HQY - Earnings call transcript Q3 2020

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Operator

Welcome to HealthEquity's Third Quarter of Fiscal 2020 Earnings Call. [Operator Instructions] Go ahead, Mr. Putnam.

Richard Putnam

Thank you, Joel. Good afternoon, everyone. quarter call third XXXX our HealthEquity's year. to earnings for conference fiscal Welcome we President is Jon Neeleman, me our have With today, and President Kessler, and Darcy and CFO. Ted Executive Vice VP HealthEquity's Vice-Chair; and Bloomberg, Executive who our COO; Mott, Founder Steve CEO;

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

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

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

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

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

Jon Kessler

joining integrating of is acquisition of will to It the time better every growth us. performance growing in results operating of HSA continued first WageWorks; one. WageWorks speak results completed have and and to key market; fast second, Richard. Darcy to the XXth, quarter the as thanks results it leadership and and on you help the path metrics multiple all you, and reflect first, opportunities offer Steve we our market; in to financial to Equity's which gets guidance as comments This will just the Thank on the full Today's was on a start I'm outlook third and start on thoughts profits. with and improved of the I'll then and say, our will August good on pleased for year Ted WageWorks integration; revised for will us our update well profitability; Q&A. join for

key acquisition, across one [ph] and XX% adjusted and at delivered early metrics end, delivered directed the XX% the accounts include revenue both strong and strong XX% improvement $XX.X and $XX.X wins year-over-year both assets WageWorks even were in both were on accounts expect XX% revenue HealthEquity, up growth respectively, consumer and HSA stronger previously adjusted and service EBITDA. of HSA we and Growth go. HSA assets a again $XX grew reached member efficiency. as would accounts October, growth performed well. billion million we reached range CDB quarter's respectively end HSA be post discussed million and in and and revenue XX% and as members XX% Here Legacy the team top Total September both EBITDA of year-over-year. month, and $X.X performed year-over-year during HSA XXX% which year-over-year. Legacy million. HealthEquity respectively will and QX, benefit WageWorks

excluding and XX% acquisition. of in workers level project is year has and The added HSA acquisition HSA is XXX,XXX ever enrolled growth reached number firms year HealthEquity's and excluding of that impacts, Number investing HSA more and assets year, one teams, that's acquire again assets, in the annual $XXX now types found and more market position assets by its that's in the qualified our HSA of management remains added in grew share relationship Invested to new and four than of which in HSAs, HSA does ago, XX% which a ago half it. members now large family mid-year Devenir's tough so ones market The members comp market highest performance, than sales plans. small XX%, confirms qualified HSA report foundations, benefit plans accounts. percentage The good. released strong XX% the and from offer sustained their survey HSA and last September million times pretty compared

a this surveyed released every category and commuter new city the in that and only not shows COBRA survey market quarter HSAs, Another HRAs, FSAs, complementary includes CDB be by leader in HealthEquity to benefits. but

delivered opportunity growth the So the profitable operating strong believe evidenced and to more ahead. quarter this team points we and sales market and

has and team going the is Ted, the away. to seizing building the opportunity Ted it to leadership, integration, update about market on that WageWorks us take attained. on is which

Ted Bloomberg

Thank to in before of laid our to to ultimately are But Purple achieving you, goals thank made our clear members solution. short so reporting, and team I moment, who the hard of and progress start goals tremendous business The we have out September. referencing we our our made entirely a I do integration. They synergies, forward end-to-end everything and our Jon. do, growing I'll in describe centric to the on their timely all HSA the on efforts. by of date for this In we are state fast an like confidence working integration achieving incredibly would going have due bringing

First, into subsumed timely HealthEquity's WageWorks has The clear operations policies. team accounting reporting. and

by A is have or include client-held CDBs, been assets of we money from For the and under payment what employer-sponsored for call by metrics. WageWorks and all funds company's new data HealthEquity such breakdown by operating held timely WageWorks HealthEquity will and into plus benefits held held participants, XX-Q CDB accounts, partners a example, assets funds has the of filed separated as metrics still total traditionally provided, client HSA those legacy liabilities.

revenue as to from come cost The with rationalizing has service entire of and day team focused originally synergies, earlier dissynergies. now announced flattening synergy is of management run revenue million revenue million and certain to the on a on synergies realize platform successful to to and rate $XX one the with $XX off trend agreements. Efforts are HealthEquity's sunset management and team elimination of roles, have achieved rate commitment already it's follow approximately operating taken start additional or run platforms negotiation date efficiencies by well on custodial and these optimization to net a synergies. Cost redundant than promised fiscal operations. the organization [Technical steps meet executive net realized. of Difficulty] the Second, the XXXX, basis Based expects of end redundant fully synergies optimize as strong to

We complete of we Together, investments resolved do. Third, to whom of and back we the to after expect begun WageWorks. XX service our service the offshored had now health our firms, for then outstanding with XX,XXX Also consulting bringing to clients are WageWorks over service many quarter. expressed shared cases have about notice we benefit and practice experience their concern employers employer the began immediately is within to for customers, engaged home HealthEquity process running calls change. ago, everything in start clients resolutions national of as members online. closing agreed with believe the leaders the with Legacy SLAs. second a service team strengthen building acquisition, at we the which only bringing Purple teams advisers investments influential that the trust team our days come the upon with service XX% and platform WageWorks US, fully case will

As our $XX in security, and occurred of synergy to $XX goals. Approximately platforms we committed million this one-time that you value million spend achieve to $XXX consolidate engagement have and our during quarter. and know, enhance million expenses service,

that and and importantly centric by Fourth, our taking HSA market to demand. the clients growing partners business most end-to-end and solution is

we closing expected to acquisition seizing The is days the this the sales sales on begin created influencing that As season. in of team during September, the closing opportunity earlier opportunity. results discussed than

bundle renewed both with CDB praising private largest new our spreads relationship culture. one in benefits [ph] and [Technical service consult of established of successfully services. our list partner Our largest situation provider succeeded Difficulty] the Difficulty] complementary nation's employer-client and Also HSA adding found with of was in team competitive the a a [Technical sector the

HealthEquity On of the end in commuter leading the urban smaller spectrum, market to on dozen WageWorks [Technical other results, Difficulty] clients Difficulty]. bundle areas boarded. client promote the to the new the [Technical launched clients already phone-based several And outreach team benefits.

