HealthEquity, Inc. (NASDAQ: HQY), a leading provider of health savings accounts (HSAs), reported a strong third quarter for the fiscal year 2024, with significant growth in revenue and adjusted EBITDA. The company experienced a 15% increase in revenue year-over-year and a 30% growth in adjusted EBITDA. With a total of 8.3 million HSA members and $22.6 billion in HSA assets, the company's performance reflects a solid expansion in its customer base and asset accumulation. HealthEquity also provided an upbeat outlook for fiscal years 2024 and 2025, expecting continued growth in revenue and adjusted EBITDA margins. The company's financial guidance anticipates revenue between $985 million and $995 million for fiscal 2024 and between $1.14 billion and $1.16 billion for fiscal 2025.
Key Takeaways
- HealthEquity reported a 15% increase in year-over-year revenue and a 30% growth in adjusted EBITDA.
- The company ended the quarter with 8.3 million HSA members, representing an 8% increase, and $22.6 billion in HSA assets, up by 12%.
- HealthEquity's outlook for fiscal 2024 includes revenue between $985 million and $995 million, with adjusted EBITDA between $350 million and $360 million.
- For fiscal 2025, the company expects revenue between $1.14 billion and $1.16 billion, with adjusted EBITDA reaching approximately 38% to 39% of revenue.
- The acquisition of BenefitWallet is fully integrated into the fiscal 2025 guidance, contributing to revenue and higher yield.
- HealthEquity plans to host an Investor Day in February 2024 to discuss multiyear strategic initiatives and product innovations.
Company Outlook
HealthEquity's CFO has raised the company's outlook for the fiscal year 2024 and provided initial guidance for fiscal 2025, which reflects a confident stance on the company's future performance. The expected revenue for fiscal 2024 is set to be just shy of $1 billion, while projections for fiscal 2025 indicate a revenue surpassing $1.1 billion. The adjusted EBITDA is also projected to grow significantly, reaching nearly 40% of revenue.
Bearish Highlights
The company is aware of the competitive landscape and the importance of fee structures in retaining business. They have adopted a conservative approach to fees, recognizing the need to stay competitive, particularly in the HSA space.
Bullish Highlights
HealthEquity has expressed a positive outlook, emphasizing the BenefitWallet acquisition's contribution to revenue growth and EBITDA margins. The company also sees an increasing trend in enterprise customers adopting high deductible health plans, which is expected to drive further growth in HSA memberships.
Misses
There were no significant misses reported during the earnings call. The company's financial results and guidance reflect a strong performance and an optimistic future outlook.
QA highlights
The earnings call did not highlight specific questions and answers, but the company's executives expressed confidence in HealthEquity's multiyear strategic initiatives and their ability to evaluate potential mergers and acquisitions effectively.
Additional Insights
HealthEquity is focusing on reducing service expenses by transitioning to automated customer service and leveraging generative AI to enhance customer experience. The company also anticipates an increase in deposits into the enhanced rates product, expecting it to grow as a percentage of the mix over time. Contracts rolling off and reinvestment are predicted to have a positive effect on EBITDA margins in the next 12 to 18 months.
HealthEquity's leadership team, including Jon Kessler and James Lucania, underscored the company's competitive edge, stable service fees, and the positive impact of the BenefitWallet acquisition. They also highlighted the company's conservative yet profitable approach to product pricing and the successful partnerships with employers and health plan retirement plans. The company is setting up for future expansion, as evidenced by the team's preparation efforts and the upcoming Investor Day and conferences.
HealthEquity's earnings call concluded on a note of gratitude for the team's hard work and a reiteration of the company's strong position for future growth. The company's solid financial performance in the third quarter and optimistic outlook for the coming fiscal years indicate a continued trajectory of expansion and profitability.
InvestingPro Insights
HealthEquity, Inc. (NASDAQ: HQY) has shown impressive financial results in the recent quarter, and the InvestingPro platform provides further insights into the company's performance and valuation. According to InvestingPro data, HealthEquity boasts a market capitalization of $5.81 billion USD, reflecting its significant presence in the health savings account market. The company's revenue for the last twelve months as of Q3 2024 stands at $971.04 million USD, with a notable revenue growth of 16.82%. This growth is aligned with the company's positive report and optimistic outlook for the coming fiscal years.
InvestingPro Tips also highlight that analysts have revised their earnings estimates upwards for the upcoming period, suggesting confidence in the company's future performance. Additionally, HealthEquity is expected to be profitable this year, which is consistent with the company's strong earnings report.
While the company is trading at a high earnings multiple with a P/E ratio of 202.04, this could be indicative of investors' high expectations for future earnings growth. The company's stock generally trades with low price volatility, which might appeal to investors looking for stable investment options in the healthcare sector.
For readers interested in a deeper analysis, there are 12 additional InvestingPro Tips available on the InvestingPro platform, which can be accessed at https://www.investing.com/pro/HQY. Subscribers can now take advantage of a special Cyber Monday sale with discounts of up to 60% on InvestingPro subscriptions. Additionally, use coupon code sfy23 to get an extra 10% off a 2-year InvestingPro+ subscription, unlocking even more insights and value for your investment research.
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