hqy-20230731

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-36568



HEALTHEQUITY, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-2383166

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

15 West Scenic Pointe Drive

Suite 100

Draper, Utah 84020

(Address of principal executive offices) (Zip code)

(801) 727-1000

(Registrant's telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	HQY	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of August 31, 2023, there were 85,627,521 shares of the registrant's common stock outstanding.


		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial statements
	Condensed consolidated balance sheets as of July 31, 2023 (unaudited) and January 31, 2023	3
	Condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended July 31, 2023 and 2022 (unaudited)	4
	Condensed consolidated statements of stockholders' equity for the three and six months ended July 31, 2023 and 2022 (unaudited)	5
	Condensed consolidated statements of cash flows for the six months ended July 31, 2023 and 2022 (unaudited)	6
	Notes to condensed consolidated financial statements (unaudited)	8
Item 2.	Management's discussion and analysis of financial condition and results of operations	17
Item 3.	Quantitative and qualitative disclosures about market risk	31
Item 4.	Controls and procedures	32
Part II. OTHER INFORMATION
Item 1.	Legal proceedings	34
Item 1A.	Risk factors	34
Item 5.	Other information	34
Item 6.	Exhibits	35
	Signatures	36


(in thousands, except par value)	July 31, 2023		January 31, 2023
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	290,345	$	254,266
Accounts receivable, net of allowance for doubtful accounts of $4,639 and $4,989 as of July 31, 2023 and January 31, 2023, respectively	92,581		96,835
Other current assets	39,631		31,792
Total current assets	422,557		382,893
Property and equipment, net	9,145		12,862
Operating lease right-of-use assets	51,976		56,461
Intangible assets, net	881,937		936,359
Goodwill	1,648,145		1,648,145
Other assets	52,696		52,180
Total assets	$	3,066,456	$	3,088,900
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	12,543	$	13,899
Accrued compensation	31,421		45,835
Accrued liabilities	49,281		43,668
Current portion of long-term debt	—		17,500
Operating lease liabilities	10,026		10,159
Total current liabilities	103,271		131,061
Long-term liabilities
Long-term debt, net of issuance costs	873,581		907,838
Operating lease liabilities, non-current	52,371		58,988
Other long-term liabilities	13,092		12,708
Deferred tax liability	74,527		82,665
Total long-term liabilities	1,013,571		1,062,199
Total liabilities	1,116,842		1,193,260
Commitments and contingencies (see Note 5)
Stockholders’ equity
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2023 and January 31, 2023, respectively	—		—
Common stock, $0.0001 par value, 900,000 shares authorized, 85,612 and 84,758 shares issued and outstanding as of July 31, 2023 and January 31, 2023, respectively	9		8
Additional paid-in capital	1,785,014		1,745,716
Accumulated earnings	164,591		149,916
Total stockholders’ equity	1,949,614		1,895,640
Total liabilities and stockholders’ equity	$	3,066,456	$	3,088,900


	Three months ended July 31,				Six months ended July 31,
(in thousands, except per share data)	2023		2022		2023		2022
Revenue
Service revenue	$	105,719	$	103,034	$	210,831	$	207,382
Custodial revenue	98,917		65,599		193,358		124,964
Interchange revenue	38,913		37,509		83,792		79,475
Total revenue	243,549		206,142		487,981		411,821
Cost of revenue
Service costs	76,543		74,914		157,098		155,788
Custodial costs	9,133		7,090		18,133		13,731
Interchange costs	6,943		6,326		13,994		13,317
Total cost of revenue	92,619		88,330		189,225		182,836
Gross profit	150,930		117,812		298,756		228,985
Operating expenses
Sales and marketing	19,123		15,843		39,058		32,403
Technology and development	54,767		46,580		107,959		91,763
General and administrative	27,090		25,937		51,984		49,664
Amortization of acquired intangible assets	23,166		24,181		46,332		47,879
Merger integration	2,044		7,683		5,502		16,977
Total operating expenses	126,190		120,224		250,835		238,686
Income (loss) from operations	24,740		(2,412)		47,921		(9,701)
Other expense
Interest expense	(13,272)		(11,493)		(28,269)		(21,954)
Other income (expense), net	2,756		32		4,584		(269)
Total other expense	(10,516)		(11,461)		(23,685)		(22,223)
Income (loss) before income taxes	14,224		(13,873)		24,236		(31,924)
Income tax provision (benefit)	3,643		(3,219)		9,561		(7,631)
Net income (loss) and comprehensive income (loss)	$	10,581	$	(10,654)	$	14,675	$	(24,293)
Net income (loss) per share:
Basic	$	0.12	$	(0.13)	$	0.17	$	(0.29)
Diluted	$	0.12	$	(0.13)	$	0.17	$	(0.29)
Weighted-average number of shares used in computing net income (loss) per share:
Basic	85,533		84,443		85,286		84,236
Diluted	86,341		84,443		86,356		84,236


