• HealthEquity Reports Fiscal Year and Fourth Quarter Ended January 31, 2023 Financial Results

    المصدر: Nasdaq GlobeNewswire / 21 مارس 2023 16:01:00   America/New_York

    Highlights of the fiscal year include:

    • Revenue of $861.7 million, an increase of 14% compared to $756.6 million in FY22.
    • Net loss of $26.1 million, compared to $44.3 million in FY22, with non-GAAP net income of $114.5 million, compared to $110.2 million in FY22.
    • Net loss per diluted share of $0.31, compared to $0.53 in FY22, with non-GAAP net income per diluted share of $1.36, compared to $1.33 in FY22.
    • Adjusted EBITDA of $272.3 million, an increase of 15% compared to $236.0 million in FY22.
    • 8.0 million HSAs, an increase of 11% compared to FY22.
    • Total HSA Assets of $22.1 billion, an increase of 13% compared to FY22.
    • 14.9 million Total Accounts, including both HSAs and complementary CDBs, an increase of 4% compared to FY22.

    Highlights of the fourth quarter include:

    • Revenue of $233.8 million, an increase of 15% compared to $203.3 million in Q4 FY22.
    • Net loss of $0.2 million, compared to $32.8 million in Q4 FY22, with non-GAAP net income of $31.3 million, compared to $17.0 million in Q4 FY22.
    • Net loss per diluted share of less than one cent, compared to $0.39 in Q4 FY22, with non-GAAP net income per diluted share of $0.37, compared to $0.20 in Q4 FY22.
    • Adjusted EBITDA of $73.6 million, an increase of 46% compared to $50.4 million in Q4 FY22.

    DRAPER, Utah, March 21, 2023 (GLOBE NEWSWIRE) -- HealthEquity, Inc. (NASDAQ: HQY) (“HealthEquity” or the “Company”), the nation’s largest health savings account (“HSA”) custodian, today announced financial results for its fourth quarter and fiscal year ended January 31, 2023.

    “Team Purple closed out fiscal 2023 in record fashion with its best year of new HSAs from sales, its highest ever HSAs, HSA Assets, and Total Accounts, and record revenue and Adjusted EBITDA,” said Jon Kessler, HealthEquity President and CEO. “In fiscal 2023, HealthEquity became the largest HSA custodian measured by both accounts and HSA Assets. In fiscal 2024, we believe we are strongly positioned to continue to outpace overall market growth, substantially improve profit margins, and execute on our vision to help our members more fully connect health and wealth.”

    Fiscal year financial results

    Revenue for the fiscal year ended January 31, 2023 was $861.7 million, an increase of 14% compared to $756.6 million for the fiscal year ended January 31, 2022. Revenue this year included: service revenue of $430.2 million, custodial revenue of $283.1 million, and interchange revenue of $148.4 million.

    HealthEquity reported a net loss of $26.1 million, or $0.31 per diluted share, and non-GAAP net income of $114.5 million, or $1.36 per diluted share, for the fiscal year ended January 31, 2023. The Company reported a net loss of $44.3 million, or $0.53 per diluted share, and non-GAAP net income of $110.2 million, or $1.33 per diluted share, for the fiscal year ended January 31, 2022.

    Adjusted EBITDA was $272.3 million for the fiscal year ended January 31, 2023, an increase of 15% compared to $236.0 million for the fiscal year ended January 31, 2022. Adjusted EBITDA was 32% of revenue, compared to 31% for the fiscal year ended January 31, 2022.

    As of January 31, 2023, HealthEquity had $254.3 million of cash and cash equivalents and $925.3 million of outstanding debt, net of issuance costs. This compares to $225.4 million in cash and cash equivalents and $930.8 million of outstanding debt as of January 31, 2022.

    Fourth quarter financial results

    Revenue for the fourth quarter ended January 31, 2023 was $233.8 million, an increase of 15% compared to $203.3 million for the fourth quarter ended January 31, 2022. Revenue this quarter included: service revenue of $114.2 million, custodial revenue of $83.5 million, and interchange revenue of $36.1 million.

