What changed in this filing

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Item 1A. Risk Factors

2022-03-31 compared with 2021-03-31 · 243 added, 222 removed, 329 unchanged (59% of the section changed)

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Risks relating to our business and industry

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

• We may experience difficulties in integrating the operations of WageWorks into our business and in realizing the expected benefits of the WageWorks Acquisition.

• Our management has identified material weaknesses in our internal control over financial reporting in the WageWorks subsidiary that could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

• The COVID-19 pandemic has materially impacted our business and this impact may continue.

• Our acquisition strategy and the integration of our recent and future acquisitions may not be successful.

• Our management has identified material weaknesses in our internal control over financial reporting that could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

• Any diminution in, elimination of, or change in the availability of tax benefits for HSAs and other CDBs, or in the use of these accounts, would materially adversely affect us.

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

• A decline in interest rate levels, including an environment of negative interest rates, may reduce our ability to earn income on our HSA Assets and Client-held funds and to attract HSA contributions.

• If we are not successful in adapting to our rapidly evolving industry, our growth may be limited, and our business may be adversely affected.

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• If our members do not continue to utilize our payment cards, our results of operations, business, and prospects would be materially adversely affected.

Risks relating to our service and culture

• Any failure to offer high-quality customer support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.

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

• If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success.

Data security, technological, and intellectual property risks

• Cyber-attacks or other privacy or data security incidents could materially adversely impact our business.

• Cyber-attacks, including ransomware attacks, or other privacy or data security incidents could materially adversely impact our business.

• Fraudulent and other illegal activity involving our products and services could lead to financial and reputational damage to us and reduce the use and acceptance of our products and services.

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• Our technology platforms may link to or utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

• Failure to adequately protect our brands and the intellectual property rights related to our products and services, and infringement of the intellectual property rights of others, would negatively impact our business.

• Failure to adequately protect our brands and other intellectual property rights, and infringement of the intellectual property rights of others, would negatively impact our business.

• If we are unable to promote our brands effectively, our business may suffer.

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Legal and regulatory risks

• The restatement of WageWorks’ previously issued financial results resulted in securities class action and stockholder litigation, which could have a material adverse impact on us.

• The healthcare regulatory and political framework is uncertain and evolving, and we cannot predict the effect that further healthcare reform and other changes in government programs may have on our business, financial condition, or results of operations.

• Changes in applicable federal and state laws relating to the tax benefits available through tax-advantaged healthcare accounts such as HSAs and other CDBs could materially adversely affect our business.

• Changes in applicable federal and state laws relating to HSAs and other CDBs could materially adversely affect our business.

• We are subject to privacy regulations, including regarding the access, use, and disclosure of personally identifiable information.

If we or any of our third-party vendors experience a privacy breach, it could result in substantial financial and reputational harm, including possible criminal and civil penalties.

• Legislative, regulatory, and legal developments involving taxes could adversely affect our results of operations and cash flows.

• Changes in laws and regulations relating to interchange fees on payment card transactions could adversely affect our revenue and results of operations.

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• A change in relationship with any of our bank identification number sponsors, or the failure by these sponsors to comply with certain banking regulations, could materially and adversely affect our business.

• A business failure in any of our federally insured custodial depository partners would materially and adversely affect our business.

• Replacing our third-party vendors would be difficult and disruptive to our business.

Acquisition and growth-related risks

• Our acquisition strategy may not be successful.

Growth-related risks

• We may not be able to operate, integrate, and scale our technology effectively to match our business growth.

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• We may need to record write-downs from future impairments of identified intangible assets and goodwill.

Risks relating to our service and culture

• Any failure to offer high-quality customer support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.

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

• If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success.

Financing, tax and related risks

Financing and related risks

• Our substantial debt could limit our ability to fund operations, expose us to interest rate volatility, limit our ability to raise additional capital and have a material adverse effect on our ability to fulfill our obligations under our credit agreement and indenture and to our Network Partners, Clients and members.

