HealthEquity (HQY) 5 Jun 232024 Q1 Earnings call transcript

Company Profile

Participants

Richard Putnam	Investor Relations
Jon Kessler	President and Chief Executive Officer
Tyson Murdock	Executive Vice President and Chief Financial Officer
Steve Neeleman	Vice Chair and Founder of the company
Glen Santangelo	Jefferies
Stan Berenshteyn	Wells Fargo
Anne Samuel	JPMorgan
George Hill	Deutsche Bank
Greg Peters	Raymond James
Sandy Draper	Guggenheim
David Larsen	BTIG
Scott Schoenhaus	KeyBanc
Stephanie Davis	SVB Bank
Mark Marcon	Baird
Allen Lutz	Bank of America

Call transcript

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Operator

Good day and welcome.

I would now like to turn the conference over to Richard Putnam to HealthEquity’s Earnings Call. Please go ahead.

Richard Putnam

Thank you, Sara. Hello, everyone. quarter year first call. earnings HealthEquity's to of XXXX fiscal conference Welcome President name Relations the today Kessler, Investor Richard call CEO, HealthEquity Jon My Putnam, me for is and joining is and Dr. on Murdock, Chair Vice and of and Vice our Neeleman, the and Executive Steve company's the Founder company, Tyson CFO. President

to the two I important reminders. Before I Jon, turn call over have

The contributions recording of after today's this found First, be of fiscal quarter we our press our a the the certain close subsidiaries they will for market webcast first non-GAAP and press ir.healthequity.com. Investor included that reconciliations definitions on release release of Relations including a administer. results copy announcing these of A GAAP financial of this owned wholly non-GAAP The afternoon. release, comparable was measures measures can from also our issued results financial reference accounts XXXX includes which financial is website, with today. and measures press

statements many these to statements subject today uncertainties subsequent filed annual which SEC, future statements our We Form might including will may and of estimates undue review forward-looking responses events. or that affect as relating considered XX-K factors affect discussion the contain by the or and our also to and the and we made periodic comments update other caution risks cause our the future information in price statements could may that to here differ forward-looking obligation statements, are defined or to from to to stock your market results There as placing made SEC. factors encourage these report against reliance forward-looking. materially forward-looking on XXXX, revise of light view information our forward-looking on or our reflect important as detailed today. predictions, forward-looking today, new X, these These and reports questions inour be Second, assume statements today. the no We of you June other with business, of and that management's are risk results actual expectations,

our One our planned postponing prepared before the that are Once with announcement conflicts up open from announced we Q&A Sara. our some and of operator date. the to date, XX, with be release due hear press have the of remarks, Investor you encountered, we later conclusion rescheduled final Day at July was a help invitation. call to for recently to will the we At will provide the we we for be Jon,

over to Now, Jon. you,

Jon Kessler

you and XXXX. thank for QX results, a view and and the here year, everyone, start QX fiscal healthy as Hi, our for our key discuss will raised metrics Tyson and will for performance, is fiscal for joining Steve as on Q&A. us guidance detail well I to

QX, the HSA by HSA grew EBITDA, delivered adjusted year-over-year COBRA which in XX%. was grew accounts team plus and change was the growth methodology. XX%, XX%, in X% discussed which In were double-digit plus total assets previously muted revenue, plus X%, members which

expected by nearly wide, employer we HSAs. that, blistering economy rates offset quarter, growth and last and HSAs comp during that opened the million year, job HSAs billion that's off grew XX%, assets and board we're market. XX,XXX particularly to a started Team all of invested of numbers, dicey the drop members X new year accounts, kind including selling QX's XX Purple HSA round total with year-over across million new the given adds, more strong was despite investors HSA XX with our QX became in ended down pleased for XXX,XXX year-over-year and a HealthEquity assets, but the actually XX% turnover

given expanded exiting later last footprint this In wins year-over-year, the competition benefits onboard the that were in banks in cash, renewal. up were HSAs an by for driven logo activity. noticeably of that not same calendar a will year, and year partner that anticipation employers saw ‘XX and see transfers of time from did we this we net the tough Enterprise year, at seeking business. addition, win-wins Obviously,

For that HSA level to we full-year, employer growth. lower will at adoption the the are help confident increasingly offset job macro increased

exchange of QX if in whole methodology. a by COBRA saw by you and commuter to therefore were CDVs, has FSAs grew ACA subsidies and Health aforementioned our new some HRAs accounts rebound, and simply strong, CDV much that, its COBRA compensate continue which success, quarter as maintained very runoffs, impact daylight exclude on slow is offset members fees significant X%, uptake with begun negatively the onboarding X% fixed good as for raising CDV growth, by some to extra COBRA the and the excluding early logos seasonal adjustment fees needed. the activity of accounting team

points While quarter. increased service calmer there's revenue our by as year-over-year, basis a benefited a much even for from service members wage gains to wood as much chop environment versus ago fell year we costs despite team XX fees, service actually on

