(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
[X] | Accelerated Filer | [ ] | ||
Non-accelerated Filer | [ ] | (Do not check if a smaller reporting company) | Smaller Reporting Company | |
Emerging Growth Company | ||||
Page No. | ||
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | Derived from Audited Financial Statements | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash | |||||||
Short-term investments | |||||||
Receivables, net | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Operating lease right-of-use assets | — | ||||||
Goodwill | |||||||
Acquired intangible assets, net | |||||||
Deferred tax assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | $ | |||||
Customer obligations | |||||||
Short-term operating lease liabilities | — | ||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
Long-term debt, net of issuance costs | |||||||
Long-term operating lease liabilities | — | ||||||
Other long-term liabilities | |||||||
Total liabilities | |||||||
Commitments and Contingencies (Note 10) | |||||||
Stockholders’ Equity: | |||||||
Common stock, par value $0.001 per share (1,000,000 shares authorized; 40,350 shares issued and 39,870 shares outstanding at June 30, 2019 and 40,333 shares issued and 39,853 shares outstanding at December 31, 2018) | |||||||
Additional paid-in capital | |||||||
Treasury stock at cost (480 shares at June 30, 2019 and December 31, 2018) | ( | ) | ( | ) | |||
Accumulated other comprehensive income (loss) | ( | ) | |||||
Retained earnings | |||||||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ | |||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Healthcare | $ | $ | $ | $ | |||||||||||
COBRA | |||||||||||||||
Commuter | |||||||||||||||
Other | |||||||||||||||
Total revenues | |||||||||||||||
Operating expenses: | |||||||||||||||
Cost of revenues (excluding amortization of internal use software) | |||||||||||||||
Technology and development | |||||||||||||||
Sales and marketing | |||||||||||||||
General and administrative | |||||||||||||||
Amortization | |||||||||||||||
Employee termination and other charges | |||||||||||||||
Total operating expenses | |||||||||||||||
Income from operations | |||||||||||||||
Interest and other income, net | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income before income taxes | |||||||||||||||
Income tax provision | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income | $ | $ | $ | $ | |||||||||||
Net income per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Shares used in computing net income per share: | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
Net income | $ | $ | |||||||||||
Net unrealized gain (loss) on short-term investments, net of tax | ( | ) | |||||||||||
Total comprehensive income | $ | $ | |||||||||||
Three and Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Common stock | Additional paid-in capital | Treasury stock at cost | Accumulated other comprehensive income (loss) | Retained earnings | Total stockholders’ equity | ||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||
Capitalized stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | ||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Balance at March 31, 2019 | ( | ) | ( | ) | |||||||||||||||||||||||
Exercise of stock options | — | — | — | — | |||||||||||||||||||||||
Stock-based compensation expense (reversal), net | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Capitalized stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | ||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
Three and Six Months Ended June 30, 2018 | |||||||||||||||||||||||||||
Common stock | Additional paid-in capital | Treasury stock at cost | Accumulated other comprehensive loss | Retained earnings | Total stockholders’ equity | ||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Exercise of stock options | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock under Employee Stock Purchase Plan | — | — | — | — | |||||||||||||||||||||||
Issuance of restricted stock units, net of shares withheld for employee taxes | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||
Capitalized stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
ASC 606 cumulative-effect adjustment | — | — | — | — | — | ||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Balance at March 31, 2018 | ( | ) | ( | ) | |||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||
Capitalized stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | ||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of debt issuance costs | |||||||
Amortization of contract costs | |||||||
Stock-based compensation expense | |||||||
Provision for doubtful accounts | |||||||
Other | ( | ) | |||||
Changes in operating assets and liabilities: | |||||||
Receivables | |||||||
Prepaid expenses and other current assets | ( | ) | |||||
Other assets | ( | ) | ( | ) | |||
Accounts payable and accrued expenses | ( | ) | ( | ) | |||
Customer obligations | ( | ) | ( | ) | |||
Other liabilities | |||||||
Net cash (used in) provided by operating activities | ( | ) | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Purchases of short-term investments | ( | ) | ( | ) | |||
Proceeds from sales of short-term investments | |||||||
Proceeds from maturities of short-term investments | |||||||
Purchases of intangible assets | ( | ) | ( | ) | |||
Net cash provided by (used in) investing activities | ( | ) | |||||
Cash flows from financing activities: | |||||||
Proceeds from exercise of common stock options | |||||||
Proceeds from issuance of common stock under Employee Stock Purchase Plan | |||||||
Payments of debt modification costs | ( | ) | ( | ) | |||
Payments of debt principal | ( | ) | |||||
Payment of finance lease obligations | ( | ) | ( | ) | |||
Taxes paid related to net share settlement of stock-based compensation arrangements | ( | ) | |||||
Net cash (used in) provided by financing activities | ( | ) | |||||
Net decrease in cash and cash equivalents, unrestricted and restricted | ( | ) | ( | ) | |||
Cash and cash equivalents at beginning of period, unrestricted and restricted | |||||||
Cash and cash equivalents at end of period, unrestricted and restricted | $ | $ | |||||
Supplemental cash flow disclosure: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | $ | |||||
Income taxes | $ | $ | |||||
Noncash financing and investing activities: | |||||||
Property and equipment, accrued but not paid | $ | $ | |||||
Property and equipment under finance lease | $ | $ | |||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Numerator: Net income | $ | $ | $ | $ | |||||||||||
Denominator: | |||||||||||||||
Basic weighted-average shares | |||||||||||||||
Effect of potentially dilutive shares: | |||||||||||||||
Weighted-average dilutive stock options, restricted stock and performance restricted stock units, and employee stock purchase plan shares | |||||||||||||||
Diluted weighted-average shares | |||||||||||||||
Net income per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Benefit administration services and COBRA | $ | $ | $ | $ | ||||||||||||
Interchange | ||||||||||||||||
Other | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues recognized in the period for: | ||||||||||||||||
Performance obligations satisfied from amounts included in contract liabilities at the beginning of the period | $ | $ | $ | $ | ||||||||||||
Performance obligations satisfied from new activities in the period - contract revenues | ||||||||||||||||
Total revenues | $ | $ | $ | $ | ||||||||||||
June 30, 2019 | |||
2019 (remainder of year) | $ | ||
2020 | |||
2021 | |||
2022 and thereafter | |||
Total | $ | ||
June 30, 2019 | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | Level 1 | Level 2 | ||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Commercial paper | ( | ) | ||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||
Total cash equivalents | ( | ) | ||||||||||||||||||||||
Short-Term Investments: | ||||||||||||||||||||||||
U.S. government securities | ( | ) | ||||||||||||||||||||||
U.S. government agency securities | ( | ) | ||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||
Corporate debt securities | ( | ) | ||||||||||||||||||||||
Commercial paper | ||||||||||||||||||||||||
Asset-backed securities | ( | ) | ||||||||||||||||||||||
Total short-term investments | ( | ) | ||||||||||||||||||||||
Total cash equivalents and short-term investments | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
December 31, 2018 | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | Level 1 | Level 2 | ||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Commercial paper | ||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||
Total cash equivalents | ||||||||||||||||||||||||
Short-Term Investments: | ||||||||||||||||||||||||
U.S. government securities | ( | ) | ||||||||||||||||||||||
U.S. government agency securities | ( | ) | ||||||||||||||||||||||
Municipal bonds | ( | ) | ||||||||||||||||||||||
Foreign government securities | ( | ) | ||||||||||||||||||||||
Corporate debt securities | ( | ) | ||||||||||||||||||||||
Commercial paper | ( | ) | ||||||||||||||||||||||
Certificates of deposit | ||||||||||||||||||||||||
Asset-backed securities | ( | ) | ||||||||||||||||||||||
Total short-term investments | ( | ) | ||||||||||||||||||||||
Total cash equivalents and short-term investments | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
June 30, 2019 | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | ||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Commercial paper | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
Total cash equivalents in unrealized loss position | ( | ) | ( | ) | ||||||||||||||||||||
Short-Term Investments: | ||||||||||||||||||||||||
U.S. government securities | ( | ) | ( | ) | ||||||||||||||||||||
U.S. government agency securities | ( | ) | ( | ) | ||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Commercial paper | ||||||||||||||||||||||||
Asset-backed securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Total short-term investments in unrealized loss position | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Total cash equivalents and short-term investments in unrealized loss position | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Less than 12 months | ||||||||
