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HealthEquity Inc (HQY) Q3 2020 Earnings Call Transcript

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HealthEquity Inc (NASDAQ: HQY)
Q3 2020 Earnings Call
Dec 3, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to HealthEquity's Third Quarter of Fiscal 2020 Earnings Call. [Operator Instructions]

Go ahead, Mr. Putnam.

Richard Putnam -- Director of Investor Relations

Thank you, Joel. Good afternoon, everyone. Welcome to HealthEquity's third quarter earnings conference call for our fiscal 2020 year. With me today, we have Jon Kessler, President and CEO; Steve Neeleman, HealthEquity's Founder and Vice-Chair; Ted Bloomberg, who is our Executive VP and COO; Darcy Mott, our Executive Vice President and CFO.

Before I turn the call over to Jon, I would like to remind those listening here today that there is a copy of today's earnings release and accompanying financial information posted on our Investor Relations website, which is ir.healthequity.com. We also claim Safe Harbor concerning the forward-looking statements included in today's earnings release and that will be made during this conference call, including predictions, expectations, estimates, or other information that might be considered forward-looking.

Throughout today's discussion, we will present some important factors relating to our business, which could affect those forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. We 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 that are detailed on -- which are detailed in our Annual Report on Form 10-K, which is filed with the SEC in March of 2019 along with any subsequent periodic or current reports filed with the SEC. We are not obligating ourselves to revise or update these forward-looking statements in light of new information or future events.

With that out of the way, we'll now turn the call over to Mr. Jon Kessler.

Jon Kessler -- President and Chief Executive Officer

Thank you, Richard. It just gets better every time and thanks all of you for joining us. This is the first quarter in which our operating results will reflect the acquisition of WageWorks completed on August 30th, and I'm pleased to say, it was a good one. Today's results and improved full year outlook speak first, to help Equity's continued leadership of the growing HSA market; second, to our fast start on integrating WageWorks; and third to the multiple opportunities we have for the growth of profits. I'll start with comments on key metrics and performance in the market; Ted will update on WageWorks integration; and then Darcy will offer thoughts on the financial results and revised guidance as well as our path to profitability; and Steve will join us for Q&A.

Here we go. Growth across key metrics were strong as one would expect post acquisition, during Q3, revenue and adjusted EBITDA grew 123% and 87% respectively, year-over-year. HSA members reached $5.0 million and HSA assets $10.5 billion will be at quarter's end, up 37% and 48% respectively year-over-year. Total accounts which include HSA accounts and consumer directed benefit were CDB accounts reached $12.5 million. Legacy HealthEquity and WageWorks both performed well. HealthEquity, again delivered strong year-over-year revenue and HSA member growth of 21% and 17% respectively and even stronger 24% year-over-year growth on both HSA assets and adjusted EBITDA. Legacy WageWorks performed in both September and October, as the $35 million [Phonetic] a month, top end of the revenue range we previously discussed and the team delivered early wins in both service improvement and efficiency.

The sales and relationship management teams, excluding acquisition impacts, added 141,000 new HSAs, that's 18% more than the tough comp from a year ago, and HSA members added $260 million in HSA assets, which is more than four times their year ago performance, that's pretty good. Invested assets and the number of HSA members investing grew 45% and 29% compared to last year, again excluding acquisition. The HSA market remains strong and so does our position in it. The types of family foundations, annual benefit survey released in September found that the percentage of workers enrolled in HSA qualified plans has now reached 23%, which is its highest level ever and half of large firms and acquire [Phonetic] small ones now offer HSA qualified plans. Devenir's mid-year market report project sustained growth in HSA assets and confirms HealthEquity's Number one market share by accounts. Another survey released this quarter by city shows the new HealthEquity to be a market leader not only in HSAs, but in every complementary CDB category surveyed and that includes FSAs, HRAs, COBRA and commuter benefits. So the team delivered strong and profitable operating and sales growth this quarter and we believe the market evidenced points to more opportunity ahead.

Ted is going to update on the WageWorks integration, which to us is about seizing that opportunity and building on the market leadership, the team has attained. Ted, take it away.

Ted Bloomberg -- Executive Vice President and Chief Operating Officer

Thank you, Jon. In a moment, I'll describe the state of our integration by referencing the goals we laid out in September. But before I do, I would like to thank all of our team members who are working so hard on this integration. The progress we have made to date and our confidence going forward are entirely due to their tremendous efforts. They have in short made an incredibly fast start on achieving our goals of timely and clear reporting, achieving synergies, bringing Purple to everything we do and ultimately growing the business for our end-to-end HSA centric solution.

First, timely and clear reporting. The team has subsumed WageWorks operations into HealthEquity's accounting policies. For example, money is held by WageWorks for payment of benefits under employer-sponsored CDBs, or what we call client-held funds have been separated from the company's assets and liabilities. A timely filed 10-Q will include all the data HealthEquity has traditionally provided, plus new operating metrics such as CDB participants, total accounts, a breakdown of HSA assets into those still held by legacy WageWorks partners and by HealthEquity and client held funds metrics.

Second, cost and revenue synergies. The team has achieved approximately $15 million of run rate synergies, net of dissynergies. Cost synergies to date have come from day one elimination of redundant executive roles, rationalizing and flattening the entire organization and the successful negotiation of certain service agreements. Efforts to realize promised revenue synergies are off to a strong start as well with the management team focused on the trend [Technical Issues] to HealthEquity's custodial platform [Technical Issues] and optimize operations.

Based on these steps already taken management now expects to meet its $50 million net synergy commitment on a run rate basis by the end of fiscal 2021, earlier than originally announced with additional efficiencies to follow as redundant operating platforms or sunset and revenue optimization is fully realized.

Third, investments for our customers, which start with bringing Purple service to everything we do. 90 days ago, the team began bringing offshored Legacy WageWorks service calls back home to the US, a process we expect to complete in the second quarter. WageWorks members and clients have begun to notice the change. Also immediately after closing the acquisition, HealthEquity service teams engaged with practice leaders of the national health benefit consulting firms, many of whom had expressed concern about their service experience with WageWorks.

Together we resolved over 20,000 then outstanding service cases for our shared employer clients and we are now running at 98% of case resolutions within agreed upon SLAs. We believe that the trust the team is building with employers and influential advisors will only strengthen as our platform investments come fully online. As you know, we have committed $80 million to $100 million in one-time expenses to enhance service, security, engagement and value and consolidate our platforms and achieve our synergy goals. Approximately $18 million of that spend occurred during this quarter.

Fourth, and most importantly is growing the business by taking to market and end-to-end HSA centric solution that our clients and partners demand. As we discussed in September, closing the acquisition earlier than expected created the opportunity to begin influencing sales results during the closing days of this sales season. The team is seizing on that opportunity. Our largest private sector employer-client relationship was successfully renewed in a competitive situation with a bundle of HSA and complementary CDB services. Also the team succeeded in adding [Technical Issues] provider list of one of the nation's largest benefits consult [Technical Issues] with the partner praising both our newfound breadth and our established service culture.

On the other end of the client spectrum, the team launched phone-based outreach to smaller HealthEquity clients in urban areas to promote WageWorks market leading commuter benefits. And the [Technical Issues] the results, several dozen new bundle clients already on boarded. [Technical Issues] Operator, I think we are losing, Ted. Do you still have him or not?

Operator

I'm showing his line is still connected.

Jon Kessler -- President and Chief Executive Officer

Why don't we do this. Since, we did lose Ted and Steve there, hopefully they're not in their bathing suits or whatnot. Let me just close out Ted's remarks and then throw to Darcy. Integration is about building our position of market leadership. And we're off to a really good start, is really the way to put what Ted said on the four points he made. For our shareholders, we've committed that the end result is going to be more opportunities deliver consistent profit growth of the kind that you kind of expect from us. And so that is really where Darcy is going to take from here.

So let me throw to you, Darcy.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Okay. Thanks, Jon. I will discuss HealthEquity's third quarter ended October 31st results on both the GAAP and a non-GAAP basis. A reconciliation of non-GAAP results and guidance that we discuss here to their nearest GAAP measurement is provided in the press release that was published earlier today. Our fiscal third quarter financial results include two months of operations subsequently closing the WageWorks acquisition on August 30th. The WageWorks acquisition diversifies our revenue growth opportunity reducing the overall impact of interest rate variability on total revenue.

In Q3, revenue grew overall and organically in each of our three categories. Service revenue grew to $87.6 million, rising from 30% of revenue in the second quarter to 56% in the third quarter. This is primarily attributable to the acquired 6.8 million CDBs and 757,000 [Phonetic] HSAs and 16% organic HSA growth. HealthEquity stand-alone service revenue per HSA decreased 9% in the quarter. We are suspending the guidance provided since our IPO of service revenue per HSA declining 5% to 10% per year. While we continue to focus incentives on clients and network partners that bring us more HSAs and HSA assets, we expect that service revenue growth will be tied more closely to total account growth going forward.

Custodial revenue of $47 million in the third quarter increased 49% year-over-year attributable to growth in HSA assets and the higher year-over-year annualized interest rate yield of 2.48% on HSA cash assets custodied by HealthEquity during the quarter. Custodial share of total revenue declined to 30% from 50% in Q2. Going forward we have multiple paths to earn additional custodial revenue continuing to grow balances, transitioning all accounts to HealthEquity custody, and earning more interest on client help funds. The HSA asset table of today's press release includes additional detail to help you access these opportunities.

Interchange revenue grew 62% in the third quarter to $22.5 million driven by the increase in average total accounts, including from WageWorks. Our large base of total accounts offers multiple opportunities to grow interchange revenue going forward.

Gross profit grew to $96 million, compared to $45.8 million in the prior year. Gross margin remained high at 61%, despite the change in revenue mix resulting from the WageWorks acquisition. Operating expenses were $86.1 million, or 55% of revenue. Resulting income from operations was $9.9 million, or 6% of revenue. Operating income excluding $17.7 million of integration expenses and $13 million in acquired intangibles, amortization was $40.6 million, or 26% of revenue.

We had a net loss in the third quarter of $21.3 million, or $0.30 per share on a GAAP basis, reflecting additional expenses in interest, acquisition costs, merger, integration expenses and amortization of acquired intangible assets. Our non-GAAP net income was $32.8 million, compared to $20 million in a 65% increase. Non-GAAP net income per share grew to $0.47, compared to $0.31 per share last year. Our adjusted EBITDA for the quarter increased 87% to $55.5 million and adjusted EBITDA margin was 35%.

We now have multiple avenues for margin expansion. Engaging our members to grow HSA assets will remain a powerful driver of margins. The more than four-fold increase in organic HSA asset growth over the year ago period Jon mentioned is encouraging. As Ted reported, cost efficiency efforts are ahead of schedule. Reducing platform redundancy over the next few years will also improve margins. These opportunities potentially reduce the impact of variability in custodial cash yield.

As a reminder, HealthEquity's federally insured cash placement program is structured to prioritize rate stability and the development of diverse mutually beneficial long-term depository partner relationships. We continue to expect a 2.5% interest rate yield on HealthEquity custodied HSA cash assets under the full year of fiscal 2020. However, recent feedback leaves us a bit more cautious with respect to new cash placements we will be making beginning around year-end, including HSA, cash growth, depository contract renewals and the transition of legacy WageWorks HSA assets to the HealthEquity platform.

National average jumbo CD rates across three-year to five-year durations have fallen by 25 basis points to 30 basis points over the past several months, according to FDIC data, under present conditions, we would expect yields on HealthEquity custodied cash overall to decline slightly as new cash placements occur.

Turning to the balance sheet. As of October 31, 2019, we had $174 million of cash and cash equivalents with $1.2 billion of Term A debt outstanding net of issuance costs and no outstanding amounts drawn on our credit line.

Turning to guidance for fiscal year 2020. Based on where we ended the first nine months of fiscal 2020, we are raising HealthEquity revenue guidance for fiscal 2020 to a range between $520 million and $526 million. We expect our non-GAAP net income to be between $101 million and $105 million, resulting in non-GAAP diluted net income per share between $1.46 and $1.52 per share.

We are raising guidance on HealthEquity's adjusted EBITDA to between $182 million and $186 million for fiscal 2020. Please see our reconciliation of our non-GAAP measures provided in the earnings release to note that guidance on our non-GAAP net income and per share calculations include interest expense and acquired intangible amortization associated with the acquisition without including the WageWorks business. These estimates include achieved run rate synergies discussed today. Our net non-GAAP diluted net income per share estimate is based on an estimated diluted weighted average shares outstanding of approximately 69 million shares for the year.

The outlook for fiscal 2020 assumes a projected statutory income tax rate of approximately 24%. As Ted mentioned, we are already working to trim costs and realize synergies from our combined operations. However, the fourth quarter of WageWorks business has a similar seasonality as HealthEquity. We usually see a ramp up of costs going into the fourth quarter and preparing for an on-boarding of new accounts. We are off to a good start to achieving the outline synergies that Ted discussed earlier. These synergies will be additive to both the top and bottom line for fiscal 2020 and beyond.

As we have done in recent reporting periods, our full year guidance includes a detailed reconciliation of GAAP and non-GAAP metrics. This includes management's estimates of depreciation and amortization of prior capital expenditures and anticipated stock compensation expense, but this does not include a forecast of stock option exercises for the remainder of the fiscal year.