    HealthEquity reported a net loss of $0.2 million, or less than one cent per diluted share, and non-GAAP net income of $31.3 million, or $0.37 per diluted share, for the fourth quarter ended January 31, 2023. The Company reported a net loss of $32.8 million, or $0.39 per diluted share, and non-GAAP net income of $17.0 million, or $0.20 per diluted share, for the fourth quarter ended January 31, 2022.

    Adjusted EBITDA was $73.6 million for the fourth quarter ended January 31, 2023, an increase of 46% compared to $50.4 million for the fourth quarter ended January 31, 2022. Adjusted EBITDA was 31% of revenue, compared to 25% for the fourth quarter ended January 31, 2022.

    Account and asset metrics

    HSAs as of January 31, 2023 were approximately 8.0 million, an increase of 11% year over year, including 541,000 HSAs with investments, an increase of 19% year over year. Total Accounts as of January 31, 2023 were 14.9 million, including 6.9 million other consumer-directed benefits (“CDBs”).

    Total HSA Assets as of January 31, 2023 were $22.1 billion, an increase of 13% year over year. Total HSA Assets included $14.2 billion of HSA cash and $7.9 billion of HSA investments. Client-held funds, which are deposits held on behalf of our Clients to facilitate administration of our CDBs, and from which we generate custodial revenue, were $0.9 billion as of January 31, 2023.

    Business outlook

    For the fiscal year ending January 31, 2024, management expects revenues of $960 million to $975 million. Its outlook for net income is between $0 and $11 million, resulting in net income of $0.00 to $0.13 per diluted share. Its outlook for non-GAAP net income, calculated using the method described below, is between $152 million and $163 million, resulting in non-GAAP net income per diluted share of $1.74 to $1.87 (based on an estimated 87 million weighted-average shares outstanding). Management expects Adjusted EBITDA of $320 million to $335 million.

    See “Non-GAAP financial information” below for definitions of our Adjusted EBITDA and non-GAAP net income. A reconciliation of the non-GAAP financial measures used throughout this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.

    Conference call

    HealthEquity management will host a conference call at 4:30 pm (Eastern Time) on Tuesday, March 21, 2023 to discuss the fiscal 2023 fourth quarter and year-end results. The conference call will be accessible by dialing 1-833-630-1956, or 1-412-317-1837 for international callers, and referencing conference ID “HealthEquity, Inc. call.” A live audio webcast of the call will be available on the investor relations section of our website at http://ir.healthequity.com.

    Non-GAAP financial information

    To supplement our financial information presented on a GAAP basis, we disclose non-GAAP financial measures, including Adjusted EBITDA, non-GAAP net income, and non-GAAP net income per diluted share.

    • Adjusted EBITDA is adjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, amortization of incremental costs to obtain a contract, costs associated with unused office space, and certain other non-operating items.
    • Non-GAAP net income is calculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
    • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.

    Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. We believe that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. The Company cautions investors that non-GAAP financial information, by its nature, departs from GAAP; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. In addition, while amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is not excluded. Whenever we use these non-GAAP financial measures, we provide a reconciliation of the applicable non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed in the tables below.

    About HealthEquity

    HealthEquity and its subsidiaries administer HSAs and other consumer-directed benefits for our more than 14 million accounts in partnership with employers, benefits advisors, and health and retirement plan providers who share our mission to connect health and wealth and value our culture of remarkable “Purple” service. For more information, visit www.healthequity.com.

    Forward-looking statements

    This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our industry, business strategy, plans, goals and expectations concerning our markets and market position, product expansion, future operations, expenses and other results of operations, revenue, margins, profitability, acquisition synergies, future efficiencies, tax rates, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “aims,” “anticipates,” “plans,” “estimates,” “expects,” “should,” “assumes,” “continues,” “could,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.

    Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to be correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, risks related to the following:

    • our dependence on the continued availability and benefits of tax-advantaged health savings accounts and other consumer-directed benefits;
    • our ability to adequately place and safeguard our custodial assets, or the failure of any of our depository or insurance company partners;
    • our ability to realize the anticipated financial and other benefits from combining the operations of recent and future acquisitions with our business successfully;
    • our ability to compete effectively in a rapidly evolving healthcare and benefits administration industry;
    • our ability to successfully identify, acquire and integrate additional portfolio purchases or acquisition targets;
    • the significant competition we face and may face in the future, including from those with greater resources than us;
    • the impact of societal and economic changes arising out of the COVID-19 pandemic on the Company, its operations and its financial results;
    • our reliance on the availability and performance of our technology and communications systems;
    • potential future cybersecurity breaches of our technology and communications systems and other data interruptions, including resulting costs and liabilities, reputational damage and loss of business;
    • the current uncertain healthcare environment, including changes in healthcare programs and expenditures and related regulations;
    • our ability to comply with current and future privacy, healthcare, tax, ERISA, investment adviser and other laws applicable to our business;
    • our reliance on partners and third-party vendors for distribution and important services;
    • our ability to develop and implement updated features for our technology and communications systems and successfully manage our growth;
    • our ability to protect our brand and other intellectual property rights; and
    • our reliance on our management team and key team members.

    For a detailed discussion of these and other risk factors, please refer to the risks detailed in our filings with the Securities and Exchange Commission, including, without limitation, our most recent Annual Report on Form 10-K and subsequent periodic and current reports. Past performance is not necessarily indicative of future results. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

    Investor Relations Contact
    Richard Putnam
    801-727-8939
    rputnam@healthequity.com


    HealthEquity, Inc. and subsidiaries
    Consolidated balance sheets (unaudited)

    (in thousands, except par value)January 31, 2023 January 31, 2022
    Assets   
    Current assets   
    Cash and cash equivalents$254,266 $225,414
    Accounts receivable, net of allowance for doubtful accounts of $4,989 and $6,228 as of January 31, 2023 and 2022, respectively 96,835  87,428
    Other current assets 31,792  38,495
    Total current assets 382,893  351,337
    Property and equipment, net 12,862  23,372
    Operating lease right-of-use assets 56,461  63,613
    Intangible assets, net 936,359  973,137
    Goodwill 1,648,145  1,645,836
    Other assets 52,180  49,807
    Total assets$3,088,900 $3,107,102
    Liabilities and stockholders’ equity   
    Current liabilities   
    Accounts payable$13,899 $27,541
    Accrued compensation 45,835  47,136
    Accrued liabilities 43,668  57,589
    Current portion of long-term debt 17,500  8,750
    Operating lease liabilities 10,159  12,171
    Total current liabilities 131,061  153,187
    Long-term liabilities   
    Long-term debt, net of issuance costs 907,838  922,077
    Operating lease liabilities, non-current 58,988  65,232
    Other long-term liabilities 12,708  14,185
    Deferred tax liability 82,665  99,846
    Total long-term liabilities 1,062,199  1,101,340
    Total liabilities 1,193,260  1,254,527
    Commitments and contingencies   
    Stockholders’ equity   
    Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of January 31, 2023 and 2022   
    Common stock, $0.0001 par value, 900,000 shares authorized, 84,758 and 83,780 shares issued and outstanding as of January 31, 2023 and 2022, respectively 8  8
    Additional paid-in capital 1,745,716  1,676,508
    Accumulated earnings 149,916  176,059
    Total stockholders’ equity 1,895,640  1,852,575
    Total liabilities and stockholders’ equity$3,088,900 $3,107,102
          


    HealthEquity, Inc. and subsidiaries
    Consolidated statements of operations and comprehensive loss (unaudited)

