Core Insights - HealthEquity reported revenue of $322.16 million for the quarter ended October 2025, reflecting a year-over-year increase of 7.2% and exceeding the Zacks Consensus Estimate of $319.96 million by 0.69% [1] - The company's EPS for the quarter was $1.01, up from $0.78 in the same quarter last year, resulting in an EPS surprise of 12.22% compared to the consensus estimate of $0.90 [1] Financial Performance Metrics - Total HSA Assets reached $34.45 billion, surpassing the average estimate of $33.68 billion [4] - HSA investments amounted to $17.54 billion, exceeding the estimated $16.22 billion [4] - Total Accounts - CDBs were reported at 7.17 million, above the estimate of 7.05 million [4] - Total Accounts stood at 17.28 million, slightly above the average estimate of 17.26 million [4] - HSA cash assets were $16.91 billion, below the estimated $17.43 billion [4] - Total Accounts - HSAs reached 10.11 million, slightly below the estimate of 10.21 million [4] - Revenue from Services was $120.29 million, slightly above the estimate of $119.5 million, marking a year-over-year increase of 0.9% [4] - Custodial Revenue was reported at $159.07 million, exceeding the estimate of $156.61 million, with a year-over-year change of 12.9% [4] - Interchange Revenue was $42.81 million, slightly below the estimate of $42.88 million, reflecting a year-over-year increase of 6.2% [4] Stock Performance - HealthEquity's shares have returned 4.1% over the past month, contrasting with a -0.1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - HealthEquity (HQY) reported quarterly earnings of $1.01 per share, exceeding the Zacks Consensus Estimate of $0.90 per share, and up from $0.78 per share a year ago [1] - The earnings surprise for this quarter was +12.22%, following a previous surprise of +17.39% when earnings were $1.08 per share against an expectation of $0.92 per share [2] - The company achieved revenues of $322.16 million for the quarter ended October 2025, surpassing the Zacks Consensus Estimate by 0.69% and increasing from $300.43 million year-over-year [3] Financial Performance - HealthEquity has surpassed consensus EPS estimates three times over the last four quarters [2] - The company has also topped consensus revenue estimates four times in the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is $0.91, with expected revenues of $331.33 million, and for the current fiscal year, the estimate is $3.86 on $1.31 billion in revenues [8] Market Position - HealthEquity shares have increased by approximately 3.1% since the beginning of the year, while the S&P 500 has gained 16.1% [4] - The Zacks Rank for HealthEquity is currently 3 (Hold), indicating expected performance in line with the market in the near future [7] - The Medical Services industry, to which HealthEquity belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, suggesting potential challenges ahead [9]

Financial Data and Key Metrics Changes - Revenue increased by 7% year-over-year, with service revenue up 1% to $120.3 million and custodial revenue growing 13% to $159.1 million [19] - Net income surged by 806% year-over-year to $51.7 million, or $0.59 per share, while non-GAAP net income increased by 26% to $87.7 million [21] - Adjusted EBITDA rose by 20% to $141.8 million, with an adjusted EBITDA margin of 44%, up 460 basis points from the previous year [21][23] Business Line Data and Key Metrics Changes - Health Savings Accounts (HSAs) grew by 6%, with total accounts increasing by 5% and HSA assets up 15% to over $34 billion [5][10] - The number of HSA members who invest grew by 12%, and HSA invested assets increased by 29% to $17.5 billion [10] - The average HSA balance grew by 8% year-over-year, contributing to the 15% increase in HSA assets [8] Market Data and Key Metrics Changes - The annualized yield on HSA cash was 3.53% for the quarter, reflecting higher placement rates and increased balances [19] - Interchange revenue grew by 6% to $42.8 million, outpacing total account growth of 5% [19] Company Strategy and Development Direction - The company aims to help members save, spend, and invest for health, addressing the affordability challenge faced by American families and employers [6] - A new direct HSA enrollment platform was launched to facilitate HSA adoption, particularly for those choosing bronze plans on the ACA exchanges [8] - The company is focused on expanding the use of HSAs and enhancing consumer control, with ongoing efforts to educate policymakers about the benefits of HSAs [12][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about new account growth in Q4, driven by partnerships with employers and plan design [8] - The company is well-prepared for the busy season with enhanced security features and a member-first mobile experience [10] - Management highlighted the importance of AI in improving service efficiency and personalizing member experiences [11] Other Important Information - The company repurchased approximately $94 million of its outstanding shares during the