HQY - Earnings call transcript Q1 2020

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Operator

Welcome to HealthEquity's First Quarter of Fiscal 2020 Earnings Call. Please note that this event is being recorded.

Go ahead Mr. Putnam.

Richard Putnam

Thank you, Jimmy. everyone. afternoon good And first conference HealthEquity's quarter to call. earnings Welcome

Jon and Chair; CEO; me CFO. Mott, today, Neeleman, President have we and President Vice With Steve Kessler, Founder Executive Vice our Darcy and

call I that ir.healthequity.com. Investor today's Relations on those that earnings over Before an listening, the to I financial to are copy would a is is our accompanying website Jon, there release, which remind like of posted turn information

to and other included We will also include present concerning those that may risks which we harbor during today's important conference be to to forward-looking. relating cause could that our claim might release this some this actual forward-looking forward-looking made considered in our materially predictions, today. earnings statements forward-looking today's expectations, affect These information made safe results from call. statements business subject be and will statements. differ discussion Throughout They uncertainties factors are estimate statements that and

placing along these with that may detailed we future the SEC factors risks caution market other As you We or and results XX-K discussion of reliance review of forward-looking Form Annual undue in you periodic filed reports affect a other to encourage any the Report the price March on our in SEC. subsequent stock our XXXX, statements. concurrent these result, with against with on our the filed

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

Kessler. With all call turn the over to that of Mr. Jon I'll out the way,

Jon Kessler

here for quarter our in late and a day Thank XXXX out lovely first everyone thanks on for us Richard, you earnings call. joining Utah spring

metrics. results operating QX to speak of key will performance I

and our guidance. join us a Mott of review update CFO And is during then celebrity provide our will will financial Darcy more Q&A. the Neeleman well. as Our our Steve detailed He spokesman results

of HealthEquity profitability our robust trend So custodial assets, key on that continued top of measures to on and HSA member business. looking the growth. four year-over-year drive metrics outperformance revenue and the first of

an $XX.X custodial XX% $X.X adjusted HSA Revenues $X.X from at up larger up end members assets even larger XX% even year and million was XX% and a reached ago. quarter's up at of year-over-year, to year-over-year. grew year-over-year end were billion million XX% million, up EBITDA $XX.X quarters'

interchange all our resulted from that up ramping XX% XXX team basis of Strong the to of EBITDA last investment Custodial, season Steve gross well the and expectations. as all on and more to by that fees QX. margins it annual the in service exceeded year-over-year finish detailed began margins as a program notwithstanding effort call. expanded busy Adjusted points occurred than our

as ago. got the to or million year The And The in growth start. compared in period a HealthEquity sales more HSA assets contributions a increased result HSAs the XX%. number as team new Custodial comparable the that last opened year. times increased market of also quarter. assets well members seen than gains. Invested XX,XXX was strong was up XX% by investing X off to the of $XXX grew

smaller portfolio of rest of regained the interest the was macro of results activity acquisitions, softening have pipeline we to and the in over year. no environment QX, health acquisition Although, some there the hope the good portfolio with rate

a market, that our and this terrific to So to we outpace substantially HealthEquity believe of to adds start the continues up all largest 'XX. competitors FY

partner describe as of four with administration. established the intersection benefits HSAs managed chosen often being HealthEquity to industries of each We banking, Firms care, of outperformance? this retirement part these as have industries: complete enabled solution. a What and at in

an our relative focus bank asset another what health service a largest Purple Purple makes and insurer, it partnership, proprietary a the Our unique are enables HealthEquity a competitors. on the and technology our third and to that One manager. culture -

incentive the in to With they our and health take connecting partners, next today, member them trust and meet the and help the employer are steps and where every HealthEquity wealth. establish has tools

number a featured a team strong first with under of partnerships. lot power thanks the and wins clients softer and year-over-year technology our partners live saw integrated with XXX(k) dozen partners. went plan with among our new strength the associated depository a part and of a record the examples rate relationships HSA custodial peace. QX margins the and of keeper environment of to our employer interesting The we grew Purple, of renewals enabled that's that's health despite in clients partnership retirement We

taken also the first the about The business investment promising which and talked members. and HealthEquity consumer X% is essentially during the by all its early its that solution past, saw has HSA-centric Steve HRA brokers in year-over-year of and grew we in and quarter. benefits seeking directed directed COBRA from a clients partnership for market results and with single capabilities sold believe was advisors or competitors their CDB consumer benefits clients ahead FSA

go and CDB open approximately proposal, faster about proposed a to the HealthEquity of our further, market million shares stock employers. COBRA, investment to other Prior WageWorks of WageWorks benefits achieve and quarter commuter to X% company purchases. HealthEquity provider common X.X during acquire of HRA, To goals the acquired FSA or through services to leading also the making

accelerate and this progress We wealth. to in and our health other alternatives evaluate continue connecting to

a upon during Now let's here strong return quarter the to shine which the light. Darcy? is brighter Darcy performance to

Darcy Mott

Jon. Thanks

both is GAAP the results reconciliation I discuss release non-GAAP will to that we and non-GAAP was here A in of the measurement earlier the discuss GAAP that our press basis. published nearest provided a results on today.

