Healthequity, Inc. Q3 FY2021 Earnings Call

Thank you. Good afternoon and welcome, everybody, to HealthEquity's Third quarter of Fiscal Year 2021 Earnings Conference Call. My name is Richard Putnam, Investor Relations for HealthEquity. Joining me today is Jon Kessler, President and CEO; Dr. Steve Neeleman, Vice Chair and Founder of the company; Darcy Mott, the company's EVP and CFO; Tyson Murdock, our EVP and Deputy CFO; and Ted Bloomberg, our EVP and Chief Operating Officer. Before I turn the call over to Jon, I have two important reminders. First, a press release announcing our third quarter earnings, including definitions of certain non-GAAP financial measures that we'll reference today was issued after the market closed this afternoon. A copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures and a recording of this webcast can be found on our Investor Relations website. Second, our comments and responses to your questions today reflect management's view as of today, December 7th, 2020, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, or other information that might be considered forward-looking. There are many important factors relating to our business, which could affect the forward-looking statements made today. These forward-looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from statements made here today. As a result, we caution you against placing undue reliance on these forward-looking statements and we also encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stock detailed in our latest annual report on Form 10-K and 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 conclusion of our prepared remarks, we'll turn the call over to Jimmy, our operator, to provide instructions and to host our Q&A. With that, I'll now turn the mic over to our CEO, Jon Kessler.

Thanks, Richard, and hello everyone. I have a detailed statement prepared, but I'll begin by acknowledging that COVID presents a challenging environment. However, our team is currently performing exceptionally well, delivering the profitable, growing, and visible business that you expect from us. In the fiscal third quarter, our team achieved improved financial performance and surpassed our expectations despite the pandemic's challenges, thanks to our ongoing integration efforts and strong sales driven by our total solution strategy. We are increasing our full-year outlook and are also ready to provide preliminary insights into key factors for fiscal 2022. I'll review our Q3 performance, including key metrics, our projections for FY 2021 sales as we approach January, and the WageWorks integration. Steve will discuss the potential actions from the outgoing and incoming administrations in Congress that can benefit healthcare consumers. Tyson will present the financial results, and Darcy will go over our revised guidance. Ted is also here for the Q&A session. So, we have a full lineup for you. Let’s begin with key metrics. Revenue reached $179 million, marking a 14% year-over-year increase, driven by organic growth and the prior-year performance of WageWorks in August, even as we navigated the pandemic’s ongoing effects on custodial yields and our members' utilization of commuter benefits and healthcare cards. We estimate that decreased use of commuter benefits and healthcare spending resulted in about $10 million of challenges this quarter. Adjusted EBITDA was $61 million, up 10% from last year, and the adjusted EBITDA margin remained steady at 34%, even with the onset of the enrollment season. As I will explain shortly, we believe there is more growth ahead. We ended the quarter with 5.5 million HSAs, a 9% increase year-over-year and an 11% increase when excluding the effects of closure-related migration discussed last quarter. We saw 104,000 new HSAs opened, which we consider solid given the overall lack of newly eligible hires in the economy during the quarter. Total accounts remained flat year-over-year at 12.5 million, with increases in HSA, FSA, and COBRA accounts balancing a $0.6 million decline in commuter accounts that are temporarily inactive. Finally, HSA assets grew to $12.4 billion, a 19% year-over-year increase, with an additional $229 million coming in sequentially. While the value of investment assets provided some support, we believe the ongoing contributions from members in response to HealthEquity's engagement and education efforts are what truly drove this growth. Q4, especially January, will provide deeper insights into the sales activities for FY 2021. I want to acknowledge the growth challenges we face, as many HR departments have delayed initiatives and some remain in crisis mode, with work from home situations affecting many of us. Nonetheless, our team is excitedly preparing for what we expect to be our busiest January ever. Here are a few reasons for our optimism. Our relationship executives managing HealthEquity's 500 largest employer clients achieved a remarkable 97% retention rate in FY 2021, even amid considerable platform migration activity, which has turned out to be more of a chance to showcase our exceptional service rather than a cause for attrition. The enterprise sales team has shown its strongest performance in years, buoyed by excellent cross-selling of existing clients and significant wins with new clients. In fact, Thanksgiving week was the first week since summer without a win for the enterprise team, which is a positive sign. We have previously noted the increase in bundled RFPs from our total solution strategy, which has led to steady growth in the average number of HealthEquity services used by managed clients throughout FY 2021. This trend has begun to emerge among our midsized commercial clients in the third quarter, with 12 of our network partners adding HealthEquity services to their offerings this year. We aim to continue this growth trend with smaller employers in FY 2022. Additionally, the number of open enrollment interactions with members, especially prospective ones, has already more than doubled year-over-year, as clients have embraced the fully virtual open enrollment tools we discussed last quarter, including live and on-demand content, interactive tools, social media, and 24/7 live support. The team is continuing to finalize and implement FY 2021 business, and we are starting to see our enterprise and new partner sales pipeline for FY 2022 take shape, with some positive wins for employers whose benefit years start in March and April already secured. Now, regarding integration, we continue to make progress. By the end of the third quarter, HealthEquity had achieved approximately $55 million in ongoing annual synergies, compared to $63 million in cumulative one-time integration costs, representing a strong return. The team is on track to reach $80 million in ongoing annual synergies while keeping one-time expenses around $100 million by the end of fiscal 2022 as we phase out legacy platforms. We have reached our FY 2021 goal of 10 platform migrations, with more opportunities remaining before the fiscal year concludes. Currently, 97% of all HealthEquity HSAs and their assets are on the HealthEquity custodial platform. In Q4, we'll launch the first version of HealthEquity's unified portal experience for our clients, followed by the introduction of a dozen major new portal features over the next year. With changes occurring in Washington, we recognize that many Americans are looking for practical solutions to manage the pandemic and its implications for families. Steve will now outline some opportunities for HSAs and CDBs that Congress is currently considering. Steve?

