Can you update on the progress of AI automation and its impact on service gross margins, especially for the rest of the year?

The company is pleased with improving service cost per account by reducing contacts through product experience quality, self-service, and automation (e.g., reduced fraud, passkey adoption, claims automation). Significant progress has been made, and there is still substantial opportunity for further efficiencies, particularly in client integrations and back-office/claims automation. “We're really pleased with the progress that we've made around improving our service cost per account, which is really the metric that we're driving across our teams.”

How does AI investment manifest in capitalized software development costs, and will it yield expense savings in the tech and development category?

While AI introduces costs like token usage and compute, these are managed within the existing tech and development percentage of revenue, aiming for overall operating efficiency. Significant manual process reductions (up to 90%) and faster resolution times are being achieved. Future opportunities exist in client integrations and back-office automation. “While we are seeing that increase of costs associated with token use in our company, we're keeping that within the framework of our percentage of revenue associated with tech and dev.”

Regarding the $6 million year-over-year reduction in service costs, is any portion of this one-time, and how should we think about its trajectory?

Approximately $2 million of the service cost improvement was due to lower-than-expected medical claim usage utilization for employees, which is considered seasonal and is expected to normalize. The remaining improvement represents real, sustainable year-over-year efficiency gains. “Just in the service line alone, that was about $2 million of the year-over-year improvement. And that just feels seasonal to me. So our current expectation is that that cost is going to come back.”

HQY

HealthEquity (HQY) Q1 FY27 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q1 FY27)· Health Care· May 28, 2026

Source: earnings call transcript

Executive summary

HealthEquity Q1 FY27 — Strong Profitability and Raised FY27 Guidance

HealthEquity delivered strong Q1 FY27 results, driven by disciplined execution, expanding adjusted EBITDA margins, and accelerating growth in HSA accounts and assets. The company raised its full-year guidance, reflecting confidence in its financial model and strategic initiatives, including significant investments in AI and an expanded share repurchase program. This quarter highlights HealthEquity's evolution towards a comprehensive healthcare financial operating system, enhancing member engagement and operational efficiency.

Highlights

Adjusted EBITDA margin expanded to 46% in Q1 FY27, up from 42% in Q1 FY26.
Total HSA assets grew 19% year-over-year.
New HSAs from sales grew 15%, adding 172,000 new HSAs to the platform.
HSA investors grew 18% and invested assets held by HSA members grew 38%.
Share repurchase authorization increased by $1 billion, reflecting confidence in long-term outlook.
AI-driven tools reduced manual handling of service emails by 25% and fraud costs declined nearly 90% year-over-year.

Concerns

Lower-than-expected medical claim usage utilization for internal employees impacted service costs by approximately $2 million, considered seasonal.
Interchange revenue grew 5% year-over-year, a slower pace potentially reflecting lower healthcare utilization.

Guidance & targets

Category	Target	Timeline	Confidence
Fiscal 2027 Revenue	$1.41 billion to $1.42 billion high materiality	FY27 · 2027	High
Fiscal 2027 GAAP Net Income	$242 million to $248 million high materiality	FY27 · 2027	High
Fiscal 2027 GAAP Diluted EPS	$2.88 to $2.95 per share high materiality	FY27 · 2027	High
Fiscal 2027 Non-GAAP Net Income	$392 million to $398 million high materiality	FY27 · 2027	High
Fiscal 2027 Non-GAAP Diluted EPS	$4.66 and $4.73 per share high materiality	FY27 · 2027	High
Fiscal 2027 Adjusted EBITDA	$625 million and $633 million high materiality	FY27 · 2027	High
Fiscal 2027 Average Yield on HSA Cash	approximately 3.85% medium materiality	FY27 · 2027	Medium
Fiscal 2027 GAAP and Non-GAAP Income Tax Rate	approximately 25% low materiality	FY27 · 2027	High

HQY operating KPIs by quarter

HQY operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Jan 2026 Q4 FY26	This call Apr 2026 Q1 FY27	Jul 2026 Q2 FY27	Change vs prior quarter
New HSAs added	550K In the fourth quarter, we delivered 23% adjusted EBITDA growth and more than 500 basis points of adjusted EBITDA margin expansion, while adding a record 550,000 HSAs, resulting in more than 1 million new HSAs from sales for the year, bringing total accounts to 17.8 million and HSA Assets to more than $36 billion. Source: earnings call transcript	172K New HSAs from sales grew 15%, introducing 172,000 new HSAs to our platform. Source: earnings call transcript	—	-68.7%
App downloads	3.6M+ We now have more than 3.6 million downloads of our app, reflecting the growing adoption of digital-first healthcare. Source: earnings call transcript	—	5M+ Monthly active users on the app reached 1.4 million in July, up 62% year-over-year, while total app downloads exceeded 5 million. Source: earnings call transcript	—
Clients	100K+ That level of growth reflects the deeply integrated proprietary compliant platform with more than 200 network partners in over 100,000 clients, supported by a member first secure mobile experience. Source: earnings call transcript	—	~100K So, look, I mean, one of the benefits of having around 100,000 or more clients is we see all different types, right? Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Marketplace Diagnostics and Men's Health	expansion	May 2026
Oura Ring 5	launch	Next week