Breaking then three our fiscal for Revenue for to fiscal full XX% interchange XXXX. revenue custodial of the quarter first update million. and the first guidance our grew the quarter. financial we growth first quarter year-over-year during down service, in to I'll $XX.X will see of I review and continue results revenue into to each XXXX an provide the our categories,

of have to XX% outlined revenue over last the revenue total we in represented million percent year. strategy to quarter. quarter $XX.X Service down revenue grew service declined quarter year-over-year the years, total of the the Consistent last revenue first the X% from it in first XX% five as a that in with

more predominant, custodial service offset to year-over-year per HSAs revenue HSA. partially increase an service quarter, has XX% in As average growth was X% average revenue a attributable by decrease during revenue the become in

are HSA by Remember fees employees, and partners. behalf value over paid employers time, more to deliver on bringing service down primarily by network these of so our employer their we and

HSA we last to to indicated expect in XX% revenue end As towards XXXX. guidance we our be service historical for of fiscal decrease high the for a quarter, X%

quarter of was to million on a representing custodial QX $XX X.XX% quarter, XX% the cash Custodial increase year-over-year. the of in average compared and the annualized growth interest custodial year. average first last result revenue in rate during an XX% higher assets was of X.XX% The in increase assets the yield

We first expect consistent X.X%. on quarter range approximately a with cash yield that assets the fiscal custodial our in be for will XXXX

the per in last quarter from in XX% in million compared grew last the to the revenue decrease a average Interchange in year, year-over-year Interchange HSAs HSA. revenue the first the spend $XX.X in increase benefited $XX.X average offset million quarter XX% quarter, to quarter first by to year. first compared

increasing year, million Gross of increasing revenue profit margin the XX% $XX compared yield higher gross to in prior quarter first assets. first to for higher the quarter and in in mix $XX.X last was custodial XX% on was the level the from year. a the the result quarter custodial to the gross margin cash The million

in $XX.X expenses first quarter. was the Income were operations XX% XX% quarter, operations compared or revenue first revenue from $XX.X of quarter during the or Operating year. million million $XX.X in of to million an XX% the from generating income of last margin

We year, be expect the investments of through operating in call margins will up that conference lower XXXX. discussed the that quarter March rest the sales, technology were our and fourth ramp fiscal through in to continue as development

the compared mentioned We generated quarter of million of Jon the that million, income income in prior earlier. equity of gain $XX.X $XX.X tax XXXX included fiscal the net for year. investment of $XX.X Net first unrealized on WageWorks to net in million

Our first EPS of for diluted quarter was the share per compared the to fiscal for prior $X.XX XXXX GAAP year. $X.XX

per of tax, $X.XX the of stock of share. Excluding stock fiscal net adjustment, and option and quarter XXXX income impact investment per $XX.X for first our tax exercises net the share were net non-GAAP income million and compensation equity the

EBITDA increased in year. adjusted was compared XX%. $XX.X to prior $XX.X EBITDA to the non-GAAP the million million XX% the quarter Our for in quarter Adjusted margin

balance April as no outstanding the XX, had of cash of to sheet million $XXX equivalents cash we XXXX, Turning debt. with and

raising Turning revenue our the $XXX of million to fiscal million. are XXXX for where between guidance guidance we on for XXXX, $XXX fiscal XXXX, to range fiscal we a first and ended based quarter

million. share diluted We million. income net and expect EBITDA non-GAAP $XX between between per and and to $X.XX income $XX and million $XXX million be $XXX Non-GAAP per share adjusted between net $X.XX

approximately share shares net for for of projected diluted XX%. tax includes is weighted rate estimated fiscal diluted non-GAAP statutory outlook Our a income on GAAP XX million per based approximately year. income the estimate average XXXX shares an of The non outstanding

Before call back two I our would to like reflected I Jon, to guidance. items turn highlight in the

to of of for approximately contracts, rate on be range deposits year's assets yield X.X%. the what our cash in that the this all we quarter cash in custodial expect placed First, reported this now rate are in custodial we interest XXXX the interest fiscal

But and This expenses. Second, year of reporting does of not mark-to-market exercises our includes a include amortization reconciliation excludes of year for additional our as detailed metrics. GAAP equity we full and compensation GAAP in any prior expenditures a estimates recent and capital of investment. includes and option this remainder anticipated of stock guidance have depreciation for fiscal done the stock forecast the periods adjustments non management's

I'll for that closing turn With some to over remarks. back the call Jon

Jon Kessler

turn We'll an a by team on the company XX:XX you X:XX forward. Times NASDAQ pm and expectations. briefly at NASDAQ on that for which also a market from we once then want XXth partners focused am Purple I will and the our by XX opening to celebrate exceeded ringing we again Day focus five Square. to as years close our again Investor public in to and in Thanks June stayed mentioning the site quarter bell, host

so have hope join with done of If you in through HealthEquity see The Richard us to would team not leadership Ted, entire you all Investor and we to get our like touch I, site. please there. all Darcy already, Relations Steve, and

With questions. let's that some take

Operator

with Instructions] first Jamie Fargo. comes [Operator Our question Stockton from Wells

now open. Your is line

Jamie Stockton

kind of you're put the you long come or on from standpoint there'll one it. the I of maturity lot at kind because three the of And Would in you putting obviously same talk the partners comparable well how premium timeframe cash first the you're a shorter there. on a get we as a year? you that that you the a you kind the or to cash a or you is do inverted toward you've work think duration right duration? yield, to standpoint least next be willing guys to yield the used? for curve of CD year-ish about where about not be treasury that, the likely to over guess give enhance Darcy, is I let's focus historical did Can think be of yield a maybe level say part premium versus know now maybe you getting would if same of could the jumbo with with

Darcy Mott

Yes. talked before. about And Good question, Jamie. we've this

What actually to Our custodial predictability to and the yield deliver laddering approach We is and do and been the necessarily. the don't of trying duration to manage and off of fairly maximize assets. the try placement yields the funds to consistency consistent. has we're

we roll every you every new we the depository and contracts contracts agreements As on year new of year. into some bring expiring know,

its And year of to three year a closer And at at - generally the we of kind to we're generally years then down the back duration the works of way up year a throughout duration. three this and it bump about it practice we've so into year. then followed two beginning

we're at will that time, managing any expirations that managing are happen in we so given And same year. the

expirations particular We bunch to with be and time. want the that point rates limited whole at don't in one whatever be a year in caught are of to

and great It past. on a for confidence of that tell on great us we well have a duration. a strategy we yields to for deal you us only worked to in revenue of So that also but not predictability, basis, gives expect the deal what has on do

guidance add year in of have also we add into we'll in and as contracts through will deal today, cover the place this going remainder we this given that would for January, more we'll we the we've of some have capacity roll capacity great go I that confidence some because contracts. a that process, yes, and

- remain new the given would that But into it's an if year. XXXX placements this and the what next today, with rate a we still it as at in going environment, what roll uplifting result even of our see rate contracts even is we'll given flat current environment

in us does the So like through very approach. we're effect it's to We it. that it and manage that. We confident laddering that like easy for

Jamie Stockton

as just maybe follow-up. And my

that? making investments from quantified of the you half kind expenses a of you year investments, $XX On that growth million, think this of that guys capital are it I standpoint, situation probably of half presumably going at duplicative. this as some that year. Or that has impacted investments How all? does wage Because were it impact into up might ultimately end being the those solutions it

made could there plans you just about talk probably after offer for be I that of that if think you made kind you investments the would that great. maybe those

Jon Kessler

Jon. to to is talk Good This Jamie. you. Thanks, Yes.

in the will one be And and WageWorks are in nature a acquire to working, - lot, be the want all. As affected candidly making and has date, a the by market. what investments design, way we but learning of we teams we've pace offer from our very working either not activities to to the other at or far that's we the we're to investments want our also as done them we the learn or lot

been and going there more there's would continue would real transaction date, that any we're I to and there a our impact, not until and were to impact no investment So be with program. expect definitively unless

Operator

from And SunTrust. our next Sandy with comes question Draper

Your open. line is now

Sandy Draper

wage It's guess much I'm how first not around question, sure I the can you answer the it. situation.

are but going there hear is to any what that and conversation stock? helpful. as it's you just sort you do at there investment are of be next you and update what no back? - can the to with Just just waiting of update, out any - specific there Just - the do Or maybe are steps? sort you of it is to steps what next figure would just point Now an Is type on?

Jon Kessler

I here reiterate to proposal made of press making The XXth, had the built the just to up to the we that to XXth. useful and the of by XXth this the the morning or can't issuing steps on occurred our probably that was - have releases we had indicated part And prior of the companies confirmatory on quickly April April position. the was that that remember. there that it's Well, proposal date. as entered both evening We XX, we've proposal proposal, domain public responded evidenced

to would I but was in guess piece, call means objectives piece of say thoughtful course this overall the a talked way. of strategic I the no by of that and a only on one our ones the months we've about an effort over approach others very number that

Board deliberate this was the in approaching that happens, question our see potential think else to in role questions really of approving two I I in you. anything to we have thoughtful we'll process. so part what making very in say And your that have its you of or or last terms - investments answered the don't next we I on and update response made, what the steps company's will have and

strategic question first the The that did And concluded investment our did. it was objectives. support we

