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HealthEquity (HQY) Q4 Earnings and Revenues Top Estimates

Zacks Equity Research

HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of 39 cents in fourth-quarter fiscal 2020, which surpassed the Zacks Consensus Estimate of 34 cents by 14.7%. The bottom line also improved a significant 30% on a year-over-year basis.

For the full-year fiscal 2020, adjusted EPS came in at $1.17, down 9.3% from the year-ago period. Further, the bottom line missed the consensus mark of $1.67 per share by 29.9%.

Revenues in Detail

The Zacks Rank #2 (Buy) company generated revenues of $201.2 million outpacing the Zacks Consensus Estimate by 1.4%. Further, the figure soared 165.5% from the prior-year period.

For the full-year fiscal 2020, revenues came in at $531.9, which soared 85.2% from the year-ago period and beat the consensus mark by 0.2%.

HealthEquity, Inc. Price, Consensus and EPS Surprise

 

HealthEquity, Inc. Price, Consensus and EPS Surprise

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

HSA Member Detail

As of Jan 31, 2020, the total number of Health Savings Accounts (HSA), for which HealthEquity served as a non-bank custodian (HSA members), was 5.3 million, up 34% year over year.

Additionally, total Active HSA members were 4.3 million, up 34% year over year.

Total Custodial Assets totaled $11.5 billion, up 43% year over year.

Segmental Performance

Service Revenues: At this segment, revenues totaled $122.2 million, up significantly from the year-ago quarter’s $25.8 million.

Custodial Revenues: At this segment, revenues grew 39.2% year over year to $49.4 million, attributable to growth in HSA assets and 2.41% higher year-over-year annualized interest rate yield on HSA cash assets.

Interchange Revenues: At this segment, revenues skyrocketed 104% year over year to $29.7 million. Per management, the upside was driven by increase in average total accounts.

Margin Details

HealthEquity generated gross profit of $113.7 million, up significantly from the year-ago quarter’s $44.4 million. Gross margin was 56.5% of net revenues, down 220 bps year over year.

Sales and marketing expenses summed $13.9 million, up 76.6% year over year. Technology and development expenses totaled $31.5 million, up from $10 million in year-ago quarter. General and administrative expenses amounted to $23.4 million, up from the prior-year quarter’s $8.5 million.

Operating income in the fiscal fourth quarter was $14.5 million, down 12.3% year over year. Operating margin totaled 7.2% in the quarter, down significantly from the year-ago quarter’s 21.9%.

Guidance

HealthEquity issued its guidance for fiscal 2021.

The company expects revenues between $770 million and $790 million. The Zacks Consensus Estimate is pegged at $822.4 million.

Adjusted net income is projected between $124 million and $132 million.

Adjusted EPS for fiscal 2021 is expected within $1.70-$1.81. The Zacks Consensus Estimate for earnings is pegged at $1.81.

Summing Up

With solid HSA member growth, HealthEquity exited fourth-quarter fiscal 2020 on an impressive note. Strong growth in Service, Custodial and Interchange segments buoys optimism.

Notably, solid growth in HSAs and custodial assets bolstered the company’s top line. 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 to regional employers. Additionally, a promising fiscal 2021 guidance instils optimism in the stock.

However, a significant drop in operating and gross margin raises concern. In fact, operating income also declined in the quarter. The company also faces stiff competition in the Medical Services market. HealthEquity is required to comply with the strict treasury regulations formulated by the Internal Revenue Service (IRS).

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks that reported solid results this earning season are Stryker Corporation SYK, Accuray Incorporated ARAY and IDEXX Laboratories, Inc. IDXX, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Fourth-quarter reported revenues of $4.13 billion surpassed the Zacks Consensus Estimate by 0.7%.

Accuray reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of a penny, beating the Zacks Consensus Estimate of a loss of 7 cents.
Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%.

IDEXX Laboratories reported fourth-quarter 2019 adjusted EPS of $1.04, which beat the Zacks Consensus Estimate of 91 cents by 14.3%. Revenues were $605.4 million, surpassing the Zacks Consensus Estimate by 0.9%.

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