• HealthEquity Reports First Quarter Ended April 30, 2022 Financial Results

    Source: Nasdaq GlobeNewswire / 06 Jun 2022 16:00:00   America/New_York

    Highlights of the first quarter include:

    • Revenue of $205.7 million, an increase of 12% compared to $184.2 million in Q1 FY22.
    • Net loss of $13.6 million, compared to $2.6 million in Q1 FY22, with non-GAAP net income of $22.7 million, a decrease of 27% compared to $31.0 million in Q1 FY22.
    • Net loss per diluted share of $0.16, compared to $0.03 in Q1 FY22, with non-GAAP net income per diluted share of $0.27, compared to $0.38 in Q1 FY22.
    • Adjusted EBITDA of $58.3 million, a decrease of 1% compared to $59.0 million in Q1 FY22.
    • 7.4 million HSAs, an increase of 26% compared to Q1 FY22.
    • Total HSA Assets of $20.3 billion, an increase of 35% compared to Q1 FY22.
    • 14.5 million Total Accounts, including both HSAs and complementary CDB accounts, an increase of 13% compared to Q1 FY22.
    • The Company closed its acquisition of the HealthSavings HSA portfolio on March 2, 2022.

    DRAPER, Utah, June 06, 2022 (GLOBE NEWSWIRE) -- HealthEquity, Inc. (NASDAQ: HQY) ("HealthEquity" or the "Company"), the nation's largest health savings account ("HSA") non-bank custodian, today announced financial results for its first quarter ended April 30, 2022.

    "We started fiscal year 2023 with record new HSA sales for a first quarter and overall highs for Total HSA Assets, HSAs, Total Accounts, and quarterly revenue," said Jon Kessler, President and CEO of HealthEquity. "With the benefit of an improved economy and higher interest rates, we are off to a fast start for the fiscal year and are well-positioned to outpace the market and deliver strong revenue and adjusted EBITDA in fiscal 2023."

    First quarter financial results

    Revenue for the first quarter ended April 30, 2022 was $205.7 million, an increase of 12% compared to $184.2 million for the first quarter ended April 30, 2021. Revenue this quarter included: service revenue of $104.3 million, custodial revenue of $59.4 million, and interchange revenue of $42.0 million.

    HealthEquity reported a net loss of $13.6 million, or $0.16 per diluted share, and non-GAAP net income of $22.7 million, or $0.27 per diluted share, for the first quarter ended April 30, 2022. The Company reported a net loss of $2.6 million, or $0.03 per diluted share, and non-GAAP net income of $31.0 million, or $0.38 per diluted share, for the first quarter ended April 30, 2021.

    Adjusted EBITDA was $58.3 million for the first quarter ended April 30, 2022, a decrease of 1% compared to the first quarter ended April 30, 2021. Adjusted EBITDA was 28% of revenue, compared to 32% for the fiscal quarter ended April 30, 2021.

    Account and asset metrics

    HealthEquity reported sales of 159,000 new HSAs in the first quarter ended April 30, 2022, compared to 115,000 in the first quarter ended April 30, 2021. HSAs as of April 30, 2022 were 7.4 million, an increase of 26% year over year, including 506,000 HSAs with investments, an increase of 36% year over year. Total Accounts as of April 30, 2022 were 14.5 million, including 7.1 million other consumer-directed benefits ("CDBs").

    Total HSA Assets as of April 30, 2022 were $20.3 billion, an increase of 35% year over year. Total HSA Assets included $12.9 billion of HSA cash and $7.3 billion of HSA investments. Client-held funds, which are deposits held on behalf of our Clients to facilitate administration of our CDBs, and from which we generate custodial revenue, were $0.9 billion as of April 30, 2022.

    HealthSavings HSA portfolio acquisition

    In March 2022, we acquired the Health Savings Administrators, L.L.C., HSA portfolio, which consisted of $1.3 billion of HSA Assets held in approximately 87,000 HSAs, for a purchase price of $60 million in cash.

