HEALTHEQUITY, INC. Q1 FY2026 earnings call

• Team Purple delivered strong growth in key metrics with revenue up 15%, adjusted EBITDA up 19%, HSAs up 9%, CDB accounts up 4%, total accounts up 7%, and HSA assets up 15%.
• Opened 150,000 new HSAs in the quarter, with softer macroeconomic conditions impacting sales. Continued to see a strong enterprise pipeline and more SMB companies adopting HSA-qualified health plans.
• Made progress with Member First secure mobile experience, leveraging AI for expedited claims, AI chat, and AI agent to improve member satisfaction and reduce costs.
• Highlighted HSA market-expanding provisions in the House budget bill, including allowing working seniors on Medicare Part A to contribute to HSAs, expanding HSA use on exchanges, and increasing contribution limits for lower-income earners.
• Reduced fraud reimbursements from $11 million in Q4 to $3 million in Q1, with reprioritization of investments in advanced security and fraud detection technologies.

HealthEquity saw strong year-over-year growth across key metrics. Revenue was up 15%, adjusted EBITDA up 19%. HSAs grew 9%, CDB accounts grew 4%, driving total accounts up 7%, and HSA assets up 15%. Service revenue was a record $119.8 million, up 1% year-over-year. Custodial revenue grew 29% to a record $156.5 million. Interchange revenue grew 14% to $54.6 million. HSA assets reached over $31 billion with 9.9 million HSAs, and HSA cash was $17.1 billion. Invested assets in HSAs grew 24% to $14.2 billion.

• Fiscal 2026 revenue expected in the range of $1.285 billion to $1.305 billion.
• GAAP net income expected in the range of $173 million to $188 million ($1.96 to $2.13 per share).
• Non-GAAP net income expected between $320 million and $335 million ($3.61 to $3.78 per share).
• Adjusted EBITDA expected in the range of $530 million to $550 million.
• Locked in 4% rates net of hedging costs on $500 million of maturities, with expectations of further derisking transactions, and an average yield on HSA cash expected to be approximately 3.5% for fiscal 2026.
• Continued share repurchases under the $300 million authorization.

• Macroeconomic conditions affecting job creation and GDP growth, which could impact new account sales.
• Fraud risks, although progress is being made in reducing fraud reimbursements, continued vigilance is required.
• Regulatory uncertainties related to the passage and implementation of HSA market-expanding provisions in legislation.

Q: George Hill asked about the slowdown in HSA selling conditions and forward visibility on the macro impact.

A: Scott Cutler stated it's a tough comp but felt good about the pipeline, optimistic about the enterprise and SMB adoption, and cautious about macro impact on job creation and GDP growth.

Q: George Hill followed up on forward treasury contracts duration.

A: James Lucania said they locked in 5-year treasury rates on maturities in Q4 of 2026 and Q4 of 2027.

Q: Alan Lutz asked about fraud costs vs EBITDA raise.

A: James Lucania said fraud costs were as expected, and they are on track to reach one basis point fraud cost run rate in the back half of the year.

Q: Alan Lutz asked about the size of the addressable market expansion from legislation.

A: Steve Neeleman explained it's a net 20 million increase, not 40 million.

Q: Anne Samuel asked about tracking towards getting members to download the app and security.

A: Scott Cutler said mobile strategy is tied to security, with plans for passwordless passkey authentication by fall, and driving app download adoption.

Q: Greg Peters asked about selling season and enterprise customer retention.

A: Scott Cutler said no fallout from fraud on retention, retention rates high, and enterprises are seeing positive changes with security measures.

Q: Scott Schoenhaus asked about fraud detection investments and cases.

A: Scott Cutler detailed deploying resources into security, reducing sequential fraud rates, attacking general account takeovers and fraudulent transactions, and focusing on mobile security access.

Q: Steven Valiquette asked about HSA contribution limits and existing account holders.

A: Scott Cutler and Steve Neeleman discussed that most account holders fit the income thresholds, plan design is key, and driving awareness to contribute to max is important.

Q: David Roman asked about growth between custodial cash and HSA investment cash.

A: James Lucania explained custodial cash yields and investment cash basis points, with different unit economics for savers/spenders and investors.

Q: Jamie asked about Medicare Type A seniors and HSA propensity.

A: Steve Neeleman shared that longer-tenured members with HSAs tend to contribute more, and there's opportunity for education and plan design to drive adoption.

Q: Stan Berenshteyn asked about forward contracts and legislation impact on growth.

A: James Lucania explained hedging to derisk maturities, and Steve Neeleman discussed the broader impact of legislation on employer value propositions and market expansion.

Q: Matthew Ingalls asked about AI impact on service costs.

A: Scott Cutler discussed AI's role in automating interactions, improving member experience, and driving down service costs through self-service and generative AI opportunities.

Q: David Larson asked about chip card, Navigator, Analyzer, and app authentication.

A: Scott Cutler said the chip card is rolled out for new members, Analyzer is GA, Navigator is for member experience, and access to platform will be through mobile app with passwordless authentication by fall.

Q: Constantine Davides asked about CDB growth opportunities and HPA initiatives.

A: Scott Cutler and James Lucania discussed growth in core CDH bundle, FSA accounts, and HPA as a product to drive high deductible health plan adoption, with strong uptake from enterprise clients.