improvement provided we that to responses fees fields believe longer there come plus fees is respect we automated -- fields preview to come with service -- that As with the be fields this and over good to over we term more -- of of what transcriber. is rapid continues custodial term. QX to a yields and quarter, luck will in like fields, believe is the tech chat last as discussed longer to also interactions drive more

rates chose As ladder yields bank cash. for chose rates or of portfolio HSA rose their on the and debts deposit our enhanced COVID enhanced members out more for

as strength talked CDB of High on to well. the rates we the in loans course March. health short-term income quarter over as a provided of boost model our about client the saw You

management added allowed to enables which to All A allowed growth from of balance to operations, reduce profitability will this to GAAP to and us debt strong in led outstanding to HealthEquity’s detail, a term and management adds continue future flow rate outstanding as in innovation. invest and cash -- loan which resilient on reduce Tyson up return to QX, -- variable

will and Murdock the Mr. detail now outlook. results financial

Tyson Murdock

our financial will of first GAAP measures quarter GAAP a results highlight I you, Thank to found measures non-GAAP release. non-GAAP and press is and reconciliation today's in Jon.

First to and rate revenue million. revenue year-over-year. XX% in was $XX.X million in on XX% million, HSA versus the in the year-over-year was first yield period. $XX.X ago margin interest the basis XX% Service X% year grew revenue quarter. custodial annualized grew this X% $XXX.X year was increased quarter XX% XXX revenue up quarter Gross first to cash points. Interchange The

basis. $X.X share per first the was or on $X.XX for million income quarter Net GAAP a EPS

for first quarter $XX.X net non-GAAP million compared share non-GAAP per and to share, share per was income year. per was Our the last net $X.XX income $X.XX

also higher than of EBITDA and the the increased over rate While quarter we stated X.X%. interest pay and a interest on margin XXX was year. for income, was A the adjusted basis generated yields last $XXX increased point they of interest improvement $XX.X EBITDA Adjusted a million million rate term remaining rates custodial more to loan XX%,

of a the reduce balance sheet, as debt balance of XX, our cash in costs. equivalents $XXX of million million to of cash with $XX $XXX and debt Turning April resulting of outstanding net cash issuance to variable used end XXXX, outstanding quarter we of

credit line $X undrawn an billion have to continue available. of We

$XXX guidance be of to net $XXX in income range For we're million million the million. and fiscal $XX $X to following, raising now revenue the range expect ‘XX, and GAAP between million. in a

for non-GAAP XX between year. expect non-GAAP $XXX income $XXX the million an net income share between outstanding We to in and million, and $X.XX shares diluted million estimated per be resulting net upon $X.XX based

adjusted expect $XXX We and EBITDA be million. to $XXX between million

fed assumptions, in the futures. ‘XX Jon As basing and guidance financing secured embedded mid-duration such mentioned, forward rate market treasury we are indicators, rate curves forward-looking on interest fiscal and overnight funds as

on raising rating members for while fiscal members -- average credit XXX expected yield average HSA -- on remained ‘XX, rating sequentially. on cash or receive HSA HSA to approximately rates basis the flat the credit receive We the on cash HAS average HSA are points

end fiscal ‘XX. We continue increase in the a point XX to of bake by basis

them. in our are crediting in As a members our the with HSA with the receive reminder, facility formula rate, determined agreements accordance

reduced higher interest rate reflects versus outstanding. expectation rates also HealthEquity's guidance the debt on of of rate year, last the by amount Our debt partially offset average variable variable

a last second-half disproportionately. year's costs, as year rapidly exited revenue and service heavier the also includes benefited pandemic of guidance Our first-half cadence we the were last by seasonal that disrupted which and earnings, rising environment smoother, rate

this statutory We GAAP stable interchange relatively XX share be as this revenue normalized diluted expect interest rate rate that and projected we remainder a share approximately tax of positive a would of of the now income year net seasonally equivalents more includes income common We anticipate which and count a million, earlier, assume year. suggested over this year. XX% environment as

strangely tax GAAP this net is income to impact positive to going GAAP our year. Moving

know, low of items, calculated income rate on XX% rate. full-year fiscal calculated a of guidance, level XX% you our QX's tax ‘XX. a the Based tax tax GAAP as the roughly of As look rate current impact can because pretax expect tax on we squarely, for such discrete

fiscal the included we've of metrics includes a GAAP reporting of items end the definition full at such periods, As all of non-GAAP and earnings the our the XXXX release. guidance recent in is in done to reconciliation provided release earnings a

assets acquired income, In net addition, is not excluded intangible revenue of those while is the assets generated intangible being from acquired amortization non-GAAP the from excluded.

operator of questions, -- a instructions. Q&A go so we Thank for a And to we with let's have now right have our that, you'll number you. know

Operator

you. Thank

question-and-answer We Please begin from question Santangelo [Operator Instructions] first with Glen the go Jefferies. will ahead. now session. Our comes

Glen Santangelo

thanks had we're It could, the would I'm and in I if thanks of that of for is Hey, but taking Nice now of a for maybe next sort I that right us correctly. don't thinking third, that curve, you to thing even much a assess Tyson, current of know couple comment Yes, it be about is Thanks. yield you it? to sort how this investing much want yield variable you only the math a like I looks us at third, year-over-year and good total of still the evening how and model to it correctly questions, it but And this HSA one, the a sense there. versus of have way question. ask I year, a think third, quick fiscal financial if could because more trying just you help billion ’XX, and that don't just you're X give know not stop the much ’XX $XX. of in? about says sort on fits reason year in I'll to Is and ‘XX. more assets

Tyson Murdock

Yes, good question.

