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 15% year over year, reaching $119.8 million for the first quarter [19] - Adjusted EBITDA rose by 19% to $140.2 million, with adjusted EBITDA as a percentage of revenue at 42% compared to 41% in the previous year [21] - Net income for the first quarter 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] - Custodial revenue grew by 29% to a record $156.5 million [20] - Fraud reimbursements decreased significantly from $11 million in Q4 to $3 million in Q1 [20][21] Business Line Data and Key Metrics Changes - Health Savings Accounts (HSAs) grew by 9%, with total accounts increasing by 7% [6] - Cash and Depository (CDB) accounts grew by 4%, with net CDB account growth of 260,000 year over year [6] - HSA assets increased by $4 billion year over year, totaling over $31 billion [6][7] - The number of HSA members who invest grew by 16%, driving invested assets up by 24% to $14.2 billion [7] Market Data and Key Metrics Changes - HealthEquity serves nearly a quarter of all HSAs in the USA, reflecting market share growth [8] - The average balances of HSA members grew by 6% this year [7] - The annualized yield on HSA cash was 3.5% for the quarter [20] Company Strategy and Development Direction - The company is focusing on expanding its Member First secure mobile experience and leveraging AI technology to enhance claims processing and member satisfaction [9][10] - HealthEquity is advocating for legislative changes to expand HSA access, particularly for working seniors eligible for Medicare [15][18] - The company aims to help employers reduce healthcare costs while empowering employees to build health security [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the enterprise pipeline and selling season despite softer macroeconomic conditions [7][30] - The company is cautious about the macro impact on job creation and slower GDP growth affecting new account sales [31] - Management believes that the proposed budget bill could significantly expand the addressable market for HSAs, potentially allowing 20 million more families access [16][18] Other Important Information - The company repurchased approximately $60 million of its outstanding shares during the quarter [22] - HealthEquity is committed to reducing fraud costs to one basis point of total HSA assets per year [21][26] Q&A Session Summary Question: What is the reason for the slowdown in HSA selling conditions? - Management noted that the current sales are lower than last year but still higher than two years ago, expressing optimism about the enterprise pipeline and the potential for growth despite macroeconomic challenges [30] Question: What is the duration of the locked-in rates from forward treasury contracts? - The company locked in rates for five-year treasury contracts to enhance rate migration [33] Question: How much of the fraud costs above the one basis point are included in the guidance? - Management indicated that they are not changing their outlook based on the current quarter's fraud costs, which were in line with expectations [39] Question: Can you clarify the net increase in the addressable market due to proposed legislation? - Management clarified that the net increase is 20 million, considering both Medicare Part A individuals and those on exchanges [42] Question: How is the company tracking towards app downloads and security measures? - The company reported 1.2 million app downloads and is focused on enhancing security through mobile authentication methods [49] Question: Has there been any fallout from elevated fraud levels on enterprise retention? - Management confirmed that there has been no fallout from fraud, with retention rates higher than in previous years [54] Question: Is the AI technology already impacting service costs? - Management stated that while they do not break out exact costs, AI is expected to help reduce service costs over time by automating interactions [100]

Financial Data and Key Metrics Changes - Revenue increased by 19% year-over-year in Q4, reaching $124.2 million, with full fiscal year revenue at $1.2 billion, up 20% year-over-year [10][22][26] - Adjusted EBITDA rose by 9% in Q4 to $107.8 million, with a full year adjusted EBITDA of $471.8 million, up 28% [10][25][26] - Net income for Q4 was $26.4 million or $0.30 per share on a GAAP basis, while non-GAAP net income was $61.3 million or $0.69 per share [25][28] - HSA assets increased by 27% year-over-year, totaling $32 billion, with HSA cash reaching $17.4 billion [10][11][22] Business Line Data and Key Metrics Changes - Total accounts grew by 9% year-over-year, with HSA accounts increasing by 14% and CDB accounts growing by 2% [10][12] - The number of HSA members who invest rose by 23% year-over-year, driving invested assets up 44% to $14.7 billion [10][11] - Custodial revenue grew by 37% to a record $144.1 million in Q4 [22] Market Data and Key Metrics Changes - The annualized yield on HSA cash was 3.23% for the quarter, with enhanced rate placements making up 49% of HSA cash placements [23][29] - Interchange revenue grew by 13% to $43.5 million, reflecting increased contributions and distributions [23] Company Strategy and Development Direction - The company is focusing on a member-first secure mobile experience, emphasizing seamless digital interactions for healthcare needs [14][15] - The Assist portfolio was introduced, which includes solutions like Analyzer and Navigator aimed at improving employer benefits offerings and employee healthcare decisions [16][17][58] - The company is consolidating platforms and moving to the cloud to enhance technological capabilities, including AI-driven solutions [15][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased cyber threats and fraud attacks, leading to higher service costs, but remains optimistic about reducing these costs in the future [13][24] - The company expects revenue for fiscal year 2026 to be between $1.28 billion and $1.305 billion, with GAAP net income projected between $164 million and $179 million [27][28] - Management is confident in the growth trajectory, driven by strong sales and technology investments [27][50] Other Important Information - The company repurchased $122 million of its outstanding shares during fiscal 2025, with $178 million remaining on the share repurchase authorization [26] - Cash on hand was $296 million as of year-end January 31, 2025, with $340 million generated from operations [26] Q&A Session Summary Question: Follow-up on incremental service costs - Management explained that the $17 million in Q4 service costs were due to fraud-related reimbursements and excess service costs, expecting these to continue into the first half of FY '26 [35][39][41] Question: Earnings guidance and potential risks - Management highlighted confidence in custodial revenue growth and operational efficiencies, while acknowledging potential risks from service costs and fraud [44][50] Question: Monetization of Assist initiative - The company clarified that the Assist initiative focuses on enhancing member engagement and benefits management, with products like Analyzer and Navigator being key components [56][58] Question: Technology investment and R&D - Management indicated no significant change in R&D spending percentage but emphasized prioritizing technology that enhances member experience [66][71] Question: HSA member growth and market share - Management noted that growth in HSA accounts is increasingly coming from small and medium-sized businesses, with a focus on leveraging technology for better engagement [75][80] Question: M&A strategy and capital allocation - The company maintains a high bar for M&A opportunities, focusing primarily on organic growth and execution within the industry [82][84] Question: Member and employer reactions to service issues - Management reported high client retention rates in the high-90s despite recent challenges, emphasizing commitment to service quality [100][103] Question: Update on fraud activity and security measures - Management clarified that the fraud incidents involved multiple bad actors, not a single entity, and outlined ongoing efforts to enhance security measures [120][123]

Financial Data and Key Metrics Changes - In Q4, revenue increased by 19% year over year, with adjusted EBITDA rising by 9% [9][19] - Total accounts reached 17 million, including 9.9 million HSAs, with HSA assets growing by 27% to $32 billion [9][19] - Net income for Q4 was $26.4 million, or $0.30 per share on a GAAP basis, while non-GAAP net income was $61.3 million, or $0.69 per share [19][20] Business Line Data and Key Metrics Changes - Service revenue grew by 19% year over year, reaching a record $124.2 million, while custodial revenue increased by 37% to $144.1 million [15][17] - Interchange revenue grew by 13% to $43.5 million, driven by increased contributions and payments on the platform [17][18] - The number of HSA members who invest grew by 23% year over year, with invested assets up 44% to $14.7 billion [9][19] Market Data and Key Metrics Changes - The annualized yield on HSA cash was 3.23% for the quarter, with enhanced rate placements making up 49% of HSA cash placements [17][21] - The company expects average yield on HSA cash to be approximately 3.45% during fiscal year 2026 [21] Company Strategy and Development Direction - The company is focusing on a member-first secure mobile experience, consolidating platforms, and moving to the cloud [11][12] - The Assist portfolio was introduced to enhance employer and employee benefits engagement, with offerings like Analyzer and Navigator aimed at improving healthcare decisions [13][14] - The company is committed to reducing service costs while enhancing customer experiences through technology investments [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased cyber threats and fraud attacks, leading to higher service costs, but expects normalization in the latter half of FY 2026 [10][22] - The company anticipates revenue for FY 2026 to be between $1.28 billion and $1.305 billion, with adjusted EBITDA expected to be between $525 million and $545 million [20][21] - Management remains optimistic about growth driven by enhanced rates and operational efficiencies [38][66] Other Important Information - The company repurchased $122 million of its outstanding shares during FY 2025, with $178 million remaining on the share repurchase authorization [20] - The company is prioritizing investments in fraud prevention and detection capabilities [18][75] Q&A Session Summary Question: Follow-up on incremental service costs - Management explained that the $17 million in Q4 was due to costs associated with fraud activity and excess service expenses [26][28] Question: Earnings guidance and potential risks - Management highlighted tailwinds from custodial revenue and operational efficiencies, while acknowledging potential risks from service costs [33][39] Question: Monetization of Assist initiative - Management clarified that the Assist initiative focuses on enhancing member engagement and does not have direct monetization yet [43][46] Question: HSA member growth and market share - Management noted that growth is coming from small and medium-sized businesses, with a focus on leveraging technology for better engagement [59][61] Question: M&A strategy versus organic growth - Management indicated a high bar for M&A opportunities, focusing primarily on organic growth and execution [65][66] Question: Member and employer reactions to recent issues - Management reported high client retention rates in the high 90s despite challenges faced [80] Question: Update on fraud activity and security measures - Management clarified that the fraud incidents were not due to a cybersecurity breach but rather account takeovers, and they are enhancing security measures [99][100]