What changed in this filing

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Item 1A. Risk Factors

2021-09-09 compared with 2021-06-08 · 63 added, 16 removed, 35 unchanged (69% of the section changed)

2 unchanged sentences

These risk factors do not identify all risks that we face, and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.

The ongoing COVID-19 pandemic has materially impacted our business and may continue to materially impact our business.

Our business has been, and may continue to be, materially and adversely affected by the COVID-19 pandemic.

The Federal Reserve’s interest rate cut in response to the economic impact of COVID-19 and other interest rate market conditions have caused interest rates to decline significantly.

While interest rates have improved somewhat since these actions were taken by the Federal Reserve, the funds that we place with our depository partners in this environment continue to be placed at lower interest rates than we originally expected.

We have also seen an increase in regulatory changes related to our products due to government responses to the COVID-19 pandemic and may continue to see additional regulatory changes, which changes require substantial time and costs for us to ensure compliance.

For example, regulatory changes related to our COBRA product have created uncertainty and additional workload on our team members.

Further regulatory changes could reduce our operational efficiency and result in additional costs.

Our financial results related to certain of our products have also been adversely affected.

For example, we have seen a significant decline in the use of commuter benefits, and the recent spread of the Delta variant of COVID-19 and the associated decisions by employers to delay return-to-office plans for their employees will further delay the recovery of use of these commuter benefits.

In addition, to the extent the "work from home" trend continues after the pandemic, that would further negatively impact the revenue we receive from commuter benefits.

During the initial stages of the pandemic, we saw a negative impact on our members' spend on healthcare, which negatively impacted both our interchange revenue and service revenue.

If the current increase in COVID-19 cases associated with the Delta variant results in new lockdowns or restrictions on elective medical procedures, our interchange revenue and service revenue could again be negatively impacted.

In the event our financial results are severely impacted, it may make it more difficult for us to comply with the financial covenants in our credit agreement, which could result in a breach of the financial covenants and the acceleration of our outstanding debt by our lenders.

As a result of the ongoing pandemic, substantially all of our team members have been working from home.

Sales opportunities have been impacted by the lack of travel and in-person meetings, with some opportunities delayed and most now being held virtually.

The rise in the Delta variant may mean that sales opportunities and lack of travel continue to be impacted longer than we anticipated and likely means that we will be supporting the open enrollment activities of our Clients virtually again during the upcoming open enrollment season.

We may be unable to meet our service level commitments to our Clients as a result of disruptions to our work force and disruptions to third-party contractors that we rely on to provide our services.

The risk of cybersecurity breaches and incidents, and the potential impact of these on our operations, is also higher while our team members log in to our network remotely.

The extent to which the COVID-19 pandemic will continue to negatively impact our business remains highly uncertain and, as a result, may continue to have a material and adverse impact on our business and financial results.

Failure to adequately manage and maintain our custodial assets, or the failure of any of our depository or insurance partners, could materially and adversely affect our business, financial condition and results of operations.

As a non-bank custodian, we rely on our federally insured custodial depository partners and our insurance company partners to hold the vast majority of the HSA Assets that we hold in custody.

If any material adverse event were to affect one of our depository partners or our insurance company partners, including a significant decline in its financial condition, a decline in the quality of its service, loss of deposits, its inability to comply with applicable banking and financial services regulatory requirements, systems failure or its inability to return principal or pay interest thereon, our business, financial condition and results of operations could be materially and adversely affected.

The HSA Assets held through our insurance company partners are not federally insured.

As a result, in the event of a failure of one of our insurance company partners, the HSA Assets held through that partner would be at risk and no assurance can be given that these contractual provisions will be sufficient.

Although the members bear the risk of loss with respect to investment of their HSA Assets, we would suffer reputational harm if one of our insurance company partners failed or otherwise breached its obligations to guarantee principal or pay interest thereon, which could in turn lead to financial harm to the Company.

Certain of our arrangements with our depository and insurance company partners require that we keep a minimum amount of HSA Assets with such partner, including sufficient liquid assets.

If we fail to comply with those minimum HSA Asset requirements, including as a result of withdrawals by our members, we may be subject to penalties payable to our partners or a reduction in the interest payable.

These requirements accordingly restrict our ability to quickly terminate our arrangements with these partners and remove our HSA Assets.

Such penalties or reductions, if imposed, could have a material and adverse impact on our business, financial condition and results of operations.

In addition, certain of our insurance company partners have commitments to us with respect to the interest rates paid;

however, some of these commitments are conditional upon certain market events and/or satisfaction of our obligations to the partner.

A reduction of the interest rate payable, or a requirement that we post collateral in lieu of any such reduction, could have a material and adverse impact on our business, financial condition and results of operations.

In addition to any potential penalties payable, if we were required to change depository or insurance company partners, we cannot accurately predict the success of such change or that the terms of our agreement with the new partner would be as favorable to us as our current agreements.

Our acquisition of the Further business may not be consummated, and the integration of the Further business may not be successful.

We have entered into an agreement to acquire Further.

Completion of the acquisition is subject to a number of risks and uncertainties, and we can provide no assurance that the various closing conditions to the Further acquisition will be satisfied.

Many of the conditions that are required to close the acquisition of Further are not within our control, and we cannot predict when, or if, the acquisition will be completed.

In particular, the closing of the acquisition is subject to our ability to put in place group annuity contracts with an insurance company partner to hold the custodial and other account assets being transferred in the acquisition.

