Cover Page
Cover Page - shares | 9 Months Ended | |
Oct. 31, 2019 | Dec. 02, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Oct. 31, 2019 | |
Document Transition Report | false | |
Entity File Number | 001-36568 | |
Entity Registrant Name | HEALTHEQUITY, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 52-2383166 | |
Entity Address, Address Line One | 15 West Scenic Pointe Drive | |
Entity Address, Address Line Two | Suite 100 | |
Entity Address, City or Town | Draper, | |
Entity Address, State or Province | UT | |
Entity Address, Postal Zip Code | 84020 | |
City Area Code | 801 | |
Local Phone Number | 727-1000 | |
Title of 12(b) Security | Common stock, par value $0.0001 per share | |
Trading Symbol | HQY | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 70,879,268 | |
Entity Central Index Key | 0001428336 | |
Current Fiscal Year End Date | --01-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed consolidated balance
Condensed consolidated balance sheets - USD ($) $ in Thousands | Oct. 31, 2019 | Jan. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 174,557 | $ 361,475 |
Accounts receivable, net of allowance for doubtful accounts as of October 31, 2019 and January 31, 2019 of $1,021 and $125, respectively | 66,647 | 25,668 |
Other current assets | 29,119 | 7,534 |
Total current assets | 270,323 | 394,677 |
Property and equipment, net | 35,199 | 8,223 |
Operating lease right-of-use assets | 88,515 | |
Intangible assets, net | 796,228 | 79,666 |
Goodwill | 1,335,187 | 4,651 |
Deferred tax asset | 0 | 1,677 |
Other assets | 34,469 | 21,122 |
Total assets | 2,559,921 | 510,016 |
Current liabilities | ||
Accounts payable | 7,966 | 3,520 |
Accrued compensation | 37,559 | 16,981 |
Accrued liabilities | 54,305 | 8,552 |
Current portion of long-term debt | 31,250 | 0 |
Operating lease liabilities | 10,780 | |
Total current liabilities | 141,860 | 29,053 |
Long-term debt, net of issuance costs | 1,196,016 | 0 |
Operating lease liabilities, non-current | 73,052 | |
Deferred tax liability | 128,642 | 916 |
Other long-term liabilities | 2,590 | 2,968 |
Total liabilities | 1,542,160 | 32,937 |
Commitments and contingencies (see note 7) | ||
Stockholders’ equity | ||
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively | 0 | 0 |
Common stock, $0.0001 par value, 900,000 shares authorized, 70,832 and 62,446 shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively | 7 | 6 |
Additional paid-in capital | 806,050 | 305,223 |
Accumulated earnings | 211,704 | 171,850 |
Total stockholders’ equity | 1,017,761 | 477,079 |
Total liabilities and stockholders’ equity | $ 2,559,921 | $ 510,016 |
Condensed consolidated balanc_2
Condensed consolidated balance sheets (Parenthetical) - USD ($) $ in Thousands | Oct. 31, 2019 | Jan. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 1,021 | $ 125 |
Preferred stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (in shares) | 900,000,000 | 900,000,000 |
Common stock, issued (in shares) | 70,832,000 | 62,446,000 |
Common stock, outstanding (in shares) | 70,832,000 | 62,446,000 |
Condensed consolidated statemen
Condensed consolidated statements of operations and comprehensive income (loss) (unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Revenue: | ||||
Total revenue | $ 157,118 | $ 70,495 | $ 330,793 | $ 211,466 |
Cost of revenue: | ||||
Total cost of revenue | 61,083 | 24,678 | 118,565 | 74,718 |
Gross profit | 96,035 | 45,817 | 212,228 | 136,748 |
Operating expenses: | ||||
Sales and marketing | 12,654 | 7,502 | 30,015 | 21,605 |
Technology and development | 23,511 | 8,678 | 46,061 | 25,055 |
General and administrative | 19,222 | 9,161 | 37,193 | 24,561 |
Amortization of acquired intangible assets | 13,051 | 1,490 | 16,036 | 4,438 |
Merger integration | 17,675 | 0 | 20,459 | 0 |
Total operating expenses | 86,113 | 26,831 | 149,764 | 75,659 |
Income from operations | 9,922 | 18,986 | 62,464 | 61,089 |
Interest expense | (10,225) | (68) | (10,355) | (204) |
Other expense, net | (30,949) | (1,487) | (8,347) | (1,427) |
Income (loss) before income taxes | (31,252) | 17,431 | 43,762 | 59,458 |
Income tax provision (benefit) | (9,918) | 1,745 | 3,908 | (1,322) |
Net income (loss) | (21,334) | 15,686 | 39,854 | 60,780 |
Comprehensive income | $ (21,334) | $ 15,686 | $ 39,854 | $ 60,780 |
Net income (loss) per share: | ||||
Basic (in usd per share) | $ (0.30) | $ 0.25 | $ 0.61 | $ 0.98 |
Diluted (in usd per share) | $ (0.30) | $ 0.25 | $ 0.59 | $ 0.96 |
Weighted-average number of shares used in computing net income (loss) per share: | ||||
Basic (in shares) | 70,524 | 62,088 | 65,727 | 61,718 |
Diluted (in shares) | 70,524 | 63,923 | 67,150 | 63,628 |
Service revenue | ||||
Revenue: | ||||
Total revenue | $ 87,620 | $ 25,041 | $ 140,710 | $ 74,797 |
Cost of revenue: | ||||
Total cost of revenue | 52,278 | 17,562 | 92,672 | 52,808 |
Custodial revenue | ||||
Revenue: | ||||
Total revenue | 46,972 | 31,564 | 132,538 | 90,713 |
Cost of revenue: | ||||
Total cost of revenue | 4,384 | 3,551 | 12,716 | 10,492 |
Interchange revenue | ||||
Revenue: | ||||
Total revenue | 22,526 | 13,890 | 57,545 | 45,956 |
Cost of revenue: | ||||
Total cost of revenue | $ 4,421 | $ 3,565 | $ 13,177 | $ 11,418 |
Condensed consolidated statem_2
Condensed consolidated statements of stockholders' equity (unaudited) - USD ($) $ in Thousands | Total | Common stock | Additional paid-in capital | Accumulated comprehensive loss | Accumulated earnings |
Beginning balance at Jan. 31, 2018 | $ 346,274 | $ 6 | $ 261,237 | $ (269) | $ 85,300 |
Issuance of common stock upon exercise of stock options, and for restricted stock | 0 | 21,366 | |||
Issuance of common stock | 0 | ||||
Other issuance of common stock | 0 | ||||
Stock-based compensation | 15,461 | ||||
Net income (loss) | 60,780 | 60,780 | |||
Ending balance at Oct. 31, 2018 | 456,801 | 6 | 298,064 | 0 | 158,731 |
Beginning balance at Jul. 31, 2018 | 432,619 | 6 | 289,568 | 0 | 143,045 |
Issuance of common stock upon exercise of stock options, and for restricted stock | 0 | 2,762 | |||
Issuance of common stock | 0 | ||||
Other issuance of common stock | 0 | ||||
Stock-based compensation | 5,734 | ||||
Net income (loss) | 15,686 | 15,686 | |||
Ending balance at Oct. 31, 2018 | 456,801 | 6 | 298,064 | 0 | 158,731 |
Beginning balance at Jan. 31, 2019 | 477,079 | 6 | 305,223 | 0 | 171,850 |
Issuance of common stock upon exercise of stock options, and for restricted stock | 0 | 7,363 | |||
Issuance of common stock | 1 | ||||
Other issuance of common stock | 462,270 | ||||
Stock-based compensation | 31,194 | ||||
Net income (loss) | 39,854 | 39,854 | |||
Ending balance at Oct. 31, 2019 | 1,017,761 | 7 | 806,050 | 0 | 211,704 |
Beginning balance at Jul. 31, 2019 | 1,017,031 | 7 | 783,986 | 0 | 233,038 |
Issuance of common stock upon exercise of stock options, and for restricted stock | 0 | 712 | |||
Issuance of common stock | 0 | ||||
Other issuance of common stock | 3,776 | ||||
Stock-based compensation | 17,576 | ||||
Net income (loss) | (21,334) | (21,334) | |||
Ending balance at Oct. 31, 2019 | $ 1,017,761 | $ 7 | $ 806,050 | $ 0 | $ 211,704 |
Condensed consolidated statem_3
Condensed consolidated statements of cash flows (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 31, 2019 | Oct. 31, 2018 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 39,854 | $ 60,780 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 28,791 | 13,498 |
(Gains) losses on marketable equity securities and other | (25,303) | 895 |
Deferred taxes | 690 | 394 |
Stock-based compensation | 31,194 | 15,461 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,817) | (2,863) |
Other assets | (4,937) | (4,568) |
Operating lease right-of-use assets | 3,340 | |
Accounts payable | 524 | (1,087) |
Accrued compensation | (8,012) | (2,617) |
Accrued liabilities and other current liabilities | 13,655 | 451 |
Operating lease liabilities, non-current | (2,859) | |
Other long-term liabilities | (50) | 441 |
Net cash provided by operating activities | 74,070 | 80,785 |
Cash flows from investing activities: | ||
Acquisitions, net of cash acquired | (1,630,066) | 0 |
Purchases of intangible member assets | (9,070) | (1,195) |
Purchases of marketable equity securities and other | (53,845) | (574) |
Purchases of property and equipment | (5,180) | (3,467) |
Purchases of software and capitalized software development costs | (17,232) | (7,352) |
Net cash used in investing activities | (1,715,393) | (12,588) |
Cash flows from financing activities: | ||
Proceeds from long-term debt | 1,250,000 | 0 |
Payment of debt issuance costs | (30,504) | 0 |
Settlement of client-held funds obligation | (230,928) | 0 |
Proceeds from follow-on equity offering, net of payment for offering costs | 458,495 | 0 |
Proceeds from exercise of common stock options | 7,342 | 21,338 |
Net cash provided by financing activities | 1,454,405 | 21,338 |
Increase (decrease) in cash and cash equivalents | (186,918) | 89,535 |
Beginning cash and cash equivalents | 361,475 | 199,472 |
Ending cash and cash equivalents | 174,557 | 289,007 |
Supplemental cash flow data: | ||
Interest expense paid in cash | 249 | 162 |
Income taxes paid in cash, net of refunds received | 9,127 | 628 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Equity-based acquisition consideration | 3,776 | 0 |
Purchases of property and equipment included in accounts payable or accrued liabilities at period end | 168 | 6 |
Exercise of common stock options receivable | 21 | 28 |
Computer software intangible asset | ||
Supplemental disclosures of non-cash investing and financing activities: | ||
Purchases of intangible assets | 316 | 156 |
Acquired HSA portfolios | ||
Supplemental disclosures of non-cash investing and financing activities: | ||
Purchases of intangible assets | $ (151) | $ 0 |
Summary of business and signifi
Summary of business and significant accounting policies | 9 Months Ended |
Oct. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of business and significant accounting policies | Summary of business and significant accounting policies Business HealthEquity, Inc. was incorporated in the state of Delaware on September 18, 2002. HealthEquity, Inc. is a leader in administering health savings accounts (“HSAs”) and complementary consumer-directed benefits (“CDBs”), which empower consumers to access tax-advantaged healthcare savings while also providing corporate tax advantages for employers. Acquisition of WageWorks, Inc. On August 30, 2019, HealthEquity, Inc. closed the acquisition of WageWorks, Inc. (“WageWorks”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), for $51.35 per share in cash, or approximately $2.0 billion to WageWorks stockholders (the “Acquisition”). As a result of the Acquisition, HealthEquity, Inc. gained access to more of the HSA market by expanding its direct distribution to employers and benefits advisors as a single source provider of HSAs and other CDBs, including flexible spending accounts, health reimbursement arrangements, COBRA administration, commuter and other benefits. Principles of consolidation The condensed consolidated financial statements include the accounts of HealthEquity, Inc. and its wholly owned subsidiaries, HealthEquity Trust Company, HEQ Insurance Services, Inc., HealthEquity Advisors, LLC, HealthEquity Retirement Services, LLC, and, after the closing of the Acquisition on August 30, 2019, WageWorks, Inc. and its subsidiaries MyFlexMobile, Inc., WageWorks India, Inc. and WageWorks Services, LLP (collectively referred to as the "Company"). Prior to the closing of the Acquisition, the Company held a 4% ownership interest in WageWorks. The Company measured the investment at fair value, and all gains on the investment were recognized in other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). In connection with the closing of the Acquisition on August 30, 2019, the Company's investment in WageWorks was canceled, and WageWorks became a wholly owned subsidiary of the Company. The Company has a 22% ownership interest in a limited partnership for investment in and the management of early stage companies in the healthcare industry; this partnership interest is accounted for using the equity method of accounting. The investment was approximately $0.2 million as of October 31, 2019 and is included in investments on the accompanying condensed consolidated balance sheet. The Company has a 1% ownership interest in a limited partnership that engages in the development of technology-based financial healthcare products. The Company elected the measurement alternative for non-marketable equity investments to account for the investment. The investment was valued at $0.5 million as of October 31, 2019 and is included in investments on the accompanying condensed consolidated balance sheet. Acquisitions of businesses, including the Acquisition of WageWorks, are accounted for as business combinations, and accordingly, the results of operations of acquired businesses are included in the condensed consolidated financial statements from the date of acquisition. All significant intercompany balances and transactions have been eliminated. Basis of presentation The accompanying condensed consolidated financial statements as of October 31, 2019 and for the three and nine months ended October 31, 2019 and 2018 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. In the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended January 31, 2019 . The fiscal year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Significant accounting policies There have been no material changes in the Company’s significant accounting policies, other than the additions of the policies described below for leases, investments in equity securities, and client-held funds, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended January 31, 2019 . Leases. The Company determines if a contract contains a lease at inception or any modification of the contract. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a specified period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company has entered into various operating leases consisting of office space, data storage facilities, and other leases with remaining lease terms of approximately less than 1 year to 11 years, often with one or more Company options to renew. These renewal terms can extend the lease term from 3 to 10 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. Leases with an expected term of 12 months or less at commencement are not accounted for on the balance sheet. All operating lease expense is recognized on a straight-line basis over the expected lease term. Certain leases also include obligations to pay for non-lease services, such as utilities and common area maintenance. The services are accounted for separately from lease components, and the Company allocates payments to the lease and other services components based on estimated stand-alone prices. Operating lease right-of-use ("ROU") assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the rate implicit in each lease is not readily determinable, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company used its incremental borrowing rate on February 1, 2019 for all leases that commenced prior to that date. Operating leases are included in operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current on the condensed consolidated balance sheets beginning February 1, 2019. Investments in equity securities. Marketable equity securities are strategic equity investments with readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at fair value and were classified as investments on the condensed consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). As a result of the Acquisition on August 30, 2019, the Company's marketable equity security investment in WageWorks was canceled. Non-marketable equity securities are strategic equity investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for using the measurement alternative and are classified as other assets on the condensed consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net on the condensed consolidated statements of operations and comprehensive income (loss). Equity method investments are equity securities in investees the Company does not control but over which the Company has the ability to exercise significant influence. Equity-method investments are included in other assets on the condensed consolidated balance sheets. The Company's share of the earnings or losses as reported by equity-method investees, amortization of basis differences, and related gains or losses, if any, are recognized in other expense, net on the condensed consolidated statements of operations and comprehensive income (loss). The Company assesses whether an other-than-temporary impairment loss on equity method investments and an impairment loss on non-marketable equity securities has occurred due to declines in fair value or other market conditions. If any impairment is considered other than temporary for equity method investments or impairment is identified for non-marketable equity securities, the Company will write down the investment to its fair value and record the corresponding charge through other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). Client-held funds. Many of the Company's client services agreements with employers (referred to as "Clients") provide that Clients remit funds to the Company to pre-fund Client and employee participant contributions related to flexible spending accounts and health reimbursement arrangements (“FSAs” and “HRAs”, respectively) and commuter accounts. These Client-held funds remitted to the Company do not represent cash assets of the Company to the extent that they are not combined with corporate cash, and accordingly are not included in cash and cash equivalents on the Company's condensed consolidated balance sheets. Prior to the closing of the Acquisition, Wageworks included all Client-held funds with its corporate cash assets on its balance sheet, with an offsetting Client-held funds obligation. As of the closing of the Acquisition on August 30, 2019, WageWorks held approximately $682 million of Client-held funds, of which $238 million was combined with its corporate cash within WageWorks' corporate bank accounts; therefore, the Company determined that this $238 million of Client-held funds were assets of the Company, while the approximately $444 million of remaining Client-held funds were not assets of the Company. Prior to October 31, 2019, the Company segregated $231 million of Client-held funds from its corporate bank accounts. Accordingly, as of October 31, 2019 , $7 million of Client-held funds remained combined within the Company's corporate bank accounts and therefore remained on the Company's condensed consolidated balance sheets in cash and cash equivalents, with an offsetting liability included in accrued liabilities. Recent adopted accounting pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (codified as "ASC 842"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. ASC 842 requires that a lessee recognize a liability to make lease payments (the lease liability) and a ROU asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASC 842 on February 1, 2019 using the modified retrospective transition method with the adoption date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The adoption of ASC 842 on February 1, 2019 resulted in the recognition on the Company's condensed consolidated balance sheet of both operating lease liabilities of $40.6 million and ROU assets of $38.0 million , which equals the lease liabilities net of accrued rent previously recorded on its consolidated balance sheet under previous guidance. The adoption of ASC 842 did not have an impact on the Company's condensed consolidated statement of operations, stockholders’ equity and cash flows for the three and nine -month period ended October 31, 2019 . In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU permits the capitalization of implementation costs incurred in a software hosting arrangement. This ASU is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the new standard as of October 31, 2019 using the prospective transition method. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. Recent issued accounting pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost be presented at the net amount expected to be collected. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company does not plan to early adopt this ASU. The Company is currently evaluating the potential effect of this ASU on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In August 2018, FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, "Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential effect of this ASU on the consolidated financial statements. |
Net income (loss) per share
Net income (loss) per share | 9 Months Ended |
Oct. 31, 2019 | |
Earnings Per Share [Abstract] | |
Net income (loss) per share | Net income (loss) per share The following table sets forth the computation of basic and diluted net income (loss) per share: (in thousands, except per share data) Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Numerator (basic and diluted): Net income (loss) $ (21,334 ) $ 15,686 $ 39,854 $ 60,780 Denominator (basic): Weighted-average common shares outstanding 70,524 62,088 65,727 61,718 Denominator (diluted): Weighted-average common shares outstanding 70,524 62,088 65,727 61,718 Weighted-average dilutive effect of stock options and restricted stock units — 1,835 1,423 1,910 Diluted weighted-average common shares outstanding 70,524 63,923 67,150 63,628 Net income (loss) per share: Basic $ (0.30 ) $ 0.25 $ 0.61 $ 0.98 Diluted $ (0.30 ) $ 0.25 $ 0.59 $ 0.96 For the three months ended October 31, 2019 and 2018 , approximately 3.2 million and 36,000 shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings (loss) per share as their inclusion would have been anti-dilutive. For the nine months ended October 31, 2019 and 2018 , approximately 0.3 million and 0.1 million shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings (loss) per share as their inclusion would have been anti-dilutive. |
Business combination
Business combination | 9 Months Ended |
Oct. 31, 2019 | |
Business Combinations [Abstract] | |
Business combination | Business combination Acquisition of WageWorks Overview and total consideration paid On August 30, 2019, the Company closed the Acquisition of WageWorks for $51.35 per share in cash, or approximately $2.0 billion to WageWorks stockholders. The Company financed the transaction through a combination of $816.9 million cash on hand plus net borrowings of approximately $1.22 billion , after deducting lender fees of approximately $30.5 million , under a term loan facility (see Note 8—Indebtedness). Pursuant to the Merger Agreement, the Company replaced certain outstanding restricted stock units originally granted by WageWorks with the Company’s equivalent awards. The outstanding WageWorks vested and unvested stock options, and certain unvested restricted stock units, were settled in cash as specified in the Merger Agreement. The portion of the fair value of partially vested awards associated with pre-acquisition service of WageWorks award recipients represented a component of the total consideration, as presented below. The Acquisition was accounted for under the acquisition method of accounting for business combinations. Under this accounting method, the total consideration paid was: (in millions) Aggregate fair value of WageWorks stock acquired $ 2,018.8 Fair value of previously owned investment in WageWorks stock 81.4 Fair value of equity awards exchanged for cash attributable to pre-Acquisition service 18.1 Fair value of equity awards replaced attributable to pre-Acquisition service 3.8 Total consideration paid $ 2,122.1 Consideration paid was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the Acquisition date. Management estimated the fair value of tangible and intangible assets and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants to value acquired intangible assets. The initial allocation of the consideration paid is based on a preliminary valuation and is subject to potential adjustment during the measurement period (up to one year from the Acquisition date). Balances subject to adjustment primarily include the valuations of acquired assets (tangible and intangible) and liabilities assumed, as well as tax-related matters. The Company expects the allocation of the consideration transferred to be finalized within the measurement period. Preliminary allocation of consideration (in millions) Estimated fair value Cash and cash equivalents $ 406.8 Other current assets 56.5 Property, plant, and equipment 26.6 Operating lease right-of-use assets 42.5 Intangible assets 715.3 Goodwill 1,330.5 Other assets 5.9 Client-held funds obligation (237.5 ) Other current liabilities (69.1 ) Other long-term liabilities (26.7 ) Deferred tax liability (128.7 ) Total consideration paid $ 2,122.1 The Acquisition resulted in $1.3 billion of goodwill. The preliminary goodwill to be recognized is attributable to several strategic, operational and financial benefits expected from the Acquisition, including custodial and interchange revenue synergies based on current contractual relationships, as well as operational cost synergies resulting from increased scale in service delivery and elimination of duplicative management functions and other back-office operational efficiencies. The goodwill created in the Acquisition is not expected to be deductible for tax purposes. The preliminary allocation of consideration exchanged to acquired identified intangible assets is as follows: (in millions) Fair value Weighted-average remaining amortization period (years) Customer relationships (1) $ 598.5 15.0 Developed technology (1) 96.9 4.5 Trade names & trademarks (1) 12.3 3.0 Identified intangible assets subject to amortization 707.7 13.4 In-process software development costs 3.8 n/a Total acquired intangible assets $ 711.5 (1) The Company preliminarily valued the acquired assets utilizing the discounted cash flow method, a form of the income approach. In connection with the transaction, for the three and nine months ended October 31, 2019 , the Company incurred approximately $ 32.9 million and $40.7 million , respectively, of acquisition costs, which are recorded as other expense, net. For the three months ended October 31, 2019 , WageWorks contributed revenue of approximately $72.1 million . For the three months ended October 31, 2019 , operating expenses related to WageWorks were approximately $39.9 million . Pro forma information The unaudited pro forma results presented below include the effects of the Acquisition as if it had been consummated as of February 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition, which include adjustments related to the amortization of acquired intangible assets, interest income and expense, and depreciation. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the integration of WageWorks. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. The estimated pro forma revenue and net income (loss) includes the alignment of accounting policies, the effect of fair value adjustments related to the Acquisition, associated tax effects and the impact of the borrowings to finance the Acquisition and related expenses. (in thousands) Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Revenue $ 194,450 $ 186,022 $ 598,815 $ 573,520 Net income (loss) $ (3,286 ) $ (21,145 ) $ 34,559 $ 9,120 |
