HealthEquity, Inc.

Good afternoon, and welcome to the Health Equity Second 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. Appreciate it. Hello, everyone. Welcome to Health Equity's second quarter of fiscal year 2025 earnings conference call. My name is Richard Putnam. I do investor relations for Health Equity. Joining me today is John Kessler, President and CEO, Dr. Steve Neelaman, Vice Chair and Founder of the company, and James Lucania. One-year anniversary, James. Executive Vice President and CFO. Before I turn the call over to John, I have a couple of reminders. First, a press release announcing the financial results for our second quarter of fiscal 2025 was issued after the market closed this afternoon. These financial results include contributions from our wholly-owned subsidiaries and 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. The website is ir.healthequity.com. Second, our comments and responses to your questions today reflect management's view as of today, September 3rd, 2024. And they will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, and 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 uncertainties that may cause the actual results to differ materially from statements made here today. So we caution you 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 FCC. We assume no obligation to revise or update these foreign-looking statements in light of new information or future events. Now, over to John.

Thank you, Richard. Well done. Hello, everybody. Today is the day after Labor Day, and that's the unofficial start of fall. And for some, that means leaves turning or the start of football season. For us on Team Purple, it also means open enrollment and busy season are right around the corner. Based on the numbers that we're reporting today, we're looking forward to a very busy and very productive busy season. I will discuss Q2's momentum and key metrics and progress towards our strategic goals. Jim will touch on Q2 financial results before detailing our raised guidance and a little bit about our share repurchase authorization. And Steve is here for Q&A on the state of the market at mid-sales cycle and also on recent developments in our nation's capital. Let's get to it. In Q2, the team again delivered double-digit year-over-year growth across most key metrics, including revenue plus 23% year-over-year, adjusted EBITDA plus 46%, and HSA assets plus 27%. HSA members grew 15%. from strong HSA sales and closing the final tranche of benefit wallet. Strong HSA growth drove total accounts up 9%. Health equity ended Q2 with over 16 million total accounts, including 9 million HSAs, holding $29 billion in HSA assets. HSA assets overall increased $2.2 billion in the quarter and, of course, $6.3 billion year over year. And we grew the number of our HSA members that invest faster than accounts, in fact, by 24% year over year, helping to drive invested assets up 43% year over year to over $13 billion. Turning to sales, Team Purple added 187,000 new HSAs from sales in the quarter, 20% more than Q2 of last year, resulting in a record first half for our sales and relationship management team. and we remain very positive about this year's selling season. Beyond the organic growth in HSAs, we reported in June that the team had transitioned the last of three tranches of benefit wallet at the start of Q2, adding approximately 216,000 HSAs and 1.0 billion of HSA assets in the second quarter. The timely completion of transferring HSAs and assets from Benefit Wallet, for which I thank the team and our clients and our partners at Benefit Wallet greatly, has opened up opportunity for CDB cross-sales into FY26 and locked in strong custodial yields on these assets for years to come. That is good. Thank you. CDB account growth turned positive with 1% year-over-year growth in Q2, even though we haven't quite lapped the final runoff of the extended life national emergency accounts, which will occur later this year. CDB sales into the plan year beginning January 1 also look very robust. Results this quarter also represent a down payment on the multi-year 3Ds strategy, that's 3Ds, we discussed at Investor Day. And each of the Ds represents kind of a transformation within the company. The first D represents which is delivering remarkable experiences, is about the digital transformation of service delivery. In Q2, the team delivered flat year-over-year service expense on 9% total account growth. That's really good. A new mobile app launched, continuing our rollout of claims AI. And last month, in August, I can't believe that's last month. It seems like it was just two days ago. Our card processor migration wrapped up. Thank you, team, for that, which enables stack cards on major digital wallets and next year instant card issuance, which I'm really excited about. The second D, deepening partnerships, is about the digital transformation of sales and the deepening of our partnerships around the health benefits ecosystem. In addition to record HSA openings and strong CDB results, the team continued work towards scaling partner-facing APIs and with a new third-party developer portal. It's coming. It's coming a little later this year, maybe in the third quarter, I think the third quarter. The team, just try and transcribe that. The team also expanded our stable of blue chip enhanced rates partners, speaking of partners, to keep up with adoption of enhanced rates, especially by new HSA members. The third D, driving member outcomes, is about extending health equities differentiation as a utilization accelerator, not only of health accounts and health savings, but of our partners' health benefits point solutions more broadly, something we've been doing for a long time and we're now in a position to do even more of. One of those outcomes that doesn't get talked about enough, actually, though, is dignity. And this morning, we announced the formal launch of HPAs, yeah, HPAs or HPAs, HPAs, spelled HPA, apostrophe S, a no-interest and no-fee option for employees to pursue medical care with flexible payment terms. Your credit score should not influence your access to care. This is a way for employers to make that happen. A version of it already was put into law for Medicare Part D recipients, and the commercial market employers should have it, and we're bringing it to them, and we're really excited about it. All this adds up to a quarter of investment and promise for the future within the envelope of robust growth in the present in terms of health equity's top line, its margins, and its cash flow from operations, as Jim is about to detail. Jim. Thank you, John.