1

NYSE: WAGEJason A. Moser

2

Consumer directed benefit (CDB) plans such as Flex Spending Accounts (FSA), Health Reimbursement Arrangements (HRA) and Health Savings Accounts (HSA) are effective vehicles that help minimize employees’ tax exposure.

WageWorks is a pure play provider offering these vehicles to US businesses of all sizes with ample room to grow its customer base. The value proposition it offers to employees and employers makes it an interesting portfolio candidate.

The idea

3

What does WageWorks do?

WageWorks provides consumer-directed benefits programs (CDBs) to employees to

save money on taxes in the UA. These programs include Flexible Spending

Accounts (FSA), Health Reimbursement Arrangements (HRA), commuter

programs, COBRA and operational services to its clients.

4

Market opportunity

$2,500The Affordable Care Act imposes a $2,500 limit, indexed to inflation, on pre-tax dollar employee contributions made to a healthcare FSA for plan

years that begin on or after January 1, 2013.

$5,000 Current laws and regulations limit the amount of

pre-tax dollars employees can contribute to dependent care FSAs to $5,000 per tax year.

2014For 2014, the monthly maximum is $130 for transit or vanpooling, $250 for parking and $20 for bicycle

reimbursement.

5

Market opportunity

6

Changes in healthcare legislation have resulted in heavier than forecasted enrollment in private healthcare exchanges.

So far this year 3 million people have enrolled through private exchanges. This growth is being driven primarily by small and mid-size businesses.

Accenture estimates this enrollment number will reach 40 million employees by 2018, surpassing those in state and federally funded programs.

Employees moving to these private exchanges typically take less coverage/higher deductible plans. This means more out of pocket expense which means greater incentive to participate in some form of CDB.

Private exchange opportunity

7

CDB programs with large clients typically run 3-4 years and provide for monthly fees based on participants.

SMBs (small/medium businesses) typically sign for 1-3 year terms, monthly fee remains constant throughout the term.

How do they make money?

8

Direct SalesSMB Distribution ChannelGroup Purchasing OrganizationsChannel PartnershipsPrivate Exchanges

How do they make money?

9

WageWorks metrics that matter

2012 2013

Employee participants 2.8 million 3.2 million

Employer clients 27,000 29,000

WageWorks Prepaid Debit Cards Used 2.2 million 3.9 million

10

Sales growth

11

Robust margins

12

Use it or lose it no more

Previous iterations of health flex spending accounts stated whatever you didn’t use you would lose.

This was unreasonable. Healthcare expenses are difficult to predict; the prospect of throwing money away is too high a hurdle.

On October 31, 2013 US Treasury modified this clause. Today participants may now carry up to $500 of their unused balance forward to the following year’s plan.

13

Revenue breakdown

14

Shares trade at 68X earnings; EV/EBIDTA of 30; 57X FCF; 7X sales. Balance sheet has $371 million cash versus $30 million in debt. From 2009-2013 the top line has grown at 19% CAGR; bottom line 122%. Profitable every year since 2011; FCF positive since 2009. Management calling for 15%-25% CAGR top line in coming years. At 20% WAGE is doing $545 million in sales for 2018. Net margin of 11%

results in $60 million net income. At 30X earnings you have a market cap of $1.8 billion. But would the

market pay more for growth? 40X? 50X? Maybe. It’s paying 68X today. Modeling out 20% annual revenue growth next five years and operating

margin expanding over time still pegs shares pricey at $45 today. This stock pulls below $40 and I start getting interested assuming the

fundamentals are still sound.

Understanding future worth

15

CEO/Director Joe Jackson: CEO since 2/2007, formerly at Western Union.

SVP and Co-Founder Clem O’Donnell: serves as COO of Tracker Corp., CTO of WAGE from 2000-2009.

CFO Colm Callan: CFO since 9/2014, came from eBay and PayPal.

COO Edgar Montes: COO since 12/2012 with the company since 2007.

Management

16

Strategery: Growing via acquisition is risky. These are modest portfolio additions though so they’re less risky.

Legislation: Any changes in healthcare or tax legislation that works against them could hinder growth.

Pure: While WAGE is a pure play, it is also much smaller than some of its competitors with greater financial resources and reach.

Growth: If growth based on growing the customer base and new offerings fails to take hold, investors may bail.

Channels: Channel partner strategy is also a meaningful growth lever, we want to see these continue.

Recession: Fewer jobs, tighter pursestrings, you get the picture. Participation: One of the big hurdles continues to be educating employees

to the benefits of participating. Also an opportunity for WAGE.

Risks

17

Large health insurers

Payroll companies

Commercial banks

Competition

18

Taxes are a drag on employees’ income. Consumer Directed Benefit (CDB) accounts offer relatively

simple options to minimize one’s exposure. Healthcare, childcare, commuting are WAGE’s core offerings. Opportunities to engage and educate consumers on the value

proposition for both employees and employers. Private exchanges could be a big catalyst in the coming years. A pure play with customer-centric management WAGE has

the opportunity to outshine larger, less-focused competition. The stock today at 68X earnings is rich, however a pullback

could present investors with a compelling opportunity.

Bottom line for investors

19

Remember, investing is all about the future. There are

never any guarantees and you're taking a measure of a leap of faith

every single time.