• HealthEquity Reports Third Quarter Ended October 31, 2021 Financial Results

    Source: Nasdaq GlobeNewswire / 06 Dec 2021 16:01:00   America/New_York

    Highlights of the third quarter include:

    • Revenue of $180.0 million, an increase of less than one percent compared to $179.4 million in Q3 FY21.
    • Net loss of $5.0 million, compared to net income of $1.8 million in Q3 FY21, with non-GAAP net income of $28.9 million, a decrease of 10% compared to $32.2 million in Q3 FY21.
    • Net loss per diluted share of $0.06, compared to net income per diluted share of $0.02 in Q3 FY21, with non-GAAP net income per diluted share of $0.35, compared to $0.41 in Q3 FY21.
    • Adjusted EBITDA of $61.1 million, the same as in Q3 FY21.
    • 6.2 million HSAs, an increase of 14% compared to Q3 FY21.
    • Total HSA Assets of $16.4 billion, an increase of 32% compared to Q3 FY21.
    • 13.3 million Total Accounts, including both HSAs and complementary CDB accounts, an increase of 6% compared to Q3 FY21.
    • The Company closed its acquisition of the Fifth Third Bank HSA portfolio on September 29, 2021 and its acquisition of Further on November 1, 2021.
    • The Company issued $600 million aggregate principal amount of 4.50% Senior Notes due 2029 and refinanced its credit facility.

    DRAPER, Utah, Dec. 06, 2021 (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 third quarter ended October 31, 2021.

    "The HealthEquity team delivered another strong quarter of HSA growth, with new HSA sales of 151,000 in the third quarter and 446,000 in the year to date," said Jon Kessler, President and CEO of HealthEquity. "Adding to this year’s strong organic growth, we have on-boarded 160,000 new HSAs from Fifth Third Bank in the third quarter and 580,000 from Further in November to start our fourth quarter. HSA members have added nearly another $1 billion to their HSAs this quarter, and their HSA investments have grown significantly. We believe we are poised for a strong finish to this year’s selling season, continuing to outpace market growth."

    Third quarter financial results

    Revenue for the third quarter ended October 31, 2021 was $180.0 million, an increase of less than one percent compared to $179.4 million for the third quarter ended October 31, 2020. Revenue this quarter included: service revenue of $102.7 million, custodial revenue of $49.0 million, and interchange revenue of $28.2 million.

    HealthEquity reported a net loss of $5.0 million, or $0.06 per diluted share, and non-GAAP net income of $28.9 million, or $0.35 per diluted share, for the third quarter ended October 31, 2021. The Company reported net income of $1.8 million, or $0.02 per diluted share, and non-GAAP net income of $32.2 million, or $0.41 per diluted share, for the third quarter ended October 31, 2020.

    Adjusted EBITDA was $61.1 million for the third quarter ended October 31, 2021, the same as in the third quarter ended October 31, 2020. Adjusted EBITDA was 34% of revenue for each of the third quarters ended October 31, 2021 and 2020.

    Account and asset metrics

    HealthEquity reported sales of 151,000 new HSAs in the third quarter ended October 31, 2021, compared to 104,000 in the third quarter ended October 31, 2020. HSAs as of October 31, 2021 were approximately 6.2 million, an increase of 14% year over year, including 431,000 HSAs with investments, an increase of 43% year over year. Total Accounts as of October 31, 2021 were 13.3 million, including 7.1 million other consumer-directed benefits ("CDBs").

    Total HSA Assets as of October 31, 2021 were $16.4 billion, an increase of 32% year over year. Total HSA Assets included $10.5 billion of HSA cash and $6.0 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 $0.8 billion as of October 31, 2021.