With that, I'll turn the call back over to Jon for some closing remarks.

Jon Kessler -- President and Chief Executive Officer

Thanks, Darcy. And I did want to say a little bit of a thanks to Darcy and Tyson Murdock's finance team in Draper, in Tempe, in Dallas, in Santa and elsewhere. It's due to their hard work that we are able to deliver the first combined quarter to you in a clear and timely way. And it is a good quarter to be delivering. We are meeting our commitments. We delivered strong results. We are raising our outlook. We are delivering synergies faster. We've reported strong sales. And we are bringing a unique story to the market at a great time to do it. All headwinds don't blow ones, so interest rates come to mind as a challenge, but we have multiple paths to grow profits going forward. And we thank you for being part of that journey.

With that, I will close and ask the operator to take some questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Anne Samuel with JP Morgan. Your line is now open.

Jon Kessler -- President and Chief Executive Officer

Hi, Anne.

Anne E. Samuel -- JP Morgan -- Analyst

Hi, guys. Thanks for taking the question and congrats on the great quarter.

Jon Kessler -- President and Chief Executive Officer

Thank you.

Anne E. Samuel -- JP Morgan -- Analyst

My first question is really on the synergies. I was hoping maybe you could parse out what came on sooner than you expected now that you think you can achieve your target earlier than the expected 24 months to 36 months?

Jon Kessler -- President and Chief Executive Officer

Yeah. I'll comment generally and then ask either Darcy or Ted, if they'd like to add. In general, what we're seeing is, that on the cost side, we -- at least on the cost side. Cost side, we've been able to make more progress, I think sooner than we expected. And I think that just generally reflects a level of teamwork across Legacy HealthEquity, Legacy WageWorks and really an embracing a process and the fact that very generally that Ted and our integration team have managed it effectively. It also reflects level of diligence that was done in this regard. And so the cost side, I think is something that we feel real pleased about where we are and as Ted said, I think not only we will be able to get there, but once we get there, we can stop talking about synergies, but we'll still be talking about business efficiency and I think there'll be more to do.

On the revenue side, I think the biggest things that we've been able to do are: first, involves something that it sounds very technical, but it is really important, which is we've been able to separate out on the WageWorks side, the legacy what we refer to as client health funds in the CDB benefits from the company's operating cash and that's -- as Ted commented that's consistent with HealthEquity's accounting policies and approach. We think it's the right way to approach it. We think it gives our clients greater stability and certainly makes our financials much clearer. But it also has allowed us to focus immediately on optimizing those funds to generate some revenue and that's something that's really helped us out in the current quarter as well as some of our agreements with third parties.

I think looking forward, what we really look forward to is, first of all, beginning the process of migrating HSAs from the legacy custodial partners that WageWorks add to HealthEquity. And as Darcy mentioned, we've provided some information that helps in that regard. And then secondly, completing what have already been very fruitful discussions with different partners that help us really leverage our size and scale to increase for example, interchange revenue with our network partners. So we feel like folks are competing for our business and that's good and that will help us too. So that's where we are and that's where we're headed. And I think the net result of that is, as Ted said is, we're going to get to the point of achieving our $50 million target much sooner than we thought and of course, we will take a little time to realize that in full, but we'll get there.

Darcy, anything to add to that?

Darcy Mott -- Executive Vice President and Chief Financial Officer

No, I think, well, primarily the things that she asks what came a little bit faster. We talked about getting access to the client-held funds quickly and we've made that transition quickly. And then on the expense side, I think we went through a very concerted effort to try to get capture as many of those as we could as soon as possible.

Jon Kessler -- President and Chief Executive Officer

I don't -- given the interruption in the middle of the call, I don't know, if we have had Ted and Steve with us on the audio now, do we?

Ted Bloomberg -- Executive Vice President and Chief Operating Officer

Yes, Jon, we are here, but nothing to add to your answer. Thank you.

Jon Kessler -- President and Chief Executive Officer

Thank you, thank you. See, we told you that roller skating on Miami Beach was not going to be the way to do this, and we're teasing, guys. They're not rollerskating. They're on Miami Beach, they may be rollerskating. Okay. Thanks, Anne.

Anne E. Samuel -- JP Morgan -- Analyst

Thanks. That was very helpful.

Operator

Thank you. Our next question comes from Alex Paris with Barrington Research. Your line is now open.

Jon Kessler -- President and Chief Executive Officer

Hi, Alex.

Chris Howe -- Barrington Research -- Analyst

This is Chris Howe sitting in for Alex. Good afternoon, everyone.

Jon Kessler -- President and Chief Executive Officer

Hi.

Chris Howe -- Barrington Research -- Analyst

Hey, I'm actually rollerblading right now. So --

Jon Kessler -- President and Chief Executive Officer

You're a braver man than I.

Chris Howe -- Barrington Research -- Analyst

Following up on the previous question, just about the synergies, you're ahead of schedule toward the $50 million. I would assume there is a part of the synergistic opportunity that's not yet realized and not yet quantifiable. Can you comment on perhaps maybe some additional upside that we may see as you continue to effectively integrate WageWorks into the business?

Jon Kessler -- President and Chief Executive Officer

Yeah. I mean that the biggest component of that, thank you for the question is, really the whole point of this thing, which is to give us more and [Phonetic] that's on selling our service and to winning [Indecipherable]. And all of the synergies we talked about are in the nature of what I guess in the parlance people [Indecipherable] bankable synergies that is stuff that is somewhat within our control and that we can work on as quickly as possible. But the real goal of all of this is to advance the HSA market by getting us more at-bats and winning more of raising our batting average. And as Ted reported, I think some of that is already happening. Obviously, it is early days and so forth, but that's really where I think ultimately this transaction. And broadly speaking the strategy that predated it at the company are really going to shine. And that is in terms of our ability to continue to outpace the market, to continue to add on to both the top line and then of course opportunities to drive synergies as well as by the way -- benefits to our customers. Although, it's not directly related, when I look at the growth in the asset base this quarter, I mean, that's our members saving more money. And they're doing that by taking advantage of the things we have on our platform that really help them learn how to use an HCA the way should be used, get the most out of every dollar etc. And so that's where the thing really shines over the long-term. And of course those are not things we attempted to quantify, but rather the benefit that we hope to be not just the icing, but the cake for our shareholders as well as for our members of client.

Chris Howe -- Barrington Research -- Analyst

That's great. And then just one last question, as it relates to WageWorks, since we're on the topic of the cost side and how that's going ahead of expectations. How should we think of WageWork, margin potential expansion. I know, previously you had mentioned 20% historical margins. Do you think we get north of 20%, as we roll into calendar year '20 and in the fiscal year '21, or how should we think about the different opportunities that you see in that side of the business?

Jon Kessler -- President and Chief Executive Officer

Darcy?

Darcy Mott -- Executive Vice President and Chief Financial Officer

Yeah. We commented as you said last quarter that we've actually that we inherited kind of a 20% EBITDA margin business. Over time, we're not going to separate out reporting for wage, specifically and to be honest with you, the blending of the synergies that we achieve along with the wage business were kind of merged together along with HealthEquity performance. But overall long-term on margins, we expect that we will be able to get margin expansion, as we talked about. The timing of that will be dependent on how quickly we can make some of these changes, but also absorb them into the marketplace and to grow the business.

And so we do believe that long-term, that the acquisition is an opportunity for us to grow margins, albeit we recognize in the short term, that the combined margins are less than what HealthEquity was referring before. But we believe that together with wage and with the opportunities for synergies that we will get margin expansion.

Chris Howe -- Barrington Research -- Analyst

That's all, very helpful. And I appreciate the color and good quarter. And there is some oncoming traffic ahead and I'm roller-bleeding. So I'll have to jump back in the queue.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Thanks, Chris. Talk you later.

Chris Howe -- Barrington Research -- Analyst

All right, thank you.

Operator

Thank you. Our next question comes from Jamie Stockton with Wells Fargo. Your line is now open.

Jamie Stockton -- Wells Fargo -- Analyst

Thanks. Maybe just following up on the wage business and the profitability and I think maybe Darcy, you mentioned something in your remarks about this, but -- and if I do my math right, it had kind of mid '20s EBITDA margin, as far as the contribution during the quarter. Is that maybe high because it wasn't reflecting a lot of the work that happens during open enrollment and kind of your previous commentary implies a much lower profitability number in the fourth quarter.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Yes, you're correct, Jamie. And so, just as I also mentioned in my comments is that the same seasonality that we have always experienced at HealthEquity, and this was reflected in our guidance, is also true for wage. There's a lot of on-boarding costs that get expensed in the fourth quarter before the accounts actually arrive on scene. And so we would expect a similar performance with respect to margins in the fourth quarter on seasonality, as we have always experienced at HealthEquity. And so you're correct in that margins between third quarter and fourth quarter decreased, because of that factor primarily.

Jamie Stockton -- Wells Fargo -- Analyst

Okay and then my other question is just on the yield commentary. I guess, I'm curious how much of that as you kind of look forward to next year is related to your kind of legacy cash and what you would be putting to work and what's happening with the yield environment versus the notion that you are going to have more cash on the wage side, some of which you are going to be able to get control of and put to work, maybe at a shorter duration, some of which you don't have control? And if you could just give us some color on how much the wage cash is impacting your commentary that would be great.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Yeah, most of our commentary was surrounding our Legacy HealthEquity cash business and we're trying to give you a flavor. I think when we talked in our -- well, both the third quarter and today, we've guided that for FY '20. We expect our Legacy yields to be in the 2.50% range. And as you know, those have come down slightly from the second to third to fourth quarter in that guidance, but very slightly. With respect to the future rates, as you know, we ladder things out. We've said that there has been since we talked several months ago about a 25 bps to 30 bps decrease in these kind of three to five year rates because we ladder, we don't get the full impact of that, but we will get some portion of that impact. So we're really talking about on the HealthEquity interest rate environment of -- from what we said in September. We thought that it would be flat to slightly up. Now we're saying, it's going to be slightly down because of this impact.

With respect to the custodialization or the revenue derived from the Wage HSA assets, it's really dependent on the timing of when we were able to move those assets on to our depository network and the interest rates that will be prevalent at that point in time. And so we haven't built any preconceived idea into that with respect to future rates, it's really reliant almost on the timing of when we actually get those assets on board.

Jamie Stockton -- Wells Fargo -- Analyst

Okay, thank you.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Thanks, Jamie.

Operator

Thank you. Our next question comes from Greg Peters with Raymond James. Your line is now open.

Marcos Holanda -- Raymond James -- Analyst

Hi, good afternoon. Thanks for taking my question. This is Marcos in for Greg.

Jon Kessler -- President and Chief Executive Officer

See, Marcos, he knows about rollerblading and all that kind of stuff. He's -- I'm guessing Marcos has worn a unitard. Go ahead Marcos, good to talk to you.

Marcos Holanda -- Raymond James -- Analyst

You know it, Jon. I was hoping we could talk about the base business first. And if my math is right, I think you guys got it an excess of 100 basis points of adjusted EBITDA margin improvement in the quarter. So I was hoping you guys could maybe comment on what's driving the leverage there on the Legacy HealthEquity side.

Darcy Mott -- Executive Vice President and Chief Financial Officer

It's -- over time, it's getting more and more difficult and we will get more difficult to separate out at the EBITDA level, the HealthEquity versus the Wage versus the synergy business. So it kind of all gets blended together as we're managing the business as one company and not as separate, distinct entities. And so, whatever calculations, we do on an individual basis can be skewed by that.

But that being said, we believe that we have a profitable growth engine to generate EBITDA. And I know there's been some concern that, hey we had higher margins than what Wage did, but we think that collectively together, over the long-term time that we will grow those EBITDA margins even further. Now there will be some hiccups along the way as you're trying to transition through that integration when you blend [Technical Issues] things. But we are optimistic and we feel that the base business has always been a driver of profitability because ultimately, as our members save more dollars, then that generates additional revenue and additional profitability as we scale to deliver that service.

I mean one factor that's just worth noting is that there was very strong growth in both total and average assets, over the course of the quarter. And as you know, ultimately our model is about -- we believe every family should have an HSA, and the more families that have them and the more families that know how to integrate them into their overall financial planning to have a more secure future when it comes to healthcare, as well as a more secure present. A lot of the benefit of that kind of drops to us, shows up as revenue and then it drops straight to bottom line. So relatively modest improvements in growth in assets, we have a very, very significant impact ultimately on bottom line. And you saw some of that in the Legacy HealthEquity business this quarter. And certainly it's the point of everything we do is moving toward that direction. So hopefully, we'll see more.

Marcos Holanda -- Raymond James -- Analyst

Great. And then on the wage side, the revenue, it seems like it's running better than the annualized $420 million you guys mentioned previously. I guess, can you give us some comments on the revenue there, and an update on the ADP side of the business?

Jon Kessler -- President and Chief Executive Officer

Yeah, I'll just comment more generally and then ask Ted to comment on ADP, and more generally, it's the topic of that kind of activity. So if you kind of break it out and ignore synergies and the like -- we're running right at the -- as Darcy said, I think, right at the top end of where we expect it to be. I think it was Darcy -- it was Ted who said it, right at the top end of where we expect it to be -- so I wouldn't say we're running above our expectations, but I think we're in a good place. And with -- look it's two months in. But I think, that the lesson probably to be gained from that is and this gets into the question about enrollment and so forth is that though, we've never been through an annual enrollment with Wage.

