U.S. markets closed
  • S&P Futures

    3,849.50
    +10.50 (+0.27%)
     
  • Dow Futures

    31,584.00
    +119.00 (+0.38%)
     
  • Nasdaq Futures

    12,657.25
    -6.50 (-0.05%)
     
  • Russell 2000 Futures

    2,212.40
    +22.70 (+1.04%)
     
  • Crude Oil

    67.15
    +1.06 (+1.60%)
     
  • Gold

    1,704.90
    +6.40 (+0.38%)
     
  • Silver

    25.48
    +0.19 (+0.74%)
     
  • EUR/USD

    1.1923
    -0.0001 (-0.01%)
     
  • 10-Yr Bond

    1.5540
    +0.0040 (+0.26%)
     
  • Vix

    24.66
    -3.91 (-13.69%)
     
  • GBP/USD

    1.3840
    +0.0012 (+0.09%)
     
  • USD/JPY

    108.3380
    -0.0440 (-0.04%)
     
  • BTC-USD

    51,290.32
    +2,394.31 (+4.90%)
     
  • CMC Crypto 200

    982.93
    +39.75 (+4.21%)
     
  • FTSE 100

    6,630.52
    -20.36 (-0.31%)
     
  • Nikkei 225

    28,864.32
    0.00 (0.00%)
     

HealthEquity Reports Third Quarter Ended October 31, 2020 Financial Results

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
HealthEquity, Inc.
·22 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Highlights of the third quarter include:

  • Revenue of $179.4 million, an increase of 14% compared to $157.1 million in Q3 FY20.

  • Net income of $1.8 million, with non-GAAP net income of $32.2 million, compared to net loss of $21.3 million and non-GAAP net income of $30.3 million in Q3 FY20.

  • Net income per diluted share of $0.02, with non-GAAP net income per diluted share of $0.41, compared to net loss per diluted share of $0.30 and non-GAAP net income per diluted share of $0.43 in Q3 FY20.

  • Adjusted EBITDA of $61.1 million, an increase of 10% compared to $55.5 million in Q3 FY20.

  • 5.5 million HSAs, an increase of 9% compared to Q3 FY20.

  • $12.4 billion Total HSA Assets, an increase of 19% compared to Q3 FY20.

  • 12.5 million Total Accounts, including both HSAs and complementary CDB accounts, the same as in Q3 FY20.

DRAPER, Utah, Dec. 07, 2020 (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 third quarter ended October 31, 2020, compared to its prior quarter ended October 31, 2019. The third quarter of fiscal 2020 reflects two months of WageWorks' results.

"HealthEquity provided another quarter of growth and profitability," said Jon Kessler, President and CEO of HealthEquity. "Our team helped members open over 104,000 new HSAs this quarter, growing membership organically by 11% year-over-year, with HSA assets growing by more than $200 million, or 19% year-over-year. Total accounts held steady at 12.5 million despite 0.6 million commuter accounts being suspended as more participants began working from home due to COVID-19. Revenue grew by 14% to $179 million, overcoming a nearly 40% decrease in commuter revenue, and adjusted EBITDA grew 10% to $61 million in the quarter, producing a 34% margin during the pandemic. We are pleased with how quickly the team has adjusted during this time and look forward to finishing this fiscal year strong, positioning us for further growth next year."

Third quarter financial results

Revenue for the third quarter ended October 31, 2020 of $179.4 million grew 14% compared to $157.1 million for the third quarter ended October 31, 2019. Revenue this quarter included: service revenue of $104.6 million, custodial revenue of $48.5 million, and interchange revenue of $26.3 million.

HealthEquity reported net income of $1.8 million, or $0.02 per diluted share, and non-GAAP net income of $32.2 million, or $0.41 per diluted share, for the third quarter ended October 31, 2020. The Company reported a net loss of $21.3 million, or $0.30 per diluted share, and non-GAAP net income of $30.3 million, or $0.43 per diluted share, for the third quarter ended October 31, 2019.

Adjusted EBITDA was $61.1 million for the third quarter ended October 31, 2020, an increase of 10% compared to $55.5 million for the third quarter ended October 31, 2019. Adjusted EBITDA was 34% of revenue compared to 35% for the third quarter ended October 31, 2019.

Account and asset metrics

HSAs as of October 31, 2020 were approximately 5.5 million, an increase of 9% year over year, including 302,000 HSAs with investments, an increase of 54% year over year. Total Accounts as of October 31, 2020 were 12.5 million, including 7.0 million consumer-directed benefit ("CDB") accounts.

