HQY - Earnings call transcript Q3 2018

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Operator

Good day, everyone. And welcome to HealthEquity's Third Quarter of Fiscal 2018 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Richard Putnam, Investor Relations. Go ahead, Mr. Putnam.

Richard Putnam

I also afternoon, HealthEquity's our welcome quarter fiscal at call. me and of President Neeleman, who Good Vice joining and who earnings Sandra. who and Executive With HealthEquity. Vice Darcy Mott, Chief Dr. is CEO for Kessler, us have Steve year Officer Founder today, you, everyone. President the those We and are and conference is our Financial Thank we our Jon Company; have XXXX Chairman who third is

We accompanying will issued and be referencing the earnings earlier financial release the was information that today.

find which the our Investor earnings include or other projections, can be might call Relations In during copy and will ir.healthequity.com. conference expectations, considered our estimates at You posted that forward-looking. release today, information a statements, Web be forward-looking on we site making

and Our that materially the forward-looking statements uncertainties made to may cause to are differ subject actual results from statements today. risk our

forward-looking reliance reports factors we As results important or XX, XXXX, stock, caution result, We and these other these risks which present to will forward-looking may factors review in with the on a connection could March placing market relating some forward-looking on to discussion SEC. our the you undue with with encourage filed those SEC statements. current affect the statements our you business, Form of those on price statements. in and affect against you of Report that periodic In our can Annual the future which our detailed find XX-K or filed subsequent

in light revise or future to these of events. obligating statements or not forward-looking are ourselves We new information update

statement. just didn't tune to Safe through me Now, the hear I know go in you Harbor

I'll turn Jon. call So without to further over ado, the

Jon Kessler

to have chance in for yet, us; delivered commitment margins. holidays. QX. did to time year to And another the the happy began joining these everyone Richard. much job. thanks the team with fantastic the a commitments market commitment you, at outpace growth same very fiscal And We Thank And and you a grow on

quarter, at $XX.X for $X million; a XX% key Revenue XX%, a adjusted were setting year to that the up HSA year-over-year our year-over-year and and the of between even record extending assets XX% a topped grew at year-to-date. first XX% XX% grew larger time $X.X an quarter's year larger, a EBITDA were million members drive million; from $XX.X end quarter-end at at to During custodial the and up even metrics grew four business ago; billion XX% rate ago. from

we and and First and $XXX XX% additional for that’s assets HSAs HealthEquity Interstate Turning those XXX,XXX the new XXX,XXX in new in in another million in during XXXX; quarter. assets HSA third and more our $XXX custodial assets that’s fiscal fiscal from to XX,XXX $XX the assets, than Bank HSAs sales; the 'XX; million accounts million a than of custodial HSAs addition to in on-boarded also friends at total members during quarter the during QX opened custodial added quarter quarter, XX% third more of and

and and similarly members Last others. Our reaching year-over-year, respond faster Times some XX% to billion number from members HealthEquity The following savings. New and the $X year-over-year focus reviews health HealthEquity's for custodial favorable even Kiplinger's the XX% grew of investing continue first to an York assets HSA, building best named time. on invested MorningStar grew month,

low competitors you, something value and retain fully our in as ownership, largest proprietary can investments integrated keep into do which is past, means we shareholders. discussed platform. the we are that HealthEquity Our can have, offer for not proprietary members’ can our platform And more HealthEquity's we’ve fees

many Our with that open new year and January. enrollment coincides employers plan season of busy the team in now is start the fick in

previously members results in team members, all you accounts full-time training the see is we the and new forth. our opening this, of when of or first the new are either additional portfolio QX report year. announced our And on-board, are will shipping Steve, results This executive after of so successful would the All aligned on-the-job, of ordinarily to acquisition of point along where cards are our commentary. HSA call leaders, color provide credit the some on-boarding with unit one in

the Now, in it Darcy to Mr. Q&A give location and to But the us, you told going for we’re its and from undisclosed. the undisclosed results but will Mott. here year-end an our disclose me and I with review with holidays quarter straight jump outlook. provide who that’s detail, Steve of gift us upon financial he gravity, is time why and couldn’t revised

Darcy Mott

quarter; of revenue to $XX.X three revenue service during $XX custodial to it as XX% to continue with gain results in XX% quarter revenue I that down today. last revenue, third from Thanks, The quarter grew GAAP continuing XX% both discuss I'll our in our prominence nearest service, basis. release revenue anticipated; a the result our in discuss total will reviewing year. third we business then the the and third to year begin of custodial down Jon. I a quarter of the quarter declined percent you of grew revenue, million. our and will non-GAAP and results the provided release press full on to is third for Breaking here outlook million the to that see the in press Revenue update represented in measurements in that the reconciliation revenue our on published the service non-GAAP we GAAP components; year-over-year the for into by quarter as earlier XX% each growth year-over-year total interchange fiscal was and XXXX.