    HealthSavings HSA portfolio acquisition

    HealthEquity also announced it has entered into a definitive agreement with Health Savings Administrators, L.L.C. (“HealthSavings”) to transition the custody of HealthSavings’ HSA portfolio to HealthEquity. The definitive agreement provides a $60 million purchase price for nearly $1.3 billion of HSA assets held in approximately 87,000 HSAs. Given that a significant portion of the HSA assets are currently invested, HealthSavings and HealthEquity are working closely to coordinate an in-kind transfer of most of the invested assets. The transition of HealthSavings’ HSAs to the HealthEquity platform is expected to be completed in the first quarter of fiscal 2023. Willkie Farr & Gallagher LLP is serving as legal advisor to HealthEquity. HealthSavings has engaged Raymond James & Associates, Inc. as financial advisor and Ellenoff Grossman & Schole LLP as its legal advisor.

    WageWorks integration

    HealthEquity completed its acquisition of WageWorks on August 30, 2019. As of October 31, 2021, we have achieved approximately $75 million of the approximately $80 million in annualized ongoing net synergies we expect to achieve by the end of fiscal year 2022.

    Business outlook

    For the fiscal year ending January 31, 2022, management expects revenues of $750 million to $755 million. Its outlook for net loss is between $36 million and $33 million, resulting in net loss of $0.43 to $0.40 per diluted share. Its outlook for non-GAAP net income, calculated using the method described below, is between $108 million and $112 million, resulting in non-GAAP net income per diluted share of $1.30 to $1.35 (based on an estimated 83 million diluted weighted-average shares outstanding). Management expects Adjusted EBITDA of $230 million to $235 million. This outlook includes the impact of the Fifth Third Bank HSA portfolio, which closed on September 29, 2021, and the Further acquisition, which closed on November 1, 2021. This outlook also includes the impact of the $600 million aggregate principal amount of 4.50% Senior Notes due 2029 and the refinanced credit facility.

    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, December 6, 2021 to discuss the third quarter 2022 financial results. The conference call will be accessible by dialing 844-791-6252, or 661-378-9636 for international callers, and referencing conference ID 5354046. 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, and other certain 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, 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 13 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 the ongoing 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 WageWorks and Further with our business in an efficient and effective manner;
    • our ability to integrate the Further 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;
    • recent and 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, 2021 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)October 31, 2021 January 31, 2021
     (unaudited)  
    Assets   
    Current assets   
    Cash and cash equivalents$649,129  $328,803 
    Accounts receivable, net of allowance for doubtful accounts of $6,063 and $4,239 as of October 31, 2021 and January 31, 2021, respectively84,083  72,767 
    Other current assets30,919  58,607 
    Total current assets764,131  460,177 
    Property and equipment, net24,930  29,106 
    Operating lease right-of-use assets81,150  89,508 
    Intangible assets, net820,946  767,003 
    Goodwill1,363,549  1,327,193 
    Other assets44,908  37,420 
    Total assets$3,099,614  $2,710,407 
    Liabilities and stockholders’ equity   
    Current liabilities   
    Accounts payable$5,244  $1,614 
    Accrued compensation32,695  50,670 
    Accrued liabilities49,879  75,880 
    Current portion of long-term debt6,563  62,500 
    Operating lease liabilities12,693  14,037 
    Total current liabilities107,074  204,701 
    Long-term liabilities   
    Long-term debt, net923,501  924,217 
    Operating lease liabilities, non-current67,836  74,224 
    Other long-term liabilities18,953  8,808 
    Deferred tax liability110,400  119,729 
    Total long-term liabilities1,120,690  1,126,978 
    Total liabilities1,227,764  1,331,679 
    Commitments and contingencies   
    Stockholders’ equity   
    Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively—  — 
    Common stock, $0.0001 par value, 900,000 shares authorized, 83,586 and 77,168 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively8  8 
    Additional paid-in capital1,662,965  1,158,372 
    Accumulated earnings208,877  220,348 
    Total stockholders’ equity1,871,850  1,378,728 
    Total liabilities and stockholders’ equity$3,099,614  $2,710,407 


    HealthEquity, Inc. and its subsidiaries
    Condensed consolidated statements of operations and comprehensive income (loss) (unaudited)

