Core Insights - HealthEquity reported revenue of $325.84 million for the quarter ended July 2025, marking an 8.6% year-over-year increase and exceeding the Zacks Consensus Estimate of $318.81 million by 2.2% [1] - The company achieved an EPS of $1.08, up from $0.86 a year ago, representing a surprise of 17.39% compared to the consensus estimate of $0.92 [1] Financial Performance Metrics - Total HSA Assets reached $33.14 billion, surpassing the average estimate of $32.48 billion [4] - Total HSA investments amounted to $16.1 billion, exceeding the estimated $14.78 billion [4] - CDBs Accounts totaled 7.15 million, compared to the average estimate of 6.88 million [4] - Total Accounts stood at 17.14 million, above the average estimate of 16.97 million [4] - Total HSA cash was reported at $17.04 billion, slightly below the average estimate of $17.7 billion [4] - HSAs Accounts were 9.99 million, compared to the estimated 10.1 million [4] - Revenue from Services was $117.87 million, slightly above the estimated $116.04 million, reflecting a 1% year-over-year change [4] - Revenue from Custodial services reached $159.88 million, exceeding the average estimate of $155.15 million, with a year-over-year increase of 15.3% [4] - Revenue from Interchange was $48.09 million, surpassing the estimated $46.74 million, representing an 8% year-over-year change [4] Stock Performance - HealthEquity's shares have returned -2% over the past month, while the Zacks S&P 500 composite increased by 3.8% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - HealthEquity reported quarterly earnings of $1.08 per share, exceeding the Zacks Consensus Estimate of $0.92 per share, and up from $0.86 per share a year ago [1] - The earnings surprise for this quarter was +17.39%, following a previous quarter surprise of +19.75% where actual earnings were $0.97 compared to an expected $0.81 [2] - Over the last four quarters, HealthEquity has surpassed consensus EPS estimates three times [2] Group 2: Revenue Performance - The company posted revenues of $325.84 million for the quarter ended July 2025, surpassing the Zacks Consensus Estimate by 2.20%, and up from $299.93 million year-over-year [3] - HealthEquity has topped consensus revenue estimates four times over the last four quarters [3] Group 3: Stock Performance and Outlook - HealthEquity shares have declined approximately 6.9% since the beginning of the year, while the S&P 500 has gained 9.8% [4] - The current consensus EPS estimate for the upcoming quarter is $0.91 on revenues of $318.56 million, and for the current fiscal year, it is $3.73 on $1.3 billion in revenues [8] Group 4: Industry Context - The Medical Services industry, to which HealthEquity belongs, is currently in the top 41% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [9] - Another company in the same industry, PACS Group, Inc., is expected to report quarterly earnings of $0.47 per share, reflecting a year-over-year change of +771.4% [10]

Financial Data and Key Metrics Changes - Revenue increased by 9% year over year, with net income up 67% and adjusted EBITDA up 18% to an all-time quarterly high [8][24][26] - Gross margin reached a record 71%, with adjusted EBITDA margin near record levels at 46% [8][26] - HSA assets grew by 12% year over year, totaling over $33 billion [8][9] Business Line Data and Key Metrics Changes - Service revenue increased by 1% to $117.9 million, while custodial revenue grew 15% to a record $159.9 million [24] - Interchange revenue grew 8% to $48.1 million, indicating increased member contributions and distributions [24] Market Data and Key Metrics Changes - The number of HSA members who invest grew by 10% year over year, driving invested assets up 23% to $16.1 billion [9] - Total accounts reached over 17 million, with HSA accounts growing by 6% and CDB accounts by 4% [8] Company Strategy and Development Direction - The company is focusing on enhancing consumer experiences through a mobile-first strategy, including the rollout of a secure mobile app and passkey authentication [11][15] - Legislative changes in July expanded HSA eligibility, which the company aims to capitalize on by improving enrollment processes and targeted marketing campaigns [17][20] Management's Comments on Operating Environment and Future Outlook - Management noted that despite a softer labor market, the company opened 163,000 new HSAs in the quarter, indicating strong enterprise wins and client retention [9][10] - The company remains optimistic about the impact of recent legislative changes on HSA adoption and overall market growth [19][21] Other Important Information - The company repurchased approximately $66 million of its outstanding shares during the quarter, with $352 million remaining on its repurchase authorization [27][28] - The introduction of new security measures and AI technology is expected to enhance member experience and reduce service costs [12][14] Q&A Session Summary Question: Any milestones regarding HSA fraud? - Management emphasized ongoing improvements in member experience and security measures, with no specific milestones highlighted [36][37] Question: Future legislative opportunities for HSA reform? - Management expressed excitement about recent HSA expansions and indicated ongoing efforts to advocate for further reforms, including Medicare-related provisions [39][45] Question: Clarification on locked rates for HSA cash? - Management confirmed that the locked rates apply to both basic and enhanced yield products, with a focus on rolling over maturing contracts [49][51] Question: Insights on HSA cash growth and investment behavior? - Management noted that the dip in HSA cash is due to increased investment behavior among account holders, alongside higher spending [80][83] Question: Implications of rising healthcare premiums on HSA enrollment? - Management believes that rising healthcare costs will strengthen the value proposition for HSAs, leading to increased enrollment [87][89]

Financial Data and Key Metrics Changes - Revenue increased by 9% year-over-year, reaching $656.7 million for the first half of fiscal 2026 [19][24] - Net income rose by 67% to $59.9 million, or $0.68 per share on a GAAP basis [6][21] - Adjusted EBITDA increased by 18% to $151.1 million, with an adjusted EBITDA margin of 46% [6][22] - HSA assets grew by 12% year-over-year, totaling over $33 billion, with HSA cash reaching $17 billion [6][19] Business Line Data and Key Metrics Changes - Service revenue increased by 1% to $117.9 million, while custodial revenue grew by 15% to a record $159.9 million [19][20] - The number of HSAs grew by 6%, and CDB accounts increased by 4%, contributing to a total account growth of 5% [6][19] - The average balances of HSA members increased by 6% year-over-year [6] Market Data and Key Metrics Changes - The labor market is underperforming relative to expectations, with job growth down 40% year-to-date [7][59] - HealthEquity opened 163,000 new HSAs in the quarter, indicating strong enterprise wins and client retention [7][48] Company Strategy and Development Direction - The company is focusing on enhancing its member-first secure mobile experience and leveraging AI for service modernization [10][12] - Legislative changes in the budget bill passed in July are expected to expand HSA adoption significantly, allowing more families access to HSAs [14][16] - The company plans to invest in marketing and technology to capitalize on the new market opportunities created by the legislative changes [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the largest expansion of HSA regulations in 20 years and the potential for increased HSA adoption [17][39] - The company anticipates continued growth despite macroeconomic challenges, focusing on improving member engagement and service efficiency [80][81] Other Important Information - The company repurchased approximately $66 million of its outstanding shares during the quarter, with $352 million remaining on its repurchase authorization [23][29] - The introduction of passkey authentication is expected to enhance security and improve the member experience [12][13] Q&A Session Summary Question: What milestones are expected regarding HSA fraud? - Management highlighted ongoing improvements in security and member experience, with no specific milestones but a focus on continuous progress [32][33] Question: Are there opportunities for HSA reform in future legislation? - Management noted the recent significant HSA expansion and expressed optimism about future legislative opportunities [34][39] Question: How does the company view the impact of interest rate changes on custodial revenue? - Management refrained from speculating on future interest rates but confirmed that they are locking in rates for upcoming maturities [91][92] Question: What is the outlook for HSA cash growth? - Management indicated that the dip in HSA cash is due to increased investment behavior among account holders and higher spending [72][75] Question: How does the company plan to capture the ACA opportunity? - Management stated that they will not separately break out ACA-related accounts but are focused on overall HSA growth [96][98]

Financial Data and Key Metrics Changes - Revenue increased by 9% year over year, with net income up 67% and adjusted EBITDA up 18% to an all-time quarterly high [6][22][24] - Gross margin reached a record 71%, up from 68% in the same quarter last year, with adjusted EBITDA margin near record levels at 46% [6][22][24] - HSA assets grew by $3.7 billion year over year, with total accounts exceeding 17 million [6][7][22] Business Line Data and Key Metrics Changes - Service revenue increased by 1% to $117.9 million, while custodial revenue grew 15% to a record $159.9 million [22] - Interchange revenue grew by 8% to $48.1 million, indicating increased member contributions and distributions [22] - HSA accounts grew by 6%, and CDB accounts grew by 4%, driving total accounts up by 5% [6][22] Market Data and Key Metrics Changes - The labor market is underperforming