We to $XX.X lower compared in third quarter million in quarter benefitted third year-over-year to the grew year. in the by decrease compared XX% XX% assets the became last of spend decrease in quarter most the history. the Company's in $XX.X in revenue to was in revenue offset the third per As net growth. On the year-over-year partially revenue quarter, million share million partially in million increase more average average in $X.X HSA. of HSAs quarter, fiscal low a year-to-date estimated the last last quarter quarter an $X.XX the of year. invested per of revenue increase year-over-year third the X% HSA the per Custodial at custodial or of also non-GAAP quarter XXXX. the cash of the or third custodial revenue of compared basis, service in HSAs quarter average the third XX% assets to in by for to in combined, $XX.X by of XX% generated per million revenue A cash to which $XX.X X% $XX.X profit assets offset the year. stream operations $X.XX accounted million XX% the the quarter, of year, custodial at an Invested quarter during the an from to with $XX.X the income in contributed or increase we prior a Interchange of compared service average for quarter, XX% third revenue Income decrease million the of in the $XX.X were Service representing our the growth year, grew the attributable quarter, and XX% a We the to in in discussed Custodial revenue to quarter gross on predominant. for last quarter the custodial growth million expenses is third from average operating HSA quarter XX% as year-over-year was during of in for diluted year. custodial we compared per Operating million end million growth year. share to GAAP the was revenue the third X% margin XX%. $XX.X expected generated XX% quarter. XX% annualized fuelled million $XX.X end X.XX% rate guidance. or was third margin average XX% year, was last year-over-year. previous custodial XX% revenue Interchange to revenue in X.XX% XX% income in $X during increase Gross increase net yield compared compared compared to prior the of higher prior diluted interest generated to

share. Our diluted non-GAAP $X.XX net per income was diluted share per the third for quarter

last EBITDA Adjusted quarter Our $XX.X to increased $XX.X for adjusted margin EBITDA was quarter to XX%, compared year. quarter year. million XX% XX% prior third the in in the the up from in million

$X.XX $XX.X XXXX, net the prior million, million; year; the last of net the share compared nine income fiscal up year. income XX% income $XX.X million non-GAAP year; and first was XX% $XX adjusted nine of million to net was was compared months diluted per last revenue was For EBITDA first months GAAP non-GAAP $XX.X was to up from

Turning to sheet. balance the

of XXXX, cash we debt. and marketable As XX, October with equivalents cash, $XXX of had securities no million outstanding

turn for XXXX-XX. adopting that taxes to I income standard the net update clearer business I diluted to a to remind of the now Before fiscal prior year provide you our you XXXX, and on we non-GAAP remainder to net the a non-GAAP per accounting want income impact from outlook report without share comparison

reconciliation release. We have measures measures provided most such definition of comparable of to each and the earnings in a non-GAAP the the GAAP

follows. January is outlook year as the business Our ended for XX, XXXX

$XXX million million to range $XXX our $XXX million. and narrowing a are between million to We revenue outlook range $XXX a from between

net during GAAP to and we $XX income the with expense range making Our respect to year, million; income $XX is option range from tax the any million a which million income. a between between $XX exercises are not of would and $XX have and narrowing outlook increasing net stock effect million reducing additional forecast however,

$XX adjusted between million million range and EBITDA from a a million $XX is $XX to million. range narrowing and $XX between outlook Our

net of and and net is income or stock expect of based a net to the due in our back non-GAAP compensations an excess also $XX non-GAAP We $XX tax update tax by adding million to XX% range non-cash our calculated net million be standards accounting adoption estimated rate statutory income impact benefits to and of between of income XXXX-XX.

a outlook in that, per call $X.XX range outstanding. results average an net on share million non-GAAP and weighted for questions. diluted shares share back remarks the turn income to based With income closing I'll diluted net estimated Jon between over non-GAAP some $X.XX per and diluted Our $XX

Jon Kessler

one all every City during delivering members hard and and belongs -- Darcy work an Kansas at season, enrollment think, that open thing team that resting hour for had in and to but and HealthEquity take be can that nation same holiday season to in always for member in credit great boarded gaps we've in they've ready working discussed is expect thing. a holidays, some we while as not are wish every and our who And happy of Draper, the better results doing has that we the operator, every year call I about be teams, hardest our assured day; ahead. to during we we what the around their you what everyone will always, --. Price, get service With let's the to sense, Look all and purple even be fellow restful rest Lot today the that, partners questions. we'll last on our get remarkable