     Three months ended October 31, Nine months ended October 31,
    (in thousands, except per share data)2021 2020 2021 2020
    Revenue       
    Service revenue$102,733  $104,562  $314,449  $319,638 
    Custodial revenue49,006  48,544  144,760  142,352 
    Interchange revenue28,215  26,245  94,050  83,411 
    Total revenue179,954  179,351  553,259  545,401 
    Cost of revenue       
    Service costs66,217  65,936  204,183  202,195 
    Custodial costs5,734  4,762  15,567  14,805 
    Interchange costs4,683  4,095  15,102  13,985 
    Total cost of revenue76,634  74,793  234,852  230,985 
    Gross profit103,320  104,558  318,407  314,416 
    Operating expenses       
    Sales and marketing12,726  12,880  42,288  36,502 
    Technology and development38,070  30,758  111,437  92,490 
    General and administrative20,004  22,099  63,503  61,590 
    Amortization of acquired intangible assets19,642  19,126  59,745  56,905 
    Merger integration13,244  8,193  38,422  31,328 
    Total operating expenses103,686  93,056  315,395  278,815 
    Income (loss) from operations(366) 11,502  3,012  35,601 
    Other expense       
    Interest expense(11,881) (6,952) (25,824) (28,110)
    Other income (expense), net3,122  (421) (164) (2,009)
    Total other expense(8,759) (7,373) (25,988) (30,119)
    Income (loss) before income taxes(9,125) 4,129  (22,976) 5,482 
    Income tax provision (benefit)(4,087) 2,340  (11,505) 2,015 
    Net income (loss) and comprehensive income (loss)$(5,038) $1,789  $(11,471) $3,467 
    Net income (loss) per share:       
    Basic$(0.06) $0.02  $(0.14) $0.05 
    Diluted$(0.06) $0.02  $(0.14) $0.05 
    Weighted-average number of shares used in computing net income (loss) per share:       
    Basic83,551  76,701  82,939  73,358 
    Diluted83,551  77,845  82,939  74,665 


    HealthEquity, Inc. and its subsidiaries
    Condensed consolidated statements of cash flows (unaudited)

     Nine months ended October 31,
    (in thousands) 2021   2020 
    Cash flows from operating activities:   
    Net income (loss)$(11,471) $3,467 
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
    Depreciation and amortization98,364  85,485 
    Stock-based compensation41,700  30,313 
    Amortization of debt discount and issuance costs3,616  3,818 
    Loss on extinguishment of debt4,044  — 
    Change in fair value of contingent consideration(2,147) — 
    Other non-cash items(750) 1,727 
    Deferred taxes(8,765) (973)
    Changes in operating assets and liabilities:   
    Accounts receivable, net(10,090) 8,063 
    Other assets19,888  3,309 
    Operating lease right-of-use assets8,944  8,344 
    Accrued compensation(18,098) (15,251)
    Accounts payable, accrued liabilities, and other current liabilities(34,023) (7,936)
    Operating lease liabilities, non-current(6,808) (8,361)
    Other long-term liabilities6,034  8,712 
    Net cash provided by operating activities90,438  120,717 
    Cash flows from investing activities:   
    Acquisitions, net of cash acquired(49,533) — 
    Purchases of software and capitalized software development costs(49,033) (37,242)
    Purchases of property and equipment(7,284) (11,388)
    Acquisition of intangible member assets(64,463) (28,100)
    Proceeds from sale of equity securities2,367  — 
    Net cash used in investing activities(167,946) (76,730)
    Cash flows from financing activities:   
    Principal payments on long-term debt(1,003,125) (223,438)
    Proceeds from issuance of long-term debt950,000  — 
    Payment of debt issuance costs(11,846) — 
    Proceeds from follow-on equity offering, net of payments for offering costs456,642  286,779 
    Settlement of client-held funds obligation, net(1,565) (4,189)
    Proceeds from exercise of common stock options7,728  4,491 
    Net cash provided by financing activities397,834  63,643 
    Increase in cash and cash equivalents320,326  107,630 
    Beginning cash and cash equivalents328,803  191,726 
    Ending cash and cash equivalents$649,129  $299,356 


