Full Year 2020 Healthequity Inc Corporate Sales Call
Please go ahead Mr Putnam.
Thank you Christopher and good afternoon, welcome to health equities fiscal year 'twenty 'twenty, one sales metrics conference call. My name is Richard Putnam to Investor Relations here for for health equity.
Joining me today is Jon Kessler, President and CEO, Dr. Steve Neeleman, Vice chair and founder of the company.
Darcy Mott, the company's executive Vice President and CFO, Tyson Murdock Executive Vice President and Deputy CFO, and Ted Bloomberg, Our executive Vice President and Chief operating Officer.
Before I turn the call over to Jon I have two important reminders first.
A press release announcing our sales metrics for FY 'twenty, one was issued after the market closed this afternoon.
The metrics reported in the press release include the contributions from our wholly owned subsidiary wage works and accounts it administers press.
Press release also includes definitions of certain non-GAAP financial measures that we will reference today.
A copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures.
And a recording other webcast can be found on our Investor Relations website, which is IR dot health equity Dot com.
Second our comments and responses to your questions today reflect management's view as of today February eight 2021 and will contain forward looking statements as defined by the SEC, including predictions expectations estimates or other.
<unk> that might be considered forward looking there are many important factors relating to our business, which could affect these forward looking statements made today and these forward looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from the statements made here today.
As a result, we caution you against placing undue reliance on these forward looking statements. We also encourage you to review the discussion of these factors and other risks that may affect our future results for the market price of our stock which are detailed in our latest annual report on form 10-K and in subsequent.
Periodic reports filed with the SEC, we assume no obligation to revise or update these forward looking statements in light of new information or future events.
And at the conclusion of our prepared remarks, we will turn the call over to our operator to provide instructions and to host our Q&A.
With that other out of the way I'll turn the mic over to our CEO Jon Kessler.
Richard and thanks, everyone for joining us today I will.
Talk about the FY 'twenty, one sales results Ted will describe our plan to beat them in fiscal 'twenty. Two and then Tyson is going to update your FY 'twenty, one guidance and offer a first look at FY 'twenty two based on the results we're reporting today.
Steve and Darcy will join us for the Q&A. So one thing that makes working at health equity. That's very special is the fact that our aligned our mission and our business are so well aligned the teams ability to help our members connect health and wealth and successfully build health savings also fuels our long term growth.
Our members have a lot of success. This past year in that regard health equity HSA members ended fiscal 'twenty, one with $14 $3 billion in HSA assets up 24% from a year ago, and 26% on an organic basis organic asset growth, which excludes both gains and losses from the wage works acquisition of migration increased from one.
8 billion in fiscal 'twenty to roughly $3 billion in 'twenty one.
Even more exciting is the growth in average HSA balance, which grew by 15% in FY 'twenty, one up from 7% in fiscal 'twenty and 2% in fiscal 19. The majority of that growth occurred from the result of sales and member engagement efforts throughout the year.
What happened first our new members added more assets than ever before health equity ended fiscal 'twenty, one with $5 8 million HSA members up 8% year over year and 11% excluding migration related closures that total includes 687000, new HSA members added during the year, which is down from FY.
Mid Twenty's record 724000.
Most all of that year over year GAAP occurred in the second and third quarters during which new hiring by existing clients ground to a halt as a result of the pandemic Q4, driven by open enrollment and new client wins was much stronger as Ted will describe in a bit more detail. These HSA wins included both cross sell clients consolidating with <unk>.
Equity at top and existing CDB relationship and new logos, the new HSA clients fed approximately 300 million in HSA transfers from other custodians in FY 'twenty, one which was up 35% year over year, most of which occurred in January.
Second.
More of our members, both new and existing learned the full power of an HSA transitioning from spenders to savers and investors. The number of our HSA members, who invest grew 51% year over year 51 per cent. That's a lot the percentage of HSA members, who invest reached five 8% at fiscal year end compared to $4 one a year.
[noise] ago, HSA invested assets grew 48% year over year far outpacing stock or bond market gains for $2 billion in HSA invested assets now make up 29% of total HSA assets as of the fiscal year and these are really positive trends for the long term value of health equity in our view because.
More members using the full power of HSA is drive our profitability and cross sell and client takeaways spur outperformance of top a still growing HSA market. They speak to the return on our investment and integration to a total solution and single proprietary platform, which drives cross sell and in the engagement and Inc.
And the engagement infrastructure and capabilities of that proprietary platform, which drive members to action CDB enrollment was not so exciting at least temporarily at fiscal year end health equity managed $12 8 million total accounts.
It gives me, including the $5 8 million HSA as we've discussed plus 7 million Cdb's health equity sold and implemented new CDB accounts with nearly 1 million members in fiscal 2021, that's good but <unk> in total still felt zero point $4 million or 5% versus a year ago and ex.
Commuter still grew by only zero point $3 million or 4%. There are two reasons for this both related to the pandemic first as I just mentioned about 650000 commuter accounts remain in suspense due to the continuing for continuing full time work from home and these are not included on our total accounts numbers.
We did not see Sig and I should say, we did not see significant office reopening in Q4 second a similar number of FSA members did not re enroll for fiscal 'twenty. One and these include dependent care FSA members with temporary lack of access to or need for childcare during work from home and health FSA.
<unk>, who perhaps at the time of enrollment we're still carrying significant 2020 balances due to interrupted health care access during the pandemic.
Ted will talk about our opportunities to spur recovery in these areas in his remarks on our fiscal 'twenty two opportunities as.
As information on the HSA market growth. During this cycle comes around from various sources will have more to say about our performance versus competitors in the market as a whole. So now let's look forward, while the pandemic remains with us the health equity team intends to beat the results I've just reviewed and to do so decisively demonstrating the strategic.
Value of the wage works integration and our total solution strategy I'd like to turn the call over to Ted to discuss our plans to do that in fiscal 'twenty to Ted.
Thanks, Jon Good afternoon, everybody, let me start with a message to all of our house equity team members clients and partners. Thank you for all your contributions for fiscal 2021 sales achievements my remarks will focus on the opportunity to accelerate our success in fiscal 2022.
As you know health equity has multiple paths to growth first winning new network partner and employer client logos second cross selling more services to current clients via our total solution strategy.