• The indenture and the credit agreement contain covenants that impose significant operational and financial restrictions on us, and the failure to comply with these covenants would result in an event of default under these instruments.

• We may be unable to generate or obtain sufficient capital to fund our business and growth strategy.

• The terms of our credit facility require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility.

• We may be adversely affected by interest rate changes due to the floating interest rate under our credit agreement.

• Legislative, regulatory, and legal developments involving taxes could adversely affect our results of operations and cash flows.

General Risk Factors

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Risks relating to our business and industry

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 current outbreak of the COVID-19 pandemic.

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

As a result, the funds that we place with our depository partners in this environment have been, and are likely to continue to be for the foreseeable future, placed at lower interest rates than we originally expected.

In addition, stock market volatility, such as a decline in the stock market, may decrease HSA investment assets and the related fees we earn from HSA investment assets.

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

For example, we have seen a significant decline in the use of commuter benefits and in our members' spend on healthcare, which has negatively impacted both our interchange revenue and service revenue.

If the "work from home" trend continues after the pandemic, the revenue we receive from commuter benefits would continue to be negatively impacted.

As the pandemic persists, some Clients may be unable to pay fees required under contracts and exercise "force majeure" or similar defenses, which would negatively impact our financial results.

As an increasing number of companies go out of business, the number of our Clients and potential Clients could be adversely affected.

Increased unemployment may mean that fewer of our members utilize HSAs or other CDBs and may reduce overall demand for our products.

In the event our financial results continue to be severely impacted or the impact worsens, 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.

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

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 increased 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 FSA and COBRA product have created uncertainty and additional workload on our team members, which could reduce our operational efficiency and result in additional costs.

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

For example, regulatory changes related to our COBRA product 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 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.

In the event of new lockdowns or restrictions on elective medical procedures, our interchange revenue and service revenue could again be negatively impacted.

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.

We have also had to support the open enrollment activities of our Clients virtually.

In addition, we have had to support Client open enrollment activities virtually.

New COVID-19 variants may result in continued impacts to these activities.

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.

Our team members may be less efficient at home, and it may take additional time for us to pursue significant business initiatives.

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 supply chain constraints arising out of the pandemic have impacted our ability to provide our team members the technology they need to work efficiently in a remote environment.

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.

We may experience difficulties in integrating the operations of WageWorks into our business and in realizing the expected benefits of the WageWorks Acquisition.

The success of the WageWorks Acquisition depends in part on our ability to realize the anticipated business opportunities from combining the operations of WageWorks with our business in an efficient and effective manner.

The integration process is an expensive multi-year process that could take longer and cost more than anticipated and result in the loss of Clients.

As part of the integration process, we are working to migrate certain Clients to different technology platforms, which could result in Client attrition if we are unable to meet Client expectations or if we are unable to meet the technical requirements of our Clients.

Our acquisition strategy and the integration of our recent and future acquisitions may not be successful.

We have in the past acquired, and, as a key part of our strategy, seek to acquire or invest in, assets, businesses, products, or technologies that we believe could complement or expand our products and services, enhance our technical capabilities, or otherwise offer growth opportunities.

There is no assurance that we will be successful in consummating such acquisitions, or even if consummated, realize the anticipated benefits of these or any future acquisitions.

The pursuit of potential acquisitions may divert the attention of management and cause us to incur

various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.

The success of our acquisitions will depend in part on our ability to realize the anticipated business opportunities from combining the operations of these businesses with our business in an efficient and effective manner.

Integration of our acquisitions could take longer than anticipated and could result in the loss of key team members, the disruption of our ongoing business and the acquired 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, and could harm our financial performance.

Our management team and other team members are spending significant amounts of time on integration efforts relating to the WageWorks Acquisition and the Further Acquisition, which may distract them from their other responsibilities.

Integration could also disrupt each company's ongoing businesses, result in tax inefficiencies, or create inconsistencies in standards, controls, information technology systems, procedures, and policies, any of which could adversely affect our ability to maintain relationships with third parties, or our ability to achieve the anticipated benefits of these acquisitions and could harm our financial performance.

