hqy-20220731

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, 2022


☐			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, 2022, there were 84,530,727 shares of the registrant's common stock outstanding.

Table of Contents

HealthEquity, Inc. and subsidiaries

Form 10-Q quarterly report

Table of contents


		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial statements
	Condensed consolidated balance sheets as of July 31, 2022 (unaudited) and January 31, 2022	3
	Condensed consolidated statements of operations and comprehensive loss for the three and six months ended July 31, 2022 and 2021 (unaudited)	4
	Condensed consolidated statements of stockholders' equity for the three and six months ended July 31, 2022 and 2021 (unaudited)	5
	Condensed consolidated statements of cash flows for the six months ended July 31, 2022 and 2021 (unaudited)	6
	Notes to condensed consolidated financial statements (unaudited)	8
Item 2.	Management's discussion and analysis of financial condition and results of operations	18
Item 3.	Quantitative and qualitative disclosures about market risk	32
Item 4.	Controls and procedures	33
Part II. OTHER INFORMATION
Item 1.	Legal proceedings	36
Item 1A.	Risk factors	36
Item 6.	Exhibits	37
	Signatures	38

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Part I. Financial information

Item 1. Financial statements

HealthEquity, Inc. and subsidiaries

Condensed consolidated balance sheets


(in thousands, except par value)	July 31, 2022		January 31, 2022
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	176,886	$	225,414
Accounts receivable, net of allowance for doubtful accounts of $6,215 and $6,228 as of July 31, 2022 and January 31, 2022, respectively	90,426		87,428
Other current assets	41,274		38,495
Total current assets	308,586		351,337
Property and equipment, net	18,028		23,372
Operating lease right-of-use assets	60,588		63,613
Intangible assets, net	991,945		973,137
Goodwill	1,645,999		1,645,836
Other assets	48,878		49,807
Total assets	$	3,074,024	$	3,107,102
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	15,841	$	27,541
Accrued compensation	41,989		47,136
Accrued liabilities	43,287		57,589
Current portion of long-term debt	13,125		8,750
Operating lease liabilities	11,275		12,171
Total current liabilities	125,517		153,187
Long-term liabilities
Long-term debt, net	914,966		922,077
Operating lease liabilities, non-current	62,626		65,232
Other long-term liabilities	13,731		14,185
Deferred tax liability	92,288		99,846
Total long-term liabilities	1,083,611		1,101,340
Total liabilities	1,209,128		1,254,527
Commitments and contingencies (see Note 6)
Stockholders’ equity
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively	—		—
Common stock, $0.0001 par value, 900,000 shares authorized, 84,526 and 83,780 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively	8		8
Additional paid-in capital	1,713,122		1,676,508
Accumulated earnings	151,766		176,059
Total stockholders’ equity	1,864,896		1,852,575
Total liabilities and stockholders’ equity	$	3,074,024	$	3,107,102

See accompanying notes to condensed consolidated financial statements.

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HealthEquity, Inc. and subsidiaries

Condensed consolidated statements of operations and

comprehensive loss (unaudited)


	Three months ended July 31,				Six months ended July 31,
(in thousands, except per share data)	2022		2021		2022		2021
Revenue
Service revenue	$	103,034	$	109,182	$	207,382	$	211,716
Custodial revenue	65,599		48,776		124,964		95,754
Interchange revenue	37,509		31,145		79,475		65,835
Total revenue	206,142		189,103		411,821		373,305
Cost of revenue
Service costs	74,914		67,334		155,788		137,966
Custodial costs	7,090		4,824		13,731		9,833
Interchange costs	6,326		4,974		13,317		10,419
Total cost of revenue	88,330		77,132		182,836		158,218
Gross profit	117,812		111,971		228,985		215,087
Operating expenses
Sales and marketing	15,843		15,476		32,403		29,562
Technology and development	46,580		37,898		91,763		73,367
General and administrative	25,937		22,812		49,664		43,499
Amortization of acquired intangible assets	24,181		20,289		47,879		40,103
Merger integration	7,683		16,371		16,977		25,178
Total operating expenses	120,224		112,846		238,686		211,709
Income (loss) from operations	(2,412)		(875)		(9,701)		3,378
Other expense
Interest expense	(11,493)		(7,254)		(21,954)		(13,943)
Other income (expense), net	32		344		(269)		(3,286)
Total other expense	(11,461)		(6,910)		(22,223)		(17,229)
Loss before income taxes	(13,873)		(7,785)		(31,924)		(13,851)
Income tax benefit	(3,219)		(3,967)		(7,631)		(7,418)
Net loss and comprehensive loss	$	(10,654)	$	(3,818)	$	(24,293)	$	(6,433)
Net loss per share:
Basic	$	(0.13)	$	(0.05)	$	(0.29)	$	(0.08)
Diluted	$	(0.13)	$	(0.05)	$	(0.29)	$	(0.08)
Weighted-average number of shares used in computing net loss per share:
Basic	84,443		83,481		84,236		82,628
Diluted	84,443		83,481		84,236		82,628

See accompanying notes to condensed consolidated financial statements.

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HealthEquity, Inc. and subsidiaries

Condensed consolidated statements of stockholders’ equity (unaudited)


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2022		2021		2022		2021
Total stockholders' equity, beginning balance	$	1,855,263	$	1,848,270	$	1,852,575	$	1,378,728

Common stock:
Beginning balance	8		8		8		8
Issuance of common stock upon exercise of stock options, and for restricted stock	—		—		—		—
Other issuance of common stock	—		—		—		—
Ending balance	8		8		8		8
Additional paid-in capital:
Beginning balance	1,692,834		1,630,529		1,676,508		1,158,372
Issuance of common stock upon exercise of stock options, and for restricted stock	2,134		2,599		4,474		5,315
Other issuance of common stock	—		(2)		—		456,640
Stock-based compensation