HealthEquity, Inc.

What they do

HealthEquity administers HSAs, FSAs, HRAs, COBRA, commuter and other consumer-directed benefits (CDBs) for employers, which it calls Clients, reaching them largely through benefits brokers and more than 200 Network Partners such as health plans and retirement plan recordkeepers. As of July 31, 2026 it administered 10.7 million HSAs with $37.9 billion in HSA Assets and 7.0 million complementary CDBs, for 17.8 million Total Accounts. It earns revenue from three sources: service fees from Clients, Network Partners and members; custodial revenue on HSA cash and Client-held funds held by insurance company and depository partners; and interchange fees on member card and virtual payments. It is an IRS-approved non-bank custodian of member HSAs and also offers payment processing, a healthcare marketplace, and investment advice.

Revenue drivers

• Custodial revenue — Earned primarily on HSA cash held by insurance company partners and federally insured Depository Partners and on Client-held funds; at $175.9 million in the quarter ended July 31, 2026, it was the largest of the three revenue lines.
• Service revenue — Fees paid by Clients, Network Partners and members for administration of HSAs and CDBs, plus revenue from invested HSA Assets and the marketplace; $124.4 million in the quarter ended July 31, 2026.
• Interchange revenue — Merchant fees on payments made with members' physical cards and the virtual payment system; $50.4 million in the quarter ended July 31, 2026, the smallest of the three lines.
• Client-held funds — Deposits held on behalf of Clients to facilitate CDB administration, from which the company generates custodial revenue; $0.9 billion as of July 31, 2026.

Recent performance

For the second quarter ended July 31, 2026, revenue rose 8% to $350.7 million from $325.8 million a year earlier, split into service revenue of $124.4 million, custodial revenue of $175.9 million, and interchange revenue of $50.4 million. Net income increased 10% to $65.6 million, or $0.78 per diluted share, from $59.9 million, or $0.68, and net income margin rose to 19% from 18%. Adjusted EBITDA increased 11% to $167.0 million, or 48% of revenue, up from 46%. Total HSA Assets grew 14% year over year to $37.9 billion, including $17.4 billion of HSA cash and $20.6 billion of HSA investments, and new HSAs from sales were 202 thousand, up 24%. The company repurchased 1.2 million shares for $108.1 million in the quarter, leaving $948.4 million authorized.

Strategy

HealthEquity describes its model as highly visible, with the vast majority of accounts opened before the start of the fiscal year, and it differentiates on service culture, product breadth, ecosystem connectivity and proprietary technology. It has grown share from 4% of the HSA market by HSA Assets in December 2010 to 20% as of December 2025, ranking first by accounts and second by HSA Assets per Devenir. In fiscal 2025 it acquired the BenefitWallet HSA portfolio, about 616,000 HSAs and $2.7 billion of HSA Assets, from Conduent Business Services for $425.0 million. The latest 10-Q states the company is increasingly using AI both to improve customer service and engagement and to increase efficiencies, and it continues to return capital through repurchases.

Risks

• Tax-benefit dependence — Substantially all revenue comes from tax-advantaged HSAs and CDBs, so any law limiting or eliminating those tax benefits would have a material adverse effect.
• Depository and insurance partner risk — As a non-bank custodian it relies on insurance company partners and federally insured Depository Partners to hold HSA cash, and HSA cash held through insurance company partners is not federally insured, leaving members exposed to partner failure.
• Concentration in employer channel — Consumers are reached primarily through employer Clients and broker/Network Partner relationships, so loss or disruption in those channels would slow account growth.
• Acquisition integration — The company's own forward-looking statements flag risks around integrating acquired businesses, including the BenefitWallet portfolio, and realizing anticipated synergies.

Outlook

For the fiscal year ending January 31, 2027, management raised guidance and now expects revenues of $1.411 billion to $1.421 billion, net income of $242 million to $248 million ($2.88 to $2.96 per diluted share), and non-GAAP net income of $392 million to $398 million ($4.66 to $4.73 per diluted share on an estimated 84 million diluted shares). Adjusted EBITDA is expected at $628 million to $636 million. Management said the quarter's record Adjusted EBITDA margin, accounts and assets give it confidence to raise guidance and enter the second half focused on scaling efficiently.