Supplemental financial statemen
Supplemental financial statement information | 9 Months Ended |
Oct. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental financial statement information | Supplemental financial statement information Selected condensed consolidated balance sheet and condensed consolidated statement of operations and comprehensive income (loss) components consist of the following: Property and equipment Property and equipment consisted of the following as of October 31, 2019 and January 31, 2019 : (in thousands) October 31, 2019 January 31, 2019 Leasehold improvements $ 19,404 $ 3,583 Furniture and fixtures 6,889 4,476 Computer equipment 22,890 9,242 Property and equipment, gross 49,183 17,301 Accumulated depreciation (13,984 ) (9,078 ) Property and equipment, net $ 35,199 $ 8,223 Depreciation expense for the three months ended October 31, 2019 and 2018 was $3.6 million and $0.9 million , respectively, and $5.4 million and $2.6 million for the nine months ended October 31, 2019 and 2018 , respectively. Other expense, net Other expense, net, consisted of the following: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Interest income $ 2,046 $ 358 $ 5,273 $ 919 Gain on marketable equity securities 285 — 27,570 — Acquisition costs (32,932 ) (849 ) (40,712 ) (1,074 ) Other expense (348 ) (996 ) (478 ) (1,272 ) Total other expense, net $ (30,949 ) $ (1,487 ) $ (8,347 ) $ (1,427 ) |
Leases
Leases | 9 Months Ended |
Oct. 31, 2019 | |
Leases [Abstract] | |
Leases | Leases The Company has entered into various non-cancelable operating lease agreements for office space, data storage facilities, and other leases with remaining lease terms of approximately less than 1 year to 11 years, often with one or more Company options to renew. These renewal terms can extend the lease term from 3 to 10 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. Amortization and interest expense related to finance leases were not material during the three and nine months ended October 31, 2019 . The components of operating lease costs, lease term and discount rate are as follows: Three months ended Nine months ended (in thousands, except for term and percentages) October 31, 2019 October 31, 2019 Operating lease cost $ 3,354 $ 5,515 Sublease income (249 ) (249 ) Net operating lease cost $ 3,105 $ 5,266 As of October 31, 2019 Weighted average remaining lease term 9.36 years Weighted average discount rate 4.37 % Maturities of operating lease liabilities as of October 31, 2019 were as follows: Fiscal year ending January 31, (in thousands) Operating leases Remaining 2020 $ 375 2021 14,340 2022 14,135 2023 10,595 2024 8,287 Thereafter 55,389 Total lease payments 103,121 Less imputed interest (19,289 ) Present value of lease liabilities $ 83,832 Current $ 10,780 Non-current 73,052 Total lease liabilities $ 83,832 As of October 31, 2019 , the Company had additional operating leases for office space that have not yet commenced with aggregate undiscounted lease payments of $80.2 million . These operating leases will commence in fiscal year 2021 with a lease term of approximately 11 years . Supplemental cash flow information related to the Company's operating leases was as follows: Three months ended Nine months ended (in thousands) October 31, 2019 October 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,746 $ 4,575 ROU assets obtained in exchange for new operating lease obligations $ 34,196 $ 34,394 |
Intangible assets and goodwill
Intangible assets and goodwill | 9 Months Ended |
Oct. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets and goodwill | Intangible assets and goodwill Intangible assets During the three months ended October 31, 2019 , the Company recorded $711.5 million of acquired identified intangible assets as a result of the Acquisition of WageWorks. For further information about these acquired identified intangible assets, see Note 3—Business Combination. During the nine months ended October 31, 2019 , the Company acquired the rights to act as a custodian of HSA portfolios for $7.7 million . The Company has determined the acquired intangible HSA assets to have a useful life of 15 years . The assets are being amortized using the straight-line amortization method, which has been determined to be appropriate to reflect the pattern over which the economic benefits of existing assets are realized. During the three months ended October 31, 2019 and 2018 , the Company capitalized software development costs of $7.0 million and $2.2 million , respectively, and $14.7 million and $6.4 million , respectively, for the nine months ended October 31, 2019 and 2018 , related to significant enhancements and upgrades to its technology-enabled services platforms. The gross carrying amount and associated accumulated amortization of intangible assets were as follows as of October 31, 2019 and January 31, 2019 : (in thousands) October 31, 2019 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 66,633 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,382 2,882 Acquired developed technology 96,924 — Acquired trade names 12,300 — Amortizable intangible assets, gross 870,009 132,827 Accumulated amortization (77,017 ) (53,161 ) Total amortizable intangible assets, net 792,992 79,666 Acquired in-process software development costs 3,236 — Total intangible assets, net $ 796,228 $ 79,666 During the three months ended October 31, 2019 and 2018 , the Company expensed a total of $6.2 million and $3.4 million , respectively, and $13.8 million and $10.0 million for the nine months ended October 31, 2019 and 2018 , respectively, in software development costs primarily related to the post-implementation and operation stages of its technology platforms. Amortization expense for the three months ended October 31, 2019 and 2018 was $15.7 million and $3.7 million , respectively, and $23.6 million and $10.9 million , respectively, for the nine months ended October 31, 2019 and 2018 . Goodwill During the three months ended October 31, 2019 , the Company recorded $1.3 billion of goodwill from the Acquisition of WageWorks. For further information about the resulting goodwill, see Note 3—Business Combination. There were no other changes to the goodwill carrying value during the three and nine months ended October 31, 2019 and 2018 . |
Commitments and contingencies
Commitments and contingencies | 9 Months Ended |
Oct. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Commitments In addition to the indebtedness described in Note 8 below, the Company’s principal commitments consist of operating lease obligations for office space , data storage facilities, and other leases, a processing services agreement with a vendor, and contractual commitments related to network infrastructure, equipment, and certain maintenance agreements under long-term, non-cancelable commitments. Future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $6.0 million , which is expected to be received through February 2023, and other agreements, are as follows: Year ending January 31, (in thousands) Operating leases Other agreements Total 2020 $ 375 $ 2,524 $ 2,899 2021 14,340 10,325 24,665 2022 15,692 7,182 22,874 2023 12,191 4,602 16,793 2024 9,922 1,212 11,134 Thereafter 67,717 403 68,120 Total $ 120,237 $ 26,248 $ 146,485 Rent expense was $ 3.4 million and $5.5 million for the three and nine months ended October 31, 2019 , respectively. Sublease income was $0.2 million for the three months ended October 31, 2019 . Contingencies In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Legal matters WageWorks is pursuing affirmative claims against the Office of Personnel Management ("OPM") to obtain payment for services provided by WageWorks between March 1, 2016 and August 31, 2016 pursuant to its contract with OPM. In connection with WageWorks' claims against OPM, OPM has also claimed that an erroneous statement in a certificate signed by a former executive officer constituted a violation of the False Claims Act and moved to dismiss part of WageWorks' claim against OPM as a result. As with all legal proceedings, no assurance can be provided as to the outcome of these matters or if WageWorks or OPM will be successful. On March 9, 2018, a putative class action was filed in the U.S. District Court for the Northern District of California (the “Securities Class Action”). On May 16, 2019, a consolidated amended complaint was filed by the lead plaintiffs asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against WageWorks, its former Chief Executive Officer and its former Chief Financial Officer on behalf of purchasers of WageWorks common stock between May 6, 2016 and March 1, 2018. The complaint also alleges claims under the Securities Act of 1933, as amended, arising from WageWorks’ June 19, 2017 common stock offering against those same defendants, as well as the members of its board of directors at the time of that offering. On June 22, 2018 and September 6, 2018, two derivative lawsuits were filed against certain of WageWorks’ former officers and directors and WageWorks (as nominal defendant) in the Superior Court of the State of California, County of San Mateo. The actions were consolidated. On July 23, 2018, a similar derivative lawsuit was filed against certain former WageWorks’ officers and directors and WageWorks (as nominal defendant) in the U.S. District Court for the Northern District of California (together, the “Derivative Suits”). The allegations in the Derivative Suits relate to substantially the same facts as those underlying the Securities Class Action described above. The plaintiffs seek unspecified damages and fees and costs. Plaintiffs in the Superior Court action filed an amended consolidated complaint on October 28, 2019, naming as defendants certain former officers and directors of WageWorks and alleging a direct claim of "inseparable fraud/breach of fiduciary duty" on behalf of a class. WageWorks was not named as a party in that complaint. WageWorks voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the restatement of WageWorks' financial statements and related independent investigation. WageWorks is providing information and documents to the SEC and continues to cooperate with the SEC’s investigation into these matters. The U.S. Attorney’s Office for the Northern District of California also opened an investigation. WageWorks has provided documents and information to the U.S. Attorney’s Office and continues to cooperate with any inquiries by the U.S. Attorney’s Office regarding the matter. Beginning on July 30, 2019, putative class action suits were filed in the U.S. District Court Courts for the Southern District of New York, the District of Delaware, and the Northern District of California asserting claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, against WageWorks and the former members of its board of directors. The complaints generally allege disclosure violations in the proxy statement issued by WageWorks in connection with the stockholder vote on the proposed merger with the Company. After WageWorks issued certain supplemental disclosures, these actions were voluntarily dismissed, but WageWorks may still be required to pay attorneys fees to the plaintiffs' lawyers. WageWorks previously entered into indemnification agreements with its former directors and officers and, pursuant to these indemnification agreements, is covering the defense of its former directors and officers in the legal proceedings described above. The Company and its subsidiaries are involved in various other litigation, governmental proceedings and claims, not described above, that arise in the normal course of business. While it is not possible to determine the ultimate outcome or the duration of such litigation, governmental proceedings or claims, the Company believes, based on current knowledge, that such litigation, proceedings and claims will not have a material impact on the Company’s financial position, results of operations and cash flows for the period. The Company maintains liability insurance coverage that is intended to cover the legal matters described above; however, it is possible that claims may be denied by our insurance carriers or could exceed the amount of our applicable insurance coverage, we may be required by our insurance carriers to contribute to the payment of claims, and our insurance coverage may not continue to be available to us on acceptable terms or in sufficient amounts. As required under GAAP, the Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information, the Company does not believe that any liabilities relating to these matters are probable or that the amount of any resulting loss is estimable. However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations and cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods. |