The second it company that We and I very I carefully which much for a does the make - the question and you an investment. concluded admit investment, had assessment And as the on good work was covering of to Jamie it we whether basis was. was made and more example. concluded the the that felt Board of have that that and here to a kind for do empathy

that's where to I it's at would this we point better else, are. how here. we but what exactly got not speculate we So that's And point at something think do

Sandy Draper

And here, great. and of operational get strategy. update - said XX on it's are months, you you just which and fully update operational trying some I'm XX of follow-up got are a maybe coming your the COBRA. that you pipe think sort clear platform more I the maybe guess would get next XXX(k) I wasn't product over I'm to instant first down be maybe terms benefits in to or parts the commuter joint, that of that sure just did the just what also

Jon Kessler

question. approaching approaching can as we're we're as Thank it. way learn. quickly get the it way The in is The market we you and to for

so, them will. don't et every not we cetera the very valuable, first be what our so we eventually - have our with it think with will today what we'll partnerships, And Does have adjustments. with were product first learn I savings helps feature XXX(k) customers our that like, to partners. operating actually our only make pleased grow XXX(k) and to really because sales what's in market but product

By from COBRA not there product and token, a we same market first this we and made to and are also quarter in learning. our in learning from be the perspective in selling but perspective sales just to pleased of market product

eyes, going we we deploy how we And months it sort approach, do the this et and where product their this learn XX this outlined, a us, opposed that then way things, as be end - think but technology to is process multi-year something we is the we'll agile as more of people does. but where for is market, see in that we make will to in roll a cetera, to is adjustments,

do quarter the thought also we I'd - but so was estimates an since we here And some we quarter on our don't we we business, our some see areas. well. from during area that we're did with that's where improve uplift as the did also to that investing other indicate FSA add capabilities along to quarter-on-quarter usually also that during there it saw HRA give useful

I the the good can the successful at that lesson needs think if least, So take an we all this major I like view that the is draw the process of multiple I that course occur from that of guess seemed years be feedback And iteration over in like of - very underway. effort to to for thing. a is

Operator

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

Your now line open. is

Greg Peters

spirit to two into my apparently. load try question I'm my questions going in I'm the and reputation several up of allocation.

Jon Kessler

We little we reins loosen go. the a just and here bit

Greg Peters

you as know. that's to are your celebrity what really I referring want spokesman? Why to investors Darcy think

Jon Kessler

closely pages, sports but is celebrity, Well, I your questions, fantastic of ESPN. thank watch you who that done know is that reason read or company may two know first I'll the for you of for others know, as The endeavors. aware Greg. encourage are as to how Darcy you may of the more not is he's folks now that a his sports And the and sporting representing job a in don't

Greg Peters

maybe the know In question. that to I you this answer spirit answer, started of

Jon Kessler

I actually want a I think, Tour. leadership recall, the as member James in to... Raymond I fact But have think that PGA also of don't joined I may

Greg Peters

Yes.

the sort those in Vanguard you that, circle spirit you principle an So nationwide? I us started answer to in And of of talk just your know back, update answer. of some prior give about can on initiatives. it

Jon Kessler

Yes. but he But realize doesn't is Tour, has not just we're and to shoot kidding. PGA And joined anyone in did Darcy calls intense pressure. the new say our and I'll case under well

look, morning first all talking we were perspectives. with this pipeline just - two our as this I pleased of mean so looking at And event in update. about the really but sales get we're weekly any from we

publicly typical more as our three from the others that. partnerships of partners well with that announcements, of comfortable that followed have been from approach and our cases doing each have been as product not and We we is announced the good pipeline where strong have partnership in

the able retirement long-term be more beneficiaries to the at at particularly look year And to the one and this in thesis thoughtful of really our going partnerships - able going our sort thing we're are the are really have a that the level to the you of plan, you in context with to as employees and have be that you're point of of discussions be partners look those that's here to So, imagine. pleased of at is the can plans. you're you good to going with have if willing

great to they that that all particularly but saving just be cost I've these support faster to together understand the do is try experience and research were all we place pleased obviously And possible all they're a it the on we really behind happened a together and to customers to either these our savings behind logic compete, that of see of ago with few we of of strategies can to reducing growing using a and and quickly contribute engagement as together where had working as at event really as to where us deep level the teams Greg research and savings the this some how some get intended been them meaningfully and was an some the weeks and between working their number really great ours of them employees try firms their HSAs long to or term as vehicles investing. of of

a And early we early good pipeline good. actually as well from feel are. of pretty seeing we're operation where as It's so we revenue customers kind this is and seeing still perspective about days what that's but certainly

Greg Peters

thank that answer members. And to follow-up So just for the I HSA around wanted Jon. you

have... You

Jon Kessler

was three. two. that got on you now you - And Well now

Greg Peters

Come on.

