HealthEquity(US:HQY)2021-03-16 00:20Financial Data and Key Metrics Changes - Fiscal 2021 revenue reached $734 million, a 38% increase year-over-year, with adjusted EBITDA of $241 million, both records largely due to the WageWorks acquisition [8] - The company ended FY'21 with 12.8 million total accounts and 5.8 million HealthEquity HSA members, holding $14.3 billion in HSA assets [8] - Non-GAAP net income for Q4 was $33.39 million, a 17% increase from the previous year, with non-GAAP net income per share at $0.42 compared to $0.40 [17] Business Line Data and Key Metrics Changes - Service revenue in Q4 declined 9% to $111.3 million, representing 59% of total revenue, primarily due to a 5% decline in CDB accounts [15] - Interchange revenue decreased 5% to $28.3 million, accounting for 15% of total revenue, attributed to reduced spending across platforms [16] - The annualized interest rate yield on HSA cash with yield was 1.97% during Q4, reflecting a decline in annualized yield on HSA cash [15] Market Data and Key Metrics Changes - The company reported an 11% organic growth in HSAs, outperforming the market-wide growth of 6% year-over-year [8] - Market-wide HSA asset growth was 22%, while HealthEquity achieved a 26% organic growth in HSA assets [8] - HealthEquity maintains a 19% market share in HSAs and ranks second with 16% in HSA assets [8] Company Strategy and Development Direction - The company is focused on expanding its capabilities through strategic acquisitions, such as the recent acquisition of Luum, which provides commuter solutions [10] - Management emphasized the importance of integrating new acquisitions and enhancing service offerings to meet evolving client needs [12] - The company aims to leverage synergies from the WageWorks acquisition, raising the synergy target from $50 million to $80 million [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing pandemic as a potential headwind but expressed optimism about turning these into tailwinds for fiscal 2022 [9] - The recent government stimulus bill, which includes COBRA subsidies, is expected to provide relief to families and create opportunities for the company [10] - Management anticipates revenue for fiscal 2022 to be between $750 million and $760 million, with adjusted EBITDA expected between $240 million and $246 million [19] Other Important Information - The company has migrated 97% of HSA assets to its custodial platform, enhancing operational efficiency [16] - The company reported a cash balance of $329 million as of January 31, 2021, with $987 million in debt outstanding [17] - The company is committed to achieving run rate synergies of approximately $60 million from the WageWorks acquisition [20] Q&A Session Summary Question: Thoughts on M&A market and deal multiples - Management noted increased interest in the market and emphasized their competitive advantage in identifying and executing profitable acquisitions [24][25] Question: Details on Luum acquisition and customer overlap - Management highlighted Luum's subscription-based model and its potential to enhance commuter benefits for existing clients [27][28] Question: Luum's pricing model and revenue potential - Luum operates on a subscription model, providing stability in revenue despite variability in commuting [57][60] Question: Impact of merger integration costs on cash flow - Management confirmed that merger integration costs are expected to conclude by the end of the year, which will positively impact cash flow moving forward [41][42] Question: CapEx assumptions for the upcoming year - Management indicated that CapEx is expected to be around 10% of revenue, primarily driven by technology investments [46][47]