Q1 2026 HealthEquity Inc Earnings Call

Unknown Executive: Good day and welcome to the HealthEquity First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded.

Good day and welcome to the health equity first quarter 2026 earnings Conference call.

It will be in listen only mode. Please note. This event is being recorded.

Richard Putnam: I would now like to turn the conference over to Richard Putnam. Please go ahead. Thanks, Ashia. This is Richard Putnam. Hello, everyone.

Speaker Change: I would now like to turn the conference over to Richard Putnam. Please go ahead.

Richard Putnam: Thanks, Ross Yeah. This is Richard Putnam Hello, everyone welcome to our first quarter fiscal year 2026 earnings call.

Richard Putnam: Welcome to our first quarter of fiscal year 2026 earnings call.

Richard Putnam: With me today I have Scott Cutler, President, CEO, Dr. Steve Neeleman, Vice Chair and Founder of the company, James Lucania, Executive Vice President and CFO.

Scott Cutler: With me today, I have Scott Cutler, President and CEO, Dr. Steve Neeleman, Vice Chairman and founder of the company Jameson County, our executive Vice President and CFO.

Richard Putnam: Before I turn the call over to Scott, we note that a press release announcing the financial results of our first quarter of fiscal 2026 was issued after the market closed the 7th. These financial results include contributions from our wholly owned subsidiaries and accounts they administer as well as certain non-GAAP financial measures that we will reference here today. And find a copy of today's press release on our Investor Relations website, which is ir.healthequity.com. and it will include reconciliations of these non-GAAP measures with comparable GAAP measures.

Speaker Change: Before I turn the call over to Scott, We note that a press release announcing the financial results of our first quarter of fiscal 2026 was issued after the market closed.

Financial results include contributions from our wholly owned subsidiary <unk>.

Speaker Change: And accounts they are not as sure as well as certain non-GAAP financial measures that we will reference here today.

Speaker Change: You can find a copy of today's press release on our Investor Relations website, which I'm sorry Howard.

Dot com and.

Speaker Change: It will include reconciliations of these non-GAAP measures with comparable GAAP measures.

Richard Putnam: We also note that our comments and responses to your questions today reflect management's view as of today, June 3rd, 2025, and will contain forward-looking statements as defined by the SEC. including predictions, expectations, estimates, or other information that might be considered There are many important factors relating to our business which could affect the forward looking statements made today. forward-looking statements are subject to risk and uncertainty. that may cause our actual results to differ materially from statements made here today.

Speaker Change: We also note that our comments and responses to your questions today reflect management's view as of today June 3rd 20.

Speaker Change: 25, and will contain forward looking statements as defined by the SEC, including predictions expectations estimates or other information that might be considered forward looking.

Speaker Change: There are many important factors relating to our business, which could affect the forward looking statements made today.

Speaker Change: Forward looking statements are subject to risks and uncertainties.

That may cause our actual results to differ materially from statements made here today, we caution against placing undue reliance on these forward looking statements and we also encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stock as detailed in our latest annual report on Form 10-K.

Richard Putnam: We caution against placing undue reliance on these forward-looking statements, and we also encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stock, as detailed in our latest annual report on Form 10-K and subsequent periodic reports filed with the SEC.

Speaker Change: And subsequent periodic reports filed with the SEC.

Richard Putnam: We assume no obligation to revise or update these forward-looking statements in light of new information for future events.

Speaker Change: Assume no obligation to revise or update these forward looking statements in light of new information or future events.

Speaker Change: Now over to Scott. Thanks, Richard welcome everyone. We're off to a great start for fiscal 2026, I will discuss the key metrics, reflecting that great start Steve will then give a brief update on HSA expanding provisions included in the proposed budget Bill passed by the house, a couple of weeks ago, and Jim and I will detail.

Scott Cutler: Scott. Thanks, Richard.

Scott Cutler: Welcome, everyone. We're off to a great start for fiscal 2026. I will discuss the key metrics reflecting that great start.

Scott Cutler: Steve will then give a brief update on HSA expanding provisions included in the proposed budget bill passed by the House a couple of weeks ago. And Jim and I will detail Q1 financial results and our raised outlook for fiscal year 26. The team again delivered strong year-over-year growth across our key metrics in Q1, including revenue up 15%, adjusted EBITDA up 19%, HSAs grew 9%, CDB accounts grew 4%, driving total accounts up 7%, and HSA assets up 15%. HealthEquity ended Q1 with over 17 million total accounts, including net CDB account growth of 260,000 year over year, 9.9 million HSAs, holding over 31 billion in HSA assets.

Speaker Change: Our Q1 financial results and our raised outlook for fiscal year 'twenty six.

Speaker Change: The team again delivered strong year over year growth across our key metrics in Q1, including revenue up 15%.

Adjusted EBITDA up 19%.

Speaker Change: <unk> grew 9% CDB accounts grew 4% driving total accounts up 7%.

Speaker Change: And HSA assets up 15%.

Speaker Change: How's the equity ended Q1 with over 17 million total accounts, including that CDB account growth of 260000 year over year $9 9 million HSA is holding over $31 billion in HSA assets.

Scott Cutler: HSA assets increased $4 billion year over year. The number of our HSA members who invest grew by 16% year-over-year, helping to drive invested assets up 24% to $14.2 billion. HSA cash reached $17.1 billion. The average balances of our HSA members grew by 6% this year.

Speaker Change: HSA assets increased 4 billion year over year.

Speaker Change: The number of our HSA members, who invest grew by 16% year over year, helping to drive invested assets up 24% to $14 2 billion.

Speaker Change: HSA cash reached 17 1 billion the average balances of our HSA members grew by 6% this year.

Scott Cutler: Team Purple opened 150,000 new HSAs from sales in the quarter, down from Q1 of our record setting last year, reflecting softer macroeconomic conditions. While we are still early in this year's selling season, we continue to see a strong enterprise pipeline build and more SMB companies adopting HSA qualified health plans. We are driving an enrollment and contribution strategy to grow from our existing client... especially during uncertain times, which have historically brought stronger selling We're helping employers reduce health care costs while empowering employees to build real health security. As employers are seeking solutions to manage health care costs that are growing faster than wages, we believe our message to optimize plan design and employee engagement can drive growth from our existing and new client base.

Speaker Change: Jean Purple opened 150000, new HSA is from sales in the quarter down from Q1 of our record setting last year, reflecting softer macroeconomic conditions.

Speaker Change: While we are still early in this year's selling season, we continue to see a strong enterprise pipeline build and more SMB companies adopting HSA qualified health plans.

Speaker Change: We are driving enrollment and contribution strategy to grow from our existing client base, especially during uncertain times, which have historically brought stronger selling seasons, we're helping employers reduce health care costs, while empowering employees to build real health security.

Speaker Change: As employers are seeking solutions to manage healthcare costs that are growing faster than wages. We believe our message to optimize plan design and employee engagement can drive growth from our existing and new client base. The 2024 year end do you have an ear report continues to reflect this market growth.

Scott Cutler: The 2024 year-end Devanier Report continues to reflect this market growth and HSA expansion with HealthEquity again taking market share as we now serve nearly a quarter of all HSAs in the USA.

Speaker Change: <unk> expansion with the equity again, taking market share as we now serve nearly a quarter of all HSA A's and the USA.

Scott Cutler: Deep Purple also made great progress expanding our member first secure mobile experience during the first quarter. We are leveraging investments in mobility and AI by expanding our award-winning Expediti Claims, which uses AI technology to automate claims adjudication. With this AI technology, we now serve more than 7,000 clients, and we are processing millions of dollars in reimbursement. while also driving member satisfaction scores up and reducing processing costs. Our AI chat and AI agent support are accelerating service delivery to our members and accurately addressing their needs and questions while reducing call wait time and volume.

Speaker Change: Deep peripheral also made great progress expanding our member first secure mobile experience during the first quarter, we are leveraging investments in mobility and AI by expanding our award winning expedited claims which uses AI technology to automate claims adjudication.

Speaker Change: With this AI technology, we now serve more than 7000 clients and we are processing millions of dollars in reimbursements, while also driving member satisfaction scores up and reducing processing costs are AI chat and AI agent support are accelerating service delivery to our members.

Speaker Change: Accurately addressing their needs and questions, while reducing call wait time and volume.

Scott Cutler: We are building on the recently updated stacked chip card, which we rolled out last year to deliver on our promise of expanding into a digital wallet in the future. Custom brokerage investing in your HSA was also launched on the mobile app this quarter. These technologies are transforming the way Team Purple improves our members' experiences while reducing our costs to serve them.

Speaker Change: We are building on our recently updated stacked chip card, which we rolled out last year to deliver on our promise of expanding into a digital wallet in the future.

Speaker Change: Hudson brokerage investing in your HSA was also launched on the mobile App. This quarter. These technologies are transforming the way team purple improves our members' experiences, while reducing our cost to serve them.

Scott Cutler: We're very pleased with our team's efforts to drive down successful fraud attacks on our HSA members. The launch of a number of added security measures and greater adoption of our member-first secure mobile experience has reduced direct fraud service costs from about $11 million in Q4 to about $3 million in Q1. This is still too high. However, under the direction of Sunil, our CSO, and his dedicated security and fraud team, we have reprioritized our investments in advanced security and fraud detection and prevention technologies to drive the fraud run rate exiting this quarter towards our goal of one basis point of total HSA asset per year.

Speaker Change: We're very pleased with our team's efforts to drive down successful fraud attacks on our HSA members. The launch of a number of added security measures and greater adoption of our member first secure mobile experience has reduced direct fraud service costs from about $11 million in Q4 to about $3 million in Q.

Speaker Change: This is still too high however, under the direction of Sunil our CSO and its dedicated security and fraud team. We have re prioritized our investments in advanced security and fraud detection and prevention technologies to drive this broad run rate exiting this quarter towards our goal of one basis.

Speaker Change: Point of total HSA asset per year, we have seen each month this year lower sequential fraud as our controls take hold and more of our members move to a secure mobile experience. We also are driving more of our HSA members to our newly relaunched App, we are modernizing our multi factor authentication.

Scott Cutler: We have seen each month this year lower sequential fraud as our controls take hold and more of our members move to a secure mobile experience. We also are driving more of our HSA members to our newly relaunched app. We are modernizing our multi-factor authentication across our member logins through the mobile experience and are committed to continually updating our defenses as threats evolve. We are optimistic of the actions taken thus far and the continued strengthening and implementation of controls.

Speaker Change: Patient across our member log ins through the mobile experience and are committed to continually updating our defenses as threats evolve we are optimistic that the actions taken thus far and the continued strengthening and implementation of controls.

Scott Cutler: A number of our PeerProbe teammates joined Steve and me in Washington, D.C. last month to speak with national leaders as they consider measures that will expand access to and provide greater flexibility of HSAs for millions of American families.

