HEALTHEQUITY, INC.

HealthEquity operates in the technology-enabled healthcare services industry, specifically focused on administering tax-advantaged health savings accounts (HSAs) and other consumer-directed benefits (CDBs) such as flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), COBRA, and commuter benefits. The company serves the U.S. market, reaching consumers primarily through relationships with their employers, which it calls Clients, and through a network of more than 200 Network Partners, including health plans, benefits administrators, and retirement plan recordkeepers. The industry is characterized by rapid technological change, evolving customer needs, and the entrance of non-traditional competitors, with the company's success dependent on the willingness of consumers to increase their use of HSAs and CDBs.

HealthEquity has established a leadership position in the HSA industry, increasing its market share measured by HSA Assets from 4% in December 2010 to 20% as of June 2025. According to the 2025 Midyear Devenir HSA Research Report, as of June 2025, the company was the largest HSA provider by number of accounts and the second largest HSA provider by HSA Assets. The company also believes it is the largest provider of other CDBs. Primary competitors named include Fidelity Investments, UnitedHealth Group's Optum, and Webster Bank. Competitive advantages cited include a differentiated consumer experience driven by its 'Purple' culture, a bundled solution for HSAs and complementary CDBs, large and diversified channel access through a B2B2C strategy, proprietary and integrated technology, a scalable operating model, and strong retention rates.

The company's core business model is a B2B2C distribution strategy, earning revenue primarily from three sources: service revenue, custodial revenue, and interchange revenue. Service revenue is mainly from fees paid by Clients, Network Partners, and members for administration services, including fees from invested HSA Assets and the marketplace. Custodial revenue is primarily from HSA cash held by insurance company partners and Depository Partners, and Client-held funds. Interchange revenue is from fees paid by merchants on member payment card transactions. The business model provides strong visibility into future operating performance, with the vast majority of accounts opened before the start of the fiscal year.

The core offering is the HSA, a tax-advantaged financial account for saving, spending, and investing healthcare dollars. As of January 31, 2026, the company administered 10.6 million HSAs ¹ with balances totaling $36.5 billion ² in HSA Assets, and 7.2 million complementary CDBs ³, for a total of 17.8 million Total Accounts ⁴. The company offers an investment platform and an online-only automated investment advisory service called Advisor, delivered by its SEC-registered investment adviser subsidiary, HealthEquity Advisors, LLC. Members can access three levels of service: Self-driven, GPS (guidance and advice), and AutoPilot (managed account). The company also administers healthcare FSAs, dependent care FSAs, HRAs, COBRA, and commuter benefit programs. A marketplace provides HSA and FSA members access to certain healthcare products and services through third-party partners.

In fiscal 2025, the company acquired the BenefitWallet HSA portfolio, comprising approximately 616,000 HSAs plus other accounts ⁵ which collectively totaled $2.7 billion of HSA Assets ⁶, from Conduent Business Services, LLC for a purchase price of $425.0 million ⁷. The purchase price was paid using $225.0 million ⁸ of borrowings under the revolving credit facility, with the remainder paid using cash on hand. During the fiscal year ended January 31, 2026, the company used $299.3 million ⁹ of cash for common stock repurchases and prepaid $100.0 million ¹⁰ under its Credit Agreement. In June 2025, the board authorized a new $300 million ¹¹ common stock repurchase program (the 2025 Stock Repurchase Program), supplementing a prior $300 million ¹² program approved in August 2024.

For the fiscal year ended January 31, 2026, total revenue was $1,313.429 million ¹³, a 9% increase from $1,199.774 million ¹⁴ in the prior year. Net income was $215.201 million ¹⁵, a 123% increase from $96.703 million ¹⁶ in the prior year. Diluted EPS was $2.46 ¹⁷ compared to $1.09 ¹⁸ in the prior year. Gross profit increased to $913.116 million ¹⁹ from $777.259 million ²⁰, and gross margin improved to 70% from 65%. Adjusted EBITDA was $565.984 million ²¹, a 20% increase from $471.751 million ²² in the prior year. Cash and cash equivalents were $318.927 million ²³ as of January 31, 2026, compared to $295.948 million ²⁴ as of January 31, 2025.

The company expects service revenue to continue to increase, primarily due to increases in Total Accounts and HSA investments, partially offset by lower average service fees per account. For the fiscal year ending January 31, 2027, the company expects service costs to remain relatively steady as further operational efficiencies are expected to largely offset higher costs resulting from an increase in Total Accounts. The company expects its cost of revenue to decrease as a percentage of total revenue, primarily due to an increase in custodial revenue, partially offset by costs resulting from an increase in Total Accounts.

A key growth vector is the expansion of HSA availability under the 'One Big Beautiful Bill Act,' signed into law in July 2025, which expanded HSA eligibility to individuals with Bronze and Catastrophic health plans and to include a broader range of healthcare services. The company expects to increase sales and marketing expenses to focus on brand awareness and Client and member engagement programs, including campaigns to reach individuals who are newly eligible for HSAs under this legislative expansion. Another growth vector is the continued transition of HSA cash from Basic Rates contracts to the Enhanced Rates offering, which positively impacts custodial revenue as the company generally earns a higher yield on HSA cash held by insurance company partners. The percentage of HSA cash held in Enhanced Rates increased from 49% as of January 31, 2025 to 58% as of January 31, 2026 ²⁵.

The company expects its average annualized yield on HSA cash to further increase as remaining existing agreements with Depository Partners are renewed or replaced with agreements with higher rates, resulting in higher custodial revenue. The average annualized yield on HSA cash increased from 3.11% for the fiscal year ended January 31, 2025 to 3.53% for the fiscal year ended January 31, 2026 ²⁶. On an annual basis, the company expects custodial costs to increase due to an increase in average daily HSA cash and an increase in the average annualized rate of interest retained by HSA members on HSA cash. The company expects general and administrative expenses to increase as a percentage of total revenue, primarily due to the normalization of stock-based compensation expense and additional demands on legal, compliance, and finance functions.

The company is currently investing in a modernization of its proprietary technology platforms to support new opportunities and enhance security, privacy, and platform infrastructure, while maintaining existing applications, features, and services. The company expects to continue its current level of capital expenditures during the fiscal year ending January 31, 2027 as it continues to invest in improving the architecture and functionality of its proprietary systems. Capital expenditures for the fiscal years ended January 31, 2026 and 2025 were $48.5 million ²⁷ and $53.2 million ²⁸, respectively. The company expects technology and development expenses to increase as it continues to invest in the development and security of its proprietary technology, including the ongoing modernization project.

Capital expenditures for the fiscal years ended January 31, 2026 and 2025 were $48.5 million ²⁹ and $53.2 million ³⁰, respectively. The company expects to continue its current level of capital expenditures during the fiscal year ending January 31, 2027. As of January 31, 2026, $177.7 million ³¹ of common stock remained authorized for repurchase under the company's 2025 Stock Repurchase Program. The company has no current plans to pay dividends on its common stock.

A sustained decline in prevailing interest rates would negatively impact the company's business by reducing the yield realized on HSA Assets and other Client-held funds. The company's custodial revenue from fees earned from insurance company partners and Depository Partners comprised approximately 48% of revenues during the fiscal year ended January 31, 2026 ³². The company is subject to extensive, complex, and rapidly changing federal and state laws and regulations, and any diminution in, elimination of, or change in the availability of tax benefits for HSAs and other CDBs would materially adversely affect the company. The company faces significant competition from well-known retail investment companies such as Fidelity Investments, which have gained significant market share and have advantages in brand name recognition and experience managing tax-advantaged retirement accounts.

A decline in interest rates would materially reduce the company's custodial revenue, which comprised approximately 48% of revenues during the fiscal year ended January 31, 2026 ³³, as the company earns a substantial portion of revenue from fees from insurance company partners and Depository Partners. Any diminution in, elimination of, or change in the availability of tax benefits for HSAs and other CDBs would materially adversely affect the company, as substantially all of its revenue is earned from these tax-advantaged accounts. The company faces significant competition from well-known retail investment companies such as Fidelity Investments, which have gained significant market share and have advantages in brand name recognition and resources. The company is subject to extensive and complex federal and state regulations, and failure to comply with privacy and data security laws such as HIPAA and GLBA could result in substantial financial and reputational harm. The company's substantial debt of $961.875 million ³⁴ in principal amount as of January 31, 2026, including $600 million ³⁵ of 4.50% Senior Notes due 2029 and $361.875 million ³⁶ outstanding under its Revolving Credit Facility, could limit its ability to fund operations and expose it to interest rate volatility.

Management's message emphasizes the company's leadership and innovation in providing technology-enabled services that empower consumers to make healthcare saving, spending, and investing decisions. The strategic priorities emphasized for the period ahead include continuing to invest in the modernization of proprietary technology platforms, increasing the use of AI tools and technologies to improve customer service and lower costs, and focusing on brand awareness and member engagement programs, including campaigns to reach individuals newly eligible for HSAs under the recent legislative expansion. Management also highlights the expectation that the average annualized yield on HSA cash will further increase as remaining existing agreements with Depository Partners are renewed or replaced, and that the percentage of HSA cash held in the Enhanced Rates offering will continue to increase, positively impacting custodial revenue.