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What changed in HEALTHEQUITY, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of HEALTHEQUITY, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+332 added−356 removedSource: 10-K (2025-03-18) vs 10-K (2024-03-22)

Top changes in HEALTHEQUITY, INC.'s 2025 10-K

332 paragraphs added · 356 removed · 263 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+5 added−19 removed87 unchanged
Biggest changeNPS ® is a registered trademark of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Net Promoter Score℠ is a service mark of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Corporate information HealthEquity, Inc. was incorporated as a Delaware corporation on September 18, 2002. Our principal business office is located at 15 W.
Biggest changeFor the fiscal year ended January 31, 2025, our total team member turnover was 14% and our voluntary turnover was 8%. Corporate information HealthEquity, Inc. was incorporated as a Delaware corporation on September 18, 2002. Our principal business office is located at 15 W. Scenic Pointe Dr., Ste. 100, Draper, Utah 84020. Our website address is www.healthequity.com.
Some of our direct competitors (including healthcare service companies such as UnitedHealth Group's Optum, Webster Bank, and well-known retail investment companies, such as Fidelity Investments ) are in a position to devote more resources to the development, sale and support of their products and services than we have at our disposal.
Some of our direct competitors (including well-known retail investment companies, such as Fidelity Investments, and healthcare service companies such as UnitedHealth Group's Optum and Webster Bank ) are in a position to devote more resources to the development, sale and support of their products and services than we have at our disposal.
We are working to phase out a technology platform that we acquired in the Further Acquisition, which requires us to migrate the associated Clients to one of our other technology platforms. For a description of our cybersecurity risk management framework for our technology platforms, see Item 1C. Cybersecurity. Cloud-based solution.
We are working to phase out a technology platform that we acquired in the acquisition of Further, which requires us to migrate the associated Clients to one of our other technology platforms. For a description of our cybersecurity risk management framework for our technology platforms, see Item 1C. Cybersecurity. Cloud-based solution.
We are currently investing in a significant modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services. • Complete solution for managing consumer healthcare saving and spending: We believe our technology platforms drive member outcomes by enabling our members to use this technology based on their own needs and desires.
We are currently investing in a modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services. • Complete solution for managing consumer healthcare saving and spending: We believe our technology platforms drive member outcomes by enabling our members to use this technology based on their own needs and desires.
In addition, increased participation in our Enhances Rates offering reduces our exposure to short-term fluctuations in prevailing interest rates because contract repricing occurs gradually, at approximately 10% per year. The percentage of HSA cash held in our Enhanced Rates offering has increased, and we expect that it will continue to increase.
In addition, increased participation in our Enhanced Rates offering reduces our exposure to short-term fluctuations in prevailing interest rates because contract repricing occurs gradually, at approximately 10% per year. The percentage of HSA cash held in our Enhanced Rates offering has increased, and we expect that it will continue to increase.
We believe we are one of few providers with a solution that encompasses all of the core functionality of healthcare saving and spending in one integrated, secure, and compliant system, including custodial administration of individual savings and investment accounts, card and electronic funds transaction processing, benefits enrollment and eligibility, electronic and paper medical claims processing, medical bill presentment, tax-advantaged reimbursement account and health incentive administration, HSA trust administration, online investment advice, and sophisticated analytics. • Data integration: Our technology solution allows us to integrate data from disparate sources, which enables us to seamlessly incorporate personal health information and individually tailored strategies into the consumer experience.
We believe we are one of few providers with a solution that encompasses all of the core functionality of healthcare saving and spending in one integrated, secure, and compliant system, including custodial administration of individual savings and investment accounts, card and electronic funds transaction processing, benefits enrollment and eligibility, electronic and paper medical claims processing, medical bill presentment, tax-advantaged reimbursement account -5- Table of Contents and health incentive administration, HSA trust administration, online investment advice, and sophisticated analytics. • Data integration: Our technology solution allows us to integrate data from disparate sources, which enables us to seamlessly incorporate personal health information and individually tailored strategies into the consumer experience.
We reach Clients primarily through relationships with benefits brokers and advisors, integrated partnerships with a network of health plans, benefits administrators, benefits brokers and consultants, and retirement plan recordkeepers, which we call Network Partners, and a sales force that calls on Clients directly. As of January 31, 2024, our platforms were integrated with more than 200 Network Partners.
We reach Clients primarily through relationships with benefits brokers and advisors, integrated partnerships with a network of health plans, benefits administrators, benefits brokers and consultants, and retirement plan recordkeepers, which we call Network Partners, and a sales force that calls on Clients directly. As of January 31, 2025, our platforms were integrated with more than 200 Network Partners.
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the -11- Table of Contents SEC.
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the SEC.
We have designed our solution and support services to deliver a differentiated consumer experience, which is a function of our culture and technology. We believe this provides an advantage relative to legacy competitors. • Culture: We seek to provide remarkable experiences for our members, Clients and Network Partners through what we call our "Purple" service.
We have designed our solution and support services to deliver a differentiated consumer experience, which is a function of our culture and technology. We believe this provides an advantage relative to legacy competitors. -4- Table of Contents • Culture: We seek to provide remarkable experiences for our members, Clients and Network Partners through what we call our "Purple" service.
We believe that this integration will enable us to deepen our partnerships with our Network Partners and other ecosystem partners. • Configurability: Our flexible technology solution enables us to create a unique solution for each of our Network Partners.
We believe that this integration enables us to deepen our partnerships with our Network Partners and other ecosystem partners. • Configurability: Our flexible technology solution enables us to create a unique solution for each of our Network Partners.
We handle the accounting and customer services for such terminated employees, as well as interfacing with the carrier regarding the employees’ eligibility for participation in the COBRA program. Commuter programs. We administer pre-tax commuter benefit programs. Employers are permitted to provide employees with commuter benefits including qualified transit (which includes vanpooling) and parking.
We handle the accounting and customer services for such terminated employees, as well as interfacing with the carrier regarding the employees’ eligibility for participation in the COBRA program. Commuter programs. We administer pre-tax commuter benefit programs through which employers are permitted to provide employees with commuter benefits including qualified transit and parking.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. -12- Table of Contents
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. -11- Table of Contents
We also require our team members and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement while using our property or which relate to our business. -9- Table of Contents Geographic areas Our sole geographic market is the U.S.
We also require our team members and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement while using our property or which relate to our business. Geographic areas Our sole geographic market is the U.S.
Our sales and account management teams work with and train the sales -5- Table of Contents representatives and account management teams of our Network Partners and the human resource professionals of our Clients on the benefits of enrolling in, contributing to, and saving and spending through our HSAs, and our Network Partners and Clients then convey these benefits to prospective members.
Our sales and account management teams work with and train the sales representatives and account management teams of our Network Partners and the human resource professionals of our Clients on the benefits of enrolling in, contributing to, and saving and spending through our HSAs, and our Network Partners and Clients then convey these benefits to prospective members.
An increase in the percentage of HSA cash held in our Enhanced Rates offering positively impacts our custodial -6- Table of Contents revenue, as we generally receive a higher yield on HSA cash held by our insurance company partners compared to cash held by our Depository Partners.
An increase in the percentage of HSA cash held in our Enhanced Rates offering positively impacts our custodial revenue, as we generally receive a higher yield on HSA cash held by our insurance company partners compared to cash held by our Depository Partners.
The data centers are purpose-built facilities for hosting mission critical systems with multiple built-in redundancy layers to minimize service disruptions and meet industry-standard measures. -7- Table of Contents Government regulation Our business is subject to extensive, complex, and rapidly changing federal and state laws and regulations.
The data centers are purpose-built facilities for hosting mission critical systems with multiple built-in redundancy layers to minimize service disruptions and meet industry-standard measures. Government regulation Our business is subject to extensive, complex, and rapidly changing federal and state laws and regulations.
Because part of our business is the administration of financial products such as HSAs, we are required under the Consumer Financial Protection Bureau’s financial privacy rule under GLBA to send a notice of our privacy practices to account holders and to comply with restrictions on the disclosure of nonpublic personal information to non-affiliated third parties.
Because part of our business is the administration of financial products such as HSAs, we are required under GLBA to send a notice of our privacy practices to account holders and to comply with restrictions on the disclosure of nonpublic personal information to non-affiliated third parties.
As of January 31, 2024, the Company's year-end for trust and tax purposes, the net worth of the Company exceeded the required thresholds.
As of January 31, 2025, the Company's year-end for trust and tax purposes, the net worth of the Company exceeded the required thresholds.
Several of these -8- Table of Contents laws do not apply to entities or data subject to GLBA. The Federal government is also considering legislative and regulatory proposals concerning privacy, data protection, and cybersecurity, which may require us to implement and maintain additional operational or compliance measures.
Several of these laws do not apply to entities or data subject to GLBA or HIPAA. The federal government is also considering legislative and regulatory proposals concerning privacy, data protection, and cybersecurity, which may require us to implement and maintain additional operational or compliance measures.
We strive to administer the Total Rewards package consistently, equitably, and free of discrimination as follows: • Maintaining competitive pay by reviewing market data annually • Rewarding team members based on their abilities, competencies, experience, and performance levels • Effectively communicating our Total Rewards policies and practices • Complying with all applicable federal, state, and local laws and requirements Team member engagement We also consider team member engagement an important metric of our organizational health.
We strive to administer the Total Rewards package consistently and to ensure equal opportunity as follows: • Maintaining competitive pay by reviewing market data annually • Rewarding team members based on their abilities, competencies, experience, and performance levels • Effectively communicating our Total Rewards policies and practices • Complying with all applicable federal, state, and local laws and requirements Team member engagement We also consider team member engagement an important metric of our organizational health.
Our delivery model for these platforms eliminates the need for our Clients to install and maintain hardware and software in order to support HSA and other CDB programs and enables us to rapidly implement product enhancements across our entire user base.
Our delivery model for these platforms eliminates the need -6- Table of Contents for our Clients to install and maintain hardware and software in order to support HSA and other CDB programs and enables us to rapidly implement product enhancements across our entire user base.
Neither we nor Advisor provides advice to members in respect of investments among funds on the platform; • GPS powered by HealthEquity Advisors, LLC: Advisor provides guidance and advice, but the member makes the final investment decisions and implements portfolio allocation and investment advice through the HealthEquity platform; and -3- Table of Contents • AutoPilot powered by HealthEquity Advisors, LLC: Advisor manages the account and implements portfolio allocation and investment advice automatically for the member.
Neither we nor Advisor provides advice to members in respect of investments on the platform; • GPS powered by HealthEquity Advisors, LLC: Advisor provides guidance and advice, but the member makes the final investment decisions and implements portfolio allocation and investment advice through the HealthEquity platform; and • AutoPilot powered by HealthEquity Advisors, LLC: Advisor manages the account and implements portfolio allocation and investment advice automatically for the member.
Our current innovation efforts include, among others, increasing member and client self-service capabilities, developing APIs, driving electronic communication rather than paper, increasing straight-through processing, improving overall process times utilizing both traditional robotic process automation, and increasingly through artificial intelligence ("AI") tools, leveraging stacked cards, and mobile wallet. Scalable operating model.
Our current innovation efforts include, among others, increasing member and client self-service capabilities, developing APIs, driving electronic communication rather than paper, increasing straight-through processing, improving overall process times utilizing both traditional robotic process automation, and increasingly through artificial intelligence ("AI") tools including the Expedited Claims tool, leveraging chip-enabled stacked cards, and mobile wallet. Scalable operating model.
The Talent, Compensation and Culture Committee of our board of directors acts on behalf of the board to review and determine executive compensation plans, policies, and programs; oversee the Company’s culture and related strategies, programs, and risks; and oversee the Company’s talent management, development, and retention efforts, including with respect to diversity and inclusion.
The Talent, Compensation and Culture Committee of our board of directors acts on behalf of the board to review and determine executive compensation plans, policies, and programs; oversee the Company’s culture and related strategies, programs, and risks; and oversee the Company’s talent management, development, and retention efforts.
We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 15.7 million as of January 31, 2024. We reach consumers primarily through relationships with their employers, which we call Clients.
We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.0 million as of January 31, 2025. We reach consumers primarily through relationships with their employers, which we call Clients.
Members also utilize the platform’s mobile app to view and pay claims on-the-go, including uploading medical and insurance documentation to the platform with their mobile phone cameras. • Purpose-built technology: Our technology solution was designed specifically to serve the needs of our members, Network Partners, other ecosystem partners and our Clients.
Members also utilize the platform’s mobile app, which has been re-launched to drive better outcomes, to view and pay claims on-the-go, including uploading medical and insurance documentation to the platform with their mobile phone cameras. • Purpose-built technology: Our technology solution was designed specifically to serve the needs of our members, Network Partners, other ecosystem partners and our Clients.
For example, nonpublic personal information includes information submitted by a prospective account holder in an application, an account holder’s name and contact information, and transaction information.
For -7- Table of Contents example, nonpublic personal information includes information submitted by a prospective account holder in an application, an account holder’s name and contact information, and transaction information.
The core of our offerings is the HSA, a financial account through which consumers spend and save long-term for healthcare expenses on a tax-advantaged basis. As of January 31, 2024, we administered 8.7 million HSAs, with balances totaling $25.2 billion, which we call HSA Assets, as well as 7.0 million complementary CDBs.
The core of our offerings is the HSA, a financial account through which consumers spend and save long-term for healthcare expenses on a tax-advantaged basis. As of January 31, 2025, we administered 9.9 million HSAs, with balances totaling $32.1 billion, which we call HSA Assets, as well as 7.1 million complementary CDBs.
Our leadership position is evidenced by the increase in our market share (measured by HSA Assets), from 4% in December 2010 to 20% in June 2023, as reported in the June 2023 Devenir HSA Research Report, which indicates we are the largest HSA custodian measured by both accounts and HSA Assets. Differentiated consumer experience.
Our leadership position is evidenced by the increase in our market share (measured by HSA Assets), from 4% in December 2010 to 21% in June 2024, as reported in the 2024 Midyear Devenir HSA Research Report, which stated that we are the largest HSA custodian measured by both accounts and HSA Assets. Differentiated consumer experience.
Beginning in the fiscal year ending January 31, 2025, as our Basic Rates contracts expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates. Strong retention rates. Retention of our HSA members has been strong over time.
As our Basic Rates contracts expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates. Strong retention rates. Retention of our HSA members has been strong over time.
This package includes: • Base salary • Incentive/bonus pay • Stock-based compensation • 401(k) with company matching • Health benefits The Total Rewards philosophy underlying this package is intended to promote fairness and simplicity so that team members and people leaders understand the goals and the outcomes.
This package includes: • Base salary • Incentive/bonus pay • Stock-based compensation • 401(k) with company matching • Health benefits The Total Rewards philosophy underlying this package is intended to promote fairness and simplicity so that team members and people leaders understand the performance goals they target during the year and the outcomes that result from achieving or exceeding those goals.
The maximum monthly federal (and sometimes state) tax free exclusion is indexed for inflation. Our Luum technology platform provides employers with various commuter services, including access to real-time commute data, to help them design and implement flexible return-to-office and hybrid-workplace strategies and benefits. -4- Table of Contents Our competitive landscape Our direct competitors are HSA custodians and other CDB providers.
The maximum monthly federal (and sometimes state) tax free exclusion is indexed for inflation. We also offer various other commuter services, including access to real-time commute data, to help employers design and implement flexible return-to-office and hybrid-workplace strategies and benefits. Our competitive landscape Our direct competitors are HSA custodians and other CDB providers.
We expect to continue this growth strategy, including through the BenefitWallet HSA portfolio acquisition, and are regularly engaged in evaluating different opportunities. We have developed an internal capability to source, evaluate, and integrate acquisitions that have created value for stockholders. We believe the nature of our competitive landscape provides significant acquisition opportunities.
We expect to continue this growth strategy and are regularly engaged in evaluating different opportunities. We have developed an internal capability to source, evaluate, and integrate acquisitions that have created value for stockholders. We believe the nature of our competitive landscape provides significant acquisition opportunities. Many of our competitors view their HSA businesses as non-core functions.
