HealthEquity (HQY) 8 Jun 212022 Q1 Earnings call transcript

Company Profile

Participants

Richard Putnam	Investor Relations
Jon Kessler	President and CEO
Dr. Steve Neeleman	Vice Chair and Founder
Tyson Murdock	Executive Vice President and CFO
Ted Bloomberg	Executive Vice President and COO
Greg Peters	Raymond James
George Hill	Deutsche Bank
David Larsen	BTIG
Donald Hooker	KeyBanc
Stephanie Davis	SVB Leerink
Sean Dodge	RBC Capital Markets
Mark Marcon	Baird
Sandy Draper	Truist Securities
Allen Lutz	Bank of America

Call transcript

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Operator

Please go ahead, Mr. Putnam.

Richard Putnam

Thank you, Carmen. Good afternoon. Welcome to HealthEquity’s First Quarter Fiscal Year 2022 Earnings Conference Call. Putnam, for Richard is name Investor HealthEquity. Relations My Jon and CEO; joining me President is today And Dr. Kessler, and Vice Neeleman, Steve our and Vice Executive Tyson Chief Operating Vice of our Officer. CFO; President President and Founder the Chair Company; the Murdock, Ted Executive Bloomberg, and company’s

two Before the have to Jon, over turn reminders. I I call important

comparable The that a release announcing also includes the recording of measures first webcast release year fiscal reference press will of is of and can issued from press owned definitions we our after this today’s the our in The First, our on be subsidiary which certain with of release website, accounts XXXX closed including release market measures these metrics Investor GAAP that include A contributions afternoon. WageWorks this ir.healthequity.com. quarter of Relations press it financial results copy financial reported a press was today. wholly for reconciliations found administers. and non-GAAP measures non-GAAP

here our reflect the are cause the expectations, today, that actual management’s There your and by which view questions uncertainties or as the considered predictions, results information subject be are comments factors differ today. estimates today. our forward-looking. These today SEC, will statements defined may other of X, XXXX, could to to forward-looking from including business, June important many relating affect to might forward-looking made and made as statements and statements to that materially Second, forward-looking contain statements responses risks

annual discussion the the of At encourage mic future our new reports We to statements assume on the that forward-looking revise to Form obligation and the of update or caution you and filed periodic Kessler. these placing future over turn and light instructions our other I’ll affect latest with the Q&A. statements Jon we also to risks prepared report XX-K we in our our our SEC. on of results CEO, we to information reliance factors remarks, against conclusion over these result, a or our in provide detailed price events. you will forward-looking these As to operator subsequent to stock market review the may and the turn host now of no or undue call

Jon Kessler

guidance review based done. QX raising this fiscal updated Richard. today. XXXX, late join during our HealthEquity’s somewhat Steve the on And Neeleman and spring fiscal fiscal you, will acquisition our will Ted which guidance announcing and Tyson Thank Today are we Q&A. for on WageWorks activity the April the us provide that review here will Well and are quarter fiscal of on the detail results is in we Hello, joining integration quarter operations on brisk financial for the results I full year also details on quarter, XXth and the of and and progress XXXX we will for reporting you very ended are everyone. results afternoon. XXXX strong thank for discuss first on year.

accounts versus reporting and by and custodial were last year-over-year Looking helped lower that five reopening and was include due at a Revenue the year-over-year was we’ve Adjusted year of million partially EBITDA first commuter quarter the ended lot that that of of and up $XX time. a XXX,XXX up impact in drive does pre-pandemic long that $XX quarter’s that members business metrics growth revenue. year $XX.X ago. year-over-year last similarly other benefited economic assets, trends the commuter reached and end assets been of on from at to accounts accounts and and commuter That’s at million. HSA a key and initial of $XX.X billion, the growth not a total asset from from yield and quarter’s our million, percent. end quarter year suspense. $XXX.X continue first Total in growth, nearly while members drive HealthEquity X.X remain HSA down X% for growth. HSA X% offset million first the headwinds million, revenue, largely record the member to even HSA yields which fell which CDB reached larger quarter to in XX%

grew sales will their investments members end, started connecting employers million and from sequentially quarter last with the incredible grew our of the invest, and to results, of year-over-year investing XX% detail, HSA HSAs, contribute and QX members health with year-over-year $XXX year despite and of record over HSA members more in an X% balance XX% XXX,XXX fiscal continue from wealth, spending. opened HSA XX% first restart average quarter Ted including As even fiscal the of Purple XXXX fiscal in year. a up XXX,XXX promising members Team by very new HSAs new as and grew a

Longer commutings really and this so talk acquisitions post-pandemic In hybrid those. offices will our strategies reboot that to organic addition business, assets results, -- benefits, numbers strategy and partner clients Fifth tools helping use of closings Further, enhance Third The in general Luum helped driving and little to very X.X beginning, employee put for each HealthEquity the shrink Third Further to from think benefits HealthEquity HSA we is new workplace HealthEquity’s footprint. about also increased and and of Further agreements today. partners’ figures HealthEquity’s deeper be roughly more Shield has partners commuter launch post-pandemic the growing the solution Luum It QX our Luum, Blue These that will clients additional to million in scale than custodial into the and is reached of billion and Cross term, respective core year. work carbon new market will reopen. course, and adding as the in Fifth fuel supporting commuter leadership Blue our commitment years Luum support to and $X I HealthEquity’s year portfolio. that offerings. growth flexible this for million included of come members. to in XXX want strong system, these Bank’s of strengthen supporting a to to through platform -- HSA partners capabilities we and later total growth better HSAs integration are, its their X API-based clients, not significant approximately of the with the HSA add and we’ll of the network branding reported upon