We not there's as So so portion, is much rate rate the with push. getting don't of enhanced need variable the that, impacting. much course, of smaller interest as

course the thing the Another of that the the over to by fact year that the obviously, rates so that, accelerated consider on impacted was -- variable is year last component. that substantially second-half

people So amount, of how though going based it's got size a down. very component. sort you very big. consistent about, the that it's that not curves variable that well, And much even curve see be concerned more to may obviously on of of But

kind So of that's one area.

question occurred because a portion, and that through that assets liquidity course of is think which all its years. has next as own about But the more the get model. into they consistent how get, The the think when about those M&A FDIC factors. rates that we you're run the thinking move lumpy Again, is you of over we you enhanced

that integration WageWorks those through think about Acquisition place fact on as the into Further So the type Acquisition, five-year assets back we go contracts. and things. processes of those, the we those And

have sit to five-year five contracts for in years. those they so And

you causes off that you think when based one-third, than then which that you as on smaller year amount a off is And over one-third, look you the probably get maybe one-third, three-year think placements. of you of five-year duration the about back time, what rolls those when in might you sort this next get mentioned, might

So that the telling is one-third. what that I'm is you than smaller number

to sort quite look what back that acquisitions to You those what the even that to -- time, have in prior looks acquisition, go of determine at big back prior like. to to

number. smaller a be will it so And

make don't I to you if Jon, want any that. additional know to So comments

Jon Kessler

going. here. we what We see We'll Glen. keep was I Thanks,

Glen Santangelo

very you, Thank much.

Jon Kessler

will we're that benefit. analyst just I a say four-parters. starting one-part That because was with question. was the That a four-part other not for wasn't

some four, part off, do was First analysts I know, questions. -- to Glen, don't I does pull five going other

I'm interrupt. to sorry, didn’t I Sorry, mean Sarah.

Operator

problem. No Alright.

comes question with Fargo. Wells Stan next Please go ahead. Our from Berenshteyn

Stan Berenshteyn

taking Hi, thanks for questions. my

this called want just sure I First, to I make correctly.

with expect You that on the just and new employers that. until said seems you're your you in early fees is board everybody methodology? And how it you're increasing like give thoughts Can service do on paying, pricing? us the you long are

Jon Kessler

so quarters Well, commenting bet you ask to had me whether ex in on see anyone in at of CDB although what will this, lost particular, COBRA. has -- number this now for were looking glad particular, that comment I almost a was, Tyson about is is there small drag for been just where us. refers But on about I which we would chuckling bit I we really several and a asking. because a was say a CDB an And and COBRA on black crookedy number overall, black thank

that pretty good. So was

But is in more it's subsidies, place humorously was referred to that there, now, focused for And extra my the comment years sometimes as issue on Affordable several COBRA. have Act. we Care sort now the incremental real of,

couple the a these pandemic, of is lower proponents And by they've that's the were COBRA the that place extended of uptick. think result of years. been put things. originally for they but from And I in

rates, So call affect fees does activity the we it what that in doesn't necessarily offer COBRA. but change

be increasing that naturally, the up way so And service we component. the making fee should for is

And our sold of like and our through case, partners. products, in all particular, this care channel in COBRA health both our partners, directly is

with to delivering hasn't service of that that -- the modest we think people carefully, to because component fee to, increases kind work changed. have So service kind of, that, roll understood but them for up I service coming, of we fundamentally out begun make fee And the the cost was difference. want

the ultimately want not drive overall is again, major to be number It's we really it black isn't so from to but driver perspective dragging we want And and a be don't it's forth but number. idea going to growth focused So do be to revenue our that COBRA. CDB on growth, magic, us the this again. a the some going of

Stan Berenshteyn

your to give us maybe have But And like maybe know text-based adoption just technology to remarks, base? with on And you quick Thanks. I member if just just prepared it. chat-based this. AI and the generative member an are that's Can you communications. seeing more a communication focus coming to of you follow-up, commented that money that, update I Got on then up? any had related within think maybe you don't on back maybe your opportunities communications any enhance you then

Jon Kessler

a see of So -- my would those more get mentioned if And around there two can whether on just there think money than was I anything more out the don't of you mouth. going either are a like was number I -- that there it's to appear these. By wagers is term I -- of I'm whether can it through else. without initials

experience. Let's in a lot have areas that what superior to advances seriousness, that communications more to member's automate ultimately is think be deliver I a say and really the on But perspective let's that others, say do ability us from for fair find basic to all out. accelerated of rated get these and this the the in our queries it's we

to automated. three, may really, have seen I So over those quite and but now, out the and of text-based a then text-based. gone rough one of eight we and those of has of six of every out automated it the months, be between is here, -- look last, are members’ gone in one of course up our right off have with if six believe our chart two out text-based I interactions, you transactions bit. transactions a at Both or one or of up. And turns of seven were almost

and the new stuff think help. to I yes, going helping, so it's And is

cost, at year-over-year. service commentary is, the if fell costs my you mean I look service again, nature of

Last cost in year quarter the let's script. last going there some things first good. -- on Now comp not was say service as was I other year's acknowledged are

certainly helped. very So that if But out, that we did well. even you factor

to I of so lot and member And line. to our simultaneously in service on more think there's costs improve both terms the here a experience reduce come ability

Stan Berenshteyn

much. Awesome. Thanks so

Richard Putnam

Stan. Thanks,

Operator

JPMorgan. Anne Please from comes ahead. question with next Our Samuel go

Anne Samuel

better HSAs for labor little What Hey, new could that? so your the a than coming remarks results. of about in little on had you bit more Jon, kind great spoke are bit seeing? you if Is about much growth, enrollment. better in adds and in that. expected. question your for was wondering a it driving taking congrats thanks What's employee talk I earlier strength my just prepared you you

Jon Kessler

exception of from -- in And So interesting, in maybe growth came to variance last in came and turnover I in labor benefiting was really of at the if kind our of as economy were the came with suggested expectation, market. the remarks, as we've quite kind communicate QX, kind was that the the sort year growth year-over-year we tried down job was, fact, of market when labor and you to prepared down the for while, look in a of both this QX that turnover kind year, in kind down. relative QX, of of including of last and

is now February, mean organic, So I offset smaller be that first the growth look way mostly growth would what kind same those March, kind purely year, January at holdovers meaning this that, that reduction the it the logos, of in were quarter, of point I April, this new employers employer last in of starting at basically, to But relative year. a I late, few would numbers that in to almost call the from thing. turning

Oh, nothing. interesting scene it's We this shaking you It's do outside. I I hear drill. fact when QX, at but XX%. good big at pretty think as can got that about we the all or jobs it's that's producing if It's in jobs of hopefully, we're know whole, shaking. a that producing still a so about the what's QX. rate extraordinary, the XX% last shaking. But an economy don't did you that And we're about And know

and turnover, as -- you period hang you We might have economy a delta accounted have where also, folks voluntary when banks, to trying biggest in turnover, did significantly, fewer declined on to we hang the has smaller year-over-year. pretty accounts feel about to and good consider whole on the HSAs banks imagine, portion a been and in trying the pretty those that. to But of that for particularly from of as that so transfers deposits,

going new at offset confidence expect in significantly least are I if that if you be some look level market So year. in at growth fully logo my is what labor guess view not year, that the what reduction we of be full basic offset, of have -- sufficient the is the of a to, to to the course strength the we

a And be of way. will was so that statement interpreted confidence to and, be meant hopefully, that

Anne Samuel

to great That’s hear. Thank you.

Richard Putnam

Anne. Thanks,

Operator

Our Deutsche Bank. from question comes Hill George with ahead. go next Please

George Hill

I good thanks thought question. at I of guys. of you're seeing HSA that will job commentary was offset be might that the increased that a And taking level prepared you in your question employer Jon, say growth. kind Hey, for asked. evening, on heard the But question just this Anne's kind adoption dovetailed

question you in of change adoption driving them underlying So be are like X%-ish hear levels HSA in And from seeing trend adoption of different talk the growing about the year? my to rate. underlying what's guys kind I an that the historical like, a interested guess is you would that of is

Jon Kessler

let me in the actually, as year. with our line, think meaning It's you onboard the any they since ahead our I are on that you undisclosed conceptually, prospects in later look do are And don't -- out the location, year, what's also -- if talk it the our, they level you there guess, year, have maybe. a employer of our but what's obviously. there. last think you're wins at know we but Can Steve, Steve that early can pipeline, going I that at in And ask little I on of about your bit have activity driving well current -- partners? underneath when that, employer will and

Steve Neeleman

the wasn't I we -- would large think I but in remember helped I think know have I anyway, an CDB voice. broadly, with But thinking, And of this looking And most they're have up, year, end invited. -- nice talked in then Absolutely. had hear employers the the stuff. a your with you employee you brand we about what didn't which has at first when the that New in we just been George, as on name costs at inflation are HRA, quarter what, and we towards past. the that employers of look York, I are did is on Look, more up. came the

this are this know see the on I what's to the labor to especially awaiting up are to higher seeing midsized are realize call point, and through health for ends some care think cost like in -- paid on going which employers ultimately most to hospitals at to going getting that costs. payers, a health by And they of things lot them claims. higher you're that care, have translate to Since anxiously people happen that.