The reforms included new excise taxes that incentivize employers to provide health benefits (including HSA-compatible benefits) to all full-time employees and new coverage mandates for health plans. The rules directly affect health FSAs and HRAs and have an indirect effect on HSAs.
The legislation amended various provisions in many federal laws, including the Internal Revenue Code and ERISA. The reforms included new excise taxes that incentivize employers to provide health benefits (including HSA-compatible benefits) to all full-time employees and new coverage mandates for health plans. The rules directly affect health FSAs and HRAs and have an indirect effect on HSAs.
In addition, in response to a request by an individual or an organization, the DOL’s Employee Benefits Security Administration may issue an advisory opinion that interprets and applies ERISA and/or corresponding prohibited transaction rules under the Internal Revenue Code to a specific situation, including issues related to consumer-centric healthcare accounts and retirement plans.
In addition, in response to a request by an individual or an organization, the DOL’s Employee Benefits Security Administration may issue an advisory opinion that interprets and applies ERISA and/or corresponding prohibited transaction rules under the Internal Revenue Code to a specific situation, including issues related to consumer-centric healthcare accounts and retirement plans. -8- Table of Contents Healthcare reform In March 2010, the federal government enacted significant reforms to healthcare benefits through the Affordable Care Act.
We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system. See “Key components of our results of operations” for additional information on our sources of revenue. Recent acquisitions Luum acquisition.
We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system. See “Key components of our results of operations” for additional information on our sources of revenue. Recent acquisitions HealthSavings HSA portfolio acquisition. In March 2022, we acquired the Health Savings Administrators, L.L.C.
We have increased our share of the growing HSA market from 4% in December 2010 to 20% as of June 2023, measured by HSA Assets. According to Devenir, as of June 2023, we were the largest HSA provider by both accounts and HSA Assets. In addition, we believe we are the largest provider of other CDBs.
We have increased our share of the growing HSA market from 4% in December 2010 to 21% as of June 2024, measured by HSA Assets. According to the 2024 Midyear Devenir HSA Research Report, as of June 2024, we were the largest HSA provider by both accounts and HSA Assets.
Many of our competitors view their HSA businesses as non-core functions. We believe they may look to divest these assets and, in certain cases, be limited from making acquisitions due to depository capital requirements. Our technology Technology platforms.
We believe they may look to divest these assets and, in certain cases, be limited from making acquisitions due to depository capital requirements. Our technology Technology platforms.
Our business model provides strong visibility into our future operating performance, with the vast majority of our accounts opened before the start of our fiscal year. We earn revenue primarily from three sources: service, custodial, and interchange.
Our commuter benefits offering also leverages connectivity to an ecosystem of mass transit, ride hailing, and parking providers. Our business model provides strong visibility into our future operating performance, with the vast majority of our accounts opened before the start of our fiscal year. We earn revenue primarily from three sources: service, custodial, and interchange.
We strive to provide a consistent and fair remuneration strategy for all team members through our Total Rewards package.
Pay equity Pay equity is a crucial metric in assessing equal opportunity at HealthEquity. We strive to provide a consistent and fair remuneration strategy for all team members through our Total Rewards package.
Scenic Pointe Dr., Ste. 100, Draper, Utah 84020. Our website address is www.healthequity.com. We do not incorporate the information contained on, or accessible through, our corporate website into this Annual Report on Form 10-K, and you should not consider it to be part of this report.
We do not incorporate the information contained on, or accessible through, our corporate website into this Annual Report on Form 10-K, and you should not consider it to be part of this report. -10- Table of Contents Where you can find additional information Our website is located at www.healthequity.com, and our investor relations website is located at ir.healthequity.com.
As of January 31, 2024, our team member engagement score was 80.7% favorable, 11.7% neutral, and 7.6% unfavorable, based on a participation rate of 89%. We believe that our team member engagement impacts our ability to retain our team members. For the year ended January 31, 2024, our total team member turnover was 14.4% and our voluntary turnover was 8.4%.
As of January 31, 2025, our team member engagement score was 78% favorable, 15% neutral, and 7% unfavorable, based on a participation rate of 88%. We believe that our team member engagement impacts our ability to retain our team members.
These plans allow employees to set aside pre-tax dollars to pay for eligible dependent care expenses, which typically include child care or day care expenses but may also include expenses incurred from adult and elder care.
These plans allow employees to set aside pre-tax dollars to pay for eligible dependent care expenses, which typically include child care or day care expenses but may also include expenses incurred from adult and elder care. -3- Table of Contents Current laws and regulations impose a statutory limit on the amount of pre-tax dollars employees can contribute to dependent care FSAs with no carryover allowed.
Further changes to the Affordable Care Act and related healthcare regulation remain under consideration, including "Medicare for all" plans. Investment Advisers Act of 1940 Our subsidiary HealthEquity Advisors, LLC is an SEC-registered investment adviser that provides web-only automated investment advisory services to members.
Investment Advisers Act of 1940 Our subsidiary HealthEquity Advisors, LLC is an SEC-registered investment adviser that provides web-only automated investment advisory services to members.
As our Company continues to mature, we have shifted to measuring team member engagement three times per year through a survey which contains three engagement key performance indicators (KPIs) that we believe provide a comprehensive measure of team member engagement.
We regularly seek team member feedback and measure engagement through a survey which contains three engagement key performance indicators (KPIs) that we believe provide a comprehensive measure of team member engagement.
Selected individuals are able to support areas that need help while gaining experience that can assist with their personal and professional goals. • We are implementing a leadership development program to improve team member engagement and productivity. Pay equity Pay equity is a crucial metric in assessing diversity and equal opportunity at HealthEquity.
The program is open to all Member Service Specialists, and selected individuals who are able to support areas that need help while gaining experience that can assist with their personal and professional goals. • We are implementing a broad leadership development program to improve team member engagement and productivity. • We coordinate an annual company-wide learning series, Remarkable You.
Current laws and regulations impose a statutory limit on the amount of pre-tax dollars employees can contribute to dependent care FSAs with no carryover allowed. Like healthcare FSAs, employers can also contribute funds to employees’ dependent care FSAs; however, these are subject to the statutory annual limit on total contributions.
Like healthcare FSAs, employers can also contribute funds to employees’ dependent care FSAs; however, these are subject to the statutory annual limit on total contributions. As with healthcare FSAs, employers realize payroll tax savings on the pre-tax dependent care FSA contributions made by their employees. Health reimbursement arrangements.
We seek to differentiate ourselves through our service-driven culture, product breadth, ecosystem connectivity, and proprietary technology. Our proprietary technology allows us to help consumers optimize the value of their HSAs and other CDBs and gain confidence and skills in managing their healthcare costs as part of their financial security.
Our proprietary technology allows us to help consumers optimize the value of their HSAs and other CDBs and gain confidence and skills in managing their healthcare costs as part of their financial security. Our ability to assist consumers is enhanced by our capacity to securely share data in both directions with others in the health, benefits, and retirement ecosystems.
Where you can find additional information Our website is located at www.healthequity.com, and our investor relations website is located at ir.healthequity.com. Information on our website is not incorporated into this report.
Information on our website is not incorporated into this report.
In September 2023, we entered into an agreement to acquire the BenefitWallet HSA portfolio from Conduent Business Services, LLC, for a purchase price of $425.0 million and reimbursement of up to $20.0 million of Conduent's transfer-related expenses. In addition, we expect to incur approximately $7.0 million of transaction costs associated with the acquisition.
In fiscal 2025, we acquired the BenefitWallet HSA portfolio, comprised of approximately 616,000 HSAs plus other accounts and $2.7 billion of HSA Assets, from Conduent Business Services, LLC ("Conduent") for a purchase price of $425.0 million.
As of January 31, 2024, we had 3,126 full-time team members and 24 part-time team members.
As of January 31, 2025, we had 3,105 full-time team members and 15 part-time team members. Talent acquisition and team member development Our People team seeks to attract, hire, and develop the best, most qualified candidates and team members.
We expect to pay approximately 50% of the purchase price and associated costs using cash on hand, with the remainder paid using our revolving credit facility with the actual percentages to be determined in connection with the payment for each tranche.
We paid the purchase price using $225.0 million of borrowings under our revolving credit facility, with the remainder paid using cash on hand. -2- Table of Contents Our products and services Health savings accounts.
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Our ability to assist consumers is enhanced by our capacity to securely share data in both directions with others in the health, benefits, and retirement ecosystems. Our commuter benefits offering also leverages connectivity to an ecosystem of mass transit, ride hailing, and parking providers.
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In addition, we believe we are the largest provider of other CDBs. We seek to differentiate ourselves through our service-driven culture, product breadth, ecosystem connectivity, and proprietary technology.
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In March 2021, we bolstered our commuter offering by acquiring 100% of the outstanding capital stock of Fort Effect Corp, d/b/a Luum (the "Luum Acquisition"). The aggregate purchase price for the acquisition consisted of $56.2 million in cash.
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Further changes to the Affordable Care Act and related healthcare regulation remain under consideration, including "Medicare for all" plans. In addition, legislative proposals to either increase access to HSAs and similar accounts, and conversely legislation that would curtail them, are commonly introduced in both chambers of Congress and could be taken up at any time.
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Luum provides employers with various commuter services, including access to real-time commute data, to help them design and implement flexible return-to-office and hybrid-workplace strategies and benefits. Fifth Third Bank HSA portfolio acquisition.
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HealthEquity has taken, and continues to take, steps to strengthen our talent: Our People team uses a hiring framework which seeks to improve candidate experience, ensure quality of hire, and increase our focus on hiring practices that meet or exceed industry and legal standards. • We continued an early career internship program, offering positions across two key areas: corporate business functions and technology.
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In September 2021, we acquired the Fifth Third Bank, National Association ("Fifth Third") HSA portfolio, which consisted of $490.0 million of HSA Assets held in approximately 160,000 HSAs in exchange for a purchase price of $60.8 million in cash. -2- Table of Contents Further acquisition.
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We strive to attract candidates aligned with our vision and who will provide the unique viewpoints and experiences that help drive our success going forward, including by our engaging in outreach with universities where we have a strong regional presence. -9- Table of Contents • We offer a library of resources for our “Grow Your Career” series with the Talent Partner and Talent Operations teams.
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In November 2021, we acquired the Further business (other than Further's voluntary employee beneficiary association business), a leading provider of HSA and other CDB administration services, with approximately 580,000 HSAs and $1.9 billion of HSA Assets, for $455 million in cash (the "Further Acquisition"). HealthSavings HSA portfolio acquisition. In March 2022, we acquired the Health Savings Administrators, L.L.C.
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Open to all teammates, sessions include leadership development, emotional intelligence, technical skills, and other professional development topics. • We also offer DEAL (Dedicated, Engaged, Authentic Leaders), an annual summit for all company leadership that provides an opportunity to discuss strategic priorities and initiatives and focus on leadership development and effective leadership workshops.
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The agreement contemplates a transfer of approximately 665,000 customer accounts and their approximately $2.8 billion of HSA Assets and includes a mechanism to adjust the purchase price based on the amount of HSA Assets actually transferred.
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The transfer is expected to close in multiple tranches during the first half of fiscal 2025, subject to the satisfaction of certain customary closing conditions.
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On March 7, 2024, the first of the three HSA Asset transfers occurred, with approximately 266,000 HSAs and $1.1 billion of HSA Assets transferring to HealthEquity’s custody. In connection with this transfer, HealthEquity paid the applicable purchase price of $163.9 million using cash on hand. Our products and services Health savings accounts.
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As with healthcare FSAs, employers realize payroll tax savings on the pre-tax dependent care FSA contributions made by their employees. HealthEquity administers the United States Office of Personnel Management's (“OPM”) Federal Flexible Spending Account Program (“FSAFEDS”). This relationship provides eligible federal government employees access to our advanced technology platforms and premium service capabilities. Health reimbursement arrangements.
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Healthcare reform In March 2010, the federal government enacted significant reforms to healthcare benefits through the Affordable Care Act. The legislation amended various provisions in many federal laws, including the Internal Revenue Code and ERISA.
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As of January 31, 2024, our team members had the following demographic characteristics: Executive Leadership Team (1) All Other People Leaders All Other HealthEquity Team Members (2) Women 31 % 59 % 66 % Men 69 % 41 % 33 % Under age 30 0 % 3 % 12 % Between ages 30 and 50 60 % 67 % 60 % Over age 50 40 % 30 % 28 % People of color 18 % 26 % 37 % (1) Our executive leadership team includes people in VP-level positions and above.
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(2) Gender was not specified by 1% of team members included in this column. Diversity, equity, and inclusion ("DE&I") To reach our goals, we seek to create an environment that attracts, sustains, and fulfills our team members. That starts with building and maintaining a diverse, equitable, and inclusive culture. At HealthEquity, we embrace diversity as a strength.
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We recognize the power of diverse workplaces to produce innovative ideas and foster a productive work environment. The Created Equal Council, our DE&I initiative, is comprised of HealthEquity team members who identify opportunities, guide solutions, and hold the Company accountable in the integration of DE&I practices.
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The Council is charged with researching, developing, and proposing mechanisms that will help create a supportive, positive, and inclusive work environment for all team members. The Council has representatives from key stakeholder teams, including People and Legal. Talent acquisition and team member development Our People team seeks to attract, hire, and develop qualified candidates and team members.
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HealthEquity has taken, and continues to take, steps to strengthen our talent: • To improve the candidate experience and increase our focus on inclusive hiring practices, we created hiring committees within each department.
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These hiring committees have been trained on, and employ, a competency-based structured interviewing framework. • HealthEquity maintains its focus on DE&I across all departments and hierarchies by signing the Parity Pledge. We committed to interviewing a diverse candidate for every Director-level position and above. • We developed a Talent Partnership Program with our Employee Resource Groups (ERGs).
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Started in 2023, each ERG has a dedicated Talent partner who is responsible for sharing talent acquisition news and opportunities. • We continued an early career internship program, offering 22 positions across two key areas: corporate business functions and technology.
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To foster diversity and inclusion, we established partnerships with prominent schools classified as Historically Black Colleges and Universities (HBCUs) and Hispanic Serving Institutions (HSIs) in regions where our presence is strongest. -10- Table of Contents • We built a library of resources for our “Grow Your Career” series with the Talent Partner and Talent Operations teams.
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We regularly seek team member feedback and measure engagement, previously through the Net Promoter Score℠, or NPS ® , survey, which was performed twice a year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSimilar to the work completed to integrate the acquisition of WageWorks, as part of the Further Acquisition integration process we are working to migrate certain Clients and Network Partners to different technology platforms.
Biggest changeAs part of that integration process, we are working to migrate certain Clients and Network Partners to different technology platforms. We have experienced challenges and increased costs related to Clients' and Network Partners' dissatisfaction as well as technological issues in integrating acquisitions, which could continue to occur as we continue integrating past and future acquisitions.
If any material adverse event were to affect one of our Depository Partners or our insurance company partners, including a significant decline in its financial condition, a decline in the quality of its service, loss of deposits, its inability to comply with applicable banking, insurance or other regulatory requirements, systems failure or its inability to return principal or pay interest thereon, our business, financial condition and results of operations could be materially and adversely affected.
If any material adverse event were to affect one of our Depository Partners or our insurance company partners, including a significant decline in its financial condition, a decline in the quality of its service, a loss of deposits, its inability to comply with applicable banking, insurance or other regulatory requirements, systems failure or its inability to return principal or pay interest thereon, our business, financial condition and results of operations could be materially and adversely affected.
Failure to adequately manage the liquidity of the custodial assets held by our Depository Partners and insurance company partners could materially and adversely affect our business, financial condition, and results of operations. Certain of our arrangements with our depository and insurance company partners require that we keep a minimum amount of HSA cash with such partner.
Failure to adequately manage the liquidity of the custodial assets held by our Depository Partners and insurance company partners could materially and adversely affect our business, financial condition, and results of operations. Certain of our arrangements with our Depository Partners and insurance company partners require that we keep a minimum amount of HSA cash with such partner.