QX, evidence acquisition former very for growth. Healthcare results turn formerly operating latter in pandemic quarter, time delivering sales and activity as and beginning to with tailwinds. of office strong spend headwinds reached first categories, the addition lagging delivered promising -- pre-pandemic half first visits medical to card into The the lagging such important really long-term showing during of levels

increasing value and and Bond all year-over-year wins our opportunities XX-year principal sales that and yields line credit during the points perhaps rose managed reported with steepened volume capitalize well treasuries future. yields yield three we QX growth in that trend, for insurers, as of heretofore guarantee in custodial curve fully rose versus deposit for the the choice of our partners opening assets RFP a HealthEquity’s competition roster to as with XX basis client HSA New in more our rebound banks we adding new unions, what than include spread HSA and and today. called on and partners both we our portends are and QX expanding that in months members. new XX-year To

after announced Labor employers our on to word. Leading plans start employers second commuter fancy Heretofore of recovery consistent that’s year. Day in the a with plans announced finally urban leading the their assumption of offices a -- half to reopen

on financial to of sales, for pandemic we growth and to fiscal there performance, compelling review integration. the QX effects to still headwinds and With becoming and in will total to team investments committed turn strong our over call with tailwinds was that, in XXXX benefits evidence operations Ted significant weighed So beyond. while Ted? acquisition I the growth long-term delivered

Ted Bloomberg

Jon. everybody. Thanks, Good afternoon,

season a As our off start. to Jon selling mentioned, great is

year-over-year XX% of up XXXX. HSA versus were first sales new the First XX% quarter fiscal and quarter

We’re market. bundled continue back are both XX partners the deals to business of by services our are bear to more our also their had and as marketing up partners. XX% XX% add to this our and year represent we year-over-year. that with portion to have up a that are efforts medium-sized HealthEquity services distribution seeing relationships stalled fruit, last have even product more than -- shelves. added so activities returning In the only RFPs, new partners small Cross-sell X/X/XXXX far XX agreed distribution are strong coming partners and enterprise meaning new year-over-year with market owing evidence the and which year pipeline the opportunities RFPs up our to and deferred opportunities from one sales

schedule, many XXXX, subsidy, both we announced the On acquisitions talented team the COBRA ahead our is of and on we by the despite of platforms leverage another execution connected members. four migrations integration to are the middle the and have which complete track fiscal front, migrations recently completed The and same lot team work on. decommission a platform to in which of of going WageWorks the on QX,

permanent million complete XX have remaining of run synergies rate a $XX $XX to small and promised. the remain realized to-date, million and largest migrated number of the While of the of in to we migrations synergies $XX there platforms million mid-sized realize

As of fully revenue as way efforts more and cost that to platforms. $XX the and and on are become are Jon technology three Third mentioned, after close million closed. are the Further our Fifth deals leading HSA years to achieve believe further Planning the transaction once we well-positioned we integrate within we provider likely synergies of under

with to entire against but efforts recent Luum takes It village cross-selling this Purple. to of XXXX started foot. and Team COBRA to required Last to that our still for right entire those shout is is clients with the much out subsidy our organization have eligible. to partner we but continued fill execute this to on Additionally, do, huge is are with opportunities. There effort the regulations. the a subsidy beginning pipeline to support not the fiscal the least, to promising tireless quickly Thanks and deliver efforts

turn review our Tyson results. will financial over I Now it to to

Tyson Murdock

measures first financial of in non-GAAP today’s press I a and GAAP GAAP Ted. release. review will you, our quarter non-GAAP found results, Thank measures to is reconciliation

economic XXX share the service $XXX.X yield as primarily cash all impacted annualized X% XX% this with basis $XX.X yield while blended offset of to million cash the is over the XX% compared average revenue in an in the in increased quarter. in the HSA decrease our spend first of CDBs table the rate Operating platforms million in of quarter. the $X.X decline other year HSA increase a representing loss yield quarter, last amortization across share yield and due of prior rate grew revenue or during XX% profit XX% growth $XX.X for to was $X.X prior press with grew X% of $XX.X to quarter, first in in quarter were details. accounts. average Service was Gross and as in cash million XX% year. primarily million, quarter. $XXX.X to revenue which million per GAAP assets year. growth integration net million loss was the $X.X margin X% income Income of additional of Interchange more the declined was total pandemic commuter yield average merger of Custodial of the quarter. million revenue. million, expenses XX% accounts revenue represented the to total today’s growth quarter operations The together basis with from per revenue in was a million quarter quarter $X.XX $XX with in than revenue. prior X% $X.XX quarter in year-over-year. million XX% in cash. slightly HSA representing yield in and investments first to effects growth revenue attributable $XXX.X of on intangible to and Net the helped compared revenue The quarter. or interest the active first accounts, $XX.X is the EPS million, during on HSA in XX-basis-point yield interchange provides to was First annualized declined decrease to of or XX% assets in for a in Gross average a HSA including The year. revenue expenses, points total rebound the The This release a HSA HSAs on compared acquired compared the