     Three months ended January 31,
      Year ended January 31,
     
    (in thousands, except per share data) 2023   2022   2023   2022 
    Revenue       
    Service revenue$114,234  $112,461  $430,196  $426,910 
    Custodial revenue 83,506   58,057   283,112   202,817 
    Interchange revenue 36,101   32,779   148,440   126,829 
    Total revenue 233,841   203,297   861,748   756,556 
    Cost of revenue       
    Service costs 85,079   86,119   317,360   290,302 
    Custodial costs 8,558   6,300   29,101   21,867 
    Interchange costs 5,956   5,579   25,196   20,681 
    Total cost of revenue 99,593   97,998   371,657   332,850 
    Gross profit 134,248   105,299   490,091   423,706 
    Operating expenses       
    Sales and marketing 19,201   16,317   68,849   58,605 
    Technology and development 52,722   45,927   193,375   157,364 
    General and administrative 20,833   20,876   95,628   84,379 
    Amortization of acquired intangible assets 23,166   23,046   94,586   82,791 
    Merger integration 5,110   26,383   28,596   64,805 
    Total operating expenses 121,032   132,549   481,034   447,944 
    Income (loss) from operations 13,216   (27,250)  9,057   (24,238)
    Other expense       
    Interest expense (14,305)  (10,748)  (48,424)  (36,572)
    Other income (expense), net 1,097   (5,767)  1,271   (5,931)
    Total other expense (13,208)  (16,515)  (47,153)  (42,503)
    Income (loss) before income taxes 8   (43,765)  (38,096)  (66,741)
    Income tax provision (benefit) 217   (10,947)  (11,953)  (22,452)
    Net loss and comprehensive loss$(209) $(32,818) $(26,143) $(44,289)
    Net loss per share:       
    Basic$0.00  $(0.39) $(0.31) $(0.53)
    Diluted$0.00  $(0.39) $(0.31) $(0.53)
    Weighted-average number of shares used in computing net loss per share:       
    Basic 84,718   83,708   84,442   83,133 
    Diluted 84,718   83,708   84,442   83,133 
                    


    HealthEquity, Inc. and subsidiaries
    Consolidated statements of cash flows (unaudited)

     Year ended January 31,
     
    (in thousands) 2023   2022   2021 
    Cash flows from operating activities:     
    Net income (loss)$(26,143) $(44,289) $8,834 
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
    Depreciation and amortization 161,201   137,188   115,904 
    Stock-based compensation 62,614   52,750   42,863 
    Impairment of right-of-use assets    11,246    
    Amortization of debt issuance costs 3,261   4,448   5,102 
    Loss on extinguishment of debt    4,049    
    Change in fair value of contingent consideration    (2,147)   
    Gains on equity securities    (1,677)   
    Other non-cash items 268   1,232   1,753 
    Deferred taxes (17,181)  (23,430)  (5,132)
    Changes in operating assets and liabilities:     
    Accounts receivable (9,570)  (11,204)  (413)
    Other assets 4,620   7,464   (24,839)
    Operating lease right-of-use assets 8,244   15,235   11,150 
    Accrued compensation (1,282)  (3,657)  771 
    Accounts payable, accrued liabilities, and other current liabilities (26,673)  (2,178)  30,422 
    Operating lease liabilities, non-current (7,232)  (9,412)  (10,803)
    Other long-term liabilities (1,477)  5,377   6,007 
    Net cash provided by operating activities 150,650   140,995   181,619 
    Cash flows from investing activities:     
    Business combinations, net of cash acquired    (504,533)   
    Purchases of software and capitalized software development costs (45,173)  (62,708)  (51,500)
    Acquisitions of HSA portfolios (70,583)  (65,465)  (32,371)
    Purchases of property and equipment (3,371)  (8,908)  (13,093)
    Proceeds from sale of equity securities    2,367    
    Net cash used in investing activities (119,127)  (639,247)  (96,964)
    Cash flows from financing activities:     
    Principal payments on long-term debt (8,750)  (1,003,125)  (239,063)
    Proceeds from long-term debt    950,000    
    Payment of debt issuance costs    (11,920)   
    Proceeds from follow-on equity offering, net of payments for offering costs    456,640   286,779 
    Settlement of client-held funds obligation, net (603)  (486)  (3,862)
    Proceeds from exercise of common stock options 6,682   9,754   8,568 
    Payment of contingent consideration    (6,000)   
    Net cash provided by (used in) financing activities (2,671)  394,863   52,422 
    Increase (decrease) in cash and cash equivalents 28,852   (103,389)  137,077 
    Beginning cash and cash equivalents 225,414   328,803   191,726 
    Ending cash and cash equivalents$254,266  $225,414  $328,803 
                