real I mean... first You one question. the as can't count a

Jon Kessler

on on - might not. We'll - you you probably but pull we

Greg Peters

members. HSA the So,

in looking at is by up particularly the So the is I a and only different actives sequential in HSA substantial has the members in only total increased and XX%. - the members. I'm actives XX% what X% sequential was with number change change something compared change sequential increased versus HSA struck That in

pieces you an differently? on why moving are maybe these could So us provide update

Jon Kessler

come lost if the it's on accounts folks or also that you on they're you've from close. know you'll you now things folks see different although see actually, oftentimes one wish It's but see, where where - of quarter can the I kidding, moving a first I'd no but lot quarter HSA occurring with where I the you we is see assets won. both you quarter where the you two helped Yes, as question, it's

you in many we growth see quarter was, And in see didn't HSAs I new saw see year's those that in can that really those didn't come year-on-year the what comparisons, first mean we many, as but in in, saw saw as as as assets. we this well substantial remain we this come

terms reflected So contributions in both market and takeaway. growth, - and much the of in from that rollovers but was so more

a So the we quite slightly this but a of market you it's all our and a kind different flavor a year the from just think this put while things, I if of will know for together, be comparison that basic won't be what of grew picture it sort perspective while, because can reported. there before

we we assets going that model we're certainly, thing. basic just But even really know market to about good grow try going grow think you faster, seems a sort and we to continue good feel the pretty we're our in which like will if revenues and outpace and to and that HSA and of of more you is, earnings that when saw

Greg Peters

answers. your for you Thank Okay.

Jon Kessler

the quarter I HSA think in first year though, got your last we Greg.

role. So I that's a huge how played

another you If these I put positive million in, would making compares. couldn't be $XXX mean we

Greg Peters

And by down. your reasons one I'm is leading why the the interchange of way,

Jon Kessler

okay. It's

as As you spend we've many a gives once. save lifetime help times It only happy us we're it. said to always when Darcy for says, revenue you

So for us. and good it's good you for

Operator

KeyBanc. our from And Donald next comes with Hooker question

open. Your line now is

Donald Hooker

debt potential in cost revenue for and on making and here, you from guess carried talk HealthEquity WageWorks we right - synergies just sort public sheet of forum about a over can you're time? the guys if maybe long have thinking I you ratio Obviously have that cash your what is proposal a thinking in while what kind time. of around rich a balance you for is Maybe

ratio would but up? be about You taking you acquisitions, comfortable that talked debt how

Jon Kessler

we that commented, I not that's On think best. and think the publicly I have of the synergies first part on question for probably

give feel to comfortable I can all it's hold that think of facts on better have we we probably you something until the with. like feel together we off we just think and

grow is is we the same HSA perspective from to cost the wealth the of that strategy in help I'm and that that to continue doing it, remind but felt to savings market our which down say or we whatever. to going of why said overall which short-term release hold health that So there we're obviously move what and its objective that not to than our connecting everyone our making share off because this other and synergies, in significant also the were Americans objective we to proposal and journey of that's of on

so that's your And of the sort question. of first part

I think say proposed part why on second we that's or the doing.

On speak generally we going your answer would and the to second right to to an is part question, I'm the to - think as way that how I organization of I include And since we situation. it how Board debt. you a think topic we've we on then had active for Board this can as about dialogue our long time should, apply to this

hope a decision do business recognize you this prerequisite shareholders a borrowing First money of that business else. you no good flow don't from recognize somebody is a has to highly the a predictable has and and - by for that risk that all, is that's that cash and we think that we at put money this stable --but

things that the debt be responsibly and we're in service if predictable that this that's it it. for degree it's we to going a where comfort we're with view the free have to to can assets there flow regard that to of going generally the would other use use cash free context, we Again we incur any be to where high use to or similarly it it have case cash for think I Secondly that stable flow. and likely reinforcing

I promises extent the more delivering last extent last and the has decade. are next in The very I shown that doing me company mean that is people some here with room ability whom a make really to over of would the The forecast. this point for confident we're some of than an years have on who cases And its a many clearly - in forecasting to to record point. point has been I confident the by some our track fact make the strong that we are company is by

so that one fall. said us this of testament a of having as goes gives deals That And that been is sense. I these think before the old confidence makes lot pride

the absolutely and ability any And actions shareholders might the for beneficial be that's all to the road. other of the something that cases our mindful down that margin so reduces fact of on in we are for behalf our take leverage error reduces shareholders

principles on that what that some believe don't kind the of identified we talked used company, have you're idea frankly in relative debt And in we the there in the the about depends money past. thinking We some level so spending the the those is ideal on the never for don't at are attributes just that attractiveness we've - debt about. ratio to of and

principles and And so generally we would those here might things that are as applied the we do. have about other apply thought we