Indebtedness
Indebtedness | 9 Months Ended |
Oct. 31, 2019 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness As of October 31, 2019 , long-term debt consisted of the following: (in millions) October 31, 2019 Term loan facility $ 1,250 Less: unamortized loan issuance costs (23 ) Long-term debt, net of issuance costs $ 1,227 On September 30, 2015, the Company entered into a credit facility that provided for a secured revolving credit facility in the aggregate principal amount of $100.0 million for a term of five years . Upon closing of the Acquisition on August 30, 2019, the credit facility was terminated. At the time of termination, no amounts were drawn and the Company was in compliance with all covenants. In connection with the closing of the Acquisition, on August 30, 2019, the Company entered into a credit facility (the "Credit Agreement”) that provided for: (i) a five-year senior secured term loan A facility (the “Term Loan Facility”), in an aggregate principal amount of $1.25 billion , the proceeds of which were used to finance the Acquisition, to refinance substantially all outstanding indebtedness of HealthEquity and WageWorks and to pay related fees and expenses; and (ii) a five-year senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”), in an aggregate principal amount of up to $350 million , which may be used for working capital and general corporate purposes, including acquisitions and other investments. No amounts were drawn under the Revolving Credit Facility as of October 31, 2019 . Borrowings under the Credit Facilities will bear interest at an annual rate equal to, at the option of HealthEquity, either (i) LIBOR (adjusted for reserves) plus a margin ranging from 1.25% to 2.25% or (ii) an alternate base rate plus a margin ranging from 0.25% to 1.25% , with the applicable margin determined by reference to a leverage-based pricing grid set forth in the Credit Agreement. The Company is also required to pay certain fees to the lenders, including, among others, a quarterly commitment fee on the average unused amount of the Revolving Credit Facility at a rate ranging from 0.20% to 0.40% , with the applicable rate also determined by reference to a leverage-based pricing grid set forth in the Credit Agreement. The loans made under the Term Loan Facility are required to be repaid as described in the following table: Fiscal year ending January 31, (in millions) Principal payments Remaining 2020 $ 8 2021 39 2022 63 2023 70 2024 101 Thereafter 969 Total principal payments $ 1,250 The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit, among other things, the ability of the Company to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, in each case, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains financial performance covenants, which require the Company to maintain (i) a maximum total net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 5.25 to 1.00, which steps down to (x) 5.00 to 1.00 beginning with the fiscal quarter ending July 31, 2020 and (y) 4.50 to 1.00 beginning with the fiscal quarter ending July 31, 2021 (subject to a customary “acquisition holiday” provision that allows the maximum total net leverage ratio to increase to 5.00 to 1.00 for the four fiscal quarter period ending on or following the date of a permitted acquisition by the Company in excess of $100 million ), and (ii) a minimum interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 3.00 to 1.00. The Company was in compliance with all covenants under the Credit Agreement as of October 31, 2019 . The obligations of HealthEquity under the Credit Agreement are required to be unconditionally guaranteed by WageWorks and each of the Company's subsequently acquired or organized direct and indirect domestic subsidiaries and are secured by security interests in substantially all assets of HealthEquity and the guarantors, in each case, subject to certain customary exceptions. |
Income taxes
Income taxes | 9 Months Ended |
Oct. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes The Company follows FASB Accounting Standards Codification 740-270, Income Taxes - Interim Reporting , for the computation and presentation of its interim period tax provision. Accordingly, management estimated the effective annual tax rate and applied this rate to the year-to-date pre-tax book income to determine the interim provision for income taxes. For the three and nine months ended October 31, 2019 , the Company recorded an income tax benefit of $9.9 million and income tax expense of $3.9 million , respectively. This resulted in an effective income tax benefit rate of 31.7% and an income tax expense rate of 8.9% for the three and nine months ended October 31, 2019 , respectively, compared with an effective income tax expense rate of 10.0% and an effective income tax benefit rate of 2.2% for the three and nine months ended October 31, 2018 , respectively. For the three and nine months ended October 31, 2019 and 2018 , the net impact of discrete tax items caused a percentage point benefit of 1.1 and 8.7 and a percentage point benefit of 11.2 and 24.1 , respectively, to the effective income tax rate primarily due to the excess tax benefit on stock-based compensation expense recognized in the provision for income taxes in the condensed consolidated statements of operations and comprehensive income (loss). As of October 31, 2019 and January 31, 2019 , the Company’s total gross unrecognized tax benefit was $8.1 million and $1.7 million , respectively. Certain unrecognized tax benefits have been netted against their related tax assets. As of October 31, 2019 , an unrecognized tax benefit of $0.4 million was recorded. As of January 31, 2019 , no unrecognized tax benefits had been recorded. If recognized, $7.4 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of October 31, 2019 . The Company files income tax returns with U.S. federal and state taxing jurisdictions and is not currently under examination with any jurisdiction. The Company remains subject to examination by federal and various state taxing jurisdictions for tax years after 2003. |
Stock-based compensation
Stock-based compensation | 9 Months Ended |
Oct. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-based compensation | Stock-based compensation The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive income (loss) during the periods presented: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Cost of revenue $ 1,415 $ 788 $ 3,285 $ 2,008 Sales and marketing 1,304 990 3,469 2,586 Technology and development 2,171 1,386 5,600 3,677 General and administrative 3,332 2,570 9,486 7,190 Merger integration 1,220 — 1,220 — Other expense, net 13,714 — 13,714 — Total stock-based compensation expense $ 23,156 $ 5,734 $ 36,774 $ 15,461 The following table shows stock-based compensation by award type: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Stock options $ 1,631 $ 1,917 $ 5,140 $ 5,664 Performance stock options — 178 — 503 Restricted stock units 14,099 1,956 20,718 5,543 Performance restricted stock units 1,422 793 3,467 1,843 Restricted stock awards 164 172 491 399 Performance restricted stock awards 260 718 1,378 1,509 Total non-cash stock-based compensation expense 17,576 5,734 31,194 15,461 Acquisition awards exchanged for cash 5,580 — 5,580 — Total stock-based compensation expense $ 23,156 $ 5,734 $ 36,774 $ 15,461 Stock award plans Incentive Plan. The Company grants stock options, restricted stock units ("RSUs"), and restricted stock awards ("RSAs") under the HealthEquity, Inc. 2014 Equity Incentive Plan (as amended and restated, the "Incentive Plan"), which provided for the issuance of stock awards to the directors and team members of the Company to purchase up to an aggregate of 2.6 million shares of common stock. As described below, in connection with the Acquisition, the shares of common stock available for issuance under the Incentive Plan were increased by 5.3 million shares. In addition, under the Incentive Plan, the number of shares of common stock reserved for issuance under the Incentive Plan automatically increases on February 1 of each year, beginning as of February 1, 2015 and continuing through and including February 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on January 31 of the preceding fiscal year, or a lesser number of shares determined by the board of directors. WageWorks Incentive Plan. At the closing of the Acquisition, and in accordance with the Merger Agreement, certain RSUs with respect to WageWorks common stock, granted under WageWorks, Inc. 2010 Equity Incentive Plan (the "WageWorks Incentive Plan"), were replaced by the Company and converted into RSUs with respect to 523,318 shares of common stock of the Company. In connection with the Acquisition, an additional 5,255,027 shares of the Company, representing the remaining number of shares of common stock of WageWorks that were available for issuance under the WageWorks Incentive Plan immediately prior to the Acquisition, became available for issuance under the Incentive Plan. The additional shares may be utilized for equity-based awards to be granted under the Incentive Plan, provided that (i) the period during which such shares are available under the Incentive Plan may not be extended beyond the period during which they would have been available under the WageWorks Incentive Plan, absent the Acquisition, and (ii) such equity-based awards may not be granted to individuals who were employees, directors or consultants of HealthEquity or its affiliates at the time the Acquisition was consummated. Stock options Under the terms of the Incentive Plan, the Company has the ability to grant incentive and nonqualified stock options. Incentive stock options may be granted only to Company team members. Nonqualified stock options may be granted to Company executive officers, other team members, directors and consultants. Such options are to be exercisable at prices, as determined by the board of directors, which must be equal to no less than the fair value of the Company's common stock at the date of the grant. Stock options granted under the Incentive Plan generally expire 10 years from the date of issuance, or are forfeited 90 days after termination of employment. Shares of common stock underlying stock options that are forfeited or that expire are returned to the Incentive Plan. Valuation assumptions. The Company has adopted the provisions of Topic 718, which requires the measurement and recognition of compensation for all stock-based awards made to team members and directors, based on estimated fair values. Under Topic 718, the Company uses the Black-Scholes option pricing model as the method of valuation for stock options. The determination of the fair value of stock-based awards on the date of grant is affected by the fair value of the stock as well as assumptions regarding a number of complex and subjective variables. The variables include, but are not limited to, 1) the expected life of the option, 2) the expected volatility of the fair value of the Company's common stock over the term of the award estimated by averaging the Company's historical volatility in addition to published volatilities of a relative peer group, 3) risk-free interest rate, and 4) expected dividends. The key input assumptions that were utilized in the valuation of the stock options granted during the periods presented: Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Expected dividend yield * — % — % — % Expected stock price volatility * 37.09 % 35.98% - 36.53% 37.09% - 37.84% Risk-free interest rate * 2.79 % 2.21% - 2.43% 2.52% - 2.79% Expected life of options * 6.25 years 4.95 - 5.09 years 5.17 - 6.25 years * No stock options were granted during the three months ended October 31, 2019. The Company historically used the "simplified" method to estimate the expected life of an option as determined under Staff Accounting Bulletin No. 110 due to limited option exercise history as a public company. Commencing February 1, 2019, the Company began estimating the expected life of an option using its own historical option exercise and termination data. Expected volatility is determined using weighted average volatility of the Company's historical common stock price in addition to published volatilities of publicly traded peer companies. The risk-free interest rate is determined by using published zero coupon rates on treasury notes for each grant date given the expected term on the options. The dividend yield of zero is based on the fact that the Company expects to invest cash in operations. A summary of stock option activity is as follows: Outstanding stock options (in thousands, except for exercise prices and term) Number of Range of Weighted- Weighted- Aggregate Outstanding as of January 31, 2019 2,444 $0.10 - 82.39 $ 27.37 6.74 $ 85,971 Granted 108 $63.64 - 73.61 $ 73.27 Exercised (314 ) $0.10 - 44.53 $ 23.42 Forfeited (36 ) $24.36 - 44.53 $ 30.15 Outstanding as of October 31, 2019 2,202 $0.10 - 82.39 $ 30.14 6.13 $ 61,562 