Jon Kessler

still are we Do think not? I losing, you him have Ted. Operator, or

Operator

showing connected. line still I'm is his

Jon Kessler

did or Why they're whatnot. Steve bathing we we Ted in do lose Since, there, suits their hopefully don't not and this.

to off the is put me And position a then Let is throw said and four start, of market good about he Ted to points close Integration way just our on leadership. made. we're Ted's out Darcy. the really to what building really remarks

committed result of from end For is you that more to the our us. the kind we've going growth deliver profit that opportunities consistent expect kind of shareholders, be

And so to from that where really is is here. going take Darcy

you, throw me let Darcy. to So

Darcy Mott

we nearest discuss on press guidance non-GAAP discuss non-GAAP their both published and and release to GAAP Okay. Thanks, results quarter a the that results the today. here was earlier will I XXst of ended in is Jon. HealthEquity's third provided measurement GAAP basis. October reconciliation that A

impact our August Our closing include operations of on acquisition two fiscal acquisition months the WageWorks overall variability quarter revenue subsequently revenue. of total interest opportunity on rate diversifies results reducing financial growth WageWorks third the The XXth.

CDBs XX% In per the the grew organic and XX% quarter QX, third acquired decreased HealthEquity to in quarter. to million, X.X in each grew revenue X% HSA quarter. growth. and is HSAs categories. our the the rising Service three overall to revenue of revenue revenue in $XX.X service million standalone organically of from This second and attributable XXX,XXX primarily [ph] HSA XX% in

HSA since the service year. to We suspending revenue per our guidance XX% X% provided declining of IPO per are

closely that continue revenue more and incentives partners HSA be will going more we we network growth growth account bring that focus and assets, forward. clients expect HSAs on to While total tied service to us

increased the Custodial HSA of million X.XX% in revenue HealthEquity XX% yield revenue assets assets total quarter share to attributable during Custodial custodied the quarter. growth cash and by in annualized in QX. HSA on year-over-year the interest year-over-year rate from to of $XX XX% of third XX% higher declined

help to interest The opportunities. continuing table revenue of help we grow custodial includes client additional asset you HealthEquity press funds. to earning HSA have accounts additional and detail to custody, more transitioning on access multiple forward paths all today's earn to release Going these balances,

increase XX% $XX.X the million including in quarter the accounts, to driven grew revenue Interchange by in average total third WageWorks. from

large from of revenue income the the despite $XX.X Resulting WageWorks was or XX%, grow integration revenue. year. acquisition. change $XX forward. revenue. to accounts total million, Operating million grew Gross resulting operations from interchange the opportunities Operating in million, expenses revenue high XX% to $XX.X $XX.X in compared to expenses income Gross million, or XX% at revenue. going prior base million million offers remained multiple was Our profit margin excluding of $XX.X intangibles, of $X.X in were acquired of or $XX million, of X% amortization mix and

per third $X.XX a reflecting GAAP net costs, quarter had $XX.X interest, share loss intangible integration We expenses or amortization on million, in acquired acquisition a of of merger, expenses in the additional assets. and basis,

million compared share non-GAAP share a to $XX Our to per compared income last net $X.XX per net increase. to million, XX% grew Non-GAAP income was $X.XX, $XX.X year. in

$XX.X increased EBITDA for was million XX%. EBITDA adjusted Our the and margin to XX% quarter adjusted

increase for our growth four-fold a in powerful year period to asset more ago avenues encouraging. Jon is grow multiple have of the margins. The now mentioned will HSA remain over expansion. HSA organic Engaging driver assets than members We margin

efficiency custodial are reduce potentially in opportunities the efforts cash schedule. next ahead also years redundancy platform of Reducing margins. over improve cost of reported, variability the will Ted impact yield. These As few

federally cash diverse program the stability reminder, As prioritize of mutually HealthEquity's beneficial depository a to partner insured structured development rate long-term is placement and relationships.

custodied expect X.X% of the HSA yield to rate a under assets continue full XXXX. fiscal interest year HealthEquity on We cash

transition However, us depository be more we and bit assets recent respect HSA, WageWorks placements growth, feedback new contract cautious to the to legacy of the making including leaves will platform. renewals cash a HealthEquity HSA beginning cash with year-end, around

HealthEquity fallen across occur. past the months, over overall three-year points custodied rates under basis conditions, decline cash by points durations CD would expect to National to XX we new present five-year to placements average cash FDIC to slightly jumbo XX on have basis yields as data, according several

balance sheet. Turning to the

amounts XXXX, XX, million $XXX of with issuance of outstanding our debt and credit of equivalents and drawn $X.X billion we of costs A As net outstanding Term no on cash cash October had line.

$XXX a fiscal XXXX guidance where million to million. the year HealthEquity Based on of range XXXX. we months for fiscal Turning to are XXXX, we revenue first guidance for $XXX ended between and nine raising fiscal

expect income million, and non-GAAP share $XXX between our between $XXX $X.XX per net We non-GAAP income per to net in share. $X.XX million be and diluted resulting

and to million guidance on calculations fiscal non-GAAP with note XXXX. our associated our and the amortization include intangible adjusted are achieved share estimates without guidance $XXX our synergies non-GAAP measures of net in between reconciliation interest including EBITDA acquired HealthEquity's release on WageWorks to rate Please the business. for per income These raising today. the and expense include We earnings discussed million that $XXX see acquisition provided run

Our net per shares weighted of average income based an is non-GAAP diluted outstanding on for year. estimate diluted the net share million approximately shares XX estimated

for approximately outlook projected statutory income tax fiscal XXXX XX%. of The assumes a rate

to operations. are trim our already we mentioned, and combined Ted working As from costs synergies realize

a fourth up on-boarding see WageWorks fourth quarter the of new a has quarter of an for going usually the and accounts. similar However, as We costs of into seasonality preparing business ramp HealthEquity.

to to earlier. line XXXX are synergies top the synergies additive for that These discussed fiscal a We the off beyond. will good to Ted and achieving be outline and both start bottom

we capital detailed recent GAAP of include estimates and reconciliation prior anticipated our of of compensation and As not stock this of remainder includes of expenditures periods, the have stock for a includes non-GAAP fiscal This exercises expense, done but depreciation full metrics. management's and year. year in guidance amortization forecast a the option does reporting

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

Jon Kessler

in and in It's I Thanks, thanks in Dallas, to and in bit elsewhere. say did Tyson finance of Murdock's in it Darcy. hard that deliver Tempe, Santa to team And we And Darcy a little a want Draper, first their clear to to timely able to way. to be good you the combined due work a a quarter and are is quarter delivering.