    HealthEquity, Inc. and subsidiaries
    Consolidated statements of cash flows (unaudited) (continued)

     Year ended January 31,
     
    (in thousands) 2023   2022   2021 
          
    Supplemental cash flow data:     
    Interest expense paid in cash$43,570  $16,107  $27,686 
    Income tax payments (refunds), net 1,526   (5,632)  (6,022)
    Supplemental disclosures of non-cash investing and financing activities:     
    Purchases of software and capitalized software development costs included in accounts payable, accrued liabilities, or accrued compensation 3,595   4,640   1,930 
    Purchases of property and equipment included in accounts payable or accrued liabilities 69   1,414   160 
    Acquisitions of HSA portfolios included in accounts payable or accrued liabilities    1,692    
    Decrease (increase) in goodwill due to measurement period adjustments, net (2,309)  19   5,438 
    Exercise of common stock options receivable 382   470   1,478 
                


    Stock-based compensation expense (unaudited)

    Total stock-based compensation expense included in the consolidated statements of operations and comprehensive income (loss) is as follows:

     Three months ended January 31, Year ended January 31,
    (in thousands) 2023  2022  2023  2022
    Cost of revenue$3,759 $2,711 $14,426 $11,258
    Sales and marketing 2,685  1,324  9,821  7,001
    Technology and development 3,440  2,968  13,828  13,132
    General and administrative 2,420  4,047  24,539  21,359
    Other expense, net       342
    Total stock-based compensation expense$12,304 $11,050 $62,614 $53,092
                


    Total Accounts (unaudited)

    (in thousands, except percentages)January 31, 2023 January 31, 2022 % Change 
    HSAs7,984 7,207 11%
    New HSAs from sales - Quarter-to-date445 472 (6)%
    New HSAs from sales - Year-to-date971 918 6%
    New HSAs from acquisitions - Year-to-date90 740 (88)%
    HSAs with investments541 455 19%
    CDBs6,933 7,192 (4)%
    Total Accounts14,917 14,399 4%
    Average Total Accounts - Quarter-to-date14,677 14,326 2%
    Average Total Accounts - Year-to-date14,531 13,450 8%
           


    HSA assets (unaudited)

    (in millions, except percentages)January 31, 2023 January 31, 2022 % Change 
    HSA cash$14,199 $12,943 10%
    HSA investments 7,947  6,675 19%
    Total HSA Assets 22,146  19,618 13%
    Average daily HSA cash - Year-to-date 13,049  10,579 23%
    Average daily HSA cash - Quarter-to-date 13,375  12,118 10%
             


    Client-held funds (unaudited)

    (in millions, except percentages)January 31, 2023 January 31, 2022 % Change 
    Client-held funds$901 $897 0%
    Average daily Client-held funds - Year-to-date 827  842 (2)%
    Average daily Client-held funds - Quarter-to-date 809  822 (2)%
            


    Net loss reconciliation to Adjusted EBITDA (unaudited)

     Three months ended January 31,
      Year ended January 31,
     
    (in thousands) 2023   2022   2023   2022 
    Net loss$(209) $(32,818) $(26,143) $(44,289)
    Interest income (1,179)  (82)  (1,763)  (1,501)
    Interest expense 14,305   10,748   48,424   36,572 
    Income tax provision (benefit) 217   (10,947)  (11,953)  (22,452)
    Depreciation and amortization 17,309   15,778   66,615   54,397 
    Amortization of acquired intangible assets 23,166   23,046   94,586   82,791 
    Stock-based compensation expense 12,304   11,050   62,614   52,750 
    Merger integration expenses 5,110   26,383   28,596   64,805 
    Acquisition costs (1)    5,915   53   10,832 
    Gain on equity securities    (15)     (1,692)
    Amortization of incremental costs to obtain a contract 1,137   861   4,393   4,326 
    Costs associated with unused office space 1,170      4,958    
    Other 278   520   1,968   (524)
    Adjusted EBITDA$73,608  $50,439  $272,348  $236,015 

    (1)  For the fiscal year ended January 31, 2022, acquisition costs included $0.3 million of stock-based compensation expense.


