Yahoo Finance HealthEquity (HQY) Surpasses Q1 Earnings Estimates, FY24 View Up
HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of 50 cents in first-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 21.9%. The bottom line improved 85.2% on a year-over-year basis.
GAAP EPS in the fiscal first quarter was 5 cents against the year-ago quarter’s loss of 16 cents.
Revenues in Detail
In the fiscal first quarter, the company generated revenues of $244.4 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 18.8% from the prior-year quarter.
HSA Details
As of Apr 30, 2023, the total number of Health Savings Accounts (HSA) for which HealthEquity served as a non-bank custodian (HSA members) came in at 8 million, up 9.3% year over year.
HealthEquity reported 556,000 HSAs with investments as of Apr 30, 2023, up 9.9% year over year. Total Accounts, as of Apr 30, 2023, were 14.9 million, 3.8% year over year. This uptick included total HSAs and 6.9 million other Consumer Direct Benefits (CDBs).
Total HSA assets were $22.32 billion at the end of Apr 30, 2023, up 10.1% year over year. This included $14.11 billion of HSA cash and $8.21 billion of HSA investments.
This figure compares to our fiscal first-quarter HSA cash and HSA investments projection of $15.8 billion and $8.8 billion, respectively. We had projected total HSA assets of $24.6 billion in the fiscal first 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 revenue, were $0.93 billion as of Apr 30, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $105.1 million in the quarter, up 0.7% year over year. This figure compares to our Service revenues’ fiscal first-quarter projection of $120.3 million.
Custodial revenues totaled $94.4 million, up 59.1% from the year-ago period. This figure compares to our Custodial revenues’ fiscal first-quarter projection of $70.8 million.
Interchange revenues totaled $44.9 million, up 6.9% year over year. This figure compares to our Interchange revenues’ fiscal first-quarter projection of $46.7 million.
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 32.9% to $147.8 million. The gross margin expanded 643 basis points (bps) to 60.5%.
We had projected 53.9% of gross margin for the fiscal first quarter.
Sales and marketing expenses climbed 20.4% to $19.9 million year over year, whereas technology and development expenses climbed 17.7% to $53.2 million. General and administrative expenses also increased 4.9% year over year to $24.9 million. Adjusted operating expenses of $98 million increased 14.7%.
Adjusted operating profit totaled $49.8 million, improving 93.8% from the prior-year quarter. Adjusted operating margin in the quarter expanded 788 bps to 20.4%.
Financial Position
The company exited first-quarter fiscal 2024 with cash and cash equivalents of $225.6 million compared with $254.3 million at the end of fiscal 2023. Total debt (net of issuance costs) at the end of first-quarter fiscal 2024 was $872.9 million compared with $925.3 million at the end of fiscal 2023.
Net cash flow from operating activities at the end of first-quarter fiscal 2024 totaled $31.5 million compared with $7.1 million in the year-ago period.
FY24 Guidance
HealthEquity has upped its revenue and EPS outlook for fiscal 2024.
For fiscal 2024, revenues are now projected to be between $975 million and $985 million, up from the earlier projections of $960 million and $975 million. The Zacks Consensus Estimate for the same is currently pegged at $966.4 million.
Adjusted EPS is now expected to be in the range of $1.88-$1.97, up from the prior outlook of $1.74-$1.87. The Zacks Consensus Estimate for the same currently stands at $1.75.
Our Take
HealthEquity exited first-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 all 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. The company raising its revenue and adjusted EPS outlook for the fiscal year raises our optimism.
However, continued inflationary pressure leading to higher costs and wage inflation issues does not bode well.
Zacks Rank and Other Key Picks
HealthEquity currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Hologic, Inc. HOLX, Merit Medical Systems, Inc. MMSI and Boston Scientific Corporation BSX.
Hologic, carrying a Zacks Rank of 2, reported second-quarter fiscal 2023 adjusted EPS of $1.06, beating the Zacks Consensus Estimate by 20.5%. Revenues of $ $1.03 billion outpaced the consensus mark by 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%.
Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.
Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Boston Scientific reported first-quarter 2023 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate by 9.3%. Revenues of $3.39 billion surpassed the Zacks Consensus Estimate by 7.6%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
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HealthEquity, Inc. (HQY) : Free Stock Analysis Report
