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]

Financial Data and Key Metrics Changes - Revenue increased by 15% year over year, with adjusted EBITDA up 19% [7][19] - Total accounts reached over 17 million, with HSA assets growing by 15% to over $31 billion [7][8] - Net income for Q1 was $53.9 million or $0.61 per share on a GAAP basis, while non-GAAP net income was $85.8 million or $0.97 per share [21][24] Business Line Data and Key Metrics Changes - Service revenue was a record $119.8 million, up 1% year over year, while custodial revenue grew 29% to a record $156.5 million [19][20] - HSA members who invest grew by 16% year over year, driving invested assets up 24% to $14.2 billion [8][20] - Interchange revenue increased by 14% to $54.6 million, reflecting higher member contributions and distributions [20] Market Data and Key Metrics Changes - The company serves nearly a quarter of all HSAs in the USA, indicating significant market share growth [9] - The proposed budget bill includes provisions that could expand HSA access to an additional 20 million families, potentially increasing the addressable market [16][17] Company Strategy and Development Direction - The company is focusing on optimizing plan design and employee engagement to help employers manage rising healthcare costs [9] - Investments in AI technology are being leveraged to enhance claims processing and member satisfaction while reducing costs [10][11] - The company aims to drive growth through existing client bases and new client acquisitions, particularly during uncertain economic times [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current enterprise pipeline and the potential for growth despite macroeconomic challenges [30][31] - The company is cautious about the overall macro impact on job creation and GDP growth, which may affect new account sales [31] - Management is confident in the effectiveness of their fraud prevention measures and expects to normalize service costs in the second half of the fiscal year [21][24] Other Important Information - The company has repurchased approximately $60 million of its outstanding shares during the quarter [22][24] - Enhanced rates on HSA cash are expected to stabilize at approximately 3.5% during fiscal year 2026 [24] Q&A Session Summary Question: What is the outlook on HSA selling conditions? - Management noted that new HSA sales were lower than last year but still higher than the previous fiscal year, expressing optimism about the current pipeline [28][30] Question: What is the duration of the locked-in rates? - The company has entered into forward treasury contracts for five-year treasury rates, locking in the base rate for upcoming maturities [32] Question: How much of the fraud costs are included in the guidance? - Management indicated that they are targeting a one basis point exit rate for fraud costs and have not changed their outlook based on the current quarter's performance [36][38] Question: Can you clarify the addressable market increase from the proposed legislation? - The net increase in the addressable market is estimated at 20 million, considering both Medicare Part A individuals and those on exchanges [40][41] Question: How is the company tracking app downloads and security measures? - The company has seen an increase in app downloads, with a focus on enhancing security through mobile authentication methods [44][46] Question: What is the impact of fraud on enterprise customer retention? - Management reported no negative impact from fraud on enterprise retention rates, which remain high [52] Question: How does the growth of custodial cash compare to HSA investment cash? - Investment cash is growing faster than custodial cash, with different member behaviors influencing these trends [76][78] Question: What is the status of the CHIP-enabled stacked card and related products? - The new stacked card has been rolled out for new members, with plans to integrate it into a digital wallet [107][108]