HealthEquity, Inc. (NASDAQ: HQY) ("HealthEquity" or the "Company"),
the nation's largest health savings account ("HSA") custodian,
today announced HSAs, HSA Assets and Total Accounts as of its
fiscal year ended January 31, 2024. The Company also updated
its previously announced FY24 guidance, affirmed its FY25 guidance,
provided an updated HSA cash repricing schedule, and provided
information about its upcoming Investor Day conference.
The total number of HSAs as of January 31, 2024, was 8.7
million, an increase of 9%, from 8.0 million as of January 31,
2023. The Company closed its fiscal year 2024 with 15.7 million
Total Accounts, an increase of 5%, from 14.9 million as of
January 31, 2023. HSA Assets grew to $25.2 billion as of
January 31, 2024, an increase of 14% from $22.1 billion a year
earlier.
“For the fourth quarter, Team Purple set records for organic
growth in both new HSAs from sales and Total HSA Assets, as
investments in digital education and other innovations continue to
pay off,” said President and CEO Jon Kessler.
“This strong fourth quarter sales performance provides
management the ability to raise and narrow guidance for fiscal
2024, maintain and reaffirm our fiscal 2025 outlook and layout
intermediate profit goals despite declining benchmark treasury
rates over the past three months,” said James Lucania, Executive
Vice President and CFO. “Our goal is to double non-GAAP net income
per share over the next three fiscal years as HSA cash yields
continue to rise and margins continue to expand.”
Total Accounts (unaudited)
(in thousands, except percentages) |
January 31, 2024 |
|
January 31, 2023 |
|
% Change |
HSAs |
8,692 |
|
7,984 |
|
9 |
% |
New HSAs from sales -
Quarter-to-date |
497 |
|
445 |
|
12 |
% |
New HSAs from sales -
Year-to-date |
949 |
|
971 |
|
(2 |
)% |
New HSAs from acquisitions -
Year-to-date |
— |
|
90 |
|
(100 |
)% |
HSAs with investments |
610 |
|
541 |
|
13 |
% |
CDBs |
7,006 |
|
6,933 |
|
1 |
% |
Total Accounts |
15,698 |
|
14,917 |
|
5 |
% |
Average Total Accounts -
Quarter-to-date |
15,318 |
|
14,677 |
|
4 |
% |
Average
Total Accounts - Year-to-date |
15,105 |
|
14,531 |
|
4 |
% |
HSA Assets (unaudited)
(in millions, except percentages) |
January 31, 2024 |
|
January 31, 2023 |
|
% Change |
HSA cash |
$ |
15,006 |
|
$ |
14,199 |
|
6 |
% |
HSA investments |
|
10,208 |
|
|
7,947 |
|
28 |
% |
Total HSA Assets |
|
25,214 |
|
|
22,146 |
|
14 |
% |
Average daily HSA cash -
Year-to-date |
|
14,071 |
|
|
13,049 |
|
8 |
% |
Average
daily HSA cash - Quarter-to-date |
|
14,210 |
|
|
13,375 |
|
6 |
% |
The following table summarizes the amount of HSA cash expected
to reprice by fiscal year and the respective average annualized
yield as of January 31, 2024:
Year ending January 31, (in billions, except
percentages) |
HSA cash expected to reprice |
|
Average annualized yield |
2025 |
$ |
2.1 |
|
3.6 |
% |
2026 |
|
3.5 |
|
1.6 |
% |
2027 |
|
3.2 |
|
1.6 |
% |
2028 |
|
1.9 |
|
3.8 |
% |
Thereafter |
|
3.6 |
|
3.5 |
% |
Total (1) |
$ |
14.3 |
|
2.7 |
% |
(1) Excludes $0.7 billion of HSA cash held in
floating-rate contracts as of January 31, 2024. BenefitWallet
HSA assets and any subsequent growth in HSA cash are also
excluded.
