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HealthEquity (HQY) Surpasses Q2 Earnings Estimates, FY24 View Up
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HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 53 cents in second-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 12.8%. The bottom line improved 60.6% on a year-over-year basis.
GAAP EPS in the fiscal second quarter was 12 cents against the year-ago quarter’s loss of 13 cents.
Revenues in Detail
In the fiscal second quarter, the company generated revenues of $243.5 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 18.1% from the prior-year quarter.
HSA Details
As of Jul 31, 2023, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) was 8.2 million, up 8.5% year over year.
HealthEquity reported 574,000 HSAs with investments as of Jul 31, 2023, up 11.2% year over year. Total Accounts, as of Jul 31, 2023, were 14.9 million, 3.1% year over year. This uptick included total HSAs and 6.8 million other Consumer Direct Benefits (CDBs).
Total HSA assets were $23.20 billion at the end of Jul 31, 2023, up 12.9% year over year. This included $14.02 billion of HSA cash and $9.18 billion of HSA investments.
This figure compares to our fiscal second-quarter HSA cash and HSA investments projection of $15.5 billion and $8.7 billion, respectively. We had projected total HSA assets of $24.3 billion in the fiscal second 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 revenues, were $0.81 billion as of Jul 31, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $105.7 million in the quarter, up 2.6% year over year. This figure compares to our Service revenues’ fiscal second-quarter projection of $119.1 million.
Custodial revenues totaled $98.9 million, up 50.8% from the year-ago period. This figure compares to our Custodial revenues’ fiscal second-quarter projection of $73.6 million.
Interchange revenues totaled $38.9 million, up 3.7% year over year. This figure compares to our Interchange revenues’ fiscal second-quarter projection of $45.5 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
In the quarter under review, HealthEquity’s gross profit rose 28.1% to $150.9 million. The gross margin expanded 482 basis points (bps) to 61.9%.
We had projected 58% of gross margin for the fiscal second quarter.
Sales and marketing expenses climbed 20.7% to $19.1 million year over year, whereas technology and development expenses climbed 17.6% to $54.8 million. General and administrative expenses also increased 4.4% year over year to $27.1 million. Adjusted operating expenses of $100.9 million increased 14.3%.
Adjusted operating profit totaled $49.9 million, improving 69.6% from the prior-year quarter. Adjusted operating margin in the quarter expanded 622 bps to 20.5%.
Financial Position
The company exited second-quarter fiscal 2024 with cash and cash equivalents of $290.3 million compared with $225.6 million at the fiscal first-quarter end. Total debt (net of issuance costs) at the end of second-quarter fiscal 2024 was $873.6 million compared with $872.9 million at the end of the fiscal first quarter.
Cumulative net cash flow from operating activities at the end of second-quarter fiscal 2024 totaled $108.6 million compared with $47.2 million in the year-ago period.
FY24 Guidance
HealthEquity has upped its revenue and EPS outlook for fiscal 2024.
For fiscal 2024, revenues are now projected to be between $980 million and $990 million, up from the earlier projections of $975 million and $985 million. The Zacks Consensus Estimate for the same is currently pegged at $979.7 million.
Adjusted EPS is now expected to be in the range of $1.97 to $2.06, up from the prior outlook of $1.88-$1.97. The Zacks Consensus Estimate for the same currently stands at $1.92.
Our Take
HealthEquity exited second-quarter fiscal 2024 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 HSA assets in the reported quarter is promising. The expansion of both margins also bodes well. The company raising its revenue and adjusted EPS outlook for the fiscal year raises our optimism.
However, continued inflationary pressure leading to higher wage inflation issues does not bode well.
Zacks Rank and Other Key Picks
HealthEquity currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are DaVita Inc. (DVA - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and McKesson Corporation (MCK - Free Report) .
DaVita, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $2.08, beating the Zacks Consensus Estimate by 25.3%. Revenues of $3 billion outpaced the consensus mark by 1.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has a long-term estimated growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 21.4%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
McKesson reported first-quarter fiscal 2024 adjusted EPS of $7.27, beating the Zacks Consensus Estimate by 24.3%. Revenues of $74.48 billion surpassed the Zacks Consensus Estimate by 6.6%. It currently carries a Zacks Rank #2.
McKesson has a long-term estimated growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 8.1%.
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HealthEquity (HQY) Surpasses Q2 Earnings Estimates, FY24 View Up
HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 53 cents in second-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 12.8%. The bottom line improved 60.6% on a year-over-year basis.
GAAP EPS in the fiscal second quarter was 12 cents against the year-ago quarter’s loss of 13 cents.
Revenues in Detail
In the fiscal second quarter, the company generated revenues of $243.5 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 18.1% from the prior-year quarter.
HSA Details
As of Jul 31, 2023, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) was 8.2 million, up 8.5% year over year.
HealthEquity reported 574,000 HSAs with investments as of Jul 31, 2023, up 11.2% year over year. Total Accounts, as of Jul 31, 2023, were 14.9 million, 3.1% year over year. This uptick included total HSAs and 6.8 million other Consumer Direct Benefits (CDBs).
Total HSA assets were $23.20 billion at the end of Jul 31, 2023, up 12.9% year over year. This included $14.02 billion of HSA cash and $9.18 billion of HSA investments.
This figure compares to our fiscal second-quarter HSA cash and HSA investments projection of $15.5 billion and $8.7 billion, respectively. We had projected total HSA assets of $24.3 billion in the fiscal second 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 revenues, were $0.81 billion as of Jul 31, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $105.7 million in the quarter, up 2.6% year over year. This figure compares to our Service revenues’ fiscal second-quarter projection of $119.1 million.
Custodial revenues totaled $98.9 million, up 50.8% from the year-ago period. This figure compares to our Custodial revenues’ fiscal second-quarter projection of $73.6 million.
Interchange revenues totaled $38.9 million, up 3.7% year over year. This figure compares to our Interchange revenues’ fiscal second-quarter projection of $45.5 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 28.1% to $150.9 million. The gross margin expanded 482 basis points (bps) to 61.9%.
We had projected 58% of gross margin for the fiscal second quarter.
Sales and marketing expenses climbed 20.7% to $19.1 million year over year, whereas technology and development expenses climbed 17.6% to $54.8 million. General and administrative expenses also increased 4.4% year over year to $27.1 million. Adjusted operating expenses of $100.9 million increased 14.3%.
Adjusted operating profit totaled $49.9 million, improving 69.6% from the prior-year quarter. Adjusted operating margin in the quarter expanded 622 bps to 20.5%.
Financial Position
The company exited second-quarter fiscal 2024 with cash and cash equivalents of $290.3 million compared with $225.6 million at the fiscal first-quarter end. Total debt (net of issuance costs) at the end of second-quarter fiscal 2024 was $873.6 million compared with $872.9 million at the end of the fiscal first quarter.
Cumulative net cash flow from operating activities at the end of second-quarter fiscal 2024 totaled $108.6 million compared with $47.2 million in the year-ago period.
FY24 Guidance
HealthEquity has upped its revenue and EPS outlook for fiscal 2024.
For fiscal 2024, revenues are now projected to be between $980 million and $990 million, up from the earlier projections of $975 million and $985 million. The Zacks Consensus Estimate for the same is currently pegged at $979.7 million.
Adjusted EPS is now expected to be in the range of $1.97 to $2.06, up from the prior outlook of $1.88-$1.97. The Zacks Consensus Estimate for the same currently stands at $1.92.
Our Take
HealthEquity exited second-quarter fiscal 2024 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 HSA assets in the reported quarter is promising. The expansion of both margins also bodes well. The company raising its revenue and adjusted EPS outlook for the fiscal year raises our optimism.
However, continued inflationary pressure leading to higher wage inflation issues does not bode well.
Zacks Rank and Other Key Picks
HealthEquity currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are DaVita Inc. (DVA - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and McKesson Corporation (MCK - Free Report) .
DaVita, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $2.08, beating the Zacks Consensus Estimate by 25.3%. Revenues of $3 billion outpaced the consensus mark by 1.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has a long-term estimated growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 21.4%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
McKesson reported first-quarter fiscal 2024 adjusted EPS of $7.27, beating the Zacks Consensus Estimate by 24.3%. Revenues of $74.48 billion surpassed the Zacks Consensus Estimate by 6.6%. It currently carries a Zacks Rank #2.
McKesson has a long-term estimated growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 8.1%.