HealthEquity(HQY) - 2026 Q1 - Quarterly Report

Part I. Financial Information Financial Statements The company reported increased revenue and net income, stable operating cash flow, and a slight decrease in total assets for the quarter Condensed Consolidated Balance Sheets Total assets slightly decreased to $3.42 billion, while liabilities decreased and equity increased as of April 30, 2025 Balance Sheet Summary (as of April 30, 2025 vs. January 31, 2025) | (in thousands) | April 30, 2025 (unaudited) | January 31, 2025 | | :--- | :--- | :--- | | Total Assets | $3,416,273 | $3,448,550 | | Cash and cash equivalents | $287,894 | $295,948 | | Goodwill | $1,648,145 | $1,648,145 | | Total Liabilities | $1,292,467 | $1,333,639 | | Long-term debt, net | $1,056,566 | $1,056,301 | | Total Stockholders' Equity | $2,123,806 | $2,114,911 | Condensed Consolidated Statements of Operations and Comprehensive Income Total revenue increased 15% to $330.8 million, with net income surging 87% to $53.9 million and diluted EPS rising to $0.61 Statement of Operations Summary (Three months ended April 30) | (in thousands, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Total revenue | $330,844 | $287,597 | | Service revenue | $119,784 | $118,214 | | Custodial revenue | $156,455 | $121,644 | | Interchange revenue | $54,605 | $47,739 | | Gross profit | $224,311 | $187,138 | | Income from operations | $83,078 | $41,630 | | Net income | $53,915 | $28,813 | | Diluted EPS | $0.61 | $0.33 | Condensed Consolidated Statements of Cash Flows Operating cash flow remained stable at $64.7 million, while investing activities used significantly less cash due to the absence of large acquisitions Cash Flow Summary (Three months ended April 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $64,738 | $65,429 | | Net cash used in investing activities | $(16,143) | $(269,950) | | Net cash provided by (used in) financing activities | $(56,649) | $51,771 | | Decrease in cash and cash equivalents | $(8,054) | $(152,750) | - The significant decrease in cash used for investing activities in Q1 2025 is due to the absence of large acquisitions, unlike Q1 2024 which included $256.1 million for HSA portfolio acquisitions[12] - The company used $59.1 million for common stock repurchases in Q1 2025, contributing to the net cash used in financing activities[12] Notes to Condensed Consolidated Financial Statements Key notes detail the company's single segment, cybersecurity lawsuit, $1.06 billion debt, stock repurchases, and bond forward transactions - The company is subject to a consolidated putative class action lawsuit and regulatory inquiries following a cybersecurity incident where a business partner's account was breached; the potential loss cannot be reasonably estimated at this time[38] - Total long-term debt as of April 30, 2025, was approximately $1.06 billion, consisting of $600 million in 4.50% Senior Notes due 2029 and $461.9 million outstanding under the Revolving Credit Facility[42] - Under a $300 million stock repurchase program authorized in September 2024, the company repurchased 702,000 shares for $60.3 million during the quarter, with $117.5 million remaining authorized for repurchase as of April 30, 2025[64][65][66] - In May 2025, the company executed bond forward transactions with a notional value of $500 million to hedge benchmark interest rate risk on expected future transitions of HSA cash[70] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Revenue growth was driven by increased custodial revenue and higher HSA yields, supported by strong growth in key operating metrics and sufficient liquidity Key Financial and Operating Metrics Key metrics show continued growth, with Total Accounts reaching 17.1 million, Total HSA Assets growing to $31.3 billion, and Adjusted EBITDA increasing 19% Key Operating Metrics (as of April 30, 2025) | Metric (in thousands/millions) | April 30, 2025 | April 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | HSAs (thousands) | 9,886 | 9,097 | 9% | | Total Accounts (thousands) | 17,060 | 16,010 | 7% | | Total HSA Assets (millions) | $31,271 | $27,277 | 15% | | - HSA cash (millions) | $17,066 | $15,850 | 8% | | - HSA investments (millions) | $14,205 | $11,427 | 24% | Non-GAAP Financial Metrics (Three months ended April 30) | (in thousands) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $140,208 | $117,435 | 19% | | Non-GAAP net income | $85,814 | $70,303 | 22% | Comparison of Results of Operations Total revenue increased 15% driven by custodial revenue and higher HSA yields, while operating expenses decreased due to lower G&A costs Revenue Breakdown (Three months ended April 30) | Revenue Source (in thousands) | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Service revenue | $119,784 | $118,214 | $1,570 | 1% | | Custodial revenue | $156,455 | $121,644 | $34,811 | 29% | | Interchange revenue | $54,605 | $47,739 | $6,866 | 14% | | Total revenue | $330,844 | $287,597 | $43,247 | 15% | - The increase in custodial revenue was driven by a higher average annualized yield on HSA cash, which rose to 3.50% from 2.93% YoY, and a 12% increase in the average daily balance of HSA cash[132] - General and administrative expenses decreased by 33% YoY, mainly due to lower stock-based compensation expense following the retirement of the former CEO[146] - Technology and development expenses increased 10% YoY due to continued investment in the development and security of the company's proprietary technology[144] Liquidity and Capital Resources The company maintains strong liquidity with $287.9 million in cash and a $1.0 billion revolving credit facility, sufficient for future needs - As of April 30, 2025, the company had $287.9 million in cash and cash equivalents[159] - The company has a $1.0 billion senior secured revolving credit facility, with an outstanding balance of $461.9 million as of April 30, 2025[161][162] - The company used $59.1 million for common stock repurchases during the three months ended April 30, 2025[163] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk affecting custodial revenue and debt expense, with a 1% rate increase on debt costing $4.7 million annually, and has begun hedging - A sustained decline in interest rates could negatively affect custodial revenue, while a sustained increase could increase it; the company's varied contract terms with Depository and insurance partners help mitigate short-term fluctuations[178] - The company's revolving credit facility has a variable interest rate; a hypothetical one percent increase in the interest rate on the outstanding balance as of April 30, 2025, would result in about $4.7 million of additional interest expense over the next 12 months[181] - In May 2025, the company entered into derivative contracts to hedge a portion of the benchmark interest rate risk associated with future transitions of HSA cash[178] Controls and Procedures Management concluded disclosure controls were effective as of April 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of April 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[183] - No changes occurred during the quarter ended April 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[184] Part II. Other Information Legal Proceedings The company is not a party to any material litigation outside the normal course of business, except for legal matters described in Note 5 related to a cybersecurity incident - Except as described in Note 5 (Commitments and contingencies), the company is not party to any litigation expected to have a material adverse effect on its financial position[185] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2025 - There have been no material changes in the company's risk factors since the last Annual Report on Form 10-K[186] Issuer Purchases of Equity Securities During the three months ended April 30, 2025, the company repurchased a total of 702,000 shares of its common stock at an average price that varied monthly, as part of its publicly announced repurchase program Common Stock Repurchases (Q1 FY2026) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | February 1 - 28 | 5 | $103.89 | | March 1 - 31 | 228 | $92.24 | | April 1 - 30 | 469 | $82.73 | | Total | 702 | N/A | Other Information No directors or officers of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended April 30, 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter[190] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, as well as Inline XBRL documents[191]