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HealthEquity (HQY) Q1 Earnings and Revenues Miss Estimates

Zacks Equity Research

HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of 43 cents in first-quarter fiscal 2021, which missed the Zacks Consensus Estimate of 44 cents by 2.3%. The bottom line was flat on a year-over-year basis.

Revenues in Detail

Thecompany generated revenues of $190 million, missing the Zacks Consensus Estimate by 1.3%. However, the figure skyrocketed 118% from the prior-year quarter.

HSA Member Detail

As of Apr 30, 2020, the total number of Health Savings Accounts (HSA), for which HealthEquity served as a non-bank custodian (HSA members), was 5.4 million, up 33% year over year.

Additionally, total Active HSA assets were $11.5 billion, up 38% year over year.

Total Accounts, including HSAs and complementary CDB accounts, came in at 12.7 million, up 169% year over year.

Segmental Performance

Service Revenues: At this segment, revenues totaled $111.3 million, up 315.3% from the year-ago figure.

Custodial Revenues: At this segment, revenues grew 11.9% year over year to $46.9 million.

Interchange Revenues: At this segment, revenues soared 73.8% year over year to $31.8 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

HealthEquity generated gross profit of $108.1 million, up 87.1% from the year-ago quarter. Gross margin was 56.9% of net revenues, down 947 bps year over year.

Adjusted operating profit in the fiscal first quarter was $46.5 million, up 59.6% year over year. Adjusted operating margin totaled 24.5% in the quarter, contracting 901 bps year over year.

Guidance

Due to uncertainty regarding the impact of the COVID-19 pandemic, the company is withdrawing its fiscal 2021 guidance. 

For the fiscal second quarter, the company expects revenues between $168 million and $173 million. The Zacks Consensus Estimate for the same is pegged at $190.7 million.

Adjusted net income is projected between $17 million and $22 million.

Adjusted EPS is expected within 23-30 cents. The Zacks Consensus Estimate for earnings is pegged at 45 cents.

Summing Up

HealthEquity exited first-quarter of fiscal 2021 on a dull note. Nonetheless, the company witnessed strong growth in Service, Custodial and Interchange segments. Notably, solid growth in HSAs and custodial assets bolstered the top line. Currently, HealthEquity is the second-largest HSA custodian by market share. In addition to HSA, the company offers health reimbursement arrangement  and health flexible spending account to regional employers. HealthEquity expedited its integration efforts (WageWorks buyout that closed on Aug 30, 2019) and now anticipates to achieve the previously announced goal of $50 million in run rate synergies, including the on-shoring of all telephone-based member services to the United States, by the end of the fiscal second quarter.

However, a significant drop in adjusted operating and gross margin raises concern. 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.

Zacks Rank and Key Picks

HealthEquity currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents against the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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Biogen Inc. (BIIB) : Free Stock Analysis Report
 
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