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HealthEquity (HQY) Beats Q2 Earnings & Revenue Estimates

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HealthEquity, Inc. (HQY - Free Report) posted earnings of 28 cents per share in the second quarter of fiscal 2019, surpassing the Zacks Consensus Estimate of 20 cents. The figure was higher than year-ago quarter’s earnings of 27 cents on revenue and margin expansion.

Revenues amounted to $71.1 million, up 24.9% year over year. Also, the figure marginally beat the Zacks Consensus Estimate of $70 million.

The stock has a Zacks Rank #3 (Hold).

HSA Member Details

The total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA Members) was 3.6 million, up 23% year over year.

Additionally, total Active HSA Members were 2.9 million in the reported quarter, up 19% year over year.During the quarter,82% of net HSA members in the quarter were active.

HealthEquity, Inc. Price and Consensus

 

HealthEquity, Inc. Price and Consensus | HealthEquity, Inc. Quote

Segment Details

Service revenues were up 9.3% year over year $24.9 million. The growth in service revenues was driven by 12% year-over-year increase in average HSA, offset by a 12% decline in service revenue per average HSA.

Custodial revenues are up 44.3% year over year to $30.7 million. Growth in Custodial revenues was supported by 31% growth in total custodial assets and a higher annualized interest rate yield on custodial cash assets of 2.1% during the quarter.

Interchange revenues are up 20.6% year over year to 15.4 million. Strong year-over-year growth in Interchange revenues was driven by increased card spending and more favorable interchange terms (higher spend volume).

Gross Profit Details

HealthEquity registered gross profit of $46.6 million, up 30.1% year over year in the second quarter.  Gross margin level in the second quarter was 65.5% of net revenues, up 260 basis points year over year.

Sales and marketing expenses were $7.2 million, 39.4% year over year.

Technology and development expenses were $8.4 million, up 23.6% year over year.

Guidance

For fiscal 2019, HealthEquity projects revenues in the range of $279-$285 million, up from the previous guidance of$278-$284 million. The Zacks Consensus Estimate is pegged at $282.4 million, which iswithin the guidance.   

Adjusted income is projectedin the range of $67-$71 million, upfrom the previous guidance of $55-$59 million.Adjusted net income per share is expected in the range of$1.05-$1.11. The Zacks Consensus Estimate is pegged at $1.05, which lies in the upper end of the guidance.

Wrapping Up

With strong HSA member growth, HealthEquity exited the second quarter on a solid note.The company is currently the third largest HSA custodian by market share. In addition to HSA, the company offers health reimbursement arrangement (HRA) and a health flexible spending account (FSA) to regional employers. Apart from this, HealthEquity’s 401(K) solution that lowers the cost, risk and work of managing a retirement plan buoys optimism.

Management is optimistic regarding the launch of HealthEquity retirement services. However, the company faces stiff competition in the Medical Services markets. The company is required to comply with strict Treasury Regulations formulated by the Internal Revenue Service or the IRS. The stock looks a bit overvalued at the moment.

Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which also reported solid earnings this season, are Illumina, Inc (ILMN - Free Report) ,Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc (ISRG - Free Report) .

While Illumina and Integer Holdings sport a Zacks Rank #1 (Strong Buy), Intuitive Surgical has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina reported adjusted earnings of $1.43 per sharein the second quarter of 2018, beating the consensus mark of $1.11.

Integer Holdings posted adjusted earnings of $1.06 per share in the second quarter of 2018, which exceeded the Zacks Consensus Estimate of 90 cents.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which outpaced the Zacks Consensus Estimate of $2.48 and improved 38% year over year.

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