    Business outlook

    For the fiscal year ending January 31, 2023, management expects revenues of $827 million to $837 million. Its outlook for net loss is between $51 million and $43 million, resulting in net loss of $0.61 to $0.51 per diluted share. Its outlook for non-GAAP net income, calculated using the method described below, is between $103 million and $111 million, resulting in non-GAAP net income per diluted share of $1.23 to $1.32 (based on an estimated 84 million diluted weighted-average shares outstanding). Management expects Adjusted EBITDA of $249 million to $259 million.

    See “Non-GAAP financial information” below for definitions of our Adjusted EBITDA and non-GAAP net income. A reconciliation of the non-GAAP financial measures used throughout this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.

    Conference call

    HealthEquity management will host a conference call at 4:30 pm (Eastern Time) on Monday, June 6, 2022 to discuss the first quarter 2023 financial results. The conference call will be accessible by dialing 844-791-6252, or 661-378-9636 for international callers, and referencing conference ID 6370704. A live audio webcast of the call will also be available on the investor relations section of our website at http://ir.healthequity.com.

    Non-GAAP financial information

    To supplement our financial information presented on a GAAP basis, we disclose non-GAAP financial measures, including Adjusted EBITDA, non-GAAP net income, and non-GAAP net income per diluted share.

    • Adjusted EBITDA is adjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, amortization of incremental costs to obtain a contract, costs associated with unused office space, and certain other non-operating items.
    • Non-GAAP net income is calculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
    • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.

    Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. We believe that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the Company's financial condition and results of operations. The Company cautions investors that non-GAAP financial information, by its nature, departs from GAAP; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. In addition, while amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is not excluded. Whenever we use these non-GAAP financial measures, we provide a reconciliation of the applicable non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed in the tables below.

    About HealthEquity

    HealthEquity and its subsidiaries administer HSAs and other consumer-directed benefits for our more than 14 million accounts in partnership with employers, benefits advisors, and health and retirement plan providers who share our mission to connect health and wealth and value our culture of remarkable “Purple” service. For more information, visit www.healthequity.com.

    Forward-looking statements

    This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our industry, business strategy, plans, goals and expectations concerning our markets and market position, product expansion, future operations, expenses and other results of operations, revenue, margins, profitability, acquisition synergies, future efficiencies, tax rates, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “aims,” “anticipates,” “plans,” “estimates,” “expects,” “should,” “assumes,” “continues,” “could,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.

    Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to be correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, risks related to the following:

    • the impact of societal and economic changes arising out of the COVID-19 pandemic on the Company, its operations and its financial results;
    • our ability to realize the anticipated financial and other benefits from combining the operations of recent and future acquisitions with our business successfully;
    • our ability to compete effectively in a rapidly evolving healthcare and benefits administration industry;
    • our dependence on the continued availability and benefits of tax-advantaged health savings accounts and other consumer-directed benefits;
    • our ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets;
    • the significant competition we face and may face in the future, including from those with greater resources than us;
    • our reliance on the availability and performance of our technology and communications systems;
    • potential future cybersecurity breaches of our technology and communications systems and other data interruptions, including resulting costs and liabilities, reputational damage and loss of business;
    • the current uncertain healthcare environment, including changes in healthcare programs and expenditures and related regulations;
    • our ability to comply with current and future privacy, healthcare, tax, ERISA, investment adviser and other laws applicable to our business;
    • our reliance on partners and third-party vendors for distribution and important services;
    • our ability to develop and implement updated features for our technology and communications systems and successfully manage our growth;
    • our ability to protect our brand and other intellectual property rights; and
    • our reliance on our management team and key team members.

    For a detailed discussion of these and other risk factors, please refer to the risks detailed in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 and subsequent periodic and current reports. Past performance is not necessarily indicative of future results. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

    Investor Relations Contact
    Richard Putnam
    801-727-1209
    rputnam@healthequity.com



