HealthEquity, Inc.

Good afternoon, and welcome to the Health Equity First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Richard Putnam. Please go ahead.

Thank you, Gary. Very fine job. Hello, everyone, and welcome to HealthEquity's first quarter of fiscal year 2025 conference call. My name is Richard Putnam. I do Investor Relations for HealthEquity. Joining me today is John Kessler, President and CEO, Dr. Steve Niemelman, Vice Chair and Founder of the company, and James Kanias, Executive Vice President and CFO. Before I turn the call over to John, I have a couple of reminders, as we usually do. First, a press release announcing the financial results for our first quarter of fiscal 2025 was issued after the market closed this afternoon. These financial results include the contributions from our wholly-owned subsidiaries and the accounts they administer. The press release includes definitions of certain non-GAAP financial measures that we will reference today. You can find on our investor relations website a copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures and a recording of this webcast. That website is ir.healthequity.com. Second, our comments and responses to your questions today reflect management's view as of today, June 3, 2024. and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, or other information that might be considered forward-looking. There are many important factors relating to our business which could affect the forward-looking statements made today. These forward-looking statements are subject to risk and uncertainty 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 the latest annual report on Form 10-K, the subsequent periodic reports filed with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. Out of the way, it's over to John Kepler.

Hi, everybody, and thank you for joining us for this healthy start to fiscal 2025. That was a Richard pun. You may not want to quit your day job. I will discuss Q1 key metrics and progress against our strategy. Jim will touch on Q1 results and detail our raised guidance for fiscal 2025. And Steve is here for Q1. So here we go. Wow. In Q1, the team delivered, again, double-digit year-over-year growth across nearly all of health equity's key metrics, including revenue, which was plus 18%, adjusted EBITDA, which was plus 36%. That's two times as much. And HSA assets, which was plus 22%, which were plus 22%. HSA members grew 13% from strong HSA sales and benefit wallets, each of which I will detail in a moment. Strong HSA growth drove total accounts up 7%. Health equity ended Q1 with 16 million total accounts, including 9 million HSAs, holding $27 billion in HSA assets. HSA assets overall increased $2.1 billion in the quarter, including $0.4 billion of organic growth. 20% more of our HSA members became investors year over year, helping to drive invested assets up 39%. And by the way, this quarter, our HSA investors gained access to $0 brokerage trading of individual stocks and ETFs. Returning to HSA growth, Team Purple started the selling year off with 194,000 new HSA, a record for a first quarter and 60,000 or 45% more than Q1 last year. So what happened? First, accounts from existing clients and partners grew very nicely, even more so than during the banner macro-driven Q1 two years ago. In particular, we got a boost from the Blues health plan partners that joined health equity from further a little more than two years ago and are now more accustomed to working with us. Second, Accounts from new logos, that's in quotes, mostly small and mid-sized employers at this time of year, continued the positive trend that we saw over the course of fiscal 2004. Beyond the organic HSAs, the team transitioned two of the three tranches of benefit wallet into one, adding approximately 400,000 HSAs and $1.6 billion of HSA assets. The final benefit wallet transfer occurred last month. That was at the beginning of Q2. And by timely completing what is the largest HSA portfolio transfer ever, to our knowledge, HealthEquity's tiny but mighty court dev team, thank you guys, has raised our visibility to FY25 results, has opened up opportunity for CDB cross-sales and Roll360, and Benefit, which is the new name for Max Enrolled, deployments into fiscal 26, and laid an anchor to Wingward on custodial yield for years to come. That's nautical. CDB accounts decreased 1% compared to Q1 last year, preceding the ending of the national emergency in May and account runoff later last year. Excluding that factor, we again delivered positive CDB growth year over year. The key metrics support our longer-term strategy, and the team advanced that multi-year strategy, which you've heard about, and which we call 3Ds. The first D is delivering remarkable experience. Virtualizing our service, digitizing paper and plastic on our cloud-based health accounts platform in order to reduce service expense without sacrificing member delay. Q1 saw service costs as a percentage of revenue fall 400 basis points year over year. We launched more AI-driven service tech. We expanded our claims automation for FSA members that you saw at Investor Day. We deployed also to select enterprise clients HealthEquity's stacked account card for iOS and Android mobile wallets. Pretty cool. The second D is deepening partnerships across the ecosystem to grow sales without sacrificing margins. And in addition to continued work on the technology backbone of APIs that we also discussed at Invest Today, in the partnership category, we added insurer partners and capacity in the enhanced rates program that accommodated greater than expected adoption as more than 85% of new benefit wallet members' HSA cash is in enhanced rates. The third D is driving member outcomes through new data-driven services. that give clients and partners insight and engage members to act. During Q1, we gained important client and partner feedback. Thank you to our clients and partners who participated in these sessions live on our analyzer, transparency, health payment account, and other new services in development. All of this added up or adds up to a quarter of investment for the future within the envelope of robust top line margin and cash flow from operations growth in the present, which, conveniently enough, Jim will now detail. Jim. John.