HealthEquity, Inc. Q3 FY2026 earnings call

• Strategy: Focus on helping members save, spend, and invest for health, strengthening the flywheel in these areas. - HSA growth: Ended Q3 with over 10 million HSAs, grew net CDB accounts by over 200,000 y/y, and opened ~175,000 new HSAs in the quarter. - Marketplace: HealthEquity Marketplace platform showing early momentum, including first program supporting weight loss through GLP-1s. - AI and security: Investing in AI for personalized experiences, e.g., expedited client claims solution and integrated AI experience with Parloa; fraud costs ~$300,000 in Q3, below run rate target. - Legislative: Leaders focusing on expanding HSA use to address healthcare affordability, educating legislators on HSA benefits.

In the third quarter, revenue grew 7%. Service revenue was $123.1 million, up 1% year over year. Custodial revenue grew 13% to $159.1 million. Interchange revenue grew 6% to $42.8 million. HSAs grew 6%, CDB accounts up 3% driving total accounts up 5%, and HSA assets up 15%. HSAs represent a significant segment with over 10 million accounts, and their growth contributed to overall financial performance. Revenue contribution: Service revenue ~12.5% of total revenue, custodial revenue ~16.2%, interchange revenue ~4.4%, with HSAs and related activities being core drivers.

• Fiscal 2026 revenue expected in range $1.302 billion - $1.312 billion. - GAAP net income expected in range $197 million - $205 million or $2.24 - $2.33 per share. - Non-GAAP net income expected between $341 million and $348 million or $3.87 and $3.95 per share. - Adjusted EBITDA expected between $555 million and $565 million. - Average yield on HSA cash expected ~3.54% for fiscal 2026.

Forward-looking statements subject to risks and uncertainties due to factors affecting business, including regulatory changes, market fluctuations, and competitive pressures that could materially affect actual results.

Q: On the direct HSA enrollment platform for qualified ACA members, what are marketing plans and progression of marketing expenses?

A: Rolled out new seamless enrollment experience, using $25 match for new accounts, going to market with integrated plan partners, leaning into brand marketing and growth initiatives, with early results on contribution levels encouraging and taking a longer-term view on expenses.

Q: Follow-up on bronze Exchange plans, split of contribution from plan partners?

A: Leveraging efficient distribution channel, focusing on retail experience and educating market on bronze participant eligibility, with significant investment in retail experience to target potential members.

Q: Update on HSA market slowdown and employer shift to HSAs?

A: Employers recognizing healthcare cost rise, driving affordability strategies, with conversations with clients showing affordability strategy resonating, expecting greater adoption in 2026 compared to 2025.

Q: AI and automation investments, proportion of cost structure addressable?

A: AI has broad application across functions, with efforts focused on member services, client services, and back-office operations, with significant opportunity for further efficiencies in service delivery.

Q: App downloads and margin expansion?

A: Driving app adoption with passkey technology, reducing top call driver (forgot password), with greater app adoption expected to contribute to lower cost to serve and more efficient member engagement.

Q: M&A environment and capital allocation in fiscal 2027?

A: Continued strong cash generation, considering stock buybacks, debt repayment, and opportunistic M&A with high bar for acquisitions.