Non-GAAP up decreased share, year, $X.XX of income year. year compared adjusted the through million share X% Adjusted to Our the non-GAAP $XX net $X.XX for million net for EBITDA per COVID. was impact ago. $XX a this income operating the XX%, per margin was quarter and from first last was per to million EBITDA while $XX.X quarter share of

to Turning sheet. the balance

the April and issuance between costs, close $XXX Based not acquisitions. diluted share to be ended fiscal following year will of on to revenue include $XXX $XXX for quarter a $XXX balance, estimate and range cash $X.XX economic and Revenue line be per on the have of for had include -- the Since potential estimate upon closed not of where drawn required custodial our includes EBITDA As equivalents, and Third Further guidance of the between based $XXX based The and million Third million Fifth the today. with guidance outstanding adjusted we million. $X.XX the Further Today’s and outstanding revenue XXXX. course, income XX acquisitions, our shares outstanding $XXX HSA to income XXXX, still service results and in and from providing XXXX between net of environment, million our first net from guidance and million with million, of most from Fifth per we view the we does funding to we amounts HSAs current recent or million, estimated includes an non-GAAP for on still yet are resulting credit. share net the million of non-GAAP Bank. $XXX on of fiscal between interchange $XXX million -- XX, cash cash debt no

anticipate year. indicated acquisitions Jon earlier, later those we As closing both on this

Fifth the XXX of then as insured of assumes with Our points cash, guidance HSA assets or to guidance, principal our transition guarantee back yield yield HealthEquity approximately with Further including prevailing acquisitions does all HSA a rates. HSA yield at pending the not on cash guidance to basis Third of today’s partners

a be of Ted synergies to return the reactivate of share the to to XXXX continue million. to commuter also of and efforts rate Guidance estimates of contemplates revenue half in $XX and WageWorks from accounts for We assumes conservative projected estimated from The subsidy fiscal anticipate due some COBRA our the latter a rate effect XX% and work. with income year count discussed. outlook run approximately diluted statutory that also tax

reporting detailed guidance definition the release. end in a items of to the reconciliation non-GAAP earnings As periods, of the recent we in year metrics have the GAAP is and done included our such provided full includes earnings release a at of all

closing With while In assets acquired addition, the I’ll acquired call back revenue not to excluded income, assets for excluded. intangible amortization non-GAAP from net the from the intangible over generated of that, Jon Thanks. is turn those some remarks. being is

Jon Kessler

Tyson, Thanks, nicely and everybody. Thanks, done, Ted.

for year, I we pants on fact, that in weekend our than became for all a team with leaders something on the long this at our and give which haven’t bunch, deserved course, better year thanks were else, those more something to shareholders. the care typically other We for not proceedings, potential inclusive have to challenges not months. the Today. safe, and bonuses each the XX I think, a partners, the cohesive and is our stayed taken the So positioned some and also HealthEquity’s in point person more start promising I of, and XX of clients, in the Purple responsible members. resiliency months well do, pants. full team that’s leaders seeing This like and to past despite of families are is paid more even our our from members, teammates in put over deliver for know

remarkable Thank something With that, Team So Purple, let’s this open truly for Operator? teams did. you, is call this questions. achievement. the to

Operator

with you. comes Raymond Our first Peters question Instructions] Thank [Operator from James. Greg

Greg Peters

afternoon, Good everyone.

Jon Kessler

Good afternoon, Greg.

Greg Peters

for you comments Thank Hey. pants. your about

know for paint picture to You a how sure.

Jon Kessler

by has all I shorts mean, been I policy attention. I’m justified my seems like saying is -- all the pants it

Greg Peters

I’m it. in now got right myself. I shorts

So...

Jon Kessler

in be. should, should everyone you Florida As

Greg Peters

Indeed. Anyways.

about it little revenue you was? pressure in about Jon, more of quarter guess, to I and the these of should begin percentage improve bit second will competitive some account interested on the think you or why per I a in as that total total a happened the hopefully have Tyson limit recovers back service I’m were guess total but I on I’d the first economy what basis? revenue like should there the per what gave talk year, upside Tyson is in know there to well, as pressure numbers basis you a service revenue a of was, as So, comment spend the maybe And said per will account component. obviously account half comments I is not the But what a the or to -- out service what some and accounts

Tyson Murdock

start, and Jon. ahead go I’ll

Jon Kessler

Tyson?

Tyson Murdock

Yeah. impacting back, I the come it happen. about about that’s really mean, commuter the to when how model it and when so think think your really that matters just revenue you line comes of down item service and right? to, That’s return going you what’s

know that, talked September about back we’re You and that we we was, watching people coming see Golf very the course, you as but own in tournaments just as what you of you return see yet in business well and that people restoring really seen and we timeframe now, news haven’t and see it see to-date everywhere. really that and people closely at our

know So to happen. going that you that’s

that. we’ve selling we it, when a quite And gave as the of a metrics so, successful think just having I competitive Ted show that dialog few very I within outlined, actually -- had there -- seasoning are think, about side about to that a

given conversations. I think unusual, there prior our Greg, don’t so And anything is

deal HSA percentages will we down every pricing only competitive that, when so that the thing if Jon and that don’t We the adds. there from Of of see right think in let’s increase revenue assets I and do disclose the And competition. remains on our single come a able really certainly really think underwrite some we’re to amount are is I’ll -- there have as overall bundling account has then profit, to a single-digit and approach the and number it. year. continued the as always stop right folks of provides I there we’ll the same course, effort far that’s that other but

Jon Kessler

not when I’m that It is, is to I were as look, a of implied No. switch the the something I and true. we commuter sort it guide but to thing the is -- and last about to the talked you forth. just mean, be that anything just about conservatism add think, real light rebound I clearly have but anyway. not are mean, commuter returning sure happening folks I’ll we I and by this which about our that add, where -- quizzed, Greg, is and going remains others, on so rebounding cities quarter

so, in but really that’s whole And discussion. the the factor biggest

Greg Peters

pivot Okay. And to then follow-up question M&A. will my

far equity? in moment shareholders your you another just you’ve what should or are to announced? announced in to capital, a opportunities busy already raised spend your be What’s the major you you’ve see so raise developing fund expect you and you’ve potential the the year to had some for Is transactions the -- M&A pipeline? You’ve another that going at equity, view full there hands of processing raise marketplace capital

Jon Kessler

to be twitch. you’re our intending antenna is I going in returns not of in Bit fund event. the not scale I that a that evenly managers managers fund I big returns like, to seeing imply hedge business those look, the think, feel have increasing hedge of antenna are just like shared. here any picture to -- somewhere, and X,XXX

And demonstrated of I talking -- portfolio both turns of be and activity is understood there working that transaction M&A public is perspective but discussion really good getting twists to we and folks strong continue And navigating some M&A, anybody Third and with we’ve think in related the thing proven as example to understand others, going M&A particular Fifth and sort and we so the Third but that that Fifth that I an were a was this think in of about think a deliver in few I are certainly returns from be can where partner in good to domain in a partner. there from their that have done. we twists modest sellers the turns,

or key is, be a good that that’s venues. to in show So me can for a of quarter two, combination for and this But fourth deals portfolio transactions think the to that One, third shareholders. is and powder a left returns, little don’t concluded quarter. quarter, we’ve that sellers we’re for what and -- return know we and this kinds we to show after those do I we have of second got. they’re we delivering won’t of we we’ve if forward things transaction we even hesitate go strong can we’re bit kinds winning the type good will that current those partner things for

So kind now. am at where of right that’s

Greg Peters

for it. answers. Got the Thanks

Jon Kessler

Greg. Thanks

Tyson Murdock

Greg. Yeah. Thanks,

Operator

you. Thank

comes question Bank. George next Deutsche Our Hill with from

Your please. question

George Hill

the Good taking say And degrees New Thanks XX I’ll for in it’s Jon, morning, Hampshire. guys. over question.

I’m in shorts too. So

Jon Kessler

Outstanding.

George Hill

I guess, I want to…

Jon Kessler

on backwards. Probably

George Hill

you have I or XXXX the by talking for either customers interactions ability season retention, starts? about question part the Further B Fifth would normal around share net that two happening And to ability you on maybe basis feel selling that. an that? just don’t dollar know to or you I return on client I go hear fast know the with we of don’t if your is, I take organic guess, love is do company’s in questions. through season, enough a to comfortable the the selling Number see as one net to thoughts have focus about retention and my of about would Third,

Jon Kessler

what Further some we’ve we’re talked position, Ted beyond then clients the a to of since add them. offered collectively and provide earlier to Yeah. most you don’t start it’s seeing sales valuable about great color the why and cycle something the in if I’ll in think Ted, statistics Steve talk I and can you’re around

Ted Bloomberg

back I’m happy to it then kick it you turn off to and add some color Sure. to gentlemen commentary. Yeah.

the So on I question, your on of cycle. George, think part first the sales

We are optimistic. cautiously

quality sales to market. that high, are the are busy. The we’re year the of holding deals that did disappear coming finalist Our back representatives meetings last are

one really the with know, we relationships to of sales how turn don’t XXXX. is the -- January us know are cycle going you’ve partners Our enough developing. covered But out until of long to

all and And the and top we all levels the stuff we are be the really those want well-positioned all in so funnel of feel to conversations. inputs the where and activity relative to marketplace the

it We hopes for in retention did turn on partner both amount research and client attracted Jon with your are Their the did that take like sides base portion I is much fair larger Third we’ve things the quick both that and clients and one and a marketplace. on partner at us have just like is analytical I’ll of heard. significant distribution work acquisitions, Before Their part a second We which for and Jon, over to asset the Steve especially tremendous shot the a the distribution question, so client is. of Further calls one with of working we so partners reputation to And the market coin. client and personally, of working high has Further. in these Further types. Fifth of preparation really as which them, pleased them. said, I we

their time and prospects, of pretty for team that’s we’re great work lot a long high Further great And a what’s to done team obviously, but to so and your so about a we delivered service bullish have the the job. we be clients retention in quality think

and color. So some to I’ll now turn it add Jon over Steve to

Jon Kessler

Steve?

Dr. Steve Neeleman

off would said. voice. just of Yeah. Hey, your of to kind hear Ted Good tag George. what team I

noticed going how what get hair right, we’ve figure just office in this win all, and just lot want I out on fire direction, even of going another that they with that all it lot we when kind don’t clock and the a HealthEquity, them it’s hold because more make move intent savings to say then really different to if some on year, is year meetings, people lot and their get and the just these of think we’re membership confident offer we’re a point to is a it different trying people tone of and health than but choose this better continue out in to distraction. CDBs think and positive choices sometimes are for people know accounts choose the of rather people leaders to I to making put to and better we’ve ahead, their just us choices at they’re this focus of almost is pretty other seen There base. a will resets to

were whereas could of that finalist weren’t we mind a And we of them. top have that just feel was meetings the and it tell their and that kind tailwind as distracted with of you lot of we so, People the year, headwind. year remain proverbial a just last last we a when lot no decisions

love So to of -- do on with as meetings. we’re encouraged and being I’m these all calls I teams. and our

Jon Kessler

answers add share in effectively market terms then to market questions address growth. around sort growth. talk question of, of those all I’ll The is, point I fact -- I think, just those the about If that in

muscle mid-sized to that and One of market so, a product efforts lead remarks BXB side the seen Ted on made a has into whole the some build the that and have reflects for direct what the we the have small markets a that of prepared want as year. to that the market, its we generation to his around to marketing and And is growth perhaps well genuine the about see growth growth that it’s items here. the area which due we now fold last to the market selling, significant SMB outperform the was flow the talked in also muscle that and lead in -- really But true. in that as that’s and of as sell is around mid-sized, -- the is to team to that’s part in around sort it several and

that in that again I to George, sort consistent quarter relative but as terms reported, promising. as only So, one well other of is the what is actual the it’s with in answer a quarter, the think, of the both comments, earlier competitors it’s turned quite pipeline data accounts

George Hill

Very helpful, you. Thank Jon.