Operator

[Operator the first Lisa comes question with Instructions] Our JPMorgan. Gill of line from

is open. now Your line

Lisa Gill

Neumann Do I get is if Dr. where I guess this points afternoon? extra can

Jon Kessler

yes. extra I get would think points, you

Lisa Gill

had the wondering the the because read think first any impact question tax I'm notes the DECREASE, expectations I will So reform. would as HSAs. haven't And he's around in and tax any be my all scribbled that on around sidelines, pages of many changes chance XXX to if us reform in

Jon Kessler

location. this throw and on then started revealing one his to Steve get I'll without

answer thing affect other; impact, regard the of will tax to conference -- And regard I items still written right the way surrounding some healthcare, have items and being the benefits. short kind to so that the think, it forth debate what I loss about of to much pretty discussed related the forth or a that would is are companies, an are the think got -- here generally you a the in with at on of with add These color think. we And relates some way it Steve, builds there further there're although, or around broad specific obviously, one change is potential like status to rate, on to and substantial look that’s the whole in maintain have impact. HealthEquity. it if like on say I won’t lot HAS’s stroke the quo that the we they impacts. obviously and mean, how reform. corporate talk back as could we tax as again that

Steve Neeleman

the I'm DC. keep for I'm anyway. and Lisa But question guessing, that sure not can you, you Thank

is an Jon I nothing here that’s Now, impact. is have think to right. immediate going There

of about on I didn’t change this expect sure didn’t think example. dog the one you bark the Cadillac, that they like anything it to an that And as really was kind that the bark. didn’t dog do

there all-star so now be tax get there’s plans plans. folks thought be that to as that motivation get of And right of some still business kind that in sense if do our the HSAs with down to is those strong consumer they Cadillac the might could ramifications, the And so that’s more for anyway. XXXX road always by continue being the push but don’t companies been their There's usual. it’ll directed more and of a

this in on from savings accounts. So impacts we really health any legislation current growth don’t the think

Lisa Gill

second fourth look at the out $X as what EBITDA the guidance million last off Darcy. to How look of the guidance into you same is you as quarter? And but the that you’re out quarter, metrics then you bring be would since changed I we seeing of do that And my about Darcy, to midpoint think just took the inward? the question for laid stays upper what's end.

Darcy Mott

As it pretty We confident there. narrowing is the into midpoint far we’re EBITDA our that. feel about just as concerned,

Lisa Gill

midpoint same, But staying the generally, the right.

read of and will feel I we more you upper and just nothing just I understand midpoint before hey make that. so So just to want sure There really had we inside. to narrowing that the that. is say, end we’re confident the

Darcy Mott

Yes, that’s correct.

Operator

comes with Raymond next line from our James. question Greg the And of Peters

line Your is now open.

Greg Peters

I wanted question on follow-up coming different to just last the from a way.

numbers just previous by you third specific be themselves conference quarter. quarter fact I'm service the in they manifest that quarter? think you're in curious costs. And think we affected the item And delivery higher how third the fourth thinking as call, this fourth reported results the highlighted I that about what and about would

Darcy Mott

first to little be still and hired the that, talk costs had quarters, on then those that fact both it our some flatten that money intend so about Greg a we fourth spent fraud to second and and some but forth. out more the we so those were In area in you additional spend prevention money, as that the know lot a some more and we to And respond and to and it expected that board a because we people third bit, would in have would quarter. tendency people there

still those out service January, the now and will be in as of played the quarters much is quarter. fourth we we revenues will through far generate quarter, And I generate expected we so emphasize are costs these we've year with In And hired reiterate quarter first full what revenues lower on three it but full last you fourth I particularly board new now to know respect regard. of tried people we that fourth our before have revenue largely. call to that some as that as service pretty expanse will mean margins we the overall, the on the in for what because will there. have the gamut delivery this incurred would

patterns slightly prior in the as the we've but to bigger speaking had fourth we've quarter, So in in still third expect yes be past is we're in and believe to seen generally this we to tell quarter, the decrease and will quarter picture gross trying last a years. from somewhat we the that the quarter exist that and there'll similar be what fourth maybe is generally margins to also will it's what moved the same speaking

Jon Kessler

Job, where this is side as fourth also on-board Greg, capture we forth. on reminder. we is things, of as incur a compensation is where The and expenses sales OpEx variable quarter incur so the sales, we Also, significant

So you in that's quarter. fourth see a part this we'll of what always fourth what see big and the quarter

