HQY Stock Falls as Q4 Earnings Miss Estimates, Revenues Up Y/Y

HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of 69 cents for fourth-quarter fiscal 2025, missing the Zacks Consensus Estimate by 2.82%. However, the bottom line improved 9.5% on a year-over-year basis.GAAP EPS in the fiscal fourth quarter was 30 cents, flat compared with the year-ago quarter’s EPS.Shares of HQY were down 13.6% in after-market trading following the earnings call.HealthEquity Revenues in DetailIn the fiscal fourth quarter, the company generated revenues of $311.8 million, which beat the Zacks Consensus Estimate by 2.2%. The top line improved 18.8% from the prior-year quarter.HSA Details of HQYAs of Jan. 31, 2025, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 9.9 million, up 14% year over year.HealthEquity reported 753,000 HSAs with investments as of Jan. 31, 2025, up 23% year over year. Total accounts, as of Jan. 31,2025, were 17 million, up 8.2% year over year. This uptick included total HSAs and 7.1 million Consumer Direct Benefits (CDBs), flat year over year.Total HSA assets were $32.1 billion at the end of Jan. 31, 2025, up 27% year over year. This included $17.4 billion of HSA cash (up 16% year over year) and $14.7 billion of HSA investments (up 44.1% year over year). This figure compares to our fiscal fourth-quarter HSA cash and HSA investments projection of $17 billion and $14.5 billion, respectively. We had projected total HSA assets of $31.5 billion for the fiscal fourth quarter.Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $0.9 billion as of Jan. 31, 2025.Revenue Sources of HealthEquityHealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.Service revenues totaled $124.2 million in the quarter, up 4.6% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our fourth-quarter projection of $119.9 million.Custodial revenues totaled $144.1 million, up 36.7% from the year-ago period. Our projection for the fiscal fourth-quarter Custodial revenues was $140.1 million.Interchange revenues totaled $43.5 million, up 13.3% year over year. This figure compares favorably with our fiscal fourth-quarter projection of $41.6 million.HQY Margin DetailsIn the quarter under review, HealthEquity’s gross profit rose 15.6% to $189 million. However, the gross margin contracted 160 basis points (bps) to 60.6%. We had projected the gross margin to be 59.8% in the fiscal fourth quarter.Sales and marketing expenses rose 12.3% to $23.1 million year over year, whereas technology and development expenses climbed 17% year over year to $64.7 million. General and administrative expenses also increased 29.5% year over year to $29.9 million. Total operating expenses of $146.9 million increased 18% year over year.Operating profit totaled $42.2 million, improving 8.4% from the prior-year quarter. However, the operating margin in the quarter contracted 130 bps to 13.5% compared with the prior-year quarter.HealthEquity, Inc. Price, Consensus and EPS Surprise HealthEquity, Inc. price-consensus-eps-surprise-chart | HealthEquity, Inc. QuoteFinancial Position of HQYThe company exited the fourth quarter of fiscal 2025 with cash and cash equivalents of $295.9 million compared with $322.2 million at the end of the fourth quarter of fiscal 2024. Total debt (net of issuance costs) at the end of fourth-quarter fiscal 2025 was $1.06 billion compared with $1.08 billion at the end of fourth-quarter fiscal 2024.Cumulative net cash provided by operating activities at the end of fourth-quarter fiscal 2025 totaled $339.9 million compared with $242.8 million a year ago.HealthEquity FY26 GuidanceHealthEquity has provided its revenue and EPS projections for fiscal 2026.For fiscal 2026, revenues are projected to be between $1.28 billion and $1.30 billion. The Zacks Consensus Estimate is currently pegged at $1.30 billion.Adjusted EPS is expected to be in the range of $3.57-$3.74. The Zacks Consensus Estimate currently stands at $3.72.Our Take on HQYHealthEquity exited fourth-quarter fiscal 2025 with mixed results. The company witnessed solid top-line and bottom-line performances in the reported quarter. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising.Despite inflationary challenges, HealthEquity has experienced solid growth in HSA balances, driven by a significant increase in invested assets, which now represent a larger portion of total HSA assets. The growing number of members choosing to invest in HSAs reflects a positive trend. Additionally, more members are opting for enhanced rates on HSA cash, resulting in improved and more consistent custodial yields.However, a significant rise in operating expenses leading to a decline in operating margin raises concerns.Zacks Rank & Key PicksCurrently, HealthEquity carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH. At present, Masimo sports a Zacks Rank #1 (Strong Buy), whereas Boston Scientific and Cardinal Health carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Masimo’s shares have rallied 30.1% in the past year. Estimates for MASI’s 2024 earnings per share (EPS) have increased 1.2% to $4.10 in the past 30 days. MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 17.1%. In the last reported quarter, it posted an earnings surprise of 16.6%.Estimates for Boston Scientific’s 2025 EPS have jumped 2.9% to $2.85 in the past 30 days. Shares of the company have surged 56.7% in the past year compared with the industry’s growth of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.25%. In the last reported quarter, it delivered an earnings surprise of 7.69%.Estimates for Cardinal Health’s fiscal 2025 EPS have increased 1.5% to $7.94 in the past 30 days. Shares of the company have gained 15.2% in the past year against the industry’s 4.1% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%. In the last reported quarter, it delivered an earnings surprise of 10.3%.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Boston Scientific Corporation (BSX): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report HealthEquity, Inc. (HQY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks