HEALTHEQUITY, INC. Q4 FY2025 earnings call

• Q4 saw strong year-over-year growth in key metrics: revenue up 19%, adjusted EBITDA up 9%, HSAs up 14%, CDB accounts up 2%, Total Accounts up 9%, and HSA Assets up 27%.
• The Assist portfolio was introduced, including Analyzer (real-time data on benefits inefficiencies), Navigator (supports informed healthcare decisions), and Momentum (AI-driven nudges for better benefits use).
• The team focused on a member-first secure mobile experience, with progress in platform consolidation, cloud migration, and AI/technology investments like expedited claims using AI.

In Q4, service revenue increased 19% to a record $124.2 million. Custodial revenue grew 37% to a record $144.1 million. Interchange revenue rose 13% to $43.5 million. HSAs grew 14%, with 9.9 million HSAs holding $32 billion in HSA Assets, up 27% year-over-year. CDB accounts grew 2% year-over-year. Total Accounts ended Q4 at 17 million.

• Fiscal 2026 revenue expected in the range of $1.28 billion to $1.305 billion.
• GAAP net income projected to be between $164 million and $179 million, or $1.85 to $2.01 per share.
• Non-GAAP net income expected between $318 million and $333 million, or $3.57 to $3.74 per share.
• Adjusted EBITDA forecasted to be between $525 million and $545 million. Expect continued sales growth, technology/security investments, and tailwinds from interest rates.

• Sophisticated fraud attacks leading to excess service expenses, with approximately $17 million in incremental service costs in Q4 due to fraud-related reimbursements and contact center activities.
• Cyber threats posing risks to member accounts and service costs, with continued investment needed in fraud prevention and security.

Q: Jefferies' Glen Santangelo asked about incremental service costs in Q4 and their cadence in fiscal '26.

A: James Lucania said it was due to sophisticated fraud actors, with costs expected to continue in the first half of fiscal '26 and normalize towards the end.

Q: Raymond James' Gregory Peters inquired about earnings guidance levers and enhanced yield percentage.

A: Scott Cutler and James Lucania discussed business growth drivers, expense management, and noted enhanced yield was 49% at year-end.

Q: Wells Fargo's Stan Berenshteyn asked about direct monetization of Assist products and partner involvement.

A: Scott Cutler explained Assist focuses on member-first experience, with Analyzer internally developed and Navigator in partnership with TALON, among others.

Q: JPMorgan's Anne Samuel asked about R&D investment thinking.

A: Scott Cutler stated no material change in R&D percentage, but priorities shifted to member-first secure mobile experience.

Q: Goldman Sachs' David Roman asked about HSA member growth trend and M&A strategy.

A: Scott Cutler discussed growth from small/medium businesses and high M&A bar for inorganic opportunities, focusing on organic growth.

Q: KeyBanc's Scott Schoenhaus asked about margin improvement cadence.

A: James Lucania and Scott Cutler said it was driven by reducing fraud-related costs and service modernization efforts.

Q: Baird's Mark Marcon asked about member and client reaction to issues and client retention.

A: Scott Cutler mentioned high retention rates in the high-90%s and strong client satisfaction despite challenges.

Q: Bank of America's Allen Lutz asked about HOPE Act progress and fraud insurance.

A: Steve Neeleman provided update on HOPE Act and bipartisan efforts, and James Lucania said fraud costs are being addressed via insurance policies.

Q: BTIG's David Larsen asked about fraud resolution and margin return.

A: Scott Cutler and James Lucania explained fraud is multifaceted, with efforts on security and controls, and margins expected to normalize in the back half of fiscal '26.

Q: BTIG's Sam Hasanov asked about EBIT growth by segment for 2026.

A: James Lucania stated no detailed segment EBIT guidance provided as the company doesn't report EBIT by segment.