20,000
|
|
$
|
543,200
|
|
||||||
|
2/11/2016
(1)(2)
|
43,749
|
|
—
|
|
—
|
|
43.63
|
|
2/11/2026
|
|
|
|
|
||||
|
2/17/2017
(1)(2)
|
24,999
|
|
—
|
|
—
|
|
72.30
|
|
2/17/2027
|
|
|
|
|
||||
Kimberly L. Wilford
|
2/24/2014
(1)(2)
|
25,000
|
|
—
|
|
—
|
|
57.10
|
|
2/24/2024
|
|
|
|
|
||||
|
2/18/2015
(3)
|
|
|
|
|
|
|
20,000
|
|
$
|
543,200
|
|
||||||
|
2/11/2016
(1)(2)
|
29,166
|
|
—
|
|
—
|
|
43.63
|
|
2/11/2026
|
|
|
|
|
||||
|
2/17/2017
(1)(2)
|
24,999
|
|
—
|
|
—
|
|
72.30
|
|
2/17/2027
|
|
|
|
|
(1)
|
Twenty-five percent of the shares vest on the first anniversary of the vesting commencement date, and an additional 1/48th of the shares vest on each of the 36 succeeding monthly anniversaries of the vesting commencement date, subject to the respective NEO’s continued status as our service provider through the applicable vesting date.
|
(2)
|
This option is fully vested.
|
(3)
|
The performance RSUs reported are the target number of shares subject to the grant. The market value for these shares was calculated using $27.16 per share, the closing price of the Company’s common stock on December 31, 2018. The performance RSUs are vested based on the Company’s achievements against its (A) average annual EBITDA margin target for the performance period and (B) compound revenue growth target for the performance period January 1, 2015 through December 31, 2017 and will be exercisable following the S-8 Filing Date.
|
(4)
|
The performance RSUs reported are the target number of shares subject to the grant. The market value for these shares was calculated using $27.16 per share, the closing price of the Company’s common stock on December 31, 2018. The performance RSUs are vested based on the Company’s achievements against its (A) average annual EBITDA margin target for the performance period and (B) compound revenue growth target for the performance period January 1, 2016 through December 31, 2018 and will be exercisable following the S-8 Filing Date. In general, the vesting of the performance RSUs is contingent on the NEO’s continued status as our service provider through the applicable vesting date.
|
(5)
|
The performance RSUs reported are the target number of shares subject to the grant. The market value for these shares was calculated using $27.16 per share, the closing price of the Company’s common stock on December 31, 2018. The performance RSUs are scheduled to vest on a determination date in 2020 based on the Company’s achievements against its (A) average annual EBITDA margin target for the performance period and (B) compound revenue growth target for the performance period January 1, 2017 through December 31, 2019. In general, the vesting of the performance RSUs is contingent on the NEO’s continued status as our service provider through the applicable vesting date.
|
(6)
|
RSUs will vest in four equal annual installments on each of the four anniversaries of the vesting commencement date of September 2, 2014. These RSUs vested in connection with the effective release of claims upon his termination of employment and will be exercisable upon the S-8 Filing Date.
|
•
|
Continued payment of his or her base salary as then in effect for 15 months
|
•
|
Reimbursement of COBRA premiums on a tax-neutral basis for Mr. Montes and his qualified dependents for 15 months;
|
•
|
A lump sum amount equal to 100% of the annual target bonus in effect for Mr. Montes for the year in which his involuntary termination occurs; and
|
•
|
Accelerated vesting as to 100% of Mr. Montes’ unvested equity awards that are outstanding immediately prior to his involuntary termination.
|
•
|
Continued payment of his or her base salary as then in effect for 15 months for Mr. Montes; and
|
•
|
Reimbursement of COBRA premiums on a tax-neutral basis for Mr. Montes and his qualified dependents for 15 months.