Third growing employee adoption and use of HSA cvv's through engagement and education.
Let's start with our network partners, which are health plans retirement plan record keepers and benefits administrators, with whom we actively go to market.
We grew the number of our network partners for a 170 for in fiscal 'twenty, one up from 165, one year ago and 141 two years ago.
Beyond adding these partners, we improved the quality of the relationships.
All of our partners added more health equity services to their offerings this year, showing optimism, but our bundled strategy can help them serve their clients.
We've also integrated more deeply with retirement plan partners expanding our coverage from 25% to 35% of the defined contribution or D C market and achieving significant enterprise client wins together.
Most importantly for maintaining our purple culture.
And partner satisfaction surveys earned nearly perfect scores from combined results across all types of network partners. Despite a fair amount of platform migration related activities. This year, we believe that more happy partners offering more health equity services will lead to more wins in fiscal 2022.
Direct to employer and broker driven new logo wins are also poised for fiscal 'twenty to growth because last year's deferrals are this year's incremental opportunities for.
For enterprise employers the pandemic may change more difficult this year, reducing the number of new enterprise Rfps market wide and leading many just at all.
But our talented enterprise sales team made the most of its opportunities producing twice as many new HSA members in fiscal 'twenty, one as we did in fiscal 'twenty.
So we've proven we can win an outsized share of opportunities and based on our early fiscal 'twenty two pipeline and results. We believe demand is returning this year.
Now, let's talk about cross sell where as you've heard John say, we see $400 million in revenue potential and our existing managed client base alone.
Cross sell was new to health equity in fiscal 'twenty, one and yet we made a strong start.
Over 50 of our large of our largest early adopter managed clients added a new health equity service to their benefits package. This year.
Now with significant pieces of the go forward platform in place and HSA migration substantially completed we're poised for more.
Its fiscal 'twenty two begins the team is actively engaged in cross sell discussions with roughly 20% of our managed client base. We are also beginning to scale cross sell efforts into our small and medium employer client medium employer client base, which unlocks further opportunity.
Across both new logos and cross selling the sales and account executive teams are off to a great fiscal 'twenty to start with more business already closed and at this point last year.
Finally engagement, which increases the value of both new wins and current client <unk> client relationships as Jon discussed we had our best year ever encouraging HSA members to grow their balances and there is more room to run.
For fiscal 'twenty, two our new engage $3 60 hub is winning rave reviews as a source for education for members as well as for clients and partners also.
So we are expanding the health savings score is a tool to target our efforts and inform clients plan design plan design decisions.
One example of the power of making engagement and education core to our platform came during the first few days of January.
A week after the most recent stimulus Bill became law health equity delivered live and recorded information education about what FSA and Cobra changes mean for employers and we provided a streamlined process for them to take action.
More than 5000 employers and brokers engaged with our content and nearly 2000 employers have requested a plan document changes to give their employees flexibility.
This is part of the effort Jon mentioned to reactivate CDB members, whose benefit utilization patterns were interrupted by the pandemic.
We do not need to wait until next open enrollment season to make progress.
In summary, we are well positioned to win new business grow existing business and help our member succeed by guiding them towards the right spending saving and investment decisions for their families.
I will now turn the call over to Tyson Murdock Tyson.
Thank you Ted closing the books on fiscal 'twenty, one is underway and the initial results allow us to update our guidance with the following for fiscal year ended January 31 2021.
Revenue in the range from 29% to $733 million non-GAAP net income in the range of $125 million to $128 million non-GAAP diluted EPS in the range of $1 67 to $1 71 and <unk>.
Adjusted EBITDA in the range of 236% to $240 million.
<unk> guidance implies adjusted EBITDA margin for the full fiscal 'twenty, one between 32 and 33%.
This is a remarkable achievement given the loss of high margin commuter and interchange revenue and lower yields on interest the cash during fiscal 'twenty. One we will of course report final year end results next month.
Given the expected financial results for fiscal 'twenty, one and the sales results today.
Have sufficient confidence to provide early guidance for fiscal 'twenty, two revenue, which we expect to be in the range of $740 million for $750 million.
I'd like to take a moment to describe key assumptions underlying this guidance, including those related to the unusual circumstances of the pandemic.
With regard to the computer commuter benefits and its impact on the service and card fees.
Our revenue guidance assumes that commuter will deliver less than half of its annual $75 million in pre pandemic contribution revenue with respect to health care spend and its impact on card fees.
We assume that members spend will return to pre pandemic levels within the first half of the year as vaccinations rollout in health care access has broadened.
We have not however assumed a snapback in parts than we're spending above pre pandemic levels at this time.
Ted discussed we have an opportunity to work first with employers and then with their employees to reactivate dependent and healthcare FSA enrollment is depressed by the pandemic as we are able to gauge traction we will incorporate that into future guidance.
Due to the stronger than expected interest a cash flow in January and the placement of those funds at current rates, which as you know are below our current average yield today's guidance assumes a yield on HSA cash with yield for this next year to be at the low end of our previous yield guide for about 175 basis points.
The acceleration in seasonal January deposits beyond our expectation.
Provides additional evidence that our members and employer clients understand the power of HSA and of course, we'll provide additional benefit to help pretty as interest rates and interest rate policies begin to normalize.
<unk> adjusted EBITDA margins during fiscal 'twenty, two will be a comparable levels to today's upwardly revised guidance for fiscal 'twenty, one even with revenue outlook prudently accounting for the pandemic persistence.
We will report our Q4 earnings in the third week of March.
And with more information in hand look forward to providing additional outlook at that time with that I'll turn the call back over to Jon.
Nicely done.
Uh huh.
Tom Brady you may not be passing the torch, but.
But we're getting it done here. Thank you Tyson.
So for us.
For a long time.
I'll just close with this for a long time, we predicted that debt using the full power of HSA is that American families could eventually build roughly a trillion dollars of health savings and that seemed like a big number.
But our vision and our mission and our values are all connected to that belief in that number and our vision, which is the health savings will be as much a part of American family saving strategies.
<unk> 401 case and other retirement accounts are today implies 50 to 60 million HSA is and we think that's going to happen by 2030, and our mission, which is to be the best at helping HSA members build health savings is about relentlessly driving all balances upward too and we believe the end game on that as to the 15th.
