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spk12: Welcome. I would now like to hand the conference over to your speaker today, Richard Putnam. Please go ahead.
spk10: Thank you, May, and good afternoon. Welcome to HealthEquity's second quarter fiscal year 2022 earnings conference call. My name is Richard Putnam. I do investor relations here for HealthEquity, and joining me today is John Kessler, our President and CEO of Dr. Steve Neileman, our vice chair and founder of the company, Tyson Murdoch, the company's EVP and CFO, and Ted Bloomberg, EVP and COO. Before I turn the call over to John, I have two important reminders. First, a press release announcing our financial results for the second quarter of fiscal year 2022 was issued after the market closed this afternoon. The metrics reported in the press release include contributions from our wholly owned subsidiary, WageWorks, and the account it administers. The press release also includes definition of certain non-GAAP financial measures that we will reference here today. A copy of today's press release, including the reconciliations of these non-GAAP measures with comparable GAAP measures, And a recording of the webcast can be found on our investor relations website, which is ir.healthequity.com. Second, our comments and responses to your questions today reflect management's view as of today, September 8, 2021, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, and 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 here today. These forward-looking statements are subject to risk 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 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. And they are detailed in our latest annual report on Form 10-K and in subsequent periodic reports that we file with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. At the conclusion of our prepared remarks, we will turn the call over to the operator to provide instructions and to host our Q&A. With that, I'll turn the call over to our CEO, John Kessler.
spk17: Thank you, Richard. Gets better every time. Hello, everyone, and thanks for joining us this afternoon. Today, we have good news to report. We're announcing strong results for health equity second quarter of fiscal 22, ended July 31st, and we are reaffirming guidance for the fiscal 22 full year. I will discuss our Q2 results and pending acquisitions. Ted will review operations and integration progress. And Tyson will review the financial details of the quarter and provide updated guidance for fiscal 22. Steve is here to join us for Q&A. As always, let's start with the five key metrics that drive our business. The team delivered strong year-over-year growth in HSA members and assets, while commuter yield headwinds continue to impact revenues. Revenue of $189.1 million grew 7% versus the second quarter of last year due to improving year-over-year HSA member asset and other CDB growth, along with one-time COBRA subsidy revenue that hit largely in Q2. And that was all partially offset, of course, by lower custodial yields and commuter benefit utilization, which remains well below pre-pandemic revenue levels. Adjusted EBITDA of $65.5 million grew similarly sequentially and up from... the second quarter of last year of $60.0 million. Total accounts ended the quarter at $13.1 million, which does not include the nearly 700,000 commuter accounts that went into suspense since the beginning of the pandemic. HSA members at quarter's end reached $6.0 million, up 11% year over year, and HSA assets at quarter's end reached a record $15.5 billion, up a larger 27% from a year ago. The team delivered Very strong first half sales results, including a fiscal second quarter record of 180,000 new HSAs, up 67% from 108,000 opened in Q2 last year. To date, this fiscal year, we have welcomed 295,000 new HSA members, up 38% year over year, and more than in the same period in any year of our history. HSA assets grew by $458 million during the quarter, with most of that growth ending up in investments as members and their employers continue to contribute and invest. Investing HSA members, in fact, grew 42% year-over-year, with more of our members connecting health and wealth. The average balance of HSA members grew a robust – I think it was incredible last quarter, now it's robust – 14% year-over-year, even during a quarter where member spend increased significantly. interchange revenue by 23% year-over-year. So people were spending and still contributing. CDB accounts also continued to grow as well, even without a commuter rebound. The strong organic results in Q2 do not include the acquisitions of further or fifth-third banks' HSA portfolio, which have not yet closed. We believe the further and fifth-third transactions will enhance health equities market leadership and scale in our core and growing HSA business. adding approximately 0.7 million HSAs and $2 billion of custodial assets upon their closings in total later this year. Further, we'll also strengthen the network partner strategy that has helped fuel health equities HSA growth from the start, with significant new partners, increased commitment to the Blue Cross and Blue Shield system, new API-based platform capabilities to support flexible branding, and deeper integration of health equity into partner offerings. There truly are exciting things on the way. As was reported in this morning's 8K filing, the further agreement has been amended, moving the target date for close for the bulk of the business to November and creating a separate closing process for the $0.3 billion of Viva assets. This provides Viva fiduciaries time for review before transfer while protecting deal value through an earn-out structure negotiated with the sellers. The fifth third portfolio transfer will occur shortly. We are pleased with the results we're reporting today in light of the pandemic's continuing impact. Commuter revenue remains well under 50% of pre-pandemic levels, with the Delta variant leading many employers to push back return to office plans, as you all know. Card spend plateaued in Q2, which we also see as an effect of the Delta variant. These headwinds will eventually abate, of course, and the team has the opportunity for a strong second half, capitalizing on a great sales start to the year. I will now turn the call to Ted to review operations and integration. Mr. Bloomberg.
spk05: Thanks, John. As John mentioned, we're pleased to report that second quarter new HSA sales were up 67% year over year and 56% sequentially from the first quarter this year. As you know, We recently promoted Steve Lindsay, a 15 year health equity veteran to the position of executive vice president of sales and relationship management. Steve has led the teams responsible for successful cross-selling efforts, expanding our partner relationships, including launching our record keeper partnership effort and delivering high quality service to enterprise clients, making them want to do more business with us. In fact, Steve and his team recently forged a partnership with Healthcare Services Corporation, better known as HCSC, to bring HealthEquity's Total Health Solution Bundle to HCSC's Blue Cross and Blue Shield licensees in five states. Factoring in the further acquisition, we will soon be working together with approximately two-thirds of Blue Cross Blue Shield licensees to connect health and wealth. Steve is purple through and through, has demonstrated his capabilities, and we look forward to benefiting from his impact in this expanded role. As we move into open enrollment with our clients and partners, we are optimistic as employers and employees reengage with their benefit programs. The marketing and engagement programs we have built are working. Our clients we have spoken with are overwhelmingly supportive of deploying them, and we believe we can successfully educate our members and prospective members on the benefits we help their employer offer. We are also excited about Fifth Third and further. We expect to complete the close and migration of Fifth Third before the end of Q3. They have been an exceptional partner supporting the transition and referring new business to us already. With respect to further, we've gotten to know their team and couldn't be more impressed. Planning efforts are underway to achieve $15 million of cost and revenue synergies within three years of close, and growth opportunities with their existing clients and health plan relationships are exciting. The WageWorks integration effort is winding down, with another platform migration completed and $5 million of additional synergies achieved in Q2. While we have completed 18 migrations and achieved $70 million of run rate synergies to date, there remain a number of small to mid-sized migrations to complete to achieve the remaining $10 million of the promised $80 million of permanent run rate synergies. During Q2, we also completed the rationalization of our post-WageWorks physical footprint. The team's stellar performance over the past 18 months working from home has eased the process of concentrating future in-office work to just two locations, Draper, Utah, and Irving, Texas, along with a creative space for our awesome luminaries in Seattle. I'd also like to offer kudos to the entire organization for the tireless efforts to execute against the recent COBRA subsidy regulations. Our Q2 financial results reflect the realization of that concerted effort. We're now shifting our focus to deliver a successful busy season, and we are highly optimistic that the investments we've made in self-service technology, training, staffing, and simplifying our platform will help us deliver Purple during our busiest time of year. Early returns are positive as we are meeting or exceeding service levels across the business. While there is still much to do, the first half of fiscal 22 has yielded record new HSA sales, strong integration synergies, and successful, scalable operational results thanks to the continued efforts from Team Purple. Now I will turn it over to Tyson to review financial results and guidance.