Greg Peters

competitive know should in competitors about issues, and and this perspective going business or in of And picture the changes the bigger other for opportunity CVS the about good past updated any on to marketplace. on be marketplace. the talked provide and back a I market in talked if other the you've you've posture circling just announcement, I And on there's Anthem are the your to us think from implications you an that

about talked employer relationship Optum retirement. with think their I

So there any color would helpful? be

Jon Kessler

those of certainly -- little a I to competition. do level think, quarters agree certainly three widened that generally these report we’ve the numbers seeing way gap this best is the assess growth a while I ultimately year. don't you're bit lot you think over competition to of the first obviously, -- And that relative folks would

it look I really and level take are well general ultimately as I And see of activity my to is see why. to who some that consumer both if think this really of the And the winnowing in that. the of a think who customers, are is and I bit Greg, marketplace, I starting isn't reflects little in is at at the the you employer that. but think starting level as a

obviously we've some portfolio to on of side equation. and that's M&A do one things look been So to at that able the way

and in into in the there're who that too. of is and Optum be to good terms following that's try equation. see try I going surprised am of to and and competitors, what to okay not be folks trying we've Another done integrate are some it well

that we to quarter, approach more the them at to me that their right good for But guess, than think terms point love do do. any it's in see right cost what We'll wouldn't when employer benefit I we but trying speculation. up we that, more anyone integration has over As terms see their forth, do there Aetna’s us compete some you pharmacy and to are relates with of between we of sure transaction fully greater it and really of back line-up invited to to understands kind to thing have sole to Aetna comment different as the time the I factor. of this do. would regard so, are as and Aetna not terms it's and platform issue. extent. be to so but directly what think we talking it's that's relevant this much since to industry. certainly don't a the medical to last CVS, said I'm It’s Aetna and follow who say offer means I'd absolutely With they carrier. except office We competitors, services. in closely in have CVS an

I So lot my from that the discussed really a guess that time seem mergers doesn't the to talked it's we helping of at various that be consumers perspective, is about, our is some as health insurance extent this the basic view what about were about center with to to knows And and play what expenses problems to newspaper that them that manage that. we're day-to-day about. that today. and increasingly to is as role those asking are a about health And is anyone not consumers those are front who to in the adapting reads system problems a

feel doing do. to the better world there's on if good problem results solve, the and a we're and on to market to but and competitive believes the focused described that at relative better so only want to to perspective us job, it's what pay like tell pay we're better and others that our we job doing better mission the think attention we it’s And problem to the the will can we show or that it and attention in I others results level pretty certainly do a one but some the at they isn't

Greg Peters

color. excellent That's

Just Jon. as answer follow that up a to

solution been the may the term maybe have seemingly the selecting As that to isn't. self M&A the that curious term in pipeline finally long not long smaller you in or realization any market out there platform. the and who's market for point best who coming I'm just versus have the are the HSAs out viable has change the that they banks there services

Jon Kessler

to so course rewind that of we’ve ago, sort that around forth. the We discussion so the out. this itself extent in to or think I regained as And ice-cold came that But don't believe some do is we is that year time if to I said little cold metaphor some a year and like election I know. understand results that What's our comment were something on I started market and have as people all has the since that light of results cold. a the where of better at footing I and election forth, or happened was the the you used specifics, clearly announcement then very -- all what the and over at coming

than high. this $XXX you or time, would IPO everything transaction it before, what isolation, incremental have done that shareholders in you. about And of out that that cash activity very any are in going terms the way we've strategy so do the to you return thaw to see we've we're market that since M&A quarter. at to expenditures our any is M&A not do rather the the do, million dilution to the find you to include that we're avoid in continue always different obviously those our the looked continuing do which of way of we out. has think likely And and close the think we've of sort the and those to on M&A to potential our the guidance. thus in been not and managed anticipate return ways, at themselves to And shareholder on growth see expect, shareholders we is I But approach we've number and form activity we're to at make made reflect far we tried and investments each to if make, providers and of same sitting going And are likely to

us we’ll there bit we feel and But is like try to as opportunity going feel I like here. it where So an into opposed pipeline and existence. good that's to let area certainly continue really be to to the come in shape we're

Operator

the from of comes question next our line Sandy Draper with SunTrust. And

Your open. line is now

Sandy Draper

number. for add Just you Darcy. quarters, The a that didn’t didn’t the versus couple catch Darcy quick I first, catch I Can net one housekeeping last growth provide account that?