-- broad just inflation if and more then and in issues you so kind And own the issues. employer's wrap inflation of wage

I ways. They people's more in lower most HAS. starting income studies, used our have novel, we on big are accounts accounts, name people's areas which you to higher that in see lower study to income lower see adoption now where We've case are saying, are could people of and employer more. where out you kind brand that an find when employers higher know case got HSAs that fund some companies adoption figured we interesting think doing out drives accounts a there they read look,

Jon know job lower a you with overall growth. recession know drug we're advance of business of we combined employers think, So I out in even things, because And these that EngageXXX and fact getting to resulting are factor never out, with and initiatives, the up does MAX a take signing of we people be be allowing out that enrollment to it to businesses, reach as hurts us more to their just better. able our of just enroll our all it pointed to and our more the in where executing we're offset want all kind

we to you're But to employers of that and HSA in more get think tax revolves of savings do can environment. the savings things they and because that interest tends is because bring these savings tax that it of a start tougher cost to is one the employers when economic

seeing, doing And job, we've teams. we're we the ever honestly, before, out inside to than look sales out. and George. a we're and what word better getting done our thanks And marketing that's So just our

a I think things. of it's combination

new Jon bringing as fingers logos as But these great to here, far of clients spoken are concerned, had the of some and and we're to We've that, looking but good we're really this sales crossed. on kind new some year. forward

George Hill

That's is And quick I if super very a have could follow-up. what helpful. hope I

the health us tend of lot tracking of the the GLP-X of are growth to blow the come side to a pretty gate out in drugs Just tend that and on people's expensive the just volatility, care through drugs? balances an all I at the increase wondering pretty on guys through quick. balances was deductibles HSA if are any impact or you GLP-X seeing

Jon Kessler

No, not yet.

George Hill

you. Thank answer. Easy Okay.

Richard Putnam

Thanks, George.

Jon Kessler

Thanks, George.

Operator

Our comes go Greg from question next Raymond Please ahead. James. Peters with

Greg Peters

Well, everyone. good afternoon,

Jon Kessler

Greg. Hey,

Greg Peters

Steve, I'll matters. in won't New to that Jon just invite if case York you

Steve Neeleman

you. kind of you. Thank Very

Greg Peters

you're with sticking the merger thought off number. guidance tapered year, full-year. that the Yes. reason seems you why I integration-related bit didn't little change they I like I'm general a integration for expenses? and was thinking, I asking in have that certainly is guess came seasonality but I have can would you below in where noticed through it in would The comment on and merger administration the

would detail on that helpful. some be just So

Tyson Murdock

say. We Yes. is some spend and just we're may timing getting it, if add got I to of would the small timing that with what mean I sticking the it, it's think is number. volatility so it Greg, the to I now

well. So as and then you mentioned G&A

Greg Peters

Yes.

Tyson Murdock

I make I a sure understand that question bit just... Maybe more. want to little

Greg Peters

just evident general -- just expense. was administration if inside there's of, sort expectation wondering normalized than it just the sorry, that came a and there line I that's, there's first I'm little in And I'm inside in lighter the P&L, just was going I'm the bit if on or a quarter. anything -- item,

Tyson Murdock

last I may bit just that I forfeiture because there. just some you a go year, Yes, had line. little -- comp in brought stock we right further

it at So through in last up at this that trying well. you But perspective things that a trend volatility so the there synergies you my line actually. look long time, some I see course, some think period of as a we're if and you pretty it's running you'll goes the of year that, But to mind over year, from look time. of going through versus if small quarters from see longer-term like a just that of back get

I what hope answered ask. you're trying to So that

Greg Peters

other the can so. on running take year I just rest the paydown expectation was think debt I My your that? off-line. question for What's on that's ahead.

Tyson Murdock

I look we principal is. Just paid what time. we'll at take What mean it as it is did we go. some there we we'll quite off the payments for

any anymore. see that short-term won't of you So portion

couple that. And were We it. able way. the years, accumulation it principal to elect I'm cash talking so won't next on help that of about have we is And payments going to

bite So the and we thing business at for a to do positive thought that was a just it. make

Greg Peters

Okay. Makes sense. Thanks.

Richard Putnam

Thanks, Greg.

Operator

Please comes Sandy question from ahead. Guggenheim. Draper next with Our go

Sandy Draper

quarter. is one This seasonality, congrats about strong the it but lines. applies to and much very two on question Thanks

to bit just earlier, little the trying of, when strong first Tyson, So about off, dynamics per change the the price. trying HSAs account asked account, in revenue sort a make either growth to or I'm lower of sure, in year-over-year, sequentially get thinking I'm or

uptick see down, sequentially. by my $X.XX. still some about the CDBs, you're starting You're at math, But to least in

should a And the thinking be is we it of flattish? be we Or should how sort about thinking So year-over-year do think change? about season about there? seasonality

it. about when normal about clear how seasonality then on you what commented usually you're you thinking interchange And the referenced wasn't I quite with

for for I've sure I that So steps quarter, got back make you're first The quarter. of up those highest but the quarter two not want next just is the to first the then the two maybe down applying? the and seasonality in drops fourth target. Is what

Tyson Murdock

Sure. how that kind I works. of to take Yes, We gave but think mean the just part, answer. you I'll I that that's want the reiterate that, second already seasonality

we from we year, years sequential theirselves. the we same that just perspective get better see bit seasonality rate, a plays had back are really I fine, may that little out is the comment ago, seasonality. had quarter, trying okay, of understand this script don't just of feel you maybe And make couple that of but over sure and And time, to that what an a -- more are in it's quarters just that's we I on a last so we sure like a that that make pandemic, to of in look you even to bit if little want growth acquisition that had right, want people people -- people really

other is playing rates into just the The variable as year impact from to half there, last well. the thing we're mention of second the too, that

So that's to a question. your longer of answer kind

again, is just going that interchange to so on first the part. normalized. reiterating of portion that, just top And take you're the And of Jon,

Jon Kessler

Yes. CDB mean, think really kind the got unit know, of I I over Sandy, as about, bulk pieces. was I about fees accounts. mean of you've the meaning your of right think, you side question the fees all part fees, of the the come business. service from first total and was I service And service

leave way look we there of I it grow total bit probably seem downward just HSAs think own be just a holding good, little fair And so there full-year. a a But accounts, the there. to that's at and perspective. from mix as shift pressure I'd to our there's pretty

Sandy Draper

helpful. it. Got That’s Thanks.

Richard Putnam

Thanks, Sandy.

Operator

David question Our go comes with Please ahead. next BTIG. from Larsen

David Larsen

for expectations you for on think talk congratulations bit it in the more good XXX I your Can you at little yield? said came a quarter. the Hi, bps quarter. about

that was you said, Is I last XXX XXX. it think bps is quarter. The guide, accurate? I think

time will of the benefit over points occurred and from couple year-end. of year? Thanks. yield of incremental period why funds you the I rate what take the And now only, basis a the the guess expect X I at has federal over increase is that that getting realize Will between in then I'm past to years? what And think,

Jon Kessler

Yes.

as year, in particular the year, fact And saw as that growth explains instruments. we around the is so had any So rates most during the and cash of HSA the year, our variability the you shot there, during small throughout that rate during in year really up increase relatively that's see forth. cash plus know, you fiscal good that we that portion last of funds variable did. year And the that real the

-- so based happens. But again, know, now. as curves our is you see what really this guidance year, it's And we'll forward on

see of And sort our guidance, forward of, you swing and if then variable kind at you we peak can of kind rates, terms look down. up in of curves,

to last and that situation of similar is to prior over result view year is basic smoother a that much the year relative Our the years. many course the of

And guidance that is so in our way.

at said correct. So what yes, the outset, you it absolutely is

David Larsen

mean drivers it and office is and Just there? I hospital utilization any color physician be it commuter health the environment? are utilization would helpful. Is I care there Okay. I it Great. then what mean, sequentially. talk And can short was a pop a about just very additional little revenue? revenue? in maybe the think the general very interchange key bit you very, good

Jon Kessler

Yes.

it so we kind does with outgrowing. I think and look better because saw really, lack basis. it growth help year-over-year at a little accounts commuter for interchange, the of, is bit a the cards is the that term, the answer in on growth in, mirrors a way to a But of is

So some that's our CUVs. of new and our HSAs

what that's it's So it really -- is. pretty much

David Larsen

in HSA And really would then COBRA flat you was squeeze one we more if The that do been? impact? have what the expect to sequentially. members, Great. it Okay. for COBRA, And comp when If there. just adjust I fully could

Jon Kessler

time? that I'm ask more you sorry one Speakers] Could [Multiple

David Larsen

bit HSA flat actually. to to The of relative Jan sequentially, 'XX, up number little looks kind of me but a was members it

fully that is would And expect that? the when comp impact? to of Just COBRA you because

Jon Kessler

is think members. to what referring total I you're Well,

say members total accounts are just basis. X%, a year-over-year on HSA up Let's

You're talking sequentially.

Richard Putnam

our David, quarter in, point, that come to of HSAs. lot And fourth isn't is HSAs when a there

Jon Kessler

Right.

have open some You closures. XXXX and

growth the going $XXX your something. is $X be, So XX And or base that's of million. or what, on to

it's answer So the quarter the that first to is in.

David Larsen

Great. Thanks very much.

Jon Kessler

Thanks, David.

Operator

Schoenhaus question KeyBanc. go Our Scott comes from next with ahead. Please

Scott Schoenhaus

did I your year? if state missed you Apologies of question. but you end in target XX% book my taking reiterate And for it, businesses where book for rate? the Thanks terms guys. of the of enhanced Congrats, Thanks. the

Jon Kessler

yes, I we you target. to something the didn't thing reiterate. level still it's know of our that risen But

Scott Schoenhaus

currently Jon? you at, are where And Okay.

Jon Kessler

of basis going to We're a get that. We're shy there. points hundred few

Scott Schoenhaus

that hold I want Great. ago has it know just on made changed when to you that Great. months you And HSA of assets. given kind M&A Has anything these question on the three expected to sticky banks environment. been a comments? than the slower from those

Jon Kessler

Fundamentally ladder analysts know, because we other and noted, have -- have thing, one as do back think that up is, I let say -- strategy. I a a think it's which where point me

have of or either some our exposed more of they're way by And structured otherwise. the strategy, virtue a competitors

about banks, be more And small to you're if to going and some are not the this more you're rates. might because short you're to that wild think short if the thinking exposed, looking where so with time a competitors, of at if things maybe I'm you other but really this lap get rates, and exposed wooly

so But of look, fundamentally, down capital like And think we in more And pay And bit kind of our I period just than we fair. smaller openings feel impacts so HSA we're there's of this probably again, accumulating spending banks. where from a also mean, that fact occur that the forth little a it the did it. I sense and that transfers chatter. is HSA a suggest new that smaller that's

Scott Schoenhaus

Thanks color. for the

Richard Putnam

Thanks, Scott.

Operator

from with Stephanie go ahead. SVB Our next question comes Please Davis Bank.

Stephanie Davis

guys. Hey thank quarter you taking for on Congrats question. the and my

bank last it events lot how continued. the So the greater have HSA discussions deposits, and turmoil quarter, of can some for a one we up create of bring has enduring maybe to the bank I March did sticky in from hate But your impact be around to and turmoil. demand

if mostly wondering banks in avoiding greater bank like still opportunity? you're you've was partnerships, if second-story additional focused interest any custodial on seen from the I or banks and So regional folks

Jon Kessler

to day, So general not our from want on -- like I we're, and and more situation And not not we And ourselves Florida. the say, our long-term back of It's to -- do FDIC we colleges one how relationships, don't -- perspective, is not and first say quality what question. it every it's ourselves it's that is I'm so at but a yes the to really done with graduated. end it's concern members. institution. concern your we that the going we to It's the SEC some kind have be your going to and want question, with second of that we're the of

And so…

Stephanie Davis

And my colleges in this question, like Florida.

Jon Kessler

They days. I mean, is huge killing use that these could it. Florida those talking knows everyone's knows is Everyone Everyone it. about anyway. -- I Florida got two this letters awesome.

question different want to But on deployment the to is and your not where season, things. there. to we're relationships -- build on from a we that but to answer your those second question yes, We are going the -- are. move last we'll this look institutions answer we first with we'll So is, at don't cash isn't

Stephanie Davis

let's that get on then. the the I do Is giant there on a follow-up of beat. So other more Just to granularity any had yield magnitude on you the mean -- way side?

rate Like is And expected, the enduring came enhanced in how regional renegotiations be rate contract it intra-quarter maybe mix? an this? it So it something else? floating Was it how could is than mix? much impact? from better banks, Was not

Jon Kessler

end that year. the at huge a of and do like are of it's of because most inter-quarter impact the the the think don't we I renegotiations

result yield benefit a So and on so first cash, this and principally -- movement the rates from then enhance we the -- the variable perspective. of in saw the quarter was benefit to the a

at a year-end. think could benefit this to would I be that us So

lot say floating will at benefits But have of the time rates thing. the of of going we're away. this on year-end, a of hand, other that around is of one the as long less I stuff course program it and enhanced matures to the years over year-end multiple year-end there's a

January that good. year, and all holding our be and we won't And so be will you won't -- breath every for December

Stephanie Davis

the All thanks. in I’ll keep back I’ll Alright, queue. busy. hope quite.

Jon Kessler

not recruiters Say because mentioned, name That's we listen to these things. a it.

Operator

Our Marcon go with from Please Mark next comes ahead. Baird. question

Mark Marcon

Hey, were thrilled we York here in good congratulations. afternoon would New and Steve, with be And if you us.

glad we’re super here. So

Jon Kessler

I Steve ahead. authority And a I'm know any sorry, over didn't That's I thing. went. where even had Mark, new go

Mark Marcon

yield a And on to the and product, enhanced guys the your we're one. just But a a very of But on same agreements? short partnership you've bit seeing had is tomorrow. forward super structure traditional looking duration little what you bank then as the the is question question short longer

Jon Kessler

rates So our under It's cash commitment. a X-year enhanced cash is little different. bit a typically commitment

However, have have that we whereas that the do the products is to for liquidity. we to can reason provide are separate the -- that in we bank products,

Here, the liquidity is built in.

in duration, about much want that is there's account that we portion the three-year out average think to whenever fact to closer have, and our when we for pull if want track. actual you it can we way, that you So a the inside

Mark Marcon

deal in overall is in yields enhanced product the Is the a... portion How that it sensitive market? of changes to

