HealthEquity, Inc. (NASDAQ: HQY) ("HealthEquity" or the "Company"),
the nation's largest health savings account ("HSA") custodian,
today announced financial results for its third quarter ended
October 31, 2023.
"Team Purple delivered another quarter of year-over-year
double-digit revenue growth plus margin expansion," said Jon
Kessler, President and CEO of HealthEquity. "Our outlook reflects
our ability to sustain that trend by remaining focused, together
with our partners and clients, on the needs of the healthcare
consumer."
Third quarter financial
results
Revenue for the third quarter ended October 31, 2023 was
$249.2 million, an increase of 15% compared to
$216.1 million for the third quarter ended October 31,
2022. Revenue this quarter included: service revenue of
$107.5 million, custodial revenue of $106.6 million, and
interchange revenue of $35.1 million.
HealthEquity reported net income of $14.7 million, or $0.17
per diluted share, and non-GAAP net income of $52.2 million,
or $0.60 per diluted share, for the third quarter ended
October 31, 2023. The Company reported a net loss of
$1.6 million, or $0.02 per diluted share, and non-GAAP net
income of $32.4 million, or $0.38 per diluted share, for the
third quarter ended October 31, 2022.
Adjusted EBITDA was $95.6 million for the third quarter
ended October 31, 2023, an increase of 30% compared to the
third quarter ended October 31, 2022. Adjusted EBITDA was 38%
of revenue, compared to 34% for the third quarter ended
October 31, 2022.
Account and asset metrics
HSAs as of October 31, 2023 were 8.3 million, an
increase of 8% year over year, including 592,000 HSAs with
investments, an increase of 12% year over year. Total Accounts as
of October 31, 2023 were 15.3 million, including
7.0 million other consumer-directed benefits ("CDBs").
Total HSA Assets as of October 31, 2023 were
$22.6 billion, an increase of 12% year over year. Total HSA
Assets included $14.0 billion of HSA cash and
$8.6 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, 2023.
BenefitWallet HSA portfolio acquisition
On September 18, 2023, we signed an agreement to acquire the
BenefitWallet HSA portfolio from Conduent Business Services, LLC,
which portfolio consists of approximately $2.8 billion of HSA
Assets held in approximately 665,000 customer accounts, in exchange
for a purchase price of approximately $425 million and up to $20
million in transfer-related expenses. The acquisition is expected
to close in multiple tranches during the first half of fiscal 2025,
subject to the satisfaction of certain customary closing
conditions.
Business outlook
For the fiscal year ending January 31, 2024, management
expects revenue of $985 million to $995 million. Its outlook for
net income is between $34 million and $39 million, resulting in net
income of $0.39 to $0.45 per diluted share. Its outlook for
non-GAAP net income, calculated using the method described below,
is between $181 million and $188 million, resulting in non-GAAP net
income per diluted share of $2.08 to $2.16 (based on an estimated
87 million diluted weighted-average shares outstanding). Management
expects Adjusted EBITDA of $350 million to $360 million.
For the fiscal year ending January 31, 2025, management expects
revenue of approximately $1.140 billion to $1.160 billion and
Adjusted EBITDA of approximately 38-39% of revenue. These amounts
assume an average annualized yield on HSA cash of approximately
3.00%.
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 (other
than with respect to our Adjusted EBITDA outlook for the fiscal
year ending January 31, 2025) to the most comparable GAAP financial
measures is included with the financial tables at the end of this
release. A reconciliation of our Adjusted EBITDA outlook for the
fiscal year ending January 31, 2025 to net income, its most
directly comparable GAAP measure, is not included, because our net
income outlook for this future period is not available without
unreasonable efforts as we are unable to predict the ultimate
outcome of certain significant items excluded from this non-GAAP
measure (such as depreciation and amortization, stock-based
compensation expense, and income tax provision).