Business outlook
For the fiscal year ended January 31, 2024, the Company
revised its previously provided outlook as follows:
- Revenue in the range
of $995 million to $1 billion;
- Net income in the
range of $49 million to $52 million;
- Net income per
diluted share in the range of $0.56 to $0.60;
- Adjusted EBITDA in
the range of $364 million to $369 million;
- Non-GAAP net income
in the range of $191 million to $195 million; and
- Non-GAAP net income
per diluted share in the range of $2.20 to $2.24 (based on an
estimated 87 million diluted weighted-average shares
outstanding).
For the fiscal year ending January 31, 2025, the Company
affirmed its previously provided outlook, which assumes an average
annualized yield on HSA cash of approximately 3%, as follows:
- Revenue in the range
of $1.140 billion to $1.160 billion;
- Adjusted EBITDA in
the range of 38% to 39% of revenue.
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 in our business outlook for the
fiscal year ended January 31, 2024 to the most comparable GAAP
financial measures is included with the financial tables at the end
of this release. Reconciliations to net income, the most directly
comparable GAAP measure, of our Adjusted EBITDA outlook for the
fiscal year ending January 31, 2025 and our non-GAAP net income per
share goal for the fiscal year ending January 31, 2027 are not
included, because our net income outlook for these future periods
is not available without unreasonable efforts as we are unable to
predict the ultimate outcome of certain significant items excluded
from these non-GAAP measures (such as depreciation and
amortization, stock-based compensation expense, and income tax
provision).
HealthEquity Investor Day 2024
The Company’s management team plans to present and meet with
investors at its Investor Day conference, which will be held at the
Company’s headquarters on February 22, 2024, from 9:00 AM to 1:00
PM MST and will be available at https://hqyinvestorday.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 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 15 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:
- our acquisition of
the BenefitWallet HSA portfolio may not be consummated, and if
consummated, we may not realize the expected benefits;
- our ability to adequately place and
safeguard our custodial assets, or the failure of any of our
depository or insurance company partners;
- 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 HSAs and other
CDBs;
- 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 platforms and communications
systems; 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, 2023, our Quarterly Report on Form 10-Q for the quarter ended
October 31, 2023, 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 ContactRichard
Putnam801-727-1000rputnam@healthequity.com
Reconciliation of net income outlook to Adjusted EBITDA
outlook (unaudited)
|
Outlook for the year ending |
(in millions) |
January 31, 2024 |
Net income |
$49 - 52 |
Interest income |
(12) |
Interest expense |
55 |
Income tax provision |
22 - 24 |
Depreciation and amortization |
60 |
Amortization of acquired intangible assets |
93 |
Stock-based compensation expense |
77 |
Merger integration expenses |
10 |
Amortization of incremental costs to obtain a contract |
5 |
Costs associated with unused office space |
4 |
Other expense |
1 |
Adjusted EBITDA |
$364 - 369 |
Reconciliation of net income outlook to non-GAAP net
income outlook (unaudited)
|
Outlook for the year ending |
(in millions, except per share data) |
January 31, 2024 |
Net income |
$49 - 52 |
Income tax provision |
22 - 24 |
Income before income taxes -
GAAP |
71 - 76 |
Non-GAAP adjustments: |
|
Amortization of acquired intangible assets |
93 |
Stock-based compensation expense |
77 |
Merger integration expenses |
10 |
Costs associated with unused office space |
4 |
Total adjustments to income
before income taxes - GAAP |
184 |
Income before income taxes -
Non-GAAP |
255 - 260 |
Income tax provision -
Non-GAAP (1) |
64 - 65 |
Non-GAAP net income |
$191 - 195 |
|
|
Diluted weighted-average
shares |
87 |
GAAP net income per diluted
share |
$0.56 - 0.60 |
Non-GAAP net income per diluted share (2) |
$2.20 - 2.24 |
(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’ 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. |
Total Accounts |
The sum of HSAs and CDBs on our
platforms. |
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, amortization of incremental costs to obtain a
contract, costs associated with unused office space, and certain
other 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, 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 |
Calculated by dividing non-GAAP net income by diluted
weighted-average shares outstanding. |
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