UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
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| 7389 | ||||
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Item 7.01 Regulation FD Disclosure.
On and after July 8, 2020, representatives of HealthEquity, Inc. (the “Company”) will make presentations to certain investors using the slides attached to this Current Report on Form 8-K as Exhibit 99.1 (the “Investor Presentation”). The Company expects to use the Investor Presentation, in whole or in part, and possibly with modifications, in connection with presentations to investors, analysts and others.
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company's Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The investor presentation slides include financial information not prepared in accordance with generally accepted accounting principles (“Non-GAAP Financial Measures”). A reconciliation of the Non-GAAP Financial Measures included in the slides to financial information prepared in accordance with generally accepted accounting principles (“GAAP”), as required by Regulation G, is included as an appendix to the Investor Presentation furnished as Exhibit 99.1 to this Current Report on From 8-K. The Company is providing disclosure of the reconciliation of reported Non-GAAP Financial Measures used in the Investor Presentation slides, among other places, to its comparable financial measures on a GAAP basis. The Company believes that the Non-GAAP Financial Measures provide investors the ability to evaluate financial performance in a way that is comparable to measures reported by other retailers.
Item 8.01 Other Events.
Reference is hereby made to slides 4, 8 and 10 of the Investor Presentation, which are incorporated by reference herein.
Cautionary Statement Regarding Forward-Looking Statements
This communication 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 communication.
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 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 with our business in an efficient and effective manner; |
| · | 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, investment advisor 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 most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q 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 communication.
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Item 9.01 Financial Statements and Exhibits
| Exhibit No. | Description | |
| 99.1 | Investor Presentation, in use as of July 8, 2020. | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HEALTHEQUITY, INC. | ||
| By: | /s/ Darcy Mott | |
| Darcy Mott | ||
| Executive Vice President and Chief Financial Officer | ||
Dated: July 8, 2020
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Exhibit 99.1
Copyright © 2020 HealthEquity, Inc. All rights reserved. Investor update July 7, 2020 HealthEquity does not provide legal, tax or financial advice.
Safe harbor 2 This presentation includes information contained in our public filings filed with the Securities and Exchange Commission (SEC ), which public filings are expressly incorporated herein by reference (see http://ir.healthequity.com/ ), and other publicly available information. Readers are encouraged to review our public filings for further information. Forward - Looking Statements This presentation contains “forward - looking” statements that are based on our management’s beliefs and assumptions and on inform ation currently available to management. These forward - looking statements include, without limitation, statements regarding our indust ry, business strategy, plans, goals and expectations concerning our market position, product expansion, future operations, margins, profitability, future efficiencie s, 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 ar e intended to identify forward - looking statements. Forward - looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, p erformance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward - looking statements . Forward - looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. Our actual future results may be materially di ffe rent from what we expect. Except as required by law, we assume no obligation to update these forward - looking statements publicly, or to update the reasons actual results cou ld differ materially from those anticipated in the forward - looking statements, even if new information becomes available in the future. Readers are encouraged to review our pu blic filings with the SEC for further disclosure of other factors that could cause actual results to differ materially from those indicated in any forward - looking sta tements included herein. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market si ze and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such est imates. Non - GAAP Information This presentation includes certain non - GAAP financial measures as defined by SEC rules. As required by Regulation G, we have pro vided a reconciliation of those measures to the most directly comparable GAAP measures, which is attached in the appendix hereto. SEC Rule 433 The issuer has filed a registration statement (including a base prospectus and the accompanying prospectus supplement) with t he SEC for the offering to which this communication relates. Before you invest, you should read the prospectus and the accompanying prospectus supplemen t i n that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get the se documents for free by visiting EDGAR on the SEC Web site at www.sec.gov . To obtain a copy of the prospectus supplement and related base prospectus for this offering, please contact Wells Fargo Sec uri ties, Attention: Equity Syndicate Department, 500 West 33rd Street, New York, New York, 10001, at (800) 326 - 5897 or email a request to cmclientsupport@wellsfargo.com .
Offering summary 3 Issuer HealthEquity Ticker / Exchange HQY / NASDAQ Base Offering Size $250 million Over - allotment Option 15% (100% primary) Offering Structure Common Stock Use of Proceeds To free up additional capital for organic and inorganic growth by pre - paying $200 million under its term loan facility, with the remaining proceeds to be used for general corporate purposes, which may include additional pre - payments under its term loan facility and/or potential acquisitions. Expected Pricing Tuesday, July 7, 2020 (Post - Market Close) Lock - up Period 60 Days Lead Bookrunners: Wells Fargo Securities, JP Morgan Securities Other Bookrunners : Goldman Sachs, RBC Capital Markets
Positive trends in Q2 4 June new sales opportunities up 16% vs April and up 22% YoY 84% of pipeline HSAs are in bundled opportunities FYTD June card spend up 16% vs April Continued HSA, Custodial Asset and CDB account growth Low attrition from BNYM migration Strong renewals including US Govt. OPM, HQYs largest single client On the back of these trends, HQY is launching a $250m common equity offering to increase capacity for organic and inorganic growth investment
An industry leader 5 HealthEquity HSAs, HSA Assets, HRAs, FSAs, Commuter, COBRA, and Other CDBs as of April 30, 2020. Integrations information and em ployer served information is as of January 31, 2020. Management estimates benefits administration for employers that employ 1 in 7 working Americans based on Pew Research Center ana lysis of 2018 labor force data estimating 154m working Americans as of December 31, 2018, and management’s assumption that our 12 million members represent less than half of the wo rkf orce of the employers we serve as of January 2020. HealthEquity Advisors, LLC is a wholly owned subsidiary of HealthEquity, Inc. and an SEC - registered investment adviser. Registra tion does not imply endorsement by any state or agency and does not imply a level of skill, education, or training.