|
•
|
Equity acceleration equal to:
|
◦
|
An additional 12 months of vesting for all stock options that are outstanding on the date of his involuntary termination that are subject solely to time-based vesting; and
|
◦
|
With regard to equity awards that (i) are eligible to vest, in whole or in part, based on the achievement of one or more performance metrics and (ii) were granted more than 12 months before his involuntary termination, Mr. Montes will be eligible to vest in each award as to (x) the portion of such award that otherwise would be eligible to vest based on actual achievement of the relevant performance metrics during the full performance period multiplied by (y) a fraction where the numerator is the total number of calendar days between the beginning of the applicable performance period and the date of the involuntary termination and the denominator is the total number of days in the performance period.
|
•
|
In the event his involuntary termination is due to his death or “incapacity” (as defined in his employment agreement), then 100% of the unvested portion of each of his equity awards will become immediately vested and exercisable.
|
•
|
Continued payment of his base salary as then in effect for one month; and
|
•
|
Reimbursement of COBRA premiums on a tax-neutral basis for Mr. Montes and his qualified dependents for one month.
|
•
|
continued payment for 12 months of his base salary in effect immediately before his termination (or if the termination is due to a resignation for good reason based on a material reduction in base salary, then as of immediately before such reduction); and
|
•
|
Company payment of the monthly premium for the executive officer and his eligible dependents to continue health coverage pursuant to COBRA continuation coverage for up to 12 months following his termination date (or monthly taxable payments to him for the same period in lieu of our payment of such premiums).
|
•
|
a lump-sum payment equal to 100% of his annual base salary as of immediately before his termination (or if the termination is due to a resignation for good reason based on a material reduction in base salary, then as of immediately before such reduction) or, if such amount is greater, as of immediately before the change in control;
|
•
|
a lump-sum payment equal to 100% of his target annual bonus (for the year of his termination);
|
•
|
company payment of the monthly premium for the executive officer and his eligible dependents to continue health coverage pursuant to COBRA continuation coverage for up to 12 months following his termination date (or monthly taxable payments to him for the same period in lieu of our payment of such premiums); and
|
•
|
100% accelerated vesting of all outstanding equity awards, and, with respect to equity awards with performance-based vesting, unless otherwise specified in the award agreements governing such equity awards, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels.
|
Triggering Event
|
Salary
($)
|
Bonus
($)
|
Accelerated
Stock
Options
(1)
($)
|
Accelerated
RSUs
(2)
($)
|
Health
Care
Benefits
($)
|
Total
($)
|
||||||
Edgar O. Montes
|
|
|
|
|
|
|
||||||
Termination Without Cause Not in Connection with a Change in Control
|
750,000
(3)
|
|
—
|
|
—
|
|
1,358,000
|
|
27,362
(4)
|
|
2,135,362
|
|
Termination Without Cause or Constructive Termination after a Change in Control
|
750,000
(3)
|
|
600,000
(5)
|
|
—
|
|
2,037,000
|
|
27,362
(4)
|
|
3,414,362
|
|
Change in Control Only
|
—
|
|
—
|
|
—
|
|
1,358,000
(7)
|
|
—
|
|
1,358,000
|
|
(1)
|
Amount reflects the difference between the closing sales price of a share of our common stock on December 31, 2018 ($27.16) and the per share exercise price for the option.
|
(2)
|
Amount reflects the closing sales price of a share of our common stock on December 31, 2018 ($27.16).
|
(3)
|
Upon an involuntary termination, Mr. Montes would receive payment of his salary over a period of 15 months, provided Mr. Montes executes a general release of claims and complies with the restrictive covenants under his employment agreement.
|
(4)
|
Upon an involuntary termination, Mr. Montes would receive reimbursement, and tax gross-up payments for such reimbursement (if applicable), for the cost of medical care coverage through our benefit plans for Mr. Jackson, his spouse and his eligible dependents for a period of 15 months, provided Mr. Montes executes a general release of claims and complies with the restrictive covenants under his employment agreement. The amount shown is exclusive of the tax gross-up payment.
|
(5)
|
Upon an involuntary termination within the “change in control period”, Mr. Montes will be entitled to a payment equal to 100% of the annual target bonus in effect for Mr. Montes for the year in which the his involuntary termination occurs, provided Mr. Montes executes a general release of claims and complies with the restrictive covenants under his employment agreement. The amount shown is 100% of Mr. Montes’ target annual bonus for 2018.