Jon Kessler

sir. you, Thank

Operator

Our with David Larsen question next from BTIG. is

please. Your question

Jon Kessler

David. Hi,

David Larsen

Hi. Hi. and year good a the a to here. quarter on start Congratulations good

Jon Kessler

Thank you.

David Larsen

Can thought expectations like in maybe custodial a the to line seems Yes. with little Can where more it maybe your you is yield bit you you me It would. environment in talk about coming revenue? right talk? for

about forward. for Just any thoughts going the rates. to trend talk raise has been Fed rising around interest might There inflation, where that potential

Just would helpful? so any more be around very color Thanks much. that

Jon Kessler

Sure.

the Let is million short-term, that it believe I commented it bit in have and Darcy yield of note of QX. we million expect over $XXX that is in with with me that on for that a agreements sort ladder. did we maybe down that last yield of year as our to and yields to multiyear over was it part as was roll quarter, course come will will Tyson year million $XXX our respect remains the the is the despite guidance turning cash $XXX And custodial important in say, as

think are or is still broadly that that are are there number that I marketplace environment things, in that, So doing with are we having of said, been out yield promising. do both headwind a in us. the economic the happening the That

XX while substantially XX ago. think, yields maybe fall quarter bank of those days sense, fiscal should. they in And gone over deposits Tyson months say look were first to the the it’s are where whatever is. or well. not, are the long-term, things six tend as XX full our let’s internally additionally now the so this same last basis tend But pattern both through encouraging. our always Nonetheless in pricing all the than and we lag longer higher sustaining period higher all term and We that kind that and And offered will medium as and comments I mentioned we’ve basis levels, of points then I in to clearly feeling at points, that’s the at fact

for these try company. are always a and and members vigorously, helps and always manage of so all the going we our of and strength for the clients taking even that. to more been that that We’re steps and to something to than competed more guaranteed some in It’s assets we’re ourselves of do is been This do both the assure past. IRR that well stuff keep for we that that us competitive kind that our

over this to so also And kind and business into those business of don’t to this and that goal still low ultra of a the thing. should Weathering dividends of have really possible of and kind guidance expectation yields, if course like the that biggest of is seems a low that effect say right decisions long-term to be you think pretty the pays business, our I yields turns platform see ultra back. lastly I the of an that period using another when year, that is to make period will will experience implies that, we’re even that the be all and as tailwind good the cash Steve’s anything. is airline in continuing forth, to we bigger weathered make and say I I efficient yields and the think of coming from yields this and the sale a having that’s build need come weathering this cost remainder so our thing that the that shouldn’t Again, this size But borrowing the year of weathered. build period that headwind kind over And down.

So while actions be of point looking forward where to forward smart real will we’ve because then, taken we we’re to -- we isn’t we’re but now. all it where we’re the can yet, here looking seem like the it point can the

David Larsen

It Great. this a seems Thanks of much. agree you generally Would so like for might sort that… be yields. with floor

Jon Kessler

I we… think

David Larsen

higher XXXX with fiscal and agree probably you … that should yields, speaking? would have generally

Jon Kessler

contracts in is the this activity. say right? at XXXX point. we’ve would XXXX said third we So, they we’ve of over still giving least terms that rolling are what on not fiscal year of cash less and that fiscal be and are at -- What than is that the the said placing elsewhere that I anything that is -- in to, at I fiscal definitely implication are guidance point business we on of

I not like add that’s we’re can. that but is don’t I that point? it. should say, we feel should that anything I Kessler We’ll provide that’s that it XXXX I’m it Tyson out on position all bottom probably, about don’t to I’m implication But because on I there. say, so, we should say calling And be as -- mean, as guidance up. soon think to the I a -- this. in or and

Tyson Murdock

No.

got it. I think you

David Larsen

a Thanks very quarter. much. on Congrats good

Jon Kessler

Thank you, David.

Operator

next question with from comes Hooker Our KeyBanc. Donald

please. question Your

Donald Hooker

curious what ability think sort there stuck that further that that afternoon. a little and or was past want make bit thing private like hear interesting acquisition Is Jon that label? you to label was unique trying Good why of in would that do is a -- about it was something I’d I heads your something out you that. on the makes to now? significant to to of I one love doing I the the me thoughts. Great. talk tails about one private furthers can wasn’t that tried would I what more that and

Jon Kessler

Thank Don. this, you about for asking No.