Total HSA Assets as of October 31, 2020 were $12.4 billion, an increase of 19% year over year. Total HSA Assets included $9.0 billion of HSA cash and $3.4 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 October 31, 2020.

New HSA openings and HSA asset balances

HealthEquity reported sales of 104,000 new HSAs in the third quarter ended October 31, 2020, compared to 129,000 in the third quarter ended October 31, 2019. HSA members grew their cash balances by approximately $46.0 million during the quarter, while total member balances increased by approximately $229.0 million due primarily to decreased spending per HSA and appreciation of invested balances.

WageWorks integration

HealthEquity completed its acquisition of WageWorks on August 30, 2019. We have identified opportunities of approximately $80 million in annualized ongoing net synergies to be achieved by the end of the fiscal year ending January 31, 2022, of which approximately $55 million have been achieved as of October 31, 2020.

Business outlook

For the fiscal year ending January 31, 2021, management expects revenues of $725 million to $731 million. Its outlook for net loss or income is between net loss of $5 million and net income of $2 million, resulting in net loss of $0.07 to net income of $0.02 per diluted share. Its outlook for non-GAAP net income, calculated using the method described below, is between $116 million and $121 million, resulting in non-GAAP net income per diluted share of $1.55 to $1.61 (based on an estimated 75 million weighted-average shares outstanding). Management expects Adjusted EBITDA of $232 million to $238 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 Monday, December 7, 2020 to discuss the third quarter 2021 financial results. The conference call will be accessible by dialing 844-791-6252, or 661-378-9636 for international callers, and referencing conference ID 4225999. 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 and acquisition-related costs, gains and losses on marketable 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 and acquisition-related costs, and gains and losses on marketable 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 administers Health Savings Accounts (HSAs) and other consumer-directed benefits for our more than 12 million members 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 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, 2020, as updated by our Quarterly Report on Form 10-Q for the quarter ended July 31, 2020, 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)

October 31, 2020

January 31, 2020

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

299,356

$

191,726

Accounts receivable, net of allowance for doubtful accounts of $3,458 and $1,216 as of October 31, 2020 and January 31, 2020, respectively

64,291

70,863

Other current assets

32,383

34,711

Total current assets

396,030

297,300

Property and equipment, net

31,774

33,486

Operating lease right-of-use assets

92,314

83,178

Intangible assets, net

776,311

783,279

Goodwill

1,326,793

1,332,631

Deferred tax asset

21

18

Other assets

34,019

35,089

Total assets

$

2,657,262

$

2,564,981

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$

6,746

$

3,980

Accrued compensation

34,839

50,121

Accrued liabilities

33,380

46,372

Current portion of long-term debt

62,500

39,063

Operating lease liabilities

13,894

12,401

Total current liabilities

151,359

151,937

Long-term liabilities

Long-term debt, net of issuance costs

938,558

1,181,615

Operating lease liabilities, non-current

76,666

68,017

Other long-term liabilities

11,429

2,625

Deferred tax liability

123,993

130,492

Total long-term liabilities

1,150,646

1,382,749

Total liabilities

1,302,005

1,534,686

Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively

Common stock, $0.0001 par value, 900,000 shares authorized, 76,951 and 71,051 shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively

8

7

Additional paid-in capital

1,140,268

818,774

Accumulated earnings

214,981

211,514

Total stockholders’ equity

1,355,257

1,030,295

Total liabilities and stockholders’ equity

$

2,657,262

$

2,564,981


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

Three months ended October 31,

Nine months ended October 31,

(in thousands, except per share data)

2020

2019

2020

2019

Revenue

Service revenue

$

104,562

$

87,620

$

319,638

$

140,710

Custodial revenue

48,544

46,972

142,352

132,538

Interchange revenue

26,245

22,526

83,411

57,545

Total revenue

179,351

157,118

545,401

330,793

Cost of revenue

Service costs

65,936

52,278

202,195

92,672

Custodial costs

4,762

4,384

14,805

12,716

Interchange costs

4,095

4,421

13,985

13,177

Total cost of revenue

74,793

61,083

230,985

118,565

Gross profit

104,558

96,035

314,416

212,228

Operating expenses

Sales and marketing

12,880

12,654

36,502

30,015

Technology and development

30,758

23,511

92,490

46,061

General and administrative

22,099

19,222

61,590

37,193

Amortization of acquired intangible assets

19,126

13,051

56,905

16,036

Merger integration

8,193

17,675

31,328

20,459

Total operating expenses

93,056

86,113

278,815

149,764

Income from operations

11,502

9,922

35,601

62,464

Other expense

Interest expense

(6,952

)