|
(6)
|
As of December 31, 2018, the following shares of common stock would accelerate if upon an involuntary termination within the “change in control period”: 76,042 option awards and 50,000 performance RSUs. This calculation includes RSUs that could vest on a change in control, as reported in the “Change in Control only column” and described under footnote 7. None of the options that would accelerate were in-the-money as of December 31, 2018, and therefore there is no value included in the table for them.
|
(7)
|
Amount is based on vesting in the number of target RSUs that would have vested upon a change in control on December 31, 2018 had the award of RSUs been subject to a three-year monthly time-based vesting schedule as of the grant date.
|
•
|
The median of the total annual compensation of all employees (excluding Mr. Montes) (including our consolidated subsidiaries) was $56,994.
|
•
|
Mr. Montes’ total annual compensation, as reported in the Summary Compensation Table included in this Annual Report on Form 10-K, was $733,524.
|
•
|
Based on the above, for fiscal 2018, the ratio of Mr. Montes’ total annual compensation to the median of the total annual compensation of all other employees was approximately 13 to 1.
|
•
|
We determined the median of the total annual compensation of our employees as of December 31, 2018, at which time we (including our consolidated subsidiaries) had approximately 2,207 full-time, part-time and temporary employees, approximately 2,207 (or 100% of our total employee population) of whom are U.S. employees.
|
•
|
We then compared the sum of the total annual cash compensation earned by each of these employees for fiscal 2018 as reflected in our payroll records to determine the median employee, annualizing the compensation of approximately full-time employees who started their employment with us in fiscal 2018 but did not work for us or our consolidated subsidiaries for the entire year.
|
Name
|
|
Fees Earned or Paid in cash
($)
|
|
Stock Awards
(1)
($)
|
|
Total
($)
|
|||
Thomas A. Bevilacqua
(2)
|
|
55,500
|
|
|
—
|
|
|
55,500
|
|
Bruce G. Bodaken
(3)
|
|
47,500
|
|
|
—
|
|
|
47,500
|
|
Jerome D. Gramaglia
(4)
|
|
58,000
|
|
|
—
|
|
|
58,000
|
|
George P. Scanlon
(5)
|
|
11,875
|
|
|
—
|
|
|
11,875
|
|
Robert Metzger
(6)
|
|
60,000
|
|
|
—
|
|
|
60,000
|
|
Mariann Byerwalter
(7)
|
|
35,625
|
|
|
—
|
|
|
35,625
|
|
John W. Larson
(8)
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
(1)
|
We did not grant equity awards to our directors in 2018 but intend to do so
following the S-8 Filing Date in order to compensate our non-employee directors who remain on our Board for their services to us in 2018.
|
(2)
|
As of December 31, 2018, Mr. Bevilacqua held options to purchase 15,500 shares of Common Stock and 2,500 RSUs which have vested but have not been released.
|
(3)
|
As of December 31, 2018, Mr. Bodaken held no options to purchase shares of Common Stock and 2,500 RSUs which have vested but have not been released.
|
(4)
|
As of December 31, 2018, Mr. Gramaglia held 23,000 options to purchase shares of Common Stock and 2,500 RSUs which have vested but have not been released.
|
(5)
|
As of December 31, 2018, Mr. Scanlon held no options to purchase shares of Common Stock and no unvested RSUs.
|
(6)
|
As of December 31, 2018, Mr. Metzger held 15,000 options to purchase shares of Common Stock and 5,834 RSUs which have vested but have not been released].
|
(7)
|
As of December 31, 2018, Ms. Byerwalter held no options to purchase shares of Common Stock and 2,500 RSUs which have vested but have not been released.
|
(8)
|
As of December 31, 2018, Mr. Larson held no options to purchase shares of Common Stock and 2,500 RSUs which have vested but have not been released.
|
|
|
Number of Shares
Beneficially Owned
|
|
Percentage of Shares
Beneficially Owned
|
Executive Officers and Directors:
|
|
|
||
Edgar O. Montes
(1)
|
|
263,183
|
|
*
|
Ismail (Izzy) Dawood
|
|
0
|
|
*
|
Stuart C. Harvey, Jr.