Thank you, Jon. Last year before the pandemic, approximately 82,000 of our current and potential members attended HealthEquity open enrollment events, including in-person and live online sessions. This year, over 350,000 have attended our live and on-demand events with live support. We think Americans are starting to understand that HSAs and other consumer-directed benefit accounts are part of the solution to healthcare affordability and long-term savings through this pandemic and beyond. There is evidence that Congress and the incoming administration may come to the same conclusion. For example, we have been reporting since the pandemic began that consumer spending in healthcare is down year-over-year. Consumers have billions of dollars in FSAs with use or lose provisions. Many have been unable or unwilling to get care during the pandemic. Under current rules and in most cases, they must use their funds by the end of the year to avoid forfeitures. This means consumers and the healthcare system could lose billions of dollars. As access to care improves, consumers will need that money. The return this week of shelter-in-place orders in California and elsewhere worsened the problem. Regulators can and, in our view, should immediately extend the use or lose period for expiring FSAs through the pandemic emergency period, similar to the extension that was passed for paying for telehealth services within high deductible plans during the pandemic. Extending the use or lose deadline for FSAs would have little or no cost to taxpayers, as unused FSA funds revert to sponsoring employers and not the treasury. We believe these rules should apply not only to healthcare FSAs, but also for childcare FSAs as well. Because Americans have not been able to go to work and therefore, they should not lose the funds they have set aside for their childcare. Rules around how childcare FSAs can be used during the pandemic emergency period should also be relaxed to allow consumers to have more flexibility to keep working and take care of their kids. Also incredibly, while we must all use sanitizers, masks, and other PPE to prevent the spread of COVID-19, their cost isn't FSA or HSA qualified without a doctor's authorization. HR 8450, sponsored by three Republicans and three Democrats would change this. This is a common-sense measure that shouldn't require an active Congress. We need to help unemployed Americans pay for their healthcare premiums until they're able to get back to work. During the global financial crisis in 2008, Congress acted quickly to make COBRA premiums more affordable. We agree with many in Congress who have signed on to support doing so during the pandemic emergency period. Moving to HSAs, the Commonwealth Fund and the Employer Benefits Research Institute estimate that 7.7 million American workers lost employer-sponsored coverage at the start of the pandemic. Coverage under the ACA exchanges or COBRA costs money. HSAs are part of the solution to affordability since they can be used to pay these premiums on a pre-tax basis. Since none of us anticipated this crisis, Congress and our regulators should act to permit catch-up contributions to fund these costs by extending the HSA contribution deadline for tax years 2019, 2020, and 2021 until the end of the pandemic emergency period. Congress can also expand consumers' ability to use HSAs for ACA qualifying insurance premiums by dropping the current requirement that links stability to eligibility for unemployment insurance, which, as we all know, has run out for many Americans. Finally, many consumers can't make use of HSAs because they weren't in a qualified HSA plan pre-pandemic or are unable to choose a qualified HSA plan now. Without out-of-pocket costs continuing to rise and deductibles across all plan types generally higher than HSA minimum deductibles, any health plan coverage should allow consumers to use an HSA to pay for their out-of-pocket healthcare expenses on a tax-free basis. Democrats and Republicans have proposed widening HSA eligibility to include more of these plans. We should fix this issue now for the future by permanently allowing individuals with any ACA qualifying coverage, VA or TRICARE, traditional Medicare, Medicare Advantage, Medicaid, Health Care Sharing Ministries, or Indian tribal health services to make and/or receive contributions to an HSA. You can call us naïve, but we believe that nearly 50-50 results in the November elections in the House, the Senate, and presidential election create an environment where moderate voices could have more sway, and practical measures have a greater chance for adoption. Our teams in Washington are engaged and working hard to make this happen. I will now ask Tyson to walk us through the numbers. Tyson?

