HealthEquity Inc (HQY) delivered a solid QQ1 2026 performance, underscoring its leverage of a large and growing HSA ecosystem, enhanced security controls, and ongoing product innovation. Revenue rose 15% year over year to $330.8 million, with gross margin near 68% and operating margin around 25%, driving GAAP net income of $53.9 million and non-GAAP net income of $85.8 million. Adjusted EBITDA expanded 19% year over year to $140.2 million, illustrating operating leverage amid a disciplined cost structure. The quarter featured meaningful progress on HSA metrics: 9.9 million HSAs with over $31 billion in assets, HSA cash of $17.1 billion, and invested assets of $14.2 billion, with 16% of HSA members investing. Total accounts exceeded 17 million, including 260,000 net CDB accounts year over year. Management highlighted a stronger enterprise pipeline and continued SMB adoption of HSA-qualified plans, positioning the company to benefit from a multi-year growth trajectory in HSAs even as macro conditions moderating new HSA sales persisted in the near term.
Key operational improvements centered on fraud reduction and digital engagement. Direct fraud costs declined from about $11 million in Q4 to about $3 million in Q1, as HealthEquity accelerates its secure mobile experience and fraud prevention capabilities with an aspirational target of one basis point of total HSA assets per year. Management also signaled ongoing investments to derisk interest-rate exposure and stabilize HSA yields, including forward treasury hedging that aims to keep the average HSA cash yield near 3.5% in FY2026. The company raised full-year 2026 guidance, reflecting continued revenue growth, margin stability, and disciplined capital allocation (including share repurchases and potential revolver reductions).
Strategic optionality remains material due to policy momentum around HSAs. Management outlined potential expansion provisions in the House budget bill (e.g., Medicare Part A access to contributing to HSAs, broader HSA eligibility on bronze/catastrophic plans, extended catch-up rules, increased contribution limits for lower-to-middle income households), which could meaningfully enlarge the addressable market by up to 20 million additional families on a net basis. The commentary around policy action, combined with the company’s enterprise-focused go-to-market and product initiatives (Analyzer, Navigator, Momentum; AI-enabled claims and mobile wallet roadmap), supports an attractive long-term investment thesis in HQY’s ability to monetize HSAs and related services as the healthcare cost environment evolves.