|
|
0
|
|
*
|
Scott R. Rose
(2)
|
|
3,712
|
|
*
|
John Saia
|
|
0
|
|
*
|
Thomas A. Bevilacqua
(3)
|
|
40,041
|
|
*
|
Bruce G. Bodaken
(4)
|
|
11,941
|
|
*
|
Jerome D. Gramaglia
(5)
|
|
36,041
|
|
*
|
George P. Scanlon
|
|
0
|
|
*
|
Carol Goode
|
|
0
|
|
*
|
Robert L. Metzger
(6)
|
|
18,333
|
|
*
|
John W. Larson
(7)
|
|
35,680
|
|
*
|
All Executive Officers and Directors as a group (13 persons)
(8)
|
|
411,431
|
|
1.02%
|
5% Stockholders:
|
|
|
||
BlackRock, Inc.
(19)
|
|
5,928,102
|
|
15.0%
|
The Vanguard Group
(10)
|
|
4,011,606
|
|
10.1%
|
FMR, LLC
(11)
|
|
3,213,210
|
|
8.1%
|
Conestoga Capital Advisors, LLC
(12)
|
|
2,380,804
|
|
6.0%
|
TimesSquare Capital Management, LLC
(13)
|
|
2,000,393
|
|
5.0%
|
*
|
Represent beneficial ownership of less than 1%
|
(1)
|
Includes 221,248 shares that Mr. Montes has the right to acquire by exercise of stock options.
|
(2)
|
Includes 3,174 shares that Mr. Rose has the right to acquire through the vesting of restricted stock units.
|
(3)
|
Includes 29,500 shares that Mr. Bevilacqua has the right to acquire by exercise of stock options and 2,500 shares that Mr. Bevilacqua has the right to acquire through the vesting of restricted stock units.
|
(4)
|
Includes 2,500 shares that Mr. Bodaken has the right to acquire through the vesting of restricted stock units.
|
(5)
|
Includes 23,000 shares that Mr. Gramaglia has the right to acquire by exercise of stock options and 2,500 shares that Mr. Gramaglia has the right to acquire through the vesting of restricted stock units.
|
(6)
|
Includes 15,000 shares that Mr. Metzger has the right to acquire by exercise of stock options.
|
(7)
|
Includes 2,500 shares that Mr. Larson has the right to acquire through the vesting of restricted stock units.
|
(8)
|
Includes 288,748 shares that the listed individuals have the right to acquire by exercise of stock options and 13,174 shares that these same individuals have the right to acquire through the vesting of RSUs.
|
(9)
|
Based solely on a Schedule 13GA filed with the SEC by BlackRock, Inc. on January 31, 2019. Entities affiliated with BlackRock have sole voting power with respect to 5,749,112 shares of our common stock and sole dispositive power with respect to 5,928,102 shares of our common stock. The principal business address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
|
(10)
|
Based solely on a Schedule 13GA filed with the SEC by The Vanguard Group - 23-1945930 (“Vanguard”) on February 11, 2019. Vanguard, in its capacity as investment adviser, has sole voting power with respect to 82,496 shares of our common stock, shared voting power with respect to 7,800 shares of our common stock, sole dispositive power with respect to 3,925,392 shares of our common stock, and shared dispositive power with respect to 86,214 shares of our common stock. The principal business address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
|
(11)
|
Based solely on a Schedule 13G filed with the SEC by FMR LLC (“FMR”) on February 13, 2019. Entities affiliated with FMR have sole voting power with respect to 1,200,055 shares of our common stock and sole dispositive power with respect to 3,213,210 shares of our common stock. The principal business address for FMR is 245 Summer Street, Boston, Massachusetts 02210.
|
(12)
|
Based solely on a Schedule 13G filed with the SEC by Conestoga Capital Advisors, LLC (“Conestoga”) on January 9, 2019. Entities affiliated with Conestoga have sole voting power with respect to 2,132,729 shares of our common stock and sole dispositive power with respect to 2,380,804 shares of our common stock. The principal business address of Conestoga is 550 E. Swedesford Rd. Ste 120, Wayne, PA 19087.