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2023		2022		2023		2022
Total stockholders' equity, beginning balance	$	1,918,592	$	1,855,263	$	1,895,640	$	1,852,575

Common stock:
Beginning balance	9		8		8		8
Issuance of common stock upon exercise of stock options, and for restricted stock	—		—		1		—
Ending balance	9		8		9		8
Additional paid-in capital:
Beginning balance	1,764,573		1,692,834		1,745,716		1,676,508
Issuance of common stock upon exercise of stock options, and for restricted stock	368		2,134		1,021		4,474
Stock-based compensation	20,073		18,154		38,277		32,140
Ending balance	1,785,014		1,713,122		1,785,014		1,713,122
Accumulated earnings
Beginning balance	154,010		162,420		149,916		176,059
Net income (loss)	10,581		(10,654)		14,675		(24,293)
Ending balance	164,591		151,766		164,591		151,766

Total stockholders' equity, ending balance	$	1,949,614	$	1,864,896	$	1,949,614	$	1,864,896


	July 31, 2023
(in thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount
Amortizable intangible assets:
Software and software development costs	$	246,789	$	(173,865)	$	72,924
Acquired HSA portfolios	261,188		(72,253)		188,935
Acquired customer relationships	759,782		(179,280)		580,502
Acquired developed technology	132,825		(93,370)		39,455
Acquired trade names	12,900		(12,779)		121
Total amortizable intangible assets	$	1,413,484	$	(531,547)	$	881,937


	Outstanding stock options
(in thousands, except for exercise prices and term)	Number of options	Range of exercise prices	Weighted- average exercise price		Weighted- average contractual term (in years)	Aggregate intrinsic value
Outstanding as of January 31, 2023	1,021	$14.00 - 82.39	$	36.06	3.2	$	27,293
Exercised	(34)	$14.00 - 44.53	$	29.71
Forfeited	(4)	$24.36 - 44.53	$	38.41
Outstanding as of July 31, 2023	983	$14.00 - 82.39	$	36.27	2.6	$	32,047
Vested and expected to vest as of July 31, 2023	983		$	36.27	2.6	$	32,047
Exercisable as of July 31, 2023	983		$	36.27	2.6	$	32,047


	RSUs and PRSUs
(in thousands, except weighted-average grant date fair value)	Shares	Weighted-average grant date fair value
Outstanding as of January 31, 2023	3,011	$	70.40
Granted	1,767	64.46
Vested	(801)	67.53
Forfeited	(250)	71.53
Outstanding as of July 31, 2023	3,727	$	68.13


(in thousands, except percentages)	July 31, 2023	July 31, 2022	% Change		January 31, 2023
HSAs	8,164	7,523	9	%	7,984
New HSAs from sales - Quarter-to-date	156	196	(20)	%	445
New HSAs from sales - Year-to-date	290	355	(18)	%	971
New HSAs from acquisitions - Year-to-date	—	90	(100)	%	90
HSAs with investments	574	516	11	%	541
CDBs	6,831	7,023	(3)	%	6,933
Total Accounts	14,995	14,546	3	%	14,917
Average Total Accounts - Quarter-to-date	14,954	14,497	3	%	14,677
Average Total Accounts - Year-to-date	14,967	14,462	3	%	14,531


(in millions, except percentages)	July 31, 2023		July 31, 2022		% Change		January 31, 2023
HSA cash	$	14,021	$	13,097	7	%	$	14,199
HSA investments	9,181		7,441		23	%	7,947
Total HSA Assets	23,202		20,538		13	%	22,146
Average daily HSA cash - Year-to-date	14,048		12,924		9	%	13,049
Average daily HSA cash - Quarter-to-date	14,001		12,941		8

SEC Form 10-Q filed by HealthEquity Inc.