HealthEquity (HQY) Q1 Earnings Surpass Estimates, Margins Up

Core Insights - HealthEquity, Inc. reported strong financial results for the first quarter of fiscal 2025, with adjusted earnings per share (EPS) of 80 cents, exceeding the Zacks Consensus Estimate by 21.2% and showing a year-over-year improvement of 60% [1] - The company generated revenues of $287.6 million, surpassing the Zacks Consensus Estimate by 3.2% and reflecting a 17.7% increase from the prior-year quarter [2] Revenue and Accounts - As of April 30, 2024, HealthEquity served 9.1 million Health Savings Accounts (HSA) members, a 13.1% increase year over year, with 665,000 HSAs having investments, up 19.6% year over year [3] - Total HSA assets reached $27.28 billion, up 22.2% year over year, including $15.85 billion in HSA cash (up 12.3%) and $11.43 billion in HSA investments (up 39.3%) [4] Revenue Sources - HealthEquity's revenue streams include service revenues of $118.2 million (up 6.4% year over year), custodial revenues of $121.6 million (up 37.5%), and interchange revenues of $47.7 million (up 6.4%) [6][8] Profitability and Margins - Gross profit increased by 26% to $187.1 million, with a gross margin expansion of 433 basis points to 65.1% [9] - Adjusted operating profit rose 39.2% to $69.3 million, with an adjusted operating margin expanding 373 basis points to 24.1% [11] Financial Position - At the end of the first quarter of fiscal 2025, the company had cash and cash equivalents of $251.2 million, down from $403.9 million at the end of fiscal 2024, and total debt increased to $925.7 million [12] Guidance - HealthEquity raised its revenue and EPS projections for fiscal 2025, now expecting revenues between $1.16 billion and $1.18 billion and adjusted EPS in the range of $2.93 to $3.10 [13] Overall Performance - The company experienced solid top-line and bottom-line performances, driven by robust contributions from all revenue sources and growth in HSAs, while the decline in Consumer Direct Benefits (CDBs) and client-held funds was noted as a disappointment [14][15]