December 31, 2018 | Fair Value | Gross Unrealized Loss | ||||||
Short-Term Investments: | ||||||||
U.S. government securities | $ | $ | ( | ) | ||||
U.S. government agency securities | ( | ) | ||||||
Municipal bonds | ( | ) | ||||||
Foreign government securities | ( | ) | ||||||
Corporate debt securities | ( | ) | ||||||
Commercial paper | ( | ) | ||||||
Asset-backed securities | ( | ) | ||||||
Total short-term investments in unrealized loss position | $ | $ | ( | ) | ||||
June 30, 2019 | Amortized Cost | Fair Value | ||||||
Due less than one year | $ | $ | 221,026 | |||||
Due in one to five years | 24,685 | |||||||
Total | $ | $ | ||||||
December 31, 2018 | Amortized Cost | Fair Value | ||||||
Due less than one year | $ | $ | ||||||
Due in one to five years | ||||||||
Total | $ | $ | ||||||
June 30, 2019 | December 31, 2018 | ||||||
Trade receivables | $ | $ | |||||
Unpaid amounts for benefit services | |||||||
Receivables, gross | |||||||
Less: allowance for doubtful accounts | ( | ) | ( | ) | |||
Receivables, net | $ | $ | |||||
June 30, 2019 | December 31, 2018 | ||||||
Computers and equipment | $ | $ | |||||
Software and software development costs | |||||||
Furniture and fixtures | |||||||
Leasehold improvements | |||||||
Property and equipment, gross | |||||||
Less: accumulated depreciation and amortization | ( | ) | ( | ) | |||
Property and equipment, net | $ | $ | |||||
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Gross carrying amount | Accumulated amortization | Net | Gross carrying amount | Accumulated amortization | Net | ||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Client/broker contracts and relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Trade names | ( | ) | ( | ) | |||||||||||||||||||
Technology | ( | ) | ( | ) | |||||||||||||||||||
Noncompete agreements | ( | ) | ( | ) | |||||||||||||||||||
Favorable lease agreements | ( | ) | ( | ) | |||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
As of June 30, 2019 | |||
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ | ||
June 30, 2019 | December 31, 2018 | ||||||
Accounts payable and accrued liabilities | $ | $ | |||||
Payable to benefit providers and transit agencies | |||||||
Accrued compensation and related benefits | |||||||
Other accrued expenses | |||||||
Accounts payable and accrued expenses | $ | $ | |||||
June 30, 2019 | December 31, 2018 | ||||||
Revolving credit facility used | $ | $ | |||||
Less: Outstanding letters of credit | ( | ) | ( | ) | |||
Outstanding revolving credit facility | |||||||
Unamortized loan issuance costs | ( | ) | ( | ) | |||
Long-term debt, net of issuance costs | $ | $ | |||||
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
Operating lease cost | $ | $ | ||||||
Sublease income | ( | ) | ( | ) | ||||
Net lease cost | $ | $ | ||||||
Years Ending December 31, | Operating Leases | |||
2019 (remainder of year) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total minimum lease payments | ||||
Less: imputed interest | ( | ) | ||
Present value of net minimum lease payments | ||||
Less: current portion | ||||
Long-term operating lease liabilities | $ | |||
Years Ending December 31, | Operating Leases | |||
2019 | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total future minimum lease payments | $ | |||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Future lease obligation (Mesa) | $ | $ | $ | $ | $ | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cost of revenues | $ | $ | $ | $ | ||||||||||||
Technology and development | ||||||||||||||||
Sales and marketing | ||||||||||||||||
General and administrative | ( | ) | ( | ) | ( | ) | ||||||||||
Total | $ | ( | ) | $ | $ | $ | ||||||||||
Shares | Weighted-average exercise price | Remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2018 | $ | $ | ||||||||||
Granted | ||||||||||||
Exercised | ( | ) | ||||||||||
Forfeited and cancelled | ( | ) | $ | |||||||||
Outstanding as of June 30, 2019 | $ | $ | ||||||||||
Vested and expected to vest at June 30, 2019 | $ | $ | ||||||||||
Exercisable at June 30, 2019 | $ | $ | ||||||||||
Weighted-average grant date fair value | |||||||||||||
Service- based RSUs | Performance- based RSUs | Service- based RSUs | Performance- based RSUs | ||||||||||
Unvested at December 31, 2018 | $ | $ | |||||||||||
Granted | $ | $ | |||||||||||
Vested | ( | ) | ( | ) | $ | $ | |||||||
Forfeited and cancelled | ( | ) | $ | $ | |||||||||
Unvested at June 30, 2019 | $ | $ | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Healthcare | $ | 65,172 | $ | 68,104 | $ | (2,932 | ) | (4 | )% | $ | 137,146 | $ | 143,361 | $ | (6,215 | ) | (4 | )% | |||||||||||
COBRA | 20,316 | 26,200 | (5,884 | ) | (22 | )% | 43,905 | 55,035 | (11,130 | ) | (20 | )% | |||||||||||||||||
Commuter | 19,560 | 18,847 | 713 | 4 | % | 38,900 | 37,725 | 1,175 | 3 | % | |||||||||||||||||||
Other | 3,581 | 3,357 | 224 | 7 | % | 6,903 | 7,028 | (125 | ) | (2 | )% | ||||||||||||||||||
Total revenues | $ | 108,629 | $ | 116,508 | $ | (7,879 | ) | (7 | )% | $ | 226,854 | $ | 243,149 | $ | (16,295 | ) | (7 | )% | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
Cost of revenues (excluding amortization of internal use software) | $ | 36,660 | $ | 36,143 | $ | 517 | 1 | % | $ | 75,918 | $ | 81,386 | $ | (5,468 | ) | (7 | )% | |||||||||||||
Percentage of revenue | 34 | % | 31 | % | 33 | % | 33 | % | ||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
Technology and development | $ | 15,600 | $ | 13,392 | $ | 2,208 | 16 | % | $ | 31,940 | $ | 26,425 | $ | 5,515 | 21 | % | ||||||||||||||
Percentage of revenue | 14 | % | 11 | % | 14 | % | 11 | % | ||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
Sales and marketing | $ | 18,269 | $ | 18,521 | $ | (252 | ) | (1 | )% | $ | 36,600 | $ | 36,859 | $ | (259 | ) | (1 | )% | ||||||||||||
Percentage of revenue | 17 | % | 16 | % | 16 | % | 15 | % | ||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
General and administrative | $ | 24,672 | $ | 18,898 | $ | 5,774 | 31 | % | $ | 52,581 | $ | 44,147 | $ | 8,434 | 19 | % | ||||||||||||||
Percentage of revenue | 23 | % | 16 | % | 23 | % | 18 | % | ||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
Amortization | $ | 11,041 | $ | 10,191 | $ | 850 | 8 | % | $ | 21,892 | $ | 20,182 | $ | 1,710 | 8 | % | ||||||||||||||
Percentage of revenue | 10 | % | 9 | % | 10 | % | 8 | % | ||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||
Interest and other income, net | $ | 2,883 | $ | 1,455 | $ | 1,428 | 98 | % | 5,532 | 2,721 | $ | 2,811 | 103 | % | ||||||||||||||
Interest expense | $ | (2,164 | ) | $ | (2,420 | ) | $ | 256 | (11 | )% | (4,873 | ) | (4,602 | ) | $ | (271 | ) | 6 | % | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(In thousands except percentage) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
Income before income taxes | $ | 3,106 | $ | 15,545 | $ | 8,582 | $ | 29,416 | ||||||||||||||||||||||
Income tax provision | $ | (1,309 | ) | $ | (4,621 | ) | $ | 3,312 | (72 | )% | $ | (2,728 | ) | $ | (7,473 | ) | $ | 4,745 | (63 | )% | ||||||||||
Effective tax rate | 42 | % | 30 | % | 32 | % | 25 | % | ||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||
(in thousands) | 2019 | 2018 | $ Change | ||||||||
Net cash (used in) provided by operating activities | $ | (44,192 | ) | $ | 13,559 | $ | (57,751 | ) | |||
Net cash provided by (used in) investing activities | 52,492 | (82,105 | ) | 134,597 | |||||||
Net cash (used in) provided by financing activities | (99,931 | ) | 1,395 | (101,326 | ) | ||||||
Net change in cash and cash equivalents, unrestricted and restricted | $ | (91,631 | ) | $ | (67,151 | ) | $ | (24,480 | ) | ||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Future lease obligation (Mesa) | $ | 63,094 | $ | — | $ | 5,803 | $ | 11,944 | $ | 45,347 | |||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Future lease obligation (Mesa) | $ | 63,094 | $ | — | $ | 5,803 | $ | 11,944 | $ | 45,347 | |||||||||
Incorporated by Reference | ||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith |
2.1(2) | 8-K | 001-35232 | 2.1 | 6/27/2019 | ||
3.10 | 8-K | 001-35232 | 3.1 | 6/27/2019 | ||
10.10H | 10-Q | 001-35232 | 10.10H | 8/1/2017 | ||
10.30 | 10-K | 001-35232 | 10.30 | 5/30/2019 | ||
10.35 | 10-Q | 001-35232 | 10.35 | 6/27/2019 | ||
10.36 | X | |||||
10.37 | 8-K | 001-35232 | 10.1 | 5/10/2019 | ||
31.1 | X | |||||
31.2 | X | |||||
32.1(1) | X | |||||
101.INS | Inline XBRL Instance Document | |||||
101.SCH | Inline XBRL Taxonomy Schema Linkbase Document | |||||
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |||||
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | |||||
101.LAB | Inline XBRL Taxonomy Labels Linkbase Document | |||||
101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | |||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||
(1) | The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of WageWorks, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing. |
(2) | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request. |
WAGEWORKS, INC. | ||
Date: August 8, 2019 | By: | /s/ ISMAIL DAWOOD |
Ismail Dawood | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of WageWorks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 8, 2019 | ||
/s/ Edgar O. Montes | ||
Name: | Edgar O. Montes | |
Title: | Chief Executive Officer and President (Principal Executive Officer) | |
1. | I have reviewed this Quarterly Report on Form 10-Q of WageWorks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 8, 2019 | ||
/s/ Ismail Dawood | ||
Name: | Ismail Dawood | |
Title: | Chief Financial Officer (Principal Financial Officer) | |
1. | Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, 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: August 8, 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) | |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
| Common stock, issued (in shares) | 40,350,000 | 40,333,000 |
| Common stock, outstanding (in shares) | 39,870,000 | 39,853,000 |
| Treasury stock, at cost (in shares) | 480,000 | 480,000 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Revenues: | ||||
| Total revenues | $ 108,629 | $ 116,508 | $ 226,854 | $ 243,149 |
| Operating expenses: | ||||
| Cost of revenues (excluding amortization of internal use software) | 36,660 | 36,143 | 75,918 | 81,386 |