|
(13)
|
Based solely on a Schedule 13G filed with the SEC by TimesSquare Capital Management, LLC (“TimesSquare”) on February 14, 2019. Entities affiliated with TimesSquare have sole voting power with respect to 1,840,463 shares of our common stock and sole dispositive power with respect to 2,000,393 shares of our common stock. The principal business address for TimesSquare is 7 Times Square, 42nd Floor, New York, NY 10036.
|
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)
|
|
Weighted-average exercise price of outstanding options, warrants and rights ($)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(#)
|
||||
|
|
(a)
|
|
(b)
|
|
(c)
|
||||
Equity compensation plans approved by security holders
|
|
2,927,255
(1)
|
|
|
$
|
46.59
|
|
|
5,410,194
(2)
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
2,927,255
|
|
|
|
|
5,410,194
|
|
(1)
|
Consists of the 2000 Stock Option/Stock Issuance Plan, the 2010 Equity Incentive Plan and the 2012 Employee Stock Purchase Plan. The 2000 Stock Option/Stock Issuance Plan terminated in 2010 and as a result, no additional awards will be granted under the 2000 Stock Option/Stock Issuance Plan. However, the 2000 Stock Option/Stock Issuance Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. Our 2010 Equity Incentive Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year, beginning with the 2011 fiscal year, equal to the least of (i) 1,500,000 shares of our Common Stock, (ii) four percent (4%) of the outstanding shares of our Common Stock on the last day of the immediately preceding fiscal year, or (iii) such lesser amount as our Board may determine. Our 2012 Employee Stock Purchase Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year equal to the least of (i) 500,000 shares of our Common Stock, (ii) one percent (1%) of the outstanding shares of our Common Stock on the first day of the fiscal year, or (iii) such lesser amount as our Board or a designated committee acting as administrator of the plan may determine.
|
(2)
|
The amount reported includes 2,234,942 shares available for purchase under the 2012 Employee Stock Purchase Plan at the end of fiscal 2018.
|
•
|
Forming a special committee of independent directors, excluding any current Audit Committee members, to carry out an independent investigation which would review the initial Audit Committee investigation with full authority to take whatever follow-up measures it deems appropriate, with a view to providing an overall conclusion on all matters within the scope of the initial Audit Committee investigation, inclusive of the allegations made by counsel representing certain members of the Company’s former management from April through May 2018;
|
•
|
Having such special committee engage an independent law firm to carry out this investigation;
|
•
|
Having the investigation specifically address the knowledge and role of the Company’s current CEO and each of the audit committee members with regard to the matters that were the subject of the initial Audit Committee investigation, including the allegations made by counsel to certain members of the Company’s former management from April through May 2018. In addition, the Special Committee of independent directors was asked to consider the suitability of each of these individuals in their roles as CEO and audit committee members, respectively, based on the results of the investigation, and provide an affirmative conclusion in this regard as to whether or not each individual should be exonerated, as well as any other remedial actions deemed necessary by the Special Committee;
|
•
|
Having the investigation specifically address other instances of potential management override of controls, such as the impairment assessment of the Company’s KP connector internal use software, which were not identified in the initial Audit Committee investigation but have subsequently been raised in the performance of the 2016 re-audit and completion of the 2017 audit;
|
•
|
Replacing the current Chairman of the Audit Committee; and
|
•
|
Removing Joseph L. Jackson as Executive Chairman of the Company.
|
|
|
Fiscal Year
|
||||
|
|
2018
|
|
2017
|
||
|
|
($)
|
|
($)
|
||
Audit Fees
(1)
|
|
3,562,807
|
|
|
2,613,903
|
|
Audit-Related Fees
|
|
—
|
|
|
—
|
|
Tax Fees
|
|
—
|
|
|
—
|
|
All Other Fees
|
|
—
|
|
|
—
|
|
Total
|
|
3,562,807
|
|
|
2,613,903
|
|
(1)
|
Audit fees consist of fees incurred or expected to be incurred for professional services rendered for the audit of our annual consolidated financial statements and review of our quarterly consolidated financial statements.
|
1.
|
Consolidated Financial Statements:
|
2.