Conference call
HealthEquity management will host a conference call at 4:30 pm
(Eastern Time) on Tuesday, December 5, 2023 to discuss the
fiscal 2024 third quarter financial results. The conference call
will be accessible by dialing 1-833-630-1956, or 1-412-317-1837 for
international callers, and referencing conference ID "HealthEquity,
Inc. call." A live audio webcast of the call will 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 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 dependence on
the continued availability and benefits of tax-advantaged HSAs and
other CDBs;
- our ability to
adequately place and safeguard our custodial assets, or the failure
of any of our depository or insurance company partners;
- the impact from a
decline in interest rate levels on our 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 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;
- the impact of societal and economic
changes arising out of the COVID-19 pandemic on the Company, our
operations and our financial results;
- 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
- 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 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
HealthEquity, Inc. and
subsidiariesCondensed consolidated balance
sheets
(in thousands, except par value) |
October 31, 2023 |
|
January 31, 2023 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
334,061 |
|
$ |
254,266 |
Accounts receivable, net of allowance for doubtful accounts of
$4,876 and $4,989 as of October 31, 2023 and January 31, 2023,
respectively |
|
96,181 |
|
|
96,835 |
Other current assets |
|
44,166 |
|
|
31,792 |
Total current assets |
|
474,408 |
|
|
382,893 |
Property and equipment, net |
|
7,660 |
|
|
12,862 |
Operating lease right-of-use assets |
|
50,329 |
|
|
56,461 |
Intangible assets, net |
|
860,514 |
|
|
936,359 |
Goodwill |
|
1,648,145 |
|
|
1,648,145 |
Other assets |
|
52,446 |
|
|
52,180 |
Total assets |
$ |
3,093,502 |
|
$ |
3,088,900 |
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
13,419 |
|
$ |
13,899 |
Accrued compensation |
|
31,208 |
|
|
45,835 |
Accrued liabilities |
|
41,840 |
|
|
43,668 |
Current portion of long-term debt |
|
— |
|
|
17,500 |
Operating lease liabilities |
|
9,769 |
|
|
10,159 |
Total current liabilities |
|
96,236 |
|
|
131,061 |
Long-term liabilities |
|
|
|
Long-term debt, net of issuance costs |
|
874,270 |
|
|
907,838 |
Operating lease liabilities, non-current |
|
50,580 |
|
|
58,988 |
Other long-term liabilities |
|
17,711 |
|
|
12,708 |
Deferred tax liability |
|
66,737 |
|
|
82,665 |
Total long-term liabilities |
|
1,009,298 |
|
|
1,062,199 |
Total liabilities |
|
1,105,534 |
|
|
1,193,260 |
Commitments and
contingencies |
|
|
|
Stockholders’ equity |
|
|
|
Preferred stock, $0.0001 par value, 100,000 shares authorized, no
shares issued and outstanding as of October 31, 2023 and January
31, 2023, respectively |
|
— |
|
|
— |
Common stock, $0.0001 par value, 900,000 shares authorized, 85,800