(10,225

)

(28,110

)

(10,355

)

Other expense, net

(421

)

(30,949

)

(2,009

)

(8,347

)

Total other expense

(7,373

)

(41,174

)

(30,119

)

(18,702

)

Income (loss) before income taxes

4,129

(31,252

)

5,482

43,762

Income tax provision (benefit)

2,340

(9,918

)

2,015

3,908

Net income (loss) and comprehensive income (loss)

$

1,789

$

(21,334

)

$

3,467

$

39,854

Net income (loss) per share:

Basic

$

0.02

$

(0.30

)

$

0.05

$

0.61

Diluted

$

0.02

$

(0.30

)

$

0.05

$

0.59

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

Basic

76,701

70,524

73,358

65,727

Diluted

77,845

70,524

74,665

67,150


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

Nine months ended October 31,

(in thousands)

2020

2019

Cash flows from operating activities:

Net income

$

3,467

$

39,854

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

85,485

28,791

Stock-based compensation

30,313

31,194

Amortization of debt issuance costs

3,818

1,138

Gains on marketable equity securities

(27,570

)

Other non-cash items

1,727

139

Deferred taxes

(973

)

690

Changes in operating assets and liabilities:

Accounts receivable

8,063

(1,901

)

Other assets

3,309

(4,863

)

Operating lease right-of-use assets

8,344

3,340

Accrued compensation

(15,251

)

(8,012

)

Accounts payable, accrued liabilities, and other current liabilities

(7,936

)

14,179

Operating lease liabilities, non-current

(8,361

)

(2,859

)

Other long-term liabilities

8,712

(50

)

Net cash provided by operating activities

120,717

74,070

Cash flows from investing activities:

Purchases of property and equipment

(11,388

)

(5,180

)

Purchases of software and capitalized software development costs

(37,242

)

(17,232

)

Acquisition of intangible member assets

(28,100

)

(9,070

)

Purchases of marketable securities

(53,845

)

Acquisitions, net of cash acquired

(1,630,066

)

Net cash used in investing activities

(76,730

)

(1,715,393

)

Cash flows from financing activities:

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

286,779

458,495

Principal payments on long-term debt

(223,438

)

Settlement of client-held funds obligation, net

(4,189

)

(230,928

)

Proceeds from exercise of common stock options

4,491

7,342

Proceeds from long-term debt

1,250,000

Payment of debt issuance costs

(30,504

)

Net cash provided by financing activities

63,643

1,454,405

Increase (decrease) in cash and cash equivalents

107,630

(186,918

)

Beginning cash and cash equivalents

191,726

361,475

Ending cash and cash equivalents

$

299,356

$

174,557


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

Nine months ended October 31,

(in thousands)

2020

2019

Supplemental cash flow data:

Interest expense paid in cash

$

22,849

$

249

Income taxes paid in cash, net of refunds received

1,053

9,127

Supplemental disclosures of non-cash investing and financing activities:

Property and equipment included in accounts payable or accrued liabilities

$

167

$

168

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

1,346

316

Intangible member assets included in accounts payable or accrued liabilities

289

(151

)

Decrease in goodwill due to measurement period adjustments, net

5,838

Exercise of common stock options receivable

89

21

Equity-based acquisition consideration

3,776

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 October 31,

Nine months ended October 31,

(in thousands)

2020

2019

2020

2019

Cost of revenue

$

2,209

$

1,415

$

5,737

$

3,285

Sales and marketing

2,035

1,304

4,810

3,469

Technology and development

2,641

2,171

8,051

5,600

General and administrative

4,594

3,332

11,715

9,486

Merger Integration

1,220

1,220

Other expense, net

13,714

13,714

Total stock-based compensation expense

$

11,479

$

23,156

$

30,313

$

36,774


Total Accounts (unaudited)

(in thousands, except percentages)

October 31, 2020

October 31, 2019

% Change

January 31, 2020

HSAs

5,460

5,031

9%

5,344

New HSAs from Sales - Quarter-to-date

104

129

(19)%

379

New HSAs from Sales - Year-to-date

317

344

(8)%

724

New HSAs from Acquisitions - Year-to-date

757

(100)%

757

HSAs with investments

302

197

54%

220

CDBs

7,060

7,504

(6)%

7,437

Total Accounts

12,520

12,535

—%

12,781

Average Total Accounts - Quarter-to-date

12,084

9,970

21%

12,603

Average Total Accounts - Year-to-date

12,429

6,482

92%

8,013


HSA Assets (unaudited)