long what a see around very, been time. having think interesting you for market our I it’s very is,

times to Our interested goal when when very things regard we’re meet and interested each thing. broad a shop for -- right? primarily we’re We private HealthEquity, it’s been has understand, can of kind embed It’s and a partner. more not we have our independence in our deeply the they’re and partners the we times product into are how of they let’s partners there’s more there been conveying at more our kind really are label, And to with are depth those to little is to that of which when that then distribute, using the there -- distributing go that. partners. than where -- are services partners, -- our have about are not but embedding we there in be At come product -- the

not choose going has done that magic certain sell it’s shouldn’t service I what software And gives API to to they yeah, ball think us will you’re really but what got that We it’s we magic, of will it’s like meet that that kind -- We never partners do bearings, opportunity where be are. You’ve probably it there say doing and of is, sometimes and so you know magic enables don’t And to of migrate our the Further what sell we APIs. a as do software. what I the But are be through thing. forth. together the is it, it’s to thing. elements all

that plus well partners doing this, our across I make on our been what partners. or we more product, know less some partners sometimes this where to as one sometimes opportunity. right, than do as The the seen think think plan -- otherwise well opportunity and great a that’s segment, And more there’s want is has health you’ve topic. one label place trips trips as some I on two in the leverage do, of and what embedding kind But just where this of do, as make we of the clients round utilized we with you round can best primary makes partner

and competitively would technology just offer. whoever that guess, this haven’t the be absolutely that in as to And to so, love There but certainly from useful a something HSA. are we partnered had we couldn’t useful I partners extent us, have this I see we to perspective, capability want it’s with

means solution here total want kind is being clients that’s our real able drive also to our then that at sometimes point brought want and and the offer sometimes on in whatever HSA wherever the strategy, strategy. a of partnering so CDV be depth that we side, they want it to who the but then buy on and help different being could solution So deal idea we is means partners ways to sometimes means their as it level with of

Donald Hooker

it. Got Okay.

Dr. Steve Neeleman

then maybe… And

Jon Kessler

Steve. ahead, Go

Dr. Steve Neeleman

want just it more one segments want It’s health plans just completely make to I even interesting among they quick. some comment brand… have real to

Jon Kessler

Right.

Dr. Steve Neeleman

the into …to doesn’t smaller Whereas large health plans it have really make brand may tend on the solution, multiple HSA to say CDV they get plans. the don’t to They you maybe sense. businesses health example health whereas or for that. a sense more want It have employers individuals makes like plan. when

Jon’s point plans. we these creates to this with So more partner as health flexibility just

So Jon said well. it

Donald Hooker

the give quick, And maybe employment on It’s picture perspective at your quick so a intriguing. employers. us can update real your you then on

were think I last we year worried unemployment. about

Jon Kessler

Yeah.

Donald Hooker

back, is for guidance? guys. a here tailwind in raging Seems there like you What’s your things are

Jon Kessler

Yeah.

on reflects ill-setting that. just guidance broad mean, I just that, my putting macro I is of say the I our consensus. macro very this I mean would think, what me is now and simply economy

million that very workforce pretty declining faster is source absolutely the market employment something is they or than and to the to will is that’s rate rate clear real are the take think they to whenever are be than dislocation in I has return been workers or twofold. is some that workforce in they that’s never never going And that will some chance unemployment from X unemployment But to slowly have will there’s reenter industries. whatever. -- One and data probably it jobs why huge time there seems is else of have try or to the is the a that and the that’s you then, workers going declining growing. That’s the certain is that good There’s faster they never re-stepped. a and heal. and real secondly,

also we point factor if be the headline took year year story. underlying should my worth macro guess are can consensus just this I So would that is this doesn’t full the absolutely and absolutely take help fantastic. last the that it’s But that a and absolutely heal we -- the the that following with think that tell item noting be this it’s we would healed share market I one market of kind

jobs of level that. million pre-pandemic short had $X we’re We of that are at back we still $X million, the still not and probably

yeah and So from chop still going it’s are some to the wood be going gains there’s to to here. harder

Donald Hooker

your Thank you for perspective.

Jon Kessler

Thanks, Don.

Operator

Our with next question from comes SVB Leerink. Davis Stephanie

Jon Kessler

Stephanie. Hey,

Stephanie Davis

Hey, much… guys. well. team the and as transactions is Congrats very the on on and quarter me It count shorts in

Jon Kessler

All right.

Stephanie Davis

compare as we it some on should think of versus commuter how remain with? to the service we through your something how and to bucket change step other guys me versus Luum’s by that guidance about conservative much all yields impact else, you and revenues walk with you Could maybe to

Jon Kessler

Tyson or Ted?

Ted Bloomberg

Yeah. I…

Tyson Murdock

How Stephanie. are you Thank you? Yeah.

Stephanie Davis

Hey.

Tyson Murdock

we No. issues the You got for think of pandemic quarter commuter. with so Thanks on QX me. guidance I out have It that think When really was quarter the obviously, about raise a you coming the reasonable still was I still a had question. about good.

-- still and you You positive coming thing. back the so that’s have spend

on off rolling of accounts FSA based got the out. some You’ve legislation the those and pushing timing

So then the got there. away efforts that’s you’ve in and then goes some COBRA

now the really a that really all that’s going the thought little we exactly over items where and so the course up year remainder how learned different push to it’s we a to of returns those right balance bit to business lot from the think be So we’re And guidance among be. there’s about that. of a that

to you it about anything So I those guys Jon, I’m taking don’t that as into things are and the I think Ted, some of account add? have know,

Jon Kessler

No.

Stephanie Davis

of COBRA on Then, recent the seeing around change the I influence that reimbursement? about right. you’re that and more could thinking was any pockets those early All could of policy upside into kind double business have. you hoping you

Tyson Murdock

Yeah. There we did particularly busy so mean. and actually we’re

been be for some of get COBRA. within amounted the that QX cost, well. has certainly now going a outlined guidance in will QX, the initial the So and necessarily see those to the to the of get see then getting significant of you you some to and occur revenue from to those and the and of as get generate customers But the out efforts potentially effect as there guidance people and in them start in team in off here and we regulations and Ted the mainly revenue that clients that notification efforts after who help needed this that commitments come significant made get you’ll front the not and see that to our that will uptick out in uptake during

Stephanie Davis

Thank you both. done. it’s And

Jon Kessler

Stephanie. Thanks,

Operator

Thank you.

