WageWorks (NYSE:WAGE) reported third-quarter results on Nov. 8. The leader in administering consumer-directed benefits is enjoying surging revenue and earnings, driven by a powerful combination of organic and acquisition-fueled growth.

WageWorks results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Change


$115.746 million

$88.924 million


Net income

$9.685 million

$5.894 million


Earnings per share




Data Source: WageWorks Q3 2017 earnings press release.

What happened with WageWorks this quarter?

Revenue jumped 30% year over year, to $115.7 million, driven by a 37% jump in healthcare revenue, to $66.2 million and a 48% leap in COBRA revenue, to $27.5 million.

"We completed a successful enterprise sales season and our [small and midsize business] selling season is well underway," Chairman and CEO Joe Jackson said in a press release. "We continue to see interest in all of our products and our comprehensive platform of integrated offerings remains a competitive differentiator for us."

Earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted to exclude stock-based compensation, acquisition-related expenses, and certain other items, surged 41%, to $37.3 million. Adjusted (non-GAAP) operating income soared 47%, to $31.1 million.

All told, adjusted net income increased 43%, to $18 million. And earnings per share rose 32%, to $0.45, as WageWork's share count was impacted by its recent secondary offering.

The eye of a wolf on the hunt

WageWorks is hunting for acquisitions. Image source: Getty Images.

Looking forward

WageWorks expects fourth-quarter revenue of $118.4 million to $121.4 million, with adjusted EBITDA of $35 million to $37 million and non-GAAP earnings per share (EPS) of $0.40 to $0.43.

In turn, WageWorks' updated 2017 full-year forecast now includes:

  • Revenue of $479 million to $482 million, down from a previous estimate of $479 million to $484 million.
  • Adjusted EBITDA of $145 million to $147 million, up from $142 million to $146 million.
  • Adjusted EPS of $1.76 to $1.79, up from $1.70 to $1.75

Jackson also hinted that WageWorks could be zeroing in on a new buyout deal after its recent acquisition of Tango Health's HSA business.

"We continue to actively pursue a number of acquisition and channel partner opportunities to ensure that we expand our footprint," Jackson said during a conference call with analysts. "We will remain an active player in the ongoing industry consolidation as we pursue the many targets that support this aspect of our stated growth plans."

With nearly $800 million in cash and investments on its balance sheet, WageWorks has plenty of dry powder to fund its growth-through-acquisition strategy in the years ahead.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends WageWorks. The Motley Fool has a disclosure policy.