Thank you, Steve. I will review our third quarter GAAP and non-GAAP financial results. A reconciliation of GAAP measures to non-GAAP measures is found in today's press release. Our fiscal third quarter financial results, as you know, include the operations of WageWorks, which was acquired in August of last year. While we have officially lapped the acquisition, keep in mind that Q3 last year had two months of WageWorks in the results, while this year reflects combined results for the full quarter. Third quarter revenue grew overall and organically in each of our three categories. Service revenue grew to $104.6 million, representing 58% of total revenue in the quarter and 19% year-over-year growth. The increase is primarily attributable to 21% growth in average total accounts, including those from the WageWorks acquisition and new sales. Custodial revenue grew to $48.5 million in the third quarter, representing 27% of revenue in the quarter and 3% year-over-year growth, despite a 35 basis point decline in the annualized yield on HSA cash with yield assets. Average HSA cash with yield grew 21% and average HSA investments with yields grew 57% year-over-year. The annualized interest rate yield was 208 basis points on HSA cash with yield. This yield is a blended rate for all HSA cash with yield during the quarter. The HSA assets table of today's press release provides additional details. As previously mentioned, we have migrated 97% of the HSA assets to the HealthEquity custodial platform. Interchange revenue grew to $26.2 million, representing 15% of total revenue in the quarter and 17% year-over-year growth. The increase is primarily attributable to growth in average total accounts and a negotiated more favorable interchange share, partially offset by reduced spend across our platforms in the quarter. Gross profit reached $104.6 million compared to $96 million in the third quarter of last year. Gross margin was steady sequentially at 58% in the quarter. Operating expenses were $93.1 million, or 52% of revenue, including amortization of acquired intangible assets and merger integration expenses, which together represent 15% of revenue. Income from operations was $11.5 million compared to $9.9 million in the prior year. Net income for the third quarter was $1.8 million or $0.02 per share on a GAAP EPS basis compared to a loss of $21.3 million or a loss of $0.30 per share in the prior year. Our non-GAAP net income was $32.2 million for the quarter compared to $30.3 million a year ago, a 6% increase. Non-GAAP net income per share was $0.41 per share compared to $0.43 per share last year. Adjusted EBITDA for the quarter increased 10% to $61.1 million, and adjusted EBITDA margin was steady sequentially at 34%, while operating through the impact of COVID. For the first nine months of fiscal 2021, revenue was $45.4 million, up 65% compared to the first nine months of last year. GAAP net income was $3.5 million or $0.05 per diluted share. Non-GAAP net income was $93.1 million or $1.25 per diluted share. Adjusted EBITDA was $184.1 million, up 36% from the prior year, resulting in a 34% margin for the first nine months of the fiscal year. On the balance sheet, as of October 31, 2020, we had $299 million of cash and cash equivalents with $1 billion of Term A debt outstanding and no outstanding amounts drawn on our line of credit. I will now pass the mic to Darcy to review our updated guidance. Darcy?