Our market share could decline if Fidelity and other mutual fund companies continue expanding their presence in the market. These investment companies have significant advantages over us in terms of brand name recognition, years of experience managing tax-advantaged retirement accounts (e.g., 401(k) and IRA), highly developed recordkeeping, trust functions, and fund advisory and customer relations management, among others.
Our market share could decline if Fidelity Investments and other mutual fund companies continue expanding their presence in the market. These investment companies have significant advantages over us in terms of brand name recognition, years of experience managing tax-advantaged retirement accounts (e.g., 401(k) and IRA), highly developed recordkeeping, trust functions, and fund advisory and customer relations management, among others.
Transitioning to a new service provider often takes a significant amount of time and resources and, if we are unable to complete a transition to a new provider on a timely basis, or at all, we could be forced to temporarily or permanently discontinue certain services, such as our payment card services, which could disrupt services to our customers and adversely affect our business, financial condition, and results of operations.
Transitioning to a new service provider often takes a significant amount of time and resources and, if we are unable to complete a transition to a new provider on a timely basis, or at all, we could be forced to temporarily or permanently discontinue certain services, such as our payment card services, which could disrupt services to our customers and adversely affect our business, financial condition, reputation, and results of operations.
If we were required to change BIN sponsors, we could not accurately predict the success of such change or that the terms of our agreement with a new BIN sponsor would be as favorable to us, especially in light of the regulatory scrutiny of the payment card industry, which has rendered the market for BIN sponsor services less competitive.
If we were required to change BIN sponsor, we could not accurately predict the success of such change or that the terms of our agreement with a new BIN sponsor would be as favorable to us, especially in light of the regulatory scrutiny of the payment card industry, which has rendered the market for BIN sponsor services less competitive.
In addition, we have service level agreements with certain of our Clients and Network Partners for which the availability of this software is critical. Any decrease in the availability of our service as a result of errors, defects, a disruption or failure of our licensed software may require us to provide significant fee credits or refunds to our customers.
In addition, we have service level agreements with certain of our Clients and Network Partners for which the availability of this software is critical. Any decrease in the availability of our services as a result of errors, defects, a disruption or failure of our licensed software may require us to provide significant fee credits or refunds to our customers.
We, and the banks that issue our prepaid debit cards, are subject to Payment Card Industry Data Security Standards and Visa and MasterCard association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us, including card processors.
We, and the banks that issue our prepaid debit cards, are subject to Payment Card Industry Data Security Standards and Visa association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us, including card processors.
Continued compliance with current and potential new privacy and data protection laws and regulations, and meeting expectations with respect to the control of personal data in a rapidly changing technology environment, could result in higher compliance and technology costs for us, as well as costly penalties in the event we are deemed to not be in compliance with such laws and regulations.
Compliance with current and potential new privacy and data protection laws and regulations, and meeting expectations with respect to the control of personal data in a rapidly changing technology environment, could result in higher compliance and technology costs for us, as well as costly penalties in the event we are deemed to not be in compliance with such laws and regulations.
In situations where we are subject to HIPAA and HITECH, in which we are a business associate providing services to covered entities, the covered entities direct HIPAA compliance matters in the event of a security breach, which complicates our ability to address harm caused by the breach.
In situations where we are subject to HIPAA and HITECH, for which we are a business associate providing services to covered entities, the covered entities direct HIPAA compliance matters in the event of a security breach, which complicates our ability to address harm caused by the breach.
The substantial debt we have outstanding, combined with our other financial obligations and contractual commitments, has important consequences, including the following: • our level of debt may make it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, -24- Table of Contents could result in an event of default under the Credit Agreement or the Indenture and the agreements governing such other debt; • we use a portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances and other general corporate requirements; • our interest expense has increased substantially, and could continue to increase, if interest rates continue to increase, because any outstanding borrowings under our Credit Facilities are based on variable interest rates; • the interest rate on our Revolving Credit Facility will depend on the level of our specified financial ratios, and therefore could increase if such specified financial ratios increase; • such substantial debt could leave us vulnerable to general economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged; • our debt service obligations could limit our flexibility to plan for, or react to, changes in our business and the industry in which we operate; • our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and joint ventures and other general corporate requirements; • our level of debt may prevent us from raising the funds necessary to repurchase all of the Notes tendered to us upon the occurrence of a change of control, which would constitute an event of default under the Indenture; and • a potential failure to comply with the financial and other restrictive covenants in any of our debt instruments, which, among other things, require us to maintain specified financial ratios, could, if not cured or waived, have a material adverse effect on our ability to fulfill our obligations under the Notes and on our business and prospects generally.
The substantial debt we have outstanding, combined with our other financial obligations and contractual commitments, has important consequences, including the following: • our level of debt may make it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the Credit Agreement or the Indenture and the agreements governing such other debt; • we use a portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances and other general corporate requirements; • our interest expense has increased substantially, and could continue to increase if interest rates increase beyond current levels, because any outstanding borrowings under the Revolving Credit Facility are based on variable interest rates; • the interest rate on our Revolving Credit Facility will depend on the level of its specified financial ratios, and therefore could increase if such specified financial ratios increase; -24- Table of Contents • such substantial debt could leave us vulnerable to general economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged; • our debt service obligations could limit our flexibility to plan for, or react to, changes in our business and the industry in which we operate; • our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and joint ventures and other general corporate requirements; • our level of debt may prevent us from raising the funds necessary to repurchase all of the Notes tendered to us upon the occurrence of a change of control, which would constitute an event of default under the Indenture; and • a potential failure to comply with the financial and other restrictive covenants in any of our debt instruments, which, among other things, require us to maintain specified financial ratios, could, if not cured or waived, have a material adverse effect on our ability to fulfill our obligations under the Notes and on our business and prospects generally.
Failure to comply with, or changes in, payment card industry, credit card association or other network rules or standards set by Visa or MasterCard, or changes in card association and debit network fees or products or interchange rates, could materially adversely affect us.
Failure to comply with, or changes in, payment card industry, credit card association or other network rules or standards set by Visa or changes in card association and debit network fees or products or interchange rates, could materially adversely affect us.
We are currently investing in a significant modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services.
We are currently investing in a modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services.
Our business, including HSAs and many of the CDBs we administer and our investment adviser and trust company subsidiaries, is subject to extensive, complex, and frequently changing federal and state laws and regulations, including IRS, Health and Human Services (“HHS”), and Department of Labor (“DOL”) regulations; ERISA, HIPAA, HITECH, and other privacy and data security regulations; the Advisers Act; state banking laws; state third-party administrator laws; the Patient Protection and Affordable Care Act; and developing regulation regimes for the use of AI.
Our business, including HSAs and many of the CDBs we administer and our investment adviser and trust company subsidiaries, is subject to extensive, complex, and frequently changing federal and state laws and regulations, -20- Table of Contents including IRS, Health and Human Services (“HHS”), and Department of Labor (“DOL”) regulations; ERISA, HIPAA, HITECH, and other privacy and data security regulations; the Advisers Act; state banking laws; state third-party administrator laws; the Patient Protection and Affordable Care Act; and developing regulation regimes for the use of AI.
If our members do not continue to utilize our payment cards, our results of operations, business, and prospects would be materially adversely affected. We derived 16%, 17%, and 17% of our total revenue during the fiscal years ended January 31, 2024, 2023, and 2022, respectively, from interchange fees that are paid to us when our customers utilize our payment cards.
If our members do not continue to utilize our payment cards, our results of operations, business, and prospects would be materially adversely affected. We derived 15%, 16%, and 17% of our total revenue during the fiscal years ended January 31, 2025, 2024, and 2023, respectively, from interchange fees that are paid to us when our customers utilize our payment cards.
The market for administration of HSAs and other CDBs is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs, existing competition, and the entrance of non-traditional competitors.
The market for administering HSAs and other CDBs is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs, existing competition, and the entrance of non-traditional competitors.
As a result, or if our security measures are breached again or unauthorized access to data is otherwise obtained as a result of third-party action, team member error or otherwise, our reputation could be significantly damaged, our business may suffer and we could incur substantial liability, which could result in loss of sales, Clients and Network Partners.
Whether as a result of these incidents, or if our security measures are breached again or unauthorized access to data is otherwise obtained as a result of third-party action, team member error or otherwise, our reputation could be significantly damaged, our business may suffer and we could incur substantial liability, which could result in loss of sales, Clients and Network Partners.
In addition, from time-to-time, card associations increase the organization or processing fees that they charge, which could increase our operating expenses, reduce our profit margin and materially adversely affect our results of operations, financial condition, business, and prospects. -20- Table of Contents We are subject to complex regulation, and any compliance failures or regulatory action could adversely affect our business.
In addition, from time-to-time, card associations increase the organization or processing fees that they charge, which could increase our operating expenses, reduce our profit margin and materially adversely affect our results of operations, financial condition, business, and prospects. We are subject to complex regulation, and any compliance failures or regulatory action could adversely affect our business.
New team members may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our retention efforts are not successful or our team member turnover rate increases in the future, our business, results of operations and financial condition could be materially and adversely affected.
New team members may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our retention efforts are not successful or our team member turnover rate increases, our business, results of operations and financial condition could be materially and adversely affected.
However, the rate at which we have been able to add new HSAs, CDBs and HSA Assets in the past may not be indicative of the rate at which we will be able to grow in the future. -23- Table of Contents Our success depends in part upon the ability of our executive officers to manage growth effectively.
However, the rate at which we have been able to add new HSAs, CDBs and HSA Assets in the past may not be indicative of the rate at which we will be able to grow in the future. Our success depends in part upon the ability of our executive officers to manage growth effectively.
We attempt to mitigate these risks through various business continuity efforts, including redundant infrastructure, 24/7/365 system activity monitoring, backup and recovery procedures, use of a secure storage facility for backup media, separate production and test systems, and change management and system security measures, but our precautions may not protect against all potential problems.
We attempt to mitigate these risks through various business continuity efforts, including redundant infrastructure, 24/7/365 system activity monitoring, backup and recovery procedures, use of a secure storage facility for backup media, separate production and test systems, and change management and system security measures, but our precautions, even after previous incidents, may not protect against all potential problems.
Any further unauthorized disclosure of personally identifiable information -19- Table of Contents experienced by us or our third-party service providers that process such information on our behalf could result in substantial financial and reputational harm to us, including possible criminal and civil penalties.
Any further unauthorized disclosure of personally identifiable information experienced by us or our third-party service providers that process such information on our behalf could result in substantial financial and reputational harm to us, including possible criminal and civil penalties.
During the occurrence and continuance of a default, lenders under our Credit Facilities may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, which would result in an event of default under the Indenture.
During the occurrence and continuance of a default, lenders under our Revolving Credit Facility may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, which would result in an event of default under the Indenture.
In addition, we do not have long-term contracts with our BIN sponsors, and our BIN sponsors may increase the fees charged to us or terminate our relationship.
In addition, we do not have long-term contracts with our BIN sponsor, and our BIN sponsor may increase the fees charged to us or terminate our relationship.
Further, we use third-party service providers for certain call centers -21- Table of Contents and COBRA claims and transaction processing, including certain offshore service providers for member chat service, which service providers may not provide the same quality of support services for our Clients and members.
Further, we use third-party service providers for certain call centers and COBRA claims and transaction processing, including certain offshore service providers for member chat service, which service providers may not provide the same quality of support services for our Clients and members.
Our facilities, our third-party data centers, and our cloud service providers are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including, without limitation: • extended power loss; • telecommunications failures from multiple telecommunications providers; • natural disaster or an act of terrorism; • software and hardware errors, or failures in our own systems or in other systems; • network environment disruptions such as computer viruses, hacking and similar problems in our own systems and in other systems; • theft and vandalism of equipment; and • actions or events caused by or related to third parties.
Our facilities, our third-party data centers, and our cloud service providers are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including, without limitation: • extended power loss; • telecommunications failures from multiple telecommunications providers; • natural disaster or an act of terrorism; • software and hardware errors, or failures in our own systems or in other systems; • mistakes in updating, maintaining, and accessing databases, data centers, and servers; • network environment disruptions such as computer viruses, hacking and similar problems in our own systems and in other systems; • theft and vandalism of equipment; and • actions or events caused by or related to third parties.
If any material adverse event were to affect our BIN sponsors, including a significant decline in the financial condition of any of our BIN sponsors, a decline in the quality of service provided by our BIN sponsors, the inability of our BIN sponsors to comply with applicable banking and financial service regulatory requirements or industry standards, systems failure or the inability of our BIN sponsors to pay us fees, our business, financial condition, and results of operations could be materially and adversely affected because we may be forced to reduce the availability of, or eliminate entirely, our payment card offering, which would materially impact our interchange revenue.
If any material adverse event were to affect our BIN sponsor, including a significant decline in the financial condition of such BIN sponsor, a decline in the quality of service provided by our BIN sponsor, the inability of our BIN sponsor to comply with applicable banking and financial service regulatory requirements or industry standards, systems failure or the inability of our BIN sponsor to pay us fees, our business, financial condition, and results of operations could be materially and adversely affected because we may be forced to reduce the availability of, or eliminate entirely, our payment card offering, which would -22- Table of Contents materially impact our interchange revenue.
In addition, geopolitical events, including the war between Russia and Ukraine, have resulted in, and may continue to result in, an increase in cyber-attacks. Substantially all of our workforce works remotely.
In addition, -15- Table of Contents geopolitical events, including the war between Russia and Ukraine, have resulted in, and may continue to result in, an increase in cyber-attacks. Substantially all of our workforce works remotely.
A ny failure to execute on our internal controls and continue to maintain effective internal controls, to timely implement any necessary additional improvement to our internal controls or to effect remediation of any future material weakness or significant deficiency could, among other things, result in losses from fraud or error, harm our reputation or cause investors to lose confidence in our reported financial information, all of which could have a material adverse effect on our reputation, results of operations, or financial condition.
A ny failure, whether in connection with our growth, acquisitions, or otherwise, to execute on our internal controls and continue to maintain effective internal controls, to timely implement any necessary additional improvement to our internal controls or to effect remediation of any future material weakness or significant deficiency could, among other things, result in losses from fraud or error, harm our reputation or cause investors to lose confidence in our reported financial information, all of which could have a material adverse effect on our reputation, results of operations, or financial condition.
This in turn could result in additional claims or class action litigation brought on behalf of our members, Clients or Network Partners, any of which could result in substantial cost to us and divert management’s attention and other resources away from our operations.
This in turn could result in additional claims or class action litigation brought on behalf of our members, Clients or Network Partners, any of which, regardless of merit or ultimate outcome, could result in substantial cost to us and divert management’s attention and other resources away from our operations.
As a non-bank custodian, we rely on our federally insured custodial Depository Partners and our insurance company partners to hold HSA cash that we custody. The portion of HSA cash held by our insurance company partners is increasing with the increased adoption of our Enhanced Rates program.
As a non-bank custodian, we rely on our federally insured custodial Depository Partners and our insurance company partners to hold HSA cash that we custody. The portion of HSA cash held by our insurance company partners continues to increase with the increasing adoption of our Enhanced Rates program.
In addition, all of our business is subject, to varying degrees, to fiduciary and other service provider obligations under ERISA, the Internal Revenue Code, and underlying regulations. A failure to comply could subject us to disgorgement of profits, excise taxes, civil penalties, private lawsuits, and other costs, including reputational harm.
In addition, all of our business is subject, to varying degrees, to fiduciary and other service provider obligations under ERISA, the Internal Revenue Code, and underlying regulations. A failure to comply with these or other regulatory and compliance obligations could subject us to disgorgement of profits, excise taxes, civil penalties, private lawsuits, and other costs, including reputational harm.
We may make our members whole for losses sustained when using our payment cards, even in instances where we are not directly responsible for the underlying cause of such loss.
We may reimburse our members for losses sustained when using our payment cards, even in instances where we are not directly responsible for the underlying cause of such loss.