Expanding market 6 1 Devenir HSA Research Report as of December 31, 2019 2 Management estimate as of June 2020 3 HealthEquity information as of April 30, 2020 4 Proprietary research June 2019
Outpacing market growth 7 Market data from Devenir Year - end HSA Market reports 2012 - 2019 Rank #5 #4/5 #4/5 #4/3 #2/3 #3 #2 #1/2 HealthEquity HSA market share 2014 2015 2016 2017 2018 2019 587% HQY HSA assets 444% HQY HSAs 241% Market HSA assets 165% Market HSAs By HSAs By HSA assets 8% 9% 9% 11% 13% 15% 15% 19% 7% 8% 9% 10% 12% 13% 13% 16% 2012 2013 2014 2015 2016 2017 2018 2019
Sales opportunities FYTD 8 Mar ’19 64% 36% Mar ’20 63% Apr ’19 57% 43% Apr ’20 47% 37% May ’19 May ’20 53% Jun ’20 52% 75% 60% 54% Jun ’19 25% Feb ’19 46% 45% 40% 55% Feb ’20 48% 53% 47% +125% - 4% - 14% - 16% +22% HSA+ CDB FYTD total opportunities YoY by month FYTD mix FY2020 FY2021 +5% CDB HSA+ *Data includes named employers where a formal response to a request for proposal (RFP) has been or is being prepared. These are typically larger employers in HQY’s enterprise or commercial segment
79% Bundling FYTD 9 Weighted by estimated number of accounts 84% 76% 58%
Card spend FYTD 10 FYTD20 FYTD21 - 17% CDB HSA FYTD card spend FY21 mix Note: Amounts representative of the Company’s largest card provider. Is not inclusive of all the Company’s card providers. 3% - 23% - 46% - 43% - 33% 14% - 7% - 23% - 18% 3% CDB HSA Feb ’20 Mar ’20 Apr ’20 May ’20 Jun ‘20 YoY by month
Offering benefits 11 Increased capacity to acquire sub - scale HSA portfolios Acquirer of choice for small to midsized HSA portfolios from banks and CUs More exits likely with return to ultra - low interest rate policy Since 2010, 20+ HSA portfolios acquired Continued investment in proprietary platform Industry - shaping innovation Industry - leading scale Accelerated deleveraging reduces interest costs
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -- 1.00% 2.00% 3.00% HSA portfolio acquisition 12 Source: CapitalIQ , Year - end Devenir and HealthEquity information as of July 6, 2020 (1) 2019 Year - end Devenir report Fed Funds Rate HSA custodian assets by industry (1) 16% 60% 24% HealthEquity Financial institution Managed care $2.3 $0.6 $1.8 $1.5 HSA assets transactions in $ billion not HQY HSA assets transactions in $ billion HQY $0.4
Capitalization and leverage 13 ($ in millions) April 30, 2020 As adjusted 1 April 30, 2020 January 31, 2020 Cash & cash equivalents $213 $171 $192 Long - term debt 2 $1,014 $1,214 $1,221 Total stockholders’ equity $1,283 $1,041 $1,030 Total net leverage ratio 3 2.88 3.73 3.44 1. Assumes $250 million equity capital with $200 million debt paydown 2. Includes current portion and net of issuance costs 3. Calculated per HQY’s outstanding credit agreement
$171 $213 $1,214 $1,014 Q1 21 As Adjusted Q1 21 ² Interest savings offset earnings dilution 14 x Reduces debt outstanding x Lowers pricing on overall pro forma debt x Enhances liquidity and acquisition flexibility x Increases covenant cushion Borrowing costs: L + 200 L + 175 Debt outstanding 1 Cash 1. Includes current portion and net of issuance costs 2. Assumes $250 million equity capital with $200 million debt paydown ($ in Millions)
Fiscal first quarter financial results 15 NOTE: Historic performance depicted is not necessarily indicative of past and future performance. For more information, see our Company’s public filings with the Securities and Exchange Commission (1) See reconciliation of net income, the most comparable GAAP measure, to Non - GAAP Adjusted EBITDA in appendix . • 118% Q1 revenue growth YoY - 315% Q1 growth in Service Revenue - 12% Q1 growth in Custodial Revenue - 74% Q1 growth in Interchange Revenue • 62 % Adjusted EBITDA growth Q1 YoY • 57% Q1 Gross margin • 33% Q1 Adjusted EBITDA margin Three Months Three Months Revenue ($M) Adjusted EBITDA (1) ($M) $69.9 $87.1 $190.0 FY19 FY20 FY21 $29.6 $38.9 $63.0 FY19 FY20 FY21
First quarter HSA key metrics 16 HSAs (000s) • 104K Q1 new organic HSAs • 33% growth YoY • $3.2B net increase YoY • 38% growth YoY NOTE: HSA and HSA Asset balances as of April 30 in each year with Q1FY21 balances including the acquired HSAs and HSA assets fr om WageWorks and other in FY 2020. Historic performance depicted is not necessarily indicative of past and future performance. For more information, s ee our Company’s public filings with the Securities and Exchange Commission HSA Assets ($M) 2,805 3,476 4,054 671 578 1,326 3,476 4,054 5,380 Q1FY19 Q1FY20 Q1FY21 Net new HSAs Beg HSAs $5,511 $6,404 $8,724 $1,351 $1,917 $2,780 $6,862 $8,321 $11,504 Q1FY19 Q1FY20 Q1FY21 Invested assets Cash assets
18 Appendix
Adjusted EBITDA reconciliation 19