Speaker Change: Our purple teammates join Steve and me in Washington, DC last but to speak with national leaders as they consider measures that will expand access to and provide greater flexibility of HSA for millions of American families. It was serendipitous house released their draft or the budget Bill while we were there.

Scott Cutler: It was serendipitous the House released their draft of the budget bill while we were there. We are excited to see these HSA market expanding provisions move forward.

Speaker Change: We are excited to see these HSA market expanding provisions move for Street, Steve can you briefly walk us through what we've seen so far and what to expect as they work through the budget Bill process.

Stephen Neeleman: Steve, can you briefly walk us through what we've seen so far and what to expect as they work through the budget bill process? Thanks, Scott. It was an exciting time to have so many from Team Purple show up in Washington that week.

Steve: Sure. Thanks, Scott It was an exciting time to have so many from team purple show up in Washington that week.

Stephen Neeleman: This work that we've been engaged with. to expand HSAs is important as there have not been any substantive legislative changes to the HSA rules and regs since 2000. As many of you have seen in the budget bill passed by the House, there are a number of provisions that, if they became law, would expand the use of HSAs. The largest proposed change is granting our working seniors eligible for Medicare Part A the ability to make contributions to an HSA while they remain on their employer's HSA-qualified health insurance. According to the U.S. Census Bureau, this population represents about 20 percent of the current workforce and it is expected to be the fastest growing population in the workforce over the next several years.

Speaker Change: This work that we've been engaged with.

Speaker Change: To expand HSA is as important as there have not been any substantive legislative changes to the HSA rules and regs since 2006.

Speaker Change: As many of you have seen in the budget Bill passed by the house. There are a number of provisions that if it became law would expand the use of HSA.

Speaker Change: The largest proposed changes granting our working seniors eligible for Medicare part a the ability to make contributions to an HSA while they remain on your employer's HSA qualified health plan.

Speaker Change: According to the U S census Bureau, this population represents about 20% of the current workforce and is expected to be the fastest growing population in the workforce over the next several years in fact over the next five years over 20 million Americans will become Medicare eligible and many of these people are currently funding hsa's and they can and they can.

Stephen Neeleman: In fact, over the next five years, over 20 million Americans will become Medicare eligible and many of these people are currently funding HSAs and they can continue to do so while working with the new legislation. Other provisions in the proposed HSA section of the bill include an expanded use of HSAs on exchanges. All bronze and catastrophic plans would become HSA eligible, allowing HSAs to be used in conjunction with employer on-site medical clinics and with direct primary care arrangements without jeopardizing HSA eligibility, expanding the use of HSAs to pay for gym membership and fitness programs, allowing unspent money in workers' FSAs and HRAs to fund HSAs, allowing taxpayers who are 55 years and older to have catch-up contributions by both spouses to be deposited into the same HSA, and allowing members earning under $75,000 per year individually or $150,000 per year per family to increase their maximum contribution up to double the current prescribed amount into their HSAs.

Speaker Change: To do so are working with the new legislation.

Speaker Change: Provisions in the proposed HSA section of the Bill include an expanded use an HSA is on exchanges all bronze and catastrophic plans would become HSA eligible, allowing HSA is to be used in conjunction with employer onsite medical clinics and with direct primary care arrangements without jeopardizing HSA eligibility expanding.

Speaker Change: The use of HSA to pay for gym membership and fitness programs, allowing unspent money in workers' FSA and HRA to fund Hsa's, allowing.

Speaker Change: Taxpayers are 55 years and older.

Speaker Change: Have catch up contributions by both spouses to be deposit into the same HSA and allowing members.

Speaker Change: Earning under 75000 per year individually or $150000 per year per family to increase their maximum contribution up to double the prescribed to current prescribed amount into their HSA. These contributions would phase out as taxpayers make 100000 individually and 200000 as a family per year our industry.

Stephen Neeleman: These contributions would phase out as taxpayers make $100,000 individually and $200,000 as a family per year. Our industry believes that these provisions could allow up to 20 million more American families to have access to the remarkable benefits provided by HSAs, and that would be the largest expansion of the regulatory framework in the last 20 years. We believe many of these provisions will make it easier for employers to offer and to promote HSAs. That would be great.

Speaker Change: These provisions could allow up to $20 million more American families to have access to the remarkable benefits provided by HSA and that would be the largest expansion of the regulatory framework in the last 20 years for HSA. We believe many of these provisions will make it easier for employers to offer and to promote HSA.

Speaker Change: That would be great. If they become law. These provisions are a good down payment on our commitment to help all Americans have personally owned.

Stephen Neeleman: And if they become law, these provisions are a good down payment on our commitment to help all Americans have personally owned health care.

Speaker Change: Health care accounts, we will of course watch it closely as the Senate or.

Stephen Neeleman: We'll of course watch this closely as the Senate unveils their version of the tax bill, and of course the bills will then need to be combined in reconciliation, and our goal is to see all of these HSA provisions and other similar remain in the bill and we want to make sure that we're following how they're impacted in the bill before they can send it on to the president for a statement. We will continue to work hard to educate legislators and regulators on the benefits of HSAs and continue to press for other ways to expand these accounts to new populations.

Speaker Change: Their version of the tax Bill and the and of course, the bills would that need to be combined and reconciliation and our goal is to see all of these HSA provisions and other similar accounts.

Speaker Change: Remainder of the deal and we want to make sure that.

Speaker Change: Fallen and how they're impacted and the bill before they can send it off to the president for signature we will continue to work hard to educate legislators and regulators on the benefits of HSA and continue to press for other ways to expand these accounts to new populations.

Stephen Neeleman: We, of course, remain confident that HSAs and other tax advantages help the community. are popular on both sides of the political aisle, and we'll continue to advocate for all Americans to have the opportunity to have access to healthcare.

Speaker Change: Of course remain confident that HSA and other tax advantage health accounts.

Speaker Change: Our popular on both sides of the political aisle and we will continue to advocate for all Americans to have the opportunity to have access to them.

James Lucania: I'll now turn the time over to Jim and he'll go over the financials. Thanks, Steve. I'll briefly highlight our first quarter of 2026 fiscal year gap and non-gap financial results. As always, we provide a reconciliation of gap measures to non-gap measures in today's press First quarter revenue increased 15% year-over-year. Service revenue was a record $119.8 million, up 1% year-over-year. Custodial revenue grew 29% to a record $156.5 million in the first quarter. The annualized yield on HSA cash was 3.50% for the quarter, as a result of higher replacement rates and continued increase in the number of accounts participating in enhanced rates.

Speaker Change: I'll turn the time over to Jim and he'll go over the financials Jim.

Jim: Thanks, Steve.

Speaker Change: I'll briefly highlight our first quarter of 2026 fiscal year, GAAP and non-GAAP financial results as always we provide a reconciliation of GAAP measures to non-GAAP measures in today's press release.

Speaker Change: First quarter services first quarter revenue increased 15% year over year service revenue was a record $119 $8 million up 1% year over year Stonehill revenue grew 29% to a record $156 $5 million in the first quarter the annualized yield on HSA cash was $3 five.

Speaker Change: Zero percent for the quarter as a result of higher replacement rates and continued increase in the number of accounts participating and enhanced rates.

James Lucania: Interchange revenue grew 14% to $54.6 million, notably faster than the 7% account growth, as members increased both contributions and distributions and conducted more payments on platform versus requesting cash reimbursement for payments made off platform. Gross profit of $224.3 million with 68% of revenue in the first quarter, up from 65% in the first quarter last year. Service costs incurred in the first quarter included, as Scott mentioned, approximately three million dollars of fraud reimbursements to members, down from about eleven million dollars in the fourth quarter last year, reflecting our improved capabilities in identifying and preventing the sophisticated fraud activity our members experienced in the prior two quarters.

Speaker Change: Interchange revenue grew 14% to $54 $6 million, notably faster than the 7% account growth.

Speaker Change: As members increase both contribution and distribution and conducted more payments on platform versus requesting cash reimbursement for payments made off platform.

Speaker Change: Gross profit of $224 $3 million was 68% of revenue in the first quarter up from 65% in the first quarter last year.

Speaker Change: Service costs incurred in the first quarter included as Scott mentioned, approximately $3 million of broad reimbursement and members down from about $11 million in the fourth quarter last year, reflecting our improved capabilities in identifying and preventing the sophisticated fraud activity our members experienced in the prior two quarters.

James Lucania: We continue to invest in fraud prevention and detection capabilities and drive higher adoption of our secure mobile experience, and we believe these efforts will normalize service costs in the second half of fiscal year 26. Net income for the first quarter was $53.9 million, or $0.61 per share, on a gap basis. Non-gap net income was $85.8 million, or $0.97 per share. Adjusted EBITDA for the quarter was $140.2 million, up 19%, compared to Q1 last year. And adjusted EBITDA as a percentage of revenue was 42%, compared to 41% in the first quarter last year. Turning to the balance sheet, as of April 30th, 2025, cash on hand was $288 million.

Speaker Change: We continue to invest in fraud prevention and detection capabilities and drive higher adoption of our secure mobile experience and we believe these efforts will normalized service cost in the second half of fiscal year 'twenty six.

Speaker Change: Net income for the first quarter was $53 $9 million or <unk> 61 per share on a GAAP basis non-GAAP net income was $85 $8 million or <unk> 97 per share.

Speaker Change: Adjusted EBITDA for the quarter was $142 million up 19% compared to Q1 last year and adjusted EBITDA as a percentage of revenue was 42% compared to 41% in the first quarter of last year.

Speaker Change: Turning to the balance sheet as of April 32025, cash on hand was $288 million, we generated $65 million of cash flow from operations in the first quarter of FY 'twenty six.

James Lucania: We generated $65 million of cash flow from operations in the first quarter of FY 26. The company ended the quarter with approximately $1.1 billion of debt outstanding and net of issuance costs. The company repurchased approximately $60 million of its outstanding shares during the quarter and has approximately $118 million remaining on our previously announced $300 million share repurchase authorization.

Speaker Change: The company ended the quarter with approximately $1 $1 billion of debt outstanding net of issuance cost cuts.

Speaker Change: The company repurchased approximately $60 million of its outstanding shares during the quarter and it has approximately $118 million remaining on our previously announced $300 million share repurchase authorization.

James Lucania: Before I detail our raised guidance and assumptions, a word on our HSA cash maturity schedule that was updated and included in today's earnings. As we have indicated in previous earnings calls and our investor day last year, enhanced rates while providing higher yields are more about reducing the volatility of our yield on HSA cash. To further reduce volatility and rate exposure, in the fourth quarter last year we amended and extended maturities on some of the $3.2 billion of depository custodial contracts maturing in FY26, in essence pulling forward those maturities into what we believe is a better rate environment.

Speaker Change: Before I detail, our raised guidance and assumptions a word on our HSA cash maturity schedule that was updated and included in today's earnings release as.

Speaker Change: As we have indicated in previous earnings calls and our Investor day last year enhanced rates, while providing higher yields are more about reducing the volatility of our yield on HSA cash to further reduce volatility and rate exposure in the fourth quarter last year, we amended and extended maturities on some of the $3 $2 billion.

Speaker Change: Of depository custodial contracts maturing in FY 'twenty six in essence pulling forward those maturities into what we believe is a better rate environment. The.

James Lucania: The remaining $1.7 billion of maturing contracts this fiscal year are largely scheduled to be replaced into new contracts at the end of this year. We also have $4 billion of HSA cash in contracts maturing next year, FY27. In order to further de-risk expected interest rate volatility on the combined remaining $5.7 billion maturing over the next 20 months, we have entered into some forward Treasury contracts during Q2 that essentially locked in five-year Treasury base rates at approximately 4% net of hedging costs on $500 million of these maturities. We anticipate further de-risking transactions over the remainder of FY20.

Speaker Change: The remaining $1 $7 billion of maturing contracts. This fiscal year are largely scheduled to be replaced into new contracts at the end of this year.

Speaker Change: We also have $4 billion of HSA cash in contracts maturing next year FY 'twenty seven.

Speaker Change: In order to further derisk expected interest rate volatility on the combined remaining $5 $7 billion in maturing over the next 20 months, we have entered into some forward treasury contracts during Q2 that essentially locked in five year Treasury base rates at approximately 4% net of hedging costs on 500.

Speaker Change: <unk>.

Speaker Change: These maturities.

Speaker Change: We anticipate further derisking transactions over the remainder of FY 'twenty six.

James Lucania: We expect the average yield on HSA cash will be approximately 3.5% during fiscal 26. As a reminder, we base custodial yield assumptions embedded in guidance on projected HSA cash deployments and rollovers, schedule of which is contained in today's release, as well as an analysis of forward-looking market indicators, such as the secured overnight financing rate and mid-duration treasury forward growth. These are, of course, subject to change and not perfect predictors of future market conditions. Our Fiscal 26 guidance reflects the expected carry-forward of the trajectories for revenue and margins for the remainder of this year, including technology and security investments to reduce fraud and drive operational efficiency.

Speaker Change: We expect the average yield on HSA cash will be approximately three 5% during fiscal 'twenty six.

Speaker Change: As a reminder, we based studio yield assumptions embedded in guidance on projected HSA cash deployment and rollovers scheduled of which is contained in today's release as well as an analysis of forward looking market indicators, such as the secured overnight financing rate in mid duration treasury forward curves.

Speaker Change: These are of course subject to change and not perfect predictors of future market conditions.

Speaker Change: Our fiscal 'twenty <unk> guidance reflects the expected carry forward of the trajectories for revenue and margins for the remainder of this year, including technology and security investments to reduce fraud and drive operational efficiencies as well as relatively stable forward interest rate curves. We expect revenue in a range between one point to 85 and 1.30.

James Lucania: as well as relatively stable forward interest rate curves. We expect revenue in a range between $1.285 and $1.305 billion. Gap net income in a range of $173 to $188 million or $1.96 to $2.13 per share. We expect non-gap net income to be between $320 and $335 million or $3.61 and $3.78 per Finally, we expect Adjusted EBITDA to be between $530 and $550 million. We continue to invest in protecting our members' assets and data, while providing them with remarkable experience. We're pleased with how we exited Q1 and look to make additional progress in Q2 towards normalizing fraud costs to our target of one basis point on total assets per annum.

Speaker Change: <unk> 5 billion.

Speaker Change: GAAP net income in a range of $173 million to $188 million or $1 96 to $2 13 per share. We expect non-GAAP net income to be between 320, and $335 million or $3 61, and $3 78 per share.

Speaker Change: He used upon an estimated 88 5 million shares outstanding for the year.

Speaker Change: Finally, we expect adjusted EBITDA to be between 530 and $550 million, we continue to invest in protecting our members assets in data, while providing them with a remarkable experience. We're pleased with how we exited Q1 and look to make additional progress in Q2 towards normalizing fraud costs to our target of one basis point on total assets.

Anna: For Anna.

James Lucania: Our guidance includes additional expected share purchases under the $300 million repurchase authorization and potential reductions in revolver borrowing. Continued strong cash flows and available borrowings on our revolver. We will maintain ample capacity for portfolio acquisitions should they become available. We assume a GAAP and a non-GAAP income tax rate of approximately 25% and diluted share count of $88.5 million, including common share.

Speaker Change: Our guidance includes additional expected share repurchases under the 300 million dollar repurchase authorization and potential reductions in revolver borrowings during the fiscal year with continued strong cash flows and available borrowings on our revolver, we will maintain ample capacity for portfolio acquisitions should they become available.

Speaker Change: We assume a GAAP and non-GAAP income tax rate of approximately 25% and diluted share count of $88 5 million, including common share equivalents.

Unknown Executive: As we've done in previous reporting periods, our fiscal 2026 guidance includes a reconciliation of GAAP to the non-GAAP metrics provided in the earnings release, and a definition of all such items is included at the end of In addition, while the amortization of acquired intangible assets is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is With that, let's go to the operator for your question.

Speaker Change: As we've done in previous reporting periods. Our fiscal 2026 guidance includes a reconciliation of GAAP to non-GAAP metrics provided in the earnings release and a definition of all such items is included at the end of the earnings release. In addition, while the amortization of acquired intangible assets is being excluded from non-GAAP net income the revenue generated from those acquire.

Speaker Change: Intangible assets is included with that let's go to the operator for your questions.

Unknown Executive: Thank you.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys, but anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

George Hill: The first question comes from George Hill with Deutsche Bank. Please go ahead. Hey guys, I appreciate the time and thanks for taking the questions.

George Hill: The first question comes from George Hill with Deutsche Bank. Please go ahead.

Speaker Change: Hey, guys I appreciate the time and thanks for taking the questions I guess I'd, probably start off with the slowdown in the each I think selling conditions are you just thinking that this is a tough comp or is there something macro that you're attributing this to kind of would love any kind of forward visibility on how youre thinking about the environment.

Scott Cutler: I guess, Scott, I'd probably start off with the slowdown in the HSA excelling conditions. Are you just thinking that this is a tough comp or is there something macro that you're attributing this to and kind of would love any kind of forward visibility on how you're thinking about the environment? Yeah, thanks, George. So $150,000 in new HSA sales, a little bit lighter than last year at $194,000. But again, recognizing that it's substantially higher than the $134,000 in Q1 of fiscal year 24. So we're actually, we actually feel pretty good. I think when we look at the pipeline of what we see currently, we're optimistic about that pipeline in enterprises, as I said, in my comments.

Speaker Change: Yeah. Thanks, George So 150000, new HSA sales, a little bit lighter than last year at 194, but again recognizing that it's substantially higher than the 134 K in Q1 of fiscal year 'twenty four so we're actually.

Speaker Change: We feel pretty good I think when we look at the pipeline of what we see currently we are optimistic about that pipeline in enterprises as I said in my comments and I think in other economic downturns, we've actually seen the opportunity to lean into the message.

Scott Cutler: And I think in other economic downturns, we've actually seen the opportunity to lean into the message. And, you know, what we're driving in terms of our value proposition with employers is that with effective plan design, and greater adoption, we can help drive down their health care costs, you know, that are growing faster than wages. So I guess that's what I'd say is that there's really nothing to see here relative to our either short or longer term view of the market. We're optimistic about the selling season, we feel like we've got a good enterprise pipeline.

Speaker Change: And what we're driving in terms of our value proposition with employers is that with effective plan design and greater adoption, we can help drive down their health care costs that.

Speaker Change: They are growing faster than wages. So I guess, that's what I'd say is that there is really nothing to see here relative to our either short or longer term view of the market. We're optimistic about the selling season, we feel like we've got a good enterprise pipeline, but if anything were cautious about.

James Lucania: But if anything, we're cautious about the macro impact overall, for job creation, slower GDP growth as that relates to new account sales. That's helpful.

Speaker Change: The macro impact overall for job creation slower GDP growth as that relates to new account sales.

Speaker Change: That's helpful. Tim if I could sneak in a real quick follow up you talked about locking in the 4% rates net of hedging cost I might've missed this did you say what the duration on that was like what's is that the typical two to three year holding period or is that longer.

James Lucania: And Jim, if I could speak in a real quick follow up, you talked about locking in the 4% rates net of hedging costs. I might have missed this. Did you say what the duration on that was? Like what's is that the typical two to three year holding period? Or is that longer? Oh, yeah.

Speaker Change: Yes. So what we've done is we have entered into forward treasury contract for five year Treasury, so effectively locking in the base rate.

George Hill: So what we've done is we have entered into forward treasury contracts for five year treasuries. So effectively locking in the base rate for a basic rate to enhance rate migration. So yeah, it's locking in the T portion of those maturities that are happening in Q4 of this year and Q4 of next year. Okay, I appreciate that. I'll hop back in. Thanks, George.

Speaker Change: For a basic rate to enhanced rate migration.

Speaker Change: So yeah. It's it's it's blocking into T portion of those maturities that are happening in Q4 of.

Speaker Change: This year in Q4 of next year.

Speaker Change: Okay I appreciate that I'll hop back in the queue. Thanks, guys. Thanks George.

Allen Lutz: The next question comes from Allen Lutz with Bank of America, please go ahead. Yeah, let me try to try to unpack that. So, um, yeah, so while we may have been ahead of your expectation, we're pretty much like right on where we where we expected to be at this point in the year on on our outlook. So we are we're trying to get to a one basis point exit rate, which we think we can get to in the back half of this year. We're not signing up for for for being there. Right now, obviously not there right right now with 3 million, 3 million of expense in the quarter.

Allen Lutz: The next question comes from Allen Lutz Smith Bank of America. Please go ahead.

Allen Lutz: Hey, good afternoon, and thanks for taking the questions Jim fraud costs were about 9 million better than we expected, but the EBITDA raise was only about $5 million can you talk about how much of the fraud costs above that one basis point or still included in the guide or I guess, if I put it in another way of QQ.

Allen Lutz: Goes back to what you know that one basis point of a broad cost run rate for the full year, how much upside to the current guidance there. Thanks.

Allen Lutz: Yeah, let me try to try to unpack that so.

Allen Lutz: Yes, so well we may have been ahead of your expectation, where we're pretty much like right on where we where we expect it to be at this point in the year on on our outlook.

Allen Lutz: So we are we're trying to get to a one basis point exit rate.