Thank you, Tyson. As you know, our results and guidance for FY 2021 remain sensitive to the COVID-19 pandemic and the timing of economic recovery. As Tyson just discussed, we continue to see improving economic trends, but remain cautious about the impact of a surge in COVID and how quickly employers will open the doors to their businesses, especially in large cities. Based upon our third quarter operating results and the economic progress to date, we are increasing our guidance for the full fiscal year 2021. Specific variables will impact our performance through the remainder of fiscal year 2021, include, but are not limited to, members' access to and spending on healthcare and their use of transit, parking, and other commuter benefits. The modest pace of recovery and employment may negatively impact the number of our average total accounts and conversely perhaps spur uptake in COBRA and other benefit continuation products. Across these and other variables, there exists a wide range of plausible outcomes for the remainder of fiscal 2021. Importantly, however, our guidance for fiscal 2021 assumes that current trends across these and other variables continue through the remainder of the year. Under these assumptions, we expect HealthEquity will generate revenue for fiscal 2021 in a range between $725 million and $731 million. We expect our non-GAAP net income to be between $116 million and $121 million, resulting in non-GAAP diluted net income per share between $1.55 and $1.61 per share. We expect HealthEquity's adjusted EBITDA to be between $232 million and $238 million for fiscal 2021. Our non-GAAP diluted net income per share estimate is based on an estimated diluted weighted average shares outstanding of approximately 75 million shares for the year. The outlook for fiscal 2021 assumes a projected statutory income tax rate of approximately 25%. Today's guidance includes the effect of having achieved approximately $55 million in annualized run rate net synergies as of the end of the third quarter, with estimated net synergies of $80 million expected to be achieved by the end of FY 2022. Given the current interest rate environment and recent discussions with our depository partners, we are maintaining our yield guidance of approximately 2.05% on HSA cash with yield during full year fiscal 2021. We also feel confident to provide a yield outlook at this time for FY 2022. Based on anticipated new HSA cash, expiring rate contracts, and current market rates, we expect our yield for HSA cash with yield to be between 1.70% and 1.80% for FY 2022. Our above guidance includes a detailed reconciliation of GAAP to the non-GAAP metrics provided in the earnings release. A definition of all such items is included at the end of the earnings release. In addition, while the amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is not included. With that, I'll turn the call back over to Jon for some closing remarks.

Thank you, Darcy. Before we move to Q&A, I want to take a moment to express my gratitude to our team of over 3,000 members who continue to work in various locations, including living rooms, kitchens, and in my case, a corner of the floor behind the Christmas tree. They have been doing this for many months. Simultaneously, as I mentioned earlier, they have made significant strides in helping our members connect health and wealth while also building the kind of business that you, as shareholders, expect from us. So once again, thank you to the team. Now, operator, please proceed.

Thank you. Our first question comes from Anne Samuel with JPMorgan. Your line is now open.