Dollars to $20000 balances that we see and our mature account cohorts today and in fact based on today's numbers our investors both new and long standing are all are on average already there even though obviously their numbers have grown very quickly and so we have a lot of new investors. So this is a long journey, it's a long journey.
Two a trillion dollars of assets being put towards health care security by the American public, but the path to that trillion dollars prediction gets clear every time. We report these sales results to you.
Before going to questions I want to join in the thinking and in particular to thank those who are truly responsible for the results. We're reporting today and driving health equity in our industry forward, which is not us, but rather our sales executives around the country. Our marketing team. Our sales support superstars are hard zooming account executives that used to be hard.
Traveling now Theyre, just hard zooming service managers implementation specialist technology and operations service delivery teams and of course, our member service specialists, who welcome new members and really get them off on the right foot and just did a fantastic job. This year in January and a big Thank you to our network partners, our health and retirement benefit.
Planned partners as well as of course, our employer clients for all day due to support their members to building health savings. It's really is a direct result of their efforts that health equity closed fiscal 'twenty, one setting new highs for our number of network partners, our HSA members and assets.
And really showing that we've got millions of families doing something positive about health care in America by building health savings so with that I will open the call for trying to call back the operator and open for questions operator.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your telephone keypad. If for your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Again that is star one.
Your first question is from Greg Peters from Raymond James Your line is open.
Good afternoon.
First question just big picture question.
The last several months, we've seen some some changing.
While some headwinds for the industry I think the Allegiant CEO stepped down.
Webster's fourth quarter results were great.
<unk> was sold can you give us sort of a perspective from where you sit on what's going on with some of your competitors, it's resulting in the change in and what the headwinds are there.
Yes.
Some of those maybe it could be characterized as headwind some not.
Thank you.
Without commenting on any specific competitor, Greg that debt and.
And thank you for the question debt.
Im surprised youre, even available in Tampa, I would think you'd be out partying and whatnot, but.
Rog, you, maybe but I am definitely baragi alright, good drug is good.
But.
Yeah.
It's better than gronchi, but but.
But I think that what youre seeing is.
Some consolidation of the industry based on the fact that Ah.
Succeeding in this industry takes capital. It takes it takes really it takes talent, obviously and it takes investment in both.
Technical capabilities, but also in technical ecosystem and connectivity and.
For folks who are not able to make those investments or haven't made those investments.
And you'd be challenging to continue to put up numbers.
And.
And we're poised to try and take advantage of that as you know, we've we've accumulated quite a bit of of operating cash and based on the numbers Tyson reported or guided towards I expect that debt will grow that cash pile. This quarter and we have a ton of capacity out there and so we're going to be kind of focused on.
On where those opportunities make sense for us.
On on potential M&A.
And other kinds of transactions that really help us take advantage of that consolidation and of course, then beyond that we're going to we're going to be competitors in the marketplace.
Relative to what other competitors have put out there so far.
Our growth in terms of assets and accounts and whatnot feel.
Feels pretty good.
Particularly on organic basis.
But we'll see what others have to say as the industry reports I guess I basically think the industry as a whole is not only alive and well, but it's doing what we said it would do which was overtime right accounts would mature and the asset component of those accounts would start growing and so forth and over time.
We said I'm back six years ago I remember you were there is is that debt.
Like all industries, the winners and losers with separate from each other and I think we're a winner.
Yes.
So the other question I had.
Was around.
Just account retention and network partners obviously.
The results were challenged last year I'm, just I'm not looking at account specific account for touches on what day.
Employer retention, what your retention of your customers were.
If that makes sense and then on the new the New network partners for hospitals, I think you said 174 versus 165 versus $1 41.
And I'm just curious what the percentage of the HSA is relate to those is it an increasing percentage of your HSA is related to those network partners is it a static number just trying to understand how that percentage is changing.
Yes, I'll try and take the first part and I'm not sure that we're yet in a position to report accurately and specifically on the second part, but I'll I'll give it a shot and if tyson or Darcy wants to.
Wants to chime in they are welcome to do so.
The first part of your question I think was about employer retention and.
The gist of it was no I forgot that we've allowed you to do a two part question and now the floodgates are open so who knows.
Yes.
But but but.
I imagine Richard Texting me in the background somehow but.
Yes.
We were you were giving me a hard time about the Super Bowl. So I figure I'd give I'll pass that's fair that's fair.
So so.
I think.
In terms of employers the truth is and I think we commented on this little bit in the third quarter call.
We did extremely well our biggest source of attrition. This year an HSA is was the accounts that we were moving over and we've talked about those in each quarter.
There were another I don't know 10, or 15000 or whatever it was in this quarter. This last fourth quarter, but those numbers have trailed off as obviously as we've moved accounts over.
Barring that we had a very good year in terms of account attrition and I think also from an employer perspective.
As Ted talked about one of the things that ultimately surprised me a little bit was the contribution to HSA is from new logos.
We said throughout the year that winning new logos, particularly in the direct market was going to be challenging in the context for the pandemic, but but the team really did a nice job with the wins that we got we went for some big ones and one knows and.
That's the reason that those contributed so heavily to dollars transferred over in January and and.
And obviously, we will be with us for a long time, so that's my sense of it.
The last part of your question was about.
The percentage for HSA as that are coming from partners versus direct.
Obviously, our goal to some extent with the total solution strategy is to expand our direct and broker enabled sales.
It's a weird year to look at that in fiscal 'twenty, one given all that was going on our partners remain very strong and as Ted commented, we started to see some.
Notable wins from.
The retirement plan channel, even as we continue to kind of increase the <unk>.
Foundational infrastructure there so.
But I feel like like if I look at it and you take a step back there for ways you can win business and here you can sell direct to employers you sell through brokers you can sell through in partnership with health plans and you can sell in partnership with retirement and.
In each of those areas. We saw good contributions this year from both existing and new partners.
But.
Obviously, it's a little bit tough with the pandemic and we hung in there and we think that puts us in a great position going forward.
Thanks, Greg I've got it thanks.
Thanks for giving you the book.
Yes, apparently.
Yeah.
I get the blame him this is fantastic.
We're just worked at home.
Who's next.