Vested and expected to vest as of October 31, 2019 2,202 $ 30.14 6.13 $ 61,562 Exercisable as of October 31, 2019 1,501 $ 22.91 5.50 $ 51,131 The aggregate intrinsic value in the table above represents the difference between the estimated fair value of common stock and the exercise price of outstanding, in-the-money stock options. As of October 31, 2019 , the weighted-average vesting period of non-vested awards expected to vest is approximately 1.5 years ; the amount of compensation expense the Company expects to recognize for stock options vesting in future periods is approximately $8.8 million . Restricted stock units and restricted stock awards The Company grants RSUs and RSAs to certain team members, officers, and directors under the Incentive Plan. RSUs and RSAs vest upon service-based criteria and performance-based criteria. Generally, service-based RSUs and RSAs vest over a four-year period in equal annual installments commencing upon the first anniversary of the grant date. RSUs and RSAs are valued based on the current value of the Company's closing stock price on the date of grant less the present value of future expected dividends discounted at the risk-free interest rate. Acquisition of WageWorks. As described above, at the closing of the Acquisition, and in accordance with the Merger Agreement, 523,318 service-based RSUs with respect to WageWorks common stock were replaced by the Company and converted into RSUs with respect to common stock of the Company. These replaced awards are included in the granted amounts in the summary of RSU and RSA activity below. The awards replaced by the Company in the Acquisition were measured at the Acquisition date based on the estimated fair value of $29.7 million . A portion of that fair value, $3.8 million , which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. As of the closing of the Acquisition, the remaining portion of the fair value of those awards was $25.9 million , representing post-Acquisition share-based compensation expense, $8.1 million of which was recognized during the three months ended October 31, 2019 as acquisition-related costs, and the remainder of which will be recognized in the ordinary course as these team members provide service over the remaining vesting periods. Additionally, at the closing of the Acquisition, and in accordance with the Merger Agreement, the Company exchanged for cash certain WageWorks equity awards measured at the Acquisition date based on the estimated fair value of $23.6 million . A portion of that fair value, $18.1 million , which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. As of the closing of the Acquisition, the remaining portion of the fair value of the awards exchanged for cash was $5.6 million , representing post-Acquisition share-based compensation expense that was recognized during the three months ended October 31, 2019 . Performance restricted stock units and awards. In March 2017, the Company awarded 146,964 performance-based RSUs ("PRSUs"). Vesting of the PRSUs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2020. The Company records stock-based compensation related to PRSUs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurs at vesting. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 150% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals. As a result of the Acquisition, we expect the Compensation Committee of the Board of Directors to consider revisions to certain existing PRSU performance goals. In March 2018, the Company awarded 227,760 performance-based RSAs ("PRSAs"). Vesting of the PRSAs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2021. The Company records stock-based compensation related to PRSAs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurred at the grant date. The Company believes it is probable that the PRSAs will vest at least in part. The vesting of the PRSAs will ultimately range from 0% to 200% based on the level of achievement of the performance goals. The PRSAs were issued at the 200% level of achievement. As the underlying shares were issued at grant date, they are subject to clawback based on actual Company performance. As a result of the Acquisition, we expect the Compensation Committee of the Board of Directors to consider revisions to certain existing PRSU performance goals. In March 2019, the Company awarded 129,963 PRSUs. Vesting of the PRSUs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2022. The Company records stock-based compensation related to PRSUs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurs at vesting. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 200% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals. As a result of the Acquisition, we expect the Compensation Committee of the Board of Directors to consider revisions to certain existing PRSU performance goals. A summary of the RSU and RSA activity is as follows: RSUs and PRSUs RSAs and PRSAs (in thousands, except weighted-average grant date fair value) Shares Weighted-average grant date fair value Shares Weighted-average grant date fair value Outstanding as of January 31, 2019 647 $ 55.18 256 $ 61.93 Granted 1,124 64.61 — — Released (320 ) 58.01 (11 ) 62.75 Forfeited (83 ) 56.02 (10 ) 61.72 Outstanding as of October 31, 2019 1,368 $ 62.22 235 $ 61.91 For the nine months ended October 31, 2019 , the aggregate intrinsic value of RSUs and RSAs released was $19.9 million and $0.8 million , respectively. For the nine months ended October 31, 2018 , the aggregate intrinsic value of RSUs released was $5.5 million . Total unrecorded stock-based compensation expense as of October 31, 2019 associated with RSUs and PRSUs was $67.1 million , which is expected to be recognized over a weighted-average period of 2.6 years . Total unrecorded stock-based compensation expense as of October 31, 2019 associated with RSAs and PRSAs was $4.3 million , which is expected to be recognized over a weighted-average period of 1.6 years . |
Fair value
Fair value | 9 Months Ended |
Oct. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value | Fair value Fair value measurements are made at a specific point in time, based on relevant market information. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1—quoted prices in active markets for identical assets or liabilities; • Level 2—inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3—unobservable inputs based on the Company’s own assumptions. Level 1 instruments are valued based on publicly available daily net asset values. Level 1 instruments consist primarily of cash and cash equivalents. The carrying value of cash and cash equivalents approximate fair values as of October 31, 2019 |
Summary of business and signi_2
Summary of business and significant accounting policies (Policies) | 9 Months Ended |
Oct. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of consolidation | Principles of consolidation The condensed consolidated financial statements include the accounts of HealthEquity, Inc. and its wholly owned subsidiaries, HealthEquity Trust Company, HEQ Insurance Services, Inc., HealthEquity Advisors, LLC, HealthEquity Retirement Services, LLC, and, after the closing of the Acquisition on August 30, 2019, WageWorks, Inc. and its subsidiaries MyFlexMobile, Inc., WageWorks India, Inc. and WageWorks Services, LLP (collectively referred to as the "Company"). Prior to the closing of the Acquisition, the Company held a 4% ownership interest in WageWorks. The Company measured the investment at fair value, and all gains on the investment were recognized in other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). In connection with the closing of the Acquisition on August 30, 2019, the Company's investment in WageWorks was canceled, and WageWorks became a wholly owned subsidiary of the Company. The Company has a 22% ownership interest in a limited partnership for investment in and the management of early stage companies in the healthcare industry; this partnership interest is accounted for using the equity method of accounting. The investment was approximately $0.2 million as of October 31, 2019 and is included in investments on the accompanying condensed consolidated balance sheet. The Company has a 1% ownership interest in a limited partnership that engages in the development of technology-based financial healthcare products. The Company elected the measurement alternative for non-marketable equity investments to account for the investment. The investment was valued at $0.5 million as of October 31, 2019 and is included in investments on the accompanying condensed consolidated balance sheet. Acquisitions of businesses, including the Acquisition of WageWorks, are accounted for as business combinations, and accordingly, the results of operations of acquired businesses are included in the condensed consolidated financial statements from the date of acquisition. All significant intercompany balances and transactions have been eliminated. |
Basis of presentation | Basis of presentation The accompanying condensed consolidated financial statements as of October 31, 2019 and for the three and nine months ended October 31, 2019 and 2018 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. In the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended January 31, 2019 . The fiscal year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. |
Reclassifications | Certain reclassifications have been made to prior year amounts to conform to the current year presentation. |
Leases | Leases. The Company determines if a contract contains a lease at inception or any modification of the contract. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a specified period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company has entered into various operating leases consisting of office space, data storage facilities, and other leases with remaining lease terms of approximately less than 1 year to 11 years, often with one or more Company options to renew. These renewal terms can extend the lease term from 3 to 10 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. Leases with an expected term of 12 months or less at commencement are not accounted for on the balance sheet. All operating lease expense is recognized on a straight-line basis over the expected lease term. Certain leases also include obligations to pay for non-lease services, such as utilities and common area maintenance. The services are accounted for separately from lease components, and the Company allocates payments to the lease and other services components based on estimated stand-alone prices. Operating lease right-of-use ("ROU") assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the rate implicit in each lease is not readily determinable, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company used its incremental borrowing rate on February 1, 2019 for all leases that commenced prior to that date. Operating leases are included in operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current on the condensed consolidated balance sheets beginning February 1, 2019. |
Investments in equity securities | Investments in equity securities. Marketable equity securities are strategic equity investments with readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at fair value and were classified as investments on the condensed consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). As a result of the Acquisition on August 30, 2019, the Company's marketable equity security investment in WageWorks was canceled. Non-marketable equity securities are strategic equity investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for using the measurement alternative and are classified as other assets on the condensed consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net on the condensed consolidated statements of operations and comprehensive income (loss). Equity method investments are equity securities in investees the Company does not control but over which the Company has the ability to exercise significant influence. Equity-method investments are included in other assets on the condensed consolidated balance sheets. The Company's share of the earnings or losses as reported by equity-method investees, amortization of basis differences, and related gains or losses, if any, are recognized in other expense, net on the condensed consolidated statements of operations and comprehensive income (loss). The Company assesses whether an other-than-temporary impairment loss on equity method investments and an impairment loss on non-marketable equity securities has occurred due to declines in fair value or other market conditions. If any impairment is considered other than temporary for equity method investments or impairment is identified for non-marketable equity securities, the Company will write down the investment to its fair value and record the corresponding charge through other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). |
Client-held funds | Client-held funds. Many of the Company's client services agreements with employers (referred to as "Clients") provide that Clients remit funds to the Company to pre-fund Client and employee participant contributions related to flexible spending accounts and health reimbursement arrangements (“FSAs” and “HRAs”, respectively) and commuter accounts. These Client-held funds remitted to the Company do not represent cash assets of the Company to the extent that they are not combined with corporate cash, and accordingly are not included in cash and cash equivalents on the Company's condensed consolidated balance sheets. |