Thanks for taking the question. You spoke about strong cross-selling. I was hoping maybe you could provide a little bit more color there? And then what does the overlap look like between existing Wage customers and HealthEquity customers?

Ted, why don't you give a little color on the cross-sell activity and what we're seeing? Only if he’s not on mute though. All right, well if he won't, I will. You can still hear me, though, can't you Anne?

I had a great answer, Anne, but no one heard it except for me since I'm in the corner of my bedroom. Fortunately, I got to practice. We are really pleased with the quality of conversations we're having with our existing enterprise clients and the enthusiasm they have for purchasing new services from us. You've heard some high-level comments from Jon, and I'll keep it brief to avoid being interrupted by Tyson. Essentially, we're seeing a significantly higher close rate on cross-sold sales opportunities, which isn't surprising. However, we were a bit surprised by the extent of our success in introducing new products to our current clients. Quarter after quarter, the average number of products utilized by our enterprise clients continues to rise. More importantly, we've analyzed the potential opportunity with our top 500 and 1,500 clients and found that there are many products they don't currently have. We believe this opportunity will remain for a considerable period, allowing us to continue making progress. Tyson, feel free to jump in if you have more specifics. The key takeaway is that we see considerable success, with the penetration of our products increasing, and we also recognize that there are several years of cross-sell opportunities ahead. Regarding overlap, while we won't share specific numbers, we've noticed that in instances where a client is part of both legacy HealthEquity and legacy WageWorks, the opportunity to consolidate services under the HealthEquity model has likely contributed to our 97% retention rate. Clients seem to be satisfied as long as we address issues with wage services, and so far, we’ve been able to do that. While we don’t disclose precise overlap statistics, it’s been a useful guide for us in consolidating services for our enterprise clients.

That’s really helpful. Thanks, guys.

Good afternoon, Team Purple.

Hello.

I will share some market updates. Last I checked, your stock was down about 5% in after-hours trading. While I know you don't focus too much on short-term fluctuations, I'm noticing a couple of factors that might be concerning some investors. Firstly, the full-year guidance appears to suggest that the implied fourth quarter expectations may be somewhat lower than what analysts anticipate. Secondly, regarding the HSA balances, it was mentioned in the press release that only $46 million in new cash was added this quarter. I find it difficult to reconcile that figure. With 5.5 million accounts, that averages to about $8 per account for the quarter, which seems low considering that the potential contributions could be much higher. I also have another point of confusion that I'd like to address.

Yeah. Why don't you throw that one out, so we can hit them all at the same time?

Okay. Then just the accounts, the actual account numbers, the CDB, obviously, the rate of deceleration sequentially is beginning to moderate, but still we're seeing the CDB account numbers decline sequentially. I think your previous guidance or suggestion would be that, that would stabilize and grow in the fourth quarter. The HSA numbers, you throw in the gross numbers, but if you take out the net with – it's not as strong. This is the age-old discussion that we always have every quarter, it seems like about the accounts that you're closing at the same time you're opening new accounts. That's it.

I'll address a couple of those points and then pass the guidance question to Darcy. I'm not really focused on after-hours movements, but looking at the questions from your perspective, regarding HSAs, the net growth approached 100,000 with 104,000 new accounts. It wasn’t quite at 100,000, but it was close enough for the third quarter. As I mentioned earlier, a challenge we face is that in typical quarters we'd expect a base increase in accounts due to employment growth and client hiring. This quarter, however, did not see significant hiring, though there might have been some rehiring. You can decide for yourself if that number is satisfactory, but there isn't a large gap between the open and net increase figures. Concerning CDBs, the main issue we face is with commuter accounts. This quarter, we had around 100,000 more commuter accounts in suspense compared to last quarter, which was offset by the rise in HSAs and some modest increases elsewhere. On the asset side, we saw people turning $170 million into investments, but market growth during the quarter didn’t help much due to the timing of deposit beginnings and ends. Tyson can elaborate on the figures if needed. The key reason for the movement is that they took cash and converted it to investments, which is what we want, as it helps grow balances and creates more loyal account holders. COVID isn't the best situation for us, but our focus is on what we can control—building a profitable and growing business. We aim to be ready for when headwinds become tailwinds. Regarding guidance for Q4, I will pass that to Darcy to begin, and I might add something later if necessary. He may be on mute, like everyone else is now.

