HealthEquity Reports Strong Third Quarter Results, Raises Business Outlook

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DRAPER, Utah, Dec. 03, 2019 (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, 2019.

“The new HealthEquity outperformed in a market that keeps growing, and got a fast start on the integration of WageWorks to continue that growth,” said President and CEO Jon Kessler. “For the full year, these results set the team up to deliver strong sales while keeping its commitments to customers, partners and shareholders.”

Revenue for the third quarter ended October 31, 2019 of $157.1 million grew 123% compared to $70.5 million for the third quarter ended October 31, 2018, and 21% excluding the impact of the WageWorks acquisition and related realized net synergies. Revenue this quarter included: service revenue of $87.6 million, custodial revenue of $47.0 million, and interchange revenue of $22.5 million.

HealthEquity reported a net loss of $21.3 million, or $0.30 per diluted share, and non-GAAP net income of $32.8 million, or $0.47 per diluted share, for the third quarter ended October 31, 2019. One year ago, the Company reported third quarter ended October 31, 2018 net income of $15.7 million, or $0.25 per diluted share, and non-GAAP net income of $20.0 million, or $0.31 per diluted share. The net loss for the quarter is primarily due to merger integration expenses and acquisition costs combined, net of tax, of $38.5 million.

Adjusted EBITDA of $55.5 million for the third quarter ended October 31, 2019 grew 87% compared to $29.7 million for the third quarter ended October 31, 2018, and 24% excluding the impact of the WageWorks acquisition and related net realized synergies. Adjusted EBITDA was 35% of revenue compared to 42% for the third quarter ended October 31, 2018.

As of October 31, 2019, HealthEquity had $174.6 million of cash and cash equivalents and $1.2 billion of outstanding debt, net of issuance costs. This compares to $361.5 million in cash and cash equivalents and no outstanding debt as of January 31, 2019.

HSAs as of October 31, 2019 exceeded 5.0 million, an increase of 37% year over year, or 16% excluding acquired HSAs. Active HSAs were 4.1 million, up 38% from one year ago, including 197,000 HSAs with investments, an increase of 29% year over year. Total Accounts as of October 31, 2019 reached 12.5 million, including 7.5 million CDBs, 6.8 million from the WageWorks acquisition.

Total HSA Assets as of October 31, 2019 were $10.5 billion, an increase of 48% year over year, or 24% excluding acquired HSA assets. Total HSA Assets included $7.9 billion of HSA Cash and $2.5 billion of HSA Investment Assets. Client-held funds, which include funds remitted to the Company to pre-fund and facilitate administration of Client and employee contributions of other CDBs and from which we generate custodial revenue, were $670.0 million as of October 31, 2019, including approximately $593 million from the WageWorks acquisition.

HealthEquity reported sales of 141,000 new HSAs in the third quarter ended October 31, 2019, nearly 18% more than in the year-ago period. HSA members grew their balances by approximately $260 million in the quarter, more than four times greater than in the year-ago period, reflecting both large net inflows and a positive market backdrop.

HealthEquity completed its acquisition of WageWorks on August 30, 2019.  We have achieved an annual run-rate of approximately $15 million net synergies since that date, and we now aim to achieve our previously stated goal of a run rate of $50 million of net synergies by the end of fiscal 2021, earlier than the 24 to 36 months from closing previously anticipated. We have made progress on commitments to WageWorks clients, including that we now expect to complete the on-shoring of all telephone-based member services to the United States during the second quarter of fiscal 2021.

For fiscal year 2020 for the combined HealthEquity, which includes five months of WageWorks' operating results, we expect our revenue to be between $520 million and $526 million. Our outlook for net income is a range of $16 million to $20 million, resulting in net income per diluted share range of $0.24 to $0.28. Our Adjusted EBITDA outlook is a range of $182 million to $186 million. We define Adjusted EBITDA as adjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, integration and acquisition-related costs, gains and losses on marketable equity securities, and other certain non-operating items. We also expect our non-GAAP net income to be in a range between $101 million and $105 million. Our non-GAAP net income is calculated by adding back to net income amortization of acquired intangible assets, stock-based compensation expense, and integration and acquisition-related costs, net of an estimated statutory tax rate of 24%, subtracting the excess tax benefits due to the adoption of Accounting Standards Update ("ASU") 2016-09, and adjusting for gains and losses on marketable equity securities, net of an estimated statutory tax rate of 24%. Our non-GAAP net income outlook results in a non-GAAP net income per diluted share range between $1.46 to $1.52 (based on an estimated 69 million weighted-average shares outstanding).

A reconciliation of the non-GAAP financial measures used in this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.

HealthEquity management will host a conference call at 4:30 pm (Eastern Time) on Tuesday, December 3, 2019 to discuss the fiscal third quarter 2020 financial results. The conference call will be accessible by dialing 844-791-6252, or 661-378-9636 for international callers, and referencing conference ID 1373115. A live audio webcast of the call will also be available on the investor relations section of our website at .

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.

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.

HealthEquity administers Health Savings Accounts (HSAs) and other consumer-directed benefits for our more than 12 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 .

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, 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,” “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:

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 most recent Annual Report on Form 10-K 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.

Richard Putnam801-727-1209rputnam@healthequity.com

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

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Globe Newswire: 21:01 GMT Tuesday 3rd December 2019

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