Darcy Mott

think XX,XXX FIB. the gave plus that from Jon I numbers Yes, the XXX,XXX

Sandy Draper

are from coming a and but the And quarter this short so people that or high Thanks. really of anecdotally on, Then really growth bigger push seeing and not would Jon to just question from Or sense the or seeing -- about to type nine appreciated? can you its of accounts term know, bulb more be keep I'm recent partners? a that I shift than who've pushing you new signed trying them, the on going get to light so from now towards Are basis. around picture month Darcy new plan but might a Steve existing coming of this deductibles we’re is still penetration for answer very longer-term. commentary adding are more and think is more accounts when up a already this is situation? really the drive that's much as on getting the there? logo just type off. go basis, and low now a Any

Jon Kessler

say to bucket Steve but is I is, the coming and invite answer they’re there add, all from a would three. I'll third

then come are middle Obviously, of in activity, we year at about and logo plenty of think of the -- But that both I other sense. if one our front, answer in new channel groups be ending hallmarks from will that both sales I business, are time we’ll this end coming is be think We, cases from been HSAs takeaway think sales well. of most as season think forward on in growth the there's employers And some will seeing whether the from as and see. there's come then from the that would, a makes is up I will have bucket activity. as few end very of looking we and for the plan third any nice really clearly take in the I and And takeaway are is health I pleased the of with the the long be channels. long, that existing well they partners midsize will here, The even high small does that all general step next logo think that some the to you then think your we’re terms as wins plenty and takeaway and with logos year competitors, of season existing new through three. and

plenty So suggest that less but the in -- growth of more a of logo really to mean, the those run-way new rolling from trend, new of existing -- terms year I keep in most might general a the question obviously, don't you given think I in down. from right buckets accounts for the anything I there's see don’t on see I the the on terms that. the little any really our come existing new got and logos little logos. obvious of But reasons.

Darcy Mott

comment of partners. would to is Darcy. say annual it's to existing just that three in is add first usually Sandy, think split. fair the I that from most quarters, about this basis this This I on we an But that coming that

Jon Kessler

always… it As

Darcy Mott

the of coming when names partners. lot A quarter fourth new in through on enrollment new are on our they that the go open

Operator

line Baird. question next our comes of R.W. And Mark Marcon with from the

open. line is now Your

Mark Marcon

the the over during say XX effective about of just fed How yield ended should quarter, funds should we to going vis-à-vis, months? casing we yield, this how regard next think the you that With effective are six -- to the up. rates obviously up achieving

Darcy Mott

that's week… Well, first the of all, we’ve past commented maybe that on a this next in bit quite

Mark Marcon

a been little better for? than were looking it's bit But we what

Darcy Mott

quarter year that if XXX that. last full is we're that range, for we in quarter, be think in the we the trying played comment think And that out is I our range. guidance Yes, to in that we full consistent with be but to came that you same year, gave

on And mean, bp on we'll With so we respect next as Fed Mark is depending But expiring is next know, increases year's we've general to bring current as rates or the only rates in guidance comment we in mean and say in I on for you rate there throughout Fed geared put ladder fiscal But XX we said have up rates. that on increase, our we if that past, necessarily and comment in for ours what increase year, the that the as what's guidance. this of given year. when what benefit new. get isn’t rate. will

we off don't for in And that’s so that XX% year, but on impact full portfolio and so rolling full coming given maybe may that’s get some portion we any get the on XX%; new. it

And so, said range, we’ve our year it's out in is some three that duration, which but take. see or spread generally we'll there give uplift over

Mark Marcon

regards towards then with push the under you that's to investments management. had clearly strategic And obviously, growth accounts and working. of a And increasing the -- investment just the

there? that In a you growth of the just -- where the how that is behavioral am or up certain of much to among any as across balances opposed trying we're seeing active balance I the accounts terms switch certain understand they really message there's switch higher to accounts just rapid if now, coming shift there how portion. getting would any to lower

Jon Kessler

this where seeing getting the happy a course answer but finally I in-term balanced you always is sitting good audience. we're close I'll me of at audience, on is point that of to some going think and demographics. begin back demographics, type long through or people, investment. spend what income But to to today you is me generally it's be which it's a as something to tomorrow. it's balance both one. hardening what as folks when I look a across not that as just we're from being mechanism substantial look they yet I cut give message to that's effectively I a sure a that question. that numbers long of does -- a getting is that perspective have what other a above run-way get is is addition it investing, yes what first well see that see But made, of lot HSA this broader me And matter am in that don't is I very is can That's it. the also save front mean, to there's nor seeing at not to true to around thresholds, you term to if think interesting it mechanism quite still And fundamentally to you a balance. this minimum to the demographic an of be who I concentrations concentration for And is really you suppose you less for large it's do a of economic indicates

than that. future And the of pretty The would I blunt end is you're mining that's and so then that. vein put there, it okay vein is tapped that's the rather and that way seems one