RBC Markets. comes Sean Capital question with next from Our Dodge

Jon Kessler

Sean.

Sean Dodge

account invested to to similar of so much help can assets. yields Good us Hi. incremental there the the Third acquisition with $XXX share difference million XXX,XXX any versus fees us that’ll Thanks. HAS, going to cash? monthly Are holding assets How is you Maybe understand revenue Fifth HealthEquity? Any are earning? in the those back the details add afternoon. potential accounts other their

Jon Kessler

encourage that for the balance acquire a account having we on we’ll couple lower higher. think, point average and Yeah. average you HSA we we account fees fees this things. close are that’s said, an at portfolios, per shortly all typically first HealthEquity certainly think say and But have thereafter will some I of we we’ll to relied mean mean because our either quarter when is of would than we’ll of have in I case I reflect the been sort something or and this because it next more that per in do whatever all the continent sort guidance the of then same. also readily because

math $X,XXX. the is the well in the balance over average do counties you If

and then probably so place assets. obviously guess, and So one we’ll that’s factor I the

interchange place pretty see we’ll that And accounts. so do for the we’ll them at when goes, how sites it’s it. then yields then spend the -- to our prevailing And typical time current and

we boils that’s of know it so advance fundamentally, bit So down in try of guidance as I as we’ll date. soon close say, challenge guess would information a little I this Sean doing don’t and closes reflect in the the that, sort our to of

Sean Dodge

Got it.

does many up in your latter take in where employment actually they would not view impact COBRA how opt to we bit on little think If activity the was quickly maybe picture to of quarter. the And of the second there the employment being the COVID position on or a a revenue improving in of related said Okay. that about notifications need half the you some end COBRA, year… or Tyson just recovery,

Jon Kessler

don’t think opt to are take We too out. going to many people

terrible I early by but us. think, would not I the at suggest days, it

Tyson Murdock

all by of us. Not

Jon Kessler

usual that of and remainder of number with interesting has think I is our factored us that one more I’ll moving guidance at kind know the unknowns pieces. take this. an here the led mean, it’s than that’s a into mean I you of look, shot I this the year of

revenues, if we that’s truth that have the we’ve in know, argument that. well, that you do when someone so answer what is, see, -- is mount what to we of and forecast say, minute a real then we could and can and both wait we try know jobs terms and costs And you has and exactly everyone to some don’t don’t that could to tried there’s

or revenue all -- look it one it is or thing some be other, The is of the existence have impact and end who that profitability all taken not this human will material to care the about off So we the people, other. our or to we’ll get direction of, take butts one clients we thing way that, in enough. best that our going need will be whether the work care do of, shown is to hopefully,

Sean Dodge

it. Got

Okay. That’s very helpful.

Jon Kessler

Thanks, Sean.

Operator

you. Thank

Our next question comes from Mark Marcon with Baird.

Mark Marcon

with congrats as think am to. we about relative jumbo the on the to and it bit afternoon five-year the talk increased to yield Good number I you’ve going to relates talked wondering, should three-year Hey. effective quarter. get How’s typical now? to of partners that deposit looking the that premium CDs? say if little you that can a How about you’re

Jon Kessler

hard bit little to right know there’s a it’s occurring mean, Mark, I placement not because Yeah. much now.

and I rubber two one trick is are lot agreements the until will obtaining real track say guess, having your record well, of in little a and season the road the moves. end year. where day a of the We’re period meets having the nothing, I of none for competition that, a a a But, these to at premium money there’s of talking because is having in the delivering, -- later money the is

optimistic things There the are And since most be obviously impacts the and help I parties. put will can so, with this unfortunate, -- that catch impacts would we I a future most makes as think, of is. us on having lot we would going somewhat much late at nonetheless, benefit there where more of that it’s the and occur more in those the as places it us. of hard having is our all certainly something different to pretty of one of again placements in year money But And year. that worked those be are years discussions of every

Mark Marcon

that coming mean just say follow-up than an placements that, does current in are rolling and it off? less to I I effective you on mean, yield Okay. did that’s what’s seem,

Jon Kessler

Sure.

Mark Marcon

are Do that sense -- you you is up. starting that getting move to though end bottom the

in think we sequentially necessarily terms terms in by So closer the for about for as full getting the to yield? going effective bottom year -- of that the not year, end of be just to but year, this next probably getting we’re the of we’re

Jon Kessler

the I trying and the mean is clearly been is, think a narrowing narrowed the ask, the in that to both on side, has So other gap answer if side right? directions, there you’re I yes. demand

Mark Marcon

to that expectations. there, that’s you nicely. relative sequential And Okay. picked where talk mean, I acceleration Can this then Great. Interchange monthly little about you’re were a up really strong the bit that seeing things really because looks,

bit little pace the talk about the a you just there? that can So of rebound

Jon Kessler

Tyson?

Tyson Murdock

Yeah. the area places tracked. to nice that that getting nice than what see was lagged even a bright and was that the particularly be see pretty saw even better we through as some in largely closed where the was That different one there sort if and will in see was to the people the single spend real spend that was has was that not cases month were that, so we Yeah, little people every consistent. things going to They the procedures we walked of better to spot and we amount and normalized of that one medical of relative most quarter which a expected.

commuter not clearly the Of there. course interchange is still

Mark Marcon

Yeah. Great.

