HealthEquity stock plummets as firm’s profit is hurt by cyber threats, fraud

Takeaways

• HealthEquity reported that cyber-threats and fraud attacks had increased its costs.
• The custodian of health savings accounts missed profit estimates and provided weak guidance for the full year.
• HealthEquity blamed "bad actors" for an approximately $17 million reduction in gross profit.

HealthEquity shares (HQY) fell 20% on Wednesday, after the Health Savings Accounts (HSA) custodian missed its profit estimates and provided weak guidance due to the rising costs of criminal activity against the firm.

Visible Alpha surveyed analysts and they expected $0.71. Revenue increased 19% over the past year to $311.8 millions, exceeding expectations.

In a transcript of the analyst call provided by AlphaSense, CEO Scott Cutler explained that along with other financial firms, HealthEquity has seen "increased cyber threats and fraud attacks from bad actors using sophisticated technology, techniques and methods." Cutler noted those activities "led to excess service expense."

CFO James Lucania reported that gross profit had been reduced by $17 million as a result of increased service costs “incurred in order to protect members and reimburse those impacted with sophisticated fraud activity, and assist members during our processor consolidation.”

HealthEquity expects a full-year adjusted EPS between $3.57 and $3.74 as well as revenue between $1.280 billion and $1.305 billion. Visible Alpha estimated $3.66 billion and $1.302 Billion respectively.

HealthEquity’s shares have been in negative territory over the past year.