spk11: Thank you, Ted. I'll review our second quarter gap and non-gap financial results. A reconciliation of gap measures to non-gap measures is found in today's press release. Second quarter revenue grew 7%, as John indicated, with each of our revenue components posting year-over-year gains. Service revenue grew 5% to $109.2 million, representing 58% of total revenue in the quarter. The second quarter growth in service revenue is primarily attributable to 8% growth in average total accounts and driven by growth in COBRA, partially offset by commuter accounts in suspense from the impact of the pandemic. While there remains an opportunity to provide additional COBRA services in the second half of fiscal 22, most of the upfront work and nearly all the subsidiary revenue was recognized in Q2. Custodial revenue grew 4% to $48.8 million in the second quarter, compared to $46.9 million in the prior second quarter, 18% growth in average HSA cash with yield at 88% growth in average HSA investments with yield more than offset a 33 basis point decline in the annualized yield on HSA cash. The annualized interest rate yield was 177 basis points on HSA cash with yield during the second quarter of this year. 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. Interchange revenue grew 23% to $31.1 million, representing 16% of total revenue in the quarter. The interchange revenue increase was primarily due to a rebound in a spend across our platforms in the quarter and growth in average total accounts. Gross profit was $112 million compared to $101.8 million in the second quarter of last year, and gross margin was 59% in the quarter. Operating expenses were $112.8 million or 60% of revenue, amortization of acquired intangible assets and merger integration expenses, together represented 19% of revenue. Net loss for the second quarter was $3.8 million or a loss of $0.05 per share on a GAAP EPS basis. Our non-GAAP net income was $33.4 million for the second quarter this year, up from $30.1 million a year ago. Non-GAAP net income per share was $0.40 per share compared to $0.42 per share last year. Adjusted EBITDA for the quarter grew 9% to $65.5 million and adjusted EBITDA margin was 35% higher than prior trends due to the COBRA subsidy revenue in the quarter. For the first six months of fiscal 22, revenue was $373.3 million, up 2% compared to the first six months of last year. Gap net loss was $6.4 million, or $0.08 per diluted share. Non-gap net income was $64.4 million, or $0.78 per diluted share. And adjusted EBITDA was $124.5 million, up 1% from the prior year, resulting in 33% adjusted EBITDA margin for the first half of this fiscal year. Turning to the balance sheet, as of July 31st, we had $754 million of cash and cash equivalent, with $974 million of debt outstanding net of issuance costs, with no outstanding amounts drawn on our line of credit. The cash balance, of course, still includes the funding required to close the further and fifth third HSA acquisitions. As you know, we routinely have on file with the SEC a shelf registration statement on Form S3 to assure you we have access to the capital markets as needed. Our existing shelf registration expired yesterday, which means you will see a new S3 soon. Based on where we ended the second quarter and our current view of the economic environment, we are maintaining guidance for Fiscal 22 that we previously provided, which includes Revenue for fiscal 22 to range between $755 and $765 million. Non-GAAP net income to be between $122 and $126 million, resulting in non-GAAP diluted net income between $1.45 and $1.50 per share, based upon an estimated 84 million shares outstanding for the year. And adjusted EBITDA between $241 and $247 million. Today's guidance includes our most recent estimate of service, custodial, and interchange revenue based on results to date. Compared to last quarter, our guidance includes a more conservative outlook for commuter revenue and interchange for the remainder of this year due to the Delta variant surge, offset by the addition of Fifth Third Bank revenue expected in Q4. We now expect to close the further acquisition in Q4 this year. Guidance does not include any potential impact from the further acquisition except for the associated preparatory merger and integration expenses incurred through July 31st, 2021. Our full year gap net loss and loss per share guidance includes the impact of these year-to-date merger and integration expenses. Our guidance assumes a rate on HSA cash with yield of approximately 175 basis points unchanged from prior periods. Our yield guidance does not factor the pending further assets and migration to health equity depository and insurance partners at the then prevailing rates. Guidance also includes the benefit of run rate synergies achieved from wage works that Ted mentioned. The outlook for fiscal 22 assumes a projected statutory income tax rate of approximately 25% and a diluted share count at $84 million. Though we don't provide quarterly guidance, let me speak for a moment about seasonality. During Q2, the company benefited from incremental revenue connected to the administration of COBRA subsidies included in the pandemic stimulus legislation. As you know, the stimulus plan subsidies ran from April to September. However, the bulk of revenue related to upfront notification and administration of the subsidies were earned in our second quarter. Guidance reflects our expectation of little additional COBRA subsidy revenue in Q3 and, of course, none in Q4. Pre-pandemic, we also had a seasonal interchange pattern where Q1 and Q4 were seasonally higher, with Q3 being the lowest quarter for interchange revenue. As John mentioned, we have seen a plateau of spending excluding commuter and expect to return to the pre-pandemic seasonal revenue patterns for interchange, again, excluding commuter services. As we have done in recent reporting periods, our full-year guidance includes a detailed reconciliation of gap to the non-gap metrics provided in the earnings release, and 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 excluded. With that, I'll turn the call back over to John for some closing remarks.
spk17: Thanks, Tyson. The story of this call, I think, is around improved efficiency, as Tyson mentioned, as well as, of course, sales performance. in Q2 and for the entire first half. And these are both teen sports. And in this case, particularly thinking about sales, the team includes everyone in health equity, our network partners, our clients, and their benefits advisors. And I wanted to say a brief thank you to that group who have worked very hard with us over this period of time where there's a lot of uncertainty to really produce good results. And so with that, let's open the call up to questions. Operator.
spk12: Absolutely. At this time, I would like to remind everyone to ask a question. You will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Greg Peters of Raymond James. Your line is open.
spk03: Good afternoon, everyone, at HealthEquity. Good to hear from you. Yeah, well, thank you for the call. And I guess I'm supposed to ask one question with one follow-up. Is that the rules? You didn't really... I mean, you're in Florida.
spk17: I don't think anyone follows any of the rules anyway, so... Well, yes, exactly.
spk03: Well, I'm going to try and be respectful of my peers. I'll stick to one question, one follow-up. So let's focus on custodial revenue. And I think many are focused on or are paying attention to where the three-year jumbo CD rate is. It really hasn't moved much. And more importantly... The data coming out of the banking industry suggests there's just not a lot of new loan demand. And so I thought I'd just provide you the opportunity to talk about your perspective on the cash yield that you're going to be able to generate beyond just this year with your depository partners.
spk17: Yeah. Tyson, why don't you start with just a discussion of where we are from a guidance perspective for this year and how we're thinking about the remainder of this year, and I'll opine a little bit on our longer-term strategy.
spk11: Yeah. So, hey, Greg. So, 177 BIPs for Q2, and then, of course, the guide of 175, and that includes, you know, We stayed there, even though rates have come down, obviously, like you just mentioned, because we're confident in our ability to place. You know, season's getting a little closer to make those placements. We're watching that very closely, and we feel like we've created some demand having more depository partners and, of course, some of our other partners that we work with, and so feel good about the guidance that we have before and now.
spk17: So, yeah, and so thinking about – you know, going forward, well, obviously I'm not going to offer multi-year guidance here. Right. One of the things that is, I think, making us feel decent about, you know, fundamentally about our business model, which, you know, going back to the first time we met, you know, we talked about the fact that one of the nice things about our model of being not attached to a particular bank or a particular insurance company or a that we have a lot of flexibility to pivot and do what's best for our members and then for us in terms of being able to deliver them value and keep other fees down. And so what I see there is a couple of things happening. First of all, as we get into kind of placement season here, we are, as we do from the bank perspective, playing the field, and that seems to be going about as expected. Obviously, the banking sector is going to be, in our view, a long-term challenge. But nonetheless, in terms of basically not just the loan demand, but effectively being pushed to buy treasuries by the sort of cumulative effect of various government regulations, that's not so helpful. However, what I also see happening here is, and we've talked about this a little bit in the last couple of calls, is I see a mix shift occurring within our cash assets between the products that we offer. As you know, we offer our FDIC deposit product, and we also offer an enhanced rates product that we've historically called Yield Plus. It's an annuity product that generates higher, as the name implies, higher rates for our members and higher rates for us. With the further acquisition, we'll be bringing on a material amount of the further transaction includes enhanced rates type business. on the HSA side, and that will be, from my perspective, that's serving as a catalyst for us to more effectively educate our members about their options as well as to really do on that side of the house what we've tried to do on the deposit side, which is have multiple partners, work effectively with our partners, have telegraph our needs, build long-term relationships. And a way to think about that whole thing is it's going to provide some stability underneath this number. You know, we've – and so, you know, we'll, I think, provide guidance pretty shortly here, either in December, as we did last year, or in January, February, as we did the prior year. I'm not sure yet. But we'll provide some guidance very quickly about 2023 fiscal year. And what I would have people kind of just keep in mind is that I think The mixed shift opportunity within the cash component is something that is actually potentially quite helpful to us, and I think we're uniquely positioned to do among competitors because we're not pushing prop money market funds. We're not trying to satisfy our own treasury officer or that kind of thing, and we have the flexibility to move money where it's most useful.
spk03: Yeah, that makes sense. As my follow-up, and it's going to be a pivot, but the investment community is, I'm sure you will not be surprised by, there's a lot of speculation going into your earnings print regarding just what's going on with high deductible health plan adoption this year in the industry and with new HSAs and there were some out there suggesting that the growth in just the industry adoption for high-deductible health plans and HSAs just isn't what it used to be. Maybe you could speak on your opinion on what the industry outlook is for this beyond just this year. And I know you spoke optimistically about the outlook and your strong second quarter results, so I'm not trying to diminish that. I'm just curious about your perspective on you know, for the industry outlook?
spk17: Well, I guess my basic perspective is that there's a, you know, what I see is a divergence of providers between those that have scale and scope and can really meet the needs in terms of both potential distribution partners as well as ultimately employers and members, you know, and those where they're more limited. And I think, you know, if you look at what's been printed out there in terms of, of our results now as well as other results that have been printed, you can kind of see that. And so that's what I see. And so I think when folks look at this thing, obviously the ultimate market answer is going to be somewhere between the winners and everyone else. And our job is to be one of the winners. And so I feel good about where we ended up for the first half of this year in that regard. We'll see what others have to say. you know, Devonier and others as they print, but certainly relative to the prints you've seen, that feels like it's the case.
spk03: Just on that point.
spk17: And I should say in terms of both accounts and assets, so that seems pretty good.
spk03: On the account side, though, you used to talk about how the industry, and we used to observe how the industry used to generate, give or take, 3 million new accounts per year. That kind of reset last year with COVID-19. When you think about this year and next year, do you think we can get back to that $3 million account per year industry sort of run rate, or is it going to be – it feels like it's going to be less. That's just the final question.
spk17: I note that you've gone full Floridian on this one. So welcome. As a native, welcome. But, look, I don't know. And I think nobody does. And we'll, we'll go through the year and find out what I do know is that, that, um, you know, growth of this market is going to be, uh, is going to occur over a long period of time. We're about 30 million accounts into a 60 million account market in my view. And I've had that view in good times and bad times and what have you. And, um, the fundamental factors that lead us to that place haven't changed. I, you know, healthcare has bad, um, but, the idea of leaving people out in the cold in terms of their ability to spend tax efficiently and save for their retirement does not seem like that's going to be one of the fads. And so I think we're going to have plenty of growth opportunity going forward, and our job is to capture the most of it.
