HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of 63 cents in fourth-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 12.5%. The bottom line improved 70.3% on a year-over-year basis.
GAAP EPS in the fiscal fourth quarter was 30 cents against the year-ago quarter’s loss of less than 1 cent per share.
Full-year fiscal 2024 adjusted EPS was $2.25, up 65.4% compared with that at the end of the comparable fiscal 2023 period. The figure topped the Zacks Consensus Estimate by 2.7%.
Revenues in Detail
In the fiscal fourth quarter, the company generated revenues of $262.4 million, which beat the Zacks Consensus Estimate by 1.5%. The top line improved 12.2% from the prior-year quarter.
Full-year fiscal 2024 revenues were $999.6 million, reflecting a 15.9% uptick from the comparable fiscal 2023 period. The figure topped the Zacks Consensus Estimate by 0.4%.
HSA Details
As of Jan 31, 2024, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) was 8.7 million, up 8.9% year over year.
HealthEquity reported 610,000 HSAs with investments as of Jan 31, 2024, up 12.8% year over year. Total Accounts, as of Jan 31, 2024, were 15.7 million, up 5.2% year over year. This uptick included total HSAs and 7 million other Consumer Direct Benefits (CDBs).
Total HSA assets were $25.21 billion at the end of Jan 31, 2024, up 13.9% year over year. This included $15.01 billion of HSA cash and $10.21 billion of HSA investments.
This figure compares to our fiscal fourth-quarter HSA cash and HSA investments projection of $15.8 billion and $8.7 billion, respectively. We had projected total HSA assets of $24.5 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 revenues, were $0.84 billion (down 6.7%) as of Jan 31, 2024.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $118.6 million in the quarter, down 1.1% year over year. This figure compares to our Service revenues’ fiscal fourth-quarter projection of $119.3 million.
Custodial revenues totaled $105.4 million, up 35.4% from the year-ago period. This figure compares to our Custodial revenues’ fiscal fourth-quarter projection of $108.4 million.
Interchange revenues totaled $38.4 million, up 6.3% year over year. This figure compares to our Interchange revenues’ fiscal fourth-quarter projection of $30.1 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
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 21.2% to $163.3 million. The gross margin expanded 461 basis points (bps) to 62.2%.
We had projected 63.4% of gross margin for the fiscal fourth quarter.
Sales and marketing expenses climbed 7.1% to $20.6 million year over year, whereas technology and development expenses climbed 4.8% to $55.2 million. General and administrative expenses also increased 8.3% year over year to $23.1 million. Adjusted operating expenses of $98.9 million increased 6.1%.
Adjusted operating profit totaled $64.4 million, improving 55.2% from the prior-year quarter. Adjusted operating margin in the quarter expanded 679 bps to 24.5%.
Financial Position
The company exited fiscal 2024 with cash and cash equivalents of $403.9 million compared with $254.3 million at fiscal 2023-end. Total debt (net of issuance costs) at the end of fiscal 2024 was $874.9 million compared with $925.3 million at the end of fiscal 2023.
Cumulative net cash flow from operating activities at the end of fiscal 2024 totaled $242.8 million compared with $150.7 million in the year-ago period.
FY25 Guidance
HealthEquity has reiterated its revenue outlook and initiated its EPS projections for fiscal 2025.
For fiscal 2025, revenues are continued to be projected between $1.14 billion and $1.16 billion. The Zacks Consensus Estimate is currently pegged at $1.15 billion.
Adjusted EPS is expected to be in the range of $2.79-$2.96. The Zacks Consensus Estimate currently stands at $2.80.
Our Take
HealthEquity exited fourth-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 the majority of 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. Management’s expectations of the impacts of the BenefitWallet HSA portfolio acquisition raise optimism.
However, a continued decline in Service revenues in the reported quarter is disappointing. The cost impacts, including interest expense, also do not bode well.
Zacks Rank and Key Picks
HealthEquity currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cencora, Inc. COR, Elevance Health, Inc. ELV and Cardinal Health, Inc. CAH.
Cencora, carrying a Zacks Rank of 2 (Buy), reported first-quarter fiscal 2024 adjusted EPS of $3.28, beating the Zacks Consensus Estimate by 14.7%. Revenues of $72.25 billion outpaced the consensus mark by 5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cencora has a long-term estimated growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.7%.
Elevance Health reported fourth-quarter 2023 adjusted EPS of $5.62, beating the Zacks Consensus Estimate by 1.3%. Revenues of $42.45 billion outpaced the consensus mark by 1.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12%. ELV’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.1%.
Cardinal Health reported second-quarter fiscal 2024 adjusted EPS of $1.82, beating the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion surpassed the Zacks Consensus Estimate by 1.1%. It currently carries a Zacks Rank #2.
Cardinal Health has a long-term estimated growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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