Can you hear me?

All right. Now, we can hear you.

I muted myself, but it seems it didn't register when I tried to unmute. The midpoint of our guidance would indicate around $183 million. We believe there could be some upside, but we remain cautious. This is an increase from our performance this quarter. We'll monitor how spending returns, as that is a factor for us. Steve mentioned the potential for individuals to utilize their FSA dollars, so we are cautiously optimistic about that, which informs the midpoint of our guidance.

I would like to add that we had a similar conversation last quarter, where people were calculating the numbers for the rest of the year. I understand why they do that, but considering our guidance strategy and the uncertainties involved, it's clear why we prefer to take a conservative stance. That's our standard approach and has always been. Nevertheless, we strive to exceed expectations. For the quarter, we believe we did meet or surpass analyst expectations in several areas, as well as our own expectations.

Great. Thanks for the questions. Hey, how are you, Jon?

All right.

I guess maybe just to follow-up there on the guidance. I know you just touched on the revenue side, but I think similar question on the implied EBITDA guide for 4Q looks to be down a bit compared to what you've been doing. It might be a similar answer, but I'm just curious if there's anything worth calling out there as far as what might be driving the sequential EBITDA or at least the expectation for sequential EBITDA to maybe be a little bit lower than some were expecting.

Yes. Darcy, do you want to get this one?

Sure. Historically, we have consistently seen significant expenditures in Q4 as we prepare for our January enrollment. This involves hiring and training new staff and getting them set up on the phones, which will impact both our service delivery costs and some operating expenses in Q4. We are particularly pleased that throughout this transition and migration, we have managed to maintain a solid EBITDA margin thanks to the efficiencies and synergies we have achieved, even while facing a $20 million revenue impact each quarter due to COVID. Despite the revenue shortfalls in our commuter business and the costs associated with interchange spending, we have been able to maintain our margins as best we can while striving for more efficiency.

No, that's super helpful. And then, maybe if I can just ask one follow-up. I was kind of curious on some of Steve's comments around the potential for extending the use it or lose it clause with the FSAs, not being as familiar with it. Just was wondering if maybe you could share a little bit more of what actually does need to happen for that to come to fruition? Does it need an active Congress? Is it up to employers? And then probably, most importantly, like what would that mean to the model for HealthEquity if we find ourselves somehow going into next year with larger FSA balances than we would have otherwise expected to see?

I will address that and then see if Steve would like to add anything. As you might remember, regulators believed they had the power to extend certain deadlines earlier this year, such as the enrollment deadline for COBRA, which has been extended until the end of the pandemic emergency period. At that time, many didn’t expect we would still be in this situation at this point in the year, but here we are. From our standpoint, this is something within the regulators' capabilities. It's under active discussion whether they can coordinate this effectively or if it will require Congressional action, which is somewhat beyond our control. However, like other actions taken, the practical outcome is significant. From a public policy standpoint, it allows billions of dollars to remain in the healthcare system, which would otherwise be taken out and impact consumers. This is beneficial for us, as it means people will have more disposable income. We are dedicated to ensuring people are aware of this and encourage them to spend wisely. Some individuals may struggle to utilize those funds effectively. This appears to be a logical step forward. We are optimistic that it will be implemented since it is the right course of action. Would this lead to greater funds available for people to spend as they re-engage with activities and services? Absolutely.

That makes a ton of sense.