and 84,758 shares issued and outstanding as of October 31, 2023 and
January 31, 2023, respectively |
|
9 |
|
|
8 |
Additional paid-in capital |
|
1,808,695 |
|
|
1,745,716 |
Accumulated earnings |
|
179,264 |
|
|
149,916 |
Total stockholders’ equity |
|
1,987,968 |
|
|
1,895,640 |
Total liabilities and stockholders’ equity |
$ |
3,093,502 |
|
$ |
3,088,900 |
HealthEquity, Inc. and
subsidiariesCondensed 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) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
|
|
|
|
|
|
|
Service revenue |
$ |
107,512 |
|
|
$ |
108,580 |
|
|
$ |
318,343 |
|
|
$ |
315,962 |
|
Custodial revenue |
|
106,575 |
|
|
|
74,642 |
|
|
|
299,933 |
|
|
|
199,606 |
|
Interchange revenue |
|
35,132 |
|
|
|
32,864 |
|
|
|
118,924 |
|
|
|
112,339 |
|
Total revenue |
|
249,219 |
|
|
|
216,086 |
|
|
|
737,200 |
|
|
|
627,907 |
|
Cost of revenue |
|
|
|
|
|
|
|
Service costs |
|
75,347 |
|
|
|
76,493 |
|
|
|
232,445 |
|
|
|
232,281 |
|
Custodial costs |
|
9,177 |
|
|
|
6,812 |
|
|
|
27,310 |
|
|
|
20,543 |
|
Interchange costs |
|
6,287 |
|
|
|
5,923 |
|
|
|
20,281 |
|
|
|
19,240 |
|
Total cost of revenue |
|
90,811 |
|
|
|
89,228 |
|
|
|
280,036 |
|
|
|
272,064 |
|
Gross profit |
|
158,408 |
|
|
|
126,858 |
|
|
|
457,164 |
|
|
|
355,843 |
|
Operating expenses |
|
|
|
|
|
|
|
Sales and marketing |
|
19,656 |
|
|
|
17,245 |
|
|
|
58,714 |
|
|
|
49,648 |
|
Technology and development |
|
55,614 |
|
|
|
48,890 |
|
|
|
163,573 |
|
|
|
140,653 |
|
General and administrative |
|
26,379 |
|
|
|
25,131 |
|
|
|
78,363 |
|
|
|
74,795 |
|
Amortization of acquired intangible assets |
|
23,213 |
|
|
|
23,541 |
|
|
|
69,545 |
|
|
|
71,420 |
|
Merger integration |
|
2,655 |
|
|
|
6,509 |
|
|
|
8,157 |
|
|
|
23,486 |
|
Total operating expenses |
|
127,517 |
|
|
|
121,316 |
|
|
|
378,352 |
|
|
|
360,002 |
|
Income (loss) from
operations |
|
30,891 |
|
|
|
5,542 |
|
|
|
78,812 |
|
|
|
(4,159 |
) |
Other expense |
|
|
|
|
|
|
|
Interest expense |
|
(13,545 |
) |
|
|
(12,165 |
) |
|
|
(41,814 |
) |
|
|
(34,119 |
) |
Other income, net |
|
3,741 |
|
|
|
443 |
|
|
|
8,325 |
|
|
|
174 |
|
Total other expense |
|
(9,804 |
) |
|
|
(11,722 |
) |
|
|
(33,489 |
) |
|
|
(33,945 |
) |
Income (loss) before income
taxes |
|
21,087 |
|
|
|
(6,180 |
) |
|
|
45,323 |
|
|
|
(38,104 |
) |
Income tax provision
(benefit) |
|
6,414 |
|
|
|
(4,539 |
) |
|
|
15,975 |
|
|
|
(12,170 |
) |
Net income (loss) and comprehensive income (loss) |
$ |
14,673 |
|
|
$ |
(1,641 |
) |
|
$ |
29,348 |
|
|
$ |
(25,934 |
) |
Net income (loss) per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.17 |
|
|
$ |
(0.02 |
) |
|
$ |
0.34 |
|
|
$ |
(0.31 |
) |
Diluted |
$ |
0.17 |
|
|
$ |
(0.02 |
) |
|
$ |
0.34 |
|
|
$ |
(0.31 |
) |
Weighted-average number of
shares used in computing net income (loss) per share: |
|
|
|
|
|
|
|
Basic |
|
85,697 |
|
|
|
84,572 |
|
|
|
85,424 |
|
|
|
84,349 |
|
Diluted |
|
87,122 |
|
|
|
84,572 |
|
|
|
86,707 |
|
|
|
84,349 |
|
HealthEquity, Inc. and
subsidiariesCondensed consolidated statements of
cash flows (unaudited)
|
Nine months ended October 31, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
Net income (loss) |
$ |
29,348 |
|
|
$ |
(25,934 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
115,167 |
|
|
|
120,726 |
|
Stock-based compensation |
|
59,939 |
|
|
|
50,310 |
|
Amortization of debt discount and issuance costs |
|
2,150 |
|
|
|
2,454 |
|
Loss on extinguishment of debt |
|
1,157 |
|
|
|
— |
|
Other non-cash items |
|
— |
|
|
|
269 |
|
Deferred taxes |
|
(15,928 |
) |
|
|
(10,565 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
|
654 |
|
|
|
(451 |
) |
Other assets |
|
(12,820 |
) |
|
|
6,809 |
|
Operating lease right-of-use assets |
|
8,241 |
|
|
|
6,169 |
|
Accrued compensation |
|
(14,829 |
) |
|
|
(11,630 |
) |
Accounts payable, accrued liabilities, and other current
liabilities |
|
(2,363 |
) |
|
|
(33,170 |
) |
Operating lease liabilities, non-current |
|
(9,966 |
) |
|
|
(5,401 |
) |
Other long-term liabilities |
|
5,003 |
|
|
|
(4,427 |
) |
Net cash provided by operating
activities |
|
165,753 |
|
|
|
95,159 |
|
Cash flows from investing
activities: |
|
|
|
Purchases of software and capitalized software development
costs |
|
(30,413 |
) |
|
|
(35,306 |
) |
Purchases of property and equipment |
|
(1,134 |
) |
|
|
(2,971 |
) |
Acquisitions of HSA portfolios |
|
(3,257 |
) |
|
|
(70,574 |
) |
Net cash used in investing
activities |
|
(34,804 |
) |
|
|
(108,851 |
) |
Cash flows from financing
activities: |
|
|
|
Principal payments on long-term debt |
|
(54,375 |
) |
|
|
(6,562 |
) |
Settlement of client-held funds obligation, net |
|
(183 |
) |
|
|
(1,579 |
) |
Proceeds from exercise of common stock options |
|
3,404 |
|
|
|
6,616 |
|
Net cash used in financing
activities |
|
(51,154 |
) |
|
|
(1,525 |
) |
Increase (decrease) in cash
and cash equivalents |
|
79,795 |
|
|
|
(15,217 |
) |
Beginning cash and cash
equivalents |
|
254,266 |
|
|
|
225,414 |
|
Ending
cash and cash equivalents |
$ |
334,061 |
|
|
$ |
210,197 |
|
HealthEquity, Inc. and
subsidiariesCondensed consolidated statements of
cash flows (unaudited) (continued)
|
Nine months ended October 31, |
(in thousands) |
|
2023 |
|
|
2022 |
Supplemental cash flow data: |
|
|
|
Interest expense paid in cash |
$ |
44,194 |
|
$ |
36,268 |
Income tax payments, net |
|
24,777 |
|
|
775 |
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 |
|
2,882 |
|
|
4,099 |
Purchases of property and equipment included in accounts payable or
accrued liabilities |
|
98 |
|
|
297 |
Exercise of common stock options receivable |
|
19 |
|
|
21 |
Increase in goodwill due to measurement period adjustments,
net |
|
— |
|
|
77 |
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) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Cost of revenue |
$ |
4,673 |
|
$ |
3,662 |
|
$ |
13,222 |
|
$ |
10,667 |
Sales and marketing |
|
3,506 |
|
|
2,569 |
|
|
9,763 |
|
|
7,136 |
Technology and
development |
|
5,923 |
|
|
4,045 |
|
|
15,098 |
|
|
10,388 |
General and
administrative |
|
7,560 |
|
|
7,894 |
|
|
21,856 |
|
|
22,119 |