We commitments. our meeting strong results. are We delivered

We are raising outlook. our

at We being blow are interest synergies thank challenge, the going part do don't And sales. a paths for story We've to time it. but are to have we that headwinds a bringing delivering ones, profits we a market to grow great faster. reported unique as of rates we come And All journey. to multiple mind so forward. you strong

will that, ask take close the some I operator With questions. and to

Operator

Anne you. Morgan. comes first with Instructions] JP question Thank Our [Operator Samuel from

open. line now Your is

Anne Samuel

on My the and now earlier first really to than sooner question on you you is I you expected Hi, synergies. taking parse XX guys. months? can came achieve Thanks the hoping for question what quarter. months was expected think on that congrats maybe than the great could target the XX out you your

Jon Kessler

that on integration very Yes. reflects In done we Legacy if regard. was than comment that think we've or really I our been sooner generally and teamwork I make side, diligence just and WageWorks side. managed on embracing team a have then and ask an this able of Legacy generally reflects It I'll cost we're level HealthEquity, Cost fact a process the and that Darcy least And also either is, -- of what level think effectively. general, that Ted, across it Ted they'd generally cost side, like more in that to expected. progress, add. at seeing we the the to

business cost to efficiency about still And not stop and I there, once we something about that only we'll so side, said, be about we there'll we synergies, and feel where I will do. pleased be to think talking think be are can think get is but we able as talking get Ted I there, we but more the real

parties. as important, are: the also us operating WageWorks is we've right and We policies funds it's and in certainly well our On been cash that really stability which we've the accounting But something the gives client from with that's refer of think able involves it out that revenue clients some biggest the Ted approach to side, focus technical, to current that's I clearer. but optimizing financials as as sounds the the with immediately that's able has approach. helped it HealthEquity's those us as the very consistent in is been We our funds it think health greater that's things commented first, third to we on our it. some allowed much something agreements do company's benefits and to separate to think and legacy the -- makes to on CDB revenue way out it side, what really quarter generate

that what And fruitful information example, helps think with partners forward to our that regard. as us beginning we for to look we've migrating scale and forward, partners. legacy really interchange help different HSAs completing some really HealthEquity. already looking Darcy I And of is, to been that our discussions provided then mentioned, increase network from all, process what leverage that add of secondly, in size the with partners WageWorks first the revenue have very custodial

feel our we will that's good So business help us that and and too. for competing folks like are

So target that's result net as the a of little where than will that's And and there. said is, to and much realize achieving sooner get that million $XX to headed. are of point the get our going we we that we're thought we to Ted time we're we'll take course, where in is, but I full, of think

to that? Darcy, anything add to

Darcy Mott

No.

then soon a as access that could we of client-held that well, to the and capture -- funds We we've side, to what through many as quickly she I a as try think about very getting faster. to effort went the think I as asks on came little things we talked the transition bit quickly. primarily concerted those possible. expense And made get

Jon Kessler

we? do I the interruption and -- the audio of on with don't Ted had middle given know, have we Steve if now, in call, I don't the the us

Ted Bloomberg

your you. are add But we Thank answer. to nothing here. Jon, Yes, to

Jon Kessler

skating do be They're way this, not Beach, not be Beach guys. teasing, we thank Thank they roller They're going was and the on Miami you. on that to Miami we're told See, roller-skating. may you, you to roller-skating.

Okay. Thanks, Anne.

Anne Samuel

helpful. was That Thanks. very

Operator

you. Thank

Our next comes from question Research. with Barrington Alex Paris

is line Your open. now

Chris Howe

sitting Good everyone. Alex. I'm afternoon, for now. Chris actually is Howe This in rollerblading right

So…

Jon Kessler

I. braver a than You're man

Chris Howe

Following the $XX a synergies, may would the upside quantifiable. perhaps that's some as integrate million. question, comment about business? is up realized that maybe towards part ahead on yet the previous Can schedule to see on of synergistic effectively you're I just and assume there additional yet you we of into continue the not you opportunity not WageWorks the

Jon Kessler

to is our the continue market, to winning as Ted that's but continue happening. way I in are to that, is thank that days going of then raising possible. stuff speaking to synergies this control what more we our biggest service market and as terms of is, course our that and talked reported, strategy thing, can I I of selling early And all as drive to at of and is goal benefits bankable real more the are in outpace whole as top where opportunities give of forth, us to of shine. mean the some with And to about component on well the which within getting that's and question But parlance already people both line the think ability to it on and all customers. us think the the we Yes. to advance the really our of that you synergies -- is by for so that really this to it on to is point is broadly company And really Obviously, the winning. and the transaction. the nature is guess as the our predated ultimately the add that at-bats in somewhat quickly this synergies average. that that by of of And more work of HSA batting I

advantage learn the to should related, Although, we it's I most things help growth be asset that's in how the And dollar doing used, etc. really them at quarter, use not out by platform of of saving every that this have the base way taking HCA directly more I they're on members the money. get mean, look the our an when our that

are thing but the quantify, just as not rather hope the things as And where we for over shines to shareholders icing, to our of of we that's really cake the the attempted long-term. for client. so course not our but that well members benefit And be those the

Chris Howe

we question, think calendar as mentioned on see of we different expectations. we're side how That's get think about or XX%, it into then one the that's think to in margin we ahead that as 'XX, great. that last the cost WageWork, XX% historical the should of had And of you should since the margins. Do opportunities how 'XX I we know, relates How and of business? side WageWorks, of fiscal roll going previously just potential topic year year expansion. in you and you north the

Jon Kessler

Darcy?