    HealthEquity, Inc. and its subsidiaries
    Condensed consolidated statements of cash flows (unaudited) (continued)

     Nine months ended October 31,
    (in thousands)2021 2020
    Supplemental cash flow data:   
    Interest expense paid in cash$13,685  $22,849 
    Income tax payments (refunds), net(5,926) 1,053 
    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 compensation3,708  1,346 
    Purchases of property and equipment included in accounts payable or accrued liabilities479  167 
    Purchases of intangible member assets included in accounts payable or accrued liabilities2,281  289 
    Contingent consideration recognized at acquisition8,147  — 
    Exercise of common stock options receivable1  89 
    Decrease in goodwill due to measurement period adjustments, net19  5,838 


    Stock-based compensation expense (unaudited)

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

     Three months ended October 31, Nine months ended October 31,
    (in thousands) 2021   2020   2021   2020 
    Cost of revenue$3,076  $2,209  $8,547  $5,737 
    Sales and marketing829  2,035  5,677  4,810 
    Technology and development3,458  2,641  10,164  8,051 
    General and administrative5,921  4,594  17,312  11,715 
    Other expense (1)—  —  342  — 
    Total stock-based compensation expense$13,284  $11,479  $42,042  $30,313 

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


    Total Accounts (unaudited)

    (in thousands, except percentages)October 31, 2021 October 31, 2020 % Change January 31, 2021
    HSAs6,241  5,460  14% 5,782 
    New HSAs from sales - Quarter-to-date151  104  45% 370 
    New HSAs from sales - Year-to-date446  317  41% 687 
    New HSAs from acquisitions - Year-to-date160  —  n/a  — 
    HSAs with investments431  302  43% 333 
    CDBs7,085  7,060  0% 7,028 
    Total Accounts13,326  12,520  6% 12,810 
    Average Total Accounts - Quarter-to-date13,247  12,084  10% 12,659 
    Average Total Accounts - Year-to-date13,158  12,429  6% 12,604 


    HSA Assets (unaudited)

    (in millions, except percentages)October 31, 2021 October 31, 2020 % Change January 31, 2021
    HSA cash with yield (1)$10,410  $8,759  19 % $9,875 
    HSA cash without yield (2)59  258  (77)% 244 
                 
    Total HSA cash10,469  9,017  16 % 10,119 
    HSA investments with yield (1)5,900  3,255  81 % 4,078 
    HSA investments without yield (2)59  168  (65)% 138 
    Total HSA investments5,959  3,423  74 % 4,216 
    Total HSA Assets16,428  12,440  32 % 14,335 
    Average daily HSA cash with yield - Year-to-date9,925  8,445  18 % 8,599 
    Average daily HSA cash with yield - Quarter-to-date$10,099  $8,672  16 % $9,060 

    (1)   HSA Assets that generate custodial revenue.

    (2)   HSA Assets that do not generate custodial revenue.


    Client-held funds (unaudited)

    (in millions, except percentages)October 31, 2021 October 31, 2020 % Change January 31, 2021
    Client-held funds (1)$811  $798  2 % $986 
    Average daily Client-held funds - Year-to-date (1)849  847  — % 847 
    Average daily Client-held funds - Quarter-to-date (1)796  819  (3)% 848 

    (1)   Client-held funds that generate custodial revenue.


