HealthEquity reported record scale across several key operating metrics during its fiscal second quarter, with HSA assets approaching $38 billion and adjusted EBITDA margin reaching an all-time high.
Revenue for the quarter ended July 31 increased 8% year-over-year to $350.7 million from $325.8 million.
Revenue consisted of $175.9 million of custodial revenue, $124.4 million of service revenue and $50.4 million of interchange revenue.
Adjusted EBITDA increased faster than revenue, rising 11% to $167 million.
Adjusted EBITDA margin consequently expanded to a record 48% from 46%, an improvement of 200 basis points.
The margin expansion indicates that HealthEquity is converting growth in accounts and assets into increasing operating leverage.
GAAP profitability also improved.
Net income increased 10% to $65.6 million from $59.9 million.
Net income margin reached 19%, compared with 18% in the prior-year quarter.
Diluted EPS increased 15% to $0.78 from $0.68.
Non-GAAP net income increased to $103.8 million from $94.6 million, while non-GAAP diluted EPS increased 15% to $1.24 from $1.08.
The company’s HSA platform reached several records.
Total HSA assets increased 14% year-over-year to $37.9 billion.
That total consisted of $17.4 billion of HSA cash and $20.6 billion of HSA investments.
The investment portion is particularly important because investment balances can deepen member relationships and potentially expand the economics of HSA accounts over time.
Total HSA accounts increased 8% to a record 10.7 million.
Approximately 900,000 of those HSAs had investments, representing a 20% year-over-year increase.
New HSAs generated through sales reached 202,000 during the quarter, up 24%.
HealthEquity ended the quarter with 17.8 million total accounts, including 7 million complementary consumer-directed-benefit accounts.
The company also continued returning capital to shareholders.
HealthEquity repurchased approximately 1.2 million shares for $108.1 million during Q2.
It had another $948.4 million remaining under its stock-repurchase authorization at the end of July.
Management raised fiscal 2027 guidance following the record quarter.
Full-year revenue is now expected between $1.411 billion and $1.421 billion.
Net income is projected between $242 million and $248 million, translating to diluted EPS of $2.88 to $2.96.
Non-GAAP net income is expected between $392 million and $398 million, or $4.66 to $4.73 per diluted share.
Adjusted EBITDA guidance was increased to $628 million to $636 million.
HealthEquity’s quarter demonstrates an attractive combination of account growth, asset growth and margin expansion.
HSA assets increasing 14% against 8% revenue growth also suggests that the scale of assets under custody is growing materially faster than current reported sales.
Meanwhile, record adjusted EBITDA margin provides evidence that technology-enabled efficiency and operating leverage are increasingly contributing to the bottom line.
KEY QUOTES:
“HealthEquity delivered a record-setting second quarter, with record Adjusted EBITDA margin of 48%, record HSA accounts of 10.7 million and record HSA Assets of nearly $38 billion.”
“These results reflect strong execution across the business and the durability of our model as growth comes from more places, member relationships deepen and technology-enabled efficiency improves how we serve members and clients.”
“This momentum gives us confidence to raise fiscal 2027 guidance and enter the second half focused on scaling efficiently and creating long-term value.”
Scott Cutler, President and Chief Executive Officer of HealthEquity