Darcy Mott

said before, also that marketplace so that albeit we can and some believe we to have recognize get changes, we acquisition of margin referring short to us grow but term, with on will that last long-term, to HealthEquity quarter actually wage long-term not that together the an Yes. business a combined timing and kind We synergies the performance. on grow that left the wage we specifically will Overtime, how you, believe inherited talked make absorb to separate but we're for that of the XX% is we dependent expect, commented expansion and quickly get we overall margins as margin the to with was be a do margin at opportunities into of out along the we've that will you business the opportunity with that in for them margins, about going blending we and business. we honest able EBITDA achieve we wage along the the for together -- margins, of of synergies that be we with But kind expansion. HealthEquity the that merge be the

Chris Howe

traffic quarter. appreciate all, is some good the bleeding. very and I'm I And there oncoming color and That's helpful. And ahead roller

in the back queue. have So jump I'll to

Darcy Mott

you Thanks, Chris. Talk later.

Operator

Thank you.

Fargo. comes Our Jamie from Stockton next with Wells question

is line now Your open.

Jamie Stockton

business you maybe wage contribution my the maybe quarter, your of up fourth margin far the EBITDA high and commentary lower quarter. do in as but about it remarks a if the think I Maybe previous something profitability had I 'XXs your on open work math and it that mentioned the of Darcy this, kind right, Thanks. following enrollment mid happens just that profitability of kind because during a is much implies reflecting wasn't in during the and lot number the as

Darcy Mott

You're correct, Jamie.

we mentioned accounts was just as lot before also my in cost because between seasonality expensed scene have is the reflected always this always margins that fourth arrive our fourth margins in there's of primarily. on-boarding would on quarter HealthEquity, third guidance quarter so, fourth wage, actually in we correct And get respect that that decrease, comments a to in to on as in with that and you're HealthEquity so performance and and a I experienced the in in and so experienced quarter the same seasonality, expect factor we similar quarter have is also for true the of

Jamie Stockton

I happening then question with going us to how your guess, a and notion work kind duration, commentary, just shorter the you and related some to have And other could side, yield of your be on of what more what look the of curious some and year you be control maybe next great. are at give what's of to commentary if going you than impacting the forward some you of to is I'm would Okay. color be much you cash putting get the that able control would are to the kind wage you my put wage versus is to which the environment have much on how is on just that yield as cash legacy that of don't work, cash

Darcy Mott

of to Yes, our was and commentary flavor. our surrounding we're trying HealthEquity business cash you most a Legacy give

second in we things rates, ladder, guided since we've well, bip as ladder fourth year I be don't we in rates months the quarter X and bip to to several future think because but we as know, said but the about the expect portion to ago Legacy quarter in the in slightly to get know, very our, 'XX, when some talked we've that third there that of decrease will we XX the that, been XXX today, our come of you we for full and with yields have we from XX FY third those range down both to that talked kind has respect slightly X impact guidance, these impact. of you the get we out, to

So we're in they the to environment flat -- interest we what really thought about rate up. HealthEquity on would slightly we talking -- be September said from

down this going seeing, it's because Now to we're be of slightly impact.

idea almost future on in move With respect we really derived network with haven't really -- so point to it's to were rates, the dependent the those into built reliant interest that of board. when we timing assets, assets those or to timing to that we when at the preconceived respect time any on HSA get [ph] from on able assets rates, prevalent to wage, re-utilization the the be revenue will and on of there our depository actually and the it's

Jamie Stockton

thank Okay, you.

Operator

Thank you.

Raymond James. comes with Peters from next Our Greg question

now open. is line Your

Unidentified Analyst

Hi, question. [ph] my is good Mark Thanks This for for Greg. taking afternoon.

Jon Kessler

rollerblading Marcos, about good ahead has talk all I'm to knows that. -- and Marcos go He to guessing, you.

Unidentified Analyst

in it, Jon. margin I quarter. was think of improvement is You excess I we know it hoping first points business basis about got guys my XXX math EBITDA adjusted the talk of you the if in and could base right,

on I'm Legacy HealthEquity hoping guys what's there on the side. comment could leverage maybe you the driving So

Jon Kessler

the will and at it the difficult difficult times more out to versus separate we HealthEquity business. synergy more gives -- the and over It's more that get WageWorks EBITDA level

entities. not of gets one kind company together as it the and as business all blended So managing separate we're as distinct

had that, there we even EBITDA some have think EBITDA And generate basis believe have be skewed can calculations, that that will being that I so, grow time higher has [ph], but individual those together to a growth the wage further. profitable we concern by engine that we collectively said, margins margins been and that that. But whatever we know we the long-term do we on over

be of our then feel are there generates trying deliver members has profitability to that because as scale driver will the you additional optimistic to more some business that Now been always but base transition dollars, integration and that save ultimately as Difficulty] to blend service. a we way when profitability as you're through [Technical we and the hiccups we revenue along that additional

Darcy Mott

and is I that strong have ultimately know should know, families just noting that's factor you comes over quarter that there that Legacy direction. it's very, to some the them families well the financial ultimately this that in about secure both worth integrate then straight model the their as very quarter shows HealthEquity health and drops in is is the we family point more a up the a that and and and and average the have them have how moving and certainly -- benefit more everything that it mean more was line future very course of and secure significant modest A do believe total normal the assets to our of kind planning one growth and as overall of lot drops to online of growth business you as an presence. when us every and have up into to saw of on care we bottom impact of improvements towards revenue relatively so as assets, in we

more. hopefully, So we'll see

Unidentified Analyst

update annualized side, million XXX better can the on side like ADP the some you us there, guys the I on seems guess, you on comments mentioned then give previously, it's than business. and an the wage revenue the of revenue, the it running And Great.

