HealthEquity Reports Second Quarter Ended July 31, 2015 Financial Results
Highlights of the second quarter include:
-
Revenue of
$30.5 million , an increase of 46% compared to Q2 FY15. -
Net income of
$4.4 million , an increase of 46% compared to Q2 FY15. -
Net income per diluted share of
$0.08 compared to$0.06 in Q2 FY15. -
Adjusted EBITDA of
$11.1 million , an increase of 62% compared to Q2 FY15. -
Pro forma non-GAAP EPS of
$0.09 per share compared to$0.07 in Q2 FY15. - HSA Members grew to 1.5 million, an increase of 45% compared to Q2 FY15.
-
Total AUM grew to
$2.6 billion , a 47% increase compared to Q2 FY15. - Increase in FY16 revenue guidance.
Commenting on the quarter,
Second quarter financial results
For the second quarter ended
-
Account fee revenue of
$14.6 million , an increase of 38% compared to Q2 FY15. -
Custodial fee revenue of
$9.0 million , an increase of 52% compared to Q2 FY15. -
Card fee revenue of
$6.8 million , an increase of 60% compared to Q2 FY15.
Net income was
Net income per share attributable to diluted common share was
Adjusted EBITDA was
As of
HSA Member and AUM metrics
The total number of HSAs for which we serve as a non-bank custodian ("HSA Members") as of
Total assets under management ("AUM") as of
-
Cash AUM of
$2.3 billion , an increase of 46% compared toJuly 31, 2014 ; and -
Investment AUM of
$372.1 million , an increase of 56% compared toJuly 31, 2014 .
Investment AUM was 14% of total AUM as of
Business outlook
For the year ended
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Non-GAAP financial information
To supplement our financial information presented on a GAAP basis, we disclose Adjusted EBITDA, pro forma non-GAAP earnings per diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, and non-GAAP operating margin, which are non-GAAP financial measures. We define Adjusted EBITDA as adjusted earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, and other certain non-operating items. We define pro forma non-GAAP earnings per diluted share as net income per diluted share, calculated by adding back to net income non-cash stock-based compensation expense, net of tax, and to give effect to the conversion of all our outstanding convertible preferred stock and redeemable convertible preferred stock into common stock, which occurred on
These 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. The company cautions investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. 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 measures as detailed in the tables below.
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 the company's industry, business strategy, plans, goals and expectations concerning our market position, product expansion, future operations, revenue, margins, profitability, future efficiencies, 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. Forward-looking statements are subject to a number of risks and uncertainties, many of
which involve factors or circumstances that are beyond the control of the company. The company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, the continued availability of tax-advantaged consumer-directed benefits to employers and employees, the company's ability to acquire and retain new network partners and to cross-sell its products to existing network partners and members, the company's ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets, the company's ability to raise awareness among employers and employees about the advantages of adopting and participating in consumer-directed benefits programs, and the company's ability to identify and execute on network partner opportunities. For a detailed discussion of these and
other risk factors, please refer to the risks detailed in the company's filings with the
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Condensed consolidated statements of operations and comprehensive income (unaudited) | ||||
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(in thousands, except per share data) | 2015 | 2014 | 2015 | 2014 |
Revenue: | ||||
Account fee revenue | $ 14,604 | $ 10,548 | $ 29,001 | $ 20,936 |
Custodial fee revenue | 9,031 | 5,934 | 17,450 | 11,361 |
Card fee revenue | 6,771 | 4,233 | 13,588 | 8,531 |
Other revenue | 88 | 176 | 305 | 294 |
Total revenue | 30,494 | 20,891 | 60,344 | 41,122 |
Cost of services: | ||||
Account costs | 8,316 | 6,703 | 16,705 | 13,131 |
Custodial costs | 1,512 | 1,006 | 2,935 | 1,944 |
Card costs | 2,049 | 1,412 | 4,151 | 2,817 |
Other costs | 32 | 1 | 62 | 2 |
Total cost of services | 11,909 | 9,122 | 23,853 | 17,894 |
Gross profit | 18,585 | 11,769 | 36,491 | 23,228 |
Operating expenses: | ||||
Sales and marketing | 2,737 | 2,321 | 5,570 | 4,554 |
Technology and development | 3,998 | 2,302 | 7,522 | 4,488 |
General and administrative | 3,943 | 1,666 | 7,101 | 2,809 |
Amortization of acquired intangible assets | 409 | 409 | 818 | 818 |
Total operating expenses | 11,087 | 6,698 | 21,011 | 12,669 |
Income from operations | 7,498 | 5,071 | 15,480 | 10,559 |
Other expense: | ||||
Loss on revaluation of redeemable convertible preferred stock derivative | — | — | — | (735) |
Other expense, net | (542) | (39) | (647) | (131) |
Total other expense | (542) | (39) | (647) | (866) |
Income before income taxes | 6,956 | 5,032 | 14,833 | 9,693 |
Income tax provision | 2,535 | 2,004 | 5,435 | 3,947 |
Net income | $ 4,421 | $ 3,028 | $ 9,398 | $ 5,746 |
Net income attributable to common stockholders: | ||||