Your next question is from Stephanie Davis from SBB Leerink.
Hey, guys.
Thank you for taking my question was that you have your dogs in the background are now.
You heard my dog Barking very scary bark.
No.
All lines have mapping happily on the cash outstanding.
Have a quick question on the forward numbers because they seem so different from.
The positive takeaways on the metrics that you gave earlier on the call.
Yes.
That implied guidance, yes.
I'll speak a little of this and then ask Tyson to detail that I think the core is that debt.
We don't know as Youre, well aware, we don't know how.
The coverage analysts and the like think about.
About the particularly the pandemic impacts on commuter and alike and I think that's probably where the big Delta is but Tyson you can provide some details on how we thought about those issues and kind of where the opportunities are going forward.
Yeah, Hey, Stephanie Thanks for letting me have the opportunity to outline these.
There are still those headwinds there, we really haven't seen an improvement in commuter and if someone knows better than my team about when that will come back and how that will work through the pandemic I'd love to talk about it but it just hasn't hasn't and so.
That's why we put the numbers in the script about where the run rate was and where were actually landing.
And this forward year, it'll be even lower than this last 21 here and so that's an area that at the end of the day. We haven't included a lot and that forward model relative to commute or second half of the year. There may be something is.
People come back to work.
But that's not really a big driver of that.
When you think about the spend side of it.
That's also something that I think we've been made for about I don't think that that's going to spike back I think people are going to do that in a different way and so we've been a little careful about that I mean, the good news is we there's a lot more assets that came in so that we will do a couple of things one we can replace debt replaced it and the other thing is that people will spend some.
And so that will help drive some of that but we really haven't put anything in there that really pushed out along and then and then I think where the work actually has to happen and we have to.
So we see what the how the team executes isn't this FSA run off from some of the change in the legislation and that's really something that debt and I've talked a lot about the whole team is about how to execute on that we were out really early with our webinars on it.
A lot of feedback from our from our.
For partners and our employers about what theyre going to do with plan design, but they actually have to follow through from that so we'll see if we get something there as well, but again.
Not included in there so.
That's those are the main assumptions that I think you'd be looking at of course, there is still interest rates from there.
That are lower than we wanted to be in those type of things.
Now correct me, if I'm wrong, but given the timing of your fiscal year don't you really only have that.
Let's call it two months of tough comp on the commuter business or do you assume it's going to get markedly worse than what it was during the height of pandemic losses here.
No you are correct and that's why we've really taken it down to the run rate over the last half of this.
For fiscal 'twenty, one year into the next year and you are correct. We had we had good results in.
In February for computer in March until things.
It's sort of lags the shutdown because people don't turn their card.
Awesome.
And pull away from it until that point, but youre exactly right.
The key point there is the timing is that last point Tyson made Stephanie. So so I think as we've talked about if you go back to our script from the first quarter of last year.
We saw some fall off.
In.
Really in April revenue for commuter, but even then it wasn't as substantial as it ended up being for the full year, mostly because stuff kind of.
Folks either they were wherever they were in the world is still going to work or they thought they would be or what have you.
Or do they just didn't get round to it one way or the other but but what we did is took where we were in the fourth quarter and extended that out and I think thats. It.
We're.
I feel like if from an investor's perspective, our job there is just to be clear about our thinking.
If we can do better great and we will by the way I'm sure you'll be hearing about some things, we're going to try and do to accelerate that kind of.
That benefit as a whole and make it more relevant and in the future workplace, but.
But nonetheless, we wanted to be prudent about it.
Understood I'll be hoping for some conservatism. So we're not spending a whole other year back at home.
Yes that would be ideal thanks, thanks Stephanie.
Your next question is from Donald Hooker from Keybanc.
Hey, Jon.
Hey, great good afternoon good.
Good afternoon.
Could you just on the.
The topic of the yield.
The guidance around the yield cash yield from HSA is what it sounds like I guess is a little bit lower than you thought is.
Is there a way to think about from the incremental yield on that incremental deposit dollar, but youre, giving us sort of an aggregate yields I think we're all trying to.
Figure out what where this thing is going to settle out at.
I don't know if youre willing to share that are directionally kind of give us visibility because there is sort of obviously a lagged effect. This will play out over a little bit of time beyond even this coming year.
Can you give us a little bit of guidance on that.
I think maybe that's a good one for Darcy you want to take this one.
Sure.
And you're right, we don't give what.
Individual placements are in specific contracts from a competitive standpoint, but the movement from.
What we guided in.
J P. Morgan conference was based on our range of estimate at the time and if Youll recall, we estimated our cash would be between 96% 90, 796 billion and $9 7 billion, we reported to day $10 1 billion in cash so.
However, you want to calculate that that's another $400 million or so.
And so we have now placed that money and it said <unk>.
For us rates right now.
We will continue to ladder things out.
Don and so.
So, we're saying that our midpoint of our range before was in between.
Between 175, and $1 80 was kind of in that 170, 778 range, which we were very comfortable with and we're just taking it down to the lower end of that range because of that impact.
Of the new money at a lower rate.
Right.
Are very interesting to watch Washington for 14 years now.
Trying to predict what our revenue will be.
We are kind of at the low end of that.
The good news is that we've got all 10 billion placed.
And we rely on our depository relationships and we have very strong good relationships with all of our depository.
So we will be.
Opportunistic as the year progresses.
We'll see if rates firm up a little bit maybe you get a little bit of benefit there, but the most exciting thing is that we continue to grow we can grow our cash assets.
And our investment assets and so.
Our yield.
Every quarter, we will give you our complete clarity view of what we believe our yields will be for the remainder of the year.
Okay, and then maybe I'll ask one follow up.
Jump back in queue.
Did reference that the COVID-19 outbreak.
Not surprisingly caused some distractions among your network partners and there were some deferrals.
Is there any can you give us any sort of incremental commentary around.
These deferrals or youre going to get kind of I don't know if youre willing to I don't know if its possible to quantify them or are these these deferrals can be recaptured in this fiscal year going into so for fiscal 'twenty three.
You'll sort of get a catch up I'm, just kind of sort of think through that based on the comments there.
Yes, Ted why don't you take this one I interpret the question is basically being about.