|
Exhibits:
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
||
3.1
|
|
|
S-1
|
|
333-173709
|
|
3.2
|
|
7/19/2011
|
|
3.2
|
|
|
8-K
|
|
001-35232
|
|
3.1
|
|
10/28/2016
|
|
4.1
|
|
|
S-1
|
|
333-173709
|
|
4.1
|
|
7/19/2011
|
|
4.5
|
|
|
S-1
|
|
333-173709
|
|
4.5
|
|
7/19/2011
|
|
4.9*
|
|
|
|
|
|
|
|
|
|
|
10.1†
|
|
|
S-1
|
|
333-173709
|
|
10.1
|
|
7/19/2011
|
|
10.2†
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
4/17/2013
|
|
10.3†
|
|
|
S-1
|
|
333-173709
|
|
10.3
|
|
7/19/2011
|
|
10.4†
|
|
|
S-1
|
|
333-173709
|
|
10.4
|
|
4/25/2011
|
|
10.5†
|
|
|
S-1
|
|
333-173709
|
|
10.5
|
|
4/25/2011
|
|
10.6†
|
|
|
10-K
|
|
001-35232
|
|
10.6
|
|
2/27/2013
|
|
10.6A
|
|
|
S-8
|
|
333-204219
|
|
10.6A
|
|
5/15/2015
|
|
10.7†
|
|
|
S-1
|
|
333-173709
|
|
10.7
|
|
3/7/2012
|
|
10.8†
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
4/21/2017
|
|
10.9†
|
|
|
8-K
|
|
001-35232
|
|
10.2
|
|
4/21/2017
|
|
10.10
|
|
|
S-1
|
|
333-173709
|
|
10.10
|
|
4/25/2011
|
|
10.10A
|
|
|
S-1
|
|
333-173709
|
|
10.10A
|
|
3/7/2012
|
|
10.10B
|
|
|
S-1
|
|
333-173709
|
|
10.10B
|
|
3/7/2012
|
|
10.10C
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
9/24/2012
|
|
10.10D
|
|
|
10-K
|
|
001-35232
|
|
10.10D
|
|
2/27/2013
|
|
10.10E
|
|
|
10-K
|
|
001-35232
|
|
10.10E
|
|
2/26/2015
|
10.10F
|
|
|
10-K
|
|
001-35232
|
|
10.10F
|
|
2/25/2016
|
|
10.10G
|
|
|
10-Q
|
|
001-35232
|
|
10.10G
|
|
11/9/2016
|
|
10.10H
|
|
|
10-Q
|
|
001-35232
|
|
10.10H
|
|
8/1/2017
|
|
10.11
|
|
|
S-1
|
|
333-173709
|
|
10.11
|
|
4/25/2011
|
|
10.12
|
|
|
S-1
|
|
333-173709
|
|
10.12
|
|
4/25/2011
|
|
10.13
|
|
|
S-1
|
|
333-173709
|
|
10.13
|
|
4/25/2011
|
|
10.14
|
|
|
S-1
|
|
333-173709
|
|
10.14
|
|
4/25/2011
|
|
10.15
|
|
|
S-1
|
|
333-173709
|
|
10.15
|
|
4/25/2011
|
|
10.16
|
|
|
S-1
|
|
333-173709
|
|
10.16
|
|
4/25/2011
|
|
10.17
|
|
|
S-1
|
|
333-173709
|
|
10.17
|
|
4/25/2011
|
|
10.18
|
|
|
S-1
|
|
333-173709
|
|
10.18
|
|
4/25/2011
|
|
10.25
|
|
|
S-1
|
|
333-173709
|
|
10.25
|
|
6/8/2011
|
|
10.26
|
|
|
10-K
|
|
001-35232
|
|
10.26
|
|
2/26/2015
|
|
10.27
|
|
|
10-K
|
|
001-35232
|
|
10.27
|
|
2/26/2015
|
|
10.27A
|
|
|
10-K
|
|
001-35232
|
|
10.27A
|
|
2/26/2015
|
|
10.27B
|
|
|
10-K
|
|
001-35232
|
|
10.27B
|
|
2/26/2015
|
10.27C
|
|
|
10-K
|
|
001-35232
|
|
10.27C
|
|
2/26/2015
|
|
10.27D
|
|
|
10-K
|
|
001-35232
|
|
10.27D
|
|
2/26/2015
|
|
10.28
|
|
|
10-Q
|
|
001-35232
|
|
10.1
|
|
5/5/2015
|
|
10.28A
|
|
|
10-Q
|
|
001-35232
|
|
10.2
|
|
5/5/2015
|
|
10.28B
|
|
|
10-Q
|
|
001-35232
|
|
10.3
|
|
5/5/2015
|
|
10.29†
|
|
|
8-K
|
|
001-35232
|
|
10.2
|
|
4/17/2013
|
