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HealthEquity (HQY) Beats on Q4 Earnings, Margins Rise
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HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 37 cents in fourth-quarter fiscal 2023, which surpassed the Zacks Consensus Estimate by 8.8%. The bottom line improved 85% on a year-over-year basis.
Our projection of adjusted EPS was 30 cents.
GAAP loss per share in the fiscal fourth quarter was less than one cent, narrower than the year-ago quarter’s loss of 39 cents per share.
Full-year adjusted EPS was $1.36, up 2.3% from the end of the comparable fiscal 2022 period. The figure surpassed the Zacks Consensus Estimate by 2.3%.
Our projection of full-year adjusted EPS was $1.29.
Revenues in Detail
In the fiscal fourth quarter, the company generated revenues of $233.8 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 15% from the prior-year quarter.
The fiscal fourth-quarter revenue compares to our estimate of $224.1 million.
Full-year revenues were $861.7 million, reflecting a 13.9% uptick from the comparable fiscal 2022 period. The figure surpassed the Zacks Consensus Estimate by 0.5%.
Our projection of full-year revenues was $852 million.
HSA Details
As of Jan 31, 2023, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) came in at 7.9 million, up 10.8% year over year.
HealthEquity reported 541,000 HSAs with investments as of Jan 31, 2023, up 18.9% year over year. Total Accounts, as of Jan 31, 2023, were 14.9 million, up 3.6% year over year. This uptick included total HSAs and 6.9 million other Consumer Direct Benefits (CDBs).
Total Active HSA assets were $22.15 billion at the end of Jan 31, 2023, up 12.9% year over year. This included $14.19 billion of HSA cash and $7.95 billion of HSA investments.
This figure compares to our fiscal fourth-quarter HSA cash and HSA investments projection of $15 billion and $7.9 billion, respectively. We had projected total Active HSA assets of $22.9 billion in the fiscal fourth quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenue, were $0.90 billion as of Jan 31, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $114.2 million in the quarter, up 1.6% year over year. This figure compares to our Service revenues’ fiscal fourth-quarter projection of $117.8 million.
Custodial revenues totaled $83.5 million, up 43.8% from the year-ago period. This figure compares to our Custodial revenues’ fiscal fourth-quarter projection of $67.8 million.
Interchange revenues totaled $36.1 million, up 10.1% year over year. This figure compares to our Interchange revenues’ fiscal fourth-quarter projection of $38.5 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
In the quarter under review, HealthEquity’s gross profit rose 27.5% to $134.2 million. The gross margin expanded 561 basis points (bps) to 57.4%.
We had projected 55% of gross margin for the fiscal fourth quarter.
Sales and marketing expenses climbed 17.7% to $19.2 million year over year, whereas technology and development expenses climbed 14.8% to $52.7 million. However, general and administrative expenses fell 0.2% year over year to $20.8 million. Adjusted operating expenses of $92.8 million increased 11.6%.
Adjusted operating profit totaled $41.5 million, improving 87.1% from the prior-year quarter. Adjusted operating margin in the quarter expanded 683 bps to 17.7%.
Financial Position
The company exited fiscal 2023 with cash and cash equivalents of $254.3 million compared with $225.4 million at the end of fiscal 2022. Total debt (net of issuance costs) at the end of fiscal 2023 was $925.3 million compared with $930.8 million at the end of fiscal 2022.
Cumulative net cash flow from operating activities at the end of fiscal 2023 totaled $150.7 million compared with $140.9 million in the year-ago period.
FY24 Guidance
HealthEquity has issued its revenue and EPS outlook for fiscal 2024.
For fiscal 2024, revenues are projected to be between $960 million and $975 million. The Zacks Consensus Estimate for the same is currently pegged at $958.3 million.
Adjusted EPS is expected to be within $1.74-$1.87. The ZCE for the same currently stands at $1.71.
Our Take
HealthEquity exited fourth-quarter fiscal 2023 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. The top line benefited from robust contributions from all its revenue sources. Solid growth in HSAs also drove the top line. The solid uptick in total active HSA assets in the reported quarter is promising. The expansion of both margins also bodes well.
However, a decline in U.S. commercial bank deposits in the first two months of the calendar year of 2023 does not bode well.
Zacks Rank and Key Picks
HealthEquity currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, Masimo Corporation (MASI - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
Masimo, sporting a Zacks Rank #1, reported fourth-quarter 2022 adjusted EPS of $1.32, which beat the Zacks Consensus Estimate by 12.8%. Revenues of $617 million outpaced the consensus mark by 2.7%.
Masimo has an estimated growth rate of 3.5% for 2023. MASI’s earnings surpassed estimates in all the trailing four quarters, the average being 9%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently carries a Zacks Rank #2.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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HealthEquity (HQY) Beats on Q4 Earnings, Margins Rise
HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 37 cents in fourth-quarter fiscal 2023, which surpassed the Zacks Consensus Estimate by 8.8%. The bottom line improved 85% on a year-over-year basis.
