HealthEquity (NASDAQ:HQY) executives emphasized accelerating earnings power and expanding operating leverage during the company’s fiscal fourth-quarter 2026 earnings call, pointing to record HSA sales, margin expansion, and improving security and service efficiency. Management also raised its fiscal 2027 outlook, citing momentum in new accounts and assets alongside increased visibility into the year ahead.
Fourth-quarter results highlight margin expansion and record HSA sales
President and CEO Scott Cutler said fiscal 2026 showed “accelerating earnings power” as HealthEquity delivered “strong execution, significant margin expansion and record HSA sales.” In the fiscal fourth quarter, the company added a record 550,000 HSAs and ended the year with more than 1 million new HSAs from sales, bringing total accounts to 17.8 million and HSA assets to more than $36 billion.
CFO James Lucania provided additional detail, reporting fourth-quarter revenue of $334.6 million, including service revenue of $127.1 million (up 2%), custodial revenue of $161.4 million (up 12%), and interchange revenue of $46.1 million (up 6%). Gross profit was $228.1 million and gross margin rose to 68% from 61% a year earlier, which Lucania said reflected reduced fraud costs and continued service efficiency. Adjusted EBITDA was $132.9 million, up 23% year-over-year, and adjusted EBITDA margin expanded more than 500 basis points to 40%.
Platform strategy centers on “save, spend, invest” flywheel and digital engagement
Cutler reiterated HealthEquity’s strategy around a “flywheel” to help members save, spend, and invest for healthcare. He said total HSA assets grew 14% to more than $36 billion, and asset growth continues to outpace account growth, reflecting higher balances per member and deeper engagement.
On spending, Cutler highlighted the launch of HealthEquity’s Marketplace in the fourth quarter, which initially includes weight loss programs, hormone replacement therapy, and healthcare wearables. He described early adoption and retention among participating members as encouraging, while also stating that fiscal 2027 guidance does not incorporate “material Marketplace revenue.” Over time, the company expects to add products, services, and partners, with the goal of expanding engagement and introducing recurring revenue streams.
On investing, management said HSA investors grew 10% year-over-year and invested assets now represent more than 50% of total HSA assets. Cutler pointed to what he described as a large engagement opportunity, saying about 95% of HSA members still do not reach contribution limits and over 90% have not invested.
Mobile adoption remains a key focus. Cutler said the company has more than 3.6 million app downloads and expects digital-first behavior to grow as younger consumers enter the system. In response to questions, management emphasized that increased mobile engagement is foundational to improving member journeys and enabling more self-service interactions.
Security progress and AI-driven service efficiency
Executives devoted significant time to security, fraud, and service costs. Cutler said fourth-quarter fraud reimbursements were about $0.3 million, and the exit-rate run rate was 0.1 basis points for the quarter, below the company’s target of 1 basis point of total HSA assets annually. He said fiscal-year fraud costs were approximately 1.1 basis points and described HealthEquity’s performance as ranking in the top percentile among comparable portfolios in the Visa network.
Management also described efforts to improve card authorization performance and reduce false positives in fraud detection. Cutler said passkey authentication is helping eliminate traditional passwords, improving security while simplifying access and “preserving interchange economics.”
AI was positioned as a major driver of both experience improvements and cost reduction. Cutler said the company is embedding AI in three areas:
- Member experience: tools such as Expedited Claims, HSA Answers, and HealthEquity Assist evolving toward contextual support and more digital-first resolution paths.
- Operational efficiency: automation to reduce service costs and improve resolution speed.
- Personalization: longer-term applications aimed at helping members optimize contributions, identify tax savings opportunities, and make better spending and investing decisions.
In Q&A, management said it expects further opportunity to drive gross margin expansion through lower service cost per account, including automation not only for member service interactions but also for client processes such as implementation and onboarding. Executives also described service costs as roughly divided into thirds across member services, client services, and back office functions.
Regulatory tailwinds: expanded HSA eligibility for ACA exchange bronze plans
Vice Chair and founder Dr. Steve Neeleman said the policy environment for HSAs is the most constructive in two decades. He pointed to the Working Families Tax Cuts Act—also referred to on the call as the “One Big Beautiful Bill Act”—which expanded HSA eligibility to Americans selecting bronze plans on ACA exchanges. Neeleman described the change as the most significant structural shift since HSAs were created, and said it could bring HSA eligibility to millions of households shopping for coverage on the exchanges.
Management said the company began seeing these accounts come in starting in January tied to the enrollment season, but emphasized it is still early. Neeleman said the law was signed after plans had already been filed, making it initially difficult for consumers to know whether a plan was HSA-qualified; he said the company now has a “running head start” to simplify enrollment and integrate HSA setup with exchange plan selection through health plan partners.
Cutler also said the company sees a meaningful retail distribution opportunity, particularly for consumers selecting bronze plans, supported by HealthEquity’s direct HSA enrollment platform. In response to questions, management said early data points for the ACA cohort showed encouraging contribution behavior, though executives cautioned the cohort is only a few months old and it is too soon to assess longer-term engagement and value relative to employer-sponsored accounts.
Capital allocation, hedging, and raised fiscal 2027 outlook
Lucania said fiscal 2026 revenue was $1.313 billion, up 9.5% year-over-year. GAAP net income was $215.2 million, or $2.46 per diluted share, and non-GAAP net income was $349.8 million, or $4.00 per diluted share. Adjusted EBITDA was $566 million, up 20% year-over-year, representing a 43% adjusted EBITDA margin.
On the balance sheet, the company ended the year with $319 million in cash and generated $457 million in cash flow from operations during fiscal 2026. Debt outstanding was about $957 million net of issuance costs after paying down $25 million of the revolver in the quarter. HealthEquity repurchased about $82 million of shares in the quarter and more than $300 million for the year, reducing diluted shares outstanding by about 3% and leaving roughly $178 million remaining under its repurchase authorization.
Lucania also discussed forward rate locks and enhanced-rate contract strategy for HSA cash. He said the company ended the quarter with forward contracts on U.S. Treasury bonds with a notional amount of about $2.4 billion tied to maturities between March 2026 and January 2028, with a blended rate lock of 3.92% (excluding negotiated premiums). He said HealthEquity ended fiscal 2026 with an average yield of 3.53% on HSA cash and expects average yield of about 3.8% for fiscal 2027.
Management raised fiscal 2027 guidance, now expecting:
- Revenue: $1.405 billion to $1.415 billion
- GAAP net income: $239 million to $246 million (or $2.78 to $2.85 per share)
- Non-GAAP net income: $392 million to $400 million (or $4.56 to $4.65 per share)
- Adjusted EBITDA: $618 million to $628 million
The outlook assumes a 25% GAAP and non-GAAP tax rate and a diluted share count of 86 million, and includes continued investment in technology, security, and sales and marketing, along with ongoing capital returns and balance sheet flexibility for potential acquisitions.
In closing remarks, Cutler said the company was pleased with results for the quarter and year and remains optimistic as assets and engagement scale, which management believes will continue to expand the platform’s earnings power.
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.