Jon Kessler

of on then topic ask that of ADP and Yes, I'll activity. comment Ted in kind more just comment and generally generally more to the

it out break like think I -- we expected the of -- and at be. as kind of right to where the we're ignore said, the you running end Darcy and top right if at synergies it So

more this Well, that into going we about We've Jeff, another forth have been have we from I it's so have though. nonetheless, that a so So is that's and story say enrollment think of but, seen level I as is conservative comment book with we're wage. question -- to probably stability you that good never the be and wouldn't regard guidance, think gained us. I of lesson to it, do but the enrollment running business that look and above an our the in pleases that a with but on months in Company actually gets legacy a ADP through a [ph]? but forth be to Ted, detail in want our we're that and annual little two the anything expectations, But I in. on to with certainly we're place so

Ted Bloomberg

Sure, thanks.

some book the ADP and simply as Jon happy huge alluded culture. lot rest of we're so it's address a service and challenges is which some for we're, is it of the we're kind rewarded were effort legacy our calls, more we and to this remediate, see to deploy we of of and purple really the important book resources us is focus client. kind seeing thrown service bringing a around then being service a the our us wrapping to of for in for to clients we thereby lot -- place stabilization quickly We've kind and have So hope on-shore of area and to of arms of a what

business, we're book done arms So we of getting previously. to the been stabilized I the we've kind our say of had never it business integration which and that of now and have complete around would the

now we to but feel lot where better probably that's XX a days we do. So it about than more ago, are work and did

Unidentified Analyst

just you. year. comment one for you on my let to -- Great, of next me Carnival last go I'm perhaps you Greg thank to release to persuade you. to count duties to out really And that Jon, want you know just I

Jon Kessler

Marcos that [ph]. with luck Good

Unidentified Analyst

Congrats. guys. Thanks,

Operator

you. Thank

Sandy with Our SunTrust. from comes Draper next question

is now open. line Your

Sandy Draper

market. probably notice Thanks first Steve, a employers survey Kaiser on Jon in time, or for of I around very reintroducing more know the Question for much. surveys, more I did you PPOs. with one we thing the are the referenced couple the

offering conversations you or promoting the is just PPOs an employers had noticed in in that again? curious Just season. you've our sales Thanks. it Have and

Jon Kessler

I and surveys, style pin finding mean, dancing post sometimes as the about intend a I we particularly want now HSA head want all Spending think but close and have measures option I little of but we thoughts. a great or with it pre-tax, options it's think I good idea yet healthcare not in -- that ready employers either on whereby largest by it's plan, option the to we're two cited flex others, plan the that think these are short great I is One an product and whether their it, all with spend and a scale make dollar the is for that to our to consistent player people safe of the or who account product to with business WageWorks, offer of perspective in bit, thing, that I and use an a we to be HMO that study an an to damn the to very, is, are product. that that's from that's a to think a really a

takeaway So, other that recognizing give people research the do with, want co-pay out-of-pockets. comfort of with I think sort versus particular people of options main have with that in that consistent the out in employers, is different there to levels

been not cases what and that plans we they of PPO preventive suspect and will that plan time HSA distinction of over more a a is between part that's plans, more so because opportunity between works we higher, Now, of step interesting, too, into is these ultimately and clarity look gives greater pricing co-pay drug, an the many years, data that's course traditional regard a with the see the for kind very different it further, with plus to that blur HSA and the the having and the over get of with that's items of good one pocket said, time HSA as plan, part really co-pay set. inclusion if the this of I at cost over way distinction lot plant, that the is are a in what's people the the you the you of plan out

that's would add Steve I how I that? So anything result you explain the to described. think to

Steve Neeleman

the right, the our when experience which thing I think choice for But been that us. balanced the choice. works I is is, employees is and take that more No, think like that give employers HSA to nice you're well

Sandy Draper

I'll Great, one thanks. stick to question.

Operator

Thank you.

Donald from Hooker KeyBanc. with Our next question comes

Your line is now open.

Donald Hooker

you for good you -- thank and afternoon. thank Great,

is the seem terms couple One a can of a of more the you still more all with of retirement -- hello, hear, any optimistic little relationships maybe Are traction past share very there quarters here phenomena? numbers year one -- there there. of bit us maybe of those more next in planning that or on you more

Jon Kessler

those the of expressed Well, I relationships. the in we retirement for when that a for think don't terms employer thing in members. more announced We've The cases done in relationships cycle, one habit in and announcing when September a the getting perhaps various say, with I whether and matter one we other. our said while would as objective the to of plan retirement that WageWorks out have are Don, sales that we'll of that or reasons, our of their place or relationships roughly coverage acquire after a doubling say mean, some we health and to we little probably we're make plan I retirement express done agreement the channel we or pointed

just ton is I see relationships date a sales plan but we -- relationships, of with that kind learning some and then season course, really point date selling have the now to everyone's been, kind stand it it We've, our and X% the we've benefits, focusing and regard can get it's current can to on what's really early really this that they well about not funds that of to that about really not good only or and days, obviously of are, lot some think in suspect tell help numbers look not matter meet no just we more that won of sales, we're little to of continue. it's been savings. up you think It's of new HSA, sales a the partners particularly you and aggregate a group the people able have that that's look and expect and -- some because end existing on to made I it's about it's a it's we underway. say in of with that to sense. the at I solution we're not getting intuitively trading the the at talking off where to are to the they we it indebted like the but way current once But that something X% we're we'll everybody who really a XXX(k) health the way this small everybody, introduce ends season. linked has makes just a instead where just, is helping

Donald Hooker

you sort Okay. quarters of ago couple attrition call do of follow-up think how cover when and the acquired revenue the acquired the as you WageWorks can churning we that years business, where you and see WageWorks of a to more realistically one of return you much growth FSA that maybe , ADP, on a on at are businesses communicated do and now, looking a sort sort of stabilize profile. side And mentioned ADP this of think I few were and the sort had well, from