Well, actually I have, but that's another story. But nonetheless, as a Company we haven't and so we're going to be conservative in our guidance, so forth that we have seen a level of stability in the book of business that certainly pleases us. Ted, do you want to comment on that a little more detail on anything with regard to the legacy ADP books?

Ted Bloomberg -- Executive Vice President and Chief Operating Officer

Sure, thanks. So this is a huge area of focus for us and it's a really important place for us to kind of deploy our Purple service culture. We've thrown a lot of resources of wrapping our arms around the legacy ADP clients and we're seeing what we hope to see which is some stabilization in the book. As Jon alluded to -- and so we're, it is a lot of effort to kind of service remediate, we're bringing some calls on-shore more quickly then we have for the rest of the book simply to kind of address some service challenges and we were being rewarded there by some happy client. So I would say that we're getting our arms around the business and we've stabilized it and now we have to kind of complete the integration of the book of business, which had never been done previously.

So that's where we are now feeling probably better about it than we did 60 days ago, but a lot more work to do.

Marcos Holanda -- Raymond James -- Analyst

Great, thank you and Jon, just one last comment for you. I just want to -- you know that I'm really counting on you to perhaps persuade Greg to let me release you off of my duties to go to Carnival next year. So --.

Jon Kessler -- President and Chief Executive Officer

Good luck with that Marcos, It's a [Indecipherable], roadshow, perhaps.

Marcos Holanda -- Raymond James -- Analyst

Thanks, guys. Congrats.

Operator

Thank you. Our next question comes from Sandy Draper with SunTrust. Your line is now open.

Sandy Draper -- SunTrust -- Analyst

Thanks very much. Question probably for Jon or Steve, more around the market. I know you referenced, Jon a couple of surveys. The one thing I did notice in the Kaiser survey, was it more employers for the first time, we're reintroducing PPOs. Just curious in the conversations you've had in sales season. Have you noticed that and is it just an offering or employers promoting PPOs again? Thanks.

Jon Kessler -- President and Chief Executive Officer

I think the short -- I mean, two thoughts. One is, as with all of these surveys, it's very, sometimes we're all dancing on the head of a pin a little bit. But I think with that -- what that finding is consistent with is the idea that employers want to offer options. And whether it's an option to an HMO or an option to an HSA style plan, from our perspective that's a good thing, particularly I think about it post-WageWorks, we now have a great product for people who are not yet ready to be in an HSA plan but want to spend their healthcare dollar pre-tax, and that's a spending account product. And we're -- by the measures of the study that I cited, and I think by others, we are either the largest or damn close to it, player in that business and we intend to use that scale to make that a really great product.

So, I think that the main takeaway and consistent with other research out there is that employers, do want to give people options recognizing that people have different levels of comfort with, in particular with the sort of co-pay versus out-of-pockets. Now, that having been said, what's interesting, if you look at the data one step further, is that with greater clarity with regard to pricing, as we kind of get into this over the course of years, what you see with a lot of these plans is the co-pay and the out-of-pocket cost for a drug, they are not very different. In many cases the co-pay is higher, that's part of the plan, that's part of the way the plan works. And so I suspect over time the distinction between that plus the inclusion of more preventive items in the HSA plans, we will really blur the distinction between a PPO and an HSA plan, a traditional HSA plan over time and ultimately that's good too, because it gives more people the opportunity to save. So I think that's how I would explain the result you described. Steve anything to add to that?

Stephen D. Neeleman -- Founder and Vice Chairman

No, I think you're right, I think that employers like to give choice. But the nice thing is, is that when the choice is balanced, more employees take the HSA which has been our experience and that works well for us.

Sandy Draper -- SunTrust -- Analyst

Great, thanks. I'll stick to one question.

Stephen D. Neeleman -- Founder and Vice Chairman

Thank you.

Jon Kessler -- President and Chief Executive Officer

Thank you, Sandy.

Operator

Thank you. Our next question comes from Donald Hooker with KeyBanc. Your line is now open.

Donald Hooker -- KeyBanc -- Analyst

Great, thank you for -- thank you and good afternoon. Wanted to hear, maybe a little bit more on those retirement planning relationships in the past couple of quarters, you all seem very optimistic there. Are there any numbers you can share with us in terms of traction there or is that more -- still more maybe more of a next year phenomenon?

Jon Kessler -- President and Chief Executive Officer

Well, I think we'll probably have a little more to say when we're done with the sales cycle, Don, I mean, one thing I would say, as we said in September or perhaps when we announced the agreement to acquire a WageWorks stack, and we pointed out our place in the retirement channel. And we express the objective of getting roughly doubling, expressed in terms of their members. The coverage of our retirement plan relationships and while we don't make a habit of announcing relationships one after the other. We've done that in some cases for various reasons, whether those are health plan or retirement or -- for that matter employer relationships.

I can tell you, that plan is well under way. We've, -- we've won some new relationships and then with regard to the existing relationships, it's early days, of course, but we're learning a lot in the current sales season and obviously have made some sales. You see that the numbers to date and we expect that to continue. I suspect we'll have a little more to say about this once the -- that we're talking about the end of the current sales season.

But it's something that we think just makes a ton of sense. It's not the only way to look at an HSA, but it's a way to look at it. And I think particularly what's good about it is you're not really trading off, it's not just, it's not just helping the 3% or 4% who like really get this intuitively and we aggregate some funds and da da da, and we're able to help everybody, meet everybody where they are. And that's really been the selling point with our partners to date has been, it's instead of a solution that really kind of just ends up focusing on a small group of people because the 401(k) are linked, now we can really introduce everyone to getting benefits, no matter where they kind of stand on that health savings journey.

Donald Hooker -- KeyBanc -- Analyst

Okay. And maybe one follow-up on the WageWorks side of the business, you had communicated and mentioned on this call as well, the sort of attrition from the ADP, the acquired ADP, I think the COBRA FSA businesses that were acquired a few years ago and where are you now, how much more do you sort of see that sort of churning, looking at a couple of quarters and when can sort of WageWorks do you think, realistically stabilize and return to a revenue growth profile?

Jon Kessler -- President and Chief Executive Officer

Well, we said last quarter that the rough baseline that we provided was sort of the baseline where we thought the business was. We did say we thought at the time that there was some risk that we would see incremental attrition on a net basis going into next year. And frankly, while we feel more confident about that at the moment as Ted suggested and I suggested. I guess, Darcy even suggested, even Darcy. We've never been through this cycle. And so we're going to remain cautious about it in our Q4 guidance to some extent. Our implicit Q4 guidance, certainly reflects that level of caution, but look if the question would be, where do -- is that date sooner in my mind today than it was 60 days ago, when we, I guess, now 90 days ago, when we closed the transaction. The answer is absolutely and that reflects as Ted said, the work of the teams to really hop on this and take advantage of everything that we had learned during diligence and then stuff we didn't know and just get to work.

When clients see moving forward, they tend to want to stick with you. When they see you doing nothing, they don't. And I think it's fair to say that the team on both the relationship side and the service side, is moving forward. Something that may have gotten lost in the difficulties that Ted was having on the phone, but maybe it's worth mentioning here is, I mean, I'm violating my rule about droning on in the answers, but only because we had a little phone difficulty, is we had at the beginning of September within the legacy book of business, we had 20,000 outstanding cases, service escalations from employers that the team as a whole, both Legacy HealthEquity, Legacy WageWorks hopped on, got cleaned up and now is operating at where they should be which is at 98% service level on the timeliness of resolving every employer question.

And that's a pretty good thing to have accomplished in a month or two, but I think more importantly, to your question, it signals to the clients and their advisors that things are going to be different and they're going to be better, and that in fact what you're going to get out of all of this is a darker shade of purple and that's a good thing.

Donald Hooker -- KeyBanc -- Analyst

Thank you very much.

Jon Kessler -- President and Chief Executive Officer

Thanks, Don.

Operator

Thank you. Our next question comes from George Hill with Deutsche Bank. Your line is now open.

George Hill -- Deutsche Bank -- Analyst

Hey. Good afternoon, guys and thanks for taking the question. How are you guys?

Jon Kessler -- President and Chief Executive Officer

Hi, George. Welcome.

George Hill -- Deutsche Bank -- Analyst

Thank you. I guess, Jon and Darcy, another follow-up question on rates. You guys have done a good job I guess, mitigating the downward pressure on results as rates have declined, I guess can you provide any commentary on what you're rate visibility looks like. So if we were to continue to see modest declines, how long could you guys hold the current rate of return. And then should got help us all we get into an environment where rates begin to increase, would you guys have a faster potential to kind of inflect to the upside or kind of reinvest our balances, sort of kind of maximize a positive change in rates?

Jon Kessler -- President and Chief Executive Officer

Darcy?

Darcy Mott -- Executive Vice President and Chief Financial Officer

Yes, thanks for your question, George. We have kind of had a custodial cash management policy in place for going back to pre-IPO days. And as you know, we ladder it out. We don't try to chase a current rate environment to get every squeeze -- every ounce of interest that we can out of it. What we're trying to do is provide as much stability and visibility into the rate environment that we can and that policy has worked very well for us and we will continue with that policy.

So what that produces is, as we saw -- we've seen both rising and decreasing rate environments, and in both of those, what it does is provides us the ability to expand our depository relationships to fairly significant. We have, you know, as you know in double digits of depository relationships. And it provides us the flexibility on, when it comes time to place funds, is to be as flexible as possible. So we will just continue that same path. But we're not saying that yields won't decrease as rates -- if rates go down. And we will get that over our duration period. And the same will happen if rates go up, we get those benefits over our duration period. So that's -- we will continue to manage that just as we have in the past.

George Hill -- Deutsche Bank -- Analyst

Okay. And maybe if I can have a quick follow-up. Jon, you guys had the chance to close wage before what I would call definitely before open enrollment season but probably during the peak of kind of selling season into the employer-sponsor space. Kind of just feedback that you guys and your sales teams, we're hearing from plan sponsors around the acquisition and the integration kind of what they were looking for out of the combined organization would be interesting color.

Jon Kessler -- President and Chief Executive Officer

I'm going to throw that one to Steve.

Stephen D. Neeleman -- Founder and Vice Chairman

Hey George, it's good to hear your voice. No, I think that as we've talked to people really what they're seeking is just the full bundle, they want the full solution. And it's pretty remarkable that if you look at the two books of business it kind of 90% of our business prior to acquisition on the Legacy HealthEquity side was HSA, and 90% of the Wage business prior to acquisition was what we would call CDB, non-HSA consumer record benefits.

And so as we've gone out to the market not only talk to the employers themselves but our health plan partners and also just the whole myriad of benefit consultants and brokers. I think the key thing they want is simplicity and they want one partner. And so for us to build off with a full bundle independent of what they want. Is the most exciting thing for them. And then obviously, when we can, -- when we can start to add additional products into our stack, with there's benefits to pricing and scale and service and just a bunch of other stuff. So I think that's the thing that's resonated the most is -- can you do more for us. And I'll remind since we've been at this for a while, I'll remind the Group on the phone that I think of 12 years ago, shortly before Jon joined us, we started getting that request. I mean, we had RFPs from employers and health plans, and can you do more than just HSAs. And we started dabbling with it and felt like we needed to say yes to things like Flexible Spending Accounts and HRAs. But it's pretty neat to be with our new Wage, Legacy Wage, sisters and brothers and having them teach us about all these new accounts that they're doing and have done and just being able to say yes, a lot more often I think is a tremendous solution for not only our sales people, but our account executives who are managing our legacy 45,000 employees on the HealthEquity side. Does that answer your question, George?

George Hill -- Deutsche Bank -- Analyst

Nope, it does. And I'll cap myself at two for now. And hop back in the queue. Thanks.

Jon Kessler -- President and Chief Executive Officer

Thank you, George.

Operator

Thank you. Our next question comes from Allen Lutz with Bank of America. Your line is now open.

Allen Lutz -- Bank of America -- Analyst

Everyone and thank you for the questions. For core HealthEquity, how would you compare the selling season versus where you were this time last year.

Jon Kessler -- President and Chief Executive Officer

That is a great question, Allen, and thank you for asking it. Genuinely, because we were reminiscing a little bit in the minutes before the call about this topic. We do, this December call, typically from a room here in New York that one of our long time Board members, although he is no longer on the Board, generously had refused, and we were in the same room a year ago. And a year ago at this point, as you will recall, and certainly others may, we were somewhat concerned about where the sales process was, and we telegraphed that.

And we -- the basis for our concern at the time, really was about the feedback from employers that was, hi, the economy is pretty good, really good. And we all got a tax cuts and everyone knows it. So we don't want to rock the boat in any way, shape or form. And so we're just going to like leave benefits alone and we got a lot of that kind of discussion.

Now in the end, we did a little better than we thought and the consumer absolutely came through in terms of cash coming into the accounts, but we had those real concerns. And you heard those reflected at the same time Allen in our competitors. I mean, as I recall, there was a little joke on this call a year ago, where the folks over at Health Group had expressed the view that the future was going to be something else. And we said, well, if they want to sell their business, we got a place to call. I got my number right here. By the way, that number's still available. But someone commented -- one of your brethren on this call, commented to me earlier in the day that whether I don't know, Investor Day or recent call that United didn't the last couple of days. Now they're back to featuring OptumHealth brand. And I think that is -- those are -- so there was some -- year ago there was some of that, not pessimism, certainly some concern about the pace of growth.

And obviously, we've had a strong first three quarters, in terms of the actual reported both results and account adds and asset adds, and we are going to try and continue that momentum into the fourth, along with having a truly unique story, as Steve just discussed. And so I guess the short version is that we've had a good year so far. We do not take it for granted, but we're going to try and finish strong as well.

Allen Lutz -- Bank of America -- Analyst

That's helpful. I guess following directly up on that, what do you think is caused the change in sort of posturing or thoughts by the industry, by employers on HSA. I mean, you look at your growth in the quarter 18% year-over-year, which is really strong. The sequential growth was really strong. Is it new employers coming sort of outside of the normal selling season. Is it increase in compliance for employers you currently have? Where are you seeing this strength coming from and then can we expect to see that continue into fiscal '21? Thanks.

Jon Kessler -- President and Chief Executive Officer

Well, obviously first of all, I'm not sure there has been much change, except in one area, which is, -- which is that last year in particular. As I said a moment ago that the economy was just going crazy. And we also were on the heels of a large corporate tax cut, and I think there was a real reticence on the part of employers to do anything other than just say, benefit is only going up a few percent next year, turn the page. And sometimes that can sound good, but unfortunately it also defers changes that ultimately have real value to consumers.

But it's what happens sometimes. So, I think that's probably the biggest change. I'm not -- as we said last year, we didn't agree with the sentiment that there was some fundamental slowdown in the market in terms of employers offering. And in fact then, when Kaiser came out with their information, it turned out we were right about that. That is to say to that offer rates continue to grow, steadily year-after-year. We still like to see more of the small group market follow the large group because in small group world, there is a little bit of -- always a little bit of a tendency to lag in part because of the way small group insurance is priced. But I think that's the only real change in the real world.

I do think in sort of the industry chatter, however, I think that a couple of things have occurred. One is -- very candidly is the WageWorks acquisition. I think, shine some additional light on this industry and it showed us -- we have a lot of choices about what we can do. And what we chose to do, executing on the strategy we've been working on for a couple of years before then, was do something that would give us more add-backs in the market we're in. It was a vote on our part, with your dollars, that is our shareholders' dollars and with our fee, that was this market is going to continue to grow for a long time, and we're going to be here.

And so let's do think strengthen that versus say, OK, what's the next thing, if that makes any sense. And I suspect that has had some impact, particularly over the last few months on the chatter within the broker community and so forth about -- I don't want to say the world revolves around us, but I -- but certainly we've heard a lot about it in that regard.

Allen Lutz -- Bank of America -- Analyst

Thanks, Jon.

Jon Kessler -- President and Chief Executive Officer

Thank you, Allen.

Operator

Thank you. Our next question comes from Robert Jones of Goldman Sachs. Your line is now open.

Jon Kessler -- President and Chief Executive Officer

Hi, Robert, welcome.

Robert Jones -- Goldman Sachs -- Analyst

Great, thanks for taking my questions. Appreciate it. I guess just to go back and following up on actually that previous question, around the guidance. Clearly strong progress in the quarter and throughout the year from the kind of legacy business excluding Wage. And clearly, the new guidance tonight incorporates everything. I'm just curious if you could parse out at all -- was there any upside as you thought about the full year coming from the legacy business as opposed to just incorporating Wage and then the synergy portfolio that you guys discussed?

Darcy Mott -- Executive Vice President and Chief Financial Officer

Well, this is Darcy. I'll start and then, Jon can fill in the pieces. I know you're relatively new to this, but I'm sure you know that we, first of all, take a very conservative approach to guidance. And historically for the legacy HealthEquity business, there are really three drivers, particularly going into the end of the year that really will drive results. One of them is the interest rate environment which we've talked about.

Secondly, is the growth in cash assets particularly; and the investments also grow rapidly, they don't have as much revenue impact as the cash assets do. And then thirdly, account. And Jon just kind of talked about what's happening in the account environment, vis-a-vis comparison to last year. We are typically conservative on the forecasting of cash growth, and that is reflected in our guidance. Additionally, in this year because of the acquisition, the Wage account growth factor plays into that. And as Jon said, because this is new for us, we've been reasonably cautious about what that account growth will be from January and while we're working to make that as robust as possible, we are reasonably cautious about what that is for this fiscal year. When we report our fourth quarter results, we'll tell everybody exactly how that went.

And so we're cautious in that regard. And then the fifth factor that is factoring in here is the synergy issue, both on a revenue and on an EBITDA basis, and we've talked a lot about the synergies. We're -- as we've said, we're very confident in achieving our synergy targets and having achieved those by taking actions,

but the realization of those obviously takes time. And so to actually reflect the synergy results into a particular quarter, requires real work in order to that. So, once again, we're conservative in that regard about the realization of those that we get in a particular number.

Jon Kessler -- President and Chief Executive Officer

I would say -- I'm not sure there is really much to add to that as frequently answered. I think your question specifically related to the core business, it starts -- it's particularly, when you think forward, it gets very difficult to segregate. And frankly, we don't want to be segregating the two. But a couple of areas that I think are worth highlighting that maybe -- certainly are reflected in our guidance, but that maybe aren't -- they'll just stick-off the page. When -- as you know, when you do a transaction like this, you have hopes about areas where you're going to be able to do the same job for a larger book of business, with more or less the same level of resource, and therefore generate effectively margin expansion cost earnings.

I feel, we -- I feel really good about what I'm seeing from the team in terms of our ability to do that. And ultimately, by the way, I think it's a tremendous benefit for everyone involved. Everyone ends up with a better job, everyone ends up with a better outcome all-in-all when you can operate more efficiently, whether it's ultimately, they're on our team or elsewhere. But I think, you see it -- and by the way, this is before we really get into the business of actually closing down some of the legacy duplicative operating platforms that exist, that will take some time as we've always said. But that too will be better for everyone in terms of the service we're able to deliver, the costs; and then, obviously, ultimately people's career advancement. So -- one area that really does stick out whether it's the core business or the wage business, it's a little bit hard for me to tell. But it is that the component of this that is -- we are going to able to operate and see real benefits overtime in terms of operating cost leverage as well as gross margin.

We've got a little work to do for you at the baseline. We only had two quarter, two months, not three that I think. But it's very clear to me that those things are going to happen. And then the second point is; I'd say another thing that you sort of hope will occur, and then you have to sort of see if it does is -- you have partners that you work with, and you're able to bring in more volume, and you need to see how they respond to that. And I've been really pleased thus far with the vigor with which our partners of all kinds have responded to the way that Ted and our team, as well as our vendor management team has approached in each of our different partners, both existing and would be new.

I think, if I look at it, whether we're talking about card networks or our card issuing partner or the banks on the depository side or folks who do processing for it; people recognize that this is going to be a market-leading story and they want to be a part of it. And particularly, those who have experience working with us in one way or the other that know how we operate are willing to sacrifice some amount of margin for the fact that we consistently try to over-deliver and rather than overpromise in a process where we're trying to attract their business or what have you.

And so those are two things that -- maybe don't shoot off the page per say, but where they really do show up is in the overachievement on EBITDA and then the dramatic improvement in our EBITDA guidance that is there for this year. Now, rates are a headwind in the other direction that balance that out. But there are going to be times in our business when rates are a tailwind and a headwind. As I said earlier, everything is not going to blow in the same direction at once and that's -- probably that level of diversity is a good thing, but those are the things that really should go, to me.

Robert Jones -- Goldman Sachs -- Analyst

Those are really helpful perspective. I really appreciate it.

Jon Kessler -- President and Chief Executive Officer

Thank you.

Darcy Mott -- Executive Vice President and Chief Financial Officer

Thanks, Bob.

Operator

Thank you. Our next question comes from Mark Marcon with Baird. Your line is now open.

Mark Marcon -- Baird -- Analyst

Hey, good afternoon everybody.

Jon Kessler -- President and Chief Executive Officer

Hi, Mark.

Mark Marcon -- Baird -- Analyst

Hey, two questions if I may. One is a fairly short one; which is just -- which of the consumer-directed benefits within the Wage portfolio are you the most excited about that you're hearing the most about in terms of joint selling both for this year and then going into next year? And then the second question, would this basically be the fund placement -- the asset transfer within Wage under your portfolio, where you can get your effective yield as opposed to what they've been doing with BMY?

Jon Kessler -- President and Chief Executive Officer

You want to try that second question first Darcy?

Darcy Mott -- Executive Vice President and Chief Financial Officer

Sure. There is two components of fund placement as you said, Mark there. We now call client health funds, which used to be on the Wage balance sheet which has been removed from our balance sheet. And those we are in the process of monetizing those already. We think that we've had a little bit of yield expansion there. But we have a process already in place in the first 90 days that we've been together to make that happen.

With respect to the HSA assets, as we've talked, we're all about getting those transferred and those are in different depositories today. And as we've said before, we have contact with each of them and we're working through that process. And we want to get that done as quickly as we can but that's a little bit more challenging because it's very complicated to just move an HSA off of a platform and to -- you have employer relationships, you have individual relationships, etcetera, etcetera. And so as we do that, then we will go through our normal process of replacing those cash deposits into our depository network.

Jon Kessler -- President and Chief Executive Officer

Yes. With regard to the first question, you know, you'll see where I'm going with this in a second, there are people on this call who will have literally been missionaries, that would not be me. But when it comes to helping American families kind of make ends meet. I think it's fair to say that we have a team of almost 3,000 missionaries. And what really, ultimately, it gets -- I think me and I believe our team, really juiced is that we now have so many more tools to help people do that.

And so, if I go through the CDBs, the commuter product that we have, as an example, it is -- there is nothing else like it, there is nothing else close to it. And I can't tell you how many -- -- I was at a very fancy event with all kind of CEOs and whatnot last week, and like there is always like fancy-pants CEOs, and they are like -- and that was a product where like, half of them used it and they're like -- oh yes, this is incredibly convenient, and I saved like $60. The great part is, service their assistant, and service the bank teller, right. And it make -- the $60 may not mean as much to them, but it means a hell of a lot on a monthly basis to a lot of other people; and taking that money and making that part of long-term savings is a big deal.

And look at COBRA. And today -- and this isn't going to happen immediately, Mark, OK. But we now play a significant role in the way that Americans transition jobs. And we can make that a better process, right. Health care should not be the source of friction as someone suggested earlier in the week on the campaign trail, right, in changing jobs. It doesn't need to be, people are scared for reasons they don't need to be, this can be done right, and we can help people do it right. And that's a different thing from just we send them the forms and those that check-the-box, we collect their dollars and we make money on COBRA, right. There is more to it than that and that comes not only at no cost to our clients, it makes things better for our clients, and so we're excited about that.

And then, as I said earlier, the Flexible Spending Accounts in the HRAs, they are kind of -- as Steve might say, being a doctor though, I'm not sure doctors are supposed to put it this way. They are kind of a gateway drug to the HSA. And that's the way we think they can be used and so we're -- and we're particularly excited about there is given our scale, the things that people don't like about those products is they can be a pain in the butt to run. And given our scale, one of the things we're asking for from our business partners is, if you want to work with us going forward, we need your commitment to innovation, we need you to help us make this easier in ways that we cannot do ourselves.

So, I guess, that's a kind of a long answer. But it's a way to say that ultimately what's exciting to us beyond the ability to offer simplicity to our clients and to their advisors and brokers and the like is the ability to do what really motivates our people, which is to deliver excellent service while helping families connect health and wealth and make ends meet, that's the stuff we really like to do. And so that's why we felt this was a good fit in the first place, and why it has proven to be so forth.

Mark Marcon -- Baird -- Analyst

Excellent. Thank you.

Jon Kessler -- President and Chief Executive Officer

Thanks, Mark.

Operator

Thank you. I'm not showing any further questions at this time, I would now like to turn the call back over to Jon Kessler for closing remarks.

Jon Kessler -- President and Chief Executive Officer

Well, thanks everyone for joining us a half hour earlier than usual. That seems to have worked well. Thanks, Ted and Steve for joining us from an undisclosed location on roller skates or something like that. And we'll look forward to our usual schedule of providing some updates on sales activity after the New Year. And then providing our fourth quarter results in March. So, thanks everybody. Bye.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Richard Putnam -- Director of Investor Relations

Jon Kessler -- President and Chief Executive Officer

Ted Bloomberg -- Executive Vice President and Chief Operating Officer

Darcy Mott -- Executive Vice President and Chief Financial Officer

Stephen D. Neeleman -- Founder and Vice Chairman

Anne E. Samuel -- JP Morgan -- Analyst

Chris Howe -- Barrington Research -- Analyst

Jamie Stockton -- Wells Fargo -- Analyst

Marcos Holanda -- Raymond James -- Analyst

Sandy Draper -- SunTrust -- Analyst

Donald Hooker -- KeyBanc -- Analyst

George Hill -- Deutsche Bank -- Analyst

Allen Lutz -- Bank of America -- Analyst

Robert Jones -- Goldman Sachs -- Analyst

Mark Marcon -- Baird -- Analyst

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