relative to expectations, impacting hiring rates [7] - The budget bill passed in July expanded HSA eligibility, allowing more families access to HSAs, which is expected to drive future growth [15][17][19] Company Strategy and Development Direction - The company is focusing on enhancing consumer experiences through a mobile-first strategy and improved security measures [10][13] - Investments in AI technology are aimed at automating claims processing and enhancing member satisfaction [10][11] - The company is preparing for a busy growth season by leveraging improved data analytics and upselling opportunities [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong early indicators for new enterprise wins and client retention [8][9] - The company is confident that the recent legislative changes will significantly expand the market for HSAs, potentially allowing 3 to 4 million more families access to HSAs [19][20] - Management acknowledged the challenges posed by the current macroeconomic environment but emphasized the strength of their value proposition in helping employers manage healthcare costs [86][88] Other Important Information - The company repurchased approximately $66 million of its outstanding shares during the quarter, with $352 million remaining on its repurchase authorization [25][30] - The introduction of passkey authentication is expected to enhance security and improve the member login experience [12][13] Q&A Session Summary Question: Any milestones regarding HSA fraud? - Management highlighted ongoing improvements in member security and the introduction of PassKey for better authentication, with no specific milestones identified [34][35] Question: Future legislative opportunities for HSA reform? - Management noted the recent HSA expansion as significant and expressed intent to pursue further opportunities in future legislation [37][40] Question: Impact of interest rate changes on custodial revenue? - Management refrained from specific modeling but acknowledged that placement rates will depend on market conditions at the time of asset placement [102][104] Question: Increase in service gross margin? - Management attributed the increase to efficient service delivery and investments in technology, with ongoing efforts to automate processes [98][100] Question: Implications of rising healthcare premiums on HSA enrollment? - Management indicated that rising healthcare costs strengthen the value proposition for HSAs, potentially leading to increased enrollment [86][88]

Core Insights - HealthEquity reported adjusted earnings of $1.08 per share, exceeding the Street estimate of 92 cents [1] - Quarterly revenue reached $325.83 million, surpassing the analyst estimate of $320.82 million [1] - The company experienced a 9% revenue growth, a record gross margin of 71%, and a record adjusted EBITDA of $151 million [2] Outlook and Guidance - HealthEquity raised its fiscal 2026 adjusted EPS guidance to a range of $3.74 to $3.91, compared to the previous estimate of $3.72 [3] - The fiscal 2026 revenue guidance was also increased to between $1.29 billion and $1.31 billion, against the prior estimate of $1.3 billion [3] Key Metrics - The company reported 10.0 million Health Savings Accounts (HSAs), a 6% increase compared to the second quarter of FY25 [5] - Total HSA assets amounted to $33.1 billion, reflecting a 12% increase from the second quarter of FY25 [5] - The total number of accounts, including HSAs and complementary Consumer Directed Benefits (CDBs), reached 17.1 million, a 5% increase compared to the second quarter of FY25 [5]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36568 HEALTHEQUITY, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 52-2383166 (I.R.S. Em ...

[Executive Summary & Highlights](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Highlights) [Second Quarter FY25 Performance Overview](index=1&type=section&id=1.1.%20Second%20Quarter%20FY25%20Performance%20Overview) HealthEquity reported strong financial results for the second quarter ended July 31, 2025, with significant growth in revenue, net income, and Adjusted EBITDA, alongside record gross margins Q2 FY25 Performance Summary | Metric | Q2 FY25 (Ended Jul 31, 2025) | Q2 FY24 (Ended Jul 31, 2024) | Change (%) | | :----------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenue | $325.8 million | $299.9 million | 9% | | Gross Margin | 71% | - | Record | | Adjusted EBITDA | $151.1 million | $128.3 million | 18% | | Adjusted EBITDA (% of Rev) | 46% | 43% | +3 ppts | | Net Income | $59.9 million | $35.8 million | 67% | | Non-GAAP Net Income | $94.6 million | $76.3 million | 24% | | Diluted EPS (GAAP) | $0.68 | $0.40 | 70% | | Diluted EPS (Non-GAAP) | $1.08 | $0.86 | 26% | [Key Account and Asset Growth](index=1&type=section&id=1.2.