Donald Hooker

a talk tiered job you maybe fees to then per can your Or fees done the due by quick on your why about be just member, continue declining? there are member pricing And just interchange sort declining going forward? to strategic and one real pricing interchange of that you've would good explaining strategy thinking services per the

Darcy Mott

been talked the year. relatively builds get back starts basis. spend actually The basis then HSA and been On coming it's see past the seasonality off usually end regular a has our of in has it Yes. an in about We some occurring that that of yield on towards we in up first it RA, is rate we've the down quarter constant. per a higher, do or the patterns whether that interchanges or see a as that we HSA a at about

educated because spending dollars. And think not a HSA so with wisely is their that or would to lot of becoming people spending we like about more are this

think not have kind and it's rate to money that function they a et cetera. what the spend, they somewhat of in I how of frankly much of But issue, talked and a the bills we've have number it's growth a accounts, about

So spend the it really HSA. comes to down for

Jon Kessler

this. our annual super aren't we would not partner completed there a thing like I to - it's I we fancy key Steve mean speak summit one - there's without ask just what and we an going no... crazy, have to call

Donald Hooker

Celebrities.

Jon Kessler

Celebrity.

there? you were - While

Donald Hooker

I No, elsewhere. was

Jon Kessler

there. And wasn't celebrity our true. that's Right but

them. outselling actually were You

we things a any available in learning but fancy, of And not the But celebrities. on HealthEquity, not they're present one the to really we clients as using plan think that of HealthEquity. we with well it's And do good. experience. doing, our of event, to it a but that's managing ask So health really experience more them beyond just tools their in which their is are what all broadly is experience

amount and one is as of of out spending their thought of spending to implicit members a much at keeping year that under having heard keeping who spends mean total of in implicit overall control. going what was you folks this success not not control little just I company examples we pocket and and things a elaborate I we and keeping number Steve on that, - And this bit just heard are significant the really in of could the very under spend,

So do that all. to you want at to speak

Steve Neeleman

Yes. Sure.

towards used spend a health in that be down. that research there population would go starts accounts they savings show goes year percentage really So would as every a to studies to that publish that

the enough your of (ph) HSA overall in nutritional large because by when have be don't what that was population become it were XX% can into those was studies think general almost you numbers that over thumb fact, it's of and population about more In tend a if than cut plan your They you self-evident. an plan it's to rule get type XX%. you publish trend anymore, would I real

they experience our half that now remarkable trend and we're And talk last key about that over where is yes, presentations, month, as would their our to used to were XX% in be. it only exact we know with what it was not partners having hear they

- just we've educate the people they favor money employer have saving hey, and change about that because and of almost help Is its used a of saying try see to we've to you to need part your be do it to the importance your talking understand in I them HSAs with leader and And can also a they going rather tried were savings how go be an think where as HSA all you're than I them to down. need to a think investment seen health people trend long-term vehicles. and meeting do But their because accounts.

them, decidedly. in, that And And they long-term, for the if families a the its age. it that attributes the employee put this better of for different led better We've best is with money to this educate we as is need device can tax going their message the benefit people to will they're to because that us. member

it almost consequently the benefits then employer. But

saying efforts. and in need of then it's And our it to educational so help us look a being see just realized kind

And MRI it's couple study an drug shift generic talk to couple and or a extra get you so walks call a going or or and something need stuff this name making do making time just a all saving but if a like that the and a street, dollars. from down to little thousand radiology and to we the about - of brand

of money for They're on to then down. leads that we they're because the the the perhaps make help manage spending the still us we'll the money it getting need, care less months. spending over it's just this they great trend which and next part XX But can

Jon Kessler

think here where do there that's line all do you're enrollment we talked some tied that HSA like of election still comes and way they we the these my when are open not But as end I it. the think of mind win-win Spending Accounts one revenue as we in they incidents, one well with way know about at is people that and there about that and number. have is Flexible is think to made really and an opportunities that to that lot people real a us I for also have increase of can - the

those the and And are what and terms that expenses the doing continuing in tighten on front. meaningfully engagement that's so caused year expense the of incidents a HSA in through team reduce we're the areas extra on when to running Ted year really of that working have of spike unanticipated those people that that up number individuals dollars can a during one

feel of and good, something pay its good that. this of depth commentary in to of we attention So some it's give crosscurrents not should some there's for a - of that's terms as sort but a the just you little it's of bit of

Operator

our And comes with from Naidu Mohan Oppenheimer. next question

open. now is line Your

Mohan Naidu

see for you and to are where second us what the on your we technology the investments. on Two cycle on One what Can all. through update thoughts Medicare one should me. the just And expect questions for year? maybe the are you in for Steve,

As about on that event such be, implications seems unlikely but your an your to potentially and of views business. curious