spk03: Got it. Thanks for the answers.
spk17: Thanks, man.
spk03: Thanks, Fred.
spk12: Your next question comes from the line of Anne Samuel of JP Morgan. Your line is open.
spk15: Hey, Anne.
spk01: Hi. Thanks for taking the question. I was hoping maybe you could provide some incremental color on the incremental conservatism around computer and interchange. And then maybe as we think about the commuter business, is there any offset from Loom as commuters start to think about getting to work in different ways? Thanks.
spk11: Dyson? Yeah. Hey, Anne. How are you doing? So thanks for the question. And what I would say about that is, like you, I'm watching closely how this is playing out. And as we looked at Commuter over that second half, based on what we had kind of thought about 90 days ago and watched the Delta variant kind of rear its ugly head here and saw the news and looked at our own business and when we were going to come back, looked at other businesses and how they were going to come back, and also just monitoring results as we see people start to utilize Commuter. the cards and so on and so forth, it just felt better for us to be more conservative in the second half of the year, given those kind of news themes. And I think every single day that goes by, it sort of even makes it a little bit more, in my mind, feeling like it's going to be a conservative comeback as far as getting people back into the office. I think the same is true on the interchange side, and we wanted to temper that because, again – I think we're in another situation where you see case counts rising. Of course, I'm looking at the same charts that you're looking at, and those are rising, and people are doing something different. This is still with us. And so bringing in that conservatism and kind of making a point of that was important to kind of protect that second half of the year. And then the other question you asked on there as well was just about loom. And we feel good about what that team's doing. In some ways, it's a similar impact with people. When they get back in the office, there's more utilization of that platform. There's more interest in it, but it creates a lot of really great conversations around the commuter benefits that are already integrated in there. Again, if you think about long-term versus quarter-to-quarter, this is going to be something that really helps us over that period of time. I'd leave it at that. John, any other comments?
spk17: I think that makes sense. Well, I'll just say we don't know what's going to happen in the second half of the year. We feel good about having been perhaps less sanguine than others were, not that we were expecting Delta, but back in June when everything looked pretty rosy, we were cautious and we got some criticism for that. I think, as it turns out, that caution in terms of the pace of commuter rollback was warranted. And, look, you know, I don't have a crystal ball on this, so we try to guide what we see, and if we can deliver better results, of course we will, just as we did this course.
spk15: Great. Very helpful.
spk12: Thank you.
spk10: Thank you. Thanks, Anne.
spk12: Your next question comes from the line of George Hill of Dolce Bank. Your line is open.
spk08: Hey, George. I have a question. Hey, John, how's it going? Hey, John, I'm going to lead the witness here a little bit, which is we look at a tough rate environment, the Delta variant slowing commute and interchange expectations. I guess I would ask any changes in how you guys think about cap deployment.
spk17: I don't know where you're leading me to. That's my concern. I don't know, George. What do you think?
spk08: John, don't ask me. I'm a former banker. I'll tell you something.
spk17: Well, at least it's former. That's good. Look, I think, as is obvious from our activity, the M&A pipeline feels like there are a lot of opportunities there. What we're going to focus on going forward, I think, is... stuff that, at least in the near term here, would be stuff that looks a little like Fifth Third, where it's portfolio acquisition, it cash flows immediately, that kind of thing. I think that's the right thing to be doing in this environment. And none of those things are going to go crazy, but I think the right way to think about it is that the capital that we have There are going to be – we've been saying this for years, and it's been true, right? It's like, yes, we're generating cash, and yes, there are good ways to use it that generate very strong return to our shareholders and very predictable return. And I think that's likely to be what we're going to do, and there does seem to be a decent pipeline for those things. And so that's kind of where we'll be. I don't see us looking at this environment we have today – and doing anything that's in the nature of strategic pivot or what have you. With further, we decided to, as you know, I think we decided to both sort of double down on our view about the opportunities within our health plan partners, and then also we have a view that from a technology perspective, the ability to do more API work, more gray label work, more product integration work, is going to be good not only in the health plan channels but elsewhere. And, you know, that makes perfect sense to me. But that's, you know, that to me is a modest pivot. We're not going to do any big pivots anytime soon, I don't think.
spk08: Yeah, I think you saw exactly where I was leading you. I think the more direct question would have just been, like, do you see more opportunity in the businesses you're currently in or is there a chance to take greater share of wallet with the clients you serve with new offerings? but I think you gave me the answer pretty clearly.
spk17: Thank you. I think we have plenty of wallet share opportunity within the products we have from a cross-sell perspective. That was helpful in this quarter. It's been helpful for the last year. Let's go and get the wallet share we can with our existing products. One nice thing about that, and maybe in a further question, Ted will have a chance to elaborate on this, is we're really honing our skills in that area. And so if there are other opportunities later down the line, great.
spk08: Okay. I'll hop back in. Thank you.
spk17: Thanks, George.
spk12: Your next question comes from the line of Donald Hooker of KeyBank. Your line is open.
spk06: Great. Good afternoon. Thank you for the question here. So I'm sorry if I missed this, but you talked about the COBRA subsidies benefiting the quarter. Did you size them, or was that the entirety of the sort of upside to your expectations? Tyson, you want to hit that?
spk11: Yeah, I think the way to look at that, Don, thanks for the question, is just when you saw us, you know, go through guidance increases over the course of the spring. So you saw us raise for Cobra and Loom, you know, early on, and then, you know, it started to materialize a little bit more in there. And so that was the way that we sort of messaged that. But we didn't go out and just specifically size the increase. But, you know, those things kind of played out like we expected, and it was a probably a little better, and that was good. So a lot of hard work by the team to get it done and to do it right. And so I think it proved a lot of things in our business as well about what we're capable of doing.
spk06: Super. Maybe one quick follow-up. You guys commented going into the enrollment season here, you had some learnings from last year from the COVID environment around self-service training and technology and whatnot. Are there one or two things you would highlight to us that could be sort of some – give us some room for optimism this benefits enrollment season from what you learned last year? Yeah, Ted, why don't you take that one?
spk05: I had a feeling that pitch was coming from John. Yeah, I would say there's two or three things that give me great optimism. The first one is that is the way that we do virtual education and open enrollment support. In previous years, we were constrained a little bit by how physically proximal we could get to our members and prospective members. And it was fairly inefficient. And I think one of the great things that, you know, COVID helped us with and that we were on top of was moving to a virtual model where we can serve more people, help more people, create more content, be with the families when they want to engage with the content. Like we don't have to show up at work. We can, you know, we can create content on demand and support that with, team members, where if you want to sit down with your spouse and go through your benefits, we're there to support that effort. And the results that we saw last year were really a cause for optimism, and we're off to an equally good, if not better, start this year. So I think the pivot to virtual open enrollment and the way we were able to support that and the way our clients kind of jumped on board with partnering with us to support that is one big cause for optimism. I think the second big cause for optimism is maybe a little bit less sexy on the revenue side, but equally important, which is, you know, we don't have 22 platforms anymore. That really helps, right? I mean, you know, we've done a lot of work over the last two years. We've done 18 migrations. You know, that doesn't mean yet we've sunset 18 platforms because some of those migrations are multi-step, but we're serving far fewer platforms with, you know, far more robust and capable platforms cross-training, far better awareness of what both our clients and members are asking us for, and it's helping us service people more effectively and without, you know, stuff kind of falling through the cracks. I think that puts us in a better position to have a successful busy season. So those would be the two points I would make, one on the growth side and then one on both the cost containment and service side that are, you know, exciting from my chair. John, I don't know if you have anything to add there.
spk17: I think if you take all that together and throw in the discussion that we've had over the last few quarters here with regard to technology investments in both API-based infrastructure and also from a data perspective, I mean, I think it's not very obvious from the results in recent quarters with all the noise around COVID and other factors. But, you know, underneath the covers, what we're trying to do is The way we look at this is we're in a market that from a secular perspective is going to have decent growth and certainly steady growth, and we're going to outperform. The way we can turn that into spectacular outperformance, particularly from a margin perspective, that is growing revenue and serving people efficiently, is by maintaining our roots as a true technology company. And you're going to see those who watch closely, very closely, have already seen investments in that area. and you're going to see more in terms of both people and feature functionality and so forth as we begin to integrate further. There is a lot of opportunity to apply technology to a market that is going to be there for us. We feel very confident about that and that we're already able to outperform to kind of make that even better. And an opening moment is just kind of one great example of that.
spk06: Well, look forward to it. Good luck with that. Thanks so much. Thank you. Thanks, Don.
spk12: Your next question comes from the line of Sean Dodge of RBC Capital Markets. Your line is open.
spk14: Mr. Dodge. Thanks for taking the questions. I guess first just a quick clarification on the guidance. Is there a revenue contribution from Fifth Third? In this round, that was not included in the last quarter's guidance. Tyson, you want to hit that one?
spk11: Yes, there is actually. And so we've included that. That was, you know, we talked about that is essentially sort of the offset in there to kind of maintain guidance. So you do have that inorganic growth located in there. But it's relatively small.
spk14: Okay, is it just like a couple million?
spk17: We haven't put a number out there. Yeah, I mean, I'm going to put a number out, but it's small. Think about it this way. We won't get but a couple of months of it, and it's not a huge number either way.
spk14: Okay, fair enough. And then another kind of quick one on further and fit there. There's, like you said, about 700,000 HSAs between the two. Is this like a net estimate, or do you have a sense of the net contribution of the quality HSAs that this will bring? I mean, net of account duplicates, zero balance accounts, and some attrition and stuff with the migration that I think you saw with WageWorks.
spk17: I think the answer to that is roughly yes. I want to think about particularly with further where we are less, you know, because we're not, in both cases we're not closed yet. In the case of further, you know, because of antitrust and all kinds of stuff, there's a little bit of probably information that we're missing that makes that imperfect, but order of magnitude the answer is yes.
spk14: Okay. All right. Great. That's all for me. Thanks.
spk12: Your next question comes from the line of David Larson of BTE IG. Your line is open.
spk04: Hi. Can you talk about your EBITDA margin expectations going forward, you know, longer term and the medium term, and also maybe your costs overall? It looks like there's a percentage of revenue on a year-over-year basis, sales and marketing and tech and development and G&A. are all up. Um, and they're also obviously up sequentially. So just any, any thoughts there and, and like the 80 million in cost synergies, that's a really big number. Um, that's like one quarters worth of full adjusted EBITDA. So just any, any thoughts on what your expectations are for EBITDA margin expansion going forward would be very helpful. Thank you.
spk17: Yeah. Tyson, why don't you hit this, uh, one, um, uh, and I, I could preview, but go ahead.
spk11: Sounds good. I mean, what we continue to talk about internally and externally is that we'll continue to grow revenue at a steady clip and, you know, into double digits as account growth occurs. And obviously asset growth is another counter to that. And then growing even a margin even a little bit more quickly than that. And so that's getting to the efficiencies. And John was mentioning this earlier. And that's really about how we service our clients for our biggest cost life. And so you think about the virtualization of enrollment. You think about self-service opportunities. You think about the consolidation of the platforms, which, as you mentioned, that relates largely to the cost synergy that's occurring is that we consolidate those platforms. Everything around those platforms is what is located in that synergy related to particularly service but all other aspects. And you think about, like you said, sales and marketing technology and G&A and You know, there are efficiency opportunities, I think, even beyond that synergy estimate, as we've said before. And then I think just to kind of hit into the operating parts, the operating expenses, and your question was broad, so I'm trying to make sure I took a couple of little scrawly notes here, but let me know if I missed something here. Of course, on the technology side, there's large investments that are occurring that are capitalized, but of course, then the amortization starts to occur. on that. There's also the talent that we have within technology and, you know, paying for that. So you've got the related stock comp in there as well to get the right talent into the door as we merge platforms and as we, you know, try to get down to essentially single platform, which, again, increases that efficiency. And then if I talk a little bit about sales and marketing, I think this has been something that really under the tutelage of Ted and other leaders, we've really made a lot of progress here and built out this function of the company over the last particularly three years. to really do this in a way that allows our users to learn more quicker, easier, you know, about HSA growth. And I think that, you know, a quarter of growth in HSAs is, you know, it can be a little bit of a testament to that. And then we'll see how we do when we go through an enrollment season. So I think that investment's worth it. Of course, you know, within technology, you've got security. That's a big focus of the company as we mature and get larger, you know, to make sure that we've got the appropriate security in place. And so I think all those things you're seeing are just really investments for that long-term future when you think about where we're going to be over the years and as we move towards that TAM. I guess I'll stop there. I probably didn't hit everything, David, but you can, I guess, ask another question or John can maybe add to those things.
