HealthEquity (HQY) Q4 2026 Earnings Transcript

Image source: The Motley Fool.
Date
Tuesday, March 17, 2026, at 4:30 p.m. ET
Call Participants
-
President and Chief Executive Officer — Scott Cutler
-
Vice Chair and Founder — Dr. Steve Neeleman
-
Executive Vice President and Chief Financial Officer — James Lucania
-
Investor Relations — Richard Putnam
Need a quote from a Motley Fool analyst? Email [email protected]
Full Conference Call Transcript
Operator: Good afternoon. And welcome to the HealthEquity, Inc. Fourth Quarter and Full Year 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please note this event is being recorded. I would now like to turn the conference over to Richard Putnam. Please go ahead.
Richard Putnam: Thank you, Gary. Hello, everyone. Thank you for joining us this afternoon. This is HealthEquity, Inc.'s fourth quarter fiscal 2026 earnings conference call. My name is Richard Putnam. I do Investor Relations for HealthEquity, Inc. Joining me today are Scott Cutler, President and CEO, Dr. Steve Neeleman, Vice Chair and Founder of the company, and James Lucania, Executive Vice President and CFO. Before I turn the call over to Scott for our prepared remarks, we note that the press release announcing our fourth quarter financial results was issued after the market closed this afternoon, and that it includes certain non-GAAP financial measures that we will reference here today.
You can find a copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures, on our Investor Relations website, which is ir.healthequity.com. Our comments and responses to your questions reflect management's view as of today, March 17, 2026, and they will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, or other information that might be considered forward-looking. There are many important factors relating to our business which could affect our results. Forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from results from statements made here today.
We caution against placing undue reliance on these forward-looking statements, and we encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stock as detailed in our latest annual report on Form 10-K, which was filed just today, and subsequent periodic reports filed with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. With that out of the way, let's go to Scott.
Scott Cutler: Thanks, Richard, and we welcome everybody for joining us today. I'll begin with our fiscal 2026 results and the strategic progress positioning us for fiscal 2027, Steve will address the regulatory environment, and Jim will walk through our financials and raised fiscal 2027 outlook. Fiscal 2026 was a year of accelerating earnings power for HealthEquity, Inc. as we delivered strong execution, significant margin expansion, and record HSA sales. We are proud of the team's execution and the progress we are making building this platform for the long term.
In the fourth quarter, we delivered 23% adjusted EBITDA growth and more than 500 basis points of adjusted EBITDA margin expansion while adding a record 550,000 HSAs, resulting in more than 1,000,000 new HSAs from sales for the year, bringing total accounts to 17,800,000 and HSA assets to more than $36,000,000,000. Revenue grew 7% year over year and net income increased 89% to $49,700,000. Non-GAAP net income increased 33% and non-GAAP net income per diluted share grew 38% reflecting meaningful margin expansion. What you see in these results is the operating leverage inherent in the HealthEquity, Inc. platform as assets, engagement, and automation scale.
We also returned more than $300,000,000 to our shareholders through our share repurchase program in fiscal 2026, reducing diluted shares outstanding by approximately 3%. At the center of our strategy is a flywheel helping members save, spend, and invest for healthcare. As engagement deepens across each dimension, the model becomes more valuable and more efficient. Greater engagement drives spending, balances, and long-term earnings power. We advanced each component in fiscal 2026. On save, total HSA assets increased 14% to more than $36,000,000,000, reinforcing the long-term value embedded in the platform. Importantly, asset growth continues to outpace account growth, reflecting higher balances per member and deeper engagement.
On spend, we expanded the way members can use their HSAs by launching our market. Beyond HSAs, our platform also supports flexible spending accounts and commuter benefits, giving employers a single destination to administer the full spectrum of consumer-directed benefits. And on the invest component, HSA investors grew 10% year over year and invested assets now represent more than 50% of total HSA assets. Importantly, about 95% of HSA members still do not reach contribution limits and over 90% have not yet invested, creating significant opportunity for engagement-driven growth. Member engagement increasingly happens through our mobile platform. We now have more than 3,600,000 downloads of our app, reflecting the growing adoption of digital-first healthcare.
That shift will only accelerate as younger consumers enter the system expecting to manage healthcare and finances digitally. Another advantage that becomes clear over time is the compounding value of our member cohorts. Each year we add new HSA members who grow balances, increase engagement, and become more valuable as their accounts mature. Some of the most valuable accounts on our platform today are those open more than a decade ago. The scale of our distribution is reflected in one simple fact. We added over 1,000,000 new HSAs from sales a year when the U.S. economy added just 181,000 jobs.
That is a powerful reflection of the demand for 200 network partners and over 100,000 clients supported by a member-first secure mobile experience. Built over years, that advantage compounds as accounts mature and HSA assets grow, resulting in increased revenue and cash flow for us, which in turn funds our continued investment in innovation, security, and AI. We are also expanding HSA distribution into a large new retail healthcare channel. Our direct HSA enrollment platform expands access beyond employer-sponsored plans, enabling individuals to open and fund HSAs through our mobile and web experience. That is especially relevant for consumers selecting bronze plans on ACA exchanges, where we see a meaningful new retail distribution opportunity.
As millions of households evaluate coverage options, our retail capabilities position us to capture incremental adoption. More broadly, healthcare affordability pressures continue to drive adoption of consumer-directed healthcare. As we previously shared, a third-party study across nearly 1,000,000 employees from several of our largest employer clients found that higher HSA adoption correlated with significantly lower per-employee healthcare costs while employees save more on premiums and taxes and grew their HSA balances. HSAs are becoming core infrastructure for how Americans plan and pay for healthcare. With that structural tailwind, trust remains foundational. On security, we continue to make measurable progress.
