HealthEquity, Inc. Q4 FY2026 earnings call

• Fiscal 2026 was a year of accelerating earnings power with strong execution, significant margin expansion, and record HSA sales. Delivered 23% adjusted EBITDA growth and over 500 basis points of adjusted EBITDA margin expansion in Q4, added 550,000 HSAs in Q4 and over 1 million for the year. • The flywheel strategy of helping members save, spend, and invest for healthcare is central. On SAVE, total HSA assets increased 14% to over $36 billion. On SPEND, expanded HSA usage with marketplace launch and supports other consumer-directed benefits. On invest, HSA investors grew 10% and invested assets represent over 50% of total HSA assets. • Member engagement via mobile platform with over 3.6 million app downloads. Expanding HSA distribution into retail healthcare channel, especially for ACA exchange bronze plan consumers. • Security progress with fraud reimbursements low and card authorization performance improved. AI central to next-gen healthcare financial OS, embedding in member experience, operational efficiency, and personalization at scale. • Launched marketplace in Q4 with early offerings in weight loss, hormone replacement therapy, and healthcare wearables, with early adoption encouraging.

In fiscal 2026, HealthEquity had strong financial performance. Revenue grew 7% year-over-year. In the fourth quarter, adjusted EBITDA grew 23% with more than 500 basis points of adjusted EBITDA margin expansion. They added a record 550,000 HSAs in the fourth quarter, resulting in more than 1 million new HSAs for the year, total accounts reached 17.8 million and HSA assets were over $36 billion. Service revenue grew 2% year-over-year, custodial revenue increased 12%, interchange revenue grew 6%. Gross profit was $228.1 million with 68% gross margin. Non-GAAP net income increased 33% and non-GAAP net income per diluted share grew 38%. In fiscal 2027, they raised guidance with expected revenue between 1.405 and $1.415 billion, GAAP net income between 239 to $246 million, non-GAAP net income between $392 and $400 million, and adjusted EBITDA between $618 and $628 million.

• Raised fiscal 2027 guidance: Revenue expected between 1.405 and $1.415 billion. GAAP net income expected between 239 to $246 million ($2.78 to $2.85 per share). Non-GAAP net income expected between $392 and $400 million ($4.56 and $4.65 per share). Adjusted EBITDA expected between $618 and $628 million. • Guidance reflects continued revenue growth, sustained margin expansion, and disciplined investment in technology, security, and sales and marketing. Assumes continued capital return and strong balance sheet, with expectation to make additional share purchases and reduce borrowings on revolver.

• Forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially, including factors in latest annual report on Form 10-K and subsequent periodic reports. • Impact of interest rate volatility on HSA cash deposit contracts and forward interest rate hedges. • Competitive landscape and potential pricing pressure, though retention and market share growth are noted. • Uncertainty around the pace and extent of member adoption and engagement with new marketplace offerings.

Q: Mark Marcon with Baird asked about gross margin expansion and engagement with early marketplace users.

A: Scott Cutler said they're proud of fraud cost reduction and progress on service cost per account, driving efficiencies through AI. On marketplace, early engagement is positive with pleased retention of members in early programs.

Q: Stan Burnside with Wells Fargo asked about conversion from ACA cohort and plans with asset resets.

A: Scott Cutler and Steve Nieleman said ACA cohort accounts are early, with progress in January, and plan to make it simple for bronze plan members. Jim Lucania said capital allocation philosophy remains, with free cashflow used for share repurchase and debt reduction.

Q: George Hill with Deutsche Bank asked about trends in HSA dollars toward marketplace offerings.

A: Scott Cutler said early trends are positive with significant member sign-ups, and marketplace offerings will become material revenue.

Q: Steven Valliquette with Mizuho Securities asked about macro and unemployment trends.

A: Steve Nieleman said healthcare affordability drives growth more than macro headwinds.

Q: Brian Tanquillette with Jefferies asked about organic growth and employment.

A: Scott Cutler said driving engagement via mobile app and marketplace is key, with integrated experience driving usage.

Q: Peter Warrendorf with Barclays asked about member lives from bronze plans and competitive landscape.

A: Scott Cutler said early data on bronze plan members is encouraging, with strong retention and market share growth.

Q: Alan Luz with Bank of America Securities asked about service cost breakdown and M&A.

A: Scott Cutler said service costs divided into member, client, and back office, with AI automating interactions. No correlation between AI and M&A.

Q: David Larson with BTIG asked about interest rates and HSA cash yield.

A: Jim Lucania said forward curve factors into guidance, enhanced rates migration reducing standard deviation of returns.

Q: David Roman with Goldman Sachs asked about HSA balances and investment growth implications.

A: Jim Lucania explained that new accounts drive cash growth, investment growth hits service revenue line with mid-20s basis points on invested assets.

Q: Mitch Rubin with Raymond James asked about differences in ACA retail members' balances and engagement.

A: Scott Cutler said cohort is early, but pleased with contribution behavior so far.