HealthEquity (NASDAQ:HQY) reported accelerated revenue growth and record profitability in its fiscal 2027 second quarter, citing HSA account expansion, higher member engagement and technology-driven service efficiencies. The company raised its full-year outlook after generating record adjusted EBITDA margin of 48%.
“Q1 demonstrated that the model is scaling, and Q2 showed that the model is becoming more durable,” President and CEO Scott Cutler said, pointing to stronger operating cash flow, disciplined capital allocation and lower service costs as health savings account, or HSA, accounts reached 10.7 million.
Revenue, Profit and Cash Flow
Gross profit totaled a record $258 million, representing about 74% of revenue, compared with 71% a year earlier. GAAP net income was a record $65.6 million, or $0.78 per diluted share. Non-GAAP net income was $103.8 million, or $1.24 per diluted share.
Lucania said the quarter included $3.3 million of one-time disposal expense related to internally developed software that is no longer in use. Adjusted EBITDA rose 11% year over year to a record $167 million, while adjusted EBITDA margin expanded to 48% from 46% in the prior-year quarter.
For the first six months of fiscal 2027, HealthEquity reported revenue of $705.4 million, up 7% year over year, and adjusted EBITDA of $331.5 million, up 14%. First-half adjusted EBITDA margin was 47%.
The company ended the quarter with $256 million in cash and generated $136 million in operating cash flow. Debt outstanding, net of issuance costs, was approximately $931 million.
HSA Growth and Member Engagement
HealthEquity said total HSA assets grew 14% year over year, total HSAs increased 8%, and new HSAs from sales rose 24%. New sales set a second-quarter record and marked the company’s strongest quarter outside the fourth-quarter open-enrollment period, according to Cutler.
Client renewals are on pace to remain above 90% for the full year, he said. Management attributed account growth to a mix of expansion within existing clients, health-plan and broker partnerships, direct channels, individual and family plans, and new-logo sales.
Cutler said healthcare affordability continues to support demand for high-deductible health plans paired with HSAs. He said HealthEquity’s advisory services help employers assess enrollment, adoption, contributions and plan-design strategies. The company has seen some clients increase HSA adoption from about 25% to more than 60% or 70%, according to Cutler.
Vice Chair and founder Steve Neeleman said the company is also seeing interest in individual coverage health reimbursement arrangements, or ICHRAs, and individual and family plans. He noted that bronze and catastrophic plans became universally HSA-qualified following legislation passed more than a year ago, and said HSA-qualified plan participation in exchanges has approached 50% in some states, compared with 2% nationally before the law change.
Marketplace, Investing and App Development
Management highlighted growing activity in its Marketplace offering, which connects members with health and wellness products and services. Marketplace had more than 14,000 active members at quarter end, with continued monthly growth. While Marketplace revenue remains immaterial to overall financial results, Cutler said subscriber growth and purchase activity have been encouraging.
The company expanded Marketplace categories to include metabolic health, hormonal health, diagnostics, consumer health devices, skincare and recovery, and is developing offerings in sleep, health, vision and pediatric care. A promotional event called Health Savings Days drove what Cutler described as Marketplace’s highest-traffic and largest sales week to date, including 500,000 unique visitors during the week.
Cutler said non-metabolic offerings now account for about one-third of Marketplace revenue. HealthEquity is testing personalized in-app placements, email campaigns, promotional efforts, A/B testing and user-experience changes to improve conversion.
Mobile engagement also increased. Monthly active app users reached 1.4 million in July, up 62% year over year, and total app downloads exceeded 5 million. HealthEquity expects to introduce a next-generation app in coming months that will combine its primary app and EZ Receipts reimbursement app into a single experience for accounts, reimbursements, investing, education and Marketplace access.
In investing, the company reported a record number of investing HSA members, up 20% year over year, and said invested HSA balances reached 28% of total HSA assets. About 9% of its total HSA population currently invests. The company recently launched Simply Invest, an investment lineup without an administrative fee.
AI Efficiencies and Updated Outlook
HealthEquity said automation and artificial intelligence initiatives reduced human-handled calls by 25% year over year, while card-related calls declined 30%. AI resolved 85% of routine chat inquiries in targeted workflows and contained 55% of card-related phone contacts, according to Cutler.
Lucania said the service-cost improvement did not reflect a one-time benefit. He said the company continued to perform below its fraud-loss target while reducing service and operating costs.
The company repurchased approximately $108 million of shares during the quarter at an average price below $90 per share. It had about $948 million remaining under its cumulative $1.6 billion repurchase authorizations. Management said it expects to continue share repurchases, reduce revolver borrowings during the year and preserve capacity for potential acquisitions.
HealthEquity raised its fiscal 2027 guidance and now expects:
- Revenue of $1.411 billion to $1.421 billion.
- GAAP net income of $242 million to $248 million, or $2.88 to $2.96 per diluted share.
- Non-GAAP net income of $392 million to $398 million, or $4.66 to $4.73 per diluted share.
- Adjusted EBITDA of $628 million to $636 million.
- Average yield on HSA cash of 3.85% to 3.9%.
Lucania said the company had $2.3 billion of remaining HSA cash in contracts repricing during fiscal 2027. It ended the quarter with $3 billion of outstanding forward contracts, locking in a five-year Treasury rate of about 3.9% net of costs across fiscal 2027 through fiscal 2029.
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.