The magnitude of our pipeline deferrals and what we're seeing so far early in 'twenty and fiscal 'twenty, two with regard to capturing that demand this year.
Sure. Thanks for the question.
We try to analyze this topic.
Pretty diligently, but theres no sort of like league table for the number of Rfps that are out in the marketplace for the way that we do it is we.
Serving our big broker consultant partners and the vibe that we got was enterprise rfps were down depending on geography, depending on.
This line significant sort of double digit percentage is kind of across all the people that we serve it which is an anecdote not analysis, but just kind of gives you some.
Some anchor and I think our experience in.
Sort of supported that also anecdotally, which is that we started a bunch of cases debt ended up getting deferred.
I mentioned in my remarks that our closed sales.
Through this point in the year are significantly higher than in previous years and that's in large part due to cases that rolled over a year by year. So.
We know.
Where those deferrals are working them diligently.
And we're excited about their volume and we expect it to be.
It will be reflected in the opportunities that we have in <unk>.
This sales year.
But to your point the exact point, it's hard to get an exact analysis of how many opportunities got deferred industry wide. How many did we get what are the opportunities et cetera. So the best we can do is kind of say that we're.
We're pretty optimistic about some of those cases that got deferred last year coming back this year.
Okay, well thank you so much.
Thanks, Jon.
Your next question is from Sean Dodge from RBC capital markets.
Mr Dodge welcome.
Hi, good afternoon.
Okay, I guess, maybe not to belabor, but asking them earlier question is just a little bit different just to make sure were clear around the sales outlook. I think this time last year. You. All said you had something like 136 Rfps from September one to January 31 that you would receive.
We should think about that being kind of the metric here and then that being down.
I guess quote unquote strong double digits am I interpreting that right.
If I understand your question.
Maybe a weighted.
But the way to think about it is and we can think about it in terms of rfps or opportunities and I should say in this regard we're going to be in a better position to talk about opportunities, which is the right way to think about it since especially in cross sell you don't you don't maybe you don't go to RFP, that's the whole idea.
As the team is now kind of completed at least from a sales facing perspective.
The integration of our sales CRM systems, and so forth, but but I guess the way to think about it as simply as follows.
Industry wide and then this makes total sense there was less like.
If it wasn't critical for you to do you didn't do it right. So, especially when you think about customers that we're having to make those calls in the relatively early part of the year and into the summer, which would be your larger customers right, where none of us really knew what was going on.
And so that was reflected in aggregate RFP volume industry wide, we actually did reasonably well, meaning we kind of roughly held serve in RFP volume, but then as Ted mentioned right we saw.
A considerable amount of okay. We started this process, but now we realize what's going to take and we've got other stuff to do are going to stall out I commented in an earlier call that about a third of our on the enterprise side about a third of our Rfps.
I actually ended up being deferrals that are into next into this now this year and so our job is to go windows and.
Well first to kind of get them restarted and then go in them and we've done some of that already and we will keep doing it but I think thats. The broader picture is is that.
Certainly when it comes to this kind of stuff wasn't a great year for switching activity.
And yet we did okay in truth, the only thing that debt the only area of of of weakness that really shows up in the numbers on a year over year basis is actually not related to anything we're talking about now it's related to the absence of new employees in the middle of the year right. So so meaning meaning new.
In other words for new employees existing clients, where people come in and you have the opportunity to win that new Guy plus the old Guy can stick, maybe who he or she replaced can stick around and you can see that in the month over month data really clearly that debt up until about may we were in really good shape and.
Is that kind of is is hiring and that occurred in February and into March. So first but benefits months eligible might be April may and then things kind of slow down and then come November December they speed up again, well why because November December and January is when we see the benefits of open enrollment, meaning new clients.
And new open enrollment activity. So it's I think.
I guess the way I would summarize it is looking at our new client wins looking at our accounts from new clients et cetera.
And we did more than we at least held serve looking at assets, we did more than hold serve including cash assets not just market growth and all of that.
But where we were challenged but that having been said our goal wasn't to hold serve our goal was to do better based on the fact that we're rolling out this integrated solution and integration and total solution strategy and I think what we're trying to communicate is we think that debt.
With a little bit of the dust settled that we can get back to that pattern that we were on at the very beginning of last year and and really have a good year. This year.
Okay. That's helpful. And then just a quick question I know the personalized care Act was reintroduced about a week ago debt.
It would be very nice tailwind for you all and I get it's a tough question to ask or answer but is there any particular insight or visibility or anything youre seeing and hearing that that gives you. Some hope that could something like that could mean for yes.
Yes, Steve.
If you're on if you back with US I know Steve is.
Quite literally trying to get a.
<unk> for lay people and turn them into folks in to help them move people through.
Vaccination sites, but but Steve if you Ron if you could comment on that would be great.
Yes, so were fallen legislation you really really closely.
Cobra language was released literally about.
57 minutes ago Im trying to use John's appropriate use of the word literal that at all.
That is actually because that I think.
That's actual revenue.
Anyway, Okay. So it was actually released could be some minutes ago.
And so we're just digging through it it does look like it in the language from the Chairman's version of this and this is from a labor Committee.
They are asking for six months Covid relief.
At an 85% coverage level and.
There is some precedent with that and.
Obviously, those need to be signed and it would be six months after the bill.
And I think our team can comment on on how we even model, which we haven't but that's just being released now for some other provisions in there. We think we will come out of the amendments.
And we're still waiting for other releases for the house ways and means committee and things like that so we think Thats a great thing for Americans that are out of work we estimate that it's between two and 3 million Americans right. Now are out of work that previously had coverage, we know that theres more Americans or they're out of work did not have coverage for this.
Non acquired too.
And so we're tracking that closely not only to help folks in.
We're happy to help them get vaccinated, whatever we can do honestly, but we're in this case, helping get insurance.
We continued making contributions day, just days and things like that.
And then we're hopeful that there'll be some other things that come out of the Bill there was some language that went into the amendments around health savings accounts were not sure where that will land it will probably come out.
The bipartisan vote too.
Maybe it gets H expansion through this.
Through this through this next reconciliation bill, but that was going through the details, but we do think that there is a good opportunity as they start getting to amendments to get to our longer goal, which is to really tie.
<unk> have an HSA to any credible ACA coverage.
