HealthEquity Inc. Earnings Call Highlights Growth and Legislative Wins

Healthequity Inc ((HQY)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the latest earnings call, HealthEquity Inc. expressed a generally positive sentiment, underscoring robust financial growth and favorable legislative developments that could significantly broaden the market for Health Savings Accounts (HSAs). While there were improvements in fraud prevention, the costs associated with fraud remain a concern. Additionally, caution was noted regarding economic conditions that might affect new HSA sales. However, the positive aspects of growth and legislative progress seem to outweigh these challenges.

Strong Year-over-Year Growth

HealthEquity Inc. reported a commendable 15% increase in revenue and a 19% rise in adjusted EBITDA. The company also saw a 9% growth in HSAs and a 4% increase in Consumer-Directed Benefits (CDB) accounts, leading to a 7% rise in total accounts. HSA assets grew by 15%, showcasing the company’s strong financial performance.

Positive Legislative Developments

The earnings call highlighted potential legislative changes that could expand HSA usage to 20 million more American families. Notably, these changes include provisions that would allow working seniors eligible for Medicare Part A to contribute to HSAs, potentially broadening the market significantly.

Record Custodial Revenue

HealthEquity achieved a record custodial revenue of $156.5 million in the first quarter, marking a 29% increase. This record-setting revenue underscores the company’s strong financial standing and operational success.

Improved Fraud Prevention

The company has made significant strides in fraud prevention, reducing fraud service costs from $11 million in Q4 to $3 million in Q1. Ongoing investments in security are yielding positive results, although fraud costs remain a concern.

Increase in HSA Investment

There was a notable 16% increase in the number of HSA members who invest, driving invested assets up by 24% to $14.2 billion. This growth in investment activity highlights the increasing engagement of HSA members.

Strong Cash Flow and Share Repurchase

HealthEquity generated $65 million in cash flow from operations and repurchased approximately $60 million of outstanding shares, demonstrating strong financial health and shareholder value enhancement.

Softer HSA Sales

Despite the overall growth, the company experienced softer sales in new HSAs compared to last year’s record-setting Q1, reflecting the impact of softer macroeconomic conditions.

Continued Fraud Costs

While fraud prevention has improved, fraud costs remain a concern with $3 million in reimbursements in Q1, indicating ongoing challenges in this area.

Economic Uncertainty Impact

The company expressed caution regarding the macroeconomic impact on job creation and GDP growth, which could potentially affect new account sales.

Forward-Looking Guidance

Looking ahead, HealthEquity anticipates continued growth through strategic enhancements, such as leveraging AI for claims processing and expanding mobile app features. The company also plans to pursue legislative efforts to expand HSA access and flexibility, aiming to sustain its growth trajectory.

In summary, HealthEquity Inc.’s earnings call conveyed a positive outlook, driven by strong financial growth and legislative progress. While challenges such as fraud costs and economic uncertainty persist, the company’s strategic initiatives and market expansion efforts are poised to support continued success.