Robert, the only thing I'd add, Jon's got it right. I mean, he knows this code. When they issued this notice in 2020; that’s in the spring, they just kind of said in the language, we think everything will be back to normal in the fall. Therefore, we're going to extend the deadline for the 2019 plan years because we had the same issue in the spring, right? They didn't have time to use their grace period and we said, we'll extend to 2019 through the end of the year, but otherwise we're going to go back to normal. Because we think it will be back at normal then. We're not back at normal. We do think that the regulators can act on this and we think they will. I mean, we know that both the outgoing administration and the incoming administration are very pro-consumer, which is what this is all about, it's helping the consumers on. There's a bunch of momentum. I can tell you, there's all kinds of sponsors that have been signing on letters and things like that. A wide group of people, everyone from the American Benefits Council to the AFL-CIO and on the National Education Association, they are all asking for this leniency not only around when you can use your FSA dollars and your HRA dollars and things like that, but also for things like COVID extension. So we're pushing hard.

Good evening, team. No, things are not back to normal yet, Steve. I have three questions that I'll ask all at once. First, Darcy, regarding the rate guidance for calendar 2021 of 170 to 180 basis points. As we look at the year ahead, should we expect a linear progression towards the low end, or a more flat number throughout the year? Jon and Steve, I have two questions for you as well. Following the recent benefit selling season affected by COVID, did you observe any new trends that are noteworthy? Additionally, United seems to be increasing their focus on healthcare finance banking. Did you notice any competitive changes from them at the conclusion of this selling season? Thanks.

I'll begin with the last part. When we went public, only 2% of Health Savings Accounts were held by investors, which was consistent across the industry. HealthEquity has increased this figure to over 5%. While this may seem low, I monitor this number closely each month, and it continues to rise. The first step is for individuals to become investors. Once they do, they start viewing their HSA differently, shifting from a spending account to a savings account, and ultimately as a long-term retirement savings tool. This transformation takes time, but it aligns with our mission, and we are committed to it. The financial outcomes will follow as we persist in this effort. Individuals should aim to have significantly more than $3,000 or even $5,000 in their HSAs, as this will cover their healthcare expenses both throughout their lives and during retirement, when those expenses can be considerable. This allows them to manage those costs tax-free instead of withdrawing funds from other sources. I've discussed this point several times, and we will stay the course. The accounts and assets will grow much faster than traditional cash balances.

Yes, I think it's interesting that despite the pandemic, our focus has remained consistent with what we set out a year ago. If you look at our priorities from the time of the WageWorks acquisition or even at the IPO, they haven't changed. This reflects our belief in the long-term potential of the business. We're not trying to chase any trends; rather, we need to be prepared for when people are ready to return to work. If fewer people come back in the end, we'll adapt, but right now, we need to be ready for when most of them do. Similarly, regarding rates, we need to concentrate on helping people grow their balances and fostering strong, diverse relationships for deploying those deposits. We've been focused on this approach. Interestingly, if you can make a profit in a challenging environment, like airlines during high oil prices, then the potential in a better environment is significant. We achieved 34% EBITDA margins last quarter despite missing out on $20 million of high-margin revenue. If we can succeed with improving metrics in tough conditions, we're positioned to thrive when circumstances improve. Some may focus on the short-term impacts of the pandemic, but that's not a risk I want to take.

Thanks very much. Just maybe the first one, I heard two different numbers. I heard Darcy mention maybe about $20 million of revenue impact from COVID; you could look at it that way. But I thought I heard Jon say something about $10 million this quarter, if I remember correctly, I think it was $16 million last quarter. I'm just trying to, one; sort of make sure I think about what's the difference?

The $10 million is ex-interest rate impact; the $20 million is inclusive of interest rate impact. That's all.

Yes, that's correct. The $10 million and the $16 million are similar numbers, Sandy? That's correct.

It's difficult. We want to be careful when discussing this impact. We're trying to provide you with as accurate a sense as we can of where the business would be in a more normal environment. That's why we've provided details on the impact regarding commuter spending, which has come back somewhat, but not as much as we would like. We have seen some benefits in other areas. Commuter spending has not changed significantly.