Healthequity Inc ((HQY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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HealthEquity Inc. recently held its earnings call, revealing a generally positive sentiment despite some challenges in the macroeconomic environment. The company showcased strong financial performance, legislative victories for Health Savings Accounts (HSAs), and technological advancements, all contributing to an optimistic outlook.
Record Gross Margin and Adjusted EBITDA
HealthEquity reported impressive financial metrics for Q2 fiscal 2026, achieving a record gross margin of 71% and a near-record adjusted EBITDA margin of 46%. These figures underscore the company’s robust financial health and operational efficiency.
Strong Growth in HSA and CDB Accounts
The company experienced significant growth in its Health Savings Accounts (HSAs) and Consumer-Directed Benefits (CDB) accounts, with HSAs growing by 6% and CDB accounts by 4%. This growth drove a total account increase of 5%, with HSA assets rising by 12% year-over-year, reflecting HealthEquity’s strong market position.
Significant Legislative Wins for HSAs
A major highlight was the legislative win in July, where a budget bill expanded HSAs by allowing direct primary care arrangements and low-cost telehealth. This expansion is expected to increase HSA accessibility for 3 to 4 million more American families, marking a significant step forward for the company.
Improved Fraud Prevention and Security Measures
HealthEquity has made strides in enhancing its security measures, reducing fraud service costs from $3 million in Q1 to an exit run rate in Q2 close to the target of one basis point of total HSA assets per year. This improvement highlights the company’s commitment to safeguarding its clients’ assets.
AI and Technology Enhancements
The company has embraced AI technology, launching expedited claims processing to improve member satisfaction and reduce costs. Additionally, the completion of moving the v5 platform to a 100% cloud-based system has resulted in a 92% increase in response times, showcasing HealthEquity’s technological prowess.
Underperforming Labor Market
Despite the positive developments, HealthEquity acknowledged challenges in the macroeconomic environment, particularly an underperforming labor market. Employment growth has decreased by 40% year-to-date year-over-year through July, presenting a potential headwind for the company.
Forward-Looking Guidance
Looking ahead, HealthEquity has raised its fiscal 2026 guidance, expecting revenue between $1.29 and $1.31 billion, GAAP net income of $185 to $200 million, and Adjusted EBITDA between $540 million and $560 million. The company remains optimistic about new enterprise wins and client retention, leveraging AI to enhance services and reduce costs. Legislative changes expanding HSA access are also anticipated to benefit millions of American families.
In summary, HealthEquity’s earnings call reflected a positive sentiment, driven by strong financial performance, strategic legislative wins, and technological advancements. Despite facing challenges in the labor market, the company’s forward-looking guidance remains optimistic, highlighting its strategic positioning for future growth.