Jon Kessler

team both is to did be question we're said and importantly, better, would -- and operating last XX% to think clients level know things that their thought two, incremental that of baseline the we in provided didn't is in Well, that that both I'm when of in the you're stuff Ted sort employer had basis baseline the pretty into is as see every up we it's you was on don't Legacy if mean we shade difficulties forward, moving had a may worth is, about time the reflects rough transaction, and now to we they now book of you more work we answers, of is the question where was quarter level the my XX answer the at the then we where and mind to it a on to because days is, the at we the in get service different have there think darker thought they something Legacy look out going bought that risk business the just resolving to of say but fact when got that we business, we've to the a next maybe been but your to we to outstanding mentioning that good the service September attrition violating thing. through advantage some date hopped teams in be in that that and said, net close going all today good my that ago, we of the the XX be is a here and and more at [indiscernible] year. our see Darcy it month I about that cases, when was moving that on rule And with that's of guess, rolling during difficulty, frankly, clients relationship service our team I learned accomplished question nothing, timeliness lost should and the XX,XXX implicit we QX remain a days the while diligence extent at had as going cleaned and and this moment what Ted cautious they of it's to was suggested. to guess, on, get suggested the -- we even are work gotten confident it the about see on never cycle have a going but want I doing at they phone, in going some thing say hop that from everything and I to which that and reflects sooner had to having really advisers beginning within forward, so take ago, signals tend caution, of on and I legacy of fair stick guidance in this employers be HealthEquity, suggested this side, I and but is feel that that's whole, only of absolutely phone we the we as escalations certainly do we, side when the was WageWorks guidance QX where they're would than Ted or on

Donald Hooker

much. very you Thank

Operator

Thank you.

Hill George comes Deutsche next from Bank. with Our question

now Your is open. line

George Hill

and guys afternoon, thanks the for Good question. How guys? taking you are

Jon Kessler

Welcome.

George Hill

I another follow-up guess, rates. Darcy, you. Jon Thank question and on

on guys visibility guess results on mitigating provide downward You rate done have have looks pressure commentary a good guess declined, I you're the rates as I job you what can like. any

got continue and have would rates you to environment were increase, an rates? kind of of the if to us to maximize see where potential rate change hold a guys could to begin to inflect faster the So we then upside in of balances reinvest kind all to help return positive or declines a of should our guys modest so kind how we current long you get into

Jon Kessler

Darcy?

Darcy Mott

your Yes, George. thanks question, for

rate very into you management of it that the environment we has that will and with worked us visibility cash every custodial to try back it's rate policy that a in environment a place chase for had to for is it. much continue we're to pre-IPO have ladder trying we don't out. -- policy. every We know, can can out squeeze as provide that for we of policy that interest current We stability and and as do and well What days that -- we get to going

to decreasing as to What relationships rate those. that seen and does fairly expand depository produces what So of we it is us significant. and both sell both provides our in rising and is, environment the we've ability

the continue so just in know depository time not relationships double us digits yields that and so seeing comes when those as but will flexible our get same flexibility decrease rates will happen go will period as you possible, as if to will you we we over funds provides that continue benefits the be path, period in we it we best. will is just in duration the manage rates the And have of if as we on we're know, same as down. in have, get to it We up, that our rates that over that duration go place

George Hill

a before Jon, color. follow-up. selling maybe that kind organization enrollment the chance integration of sponsors probably interesting guys they And of guys I What kind call out in kind would from just looking of your combined open teams, wage to plan the acquisition and what before. if had would kind of you hearing for during sales I space employer-sponsored we're around of be the close the you peak the of definitely feedback season Okay. and in but quick were the season

Jon Kessler

going we're I'm going to that to throw speak [ph]. --

Darcy Mott

business books a really and that we to as we've acquisition it's just you're what the seeking of kind CVB, XX% that solution look remarkable health side wage think on business business is good at record if prior and they of what legacy equity to our that would XX% I and talked to to was of George, want the call you hear prior pretty was bundle, people the voice two of HSA acquisition non-HSA consumer benefits. full the full

and as health is only to plan gone themselves think want our of market the whole simplicity not want consultants out one I they employers they we've benefit brokers, myriad the partner. And the also partners talk so key and thing just to and that the

stack add service want. they when can to and And exciting us bunch start the and obviously additional is so then and our of a of we to when pricing independent -- just there for products can, what stuff. the build we off for scale to other most bundle with and benefits into Is full

do that's you that's us, -- thing most for right. think I more is So resonated can is the the

been I'll Jon And while, I joined getting that a us, think ago, at doing pretty years accounts to I HSAs just started before you our things it's it from Spending that I'll these side. teachers of had wage, able just be done we and phone health like the for the and for Accounts I mean, they're and remind lot brothers remind since this your shortly we've we a with to Does only tremendous and yes, our often Flexible managing XX request. we but group our question, that plans to on George? HRAs XX,XXX executives think do is and yes and say them dabbling new our needed and not and to more with employers HealthEquity started being a that like can RFPs than we new all say the solution sales account answer need on more people legacy legacy sisters and about to employees have having wage, felt

George Hill

Thanks. and in it [indiscernible] back No, I'll doesn't. the queue. hop myself get

Operator

Thank you.

next Our comes question of Bank from Allen with Lutz America.

Your open. line is now

Allen Lutz

Thank questions. you for the

last For year? core HealthEquity, were this season would how you where this at you can selling versus time

Jon Kessler

great a it. cuts others that don't certainly and that at -- is year room longer concerned is pretty one Allen, ago feedback in no New where for the rock and and concern were basis good time of about were on Board in point, any that recall, will although and the way, you long here and year at we members and boat may, form. sales the use the our somewhat everyone we York let's we process was generously this really Board was telegraphed we topic. this in question, wrap same because employers room as about tax call bit about to the the do this you time, is We for were the Genuinely little reminiscent our in and call, before thank typically or the the asking a economy we we so hey, minutes have knows from shape was, December all That really the that from and the ago a we good it, want

just light alone benefits -- of a discussion. we're to lot kind so And we that got going of and

joke competitors, same little ago, a I view call in a group the a we over and little year came a the of time accounts, we the Now those in the we real and reflected through to folks mean, couple way, to if the had end, in earlier this gave but that there be my right coming is available, but I any recall terms cash the commented had here. into that call, better where at or heard fall By me our the concerns commented expressed future on of you well, health the want thought still Allen consumer than business, did absolutely we Investor is brother that of someone as we those -- on place in on number got something sell and Day the a day last their they in United to in recent to your was days. going this I one number else call. was say, did

some are, Now of the strong obviously, they're an reported first back truly I with actual was ago certainly some and both And there and the a quarters terms fourth those think was concern results and so we're into them the momentum three to featuring non-pessimism unique and ads as about in a to along that's, some of pace of account we've continue year that try growth. had going asset story. having that there

you've just As discussed.

