雅虎香港財經 HealthEquity, Inc. (NASDAQ:HQY) Q4 2024 Earnings Call Transcript
HealthEquity, Inc. (NASDAQ:HQY) Q4 2024 Earnings Call Transcript March 19, 2024
HealthEquity, Inc. beats earnings expectations. Reported EPS is $0.63, expectations were $0.56. HQY isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the HealthEquity Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Richard Putnam. Please go ahead.
Richard Putnam: Thank you, MJ. Hello, everyone. Happy Vernal Equinox, and welcome to HealthEquity's fourth quarter fiscal year-end and 2024 earnings conference call. My name is Richard Putnam, Investor Relations for HealthEquity, and joining me today is Jon Kessler, President and CEO; James Lucania, Executive Vice President and CFO; and Dr. Steve Neeleman, Vice Chair and Founder of the Company. Before I turn the call over to Jon, I have a couple of reminders. First, a press release announcing the financial results for our full year and fourth quarter of fiscal 2024 was issued after the market closed this afternoon. These financial results include the contributions from our wholly-owned subsidiaries and accounts they administer, but do not include any impact from BenefitWallet HSA portfolio acquisition.
The press release includes definitions of certain non-GAAP financial measures that we will reference today. A copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures and a recording of this webcast can be found on our Investor Relations website, which is ir.healthequity.com. Second, our comments and responses to your questions today reflect management's view as of today, March 19, 2024, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates or other information that might be considered forward-looking. There are many important factors relating to our business, which could affect the forward-looking statements made today. These forward-looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from statements made here today.
We caution against placing undue reliance on these forward-looking statements, and we also encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stocks as detailed in our latest annual report on Form 10-K and any subsequent periodic reports filed with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. With that out of the way, let's turn the call over to Jon Kessler. Jon?
Jon Kessler: Hi there. Thank you, Richard. Today is also a baseball's major, in addition to being the vernal equinox, is also baseball's opening day. Should be a national holiday. The good news is you do not need the permission of Major League Baseball to reproduce or account this call. You don't need anyone's permission. You can just do it. So with that, thank you for joining us. And since we just held our Investor Day Jim and I are going keep prepared remarks and of course, Steve is here for Q&A. In fiscal '24, the team delivered double-digit year-over-year growth in revenue at 16% and reached the $1 billion in revenue milestone. Adjusted EBITDA grew more than twice as fast at 36% and in sales, as we previously reported, new logo growth and network partner production drove a record Q4 and a strong year overall.
Members and assets grew 9% and 14% respectively in fiscal '24 and the team opened 949,000 new HSAs from sales. HealthEquity ended the fiscal year with 8.7 million HSA members in total. More than 30% of HSA cash is now in enhanced rates. Investing members and invested assets grew 13% and 28%, respectively. Total HSA assets reached $25.2 billion and total accounts grew 5%, including from organic CDB net growth for the first time since the pandemic began. Now, if you weren't at our Investor Day or if you were dazzled by the mountain views, listen up. Management aims to continue strong top-line growth and competitive outperformance while doubling non-GAAP net income per share from fiscal 2024 levels over the next 3 years. To do this, we have focused capital investment on our proprietary health accounts platform and the ecosystem to which it connects us, leveraging foundations in the cloud, in data science, and in API technology to deliver remarkable experiences, to deepen partnerships, and to drive member outcomes.
We call those 3Ds. We further leverage our platform through opportunistic HSA portfolio acquisitions such as BenefitWallet, the transition of which we expect to complete in Q2. This 3-year strategy will, we believe, not only build shareholder value, but also advance HealthEquity's mission, which is to save and improve lives by empowering healthcare consumers. It's important stuff. Now to Jim to detail other important stuff, which is our Q4 and fiscal '24 performance and enhanced guidance for fiscal 2025. Jim?