spk17: Maybe just one thing that may not be obvious is, unless you look down below, is the effect of stock comp expense on – on an unadjusted basis on each of these expense items, particularly the OpEx items. And we, David, as we've, I think, discussed, but over the last few years here, we've gone from options to RSUs, and then in the case of our senior-most executives, PRSUs based on relative PSR. And I think as investors, that's what people want us to do. um, uh, the practical effect, uh, is, um, as you probably know, is that, that from an accounting perspective, you know, you, you get, um, additional expense without any additional burn. And, um, so, so that's had, I think in percentage terms, some effect that's, that's not immaterial on, um, uh, on these as, as kind of the accounting of that has spooled out. Um, and so, so, you know, maybe offline, if, if we want to detail some of that, we can, but, uh, that's something that's in these numbers that matters.
spk04: Okay, great. No, that's very helpful. Thank you very much. And then just any color around the health card spend would be great. And are you seeing volumes come back up both on the inpatient side and on the ambulatory side?
spk17: So I'll start and then throw to Tyson. We said last quarter that we felt like looking at spend that spend for the first quarter of our fiscal year had kind of reached back to pre-pandemic levels. And that was true. You know, things were a little more, well, maybe I'll just answer, but things were a little more patchy in the second quarter in the sense that we, we had, we had good months and then particularly, you know, as we got towards the end of the quarter and you saw a little more potential effect from Delta and, a little bit softer. Not anything like the pandemic period of time, but a little bit softer. And I think that's consistent with what other folks have reported in terms of utilization and the like. I don't know that to be true, but I suspect it to be true. And we did take a little bit off the table for the second half of the year in thinking about this, just because we don't know what's going to happen. But overall, we're kind of as I think it was said a couple of times in the prepared remarks, you know, we kind of feel like we've plateaued at this level, and then, you know, we just have to think about, as do you, as you forecast for the remainder of the year, that, you know, pre-pandemic, seasonally, the first and fourth quarters are our strongest, and the second and particularly the third quarters are our weakest, just because of people's spending patterns. And so those are other factors that are out there.
spk04: Great. Thanks very much. Congrats on a good quarter. Thank you. Thanks.
spk12: Your next question comes from the line of Scott Schoenhaus of Stevens. Your line is open.
spk16: Hey, Scott. Hey, team. Thanks for taking my questions. So my first question is on the new HSA member growth. Looks like it's the largest new member ad in any two Q going back in my model in recent years. Can you provide us on any color where this is coming from? Is it more on the cross-selling opportunities that you're executing on, on the WageWorks client base? Any color would be great. Thanks. Chad, why don't you take this one?
spk05: Sure. Thanks for the question. I think it's really three things. I think the first one is some deals that were stocked last year getting unstuck, which helps. I think a second place would be sort of general channel performance. The Record Keeper channel is really showing some growth for us, but we're also doing very well with our health plans and with our benefits advisors and brokers and consultants. So I think that's another place where we're winning. I think maybe there's four. The third one is just really good you know, net hiring from existing clients. A lot of our clients are experiencing an economic recovery and therefore, you know, adding team members and those team members open HSAs, which is super helpful. And then, you know, we continue to have, as you alluded to, a strong cross-sell year as well, especially in the enterprise space meeting our largest clients. I would say those four things.
spk16: That's great. Thanks. And I guess my follow-up question is around that last, you know, cross-sell opportunity, particularly on the wage work side. I believe when you guys acquired wage, less than 3% of their clients had an HSA account. Where is that today? And then how is COVID impacting this cross-selling opportunity for the HSA business, given the current impaired commuter market? Sure.
spk05: Yeah, I'm happy to take that one, John. Thanks. Sorry. So I think it's a crosswind. COVID's a crosswind from a cross-sell perspective. On the one hand, I think we're the beneficiary of some vendor and partner consolidation that might come from an overtaxed people department. And so I think we're winning some cross-sell deals and pulling some cross-sell deals through the pipeline faster because vendor consolidation is attractive to overburdened HR departments. I think on the flip side, we're seeing you know, a little bit, you know, a little bit of paralysis saying, yeah, yeah, we want to go with you guys, but we just can't make a move this year, which we actually think sets us up well in the future. And, you know, with respect to CrossDell, I don't have that number. We can try to follow up with you on what percentage of WageWorks clients, legacy WageWorks clients offer an HSA. But I would just highlight two things. The first one is our CrossDell isn't HSA only. We're actually experiencing a lot of other consumer-directed benefit account cross-sell into the legacy health equity base, and then, you know, that HSA cross-sell into the wage base. And I would say that I think the biggest opportunity remaining that we haven't quite cracked the code on is sort of that below the enterprise space cross-sell. We, you know, meaning, you know, our top several hundred clients, you know, the few thousand clients below that space, I think that we're sort of just revving up the engines there. So to me, that's one of the reasons for optimism.
spk16: Thanks very much.
spk12: Your next question comes from the line of Alan Lutz of Bank of America. Your line is open.
spk07: Hey, thanks for taking the questions. Hey, John. Going back to the service revenue, there was a nice step up sequentially. I guess Outside of COBRA and then outside of adding new accounts, is there anything that increased sequentially in there that we should think about?
spk17: Tyson, do you want to hit this one?
spk11: I mean, I think sequentially, you know, you're specifically stating that. I mean, I would be pretty consistent when you think about, you know, other things like commuter interchange. Obviously, interchange, we call that as more stabilized. Commuters, you know, pretty consistent. flat sequentially, if you will, other than maybe the card swipes starting to happen with the users that are already in there, but that's pretty small. And so it's really just that big Cobra piece of revenue that kind of causes that to be kind of an anomaly for the year relative to someone just smoothing out the rest of the quarters. And so I'd call it at that. If I tried to kind of pick that apart even a little bit more, like I said, HSAs are largely set at the beginning of the year. Obviously, we had a good Q2, so that adds in a lot. But most of the HSAs are going to come in in season, right? Although I still think that Q2 is pretty big. So anyway, I would say that's about it. I don't know, John, if there's any other thoughts you have. Yeah, I mean, I think you have all the right factors, Alan.