    HealthEquity, Inc. and its subsidiaries

    Condensed consolidated balance sheets

    (in thousands, except par value)April 30, 2022 January 31, 2022
     (unaudited)  
    Assets   
    Current assets   
    Cash and cash equivalents$161,247 $225,414
    Accounts receivable, net of allowance for doubtful accounts of $6,542 and $6,228 as of April
    30, 2022 and January 31, 2022, respectively
     86,003  87,428
    Other current assets 31,673  38,495
    Total current assets 278,923  351,337
    Property and equipment, net 21,003  23,372
    Operating lease right-of-use assets 62,599  63,613
    Intangible assets, net 1,007,864  973,137
    Goodwill 1,645,836  1,645,836
    Other assets 48,842  49,807
    Total assets$3,065,067 $3,107,102
    Liabilities and stockholders’ equity   
    Current liabilities   
    Accounts payable$13,661 $27,541
    Accrued compensation 33,405  47,136
    Accrued liabilities 47,840  57,589
    Current portion of long-term debt 10,938  8,750
    Operating lease liabilities 11,807  12,171
    Total current liabilities 117,651  153,187
    Long-term liabilities   
    Long-term debt, net 918,514  922,077
    Operating lease liabilities, non-current 64,344  65,232
    Other long-term liabilities 13,919  14,185
    Deferred tax liability 95,376  99,846
    Total long-term liabilities 1,092,153  1,101,340
    Total liabilities 1,209,804  1,254,527
    Commitments and contingencies   
    Stockholders’ equity   
    Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and
    outstanding as of April 30, 2022 and January 31, 2022, respectively
       
    Common stock, $0.0001 par value, 900,000 shares authorized, 84,365 and 83,780 shares
    issued and outstanding as of April 30, 2022 and January 31, 2022, respectively
     8  8
    Additional paid-in capital 1,692,835  1,676,508
    Accumulated earnings 162,420  176,059
    Total stockholders’ equity 1,855,263  1,852,575
    Total liabilities and stockholders’ equity$3,065,067 $3,107,102


    HealthEquity, Inc. and its subsidiaries

    Condensed consolidated statements of operations and comprehensive loss (unaudited)

     Three months ended April 30, 
    (in thousands, except per share data) 2022   2021 
    Revenue   
    Service revenue$104,348  $102,534 
    Custodial revenue 59,365   46,978 
    Interchange revenue 41,966   34,690 
    Total revenue 205,679   184,202 
    Cost of revenue   
    Service costs 80,874   70,632 
    Custodial costs 6,641   5,009 
    Interchange costs 6,991   5,445 
    Total cost of revenue 94,506   81,086 
    Gross profit 111,173   103,116 
    Operating expenses   
    Sales and marketing 16,560   14,086 
    Technology and development 45,183   35,469 
    General and administrative 23,727   20,687 
    Amortization of acquired intangible assets 23,698   19,814 
    Merger integration 9,294   8,807 
    Total operating expenses 118,462   98,863 
    Income (loss) from operations (7,289)  4,253 
    Other expense   
    Interest expense (10,461)  (6,689)
    Other expense, net (301)  (3,630)
    Total other expense (10,762)  (10,319)
    Loss before income taxes (18,051)  (6,066)
    Income tax benefit (4,412)  (3,451)
    Net loss and comprehensive loss$(13,639) $(2,615)
    Net loss per share:   
    Basic$(0.16) $(0.03)
    Diluted$(0.16) $(0.03)
    Weighted-average number of shares used in computing net loss per share:   
    Basic 84,022   81,747 
    Diluted 84,022   81,747 


    HealthEquity, Inc. and its subsidiaries

    Condensed consolidated statements of cash flows (unaudited)