Mark Marcon

some in behavior concern balance mean, terms I at at potentially shift going potentially any average cash too down point all if of successful. the the is

Jon Kessler

you aligned. some make put sense at Mark, trade-offs at, that well and what are media you to I there're between profitability to quite a mean, recognizing have going be who the that here's would would level class admission, in instances run high show and is I -- state permission problem have when profitability always to that be long you are really where do

for to the at use cash, thing to of has the as long And this we grown part, that have in think about use look, and vehicle. a event business commentary changed. data at fact for is an we us appropriate it's to And if was choices we about think, that's from was that on If totally essentially way it focused heard And this and that anything additive give I hold even the to way that to the industry term beginning example. hasn't an somebody data you're them people in recently savings the the most able want this this, be gotten want comment those stronger. and how cash they those not really when the patterns population to choices you one investing as the the so I We and about I where think is think the HealthEquity. cash was approach investing be we're

So than for guess as cash majority it look the additive the balances. vast I we a rather is basically it at substitute of

Darcy Mott

coming balances from not balance, that cash average to that that decrease from occur, you than is the I would that investors. an from average Investors cash it's see time-to-time may add the have higher happening you year that lower impact accounts then average their see to do. have first cash you new non-investors on that Where and year. when is in bring that year-to-year, balances the from grow

And balances has the all than average members. population investor cash so we actually the that see higher other

Mark Marcon

of service function we And security mentioned feel we to we're full quarter last slew cost. that you then look had the going got it like now have the and a regards one have the the cost, that? do going in the again? Or and the service step and think increase this then obviously That's fourth now quarter. for leverage cadence should full we to you're When terms just what one you've of costs, increased expected. And the year-over-year you've we how about at to with I

Darcy Mott

step function compare the that's function, something to we bit. there. from I moved bigger spent think in or year-over-year had million maybe quarter, how through what factor looking than that a It’s rate also fourth whatever; little think a a $X offset some have to on, will impact but an run or extra at probably third to on look biggest all a improvements quarter we at quarters, we've that prevention we a although, it that to I from that's fraud that last the spent is year

there's to like in whatever. the less quarter was going relative might you last just quarter So, fourth year. that basis will still margin function cost and third between full X% a But be on intact, the be and at than looking to be more in year there the happen there is going was QX or QX

Mark Marcon

new mean of that’s bringing Yes. function them people just a up. I on setting and

Darcy Mott

Exactly…

Jon Kessler

know I over quarters, expenses of and this fiscal it have one-time for mean in short the indicated we in as term good longer forth, but at what way as of would we're expenses think that might think 'XX we And of working one make about first, that’s it. benefit yes. a for keep forth. a two to of we will is because Those ease-of-use. in looking people area, have is Mark answer you we perspective to before protection particularly security, that questions and that going think leverage longer is all I those maybe I on look terms protection the there are in did something have I terms particularly it's also coming so security, we out But over the investments the the leverage on what expect course think recognizing the think they have both we and term. and us to and them from alongside your part so

benefit long won't think that’s fourth to rebound I be, And or we better able financial whatever service the provider the there user institution something doesn’t it But the in given have certainly over what would spending in quarter to much health we then the their quarter that going they're and the a for plan a or is expenses. money those points spending can always as deliver avoid account than same Darcy might can the security on out and we’re takeover that if experiencing term. accounts but so people were we in our mean time did. because more less for people third to spend that about at good and relative leverage experience at in benefits is So we to a on that reason greater feel life, that a

Operator

our from question the Donald Thank of KeyBanc. you. next comes Hooker line And with

Your open. now line is

Donald Hooker

stock in data growing And curious guess, obviously, that’s that perhaps I'm that a I and was people or… the putting to investments how other of investment I partially -- exciting are mean obviously much are there the up. just curious if assets that I fast. out parse is so market that point the driving is is And guess also I sense. or more But way money

Jon Kessler

inflows. It actually are for you’re stock to not bigger that of the has when importantly the seeing as is; one, And the these at deployed still assets bulk preference [indiscernible]. more effect, expect, market reason look the deploy you is numbers is increased assets effect but among how the might think investors I these But you conservatively. more there is a are an

So terrible. trail and well XXX of and sure S&P investments you I'm roses aware, they wine funds some for more bond and year, conservative significantly. more But forth are hasn’t less over the been growth and those the been and exactly so all last it course has market tech of

put bit into is is inflows. the seen because last in in that you to of have we’ve big So all individual the while or obviously parse growth it is might hard growth picture from little a coming the it bulk out, who seen what the