%20Key%20Account%20and%20Asset%20Growth) The company continued to expand its account base and managed assets, with notable growth in HSAs and total HSA assets Account and Asset Metrics | Metric | As of Jul 31, 2025 | YoY Change (%) | | :----------------- | :----------------- | :------------- | | HSAs | 10.0 million | 6% | | HSAs with Investments | 782,000 | 10% | | Total Accounts | 17.1 million | 5% | | Total HSA Assets | $33.1 billion | 12% | | HSA Cash | $17.0 billion | - | | HSA Investments | $16.1 billion | - | [CEO Commentary and Business Outlook](index=1&type=section&id=1.3.%20CEO%20Commentary%20and%20Business%20Outlook) CEO Scott Cutler highlighted the company's strong momentum and an even brighter outlook, driven by legislative expansion of HSAs and proprietary technologies. The company also provided its business outlook for the fiscal year ending January 31, 2026 - CEO Scott Cutler noted continued momentum with strong revenue growth, record gross margin, and record adjusted EBITDA, attributing success to proprietary technologies and platforms[3](index=3&type=chunk) - The outlook is considered brighter due to the largest legislative expansion of HSAs since 2006, increasing access to financial security and tax benefits for American families[3](index=3&type=chunk) Fiscal Year 2026 Business Outlook (Ending January 31, 2026) | Metric | Guidance Range | | :----------------------- | :------------------------- | | Revenue | $1.290 billion - $1.310 billion | | Net Income | $185 million - $200 million | | Net Income per Diluted Share | $2.11 - $2.28 | | Non-GAAP Net Income | $329 million - $344 million | | Non-GAAP Net Income per Diluted Share | $3.74 - $3.91 | | Adjusted EBITDA | $540 million - $560 million | [Second Quarter Financial Results (Ended July 31, 2025)](index=1&type=section&id=2.%20Second%20Quarter%20Financial%20Results%20(Ended%20July%2031%2C%202025)) [Revenue Analysis](index=1&type=section&id=2.1.%20Revenue%20Analysis) HealthEquity's total revenue for Q2 FY25 increased by 9% year-over-year, driven by growth across all three revenue streams, with custodial revenue showing the strongest percentage increase Revenue Breakdown | Revenue Type | Q2 FY25 ($ millions) | Q2 FY24 ($ millions) | YoY Change ($ millions) | YoY Change (%) | | :---------------- | :------------------- | :------------------- | :---------------------- | :------------- | | Service Revenue | $117.9 | $116.7 | $1.2 | 1% | | Custodial Revenue | $159.9 | $138.7 | $21.2 | 15% | | Interchange Revenue | $48.1 | $44.5 | $3.6 | 8% | | **Total Revenue** | **$325.8** | **$299.9** | **$25.9** | **9%** | [Net Income and Earnings Per Share (GAAP & Non-GAAP)](index=1&type=section&id=2.2.%20Net%20Income%20and%20Earnings%20Per%20Share%20(GAAP%20%26%20Non-GAAP)) The company reported substantial increases in both GAAP and non-GAAP net income and diluted EPS for the second quarter, reflecting improved profitability Net Income and EPS | Metric | Q2 FY25 (Ended Jul 31, 2025) | Q2 FY24 (Ended Jul 31, 2024) | YoY Change (%) | | :----------------------- | :--------------------------- | :--------------------------- | :------------- | | Net Income (GAAP) | $59.9 million | $35.8 million | 67% | | Net Income per Diluted Share (GAAP) | $0.68 | $0.40 | 70% | | Non-GAAP Net Income | $94.6 million | $76.3 million | 24% | | Non-GAAP Net Income per Diluted Share | $1.08 | $0.86 | 26% | [Adjusted EBITDA Performance](index=1&type=section&id=2.3.%20Adjusted%20EBITDA%20Performance) Adjusted EBITDA saw an 18% increase year-over-year, reaching a record $151.1 million, and its margin improved to 46% of revenue Adjusted EBITDA | Metric | Q2 FY25 (Ended Jul 31, 2025) | Q2 FY24 (Ended Jul 31, 2024) | YoY Change ($ millions) | YoY Change (%) | | :-------------- | :--------------------------- | :--------------------------- | :---------------------- | :------------- | | Adjusted EBITDA | $151.1 million | $128.3 million | $22.8 | 18% | | As % of Revenue | 46% | 43% | +3 ppts | - | [Account and Asset Metrics](index=1&type=section&id=3.%20Account%20and%20Asset%20Metrics) [HSA and Total Accounts](index=1&type=section&id=3.1.%20HSA%20and%20Total%20Accounts) HealthEquity reported continued growth in its account base, with HSAs reaching 10.0 million and total accounts, including other consumer-directed benefits (CDBs), at 17.1 million Account Growth | Metric | As of Jul 31, 2025 | As of Jul 31, 2024 | YoY Change (%) | | :----------------- | :----------------- | :----------------- | :------------- | | HSAs | 9,989 thousand | 9,383 thousand | 6% | | HSAs with Investments | 782 thousand | 711 thousand | 10% | | CDBs | 7,153 thousand | 6,898 thousand | 4% | | **Total Accounts** | **17,142 thousand**| **16,281 thousand**| **5%** | - New HSAs from sales decreased by **13% quarter-to-date** and **18% year-to-date** compared to the previous fiscal year[33](index=33&type=chunk) [Total HSA Assets](index=1&type=section&id=3.2.%20Total%20HSA%20Assets) Total HSA Assets grew by 12% year-over-year, reaching $33.1 billion, with a significant portion allocated to investments Total HSA Assets | Asset Type | As of Jul 31, 2025 ($ billions) | As of Jul 31, 2024 ($ billions) | YoY Change (%) | | :---------------- | :------------------------------ | :------------------------------ | :------------- | | HSA Cash | $17.0 | $16.4 | 4% | | HSA Investments | $16.1 | $13.1 | 23% | | **Total HSA Assets**| **$33.1** | **$29.5** | **12%** | [Client-Held Funds](index=1&type=section&id=3.3.%20Client-Held%20Funds) Client-held funds remained stable year-over-year at $0.8 billion, which are deposits used to facilitate the administration of CDBs and generate custodial revenue Client-Held Funds | Metric | As of Jul 31, 2025 ($ millions) | As of Jul 31, 2024 ($ millions) | YoY Change (%) | | :---------------- | :------------------------------ | :------------------------------ | :------------- | | Client-held funds | $818 | $817 | 0% | [Business Outlook for Fiscal Year 2026](index=3&type=section&id=4.%20Business%20Outlook%20for%20Fiscal%20Year%202026) [Full Year FY26 Financial Guidance](index=3&type=section&id=4.1.%20Full%20Year%20FY26%20Financial%20Guidance) HealthEquity provided its financial guidance for the fiscal year ending January 31, 2026, projecting continued growth in revenue, net income, and Adjusted EBITDA Fiscal Year 2026 Business Outlook (Ending January 31, 2026) | Metric | Guidance Range | | :----------------------- | :------------------------- | | Revenue | $1.290 billion - $1.310 billion | | Net Income | $185 million - $200 million | | Net Income per Diluted Share | $2.11 - $2.28 | | Non-GAAP Net Income | $329 million - $344 million | | Non-GAAP Net Income per Diluted Share | $3.74 - $3.91 | | Adjusted EBITDA | $540 million - $560 million | [Stock Repurchase Program](index=1&type=section&id=5.%20Stock%20Repurchase%20Program) [Q2 FY25 Repurchase Activity](index=1&type=section&id=5.1.%20Q2%20FY25%20Repurchase%20Activity) During the second quarter, HealthEquity repurchased 0.7 million shares of its common stock for $66.0 million, with $351.8 million remaining authorized under its programs - The Company repurchased **0.7 million shares** of common stock for **$66.0 million** during Q2 FY25[9](index=9&type=chunk)[10](index=10&type=chunk) - As of July 31, 2025, **$351.8 million** remained authorized for repurchase under the Company's stock repurchase programs[9](index=9&type=chunk) [Non-GAAP Financial Information](index=3&type=section&id=6.%20Non-GAAP%20Financial%20Information) [Definitions of Non-GAAP Measures](index=3&type=section&id=6.1.%20Definitions%20of%20Non-GAAP%20Measures) HealthEquity provides non-GAAP financial measures, including Adjusted EBITDA, non-GAAP net income, and non-GAAP net income per diluted share, to offer additional insights into its financial performance, cautioning that these should be considered supplementary to GAAP results - Non-GAAP financial measures are used to supplement GAAP information, providing useful insights into financial and business trends[15](index=15&type=chunk)[16](index=16&type=chunk) - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, amortization of incremental costs to obtain a contract, costs associated with unused office space, and certain other non-operating items[19](index=19&type=chunk)[45](index=45&type=chunk) - Non-GAAP net income is calculated by adjusting GAAP net income before income taxes for amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, then subtracting a non-GAAP tax provision[19](index=19&type=chunk)[45](index=45&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=11&type=section&id=6.2.%20Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) The reconciliation tables detail the adjustments made to GAAP net income to arrive at Adjusted EBITDA for both the three and six months ended July 31, 2025 and 2024, and for the full fiscal year 2026 outlook Reconciliation of Net Income to Adjusted EBITDA (Three Months Ended July 31) | Item | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------------ | :----------------- | :----------------- | | Net income | $59,854 | $35,822 | | Interest income | (3,364) | (3,103) | | Interest expense | 14,955 | 15,427 | | Income tax provision | 18,194 | 10,794 | | Depreciation and amortization | 11,453 | 12,629 | | Amortization of acquired intangible assets | 27,001 | 30,981 | | Stock-based compensation expense | 19,068 | 21,574 | | Merger integration expenses | 1,266 | 1,777 | | Amortization of incremental costs to obtain a contract | 1,951 | 1,681 | | Costs associated with unused office space | 723 | 806 | | Other | (27) | (101) | | **Adjusted EBITDA** | **$151,074** | **$128,287** | Reconciliation of Net Income Outlook to Adjusted EBITDA Outlook (FY26) | Item | Outlook for FY26 ($ millions) | | :------------------------------------------ | :---------------------------- | | Net income | $185 - 200 | | Interest income | (11) | | Interest expense | 56 | | Income tax provision | 62 - 67 | | Depreciation and amortization | 48 | | Amortization of acquired intangible assets | 108 | | Stock-based compensation expense | 75 | | Merger integration expenses | 6 | | Amortization of incremental costs to obtain a contract | 8 | | Costs associated with unused office space | 3 | | **Adjusted EBITDA** | **$540 - 560** | [Reconciliation of Net Income to Non-GAAP Net Income](index=12&type=section&id=6.3.%20Reconciliation%20of%20Net%20Income%20to%20Non-GAAP%20Net%20Income) This section provides the reconciliation from GAAP net income to non-GAAP net income, detailing specific adjustments for non-recurring and non-cash items, and applying a normalized non-GAAP tax rate for both historical periods and the fiscal year 2026 outlook Reconciliation of Net Income to Non-GAAP Net Income (Three Months Ended July 31) | Item | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------------ | :----------------- | :----------------- | | Net income | $59,854 | $35,822 | | Income tax provision | 18,194 | 10,794 | | Income before income taxes - GAAP | 78,048 | 46,616 | | Non-GAAP adjustments: | | | | Amortization of acquired intangible assets | 27,001 | 30,981 | | Stock-based compensation expense | 19,068 | 21,574 | | Merger integration expenses | 1,266 | 1,777 | | Costs associated with unused office space | 723 | 806 | | Loss on extinguishment of debt | — | — | | Total adjustments to income before income taxes - GAAP | 48,058 | 55,138 | | Income before income taxes - Non-GAAP | 126,106 | 101,754 | | Income tax provision - Non-GAAP (25%) | 31,526 | 25,439 | | **Non-GAAP net income** | **$94,580** | **$76,315** | | Non-GAAP net income per diluted share | $1.08 | $0.86 | Reconciliation of Net Income Outlook to Non-GAAP Net Income Outlook (FY26) | Item | Outlook for FY26 ($ millions) | | :------------------------------------------ | :---------------------------- | | Net income | $185 - 200 | | Income tax provision | 62 - 67 | | Income before income taxes - GAAP | 247 - 267 | | Non-GAAP adjustments: | | | Amortization of acquired intangible assets | 108 | | Stock-based compensation expense | 75 | | Merger integration expenses | 6 | | Costs associated with unused office space | 3 | | Total adjustments to income before income taxes - GAAP | 192 | | Income before income taxes - Non-GAAP | 439 - 459 | | Income tax provision - Non-GAAP (25%) | 110 - 115 | | **Non-GAAP net income** | **$329 - 344** | | Non-GAAP net income per diluted share | $3.74 - 3.91 | - A normalized non-GAAP tax rate of **25%** is applied to provide consistency across interim reporting periods, eliminating effects of non-recurring and period-specific items[41](index=41&type=chunk)[43](index=43&type=chunk) [Forward-Looking Statements](index=3&type=section&id=7.%20Forward-Looking%20Statements) [Disclaimer and Identifying Terms](index=3&type=section&id=7.1.%20Disclaimer%20and%20Identifying%20Terms) This section serves as a disclaimer regarding forward-looking statements, which reflect current expectations about future events and outcomes, and identifies the terminology used to denote such statements - The press release contains 'forward-looking statements' as defined by the Private Securities Litigation Reform Act of 1995[18](index=18&type=chunk) - Such statements reflect current expectations and may not be realized, as they are subject to various known and unknown risks, uncertainties, and other factors[21](index=21&type=chunk) - Words like 'may,' 'believes,' 'intends,' 'seeks,' 'aims,' 'anticipates,' 'plans,' 'estimates,' 'expects,' 'should,' 'assumes,' 'continues,' 'could,' 'will,' 'future,' and their negatives or similar terms, identify forward-looking statements[20](index=20&type=chunk) [Risks and Uncertainties](index=5&type=section&id=7.2.%20Risks%20and%20Uncertainties) The company outlines various risks and factors that could cause actual results to differ materially from forward-looking statements, including operational, competitive, regulatory, and technological challenges - Risks include the ability to safeguard custodial assets, competition in the healthcare and benefits administration industry, and dependence on tax-advantaged HSAs and other CDBs[23](index=23&type=chunk) - Operational risks encompass fraudulent account activity, successful integration of acquisitions, reliance on technology and communication systems, and cybersecurity breaches[23](index=23&type=chunk) - Regulatory and market risks include the uncertain healthcare environment, potential regulatory changes, compliance with various laws, and reliance on partners and third-party vendors[23](index=23&type=chunk) [About HealthEquity](index=3&type=section&id=8.%20About%20HealthEquity) [Company Overview](index=3&type=section&id=8.1.%20Company%20Overview) HealthEquity is the nation's largest health savings account (HSA) custodian, administering HSAs and other consumer-directed benefits (CDBs) for over 17 million accounts, aiming to empower healthcare consumers - HealthEquity is the nation's largest health savings account ('HSA') custodian by number of accounts[2](index=2&type=chunk) - The company and its subsidiaries administer HSAs and other consumer-directed benefits for more than **17 million accounts**[17](index=17&type=chunk) - HealthEquity partners with employers, benefits advisors, and health and retirement plan providers to empower healthcare consumers and improve lives[17](index=17&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=9.%20Condensed%20Consolidated%20Financial%20Statements) [Balance Sheets](index=6&type=section&id=9.1.%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of HealthEquity's financial position as of July 31, 2025, compared to January 31, 2025, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Item | July 31, 2025 | January 31, 2025 | | :------------------------------------------ | :------------ | :--------------- | | **Assets** | | | | Cash and cash equivalents | $304,461 | $295,948 | | Total current assets | $492,832 | $477,749 | | Intangible assets, net | $1,152,456 | $1,204,658 | | Goodwill | $1,648,145 | $1,648,145 | | **Total assets** | **$3,416,678**| **$3,448,550** | | **Liabilities and stockholders' equity** | | | | Total current liabilities | $116,575 | $156,323 | | Long-term debt, net of issuance costs | $1,006,834 | $1,056,301 | | Deferred tax liability | $86,615 | $55,834 | | **Total liabilities** | **$1,270,257**| **$1,333,639** | | Total stockholders' equity | $2,146,421 | $2,114,911 | | **Total liabilities and stockholders' equity**| **$3,416,678**| **$3,448,550** | [Statements of Operations](index=7&type=section&id=9.2.%20Statements%20of%20Operations) The condensed consolidated statements of operations present the company's revenues, costs, and expenses, leading to net income for the three and six months ended July 31, 2025, compared to the prior year Condensed Consolidated Statements of Operations (Three Months Ended July 31, in thousands) | Item | 2025 | 2024 | | :------------------------ | :--------- | :--------- | | Total revenue | $325,835 | $299,928 | | Total cost of revenue | $93,240 | $95,876 | | Gross profit | $232,595 | $204,052 | | Total operating expenses | $142,983 | $145,123 | | Income from operations | $89,612 | $58,929 | | Total other expense | $(11,564) | $(12,313) | | Income before income taxes| $78,048 | $46,616 | | Income tax provision | $18,194 | $10,794 | | **Net income** | **$59,854**| **$35,822**| | Diluted EPS | $0.68 | $0.40 | Condensed Consolidated Statements of Operations (Six Months Ended July 31, in thousands) | Item | 2025 | 2024 | | :------------------------ | :--------- | :--------- | | Total revenue | $656,679 | $587,525 | | Total cost of revenue | $199,773 | $196,335 | | Gross profit | $456,906 | $391,190 | | Total operating expenses | $284,216 | $290,631 | | Income from operations | $172,690 | $100,559 | | Total other expense | $(23,689) | $(20,704) | | Income before income taxes| $149,001 | $79,855 | | Income tax provision | $35,232 | $15,220 | | **Net income** | **$113,769**| **$64,635**| | Diluted EPS | $1.29 | $0.73 | [Statements of Comprehensive Income](index=8&type=section&id=9.3.%20Statements%20of%20Comprehensive%20Income) The condensed consolidated statements of comprehensive income show net income and other comprehensive income components, such as net unrealized gains from cash flow hedges, for the three and six months ended July 31, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (Three Months Ended July 31, in thousands) | Item | 2025 | 2024 | | :------------------------ | :--------- | :--------- | | Net income | $59,854 | $35,822 | | Net unrealized gains, net of income tax expense (Cash flow hedges) | $203 | — | | **Comprehensive income** | **$60,057**| **$35,822**| Condensed Consolidated Statements of Comprehensive Income (Six Months Ended July 31, in thousands) | Item | 2025 | 2024 | | :------------------------ | :--------- | :--------- | | Net income | $113,769 | $64,635 | | Net unrealized gains, net of income tax expense (Cash flow hedges) | $203 | — | | **Comprehensive income** | **$113,972**| **$64,635**| [Statements of Cash Flows](index=9&type=section&id=9.4.%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows detail the cash generated from or used in operating, investing, and financing activities for the six months ended July 31, 2025, compared to the prior year Condensed Consolidated Statements of Cash Flows (Six Months Ended July 31, in thousands) | Cash Flow Activity | 2025 | 2024 | | :---------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $200,604 | $173,558 | | Net cash used in investing activities | $(27,323) | $(479,032) | | Net cash provided by (used in) financing activities | $(164,768) | $228,388 | | Increase (decrease) in cash and cash equivalents | $8,513 | $(77,086) | | Beginning cash and cash equivalents | $295,948 | $403,979 | | **Ending cash and cash equivalents**| **$304,461**| **$326,893**| - Investing activities in 2024 included significant acquisitions of HSA portfolios (**$452,241 thousand**), which were absent in 2025[29](index=29&type=chunk) - Financing activities in 2025 included principal payments on long-term debt (**$50,000 thousand**) and repurchases of common stock (**$125,810 thousand**), which were not present in 2024[29](index=29&type=chunk) [Supplemental Financial Data](index=10&type=section&id=10.%20Supplemental%20Financial%20Data) [Stock-Based Compensation Expense](index=10&type=section&id=10.1.%20Stock-Based%20Compensation%20Expense) Stock-based compensation expense decreased for both the three and six months ended July 31, 2025, compared to the prior year, with reductions across most functional areas Stock-Based Compensation Expense (Three Months Ended July 31, in thousands) | Functional Area | 2025 | 2024 | | :------------------------ | :-------- | :-------- | | Cost of revenue | $3,114 | $2,934 | | Sales and marketing | $1,529 | $3,850 | | Technology and development| $5,732 | $6,454 | | General and administrative| $8,693 | $8,336 | | **Total** | **$19,068**| **$21,574**| Stock-Based Compensation Expense (Six Months Ended July 31, in thousands) | Functional Area | 2025 | 2024 | | :------------------------ | :-------- | :-------- | | Cost of revenue | $6,501 | $7,459 | | Sales and marketing | $6,399 | $8,173 | | Technology and development| $11,652 | $12,394 | | General and administrative| $8,852 | $25,568 | | **Total** | **$33,404**| **$53,594**| [HSA Cash Yields](index=11&type=section&id=10.2.%20HSA%20Cash%20Yields) The company provided a summary of HSA cash held by depository and insurance company partners, indicating expected repricing schedules and the average annualized yield earned on these funds HSA Cash Expected to Reprice and Average Annualized Yield (As of July 31, 2025, in billions) | Year ending January 31, | HSA cash expected to reprice | Average annualized yield | | :---------------------- | :--------------------------- | :----------------------- | | Remainder of 2026 | $1.3 | 1.7% | | 2027 | $4.1 | 2.0% | | 2028 | $2.2 | 4.1% | | 2029 | $1.5 | 3.7% | | Thereafter | $7.3 | 4.5% | | **Total** | **$16.4** | **3.5%** | - The total HSA cash expected to reprice is **$16.4 billion**, excluding **$0.6 billion** held in floating-rate contracts[35](index=35&type=chunk) [Glossary of Certain Terms](index=13&type=section&id=11.%20Glossary%20of%20Certain%20Terms) [Key Definitions](index=13&type=section&id=11.1.%20Key%20Definitions) This section provides definitions for key terms used throughout the financial report, including various account types, asset categories, and non-GAAP financial measures, ensuring clarity and consistent understanding - HSA (Health Savings Account) is a financial account for tax-advantaged healthcare spending and saving[45](index=45&type=chunk) - CDB (Consumer-directed benefits) include flexible spending and health reimbursement arrangements, COBRA administration, commuter, and other benefits[45](index=45&type=chunk) - Total HSA Assets comprise HSA members' custodial cash assets and investments held by partners[45](index=45&type=chunk)

Core Insights - HealthEquity, Inc. reported a strong second quarter with a 9% revenue growth, reaching $325.8 million, and a record gross margin of 71% [3][4][11] - The company achieved a net income of $59.9 million, a 67% increase year-over-year, with non-GAAP net income of $94.6 million, up 24% [5][11] - Adjusted EBITDA for the quarter was $151.1 million, reflecting an 18% increase compared to the previous year, representing 46% of revenue [6][11] Financial Performance - Revenue for Q2 FY25 was $325.8 million, up from $299.9 million in Q2 FY24, with service revenue at $117.9 million, custodial revenue at $159.9 million, and interchange revenue at $48.1 million [4][11] - Net income was $59.9 million, or $0.68 per diluted share, compared to $35.8 million, or $0.40 per diluted share, in the same quarter last year [5][11] - Non-GAAP net income was $94.6 million, or $1.08 per diluted share, compared to $76.3 million, or $0.86 per diluted share, in Q2 FY24 [5][11] Account and Asset Metrics - As of July 31, 2025, HealthEquity managed 10.0 million HSAs, a 6% increase year-over-year, with 782,000 HSAs having investments, a 10% increase [7][11] - Total HSA assets reached $33.1 billion, a 12% increase from the previous year, including $17.0 billion in HSA cash and $16.1 billion in HSA investments [8][11] - Total accounts managed by the company were 17.1 million, including 7.2 million other consumer-directed benefits, marking a 5% increase year-over-year [7][11] Stock Repurchase Program - The company repurchased 0.7 million shares of its common stock for $66.0 million during the second quarter, with $351.8 million remaining authorized for repurchase [9][11] Business Outlook - For the fiscal year ending January 31, 2026, management expects revenues between $1.290 billion and $1.310 billion, with net income projected between $185 million and $200 million [12][11]

HealthEquity, Inc. HQY will release earnings results for the second quarter after the closing bell on Tuesday, Sept. 2.Analysts expect the Draper, Utah-based company to report quarterly earnings at 92 cents per share, up from 86 cents per share in the year-ago period. HealthEquity projects to report quarterly revenue of $320.69 million, compared to $299.93 million a year earlier, according to data from Benzinga Pro.On June 3, HealthEquity reported first-quarter earnings of 97 cents per share, which beat the ...