UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K |
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
March 22, 2016
Commission File Number: 001-36568
HEALTHEQUITY, INC. | ||
Delaware | 7389 | 52-2383166 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) | ||
15 West Scenic Pointe Drive
Suite 100
Draper, Utah 84020
(801) 727-1000
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On March 22, 2016, HealthEquity, Inc. issued a press release announcing its financial results for its fourth quarter and year ended January 31, 2016. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
This information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
99.1 | Press release issued by HealthEquity, Inc. dated March 22, 2016, announcing financial results for its fourth quarter and year ended January 31, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HEALTHEQUITY, INC. | |||
Date: March 22, 2016 | By: | /s/ Darcy Mott | |
Name: | Darcy Mott | ||
Title: | Executive Vice President and Chief Financial Officer | ||
EXHIBIT INDEX
Exhibit no. | Description | |
99.1 | Press release issued by HealthEquity, Inc. dated March 22, 2016, announcing financial results for its fourth quarter and year ended January 31, 2016. | |
HealthEquity Reports Fourth Quarter and Year Ended January 31, 2016 Financial Results
Highlights of the fiscal year include:
• | Revenue of $126.8 million, an increase of 44% compared to FY15. |
• | Net income of $16.6 million, an increase of 63% compared to FY15. |
• | Net income per diluted share of $0.28 compared to $0.21 in FY15. |
• | Adjusted EBITDA of $40.6 million, an increase of 61% compared to FY15. |
• | Non-GAAP earnings per diluted share of $0.34 per share compared to $0.23 in FY15. |
• | HSA Members of 2.1 million, an increase of 50% compared to FY15. |
• | Total AUM of $3.7 billion, an increase of 56% compared to FY15. |
Highlights of the fourth quarter include:
• | Revenue of $35.9 million, an increase of 44% compared to Q4 FY15. |
• | Net income of $3.1 million, an increase of 128% compared to Q4 FY15. |
• | Net income per diluted share of $0.05 compared to $0.02 in Q4 FY15. |
• | Adjusted EBITDA of $8.9 million, an increase of 61% compared to Q4 FY15. |
• | Non-GAAP earnings per diluted share of $0.07 per share compared to $0.04 in Q4 FY15. |
Draper, Utah – March 22, 2016 – HealthEquity, Inc. (NASDAQ: HQY), one of the nation's largest HSA custodians, today announced financial results for its fourth quarter and year ended January 31, 2016.
"During fiscal 2016, HealthEquity more than sustained the momentum it demonstrated out-of-the-gate as a public company. A very strong Q4 provided visibility to strong revenue growth and even stronger profit growth in FY17. And another year of market share growth points to the durability of our advantage over competitors," remarked Jon Kessler, President and CEO of HealthEquity.
The Company also announced it had achieved two important growth milestones in recent days.
Transition of HSAs acquired from M&T Bank is now complete. The acquisition, announced less than 60 days ago, brought approximately 35,000 HSA Members and $63 million in AUM to HealthEquity. "M&T has been a great partner in executing this transition, and we look forward to continuing that partnership by making HealthEquity HSAs available to M&T customers going forward," said Brad Bennion, Senior Vice President for Product and Corporate Development.
With continuing growth and timely completion of the M&T transition, HealthEquity also surpassed $4 billion in AUM. "If every American family had an HSA," said Founder and Vice Chairman Dr. Stephen Neeleman, "we would all have lower-cost healthcare and a system more responsive to the consumer. We measure our contribution towards that goal by growth in HealthEquity HSA Member's savings." The Company's AUM has roughly doubled in just 24 months.
Full year financial results
For the year ended January 31, 2016, HealthEquity reported revenue of $126.8 million, an increase of 44% compared to $87.9 million for the year ended January 31, 2015. Revenue consisted of:
• | Service revenue of $61.6 million, an increase of 35% compared to FY15. |
• | Custodial revenue of $37.8 million, an increase of 55% compared to FY15. |
• | Interchange revenue of $27.4 million, an increase of 55% compared to FY15. |
Net income was $16.6 million for the year ended January 31, 2016, compared to $10.2 million for the year ended January 31, 2015.
Net income per share attributable to diluted common share was $0.28 for the year ended January 31, 2016, compared to $0.21 for the year ended January 31, 2015. Non-GAAP earnings per diluted share for the year ended January 31, 2016 was $0.34, compared to $0.23 for the year ended January 31, 2015.
