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HEALTHEQUITY, INC. (HQY)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered record revenue ($330.8M) and record Adjusted EBITDA ($140.2M), with strong non-GAAP EPS of $0.97; both revenue and EPS exceeded Wall Street consensus, and management raised FY26 guidance ranges across revenue, GAAP and non-GAAP EPS, and Adjusted EBITDA .*
  • Revenue grew 15% YoY, driven by custodial revenue up 29% and interchange up 14%; gross profit rose to 68% of revenue (from 65% a year ago), reflecting pricing/mix and operating leverage .
  • Fraud-related service costs fell sharply to ~$3M from ~$11M in Q4, with management targeting a one-basis-point annualized fraud cost exit rate; retention remained “high 90s%” with no client fallout reported .
  • Guidance raised: FY26 revenue to $1.285–$1.305B (prior $1.280–$1.305B), GAAP net income to $173–$188M (prior $164–$179M), non-GAAP EPS to $3.61–$3.78 (prior $3.57–$3.74), and Adjusted EBITDA to $530–$550M (prior $525–$545M) .
  • Catalysts: continued improved fraud posture, de-risking of HSA cash repricing via forward treasury hedges (~4% base rate on $500M), and potential legislative HSA expansion that could add ~20M eligible families industry-wide .

What Went Well and What Went Wrong

What Went Well

  • Record financials: “record quarterly revenue, record Adjusted EBITDA, and increased guidance for the year,” per CEO Scott Cutler .
  • Mix and margin: custodial revenue up 29% to $156.5M; gross profit reached 68% of revenue; Adjusted EBITDA margin expanded to 42% (vs 41% LY) .
  • Fraud remediation and security: fraud costs fell to ~$3M from ~$11M in Q4; mobile-first secure authentication roll-out advancing; no enterprise client fallout with retention in the high 90s% .

What Went Wrong

  • Softer selling season: 150k new HSAs from sales in Q1, down from 194k the prior year, with management citing tougher comps and macro caution on job growth/GDP .
  • Elevated service costs remain: while improved, fraud-related costs are still above target; management expects normalization in 2H FY26, not immediately .
  • Insurance recovery timing unclear: no update reflected in outlook; fraud impacts mitigated operationally but recovery proceeds not embedded .

Financial Results

Quarterly Financials (historical comparison)

MetricQ3 FY25 (Oct 31, 2024)Q4 FY25 (Jan 31, 2025)Q1 FY26 (Apr 30, 2025)
Revenue ($USD Millions)$300.4 $311.8 $330.8
GAAP Diluted EPS ($)$0.06 $0.30 $0.61
Non-GAAP Diluted EPS ($)$0.78 $0.69 $0.97
Gross Profit ($USD Millions)$197.0 $189.0 $224.3
Gross Profit Margin %—61% 68%
Adjusted EBITDA ($USD Millions)$118.2 $107.8 $140.2
Adjusted EBITDA Margin %39% 35% 42%

YoY Snapshot (Q1 FY25 vs Q1 FY26)

MetricQ1 FY25 (Apr 30, 2024)Q1 FY26 (Apr 30, 2025)
Revenue ($USD Millions)$287.6 $330.8
GAAP Diluted EPS ($)$0.33 $0.61
Non-GAAP Diluted EPS ($)$0.80 $0.97
Adjusted EBITDA ($USD Millions)$117.4 $140.2

Segment Revenue Breakdown

Segment RevenueQ3 FY25Q4 FY25Q1 FY26
Service ($USD Millions)$119.2 $124.2 $119.8
Custodial ($USD Millions)$141.0 $144.1 $156.5
Interchange ($USD Millions)$40.3 $43.5 $54.6

KPIs and HSA Assets

KPI / AssetsQ3 FY25Q4 FY25Q1 FY26
HSAs (Millions)9.508 9.889 9.886
HSAs with investments (Thousands)717 753 770
Total Accounts (Millions)16.463 17.033 17.060
HSA Cash ($USD Billions)$16.386 $17.435 $17.066
HSA Investments ($USD Billions)$13.601 $14.676 $14.205
Total HSA Assets ($USD Billions)$29.987 $32.111 $31.271

Consensus vs Actual (Q1 FY26)

MetricConsensusActual
Revenue ($USD Millions)$322.1*$330.8
Primary EPS ($)$0.813*$0.97
EBITDA ($USD Millions)$122.3*$123.1*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (3/18/2025)Current Guidance (6/3/2025)Change
Revenue ($USD Billions)FY26$1.280–$1.305 $1.285–$1.305 Raised (low end)
GAAP Net Income ($USD Millions)FY26$164–$179 $173–$188 Raised
GAAP Diluted EPS ($)FY26$1.85–$2.01 $1.96–$2.13 Raised
Non-GAAP Net Income ($USD Millions)FY26$318–$333 $320–$335 Raised
Non-GAAP Diluted EPS ($)FY26$3.57–$3.74 $3.61–$3.78 Raised
Adjusted EBITDA ($USD Millions)FY26$525–$545 $530–$550 Raised

Assumptions include average HSA cash yield ≈3.5% and diluted share count ~88.5–89M .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25)Previous Mentions (Q4 FY25)Current Period (Q1 FY26)Trend
AI/technology initiativesLimited in PR; focus on records and guidance Expedited Claims AI, chip-enabled stacked card; mobile app >1M downloads Expanded secure mobile experience; AI claims at 7,000+ clients; chat/agent support; brokerage in app Growing emphasis; deeper deployment
Fraud/security postureNot highlighted in PR Elevated service costs (~$17M) and plan to normalize in 2H FY26; hire CSO; target 1bp Fraud costs down to ~$3M; monthly sequential improvements; app-based passkey authentication roll-out Improving; normalization targeted 2H
Custodial yields & hedgingFY26 yield outlook 3.4–3.5% Enhanced rates penetration 49%; FY26 avg yield ~3.45% FY26 avg yield ~3.5%; forward treasuries locked ~4% on $500M Yield stability; risk de-risked
Selling season/macroRecords; initial FY26 outlook Peak season strength; 1M HSAs from sales 150k new HSAs; softer YoY; cautious macro on jobs/GDP; pipeline solid Softer near-term; pipeline supportive
Legislative HSA expansionFY26 outlook notes; no legislative detail Advocacy and Assist portfolio strategy; policy optimism House budget bill provisions; potential net +20M families; multiple expansion avenues Positive optionality building

Management Commentary

  • “The HealthEquity team started fiscal 2026 with a strong first quarter that included record quarterly revenue, record Adjusted EBITDA, and increased guidance for the year” — Scott Cutler, CEO .
  • “Service costs… included approximately $3 million of fraud reimbursements… down from about $11 million in the fourth quarter last year… we believe these efforts will normalize service costs in the second half of fiscal year 2026.” — James Lucania, CFO .
  • On hedging rate risk: “We have entered into some forward treasury contracts… locking in five-year treasury base rates at approximately 4%… on $500 million of these maturities.” — CFO .
  • On HSA expansion: “These provisions could allow up to 20 million more American families to have access to the remarkable benefits provided by HSAs.” — Dr. Steve Neeleman, Vice Chair .

Q&A Highlights

  • Fraud trajectory and cost normalization: Management aims to exit FY26 at ~1bp fraud cost annualized; Q1 fraud ~$3M, monthly sequential improvement; no insurance recovery included in guidance .
  • Rate hedging and yield stability: Forward treasuries lock ~4% base rates on $500M maturities to de-risk $5.7B of repricing through FY27; FY26 HSA cash yield expected ~3.5% .
  • Selling environment: 150k new HSAs vs 194k LY; pipeline strong in enterprise/SMB; macro caution on job creation/GDP .
  • Client retention: No fallout from fraud; retention “high 90s%” year-to-date .
  • Mobile-first security: App downloads ~1.2M; moving to passwordless passkey authentication; access to platform to require mobile app before year-end .

Estimates Context

  • Q1 FY26 beat: Revenue $330.8M vs $322.1M consensus; non-GAAP EPS $0.97 vs $0.813 consensus; EBITDA slightly above consensus ($123.1M vs $122.3M). Expect upward estimate revisions to FY26 following guidance raise .*
  • FY26 consensus vs guidance: Consensus EPS ~$3.89 vs company non-GAAP EPS guide $3.61–$3.78 (midpoint $3.695); consensus revenue ~$1.3099B vs company revenue $1.285–$1.305B (midpoint $1.295B). Alignment is close on revenue; EPS consensus remains above guide midpoint, implying room for estimate convergence if fraud normalization and margin expansion materialize as planned.*

Values retrieved from S&P Global.*

FY26 Consensus vs Company Outlook

MetricFY26 ConsensusCompany Guidance (Range/Mid)
Revenue ($USD Billions)$1.3099*$1.285–$1.305 ($1.295 mid)
EPS Normalized ($)$3.889*$3.61–$3.78 ($3.695 mid)

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q1 FY26 delivered clear beats on revenue and non-GAAP EPS and improved margins, with a guidance raise across all major FY26 metrics — a positive revision signal .
  • Fraud-related service costs declined materially; the company targets further normalization in 2H FY26. Monitoring monthly fraud trends and app-authentication milestones is key for margin trajectory .
  • Rate risk de-risked via forward treasuries (~4% base rate on $500M), supporting custodial yield stability near ~3.5% FY26; watch enhanced-rate penetration and rollover schedule .
  • HSA investment adoption (HSAs with investments up 16% YoY) and interchange growth (+14%) reflect strengthening member engagement and platform utilization, supporting diversified revenue growth .
  • Selling season softness (150k new HSAs vs 194k LY) appears comp/macro-related; enterprise pipeline and SMB adoption remain constructive; monitor Q2/Q3 sales KPIs .
  • Legislative optionality: House bill could net expand HSA eligibility by ~20M families; potential multi-year TAM uplift if enacted; track Senate progress and reconciliation outcomes .
  • Valuation/estimates setup: FY26 consensus EPS modestly above guidance midpoint; further fraud normalization and service modernization could drive estimate convergence or upside if execution continues.*

Values retrieved from S&P Global.*

Sources

  • Q1 FY26 8-K earnings press release and exhibits .
  • Q1 FY26 earnings call transcript .
  • Q4 FY25 8-K press release and transcript .
  • Q3 FY25 8-K press release .
  • Press release (earnings date) .
  • Analyst consensus (S&P Global) for Q1 FY26 and FY26.*