Donald Hooker

small uses otherwise? And any know on there's those initiatives sphere. bit terms I last kind at your types there aside I or was numbers, And there. update But around as a your of I updates of providing fingertips. you of know have guess this of healthcare. question And telemedicine to a the not was I if members and didn’t the way maybe if educate HAS of little in curious Thanks. the intrigued and its your -- telemedicine I lower-cost was but typical maybe it using any quarter in may call on workaround is

Jon Kessler

answer gathered to stuff think shorter is the have press we'll remind the and in over we're setting continue do think, I time, release. about once I this as not is we product this occasionally a you for

then have in stuff seeing the that two rather progress about talk But in generally we’d some up So of do and results think we financials it. areas. can I show we're

with identified, clinically trying find about little clinical very some more the you're tangible which you First think as a might to you related one bit examples. again sense money in the conceptually is of

that given adopted or thing, progress of topical of growing. where stuff free you've this point people it's -- that it's talked that's balances also whether year. things very But that rates people thing remind financial are for year is and it confident some topical about becoming help results we're members to you there doing, that that's so of the care that cash consumers. the investing that's you directly to the are health So side to data about And at very for plan behaviors their of where want use shots time where the efforts adopting the take you some or see that the they're very in kind the flu are who seen -- where they're wealth point on we this that health that see that is again is

like So in I provide that of think seeing and they aisle sides well both seem as there. somewhere we're on and both that as progress as looks particular relevant and working updates on

Operator

Oppenheimer. Thank our line next you. the And question with of Naidu comes from Mohan

Your now is open. line

Mohan Naidu

legislative could any way administrative changes the tax instead on expectation HSA eligible in Just or members expand for changes, is an a of being potentially guess, in that the I regulator still the there bill? reform

Jon Kessler

excellent. something is this of on be some And regulatory comment stuff like hard. working the on we're if around discussion that'd to Yes, pretty Steve, you'd the

Steve Neeleman

to and things Look, just we like the needs hopeful. lot a current with support to puts that to people to work on changes that are are still that be or of the subsidies going clearly redo help either There's done law it. that

am Care And there time from a of XXXX so even and friends Act, like to subsidy our of quarter call though what be a it is first do as to losing now, there're get into that and not in that. issues things of Americans renewed that the that there's Obama right there lot are spend a trying solution the insurance Affordable make going of worked. the effort we I lot we Washington hearing this we're that or people And because Care

these the certainly We're about the around that think we we allowing in past now XX% our of score so allow pretty we're types old turn people contributions in Medicare. these to there. people along that Medicare. time past bills and We right And seniors full if in that XX These well. we’ve as they're about bills continue to some actually currently are an that mentioned talked efforts of make to even scored years to of HSA working enrolled getting go

do doesn’t as arrangements are focusing the pie, Medicaid some all do how the candidly a in seen to took now get hope, have Obama mean give type expand we've as Tricare. we're And HSAs, even health on to think that more allowing that you some about that you progress. the while administration. is past or it get But table got think the We passed lost we haven't to reform Medicare your and have things think people people cost have currently we know been and are this headed And to talked those employers. working in studied that how so things for that on I towards of keep we’re the really some more areas There at that even working anyone employers these point HSAs to for consumers, are I they're are frustrated the down.

into so benefit And HSAs the clear stuff help could was pretty in to reform law these they're mess It's to that weren't the ought tax healthcare with go anything they it that just on bills, to law. any tax reform if especially related going healthcare.

Mohan Naidu

any Got it, size driver sub-markets are you region up market adoption in of the employer a guys really the geographic could big the it’s coming you see is each point plan you in just these submarkets? submarkets do whether Rick, if that and or the question itself. a on or general inflection by how seeing any in years? thanks in be these How the that is coming there here, Steve. Maybe for of guys health

Jon Kessler

It's a question, Mohan. great

the context of play And form those other decision the that's And is you a related we we wide HSAs and generally all making in which how is not obviously or the of activity that are much of specific really how channel to one sold And simplest those of both both think coming understanding of new worth submarket. in much another see about channels it’s XX% then XX% health way all of first sold well. health are are to through that employer the think market to or want I plan. about growth plan. of from directly very account channels it the is serve and the in that

the side where has this as growth field employer we've far things, towards middle you action, well expect see trend sale the that the those think partners versus in of totally seen group that saw we going more a happening group And as current small tilts and upper documented in the much year this And thus individual have you that commented I versus because think in of small market it community. group. the particularly the brokering more fair and side, it’s the as see is as that before activity in of far this or cycle. including employer large employer and outpacing I little fairly been forward. middle we'll their we've areas more are HSA I with some then as