It would be considered inc. Global coverage should have an interest and we just think it's that simple most deductibles are a lot higher now than they were when the interest rates became law back in 2000 and for January one and go for so we think every American use an HSA and that is independent of whether they're in Medicare and Medicaid Tricare regular commercial ensure.
Everyone needs, an HSA and we're not going to rest until that happens. So I don't know if that answers. Your question, but this is evolving quickly and we're following it closely and we're pretty pleased with the Covid stuff got in there and network.
Now we're looking for HSA expenses.
Sounds great.
That was a great answer thank you again.
Good day, everyone can make and can make a vaccination line a drive through vaccination run with the efficiency of a chick Fil a drive thru it is Steve Neeleman.
So come to Utah and get your vaccine and we May give you certainty average due at the same time.
Yeah.
Your next question is from Sandy Draper from crew with Securities.
Sandy.
Hey, how are you doing Jon.
Net.
This is probably less of a question as to clarification, just so I've got it right in my head. So you said there are about 650000 commuter accounts still suspended and so based on tyson's comments youre not assuming.
Any of those come back and want to think about that in terms of revenue pre pandemic. There was $75 million of commuter benefit it was let youre expecting less than half of that this year, but that's even down from for ESCO year, you just completed.
Correct.
Okay, and then I've got a lot of that right because of the drag that was sort of the answer to Stephanie's question, Yes.
Got it okay great.
That's the first point that that's helpful. So debt.
The real question is.
When you think about.
The sales the opportunities.
Obviously, there is some mid year stuff that could happen that could potentially bring some accounts and but.
When you think about.
How much better as I go back to some peak.
Peak levels of.
Fourth quarter sort of.
Signings I'm, just trying to get a sense for how big of an acceleration do you think you could see.
And new business wins, and I know you don't want to give a number I'm not asking for that but just are we talking like a modest single digit type of improvement. You think you can do very strong double digit improvement just trying to get some type of sense for.
As things get back to hopefully back to normal sales process gets better you guys are used to selling in a.
Virtual environment clients are actually making decisions.
If I look at one way if a third of decisions or whatever you said got deferred.
Could you even see a 30% increase I'm just trying to get some way to think about this.
I think we actually are have come closer to giving you a number than ever before so let me, let me try and kind of round it out.
Hum.
Let's let's start with let me, let me start with the CDB side, and then go to the HSA side. Okay on the CTV side, we actually sold nearly or I should say sold opened nearly 1 million new CDB is this year.
The trouble is you know is that is that we also got those.
650000 commuters in suspense and then we've got.
A similar number as I think.
One of US said in our remarks.
Of FSA folks who.
Basically.
Alright, I don't need this right now.
And particularly non dependent care side. So so.
We actually had a pretty good sales year, there and I think.
In in December and then and then even a J P M.
We were we were feeling pretty good about that particular point.
And so and I think we can improve on it this year because in a way where you see cross sells there they're easier. So so the two opportunities. There one is the stuff that's about bringing people back in and we will have more to say about that over the course of the year and then two is is about I think repeating and refining the success on the sales side there.
So that <unk>.
I think on the HSA side.
Here's the way I'd put it is.
And this is a little bit where I was going in response to Don's question is.
I think it's very easy to focus on and we'd probably be comfortable to say well the only difference between $7 20 for last year and 680, whatever this year seven is his employment, which by the way is true that's great, but our goal of less than 724 our goal.
Pre pandemic and all of that was was to beat that number and and then and so.
That continues to be the case from my perspective and continues to be doable from my perspective.
I'm not going to presume, we can't we've done it, but but but that continues to be the case and the fact that what's relevant about the sales cycle that just happened and the numbers the area that really did exceed our I mean genuinely exceeded what we thought we would be on January 1st right between the first 30th was one was was that debt.
With people.
Putting new deposits into the HSA is but also the accounts. We won more of them were were accounts that had already existed and we were very successful at bringing those balances over so what that means is that new sales are more immediately valuable to us. So so that's kind of a good thing too for the long range for the business and so.
Those are the numbers that I would use to help you think about what we would like to get done this year.
Okay, Great that's really helpful. Thanks, Sean.
Yes, Sir thanks, Andy.
Your next question is from Anna <unk> from Bank of America. Your line is open.
Hey, Thanks for taking the questions the first one.
Just a clarification you said 650000 FSA members did not re enroll in 2021 is that correct yes.
Roughly that that particular number I mean, that's the commuter number we know precisely the FSA number has got a little bit of play in it because there is a lot of.
For lack of a better term fog of war around.
The Delta between December and January as people are trying to understand this temporary relief under the stimulus bill and so forth, but roughly yes.
Okay, and then are they no longer paying a service fee and then.
What's embedded in the guide for those people coming back if at all and then what.
Do you think would need to happen for them to sign up is.
Is it possible for year or is this something that would get pushed back for next year.
Tyson why why don't you speak to what we've what we've how we've thought about this for guidance purposes, and then maybe Ted you can speak to some of the efforts that we're making with employers to give to create the opportunity for these folks to come back.
Yeah.
On the one thing is we're not including accounts and there arent deriving revenue. So there. They are done driving revenue then they're not there they're part of the.
Carryover then of course you have.
And in those accounts and then we haven't put.
Come back and they're not sort of in my comments, what I was referring to and maybe it wasn't super clear, but that's the level of effort that we got to go through an even even just the legislation coming out in 2017 figuring out a way to execute against that we know we were out there early with the Webinars like I said and we've got a lot of good responses from.
Folks, it's a matter of working through and actually solidifying what they what they set out you can't really rely on that until we actually did happen.
And Ted do you want us to some of that.
And what the option sure Charlie.
Got it right the answer in a nutshell is just outreach outreach outreach.
It would be hard enough for me to explain the new every nuance of the.
Opportunities that were in that 2500 or 5000 page Bill that came out in January much less somebody who's got 57 other things on his or her plate. So that's why we're in full scale education mode Narrowcast broadcast Webinars outreach et cetera, we've got under Steve you've got a whole kind of.
Legislative Affairs team that is.
Interacting directly with clients just to make sure they understand what their options are.
So we don't.
Pretty bullish on our ability to impact behavior, especially because the legislation did paved the way for some pretty simple things that employers can do.
