HealthEquity Inc (HQY) Q2 2025 Earnings Report

HealthEquity (HQY) delivered a solid QQ2 FY2025, underpinned by strong top-line momentum and ongoing execution of the company’s multi-year 3Ds transformation. Revenue rose 23% year over year to $299.9 million, with gross margin expanding to 68.0% (vs. 62.0% a year ago), and adjusted EBITDA up 46% to $128.3 million. Net income reached $35.8 million ($0.40–$0.41 per share GAAP; $0.86 non‑GAAP), reflecting continued operating leverage on higher HSA activity and favorable mix shifts as HealthEquity scales its cash management and custodial businesses. HSA assets climbed to $29.0 billion with total accounts exceeding 16 million, including over 9 million HSAs, and invested assets rose 43% year over year to more than $13.0 billion, aided by a 24% year‑over‑year increase in members investing faster than accounts.

Management framed QQ2 as a down payment on a multi‑year growth trajectory anchored in the 3Ds – delivering remarkable experiences (digital service delivery), deepening partnerships (APIs and ecosystem collaborations), and driving member outcomes (differentiated, utilization‑oriented solutions). A notable near‑term milestone was the formal launch of Health Payment Accounts (HPAs), a no‑interest, no‑fee option designed to broaden access to care and strengthen employer/plan sponsor value propositions. While HPAs are expected to contribute meaningfully over the medium term (modest FY2026 impact, larger in FY2027–FY2028), the near‑term dividend will accrue to cross‑selling opportunities tied to BenefitWallet and enhanced rate deployments.

HQY reconfirmed full‑year guidance for FY2025: revenue of $1.165–$1.185 billion; GAAP net income of $94–$109 million (~$1.05–$1.22 per share) and non‑GAAP net income of $265–$280 million (~$2.98–$3.14 per share) with adjusted EBITDA of $458–$478 million. The company also announced the start of a $300 million share repurchase program and completed a refinancing that extends revolver maturities to 2029, supporting portfolio growth and optionality. Cash flow remained robust on an operating basis (H1 FY25 operating cash flow of $108.1 million) but free cash flow was negative (‑$100.95 million) largely due to the BenefitWallet acquisition-related investments. Investors should monitor the cadence of operating costs during the second half (seasonality in member onboarding and card issuance) and the evolving mix toward Enhanced Rates as the company progresses toward its 60% Enhanced Rates target by FY2027. Overall, the QQ2 results reinforce HQY’s differentiated position in the growing consumer‑directed health accounts market, with multiple levers to sustain growth and a clear path to improving profitability through operating leverage and higher‑margin product introductions.