- Revenue and Profit Growth Surpass Expectations Revenue rose 7% YoY, net income surged 806%, and adjusted EBITDA hit $141.8 million (20% growth), with a 40% adjusted EBITDA margin.
- HSA Assets and Account Growth Accelerate HSA assets reached $34 billion (15% YoY), with 10 million HSAs and 17 million total accounts, reflecting strong adoption.
- Strategic Technology Investments Drive Efficiency AI and automation reduced call durations from 5-10 minutes to under 1 minute, targeting 30-33% service cost buckets ($106-110 million annually) for optimization.
- Legislative Momentum Expands Market Potential Proposals to make HSAs available to all Americans and ACA integration aim to unlock 2-3 million new households, targeting a $60.40 enhanced yield per HSA by 2027.
- Financial Guidance Reflects Margin Resilience Fiscal 2026 adjusted EBITDA guidance of $555–565 million (40% margin) and $259 million in buybacks underscore confidence in cash flow and shareholder returns.
Business Growth and Legislative Developments
The company is well-positioned for future growth, having launched a new direct HSA enrollment platform to support the Affordable Care Act exchanges. Legislative developments, such as the proposal to make HSAs available to every American, could further expand the company's market. With a strong track record of client retention, HealthEquity is poised to capitalize on the growing demand for HSAs.
Valuation and Pricing
Using the provided valuation metrics, HealthEquity's P/E Ratio stands at 42.37, P/B Ratio at 3.81, and EV/EBITDA at 18.87. These metrics suggest that the market has priced in significant growth expectations. Analysts estimate next year's revenue growth at 9.8%, which may be challenging to achieve given the current valuation multiples.
Operational Efficiency and Cost Management
HealthEquity has been improving operational efficiency, with service costs around $320-330 million per year. The company is leveraging AI and automation to reduce costs, particularly in member services. The adoption of the company's app has been significant, with 400,000 downloads in October alone, driven by the passkey authentication requirement.
Future Outlook and Guidance
The company remains optimistic about new account growth in Q4, driven by enterprise demand to control medical costs. HealthEquity expects to continue investing in technology and security, and to make additional share repurchases under its remaining $259 million repurchase authorization. The company will provide 2027 guidance at JPMorgan in January, and is expected to reprice higher, with some of these changes already hedged.
Growth Initiatives and Market Opportunities
HealthEquity is focusing on growth initiatives, including brand marketing, upper funnel awareness, and consideration, as well as paid search and social channels. The company sees significant opportunities in the HSA market, with a Total Addressable Market (TAM) expansion potential, particularly with the brand product opportunity. The company estimates that 2-3 million households may be impacted, with potential for a "steep, but fast learning curve" as people understand the benefits of HSAs.