benefits directly been because of it’s a different larger there thing. are that's an layers of the every if impact course pricing self and and surprising; principle at growth much virtually the of funded rolled the employer forth in impact that you because out more I pronounced, but way feels one, period over this time think terribly and agent whereas trend with not affects that’s case, very fully bit the the of and muted we’re that extended are pretty kind of level issue there things very, that isn’t the so a also is ensured little where insurance

we And are where so today. that's

little offer likely be really see really would those us, and because a the for occur we at smaller out once as look opportunities that be more lot they’re employers plans market obvious I employers gain middle of interesting just a it. few will only think will growth they of HSA that because

is is cetera. our and mission, there. we’re at. But lot the those we to we��ll confident with paths consumer There of is going ways of on shown the are want to be But on consulting -- our to be basic are real and community, working we there. consumer are And more et to consumers. that lots consumers. healthcare thus with it's savings hand, when other health explore we well, partnering are so which ways build consumers different partnering off and all butts think to lots an And are different the build that them true is for be health there opportunity to what I we resource trying get want want well we to to that we've And do obviously what employer, to theme our we the that will think to the on hand, it whether and serve I far that’s put plan, work friends with but with one

Mohan Naidu

do can I it I -- one. in. Maybe last any wasn't guess, BenefitGuard updates get not sneak airtime if on today being one, any running just that for quick

Jon Kessler

or real now that’s as together, you're build have properly going What's should first to appreciate to not educate up still going you or really a me than being I a conversations material power of accounts esoteric, is strikes it's little of you mean -- services we’d for value here. it's really signed HealthEquity they the we’re asking, traditionalists we're time that the this it's stop do the learning. in -- retirement maybe mean you telling about these the I But as year, growth which going out properly faster. within the are is value, who more. is about in waterfall put there of these think past. something eye-opening importantly, I I for about of And the to very BenefitGuard bunch message and able the money bit part terribly frankly it And retirement of consumers think hey, like is lot the first things getting are a not if talking in savings obviously about there. the there on It's your different you’re people has on new the you're about well. you community be part this about folks

not the we’re going pretty and rules trying and I'm help future. just people market more neat. sure of being works have Again, really they a say learning in is for And how we’ll build You’re lot to that and more cautious be it's are. question you to asking. it's do to But leveraging still that a the able as the about of it. different to of part about it Thank careful channel risk, question about we’re

Operator

final Steven comes Capital line Wardell with our the of And Chardan Markets. question from

Your line open. now is

Steven Wardell

account what range is you account And just mentioned the rate or account Can and decline at do low fee fee that lesser review also you decline? current think tell declines? You at -- decline. of behind the of the fees being greater potential the low-end of being the us again what's behind

Darcy Mott

Darcy. Yes, this is

for from As than you guided lower that range. trend this it's continuing. year we last consistently in expect to any we was The and than IPO this be X% to higher know, our have a mean little little variability year-in year we This on the year-out, bit XX% to year bit that I But it be expect that. range. given tracking fairly

to their on giving renewals of or penetration a that years et and might it’s contracts so variability depends we’re little better higher And little that plans a that that. cetera. see you The it's cetera bit bit et over some broad-brush than within say than

see at lower but just seeing we're any we more a that trend And year. given look We that. little bit so extraordinary into in anything like broad this will continue one you year, something as read may that wouldn't

Jon Kessler

term this value we and Steve, Yes, -- value level, And our And our maintaining it to able did to isn't us It to economics. talk -- some way look was another declines about think just to to side pay unit side just their them on up, growing put would a we're I being because as on easy consumers, and to the such that at for our number deliver as manage fees number actually so employer trend, most these I through at this. we do terms to basic our do the some we and to those a partners deliver customers that's of of still have shows is in that truly health in planning while headlines. if have a been thought is over and well view say trying would way it's to would ongoing obviously. long to it the

to And the of number want it. at there'll given we that we spits that's be it's the in just manage way to recognizing so but not machine, a ups out downs is this It's year, with of variation we pretty part and that other, direction way one it try any And look value think I say that that's deliver to fair or to and in we some the deliver people guiding we've the why it's much to been on. before since IPO. the this

Operator

you. closing that Thank And to Jon does the to today's return And session. Kessler conclude remarks. I'd any Mr. like call Q&A for

Jon Kessler

close Thank year. the we'll happy wishing you Thank I'll very guess. operator. I Xst a by and talk and you. holiday season much, the just again And everyone after safe of

Operator

you gentlemen, may for thank you all disconnect. This Everyone does conclude in today's and call. have program participating a great Ladies the and day.

HealthEquity (HQY) 5 Dec 172018 Q3 Earnings call transcript