HealthEquity (HQY) Q1 2025 earnings summary

Executive summary

• Revenue grew 18% year-over-year to $287.6 million in Q1 FY25, driven by record HSA sales, increased adoption of Enhanced Rates, and the BenefitWallet acquisition.

• Adjusted EBITDA increased 36% to $117.4 million, with margin improving to 41% of revenue.

• Net income rose to $28.8 million from $4.1 million, with non-GAAP net income at $73 million ($0.80/share).

• BenefitWallet acquisition added up to 616,000 HSAs and $2.7 billion in assets, with the final tranche completed in May 2024.

• Total accounts reached 16 million, including 9.1 million HSAs and $27.3 billion in HSA assets as of April 30, 2024.

Financial highlights

• Service revenue was $118.2 million (+6% YoY), custodial revenue $121.6 million (+37%), and interchange revenue $47.7 million (+6%).

• Gross profit increased to $187.1 million from $148.5 million, with margin improving to 65% from 61% YoY.

• Net income per diluted share was $0.33 (GAAP) and $0.80 (non-GAAP), up from $0.05 and $0.50, respectively, in Q1 FY24.

• Cash flow from operations was $65.4 million, up from $31.5 million in Q1 FY24.

• Operating expenses rose 16% to $145.5 million, mainly due to higher stock-based compensation and personnel costs.

Outlook and guidance

• FY25 revenue guidance raised to $1.16–$1.18 billion.

• GAAP net income expected at $90–$105 million ($1.01–$1.18/share); non-GAAP net income at $261–$276 million ($2.93–$3.10/share).

• Adjusted EBITDA forecasted at $454–$474 million.

• Guidance incorporates BenefitWallet impact, higher net interest expense, and plans to pay down variable rate debt with operating cash flow.

• Average HSA cash yield guidance increased to 3.00–3.05% for FY25.