Deals & partnerships

UnitedHealth (acquiring Allegis) Acquisition (competitor)

Allegis, a white-labeled software provider, is being acquired by UnitedHealth. HealthEquity views this as a potential net positive, as existing clients of Allegis may view the tie-up as competitive and seek alternatives.

Risks & headwinds

Seasonal medical claim usage utilization Q1 FY27, expected to normalize

Approximately $2 million impact on service costs in Q1 FY27

Mitigation:The company has pushed this beat back into the forecast, expecting costs to return to prior actuarial assumptions.

Slower interchange revenue growth Q1 FY27

5% YoY growth in Q1 FY27, slower than previous periods

Mitigation:Reflected some interchange conservatism in the current outlook; monitoring for potential behavior shifts in consumer spending.

Competitive environment changes from Allegis acquisition Ongoing

Potential for existing clients of Allegis to view the UnitedHealth tie-up as competitive.

Mitigation:HealthEquity is watching for these movements, viewing it as a potential opportunity for their direct-to-client model.

Consumer education for Bronze plans Ongoing

Only 30% of people on exchanges are in HSA qualified plans (up from 2% a year ago), indicating a new muscle for consumers.

Mitigation:Working through channel partners and brokers to educate consumers on the benefits of HSAs, especially with Bronze plans.

Q&A highlights

What is the gating function for investing in sales and marketing to drive marketplace growth?

There is no gating function for sales and marketing spend in the marketplace, as its growth is driven by member engagement within the mobile experience. The focus is on scaling foundations, expanding visibility, enhancing marketing to existing members, and adding new programs, rather than external marketing spend.

“There's really no gating function because it's not a channel that's dependent on marketing spend like other e-commerce sites would be.”

asked by Stanislav Berenshteyn · answered by Scott Cutler

2 min read 6 chapters

Detailed narrative

Strategic Platform Evolution

HealthEquity is evolving beyond traditional administration to a comprehensive healthcare financial operating system. This platform integrates accounts, assets, payments, investing, marketplace, digital engagement, and advisory capabilities. The strategy aims to expand the value of each member relationship, improve efficiency, and drive durable compounding as accounts mature, reinforcing the company's long-term growth outlook.

HSA Growth and Member Engagement

The company outpaced industry HSA account growth in Q1 FY27, with total HSA assets increasing by 19% and new HSAs from sales growing 15%, adding 172,000 new accounts. Member engagement deepened, evidenced by a 90% year-over-year increase in mobile monthly active usage. Over two-thirds of marketplace transactions now occur through the mobile app, contributing to an expanded lifetime value per member.

AI-Driven Operational Efficiency

HealthEquity is leveraging technology and AI to enhance the member experience, bolster security, and reduce the cost to serve. AI-driven tools have reduced manual handling of member and client service emails by 25%. In targeted workflows like card servicing and claims inquiries, AI-enabled automation cut manual efforts by over 90% and accelerated processing times by up to 50%, leading to a nearly 90% decline in fraud costs year-over-year.

Marketplace Expansion and Economics

The marketplace is emerging as a significant driver of engagement, now serving over 10,000 members with health-related programs and products. Recent expansions include diagnostics and men's health, with metabolic health programs being the most active, generating $90-$100 per member per month.

The company prioritizes marketplace additions based on member spending patterns and curates high-value products, with new offerings like Oura Ring 5 and men's health showing rapid uptake.

Capital Allocation and Share Repurchase

HealthEquity's Board increased the share repurchase authorization by $1 billion, reflecting strong confidence in the business's long-term outlook and cash generation capabilities. The company remains an active buyer of its shares, having repurchased $123 million in Q1 FY27. This capital allocation strategy maintains flexibility for both share repurchases and potential portfolio acquisitions, without impacting the ability to finance future M&A opportunities.

Custodial Yield Management

The company has $3.2 billion of HSA cash contracts maturing in fiscal 2027, weighted towards the back half of the year. To mitigate volatility, HealthEquity has forward treasury contracts outstanding on $3.5 billion of maturities across fiscal years 2027 through 2029, effectively locking in 5-year treasury rates at approximately 3.9% net of costs.

This program aims to narrow the range of potential outcomes tied to movements in the 5-year treasury benchmark.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.