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HealthEquity (HQY) Earnings & Revenues Top Estimates in Q1

HealthEquity, Inc. HQY reported adjusted earnings of 41 cents per share in first-quarter fiscal 2020, which surpassed the Zacks Consensus Estimate of 34 cents by 20.6%. The bottom-line figure also improved 32.3% on a year-over-year basis.

Revenues amounted to $87.1 million, which increased 24.5% year over year and also outpaced the Zacks Consensus Estimate by 3.7%.

HSA Member Details

As of April 30, 2019, the total number of Health Savings Accounts (HSA), for which HealthEquity served as a non-bank custodian (HSA Members), was 4.1 million, up 17% year over year.

Additionally, total Active HSA Members were 3.2 million, up 13% year over year.

Total Custodial Assets was $8.3 billion, up 21% year over year.

HealthEquity, Inc. Price, Consensus and EPS Surprise

 

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

Segmental Performance

Service Revenues: At this segment, revenues rose 8% year over year to $26.8 million. The uptick was driven by year-over-year increase of 17% in average HSA, partially offset by decline of 8% in service revenues per average HSA.

Custodial Revenues: At this segment, revenues increased 48% year over year to $42 million. The improvement was supported by 21% growth in average custodial cash assets and higher annualized interest rate yield on custodial cash assets of 2.5% during the quarter under review.

Interchange Revenues: At this segment, revenues improved 10% year over year to $18.3 million. The interchange revenues gained from year-over-year increase of 17% in average HSAs. The improvement was negated by a decrease in spend per average HSA.

Gross Margin Details

HealthEquity registered gross profit of $57.8 million, up 30.2% year over year in the first quarter. Gross margin level was 66.3% of net revenues, up 280 bps year over year.

Sales and marketing expenses summed $8.9 million, up 30.8% year over year. Technology and development expenses totaled $10.9 million, up 36.7% year over year. General and administrative expenses amounted to $8.7 million, up 16% year over year.

Operating income in the fiscal first quarter came in at $27.7 million, up 34.8% year over year. Operating margin totaled 31.8% in the quarter, up 240 bps year over year.

Guidance Raised

For fiscal 2020, HealthEquity now projects revenues in the range of $339-$345 million (up from the previously guided range of $333-$339 million). The mid-point of $342 million is above the Zacks Consensus Estimate of $337.4 million.

Adjusted net income is currently envisioned in the band of $83-$87 million (up from the previously guided range of $80-$84 million). Adjusted net income per share is expected in the $1.28-$1.34 range (up from the previous band of $1.23-$1.29 per share). The mid-point of $1.31 is above the Zacks Consensus Estimate of $1.28.

Adjusted EBITDA outlook is projected between $135 million and $140 million (up from the prior range of $133 million and $138 million).

Summing Up

With solid HSA member growth, HealthEquity exited the first quarter of fiscal 2020 on an impressive note. Additionally, the company raised fiscal 2020 guidance. Strong growth in Service and Custodial revenue segments buoys optimism.

Notably, solid growth in HSAs and custodial assets provided bolster to the company’s top-line performance. Currently, HealthEquity is the third largest HSA custodian by market share. In addition to HSA, the company offers health reimbursement arrangement (HRA) and health flexible spending account (FSA) to regional employers.

These apart, HealthEquity’s 401(K) solution, which lowers the cost, risk and work of managing a retirement plan, bodes well for the company. Moreover, management is optimistic about the launch of HealthEquity retirement services.

However, the company faces stiff competition in the Medical Services markets. HealthEquity is required to comply with strict Treasury Regulations formulated by the Internal Revenue Service or the IRS.

Zacks Rank

Currently, HealthEquity carries a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

Some better-ranked stocks, which reported solid results this earning season include Masimo Corporation MASI, DENTSPLY SIRONA Inc. XRAY and CONMED Corporation CNMD.

Masimo Corporation reported first-quarter 2019 adjusted earnings per share (EPS) of 79 cents, which surpassed the Zacks Consensus Estimate of 75 cents. The company’s revenues improved 8.8% year over year to $231.7 million and outpaced the Zacks Consensus Estimate of $223.6 million. The company carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

DENTSPLY reported adjusted EPS of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues came in at $946.2 million and surpassed the Zacks Consensus Estimate of $917.1 million. The company carries a Zacks Rank #2.

CONMED reported first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million. The company sports a Zacks Rank of 1.

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Masimo Corporation (MASI): Free Stock Analysis Report
 
DENTSPLY SIRONA Inc. (XRAY): Free Stock Analysis Report
 
CONMED Corporation (CNMD): Free Stock Analysis Report
 
HealthEquity, Inc. (HQY): Free Stock Analysis Report
 
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