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HealthEquity Reports Second Quarter Ended July 31, 2021 Financial Results

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Highlights of the second quarter include:

  • Revenue of $189.1 million, an increase of 7% compared to $176.0 million in Q2 FY21.

  • Net loss of $3.8 million, compared to net loss of $0.1 million in Q2 FY21, with non-GAAP net income of $33.4 million, compared to $30.1 million in Q2 FY21.

  • Net loss per diluted share of $0.05, compared to net loss per diluted share of less than one half of one cent in Q2 FY21, with non-GAAP net income per diluted share of $0.40, compared to $0.42 in Q2 FY21.

  • Adjusted EBITDA of $65.5 million, an increase of 9% compared to $60.0 million in Q2 FY21.

  • 6.0 million HSAs, an increase of 11% compared to Q2 FY21.

  • $15.5 billion Total HSA Assets, an increase of 27% compared to Q2 FY21.

  • 13.1 million Total Accounts, including both HSAs and complementary CDB accounts, an increase of 5% compared to Q2 FY21.

DRAPER, Utah, Sept. 08, 2021 (GLOBE NEWSWIRE) -- HealthEquity, Inc. (NASDAQ: HQY) ("HealthEquity" or the "Company"), the nation's largest health savings account ("HSA") non-bank custodian, today announced financial results for its second quarter ended July 31, 2021.

"HealthEquity is built for growth as the team showed in the second fiscal quarter, delivering a record 180,000 new HSAs and 27% year-over-year HSA Asset growth,” said Jon Kessler, President and CEO of HealthEquity. “With our organic momentum and the Further and Fifth-Third HSA portfolio acquisitions planned to close later this fiscal year, Team Purple is positioned to gain market share in FY22 and exit the year with strong momentum."

Second quarter financial results

Revenue for the second quarter ended July 31, 2021 of $189.1 million increased 7% compared to $176.0 million for the second quarter ended July 31, 2020. Revenue this quarter included: service revenue of $109.2 million, custodial revenue of $48.8 million, and interchange revenue of $31.1 million.

HealthEquity reported a net loss of $3.8 million, or $0.05 per diluted share, and non-GAAP net income of $33.4 million, or $0.40 per diluted share, for the second quarter ended July 31, 2021. The Company reported a net loss of $0.1 million, or less than one half of one cent per diluted share, and non-GAAP net income of $30.1 million, or $0.42 per diluted share, for the second quarter ended July 31, 2020.

Adjusted EBITDA was $65.5 million for the second quarter ended July 31, 2021, an increase of 9% compared to $60.0 million for the second quarter ended July 31, 2020. Adjusted EBITDA was 35% of revenue compared to 34% for the second quarter ended July 31, 2020.

Account and asset metrics

HealthEquity reported sales of 180,000 new HSAs in the second quarter ended July 31, 2021, compared to 108,000 in the second quarter ended July 31, 2020. HSAs as of July 31, 2021 were approximately 6.0 million, an increase of 11% year over year, including 402,000 HSAs with investments, an increase of 42% year over year. Total Accounts as of July 31, 2021 were 13.1 million, including 7.2 million other consumer-directed benefits ("CDBs").

Total HSA Assets as of July 31, 2021 were $15.5 billion, an increase of 27% year over year. Total HSA Assets included $10.0 billion of HSA cash and $5.4 billion of HSA investments. Client-held funds, which are deposits held on behalf of our Clients to facilitate administration of our CDBs, and from which we generate custodial revenue, were $0.8 billion as of July 31, 2021.

WageWorks integration

HealthEquity completed its acquisition of WageWorks on August 30, 2019. As of July 31, 2021, we have achieved approximately $70 million of the approximately $80 million in annualized ongoing net synergies we expect to achieve by the end of fiscal year 2022.

Business outlook

For the fiscal year ending January 31, 2022, management expects revenues of $755 million to $765 million. Its outlook for net loss is between $17 million and $13 million, resulting in net loss of $0.20 to $0.15 per diluted share. Its outlook for non-GAAP net income, calculated using the method described below, is between $122 million and $126 million, resulting in non-GAAP net income per diluted share of $1.45 to $1.50 (based on an estimated 84 million diluted weighted-average shares outstanding). Management expects Adjusted EBITDA of $241 million to $247 million. This outlook includes the potential impact from the acquisition of the Fifth Third Bank HSA portfolio, which is expected to close by the end of the Company's fiscal third quarter. This outlook does not include any potential impact from the Further acquisition, except for associated merger integration expenses incurred through July 31, 2021.

The Company has entered into two agreements to acquire Further: (1) an agreement to acquire all cash balances and investment assets included in any voluntary employee beneficiary association (“VEBA”) account that is funding a health reimbursement arrangement (either Section 501(c)(9) or Section 115 trusts) and all contracts related exclusively thereto, which is anticipated to close on January 31, 2022, and (2) an amended agreement to acquire the remainder of the Further business, with a target closing date on November 1, 2021. Accordingly, the Company's financial results are expected to include a portion of Further's operating results from the closing date through the end of fiscal year 2022. In addition to the outlook for the HealthEquity standalone business above, management expects Further revenue for that period to be between $10 million and $12 million.

See “Non-GAAP financial information” below for definitions of our Adjusted EBITDA and non-GAAP net income. A reconciliation of the non-GAAP financial measures used throughout this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.

Conference call

HealthEquity management will host a conference call at 4:30 pm (Eastern Time) on Wednesday, September 8, 2021 to discuss the second quarter 2022 financial results. The conference call will be accessible by dialing 844-791-6252, or 661-378-9636 for international callers, and referencing conference ID 1425679. A live audio webcast of the call will also be available on the investor relations section of our website at http://ir.healthequity.com.

Non-GAAP financial information

To supplement our financial information presented on a GAAP basis, we disclose non-GAAP financial measures, including Adjusted EBITDA, non-GAAP net income, and non-GAAP net income per diluted share.

  • Adjusted EBITDA is adjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, and other certain non-operating items.

  • Non-GAAP net income is calculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, and gains and losses on equity securities, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.

  • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.

Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. We believe that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the Company's financial condition and results of operations. The Company cautions investors that non-GAAP financial information, by its nature, departs from GAAP; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. In addition, while amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is not excluded. Whenever we use these non-GAAP financial measures, we provide a reconciliation of the applicable non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed in the tables below.

About HealthEquity

HealthEquity and its subsidiaries administer HSAs and other consumer-directed benefits for our more than 13 million accounts in partnership with employers, benefits advisors, and health and retirement plan providers who share our mission to connect health and wealth and value our culture of remarkable “Purple” service. For more information, visit www.healthequity.com.

Forward-looking statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our industry, business strategy, plans, goals and expectations concerning our markets and market position, product expansion, future operations, expenses and other results of operations, revenue, margins, profitability, acquisition synergies, future efficiencies, tax rates, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “aims,” “anticipates,” “plans,” “estimates,” “expects,” “should,” “assumes,” “continues,” “could,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to be correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, risks related to the following:

  • the impact of the ongoing COVID-19 pandemic on the Company, its operations and its financial results;

  • our ability to realize the anticipated financial and other benefits from combining the operations of WageWorks with our business in an efficient and effective manner;

  • our ability to close the acquisition of Further and integrate the Further business successfully;

  • our ability to compete effectively in a rapidly evolving healthcare and benefits administration industry;

  • our dependence on the continued availability and benefits of tax-advantaged health savings accounts and other consumer-directed benefits;

  • our ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets;

  • the significant competition we face and may face in the future, including from those with greater resources than us;

  • our reliance on the availability and performance of our technology and communications systems;

  • recent and potential future cybersecurity breaches of our technology and communications systems and other data interruptions, including resulting costs and liabilities, reputational damage and loss of business;

  • the current uncertain healthcare environment, including changes in healthcare programs and expenditures and related regulations;

  • our ability to comply with current and future privacy, healthcare, tax, ERISA, investment adviser and other laws applicable to our business;

  • our reliance on partners and third-party vendors for distribution and important services;

  • our ability to develop and implement updated features for our technology and communications systems and successfully manage our growth;

  • our ability to protect our brand and other intellectual property rights; and

  • our reliance on our management team and key team members.

For a detailed discussion of these and other risk factors, please refer to the risks detailed in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 and subsequent periodic and current reports. Past performance is not necessarily indicative of future results. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Investor Relations Contact
Richard Putnam
801-727-1209
rputnam@healthequity.com

HealthEquity, Inc. and its subsidiaries
Condensed consolidated balance sheets

(in thousands, except par value)

July 31, 2021

January 31, 2021

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

753,754

$

328,803

Accounts receivable, net of allowance for doubtful accounts of $5,824 and $4,239 as of July 31, 2021 and January 31, 2021, respectively

74,223

72,767

Other current assets

32,637

58,607

Total current assets

860,614

460,177

Property and equipment, net

27,382

29,106

Operating lease right-of-use assets

83,768

89,508

Intangible assets, net

770,329

767,003

Goodwill

1,363,568

1,327,193

Other assets

42,973

37,420

Total assets

$

3,148,634

$

2,710,407

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$

4,696

$

1,614

Accrued compensation

40,154

50,670

Accrued liabilities

49,098

75,880

Current portion of long-term debt

78,125

62,500

Operating lease liabilities

13,051

14,037

Total current liabilities

185,124

204,701

Long-term liabilities

Long-term debt, net of issuance costs

895,449

924,217

Operating lease liabilities, non-current

69,998

74,224

Other long-term liabilities

20,091

8,808

Deferred tax liability

115,306

119,729

Total long-term liabilities

1,100,844

1,126,978

Total liabilities

1,285,968

1,331,679

Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively

Common stock, $0.0001 par value, 900,000 shares authorized, 83,608 and 77,168 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively

8

8

Additional paid-in capital

1,648,743

1,158,372

Accumulated earnings

213,915

220,348

Total stockholders’ equity

1,862,666

1,378,728

Total liabilities and stockholders’ equity

$

3,148,634

$

2,710,407

HealthEquity, Inc. and its subsidiaries
Condensed consolidated statements of operations and comprehensive income (loss) (unaudited)

Three months ended July 31,

Six months ended July 31,

(in thousands, except per share data)

2021

2020

2021

2020

Revenue

Service revenue

$

109,182

$

103,805

$

211,716

$

215,076

Custodial revenue

48,776

46,909

95,754

93,808

Interchange revenue

31,145

25,325

65,835

57,166

Total revenue

189,103

176,039

373,305

366,050

Cost of revenue

Service costs

67,334

65,246

137,966

136,259

Custodial costs

4,824

4,998

9,833

10,043

Interchange costs

4,974

4,011

10,419

9,890

Total cost of revenue

77,132

74,255

158,218

156,192

Gross profit

111,971

101,784

215,087

209,858

Operating expenses

Sales and marketing

15,476

12,167

29,562

23,622

Technology and development

37,898

30,654

73,367

61,732

General and administrative

22,812

20,493

43,499

39,491

Amortization of acquired intangible assets

20,289

19,077

40,103

37,779

Merger integration

16,371

10,365

25,178

23,135

Total operating expenses

112,846

92,756

211,709

185,759

Income (loss) from operations

(875

)

9,028

3,378

24,099

Other expense

Interest expense

(7,254

)

(8,895

)

(13,943

)

(21,158

)

Other income (expense), net

344

(824

)

(3,286

)

(1,588

)

Total other expense

(6,910

)

(9,719

)

(17,229

)

(22,746

)

Income (loss) before income taxes

(7,785

)

(691

)

(13,851

)

1,353

Income tax benefit

(3,967

)

(543

)

(7,418

)

(325

)

Net income (loss) and comprehensive income (loss)

$

(3,818

)

$

(148

)

$

(6,433

)

$

1,678

Net income (loss) per share:

Basic

$

(0.05

)

$

0.00

$

(0.08

)

$

0.02

Diluted

$

(0.05

)

$

0.00

$

(0.08

)

$

0.02

Weighted-average number of shares used in computing net income (loss) per share:

Basic

83,481

72,343

82,628

71,669

Diluted

83,481

72,343

82,628

72,971

HealthEquity, Inc. and its subsidiaries
Condensed consolidated statements of cash flows (unaudited)

Six months ended July 31,

(in thousands)

2021

2020

Cash flows from operating activities:

Net income (loss)

$

(6,433

)

$

1,678

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

64,819

56,106

Stock-based compensation

28,416

18,834

Amortization of debt issuance costs

2,482

2,533

Change in fair value of contingent consideration

1,011

Other non-cash items

(752

)

1,145

Deferred taxes

(4,051

)

(568

)

Changes in operating assets and liabilities:

Accounts receivable, net

(230

)

628

Other assets

20,636

(3,187

)

Operating lease right-of-use assets

6,060

5,563

Accrued compensation

(10,639

)

(13,854

)

Accounts payable, accrued liabilities, and other current liabilities

(30,213

)

30

Operating lease liabilities, non-current

(4,556

)

(5,723

)

Other long-term liabilities

1,616

5,477

Net cash provided by operating activities

68,166

68,662

Cash flows from investing activities:

Acquisitions, net of cash acquired

(49,533

)

Purchases of software and capitalized software development costs

(32,097

)

(21,787

)

Purchases of property and equipment

(6,352

)

(8,987

)

Acquisition of intangible member assets

(2,653

)

(24,922

)

Proceeds from sale of equity securities

2,367

Net cash used in investing activities

(88,268

)

(55,696

)

Cash flows from financing activities:

Proceeds from follow-on equity offering, net of payments for offering costs

456,642

287,318

Principal payments on long-term debt

(15,625

)

(215,625

)

Settlement of client-held funds obligation, net

(2,636

)

(10,292

)

Proceeds from exercise of common stock options

6,672

2,817

Net cash provided by financing activities

445,053

64,218

Increase in cash and cash equivalents

424,951

77,184

Beginning cash and cash equivalents

328,803

191,726

Ending cash and cash equivalents

$

753,754

$

268,910

HealthEquity, Inc. and its subsidiaries
Condensed consolidated statements of cash flows (unaudited) (continued)

Six months ended July 31,

(in thousands)

2021

2020

Supplemental cash flow data:

Interest expense paid in cash

$

9,838

$

17,659

Income tax payments (refunds), net

(5,545

)

798

Supplemental disclosures of non-cash investing and financing activities:

Purchases of software and capitalized software development costs included in accounts payable, accrued liabilities, or accrued compensation

4,077

1,262

Purchases of property and equipment included in accounts payable or accrued liabilities

357

1,104

Contingent consideration recognized at acquisition

8,147

Exercise of common stock options receivable

119

66

Purchases of intangible member assets

58

Additions to goodwill due to measurement period adjustments

1,177

Follow-on equity offering costs accrued during the period

540

Stock-based compensation expense (unaudited)

Total stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) is as follows:

Three months ended July 31,

Six months ended July 31,

(in thousands)

2021

2020

2021

2020

Cost of revenue

$

3,068

$

2,065

$

5,471

$

3,528

Sales and marketing

2,660

1,818

4,848

2,776

Technology and development

3,693

2,493

6,706

5,410

General and administrative

6,196

5,062

11,391

7,120

Other expense (1)

342

Total stock-based compensation expense

$

15,617

$

11,438

$

28,758

$

18,834

(1) Equity-based awards exchanged for cash in connection with the Luum acquisition.

Total Accounts (unaudited)

(in thousands, except percentages)

July 31, 2021

July 31, 2020

% Change

January 31, 2021

HSAs

5,972

5,384

11

%

5,782

New HSAs from sales - Quarter-to-date

180

108

67

%

370

New HSAs from sales - Year-to-date

295

213

38

%

687

New HSAs from acquisitions - Year-to-date

n/a

HSAs with investments

402

284

42

%

333

CDBs

7,171

7,090

1

%

7,028

Total Accounts

13,143

12,474

5

%

12,810

Average Total Accounts - Quarter-to-date

13,358

12,416

8

%

12,659

Average Total Accounts - Year-to-date

13,114

12,602

4

%

12,604

HSA Assets (unaudited)

(in millions, except percentages)

July 31, 2021

July 31, 2020

% Change

January 31, 2021

HSA cash with yield (1)

$

9,938

$

8,626

15

%

$

9,875

HSA cash without yield (2)

90

344

(74

)

%

244

Total HSA cash

10,028

8,970

12

%

10,119

HSA investments with yield (1)

5,351

3,046

76

%

4,078

HSA investments without yield (2)

92

195

(53

)

%

138

Total HSA investments

5,443

3,241

68

%

4,216

Total HSA Assets

15,471

12,211

27

%

14,335

Average daily HSA cash with yield - Year-to-date

9,838

8,332

18

%

8,599

Average daily HSA cash with yield - Quarter-to-date

$

9,850

$

8,380

18

%

$

9,060

(1) HSA Assets that generate custodial revenue.

(2) HSA Assets that do not generate custodial revenue.

Client-held funds (unaudited)

(in millions, except percentages)

July 31, 2021

July 31, 2020

% Change

January 31, 2021

Client-held funds (1)

$

810

$

840

(4

)

%

$

986

Average daily Client-held funds - Year-to-date (1)

876

861

2

%

847

Average daily Client-held funds - Quarter-to-date (1)

853

891

(4

)

%

848

(1) Client-held funds that generate custodial revenue.