take we've try is but version the as I going guess not And to granted, short a strong good it finish well. had do and We so we're so that far. year for

Allen Lutz

employers the compliance you directly coming see up was really at guess can by have. that of quarter Where caused the to you the expect in from I for outside following the coming change increase in sort and our sequential of look it employers employers season. new strong. growth selling sort mean, industry 'XX? posturing That's which fiscal thoughts are by think growth really you in seeing on on Thanks. the The then, year-over-year, Is continue normal we currently is it you strong. strength into Is helpful. what of HSA. XX% I that, do or is your

Jon Kessler

all, I'm is, change, first which in one is except has -- sure area, been obviously that of in there much last year particular. which Well, not

was say crazy. going but just anything but going was the it than a of also sound year. and happens part to sometimes sometimes, reticence cut the only that differs few page employers large think real real ultimately the good, of to were tax And up on I other Turn value just said a consumers, economy I right. changes do corporate benefits there that a moment As ago that heels have unfortunately we the next a and percent to it's what also in on

like offering. that we rates to in terms probably right said fundamental biggest slowdown fact Kaiser that. about and say to of And think is when employers out last the I that continue in we didn't offer in were it then, some with out was agree as the the came the that's sentiment I'm of year, not of world, after in see year group steadily market the real because year change. market to of small small follow That with a we a to tenancy way, always information, the turned only there little group real -- in but grow group we a still change large there world. more bit to of little the the lag in is group think small insurance because the is I that's part bit priced

that last particularly a -- One shine lot what strategy can light some market have within has on the I years got industry do so something that a our executing for do that the I been working impact, chose however, with I do revolves dollars in going that but versus don't [ph]vote what us, what's [/ph] that to shareholders your grow say, heard broker that give the time, chatter say community we've we very be and dollars, on it was the suspect choices the and showed I and for long and acquisition was okay, a let's on strengthen to us, the but to a think I around with for couple of here things that is in do sink was next lot we our thing on WageWorks world to then on think, market is, about -- any forth this do is us [ph]at-bats[/ph] few the candidly we're of would additional it. of the and and so going industry more to couple fee I where is we've part some think And we sort about, had of about months want a a in occurred. our this sense. makes the -- certainly think continue

Allen Lutz

Jon. Thanks,

Operator

Thank you.

of Goldman comes question Robert from Sachs. next Our Jones

line Your is now open.

Robert Jones

the just on question previous the synergy at throughout Great, that thanks guidance portfolio guidance that guys you could year for everything. was kind business wage. that back taking curious to the my opposed I'm strong all questions. it. out around up the excluding and the actually guess just about as progress full thought the of new the clearly, you legacy parse to wage in And go discussed? Appreciate there clearly upside any and following then I you as to tonight quarter incorporating coming just if from incorporates -- year legacy from business

Darcy Mott

historically Jon start drive relatively can the there details. year three particularly end really you're I'll to to And know we, are I business, all, will Darcy. first approach then, HealthEquity conservative that the the really know is for this going the of results. legacy into this very but sure new drivers, into Well, you guidance. go I'm that and a of take

is talked them interest which of the rate One about. environment we've

have environment, grow and also it's just growth in what's account; comparison assets they then the about the as And kind last as happening Secondly, don't particularly; vis-à-vis thirdly, Jon revenue talked cash assets, the account do. to and impact in the much rapidly, investments not year. cash of

our and conservative forecasting typically in that are of cash growth, on guidance. We reflected the is

record the year because this reasonably will of that what factor the account re-utilization that tell targets lot from confident January results we're takes that as for taking wage and revenue And about a said, We're when went; we're factor fourth we've our with said, because about account is cautious while in the year, and a make quarter Jon we're what the then synergy issue, how And plays reasonably achieved cautious us, acquisition, to regard. synergies. been EBITDA we in an talked very obviously the actions this in growth by basis, those Additionally, as for we've robust as possible, about the exactly is having here everybody working on we're we'll that both of growth this in our be and is that new into synergy achieving so cautious factoring and those time. and -- on fifth that is that. as fiscal we've

So order real work the requires synergy to a actually in into reflect to that. results quarter particular

So, of that once did again, in a conservative about we're in the -- particular re-utilization that regard those we we number.

Ted Bloomberg

to there I'm I add that really as not say is would sure -- frequently to answered. much

deliver, see our all same same ultimately, terms difficult the to that. for the ends know, you to by resource, obviously, to way, about the as people's page. you less do when when able do everyone from I it's in larger legacy forward this, maybe effectively time whether think of and be up the for aren't outcome frankly, When think it's involved; duplicative some better service our think everyone ultimately team ultimately segregating specifically margin able a -- what more are better they up efficiently, the in too will costs. with with of -- reflected all can you you you're down we're very maybe the of more But job business operate a to a as business but guidance, actually everyone that do a before the but of better segregate; I'm want -- our -- really and on elsewhere. operating to of get seeing of couple don't But I related transaction generate good in by I are -- take you be about level benefit the team ends career expansion core that we've to of areas we ability think particularly, a two. and with some hopes where tremendous way, you the into therefore certainly like going I stick-off we just then, job, really have it the and feel, advancement. areas this it is -- or I book are worth it's we be starts always said, feel or gets when the I That your And question the to closing costs; exist. don't highlighting that It for a with that platforms in business. think terms will everyone

