HealthEquity (HQY) Q2 2025 earnings summary

Executive summary

• Revenue grew 23% year-over-year to $299.9 million for Q2 FY25, with Adjusted EBITDA up 46% to $128.3 million and HSA assets up 27% to $29.5 billion; HSA members increased 15% and total accounts reached 16.3 million.

• Net income for the quarter was $35.8 million (GAAP EPS $0.40), up 239% year-over-year; non-GAAP net income was $76.3 million (non-GAAP EPS $0.86), up 67%.

• Successfully completed the BenefitWallet acquisition, adding up to 616,000 HSAs and $2.7 billion in assets, supporting future cross-sales and strong custodial yields.

• Launched Health Payment Accounts (HPAs), a no-interest, no-fee option for flexible medical payments, with expected modest P&L impact in FY26 and more significant contribution in subsequent years.

• Continued digital transformation with new mobile app, Claims AI rollout, and card processor migration enabling digital wallet integration and future instant card issuance.

Financial highlights

• Q2 revenue was $299.9 million, up 23% year-over-year; service revenue $116.7 million, custodial revenue $138.7 million, and interchange revenue $44.5 million.

• Gross profit margin improved to 68% from 62% year-over-year; gross profit for Q2 FY25 was $204.1 million.

• Adjusted EBITDA reached $128.3 million, up 46% year-over-year, representing 43% of revenue.

• Cash on hand at quarter end was $326.9 million; cash flow from operations for the six months ended July 31, 2024 was $173.6 million.

• Long-term debt increased to $1.1 billion, reflecting new borrowings for acquisitions.

Outlook and guidance

• FY25 revenue guidance raised to $1.165–$1.185 billion; GAAP net income expected at $94–$109 million ($1.05–$1.22 per share).

• Non-GAAP net income projected at $265–$280 million ($2.98–$3.14 per share); Adjusted EBITDA expected at $458–$478 million.

• Average HSA cash yield forecasted at 3.05% for FY25; guidance includes BenefitWallet acquisition impacts and $300 million share repurchase authorization.

• Guidance assumes a 25% non-GAAP tax rate and 89 million diluted shares.

• Expectation of higher interest expense due to additional borrowings and increased investment in growth and compliance.