Recent adopted and issued accounting pronouncements | Recent adopted accounting pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (codified as "ASC 842"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. ASC 842 requires that a lessee recognize a liability to make lease payments (the lease liability) and a ROU asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASC 842 on February 1, 2019 using the modified retrospective transition method with the adoption date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The adoption of ASC 842 on February 1, 2019 resulted in the recognition on the Company's condensed consolidated balance sheet of both operating lease liabilities of $40.6 million and ROU assets of $38.0 million , which equals the lease liabilities net of accrued rent previously recorded on its consolidated balance sheet under previous guidance. The adoption of ASC 842 did not have an impact on the Company's condensed consolidated statement of operations, stockholders’ equity and cash flows for the three and nine -month period ended October 31, 2019 . In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU permits the capitalization of implementation costs incurred in a software hosting arrangement. This ASU is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the new standard as of October 31, 2019 using the prospective transition method. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. Recent issued accounting pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost be presented at the net amount expected to be collected. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company does not plan to early adopt this ASU. The Company is currently evaluating the potential effect of this ASU on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adoption; however, it does not believe this ASU will have a material impact on the Company's consolidated financial statements. In August 2018, FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, "Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential effect of this ASU on the consolidated financial statements. |
Net income (loss) per share (Ta
Net income (loss) per share (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of earnings (loss) per share, basic and diluted | The following table sets forth the computation of basic and diluted net income (loss) per share: (in thousands, except per share data) Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Numerator (basic and diluted): Net income (loss) $ (21,334 ) $ 15,686 $ 39,854 $ 60,780 Denominator (basic): Weighted-average common shares outstanding 70,524 62,088 65,727 61,718 Denominator (diluted): Weighted-average common shares outstanding 70,524 62,088 65,727 61,718 Weighted-average dilutive effect of stock options and restricted stock units — 1,835 1,423 1,910 Diluted weighted-average common shares outstanding 70,524 63,923 67,150 63,628 Net income (loss) per share: Basic $ (0.30 ) $ 0.25 $ 0.61 $ 0.98 Diluted $ (0.30 ) $ 0.25 $ 0.59 $ 0.96 |
Business combination (Tables)
Business combination (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Business Combinations [Abstract] | |
Total Consideration Paid | Under this accounting method, the total consideration paid was: (in millions) Aggregate fair value of WageWorks stock acquired $ 2,018.8 Fair value of previously owned investment in WageWorks stock 81.4 Fair value of equity awards exchanged for cash attributable to pre-Acquisition service 18.1 Fair value of equity awards replaced attributable to pre-Acquisition service 3.8 Total consideration paid $ 2,122.1 |
Preliminary Allocation of Consideration | Preliminary allocation of consideration (in millions) Estimated fair value Cash and cash equivalents $ 406.8 Other current assets 56.5 Property, plant, and equipment 26.6 Operating lease right-of-use assets 42.5 Intangible assets 715.3 Goodwill 1,330.5 Other assets 5.9 Client-held funds obligation (237.5 ) Other current liabilities (69.1 ) Other long-term liabilities (26.7 ) Deferred tax liability (128.7 ) Total consideration paid $ 2,122.1 |
Preliminary Allocation of Consideration Paid to Acquired Identified Intangible Assets | The preliminary allocation of consideration exchanged to acquired identified intangible assets is as follows: (in millions) Fair value Weighted-average remaining amortization period (years) Customer relationships (1) $ 598.5 15.0 Developed technology (1) 96.9 4.5 Trade names & trademarks (1) 12.3 3.0 Identified intangible assets subject to amortization 707.7 13.4 In-process software development costs 3.8 n/a Total acquired intangible assets $ 711.5 (1) The Company preliminarily valued the acquired assets utilizing the discounted cash flow method, a form of the income approach. |
Pro Forma Information | The estimated pro forma revenue and net income (loss) includes the alignment of accounting policies, the effect of fair value adjustments related to the Acquisition, associated tax effects and the impact of the borrowings to finance the Acquisition and related expenses. (in thousands) Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Revenue $ 194,450 $ 186,022 $ 598,815 $ 573,520 Net income (loss) $ (3,286 ) $ (21,145 ) $ 34,559 $ 9,120 |
Supplemental financial statem_2
Supplemental financial statement information (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Property and equipment | Property and equipment consisted of the following as of October 31, 2019 and January 31, 2019 : (in thousands) October 31, 2019 January 31, 2019 Leasehold improvements $ 19,404 $ 3,583 Furniture and fixtures 6,889 4,476 Computer equipment 22,890 9,242 Property and equipment, gross 49,183 17,301 Accumulated depreciation (13,984 ) (9,078 ) Property and equipment, net $ 35,199 $ 8,223 |
Other income (expense), net | Other expense, net, consisted of the following: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Interest income $ 2,046 $ 358 $ 5,273 $ 919 Gain on marketable equity securities 285 — 27,570 — Acquisition costs (32,932 ) (849 ) (40,712 ) (1,074 ) Other expense (348 ) (996 ) (478 ) (1,272 ) Total other expense, net $ (30,949 ) $ (1,487 ) $ (8,347 ) $ (1,427 ) |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Leases [Abstract] | |
Lease cost | The components of operating lease costs, lease term and discount rate are as follows: Three months ended Nine months ended (in thousands, except for term and percentages) October 31, 2019 October 31, 2019 Operating lease cost $ 3,354 $ 5,515 Sublease income (249 ) (249 ) Net operating lease cost $ 3,105 $ 5,266 As of October 31, 2019 Weighted average remaining lease term 9.36 years Weighted average discount rate 4.37 % Supplemental cash flow information related to the Company's operating leases was as follows: Three months ended Nine months ended (in thousands) October 31, 2019 October 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,746 $ 4,575 ROU assets obtained in exchange for new operating lease obligations $ 34,196 $ 34,394 |
Operating lease liability maturity schedule | Maturities of operating lease liabilities as of October 31, 2019 were as follows: Fiscal year ending January 31, (in thousands) Operating leases Remaining 2020 $ 375 2021 14,340 2022 14,135 2023 10,595 2024 8,287 Thereafter 55,389 Total lease payments 103,121 Less imputed interest (19,289 ) Present value of lease liabilities $ 83,832 Current $ 10,780 Non-current 73,052 Total lease liabilities $ 83,832 |
Intangible assets and goodwill
Intangible assets and goodwill (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of finite-lived intangible assets | The gross carrying amount and associated accumulated amortization of intangible assets were as follows as of October 31, 2019 and January 31, 2019 : (in thousands) October 31, 2019 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 66,633 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,382 2,882 Acquired developed technology 96,924 — Acquired trade names 12,300 — Amortizable intangible assets, gross 870,009 132,827 Accumulated amortization (77,017 ) (53,161 ) Total amortizable intangible assets, net 792,992 79,666 Acquired in-process software development costs 3,236 — Total intangible assets, net $ 796,228 $ 79,666 |
Schedule of indefinite-lived intangible assets | The gross carrying amount and associated accumulated amortization of intangible assets were as follows as of October 31, 2019 and January 31, 2019 : (in thousands) October 31, 2019 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 66,633 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,382 2,882 Acquired developed technology 96,924 — Acquired trade names 12,300 — Amortizable intangible assets, gross 870,009 132,827 Accumulated amortization (77,017 ) (53,161 ) Total amortizable intangible assets, net 792,992 79,666 Acquired in-process software development costs 3,236 — Total intangible assets, net $ 796,228 $ 79,666 |
Commitments and contingencies O
Commitments and contingencies Operating Lease Maturity (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease liability maturity schedule | Future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $6.0 million , which is expected to be received through February 2023, and other agreements, are as follows: Year ending January 31, (in thousands) Operating leases Other agreements Total 2020 $ 375 $ 2,524 $ 2,899 2021 14,340 10,325 24,665 2022 15,692 7,182 22,874 2023 12,191 4,602 16,793 2024 9,922 1,212 11,134 Thereafter 67,717 403 68,120 Total $ 120,237 $ 26,248 $ 146,485 |
Indebtedness (Tables)
Indebtedness (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | As of October 31, 2019 , long-term debt consisted of the following: (in millions) October 31, 2019 Term loan facility $ 1,250 Less: unamortized loan issuance costs (23 ) Long-term debt, net of issuance costs $ 1,227 |
Schedule of Maturities of Long-term Debt | The loans made under the Term Loan Facility are required to be repaid as described in the following table: Fiscal year ending January 31, (in millions) Principal payments Remaining 2020 $ 8 2021 39 2022 63 2023 70 2024 101 Thereafter 969 Total principal payments $ 1,250 |
Stock-based compensation (Table
Stock-based compensation (Tables) | 9 Months Ended |
Oct. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Summary of share based compensation recognized | The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive income (loss) during the periods presented: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Cost of revenue $ 1,415 $ 788 $ 3,285 $ 2,008 Sales and marketing 1,304 990 3,469 2,586 Technology and development 2,171 1,386 5,600 3,677 General and administrative 3,332 2,570 9,486 7,190 Merger integration 1,220 — 1,220 — Other expense, net 13,714 — 13,714 — Total stock-based compensation expense $ 23,156 $ 5,734 $ 36,774 $ 15,461 |
Summary of stock-based compensation expense by award type | The following table shows stock-based compensation by award type: Three months ended October 31, Nine months ended October 31, (in thousands) 2019 2018 2019 2018 Stock options $ 1,631 $ 1,917 $ 5,140 $ 5,664 Performance stock options — 178 — 503 Restricted stock units 14,099 1,956 20,718 5,543 Performance restricted stock units 1,422 793 3,467 1,843 Restricted stock awards 164 172 491 399 Performance restricted stock awards 260 718 1,378 1,509 Total non-cash stock-based compensation expense 17,576 5,734 31,194 15,461 Acquisition awards exchanged for cash 5,580 — 5,580 — Total stock-based compensation expense $ 23,156 $ 5,734 $ 36,774 $ 15,461 |
Summary of assumptions | The key input assumptions that were utilized in the valuation of the stock options granted during the periods presented: Three months ended October 31, Nine months ended October 31, 2019 2018 2019 2018 Expected dividend yield * — % — % — % Expected stock price volatility * 37.09 % 35.98% - 36.53% 37.09% - 37.84% Risk-free interest rate * 2.79 % 2.21% - 2.43% 2.52% - 2.79% Expected life of options * 6.25 years 4.95 - 5.09 years 5.17 - 6.25 years * No |
Summary of stock option activity | A summary of stock option activity is as follows: Outstanding stock options (in thousands, except for exercise prices and term) Number of Range of Weighted- Weighted- Aggregate Outstanding as of January 31, 2019 2,444 $0.10 - 82.39 $ 27.37 6.74 $ 85,971 Granted 108 $63.64 - 73.61 $ 73.27 Exercised (314 ) $0.10 - 44.53 $ 23.42 Forfeited (36 ) $24.36 - 44.53 $ 30.15 Outstanding as of October 31, 2019 2,202 $0.10 - 82.39 $ 30.14 6.13 $ 61,562 Vested and expected to vest as of October 31, 2019 2,202 $ 30.14 6.13 $ 61,562 Exercisable as of October 31, 2019 1,501 $ 22.91 5.50 $ 51,131 |
Summary of restricted stock unit activity | A summary of the RSU and RSA activity is as follows: RSUs and PRSUs RSAs and PRSAs (in thousands, except weighted-average grant date fair value) Shares Weighted-average grant date fair value Shares Weighted-average grant date fair value Outstanding as of January 31, 2019 647 $ 55.18 256 $ 61.93 Granted 1,124 64.61 — — Released (320 ) 58.01 (11 ) 62.75 Forfeited (83 ) 56.02 (10 ) 61.72 Outstanding as of October 31, 2019 1,368 $ 62.22 235 $ 61.91 |