Jon Kessler

I just… would

Mark Marcon

much. Thank you very

Jon Kessler

many you Mark we’ve others. still seasonal know add well here this is very component just it. I Just But for a talked about because to has times. know that interchange

and kind in in of not nonetheless first their period, from as we all both two And ending be future and benefit from so where years accounts, for in are are have that thing that as example, that quarter fact have the that where total the -- But reflected interchange. ago. this will well in ending right, we that’ll we accounts quarters grace will case we --

and So off accounts of beginning year and of at people their all the that. the course have topped

should but feel certainly our there’s QX where So kind but is to some they pleased we we for kind see seasonality be QX, model to be it to and thinking in it kind think in I got of back in spend were that’s of to as relative about levels healthcare particular you. like still folks was, pre-pandemic -- of and still

Mark Marcon

Look to Great. tomorrow. forward again talking

Tyson Murdock

Yes.

Jon Kessler

Thanks, Mark.

Tyson Murdock

Thanks, Mark.

Operator

Thank you.

from Draper Sandy Securities. comes Our question with Truist next

Sandy Draper

Thanks so since you effects it much be like the bring may commuter XXs benefits. this up in Joh of sounds the stuck there all

Jon Kessler

lot A but.

Sandy Draper

So we’re spend up, cash going interchange interchange of and to can down sure well the offset maybe following of taking first revenues lot and money a we spend, have that was we balances? coming just sequentially on just in see some cash out being actually on we of stronger saw for the be the while see should been The time starting we’re because account the of just make questions how but been building, you the loved my some a that, your comment thoughts it. that added the is note did that per up asked, about

Jon Kessler

sort It’s put but declines of to market and function see just people asset the as would with it growth made a point, just more growth, thrilled could growth thrilled but of thank making meaning Sandy, been a they’re balanced out. and thrilled Yeah. have growth, is people we not the Look in important that balance continuing again, to of market growth, that. it. in case we net quarter taking for aggregate certainly value spend than that primarily also you see that began into accounts of And really this also we’re

times, more in and around effect this money of And also So money talked people continued so the but about has that’s to while in and saw thing just in has dollars, put I many, tending grows towards investing. happening terms we know tradeoff forth, aggregate. of as the move a faster individual the that stick as quarter, it what’s we’ve think and is many, the biggest in that many you

we in the long-term be looking quarter, quarter have business. a So spend kind in score to and about that’s a full I have on predictions these whole relate to accounts little potential. still sequential at the More where sector as in bit quickly And a this good that be that’s at of people so for it achieve this good. for long-term going its to a and balances the to investment basis an seeing seems grow even balances increase substantial level account pretty to

Sandy Draper

it. Got

Jon Kessler

we -- is tried something full for -- to is it have something the we that our factor it and But guidance but thinking all year. you as factor is about it have certainly into to in say

Sandy Draper

Okay. don’t have Great. up. follow actually a I Well,

now. So I’ll try to keep the though call

Jon Kessler

wearing I’m sure you wearing -- Sandy is know shorts. I

Sandy Draper

I’m Yes. shorts. wearing

Jon Kessler

shorts. Marcon though guy is he Peters. Even mean maybe wearing our and only maybe shorts. non was shorts maybe not said I wearing -- Peters he might be

Operator

have… we And

Jon Kessler

Go ahead, Carmen.

Operator

Okay.

gentlemen, in America. queue last a Allen Bank of question We Lutz with have

question Your please.

Jon Kessler

Lutz? Mr.

Allen Lutz

questions. the Hey. Thanks for taking

guess, impact XXXX I causing XXXX is back fiscal service look know you commuter slightly. a historically revenue, at we in that Going segment the was down XXXX the sequentially But big fiscal to there. fiscal that

we So there? commuter takes heading the just about second puts what remind service can line think to you the us item addition as and the quarter, are to in

Jon Kessler

Tyson? Hi, Allen.

Tyson Murdock

do assets, associated right, it how to to thinking about would think amount the underwrite well. we fees just I the aspect bundling then as Yeah. and that of goes back deals and about thinking

over that the the is there that Third example when press accounts amount to we of and out how was you account and relative Fifth those about and those a deal which think we’re that bringing pointed and the the that going so revenue And those Jon just HSAs size good the whole to really there’s so that whole into still line of item. a generated lot of be about accounts the think sale revenue you that But increases and can down off moves of if deals a to customer balances and line more that aspect about service essentially service true as of opportunities of thinking about margin of that’s area bundling profit increase things sales in think of think certain signing -- to there together able finding even take better have get our the blend more and able amount you starting feel, when to fee to to it, custodial the being particular I I’m on and a when pricing that so revenue to on almost off those. off it’s items, because we’re be

get So line you’ll anything over single be us to going little be bit the each item. the I every going see service continue manage we the signing for a huge long-term, extreme think like, deals. of decrease it We extent and that revenue not those one a to to amount can creates to it’s that’s relative an certainly rebound that and to said, of Jon I’m opportunity that day. that, think I to rates

thinking how and we negotiate and We’re so forth. install about

Allen Lutz

it. you. Got Thank

Operator

Thank you. to And call the I turn this Q&A. Jon like final back would thoughts. concludes to his Kessler for

Jon Kessler

Thanks going me Look seeing you soon shortly video gotten least thought as on out to that’s -- you’ve as in who of some you’re maybe everyone. knows. forward Thanks Well, to person and at get. all. of much

Operator

participating and program. you the now may today’s great day. Thank This in a for you concludes disconnect. Have conference

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