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HealthEquity (HQY) Q3 Earnings and Revenues Beat Estimates

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HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 41 cents in third-quarter fiscal 2021, which beat the Zacks Consensus Estimate of 35 cents by 17.1%. However, the bottom line fell 4.7% on a year-over-year basis.

Revenues in Detail

The company generated revenues of $179.4 million, outpacing the Zacks Consensus Estimate by 1.9%. Also the top line rose 14.2% from the prior-year quarter.

HSA Details

As of Oct  31, 2020, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members), came in at 5.5 million, up 9% year over year.

Additionally, total Active HSA assets were $12.4 billion, up 19% year over year.

Total Accounts including HSAs and complementary consumer direct benefits (CDB) accounts summed 12.5 million, flat year over year.

Segmental Performance

Service Revenues: Revenues of $104.6 million were up 19.4% from the year-ago figure.

Custodial Revenues: Revenues grew 3.4% year over year to $48.5  million.

Interchange Revenues: Revenues increased 16.4% year over year to $26.2 million.

Margin Details

HealthEquity generated gross profit of $104.6 million, up 8.8% from the year-ago quarter. Gross margin was 58.3% of net revenues, down 282 basis points (bps) year over year.

Adjusted operating profit in the fiscal third quarter was $38.8 million, down 4.5% year over year. Adjusted operating margin was 21.6% in the period, contracting 423 bps year over year.


HealthEquity, Inc. Price, Consensus and EPS Surprise

HealthEquity, Inc. Price, Consensus and EPS Surprise


HealthEquity, Inc. price-consensus-eps-surprise-chart | HealthEquity, Inc. Quote


Financial Position

The company exited the fiscal third quarter with cash and cash equivalents of $299.4 million compared with $268.9 million at the end of the fiscal second quarter.

Cumulative cash flow from operating activities in the third quarter came in at $120.7 million, up from $74.1 million in the year-ago period.

Full-Fiscal View

For fiscal 2021, revenues are projected within $725-$731 million (up from the previously guided range of $720-$730 million). The Zacks Consensus Estimate for the same is pegged at $728.2 million.

Adjusted earnings per share are expected within $1.55-$1.61 (up from the earlier issued range of $1.48-$1.58). The Zacks Consensus Estimate for the same stands at $1.56.

Summing Up

HealthEquity exited third-quarter fiscal 2021 on a strong note. The company witnessed a sturdy segmental performance in the quarter under review. Notably, solid growth in HSAs and custodial assets bolstered the top line. In addition to HSA, the company offers health reimbursement arrangement to regional employers. HealthEquity achieved $55 million in run rate synergies by the end of the fiscal third quarter from its acquisition of WageWorks, which was completed in August 2019.

However, a significant drop in adjusted operating and gross margin raises concern. The company also faces stiff competition in the Medical Services market. HealthEquity is required to comply with the strict treasury regulations formulated by the Internal Revenue Service (IRS).

Zacks Rank and Key Picks

HealthEquity currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that already announced quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , Align Technology, Inc. (ALGN - Free Report) and BioRad Laboratories, Inc. (BIO - Free Report) , each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion also surpassed the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, which trumped the Zacks Consensus Estimate by 281.4%. Further, revenues of $734.1 million outpaced the consensus mark by 38%.

BioRad reported third-quarter 2020 adjusted EPS of $3, which topped the Zacks Consensus Estimate by 62.2%. Revenues of $647.3 million in the quarter too exceeded the Zacks Consensus Estimate by 14.5%.

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