| Technology and development | 15,600 | 13,392 | 31,940 | 26,425 |
| Sales and marketing | 18,269 | 18,521 | 36,600 | 36,859 |
| General and administrative | 24,672 | 18,898 | 52,581 | 44,147 |
| Amortization | 11,041 | 10,191 | 21,892 | 20,182 |
| Employee termination and other charges | 0 | 2,853 | 0 | 2,853 |
| Total operating expenses | 106,242 | 99,998 | 218,931 | 211,852 |
| Income from operations | 2,387 | 16,510 | 7,923 | 31,297 |
| Interest and other income, net | 2,883 | 1,455 | 5,532 | 2,721 |
| Interest expense | (2,164) | (2,420) | (4,873) | (4,602) |
| Income before income taxes | 3,106 | 15,545 | 8,582 | 29,416 |
| Income tax provision | (1,309) | (4,621) | (2,728) | (7,473) |
| Net income | $ 1,797 | $ 10,924 | $ 5,854 | $ 21,943 |
| Net income per share: | ||||
| Basic (in dollars per share) | $ 0.05 | $ 0.27 | $ 0.15 | $ 0.55 |
| Diluted (in dollars per share) | $ 0.04 | $ 0.27 | $ 0.14 | $ 0.54 |
| Shares used in computing net income per share: | ||||
| Basic (in shares) | 39,861 | 39,853 | 39,857 | 39,838 |
| Diluted (in shares) | 40,618 | 40,412 | 40,528 | 40,446 |
| Healthcare | ||||
| Revenues: | ||||
| Total revenues | $ 65,172 | $ 68,104 | $ 137,146 | $ 143,361 |
| COBRA | ||||
| Revenues: | ||||
| Total revenues | 20,316 | 26,200 | 43,905 | 55,035 |
| Commuter | ||||
| Revenues: | ||||
| Total revenues | 19,560 | 18,847 | 38,900 | 37,725 |
| Other | ||||
| Revenues: | ||||
| Total revenues | $ 3,581 | $ 3,357 | $ 6,903 | $ 7,028 |
Condensed Consolidated Statements of Comprehensive Income Statement - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net income | $ 1,797 | $ 10,924 | $ 5,854 | $ 21,943 |
| Other comprehensive loss, net of tax | ||||
| Net unrealized gain (loss) on short-term investments, net of tax | 303 | 47 | 835 | (684) |
| Total comprehensive income | $ 2,100 | $ 10,971 | $ 6,689 | $ 21,259 |
Summary of Business and Significant Accounting Policies |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Summary of Business and Significant Accounting Policies | Summary of Business and Significant Accounting Policies Business WageWorks, Inc., (together with its subsidiaries, “WageWorks” or the “Company”) was incorporated in the state of Delaware in 2000. The Company is a leader in administering Consumer-Directed Benefits (“CDBs”), which empower employees to lower their healthcare related expenditures while also providing corporate tax advantages for employers. The Company operates as a single reportable segment on an entity level basis, and considers itself to operate under one operating and reporting segment with healthcare, transit and other employer sponsored programs representing a group of similar product lines. The Company believes that it engages in a single business activity and operates in a single economic environment. Proposed Merger with HealthEquity, Inc. On June 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with HealthEquity, Inc., a Delaware corporation (“HealthEquity”), and Pacific Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of HealthEquity (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into WageWorks (the “Merger”), with WageWorks surviving the Merger and becoming a wholly owned subsidiary of HealthEquity. Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of WageWorks common stock (other than shares (i) owned in treasury by WageWorks, (ii) owned by HealthEquity, Merger Sub or any other direct or indirect wholly owned subsidiary of HealthEquity, and (iii) held by WageWorks stockholders who perfect their appraisal rights with respect to the Merger) will be cancelled and automatically converted into the right to receive $51.35 in cash, without interest (the “Merger Consideration”). Under the Merger Agreement, at the effective time of the Merger, (x) each outstanding WageWorks stock option (whether vested or unvested) will be cancelled and, if the exercise price per share of such stock option is less than $51.35, will be exchanged for an amount of cash, without interest, equal to (1) the Merger Consideration less the applicable exercise price per share with respect to such stock option multiplied by (2) the number of shares covered by such stock option, (y) each outstanding award of WageWorks RSUs subject to only time-based vesting conditions (1) granted prior to June 26, 2019 will fully vest and be entitled to receive the Merger Consideration for each share covered by such award or (2) granted on or after June 26, 2019, will, as of the effective time of the Merger, be assumed by HealthEquity and converted automatically into an award of RSUs covering an adjusted (based on the ratio of the Merger Consideration to the volume weighted average price of a share of common stock of HealthEquity for the 20 trading days ending with the trading day immediately preceding the date of the closing of the Merger) number of shares of common stock of HealthEquity and will be subject to the same terms and conditions applicable to such RSUs immediately prior to the Effective Time, and (z) each outstanding award of WageWorks RSUs granted prior to June 26, 2019 and subject to performance-based vesting conditions (each, a “Performance Unit”) will (1) in the case of any Performance Unit for which the performance period is complete but for which the board of directors of WageWorks has not determined the achievement of the underlying performance goals, vest based on actual performance, (2) in the case of any Performance Unit for which the performance period is incomplete, vest based on target performance, and (3) in the case of any Performance Unit that does not vest in accordance with clause (1) or (2), be cancelled for no consideration. Each Performance Unit that vests according to the previous sentence will be cancelled in exchange for an amount of cash, without interest, equal to the Merger Consideration multiplied by the number of shares covered by such vested Performance Unit. WageWorks has made customary representations, warranties and covenants in the Merger Agreement, including covenants not to, during the pendency of the Merger, solicit alternative transactions or, subject to certain exceptions, enter into discussions concerning, or provide confidential information in connection with, an alternative transaction. Each of HealthEquity and Merger Sub also has made customary representations, warranties and covenants in the Merger Agreement. Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including adoption of the Merger Agreement by WageWorks’ stockholders. The early termination of the waiting period applicable to the Merger under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 was granted by the Federal Trade Commission on July 29, 2019. The transaction is not subject to any financing condition. The Merger Agreement contains certain customary termination rights for HealthEquity and WageWorks, including a right to terminate the Merger Agreement if the Merger is not completed by December 26, 2019, unless otherwise extended pursuant to the terms of the Merger Agreement. The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances, WageWorks will be obligated to pay HealthEquity a termination fee of $69,656,872. Basis of Presentation The unaudited interim condensed consolidated financial statements and the related notes have been prepared on the same basis as the audited consolidated financial statements and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The results of the interim periods presented herein are not necessarily indicative of the results of future periods or annual results for the year ending December 31, 2019. These unaudited interim condensed consolidated financial statements and the related notes should be read in conjunction with the December 31, 2018 audited financial statements and related notes, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K. The December 31, 2018 consolidated balance sheet included in this interim Quarterly Report on Form 10-Q was derived from audited financial statements. There have been no material changes to the Company’s critical accounting estimates during the three and six months ended June 30, 2019. Other than the adoption of ASU 2016-02, “Leases (Topic 842)”, there have been no material changes to the Company's critical accounting policies during the three and six months ended June 30, 2019 from the items the Company disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018. Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation, including the reclassification of deferred revenue from accounts payable and accrued expenses to other current liabilities in the condensed consolidated balance sheet as of December 31, 2018 and the statement of cash flows for the six months ended June 30, 2018. There was no impact on the condensed consolidated statements of income for the three and six months ended June 30, 2018. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of WageWorks, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the Company must make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for, but not limited to revenue recognition, allowances for doubtful accounts, useful lives for depreciation and amortization, loss contingencies, income taxes, the assumptions used for stock-based compensation including attainment of performance-based awards, the assumptions used for software and web site development cost classification, and recoverability and impairments of goodwill and long-lived assets and average customer life. Actual results may be materially different from those estimates. In making its estimates, the Company considers the current economic and legislative environment. Leases The Company leases office space under noncancelable operating leases. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable in most of the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. In addition, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company determines if an arrangement is a lease or contains a lease at inception. The Company applied the short-term lease measurement and recognition exemption in which right-of-use (“ROU”) assets and lease obligations are not recognized for short-term leases. The Company does not have lease agreements with residual value guarantees, sales leaseback terms or material restrictive covenants. The Company has one sublease for which the sublease income was recorded as a reduction to operating lease expense for the three and six months ended June 30, 2019 and 2018. The Company has lease agreements that contain both lease and non-lease components. For real estate leases, the Company accounts for lease components together with non-lease components (e.g., common-area maintenance). Amounts recognized as ROU assets related to finance leases are included in property and equipment, net in the accompanying condensed consolidated balance sheets, while related lease liabilities are included in other current liabilities and other long-term liabilities. Recently Adopted Accounting Guidance In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). In January 2019 the FASB issued ASU 2019-01 which amended the transition disclosure requirements for Topic 842. Topic 842 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating lease. The Company adopted Topic 842 prospectively during the first quarter of 2019. As part of its adoption, the Company elected a package of practical expedients for leases that commenced prior to January 1, 2019 and did not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. The Company recognizes those lease payments in the condensed consolidated statements of income on a straight-line basis over the lease term. The adoption of Topic 842 resulted in the Company recording $25.5 million of right-of-use lease assets and $38.4 million of lease liabilities as of January 1, 2019. The new standard did not have a significant impact on the condensed consolidated statements of income. See Note 10, Commitments and Contingencies for additional information. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02). This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. The Company adopted ASU 2018-02 on January 1, 2019 and applied it in the period of adoption. The Company did not elect to reclassify any tax effects of the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. The adoption of this standard did not have an effect on the Company’s condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, “Intangibles, Goodwill and Other (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract” (ASU 2018-15). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred, if those same costs would be capitalized by a customer in a software licensing arrangement under the internal-use software guidance in ASC 350-40. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company elected to early adopt the new standard as of March 31, 2019. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13), which amends the FASB’s guidance on the impairment of financial instruments. In April 2019 the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, which contains a compilation of guidance to assist practitioners with the implementation and application of ASU 2016-13, among others. ASU 2016-13 adds to GAAP an impairment model (known as the “current expected credit loss model”) that is based on expected losses rather than incurred losses. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the timing and impact of adoption on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” (ASU 2018-13). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in this standard are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements.
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Net Income per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income Per Share | Net Income per Share The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
For the three months ended June 30, 2019 and 2018, potential shares from stock options and restricted stock units totaling 1.9 million and 1.8 million, respectively, are not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive. For the six months ended June 30, 2019 and 2018, potential shares from stock options and restricted stock units totaling 1.9 million and 1.6 million, respectively, are not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive.
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Revenue |
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| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | Revenue The Company generally invoices its customers on a monthly basis with a term of net 30-60 days. The Company applies the practical expedient provided by ASC 606 and does not evaluate contracts of one year or less for the existence of a significant financing component. The Company’s policy is to exclude sales and other indirect taxes when measuring the transaction price of its subscription agreements. Disaggregation of Revenues The Company’s primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the condensed consolidated statements of income. The following table provides information about disaggregated revenue from contracts with customers by the nature of the products and services (in thousands):
Contract Balances The Company generally does not recognize revenue in advance of invoicing its customers, however, it records a receivable when revenue is recognized prior to invoicing and it has an unconditional right to payment. Alternatively, when payment precedes the related services, the Company records a contract liability, or deferred revenue, until its performance obligations are satisfied. The Company’s deferred revenue as of June 30, 2019 and December 31, 2018 was $12.6 million and $3.9 million, respectively. The balances relate to up-front fees, cash received in advance for a certain interchange revenue arrangement, and other commuter deferred revenue. The Company expects to satisfy its remaining obligations for these arrangements. Contract Costs Contract costs relate to incremental costs of obtaining a contract with a customer. Contract costs, which primarily consist of deferred sales commissions, were $9.0 million and $8.8 million as of June 30, 2019 and December 31, 2018, respectively and are included in other assets on the condensed consolidated balance sheets. Amortization expense for the deferred costs was $0.8 million and $0.7 million for the three months ended June 30, 2019 and 2018, respectively, and $1.5 million and $1.6 million for the six months ended June 30, 2019 and 2018, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented. Deferred contract costs are amortized on a straight-line basis over the period of benefit, which is consistent with the pattern of transfer of the good or service to which the asset relates. Performance Obligations During the three and six months ended June 30, 2019, the Company recognized the following revenues (in thousands):
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands). The Company applies the practical expedient to not disclose information about contracts with original expected durations of one year or less, amounts of variable consideration attributable to the variable consideration allocation exception, or contract renewals that are unexercised as of June 30, 2019.
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Investments and Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments and Fair Value Measurements | Investments and Fair Value Measurements The following tables summarize the Company’s investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as of June 30, 2019 and December 31, 2018 (in thousands):
As of June 30, 2019, the Company’s unrealized losses on investments were deemed temporary in nature. The following tables summarize the gross unrealized losses and fair values of investments in an unrealized loss position as of June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
Realized gains and losses on marketable securities are included in other income (expense), net on the Company’s condensed consolidated statements of income. Gross realized losses on marketable securities for the three and six months ended June 30, 2019 and 2018 were not significant. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments. There were no transfers between Level 1 and Level 2 fair value categories during the periods presented. The following tables summarize the estimated amortized cost and fair value of the Company’s marketable securities by the contractual maturity date as of June 30, 2019 and December 31, 2018 (in thousands):
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Receivables |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables | Receivables Receivables at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
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Property and Equipment |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property And Equipment | Property and Equipment Property and equipment at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
As of both June 30, 2019 and December 31, 2018, total right-of-use assets related to finance leases were $1.2 million, and were classified as computers and equipment. Accumulated depreciation for assets under finance leases was $0.9 million and $0.8 million at June 30, 2019 and December 31, 2018, respectively. The Company capitalized software development costs of $4.5 million and $5.9 million for the three months ended June 30, 2019 and 2018, respectively; and $8.9 million and $11.6 million for the six months ended June 30, 2019 and 2018, respectively. Amortization expense related to capitalized software development costs was $4.6 million and $3.8 million for the three months ended June 30, 2019 and 2018, respectively; and $9.1 million and $7.4 million for the six months ended June 30, 2019 and 2018, respectively. These costs are included in amortization expense in the condensed consolidated statements of income. At June 30, 2019, the unamortized software development costs included in property and equipment in the condensed consolidated balance sheets were $40.2 million. Total depreciation expense plus amortization of capitalized software development costs for the three months ended June 30, 2019 and 2018 was $8.5 million and $7.3 million, respectively. Total depreciation expense plus amortization of capitalized software development costs for the six months ended June 30, 2019 and 2018 was $16.7 million and $14.1 million, respectively.
