Key Takeaways:
HealthEquity posted record first-quarter revenue of $354.6 million and raised its fiscal 2027 outlook, as the HSA administrator's AI-driven cost cuts and member engagement gains pushed adjusted EBITDA margin to 46%.
"These results demonstrate that our flywheel is compounding through account and asset growth, deeper member engagement, technology-enabled efficiency, and increasing operating leverage," said Scott Cutler, president and chief executive officer of HealthEquity.
Revenue rose 7% from $330.8 million a year earlier, with custodial revenue — the largest segment — climbing 11% to a record $174.3 million. Gross profit reached $256.3 million, or 72% of revenue, up from 68% in the prior-year period. Adjusted EBITDA increased 17% to $164.5 million. GAAP net income was $69.4 million, or 82 cents per diluted share, compared with $53.9 million, or 61 cents, a year earlier.
The raised guidance reflects management's confidence that structural shifts in healthcare costs will continue driving employer adoption of HSAs and related financial tools. HealthEquity now expects full-year revenue of $1.41 billion to $1.42 billion and adjusted EBITDA of $625 million to $633 million, while the board authorized an additional $1 billion in share repurchases.
The company added 172,000 new HSAs from sales during the quarter, up 15% year over year, bringing total HSAs to 10.6 million. Total HSA assets grew 19% to $37.1 billion, with invested assets surging 38% to $19.6 billion. Mobile monthly active usage jumped 90%, and more than two-thirds of Marketplace transactions occurred through the mobile app.
HealthEquity is applying artificial intelligence to reduce service costs. AI-driven tools cut manual handling of member and client service emails by 25% during the quarter, and in targeted workflows such as card servicing and claims inquiries, automation reduced manual effort by more than 90% while accelerating processing times by up to 50%. Fraud reimbursements to members fell to about $300,000 from $3.2 million in the same quarter last year, reflecting improved fraud detection capabilities.
The company's Marketplace platform, which connects members to health-related programs, now serves more than 10,000 members. The metabolic health program — providing access to weight-loss services — generates administrative fees of about $90 to $100 per participating member per month, while a newer men's health offering produces fees north of $50 per member per month. Management said Marketplace revenue is included in the updated outlook but is not yet material enough to disclose separately.
HealthEquity ended the quarter with $265 million in cash and generated $98 million in operating cash flow. The company repurchased $123 million of shares during the period. Of the $3.2 billion in HSA cash contracts maturing in fiscal 2027, the company has forward Treasury contracts locking in five-year rates at about 3.9% net of costs on $3.5 billion of maturities through fiscal 2029.
The last time HealthEquity raised guidance by a comparable margin was in fiscal 2025, when the company benefited from higher interest rates on custodial cash and accelerating account growth. The current annualized yield on HSA cash stands at 3.84%, supported by higher replacement rates and increased participation in enhanced-rate contracts.
This article is for informational purposes only and does not constitute investment advice.