We rely on our management team and team members and our business could be harmed if we are unable to retain qualified personnel. Our success depends, in part, on the skills, working relationships and continued services of our executive leadership team and other key personnel.
We rely on our management team (including our new CEO) and team members and our business could be harmed if we are unable to retain qualified personnel. Our success depends, in part, on the skills, working relationships and continued services of our executive team, including our new CEO, and other key personnel.
We have in the past acquired, and, as a key part of our strategy, seek to acquire or invest in, assets, businesses, products, or technologies that we believe would complement or expand our products and services, enhance our technical capabilities, or otherwise offer growth opportunities.
As a key part of our strategy, we seek to acquire or invest in assets, businesses, products, or technologies that we believe would complement or expand our products and services, enhance our technical capabilities, or otherwise offer growth opportunities.
There can be no assurance that we will be able to accurately anticipate and respond to the changing demands we will face as we continue to expand our operations or that we will be able to manage growth effectively or to achieve further growth at all.
There can be no assurance that we will be able to accurately anticipate and respond to the changing demands we will face as we continue to expand our operations or that we will be able to manage growth effectively -23- Table of Contents or to achieve further growth at all.
Such security breaches could compromise our networks, or those of third-party service providers on which we rely, and result in the information stored or transmitted there to be accessed, modified or used in an unauthorized manner, publicly disclosed, lost, or stolen.
Such threats could result in actual security events that compromise our networks, or those of third-party service providers on which we rely, and result in the information stored or transmitted there to be accessed, modified or used in an unauthorized manner, publicly disclosed, lost, or stolen.
Changes in tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities could result in substantially higher taxes.
Changes in -19- Table of Contents tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities could result in substantially higher taxes.
If we fail to comply with those minimum HSA cash requirements, including as a result of withdrawals by our members, we may be subject to penalties payable to our partners or a reduction in the interest payable.
If we fail to comply with those minimum HSA cash requirements, including as a result of withdrawals by our members, we may be subject to penalties payable to our partners or a reduction in the interest paid to us under such arrangements.
Our direct HSA competitors are HSA custodians and administrators that include state or federally chartered banks, such as Webster Bank and Optum Bank, insurance companies, well-known retail investment companies, such as Fidelity Investments, and non-bank custodians approved by the U.S. Treasury.
We view our competition in terms of direct and indirect competitors. Our direct HSA competitors are well-known retail investment companies, such as Fidelity Investments, HSA custodians and administrators that include state or federally chartered banks, such as Webster Bank and Optum Bank, insurance companies, and non-bank custodians approved by the U.S. Treasury.
If our customers do not use these payment cards at the rate we expect, if they elect to withdraw funds using a non-revenue generating mechanism such as direct reimbursement, if the impacts of societal changes arising out of the COVID-19 pandemic continue, or if other alternatives to these payment cards develop, our results of operations, business, and prospects would be materially adversely affected.
If our customers do not use these payment cards at the rate we expect, if they elect to withdraw funds using a non-revenue generating mechanism such as direct reimbursement, or if other alternatives to these payment cards develop, our results of operations, business, and prospects would be materially adversely affected.
If we are -25- Table of Contents unable to repay outstanding borrowings when due, the lenders under our Credit Facilities will also have the right to proceed against the collateral granted to them to secure the debt. If lenders under the Credit Facilities accelerate the debt thereunder, then the obligations under the Notes would be accelerated.
If we are unable to repay outstanding borrowings when due, the lenders under our Revolving Credit Facility will also have the right to proceed against the collateral granted to them to secure the debt. If lenders under the Revolving Credit Facility accelerate the debt thereunder, then the obligations under the Notes would be accelerated.
In addition, we may not realize the anticipated cost, revenue, and other synergies associated with successfully integrating our acquisitions. Our management team and other team members continue to spend significant amounts of time on integration efforts relating to the Further Acquisition.
In addition, we may not realize the anticipated cost, revenue, and other synergies associated with successfully integrating our acquisitions. O ur management team and other team members continue to spend time on integration efforts relating to our recent acquisitions, including the Further acquisition.
A change in relationship with any of our bank identification number sponsors, or the failure by these sponsors to comply with certain banking regulations, could materially and adversely affect our business. We rely on a limited number of bank identification number ("BIN") sponsors in relation to the payment cards we issue.
A change in relationship with our bank identification number sponsor, or the failure by our sponsor to comply with certain banking regulations, could materially and adversely affect our business. We rely on a single bank identification number ("BIN") sponsor in relation to the payment cards we issue.
Our consolidated balance sheet includes significant intangible assets, including approximately $1.65 billion in goodwill and $835.9 million in intangible assets, together representing approximately 79% of our total assets as of January 31, 2024. The determination of related estimated useful lives and whether these assets are impaired involves significant judgments.
Our consolidated balance sheet includes significant intangible assets, including approximately $1.65 billion in goodwill and $1.20 billion in intangible assets, together representing approximately 83% of our total assets as of January 31, 2025. The determination of related estimated useful lives and whether these assets are impaired involves significant judgments.
Interruptions or delays that inhibit our ability to meet that standard have in the past hurt our reputation and ability to attract and retain customers, and such interruptions or delays in the future would likely also do so.
Interruptions or delays -21- Table of Contents that inhibit our ability to meet that standard have hurt our reputation and ability to attract and retain customers, and any such interruptions or delays in the future would likely also do so.
If our members do not fully use their HSAs or CDBs, if employers reduce or cease to offer HSAs or other CDB programs, if the rate of adoption of these accounts decreases, if existing Clients, Network Partners and members do not recognize or acknowledge the benefits of our services or we do not drive engagement, then the market for our services might decline or develop more slowly than we expect, which could adversely affect our operating results.
Our success depends on the willingness of consumers to increase their use of HSAs and other CDBs, our ability to increase engagement, and our ability to demonstrate the value of our services to our existing and potential Clients, Network Partners and members. -13- Table of Contents If our members do not fully use their HSAs or CDBs, if employers reduce or cease to offer HSAs or other CDB programs, if the rate of adoption of these accounts decreases, if existing Clients, Network Partners and members do not recognize or acknowledge the benefits of our services or we do not drive engagement, then the market for our services might decline or develop more slowly than we expect, which could adversely affect our operating results.
As of January 31, 2024, we had approximately 8.7 million HSAs and $25.2 billion in HSA Assets representing growth of 9% and 14%, respectively, from January 31, 2023. Our growth strategy contemplates further increasing the number of our HSAs, CDBs and our HSA Assets at relatively higher growth rates than industry averages.
As of January 31, 2025, we had approximately 9.9 million HSAs and $32.1 billion in HSA Assets representing growth of 14% and 27%, respectively, from January 31, 2024. Our growth strategy contemplates further increasing the number of our HSAs, CDBs and our HSA Assets at relatively higher growth rates than industry averages.
Disruptions at our data centers could cause disruptions to our technology platforms and data loss or corruption. We have experienced interruptions and delays in service and availability for data centers, and bandwidth and other -18- Table of Contents technology issues in the past.
Disruptions at our data centers may cause disruptions to our technology platforms and lead to data loss or corruption. We have experienced interruptions and delays in service and availability for data centers, and bandwidth and other technology issues in the past.
The success of our acquisitions depends in part on our ability to realize the anticipated business opportunities from combining the operations of the acquired businesses with our business in an efficient and effective manner.
Integration of our acquisitions may not be successful, and we may not realize the synergies anticipated from our acquisitions. The success of our acquisitions depends in part on our ability to realize the anticipated business opportunities from combining the operations of the acquired businesses with our business in an efficient and effective manner.
For example, the CCPA provides a private right of action for data breaches. Additional privacy requirements are expected as new state and federal privacy laws are enacted.
For example, many states provide a private right of action for data breaches. Additional privacy requirements are expected as new state and federal privacy laws are enacted.
For example, regulatory changes related to our FSA and COBRA products enacted in the wake of the COVID-19 pandemic created uncertainty and additional workload on our team members and resulted in additional costs.
Changes to the regulatory landscape impacting our products require substantial time and costs for us to ensure our products are compliant. For example, regulatory changes related to our FSA and COBRA products enacted in the wake of the COVID-19 pandemic created uncertainty and additional workload on our team members and resulted in additional costs.
In addition to risks related to license requirements, usage of open source software may be riskier than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
In addition to risks related to license requirements, usage of open source software may be riskier than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software.
We cannot predict if any new reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be, and such reforms could have a material adverse effect on our business. We are subject to privacy regulations, including regarding the access, use, and disclosure of personally identifiable information.
We cannot predict if any new reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be, and such reforms could have a material adverse effect on our business.
We earn a significant portion of our consolidated revenue from fees we earn from our depository and insurance company partners, approximately 39%, 30%, and 25% during the fiscal years ended January 31, 2024, 2023, and 2022, respectively.
We earn a substantial portion of our revenue from fees we earn from our Depository Partners and insurance company partners, which comprised approximately 45%, 39%, and 30% of our revenues during the fiscal years ended January 31, 2025, 2024, and 2023, respectively.
Our data recovery centers are equipped with physical space, power, storage and networking infrastructure and Internet connectivity to support our technology platforms in the event of the interruption of services at our data centers. Even with these data recovery centers, our operations would be interrupted during the transition process should our primary data center experience a failure.
Our data recovery centers are equipped with physical space, power, storage and networking infrastructure and Internet connectivity to support our technology platforms in the event of the interruption of services at our data centers. Even with these data recovery centers, our operations can be interrupted during transition processes when our primary and other data centers experienced failures.
In addition, we deposit Client-held funds with our Depository Partners in interest-bearing demand deposit accounts, and for certain Clients these amounts exceed maximum federal deposit insurance levels.
In addition, we deposit Client-held funds with our Depository Partners in interest-bearing demand deposit accounts, and federal deposit insurance may not be available for certain Clients.
A decline in prevailing interest rates has in the past and may again in the future negatively affect our business by reducing the yield we realize on our HSA Assets and other Client-held funds. In addition, if we do not offer competitive interest rates on HSA Assets, our members may choose another HSA custodian.
A decline in prevailing interest rates would negatively impact our business by reducing the yield we realize on our HSA Assets and other Client-held funds. In addition, if we do not offer competitive interest rates on HSA Assets, our members may choose another HSA custodian. Any such scenario could materially and adversely affect our business and results of operations.
If successful, their development efforts could render our services less desirable, resulting in the loss of our existing customers or a reduction in the fees we earn from our products and services. -15- Table of Contents Developments in the rapidly changing healthcare industry could adversely affect our business.
They may have a greater ability to use AI to provide enhanced products and service offerings. If successful, their development efforts could render our services less desirable, resulting in the loss of our existing customers or a reduction in the fees we earn from our products and services. Developments in the rapidly changing healthcare industry could adversely affect our business.
Legal and regulatory risks The healthcare regulatory and political framework is uncertain and evolving, and we cannot predict the effect that further healthcare reform and other changes in government programs may have on our business, financial condition, or results of operations.
Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business. -18- Table of Contents Legal and regulatory risks The healthcare regulatory and political framework is uncertain and evolving, and we cannot predict the effect that further healthcare reform and other changes in government programs may have on our business, financial condition, or results of operations.
The restrictions contained in the Credit Agreement: • limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; and • adversely affect our ability to finance our operations, strategic acquisitions, investments or alliances or other capital needs or to engage in other business activities that would be in our interest.
The terms of the Revolving Credit Facility in the Credit Agreement also require us to achieve and maintain compliance with specified financial ratios and contain the following restrictions: • limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; and • adversely affect our ability to finance our operations, strategic acquisitions, investments or alliances or other capital needs or to engage in other business activities that would be in our interest.
Under the Credit Agreement, we have the right to request additional commitments for new term loans and increases to then-existing term loans and revolving credit commitments in an amount up to the sum of (i) $300 million, plus (ii) an unlimited additional amount so long as the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 3.85 to 1.00 (assuming any such new or increased revolving commitments are fully borrowed).
Under the Credit Agreement, we have the right to request additional loans or commitments for in an amount up to $450 million, plus (ii) an additional amount so long as the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 3.85 to 1.00 as of the date such loans or commitments are incurred.
The full impact of healthcare reform and other changes in the healthcare industry and in healthcare spending is unknown. Accordingly, we are unable to predict what effect healthcare reform measures will have on our business. Changes in applicable federal and state laws relating to HSAs and other CDBs could materially adversely affect our business.
Accordingly, we are unable to predict what effect healthcare reform measures will have on our business. Changes in applicable federal and state laws relating to HSAs and other CDBs could materially adversely affect our business. HSAs and other CDBs exist as a result of provisions in the Internal Revenue Code and other laws and regulations.
Our BIN sponsors enable us to link the payment cards that we offer our members to the VISA and Mastercard networks, thereby -22- Table of Contents allowing our members to use our payment cards to pay for expenses with a “swipe” of the card.
Our BIN sponsor enables us to link the payment cards that we offer our members to the VISA network, thereby allowing our members to use our payment cards to pay for expenses with a “swipe” of the card.
Realization of these risks could negatively impact our reputation, the demand for our products and services, our financial condition and results of operations, and otherwise draw adverse regulatory scrutiny. Any disruption of service at our facilities, our third-party data centers, or our cloud service providers could interrupt or delay our customers’ access to our products and services.
Realization of these risks could negatively impact our reputation, the demand for our products and services, our financial condition and results of operations, and otherwise draw adverse regulatory scrutiny. -17- Table of Contents Disruptions of service at our facilities, our servers, our third-party data centers, or our cloud service providers have interrupted and delayed our customers’ access to our products and services and will be harmful if repeated.
Any such scenario could materially and adversely affect our business and results of operations. A decline in the value of invested HSA Assets would adversely affect our results of operations.
A decline in the value of invested HSA Assets would adversely affect our results of operations.
As one of the largest providers of HSAs and other CDBs, we are an attractive target for cyber-attacks, including ransomware attacks, which means we must continue to secure and monitor each of our technology platforms, making sure these platforms are aligned to our industry benchmark security posture.
As a result, we are frequently the target of cyber-attacks, including ransomware attacks, which means we must continue to monitor and take steps to secure each of our technology platforms, making sure these platforms are aligned to our industry benchmark security posture.
General risk factors Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. Certain provisions in our governing documents could make a merger, tender offer or proxy contest involving us difficult; even if such events would be beneficial to the interests of our stockholders.
Certain provisions in our governing documents could make a merger, tender offer or proxy contest involving us difficult; even if such events would be beneficial to the interests of our stockholders.
As a result, some of these competitors are in a position to devote greater resources to the development, promotion, sale, and support of their products and services and have offered, or may in the future offer, a wider range of products and services that are increasingly desired by potential customers, and they have also used advertising and marketing strategies (including loss-leaders) that achieve broader brand recognition or acceptance.
As a result, some of these competitors are in a position to devote greater resources to the development, promotion, sale, and support of their products and services and have offered, or may in the future offer, a wider range of products and services that are increasingly desired by potential customers, and they have also used advertising and marketing strategies (including loss-leaders) that achieve broader brand recognition or acceptance. -14- Table of Contents Finally, our competitors may have the ability to devote more financial and operational resources than we can to developing new technologies and services, including services that provide improved operating functionality, and adding features to their existing service offerings.
Such breaches could damage our reputation, and cause a loss of confidence in our products and services, reducing demand and resulting in an unwillingness of members, Clients, Network Partners and other data owners to provide us with their payment information or personal information, and otherwise harm our brand.
We have been the victim of such breaches, which have damaged our reputation and caused a loss of confidence in our products and services, and may lead to a reduction in demand and result in an unwillingness of members, Clients, Network Partners and other data owners to provide us with their payment information or personal information, and otherwise harm our brand.
The revenue opportunities earned from these efforts may fail to justify the effort or resources spent. In addition, material performance problems, defects or errors in our existing or new software may occur in the future, which may harm our operating results.
The revenue opportunities earned from these efforts may fail to justify the effort or resources spent and may not have the anticipated returns on attracting and retaining new Clients and Network Partners. In addition, material performance problems, defects or errors in our existing or new software have occurred and may occur in the future.
If the laws or regulations are changed to limit or eliminate the tax benefits available through these accounts, such a change would have a material adverse effect on our business.
We cannot predict if any new tax reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be. If the laws or regulations are changed to limit or eliminate the tax benefits available through these accounts, such a change would have a material adverse effect on our business.
Risks relating to our service and culture Any failure to offer high-quality customer support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results. Our customers depend on our support and customer education organizations to educate them about, and resolve technical issues relating to, our products and services.
Risks relating to our service and culture Any failure to offer high-quality member, Client and Network Partner support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.
Although we have implemented measures to comply with these privacy and data protection laws and regulations, we have experienced data privacy incidents in the past, though none have materially impacted our operations or financial condition.
Although we have implemented measures to comply with these privacy and data protection laws and regulations, we have experienced data privacy incidents, including an incident in 2024 in which a business partner's user account containing personally identifiable information was breached, though none have materially impacted our operations or financial condition.
Even if we can secure our systems against these activities, we are vulnerable through third parties. We rely upon third parties for certain services, such as some transaction processing services and data feeds, which subjects us to risks related to the vulnerabilities of those third parties.
We are also vulnerable to criminal fraudulent activity through our third-party service providers. We rely upon third parties to provide certain services, such as some transaction processing services and data feeds, and such reliance subjects us to risks related to the vulnerabilities of those third parties.
We cannot provide assurance that, if the indebtedness under our Credit Facilities or the Notes were to be accelerated, our assets would be sufficient to repay in full that indebtedness and our other indebtedness. If not cured or waived, such acceleration could have a material adverse effect on our business and our prospects.
We cannot provide assurance that, if the indebtedness under our Revolving Credit Facility or the Notes were to be accelerated, our assets would be sufficient to repay in full that indebtedness and our other indebtedness.
The pursuit of potential acquisitions has in the past, and may in the future, divert the attention of management and cause us to incur various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
There is no assurance that we will be successful in consummating such acquisitions, or even if consummated, realize the anticipated benefits of these or any future acquisitions. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
We rely on a combination of internal development, strategic relationships, licensing, and acquisitions to develop our content offerings, products and services.
We rely on a combination of internal development, strategic relationships, licensing, and acquisitions to develop our content offerings, products and services. These efforts may be more expensive than expected, take longer to develop and implement, and require additional personnel and resources.
We rely on standard Internet and other security systems to provide the security and authentication necessary to effect secure transmission of data. Despite our security measures, our information technology and infrastructure are vulnerable to cybersecurity threats, including attacks by hackers and other malfeasance.
Despite our security measures, our information technology and infrastructure are vulnerable to cybersecurity threats, including attacks by hackers and other malfeasance.
Healthcare laws and regulations are rapidly evolving and may change significantly in the future, which could adversely affect our financial condition and results of operations. In addition, proposals to implement a single payer or "Medicare for all" system in the U.S. or in individual states, if adopted, could have a material adverse effect on our business.
In addition, proposals to implement a single payer or "Medicare for all" system in the U.S. or in individual states, if adopted, could have a material adverse effect on our business. The full impact of healthcare reform and other changes in the healthcare industry and in healthcare spending is unknown.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn order to assess and manage our material risks from cybersecurity threats, our CSO works with cross-functional teams, which are staffed with subject matter experts and leaders from each of the following areas: • Cybersecurity: We follow a defense-in-depth security model with a Joint Security Operations Center (JSOC), Attack Surface Management, and Data Protection team working with security architects and engineers deploying controls designed to prevent or limit the success of an attack. • Privacy and Governance: Our Data Privacy and Governance team helps our technology teams build a lasting roadmap to creating our products, services, and standards with privacy by design, and transparency at the forefront. • People Safety and Crisis Management: Led by federal law enforcement veterans, our People and Partner Safety team is responsible for ensuring the security of our team members across the US.
Biggest changeIn order to assess and manage our material risks from cybersecurity threats, our CSO works with cross-functional teams, which are staffed with subject matter experts and leaders from each of the following areas: • Threat & Vulnerability Management: We follow a defense-in-depth security model with a Joint Security Operations Center, Attack Surface Management, and Data Protection team working with security architects and engineers deploying controls designed to prevent or limit the success of an attack. • Governance, Risk, and Compliance: Our Security Governance, Risk, and Compliance team helps drive trust, compliance, and data protection by managing risks, including supply chain risks, to strengthen customer confidence, support innovation, and protect our reputation. • Fraud Prevention: Our Fraud Strategy and Prevention team seeks to employ industry best practices of fraud prevention, identity and access management ("IAM"), and cybersecurity monitoring to protect the -27- Table of Contents transactions of our members and Clients.
Additionally, to help ensure our approach to customer privacy and security is effective and in line with industry standards, we publish Service and SOC 2 attestation reports on our risk management standards established by the Statement on Standards for Attestation Engagements 18 (SSAE-18).
Additionally, to help ensure our approach to customer privacy and security is effective and in line with industry standards, we publish Service and SOC 2 attestation reports on our risk management standards established by the Statement on Standards for Attestation Engagements 18.
As part of our Partner Security Risk Management program, we perform initial risk assessments prior to engaging third-party service providers and ongoing risk assessments annually thereafter, which follow an established process designed to identify, assess, and periodically review our exposure to risk through our partners.
As part of our Third Party Risk Management program, we perform initial risk assessments prior to engaging third-party service providers and ongoing risk assessments annually thereafter, which follow an established process designed to identify, assess, and periodically review our exposure to risk through our partners.
During the fiscal year ended January 31, 2024, no known cybersecurity threats materially affected, or we believe are reasonably likely to materially affect, our business, our business strategy, financial reporting, or results of operations.
During the fiscal year ended January 31, 2025, no known cybersecurity threats materially affected, or we believe are reasonably likely to materially affect, our business, our business strategy, financial reporting, or results of operations.
Item 1C. Cybersecurity Overview Cybersecurity risk is the risk of compromising the confidentiality, integrity, or availability of our technology platforms, data, and other systems, which could have an adverse impact on us, our members, Clients, and Network Partners.
Item 1C. Cybersecurity Overview Cybersecurity risk is the risk of compromising the confidentiality, integrity, or availability of our technology platforms, data, and other systems, which could have an adverse impact on us, our members, Clients, and Network Partners, and our relationships with them.
In the event a security risk is detected, or a breach occurs, we are prepared with response protocols based on National Institute of Standards & Technology ("NIST") guidelines. Our Security Incident Response Plan defines roles and responsibilities, incident severity levels, key contacts, post-incident steps, and guidelines for testing.
In the event of a security risk or breach, we are prepared with response protocols aligned with National Institute of Standards & Technology ("NIST") guidelines. Our Security Incident Response Plan defines roles and responsibilities, incident severity levels, key contacts, post-incident steps, and testing guidelines. Our procedures cover response steps for phishing attacks, ransomware, data breaches, and major vulnerabilities.
The Cybersecurity and Technology Committee also participates in cybersecurity tabletop exercises with management and receives training on cybersecurity trends and developments. The Cybersecurity and Technology Committee updates the full board of directors at each quarterly board meeting, or more frequently if needed. Our enterprise cybersecurity program is led by the CSO who oversees both information technology and information security functions.
The Cybersecurity and Technology Committee also participates in cybersecurity tabletop exercises with management and receives training on cybersecurity trends and developments. The Cybersecurity and Technology Committee updates the full board of directors at each quarterly board meeting, or more frequently if needed.
Due to the sensitive nature of our customers’ data that we hold, we have a heightened focus on data security and protection. We maintain administrative, technical, and physical safeguards designed to protect confidential data.
Cybersecurity is integrated into our operations, including through team member engagement, technology infrastructure, data fabric, and product development. Due to the sensitive nature of our customers’ data that we hold, we have a heightened focus on data security and protection. We maintain administrative, technical, and physical safeguards designed to protect confidential data.
Our enterprise cybersecurity program is designed to assess, identify, and manage cybersecurity threats through continuous monitoring of our information systems for potential vulnerabilities and through various controls and security tools designed to prevent, detect, escalate, investigate, resolve, and recover from identified and reasonably anticipated vulnerabilities, including any cybersecurity incidents, in a timely manner.
Our cybersecurity program is structured to identify, assess, and mitigate risks through continuous monitoring, proactive threat intelligence, and a multi-layered defense strategy. We implement security controls, tools, and incident response procedures to prevent, detect, escalate, investigate, resolve, and recover from identified and reasonably anticipated vulnerabilities, including cybersecurity incidents.
See “Risk Factors” in Part I, Item 1A of this Form 10-K for further information about cybersecurity risk. -26- Table of Contents Risk management and strategy We have implemented the Three Lines of Defense Model as the foundation of our risk management approach.
In addition, we have an organic threat model to evaluate our security controls against attacker tactics, techniques, and procedures. -26- Table of Contents This adaptive approach strengthens our ability to anticipate and counter emerging threats. See “Risk Factors” in Part I, Item 1A of this Form 10-K for further information about cybersecurity risk.
Our information security team serves as a First Line, working with our Enterprise Risk Management & Compliance functions as a Second Line, and our Internal Audit function as the Third Line. Cybersecurity is integrated into our operations, including through team member engagement, technology infrastructure, data fabric, and product development.
Risk management and strategy We have implemented the Three Lines of Defense Model as the foundation of our risk management approach. Our information security team serves as a First Line, working with our Enterprise Risk Management & Compliance functions as a Second Line, and our Internal Audit function as the Third Line.
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We take a strategic, risk-based approach to our cybersecurity program, which emphasizes continual improvement in an effort to protect and enable our business operations.
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As further described below, we take various steps designed to help ensure that our platforms, data, and other systems remain available, resilient, and secure in the face of risks presented both by inadvertent actions (e.g., software that fails to operate properly) and by malicious activities (e.g., threat actors deliberately seeking to steal data or otherwise cause disruption).
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Our procedures cover response steps for phishing attacks, ransomware, data breaches, and major vulnerabilities. In addition, we have an organic threat model that evaluates our security controls to help protect against attacker tactics, techniques, and procedures.
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In particular, our industry continues to be a target for increasingly sophisticated cyber threats, including those driven by the rapid advancement of AI, adoption of public cloud environments, and reliance on third parties. We take a security-by-design and risk-based approach to our cybersecurity program, which emphasizes continual improvement to safeguard non-public information and enable our business operations.
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Our CSO brings more than 20 years of cybersecurity experience in various leadership positions, both in technology and finance industries. He holds a doctorate degree from the University of Michigan and holds over 100 US and global security-related patents.
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We emphasize fraud prevention, data protection, and securing our core platforms, while also prioritizing zero trust architecture, third-party risk management, immutable backups, training our staff and others who may have access to our data and systems, and improvement of our security personnel.
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We also conduct regular tabletop exercises to ensure we are ready to respond to crises, including cybersecurity incidents. -27- Table of Contents • Fraud Prevention: Our Fraud Strategy and Prevention team leverages industry best practices of fraud prevention, identity and access management, and cybersecurity monitoring to protect the transactions of our members and Clients.
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Our enterprise cybersecurity program is led by the CSO, who brings more than two decades of cybersecurity leadership experience and oversees both information technology and information security functions.
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We continue to invest in people, processes, and technology solutions to enhance our fraud prevention program. • Security Engineering & Architecture: Our Security Engineering & Architecture team designs and implements resilient security solutions, embedding security into cloud and on-premise environments while automating controls and integrating security into development lifecycles. • Identity & Access Management: Our IAM team enforces zero trust principles, least privilege access, and adaptive authentication, managing multi-factor authentication, privileged access management, and just-in-time access to protect critical systems while ensuring seamless and compliant user access.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSince a majority of our workforce is now permanently working remotely, we no longer use portions of our office space and we have subleased, or are seeking opportunities to sublease, these offices.
Biggest changeItem 2. Properties We do not currently own any of our facilities. Our principal executive offices are located in Draper, Utah. Since a majority of our workforce is now permanently working remotely, we no longer use portions of our office space and we have subleased, or are seeking opportunities to sublease, these offices.
Removed
Item 2. Properties We do not currently own any of our facilities. Our principal executive offices are located in Draper, Utah, and we lease additional office space in Texas.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our board of directors may deem relevant. -29- Table of Contents Performance graph This performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Biggest change(2) Average price paid per share includes costs associated with the repurchases. -29- Table of Contents Performance graph This performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities Market information Our common stock is listed on the NASDAQ Global Select Market under the symbol "HQY." Holders As of March 13, 2024, there were 23 holders of record of our common stock.
Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities Market information Our common stock is listed on the NASDAQ Global Select Market under the symbol "HQY." Holders As of March 11, 2025, there were 22 holders of record of our common stock.
The following graph compares the cumulative total return of our common stock with the total return of the NASDAQ Composite Index (the "NASDAQ Composite"), the Russell 2000 Index (the "Russell 2000"), and the Russell 3000 Index (the "Russell 3000") from January 31, 2019 through January 31, 2024.
The following graph compares the cumulative total return of our common stock with the total return of the NASDAQ Composite Index (the "NASDAQ Composite") and the Russell 2000 Index (the "Russell 2000") from January 31, 2020 through January 31, 2025.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. Unregistered sales of equity securities None. Purchases of equity securities by the issuer and affiliated purchasers None. -30- Table of Contents Item 6. Reserved
The chart assumes $100 was invested on January 31, 2020 in the common stock of HealthEquity, Inc., the NASDAQ Composite, and the Russell 2000, and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Unregistered sales of equity securities None. -30- Table of Contents Item 6. Reserved
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Beginning with our Form 10-K for the fiscal year ended January 31, 2024, we changed one of our benchmark indexes from the Russell 3000 to the Russell 2000, as we believe that the Russell 2000 is more representative of our median peer group market capitalization.
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Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our board of directors may deem relevant.
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Data for the Russell 3000 is provided for comparison purposes only as we transition to use of the Russell 2000. The chart assumes $100 was invested on January 31, 2019 in the common stock of HealthEquity, Inc., the NASDAQ Composite, the Russell 2000, and the Russell 3000, and assumes reinvestment of any dividends.
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Issuer Purchases of Equity Securities The following table presents information with respect to HealthEquity's repurchases of common stock during the three months ended January 31, 2025 (in thousands, except average price paid per share).
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Period Total number of shares purchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs November 1 - 30 221 $ 97.44 221 $ 218,502 December 1 - 31 217 $ 96.96 217 $ 197,503 January 1 - 31 192 $ 102.54 192 $ 177,780 Total 630 630 (1) Repurchases may be effected through open market purchases, privately negotiated transactions or otherwise, including through Rule 10b5-1 plans.
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For additional information related to our stock repurchase program, see Note 10—Stockholders' equity to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to Adjusted EBITDA for the periods indicated: Year ended January 31, (in thousands) 2024 2023 Net income (loss) $ 55,712 $ (26,143) Interest income (12,138) (1,763) Interest expense 55,455 48,424 Income tax provision (benefit) 19,328 (11,953) Depreciation and amortization 60,315 66,615 Amortization of acquired intangible assets 92,763 94,586 Stock-based compensation expense 77,151 62,614 Merger integration expenses 10,435 28,596 Acquisition costs — 53 Amortization of incremental costs to obtain a contract 5,435 4,393 Costs associated with unused office space 4,179 4,958 Other 538 1,968 Adjusted EBITDA $ 369,173 $ 272,348 -36- Table of Contents The following table sets forth our net income (loss) as a percentage of revenue: Year ended January 31, (in thousands, except percentages) 2024 2023 $ Change % Change Net income (loss) $ 55,712 $ (26,143) $ 81,855 * As a percentage of revenue 6 % (3) % * Not meaningful Our net income (loss) increased by $81.9 million, from net loss of $26.1 million for the fiscal year ended January 31, 2023 to net income of $55.7 million for the fiscal year ended January 31, 2024, due to an increase in gross profit and other income, net, partially offset by net increases in operating expenses and income tax provision, as described more fully in the section entitled "Results of operations." The following table sets forth our Adjusted EBITDA as a percentage of revenue: Year ended January 31, (in thousands, except percentages) 2024 2023 $ Change % Change Adjusted EBITDA $ 369,173 $ 272,348 $ 96,825 36 % As a percentage of revenue 37 % 32 % Our Adjusted EBITDA increased by $96.8 million, or 36%, from $272.3 million for the fiscal year ended January 31, 2023 to $369.2 million for the fiscal year ended January 31, 2024, primarily due to an increase in total revenue, partially offset by increases in personnel-related costs.