These new group annuity contracts are subject to the approval of applicable state insurance departments and will be subject to counterparty risk with our insurance partner.

We have entered into two agreements to acquire Further:

(1) an agreement to acquire all cash balances and investment assets included in any voluntary employee beneficiary association (“VEBA”) account that is funding a health reimbursement arrangement (either Section 501(c)(9) or Section 115 trusts) and all contracts related exclusively thereto, and (2) an amended agreement to acquire the remainder of the Further business.

Completion of this acquisition is subject to a number of risks and uncertainties, and we can provide no assurance that the various closing conditions to each part of this acquisition will be satisfied.

Many of the conditions required to close the acquisition are not within our control, and we cannot predict when, or if, the acquisition will be completed.

In particular, the closing of the VEBA portion of the acquisition is subject to our ability to arrange group annuity contracts with an insurance company partner for the assets of each of the VEBA plans being transferred in the acquisition, and no assurance can be given that all or a significant portion of the VEBA plans will agree to enter into such group annuity contracts.

These new group annuity contracts are subject to the approval of applicable state insurance departments and will be subject to counterparty risk with our insurance company partner.

The inability to complete the acquisition of Further could have a material adverse effect on our results of operations, financial condition and prospects.

3 unchanged sentences

While we intend to enter into a transition services agreement in order to effectively carve-out the Further business from its parent, no assurance can be given that the carve-out will be successful.

In addition, the integration process could take longer than anticipated and could result in the loss of key employees, the disruption of the Company's ongoing business and the Further business, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with team members, Clients, Network Partners, or other third parties, or our ability to achieve the anticipated benefits of the acquisition, and could harm our financial performance.

could adversely affect our ability to maintain relationships with team members, Clients, Network Partners, or other third parties, or our ability to achieve the anticipated benefits of the acquisition, and could harm our financial performance.

If we are unable to successfully or timely integrate the operations of Further with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the acquisition of Further, and our business, results of operations and financial condition could be materially and adversely affected.

We rely on our management team and team members, and our business could be harmed if we are unable to retain qualified personnel.

Our success depends, in part, on the skills, working relationships and continued services of our executive leadership team and other key personnel.

While we have entered into offer letters or employment agreements with certain of our executive officers, all of our team members are “at-will” employees, and their employment can be terminated by us or them at any time, for any reason, and without notice, subject, in certain cases, to severance payment rights.

In order to retain valuable team members, in addition to salary and cash incentives, we provide equity-based awards that vest over time or based on performance.

The value to team members of these awards will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract offers from other organizations.

The departure of key personnel could adversely affect the conduct of our business.

In such event, we would be required to hire other personnel to manage and operate our business, and there can be no assurance that we would be able to employ a suitable replacement for the departing individual, or that a replacement could be hired on terms that are favorable to us.

Volatility or lack of performance in our stock price may affect our ability to attract replacements should key personnel depart.

Our success also depends on our ability to attract, retain, and motivate additional skilled management personnel and other team members.

For example, competition for qualified personnel in our field and geographic markets is intense due to the limited number of individuals who possess the skills and experience required by our industry, particularly in the technology-related fields.

In addition, we have experienced team member turnover as a result of both the WageWorks Acquisition and the ongoing "great resignation" occurring throughout the American economy, and we expect to continue to experience team member turnover in the future.

New hires require significant training and, in most cases, take significant time before they achieve full productivity.

New team members may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals.

For example, it has become more difficult for us to hire entry-level team members in our member service and client service teams.

If our retention efforts are not successful or our team member turnover rate continues to increase in the future, our business, results of operations and financial condition could be materially and adversely affected .

Incorporate by reference

1 unchanged sentence

Exhibit Filing Date

10.1† Stock Purchase Agreement, dated as of March 8, 2021 between HealthEquity, Inc., the Sellers listed on Schedule 1 and Evan McCordick, solely as the Sellers’ Representative.

8-K 001-36568 2.1 March 8, 2021

10.2 Employment Agreement between Tyson Murdock and the Company

8-K 001-36568 10.1 April 1, 2021

10.3† Asset and Unit Purchase Agreement, dated as of April 8, 2021, by and among Viking Acquisition Corp., HealthEquity, Inc., MII Life Insurance, Incorporated d/b/a Further and Aware Integrated, Inc.

8-K 001-36568 2.1 April 14, 2021

10.4† Custodial Transfer and Asset Purchase Agreement, dated as of April 27, 2021, by and between Fifth Third Bank, National Association, and HealthEquity, Inc.

8-K 001-36568 2.1 April 27, 2021

10.1† Amended and Restated Asset and Unit Purchase Agreement, dated as of September 7, 2021, by and among Viking Acquisition Corp., HealthEquity, Inc., MII Life Insurance, Incorporated d/b/a Further and Aware Integrated, Inc.

8-K 001-36568 2.1 September 8, 2021

10.2† Asset Purchase Agreement, dated as of September 7, 2021, by and among HealthEquity, Inc., Viking Acquisition Corp.

and MII Life Insurance, Incorporated d/b/a Further

8-K 001-36568 2.2 September 8, 2021

31.1+ Certification of the Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

10 unchanged sentences

101.PRE Inline XBRL Taxonomy presentation linkbase document

104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2021, formatted in Inline XBRL.

104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2021, formatted in Inline XBRL.

+ Filed herewith.

5 unchanged sentences

HEALTHEQUITY, INC.

June 8, 2021 By:

September 9, 2021 By:

/s/ Tyson Murdock

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors