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HEALTHEQUITY, INC. (HQY)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 revenue was $311.8M, up 19% YoY; GAAP EPS was $0.30 (flat YoY) and non-GAAP EPS was $0.69, while Adjusted EBITDA was $107.8M with margin at 35% . Custodial revenue strength (up 37% YoY) offset service cost headwinds from fraud and card processor consolidation .
  • Versus S&P Global consensus, revenue beat ($311.8M vs $305.8M*) and non-GAAP EPS missed ($0.69 vs $0.716*); Adjusted EBITDA was below consensus (company-adjusted basis) as ~$17M excess service costs compressed margins** .
  • FY26 guidance introduced: revenue $1.280–$1.305B, GAAP EPS $1.85–$2.01, non-GAAP EPS $3.57–$3.74, Adjusted EBITDA $525–$545M; average HSA cash yield assumption ~3.45% and non-GAAP tax rate 25% .
  • Strategic catalysts: record one million new HSAs from sales in FY25, HSA assets up 27% to $32.1B, and launch of the HealthEquity Assist suite (Analyzer, Navigator with TALON, Momentum) to drive enrollment, engagement, and cost-to-serve efficiency .

**Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Record-scale custodial revenue growth and higher yields: Q4 custodial revenue rose 37% to $144.1M; enhanced rate placements reached 49% of HSA cash with goal of 60% by FY27 .
  • Strong HSA and asset growth: HSAs reached 9.9M (+14% YoY) and Total HSA Assets climbed to $32.1B (+27% YoY); invested HSAs grew 23% YoY to 753k .
  • New products and AI-enabled service modernization: Assist suite launched; Expedited Claims uses AI across 7,000 clients and ~1M members; new chip-enabled stacked card rolled out, foundation for digital wallet .

What Went Wrong

  • Elevated service costs and margin compression: ~$17M excess service costs in Q4 tied to fraud reimbursement and card processor consolidation reduced gross profit and Adjusted EBITDA margin (to 35%) .
  • EPS missed consensus: non-GAAP EPS of $0.69 fell short of S&P Global consensus $0.716*, despite revenue strength** .
  • Continued near-term cost headwinds: management expects heavier-than-normal service and security costs in H1 FY26 before margins improve in H2 .

**Values retrieved from S&P Global.

Financial Results

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue ($USD Millions)$299.9 $300.4 $311.8
GAAP Diluted EPS ($)$0.40 $0.06 $0.30
Non-GAAP Diluted EPS ($)$0.86 $0.78 $0.69
Adjusted EBITDA ($USD Millions)$128.3 $118.2 $107.8
Adjusted EBITDA Margin %43% 39% 35%
Gross Margin %68% 66% 61%

Segment revenue breakdown:

Revenue Segment ($USD Millions)Q2 FY25Q3 FY25Q4 FY25
Service revenue$116.7 $119.2 $124.2
Custodial revenue$138.7 $141.0 $144.1
Interchange revenue$44.5 $40.3 $43.5

Key KPIs:

KPIQ2 FY25Q3 FY25Q4 FY25
HSAs (Millions)9.4 9.5 9.9
HSAs with investments (Thousands)711 717 753
Total Accounts (Millions)16.3 16.5 17.0
HSA Cash ($USD Billions)$16.4 $16.4 $17.4
HSA Investments ($USD Billions)$13.1 $13.6 $14.7
Total HSA Assets ($USD Billions)$29.5 $30.0 $32.1

Estimates vs actuals (S&P Global):

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue - Consensus Mean ($USD)$285.1M*$290.0M*$305.8M*
Revenue - Actual ($USD)$299.9M $300.4M $311.8M
Primary EPS - Consensus Mean ($USD)$0.699*$0.722*$0.716*
Non-GAAP Diluted EPS - Actual ($USD)$0.86 $0.78 $0.69

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance (Q4 FY25)Change
Revenue ($USD Billions)FY26$1.275–$1.295 $1.280–$1.305 Raised midpoint
GAAP Net Income ($USD Millions)FY26N/A$164–$179 Introduced
GAAP EPS ($)FY26N/A$1.85–$2.01 Introduced
Non-GAAP Net Income ($USD Millions)FY26N/A$318–$333 Introduced
Non-GAAP EPS ($)FY26N/A$3.57–$3.74 Introduced
Adjusted EBITDA ($USD Millions)FY26~41.5–42.5% of revenue (no $) $525–$545 Formalized ($)
Average HSA Cash YieldFY263.4–3.5% ~3.45% Maintained
Non-GAAP Tax RateFY26~25% ~25% Maintained
Diluted Shares (Millions)FY26~89 ~89 Maintained

Subsequent update post-Q4 (Q1 FY26): Revenue $1.285–$1.305B; GAAP net income $173–$188M; non-GAAP net income $320–$335M; Adjusted EBITDA $530–$550M .

Earnings Call Themes & Trends

TopicQ2 FY25 (Sep)Q3 FY25 (Dec)Q4 FY25 (Mar)Trend
AI/technology initiativesNew mobile app launched; Expedited Claims AI scaling; card processor migration wrapping up Continued digitization; API developer portal efforts; enhanced rates partners expanded Member-first secure mobile focus; AI claims coverage >7,000 clients/1M members; stacked chip card rollout; Assist suite launch Strengthening digital/AI adoption
Fraud/security & service costNoted operational investments; service costs held flat despite growth ~$8M excess service costs from fraud and card migration ~$17M excess Q4 service costs; heavier-than-normal costs expected in H1 FY26; margins normalizing later Elevated near term; easing by H2 FY26
Custodial yield & enhanced ratesQ2 yield ~3.1%; path to 60% enhanced rates over ~3 years Q3 yield ~3.17%; pulling forward repricings where prudent Q4 yield ~3.23%; enhanced rate mix 49%; FY26 avg yield ~3.45% Mix shifting to enhanced rates; yields stable-to-up
Interchange dynamicsInterchange up 14%; more on-platform spend Interchange up 15%; faster than account growth Interchange up 13%; continued on-platform payments Healthy usage growth
Regulatory/HOPE ActHPA launched; commentary on market need HOPE Act bipartisan momentum and paths (legislation, reconciliation, rulemaking) Continued optimism on expansion of portable health accounts Building legislative tailwinds
Sales momentum & segmentsBenefitWallet final tranche closed; 187k new HSAs; strong SMB 186k new HSAs; strong middle market; retention high 471k Q4 new HSAs; 1M FY new HSAs record; SMB-led growth Robust, record FY adds

Management Commentary

  • “Team Purple finished fiscal ‘25 in strong fashion, with record revenues...allowing us to provide our outlook for an even stronger fiscal ‘26” — Scott Cutler, CEO .
  • “Gross profit during the quarter was reduced by approximately $17M of additional service costs incurred to protect members...and to assist members during our card processor consolidation” — James Lucania, CFO .
  • “Enhanced rate placements now make up 49% of our HSA cash placements, putting us well on our way toward our goal of 60% by the end of fiscal 2027” — CFO .
  • “Assist...designed to help employers...Analyzer...Navigator (with TALON)...Momentum will nudge employees…personalized AI-driven recommendations” — CEO .
  • “We expect heavier-than-normal costs in our first two quarters...followed by better margins in the later quarters” — CFO on FY26 cadence .

Q&A Highlights

  • Service costs and fraud cadence: ~$17M Q4 excess service costs; CFO expects moderation through FY26 with normalization by H2 as security investments and digital authentication reduce call drivers .
  • Guidance sensitivities: Key levers are custodial yield progression (maturities at low legacy rates, enhanced placements) and service modernization; expense growth targeted below revenue growth .
  • Assist monetization/partners: Analyzer internally developed; Navigator with TALON; Momentum aims for AI-driven engagement; focus on enrollment/adoption/engagement .
  • R&D/tech spend: No material change in % of revenue; re-prioritization to member-first secure mobile experience; continued AI claims automation .
  • TAM expansion: HOPE Act and other pathways could expand access; bipartisan momentum noted .

Estimates Context

  • Q4 FY25: Revenue beat ($311.8M vs $305.8M*), non-GAAP EPS missed ($0.69 vs $0.716*). EBITDA consensus ($114.1M*) exceeded company Adjusted EBITDA ($107.8M), reflecting ~$17M excess service costs** .
  • Prior quarters: Revenue beats in Q2 and Q3; EPS beats vs consensus in Q2 and Q3* .
  • FY26: Consensus Primary EPS mean 3.89* sits above company’s non-GAAP EPS guidance midpoint ($3.655), implying potential downward estimate revisions unless margin normalization and yield assumptions materialize. Values retrieved from S&P Global.

**Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue momentum is intact across segments; custodial revenue and enhanced rate mix (49%) underpin earnings power even as service costs weigh near term .
  • Margin headwinds from fraud and card migration are characterized as event-driven and expected to ease by H2 FY26, supporting Adjusted EBITDA recovery .
  • FY26 guidance triangulates to revenue $1.280–$1.305B and Adjusted EBITDA $525–$545M; average HSA cash yield ~3.45% is a key underpinning .
  • Strategic product initiatives (Assist, AI claims, digital wallet) should improve engagement and lower cost-to-serve, a medium-term driver of service margin and EPS quality .
  • HSA franchise strength continues: 1M new HSAs from sales, HSAs +14% YoY, HSA Assets +27% — durable volume tailwinds for custodial and interchange lines .
  • Legislative catalysts (HOPE Act, modernization) present asymmetric upside to TAM expansion; monitor bipartisan progress and potential rulemaking .
  • Near-term trading: Watch for service cost normalization signals and enhanced rate penetration updates; medium term thesis rests on yield mix, digital/AI execution, and legislative tailwinds .