(in millions, except percentages)

October 31, 2020

October 31, 2019

% Change

January 31, 2020

HSA cash with yield (1)

$

8,759

$

7,564

16%

$

8,301

HSA cash without yield (2)

258

381

(32)%

383

Total HSA cash

9,017

7,945

13%

8,684

HSA investments with yield (1)

3,255

2,188

49%

2,495

HSA investments without yield (2)

168

326

(48)%

362

Total HSA investments

3,423

2,514

36%

2,857

Total HSA Assets

12,440

10,459

19%

11,541

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

8,445

6,652

27%

6,937

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

$

8,672

$

7,146

21%

$

7,791

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

Client-held funds (unaudited)

(in millions, except percentages)

October 31, 2020

October 31, 2019

% Change

January 31, 2020

Client-held funds (1)

$

798

$

670

19%

$

779

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

847

268

216%

382

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

819

500

64%

727

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


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

Three months ended October 31,

Nine months ended October 31,

(in thousands)

2020

2019

2020

2019

Net income (loss)

$

1,789

$

(21,334

)

$

3,467

$

39,854

Interest income

(174

)

(2,046

)

(850

)

(5,273

)

Interest expense

6,952

10,225

28,110

10,355

Income tax provision (benefit)

2,340

(9,918

)

2,015

3,908

Depreciation and amortization

10,253

6,203

28,580

12,940

Amortization of acquired intangible assets

19,126

13,051

56,905

16,036

Stock-based compensation expense

11,479

8,222

30,313

21,840

Merger integration expenses (1)

8,193

17,675

31,328

20,459

Acquisition costs (2)

13

32,932

79

40,712

Gain on marketable equity securities

(285

)

(27,570

)

Other (3)

1,168

824

4,202

1,854

Adjusted EBITDA

$

61,139

$

55,549

$

184,149

$

135,115

(1)

For the three and nine months ended October 31, 2019, includes $1.2 million of stock-based compensation expense from post-acquisition merger integration activities.

(2)

For the three and nine months ended October 31, 2019, includes $13.7 million of stock-based compensation expense from acquisition-related cash and equity accelerations.

(3)

For the three months ended October 31, 2020 and 2019, Other consisted of amortization of incremental costs to obtain a contract of $587 and $475, non-income-based taxes of $401 and $238, and other costs of $180 and $111, respectively. For the nine months ended October 31, 2020 and 2019, Other consisted of amortization of incremental costs to obtain a contract of $1,422 and $1,375, non-income-based taxes of $1,233 and $359, and other costs of $1,547 and $120, respectively.


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

Outlook for the

(in millions)

year ending January 31, 2021

Net income (loss)

$(5) - 2

Interest income

(1)

Interest expense

35

Income tax benefit

1 - 0

Depreciation and amortization

38

Amortization of acquired intangible assets

76

Stock-based compensation expense

42

Merger integration expenses

41

Other expense

5

Adjusted EBITDA

$232 - 238


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

Three months ended October 31,

Nine months ended October 31,

Outlook for the year ending

(in millions, except per share data)

2020

2019

2020

2019

January 31, 2021

Net income (loss)

$

2

$

(21

)

$

3

$

40

$(5) - 2

Income tax provision (benefit)

2

(10

)

2

4

1 - 0

Income (loss) before income taxes - GAAP

4

(31

)

5

44

(4) - 2

Non-GAAP adjustments:

Amortization of acquired intangible assets

19

13

57

16

76

Stock-based compensation expense

12

8

30

22

42

Merger integration expenses

8

17

32

20

41

Acquisition costs

33

41

Gain on marketable equity securities

(28

)

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

39

71

119

71

159

Income before income taxes - Non-GAAP

43

40

124

115

155 - 161

Income tax provision - Non-GAAP (1)

11

10

31

29

39 - 40

Non-GAAP net income

32

30

93

86

116 - 121

Diluted weighted-average shares

78

71

75

67

75

Non-GAAP net income per diluted share (2)

$

0.41

$

0.43

$

1.25

$

1.29

$1.55 - 1.61

(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 occur 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 deposits invested in an annuity contract with our insurance company partner. 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 and acquisition-related costs, gains and losses on marketable 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 and acquisition-related costs, and gains and losses on marketable 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.