Jon Kessler

cycle. of little course briefly. the guidance the at We in in to and implies, program take early beginning to ramp how ramp year question as a come there's more obviously the investment beginning that of said we over the goes. It's is see I'll the first up, that the commentary we'll the rest call Yes. this the described our but

the things. we're own or - want to to of, we've order people things market trying as to of learn on at you security So that's about whether on can quickly you by tell investing can get commentary the for are sort tried we our on efficiency where hands stuff or way talk the Steve, that? I into do the it's focus sake mean some MFA, but early, other and the that's there sake

Steve Neeleman

Yes.

time. both Washington it really earlier spend that year of the party happen the planning more done mean spend And fraud term. and taken this what near I that course, sides we're I to of a the of sure this third-party the that we of something time so. that year we've this at that the believes think minority really I could time really to case is believes spend of there's aisle. And end educating Medicare think hearing in a on lot to DC of is So last we've talked the were We we and in in

of Medicare used that recent like your phrase that is old Medicare above would be, spend through cost patients the patient when or they today if they it's Medical what's over out not a whatever. it's and get older get is out beyond American it be that have happens Medicare. a is and reimbursed study the to what that to That they most pocket and Association year not not came mobile when said $XX,XXX be what of cancer, to would cancer A on the from old father's being said get

easy should paying answer or that account, the to because savings to XXX(k), take of $XX,XXX $XX,XXX, money out close cancer XXX(k) the spending if probably And pay their to these health of is have be they're $XX,XXX that $XX,XXX bill. folks out

this exactly know will don't And go. so we where

the think folks maybe they from that longest, it's but been that that happen know newest to who the in longest, not have the there don't they short-term. do We going say voices been ones just the there have the the there

a be little this in talking bit We time will some our Day. spending Investor about

the American there's end hopeful winds independent have is whether Medicaid But you it's kind because of should spending. savings DC account, line American health name every in health out-of-pocket bottom that traditional a in a help it's in where the that trade to we Medicare, is every whether no what the whether Tricare, going of you're it's have care, to remain it send, that day, in someone in plan of matter latest whatever account plan of kind the at savings

that's kind of so And been position. our

Operator

question Demko Stephanie from next our with And comes Citi.

open. now is line Your

Stephanie Demko

got the think you've When markets about Just in. participate a one. differing quick that we end

You rate see help dynamic comparative WageWorks market. win those did we through of and maybe you of it each in walk competitive your with talk compare how mid-employer market should the kind up How to about Could sizing payers? just opportunity? us the the

Jon Kessler

space. - even exclusively and historically in enterprise And be I and on the on been try. historically partners. where on we've with obviously not we've say on the when What, I'll commercial it's regional - field - enterprise generally network as to field. field of a partners much relied in And commercial customers really network been areas our regional our with that HealthEquity we've our the would with It's outside some much pretty the been is has rates. the

with decision changed or to better or going brokers a with really toe that's churn who their key these one And over far of advisors ways increase other. certainly of and proposed sort sort the and making of we're and lack employers whether we that as in dipped are it's previously our what and - for intend we the what's means, space many that's the to through way shelf - the the really of in the other and do to our transaction a we've identified scenario where course

included request, all and and one last One year, you what of any not least in one meet - your others of of and we at we of needs those you of lot measure some a we products those services our these other a meaning that I'm if can RFP of question, but non obviously at as saying And HSA are to half and cases the activity of clients gets received, to the look XX% partner that almost RFPs piece is satisfies CDBs. didn't. so you do the do sort able said win didn't because we're offer we this well forth, there

is having footprint a going - we there's part for kind just right we part and proposal the get And to that's through it's will really us or our we're is get help ultimately concluded lot. like that is we're again that together go that so really there and that because a there, trying it road the down feel having help this other footprint successful product that to we ultimately of that whether whether that something consumers of of the means,

of we are. kind So where that's

the if service them were offer. that of and got at I for all think I terms I saw think, of material you can I'm but a even the probably we the that look not some wins in with give do first the and virtually some of is it, best think that to trying that's quarter, in in core around - connection I described I you we that we color it services

save it And really us of in in put know as today to today, in that the save money XXX(k) efficient today as the whether and you spend recognition was most whether are, way copay that's from in people HSA they buying other future future money the away where with for more. plan they can an did, and a can but them COBRA who's few or to put business, meeting plan and people, the where this I most them standalone spend for a less someone weren't words, we're in helping more HSA-centric traditional available suppose that's where type someone and how that's it where they an part less FSA we're save a that who's is save in learn for

Stephanie Demko

super Now, Jon. you, Thank that's helpful.

follow-up Just a quick on that.

