HealthEquity Conference Call Summary Company Overview - **Company**: HealthEquity - **Industry**: Health Savings Accounts (HSAs) - **Key Metrics**: - Serves over 17 million consumer-directed benefit accounts - Manages over $34 billion in HSA assets - Average member contribution: approximately $1,800 per year - Average member spending on qualified medical care: approximately $1,300 per year - Members have $16.9 billion in HSA cash and $17.5 billion in invested assets, with invested assets growing 29% year over year [3][14] Core Business Insights - HealthEquity operates the leading HSA platform in the U.S., focusing on HSAs as a solution to rising healthcare costs and affordability [3][4] - The company emphasizes the importance of HSAs as a critical financial infrastructure for managing healthcare expenses [5] - Engagement and utilization of HSAs are key to driving member value and improving economic outcomes [8][9] Strategic Initiatives - **Digital Transformation**: HealthEquity is enhancing its platform with a mobile-first strategy and AI-driven service enhancements to improve member engagement and operational efficiency [10][11][38] - **Marketplace Expansion**: The company is expanding its marketplace offerings to connect members with health solutions, thereby creating new revenue streams [15][36] - **Policy Engagement**: HealthEquity is actively involved in policy discussions to expand access to HSAs, which aligns with long-term healthcare affordability [9] Market Dynamics - The U.S. healthcare system is shifting more financial responsibility to individuals, increasing the relevance of HSAs [4][5] - The company is seeing growth in the retail and bronze market segments, with new eligibility bringing participants into the HSA ecosystem [6] - HealthEquity is positioned to benefit from the trend of employers adopting high-deductible health plans, which encourages employees to utilize HSAs [19][20] Financial Guidance - HealthEquity anticipates a revenue growth of approximately 7% at the midpoint for the upcoming year, driven by account growth, increased contributions, and marketplace revenue [22] - The company aims to continue expanding its EBITDA through efficient cost management relative to revenue growth [18] Competitive Landscape - HealthEquity acknowledges competition from retirement firms and other players in the HSA space but believes its extensive partner network and unique value proposition will maintain its market leadership [43][44] - The company is focused on enhancing its service offerings and fraud prevention measures to retain its competitive edge [44][49] Capital Allocation - HealthEquity prioritizes funding its business, pursuing strategic M&A opportunities, and returning capital to shareholders through share repurchases [49][51] - The company has a $600 million share purchase authorization and is actively buying back stock while managing its debt levels [51] Conclusion - HealthEquity is well-positioned to capitalize on the growing importance of HSAs in the U.S. healthcare landscape, with a strong focus on digital engagement, marketplace expansion, and operational efficiency. The company is committed to enhancing member experiences while navigating a competitive and evolving market environment [15][16][52]

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]