|
10.30†*
|
|
|
|
|
|
|
|
|
|
|
10.31
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
3/23/2018
|
|
10.32
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
6/28/2018
|
|
10.33
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
3/18/2019
|
|
10.34
|
|
|
8-K
|
|
001-35232
|
|
10.1
|
|
5/10/2019
|
|
21.1*
|
|
|
|
|
|
|
|
|
|
|
23.1*
|
|
|
|
|
|
|
|
|
|
|
23.2*
|
|
|
|
|
|
|
|
|
|
|
24.1*
|
|
|
|
|
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
|
|
|
|
|
32.1**
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
*
|
Filed herewith.
|
|
|
|
WAGEWORKS, INC.
|
|
|
|
|
Date: May 29, 2019
|
By:
|
|
/s/ ISMAIL DAWOOD
|
|
|
|
Ismail Dawood
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
/ S / EDGAR O MONTES
|
|
President, Chief Executive Officer
|
|
May 29, 2019
|
Edgar O. Montes
|
|
and Director (Principal Executive Officer)
|
|
|
|
|
|
|
|
/ S / ISMAIL DAWOOD
|
|
Chief Financial Officer (Principal Financial Officer)
|
|
May 29, 2019
|
Ismail Dawood
|
|
|
|
|
|
|
|
|
|
/ S / STUART C HARVEY, JR.
|
|
Executive Chairman and Director
|
|
May 29, 2019
|
Stuart C. Harvey, Jr.
|
|
|
|
|
|
|
|
|
|
/ S / THOMAS A BEVILACQUA
|
|
Lead Independent Director
|
|
May 29, 2019
|
Thomas A. Bevilacqua
|
|
|
|
|
|
|
|
|
|
/ S / BRUCE G BODAKEN
|
|
Director
|
|
May 29, 2019
|
Bruce G. Bodaken
|
|
|
|
|
|
|
|
|
|
/ S / JEROME D GRAMAGLIA
|
|
Director
|
|
May 29, 2019
|
Jerome D. Gramaglia
|
|
|
|
|
|
|
|
|
|
/ S / ROBERT L METZGER
|
|
Director
|
|
May 29, 2019
|
Robert L. Metzger
|
|
|
|
|
|
|
|
|
|
/ S / GEORGE P SCANLON
|
|
Director
|
|
May 29, 2019
|
George P. Scanlon
|
|
|
|
|
|
|
|
|
|
/ S / CAROL A. GOODE
|
|
Director
|
|
May 29, 2019
|
Carol A. Goode
|
|
|
|
|
|
•
|
|
1,000,000,000 shares are designated as common stock; and
|
|
•
|
|
100,000,000 shares are designated as preferred stock.
|
•
|
WageWorks India, Inc.
|
•
|
WageWorks Service LLP (India)
|
1.
|
I have reviewed this Annual Report on Form 10-K 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:
|
|
May 29, 2019
|
|
|
|
/s/ Edgar O. Montes
|
||
Name:
|
|
Edgar O. Montes
|
Title:
|
|
Chief Executive Officer and President
(Principal Executive Officer) |
1.
|
I have reviewed this Annual Report on Form 10-K 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:
|
|
May 29, 2019
|
|
|
|
/s/ Ismail Dawood
|
||
Name:
|
|
Ismail Dawood
|
Title:
|
|
Chief Financial Officer
(Principal Financial Officer) |
1.
|
Our Annual Report on Form 10-K for the year ended
December 31, 2018
, 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:
|
|
May 29, 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) |