quarter, with $259 million remaining on the share purchase authorization [22][26] - Fraud costs were approximately $0.3 million, significantly below the target run rate [11] Q&A Session Summary Question: What are the marketing plans for the direct HSA enrollment platform? - The company aims for a seamless enrollment experience and will market through integrated plan partners, focusing on brand marketing and growth initiatives [31][32] Question: Will there be a material contribution from standalone HealthEquity versus integrated plan partners? - The majority of business comes through partners, and the company is investing in retail experience to attract new members [40][41] Question: Is there an opportunity to increase the minimum threshold before HSA consumers can invest? - The minimum threshold is typically set by enterprise clients, and there is a significant opportunity to drive engagement and education around HSAs [44][46] Question: Are employer sponsors moving towards HSAs at an accelerating rate for 2026? - There is a realization among employers about rising healthcare costs, and the company expects greater adoption this year compared to last [56][58] Question: Are there new custodial opportunities as markets develop? - The company is actively exploring new market opportunities, particularly in light of the affordability crisis and the need for HSAs [58][59]

Financial Data and Key Metrics Changes - Revenue increased by 7% year-over-year, with service revenue up 1% to $120.3 million and custodial revenue growing 13% to $159.1 million [19] - Net income surged by 806% year-over-year to $51.7 million, or $0.59 per share, while non-GAAP net income increased by 26% to $87.7 million [21] - Adjusted EBITDA rose by 20% to $141.8 million, with an adjusted EBITDA margin of 44%, up 460 basis points from the previous year [21][26] Business Line Data and Key Metrics Changes - Health Savings Accounts (HSAs) grew by 6%, with total accounts increasing by 5% and HSA assets up 15% to over $34 billion [5][10] - The number of HSA members who invest grew by 12%, and HSA invested assets increased by 29% to $17.5 billion [10] - The average HSA balance grew by 8% year-over-year, contributing to the overall increase in HSA assets [8] Market Data and Key Metrics Changes - The annualized yield on HSA cash was 3.53% for the quarter, reflecting higher placement rates and increased balances [19] - Interchange revenue grew by 6% to $42.8 million, outpacing total account growth of 5% [19] Company Strategy and Development Direction - The company aims to help members save, spend, and invest for health, addressing the affordability challenge faced by American families and employers [6] - A new direct HSA enrollment platform was launched to facilitate retail HSA openings, particularly for those choosing bronze plans on ACA exchanges [8] - The company is focused on expanding the use of HSAs and enhancing consumer control, with ongoing efforts to educate policymakers about the benefits of HSAs [12][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about new account growth in Q4, driven by partnerships with employers and plan design support [8] - The company is well-prepared for the busy season with enhanced security features and a member-first mobile experience [10] - Management highlighted the importance of AI in improving service efficiency and personalizing member experiences [11] Other Important Information - The company repurchased approximately $94 million of its outstanding shares during the quarter, with $259 million remaining on the share purchase authorization [22][26] - Fraud costs were approximately $0.3 million, significantly below the target run rate [11] Q&A Session Summary Question: What are the marketing plans for the direct HSA enrollment platform? - The company aims for a seamless enrollment experience and will market through integrated plan partners, offering a $25 match for new accounts [31][32] Question: Will there be a material contribution from standalone HealthEquity versus integrated plan partners? - The majority of business comes through partners, and the company is focusing on educating the market about HSA eligibility [40][41] Question: Is there an opportunity to increase the minimum threshold before HSA consumers can invest? - The minimum threshold is typically set by enterprise clients, and there is a significant opportunity to drive engagement and education around HSAs [44][46] Question: Are employer sponsors moving towards HSAs at an accelerating rate for 2026? - There is a realization among employers about rising healthcare costs, and the company expects greater adoption of HSAs this year compared to last [56][58] Question: Are there opportunities for new markets similar to the Dell accounts? - The company is actively exploring new custodial opportunities and believes HSAs are gaining focus in the national healthcare discussion [58]

Financial Data and Key Metrics Changes - Revenue increased by 7% year-over-year, with net income up 806% year-over-year, driven by a significant reduction in service costs and improved margins [5][20][19] - Adjusted EBITDA rose by 20%, with an adjusted EBITDA margin of 44%, up from 39% in the same quarter last year [5][20] - Cash on hand was $309 million, with cash flows from operations amounting to $339 million in the first nine months of fiscal 2026 [20][21] Business Line Data and Key Metrics Changes - Service revenue increased by 1% year-over-year to $120.3 million, while custodial revenue grew by 13% to $159.1 million [18] - HSA accounts grew by 6%, with CDB accounts up 3%, leading to a total account growth of 5% [5][6] - HSA assets increased by 15%, with average HSA balances growing by 8% year-over-year [5][7] Market Data and Key Metrics Changes - The annualized yield on HSA cash was 3.53%, reflecting higher placement rates and increased balances [18] - Interchange revenue grew by 6% to $42.8 million, outpacing total account growth [18] Company Strategy and Development Direction - The company aims to address the affordability challenge in healthcare by promoting HSAs as a solution for consumers and employers [6][11] - A new direct HSA enrollment platform was launched to facilitate retail HSA openings, particularly for those choosing bronze plans on ACA exchanges [7][8] - The company is focusing on enhancing member experience through technology investments, including AI capabilities to improve service and security [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about new account growth in Q4, supported by ongoing collaborations with employers and partners [7] - The regulatory environment is seen as favorable, with discussions in Washington about expanding HSA access to more Americans [13][16] - The company expects continued growth in HSA adoption as healthcare costs rise and employers seek cost-saving strategies [50][51] Other Important Information - Fraud costs were approximately $0.3 million, significantly below the target run rate, indicating effective fraud prevention measures [10][19] - The company repurchased approximately $94 million of its outstanding shares during the quarter, with $259 million remaining on the share purchase authorization [21][25] Q&A Session Summary Question: What are the marketing plans for the direct HSA enrollment platform? - The company plans to ensure a seamless enrollment experience and will market through integrated plan partners, emphasizing a $25 match for new accounts [28][30] Question: Are you seeing an acceleration in employer sponsors moving towards HSAs? - Management noted that rising healthcare costs are prompting employers to consider HSAs more seriously, with expectations for greater adoption in 2026 compared to 2025 [45][51] Question: Will there be more custodial opportunities as new markets develop? - The company is actively exploring new market opportunities and believes that the demand for HSAs will continue to grow as healthcare affordability becomes a pressing issue [45][52]

HSA Accounts and Market Position - As of October 31, 2025, the company administered 10.1 million HSAs with total balances of $34.4 billion, alongside 7.2 million complementary consumer-directed benefits (CDBs), resulting in a total of 17.3 million accounts[83]. - The company increased its market share in the HSA sector from 4% in December 2010 to 20% as of June 2025, becoming the largest HSA provider by number of accounts and the second largest by HSA assets[85]. - In fiscal 2025, the company acquired the BenefitWallet HSA portfolio, adding approximately 616,000 HSAs and $2.7 billion in HSA assets for a purchase price of $425 million[88]. - Total Accounts increased by 5% from 16,463 thousand on October 31, 2024 to 17,280 thousand on October 31, 2025, driven by a 6% increase in HSAs[107]. Financial Performance - Adjusted EBITDA for the three months ended October 31, 2025 was $141.812 million, a 20% increase from $118.245 million in the same period of 2024[115]. - Net income for the three months ended October 31, 2025 was $51.692 million, an increase of 806% from $5.703 million in the same period of 2024[115]. - Non-GAAP net income increased by $18.3 million, or 26%, from Q3 2024 to Q3 2025, driven by total revenue growth and cost efficiencies[120]. - Non-GAAP net income for the nine months ended October 31, 2025, rose by $52.1 million, or 24%, compared to the same period in 2024, primarily due to increased total revenue and operational efficiencies[121]. - Total revenue for Q3 2025 was $322.2 million, a 7% increase from $300.4 million in Q3 2024, while total revenue for the nine months ended October 31, 2025, reached $978.8 million, up 10% from $888.0 million in the prior year[140]. Revenue Sources - The company earns revenue primarily from service, custodial, and interchange sources, with custodial revenue being significantly influenced by the interest rate environment[87]. - Custodial revenue increased by $18.1 million, or 13%, in Q3 2025, attributed to a rise in average annualized yield on HSA cash from 3.17% to 3.53%[142]. - Interchange revenue rose by $2.5 million, or 6%, in Q3 2025, primarily due to an increase in Total Accounts[144]. - Service revenue for Q3 2025 was $120.3 million, a slight increase of 1% from $119.2 million in Q3 2024, driven by growth in Total Accounts and HSA investments[140]. Cost Management - Total cost of revenue decreased to 30.0% of total revenue for the nine months ended October 31, 2025, down from 33.8% for the same period in 2024, as total revenue grew at a significantly higher rate than total cost of revenue[156]. - Service costs decreased by $10.0 million, or 11%, for the three months ended October 31, 2025, primarily due to efficiencies from technology investments[147]. - General and administrative expenses decreased by $15.9 million, or 16%, for the nine months ended October 31, 2025, primarily due to a reduction in stock-based compensation expenses[165]. Cash Flow and Investments - Net cash provided by operating activities increased by $75.1 million from $264.1 million for the nine months ended October 31, 2024, to $339.2 million for the same period in 2025, primarily due to increased cash receipts from custodial, interchange, and service revenues[189]. - Net cash used in investing activities decreased by $453.2 million from $491.9 million for the nine months ended October 31, 2024, to $38.7 million for the same period in 2025, largely due to a significant reduction in cash used to acquire HSA portfolios[190]. - Capital expenditures for the nine months ended October 31, 2025, were $38.4 million, slightly down from $39.7 million in the same period of 2024[186]. Regulatory and Market Trends - Regulatory changes, including the "One Big Beautiful Bill Act," have expanded HSA eligibility, potentially increasing market opportunities for the company[91]. - The average family premium for employer-sponsored health insurance has risen by 24% since 2019, driving increased participation in HSA-qualified health plans[91]. Technology and Development - The company is investing in the modernization of its proprietary technology platforms to enhance security, privacy, and transaction processing capabilities[101]. - Technology and development expenses increased by $5.7 million, or 10%, for the three months ended October 31, 2025, mainly due to higher software costs and personnel-related expenses[162]. Tax and Interest Expenses - The increase in income tax provision from $35.3 million for the nine months ended October 31, 2024, to the same period in 2025 was mainly due to higher pre-tax book income and a decrease in research and development tax credits[179]. - Interest expense decreased by $4.1 million, or 23%, for the three months ended October 31, 2025, due to lower average interest rates and principal balances[173].

Financial Performance - Revenue for the third quarter increased by 7% to $322.2 million, compared to $300.4 million in the same quarter last year[3] - Net income for the third quarter was $51.7 million, or $0.59 per diluted share, up from $5.7 million, or $0.06 per diluted share, a year ago[4] - Non-GAAP net income per diluted share rose by 29% to $1.01, compared to $0.78 in the prior year[4] - Adjusted EBITDA for the third quarter was $141.8 million, reflecting a 20% increase year over year, and represented 44% of revenue[5] - The company reported a gross profit of $228,063 thousand for the three months ended October 31, 2025, compared to $197,026 thousand in the same period of 2024, indicating a 16% increase[21] - Adjusted EBITDA for the three months ended October 31, 2025, was $141,812,000, representing a 20% increase from $118,245,000 in the same period of 2024[34] - The company's net income as a percentage of revenue increased to 16% for the three months ended October 31, 2025, compared to 2% in the same period of 2024[33] - The outlook for Adjusted EBITDA for the year ending January 31, 2026, is projected to be between $555 million and $565 million[35] - The company expects net income for the year ending January 31, 2026, to be between $197 million and $205 million[37] HSA Growth - Total HSA Assets grew by 15% to $34.4 billion, including $16.9 billion in HSA cash and $17.5 billion in HSA investments[7] - The number of HSAs increased by 6% year over year to 10.1 million, with 802,000 HSAs having investments, a 12% increase[6] - The number of Health Savings Accounts (HSAs) increased to 10,108 thousand as of October 31, 2025, a 6% increase from 9,508 thousand in 2024[28] - Total HSA assets reached $34,446 million as of October 31, 2025, reflecting a 15% increase from $29,987 million in 2024[29] - HSA investments increased by 29% to $17,536 million as of October 31, 2025, compared to $13,601 million in 2024[29] Shareholder Actions - The company repurchased 1.0 million shares for $93.7 million during the third quarter, with $258.8 million remaining authorized for repurchase[8] Cash Flow and Expenses - Cash flows from operating activities for the nine months ended October 31, 2025, were $339,179 thousand, up from $264,108 thousand in 2024[24] - The company incurred total operating expenses of $149,368 thousand for the three months ended October 31, 2025, down from $177,401 thousand in the same period of 2024, a decrease of 16%[21] - Stock-based compensation expense for the three months ended October 31, 2025, was $20,542,000, slightly down from $21,123,000 in the same period of 2024[36] Market and Technology - HealthEquity's marketplace platform is expanding access to affordable healthcare solutions, leveraging AI for personalized experiences[2] Other Financial Metrics - Average daily client-held funds for the year-to-date as of October 31, 2025, were $859 million, a 4% increase from $823 million in 2024[31] - The average annualized yield on HSA cash expected to reprice in 2026 is 1.5%[30] - Non-GAAP net income for the three months ended October 31, 2025, was $87,666,000, up from $69,387,000 in the same period of 2024[36] - The diluted weighted-average shares for the three months ended October 31, 2025, were 86,970,000[36] - The company reported a total adjustment to income before income taxes - GAAP of $49,357,000 for the three months ended October 31, 2025[36]

Core Insights - HealthEquity, Inc. reported a record third quarter for fiscal 2026, achieving a net income of $52 million, a 20% growth in Adjusted EBITDA, and a 29% increase in non-GAAP net income per share, highlighting the company's commitment to enhancing healthcare consumer experiences [2][4]. Financial Performance - Revenue for the third quarter ended October 31, 2025, was $322.2 million, reflecting a 7% increase from $300.4 million in the same quarter of the previous year [3][12]. - The company reported net income of $51.7 million, or $0.59 per diluted share, compared to $5.7 million, or $0.06 per diluted share, for the same quarter in 2024 [4][12]. - Adjusted EBITDA reached $141.8 million, marking a 20% increase compared to the previous year, with Adjusted EBITDA representing 44% of revenue, up from 39% [5][40]. Account and Asset Metrics - As of October 31, 2025, HealthEquity administered 10.1 million HSAs, a 6% increase year-over-year, including 802,000 HSAs with investments, which is a 12% increase [6][32]. - Total HSA Assets amounted to $34.4 billion, reflecting a 15% year-over-year growth, with $16.9 billion in HSA cash and $17.5 billion in HSA investments [7][34]. Shareholder Returns - The company repurchased 1.0 million shares of its common stock for $93.7 million during the third quarter, with $258.8 million remaining authorized for future repurchases [8][12]. Business Outlook - For the fiscal year ending January 31, 2026, management anticipates revenues between $1.302 billion and $1.312 billion, with net income projected between $197 million and $205 million, translating to net income per diluted share of $2.24 to $2.33 [9][41].

Core Viewpoint - HealthEquity, Inc. (HQY) is identified as a compelling investment opportunity for those seeking concentrated exposure to asset-light growth models [1] Financial Performance - The company reported Q2 FY26 financial results, indicating strong performance [1] Investment Strategy - The focus is on fundamental value drivers of business economics to identify high probability long-term compounders [1] - The company aims to buy at appropriate prices relative to intrinsic worth [1] Market Position - HealthEquity is positioned among a diverse range of financial market participants, including speculators, hedgers, long-term traders, and the public [1]

Core Insights - HealthEquity (HQY) is projected to announce quarterly earnings of $0.90 per share, reflecting a year-over-year increase of 15.4% [1] - Revenue is expected to reach $319.96 million, marking a 6.5% increase from the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' projections [1] Revenue Estimates - 'Revenue- Service' is estimated at $119.50 million, showing a year-over-year change of +0.3% [4] - 'Revenue- Custodial' is projected to be $156.61 million, indicating an increase of +11.1% from the previous year [4] - 'Revenue- Interchange' is expected to reach $42.88 million, reflecting a +6.4% change year over year [4] Asset and Account Estimates - 'Total HSA Assets' are estimated at $33.68 billion, up from $29.99 billion a year ago [5] - 'Total HSA investments' are projected at $16.22 billion, compared to $13.60 billion in the same quarter last year [5] - 'CDBs Accounts' are forecasted to reach 7.05 million, slightly up from 6.96 million in the previous year [5] Additional Metrics - 'Total Accounts' are expected to reach 17.26 million, compared to 16.46 million in the same quarter last year [6] - 'Total HSA cash' is projected at $17.43 billion, up from $16.39 billion a year ago [6] - 'HSAs Accounts' are likely to reach 10.21 million, compared to 9.51 million in the previous year [6] Stock Performance - Over the past month, HealthEquity shares have returned +11.2%, outperforming the Zacks S&P 500 composite's +0.4% change [7] - Based on its Zacks Rank 3 (Hold), HQY is expected to perform in line with the overall market in the upcoming period [7]