) delivered fourth-quarter 2013 operating earnings of 13 cents
per share, beating the Zacks Consensus Estimate by a penny.
Earnings improved 18% year over year.
For full year 2013, WageWorks delivered earnings of 56 cents per
share on revenues of $219.3 million. While the top line rose
23.7% year over year, the bottom line improved 12%.
WageWorks experienced sturdy new sales year and client renewal
period along with improvement in enrollment rates. It benefitted
from investments in increasing sales force and broker network,
developing channel partnerships, portfolio purchases and
increasing awareness of the value Consumer-Directed Benefits
WageWorks is also capitalizing on the opportunities offered by
the rise in employer adoption of private exchanges and expects to
gain from the potential impact of the Department of Treasury's
introduction of the carryover provision for Healthcare Flexible
Spending Accounts late last year.
Behind the Headlines
Total revenue of WageWorks grossed nearly $55 million in the
quarter, improving 17.8% year over year. The upside was driven by
solid contributions from Healthcare revenues (up 11%), Commuter
revenues (up 12%) and Other revenues (soaring 93%). Results also
outpaced the Zacks Consensus Estimate of $54 million.
Gross margin contracted 400 basis points to 60% in the fourth
Adjusted operating income came in at $10.4 million, up 35.1% over
the fourth quarter of 2012.
Operating expenses rose 14.1% year over year due to higher cost
of revenues, sales and marketing expenses, and general and
Adjusted earnings before income taxes, interest expenses,
interest income, depreciation and amortization (EBITDA) improved
30% year over year to $13.5 million. The increase was
attributable to the ramping up of expenses to support the new
plan year due to the addition of Ceridian and the Towers Watson
One Exchange Active business.
WageWorks exited 2013 with cash and cash equivalents of $360.3
million, increasing 17.4% year over year.
Cash flow from operating activities was $61.7 million in 2013, up
almost 10% over 2012.
Long-term debt of the company stood at $29.4 million at the end
of 2013, down 33.6% year over year.
For first-quarter 2014, WageWorks expects to deliver operating
earnings of 20-22 cents per share on total revenue of $61.6-$62.2
million. Net income is expected in the range of 13-15 cents per
Adjusted EBITDA for first quarter is expected in the range of
$16.7 million to $17.3 million.
For full-year 2014, revenues are estimated between $238.5 million
and $241.5 million. WageWorks predicts organic growth rate to
range between 9.5% and 10.5% and expects it to accelerate in the
second half of the year as the majority of the Ceridian accounts
EBITDA for 2014 is expected in the range of $65 million to $68
While operating income is expected at 79-87 cents per share, net
income is estimated in the range of 50-58 cents per share. The
Zacks Consensus Estimate, currently pegged at 73 cents, falls
short of the company guidance.
WageWorks expects revenue to increase 15% to 25% annually over
the next three years with 9% to 14% growth comings from organic
sources. Gross margin is anticipated in the range of 63% to 67%,
up from 62% to 66% while operating margin to be between 13% and
18% from 12% and 17%. EBITDA margin is expected to be in the
range to 26% to 32% from 24% to 30%.
WageWorks presently holds a Zacks Rank #3 (Hold).
Performance of Other Business Service Providers
SouFun Holdings Ltd
) reported fourth-quarter operating earnings of $1.41 per share
exceeding the Zacks Consensus Estimate by 34.5%. Results surged
86% year over¬ year.
) delivered fourth-quarter 2013 operating loss of 3 cents per
share, narrower than the Zacks Consensus Estimate loss of 13
cents and year-ago loss of 15 cents per share.
) posted fourth-quarter loss per share of 20 cents, wider than
the Zacks Consensus Estimate loss of 17 cents but narrower than
the loss of 34 cents per share incurred in the year-ago
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