    Reconciliation of net income outlook to Adjusted EBITDA outlook (unaudited)

     Outlook for the year ending
    (in millions)January 31, 2024
    Net income$0 - 11
    Interest income(7)
    Interest expense57
    Income tax provision0 - 4
    Depreciation and amortization61
    Amortization of acquired intangible assets93
    Stock-based compensation expense88
    Merger integration expenses17
    Amortization of incremental costs to obtain a contract5
    Costs associated with unused office space4
    Other expense2
    Adjusted EBITDA$320 - 335
      


    Reconciliation of net loss to non-GAAP net income (unaudited)

     Three months ended January 31,
      Year ended January 31,
     
    (in thousands, except per share data) 2023   2022   2023   2022 
    Net loss$(209) $(32,818) $(26,143) $(44,289)
    Income tax provision (benefit) 217   (10,947)  (11,953)  (22,452)
    Income (loss) before income taxes - GAAP 8   (43,765)  (38,096)  (66,741)
    Non-GAAP adjustments:       
    Amortization of acquired intangible assets 23,166   23,046   94,586   82,791 
    Stock-based compensation expense 12,304   11,050   62,614   52,750 
    Merger integration expenses 5,110   26,383   28,596   64,805 
    Acquisition costs    5,915   53   10,832 
    Gain on equity securities    (15)     (1,692)
    Costs associated with unused office space 1,170      4,958    
    Loss on extinguishment of debt          4,192 
    Total adjustments to loss before income taxes - GAAP 41,750   66,379   190,807   213,678 
    Income before income taxes - Non-GAAP 41,758   22,614   152,711   146,937 
    Income tax provision - Non-GAAP (1) 10,440   5,653   38,178   36,734 
    Non-GAAP net income 31,318   16,961   114,533   110,203 
            
    Diluted weighted-average shares 84,718   83,708   84,442   83,133 
    Non-GAAP net income per diluted share$0.37  $0.20  $1.36  $1.33 

    (1)  The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each period presented was 25%. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.


    Reconciliation of net income outlook to non-GAAP net income outlook (unaudited)

     Outlook for the year ending
    (in millions, except per share data)January 31, 2024
    Net income$0 - 11
    Income tax provision0 - 4
    Income before income taxes - GAAP0 - 15
    Non-GAAP adjustments: 
    Amortization of acquired intangible assets93
    Stock-based compensation expense88
    Merger integration expenses17
    Costs associated with unused office space4
    Total adjustments to income before income taxes - GAAP202
    Income before income taxes - Non-GAAP202 - 217
    Income tax provision - Non-GAAP (1)50 - 54
    Non-GAAP net income$152 - 163
      
    Diluted weighted-average shares87
    Non-GAAP net income per diluted share (2)$1.74 - 1.87

    (1) The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each period presented was 25%. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

    (2) Non-GAAP net income per diluted share may not calculate due to rounding of non-GAAP net income and diluted weighted-average shares.


    Certain terms

    TermDefinition
    HSAA financial account through which consumers spend and save long-term for healthcare on a tax-advantaged basis.
    CDBConsumer-directed benefits offered by employers, including flexible spending and health reimbursement arrangements (“FSAs” and “HRAs”), Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration, commuter and other benefits.
    HSA memberConsumers with HSAs that we serve.
    Total HSA AssetsHSA members’ custodial cash assets held by our federally insured depository partners and our insurance company partners. Total HSA Assets also includes HSA members’ investments in mutual funds through our custodial investment fund partner.
    ClientOur employer clients.
    Total AccountsThe sum of HSAs and CDBs on our platforms.
    Client-held fundsDeposits held on behalf of our Clients to facilitate administration of our CDBs.
    Network PartnerOur health plan partners, benefits administrators, and retirement plan recordkeepers.
    Adjusted EBITDAAdjusted earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, amortization of incremental costs to obtain a contract, costs associated with unused office space, and certain other non-operating items.
    Non-GAAP net incomeCalculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
    Non-GAAP net income per diluted shareCalculated by dividing non-GAAP net income by diluted weighted-average shares outstanding.


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