Allen Lutz: Which we think we can get to in the back half of this year, where we're not signing up for for being there right. Now obviously not there right right now with 3 million $3 million of expense in the quarter. So I'm not going to try to do the the what if we got there what what if we got their math, but but we haven't.

James Lucania: So I'm not going to try to do the the what if we got there, what what if we got their math, but but we haven't really changed our our outlook from from on a fraud perspective from from the last guy, because this quarter happened exactly as we thought it would. Okay, thanks. That makes sense.

Allen Lutz: <unk> changed our outlook from from on a broad perspective from from the last guide because this quarter happened exactly as we thought it would happen.

Speaker Change: Okay. Thanks that makes sense and then a follow up for Steve.

Allen Lutz: And a follow up for Steve around the, I guess, the size of the increase of the addressable market here. A clarification question here. I think you said that if the legislation goes through, 20 million more families through Medicare Part A could continue to contribute, which would expand the market by 20 million. But then you also say that the overall expansion could be 20 million. Is that 40 million total?

Speaker Change: Around the I get the size of the increase of the addressable market here a clarification question here I think you said that.

Speaker Change: Yeah.

Allen Lutz: The legislation goes through 20 million more families through Medicare part a could continue to contribute.

Allen Lutz: Which would expand the market by $20 million, but then you also say that our the overall expansion could be $20 million is that 40 million total because I guess the way that I'm thinking about it is what it was $20 million would just sort of age out I guess of HSA just trying to understand if this is a net $20 million or a net 40.

Stephen Neeleman: Because I guess the way that I'm thinking about it is, will those 20 million we're just sort of age out I guess of HSAs just trying to understand if this is a net 20 million or a net 40 million increase in the addressable market. Thanks. Well, yes. No problem, Allen. So it's really a net 20. And it's a combination of Medicare Part A people that when they turn 65, would typically drop out of the workforce or at least out of workforce HSAs. Plus, you've got these folks on the exchanges that are allowed to do it.

Allen Lutz: Increase in the addressable market. Thanks.

Allen Lutz: Yeah, no problem, so it's really about 'twenty.

Allen Lutz: It's a combination of Medicare part a people that when they turned 65 would typically drop out of the workforce or at least out of workforce Hsa's plus you've got these folks on the exchanges that are allowed.

Stephen Neeleman: So it's a net 20, not net 40. And that's the way we see it. That's the way the industry has been promoting it, is 20 million. Thank y'all.

Allen Lutz: To do it so it's a net 20 not net 40 and that's the way we see that's where the industry has been promoted as 20 million net.

Speaker Change: Thanks Al Thank you.

Anne Samuel: The next question comes from Anne Samuel with J.P. Morgan. Please go ahead. Hi, thanks for the question and great to hear some some positive movement on HSAs.

Speaker Change: The next question comes from Anne Samuel with Jpmorgan. Please go ahead.

Anne Samuel: Hi, Thanks for the question and great to hear from some positive movement on HSA.

Scott Cutler: I was hoping maybe you could just give a little bit of an update on how you're tracking towards your goal of getting current members to download the app and kind of how you're thinking about that around security and fraud expenses as you move towards the next onboarding. Yeah, thanks, Anne. So, again, just a reminder that the priority for us over the course of this year that, you know, certainly I came into at the beginning of the year has been number one, fraud on the platform. Number two has just been stabilization of the platform given the experiences in Q4.

Speaker Change: I was hoping maybe you could just give a little bit it's not big on you know how you're talking towards your goal of getting current members to download the App and you can kind of how youre thinking about that around you know kind of security and you know kind of product fences as you move towards the next on Onboarding season. Thanks.

Speaker Change: Yeah. Thanks, Dan. So again, just a reminder that the priority for us over the course of this year that certainly I came into at the beginning of the year has been number one.

Speaker Change: Fraud on our platform number two has just been stabilization of the platform given the experiences in Q4 and the way we're getting after that is with this mobile orientation around.

Scott Cutler: And the way we're getting after that is with this mobile orientation around a member first secure mobile experience. In combination with the efforts that we're making with fraud, in addition to the mobile download, we know that it's going to drive better engagement with members. And we know the outcome is a more secure access or authentication into our platforms. What we expect over the course of this year, on the mobile side, is that, call it by default, any member accessing or authenticating our platforms will be authenticating through a passwordless, passkey authentication method through the mobile experience.

Speaker Change: Remember first secure mobile experience.

Speaker Change: And in combination with the efforts that we're making with fraud. In addition to the mobile download we know that that's going to drive better engagement with members and we know the outcome is it more secure access authentication into our platforms, what what we expect over the course of this year.

Speaker Change: On the mobile side is that call it by the fall.

Speaker Change: Any member accessing or indicating our platforms will be authenticating through a password list past key authentication method through the mobile experience.

Scott Cutler: And we know that experience is secure. And we're also driving a strategy towards driving greater engagement with our members, which I think we also see the benefit of driving mobile adoption is putting us in a better position to help our members save, invest, and spend in an integrated app experience overall. So the mobile strategy is certainly tied to the security posture, but the end of it is a real benefit in terms of the member experience. We have seen an increase in app downloads. We highlighted about 1.2 million app downloads at the end of Q1. We're going to be driving more app download adoption, although I think the metric that we look at for success on the security side is not necessarily just app downloads, but it's actually, have we secured the perimeter, meaning you're going to be required to download the app to interact with our platform.

Speaker Change: And we know that experience is as secure and we're also driving our strategy towards driving greater engagement with our members, which I think we also see the benefit of driving mobile adoption is putting us in a better position to help our members save invest.

Speaker Change: Spend in an integrated app experience over a while overall so the mobile strategy is certainly tied to the security posture at the end of it is a real benefit in terms of the member.

Speaker Change: Experience.

Speaker Change: We haven't seen an increase in app downloads.

Speaker Change: We highlighted about 1.2 million app downloads at the end of Q1.

Speaker Change: We're gonna be driving more.

Speaker Change: Download adoption, although I think the metric that we look at where success on the security side is not necessarily just app downloads, but it's actually have we secured the perimeter of meaning.

Speaker Change: Youre going to be required to download the app to interact with our with our platforms.

Speaker Change: Okay.

Unknown Executive: Really helpful.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Speaker Change: Thanks, Dan.

Speaker Change: Yeah.

Greg Peters: The next question comes from Greg Peters with Raymond James, please go ahead. Good afternoon, everyone. I wanted to go back to the comments on the selling season. and integrate it with the fraud situation. I'm just curious, from an enterprise level, if you've seen any fallout from, you know, the elevated levels of fraud in your HSAs. And I'm curious if you could give us a sense on how the retention of your enterprise customers is proceeding in the context of the elevated fraud levels. for, you know, to help us map out what's going on. Yeah, thanks. Thanks, Greg.

Speaker Change: The next question comes from Greg Peters with Raymond James. Please go ahead.

Greg Peters: Good afternoon, everyone I wanted to go back.

Greg Peters: To the comments on the selling season.

Greg Peters: And integrate it with the fraud situation.

Speaker Change: Just curious yeah.

Speaker Change: I'm, an enterprise level, if you've seen any fallout.

Speaker Change: From the elevated levels of fraud.

Speaker Change: In your HSA is and I'm.

Speaker Change: I'm curious if you could give us a sense on how the retention of your enterprise customers is proceeding in the context of the elevated fraud levels.

Speaker Change: For them to help us tap out what's going on there.

Speaker Change: Thanks, Thanks, Greg So indirect answer to your question, we have seen no fallout from from fraud on the platform.

Scott Cutler: So in direct answer to your question, we have seen no fallout from from fraud on the platform. Our retention rates actually, you know, to date this year are higher than they've been in years past. So high 90% in terms of retention.

Speaker Change: Our retention rates actually to date this year are higher than they've been in years past, so high <unk>, 90% in terms of retention.

Scott Cutler: I think when it comes down to selling this in the enterprises is certainly with Sunil on board, and we built out an incredible leadership team around Sunil in application security and in fraud. We're also communicating very directly with our enterprise clients the why of what we're doing around all of the measures that we're taking. And so I certainly look at any incident of fraud erodes trust. And at the same time, as we're able to deploy the prevention measures, and as we're driving towards this mobile first experience, I believe enterprises are going to be looking at that as a positive change for health equity, positive change to increase security and all of our interaction with our enterprise clients, you know, effectively suggest that.

Speaker Change: I think when it comes down to selling this in the enterprises is certainly with Neil on board and we built out an incredible leadership team around Neil in application security and fraud were also communicating very directly with our enterprise clients why Oh.

Speaker Change: What we're doing around all of the measures that we're taking and so I certainly look at any incident, a fraud erodes trust and at the same time as we're able to deploy the prevention measures and as we're driving towards is mobile first experience and I believe enterprises are going to be.

Speaker Change: Looking at that as a positive change for health equity positive change to increase security and all of our interaction with our enterprise clients.

Speaker Change: Effectively suggests that and so and so again I think it's really important that we emphasize the importance and the priority of security it clear that we're making.

Scott Cutler: And so and so again, I think it's really important that we emphasize the importance and the priority of security, clear that we're making the investments around security, and it's being integrated seamlessly into the experience itself to build to build trust. Thanks for the detail and answer. Thanks, Craig.

Speaker Change: <unk> around security and it's being integrated seamlessly into the experience itself to build to build trust.

Speaker Change: Thanks for the detail on that sure.

Craig: Thanks, Craig.

Scott Schoenhaus: The next question comes from Scott Schoenhaus with KeyBank, please go ahead. Hey, team, thanks for taking my question. My first one is just a housekeeping question. You cited the $3 million in reimbursements for the quarter, which came down a lot, but what was the reimbursements from the insurance? And then what was the overall costs as you tried to invest in the quarter, if you could break all those other buckets down? Yeah, so we had what we talked about in terms of what we experienced is 3 million in direct fraud versus 11 million in Q4. It's not a it's not a reimbursement number.

Scott Schonhaus: The next question comes from Scott Schonhaus with Keybanc. Please go ahead.

Scott Schonhaus: Hey team. Thanks for taking my question. My first one is just a housekeeping question.

Speaker Change: You cited the 3 million in reimbursements for the quarter, which came.

Speaker Change: Down a lot, but what was the.

Speaker Change: Sort of the reimbursement from the insurance and then what was the overall costs as you try to you know invest in it.

Speaker Change: In the quarter, if you could break all those those other buckets down.

Speaker Change: Yeah. So we had we talked about in terms of what we experienced is 3 million indirect fraud versus 11 million in Q4.

Speaker Change: It's not a it's not a reimbursement.

James Lucania: Us reimbursing members for fraud. Yeah. So and we have no update on the insurance recovery. Yeah, nor is any nor is any reflected in our Oh, wow. Okay.

Speaker Change: US reimbursing them gosh for fraud yeah.

Speaker Change:

Speaker Change: So and and we have no update on the insurance recovery.

Speaker Change: Yeah, nor is any nor is any reflected in our outlook.

Speaker Change: Oh Wow okay.

James Lucania: And then I guess, what, you know, what are you seeing? What did you see in April? your the resources now that you're you're using you've deployed or invested in for sort of detection walk us through how you know cases where you've seen elevated activity were able to prevent activity in the recent months with these new investments thanks Yeah, so what we've been able to do is deploy resources into our security team. Importantly, it has not impacted our percentage of T&D spend relative to revenue, which we had mentioned on our on our last call. And so the resources that we've deployed, again, have been driving a sequential reduction in the fraud rates month to month over the course of this year, which we feel really good about.

Speaker Change: And then I guess, what what are you seeing what did you see in April.

Speaker Change: Your the resources now that you're you're using you've deployed or invested in for sort of detection walk us through how you know.

Speaker Change: Cases, where you've seen elevated activity, we're able to prevent activity in the recent months with these new investments. Thanks.

Speaker Change: Yeah. So what we've been able to do is deploy our resources into our security team.

Speaker Change: Importantly, it has not impacted our percentage of T&D spend relative to revenue.

Speaker Change: Which we had mentioned on our last call.

Speaker Change: And so the resources that we've deployed again have been driving a sequential reduction in the fraud rates month to month over the course of this year, which we feel really good about the main fraud vectors that we'd been attacking it there Jeff.

James Lucania: The main fraud vectors that we've been attacking have been general account takeovers, which which, which which we've been able to make great progress against, and also preventing if an account was taken over from from funds moving to or an unassociated bank account, which we've also been able to stop. The other area given that we've got, you know, millions of cards out in circulation is actually stopping and preventing fraudulent transaction largely from card not present transactions across our network. And there again, deploying fraud detection tools to be able to effectively not authorize transactions that we know are fraudulent is the way that we've been attacking fraud that's coming through the card network.

Speaker Change: General account takeovers.

Speaker Change: Which.

Speaker Change: Which which we'd be able to make great progress against and also preventing if an account was taken over from from funds moving to or an associated bank account, which we've also been able to stop.

Speaker Change: The other area given that we've got you know a million.

Speaker Change: <unk> of cars out in circulation is actually stopping and preventing.

Speaker Change: Fraudulent transaction largely from card not present transactions across our network and they're again deploying fraud detection tools to.

Speaker Change: To be able to effectively not authorize transactions that we know.

Speaker Change: Our fraudulent is the way that we've been attacking a fraud, that's coming through the card network. The last piece and we really think of it is top of the funnel has really been around protecting access to the platform through our through our mobile security efforts and again, where we're beginning our journey there.

James Lucania: The last piece, and we really think of it as top of the funnel, is really been around protecting access to the platform through through our mobile security efforts. And again, we're beginning our journey there as we drive more, you know, adoption to the mobile app. And as we as we require access to our platforms through that, and that's going to happen in the later part of the of the year. And so those are the things that we're doing to, to prioritize it, I'm very optimistic about the progress that we've made against those. And again, with the sequential fraud rates coming down month to month, and certainly are certainly encouraged by, you know, but by that progress that we've made since the since the beginning of the year.

Speaker Change: Air as we drive more adoption to the mobile App and as we as we require access to our platforms through that.

Speaker Change: And that's going to happen.

Speaker Change: The later part of the of the year and so those are the things that we're doing to to prioritize it I'm very optimistic about the progress that we've made against those and again with the sequential our fraud rates coming down month to month.

Speaker Change: Certainly encouraged by that progress that we've made since the since the beginning of the year.

Unknown Executive: Great, thank you so much.

Speaker Change: Great. Thank you so much.

Unknown Executive: Thanks, Scott.

Scott Cutler: Thanks Scott.

Stephen Laliquette: The next question comes from Stephen Laliquette with Mizzou Health Security. Please go ahead. Thanks for the afternoon. Let me offer my congrats on the results. I guess just for us, just coming back to your comments regarding all the positive HSA proposals in the House version of the budget bill, I just want to drill in a little bit deeper on the doubling of the maximum annual contribution. And I'm just curious, you guys had any numbers around that, just the number of people in existing accounts that fall into those income thresholds? Because I sort of view it as a multiplier on the HSA assets could almost be more important to your earnings than the number of eligible people that can open accounts.

Speaker Change: The next question comes from Steven Valiquette with Mizuho.

Speaker Change: <unk>. Please go ahead.

Steven Valiquette: Hi, Thanks, Good afternoon, let me offer my congrats on the results.

Speaker Change: Yeah, I guess just for US just coming back to your comments regarding all the positive HSA proposals in the house version of the budget Bill I just wanted to drill in a little bit deeper on the how the doubling of the maximum annual contributions for individuals, earning under you know 75 to $100000 a year and a.

Speaker Change: Families under I'm, making under 150 to 200 K I guess I was just curious if you guys had any numbers around that just the number of people in existing accounts that fall into those income thresholds because that sort of view. It as you know a multiplier on the HSA assets could almost be more important to your earnings than the number of eligible people.

Stephen Laliquette: So just wanted to get a little more color around that if you have any estimates. Thanks. Yeah, Steve, maybe I'll say a couple things, then you can add to it. I think when you think about it, one thing that we remind everybody is that when you look at HSA contributions, only about 4% of members contribute at the max. And so one of the key things we're trying to do is drive awareness that you should be contributing to the max. Obviously, here in the expansion, the increase of health savings account contribution limits for individuals on middle to lower incomes, I think from a score perspective, that's been scored at a cost of $8 billion over 10 years.

Speaker Change: But I can open account so just wanted to get little more color around that if you have any estimates coupled.

Amy: Coupled Amy.

Speaker Change: Steve maybe I'll say a couple of things then you can add to it I think when you. When you think about it you know one thing that we.

Speaker Change: And everybody is that when you look at HSA contributions only about 4% of members contribute at the Max.

Speaker Change: And so one of the key things we're trying to drew is as drive awareness that you should be contributing to the Max.

Speaker Change: Obviously here in the expansion the increase of health savings account contribution limits for individuals.

Speaker Change: Ill to lower incomes.

Speaker Change: I think from a score perspective, that's been scored at a cost of 8 billion over over 10 years.

Stephen Laliquette: But we do think it's modestly impactful in terms of the messaging of the power of having an HSA account as well as contributing to the max. Do you have more to add to that?

Speaker Change: But we do think it's modestly impactful in terms of the messaging of the power.

Speaker Change: Our of having an HSA account as well as contributing to the to the Max Steve I don't know if you'd have more to add to that.

Stephen Neeleman: Just a couple of things. Look, I think, I think it's a good question. The last time we looked at the median household income, of our account holders. It's around $72,000. So the vast majority would actually fit into this rubric. Now, the question is, what Scott's pointing out is how do you contribute? And I really think it comes back to a plan design issue. One of the things that gets us most excited about these provisions is we could actually come to employers, and we're doing that right now. I mean, this is part of our recession-proof part of our business is to talk to employers during these economic downturns and say, hey, this is a way for you to save money and say, really, there's an opportunity here for you to change the way you make contributions to HSAs, to help maybe lower-income people get into these accounts.

Speaker Change: Just a couple of things.

Speaker Change: I think I think it's a good question to.

Speaker Change: Last time, we looked at the median household income.

Speaker Change: Of our account holders its around $72000.

Speaker Change: So vast majority would actually fit into this.

Scott Cutler: Now the question is just what Scott's point is how do you contribute more and I really think it comes back to a plan design issue one of the things that gets us most excited about these provisions as we could.

Speaker Change: We could actually come to <unk>.

Speaker Change: Lawyers, and we're doing that right now I mean, this is part of our recession proof part of our business is to talk to employers during economic downturns and say Hey, This is a way for them to save money and say really there's an opportunity here for you to.

Speaker Change: Change the way you make contributions to HSA.

Speaker Change: To help maybe lower income people get into these accounts.

Stephen Neeleman: And so the employers can fund, and you can do variable funding. We have employers that will give more money to lower-income people than they do for higher-income people, which we think is a good strategy to drive higher adoption. That way, people aren't afraid of the higher deductible that comes with the HSA. And so, look. The short answer is, is a lot of our account holders would follow. The longer answer is, is do people really have the money? put into these accounts, and I think the answer is if they start looking at the tax advantages of the HSAs compared to even the 401K.

Speaker Change: So the employers can fund that you can do variable funding employers will give more money.

Speaker Change: People do for hiring people, which we think is a good strategy to drive higher adoption that way people aren't afraid of the higher deductible plans with the HSA and so look.

Speaker Change: Short answer is is a lot of our account holders would fall into this.

Speaker Change: The longer answer is do people really have the money.

Speaker Change: And these accounts and I think the answer is if they start looking at the tax advantages that the HSA as compared even to horrible okay.

Stephen Neeleman: It is a lot stronger from that perspective that we can start to tell that story. But the biggest thing we can do is to get employers and health plans. So I think it just opens the door, Stephen, for a lot more innovation when it comes.

Speaker Change: Because it is a lot stronger from that perspective that we can start to tell that story, but the biggest thing we can do is to employers and health plans.

Speaker Change: Start driving to higher adoption in these accounts more full replace solutions for employers because that's where they're going to not only provide we think the richest benefit for their folks and also drive down the cost.

Speaker Change: So I think it just opens the door for a lot of a lot more innovation when it comes to play at a time.

Unknown Executive: Okay, yep, that's very helpful. Thank you.

Speaker Change: Okay. Yeah, that's very helpful. Thank you.

Speaker Change: Thanks, David.

David Roman: The next question comes from David Roman with Coleman Sachs. Please go ahead. Eighth, thank you. You got Jamie on for David this afternoon. I wanted to see if you could unpack just the growth between custodial cash and HSA investment cash. The latter is growing a lot quicker. And if you can just help us think through the unit economics as the investment side grows quicker than the custodial cash. Yeah, yeah, no problem. So, you know, obviously, the custodial cash, we're making the yields on HSA cash, which which we disclosed to you guys. And sort of think of the investment cash as as something more like high 20s basis points, on average, right, we have some, some clients who have reached the max fee who are paying less, but in a typical dollars coming in at 30, 30 or so basis points.

David Roman: The next question comes from David Roman with Goldman Sachs. Please go ahead.

Jamie: Hey, Thank you you've got Jamie on for David.

David Roman: Afternoon.

Speaker Change: I wanted to see if you could unpack just the growth between custodial cash in and HSA investment cash.

Speaker Change: The latter is growing a lot quicker and if you could just help us think through the unit economics.

Speaker Change: The investment side grows quicker than the custodial cash.

Speaker Change: Yeah, Yeah, no problem. So you know obviously, the custodial cash, we're making yields on HSA cash, which which we disclosed to you guys and sort of think of the the investment cash.

Speaker Change: As as something more like a high 20 basis points on average rate we have some some clients who have reached the Max fee, we're paying less but in a typical dollars coming in at 30, 30, or so basis points. So it moves it moves up and down but high twentyish basis points on investors, but I think the spirit of the.

James Lucania: So it moves, it moves up and down, but but high 20s basis points on investors, but I think that the spirit of the of the question is like that we don't these are not sort of transferable buckets. And we tend to think of our account holders as in one or two different cohorts, right, you are either a saver, slash spender, you're an investor and a spender, or you're just an investor. And those groups behave very, very, very differently. So to the member that is growing their cash balance, helping us grow our custodial cash balance is a different member than the member that is contributing the 8000 plus family per year into into the investment balance.

Speaker Change: Of the question is like that we don't these are not sort of transferable buckets and.

Speaker Change: And we tend to think of our account holders as in one or two different cohorts you are either a saver slash spender, you're an investor and a spender or you're just an investor in those groups behaved very very very differently. So to the member that is growing their cash.

Speaker Change: Balance, helping us grow our custodial cash balance is a different member than the member that is contributing to 8000 plus family per year into into the investment balance we take care of all of those populations.

James Lucania: We we take care of all those populations. And each one of those populations is growing.

Speaker Change: And each one of those populations is growing.

Speaker Change: Okay, Great and then.

Stephen Laliquette: And then I just wanted to focus on the Medicare Type A seniors for a minute. And, you know, obviously, given the lifecycle stage of those, that population, how would you have us think about the propensity, you know, those types of patients to save in HSAs? Is there a benchmark or, you know, similar population that you'd compare it to in terms of propensity of those, of that population to invest in HSAs?

Speaker Change: I just wanted to focus on the Medicare Taipei seniors for a minute then.

Speaker Change: Obviously, given the the lifecycle stage of those.

Speaker Change: That population.

Speaker Change: How would you have us think about the propensity of those types of patients to save an HSA is there any.

Speaker Change: Benchmark or similar population that you would compare it to in terms of propensity of those.

Speaker Change: That population to invest in HSA.

Speaker Change: Yeah.

Stephen Neeleman: Do you want me to address that, Scott? Yeah, go ahead, Steve. What I think a general rule is, is people have a longer tenure with health equity, I can't speak for They probably don't have a lot of dependents at home. They don't have those types of things. They're probably a little bit healthier than they will be later in their life. And so they're putting as much money into these accounts as possible. By the time they've been with us for four or five years, they're starting to understand that, you know, if they've got an extra dollar, they should put it in their HSA.

Speaker Change: Do you want me to address yes go ahead, yes.

Steve Street: Yeah go ahead Steve.

Steve Street: What kind of a general rule is as people.

Steve Street: Have a longer tenure with health equity I can't speak for them.

Steve Street: The other companies in our space, but I know the south Texas, a longer tenure, they have with us in a little bit older. They get the more income they have to put in their HSA and so we love folks that are in there are 50 years fifth six decades of life that have been an HSA for five years, because they are really pounding the money in because they know.

Steve Street: And you know it kind of makes sense right at that point.

Steve Street: They probably don't have a lot of a lot of independents at home I don't have those types of things are probably a little bit healthier than it will be later in their life and so they put as much money into these accounts as possible.

Steve Street: By the time, they've been with us for four or five years for sure and I understand that you know if they've got an extra dollar.

Steve Street: <unk> put in there as you say and.

Stephen Neeleman: And so we do think there's a real opportunity here. Now, you know, the reality is, is that not everyone that is 65 is still in an employer-sponsored plan or a high-deductible plan. But there's a lot that are. There's a lot that are. And one of the things that happens is, is that they tend to kind of They get the notices from the government that says you better sign up for Medicare, or if they enroll in Social Security, they get auto-enrolled in Medicare Part A. And all of a sudden, they reach out to us and say, hey, I got a problem here.

Steve Street: And so so we do think there's a real opportunity here now.

Steve Street: The reality is is that not everyone that.

Steve Street: It is 65 is still in a employer sponsored plan or a high deductible plan.

Steve Street: But theres a lot that are there's a lot that are.

Steve Street: And one of the things that happens is is that they tend to.

Steve Street: Kind of.

Steve Street: They get the notices from the government as you go to sell them for Medicare.

Steve Street: If they enroll in social security to get auto enrolled in Medicare part, a and then all of a sudden they they reach out to say Hey, I got a problem here just met with my account and I've been sending me I cannot for the last six months and I can't I got to get the money out of it because.

Stephen Neeleman: I just met with my accountant, and I've been funding my account for the last six months, and I can't, I got to get the money out of because I can't do it because I've been disqualified by being in Part A. And again, they get auto-enrolled when they start with Social Security and things like that.

Steve Street: Because I can't do it because I've been disqualified by being in part a and.

Steve Street: And again to get auto enrolled when they surface, so scared and things like that so we think there's a lot of opportunities a lot of educational and that we can.

Stephen Neeleman: So, I mean, there's a lot of opportunities, a lot of educational... that we can do.

Steve Street: Can do one.

Stephen Neeleman: One of my favorite stories is about somebody that was turned 55 and put 47 bucks in his HSA. He sent me a note when he turned 65 and he said, you know, I now have over $100,000 in my HSA and he goes, I'm going to work for another five years because I want to get this thing up as high as I possibly can. so that when I really do truly go into active retirement, I have the money I need to take care of my healthcare expenses. So it's a great question. We're gonna keep chopping away at that tree, but this just gives us a little bit of a sharper accent.

Speaker Change: One of my favorite stores is about somebody that was turned 55 and 47 Bucks and as HSA you.

Speaker Change: He sent me a note when you turn 65 and he said I now have over $100000 I might just say anything's, having to work from the five years, because I want to get this thing up as high as I, possibly can.

Speaker Change: I really do truly.

Speaker Change: Moving to active retirement I have the money I need to take care of a health care system. So it's a great question.

Speaker Change: We're going to keep.

Speaker Change: Chopping away that tree, but this just gives us a little bit of a shock racks to do so.

Unknown Executive: Great, thank you.

Speaker Change: Great. Thank you.

Jamie: Yeah Jamie.

Unknown Executive: The next question comes from Stan Berenshteyn with Wells Fargo. Please go ahead. Hi, yes, hi, thanks for taking my questions. First on the forward contracts, I'm just curious, do you still get upside of freight from here? Well, we will get upside and then we will pay that upside to our counterparty on the hedge that we entered. So effectively, we've locked in treasury rate, forward treasury rates on $500 million of maturing of maturing bank contracts. And the rationale there is right, we've got $5.7 billion point-in-time risk on reinvestment or replacement of those maturing basic rate contracts.

Speaker Change: The next question comes from Dan Bernstein with Wells Fargo. Please go ahead.

Speaker Change: Yes, hi, thanks for taking my questions.

Dan Bernstein: First on the forward contracts I'm, just curious do you still get upside if rates move higher from here.

Dan Bernstein:

Dan Bernstein: Well, we will get upside and then we will.

Dan Bernstein: Hey that upside to our counterparty on the on the hedge that we entered so effectively we've locked in treasury rate.

Dan Bernstein: Forward treasury rates on $500 million of maturing of maturing bank contracts.

Dan Bernstein: And the rationale there is right. We've got five $7 billion of point in time risk on on reinvestment of replacement of those maturing basic rate contracts and and you know, we're not making a sort of speculative trading decision.

Stan Berenshteyn: And we're not making a sort of speculative trading decision. What we're doing is trying to de-risk that point-in-time risk a bit and locking in a Treasury rate that we believe is significantly above what we view as neutral. So it's locking in a good HSA yield. Could it be maximizing HSA yield? Perhaps. Could it be under-maximizing HSA yield? Perhaps. But we're effectively locking in the forward curve today to reduce that maturity wall. Got it, got it. Okay.

Dan Bernstein: What we're doing is trying to derisk that point in time risk.

Dan Bernstein: And locking in a treasury rate that that we believe is significantly above what we view as neutral. So it's it's locking in a good HSA yield could be maximizing HSA yield perhaps could it be under maximizing HSA, you'll perhaps but.

Dan Bernstein: We're we're locking in a lot of effectively locking in the forward curve today to reduce that maturity wall.

Dan Bernstein: Got it got it Okay and then another one here on the legislation. So past couple of years. The market has added about 2 million new HSA as per year. So if this legislation passes how accretive do you expect the current pace of growth to become.

Scott Cutler: And then another one here on the legislation. So, you know, past couple of years, the market has added about, you know, 2 million new HSAs per year. So if this legislation passes, how creative do you expect the current pace of growth to become? Any thoughts on that? Thanks. Yeah, we don't know. One of the things that, and again, we focus a lot on the Medicare Part A stuff, we talked a little bit about the exchanges. But there's other provisions in this legislation, which I think are equally as exciting. And everyone knows, it follows health equity that we have over 100,000 employers And, you know, they really do drive a lot of our growth, but to be able to go to an employer, again, if all these provisions stay in.

Dan Bernstein: Any thoughts on that thanks.

Speaker Change: No, we don't know, but one of the things that.

Speaker Change: And again, we focus a lot on the Medicare part as stuff, we talked a little bit about the exchanges.

Dan Bernstein: But theres other provisions in this legislation, which I think are.

Dan Bernstein: Equally as exciting and as everyone knows the false health equity, but we have over 100000 employers.

Dan Bernstein: And they really do drive a lot of our growth, but would you be able to go to an employer.

Dan Bernstein: And if all these provision stay in there and.

Dan Bernstein: Things like Hey, did you know that the money that.

Scott Cutler: People are putting in their HSAs can now be used to both pay for direct primary care. and the very existence of them being in a direct primary care. arrangement does not exclude them from having an HSA. Same thing with using HSA dollars for gym passes. or, you know, we've had a lot of employers that have come to us. It's really frustrating for us that we want to offer an on-site medical actually a good colleague. Scott and I, that we both have known for years, has on-site medical. to a bunch of the tech companies throughout Silicon Valley, and it's frustrating for them because they want to provide this upfront medical care, sometimes free of charge for people that are working.

Dan Bernstein: People are putting their exercise can now be used to both.

Dan Bernstein: Pay for direct primary care.

Dan Bernstein: Up to a certain amount per month is in the legislation.

Dan Bernstein: And the very existence have been deemed as a direct primary care.

Dan Bernstein: Arrangement does not exclude them from having an HSA.

Dan Bernstein: <unk> thing with using HSA dollars for Jim tests, and things like that or.

Dan Bernstein: We've had a lot of employers that have come to us and instead, it's really frustrating for us that we want to offer.

Dan Bernstein: And on site medical clinic actually a good colleague of Scotland.

