HealthEquity NASDAQ: HQY raised its fiscal 2027 outlook after reporting higher first-quarter profitability, record revenue in key categories and expanded margins, with management pointing to account growth, deeper member engagement and operating efficiencies from technology and artificial intelligence.
President and CEO Scott Cutler said the company delivered “disciplined execution” in the quarter, including an adjusted EBITDA margin of 46%. He said HealthEquity is benefiting from a structural shift as rising healthcare costs push employers and consumers toward health savings accounts and related financial tools.
“Healthcare affordability remains among the biggest financial challenges families face, while rising healthcare costs are driving a structural shift among employers that continues to expand the overall market,” Cutler said.
Revenue Rises as Custodial Income Reaches Record Level
Executive Vice President and CFO James Lucania said first-quarter revenue increased 7% year over year. Service revenue reached a record $122.9 million, up 3%, supported in part by Marketplace activity. Custodial revenue rose 11% to a record $174.3 million, while interchange revenue increased 5% to $57.4 million, reflecting higher member spending and transaction activity.
The annualized yield on HSA cash was 3.84%, aided by higher replacement rates, increased participation in enhanced rates and a one-time breakage fee from a depository partner that exited a custodial cash contract early. Excluding that one-time revenue, Lucania said the annualized yield would have been 3.78%.
Gross profit was a record $256.3 million, or 72% of revenue, compared with 68% in the prior-year period. GAAP net income was $69.4 million, or $0.82 per diluted share. Non-GAAP net income was $105.1 million, or $1.24 per diluted share. Adjusted EBITDA increased 17% year over year to $164.5 million.
Lucania said service costs included about $0.3 million of fraud reimbursements to members, down from roughly $3.2 million in the same quarter last year, reflecting improved fraud prevention and detection capabilities and greater adoption of secure mobile tools.
HSA Assets, Investors and Mobile Engagement Grow
Cutler said total HSA assets grew 19% in the quarter. New HSAs from sales increased 15%, adding 172,000 new HSAs to the platform. Total HSA growth was 8%, which Cutler said outpaced Devenir’s reported market growth of 6% for calendar 2025.
Cutler said HSA investors grew 18%, while invested assets held by HSA members increased 38%. He noted that only about 10% of HSAs use the full tax benefits of investing industrywide, which management views as a long-term opportunity.
Mobile engagement also expanded, with mobile monthly active usage up 90% year over year. Cutler said more than two-thirds of Marketplace transactions during the quarter occurred through the mobile app.
Management described the company’s strategy as building a broader healthcare financial platform rather than operating solely as an administrator. Cutler said HealthEquity aims to connect accounts, assets, payments, investing, Marketplace, digital engagement, advisory capabilities and service into what he called “the healthcare financial operating system” for members and clients.
Marketplace Expands Into New Categories
Marketplace remained a central topic on the call. Cutler said the platform is helping more than 10,000 members access health-related programs and products, and that HealthEquity recently expanded into diagnostics and men’s health.
In response to analyst questions, Cutler said Marketplace does not depend on traditional marketing spending in the same way as e-commerce sites. Instead, he said growth is tied to member engagement and driving users into the mobile and portal experience.
Cutler said the metabolic health program, which provides access to weight-loss services, has been the most active of the early Marketplace offerings. He said the program generates administrative fees of about $90 to $100 per participating member per month. He also said the men’s health offering, including TRT, saw rapid early adoption after launch, with economics “north of $50” per participating member per month.
Lucania said Marketplace revenue is included in the company’s updated outlook, but management is not yet breaking out Marketplace revenue separately. Cutler said it will take time before Marketplace becomes material relative to total company revenue.
AI and Automation Drive Service Efficiencies
Cutler said HealthEquity is applying technology and AI to improve service speed, strengthen security and reduce cost to serve. During the quarter, AI-driven tools reduced manual handling of member and client service emails by 25%. In targeted workflows such as card servicing and claims inquiries, AI-enabled automation reduced manual effort by more than 90% and accelerated processing times by up to 50%, he said.
AI-enabled self-service and automation contributed to more than 50,000 fewer card-related service center contacts. Cutler also said fraud remained below target, card acceptance improved and fraud costs declined nearly 90% from the first quarter of last year.
On the call, Cutler said the company is reducing contacts by improving product quality, expanding self-service and automating common member journeys such as card replacement, balance checks and claims-related processes. He said HealthEquity is still early in applying AI to client integrations and claims automation.
Lucania said the company’s AI-related investments are primarily reflected in technology development costs, while benefits are showing up in reduced service costs. He said broader internal use of AI tools may eventually cause those costs and benefits to be distributed across more departments.
Guidance Raised, Share Repurchase Authorization Increased
HealthEquity raised its fiscal 2027 guidance. The company now expects:
- Revenue between $1.41 billion and $1.42 billion.
- GAAP net income of $242 million to $248 million, or $2.88 to $2.95 per share.
- Non-GAAP net income of $392 million to $398 million, or $4.66 to $4.73 per share.
- Adjusted EBITDA of $625 million to $633 million.
The outlook assumes about 84 million shares outstanding for the year and a GAAP and non-GAAP income tax rate of approximately 25%.
Lucania said the company ended the quarter with $265 million in cash, generated $98 million of operating cash flow and had approximately $943 million of debt outstanding net of issuance costs. HealthEquity repurchased about $123 million of shares during the quarter. The board also increased the company’s share repurchase authorization by $1 billion.
Lucania said HealthEquity expects to remain an active buyer of its shares while maintaining capacity for potential portfolio acquisitions if attractive opportunities become available. Cutler said the expanded authorization reflects management’s confidence in the company’s long-term cash generation and growth outlook.
Management also discussed HSA cash maturities, noting $3.2 billion of remaining HSA cash contracts maturing in fiscal 2027, weighted toward the back half of the year. Lucania said the company has forward Treasury contracts that effectively lock in five-year Treasury rates at about 3.9% net of costs on $3.5 billion of maturities across fiscal 2027 through fiscal 2029. The company now expects average yield on HSA cash of approximately 3.85% in fiscal 2027.
About HealthEquity NASDAQ: HQY
HealthEquity, Inc NASDAQ: HQY is a leading administrator of consumer-directed health accounts and related benefit solutions in the United States. Founded in 2002 and headquartered in Draper, Utah, the company specializes in health savings accounts (HSAs) and offers complementary services such as flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), COBRA administration and commuter benefits. Through its technology-driven platform, HealthEquity enables employers, health plans and individuals to streamline account management, improve cost transparency and encourage more informed healthcare spending.
Serving millions of members across all 50 states, HealthEquity leverages an open-architecture ecosystem that integrates with health plans, payroll providers and financial institutions.
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