Total stock-based compensation expense |
$ |
21,662 |
|
$ |
18,170 |
|
$ |
59,939 |
|
$ |
50,310 |
Total Accounts (unaudited)
(in thousands, except percentages) |
October 31, 2023 |
|
October 31, 2022 |
|
% Change |
|
January 31, 2023 |
HSAs |
8,295 |
|
7,650 |
|
8% |
|
7,984 |
New HSAs from sales -
Quarter-to-date |
163 |
|
170 |
|
(4)% |
|
445 |
New HSAs from sales -
Year-to-date |
453 |
|
526 |
|
(14)% |
|
971 |
New HSAs from acquisitions -
Year-to-date |
— |
|
90 |
|
(100)% |
|
90 |
HSAs with investments |
592 |
|
529 |
|
12% |
|
541 |
CDBs |
6,984 |
|
6,849 |
|
2% |
|
6,933 |
Total Accounts |
15,279 |
|
14,499 |
|
5% |
|
14,917 |
Average Total Accounts -
Quarter-to-date |
15,167 |
|
14,523 |
|
4% |
|
14,677 |
Average
Total Accounts - Year-to-date |
15,034 |
|
14,482 |
|
4% |
|
14,531 |
HSA Assets (unaudited)
(in millions, except percentages) |
October 31, 2023 |
|
October 31, 2022 |
|
% Change |
|
January 31, 2023 |
HSA cash |
$ |
13,971 |
|
$ |
13,096 |
|
7% |
|
|
$ |
14,199 |
HSA investments |
|
8,597 |
|
|
7,108 |
|
21% |
|
|
|
7,947 |
Total HSA Assets |
|
22,568 |
|
|
20,204 |
|
12% |
|
|
|
22,146 |
Average daily HSA cash -
Quarter-to-date |
|
13,977 |
|
|
12,973 |
|
8% |
|
|
|
13,375 |
Average
daily HSA cash - Year-to-date |
|
14,024 |
|
|
12,941 |
|
8% |
|
|
|
13,049 |
Client-held funds (unaudited)
(in millions, except percentages) |
October 31, 2023 |
|
October 31, 2022 |
|
% Change |
|
January 31, 2023 |
Client-held funds |
$ |
761 |
|
$ |
759 |
|
0 |
% |
|
$ |
901 |
Average daily Client-held
funds - Quarter-to-date |
|
794 |
|
|
794 |
|
0 |
% |
|
|
809 |
Average
daily Client-held funds - Year-to-date |
|
862 |
|
|
832 |
|
4 |
% |
|
|
827 |
Reconciliation of net income (loss) to Adjusted EBITDA
(unaudited)
|
Three months ended October 31, |
|
Nine months ended October 31, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
income (loss) |
$ |
14,673 |
|
|
$ |
(1,641 |
) |
|
$ |
29,348 |
|
|
$ |
(25,934 |
) |
Interest income |
|
(3,713 |
) |
|
|
(443 |
) |
|
|
(7,795 |
) |
|
|
(584 |
) |
Interest expense |
|
13,545 |
|
|
|
12,165 |
|
|
|
41,814 |
|
|
|
34,119 |
|
Income tax provision (benefit) |
|
6,414 |
|
|
|
(4,539 |
) |
|
|
15,975 |
|
|
|
(12,170 |
) |
Depreciation and amortization |
|
14,567 |
|
|
|
16,959 |
|
|
|
45,622 |
|
|
|
49,306 |
|
Amortization of acquired intangible assets |
|
23,213 |
|
|
|
23,541 |
|
|
|
69,545 |
|
|
|
71,420 |
|
Stock-based compensation expense |
|
21,662 |
|
|
|
18,170 |
|
|
|
59,939 |
|
|
|
50,310 |
|
Merger integration expenses |
|
2,655 |
|
|
|
6,509 |
|
|
|
8,157 |
|
|
|
23,486 |
|
Acquisition costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
53 |
|
Amortization of incremental costs to obtain a contract |
|
1,379 |
|
|
|
1,114 |
|
|
|
4,033 |
|
|
|
3,256 |
|
Costs associated with unused office space |
|
950 |
|
|
|
1,181 |
|
|
|
3,252 |
|
|
|
3,788 |
|
Other |
|
301 |
|
|
|
345 |
|
|
|
454 |
|
|
|
1,690 |
|
Adjusted EBITDA |
$ |
95,646 |
|
|
$ |
73,361 |
|
|
$ |
270,344 |
|
|
$ |
198,740 |
|
Reconciliation of net income outlook to Adjusted EBITDA
outlook (unaudited)
|
Outlook for the year ending |
(in millions) |
January 31, 2024 |
Net
income |
$34 - 39 |
Interest income |
(12) |
Interest expense |
55 |
Income tax provision |
19 - 24 |
Depreciation and amortization |
60 |
Amortization of acquired intangible assets |
93 |
Stock-based compensation expense |
78 |
Merger integration expenses |
13 |
Amortization of incremental costs to obtain a contract |
5 |
Costs associated with unused office space |
4 |
Other expense |
1 |
Adjusted EBITDA |
$350 - 360 |
Reconciliation of net income (loss) to non-GAAP net
income (unaudited)
|
Three months ended October 31, |
|
Nine months ended October 31, |
(in thousands, except per share data) |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
Net income (loss) |
$ |
14,673 |
|
$ |
(1,641 |
) |
|
$ |
29,348 |
|
$ |
(25,934 |
) |
Income tax provision
(benefit) |
|
6,414 |
|
|
(4,539 |
) |
|
|
15,975 |
|
|
(12,170 |
) |
Income (loss) before income
taxes - GAAP |
|
21,087 |
|
|
(6,180 |
) |
|
|
45,323 |
|
|
(38,104 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
23,213 |
|
|
23,541 |
|
|
|
69,545 |
|
|
71,420 |
|
Stock-based compensation expense |
|
21,662 |
|
|
18,170 |
|
|
|
59,939 |
|
|
50,310 |
|
Merger integration expenses |
|
2,655 |
|
|
6,509 |
|
|
|
8,157 |
|
|
23,486 |
|
Acquisition costs |
|
— |
|
|
— |
|
|
|
— |
|
|
53 |
|
Costs associated with unused office space |
|
950 |
|
|
1,181 |
|
|
|
3,252 |
|
|
3,788 |
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
|
1,157 |
|
|
— |
|
Total adjustments to income
(loss) before income taxes - GAAP |
|
48,480 |
|
|
49,401 |
|
|
|
142,050 |
|
|
149,057 |
|
Income before income taxes -
Non-GAAP |
|
69,567 |
|
|
43,221 |
|
|
|
187,373 |
|
|
110,953 |
|
Income tax provision -
Non-GAAP (1) |
|
17,391 |
|
|
10,805 |
|
|
|
46,843 |
|
|
27,738 |
|
Non-GAAP net income |
|
52,176 |
|
|
32,416 |
|
|
|
140,530 |
|
|
83,215 |
|
|
|
|
|
|
|
|
|
Diluted weighted-average
shares |
|
87,122 |
|
|
84,572 |
|
|
|
86,707 |
|
|
84,349 |
|
Non-GAAP net income per diluted share |
$ |
0.60 |
|
$ |
0.38 |
|
|
$ |
1.62 |
|
$ |
0.99 |
|
(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 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 |
$34 - 39 |
Income tax provision |
19 - 24 |
Income before income taxes -
GAAP |
53 - 63 |
Non-GAAP adjustments: |
|
Amortization of acquired intangible assets |
93 |
Stock-based compensation expense |
78 |
Merger integration expenses |
13 |
Costs associated with unused office space |
4 |
Total adjustments to income
before income taxes - GAAP |
188 |
Income before income taxes -
Non-GAAP |
241 - 251 |
Income tax provision -
Non-GAAP (1) |
60 - 63 |
Non-GAAP net income |
$181 - 188 |
|
|
Diluted weighted-average
shares |
87 |
Non-GAAP net income per diluted share (2) |
$2.08 - 2.16 |
(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. |
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, 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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