James Lucania: Thank you, Jon. First, I just want to thank all of you that joined us for our Investor Day last month hope you found it informative. I'll briefly highlight fourth quarter fiscal year GAAP and non-GAAP financial results. As always, we provide a reconciliation of GAAP measures to non-GAAP measures in today's press release. As a reminder, the results presented here reflect the reclassifications of our income statement we described in an 8-K filed on February 21, both for fiscal '24 and the prior year for comparison. Fourth quarter revenue increased 12% year-over-year. Service revenue was $118.6 million, down 1% year over year, reflecting the final run off of National Emergency activity. Custodial revenue grew 35% to $105.4 million in the fourth quarter.
The annualized interest rate yield on HSA cash was 268 basis points for the quarter. Interchange revenue grew 6% to $38.4 million. Gross profit as a percentage of revenue was 62% in the fourth quarter this year, up from 58% in the fourth quarter last year. Net income for the fourth quarter was $26.4 million or $0.30 per share on a GAAP EPS basis. Our non-GAAP net income was $55 million or $0.63 per share versus $0.37 per share last year. Adjusted EBITDA for the quarter was $98.8 million and adjusted EBITDA as a percentage of revenue was 38%, a 620 basis point improvement over the same quarter last year. For the full fiscal year of 2024, revenue was $999.6 million which Jon generously rounded up to $1 billion, up 16% compared to last year. GAAP net income was $55.7 million or $0.64 per diluted share, and non-GAAP net income was $195.5 million or $2.25 per diluted share, up 71% and 65%, respectively, compared to last year.
Adjusted EBITDA was $369.2 million, up 36% from the prior year, resulting in adjusted EBITDA as a percentage of revenue of 37% for this fiscal year. Turning to the balance sheet. As of January 31, 2024, cash on hand was $404 million boosted by $243 million of cash flow from operations for the full fiscal year. The company had $875 million of debt outstanding net of issuance costs. We continue to have a $1 billion undrawn line of credit available. We anticipate using both cash and drawing on the line of credit over the next few months in connection with the closings of the BenefitWallet HSA portfolio acquisition. Today's fiscal '25 guidance reflects the carry forward of stronger than expected Q4 sales and efficiencies from the technology investments Jon mentioned, offset by slightly higher mix of investments versus cash in HSA assets.
We expect revenue in a range between $1.14 billion and $1.16 billion. GAAP net income in a range of $73 million to $88 million or $0.83 to $0.99 per share. We expect non-GAAP net income to be between $247 million and $262 million or $2.79 and $2.96 per share based upon an estimated 89 million shares outstanding for the year. This is a big deposit towards our goal of doubling non-GAAP net income per share to our $4.50 goal by fiscal 2027. Finally, we expect adjusted EBITDA to be between $438 million and $458 million. Our guidance reflects an expectation for an average yield on HSA cash of approximately 300 basis points for fiscal '25. As a reminder, we base custodial yield assumptions embedded in guidance on an analysis of forward-looking market indicators such as the secured overnight financing rate and mid duration treasury forward curves.
These are, of course, subject to change and not perfect predictors of future market conditions. As Jon mentioned, we ended fiscal '24 with about 30% of HSA cash in Enhance rates and expect that mix shift from basic rates to continue as over 80% of new deposits flow into enhance rates. Our guidance also includes the expected impacts of the BenefitWallet HSA portfolio acquisition anticipated to be completed in multiple tranches by the end of Q2. Cost impacts include interest expense due to an increase in the amount of variable rate debt outstanding and drawdown of corporate cash to fund the acquisition and on boarding costs beyond normal seasonal costs to serve in Q1 and Q2. We expect full run rate benefit in Q3 and beyond. We assume a non-GAAP income tax rate of approximately 25% and a diluted share count of 89 million including common share equivalents.
Based on our current full year guidance, we project a GAAP tax rate for fiscal 2025 at about 28%. As we've done in recent reporting periods, our full fiscal 2025 guidance includes a reconciliation of GAAP to the non-GAAP metrics provided in the earnings release and a definition of all such items is included at the end of the earnings release. In addition, while the amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is included. With that, we know you have a number of questions. So let's go right to our operator for Q&A.
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