Non-GAAP Adjusted EBITDA was $40.6 million for the year ended January 31, 2016, an increase of 61% compared to $25.2 million for the year ended January 31, 2015. Adjusted EBITDA was 32% of revenue for the year ended January 31, 2016, compared to 29% for the year ended January 31, 2015.
As of January 31, 2016, we had $123.8 million of cash, cash equivalents and marketable securities and no outstanding debt. This compares to $111.0 million in cash, cash equivalents and marketable securities and no outstanding debt as of January 31, 2015.
Fourth quarter financial results
For the fourth quarter ended January 31, 2016, HealthEquity reported revenue of $35.9 million, an increase of 44% compared to $24.9 million for the fourth quarter ended January 31, 2015. Revenue consisted of:
• | Service revenue of $17.1 million, an increase of 30% compared to Q4 FY15. |
• | Custodial revenue of $11.2 million, an increase of 64% compared to Q4 FY15. |
• | Interchange revenue of $7.6 million, an increase of 56% compared to Q4 FY15. |
Net income and comprehensive income was $3.1 million for the fourth quarter ended January 31, 2016, compared to $1.4 million for the fourth quarter ended January 31, 2015.
Net income per share attributable to diluted common share was $0.05 for the fourth quarter ended January 31, 2016, compared to $0.02 for the fourth quarter ended January 31, 2015. Non-GAAP earnings per diluted share for the fourth quarter ended January 31, 2016 was $0.07, compared to $0.04 for the fourth quarter ended January 31, 2015.
Non-GAAP Adjusted EBITDA was $8.9 million for the fourth quarter ended January 31, 2016, an increase of 61% compared to $5.5 million for the fourth quarter ended January 31, 2015. Adjusted EBITDA was 25% of revenue for the fourth quarter ended January 31, 2016, compared to 22% for the fourth quarter ended January 31, 2015.
HSA Member metrics
The total number of HSAs for which we serve as a non-bank custodian ("HSA Members") as of January 31, 2016 was 2.1 million, an increase of 50% from 1.4 million as of January 31, 2015.
Total assets under management ("AUM") as of January 31, 2016 was $3.7 billion, an increase of 56% year over year, consisted of:
• | Cash AUM of $3.3 billion, an increase of 58% compared to the same period last year; and |
• | Investment AUM of $405.9 million, an increase of 42% compared to the same period last year. |
Business outlook
For the year ended January 31, 2017, we expect our revenue to be between $170.0 million and $174.0 million and our Adjusted EBITDA to be between $56.0 million and $58.0 million. We expect our non-GAAP earnings per diluted share to be between $0.45 per share and $0.47 per share. Our non-GAAP earnings per diluted share estimate is based on an estimated weighted average shares outstanding of 61 million and is calculated by adding back to net income all non-cash stock compensation expense, net of tax. We expect total stock compensation expense, net of tax, to be between $5.0 million and $6.0 million for the year ended January 31, 2017.
Conference call
HealthEquity management will host a conference call at 5:00 pm (Eastern Time) on Tuesday, March 22, 2016 to discuss the fiscal year 2016 fourth quarter and full year financial results. The conference call will be accessible by dialing 888-587-0615, or 719-325-2308 for international callers, and referencing conference ID 4009198. A live audio webcast of the call will also be available on the investor relations section of the company’s website at http://ir.healthequity.com.
A replay of the conference call will be available approximately one hour after conclusion of the call and will be accessible through April 22, 2016. The replay can be accessed by dialing 888-203-1112 or 719-457-0820 for international callers, and providing access code 4009198.
Non-GAAP financial Information
To supplement our financial information presented on a GAAP basis, we disclose Adjusted EBITDA, non-GAAP earnings per diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, and non-GAAP operating margin, which are non-GAAP financial measures. We define Adjusted EBITDA as adjusted earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, and other certain non-operating items. We define non-GAAP earnings per diluted share as net income per diluted share, calculated by adding back to net income non-cash stock-based compensation expense, net of tax. Non-GAAP gross profit is calculated by excluding from gross profit stock-based compensation expense attributable to cost of revenue. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by revenues. Non-GAAP income from operations is calculated by excluding stock-based compensation expense from operating income. Non-GAAP operating margin is the ratio calculated by dividing non-GAAP operating income by revenues.
These 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. The company cautions investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. 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.
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 the company’s industry, business strategy, plans, goals and expectations concerning our market position, product expansion, future operations, revenue, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “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. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the control of the company. The company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, the continued availability of tax-advantaged consumer-directed benefits to employers and employees, the company’s ability to acquire and retain new network partners and to cross-sell its products to existing network partners and members, the company’s ability to successfully identify, acquire and integrate portfolio purchases or acquisition targets, the company’s ability to raise awareness among employers and employees about the advantages of adopting and participating in consumer-directed benefits programs, and the company’s ability to identify and execute on network partner opportunities. For a detailed discussion of these and other risk factors, please refer to the risks detailed in the company’s 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. The company undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing the company’s views as of any date subsequent to the date of this press release.
HealthEquity, Inc. and its subsidiaries
Consolidated balance sheets (unaudited)
(in thousands, except par value) | January 31, 2016 | January 31, 2015 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 83,641 | $ | 111,005 | |||
Marketable securities, at fair value | 40,134 | — | |||||
Total cash, cash equivalents and marketable securities | 123,775 | 111,005 | |||||
Accounts receivable, net of allowance for doubtful accounts of $40 as of January 31, 2016 and 2015 | 14,308 | 9,054 | |||||
Inventories | 620 | 625 | |||||
Deferred tax asset | 2,642 | 1,764 | |||||
Other current assets | 1,703 | 2,271 | |||||
Total current assets | 143,048 | 124,719 | |||||
Property and equipment, net | 3,506 | 2,577 | |||||
Intangible assets, net | 66,840 | 26,541 | |||||
Goodwill | 4,651 | 4,651 | |||||
Other assets | 1,750 | 281 | |||||
Total assets | $ | 219,795 | $ | 158,769 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 2,431 | $ | 1,303 | |||
Accrued compensation | 7,776 | 5,301 | |||||
Accrued liabilities | 1,899 | 2,227 | |||||
Total current liabilities | 12,106 | 8,831 | |||||
Long-term liabilities | |||||||
Deferred rent | 236 | 488 | |||||
Deferred tax liability | 3,996 | 5,355 | |||||
Total long-term liabilities | 4,232 | 5,843 | |||||
Total liabilities | 16,338 | 14,674 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of January 31, 2016 and 2015 | — | — | |||||
Common stock, $0.0001 par value, 900,000 shares authorized, 57,726 and 54,802 shares issued and outstanding as of January 31, 2016 and 2015, respectively | 6 | 5 | |||||
Additional paid-in capital | 199,940 | 157,094 | |||||
Accumulated other comprehensive loss | (98 | ) | — | ||||
Accumulated earnings (deficit) | 3,609 | (13,004 | ) | ||||
Total stockholders’ equity | 203,457 | 144,095 | |||||
Total liabilities and stockholders’ equity | $ | 219,795 | $ | 158,769 | |||
HealthEquity, Inc. and its subsidiaries
Consolidated statements of operations and comprehensive income (unaudited)
(in thousands, except per share data) | Three months ended January 31, | Year ended January 31, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | |||||||||||||||
Service revenue | $ | 17,101 | $ | 13,156 | $ | 61,608 | $ | 45,735 | |||||||
Custodial revenue | 11,163 | 6,817 | 37,755 | 24,374 | |||||||||||
Interchange revenue | 7,622 | 4,898 | 27,423 | 17,746 | |||||||||||
Total revenue | 35,886 | 24,871 | 126,786 | 87,855 | |||||||||||
Cost of revenue | |||||||||||||||
Service costs | 13,256 | 9,596 | 39,418 | 29,842 | |||||||||||
Custodial costs | 2,051 | 1,147 | 6,522 | 4,141 | |||||||||||
Interchange costs | 2,148 | 1,615 | 8,248 | 5,899 | |||||||||||
Total cost of revenue | 17,455 | 12,358 | 54,188 | 39,882 | |||||||||||
Gross profit | 18,431 | 12,513 | 72,598 | 47,973 | |||||||||||
Operating expenses | |||||||||||||||
Sales and marketing | 4,665 | 3,790 | 13,302 | 10,619 | |||||||||||
Technology and development | 4,891 | 3,202 | 16,832 | 10,501 | |||||||||||
General and administrative | 3,535 | 3,091 | 14,113 | 8,343 | |||||||||||
Amortization of acquired intangible assets | 981 | 410 | 2,208 | 1,637 | |||||||||||
Total operating expenses | 14,072 | 10,493 | 46,455 | 31,100 | |||||||||||
Income from operations | 4,359 | 2,020 | 26,143 | 16,873 | |||||||||||
Other expense | |||||||||||||||
Loss on revaluation of redeemable convertible preferred stock derivative | — | — | — | (735 | ) | ||||||||||
Other expense, net | (63 | ) | (98 | ) | (589 | ) | (374 | ) | |||||||
Total other expense | (63 | ) | (98 | ) | (589 | ) | (1,109 | ) | |||||||
Income before income taxes | 4,296 | 1,922 | 25,554 | 15,764 | |||||||||||
Income tax provision | 1,168 | 551 | 8,941 | 5,598 | |||||||||||
Net income | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 10,166 | |||||||
Net income attributable to common stockholders: | |||||||||||||||
Basic | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 12,058 | |||||||
Diluted | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 10,901 | |||||||
Net income per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.05 | $ | 0.03 | $ | 0.29 | $ | 0.39 | |||||||
Diluted | $ | 0.05 | $ | 0.02 | $ | 0.28 | $ | 0.21 | |||||||
Weighted-average number of shares used in computing net income per share attributable to common stockholders: | |||||||||||||||
Basic | 57,673 | 54,768 | 56,719 | 31,181 | |||||||||||
Diluted | 59,420 | 57,535 | 58,863 | 51,856 | |||||||||||
Comprehensive income: | |||||||||||||||
Net income | 3,128 | 1,371 | 16,613 | 10,166 | |||||||||||
Other comprehensive loss: | |||||||||||||||
Unrealized loss on available-for-sale marketable securities, net of tax | (64 | ) | — | (98 | ) | — | |||||||||
Comprehensive income | $ | 3,064 | $ | 1,371 | $ | 16,515 | $ | 10,166 | |||||||
HealthEquity, Inc. and its subsidiaries
Consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit) (unaudited)
Stockholders’ equity (deficit) | ||||||||||||||||||||||||||||||
Redeemable convertible preferred stock | Convertible preferred stock | Common stock | Common stock warrants | Additional paid-in capital | Accumu- lated compre- hensive loss | Accumu- lated earnings (deficit) | Total stock- holders' equity (deficit) | |||||||||||||||||||||||
(in thousands, except exercise prices) | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Balance as of January 31, 2013 | 17,433 | $ | 41,186 | 6,738 | $ | 8,990 | 5,386 | $ | 1 | $ | 3,679 | $ | — | $ | — | $ | (19,069 | ) | $ | (6,399 | ) | |||||||||
Series D-3 redeemable convertible preferred stock cash dividend | — | — | — | — | — | — | — | — | — | (694 | ) | (694 | ) | |||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||
Exercise of 1,084 warrants at $0.0682 per share | — | — | — | — | 1,084 | — | (1,345 | ) | 2,547 | — | — | 1,202 | ||||||||||||||||||
Exercise of 568 options at $0.9210 per share | — | — | — | — | 568 | — | — | 523 | — | — | 523 | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | 57 | — | — | 57 | |||||||||||||||||||
Tax benefit on stock options exercised | — | — | — | — | — | — | — | 271 | — | — | 271 | |||||||||||||||||||
Stock repurchased and retired-665,613 preferred shares (674,120 common stock equivalent shares), $5.00 per share | (84 | ) | (236 | ) | (582 | ) | (861 | ) | — | — | — | — | — | (2,274 | ) | (3,135 | ) | |||||||||||||
Redeemable convertible preferred stock accretion | — | 5,764 | — | — | — | — | — | (3,398 | ) | — | (2,366 | ) | (5,764 | ) | ||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 1,233 | 1,233 | |||||||||||||||||||
Balance as of January 31, 2014 | 17,349 | $ | 46,714 | 6,156 | $ | 8,129 | 7,038 | $ | 1 | $ | 2,334 | $ | — | $ | — | $ | (23,170 | ) | $ | (12,706 | ) | |||||||||
Issuance of series D-3 redeemable convertible preferred stock cash dividend | — | — | — | — | — | — | — | (347 | ) | — | — | (347 | ) | |||||||||||||||||
Issuance of common stock cash dividend | — | — | — | — | — | — | — | (50,000 | ) | — | — | (50,000 | ) | |||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||
Exercise of 2,972 warrants at $0.8008 per share | — | — | — | — | 2,972 | — | (2,334 | ) | 4,714 | — | — | 2,380 | ||||||||||||||||||
Exercise of 1,841 options at $1.3204 per share | — | — | — | — | 1,841 | — | — | 2,430 | — | — | 2,430 | |||||||||||||||||||
Conversion of preferred stock to common stock upon initial public offering | (17,349 | ) | (42,693 | ) | (6,156 | ) | (8,129 | ) | 32,486 | 3 | — | 50,819 | — | — | 42,693 | |||||||||||||||
Issuance of common stock | — | — | — | — | 10,465 | 1 | — | 132,586 | — | — | 132,587 | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | 2,525 | — | — | 2,525 | |||||||||||||||||||
Tax benefit on stock options exercised | — | — | — | — | — | — | — | 3,429 | — | — | 3,429 | |||||||||||||||||||
Redeemable convertible preferred stock accretion | — | (4,021 | ) | — | — | — | — | — | 4,021 | — | — | 4,021 | ||||||||||||||||||
Reclassification of series D-3 redeemable convertible preferred stock derivative liability | — | — | — | — | — | — | — | 6,917 | — | — | 6,917 | |||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 10,166 | 10,166 | |||||||||||||||||||
Balance as of January 31, 2015 | — | $ | — | — | $ | — | 54,802 | $ | 5 | $ | — | $ | 157,094 | $ | — | $ | (13,004 | ) | $ | 144,095 | ||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||
Exercise of 1,950 options at $0.98 per share | — | — | — | — | 1,951 | 1 | — | 1,914 | — | — | 1,915 | |||||||||||||||||||
Issuance of common stock | — | — | — | — | 973 | — | — | 23,492 | — | — | 23,492 | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | 5,883 | — | — | 5,883 | |||||||||||||||||||
Tax benefit on stock options exercised | — | — | — | — | — | — | — | 11,557 | — | — | 11,557 | |||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | — | — | (98 | ) | — | (98 | ) | |||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 16,613 | 16,613 | |||||||||||||||||||
Balance as of January 31, 2016 | — | $ | — | — | $ | — | 57,726 | $ | 6 | $ | — | $ | 199,940 | $ | (98 | ) | $ | 3,609 | $ | 203,457 | ||||||||||
HealthEquity, Inc. and its subsidiaries
Consolidated statements of cash flows (unaudited)
Year ended January 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 16,613 | $ | 10,166 | $ | 1,233 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 8,601 | 5,890 | 4,270 | ||||||||
Loss on revaluation of warrant liability | — | — | 614 | ||||||||
Loss on revaluation of redeemable convertible preferred stock derivative | — | 735 | 5,363 | ||||||||
Loss on other investments | — | 24 | — | ||||||||
Bad debt expense | 24 | 31 | — | ||||||||
Imputed interest on notes payable | — | — | 38 | ||||||||
Amortization of deferred financing costs | 23 | — | — | ||||||||
Deferred taxes | (2,178 | ) | 1,593 | 3,552 | |||||||
Stock-based compensation | 5,883 | 2,525 | 57 | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Restricted cash | — | — | 791 | ||||||||
Accounts receivable | (5,174 | ) | (3,380 | ) | (1,546 | ) | |||||
Inventories | 5 | (234 | ) | (118 | ) | ||||||
Other assets | (107 | ) | (1,608 | ) | (272 | ) | |||||
Accounts payable | 1,011 | (1,156 | ) | 1,492 | |||||||
Due to trust | — | — | (791 | ) | |||||||
Accrued compensation | 2,475 | 1,167 | 1,334 | ||||||||
Accrued liabilities | (383 | ) | (802 | ) | 1,808 | ||||||
Income taxes payable | — | — | (77 | ) | |||||||
Deferred rent | (252 | ) | 95 | 267 | |||||||
Net cash provided by operating activities | 26,541 | 15,046 | 18,015 | ||||||||
Cash flows from investing activities: | |||||||||||
Purchase of marketable securities | (40,291 | ) | — | — | |||||||
Purchase of property and equipment | (2,376 | ) | (1,712 | ) | (1,595 | ) | |||||
Purchase of software and capitalized software development costs | (6,896 | ) | (6,420 | ) | (3,844 | ) | |||||
Note receivable from shareholder | — | — | 800 | ||||||||
Purchase of other investments | (500 | ) | (305 | ) | — | ||||||
Acquisition of intangible member assets | (40,489 | ) | — | — | |||||||
Net cash used in investing activities | (90,552 | ) | (8,437 | ) | (4,639 | ) | |||||
Cash flows from financing activities: | |||||||||||
Repayment of notes payable | — | — | (2,167 | ) | |||||||
Dividend payments | — | (50,347 | ) | (694 | ) | ||||||
Proceeds from initial public offering, net of payments for offering costs | — | 132,587 | — | ||||||||
Repurchase of redeemable convertible preferred stock and convertible preferred stock | — | — | (3,371 | ) | |||||||
Proceeds from follow-on offering, net of payments for offering costs | 23,492 | — | — | ||||||||
Proceeds from exercise of common stock options | 1,915 | 2,430 | 523 | ||||||||
Proceeds from exercise of common stock warrants | — | 2,380 | 74 | ||||||||
Tax benefit from exercise of common stock options | 11,557 | 3,429 | 271 | ||||||||
Deferred financing costs paid | (317 | ) | — | — | |||||||
Net cash provided by (used in) financing activities | 36,647 | 90,479 | (5,364 | ) | |||||||
(Decrease) increase in cash and cash equivalents | (27,364 | ) | 97,088 | 8,012 | |||||||
Beginning cash and cash equivalents | 111,005 | 13,917 | 5,905 | ||||||||
Ending cash and cash equivalents | $ | 83,641 | $ | 111,005 | $ | 13,917 | |||||
Stock-based compensation expense (unaudited)
Total stock-based compensation expense included in the consolidated statements of operations and comprehensive income is as follows:
Three months ended January 31, | Year ended January 31, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Cost of revenue | $ | 348 | $ | 308 | $ | 1,088 | $ | 403 | |||||||
Sales and marketing | 198 | 359 | 903 | 504 | |||||||||||
Technology and development | 336 | 147 | 1,014 | 263 | |||||||||||
General and administrative | 747 | 916 | 2,878 | 1,355 | |||||||||||
Total stock-based compensation expense | $ | 1,629 | $ | 1,730 | $ | 5,883 | $ | 2,525 | |||||||
The following table presents components of our unaudited consolidated statements of operations and comprehensive income, adjusted for stock compensation expense:
Three months ended January 31, | Year ended January 31, | ||||||||||||||
(in thousands, except for percentages) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Reconciliation of gross profit to non-GAAP gross profit: | |||||||||||||||
Gross profit | $ | 18,431 | $ | 12,513 | $ | 72,598 | $ | 47,973 | |||||||
Excluding: Stock-based compensation expense attributable to cost of revenue | 348 | 308 | 1,088 | 403 | |||||||||||
Non-GAAP gross profit | $ | 18,779 | $ | 12,821 | $ | 73,686 | $ | 48,376 | |||||||
Reconciliation of gross margin to non-GAAP gross margin: | |||||||||||||||
GAAP gross margin | 51 | % | 50 | % | 57 | % | 55 | % | |||||||
Excluding: Stock-based compensation expense attributable to cost of revenue | 1 | % | 1 | % | 1 | % | — | % | |||||||
Non-GAAP gross margin | 52 | % | 51 | % | 58 | % | 55 | % | |||||||
Reconciliation of income from operations to non-GAAP income from operations: | |||||||||||||||
Income from operations | $ | 4,359 | $ | 2,020 | $ | 26,143 | $ | 16,873 | |||||||
Excluding: Stock-based compensation expense | 1,629 | 1,730 | 5,883 | 2,525 | |||||||||||
Non-GAAP income from operations | $ | 5,988 | $ | 3,750 | $ | 32,026 | $ | 19,398 | |||||||
Reconciliation of operating margin to non-GAAP operating margin: | |||||||||||||||
GAAP operating margin | 12 | % | 8 | % | 21 | % | 19 | % | |||||||
Excluding: Stock-based compensation expense | 5 | % | 7 | % | 4 | % | 3 | % | |||||||
Non-GAAP operating margin | 17 | % | 15 | % | 25 | % | 22 | % | |||||||
HSA Members (unaudited)
January 31, 2016 | January 31, 2015 | January 31, 2014 | % Change from prior year | ||||||||||||
HSA Members | 2,140,631 | 1,426,785 | 967,710 | 50 | % | 47 | % | ||||||||
Average HSA Members - Year-to-date | 1,600,327 | 1,087,962 | 747,182 | 47 | % | 46 | % | ||||||||
Average HSA Members - Quarter-to-date | 1,850,843 | 1,230,256 | 837,666 | 50 | % | 47 | % | ||||||||
HSAs with investments | 44,680 | 30,552 | 19,432 | 46 | % | 57 | % | ||||||||
Assets under management (unaudited)
(in thousands, except percentages) | January 31, 2016 | January 31, 2015 | January 31, 2014 | % Change from prior year | ||||||||||||||
Cash AUM | $ | 3,278,628 | $ | 2,075,741 | $ | 1,442,336 | 58 | % | 44 | % | ||||||||
Investment AUM | 405,878 | 286,526 | 182,614 | 42 | % | 57 | % | |||||||||||
Total AUM | $ | 3,684,506 | $ | 2,362,267 | $ | 1,624,950 | 56 | % | 45 | % | ||||||||
Average daily cash AUM - Year-to-date | $ | 2,326,506 | $ | 1,553,845 | $ | 1,137,825 | 50 | % | 37 | % | ||||||||
Average daily cash AUM - Quarter-to-date | $ | 2,682,827 | $ | 1,698,402 | $ | 1,223,589 | 58 | % | 39 | % | ||||||||
Net income reconciliation to Adjusted EBITDA (unaudited)
Three months ended January 31, | Year ended January 31, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net income | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 10,166 | |||||||
Interest expense | 68 | — | 91 | — | |||||||||||
Income tax provision | 1,168 | 551 | 8,941 | 5,598 | |||||||||||
Depreciation and amortization | 1,890 | 1,294 | 6,393 | 4,253 | |||||||||||
Amortization of acquired intangible assets | 981 | 410 | 2,208 | 1,637 | |||||||||||
Loss on revaluation of redeemable convertible preferred stock derivative liability | — | — | — | 735 | |||||||||||
Stock-based compensation expense | 1,629 | 1,730 | 5,883 | 2,525 | |||||||||||
Other (1) | (6 | ) | 150 | 496 | 328 | ||||||||||
Total adjustments | 5,730 | 4,135 | 24,012 | 15,076 | |||||||||||
Adjusted EBITDA | $ | 8,858 | $ | 5,506 | $ | 40,625 | $ | 25,242 | |||||||
(1) | For the three months ended January 31, 2016 and 2015, Other consisted of interest income of $(111) and $(29) and miscellaneous taxes of $81 and $179, and SEC registration costs of $24 and $0, respectively. For the years ended January 31, 2016 and 2015, Other consisted of interest income of $(414) and $(38), and miscellaneous taxes of $334 and $366, acquisition-related costs of $471 and $0, and SEC registration costs of $105 and $0, respectively. |
Net income per diluted share reconciliation to non-GAAP earnings per diluted share (unaudited)
Three months ended January 31, | Year ended January 31, | ||||||||||||||
(in thousands, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net income attributable to common stockholders for diluted earnings per share | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 10,901 | |||||||
GAAP adjustments for participating securities (1) | — | — | — | $ | (735 | ) | |||||||||
Net income | $ | 3,128 | $ | 1,371 | $ | 16,613 | $ | 10,166 | |||||||
Stock compensation expense, net of tax (2) | 1,010 | 1,072 | 3,647 | 1,565 | |||||||||||
Adjusted net income | $ | 4,138 | $ | 2,443 | $ | 20,260 | $ | 11,731 | |||||||
Diluted weighted-average number of shares used in computing non-GAAP earnings per diluted share: | 59,420 | 57,535 | 58,863 | 51,856 | |||||||||||
Non-GAAP earnings per diluted share | $ | 0.07 | $ | 0.04 | $ | 0.34 | $ | 0.23 | |||||||
(1) | The net impact of adjustments required for participating securities in conformity with the two-class method as prescribed by GAAP. |
(2) | The company used an estimated statutory tax rate of 38% to calculate the net impact of non-cash stock-based compensation expense. |