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Goodwill and Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill There was no change in the carrying amount of goodwill for the three and six months ended June 30, 2019. Intangible Assets Acquired intangible assets at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
Amortization of intangible assets for the three months ended June 30, 2019 and 2018 was $6.4 million and $6.3 million, respectively. For the six months ended June 30, 2019 and 2018, amortization of intangible assets was $12.8 million and $12.7 million, respectively. The estimated amortization expense in future periods at June 30, 2019 is as follows (in thousands):
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Accounts Payable and Accrued Expenses |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses Accounts payable and accrued expenses at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
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Long-term Debt |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt | Long-term debt As of June 30, 2019 and December 31, 2018, long-term debt consisted of the following (in thousands):
On April 4, 2017, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with MUFG Union Bank, N.A., as administrative agent (“Agent”). The Credit Agreement amends and restates the Company’s existing Amended and Restated Credit Agreement, and increased the Company’s borrowing capacity under the revolving credit facility to $400.0 million, with a $15.0 million letter of credit sub-facility. The Credit Agreement contains an increase option permitting the Company, subject to certain conditions and requirements, to arrange with existing lenders and/or new lenders to provide up to an aggregate of $100.0 million in additional commitments. The principal, together with all accrued and unpaid interest, is due and payable on April 4, 2022. Loan proceeds may be used for general corporate purposes, including acquisitions permitted under the Credit Agreement. The Company may prepay loans under the Credit Agreement in whole or in part at any time without premium or penalty. The fees incurred in connection with this Credit Agreement are classified as a direct deduction from long-term debt in the condensed consolidated balance sheets. The Second Amended Credit Agreement contains financial and non-financial covenants including debt ratio and interest coverage ratio requirements. The Company is currently in compliance with all the covenants under the credit facility. In the first quarter of 2019, the Company entered into a Third Reporting Extension Agreement and paid the Agent $0.1 million to extend the delivery date of the 2018 Annual Report on Form 10-K to May 10, 2019. In the second quarter of 2019, the Company entered into a Fourth Reporting Extension Agreement and paid the Agent $0.1 million to extend the delivery date of the 2018 Annual Report on Form 10-K to May 31, 2019. The fees incurred were added to loan financing fees to be amortized to interest expense over the remaining life of the loan. The 2018 Annual Report on Form 10-K was filed on May 29, 2019. As of June 30, 2019, the Company had $147.0 million outstanding under the revolving credit facility and $250.2 million unused revolving credit facility still available to borrow under the Credit Agreement. As of June 30, 2019, the interest rate applicable to the revolving credit facility was 3.90% per annum. See Note 10 for further information regarding letters of credit.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company leases office space under noncancelable operating leases and leases various office equipment under finance lease arrangements. The Company’s leases have remaining lease terms of approximately 1 to 9 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise that option. The exercise of lease renewal options is at the Company’s sole discretion. The components of operating lease expense were as follows (in thousands):
Rent expense under operating lease agreements was $1.9 million and $3.9 million for the three and six months ended June 30, 2018, respectively. Amortization and interest expense related to finance leases were not material during the three and six months ended June 30, 2019. As of June 30, 2019, the weighted-average remaining lease term and discount rate for the Company’s operating leases are 4.9 and 4.6%, respectively. As of June 30, 2019, maturities of lease liabilities by fiscal year for the Company’s operating leases, excluding the future contractual sublease income of $7.3 million, were as follows (in thousands):
Prior to the adoption of the new leases standard, future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $8.3 million which is expected to be received through February 2023, were as follows as of December 31, 2018 (in thousands):
Operating cash outflows related to operating leases were $2.3 million and $4.7 million for the three and six months ended June 30, 2019. During the second quarter of 2019, the Company entered into a lease agreement with a period of approximately 10 years to occupy 150,000 square feet of new office space in Mesa, AZ. The base rent obligation of $63.1 million is expected to commence in the third quarter of 2020, and therefore is not included in the table above. In addition to the base rent payments, the Company will be obligated to pay certain customary amounts for its share of operating expenses and tax obligation. The Company has the option to extend the term of the lease for two additional periods of five years. Contractual obligations related to this lease are shown in the table below (in thousands):
Legal Matters The Company is pursuing affirmative claims against the Office of Personnel Management (OPM) to obtain payment for services provided by the Company between March 1, 2016 and August 31, 2016 pursuant to its contract with OPM for the Government’s Federal Flexible Account Program (“FSAFEDS”). The Company initially issued its invoice for these services in February 2017. On December 22, 2017, the Company received the Contracting Officer’s “final decision” refusing payment of the invoiced amount and otherwise denying the Company’s Certified Claim. As a result of this decision, and a related Certified Claim that OPM subsequently denied, on February 8, 2018, the Company filed an appeal to the Civilian Board of Contract Appeals (“CBCA”) against OPM for services provided by the Company between March 1, 2016 and August 31, 2016. On August 3, 2018, the Company also filed an appeal to the CBCA of OPM’s June 21, 2018 denial of a Request for Equitable Adjustment for extra work associated with a contract modification imposing new security and other requirements not part of the original scope of FSAFED’s contract work. In connection with the Company’s claims against OPM, OPM has also claimed that an erroneous statement in a certificate signed by a former executive officer constituted a violation of the False Claims Act and moved to dismiss part of the Company’s claim against OPM as a result. In March 2019, the Company filed a Motion for Summary Judgment with CBCA on the December 22nd denial by the OPM. OPM has moved to defer consideration of the Motion for Summary Judgment to permit it further discovery. That Motion has been granted, but the case is on hold pending a ruling by the CBCA on the scope of the further discovery permitted in connection with the Company’s underlying Motion for Summary Judgment. In order to accelerate resolution of all matters before the CBCA, the Company’s appeal of the June 21st denial by the OPM was withdrawn on April 9, 2019. The remaining claim related to the OPM’s December 22nd denial, valued at approximately $6.2 million, could be decided by a decision on the pending Motion for Summary Judgment, or go to trial if the Motion is denied. As with all legal proceedings, no assurance can be provided as to the outcome of these matters or if the Company will be successful in recovering the full claimed amount. On March 9, 2018, a putative class action was filed in the United States District Court for the Northern District of California (the “Securities Class Action”). On May 16, 2019, a consolidated amended complaint was filed by the lead plaintiffs asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against the Company, its former Chief Executive Officer and its former Chief Financial Officer on behalf of purchasers of WageWorks common stock between May 6, 2016 and March 1, 2018. The complaint also alleges claims under the Securities Act of 1933, as amended, arising from the Company’s June 19, 2017 common stock offering against those same defendants, as well as the members of its Board of Directors at the time of that offering and the underwriters of the offering. On June 22, 2018 and September 6, 2018, two derivative lawsuits were filed against certain of our officers and directors and the Company (as nominal defendant) in the Superior Court of the State of California, County of San Mateo. The actions were consolidated. On July 23, 2018, a similar derivative lawsuit was filed against certain of our officers and directors and the Company (as nominal defendant) in the United States District Court for the Northern District of California (together, the “Derivative Suits”). The Derivative Suits purport to allege claims related to breaches of fiduciary duties, waste of corporate assets, and unjust enrichment. In addition, the complaint in District Court includes a claim for abuse of control, and the complaint in Superior Court includes a claim to require the Company to hold an annual shareholder meeting. The allegations in the Derivative Suits relate to substantially the same facts as those underlying the Securities Class Action described above. The plaintiffs seek unspecified damages and fees and costs. In addition, the complaint in the Superior Court seeks for us to provide past operational reports and financial statements, to publish timely and accurate operational reports and financial statements going forward, to hold an annual shareholder meeting, and to take steps to improve its corporate governance and internal procedures. Plaintiffs in the Superior Court action filed a Consolidated Complaint on May 2, 2019. As stipulated by the parties, and approved by the District Court, the District Court action is stayed. The parties in the District Court action are to notify the District Court within 15 days of (1) the dismissal of the Securities Class Action, (2) the denial of defendants’ motion(s) to dismiss, or (3) a party giving notice that they no longer consent to the voluntary stay. The Company voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the restatement and independent investigation. The Company is providing information and documents to the SEC and will continue to cooperate with the SEC’s investigation into these matters. The U.S. Attorney’s Office for the Northern District of California also opened an investigation. The Company has provided documents and information to the U.S. Attorney’s Office and will continue to cooperate with any inquiries by the U.S. Attorney’s Office regarding the matter. Beginning on July 30, 2019, putative class action suits were filed in the United States District Court Courts for the Southern District of New York, the District of Delaware, and the Northern District of California asserting claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, against the Company and the members of its Board of Directors. The complaints generally allege disclosure violations in the proxy statement issued by the Company in connection with the stockholder vote on the proposed merger with HealthEquity. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information, the Company does not believe that any additional liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable. In addition, in accordance with the relevant authoritative guidance, for matters which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, the Company will provide disclosure to that effect. However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods. The Company is involved in various other litigation, governmental proceedings and claims, not described above, that arise in the normal course of business. For example, on occasion a lawsuit will be filed against a customer of our COBRA business alleging that the customer’s COBRA election notice, which is typically drafted and sent out by the Company on behalf of the customer, did not fully comply with the law. Because the Company is not a proper party to such lawsuits, the Company’s involvement is typically brought on via a third-party subpoena and/or the customer defendant making an indemnification demand against the Company based on their services contract. We have and will continue to vigorously defend the Company’s interests in such lawsuits. While it is not possible to determine the ultimate outcome or the duration of such litigation, including any other litigation or any of the above described governmental proceedings or claims, the Company believes, based on current knowledge and the advice of counsel, that such litigation, proceedings and claims will not have a material impact on the Company’s financial position or results of operations.
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Stockholders' Equity |
6 Months Ended |
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Jun. 30, 2019 | |
| Equity [Abstract] | |
| Stockholders' Equity | Stockholders’ Equity Share Repurchase Program On March 11, 2019, the Company’s Board of Directors authorized a $150 million stock repurchase program for 3 years which commenced on March 13, 2019 and expires on March 12, 2022. Stock repurchases may be made from time-to-time in open market transactions, privately negotiated transactions, through accelerated share repurchase programs, or by any combination of such methods. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, corporate and regulatory requirements, restrictions under its debt obligations and other market and economic conditions. No shares of common stock have been repurchased under this program to date.
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Employee Benefit Plans |
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| Employee Benefit Plans | Employee Benefit Plans Stock-based compensation Stock-based compensation is classified in the condensed consolidated statements of income in the same expense line items as cash compensation. Amounts recorded as expense in the condensed consolidated statements of income were as follows (in thousands):
(a) Employee Stock Option Plan In May 2010, the Company adopted the 2010 Equity Incentive Plan (“2010 Plan”). Under the 2010 Plan, the Company can grant share-based awards to all employees, including executive officers, outside consultants and non-employee directors. Options under the 2010 Plan generally have a term of 10 years and vest over 4 years with 25% vesting after one year of service and monthly vesting over the remaining period. As of June 30, 2019, the 2010 Plan has a total of 5.4 million common stock shares available for issuance. There were no stock options granted during the three and six months ended June 30, 2019 and 2018 as the Company did not file its Form S-8 until June 27, 2019. Stock option activity for the six months ended June 30, 2019 was as follows (shares in thousands):
As of June 30, 2019, there was $4.8 million of total unrecognized stock-based compensation expense associated with stock options which will be recognized over a weighted-average period of approximately 1 year. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. (b) Restricted Stock Units The Company grants restricted stock units (“RSU”) to certain employees, officers, and directors under the 2010 Plan. Restricted stock units vest upon performance-based or service-based criteria. During the three and six months ended June 30, 2019, the Company granted zero performance-based restricted stock units as the Company did not file its Form S-8 until June 27, 2019. The Company did not grant performance-based restricted stock units in 2018. Performance-based restricted stock units are typically granted such that they vest upon the achievement of certain revenue growth rates and other financial metrics during a specified performance period for which participants have the ability to receive up to 200% of the target number of shares originally granted, depending on terms of the grant agreement. Stock-based compensation expense related to restricted stock units was $(3.7) million and $(1.1) million for the three months ended June 30, 2019 and 2018, respectively; and was $(2.2) million and $3.0 million for the six months ended June 30, 2019 and 2018, respectively. Total unrecorded stock-based compensation expense at June 30, 2019 associated with restricted stock units was estimated at $42.0 million, which is expected to be recognized over a weighted-average period of approximately 3 years. In the second quarter of 2019, the Company reversed previously recognized expenses of $5.2 million related to performance-based RSUs because management determined that it is improbable that the performance requirements for such RSUs will be met based on the Company's operating results for the year-to-date period ended June 30, 2019. The following table summarizes information about restricted stock units issued to officers, directors and employees under the 2010 Plan (shares in thousands):
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The Company reports income taxes using an asset and liability approach, under which deferred income taxes are provided based upon enacted tax laws and rates applicable to periods in which the taxes become payable. The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Presently, there are no income tax examinations on-going in the jurisdictions where the Company operates. The Company’s effective tax rate was 42.1% and 29.7% for the three months ended June 30, 2019 and 2018, respectively; and was 31.8% and 25.4% for the six months ended June 30, 2019 and 2018, respectively. The increase in the rate of 12.4% and 6.4% for the three and six months ended June 30, 2019 respectively relates to the discrete impact recognition of an increase in unrecognized tax benefit to the income tax provision. The income tax provision for the three months ended June 30, 2019 and 2018 was $1.3 million and $4.6 million, respectively; and was $2.7 million and $7.5 million for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the Company remains in a net deferred tax asset position. The realization of the Company’s deferred tax assets depends primarily on its ability to generate sufficient U.S. taxable income in future periods. The amount of deferred tax assets considered realizable may increase or decrease in subsequent quarters as management reevaluates the underlying basis for the estimates of future domestic taxable income.
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Summary of Business and Significant Accounting Policies (Policy) |
6 Months Ended |
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Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Business | Business WageWorks, Inc., (together with its subsidiaries, “WageWorks” or the “Company”) was incorporated in the state of Delaware in 2000. The Company is a leader in administering Consumer-Directed Benefits (“CDBs”), which empower employees to lower their healthcare related expenditures while also providing corporate tax advantages for employers. The Company operates as a single reportable segment on an entity level basis, and considers itself to operate under one operating and reporting segment with healthcare, transit and other employer sponsored programs representing a group of similar product lines. The Company believes that it engages in a single business activity and operates in a single economic environment. Proposed Merger with HealthEquity, Inc. On June 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with HealthEquity, Inc., a Delaware corporation (“HealthEquity”), and Pacific Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of HealthEquity (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into WageWorks (the “Merger”), with WageWorks surviving the Merger and becoming a wholly owned subsidiary of HealthEquity. Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of WageWorks common stock (other than shares (i) owned in treasury by WageWorks, (ii) owned by HealthEquity, Merger Sub or any other direct or indirect wholly owned subsidiary of HealthEquity, and (iii) held by WageWorks stockholders who perfect their appraisal rights with respect to the Merger) will be cancelled and automatically converted into the right to receive $51.35 in cash, without interest (the “Merger Consideration”). Under the Merger Agreement, at the effective time of the Merger, (x) each outstanding WageWorks stock option (whether vested or unvested) will be cancelled and, if the exercise price per share of such stock option is less than $51.35, will be exchanged for an amount of cash, without interest, equal to (1) the Merger Consideration less the applicable exercise price per share with respect to such stock option multiplied by (2) the number of shares covered by such stock option, (y) each outstanding award of WageWorks RSUs subject to only time-based vesting conditions (1) granted prior to June 26, 2019 will fully vest and be entitled to receive the Merger Consideration for each share covered by such award or (2) granted on or after June 26, 2019, will, as of the effective time of the Merger, be assumed by HealthEquity and converted automatically into an award of RSUs covering an adjusted (based on the ratio of the Merger Consideration to the volume weighted average price of a share of common stock of HealthEquity for the 20 trading days ending with the trading day immediately preceding the date of the closing of the Merger) number of shares of common stock of HealthEquity and will be subject to the same terms and conditions applicable to such RSUs immediately prior to the Effective Time, and (z) each outstanding award of WageWorks RSUs granted prior to June 26, 2019 and subject to performance-based vesting conditions (each, a “Performance Unit”) will (1) in the case of any Performance Unit for which the performance period is complete but for which the board of directors of WageWorks has not determined the achievement of the underlying performance goals, vest based on actual performance, (2) in the case of any Performance Unit for which the performance period is incomplete, vest based on target performance, and (3) in the case of any Performance Unit that does not vest in accordance with clause (1) or (2), be cancelled for no consideration. Each Performance Unit that vests according to the previous sentence will be cancelled in exchange for an amount of cash, without interest, equal to the Merger Consideration multiplied by the number of shares covered by such vested Performance Unit. WageWorks has made customary representations, warranties and covenants in the Merger Agreement, including covenants not to, during the pendency of the Merger, solicit alternative transactions or, subject to certain exceptions, enter into discussions concerning, or provide confidential information in connection with, an alternative transaction. Each of HealthEquity and Merger Sub also has made customary representations, warranties and covenants in the Merger Agreement. Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including adoption of the Merger Agreement by WageWorks’ stockholders. The early termination of the waiting period applicable to the Merger under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 was granted by the Federal Trade Commission on July 29, 2019. The transaction is not subject to any financing condition. The Merger Agreement contains certain customary termination rights for HealthEquity and WageWorks, including a right to terminate the Merger Agreement if the Merger is not completed by December 26, 2019, unless otherwise extended pursuant to the terms of the Merger Agreement. The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances, WageWorks will be obligated to pay HealthEquity a termination fee of $69,656,872. |
| Basis of Presentation | Basis of Presentation The unaudited interim condensed consolidated financial statements and the related notes have been prepared on the same basis as the audited consolidated financial statements and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The results of the interim periods presented herein are not necessarily indicative of the results of future periods or annual results for the year ending December 31, 2019. These unaudited interim condensed consolidated financial statements and the related notes should be read in conjunction with the December 31, 2018 audited financial statements and related notes, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K. The December 31, 2018 consolidated balance sheet included in this interim Quarterly Report on Form 10-Q was derived from audited financial statements. There have been no material changes to the Company’s critical accounting estimates during the three and six months ended June 30, 2019. Other than the adoption of ASU 2016-02, “Leases (Topic 842)”, there have been no material changes to the Company's critical accounting policies during the three and six months ended June 30, 2019 from the items the Company disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.