Dan Bernstein: Both have known for years has onsite medical clinics to a bunch of the tech companies, perhaps silicon valley and it's frustrating for them because they want to provide this upfront medical care.

Dan Bernstein: Sometimes free of charge for people that are working and you can imagine seem situations factories and things like that.

Scott Cutler: And you can imagine the same situation in factories and things like that. And yet that could disqualify them from having an HSA unless they charge a market rate at their own medical clinic, which just adds a level of complexity. So I don't know, to get to your base question. We obviously keep our eye very closely on that number of new HSAs created. And as much as we like to always capture market share like we've been doing, we wanna still capture market share, but the market be bigger, Doug. And that's what this is all about.

Dan Bernstein: And yet that could disqualify them from having an HSA unless they charge a market rate at their own medical clinic, which just adds a level of complexity.

Dan Bernstein: I don't know if you get to your base question.

Dan Bernstein: We obviously keep our eye very closely on that number of new HSA is created as much as we like to always capture.

Dan Bernstein: Market share like we've been doing.

Dan Bernstein: We want to go capture market sure what the market would be bigger doggone it and that's what this is all about and so I don't know how we can drive up that number but I just wanted to when I'm trying to convey to you. It's not just about the med RNA people.

Scott Cutler: And so I don't know how we can drive up that number, but I just wanna try to convey to you, it's not just about the MedRTA people, it's not just about the exchanges, it's about going to employers with a different value proposition saying, have your own set medical clinic. do direct primary care arrangements. Again, if these provisions stay in there and let's still have HSAs and let's really go after this and let's just go full replace, that's easy. Go Full Replace. Everyone's in. Create a nice benefit for your folks. You're going to save probably a few million bucks a year depending on the size of the employer and your people are going to now have a better benefit.

Dan Bernstein: Not just about the exchanges, it's about going to employers with a different value proposition, saying have your on site medical clinics.

Dan Bernstein: Do direct primary care arrangements again, if these provisions staying there and let's still have HSA and let's really go after this and lets just go full replace that's easiest thing.

Dan Bernstein: Gulf will replace everyone's in create a nice benefit your folks you're going to save probably a few million bucks a year, depending on the size of employer and your people can now have a better benefit. So that's what I think its all about but I don't know if that addresses your question, it's down but that's the way I see it.

Scott Cutler: So that's what I think it's all about. But I don't know if that addresses your question, Stan, but that's the way I see it. Directionally, it does. I appreciate the comments.

Dan Bernstein: Well directionally it does I appreciate the comments thanks, so much thanks.

Unknown Executive: Thanks so much. Thanks, Stan.

Speaker Change: Thanks, Tim.

Matthew Ingalls: The next question comes from Matthew Ingalls with RBC, please go ahead. Hey, guys, thanks for taking my question. Love to see the service cost come in really strong. I was wondering, is the AI chat and agent support as well as the AI claims already meaningful to that service cost strength? And if so, can you maybe size that for us and give us a sense around how impactful that could be this year as you expand it? Yeah, we don't break out the exact costs associated with, you know, with the AI deployment, what I would say is, obviously, we're trying to bend the curve on service costs over time, automate as many of the interactions that drive value to the member experience as possible.

Speaker Change: The next question comes from Matthew.

Dan Bernstein: RBC. Please go ahead.

Matthew: Hey, guys. Thanks for taking my question I Love to see the service costs come in a really strong I was wondering is the AI chat and agent support as well as the claims are already meaningful to that service cost strength and if so can you maybe size that for us and give us a sense for how impactful that could be a this year as you expand it.

Speaker Change: Yeah, we don't break out the exact costs associated with.

Speaker Change: You know with the AI deployment.

Speaker Change: What I would say is.

Dan Bernstein: Honestly, we're trying to bend the curve on service costs overtime automate as many of the interactions that drive value to the member experience as possible.

Dan Bernstein: I Love. The fact that we had an award winning product and AI around them.

Scott Cutler: I love the fact that we had an award winning product in AI around, you know, around claims. When you think about that claims process, that claims process itself would be filling out a form, having somebody look at a form, it might take a week or two weeks to adjudicate that form. And then it might take a day or two to receive the reimbursement. And we've collapsed all of that to be real time instantaneous. Through that, through that process on the phone, in a mobile device, not touching a human. So we think that's a great experience for our members.

Dan Bernstein: You know around claims when you when you think about that claims process.

Dan Bernstein: That that claims process itself would be filling out a form having somebody look at our form it might take a week or two weeks to adjudicate a that form and then it might take a day or two to receive the reimbursement and we've collapsed all of that to be real time instantaneous.

Dan Bernstein: And through that through that process on the phone in a mobile device not touching a human and so we think that's a great experience for our members and obviously at a lower cost I.

Scott Cutler: And obviously, at a lower cost.

Scott Cutler: And then when we look at the application of AI in the rest of our service efforts, we have a service modernization strategy, which is, you know, looking at how we're actually serving those customers, and looking at how we actually drive value to what the customer expectations are. And when we think about the customer today, You know, 70% of the workforce in the next couple of years is going to be millennial and Gen Z. Their expectation is digital first, certainly mobile, don't really want to interact on the phone, want to be able to use AI, generative AI, in their interactions.

Dan Bernstein: And then when we look at the application of.

Dan Bernstein: AI in the rest of our service efforts.

Dan Bernstein: We have a service modernization strategy.

Dan Bernstein: Which is looking at how we're actually serving those customers and looking at how we actually drive value to what the customer expectations are and when we think about that customer today.

Dan Bernstein: You know, it's 70% of the workforce in the next couple of years is gonna be millennial and Gen Z and their expectation is digital first certainly mobile.

Dan Bernstein: Don't really want to interact on the phone.

Dan Bernstein: Wanted to be able to use AI generative AI in our interactions and today. The reality is most of our context, our phone based and so we're gonna be looking at how we use AI to actually have more self service opportunities.

Scott Cutler: And today the reality is most of our context are phone-based, and so we're going to be looking at how we use AI to actually have more self-service opportunities, more opportunities in email and in chat, generative chat, to be able to get answers quickly where our members want those answers. And again, over time, we would expect that to drive down our service costs. And so that really is our strategy that starts with the value proposition that we have to our members to provide a remarkable experience.

Dan Bernstein: More opportunities and email and chat general chat to be able to get answers quickly where are where our members want those answers and again over time, we would expect that to drive down.

Dan Bernstein: Our hours our service costs. So that really is our strategy that starts with the value proposition that we have to our members to provide a remarkable experience.

Dan Bernstein: Okay.

Unknown Executive: Awesome. Thank you so much. Thanks, Pat.

Dan Bernstein: Awesome. Thank you so much.

Dan Bernstein: Thanks Pat.

David Larson: The next question comes from David Larson with BTIG, please go ahead. Hi, is the chip-enabled stacked card fully live? And then can you also talk a little bit about Navigator and Analyzer and Momentum? Are those all GA? And if not, when will they be? Thanks a lot.

Speaker Change: The next question comes from David Larsen with <unk>. Please go ahead.

David Larsen: Hi is the chip enabled stacked cord.

Speaker Change: Fully live and then can you also talk a little bit about on navigator and analyzer and momentum are those all G eight and if not when when will they be thanks, a lot yeah.

Scott Cutler: Yeah, yeah, so the chip card, actually Q3, Q4 last year, that's been that's been rolled out. For, you know, new members that are signing up, they're getting that new stat card experience. You know, again, the roadmap associated with that is, over time moving to a $10 in ways that consumers already do today. I think that's one of the drivers for the strength that we're seeing on the interchange side. And so that's a key part of our strategy overall.

Speaker Change: Yes.

Speaker Change: Chip card actually Q3 Q4 of last year, that's been that's been rolled out.

Speaker Change: For new members that are signing up they're getting that new stack card experience.

Speaker Change: Again, the roadmap associated with that is over time moving to a digital wallet.

Speaker Change: <unk> already integrated for example, with Apple pay.

Speaker Change: And so we're really making that seamless opportunity to to spend dollars in in ways that consumers already do today I think that's one of the drivers for the strength that we're seeing on the interchange.

Dan Bernstein: Right.

Dan Bernstein: And so that's a key part of our strategy overall, and then just quickly we announced last quarter the assist portfolio and maybe building on some comments that I made around HSA and Steve are built and we're really trying to drive a very strong value proposition to our enterprise clients around the opportunity.

Scott Cutler: And then just, you know, quickly, we announced last quarter, the assist portfolio, and maybe building on some comments that I made around HSAs and Steve built in, we're really trying to draw a very strong value proposition to our enterprise clients around the opportunity with optimal plan design around how an employer can save their costs. And this is really important, particularly in this environment today. And so analyzer today is rolled out, it's generally available, available to all of our clients that have 50 HSAs or more. And it's Here's how you compare from a plan design perspective, to best in class.

Dan Bernstein: With optimal plan design around how an employee or can see.

Dan Bernstein: Their costs.

Dan Bernstein: And this is really important particularly in this environment today and so analyzer today is rolled out it's generally available oh available to all of our clients that have 50, HSA A's or bore and it's essentially using data and insights benchmarking best in class.

Dan Bernstein: To show with data to that enterprise, Here's how you compare from a plan design perspective to best in class Here's what your investment percentage is contribution percentages enrollment percentages look like and then ultimately how much money you can save and what is the benefit that you could provide to.

Scott Cutler: Here's what your investment percentages, contribution percentages, enrollment percentages look like. And then ultimately, how much money you can save. And what is the benefit that you can provide to, you know, to your employees, if you drive more greater adoption. That's a really strong message that we're driving through our enterprise sales conversations this year. So analyzers out there, we love the uptake of that product.

Dan Bernstein: Two.

Dan Bernstein: To your employees, if you drive for greater adoption.

Dan Bernstein: That's a really strong message that we're driving through our enterprise sales conversations at this this year so analyzers out there.

Dan Bernstein: We love the uptake of that of that product.

Scott Cutler: Navigator, again, sort of a tool that we've highlighted is focused on the member experience in making more like transparent decisions around healthcare outcomes. Again, that's available to our members. You know, and that's also driven by a transparency mandate as well. So we're early in the assist portfolio overall. But I really like, you know, this is now introducing products that we're providing to, you know, to our members into our enterprises, that, you know, that ultimately drive greater adoption, enrollment and participation in our product. I think it's great. I think this is why Congress supports what you're doing and why all these expansions are in the bill here.

Dan Bernstein: Navigator again sort of a tool that we've highlighted is focused on the member experience and making more like transparent decisions around health care outcomes again, that's available to two two to our members.

Dan Bernstein: That's also driven by a transparency mandate.

Dan Bernstein: Well so we're early in the assist portfolio overall, but I really like this is now introducing products that we're providing to you.

Dan Bernstein: You know to our members into our enterprises that are you know that ultimately drive greater adoption enrollment and participation in our products.