Summary of business and signi_3
Summary of business and significant accounting policies (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 30, 2019 | Oct. 31, 2019 | Oct. 31, 2018 | Aug. 29, 2019 | Feb. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Non-marketable equity securities | $ 500 | ||||
Client held funds, included in corporate cash | 7,000 | ||||
Segregated client-held funds | 230,928 | $ 0 | |||
Operating lease liabilities | 83,832 | ||||
Operating lease right of use asset | $ 88,515 | ||||
Minimum | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Remaining operating lease terms | 1 year | ||||
Lease renewal terms extension | 3 years | ||||
Maximum | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Remaining operating lease terms | 11 years | ||||
Lease renewal terms extension | 10 years | ||||
Accounting Standards Update 2016-02 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Operating lease liabilities | $ 40,600 | ||||
Operating lease right of use asset | $ 38,000 | ||||
WageWorks, Inc | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Merger related costs, price per share | $ 51.35 | ||||
Aggregate fair value of WageWorks stock acquired | $ 2,122,100 | ||||
Client held funds, included in corporate cash | 238,000 | ||||
Client-held funds, non-assets | 444,000 | ||||
WageWorks, Inc | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Investment ownership percentage | 4.00% | ||||
Limited partnership | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Investment ownership percentage | 1.00% | ||||
WageWorks, Inc | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Client-held funds, total | 682,000 | ||||
Client held funds, included in corporate cash | $ 238,000 | ||||
Limited partnership | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Equity method investment ownership percentage | 22.00% | ||||
Equity method investments | $ 200 |
Net income (loss) per share (De
Net income (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Numerator (basic and diluted): | ||||
Net income (loss) | $ (21,334) | $ 15,686 | $ 39,854 | $ 60,780 |
Denominator (basic): | ||||
Weighted-average common shares outstanding (in shares) | 70,524,000 | 62,088,000 | 65,727,000 | 61,718,000 |
Denominator (diluted): | ||||
Weighted-average common shares outstanding (in shares) | 70,524,000 | 62,088,000 | 65,727,000 | 61,718,000 |
Weighted-average dilutive effect of stock options and restricted stock units (in shares) | 0 | 1,835,000 | 1,423,000 | 1,910,000 |
Diluted weighted-average common shares outstanding (in shares) | 70,524,000 | 63,923,000 | 67,150,000 | 63,628,000 |
Net income (loss) per share: | ||||
Basic (in usd per share) | $ (0.30) | $ 0.25 | $ 0.61 | $ 0.98 |
Diluted (in usd per share) | $ (0.30) | $ 0.25 | $ 0.59 | $ 0.96 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 3,200,000 | 36,000 | 300,000 | 100,000 |
Business combination (Narrative
Business combination (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 30, 2019 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Jan. 31, 2019 |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 1,335,187 | $ 1,335,187 | $ 4,651 | |||
Acquisition costs | 32,932 | $ 849 | 40,712 | $ 1,074 | ||
WageWorks, Inc | ||||||
Business Acquisition [Line Items] | ||||||
Merger related costs, price per share | $ 51.35 | |||||
Aggregate fair value of WageWorks stock acquired | $ 2,122,100 | |||||
Cash paid | 816,900 | |||||
Borrowing pursuant to term loan facility | 1,220,000 | |||||
Goodwill | 1,330,500 | 1,330,500 | ||||
Acquisition costs | 32,900 | $ 40,700 | ||||
Contribution of revenue | 72,100 | |||||
Operating expenses | $ 39,900 | |||||
Line of Credit | Term Loan Facility | WageWorks, Inc | ||||||
Business Acquisition [Line Items] | ||||||
Lender fees | $ 30,500 |
Business combination (Considera
Business combination (Consideration Transferred) (Details) - WageWorks, Inc $ in Millions | Aug. 30, 2019USD ($) |
Business Acquisition [Line Items] | |
Fair value of previously owned investment in WageWorks stock | $ 81.4 |
Total consideration paid | 2,122.1 |
WageWorks stock acquired | |
Business Acquisition [Line Items] | |
Aggregate fair value of WageWorks stock acquired | 2,018.8 |
Equity awards exchanged for cash attributable to pre-Acquisition service | |
Business Acquisition [Line Items] | |
Fair value of equity awards | 18.1 |
Equity awards replaced attributable to pre-Acquisition service | |
Business Acquisition [Line Items] | |
Fair value of equity awards | $ 3.8 |
Business combination (Prelimina
Business combination (Preliminary Allocation of Consideration) (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Jan. 31, 2019 |
Business Acquisition [Line Items] | ||
Goodwill | $ 1,335,187 | $ 4,651 |
WageWorks, Inc | ||
Business Acquisition [Line Items] | ||
Cash and cash equivalents | 406,800 | |
Other current assets | 56,500 | |
Property, plant, and equipment | 26,600 | |
Operating lease right-of-use assets | 42,500 | |
Intangible assets | 715,300 | |
Goodwill | 1,330,500 | |
Other assets | 5,900 | |
Client-held funds obligation | (237,500) | |
Other current liabilities | (69,100) | |
Other long-term liabilities | (26,700) | |
Deferred tax liability | (128,700) | |
Total consideration paid | $ 2,122,100 |
Business combination (Acquired
Business combination (Acquired Intangible Assets) (Details) - WageWorks, Inc - USD ($) $ in Millions | Aug. 30, 2019 | Oct. 31, 2019 |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 707.7 | |
Total acquired intangible assets | 711.5 | $ 711.5 |
In-process software development costs | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
In-process software development costs | 3.8 | |
Customer relationships | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 598.5 | |
Weighted-average remaining amortization period (years) | 15 years | |
Acquired developed technology | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 96.9 | |
Weighted-average remaining amortization period (years) | 4 years 6 months | |
Trade names & trademarks | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 12.3 | |
Weighted-average remaining amortization period (years) | 3 years | |
Identified intangible assets subject to amortization | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted-average remaining amortization period (years) | 13 years 4 months 24 days |
Business combination (Pro Forma
Business combination (Pro Forma Results) (Details) - WageWorks, Inc - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Business Acquisition [Line Items] | ||||
Revenue | $ 194,450 | $ 186,022 | $ 598,815 | $ 573,520 |
Net income (loss) | $ (3,286) | $ (21,145) | $ 34,559 | $ 9,120 |
Supplemental financial statem_3
Supplemental financial statement information (Property and equipment) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Jan. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 49,183 | $ 49,183 | $ 17,301 | ||
Accumulated depreciation | (13,984) | (13,984) | (9,078) | ||
Property and equipment, net | 35,199 | 35,199 | 8,223 | ||
Depreciation expense | 3,600 | $ 900 | 5,400 | $ 2,600 | |
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 19,404 | 19,404 | 3,583 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 6,889 | 6,889 | 4,476 | ||
Computer equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 22,890 | $ 22,890 | $ 9,242 |
Supplemental financial statem_4
Supplemental financial statement information (Other expense, net) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Interest income | $ 2,046 | $ 358 | $ 5,273 | $ 919 |
Gain on marketable equity securities | 285 | 0 | 27,570 | 0 |
Acquisition costs | (32,932) | (849) | (40,712) | (1,074) |
Other expense | (348) | (996) | (478) | (1,272) |
Total other expense, net | $ (30,949) | $ (1,487) | $ (8,347) | $ (1,427) |
Leases (Narrative) (Details)
Leases (Narrative) (Details) $ in Millions | 9 Months Ended |
Oct. 31, 2019USD ($) | |
Lessee, Lease, Description [Line Items] | |
Operating lease not yet commenced undiscounted amount | $ 80.2 |
Operating lease not yet commenced term of contract | 11 years |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining operating lease terms | 1 year |
Lease renewal terms extension | 3 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining operating lease terms | 11 years |
Lease renewal terms extension | 10 years |
Leases (Lease Cost) (Details)
Leases (Lease Cost) (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Oct. 31, 2019USD ($) | Oct. 31, 2019USD ($) | |
Leases [Abstract] | ||
Operating lease cost | $ 3,354 | $ 5,515 |
Sublease income | (249) | (249) |
Net operating lease cost | $ 3,105 | $ 5,266 |
Weighted average remaining lease term | 9 years 4 months 9 days | 9 years 4 months 9 days |
Weighted average discount rate | 4.37% | 4.37% |
Leases (Maturities of Operating
Leases (Maturities of Operating Lease Liabilities) (Details) $ in Thousands | Oct. 31, 2019USD ($) |
Leases [Abstract] | |
Remaining 2020 | $ 375 |
2021 | 14,340 |
2022 | 14,135 |
2023 | 10,595 |
2024 | 8,287 |
Thereafter | 55,389 |
Total lease payments | 103,121 |
Less imputed interest | (19,289) |
Total lease liabilities | 83,832 |
Operating lease liabilities | 10,780 |
Operating lease liabilities, non-current | $ 73,052 |
Leases (Supplemental Cash Flow
Leases (Supplemental Cash Flow Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Oct. 31, 2019 | Oct. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 2,746 | $ 4,575 |
ROU assets obtained in exchange for new operating lease obligations | $ 34,196 | $ 34,394 |
Intangible assets and goodwil_2
Intangible assets and goodwill (Narrative) (Details) - USD ($) | Aug. 30, 2019 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 |
Finite-Lived Intangible Assets [Line Items] | |||||
Capitalized software development costs | $ 7,000,000 | $ 2,200,000 | $ 14,700,000 | $ 6,400,000 | |
Software development costs incurred and expensed | 6,200,000 | 3,400,000 | 13,800,000 | 10,000,000 | |
Amortization expense | 15,700,000 | 3,700,000 | 23,600,000 | 10,900,000 | |
Change in goodwill | $ 0 | $ 0 | |||
Acquired HSA portfolios | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Fair value | $ 7,700,000 | ||||
Useful life of intangible assets | 15 years | ||||
WageWorks, Inc | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Intangible assets | $ 711,500,000 | 711,500,000 | |||
Fair value | $ 707,700,000 | ||||
Goodwill | $ 1,300,000,000 |
Intangible assets and goodwil_3
Intangible assets and goodwill (Schedule of intangible assets) (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Jan. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | $ 870,009 | $ 132,827 |
Accumulated amortization | (77,017) | (53,161) |
Total amortizable intangible assets, net | 792,992 | 79,666 |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Intangible assets, net | 796,228 | 79,666 |
In-process software development costs | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Acquired in-process software development costs | 3,236 | 0 |
Software and software development costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 66,633 | 44,835 |
Acquired HSA portfolios | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 92,770 | 85,110 |
Acquired customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 601,382 | 2,882 |
Acquired developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 96,924 | 0 |
Acquired trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | $ 12,300 | $ 0 |
Commitments and contingencies_2
Commitments and contingencies Operating Lease Maturity (Details) $ in Thousands | Jan. 31, 2019USD ($) |
Operating Leased Assets [Line Items] | |
2020 | $ 2,899 |
2021 | 24,665 |
2022 | 22,874 |
2023 | 16,793 |
2024 | 11,134 |
Thereafter | 68,120 |
Total | 146,485 |
Office Lease | |
Operating Leased Assets [Line Items] | |
2020 | 375 |
2021 | 14,340 |
2022 | 15,692 |
2023 | 12,191 |
2024 | 9,922 |
Thereafter | 67,717 |
Total | 120,237 |
Other Agreements | |
Operating Leased Assets [Line Items] | |
2020 | 2,524 |
2021 | 10,325 |
2022 | 7,182 |
2023 | 4,602 |
2024 | 1,212 |
Thereafter | 403 |
Total | $ 26,248 |
Commitments and contingencies (
Commitments and contingencies (Details) $ in Thousands | Sep. 06, 2018lawsuit | Jun. 22, 2018lawsuit | Oct. 31, 2019USD ($) | Oct. 31, 2019USD ($) | Jan. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |||||
Sublease income | $ 6,000 | ||||
Rent expense | $ 3,354 | $ 5,515 | |||
Sublease income | $ 249 | $ 249 | |||
Number of derivative lawsuits | lawsuit | 2 | 2 |
Indebtedness Schedule of Long-t
Indebtedness Schedule of Long-term Debt (Details) $ in Millions | Oct. 31, 2019USD ($) |
Debt Disclosure [Abstract] | |
Term loan facility | $ 1,250 |
Unamortized loan issuance costs | (23) |
Total | $ 1,227 |
Indebtedness (Narrative) (Detai
Indebtedness (Narrative) (Details) | Aug. 30, 2019USD ($) | Sep. 30, 2015USD ($) |
Credit Agreement Prior To Acquisition | Line of Credit | Secured Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Credit facility, amount | $ 100,000,000 | |
Facility term | 5 years | |
Long-term line of credit | $ 0 | |
Credit Agreement | Secured Debt | Line of Credit | ||
Debt Instrument [Line Items] | ||
Facility term | 5 years | |
Credit Agreement | Line of Credit | Secured Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Credit facility, amount | $ 350,000,000 | |