    Net income (loss) reconciliation to Adjusted EBITDA (unaudited)

     Three months ended October 31, Nine months ended October 31,
    (in thousands) 2021   2020   2021   2020 
    Net income (loss)$(5,038) $1,789  $(11,471) $3,467 
    Interest income(478) (174) (1,419) (850)
    Interest expense11,881  6,952  25,824  28,110 
    Income tax provision (benefit)(4,087) 2,340  (11,505) 2,015 
    Depreciation and amortization13,904  10,253  38,619  28,580 
    Amortization of acquired intangible assets19,642  19,126  59,745  56,905 
    Stock-based compensation expense13,284  11,479  41,700  30,313 
    Merger integration expenses13,244  8,193  38,422  31,328 
    Acquisition costs (gains) (1)(2,687) 13  4,917  79 
    Gain on equity securities—  —  (1,677) — 
    Other (2)1,422  1,168  2,421  4,202 
    Adjusted EBITDA$61,087  $61,139  $185,576  $184,149 

    (1)   For the nine months ended October 31, 2021, acquisition costs included $0.3 million of stock-based compensation expense.

    (2)   For the three months ended October 31, 2021, other consisted of amortization of incremental costs to obtain a contract of $0.8 million and other expenses, net, of $0.6 million. For the three months ended October 31, 2020, other consisted of amortization of incremental costs to obtain a contract of $0.6 million and other expenses, net, of $0.6 million. For the nine months ended October 31, 2021, other consisted of amortization of incremental costs to obtain a contract of $3.5 million, partially offset by other income, net, of $1.0 million. For the nine months ended October 31, 2020, other consisted of amortization of incremental costs to obtain a contract of $1.4 million and other expenses, net, of $2.8 million.


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

     Outlook for the year ending
    (in millions)January 31, 2022
    Net loss$(36) - (33) 
    Interest income(2) 
    Interest expense36 
    Income tax benefit(16) - (14) 
    Depreciation and amortization53 
    Amortization of acquired intangible assets84 
    Stock-based compensation expense57 
    Merger integration expenses48 
    Other expense6 
    Adjusted EBITDA$230 - 235 


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

     Three months ended October 31, Nine months ended October 31, Outlook for the year ending
    (in millions, except per share data)2021 2020 2021 2020 January 31, 2022
    Net income (loss)$(5) $2  $(11) $3  $(36) - (33) 
    Income tax provision (benefit)(4) 2  (12) 2  (16) - (14) 
    Income (loss) before income taxes - GAAP(9) 4  (23) 5  (52) - (47) 
    Non-GAAP adjustments:          
    Amortization of acquired intangible assets20  19  60  57  84 
    Stock-based compensation expense13  12  42  30  57 
    Merger integration expenses13  8  38  32  48 
    Acquisition costs (gains)(2) —  5  —  5 
    Gain on equity securities—  —  (2) —  (2) 
    Loss on extinguishment of debt4  —  4  —  4 
    Total adjustments to income (loss) before income taxes - GAAP48  39  147  119  196 
    Income before income taxes - Non-GAAP39  43  124  124  144 - 149 
    Income tax provision - Non-GAAP (1)10  11  31  31  36 - 37 
    Non-GAAP net income29  32  93  93  108 - 112 
               
    Diluted weighted-average shares84  78  83  75  83 
    Non-GAAP net income per diluted share (2)$0.35  $0.41  $1.12  $1.25  $1.30 - 1.35 

    (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

    Term Definition
    HSA A financial account through which consumers spend and save long-term for healthcare on a tax-advantaged basis.
    CDB Consumer-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 member Consumers with HSAs that we serve.
    Total HSA Assets HSA members' deposits with our federally insured custodial depository partners and custodial cash placed in annuity contracts with our insurance company partners. Total HSA Assets also includes HSA members' investments in mutual funds through our custodial investment fund partner.
    Client Our employer clients.
    Total Accounts The sum of HSAs and CDBs on our platforms.
    Client-held funds Deposits held on behalf of our Clients to facilitate administration of our CDBs.
    Network Partner Our health plan partners, benefits administrators, and retirement plan recordkeepers.
    Adjusted EBITDA 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, and other certain non-operating items.
    Non-GAAP net income 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, 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 Calculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.


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