In the fourth quarter, fraud reimbursements totaled approximately $300,000, putting our exit rate run rate at 0.1 basis points for the quarter, well below our target of one basis point of total HSA assets annually. Our team executed the highest performance level, reducing fraud cost to approximately 1.1 basis points during the fiscal year, placing HealthEquity, Inc. in the top percentile among comparable portfolios in the Visa network. We have also made meaningful progress improving card authorization performance, directly improving the member experience at checkout. Importantly, we are strengthening account protection while simplifying the member experience. Early-stage fraud detection has improved, false positives have declined, and authorization rates continue to strengthen.
At the same time, passkey authentication is eliminating traditional passwords, enhancing security while simplifying account access, protecting members while preserving interchange economics. In a category where trust is everything, we are proving security and seamless experience can scale together. With that foundation in place, we have begun building the next-generation healthcare financial operating system, and AI is central to that evolution. AI will enable us to move from a phone- and manual-based service experience to a place where members are guided to resolve issues in real time across multiple channels. With 17,800,000 accounts and more than $36,000,000,000 in assets, we have the data density, transaction velocity, and integration footprint to deploy AI tools for our members responsibly.
With millions of members and a growing flow of healthcare spending moving through the platform, our data scale enables AI applications that smaller platforms cannot easily replicate. AI will allow us to scale member engagement while lowering the cost to serve across the platform. We are embedding AI in three ways. First, elevating the member experience. As mentioned previously, our expedited claims solution has begun delivering faster reimbursements to members. HSA Answers and HealthEquity Assist are evolving into intelligent contextual support tools that guide members from voice to agentic chat and digital channels. Second, driving operational efficiency. We are already seeing impact as AI-driven automation reduces service costs while improving resolution speed.
Over time, we expect AI-enabled self-service to help members resolve more needs directly within defined workflows, reducing reliance on live service interactions. Third, unlocking personalization at scale. Over time, we expect members to be able to use our AI applications to optimize contributions, identify tax savings opportunities, and make more informed spending and investing decisions. AI is becoming an earnings engine for HealthEquity, Inc., improving member experience while helping lower costs to serve and increase lifetime value per account over time. Additionally, that same intelligence will continue to extend beyond service to how members discover and access healthcare programs and products.
That growing flow of healthcare spending creates an opportunity to help members discover and access services directly through our platform. Across the entire industry, Americans spent more than $40,000,000,000 from HSA accounts last year on qualified healthcare. More importantly, they more than replenished those funds by contributing more than $55,000,000,000, growing their HSA balances. As more healthcare spending moves through the platform, we see additional opportunities to bring more value to our members over time. In the fourth quarter, we launched our marketplace with early offerings focused on weight-loss programs, hormone replacement therapy, and healthcare wearables. Globally, these categories are experiencing rapid consumer adoption with an estimated total market spend of more than $100,000,000,000.
Over time, we expect to expand our marketplace with additional products, programs, services, and partners. Our marketplace expands engagement inside the HSA while introducing new recurring revenue streams and increasing the share of healthcare spend flowing through our platform. Early adoption has been encouraging. We see strong initial retention rates among participating members. We are also seeing an increasing number of merchants highlighting HSA and FSA eligibility at checkout as a way to increase conversion and drive sales, reinforcing the growing role of tax-advantaged healthcare spending. All of this reinforces the operating leverage visible in our results. We enter fiscal 2027 as a three-year member of the exclusive Rule of 50 club.
Members of this exclusive club deliver the sum of revenue growth and adjusted EBITDA margin in excess of 50. This is a designation typically associated with category-leading companies, and it is even more rare to see them sustained for longer periods of time. Based on guidance that Jim will provide in detail in a moment, we intend to make it four years in a row. That is the power of this model. As engagement, assets, and automation scale, earnings scale with them. As more Americans save, spend, and invest through HSAs, our flywheel strengthens. Accounts grow, assets deepen, engagement expands, and operating leverage follows.
As we scale distribution, growing assets, expanding engagement, and an AI-enabled platform, HealthEquity, Inc. is building the financial infrastructure for how Americans will pay for healthcare. With that, I will turn it over to Steve to walk through the policy landscape. Steve?
Steve Neeleman: Thank you, Scott. The policy environment for HSAs is the most constructive it has been in two decades. We believe we are at a genuine inflection point with healthcare affordability at the center of the conversation. Last year's Working Families Tax Cut Act, also known as the one big beautiful bill, expanded HSA eligibility to Americans selecting bronze plans offered on ACA exchanges. This law is the most significant structural change to the HSA market since the accounts were created. For the first time, millions of households purchasing coverage through the exchanges compare their plans with an HSA and access the same triple tax advantages that employer-sponsored participants have long benefited.
This is a meaningful democratization of a tool that has historically skewed towards employer-covered workers. We continue to work closely with our health plan partners to simplify the process to enroll bronze plan members into HSAs. Beyond the ACA exchange expansion, we are encouraged by the broader legislative momentum. The current administration has put forth a healthcare proposal that includes HSAs as a core component, and several members of Congress have introduced legislation aimed at further expanding HSA eligibility. We are actively engaged with policymakers on both sides of the aisle to share what we see in the real world, how HSAs reduce per-employee healthcare costs, grow member savings, and give families genuine control over their healthcare spending.
With HSAs, employers do not need to choose between saving money on benefits and ensuring healthcare financial security for their employees, they can have both. HealthEquity, Inc.'s scale and close partnerships position us well to convert this policy momentum into growth. When legislative changes create new eligible populations, our more than 200 network partners and 100,000 clients allow us to move quickly, educating and enrolling newly