You try are puts to the some correct? guys, do takes and platform? you FSA you when capabilities your have what So HRA and fit own

Jon Kessler

the Well, we're I markets. in talked - think of those it's about in probably, best where context probably are

ability plan I partners. what's what the really we've is connected think for year this added Historically, to to to fair not customers say our were generally serve health purpose. is who that platform that built we the

doesn't But we can't scale. doing we doing And that mean doesn't be new at it it capability. and so can't be more, that's mean

with this some something we're as talked the elsewhere certainly making that the a of it's to right all core products money point. pleased level, at think whether our core part about at continue indicated of that invest we'll this to are these that investment about again of use these number not we're that. while or in. transaction now. through save And of I It's accounts and if the otherwise, business benefits there offering, We've tax it's tiny consumers So we've progress, sort ultimately and HSA helping it's

need as circuit. to that about talked elsewhere, And we've complete

I ultimately that in investment just part when be need so you where disappears, money. and will And we It's it before. anyone then So just the feel been that to of keep go. really kind the it making it that's what that done place any industry our think hasn't It about Right. really helps if about taking good. you getting parity It's from circle easy. to like has really this it do perspective. hasn't not do Because with a

Stephanie Demko

helpful. Understood. Thank That's you Jon. really

Jon Kessler

at end. but got the you. wandered there, Thank of Maybe. kind to right place the It

Operator

from Bank next our with America. Lutz And comes of question Allen

now is line open. Your

Allen Lutz

winning is that current less? selling then expectations? say you how this winning And you there you specifically Where tracking year? XXX(k) about the can And the your talk versus guys you more last how and contract secondarily versus about are anything Can is season is where then win? progressing

Jon Kessler

Go with ahead first and I'll... the part

Steve Neeleman

Yes.

Let with hear Allen. voice. to me part Good first the start your

stand remain come about job. selling side So was wins teams announced last We've bit excited in talked this season. We've market the the on the start we've it - on which wins that. to starting a you that with in our record to partnerships which little know already and done already And COBRA. we we and that a about We excited bit we these talked call things announced little even COBRA fees a there. like up think keeping look the announced about great and were we

our don't names or working. any and as we And it that. like But see we're to anything do logos excited practice

fact starting partnerships record in see on sell that And happen and signed a have thing reps relatively a In talk that's really repeat the time been about great short working specifically announced. these all since to keepers. side day are and they that's we think period to even with have wins of

the these on direct doing of our lot partners health is other half that then, the what could on - to part different and in channels to a to team plan do they health we've think salespeople we're they're the channels team the more and doing that to I and dedicated sales. what that subdivide continue rely have focus the so realizing is trying is past and are

And sales working direct sales salesperson wins to that's - a actually see that we're efforts. be over supporting we're that nothing hard is happy inside of in function so announce since there's than to adding - exciting a kind be other dozen in that new or so in happier seeing that busy everyone to knows very that's pleased those pleased busy. us And we're them and and we've part last for sales year effort the that to invested folks

Jon Kessler

early the know. in Allan mean I it's cycle you as

a thought the off up too a it's finishing look, strong, know. the similar be off We we hard year are to hard I to we guess concrete, be last reasonably you you to one good last It's know I to is it think but be start. was a to little couple ended start year. as wanted a weaker So - fourth basic than were quarter we it's to but

we play we in four be say And pretty quarters - NBA strong pit can should shape. good they so if finals here, as when in

the of everything the the And in the us we're about volume, performance nature terms see of all that RFP size, we we partnerships it so way of RFPs, opportunity. that's and of kind thinking pipeline have tells new

And trying what right on so to are that's we go now.

Allen Lutz

said you us of size through Can then quarters? rest a step the operating for relative you of be the Darcy, that margins three of give sense year. the cadence And the down the the then last will and lower

Darcy Mott

them speed biggest on. and we we're a bringing I - think three ratable having productive. to that continue ramp and be be mean the to the up Yes, is just people I of spending through initiatives it'll part being up quarters. onboard getting we're money challenge The

And so year. throughout will all I course think that continue the the of the through remainder

last of be guidance just to we we you in be of we'll to at the true If I the range it's that year. quarter. our look think midpoint were what and take in fourth were to not a overall where where said going EBITDA, And be we we continue

the each you're that going year. see think to throughout I down that quarter So ratchet

Operator

closing questions any at for like you. no I'm turn to Kessler call showing this remarks. And the in time. queue I'd Jon back further Thank the

Jon Kessler

to team. partners. Yes, strongly little - the thanks. say thank This want and our a just more I is you to that includes

we guidance is quarter shake just probably to amount which June, largest so we we've is a our to - the in associated because that's this up to raised by and where we credit Darcy some with down. the - happening, looking credit there are extent we and team members happening, goes expressed in and we about for investors. I'm ever really It's the we're we increasing very, in and a work. think think the in chess and so clever December, revenue I about the feel and have his and And the we March I the team because concerns done where we here. watch what head very not optimism that that to team optimistic now forth game doing the as are have focused expressed and is business that

thank everybody. you So

Operator

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

HealthEquity (HQY) 4 Jun 192020 Q1 Earnings call transcript