Dan Bernstein: I think it's great I think this is what Congress supports what Youre doing and why why are all these expansions are in the bill here and then just quickly for your $9 9 million HSA members. What I'm hearing is by the end of the fall everybody's going to have to be using the app to and there will be dual Saatchi art.

Scott Cutler: And then just quickly, for your 9.9 million HSA members, what I'm hearing is by the end of the fall, everybody's going to have to be using the app, and there will be dual-factor authentication through the app by the end of the fall, which will completely sort of solve your fraud problem here. Did I hear that correctly? And how many people have the app now of those 9.8 million lives? I heard numbers around like 1 million or 2 million, which sounds a little bit low if everybody's going to have to use the app by the end of the fall for authentication purposes.

Dan Bernstein: Indications through the App by the end of the fall, which will completely sort of solve your fraud problem here did I hear that correctly.

Dan Bernstein: And how many people have the now those $9 8 million lives I've heard numbers around like $1 million or $2 million, which sounds a little bit low if everybody is going to have to use the app by the end of the fall.

Dan Bernstein: For authentication purposes.

Scott Cutler: Yeah, so, so again, a really important point here, you know, number one, I think we are going to be driving app downloads, it's going to be really important. We're going to be looking at is any active member. So this would be a member that is accessing the platform, maybe they're checking a balance, or they want to, you know, change some of their information. In order to do any of those actions or engagement on the platform, you're required to authenticate through the through the mobile app. And so, access will only come through the mobile app. I caution, though, to necessarily look at app downloads as a reflection of the security because effectively, you know, once access to platform is goes through that goes through that experience, you know, it's obviously a lot more secure.

Dan Bernstein: Yeah. So so again, a really important point here.

Speaker Change: I've never want I think we are going to be driving app downloads, it's going to be really important.

Speaker Change: We're going to be looking at is any active member. So this would be a member that is accessing the platform, maybe they're checking their balance or they want to change some of their information in order to do any of those actions or engagement on the platform you'll required to authenticate through the through the mobile app and so axa.

Speaker Change: This will only come through the mobile app.

Speaker Change: I would caution though to necessarily look at app downloads as a reflection of the security because effectively once access to platform as it goes through that goes through that experience.

Speaker Change: It's obviously a lot more secure.

Scott Cutler: And so that's what we're looking at in terms of like, how do we secure the secure the perimeter, but you're right in terms of the overall, you know, HSA accounts as an example, at 10 million, we have 1.2 million downloads today. You know, and again, one other, you know, one other comment, you know, we have a lot of members, for example, that could be investors, and they set it and forget it and don't actually access the platform. But again, access is going to be coming through that mobile authentication before the end of the year.

Speaker Change: So that's what we're looking at in terms of like how do we secure that secure the perimeter, but youre right in terms of the overall HSA accounts as an example, it at $10 million, we have $1 2 million downloads today.

Speaker Change: And again, what other what other comment you know we have a lot of members for example that could be investors and they set it and forget it and don't actually.

Speaker Change: Access to the platform.

Speaker Change: But again access is going to be coming through that mobile authentication before the end of the year.

Unknown Executive: Congratulations on your great quarter.

Speaker Change: Congrats on a great quarter.

Constantine Davides: Thank you. The next question comes from Constantine Davides with Citizens. Please go ahead. Thanks. Maybe just changing gears a little bit towards the CDB side, you've now delivered three quarters in a row of pretty good sequential account increases.

Speaker Change: Thank you.

Speaker Change: The next question comes comes from Constantine, David but it isn't.

Speaker Change: Please go ahead.

Speaker Change: Thanks.

Speaker Change: Maybe just changing gears a little bit towards.

Speaker Change: The CEB side, you've now delivered three quarters in a row of pretty good.

Speaker Change: Actual account increases can you just talk about where youre seeing growth opportunities right now within those products.

Scott Cutler: Can you just talk about where you're seeing growth opportunities right now within those products and any differences in terms of how you're going to market with CDB and then do you sort of expect this growth to be sustainable across the balance of the year? Yeah, so again, as we, you know, we reported out the growth that we're seeing in our other product areas, again, just a reminder that we sell this as a bundled as a bundled product, you know, and so as we look at how we're selling that to the to the enterprise, we're driving that.

Speaker Change: Any differences in terms of how youre going to market with CBB and then do you sort of expect this growth to.

Speaker Change: Sustainable across the balance of the year.

Speaker Change: Yes, so again as we reported out the growth that we're seeing and in our other product areas again, just a reminder, that we sell this as a as a bundled as a bundled product.

Speaker Change: And so as we look at how we're selling that to the to the enterprise we're driving that.

Scott Cutler: You have the actual Yeah, yeah, that's right. And I think it might not be up yet. But the, the investor presentation that Richard puts on the IR site, we'll have the detailed breakdown of the other accounts, but pretty, pretty similar story. It's been the core core bundle, right, the art, the RA products, HRA has been strong for some time now, and it continues to be strong. But notably, that are we're growing the FSA accounts, again, which had been a direct Obviously saw a lot of growth over the last few years with return to office, but I think that that story is largely complete at this point.

Speaker Change: You have the actual breakout.

Speaker Change: Right I think it might not be up yet.

Speaker Change: The investor.

Speaker Change: Presentation that Richard puts on the IR site will have the detailed breakdown of the other accounts, but pretty pretty similar story. It's been the core the core bundle right. They are they are a product's HRA has been strong for some time now and it continues to be strong, but notably there are we're growing DFS.

Speaker Change: Say accounts Ah again, which had been a drag really since the wage works acquisition on that FSA line. So it's good to see the core C. D. H bundle growing now I think on the <unk>.

Speaker Change: The other accounts on the Cobra side, we've talked about for some time like we've been we've been sort of running running off a bit a bit of that business. Some of the less profitable books books of that business. So that's a bit of a drag on service revenue because it's a high unit service called a unit service revenue.

Speaker Change: But on less profitable at the bottom line. So all of that the on on regret on regretted churn there and then computer I think.

Speaker Change: Obviously, you saw a lot a lot of growth over the last few years, which returned to office, but I think that that story is largely is largely complete at this point and so while the company X Y Z in New York goes from three to four days in the office that that person's already buying their monthly metro card. So it's.

Scott Cutler: And so while, you know, if the company XYZ in New York goes from three to four days in the office, that person's already buying their monthly MetroCard, so it's just not that much of a list anymore. The benefit was when it went from zero to one, and from one to three. So I think that that extra growth from commuter, which drove it in the past couple years is now being driven by the core product. Got it.

Speaker Change: Just not that much of a lift anymore. The benefit was when it went from zero to one and from one to three so I think that that extra growth from commuter which drove it in the past couple of years is now being driven by the core products.

Speaker Change: Got it and then if I can just sneak one last one in here.

Scott Cutler: And then if I can just sneak one last one in here, just following up on the earlier question around some of the newer assist solutions that you've launched this year, can you also give us an update on the HPA initiative that you launched last year and just how that's being received in the market? Thank you. Yeah, so again, I think this is a great product that goes to, you know, to the enterprise. You know, again, as we think about what we're trying to accomplish here, is to drive enrollment and adoption of a high deductible health plan.

Speaker Change: Just following up on the earlier question around some of the newer solutions that you've launched this year, but can you also give us an update on the HPA.

Speaker Change: Initiatives that you launched last year and just how that's being received in the market. Thank you.

Speaker Change: Yeah. So again I think this is a great product that goes to.

Speaker Change: To the enterprise.

Speaker Change: Again, as we think about what we're trying to accomplish here is to drive enrollment and adoption of our high deductible health plan and one of the historical barriers to that is obviously been.

Scott Cutler: And one of the historical barriers to that has obviously been, you know, the high deductible nature of that of that plan. And so HPA as a product is meant to effectively eliminate that as a barrier. And so, you know, we're going to the market there through partnership with patient. The uptake that we see with some of our large value proposition that we're selling, you know, to the enterprise. So we like the uptake of that as a product. And again, I think if we're successful, you know, in this value proposition, I think the outcome, hopefully, for employees as they go through the open enrollment process is actually be better educated about the difference between effectively a low deductible plan and a high deductible plan that we need to take into account the premiums, the contributions, that effectively the out-of-pocket cost can be net neutral.

Speaker Change: The high deductable nature of that of that plan and so H P. As a product is meant to effectively eliminate that as a as a barrier and so.

Speaker Change: We're going to the market there through partnership with patient.

Speaker Change: The uptake that we say that we see with some of our large enterprise clients.

Speaker Change: It is very high.

Speaker Change: In terms of again, a new value proposition that we're selling to the enterprise. So so we like the uptake of that as it as a product and again I think if we're successful.

Speaker Change: You know in this value proposition I think the outcome hopefully for employees as they go through the open enrollment process is actually be better educated about the difference between effectively a low deductible plan at a high deductible plan and when you take into account the premiums the contributions.

Speaker Change: That effectively the out of pocket costs can be net neutral.

Scott Cutler: And then, therefore, having an HSA, which prepares you for a future medical event, and you've been able to overcome any concern that you might have in the first year with contribution levels that you can drive greater adoption. So that strategically is how all of it fits together for us. And so we like the value proposition. Thanks, Constantine.

Speaker Change: And then therefore, having an HSA, which prepares you for a future medical are bad.

Speaker Change: And you've been able to overcome any concern that you might have in the first year with contribution levels that.

Speaker Change: Hey, you can drive greater adoption, so that strategically is how all of it.

Speaker Change: <unk> fits together for us and so we like the value proposition.

Constantine: Thanks Constantine.

Unknown Executive: This concludes the question and answer session. I would like to turn the conference back over to Scott Cutler for any closing remarks. Please go ahead. Well, thank you, everybody. That was a very engaging conversation. We appreciate your support. I particularly want to thank our team, Team Purple, for the remarkable results this quarter. I'm really pleased about the progress. As I personally look back on the last five months, I'm more confident that as we've now strengthened and built our team, increased our operational strength and execute on our strategy, we can make meaningful progress against our mission of saving and improving lives by empowering healthcare consumers.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Scott Cutler for any closing remarks. Please go ahead.

Speaker Change: Well. Thank you everybody that was a very engaging conversation we appreciate your support.

Speaker Change: I want to thank our team team purple for the remarkable results. This quarter I'm really pleased about the progress as I personally I look back on the last five months.

Speaker Change: I'm more confident that as we've now strengthened and built our team.

Speaker Change: <unk> increased our operational strength and rigor execute on our strategy, we can make meaningful progress against our mission of saving and improving lives by empowering health care consumers. So thank you everybody.

Scott Cutler: So, thank you, everybody.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. © The HealthEquity Inc. All Rights Reserved. © The HealthEquity Inc. All Rights Reserved.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].