Our projection of adjusted EPS was 30 cents.
GAAP loss per share in the fiscal fourth quarter was less than one cent, narrower than the year-ago quarter’s loss of 39 cents per share.
Full-year adjusted EPS was $1.36, up 2.3% from the end of the comparable fiscal 2022 period. The figure surpassed the Zacks Consensus Estimate by 2.3%.
Our projection of full-year adjusted EPS was $1.29.
Revenues in Detail
In the fiscal fourth quarter, the company generated revenues of $233.8 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 15% from the prior-year quarter.
The fiscal fourth-quarter revenue compares to our estimate of $224.1 million.
Full-year revenues were $861.7 million, reflecting a 13.9% uptick from the comparable fiscal 2022 period. The figure surpassed the Zacks Consensus Estimate by 0.5%.
Our projection of full-year revenues was $852 million.
HSA Details
As of Jan 31, 2023, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) came in at 7.9 million, up 10.8% year over year.
HealthEquity reported 541,000 HSAs with investments as of Jan 31, 2023, up 18.9% year over year. Total Accounts, as of Jan 31, 2023, were 14.9 million, up 3.6% year over year. This uptick included total HSAs and 6.9 million other Consumer Direct Benefits (CDBs).
Total Active HSA assets were $22.15 billion at the end of Jan 31, 2023, up 12.9% year over year. This included $14.19 billion of HSA cash and $7.95 billion of HSA investments.
This figure compares to our fiscal fourth-quarter HSA cash and HSA investments projection of $15 billion and $7.9 billion, respectively. We had projected total Active HSA assets of $22.9 billion in the fiscal fourth quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenue, were $0.90 billion as of Jan 31, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $114.2 million in the quarter, up 1.6% year over year. This figure compares to our Service revenues’ fiscal fourth-quarter projection of $117.8 million.
Custodial revenues totaled $83.5 million, up 43.8% from the year-ago period. This figure compares to our Custodial revenues’ fiscal fourth-quarter projection of $67.8 million.
Interchange revenues totaled $36.1 million, up 10.1% year over year. This figure compares to our Interchange revenues’ fiscal fourth-quarter projection of $38.5 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
HealthEquity, Inc. price-consensus-eps-surprise-chart | HealthEquity, Inc. Quote
Margin Details
In the quarter under review, HealthEquity’s gross profit rose 27.5% to $134.2 million. The gross margin expanded 561 basis points (bps) to 57.4%.
We had projected 55% of gross margin for the fiscal fourth quarter.
Sales and marketing expenses climbed 17.7% to $19.2 million year over year, whereas technology and development expenses climbed 14.8% to $52.7 million. However, general and administrative expenses fell 0.2% year over year to $20.8 million. Adjusted operating expenses of $92.8 million increased 11.6%.
Adjusted operating profit totaled $41.5 million, improving 87.1% from the prior-year quarter. Adjusted operating margin in the quarter expanded 683 bps to 17.7%.
Financial Position
The company exited fiscal 2023 with cash and cash equivalents of $254.3 million compared with $225.4 million at the end of fiscal 2022. Total debt (net of issuance costs) at the end of fiscal 2023 was $925.3 million compared with $930.8 million at the end of fiscal 2022.
Cumulative net cash flow from operating activities at the end of fiscal 2023 totaled $150.7 million compared with $140.9 million in the year-ago period.
FY24 Guidance
HealthEquity has issued its revenue and EPS outlook for fiscal 2024.
For fiscal 2024, revenues are projected to be between $960 million and $975 million. The Zacks Consensus Estimate for the same is currently pegged at $958.3 million.
Adjusted EPS is expected to be within $1.74-$1.87. The ZCE for the same currently stands at $1.71.
Our Take
HealthEquity exited fourth-quarter fiscal 2023 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. The top line benefited from robust contributions from all its revenue sources. Solid growth in HSAs also drove the top line. The solid uptick in total active HSA assets in the reported quarter is promising. The expansion of both margins also bodes well.
However, a decline in U.S. commercial bank deposits in the first two months of the calendar year of 2023 does not bode well.
Zacks Rank and Key Picks
HealthEquity currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, Masimo Corporation (MASI - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
Masimo, sporting a Zacks Rank #1, reported fourth-quarter 2022 adjusted EPS of $1.32, which beat the Zacks Consensus Estimate by 12.8%. Revenues of $617 million outpaced the consensus mark by 2.7%.
Masimo has an estimated growth rate of 3.5% for 2023. MASI’s earnings surpassed estimates in all the trailing four quarters, the average being 9%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently carries a Zacks Rank #2.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.