Jon Kessler

rate It's -- we the built is the in liquidity into component receive. built underlying

of So designed to is again, all produce. this

least of designed In business, We addition fixed to of medium at to term as and a all can it's being higher produce yield the over analysis. overall, for want best short out time. smoothness income as the we to get you

Mark Marcon

some perspective, to What's wondering, general comments most -- grow And over last gain has Great. the just regards and mean continue years? to I Jon? what you're your continue But share say, -- clearly wanted that then just how Okay. you competitive the with to X the rapidly. environment. evolved,

Jon Kessler

we're period a that what generally I is say that of guess I we've trends continuation of would over time for seeing seen time. a this long

seven-year came the out think since at out, it I look last information came announced. you that If we

But it to balances, principally principally also the and at And see or players, five showing in if show you retire. showing doing and consolidation. really, of five that this maintained can can't accounts, largest different assets Fidelity, both I addition and among and a from, like had in we the of addition that look growth number we and was In does has as we lot fish And terms rollover we one our also the it market terms average also other, -- of before, -- come come maybe to a from position it just do you terms HealthEquity remember. in in people with the share compete has Fidelity. obviously. But somewhat business in each ponds in

really some we're benefiting is the that that's what players. seen -- main think the I've at expense other I so And of

did. a exciting I and retirement perspective and partners at of year. calls. And from other our of one discussed good But the the execution talk in guess that's these that isn't very to of to end on in had not on and March, our their very, partners health as Mark, new say broker something would helping that's the I service very terms year it's logo -- partners our really team I think to wins. thing, about clients back the always we I

year. a service the brokers, more to much year, your in and the credit team IT business and the next people experience side. on and on and very side by that's of way Rosner technology likely of like the the team security Hill When the and the have Merv tech to they're Angelique And good send the end Larry at our led Eli

So think that I well. role a plays just as

Richard Putnam

Thanks, Mark.

Mark Marcon

Terrific. Thank you. Look forward you tomorrow. seeing

Jon Kessler

sir. Yes,

Richard Putnam

[Indiscernible] Mark. Hey,

Mark Marcon

time. But next

Jon Kessler

bluff. eye, There’s still I would red your don't call it. say

Steve Neeleman

no there's Mark, snow there. snow ground you, on there's like when I the and back

So…

Jon Kessler

next? Who’s a He’s skier.

Operator

Lutz from Our next of question go comes with Please Bank Allen ahead. America.

Allen Lutz

Thanks questions. I for the guess one Tyson. for taking

XX% going about this X year. kind a rate product of from to the goal talked enhanced of You

period. the XX% nothing And So sold the at rate paying here, of and from of time the that really rates hasn't the higher enhanced as goods that I'm I'm they're book. obviously looking the custodial at years that moved to out and you're cash line, looking core consumer? over custodial percent three a than cost to But of over

that's So Do of what is normal going I'm on for there. with have cash the much average, the consumer just just curious, smaller rates? disconnect the I'm type enhanced portfolio is than there curious customer? something electing a the Thanks. they

Jon Kessler

-- and more much marketing to Yes, I'm with so do the the it's to because answer this take really going X has forth.

on there. there two going things So are

uptake the And that mind smaller very high. in account account rate holders is among new balances. holders definition, new keep First, by have

so our of terms in of whole modest expense. pretty the not been have -- impact thing into And you has sort if fold custodial the so we

Now with that cash. would to terms occurred will have relative change relative over time in what

to big But answer question. the that's really your

that perhaps function you way you're going brand the to other. most you're are us, and the about of to go. a you're the fact that is like a upfront new one people are is not or decision are of where see it's election to making it -- It a who Fed So function likely the product

something enrollees like, to choosing to are of And our new rates. XX% say, enhanced I want XX%

those would they balances, I that what point dollars they is that fund have kind precisely, short-term who cash Otherwise, a it, because place doing keep large of or people you. second on the high make would investing value that The very be earn FDIC high right? or relatively putting rates, bond very they're typically the them component in

And those in it's in funny cash. entirely a so way, FDIC not would stay folks that expect unreasonable to

Allen Lutz

Got it. very Thank you much.

Jon Kessler

the I were thought this the curious too. but that's asked about last in about We over about form question, And few it, answer. this it quarters. is anyone's this time first the

Richard Putnam

Thanks, Allen.

Operator

for session. Kessler our any remarks. I conference turn concludes like to to closing Jon over question-and-answer back This the would

Jon Kessler

Bye-bye. length nonetheless back of on you everyone the standard the a answers, mine, great where we will, I team's on work on And if the see appreciate think, But Cabana September. I first double think I thanks, quarter. We as shortest. a average, like So is for of hour, ware, this which done did celebrate we'll for and you've well And get you pre-purchased our an if Richard. thing Richard. something all, already as do for particularly in under us, sorry best, I'm earlier, there's thank and all, in not everyone. to

Operator

today's The for conference concluded. has attending Thank presentation. you now

You may disconnect. now

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