     Three months ended April 30, 
    (in thousands) 2022   2021 
    Cash flows from operating activities:   
    Net loss$(13,639) $(2,615)
    Adjustments to reconcile net loss to net cash provided by operating activities:   
    Depreciation and amortization 39,486   31,768 
    Stock-based compensation 13,986   12,799 
    Amortization of debt discount and issuance costs 812   1,228 
    Other non-cash items    893 
    Deferred taxes (4,470)  3,243 
    Changes in operating assets and liabilities:   
    Accounts receivable, net 1,425   (475)
    Other assets 7,317   2,249 
    Operating lease right-of-use assets 2,034   3,369 
    Accrued compensation (13,731)  (17,748)
    Accounts payable, accrued liabilities, and other current liabilities (24,056)  (381)
    Operating lease liabilities, non-current (1,821)  (2,308)
    Other long-term liabilities (266)  (1,104)
    Net cash provided by operating activities 7,077   30,918 
    Cash flows from investing activities:   
    Purchases of software and capitalized software development costs (13,635)  (15,469)
    Purchases of property and equipment (1,155)  (2,490)
    Acquisition of intangible member assets (59,413)  (309)
    Acquisitions, net of cash acquired    (49,533)
    Net cash used in investing activities (74,203)  (67,801)
    Cash flows from financing activities:   
    Principal payments on long-term debt (2,187)  (15,625)
    Settlement of client-held funds obligation, net 2,335   (353)
    Proceeds from exercise of common stock options 2,811   4,189 
    Proceeds from follow-on equity offering, net of payments for offering costs    456,642 
    Net cash provided by financing activities 2,959   444,853 
    Increase (decrease) in cash and cash equivalents (64,167)  407,970 
    Beginning cash and cash equivalents 225,414   328,803 
    Ending cash and cash equivalents$161,247  $736,773 


    HealthEquity, Inc. and its subsidiaries

    Condensed consolidated statements of cash flows (unaudited) (continued)

     Three months ended April 30,
     
    (in thousands) 2022  2021 
    Supplemental cash flow data:   
    Interest expense paid in cash$15,496 $4,988 
    Income tax payments (refunds), net 55  (4,852)
    Supplemental disclosures of non-cash investing and financing activities:   
    Purchases of software and capitalized software development costs included in accounts
    payable, accrued liabilities, or accrued compensation
     2,917  3,982 
    Purchases of property and equipment included in accounts payable or accrued liabilities 1,165  765 
    Purchases of intangible member assets included in accounts payable or accrued liabilities 1,305   
    Contingent consideration recognized at acquisition   8,147 
    Exercise of common stock options receivable   5 

    Stock-based compensation expense (unaudited)

    Total stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss is as follows:

     Three months ended April 30,
    (in thousands) 2022  2021
    Cost of revenue$3,007 $2,403
    Sales and marketing 2,014  2,188
    Technology and development 3,380  3,013
    General and administrative 5,585  5,195
    Other expense, net (1)   342
    Total stock-based compensation expense$13,986 $13,141

    (1)  Equity-based awards exchanged for cash in connection with the Luum acquisition.

    Total Accounts (unaudited)

    (in thousands, except percentages)April 30, 2022 April 30, 2021 % Change January 31, 2022
    HSAs7,359 5,846 26% 7,207
    New HSAs from sales - Quarter-to-date159 115 38% 472
    New HSAs from sales - Year-to-date159 115 38% 918
    New HSAs from acquisitions - Year-to-date90  n/a   740
    HSAs with investments506 371 36% 455
    CDBs7,095 6,986 2% 7,192
    Total Accounts14,454 12,832 13% 14,399
    Average Total Accounts - Quarter-to-date14,427 12,870 12% 14,326
    Average Total Accounts - Year-to-date14,427 12,870 12% 13,450


    HSA Assets (unaudited)

    (in millions, except percentages)April 30, 2022 April 30, 2021 % Change January 31, 2022
    HSA cash$12,935 $10,026 29% $12,943
    HSA investments 7,330  4,987 47%  6,675
    Total HSA Assets 20,265  15,013 35%  19,618
    Average daily HSA cash - Year-to-date 12,910  10,051 28%  10,579
    Average daily HSA cash - Quarter-to-date 12,910  10,051 28%  12,118


    Client-held funds (unaudited)

    (in millions, except percentages)April 30, 2022 April 30, 2021 % Change January 31, 2022
    Client-held funds$872 $903 (3) % $897
    Average daily Client-held funds - Year-to-date 865  899 (4) %  842
    Average daily Client-held funds - Quarter-to-date 865  899 (4) %  822


    Reconciliation of net loss to Adjusted EBITDA (unaudited)

     Three months ended April 30,
     
    (in thousands) 2022   2021 
    Net loss$(13,639) $(2,615)
    Interest income (52)  (408)
    Interest expense 10,461   6,689 
    Income tax benefit (4,412)  (3,451)
    Depreciation and amortization 15,788   11,954 
    Amortization of acquired intangible assets 23,698   19,814 
    Stock-based compensation expense 13,986   12,799 
    Merger integration expenses 9,294   8,807 
    Acquisition costs (1) 6   5,939 
    Amortization of incremental costs to obtain a contract 1,067   1,272 
    Costs associated with unused office space 1,294    
    Other 844   (1,826)
    Adjusted EBITDA$58,335  $58,974 

    (1)   For the three months ended April 30, 2021, acquisition costs included $0.3 million of stock-based compensation expense.