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| Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation, including the reclassification of deferred revenue from accounts payable and accrued expenses to other current liabilities in the condensed consolidated balance sheet as of December 31, 2018 and the statement of cash flows for the six months ended June 30, 2018. There was no impact on the condensed consolidated statements of income for the three and six months ended June 30, 2018.
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| Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of WageWorks, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
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| Use of Estimates | Use of Estimates In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the Company must make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for, but not limited to revenue recognition, allowances for doubtful accounts, useful lives for depreciation and amortization, loss contingencies, income taxes, the assumptions used for stock-based compensation including attainment of performance-based awards, the assumptions used for software and web site development cost classification, and recoverability and impairments of goodwill and long-lived assets and average customer life. Actual results may be materially different from those estimates. In making its estimates, the Company considers the current economic and legislative environment.
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| Leases | Leases The Company leases office space under noncancelable operating leases. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable in most of the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. In addition, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company determines if an arrangement is a lease or contains a lease at inception. The Company applied the short-term lease measurement and recognition exemption in which right-of-use (“ROU”) assets and lease obligations are not recognized for short-term leases. The Company does not have lease agreements with residual value guarantees, sales leaseback terms or material restrictive covenants. The Company has one sublease for which the sublease income was recorded as a reduction to operating lease expense for the three and six months ended June 30, 2019 and 2018. The Company has lease agreements that contain both lease and non-lease components. For real estate leases, the Company accounts for lease components together with non-lease components (e.g., common-area maintenance). Amounts recognized as ROU assets related to finance leases are included in property and equipment, net in the accompanying condensed consolidated balance sheets, while related lease liabilities are included in other current liabilities and other long-term liabilities.
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| Recent Accounting Pronouncements | ecently Adopted Accounting Guidance In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). In January 2019 the FASB issued ASU 2019-01 which amended the transition disclosure requirements for Topic 842. Topic 842 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating lease. The Company adopted Topic 842 prospectively during the first quarter of 2019. As part of its adoption, the Company elected a package of practical expedients for leases that commenced prior to January 1, 2019 and did not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. The Company recognizes those lease payments in the condensed consolidated statements of income on a straight-line basis over the lease term. The adoption of Topic 842 resulted in the Company recording $25.5 million of right-of-use lease assets and $38.4 million of lease liabilities as of January 1, 2019. The new standard did not have a significant impact on the condensed consolidated statements of income. See Note 10, Commitments and Contingencies for additional information. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02). This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. The Company adopted ASU 2018-02 on January 1, 2019 and applied it in the period of adoption. The Company did not elect to reclassify any tax effects of the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. The adoption of this standard did not have an effect on the Company’s condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, “Intangibles, Goodwill and Other (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract” (ASU 2018-15). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred, if those same costs would be capitalized by a customer in a software licensing arrangement under the internal-use software guidance in ASC 350-40. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company elected to early adopt the new standard as of March 31, 2019. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13), which amends the FASB’s guidance on the impairment of financial instruments. In April 2019 the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, which contains a compilation of guidance to assist practitioners with the implementation and application of ASU 2016-13, among others. ASU 2016-13 adds to GAAP an impairment model (known as the “current expected credit loss model”) that is based on expected losses rather than incurred losses. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the timing and impact of adoption on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” (ASU 2018-13). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in this standard are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the timing and impact of adoption on its consolidated financial statements.
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Net Income per Share (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Computation Of Basic And Diluted Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
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Revenue (Tables) |
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| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue | The Company’s primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the condensed consolidated statements of income. The following table provides information about disaggregated revenue from contracts with customers by the nature of the products and services (in thousands):
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| Schedule of Revenue Recognized | During the three and six months ended June 30, 2019, the Company recognized the following revenues (in thousands):
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| Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands). The Company applies the practical expedient to not disclose information about contracts with original expected durations of one year or less, amounts of variable consideration attributable to the variable consideration allocation exception, or contract renewals that are unexercised as of June 30, 2019.
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Investments and Fair Value Measurements (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements, Recurring | The following tables summarize the Company’s investments in marketable securities and fair value measurements by investment category reported as cash equivalents and short-term investments as of June 30, 2019 and December 31, 2018 (in thousands):
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| Unrealized Gain (Loss) on Investments | The following tables summarize the gross unrealized losses and fair values of investments in an unrealized loss position as of June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
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| Investments Classified by Contractual Maturity Date | The following tables summarize the estimated amortized cost and fair value of the Company’s marketable securities by the contractual maturity date as of June 30, 2019 and December 31, 2018 (in thousands):
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Receivables (Tables) |
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| Schedule of Accounts, Notes, Loans and Financing Receivable | Receivables at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
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Property and Equipment (Tables) |
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| Schedule Of Property And Equipment | Property and equipment at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
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Goodwill and Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Acquired Intangible Assets | Acquired intangible assets at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Estimated Expected Amortization Expense | The estimated amortization expense in future periods at June 30, 2019 is as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued expenses at June 30, 2019 and December 31, 2018 were comprised of the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-term Debt Instruments | As of June 30, 2019 and December 31, 2018, long-term debt consisted of the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease Cost | The components of operating lease expense were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Lease Maturity | As of June 30, 2019, maturities of lease liabilities by fiscal year for the Company’s operating leases, excluding the future contractual sublease income of $7.3 million, were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Future Lease Obligations, Leases Not Yet Commenced | Contractual obligations related to this lease are shown in the table below (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Minimum Rental Payments for Operating Leases | Prior to the adoption of the new leases standard, future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $8.3 million which is expected to be received through February 2023, were as follows as of December 31, 2018 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Stock-based compensation is classified in the condensed consolidated statements of income in the same expense line items as cash compensation. Amounts recorded as expense in the condensed consolidated statements of income were as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary Of Stock Option Activity | Stock option activity for the six months ended June 30, 2019 was as follows (shares in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary Of Restricted Stock Units | The following table summarizes information about restricted stock units issued to officers, directors and employees under the 2010 Plan (shares in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Business and Significant Accounting Policies (Narrative) (Details) |
6 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2019
USD ($)
segment
|
Jun. 26, 2019
$ / shares
|
Jan. 01, 2019
USD ($)
|
|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Number of reportable segments | segment | 1 | ||
| Right-of-use asset | $ 22,679,000 | ||
| Lease liabilities | 34,600,000 | ||
| Accounting Standards Update 2016-02 | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Right-of-use asset | $ 25,500,000 | ||
| Lease liabilities | $ 38,400,000 | ||
| WageWorks, Inc. | HealthEquity, Inc. | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Share price (in dollars per share) | $ / shares | $ 51.35 | ||
| HealthEquity, Inc. | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Potential termination fee | $ 69,656,872 |
Net Income per Share (Computation Of Basic And Diluted Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Numerator: | ||||||
| Net income (loss) | $ 1,797 | $ 4,057 | $ 10,924 | $ 11,019 | $ 5,854 | $ 21,943 |
| Denominator: | ||||||
| Weighted-average common shares outstanding (in shares) | 39,861 | 39,853 | 39,857 | 39,838 | ||
| Effect of potentially dilutive shares: | ||||||
| Dilutive stock options and restricted stock units (in shares) | 757 | 559 | 671 | 608 | ||
| Diluted weighted-average common shares outstanding (in shares) | 40,618 | 40,412 | 40,528 | 40,446 | ||
| Basic net income per share (in dollars per share) | $ 0.05 | $ 0.27 | $ 0.15 | $ 0.55 | ||
| Diluted net income per share (in dollars per share) | $ 0.04 | $ 0.27 | $ 0.14 | $ 0.54 | ||
Net Income per Share (Narrative) (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Stock Options And Restricted Stock Units | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Anti-dilutive shares | 1.9 | 1.8 | 1.9 | 1.6 |
Revenue (Disaggregation of Revenue) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Total | $ 108,629 | $ 116,508 | $ 226,854 | $ 243,149 |
| Benefit administration services and COBRA | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total | 87,763 | 96,258 | 183,723 | 200,699 |
| Interchange | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total | 13,245 | 13,555 | 28,684 | 29,300 |
| Other | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total | $ 7,621 | $ 6,695 | $ 14,447 | $ 13,150 |
Revenue (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
| Revenue from Contract with Customer [Abstract] | |||||
| Contract balances, deferred revenue | $ 12.6 | $ 12.6 | $ 3.9 | ||
| Contract costs | 9.0 | 9.0 | $ 8.8 | ||
| Amortization expense, deferred costs | $ 0.8 | $ 0.7 | $ 1.5 | $ 1.6 | |
Revenue (Change in Performance Obligation) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Revenue from Contract with Customer [Abstract] | ||||
| Performance obligations satisfied from amounts included in contract liabilities at the beginning of the period | $ 143 | $ 143 | $ 286 | $ 286 |
| Performance obligations satisfied from new activities in the period - contract revenues | 108,486 | 116,365 | 226,568 | 242,863 |
| Total revenues | $ 108,629 | $ 116,508 | $ 226,854 | $ 243,149 |
Investments and Fair Value Measurements (Maturity of Marketable Securities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Amortized Cost | ||
| Due less than one year | $ 221,054 | $ 219,057 |
| Due in one to five years | 24,537 | 63,388 |
| Total | 245,591 | 282,445 |
| Fair Value | ||
| Due less than one year | 218,394 | |
| Due in one to five years | 63,056 | |
| Total | $ 245,711 | $ 281,450 |
Receivables (Narrative) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable, gross | $ 93,750 | $ 104,905 |
| Less allowance for doubtful accounts | (4,118) | (3,608) |
| Accounts receivable, net | 89,632 | 101,297 |
| Trade receivables | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable, gross | 49,324 | 52,525 |
| Unpaid amounts for benefit services | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable, gross | $ 44,426 | $ 52,380 |
Property and Equipment (Schedule Of Property And Equipment) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 219,541 | $ 208,785 |
| Less accumulated depreciation and amortization | (147,162) | (131,865) |
| Property and equipment, net | 72,379 | 76,920 |
| Computers and equipment | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 29,406 | 27,519 |
| Software and software development costs | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 153,063 | 144,260 |
| Furniture and fixtures | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 8,121 | 8,123 |
| Leasehold improvements | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 28,951 | $ 28,883 |
Property and Equipment (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
| Property, Plant and Equipment [Line Items] | |||||
| Capitalized software development costs | $ 4,500 | $ 5,900 | $ 8,900 | $ 11,600 | |
| Depreciation and amortization | 29,419 | 26,834 | |||
| Computers and equipment | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Capital leased assets, gross | 1,200 | 1,200 | $ 1,200 | ||
| Capital leased assets, accumulated depreciation | 900 | 900 | $ 800 | ||
| Software and software development costs | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Amortization expense related to capitalized software development | 4,600 | 3,800 | 9,100 | 7,400 | |
| Unamortized software development costs | 40,200 | 40,200 | |||
| Depreciation and amortization | $ 8,500 | $ 7,300 | $ 16,700 | $ 14,100 | |
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense for acquired intangible assets | $ 6.4 | $ 6.3 | $ 12.8 | $ 12.7 |
Goodwill and Intangible Assets (Schedule Of Estimated Expected Amortization Expense) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Remainder of 2019 | $ 12,181 |
| 2020 | 22,758 |
| 2021 | 19,953 |
| 2022 | 17,518 |
| 2023 | 14,728 |
| Thereafter | 30,253 |
| Total | $ 117,391 |
Accounts Payable and Accrued Expenses (Schedule Of Accounts Payable And Accrued Expenses) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accounts payable and accrued liabilities | $ 28,026 | $ 32,771 |
| Payable to benefit providers and transit agencies | 32,220 | 30,148 |
| Accrued compensation and related benefits | 24,180 | 28,594 |
| Other accrued expenses | 4,237 | 5,834 |
| Accounts payable and accrued expenses | $ 88,663 | $ 97,347 |
Long-term Debt (Schedule Of Line Of Credit Facilities) (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
Apr. 04, 2017 |
|---|---|---|---|
| Revolving Credit Facility | |||
| Debt Instrument [Line Items] | |||
| Revolving credit facility used | $ 400,000,000.0 | ||
| Letter Of Credit | |||
| Debt Instrument [Line Items] | |||
| Revolving credit facility used | $ 15,000,000.0 | ||
| Less: Outstanding letters of credit | $ (2,830,000) | $ (2,830,000) | |
| Line of Credit | Revolving Credit Facility | |||
| Debt Instrument [Line Items] | |||
| Revolving credit facility used | 149,830,000 | 249,830,000 | |
| Outstanding revolving credit facility | 147,000,000 | 247,000,000 | |
| Unamortized loan issuance costs | (2,094,000) | (2,307,000) | |
| Long-term debt, net of issuance costs | $ 144,906,000 | $ 244,693,000 |
Long-term Debt (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Apr. 04, 2017 |
|
| Debt Instrument [Line Items] | ||||||
| Increase option | $ 100,000,000.0 | |||||
| Payments of debt modification costs | $ 100,000 | $ 100,000 | $ 150,000 | $ 500,000 | ||
| Revolving credit facility | ||||||
| Debt Instrument [Line Items] | ||||||
| Revolving credit facility used | 400,000,000.0 | |||||
| Remaining borrowing capacity | $ 250,200,000 | $ 250,200,000 | ||||
| Interest rate | 3.90% | 3.90% | ||||
| Letter Of Credit | ||||||
| Debt Instrument [Line Items] | ||||||
| Revolving credit facility used | $ 15,000,000.0 | |||||
| Line of Credit | Revolving credit facility | ||||||
| Debt Instrument [Line Items] | ||||||
| Revolving credit facility used | $ 149,830,000 | $ 149,830,000 | $ 249,830,000 | |||
| Outstanding revolving credit facility | $ 147,000,000 | $ 147,000,000 | $ 247,000,000 | |||
Commitments and Contingencies (Lease Cost) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||||
| Operating lease cost | $ 1,806 | $ 3,620 | ||
| Sublease income | (469) | (938) | ||
| Net lease cost | $ 1,337 | $ 1,900 | $ 2,682 | $ 3,900 |
Commitments and Contingencies (Maturities of Lease Liability) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 2019 | $ 4,819 |
| 2020 | 9,700 |
| 2021 | 9,696 |
| 2022 | 6,536 |
| 2023 | 2,308 |
| Thereafter | 5,663 |
| Total minimum lease payments | 38,722 |
| Less: imputed interest | (4,122) |
| Present value of net minimum lease payments | 34,600 |
| Less: current portion | 8,242 |
| Long-term operating lease liabilities | $ 26,358 |
Commitments and Contingencies Commitments and Contingencies (Future Minimum Lease Payments) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 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 |
Commitments and Contingencies (Leases Not Yet Commenced) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| Total | $ 63,094 |
| Less than 1 year | 0 |
| 1-3 years | 5,803 |
| 3-5 years | 11,944 |
| More than 5 years | $ 45,347 |
Stockholders' Equity (Narrative) (Details) |
Mar. 11, 2019
USD ($)
|
|---|---|
| Equity [Abstract] | |
| Stock repurchase program, authorized amount | $ 150,000,000 |
| Stock repurchase program, period in force | 3 years |
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Income Tax Disclosure [Abstract] | ||||
| Effective income tax rate | 42.10% | 29.70% | 31.80% | 25.40% |
| Increase in tax rate | 12.40% | 6.40% | ||
| Income tax provision | $ 1,309 | $ 4,621 | $ 2,728 | $ 7,473 |
| Label | Element | Value |
|---|---|---|
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 6,955,000 |
| Retained Earnings [Member] | ||
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 6,955,000 |
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