HealthEquity, Inc.

Good afternoon, and welcome to the Health Equity Third Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Richard Putnam. Please go ahead.

Thank you, Nick. Hello, everyone. Welcome to Health Equity's Third Quarter of Fiscal Year 2025 Earnings Conference Call. My name is Richard Putnam, Investor Relations for Health Equity. And joining me today is John Kessler, President and CEO, Dr. Steve Nealeman, Vice Chair and Founder of the company, James Lucania, Executive Vice President and CFO, Scott Cutler, recently appointed Successor President and CEO beginning in January. Before I turn the call over to John, I have a couple of reminders. First, a press release announcing the financial results for our third quarter of fiscal 2025 was issued after the market closed this afternoon. These financial results include the contributions of our wholly owned subsidiaries and accounts they administer. Press release includes definitions of certain non-GAAP financial measures that we will reference here 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 gap measures and a recording of this webcast. That website is ir.healthequity.com. Second, comments and responses to your questions today reflect management's view as of today, December 9th, 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 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, the market price of our stock, as detailed in our latest annual report on Form 10-K and in 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. Now over to Mr. John Kessler.

Thank you, Richard. Well done, as always. Hi, everybody, and happy holidays. I will briefly discuss Q3's momentum and key metrics, and then we've got a cavalcade of stars. Steve will describe post-election paths to health account expansion. You're going to want to hear about that. Jim will detail Q3 financial results, raise FY25 guidance, and preview FY26. I know you're going to want to hear about that. And then we're privileged to have Scott Cutler here with us with a few words of introduction. Let's get to it. In Q3, the team again delivered double-digit year-over-year growth across most key metrics, including revenue, which was plus 21%, adjusted EBITDA, plus 24%, and HSA assets, plus 33%. HSA members grew 15%, driving total accounts up 8%. Health equity ended Q3 with 16.5 million total accounts, including 9.5 million HSAs, building $30 billion in HSA assets, which is a lot. In fact, HSA assets increased $7.4 billion year over year, and we grew the number of our HSA members who invest by 21% year over year, helping to drive invested assets up 58% to $13.6 billion, and if you subtract that from 30, you know that HSA cash reached $16.4 billion. With sales and digital member education in action, I wanted to say, like, firing on all cylinders, but there was a lawyer problem with that, so I didn't say that. I'm not even sure what the lawyer problem was. In any case, Team Purple opened 186,000 new HSAs organically in the quarter, and that's 14% more than Q3 last year. Our HSA members added $0.5 billion. in assets compared to a 0.6 billion decline in Q3, which is typically a lighter quarter organically. In fact, average HSA balance has grown by double digits over the past 12 months, which is awesome for our members and awesome for our mission. Net CBs were up 0.1 million quarter over quarter, though flat year over year, which is a reminder of the impact of CDB comps on CDB comps clearly reading the wrong thing, of runoff of national emergency accounts. This will be the last time I will have to say that, not only because it's my last earnings call, but because we are lapping those comps. We face a monster year over year new HSA sales comp in Q4. It's a monster. We had an incredible Q4 last year. But The team's performance over the first three quarters of fiscal 25 gives it a really good chance to break the full year record for new HSAs, which would be incredible. Our operations teams were also very busy in Q3, completing the final wave of single-card processor consolidation while battling a sophisticated and persistent fraud actor. These fraud activities led to – both of these kinds of activities, I'm sorry, led to excess one-time service expense. which Jim will detail, a top seasonal spend for new partner and client implementations and hiring and training and testing for a successful open enrollment season, which is now very much underway. You should feel confident, though, that the underlying trend of service cost reduction through remarkable digital experience continues, with AI transforming more member contacts and claims interactions and mobile wallet integration supplanting more plastics. If you have a health equity card and it's not in your mobile wallet, you've got to do it. Time to do it. Has anyone done theirs, Jim? Not yet. Because you don't spend any yet. Nope. Okay. All right. We need to work on that. Richard, have you done it? Nope. Steve? Steve's done it. Absolutely. I know Steve's done it.