    Reconciliation of net loss outlook to Adjusted EBITDA outlook (unaudited)

     Outlook for the year ending
    (in millions)January 31, 2023
    Net loss$(51) - (43)
    Interest expense43
    Income tax benefit(17) - (15)
    Depreciation and amortization64
    Amortization of acquired intangible assets97
    Stock-based compensation expense73
    Merger integration expenses31
    Amortization of incremental costs to obtain a contract4
    Costs associated with unused office space5
    Adjusted EBITDA$249 - 259


    Reconciliation of net loss to non-GAAP net income (unaudited)

     Three months ended April 30, 
    (in thousands, except per share data) 2022   2021 
    Net loss$(13,639) $(2,615)
    Income tax benefit (4,412)  (3,451)
    Loss before income taxes - GAAP (18,051)  (6,066)
    Non-GAAP adjustments:   
    Amortization of acquired intangible assets 23,698   19,814 
    Stock-based compensation expense 13,986   12,799 
    Merger integration expenses 9,294   8,807 
    Acquisition costs 6   5,939 
    Costs associated with unused office space 1,294    
    Total adjustments to loss before income taxes - GAAP 48,278   47,359 
    Income before income taxes - Non-GAAP 30,227   41,293 
    Income tax provision - Non-GAAP (1) 7,557   10,323 
    Non-GAAP net income 22,670   30,970 
        
    Diluted weighted-average shares 84,022   81,747 
    Non-GAAP net income per diluted share$0.27  $0.38 

    (1)  The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each period presented was 25%. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

    Reconciliation of net loss outlook to non-GAAP net income outlook (unaudited)

     Outlook for the year ending
    (in millions, except per share data)January 31, 2023
    Net loss$(51) - (43)
    Income tax benefit(17) - (15)
    Loss before income taxes - GAAP(68) - (58)
    Non-GAAP adjustments: 
    Amortization of acquired intangible assets97
    Stock-based compensation expense73
    Merger integration expenses31
    Costs associated with unused office space5
    Total adjustments to loss before income taxes - GAAP206
    Income before income taxes - Non-GAAP138 - 148
    Income tax provision - Non-GAAP (1)35 - 37
    Non-GAAP net income103 - 111
      
    Diluted weighted-average shares84
    Non-GAAP net income per diluted share (2)$1.23 - 1.32

    (1) The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each period presented was 25%. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

    (2) Non-GAAP net income per diluted share may not calculate due to rounding of non-GAAP net income and diluted weighted-average shares.


    Certain terms

    TermDefinition
    HSAA financial account through which consumers spend and save long-term for healthcare on a tax-advantaged basis.
    CDBConsumer-directed benefits offered by employers, including flexible spending and health reimbursement arrangements (“FSAs” and “HRAs”), Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration, commuter and other benefits.
    HSA memberConsumers with HSAs that we serve.
    Total HSA AssetsHSA members’ custodial cash assets held by our federally insured depository partners and our insurance company partners. Total HSA Assets also includes HSA members' investments in mutual funds through our custodial investment fund partner.
    ClientOur employer clients.
    Total AccountsThe sum of HSAs and CDBs on our platforms.
    Client-held fundsDeposits held on behalf of our Clients to facilitate administration of our CDBs.
    Network PartnerOur health plan partners, benefits administrators, and retirement plan recordkeepers.
    Adjusted EBITDAAdjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, amortization of incremental costs to obtain a contract, costs associated with unused office space, and certain other non-operating items.
    Non-GAAP net incomeCalculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
    Non-GAAP net income per diluted shareCalculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.


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