so you're that thing you I've our them and and partners be to approached well that to is one is team, the way are to another whether the that responded does me this of work sort -- occur, as wage business stick existing and respond -- with, little the it's out both each have of able the say real see that And that it to team for going that then hard area in is tell, component benefits partners, core that really you business we operate a or And volume been our and that. but to if will head little vendor got is months, have partners overtime -- bit bring you how vigor you to I'd terms quarter is; point which but we of thus think; see two not two all then are more to has need in it before to of as they a to well able had to gross of sort you of margin. work the we We've does clear second get really it's do different our I with hope those have with operating as our kinds the that as baseline, going happen. very And management cost in three would far leverage pleased to me new. things see that to only and

fact be card consistently sacrifice be do depository think part market-leading look of working people want business or those that some the to you. in card in it, to if what or us are try or our promise we're issuing a willing rather going recognize we that we a a have way the for side process with I folks talking is where their at how whether I the we're about story who trying partner who have to to over-deliver processing operate other amount banks they it, than of and or margin or the that particularly, on attract one experience for it; and to know this and over networks

shoot say, is up maybe this So, those in dramatic off for the then year. in there are page where that is EBITDA really the EBITDA on two do don't the show -- but things that and they improvement guidance our per overachievement

but Now, rates are that a tailwind are going there are be in a when headwind balance times to our in and business headwind. a the other direction out rates that

up good direction that's everything really of is once to a the As earlier, probably that are me. in said blow that same is but at going thing things I and to not shoot level those the diversity --

Robert Jones

perspective. are really helpful I Those appreciate really it.

Ted Bloomberg

you. Thank

Operator

Thank you.

comes Marcon question with Mark next Baird. from Our

is line Your now open.

Mark Marcon

-- for everybody. about next Hey, joint that is questions short One you portfolio two excited may. hearing in most afternoon fairly the I within selling, the which of terms the Good you're a just about wage if is most which are of consumer-directed doing year? one; both the benefits be would effective can opposed the your been second the under And asset the your this BMY to get they've then going transfer as year placement basically and -- you within what where question, into then fund wage yield this portfolio [ph]? with

Jon Kessler

Darcy? second question that try first, to want You

Darcy Mott

place already through transferred we've working we assets, HAS we're process different and get that them as sheet talked, with process of each on With call been little funds we been yield as depositories to to that which said Mark. we've about we and contact happen. to we help in two client in those it's as that's and of want in removed there be placement expansion a now are have those had wage we And There And to of the before, in we're move you of getting are it today. XX all as out complicated We a employer quickly etcetera, etcetera. components process balance the have more think in fund a that already, because you and as we've know, our make little relationship, a respect you platform together that can relationships, is Sure. said, sheet. from those HSA monetizing but have bit but used very the those balance have to that first just challenging our to you -- of that's done has the bit individual days we've we which

that, so deposits replacing normal we go of we cash through And process depository those into do as then network. will our our

Jon Kessler

me; go American meet. call the this ends I you comes missionaries, regard the With be that but this to not There would it literally on kind with people question, CRM second. helping families have Yes. in of are been first when who make know, to

have I think I gets now think we a that it's what fair is believe that. almost to say that we X,XXX tools of really team missionaries. -- ultimately, more And choose and really, it me so team do have our to many help I people

$XX at it say I there is I to -- of to hell and -- a that kind of like, have else they're of and half convenient, like there the And this is -- week, all can't very fancy-pant always many a else I last it, you as of they was it it. to but how And and with commuter what-not and much so product through a CEOs, fancy a is like so, CDBs, close go CEOs like them the great lot an the like part that nothing like deal. lot bank and other and as hours a means yes, is if money the there example, are making of was where nothing like mean does long-term it and -- that and And assistant, a so is event is tell their that we a $XX; on I big savings is, taking incredibly make and them [ph], oh basis right. it used -- people; teller part and not may monthly does product

doesn't just role need source And it in them that be, week about to that's comes COBRA, forms changing happen a more trail, thing jobs; be, transition excited better COBRA, scared do reasons the look in we're at this a clients, it play going earlier right. a on makes we than But and Americans send can money better check-the-box, people immediately, that as people the isn't and jobs, and make to we our Mark. that the the it make right, someone are right, of process, done can from our we is that that. be friction they and Healthcare not no should now significant their to in on to suggested and for for don't right. clients, only cost help way we today need the that right. it campaign and be we And collect to not dollars There and can at things different we so those this and --

can it said earlier, Flexible as doctor -- the drug then, the HRAs, sure a I might this be though, say, gateway of to they they I'm used. a Steve they doctors And HAS, that's we are being Spending supposed way; not to in and way Accounts are kind of kind the the think put as

be with we're we're you make cannot need people -- to excited easier you the And as one that partners of and us forward about us scale; innovation, And to from about those we and for asking our ourselves. our scale, given can't we to about things commitment your they there we're business in going particularly want the if given this we obtained things to is run. is, ways like need don't so work that help our products do

meet; the the health and like is ability deliver that to ability really clients excellent to a it's I wealth to on to is offer simplicity their ultimately really what brokers ends the motivates answer to like our of say our to us that's and which stuff way the do to kind service people, and helping that's advisors make we while what's So, long families to a do. but exciting and guess connect beyond a

so fit was in that's why be forth. the good so felt a place, we And has this it why proven to first and

Mark Marcon

you. Excellent. Thank

Jon Kessler

Thanks, Mark.

Operator

further the Kessler you. would to closing remarks. questions Thank like Jon turn to any not I'm back this time. now call I over at for showing

Jon Kessler

us in for roller well. joining worked skates on Steve hour everyone and undisclosed than usual, for from or on thanks to that half Ted joining New that. sales schedule results something seems some forward look an Thanks, Year. of location us we'll to Well, then, And a earlier have updates usual providing activity after like our providing March. our quarter And the fourth

So, thanks everybody. Bye.

Operator

Ladies this participating. today's call. and for gentlemen, you Thank concludes conference

may You now disconnect.

HealthEquity (HQY) 4 Dec 192020 Q3 Earnings call transcript