To help their employees take full advantage of their benefits.
And our first big foray into that was just a few days after the after the legislation came out.
We had to keep adding webinars because they were kept hitting 1000 person maximum.
And we put an online for them that basically said, hey, listen you don't even need to call us. If you want to change your documentation just tell us what you want in the form of them will do it for you and we've gotten a couple thousand of those.
So we're feeling pretty good about making ourselves available to help people and to push them down that path.
Both one on one end and more broadcast.
And.
As Tyson said, we didn't want to take that for the bank until we understood.
What it looked like and what the impact was for where we're continuing to.
Two to execute every day on this and we'll hopefully we will have more inside every time, we get this group together.
On what the potential revenue.
Revenue impact will be but for right now, we're just trying to get people to make it right decisions for their team members and their employees.
The economics will follow.
Great. Thank you.
Thanks Alan.
Your next question is from David Larsen from <unk>. Your line is open.
Hey, David.
Hey, Jon Thanks for taking the question here.
The commuter revenue and I'm, sorry to keep pushing on this but.
With the $75 million pre pandemic, you're expecting less than half of this in fiscal 'twenty. Two does that also include like the health card transaction revenue and can you distinguish between how much is health card and how much is commuter.
Yeah, I'll I'll give you the general answer.
And then have tightened elaborate it does not it's it's the it's it's commuter fees and then commuter related interchange meaning commuter card.
But Tyson you can can provide little more detail if you'd like.
And the answer to the question to you is yes. It does include that as well.
And if I may.
I'd give you a general guideline of that I mean.
Associated interchange is maybe 10% of that number.
The overall revenue number something along those lines.
Okay. So thats why the hell of it is.
So health has its own its own world in as Tyson said in his prepared remarks.
We have assumed that that.
We do get a gradual return to pre pandemic levels of health spend essentially drawing the line that we're already seeing there.
But we have seen over the course of fiscal 'twenty, one including December January we're not assuming.
Fundamentally a change in commuter spend.
Until the second half of the year and they are very very gradual.
Okay great.
Great. Thanks, and then just one more how is pricing.
Like it's my understanding that.
Fidelity for example, they've got a very aggressive pricing strategy on the HSA side.
Any thoughts around that I mean has it gotten more competitive with the pandemic or is it sort of steady as you've obviously.
Yeah, I'll I'll take this one.
I think the biggest thing that's happened in the last year that's impacted.
Well two things that have happened that have impacted pricing.
One I think favorable and one well I think in a way one favorable and one of them. We're changing the first of all the drop in interest rates and yields and the like is.
Given everyone pause I think appropriately so as to how they think about HSA service fees in the long term and.
So.
Well certainly for.
For larger accounts, there is plenty of competition there.
Are we at.
It's probably fair to say that debt in some respect.
For new business.
For your typical account, that's maybe a little bit less intense because you can't underwrite balances that don't exist in you can't underwrite balances at interest rates and the like that don't exist.
I think the second factor, though is that debt by going to a total solution strategy, we've kind of changed the way that debt that we and I think others in the industry for thinking about this and net debt debt the way that you get but certainly we're thinking about it and that's you get the way to get discount on on services from us.
As to by total solution from US right. So so what we're able to tell clients in the field, whether they are renewing or new clients is we'd love to give you a lower price the way to do that is to you.
You're doing Cobra doing with us Youre doing you've got a flexible spending account program for people who aren't in your HSA is in for Ya dependent care do that with US now did that yield a ton of fruit. This year I mean, obviously, it's certainly yielded some and.
And we will yield more going forward I think that's a better answer ultimately then just underwriting interest rates.
And we will service better in the long term so that's.
That's kind of how I think about it.
I think.
Well I guess I'll just stop there and see if that was helpful and if you want to add anything on to it.
That's very helpful. It sounds to me like with all the different products that you have from the wage acquisition. If your clients can buy a full portfolio of solutions from you about how they can improve their price point and.
And that's where you go to market strategy.
I think that's the right way to approach it from our perspective and certainly there are other competitors.
We're going to play that game too and that's okay.
But but but there are a lot of competitors can't play that game and so they're going to be really I think Tyson talked about this on our last call is is.
You've got competitors, who were heavily interest rate dependent and I think were much more challenged in this regard over the last year.
Thanks very much.
Thanks, David.
Next question is from Mark Marcon from Baird.
Yes.
Good afternoon, and thanks for taking my question.
Yes, Sir.
Couple of questions. One you mentioned.
You ended up getting some some pretty big new logo wins.
This year that you werent fully expecting.
Who did you end up winning from what were the key reasons. The key drivers. That's the first question and then the second question is basically on medical plan design among your key employers.
Are out there what's your sense in terms of to what degree they're going to tilt or tilt away from high deductible healthcare benefits.
Sometimes that shifts from year to year, just wondering with the with the employment environment being what it is how that ends up shifting this year.
Yeah.
I'll try the first one and then I mean at this point in the year, it's a little bit of a stab at the second one.
On the first point.
I have to say this is an area where in really difficult positions I'm really really proud of our enterprise team and.
And their ability to get significant new logos and then I can tell you in every one of these cases all of the companies that you think of as our would be competitors fidelity, United Obviously HSA bank. The three that people think about us from a market share perspective, but others also are involved and.
And what we.
We were able to do successfully this year I think was the following first.
We were I think very successful.
I'm really just focused on the enterprise cases, where you really know what's going on and you know all the gory details.
I really feel like the.
The company was very successful at positioning the fact that we are focused on helping everybody build health savings. We are not just out there for the in the single individual who we hope has a rollover IRA out there there could be $2 million none of our.
Members have $2 million in their HSA.
Okay.
And yet we try to serve every member really well and I think that that came it's not just a service issue. It's fundamentally what are those other members doing and the answer of course is they are trying to understand their health care bills, they're trying to understand how this stuff works, they're trying to understand how to think about.
Reising and so forth when it comes to like I've never talk to a doctor about a bill before some of them are early in the year and a lot of these decisions are ones that were made.
In.
I think you know in retrospect, where kind of sort of made that switch was needed.
In the height of the pandemic when you had people going to their employers and saying wait a minute.
I have a deductible and it's not huge but like I don't have two grand sitting around like what do I do and and we have we have answers for those and by the way those answers will get better over time, but we actually think about that whereas I think very candidly.
Some of our competitors either think about this as some sort of like gateway drug to rollover of iras or whatever or think about it as.
More of a banking product and it's neither of those things. So I think that was quite helpful.
And then the second thing I want to say is I think are also just just kind of closing my eyes and thinking about these cases.
Our partnerships.
On both the health and retirement side, we're extremely helpful. Here, even if we didn't end up selling with partner if if client was doing business with partner, we work together and it showed that we are a company that will play nice from the sandbox, we're not trying to build our own edifice here.
And that's the way this company has always operated.
And I think that showed very well at a point where clients were not looking for new problems. If that makes any sense. So so are we had our biggest win ever from a retirement plan partner, but we also had cases, where people were working with different partners of ours.
And even if we didn't end up selling through that contract or whatever it was just extremely helpful. In terms of conveying what purple is about and what we're trying to do the fact that that we were ready and we had created relationships that enabled us to work with let's say you had three health plans and one of them was our partner.
And two of war, we were ready to work with all three really well.
And our partner conveyed that we were ready to do that and that was very very helpful. So I feel like I guess my first answer is ultimately that we try to meet everyone where they are in their health care journey.
And then my second answer really is we try to do that with everyone who is a part of as an employer of your ecosystem rather than imposing our ecosystem on yet.
That's great and then any stab at the health plan design.
Thought you'd forget that one no.
I just kept talking.
[laughter] admittedly yeah. It's all it is only now I should say I should we be giving everyone as hard a time as we give correct, but but but the on the on the second question, which is about plan design.
I mean, the way you asked the question the premise was that perhaps the default was tilting away I just don't see that in the data what I see in the data is that every year the the.
The component of Health plan design that is about consumer cost share goes up and sometimes it goes up a little and sometimes it goes up a lot I think the biggest challenge we have in that regard is that not everyone. Who's not everyone is eligible to participate in an HSA, because particularly because as you.
Right.
Folks still liked to use co pay as opposed to co insurance that kind of thing and and that's what Steve is talking about when he says that any AC a creditable coverage should really be H sales, that's where we should get too so that that.
And I mean, we're at a point, where where People's deductibles and this is why companies like good Rx or the like can prosper because their deductible I'm sorry, they're there they're co payments are actually higher than the negotiated price for the drug.
And that's fine that's a plan design element and maybe it makes sense because they have certainty and they don't have to use good Rx. That's fine those people should still be eligible to safe for health care and retirement and to spend less on health care now and you know.
And so I think that the debt.
But the broad trend that is the consumer is part of the solution not part of the problem right is happening and will continue to happen year after year after year I'm, absolutely certain of it right.
Whether in good economic times and bad right.
But the specifics I think we have to get better at we have to educate both our legislators and regulators and so forth that debt. This is got to become easier for consumers and <unk>.
Transparency is a piece of that puzzle obviously too.
But.
That's my thought on it is I I think I do think there was probably a little bit of a pause on all of this last year just in the sense that there was a pause for change period, right, but but the logic of of engaging the consumer and in the process of trying to spend.
Make every health care dollar efficient is pretty irrefutable, it's damn good logic and it can be taken to extremes and I think some of those extremes.
Our view is that that legislators and other should work on it and I'm sure they will.
But I think within the mainstream it it just makes a ton of sense and Thats why youre seeing year after year.
Great. Thank you very much.
So you've got the hook just like Greg there.
That was that was that.
That's Richard flowing blowing the whistle.
We are an hour we're past the hour that we're supposed to go we didn't have one more question. So it's that good that's the content is that good.
That good.
Your last question is from George Hill from Deutsche Bank, Hey, George.
Hey, guys, Hey, Purple I can't promise that the last question will be that good because just about everything I was thinking of it's been asked I guess, Jon I would just throw at you are you seeing anything in the.
On the regulatory horizon, which causes you any concern or anything about surprise billing for about the way that the government wants to make.
Consumer drug deductibles deductibles at the point of care more palatable again, I'm generally seamless for these things is kind of positive as they would allow balances to bill but would just love you to comment on anything Youre seeing on the regulatory side do you think I actually really I'm going to be I really like what I'm seeing thus far out of the way that this transition team is sort of thought about this.
I mean I.
And I don't want to like get crosswise with with anyone but but but.
Look I as I say to answer the last question I think we should look at these what I would call Super high deductible policies.
Can an average person manage of $12000 deductible in the ACA exchanges I don't think so.
And and I mean, that's that doesn't seem great. So so I think we should be looking at that.
I think similarly, I absolutely love the action was taken on surprise billing is it perfect no right, but but I mean.
To be colloquial for a second surprise billing is bullshit. It's the first of all it's bullshit name, it's not a surprise to anyone who understands the health care system, it's out of network billing and.
And and the fact that debt that's now not something people have to worry about is another reason for them to engage with the health care system, rather than just be scared about it.
So so I really like that and.
I'd like to see this administration.
Continue I mean not not.
Well I'll say it this way that even in with a group you may not like they had a few good ideas and one of them is is the transparency rules and interoperability rules that would both both create some incremental transparency, which is good but also give consumers more control of their data.
We are.
So so so I think those are pretty good things in our job, though is to encourage.
Both the Congress demonstration to think about those in terms of how they support.
The average working consumer debt.
They have much more knowledge about what goes on in the ACA exchanges or Medicaid or Medicare than they actually do about the voluntary.
Employer sponsored market that insurers 230 odd million Americans and so that's the job that we have to keep doing and I think Steve and Jody and the team.
You know have done a really good job of kind of getting started with that over the horse last few years, but but but that's going to help us succeed.
Jon is always great color I appreciate it thank you.
Yes, Sir.
Right.
I'm trying to predict question at this time I would like to turn the call over it back to CEO, Mr. Jon Kessler for any additional or closing remarks, yes. Thanks, everyone for sticking with US we will in addition to being on the conference circuit as you can see from our releases we will be back in the middle of March I suppose to talk about.
Our Q4 earnings and as Tyson mentioned.
To give a little more color on how we see fiscal 'twenty two zone.
Until then thanks a lot.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day.
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