Revenue Recognition

WageWorks to Restate Results, CFO Resigns

The benefits company's internal investigation found “a material weakness in its internal control over financial reporting."
Matthew HellerApril 6, 2018

The chief executive and the CFO of WageWorks have resigned after an internal investigation that found a “material weakness” in the employee benefits company’s financial reporting.

CEO Joe Jackson and finance chief Colm Callan handed in their resignations on Thursday as WageWorks announced it would be restating its revenue and net income for two quarters of 2016, full-year 2016, and three quarters of 2017 as a result of the reporting problems.

“The board has concluded that the company’s historical financial statements for [those periods] should be restated and such financial statements and related communications should no longer be relied upon,” WageWorks said in a regulatory filing.

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Jackson, who has served as CEO since February 2007 and chairman of the board since December 2016, has been appointed executive chairman.

Callan joined WageWorks as CFO in September 2014 after working at PayPal and eBay. The regulatory filing said he would stay on at WageWorks for 90 days “to effect a seamless transition.”

WageWorks, which makes software to help companies administer their benefits program, first disclosed on March 2 that it had “a material weakness in its internal control over financial reporting” that was “related to managing change and assessing risk in the areas of non-routine and complex transactions.”

It said the internal investigation had reviewed “certain issues, including revenue recognition, related to the accounting for a government contract during fiscal 2016” and issues related to “whether there was an open flow of information and appropriate tone at the top for an effective control environment.”

The board’s audit committee estimates that for 2016, WageWorks overstated the $364.7 million it reported in revenue by $6.5 million to $9.5 million, overstated the $20.2 million estimated aggregate decrease in net income by $3.5 million to $5.5 million, and overstated the $108 million estimated aggregate decrease in adjusted EBITDA by about $6.0 million to $9.0 million.

WageWorks said it plans to “disclose a more detailed description of [the material] weakness, including a plan for remediating this deficiency” in its upcoming annual report.