Facility term | 5 years | |
Long-term line of credit | $ 0 | |
Credit Agreement | Line of Credit | Secured Revolving Credit Facility | Minimum | ||
Debt Instrument [Line Items] | ||
Commitment fee percentage | 0.20% | |
Credit Agreement | Line of Credit | Secured Revolving Credit Facility | Maximum | ||
Debt Instrument [Line Items] | ||
Commitment fee percentage | 0.40% | |
Credit Agreement | Line of Credit | Term Loan Facility | ||
Debt Instrument [Line Items] | ||
Credit facility, amount | $ 1,250,000,000 | |
Credit Agreement | Line of Credit | Line of Credit | ||
Debt Instrument [Line Items] | ||
Minimum interest coverage ratio | 3 | |
Credit Agreement | Line of Credit | Line of Credit | Debt covenant, beginning August 30, 2019 | ||
Debt Instrument [Line Items] | ||
Maximum leverage ratio | 5.25 | |
Credit Agreement | Line of Credit | Line of Credit | Debt covenant, beginning July 31, 2020 | ||
Debt Instrument [Line Items] | ||
Maximum leverage ratio | 5 | |
Credit Agreement | Line of Credit | Line of Credit | Debt covenant, beginning July 31, 2021 | ||
Debt Instrument [Line Items] | ||
Maximum leverage ratio | 4.50 | |
Credit Agreement | Line of Credit | Line of Credit | Debt covenant, acquisition holiday provision | ||
Debt Instrument [Line Items] | ||
Maximum leverage ratio | 5 | |
Acquisition threshold for maximum total net leverage ratio | $ 100,000,000 | |
Credit Agreement | Line of Credit | Line of Credit | London Interbank Offered Rate (LIBOR) | Minimum | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 1.25% | |
Credit Agreement | Line of Credit | Line of Credit | London Interbank Offered Rate (LIBOR) | Maximum | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 2.25% | |
Credit Agreement | Line of Credit | Line of Credit | Customary Base Rate | Minimum | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 0.25% | |
Credit Agreement | Line of Credit | Line of Credit | Customary Base Rate | Maximum | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 1.25% |
Indebtedness Schedule of Maturi
Indebtedness Schedule of Maturities of Long-term Debt (Details) $ in Millions | Oct. 31, 2019USD ($) |
Debt Disclosure [Abstract] | |
Remaining 2020 | $ 8 |
2021 | 39 |
2022 | 63 |
2023 | 70 |
2024 | 101 |
Thereafter | 969 |
Total | $ 1,250 |
Income taxes (Details)
Income taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Jan. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||||
Income tax provision (benefit) | $ (9,918,000) | $ 1,745,000 | $ 3,908,000 | $ (1,322,000) | |
Effective tax rate | 31.70% | 10.00% | 8.90% | (2.20%) | |
Decrease in effective tax rate, primarily due to excess tax benefit on stock-based compensation expense | 1.10% | 11.20% | 8.70% | 24.10% | |
Gross unrecognized tax benefits | $ 8,100,000 | $ 8,100,000 | $ 1,700,000 | ||
Unrecognized tax benefit | 400,000 | 400,000 | $ 0 | ||
Unrecognized tax benefits that would impact the effective tax rate | $ 7,400,000 | $ 7,400,000 |
Stock-based compensation (Summa
Stock-based compensation (Summary of share based compensation recognized) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 23,156 | $ 5,734 | $ 36,774 | $ 15,461 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,415 | 788 | 3,285 | 2,008 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,304 | 990 | 3,469 | 2,586 |
Technology and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 2,171 | 1,386 | 5,600 | 3,677 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 3,332 | 2,570 | 9,486 | 7,190 |
Merger integration | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,220 | 0 | 1,220 | 0 |
Other expense, net | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 13,714 | $ 0 | $ 13,714 | $ 0 |
Stock-based compensation (Stock
Stock-based compensation (Stock-based compensation expense by award type) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 23,156 | $ 5,734 | $ 36,774 | $ 15,461 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,631 | 1,917 | 5,140 | 5,664 |
Performance stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 0 | 178 | 0 | 503 |
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 14,099 | 1,956 | 20,718 | 5,543 |
Performance restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,422 | 793 | 3,467 | 1,843 |
Restricted stock awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 164 | 172 | 491 | 399 |
Performance restricted stock awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 260 | 718 | 1,378 | 1,509 |
Total non-cash stock-based compensation expense | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 17,576 | 5,734 | 31,194 | 15,461 |
Acquisition awards exchanged for cash | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 5,580 | $ 0 | $ 5,580 | $ 0 |
Stock-based compensation (Narra
Stock-based compensation (Narrative) (Details) - USD ($) $ in Thousands | Aug. 30, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares authorized (in shares) | 2,600,000 | 2,600,000 | ||||||
Percentage of capital stock | 3.00% | 3.00% | ||||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |||||
Unrecognized stock compensation expense to be recognized in future | $ 8,800 | $ 8,800 | ||||||
Share-based compensation expense | 23,156 | $ 5,734 | $ 36,774 | $ 15,461 | ||||
Restricted stock units | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Weighted-average vesting period of non-vested awards expected to vest | 2 years 7 months 6 days | |||||||
Award vesting period | 4 years | |||||||
Share-based compensation expense | 14,099 | 1,956 | $ 20,718 | 5,543 | ||||
Performance units awards (in shares) | 1,124,000 | |||||||
Aggregate intrinsic value | 19,900 | 5,500 | $ 19,900 | 5,500 | ||||
Unrecognized stock-based compensation expense related to restricted stock units to be recognized in future | 67,100 | $ 67,100 | ||||||
Stock options | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Expiration period | 10 years | |||||||
Forfeiture period | 90 days | |||||||
Weighted-average vesting period of non-vested awards expected to vest | 1 year 6 months | |||||||
Share-based compensation expense | 1,631 | 1,917 | $ 5,140 | 5,664 | ||||
Performance restricted stock units | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based compensation expense | 1,422 | 793 | 3,467 | 1,843 | ||||
Performance units awards (in shares) | 129,963 | 146,964 | ||||||
Performance restricted stock units | Minimum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Award vesting rights percentage | 0.00% | 0.00% | ||||||
Performance restricted stock units | Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Award vesting rights percentage | 200.00% | 150.00% | ||||||
Performance restricted stock awards | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based compensation expense | 260 | 718 | $ 1,378 | 1,509 | ||||
Performance units awards (in shares) | 227,760 | |||||||
Performance restricted stock awards | Minimum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Award vesting rights percentage | 0.00% | |||||||
Performance restricted stock awards | Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Award vesting rights percentage | 200.00% | |||||||
Restricted stock awards | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Weighted-average vesting period of non-vested awards expected to vest | 1 year 7 months 6 days | |||||||
Award vesting period | 4 years | |||||||
Share-based compensation expense | 164 | $ 172 | $ 491 | $ 399 | ||||
Performance units awards (in shares) | 0 | |||||||
Aggregate intrinsic value | 800 | $ 800 | ||||||
Unrecognized stock-based compensation expense related to restricted stock units to be recognized in future | 4,300 | $ 4,300 | ||||||
WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based compensation expense | $ 8,100 | |||||||
Restricted stock units | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of service-based common stock (in shares) | 523,318 | |||||||
Aggregate fair value of WageWorks stock acquired | $ 29,700 | |||||||
Pre-acquisition restricted stock units | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate fair value of WageWorks stock acquired | 3,800 | |||||||
Post-acquisition restricted stock units | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate fair value of WageWorks stock acquired | 25,900 | |||||||
Equity awards | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate fair value of WageWorks stock acquired | 23,600 | |||||||
Pre-acquisition equity awards | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate fair value of WageWorks stock acquired | 18,100 | |||||||
Post-acquisition equity awards | WageWorks, Inc | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate fair value of WageWorks stock acquired | $ 5,600 | |||||||
Incentive Plan | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of common stock issuable (in shares) | 5,255,027 |
Stock-based compensation (Assum
Stock-based compensation (Assumptions) (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |
Expected stock price volatility | 37.09% | |||
Expected stock price volatility, minimum | 35.98% | 37.09% | ||
Expected stock price volatility, maximum | 36.53% | 37.84% | ||
Risk-free interest rate | 2.79% | |||
Risk-free interest rate, minimum | 2.21% | 2.52% | ||
Risk-free interest rate, maximum | 2.43% | 2.79% | ||
Expected life of options | 6 years 3 months | |||
Granted (shares) | 0 | 108,000 | ||
Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life of options | 4 years 11 months 12 days | 5 years 2 months 1 day | ||
Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life of options | 5 years 1 month 2 days | 6 years 3 months |
Stock-based compensation (Sto_2
Stock-based compensation (Stock option activity) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Oct. 31, 2019 | Oct. 31, 2019 | Jan. 31, 2019 | |
Number of options (shares) | |||
Opening balance (shares) | 2,444,000 | ||
Granted (shares) | 0 | 108,000 | |
Exercised (shares) | (314,000) | ||
Forfeited (shares) | (36,000) | ||
Ending balance (shares) | 2,202,000 | 2,202,000 | 2,444,000 |
Vested and expected to vest as of year end (in shares) | 2,202,000 | 2,202,000 | |
Exercisable as of year end (in shares) | 1,501,000 | 1,501,000 | |
Range of exercise prices (usd per share) | |||
Beginning balance, minimum (usd per share) | $ 0.10 | ||
Beginning balance, maximum (usd per share) | 82.39 | ||
Granted, minimum (usd per share) | 63.64 | ||
Granted, maximum (usd per share) | 73.61 | ||
Exercised, minimum (usd per share) | 0.10 | ||
Exercised, maximum (usd per share) | 44.53 | ||
Forfeited, minimum (usd per share) | 24.36 | ||
Forfeited, maximum (usd per share) | 44.53 | ||
Ending balance, minimum (usd per share) | $ 0.10 | 0.10 | $ 0.10 |
Ending balance, maximum (usd per share) | 82.39 | 82.39 | 82.39 |
Weighted- average exercise price (usd per share) | |||
Opening balance (usd per share) | 27.37 | ||
Granted (usd per share) | 73.27 | ||
Exercised (usd per share) | 23.42 | ||
Forfeited (usd per share) | 30.15 | ||
Ending balance (usd per share) | 30.14 | 30.14 | $ 27.37 |
Vested and expected to vest as of year end, weighted average exercise price (usd per share) | 30.14 | 30.14 | |
Exercisable as of year end, weighted-average exercise price (usd per share) | $ 22.91 | $ 22.91 | |
Weighted- average contractual term (in years) | 6 years 1 month 17 days | 6 years 8 months 26 days | |
Vested and expected to vest as of year end, weighted average contractual term (in years) | 6 years 1 month 17 days | ||
Exercisable as of year end, weighted-average contractual term (in years) | 5 years 6 months | ||
Aggregate intrinsic value | $ 61,562 | $ 61,562 | $ 85,971 |
Vested and expected to vest as of year end, aggregate intrinsic value (usd per share) | 61,562 | 61,562 | |
Exercisable as of year end, aggregate intrinsic value | $ 51,131 | $ 51,131 |
Stock-based compensation (Restr
Stock-based compensation (Restricted stock unity activity) (Details) shares in Thousands | 9 Months Ended |
Oct. 31, 2019$ / sharesshares | |
RSUs and PRSUs | |
Shares | |
Unvested, beginning balance (in shares) | shares | 647 |
Granted (in shares) | shares | 1,124 |
Released (in shares) | shares | (320) |
Forfeited (in shares) | shares | (83) |
Unvested, ending balance (in shares) | shares | 1,368 |
Weighted-average grant date fair value | |
Unvested, beginning balance (usd per share) | $ / shares | $ 55.18 |
Granted (usd per share) | $ / shares | 64.61 |
Released (usd per share) | $ / shares | 58.01 |
Forfeited (usd per share) | $ / shares | 56.02 |
Unvested, ending balance (usd per share) | $ / shares | $ 62.22 |
RSAs and PRSAs | |
Shares | |
Unvested, beginning balance (in shares) | shares | 256 |
Granted (in shares) | shares | 0 |
Released (in shares) | shares | (11) |
Forfeited (in shares) | shares | (10) |
Unvested, ending balance (in shares) | shares | 235 |
Weighted-average grant date fair value | |
Unvested, beginning balance (usd per share) | $ / shares | $ 61.93 |
Granted (usd per share) | $ / shares | 0 |
Released (usd per share) | $ / shares | 62.75 |
Forfeited (usd per share) | $ / shares | 61.72 |
Unvested, ending balance (usd per share) | $ / shares | $ 61.91 |
Uncategorized Items - hqy-2019x
Label | Element | Value |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 13,007,000 |
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (356,000) |
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 269,000 |