Net income (loss) reconciliation to Adjusted EBITDA (unaudited)

Three months ended July 31,

Six months ended July 31,

(in thousands)

2021

2020

2021

2020

Net income (loss)

$

(3,818

)

$

(148

)

$

(6,433

)

$

1,678

Interest income

(533

)

(76

)

(941

)

(676

)

Interest expense

7,254

8,895

13,943

21,158

Income tax benefit

(3,967

)

(543

)

(7,418

)

(325

)

Depreciation and amortization

12,762

9,522

24,716

18,327

Amortization of acquired intangible assets

20,289

19,077

40,103

37,779

Stock-based compensation expense

15,617

11,438

28,416

18,834

Merger integration expenses

16,371

10,365

25,178

23,135

Acquisition costs (gains) (1)

1,665

(28

)

7,604

66

Gain on equity securities

(1,677

)

(1,677

)

Other (2)

1,552

1,500

999

3,034

Adjusted EBITDA

$

65,515

$

60,002

$

124,490

$

123,010

(1) For the six months ended July 31, 2021, acquisition costs included $0.3 million of stock-based compensation expense.

(2) For the three months ended July 31, 2021 and 2020, other consisted of amortization of incremental costs to obtain a contract of $1.4 million and $0.6 million, respectively, and other costs, net, of $0.2 million and $0.9 million, respectively. For the six months ended July 31, 2021 and 2020, other consisted of amortization of incremental costs to obtain a contract of $2.6 million and $0.8 million, respectively, and other income of $1.6 million and other costs of $2.2 million, respectively.

Reconciliation of net loss outlook to Adjusted EBITDA outlook (unaudited)

Outlook for the year ending

(in millions)

January 31, 2022

Net loss

$(17) - (13)

Interest income

(2

)

Interest expense

26

Income tax benefit

(7) - (5)

Depreciation and amortization

52

Amortization of acquired intangible assets

82

Stock-based compensation expense

58

Merger integration expenses

36

Other expense

13

Adjusted EBITDA

$241 - 247

Reconciliation of net income (loss) to non-GAAP net income (unaudited)

Three months ended July 31,

Six months ended July 31,

Outlook for the year ending

(in millions, except per share data)

2021

2020

2021

2020

January 31, 2022

Net income (loss)

$

(4

)

$

$

(6

)

$

2

$(17) - (13)

Income tax provision (benefit)

(4

)

(1

)

(8

)

(1

)

(7) - (5)

Income (loss) before income taxes - GAAP

(8

)

(1

)

(14

)

1

(24) - (18)

Non-GAAP adjustments:

Amortization of acquired intangible assets

20

19

40

38

82

Stock-based compensation expense

16

12

29

19

58

Merger integration expenses

16

10

25

23

36

Acquisition costs

2

8

11

Gain on equity securities

(2

)

(2

)

(1

)

Total adjustments to income (loss) before income taxes - GAAP

52

41

100

80

186

Income before income taxes - Non-GAAP

44

40

86

81

162 - 168

Income tax provision - Non-GAAP (1)

11

10

22

20

40 - 42

Non-GAAP net income

33

30

64

61

122 - 126

Diluted weighted-average shares

83

72

83

73

84

Non-GAAP net income per diluted share (2)

$

0.40

$

0.42

$

0.78

$

0.83

$1.45 - 1.50

(1) The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each period presented was 25%. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

(2) Non-GAAP net income per diluted share may not calculate due to rounding of non-GAAP net income and diluted weighted-average shares.

Certain terms

Term

Definition

HSA

A financial account through which consumers spend and save long-term for healthcare on a tax-advantaged basis.

CDB

Consumer-directed benefits offered by employers, including flexible spending and health reimbursement arrangements (“FSAs” and “HRAs”), Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration, commuter and other benefits.

HSA member

Consumers with HSAs that we serve.

Total HSA Assets

HSA members' deposits with our federally insured custodial depository partners and custodial cash placed in annuity contracts with our insurance company partners. Total HSA Assets also includes HSA members' investments in mutual funds through our custodial investment fund partner.

Client

Our employer clients.

Total Accounts

The sum of HSAs and CDBs on our platforms.

Client-held funds

Deposits held on behalf of our Clients to facilitate administration of our CDBs.

Network Partner

Our health plan partners, benefits administrators, and retirement plan recordkeepers.

Adjusted EBITDA

Adjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, and other certain non-operating items.

Non-GAAP net income

Calculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, and gains and losses on equity securities, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.

Non-GAAP net income per diluted share

Calculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.