spk17: I mean, the big picture is that in terms of the wins that are out there is The biggest picture is we have a bundle strategy, and our bundle strategy is about while that may produce a slight headwind to per-unit service fees, it's a boon to margin, profit, total revenue, however you want to think about it, and apropos of Ted's last answer. Looking more specifically at this period this year, basically look at the first half. You've got if you just divide service fees by total accounts, you're down 5% year over year. Well, what's going on there? On the one hand, you've got the commuter accounts that are in suspense that really hurt because they are, from a service fee perspective, our highest per account product. And then on the other side, COBRA subsidies somewhat help. And both of those things are going to abate over time. And, you know, we'll be right back where we started, which is, you know, by and large, our basic view of service fees is that they're pretty steady with the effect of, you know, in total with, you know, things like bundling and mix shifts and so forth that may happen from time to time, you know, having an impact.
spk07: That's great. And then? You know, on the selling season, is there any way to quantify how the selling season is going maybe versus fiscal 21 and fiscal 20? You know, is it reasonable to expect account growth, you know, to be in terms of new account ads to be at similar levels or, you know, whatever you can provide there? Thanks.
spk17: Yeah, we're trying to – I mean, I will say, Alan, we're trying to get out of the business of – which we got into during the pandemic so that people could really understand what's going on. You know, we started providing some pipeline information, and you'll note we didn't do it here. I think I promised last quarter that we would try and get out of this business, and so we are. And so let me not do that. I could, and I'm sure you'd like it, but – I think here's what I'd look at. If you look at the first half of the year, we opened 295,000 HSAs and grew CDB business by about 3%. The implication would be, if you sort of follow out prior years, that, as we've talked about already in this call, that we're going to do better when all is said and done this year than in prior years. Uh, um, and you know, that's a great implication, but we have to deliver on it and, um, delivery on it involves, I think, you know, in practice, three factors. The first is, is, uh, you know, kind of running through the finish line in terms of sales, particularly with, you know, our health plan partners that, that get the sales later in the year with smaller customers and so forth. Um, and in that regard, uh, the, the, the point Ted made about, uh, adding, uh, HCSC, uh, Um, you know, it's kind of nice. It's a new partner to work with. Um, um, this will be the first year, so it won't be crazy, but it's, but it's all new and that's really good. Um, uh, um, uh, that's the second thing we have to do is, um, uh, execute on open enrollment. And that's also Ted talked about that. And I think we're very well positioned to do that this year. Um, um, uh, we open enrollment really delivered for us last year when all was said and done. And, um, things were looking a lot less great prior to open enrollment. And so we've kind of doubled down on that, and we'll see how it goes. But obviously, you know, I think we have all the right, like, soldiers and cannons, and I have a stratego board in my head on the field. And then lastly, you know, macroeconomics matter. I mean, the hiring that occurred among benefits eligibles, over the course of the first, particularly the first half of the year, was definitely helpful, certainly relative to last year. And so that helps, too. When our clients expand, that means more business for us. And we've seen some of that. And so, you know, we'll see how the second half goes in total. But those are the factors that will really matter. The first two we control, the third we don't. And so we'll work on the ones we control. Makes sense.
spk07: Thank you.
spk17: Yes, sir.
spk12: Your next question comes from the line of Stephanie Davis of SVV Learing. Your line is open.
spk15: For a minute, I thought we weren't going to hear from you. I couldn't believe you.
spk13: Well, this is actually Joy Zang on for Stephanie.
spk00: Oh, hey, Joy.
spk13: Come on. Come on. Well, thank you for taking my question.
spk00: I'm good.
spk13: I'm good. One of the positives for a lower interest rate environment is that your competitive landscape is becoming more favorable. With that in mind, how should we think about the cadence of portfolio acquisitions going forward? Can we expect a continuation of that pace of two acquisitions within five months like you've done with further and the third? And can you talk about what the pipeline looks like for potential targets?
spk17: Yeah, I mean, we don't operate with any particular cadence, as you know. We don't want to price stuff into the market that isn't there, and people are like, oh, well, you promised, so I guess, you know. And I will say that further is a little bit different in the sense that it has also a technology element and a strong, strong channel element that kind of, I think, make it a larger transaction along with the the Viva product and, of course, the ability to really scale out our enhanced rates product. And so that probably – but I think if I look at, like, the fifth-third type transactions, you know, we'd love to be doing those kinds of things at that size or below all day. And what I expect that you will see from us over the course of the next couple of quarters are, in particular, I think what you're going to see is we're going to try and – I think we're going to try and do everything we can to position the company to be able to do those. And one of the things that's, I think, remarkable, and we will, as I commented and Ted elaborated on a little bit in the call, or in the prepared remarks, I should say, I'm going to focus on Fifth Third for a second. Fifth Third will be closed pretty shortly here. And closed means that the migration happened in that transaction. So, oh, yes, we're still doing wage works, and we're working to gear up further. And those are, you know, real transactions involving people and processes and so forth. But oh, by the way, there's a well oiled machine there that is serving new customers, working with a new partner to make their customers happy, making them happy, bringing them on board, you know, doing it in a compliant way. and that's, I think, in terms of our opportunities to outperform the market. If we can outperform organically and then, oh, by the way, have a steady stream of these over the long term, that really bodes well in terms of our ability to generate, ultimately to generate cash flow that reflects in the value of the shares. So, So I guess without committing to a cadence, my answer is that we are certainly going to try and set the company up to continue to do these things as they materialize. And your premise that is in a low-for-long environment, there should be more of them, is right. And our ability, both through cross-sell and through a broader product set and through enhanced rates and so forth, to really capitalize on these transactions in a low-for-long environment is, I think, better than anyone else in the market.
spk13: That's very helpful, Keller. One more follow-up from me. Yes, ma'am. On your connecting health and wealth strategy, given that one of your competitors just expanded into the retiree reimbursement arrangements market, can you provide some color on if your current product suite includes that offering or if there's an area you want to expand into?
spk17: It does. I have to admit, I'm not sure what the point of the press release was, but we read the same press release. And I mean, I don't know. It's, it's, it's probably a good argument for doing fewer rather than more press releases, which we, we have tried to embrace. Um, uh, but, um, but, uh, but maybe, you know, the answer is yes. Um, and, uh, um, uh, there are, um, these are typically HRA accounts. Um, there are some other flavors, uh, obviously the Viva business that, um, we'll be picking up with further is a sort of a form of those accounts as well. Um, and, uh, and those are out there. I don't know that they're a particular, you know, magic area of market-wide growth. What I do know is that what we want to be there to do is to provide total solutions to our clients and to our partners so that, you know, our partners aren't running around looking for one firm here and one firm there and whatnot, and having those capabilities really helps do that.
spk12: That makes a lot of sense. Thank you very much.
spk17: Yes, ma'am.
spk12: Your next question comes from the line, Mark.
spk17: I note the non-denial on the idea that Stephanie is in the Hamptons, so I'll take that for what it is.
spk09: Mark? Hey, you obviously had a great quarter in terms of HSA ads. I'm wondering if you can talk a little bit about what you're seeing in terms of the competitive environment on the whole. You know, there's obviously one large competitor out there that, you know, some people focus on. But on the flip side, it's a fragmented market, and there's a lot of players that probably aren't being super aggressive. So when you think about the entire competitive environment, how would you net it out in terms of you know, for this coming selling season and going into, you know, next year? And then I have a follow-up.
spk17: Yeah, I mean, I think I would go to, and I'm going to ask Ted if he would like to elaborate, or Steve for that matter, since both of them spend plenty of time out there, you know, kind of in hand-to-hand combat. Look, I think the big picture is around scale and scope. And, um, you know, our, our, what I think of as our most significant competitors, um, uh, obviously Fidelity we've talked about, um, and, and then UNH in terms of, of, of size, they're great competitors, but you know what? Um, the implication of that is that there are great companies that also want to partner with us. So, you know, they're, they're good companies, but, you know, Vanguard's a great company and HCSC is a great company. And, you know, um, And ADP is a great company. And those are all companies that are partnered with us. And it doesn't just have to be us. We don't have to carry all the freight. And that's always been a bit of our secret sauce, not so secret sauce. And, you know, when you look at what we're doing from a technology perspective and even from a people perspective, if you look at the move to bring Steve Lindsay into sales leadership, I mean, that's a strategy. That's a strategic calculation on our part about the value of having people both the ability to go out and meet a client wherever they are, whether that's directly with their broker, with a health plan partner, with a retirement partner, with a Ben Admin partner, with a payroll partner, I guess. And so I just think it's a winning formula to have somebody in the industry that does that and we're that somebody. Ted, anything else you'd add to that?
spk05: No, you said you made the point, John, about – distributing through channels that I was going to, but I think Steve Nealman, you lead the league in executives and finalist meetings. Would you care to offer any commentary on what you're seeing out there?
spk02: Sure. I wish we could be in person, I'll tell you that, but finalist meetings remotely aren't the best situation, but I think we're working through it. But I think the short of it is the more things change, the more they stay the same. I mean, we know about UNA is selling within their footprint. We know about Fidelity, you know, kind of trying to connect the 401Ks. We've heard that for a long time. But I think with the announcement that we made today about HCSC, I mean, we really do have the broadest kind of channel partnerships in the country. And I think that for companies that don't have their own solution, which most large health plans don't, I mean, the biggest do, but the most large ones and small ones and mid-sized ones and everyone's don't, You know, they come to HealthEquity because they know that we're going to help them compete. And the reason why they choose us is, and I'll tell you this, is they think that aligned with HealthEquity, they have a better chance to win and retain business. And so we just double down on that strategy. We do some direct sales, but we do a lot of channel sales. And so I don't think it's changed that much, honestly, in the last four to five years. That's great.
spk09: And then, you know, you've had a lot of time to think about further, and I'm wondering if you can – you know, add some additional comments with regards to just the technology and the channel partnership that you're going to gain with further, you know, as you've looked at it even more and gained a further appreciation of what it brings to the table.
spk17: Ted, why don't you start this one?
spk05: Sure. First of all, I'll point out that whenever you're talking about further, you inadvertently use the word further. You just did it, and I do it 17 times a day. It definitely happens. But I think that the punchline is we're incredibly excited about the distribution relationships that they have, and these are some of the nation's best and most effective, most forward-thinking health plans, and we look forward to continuing to grow and develop partnerships with them. You know, starting on we're doing as much planning as we can while bound, obviously, by the data sharing rules that are in place to ensure that we remain competitors until we close. But we're really excited about that. I think from a technology perspective, you know, for me, it's a little bit less about technology and a little bit about meeting the health plan partners where they are. John used a term which I hadn't heard him use before, which is gray labeling, right, which is, which I'm interpreting him to mean, you know, it's not quite white labeling. It's lots of different choices about how health plans want to go to market with HSAs. And I think not only does Further have technology that we'll be able to avail ourselves of relatively quickly, but they also have expertise in doing that, which we're really excited about. And we think we have a lot to learn from them in terms of how, which of those buttons, pressing which of those buttons matters. You know, sometimes it can be a co-brand, sometimes it can be, getting all the way into the entire communication stream that the health plan deploys. And it's really trying to meet those health plan partners where they are to make their, you know, to help them take HSAs and other consumer-directed benefits to market as effectively as possible. I think that's what we're most excited about. And then the last point I would make before I turn it over to John to see if he has anything to add is one of the things that constrains the growth of health fast-growing companies is talent. And so you want to find consumer-directed benefit, experienced, talented, capable people wherever you can. And that's one of the things we're really excited about with respect to the further acquisition because we think that it's nearly 400 people who can help contribute right away and understand the industry and have been successful in the industry. And I think that's another huge opportunity for us from a closing further perspective. And candidly, I just can't wait to close it and get on with it. John, anything you'd add?
spk17: No, that was awesome. Thank you.
spk05: Thanks for taking the question.
spk17: Yes, sir.
spk12: There are no further questions at this time. I will now turn the call over to John Kessler for closing remarks.
spk17: Yeah, everyone, thank you. Stay safe. Stay sane. It's going to get better. We're all getting through this. Our team's doing a good job of getting through it. We hope you're pleased with today's results, and we're hoping to deliver more of them to you over the next quarter. Thank you.
spk12: This concludes today's conference call. Thank you for participating. You may now disconnect.
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