Biggest changeThe following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA for the periods indicated: Year ended January 31, (in thousands) 2025 2024 Net income $ 96,703 $ 55,712 Interest income (13,914) (12,138) Interest expense 60,634 55,455 Income tax provision 19,331 19,328 Depreciation and amortization 50,573 60,315 Amortization of acquired intangible assets 111,878 92,763 Stock-based compensation expense 96,425 77,151 Merger integration expenses 40,535 10,435 Amortization of incremental costs to obtain a contract 6,745 5,435 Costs associated with unused office space 3,244 4,179 Other (403) 538 Adjusted EBITDA $ 471,751 $ 369,173 The following table sets forth our net income as a percentage of revenue: Year ended January 31, (in thousands, except percentages) 2025 2024 $ Change % Change Net income $ 96,703 $ 55,712 $ 40,991 74% As a percentage of revenue 8 % 6 % The $41.0 million, or 74%, increase in net income from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to an increase in total revenue, partially offset by an increase in operating expenses, including the settlement of a lawsuit related to a lease termination (the "Lease Settlement"), as described in Note 6—Commitments and contingencies to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, and an increase in cost of revenue, including increased costs incurred to reimburse and protect members from outside fraud activity.
For example, we are making significant investments in the architecture and infrastructure of the technology that we use to provide our services to improve our transaction processing capabilities and support continued account and transaction growth, as well as in data-driven personalized engagement to help our members spend less, save more, and build wealth for retirement.
For example, we are making investments in the architecture and infrastructure of the technology that we use to provide our services to improve our transaction processing capabilities and support continued account and transaction growth, as well as in data-driven personalized engagement to help our members spend less, save more, and build wealth for retirement.
Our full suite of CDB offerings complements our HSA solution and enhances our leadership position within the HSA sector. We are currently investing in a significant modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services.
Our full suite of CDB offerings complements our HSA solution and enhances our leadership position within the HSA sector. We are currently investing in a modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services.
We expect service revenue to increase, primarily due to an increase in Total Accounts, partially offset by lower average service fees per account. Custodial revenue.
We expect service revenue to continue to increase, primarily due to an increase in Total Accounts, partially offset by lower average service fees per account. Custodial revenue.
We believe that non-GAAP net income and non-GAAP net income per diluted share provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and our board of directors because these non-GAAP metrics reflect operating profitability before consideration of certain non-operating expenses and non-cash expenses and serve as a basis for comparison against other companies in our industry.
We -36- Table of Contents believe that non-GAAP net income and non-GAAP net income per diluted share provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and our board of directors because these non-GAAP metrics reflect operating profitability before consideration of certain non-operating expenses and non-cash expenses and serve as a basis for comparison against other companies in our industry.
We believe that Adjusted EBITDA provides useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and our board of directors because it reflects operating profitability before consideration of non-operating expenses and non-cash expenses and serves as a basis for comparison against other companies in our industry.
We believe that -35- Table of Contents Adjusted EBITDA provides useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and our board of directors because it reflects operating profitability before consideration of non-operating expenses and non-cash expenses and serves as a basis for comparison against other companies in our industry.
As of January 31, 2024, we have not recorded a valuation allowance on federal deferred tax assets, but we have recorded a valuation allowance on certain state deferred tax assets. We maintain an overall net federal and state deferred tax liability on our consolidated balance sheet.
As of January 31, 2025, we have not recorded a valuation allowance on federal deferred tax assets, but we have recorded a valuation allowance on certain state deferred tax assets. We maintain an overall net federal and state deferred tax liability on our consolidated balance sheet.
Some of our direct competitors (including healthcare service companies such as UnitedHealth Group's Optum, Webster Bank, and well-known retail investment companies, such as Fidelity Investments) are in a position to devote more resources to the development, sale, and support of their products and services than we have at our disposal.
Some of our direct competitors (including well-known retail investment companies, such as Fidelity Investments, and healthcare service companies such as UnitedHealth Group's Optum and Webster Bank ) are in a position to -33- Table of Contents devote more resources to the development, sale, and support of their products and services than we have at our disposal.
The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition.
The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying -44- Table of Contents amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition.
We expect our technology and development expenses to increase for the foreseeable future as we continue to invest in the development and security of our proprietary technology, including our ongoing modernization project described earlier. On an annual basis, we expect our technology and development expenses to remain relatively steady as a percentage of our total revenue.
We expect our technology and development expenses to increase as we continue to invest in the development and security of our proprietary technology, including our ongoing modernization project described earlier. On an annual basis, we expect our technology and development expenses to remain relatively steady as a percentage of our total revenue.
HSA cash is held by our Depository Partners pursuant to contracts that (i) typically have terms ranging from three to five years, (ii) provide for a fixed or variable interest rate payable on the average daily cash balances held by the relevant Depository Partner, and (iii) have minimum and maximum required balances.
HSA cash is held by our -37- Table of Contents Depository Partners pursuant to contracts that (i) typically have terms ranging from three to five years, (ii) provide for a fixed or variable interest rate payable on the average daily cash balances held by the relevant Depository Partner, and (iii) have minimum and maximum required balances.
In March 2022, we acquired the HealthSavings HSA portfolio, which consisted of $1.3 billion of HSA Assets held in approximately 87,000 HSAs in exchange for a purchase price of $60 million in cash. BenefitWallet HSA portfolio acquisition.
In March 2022, we acquired the HealthSavings HSA portfolio, which consisted of $1.3 billion of HSA Assets held in approximately 87,000 HSAs in exchange for a purchase price of $60 million in cash. -31- Table of Contents BenefitWallet HSA portfolio acquisition.
Over longer periods, sustained shifts in prevailing interest rates affect the amount of custodial revenue we can realize on custodial assets and the interest retained by our members. Interest on our Term Loan Facility changes frequently due to variable interest rate terms, and as a result, our interest expense is expected to fluctuate based on changes in prevailing interest rates.
Over longer periods, sustained shifts in prevailing interest rates affect the amount of custodial revenue we can realize on custodial assets and the interest retained by our members. Interest on our revolving credit facility changes frequently due to variable interest rate terms, and as a result, our interest expense is expected to fluctuate based on changes in prevailing interest rates.
We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system. See “Key components of our results of operations” for additional information on our sources of revenue. Recent acquisitions Luum acquisition.
We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system. See “Key components of our results of operations” for additional information on our sources of revenue. Recent acquisitions HealthSavings HSA portfolio acquisition.
However, our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses. Amortization of acquired intangible assets.
We expect our general and administrative expenses to decrease as a percentage of our total revenue. However, our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses. Amortization of acquired intangible assets.
The assets include acquired customer -39- Table of Contents relationships, acquired developed technology, and acquired trade names and trademarks, which we amortize over the assets' estimated useful lives, estimated to be 7-15 years, 2-5 years, and 3 years, respectively. We also acquired intangible HSA portfolios from third-party custodians.
The assets include acquired customer relationships, acquired developed technology, and acquired trade names and trademarks, which we amortize over the assets' estimated useful lives, estimated to be 7-15 years, 2-5 years, and 3 years, respectively. We also acquired intangible HSA portfolios from third-party custodians. We amortize these assets over the assets’ estimated useful life of 15 years.
These expenses begin to ramp up during our third fiscal quarter, with the majority of seasonal expenses incurred in our fourth fiscal quarter. Liquidity and capital resources For a discussion related to liquidity and capital resources for fiscal year 2023 compared to fiscal year 2022, refer to Part II, Item 7.
These expenses begin to ramp up during our third fiscal quarter, with the majority of seasonal expenses incurred in our fourth fiscal quarter. Liquidity and capital resources For a discussion related to liquidity and capital resources for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, refer to Part II, Item 7.
Expenditures include personnel-related costs, depreciation, amortization, stock-based compensation, common expense allocations (such as office rent, supplies, and other overhead expenses), new member and participant supplies, and other operating costs related to servicing our members. Custodial costs.
Expenditures include personnel-related costs, depreciation, amortization, stock-based compensation, common expense allocations (such as office rent, supplies, and other overhead expenses), costs to reimburse members from outside fraud activity, new member and participant supplies, and other operating costs related to servicing our members. Custodial costs.
Various states also have laws and regulations that impose additional restrictions on our collection, storage, and use of personally identifiable information. Privacy regulation in particular has become a priority issue in many states, including, for example, the California Privacy Rights Act, which became effective on January 1, 2023.
Various states also have laws and regulations that impose additional restrictions on our collection, storage, and use of personally identifiable information. Privacy regulation in particular has become a priority issue in many states, including, for example, the California Privacy Rights Act.
Our current innovation efforts include, among others, increasing member and client self-service capabilities, developing APIs, driving electronic communication rather than paper, increasing straight-through processing, improving overall process times utilizing both traditional robotic process automation, and increasingly through AI tools, leveraging stacked cards, and mobile wallet.
Our current innovation efforts include, among others, increasing member and client self-service capabilities, developing APIs, driving electronic communication rather than paper, increasing straight-through processing, improving overall process times utilizing both traditional robotic process automation, and increasingly through AI tools including the Expedited Claims tool, leveraging chip-enabled stacked cards, and mobile wallet.
The $125.3 million, or 48%, increase in custodial revenue from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to an increase in average annualized yield from 1.90% for the fiscal year ended January 31, 2023 to 2.49% for the fiscal year ended January 31, 2024 (due to both higher interest rates overall and increased participation in our Enhanced Rates offering), the $1.0 billion, or 8%, increase in the average daily balance of HSA cash, as described above, and an increase in interest rates on the portion of our Client-held funds held by our Depository Partners in interest-bearing demand deposit accounts that have a floating interest rate.
The $158.8 million, or 41%, increase in custodial revenue from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to an increase in average annualized yield on HSA cash from 2.49% for the fiscal year ended January 31, 2024 to 3.11% for the fiscal year ended January 31, 2025 (due to both higher market interest rates and an increase in participation in our Enhanced Rates offering from 32% of HSA cash as of January 31, 2024 to 49% as of January 31, 2025), the $2.1 billion, or 15%, -39- Table of Contents increase in the average daily balance of HSA cash, as described above, and an increase in interest rates on the portion of our Client-held funds held by our Depository Partners in interest-bearing demand deposit accounts that have a floating interest rate.
The average family premium for employer-sponsored health insurance has risen by 22% since 2018 and 47% since 2013, resulting in increased participation in HSA-qualified health plans and HSAs and increased consumer cost-sharing in health insurance more generally.
The average family premium for employer-sponsored health insurance has risen by 24% since 2019 and 52% since 2014, resulting in increased participation in HSA-qualified health plans and HSAs and increased consumer cost-sharing in health insurance more generally.
As of January 31, 2024, we administered 8.7 million HSAs, with balances totaling $25.2 billion, which we call HSA Assets, as well as 7.0 million complementary CDBs. We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 15.7 million as of January 31, 2024.
As of January 31, 2025, we administered 9.9 million HSAs, with balances totaling $32.1 billion, which we call HSA Assets, as well as 7.1 million complementary CDBs. We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.0 million as of January 31, 2025.
As of January 31, 2024, our platforms were integrated with more than 200 Network Partners. We have increased our share of the growing HSA market from 4% in December 2010 to 20% as of June 2023, measured by HSA Assets. According to Devenir, as of June 2023, we were the largest HSA provider by both accounts and HSA Assets.
As of January 31, 2025, our platforms were integrated with more than 200 Network Partners. We have increased our share of the growing HSA market from 4% in December 2010 to 21% as of June 2024, measured by HSA Assets.
In addition, once a member’s HSA cash balance -38- Table of Contents reaches a certain threshold, the member is able to invest his or her HSA Assets through our investment partner from which we earn recordkeeping and advisory fees, calculated as a percentage of the member's HSA investments.
In addition, once a member’s HSA cash balance reaches a certain threshold, the member is able to invest his or her HSA Assets through our investment partner from which we earn recordkeeping and advisory fees, calculated as a percentage of the member's HSA investments. We recognize revenue on a monthly basis as services are rendered to our members and Clients.
The $25.4 million, or 13%, increase in technology and development expenses from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to increases in personnel-related expenses and software costs.
Technology and development. The $20.7 million, or 9%, increase in technology and development expenses from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to increases in personnel-related expenses and software costs.
With our CDB capabilities, we can provide employers with a single partner for both HSAs and complementary CDBs, which is preferred by the vast majority of employers, according to research conducted for us by Aite Group.
Our Clients and their benefits advisors increasingly seek HSA providers that can deliver an integrated offering of HSAs and complementary CDBs. With our CDB capabilities, we can provide employers with a single partner for both HSAs and complementary CDBs, which is preferred by the vast majority of employers, according to research conducted for us by Aite Group.
Assuming the current interest rate environment continues, we expect custodial costs to increase due to an increase in the average annualized rate of interest retained by HSA members on HSA cash and an increase in the year-over-year average daily balance of HSA cash. Interchange costs.
On an annual basis, we expect custodial costs to increase due to an increase in the year-over-year average daily balance of HSA cash, an increase in fees charged by our Depository Partners, and an increase in the average annualized rate of interest retained by HSA members on HSA cash. Interchange costs.
Interchange costs. Interchange costs are comprised of costs we incur in connection with processing payment transactions initiated by our members. Due to the substantiation requirement on FSA/HRA-linked payment card transactions, payment card costs are higher for FSA/HRA card transactions. In addition to fixed per card fees, we are assessed additional transaction costs determined by the amount of the transaction.
Interchange costs. Interchange costs are comprised of costs we incur in connection with processing payment transactions initiated by our members. Due to the substantiation requirement on FSA/HRA-linked payment card transactions, payment card costs are higher for FSA and HRA transactions than for HSA transactions.
The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to non-GAAP net income for the periods indicated: Year ended January 31, (in thousands, except per share data) 2024 2023 Net income (loss) $ 55,712 $ (26,143) Income tax provision (benefit) 19,328 (11,953) Income (loss) before income taxes - GAAP 75,040 (38,096) Non-GAAP adjustments: Amortization of acquired intangible assets 92,763 94,586 Stock-based compensation expense 77,151 62,614 Merger integration expenses 10,435 28,596 Acquisition costs — 53 Costs associated with unused office space 4,179 4,958 Loss on extinguishment of debt 1,157 — Total adjustments to income (loss) before income taxes - GAAP 185,685 190,807 Income before income taxes - Non-GAAP 260,725 152,711 Income tax provision - Non-GAAP (1) 65,180 38,178 Non-GAAP net income 195,545 114,533 Diluted weighted-average shares 86,957 84,442 GAAP net income (loss) per diluted share $ 0.64 $ (0.31) Non-GAAP net income per diluted share $ 2.25 $ 1.36 (1) The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations.
The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to non-GAAP net income for the periods indicated: Year ended January 31, (in thousands, except per share data) 2025 2024 Net income $ 96,703 $ 55,712 Income tax provision 19,331 19,328 Income before income taxes - GAAP 116,034 75,040 Non-GAAP adjustments: Amortization of acquired intangible assets 111,878 92,763 Stock-based compensation expense 96,425 77,151 Merger integration expenses 40,535 10,435 Costs associated with unused office space 3,244 4,179 Loss on extinguishment of debt 1,576 1,157 Total adjustments to income before income taxes - GAAP 253,658 185,685 Income before income taxes - Non-GAAP 369,692 260,725 Income tax provision - Non-GAAP (1) 92,423 65,180 Non-GAAP net income 277,269 195,545 Diluted weighted-average shares 88,828 86,957 GAAP net income per diluted share $ 1.09 $ 0.64 Non-GAAP net income per diluted share $ 3.12 $ 2.25 (1) The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations.
Total HSA Assets increased by $3.1 billion, or 14%, from January 31, 2023 to January 31, 2024, primarily due to net HSA contributions from new and existing HSA members and the increased market value of invested balances. -35- Table of Contents The following table summarizes the amount of HSA cash held by our Depository Partners and insurance company partners that is expected to reprice by fiscal year and the respective average annualized yield currently earned on that HSA cash as of January 31, 2024: Year ending January 31, (in billions, except percentages) HSA cash expected to reprice Average annualized yield 2025 $ 2.1 3.6 % 2026 3.5 1.6 % 2027 3.2 1.6 % 2028 1.9 3.8 % Thereafter 3.6 3.5 % Total (1) $ 14.3 2.7 % (1) Excludes $0.7 billion of HSA cash held in floating-rate contracts as of January 31, 2024.
The following table summarizes the amount of HSA cash held by our Depository Partners and insurance company partners that is expected to reprice by fiscal year and the respective average annualized yield currently earned on that HSA cash as of January 31, 2025: Year ending January 31, (in billions, except percentages) HSA cash expected to reprice Average annualized yield 2026 $ 2.3 2.5 % 2027 4.1 1.9 % 2028 2.1 4.0 % 2029 1.5 3.6 % Thereafter 6.6 4.4 % Total (1) $ 16.6 3.4 % (1) Excludes $0.8 billion of HSA cash held in floating-rate contracts as of January 31, 2025.
Client-held funds (in millions, except percentages) January 31, 2024 January 31, 2023 % Change Client-held funds $ 842 $ 901 (7) % Average daily Client-held funds - Quarter-to-date 791 809 (2) % Average daily Client-held funds - Year-to-date 845 827 2 % Client-held funds are interest-earning deposits from which we generate custodial revenue.
Client-held funds (in millions, except percentages) January 31, 2025 January 31, 2024 % Change Client-held funds $ 896 $ 842 6 % Average daily Client-held funds - Quarter-to-date 798 791 1 % Average daily Client-held funds - Year-to-date 817 845 (3) % Client-held funds are interest-earning deposits from which we generate custodial revenue.
As of January 31, 2024, there were no amounts outstanding under the Revolving Credit Facility. We were in compliance with all covenants under the Credit Agreement as of January 31, 2024, and for the period then ended.
As of January 31, 2025, the outstanding balance under the Revolving Credit Facility was $461.9 million. We were in compliance with all covenants under the Credit Agreement as of January 31, 2025, and for the period then ended.
Recent interest rate increases have caused interest expense related to our Term Loan Facility to increase substantially. -33- Table of Contents Our proprietary technology We believe that innovations incorporated in our technology differentiate us from our competitors and help drive our growth by enabling us to better assist consumers to make healthcare saving and spending decisions and maximize the value of their tax-advantaged benefits.
Our proprietary technology We believe that innovations incorporated in our technology differentiate us from our competitors and help drive our growth by enabling us to better assist consumers to make healthcare saving and spending decisions and maximize the value of their tax-advantaged benefits.
Total Accounts The following table sets forth our HSAs, CDBs, and Total Accounts as of and for the periods indicated: (in thousands, except percentages) January 31, 2024 January 31, 2023 % Change HSAs 8,692 7,984 9 % New HSAs from sales - Quarter-to-date 497 445 12 % New HSAs from sales - Year-to-date 949 971 (2) % New HSAs from acquisitions - Year-to-date — 90 (100) % HSAs with investments 610 541 13 % CDBs 7,006 6,933 1 % Total Accounts 15,698 14,917 5 % Average Total Accounts - Quarter-to-date 15,318 14,677 4 % Average Total Accounts - Year-to-date 15,105 14,531 4 % The number of our HSAs and CDBs are key metrics because our revenue is driven by the amount we earn from them.
Total Accounts The following table sets forth our HSAs, CDBs, and Total Accounts as of and for the periods indicated: (in thousands, except percentages) January 31, 2025 January 31, 2024 % Change HSAs 9,889 8,692 14 % New HSAs from sales - Quarter-to-date 471 497 (5) % New HSAs from sales - Year-to-date 1,040 949 10 % New HSAs from acquisitions - Year-to-date 616 — * HSAs with investments 753 610 23 % CDBs 7,144 7,006 2 % Total Accounts 17,033 15,698 9 % Average Total Accounts - Quarter-to-date 16,677 15,318 9 % Average Total Accounts - Year-to-date 16,302 15,105 8 % * Not meaningful The number of our HSAs and CDBs are key metrics because our revenue is driven by the amount we earn from them.
Our sales force calls on enterprise and regional employers in industries across the U.S., as well as potential Network Partners from among health plans, benefits administrators, and retirement plan record keepers. Our Network Partners are a key channel through which we gain access to Clients and members.
Broad distribution footprint We believe we have a diverse distribution footprint to attract new Clients and Network Partners. Our sales force calls on enterprise and regional employers in industries across the U.S., as well as potential Network Partners from among health plans, benefits administrators, and retirement plan record keepers.
Income tax provision (benefit) We are subject to federal and state income taxes in the United States based on a January 31 fiscal year end.
Other income, net Other income, net, consists of interest income earned on corporate cash and other miscellaneous income and expense. Income tax provision We are subject to federal and state income taxes in the United States based on a January 31 fiscal year end.
Capital resources We maintain a “shelf” registration statement on Form S-3 on file with the SEC. A shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings.
A shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings.
The $6.4 million, or 25%, increase in custodial costs from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to an increase in the average annualized rate of interest retained by HSA members on HSA cash, which increased from 0.19% for the fiscal year ended January 31, 2023 to 0.22% for the fiscal year ended January 31, 2024, and the $1.0 billion, or 8% increase in the average daily balance of HSA cash, as described above.
The $7.2 million, or 22%, increase in custodial costs from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to the $2.1 billion, or 15% increase in the average daily balance of HSA cash, as described above, an increase in fees charged by our Depository Partners, and an increase in the average annualized rate of interest retained by HSA members on HSA cash, from 0.22% during the fiscal year ended January 31, 2024 to 0.23% during the fiscal year ended January 31, 2025.
Income tax provision (benefit) For the fiscal years ended January 31, 2024 and 2023, we recorded an income tax provision of $19.3 million and an income tax benefit of $12.0 million, respectively.
Income tax provision We recorded an income tax provision of $19.3 million in each of the fiscal years ended January 31, 2025 and 2024.
In addition, we believe we are the largest provider of other CDBs. We seek to differentiate ourselves through our service-driven culture, product breadth, ecosystem connectivity, and proprietary technology.
According to the 2024 Midyear Devenir HSA Research Report, as of June 2024, we were the largest HSA provider by both accounts and HSA Assets. In addition, we believe we are the largest provider of other CDBs. We seek to differentiate ourselves through our service-driven culture, product breadth, ecosystem connectivity, and proprietary technology.
Our offerings to members, Clients, and Network Partners consist primarily of services enabled, mandated, or advantaged by provisions of U.S. tax law and regulations.
Our offerings to members, Clients, and Network Partners consist primarily of services enabled, mandated, or advantaged by provisions of U.S. tax law and regulations. Changes in tax policy are speculative and may affect our business in ways that are difficult to predict.
We rely on cash provided by operating activities to meet our short-term liquidity requirements, which primarily relate to the payment of corporate payroll and other operating costs, principal and interest payments on our long-term debt, and capital expenditures. -44- Table of Contents As of January 31, 2024 and January 31, 2023, cash and cash equivalents were $404.0 million and $254.3 million, respectively.
We rely on cash provided by operating activities to meet our short-term liquidity requirements, which primarily relate to the payment of corporate payroll and other operating costs, interest payments on our long-term debt, and capital expenditures.
The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods: Year ended January 31, (in thousands) 2024 2023 Net cash provided by operating activities $ 242,826 $ 150,650 Net cash used in investing activities (46,074) (119,127) Net cash used in financing activities (47,039) (2,671) Increase in cash and cash equivalents 149,713 28,852 Beginning cash and cash equivalents 254,266 225,414 Ending cash and cash equivalents $ 403,979 $ 254,266 Cash flows from operating activities.
The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods: Year ended January 31, (in thousands) 2025 2024 Net cash provided by operating activities $ 339,856 $ 242,826 Net cash used in investing activities (505,454) (46,074) Net cash provided by (used in) financing activities 57,567 (47,039) Increase (decrease) in cash and cash equivalents (108,031) 149,713 Beginning cash and cash equivalents 403,979 254,266 Ending cash and cash equivalents $ 295,948 $ 403,979 Cash flows from operating activities.
Our use of Adjusted EBITDA, including as a percentage of revenue, has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. -37- Table of Contents Non-GAAP net income Non-GAAP net income is calculated by adding back to GAAP net income (loss) before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
Non-GAAP net income Non-GAAP net income is calculated by adding back to GAAP net income before income taxes the following items: amortization of acquired intangible assets, stock-based compensation expense, merger integration expenses, acquisition costs, gains and losses on equity securities, costs associated with unused office space, and losses on extinguishment of debt, and subtracting a non-GAAP tax provision using a normalized non-GAAP tax rate.
Total revenue increased by $137.8 million, or 16%, from the year ended January 31, 2023 to the year ended January 31, 2024, primarily due to the increase in custodial revenue, as well as the increases in interchange and service revenues, described above.
We expect interchange revenue to continue to increase, primarily due to an increase in Total Accounts. Total revenue. Total revenue increased by $200.2 million, or 20%, from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025, due to the increases in custodial, service, and interchange revenues, described above.
We believe our existing cash, cash equivalents, and Revolving Credit Facility will be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months.
Capital expenditures to improve the architecture of our proprietary systems include computer hardware, personnel and related costs for software engineering, and outsourced software engineering services. We believe our existing cash, cash equivalents, and Revolving Credit Facility will be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months.
HSA investments increased by $2.3 billion, or 28%, from January 31, 2023 to January 31, 2024, due to the increased market value of invested balances and transfers from HSA cash.
HSA investments increased by $4.5 billion, or 44%, from January 31, 2024 to January 31, 2025, due to the increased market value of invested balances, transfers from HSA cash, and HSA investments added through the BenefitWallet HSA portfolio acquisition.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. -46- Table of Contents We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value.
Valuation of goodwill and other long-lived assets We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value.
We recognize revenue on a monthly basis as services are rendered to our members and Clients. Custodial revenue. We earn custodial revenue primarily from HSA cash held by our Depository Partners or our insurance company partners and Client-held funds held by our Depository Partners.
Custodial revenue. We earn custodial revenue primarily from HSA cash held by our Depository Partners or our insurance company partners and Client-held funds held by our Depository Partners.
Interest rates As a non-bank custodian, our members’ custodial HSA cash assets are held by either our federally insured Depository Partners (our Basic Rates offering), pursuant to contractual arrangements we have with these Depository Partners, or by our insurance company partners through group annuity contracts or other similar arrangements (our Enhanced Rates offering).
We believe that the combination of HSA and complementary CDB offerings significantly strengthens our value proposition to employers, health benefits brokers and consultants, and Network Partners as a leading single-source provider. -32- Table of Contents Interest rates As a non-bank custodian, our members’ custodial HSA cash assets are held by either our federally insured Depository Partners (our "Basic Rates" offering), pursuant to contractual arrangements we have with these Depository Partners, or by our insurance company partners through group annuity contracts or other similar arrangements (our "Enhanced Rates" offering).
However, our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our sales and marketing expenses. -42- Table of Contents Technology and development.
On an annual basis, we expect our sales and marketing expenses to remain relatively steady as a percentage of our total revenue. However, our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our sales and marketing expenses.
Changes in tax policy are speculative and may affect our business in ways that are difficult to predict. -32- Table of Contents Our client base Our business model is based on a B2B2C distribution strategy, whereby we work with Network Partners and Clients to reach consumers to increase the number of our members with HSA accounts and complementary CDBs.
Our client base Our business model is based on a B2B2C distribution strategy, whereby we work with Network Partners and Clients to reach consumers to increase the number of our members with HSA accounts and complementary CDBs. We believe that there are significant opportunities to expand the scope of services that we provide to our current Clients.
The $21.6 million, or 17%, increase in interchange revenue from the year ended January 31, 2022 to the year ended January 31, 2023 was primarily due to increased spend per account and an increase in Total Accounts. Total revenue.
The $18.7 million, or 12%, increase in interchange revenue from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to an increase in Total Accounts and an increase in spend per account using our payment cards.
We plan to continue this growth strategy, including through the BenefitWallet HSA portfolio acquisition, and are regularly engaged in evaluating different opportunities. We have developed an internal capability to source, evaluate, and integrate acquired HSA portfolios.
We plan to continue this growth strategy and are regularly engaged in evaluating different opportunities. We have developed an internal capability to source, evaluate, and integrate acquired HSA portfolios. Our success depends in part on our ability to successfully integrate acquired businesses and HSA portfolios with our business in an efficient and effective manner.
HSA Assets The following table sets forth HSA Assets as of and for the periods indicated: (in millions, except percentages) January 31, 2024 January 31, 2023 % Change HSA cash $ 15,006 $ 14,199 6 % HSA investments 10,208 7,947 28 % Total HSA Assets 25,214 22,146 14 % Average daily HSA cash - Quarter-to-date 14,210 13,375 6 % Average daily HSA cash - Year-to-date $ 14,071 $ 13,049 8 % HSA Assets includes our HSA members’ custodial assets, which consists of the following components: (i) HSA cash, which includes member cash held by our Depository Partners and our insurance company partners, and (ii) HSA investments, which includes member investments held by our custodial investment partners.
The number of our CDBs increased by 0.1 million, or 2%, from January 31, 2024 to January 31, 2025, primarily driven by an increase in HRA accounts. -34- Table of Contents HSA Assets The following table sets forth HSA Assets as of and for the periods indicated: (in millions, except percentages) January 31, 2025 January 31, 2024 % Change HSA cash $ 17,435 $ 15,006 16 % HSA investments 14,676 10,208 44 % Total HSA Assets 32,111 25,214 27 % Average daily HSA cash - Quarter-to-date 16,634 14,210 17 % Average daily HSA cash - Year-to-date $ 16,206 $ 14,071 15 % HSA Assets includes our HSA members’ custodial assets, which consists of the following components: (i) HSA cash, which includes member cash held by our Depository Partners and our insurance company partners, and (ii) HSA investments, which includes member investments held by our custodial investment partner.
Interest on our Term Loan Facility changes frequently due to variable interest rate terms, and as a result, our interest expense is expected to fluctuate based on changes in prevailing interest rates. Other income (expense), net Other income (expense), net, consists of acquisition costs, interest income earned on corporate cash and other miscellaneous income and expense.
Interest expense Interest expense consists primarily of accrued interest expense and amortization of deferred financing costs associated with our long-term debt. Interest on our revolving credit facility changes frequently due to variable interest rate terms, and as a result, our interest expense is expected to fluctuate based on changes in prevailing interest rates.
Product breadth We are the largest custodian and administrator of HSAs, as well as a market-share leader in each of the major categories of complementary CDBs, including FSAs and HRAs, COBRA and commuter benefits administration. Our Clients and their benefits advisors increasingly seek HSA providers that can deliver an integrated offering of HSAs and complementary CDBs.
Our sales representatives and account management teams work with and train the sales representatives and account management teams of our Network Partners. Product breadth We are the largest custodian and administrator of HSAs, as well as a market-share leader in each of the major categories of complementary CDBs, including FSAs and HRAs, COBRA and commuter benefits administration.
We discuss certain of these key financial metrics, including revenue, below in the -34- Table of Contents section entitled “Key components of our results of operations.” In addition, we utilize other key metrics as described below.
We discuss certain of these key financial metrics, including revenue, below in the section entitled “Key components of our results of operations.” In addition, we utilize other key metrics as described below. For a discussion related to key financial and operating metrics for fiscal year 2024 compared to fiscal year 2023, refer to Part II, Item 7.
Our non-GAAP net income increased by $81.0 million, or 71%, from $114.5 million for the fiscal year ended January 31, 2023 to $195.5 million for the fiscal year ended January 31, 2024, primarily due to an increase in total revenue, partially offset by increases in personnel-related costs and interest expense.
The $81.7 million, or 42%, increase in non-GAAP net income from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to an increase in total revenue, partially offset by increases in personnel-related costs, professional fees, and costs incurred to reimburse and protect members from outside fraud activity.
We expect to continue our current level of capital expenditures during the fiscal year ending January 31, 2025 as we continue to invest in improving the architecture and functionality of our proprietary systems. Capital expenditures to improve the architecture of our proprietary systems include computer hardware, personnel and related costs for software engineering, and outsourced software engineering services.
Capital expenditures for the fiscal years ended January 31, 2025 and 2024 were $53.2 million and $42.8 million, respectively. We expect to continue our current level of capital expenditures during the fiscal year ending January 31, 2026 as we continue to invest in improving the architecture and functionality of our proprietary systems.
Our Credit Agreement includes a Revolving Credit Facility, in an aggregate principal amount of up to $1.0 billion, which may be used for working capital and general corporate purposes, including the financing of acquisitions and other investments. For a description of the terms of the Credit Agreement, refer to Note 8—Indebtedness.
The Revolving Credit Facility may be used in the future for working capital and general corporate purposes, including the financing of acquisitions and other investments. For a description of the terms of the Credit Agreement, refer to Note 7—Indebtedness to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Beginning in the fiscal year ending January 31, 2025, as our Basic Rates contracts expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates.
For the reasons described below, we have encouraged our members to place more of their HSA cash in our Enhanced Rates offering. As our Basic Rates contracts expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates.
For a discussion related to key financial and operating metrics for fiscal year 2023 compared to fiscal year 2022, refer to Part II, Item 7. Management's discussion and analysis of financial condition and results of operations in our fiscal year 2023 Form 10-K, filed with the SEC on March 30, 2023.
Management's discussion and analysis of financial condition and results of operations in our fiscal year 2024 Form 10-K, filed with the SEC on March 22, 2024.
The interest rate on our Term Loan Facility and Revolving Credit Facility is variable and, accordingly, we may incur additional expense if interest rates continue to increase in future periods.
The interest rate on our Revolving Credit Facility is variable and, accordingly, we may incur additional expense if interest rates increase in future periods. Other income, net The $1.5 million increase in other income, net, was due to an increase in interest income on corporate cash, partially offset by a decrease in other miscellaneous income, net.
Management's discussion and analysis of financial condition and results of operations in our fiscal year 2023 Form 10-K, filed with the SEC on March 30, 2023. Cash and cash equivalents overview Our principal sources of liquidity are our current cash and cash equivalents balances, collections from our service, custodial, and interchange revenue activities, and availability under our Revolving Credit Facility.
Cash and cash equivalents overview Our principal sources of liquidity are our current cash and cash equivalents balances, collections from our custodial, service, and interchange revenue activities, and availability under our Revolving Credit Facility.
The number of our HSAs increased by 0.7 million, or 9%, from January 31, 2023 to January 31, 2024, driven by new HSAs from sales.
The number of our HSAs increased by 1.2 million, or 14%, from January 31, 2024 to January 31, 2025, driven by new HSAs from sales and new HSAs added through the BenefitWallet HSA portfolio acquisition.
Our Network Partners collectively employ thousands of sales representatives and account managers who promote both the Network Partners' products and our products and services. Our sales representatives and account management teams work with and train the sales representatives and account management teams of our Network Partners.
Our Network Partners are a key channel through which we gain access to Clients and members. Our Network Partners collectively employ thousands of sales representatives and account managers who promote both the Network Partners' products and our products and services.
The $10.4 million in merger integration expense for the fiscal year ended January 31, 2024 was primarily due to personnel and related expenses, including expenses incurred in conjunction with the migration of accounts, professional fees, and technology-related expenses directly related to the Further acquisition and certain ongoing merger integration expenses related to the acquisition of WageWorks, including ongoing lease expense related to WageWorks offices that have been permanently closed, less any related sublease income, and professional fees.
Other merger integration expenses during the fiscal year ended January 31, 2025 consisted of professional fees, including expenses incurred in conjunction with the migration of accounts, technology-related expenses directly related to the Further acquisition and certain ongoing merger integration expenses related to the acquisition of WageWorks, Inc.
However, on an annual basis, relative to the fiscal year ended January 31, 2024, we expect our cost of revenue to decrease as a percentage of our total revenue, primarily due to an increase in custodial revenue, partially offset by increases in stock-based compensation and other personnel costs.
We expect our cost of revenue to decrease as a percentage of our total revenue, primarily due to an increase in custodial revenue and a decrease in service costs, partially offset by costs resulting from an increase in Total Accounts.
The $3.7 million, or 1%, increase in service revenue from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to an increase in administration fees earned with respect to HSAs and recordkeeping and advisory fees earned with respect to HSA investments, partially offset by lower fees with respect to FSA and COBRA accounts.
The $22.6 million, or 5%, increase in service revenue from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to the increases in the number of HSAs and the amount of HSA investments, partially offset by lower average service fees per account.
The $11.8 million, or 14%, increase in amortization of acquired intangible assets from the year ended January 31, 2022 to the year ended January 31, 2023 was primarily due to the inclusion of amortization related to identified intangible assets acquired through the Further Acquisition commencing November 1, 2021.
The $19.1 million, or 21%, increase in amortization of acquired intangible assets from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to the new intangible assets added through the BenefitWallet HSA portfolio acquisition.
The $10.4 million, or 15%, increase in sales and marketing expenses from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to an increase in personnel-related expenses and travel costs.
The $11.5 million, or 14%, increase in sales and marketing expenses from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to an increase in personnel-related expenses. We expect our sales and marketing expenses to increase as we continue to focus on our cross-selling and member engagement programs.
Net cash provided by operating activities increased by $92.2 million, primarily due to increased cash receipts with respect to our custodial revenue, partially offset by an increase in cash payments for income taxes, personnel-related expenses, and interest expense during the fiscal year ended January 31, 2024. Cash flows from investing activities.
Net cash provided by operating activities increased by $97.0 million, primarily due to increased cash receipts with respect to our custodial, service, and interchange revenues and a decrease in income tax payments, partially offset by an increase in cash payments with respect to operating expenses, cost of revenue, and interest on our long-term debt. -43- Table of Contents Cash flows from investing activities.
Other income (expense), net The $11.5 million increase in other income, net, from $1.3 million during the fiscal year ended January 31, 2023 to $12.8 million during the fiscal year ended January 31, 2024, was primarily due to a $10.4 million increase in interest income on corporate cash and a $1.2 million increase in other miscellaneous income, net.
Interest expense The $5.2 million, or 9%, increase in interest expense from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to a higher average principal balance and a $0.4 million increase in losses on extinguishment of debt.
Gross profit and gross margin Our gross profit is our total revenue minus our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue.
In addition to fixed per card fees, we are assessed additional transaction costs determined by the amount of the transaction. Gross profit and gross margin Our gross profit is our total revenue minus our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue.
Cost of revenue The following table sets forth our cost of revenue for the periods indicated: Year ended January 31, 2023 to 2024 2022 to 2023 (in thousands, except percentages) 2024 2023 2022 $ change % change $ change % change Service costs $ 317,357 $ 318,516 $ 291,618 $ (1,159) 0 % $ 26,898 9 % Custodial costs 32,502 26,101 19,492 6,401 25 % 6,609 34 % Interchange costs 27,091 25,196 20,681 1,895 8 % 4,515 22 % Total cost of revenue $ 376,950 $ 369,813 $ 331,791 $ 7,137 2 % $ 38,022 11 % Service costs.
Cost of revenue The following table sets forth our cost of revenue for the periods indicated: Year ended January 31, (in thousands, except percentages) 2025 2024 $ change % change Service costs $ 351,588 $ 317,357 $ 34,231 11 % Custodial costs 39,675 32,502 7,173 22 % Interchange costs 31,252 27,091 4,161 15 % Total cost of revenue $ 422,515 $ 376,950 $ 45,565 12 % Service costs.
Merger integration expenses include personnel and related expenses, including severance, professional fees, legal expenses, and facilities and technology expenses directly related to integration activities to merge operations as a result of acquisitions. Interest expense Interest expense consists primarily of accrued interest expense and amortization of deferred financing costs associated with our long-term debt.
We evaluate our acquired intangible assets for impairment annually, or at a triggering event. -38- Table of Contents Merger integration. Merger integration expenses include personnel and related expenses, including severance, professional fees, legal expenses and settlements, and facilities and technology expenses directly related to integration activities to merge operations as a result of acquisitions.
The $1.2 million, or less than 1%, decrease in service costs from the year ended January 31, 2023 to the year ended January 31, 2024 was primarily due to efficiencies resulting from our technology investments and lower amortization expense, largely offset by increases in personnel-related costs to support the increase in average Total Accounts. -41- Table of Contents The $26.9 million, or 9%, increase in service costs from the year ended January 31, 2022 to the year ended January 31, 2023 was primarily due to the inclusion of a full year of Further's results of operations and an increase in personnel-related costs to support the increase in average Total Accounts.
The $34.2 million, or 11%, increase in service costs from the fiscal year ended January 31, 2024 to the fiscal year ended January 31, 2025 was primarily due to a $19.1 million increase in costs incurred to reimburse members impacted by outside fraud activity and increases in costs to support the increase in Total Accounts and member interactions, partially offset by efficiencies resulting from our technology investments.
Net cash used in investing activities decreased by $73.1 million, due to a $67.3 million decrease in cash used for HSA portfolio acquisitions, a $4.1 million decrease in cash used for -45- Table of Contents purchases of software and capitalized software development costs, and a $1.7 million decrease in cash used for purchases of property and equipment.
Net cash used in investing activities increased by $459.4 million, primarily due to a $449.0 million increase in cash used to acquire HSA portfolios and a $10.0 million increase in cash used for purchases of software and capitalized software development costs. Cash flows from financing activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+0 added−2 removed11 unchanged
Biggest changeAccordingly, we may incur additional expense if interest rates increase in future periods. For example, a one percent increase in the interest rate on the amount outstanding under our credit facilities at January 31, 2024 would result in approximately $2.9 million of additional interest expense over the next 12 months.
Biggest changeOur overall interest rate sensitivity under the Revolving Credit Facility is primarily influenced by any amounts borrowed and prevailing interest rates. For example, a one percent increase in the interest rate on the amount outstanding under our Revolving Credit Facility as of January 31, 2025 would result in approximately $4.7 million of additional interest expense over the next 12 months.
Concentration of credit risk Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents. We maintain our cash and cash equivalents in bank and other depository accounts, which frequently may exceed federally insured limits.
Concentration of credit risk Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents. We maintain our cash and cash equivalents in bank and other depository accounts, which frequently exceed federally insured limits.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, the current high rate of inflation may have an adverse effect on our ability to maintain current levels of expenses as a percentage of revenue if our revenue does not correspondingly increase with inflation.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of expenses as a percentage of revenue if our revenue does not correspondingly increase with inflation.
A significant downturn in this market or changes in state and/or federal laws impacting the preferential tax treatment of healthcare accounts such as HSAs could have a material adverse effect on our results of operations. During the fiscal years ended January 31, 2024, 2023, and 2022, no one customer accounted for greater than 10% of our total revenue.
A significant downturn in this market or changes in state and/or federal laws impacting the preferential tax treatment of healthcare accounts such as HSAs could have a material adverse effect on our results of operations. During the fiscal years ended January 31, 2025, 2024, and 2023, no customer accounted for greater than 10% of our total revenue.
A sustained decline in prevailing interest rates may negatively affect our business by reducing the size of the interest rate yield, or yield, available to us and thus the amount of the custodial revenue we -47- Table of Contents can realize. Conversely, a sustained increase in prevailing interest rates can increase our yield.
A sustained decline in prevailing interest rates may negatively affect our business by reducing the size of the interest rate yield, or yield, available to us and thus the amount of the custodial revenue we can realize. Conversely, a sustained increase in prevailing interest rates can increase our yield.
However, we may be required to increase the interest retained by our members in a rising prevailing interest rate environment. Changes in prevailing interest rates are driven by macroeconomic trends and government policies over which we have no control. Client-held funds are interest earning deposits from which we generate custodial revenue.
However, we may be required to increase the interest retained by our members in a rising prevailing interest rate environment. Changes in prevailing interest rates are driven by macroeconomic trends and government policies over which we have no control. -45- Table of Contents Client-held funds are interest earning deposits from which we generate custodial revenue.
The interest rate on our $600 million of unsecured Senior Notes due 2029 is fixed at 4.50%. -48- Table of Contents
The interest rate on our $600 million of unsecured Senior Notes due 2029 is fixed at 4.50%. -46- Table of Contents
As of January 31, 2024 and 2023, we held Client-held funds of $842 million and $901 million, respectively. These deposits are amounts remitted by Clients and held by us on their behalf to pre-fund and facilitate administration of our other CDBs. These deposits are held with Depository Partners.
As of January 31, 2025 and 2024, we held Client-held funds of $896 million and $842 million, respectively. These deposits are amounts remitted by Clients and held by us on their behalf to pre-fund and facilitate administration of our other CDBs. These deposits are held with Depository Partners.
HSA Assets consist of custodial HSA funds we hold in custody on behalf of our members. As of January 31, 2024 and 2023, we held in custody HSA Assets of $25.2 billion and $22.1 billion, respectively.
HSA Assets consist of custodial HSA funds we hold in custody on behalf of our members. As of January 31, 2025 and 2024, we held in custody HSA Assets of $32.1 billion and $25.2 billion, respectively.
Our unrestricted cash and cash equivalents are held in institutions in the U.S. and include deposits in a money market account that is unrestricted as to withdrawal or use. As of January 31, 2024 and 2023, we had unrestricted cash and cash equivalents of $404.0 million and $254.3 million, respectively.
Our unrestricted cash and cash equivalents are held in institutions in the U.S. and include deposits in a money market account that is unrestricted as to withdrawal or use. As of January 31, 2025 and 2024, we had unrestricted cash and cash equivalents of $295.9 million and $404.0 million, respectively.
Our cash and cash equivalents as of January 31, 2024 and 2023 were $404.0 million and $254.3 million, respectively, the vast majority of which was not covered by federal depository insurance. We have not experienced any material losses in such accounts. Our accounts receivable balance as of January 31, 2024 and 2023 was $104.9 million and $96.8 million, respectively.
Our cash and cash equivalents as of January 31, 2025 and 2024 were $295.9 million and $404.0 million, respectively, the vast majority of which was not covered by federal depository insurance. We have not experienced any material losses in such accounts. Our accounts receivable balance as of January 31, 2025 and 2024 was $118.0 million and $104.9 million, respectively.
As of January 31, 2024 and 2023, we had $286.9 million and $341.3 million, respectively, outstanding under our Term Loan Facility and no amounts drawn under our Revolving Credit Facility.
As of January 31, 2025 and 2024, we had $461.9 million and $286.9 million, respectively, outstanding under our Revolving Credit Facility and our Prior Credit Facilities, respectively. The stated interest rate on our Revolving Credit Facility is variable and was 5.91% as of January 31, 2025.
Removed
In connection with the BenefitWallet HSA portfolio acquisition, which is expected to close in multiple tranches during the first half of fiscal 2025, we expect to borrow approximately 50% of the purchase price and related costs using our Revolving Credit Facility with the actual percentages to be determined in connection with the payment for each tranche.
Removed
Our overall interest rate sensitivity under these credit facilities is primarily influenced by any amounts borrowed and the prevailing interest rates on these instruments. The stated interest rate on our Term Loan Facility and Revolving Credit Facility is variable and was 6.69% and 6.31% at January 31, 2024 and 2023, respectively.

Other HQY 10-K year-over-year comparisons