Q2 2027 Healthequity Inc Earnings Call Transcript
Key Points
- HealthEquity Inc (HQY) delivered record Q2 results with revenue growth accelerating to 8% year-over-year and a record adjusted EBITDA margin of 48%, leading to raised fiscal 2027 guidance.
- HSA account growth remains strong, with total HSAs up 8% and new HSAs from sales up 24% year-over-year, marking a Q2 record and the strongest quarter outside of open enrollment.
- Member engagement is deepening, with monthly active app users up 62% year-over-year to 1.4 million, and record HSA invested assets up 28%, supported by the new SimplyInvest offering.
- AI-driven automation is significantly reducing service costs, with human-handled calls down 25% year-over-year and AI resolving 85% of routine chat inquiries, contributing to operating leverage.
- The company is expanding its Marketplace with over 14,000 active members, and early data shows marketplace purchasers are more likely to contribute to their HSAs, indicating potential for long-term value creation.
- Custodial revenue growth is constrained by the HSA cash hedging program, which locks in rates at approximately 3.9%, limiting upside from higher current five-year Treasury yields.
- Service revenue faces headwinds from continued headline price erosion as the company shares cost savings with clients to remain competitive.
- Marketplace revenue remains immaterial to overall financial results, and the company is still in early stages of scaling this initiative, with uncertain long-term contribution.
- The company expects a potential reduction in HSA cash balances as members shift to investing, which could temper custodial revenue growth in the near term.
- The competitive landscape remains intense, requiring ongoing investment in technology and marketing to maintain market leadership, which could pressure margins if not managed carefully.
Good day and welcome to the HealthEquity second-quarter fiscal 2027 Earnings Conference Call. (Operator Instructions) Please note that today's event is being recorded. I'd now like to turn the conference over to Richard Putnam with Investor Relations. Please go ahead, sir.
Thank you, Rocco. Good morning, everyone. Thank you for joining us for HealthEquity's Second Quarter Fiscal 2027 Earnings Conference Call. My name is Richard Putnam. I do Investor Relations for HealthEquity.
Joining me today are Jon Kessler, President and CEO; Dr. Stephen Neeleman, Vice Chair and Founder of the company; and James Lucania, Executive Vice President and CFO. A press release announcing our second quarter financial results was issued earlier this morning and includes certain non-GAAP financial measures that we will reference. You can find a copy of today's press release, including reconciliations of these non-GAAP measures with comparable GAAP measures, on our Investor Relations website, which is ir
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