Basic | $ 4,421 | $ 1,565 | $ 9,398 | $ 5,457 |
Diluted | $ 4,421 | $ 2,591 | $ 9,398 | $ 6,481 |
Net income per share attributable to common stockholders: | ||||
Basic | $ 0.08 | $ 0.19 | $ 0.17 | $ 0.70 |
Diluted | $ 0.08 | $ 0.06 | $ 0.16 | $ 0.14 |
Weighted-average number of shares used in computing net income per share attributable to common stockholders: | ||||
Basic | 56,730 | 8,135 | 55,909 | 7,757 |
Diluted | 58,932 | 41,680 | 58,318 | 45,847 |
Comprehensive income: | ||||
Net income | $ 4,421 | $ 3,028 | $ 9,398 | $ 5,746 |
Other comprehensive loss: | ||||
Unrealized loss on available-for-sale marketable securities, net of tax | (11) | — | (33) | — |
Comprehensive income | $ 4,410 | $ 3,028 | $ 9,365 | $ 5,746 |
Stock-based compensation expense
Total stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income is as follows:
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(in thousands) | 2015 | 2014 | 2015 | 2014 |
Cost of services | $ 208 | $ 52 | $ 436 | $ 70 |
Sales and marketing | 259 | 138 | 487 | 141 |
Technology and development | 237 | 53 | 387 | 85 |
General and administrative | 973 | 160 | 1,461 | 172 |
Total stock-based compensation expense | $ 1,677 | $ 403 | $ 2,771 | $ 468 |
The following table presents components of our condensed consolidated statements of operations and comprehensive income, adjusted for stock compensation expense:
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(in thousands, except for percentages) | 2015 | 2014 | 2015 | 2014 |
Reconciliation of gross profit to non-GAAP gross profit: | ||||
Gross profit | $ 18,585 | $ 11,769 | $ 36,491 | $ 23,228 |
Excluding: Stock-based compensation expense attributable to cost of services | 208 | 52 | 436 | 70 |
Non-GAAP gross profit | $ 18,793 | $ 11,821 | $ 36,927 | $ 23,298 |
Reconciliation of gross margin to non-GAAP gross margin: | ||||
GAAP gross margin | 61% | 56% | 60% | 56% |
Excluding: Stock-based compensation expense attributable to cost of services | 1% | —% | 1% | 1% |
Non-GAAP gross margin | 62% | 56% | 61% | 57% |
Reconciliation of income from operations to non-GAAP income from operations: | ||||
Income from operations | $ 7,498 | $ 5,071 | $ 15,480 | $ 10,559 |
Excluding: Stock-based compensation expense | 1,677 | 403 | 2,771 | 468 |
Non-GAAP income from operations | $ 9,175 | $ 5,474 | $ 18,251 | $ 11,027 |
Reconciliation of operating margin to non-GAAP operating margin: | ||||
GAAP operating margin | 25% | 24% | 26% | 26% |
Excluding: Stock-based compensation expense | 5% | 2% | 4% | 1% |
Non-GAAP operating margin | 30% | 26% | 30% | 27% |
Net income reconciliation to Adjusted EBITDA | ||||
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(in thousands) | 2015 | 2014 | 2015 | 2014 |
Net income | $ 4,421 | $ 3,028 | $ 9,398 | $ 5,746 |
Income tax provision | 2,535 | 2,004 | 5,435 | 3,947 |
Depreciation and amortization | 1,506 | 983 | 2,847 | 1,825 |
Amortization of acquired intangible assets | 409 | 409 | 818 | 818 |
Loss on revaluation of redeemable convertible preferred stock derivative liability | — | — | — | 735 |
Stock-based compensation expense | 1,677 | 403 | 2,771 | 468 |
Other (1) | 544 | 40 | 647 | 132 |
Total adjustments | $ 6,671 | $ 3,839 | $ 12,518 | $ 7,925 |
Adjusted EBITDA | $ 11,092 | $ 6,867 | $ 21,916 | $ 13,671 |
(1) For the three months ended |
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HSA Members | ||||
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% Change |
|
|
HSA Members | 1,537,147 | 1,061,713 | 45% | 1,426,785 |
Average HSA Members - Year-to-date | 1,484,990 | 1,015,539 | 46% | 1,087,962 |
Average HSA Members - Quarter-to-date | 1,510,403 | 1,038,853 | 45% | 1,230,256 |
Assets under management (AUM) | ||||
(in thousands, except percentages) |
|
|
% Change |
|
Cash AUM | $ 2,260,111 | $ 1,546,753 | 46% | $ 2,075,741 |
Investment AUM | 372,120 | 237,831 | 56% | 286,526 |
Total AUM | $ 2,632,231 | $ 1,784,584 | 47% | $ 2,362,267 |
Average daily cash AUM - Year-to-date | $ 2,176,971 | $ 1,480,075 | 47% | $ 1,553,845 |
Average daily cash AUM - Quarter-to-date | $ 2,214,287 | $ 1,500,672 | 48% | $ 1,698,402 |
Net income per diluted share reconciliation to Pro forma non-GAAP earnings per diluted share | ||||
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(in thousands, except per share data) | 2015 | 2014 | 2015 | 2014 |
Net income attributable to common stockholders for diluted earnings per share | $ 4,421 | $ 2,591 | $ 9,398 | $ 6,481 |
GAAP adjustments for participating securities (1) | — | $ 437 | — | $ (735) |
Net income | $ 4,421 | $ 3,028 | $ 9,398 | $ 5,746 |
Stock compensation expense, net of tax (2) | 1,027 | 252 | 1,718 | 290 |
Adjusted net income | 5,448 | 3,280 | 11,116 | 6,036 |
Pro forma diluted weighted-average number of shares used in computing pro forma non-GAAP earnings per diluted share (3) | 58,932 | 46,137 | 58,318 | 45,923 |
Pro forma non-GAAP earnings per diluted share | $ 0.09 | $ 0.07 | $ 0.19 | $ 0.13 |
(1) The net impact of adjustments required for participating securities in conformity with the two-class method as prescribed by GAAP. | ||||
(2) The company used an estimated statutory tax rate of 38% to calculate the net impact of non-cash stock-based compensation expense. | ||||
(3) For the three and six months ended |
CONTACT: Investors Contact:Source:Westwicke Partners Bob East /Asher Dewhurst 443-213-0500 healthequity@westwicke.com
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