Acquisitions also increase the risk of unforeseen legal liability, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process.

Generally, if an acquisition fails to meet our expectations, our operating results, business, and financial condition may suffer.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of additional debt, which could adversely affect our business, results of operations, or financial condition.

We may fail to fully realize the anticipated synergies associated with successfully integrating our acquisitions.

Achievement of these anticipated synergies is based on our ability to grow revenue as a combined company, the integration of technology platforms, and realization of the targeted cost synergies expected from each acquisition .

Actual operating, technological, strategic, and revenue opportunities, if achieved at all, may be less significant than expected or may take longer or cost more to achieve than anticipated.

If we are not able to achieve these objectives and realize the anticipated synergies expected from these acquisitions within the anticipated timing or at all, our business, financial condition, and operating results may be adversely affected.

The Further business is being carved out from the operations of its parent company.

As such, the successful integration of the Further business with the Company is dependent on our ability to successfully carve out the Further business from its parent.

While we have entered 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.

As part of the WageWorks Acquisition integration process, we are working to migrate certain Clients to different technology platforms, which could result in Client attrition if we are unable to meet Client expectations or if we are unable to meet the technical requirements of our Clients.

Clients may also decide to not cooperate with the platform migration process, resulting in delays to and additional costs associated with this process or the loss of those Clients.

The challenges associated with the platform migration process may result in Client dissatisfaction, potentially impairing our long-term relationship with our Clients.

The challenges associated with the platform migration process may result in Client dissatisfaction, potentially impairing our long-term relationships with our Clients.

We may also face challenges in integrating the back-office systems and people associated with these technology platforms.

Our management team and other team members are spending significant amounts of time on integration efforts, which may distract them from their other responsibilities.

Integration could also disrupt each company's ongoing businesses, result in tax inefficiencies, or create inconsistencies in standards, controls, information technology systems, procedures, and policies, any of which could adversely affect our ability to maintain relationships with third parties, or our ability to achieve the anticipated benefits of the WageWorks Acquisition, and could harm our financial performance.

We may fail to fully realize the remaining anticipated net synergies from the WageWorks Acquisition.

Achievement of these remaining anticipated net synergies is based on our ability to grow revenue as a combined company, the integration of the WageWorks' CDB and other offerings with our technology platforms, and realization of the targeted cost synergies expected from the WageWorks Acquisition.

Actual operating, technological, strategic, and revenue opportunities, if achieved at all, may be less significant than expected or may take longer or cost more to achieve than anticipated.

If we are not able to achieve these objectives and realize the remaining anticipated net synergies expected from the WageWorks Acquisition within the anticipated timing or at all, our business, financial condition, and operating results may be adversely affected.

Our management has identified material weaknesses in our internal control over financial reporting in the W ageWorks subsidiary that could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

Our management has identified material weaknesses in our internal control over financial reporting that could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

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Although we have developed a plan to address the material weaknesses, we cannot provide a timeframe as to when the remediation will be completed and tested, nor can we assure you that the remediation, integration and testing process will not reveal additional material weaknesses or other deficiencies, so that our internal control over financial reporting and related disclosure controls and procedures are effective.

If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our credit agreement, and may be required to seek waivers or repay amounts under the credit agreement earlier than anticipated, which could adversely impact our liquidity and financial condition.

Although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls over financial reporting, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.

In addition to remediating existing material weaknesses, we expect that the continued integration of the WageWorks business will require modifications to our internal control systems, processes, and information systems.

In addition to remediating existing material weaknesses, we expect that the continued integration of the WageWorks, Further and Luum businesses will require modifications to our internal control systems, processes, and information systems.

Our ability to remediate existing material weaknesses and integrate acquired companies into our internal controls has been impacted by higher than normal team member turnover, including among owners of certain controls.

If we are unable to transition ownership of controls effectively, the effectiveness of our internal controls may be negatively impacted.

We cannot be certain that changes to our internal control over financial reporting will be effective for any period, or on an ongoing basis.

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Substantially all of our revenue is earned from tax-advantaged HSAs and other CDBs.

Based on our experience with our customers, we believe that many consumers are not familiar with, or do not fully appreciate, the tax-advantaged benefits of HSAs and other CDBs.

If employers reduce or cease to offer HSAs or other CDB programs, if the tax benefits for these accounts are reduced or eliminated, or if the rate of adoption of these accounts decreases, our results of operations, financial condition, business, and prospects would be materially and adversely affected.

The efforts of governmental and third-party payers to raise revenue or contain or reduce healthcare or other costs could include restructuring the tax benefits available through HSAs and other CDBs, which may adversely affect our business, operating results, and financial condition.

For example, the federal government or states may seek to raise revenues by enacting tax laws that eliminate the tax deductions available to individuals who contribute to HSAs.

We cannot predict if any new tax reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be.

If the laws or regulations are changed to limit or eliminate the tax benefits available through these accounts, such a change would have a material adverse effect on our business.

We believe that many consumers are not familiar with, or do not fully appreciate, the tax-advantaged benefits of HSAs and other CDBs.

If our members do not fully use their HSAs or CDBs, or if employers reduce or cease to offer HSAs or other CDB programs, or if the rate of adoption of these accounts decreases, our results of operations, financial condition, business, and prospects would be materially and adversely affected .

Failure to adequately place and safeguard our custodial assets, or the failure of any of our depository or insurance company 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 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, insurance or other 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.

A decline in interest rate levels, including an environment of negative interest rates, may reduce our ability to earn income on our HSA Assets and Client-held funds and to attract HSA contributions.

We partner with our depository and insurance company partners to hold our HSA Assets and other Client-held funds.

We earn a significant portion of our consolidated revenue from fees we earn from our depository and insurance company partners, approximately 27%, 26%, and 34% during the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

A decline in prevailing interest rates, such as the current low interest rate environment due to the COVID-19 pandemic, or a negative interest rate environment, has and may continue to negatively affect our business by reducing the yield we realize on our HSA Assets and other Client-held funds.

In addition, if we do not offer competitive interest rates on HSA Assets, our members may choose another HSA custodian.

Similarly, if the value of the invested HSA Assets we hold declines, whether due to market conditions or other factors, our fees, which are based on a percentage of the asset values, would be adversely affected.

Any such scenario could materially and adversely affect our business and results of operations.

If we are not successful in adapting to our rapidly evolving industry, our growth may be limited, and our business may be adversely affected.

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The market for administration of HSAs and other CDBs is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs, existing competition, and the entrance of non-traditional competitors.

In addition, there may be a limited-time opportunity to achieve and maintain a significant share of this market due in part to our rapidly evolving industry and the substantial resources available to our existing and potential competitors.

In addition, there may be a limited-time opportunity to achieve and maintain a significant share of this market due in part to our rapidly evolving industry, industry consolidation, and the substantial resources available to our existing and potential competitors.

In order to remain competitive, we are continually involved in a number of projects to develop new services or compete with these new market entrants.

These projects carry risks, such as cost overruns, delays in delivery, performance problems, and lack of acceptance by our Clients, Network Partners and members.

Our success depends to a substantial extent on the willingness of consumers to increase their use of HSAs and other CDBs, our ability to increase engagement, and our ability to demonstrate the value of our services to our existing and potential Clients, Network Partners and members.

Our success depends on the willingness of consumers to increase their use of HSAs and other CDBs, our ability to increase engagement, and our ability to demonstrate the value of our services to our existing and potential Clients, Network Partners and members.

If our existing Clients, Network Partners and members do not recognize or acknowledge the benefits of our services or we do not drive engagement, then the market for our services might develop more slowly than we expect, which could adversely affect our operating results.

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If any of these events occur, it could materially adversely affect our business, financial condition or results of operations.

Finally, our competitors may have the ability to devote more financial and operational resources than we can to developing new technologies and services, including services that provide improved operating functionality, and adding features to their existing service offerings.

If successful, their development efforts could render our services less desirable, resulting in the loss of our existing customers or a reduction in the fees we earn from our products and services.

We may be unable to compete effectively against our current and future competitors.

The market for our products and services is highly competitive, rapidly evolving, and fragmented.

The market for our products and services is highly competitive.

We view our competition in terms of direct and indirect competitors.

Our direct HSA competitors are HSA custodians and administrators that include state or federally chartered banks, such as Webster and Optum Bank, insurance companies, well-known retail investment companies, such as Fidelity Investments, and non-bank custodians approved by the U.S.

Treasury as meeting certain ownership, capitalization, expertise, and governance requirements.

We also have numerous indirect HSA administration competitors, including benefits administrators and health plans, that license technology platforms and partner with other HSA custodians to provide "white label" HSA offerings.

Our other CDB administration competitors include health insurance carriers, human resources consultants and outsourcers, payroll providers, national CDB specialists, regional third-party administrators, and commercial banks, and these competitors may enter the HSA market or expand existing HSA offerings to compete with us.

Increased focus on HSA-favorable healthcare regulatory reforms may create renewed interest and investment by our competitors in their HSA offerings and lead to greater competition, which could make it harder for us to maintain our growth trajectory.

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and this risk could be compounded if legal requirements or administrative rules are interpreted in a way that makes compliance more onerous for us than for our competitors.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could materially adversely affect our ability to compete effectively.

Our competitors may also establish or strengthen cooperative relationships with our current or future Network Partners or other strategic

partners, thereby limiting our ability to promote our solution with these parties.

Our competitors may also establish or strengthen cooperative relationships with our current or future Network Partners or other strategic partners, thereby limiting our ability to promote our solution with these parties.

We have seen an increase in Network Partners that have decided to offer HSAs or other CDBs directly to their customers, and a continuation of this trend would significantly reduce our channel partner opportunities.

Well-known retail mutual fund companies, such as Fidelity Investments, have entered the HSA business and gained significant market share.

Well-known retail mutual fund companies, such as Fidelity Investments, have entered the HSA and CDB business and gained significant market share.

Our market share could decline if Fidelity and other mutual fund companies continue expanding their presence in the market.

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Many of our competitors, in particular banks, insurance companies, and other financial institutions, have longer operating histories and significantly greater financial, technical, marketing, and other resources than we have.

As a result, some of these competitors may be in a position to devote greater resources to the development, promotion, sale, and support of their products and services and have offered, or may in the future offer, a wider range of products and services that are increasingly desired by potential customers, and they may also use advertising and marketing strategies that (including loss-leaders) achieve broader brand recognition or acceptance.

As a result, some of these competitors may be in a position to devote greater resources to the development, promotion, sale, and support of their products and services and have offered, or may in the future offer, a wider range of products and services that are increasingly desired by potential customers, and they may also use advertising and marketing strategies (including loss-leaders) that achieve broader brand recognition or acceptance.

If successful, their development efforts could render our services less desirable, resulting in the loss of our existing customers or a reduction in the fees we earn from our products and services.

Developments in the rapidly changing healthcare industry could adversely affect our business.

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These fees represent a percentage of the expenses transacted on each card.

If our customers do not use these payment cards at the rate we expect, if they elect to withdraw funds using a non-revenue generating mechanism such as direct reimbursement, or if other alternatives to these payment cards develop, our results of operations, business, and prospects would be materially adversely affected.

The COVID-19 pandemic has had a materially adverse impact on the interchange fees generated due to decreased usage of our payment cards in our commuter product and in healthcare spending.

If our customers do not use these payment cards at the rate we expect, if they elect to withdraw funds using a non-revenue generating mechanism such as direct reimbursement, if the impacts of the COVID-19 pandemic continue, or if other alternatives to these payment cards develop, our results of operations, business, and prospects would be materially adversely affected.

Risks relating to our service and culture

Any failure to offer high-quality customer support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.

Our customers depend on our support and customer education organizations to educate them about, and resolve technical issues relating to, our products and services.

We may be unable to respond quickly enough to accommodate short-term increases in customer demand for education and support services.

Increased customer demand for these services, without a corresponding increase in revenue, could increase costs and adversely affect our operating results.

We have experienced team member turnover as a result of the ongoing "great resignation"

occurring throughout the American economy, and this has negatively impacted our ability to provide the type of service that is expected by our Network Partners, Clients and members.

A majority of our work force now works remotely, including our member service and Client service teams, and we expect this remote work environment to continue after the COVID-19 pandemic.

As a result, it may be more difficult to provide the type of service our members, Clients and Network Partners expect, and it may be more difficult to meet our service level commitments to our Clients.

Our sales process is highly dependent on the reputation of our products, services, and business and on positive recommendations from our existing customers.

Further, we use third-party vendors for certain call centers and COBRA claims and transaction processing, including certain offshore vendors for member chat service, which vendors may not provide the same quality of support services for our Clients and members.

Any failure to maintain high-quality education and technical support, or a market perception that we do not maintain high-quality education support, could adversely affect our reputation, our ability to sell our products and services to existing and prospective customers and our business and operating results.

We promote 24/7/365 education and support along with our proprietary technology platforms.

Interruptions or delays that inhibit our ability to meet that standard may hurt our reputation or ability to attract and retain customers.

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 employment agreements with 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 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.

In September 2021, the President of the United States signed the Vaccine Mandate.

While the Vaccine Mandate has been stayed by the courts, we are classified as a federal contractor due to a number of our agreements and believe we will be subject to the Vaccine Mandate if it is reinstated.

HealthEquity’s compliance with the Vaccine Mandate has and could continue to result in increased team member attrition, absenteeism, costs associated with preventing team member attrition and absenteeism, and a further material increase in team member attrition, absenteeism or increase in retention costs could have a material and adverse impact on our business, results of operations and financial condition.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success.

We believe that a critical component to our success has been our corporate culture.

We have invested substantial time and resources in building our team.

As we continue to grow, including through the integration of team members joining us through our acquisitions, we have found it difficult to maintain these important aspects of our corporate culture.

Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

Data security, technological, and intellectual property risks

Cyber-attacks or other privacy or data security incidents could materially adversely impact our business.

Cyber-attacks, including ransomware attacks, or other privacy or data security incidents could materially adversely impact our business.

Our proprietary technology platforms enable the exchange of, and access to, sensitive information, and, as a result, we are frequently the target of cyber-attacks or other privacy or data security incidents.

As one of the largest providers of HSAs and other CDBs, we are an even more attractive target for cyber-attacks, which means we must continue to secure and monitor each of our technology platforms, making sure these platforms are aligned to our industry benchmark security posture.

As one of the largest providers of HSAs and other CDBs, we are an even more attractive target for cyber-attacks, including ransomware attacks, which means we must continue to secure and monitor each of our technology platforms, making sure these platforms are aligned to our industry benchmark security posture.

In addition, recent geopolitical events, including the war between Russia and Ukraine, may result in an increase in cyber-attacks.

The majority of our work force now works remotely, and we expect this to continue even after the COVID-19 pandemic.

This remote work environment increases 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.

Our ability to ensure the security of our technology platforms and thus sensitive customer and partner information is critical to our operations.

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Such security breaches could compromise our networks and result in the information stored or transmitted there to be accessed, publicly disclosed, lost, or stolen.

Such access, disclosure, or other loss of

information could result in legal claims or proceedings leading to liability, including under laws that protect the privacy of personal information, disrupt our operations and the services we provide to our clients, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, operations, and competitive position.

Such access, disclosure, or other loss of information could result in legal claims or proceedings leading to liability, including under laws that protect the privacy of personal information, disrupt our operations and the services we provide to our clients, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, operations, and competitive position.

A major breach of our network security and systems could have serious negative consequences for our business, including possible fines, penalties and damages, reduced demand for our services, an unwillingness of members, Clients, Network Partners and other data owners to provide us with their payment information, an unwillingness of members and other data owners to provide us with personal information, and harm to our reputation and brand.

In addition, security breaches could result in the loss of this sensitive information, theft or loss of actual funds, litigation, indemnity obligations to our customers, fines and other liabilities, including under laws that protect the privacy of personal information, disrupt our operations and the services we provide to our members, Clients and Network Partners, damage our reputation, and cause a loss of confidence in our products and services.

Security breaches could result in the loss of sensitive information, theft or loss of actual funds, litigation, indemnity obligations to our Clients, fines and other liabilities, including under laws that protect the privacy of personal information, disrupt our operations and the services we provide to our members, Clients and Network Partners, damage our reputation, and cause a loss of confidence in our products and services.

If third parties improperly obtain and use the personal information of our members, we may be required to expend significant resources to resolve these problems.

While we have security measures in place, we have experienced data privacy incidents in the past, including several incidents in 2018.

As a result, or if our security measures are breached again or unauthorized access to data is otherwise obtained as a result of third-party action, team member error or otherwise, our reputation could be significantly damaged, our business may suffer and we could incur substantial liability which could result in loss of sales and customers.

As a result, or if our security measures are breached again or unauthorized access to data is otherwise obtained as a result of third-party action, team member error or otherwise, our reputation could be significantly damaged, our business may suffer and we could incur substantial liability, which could result in loss of sales, Clients and Network Partners.

We have found that the security measures associated with some of the technology platforms used by WageWorks are not sufficient and improving these security measures has taken and will continue to take significant resources.

The continued integration of the WageWorks technology platforms with our technology platforms may create further vulnerabilities in our systems.

If third parties improperly obtain and use the personal information of our customers, we may be required to expend significant resources to resolve these problems.

Because techniques used to obtain unauthorized access to or sabotage systems change frequently and are generally not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Any or all of these issues could negatively impact our ability to attract new, or increase engagement by, members, Clients and Network Partners, and subject us to third-party lawsuits, regulatory fines, contractual liability, and other action or liability, thereby harming our operating results.

Fraudulent and other illegal activity involving our products and services, including our payment cards, could lead to financial and reputational damage to us and reduce the use and acceptance of our products and services.

Fraudulent and other illegal activity involving our products and services could lead to financial and reputational damage to us and reduce the use and acceptance of our products and services.

Criminals are using increasingly sophisticated methods to capture personal information in order to engage in illegal activities such as counterfeiting and identity theft.

Even if we can secure our systems against these activities, we are vulnerable through third parties.

We rely upon third parties for some transaction processing services, data feeds, and vendors, which subjects us to risks related to the vulnerabilities of those third parties.

For example, we are exposed to risks relating to the theft of payment card numbers housed in a merchant's point of sale systems if our members use our payment cards at a merchant whose systems are compromised.

We may make our members whole for losses sustained when using our payment cards, even in instances where we are not directly responsible for the underlying cause of such loss.

We may make our members whole for losses sustained when using our payment cards, even in instances where we are not directly responsible

for the underlying cause of such loss.

A single significant incident of fraud, or increases in the overall level of fraud, involving our payment cards, our custodial accounts or our reimbursement administration services, could result in financial and reputational damage to us, which could reduce the use and acceptance of our products and services, or cause our Clients, members and Network Partners to cease doing business with us.

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Developing and implementing new and updated applications, features, and services for our technology platforms may be more difficult than expected, may take longer and cost more than expected, or may result in the platforms not operating as expected.

Attracting and retaining new customers requires us to continue to improve the technology underlying our proprietary technology platforms and requires our technology to operate as expected.

In addition, customers are increasingly seeking a bundled solution, encompassing a wide range of features.

Attracting and retaining new clients and Network Partners requires us to continue to improve the technology underlying our proprietary technology platforms and requires our technology to operate as expected.

In addition, potential clients and Network Partners are increasingly seeking a bundled solution, encompassing a wide range of features.

Accordingly, we must continue to develop new and updated applications, features, and services, and maintain existing applications, features, and services.

If we are unable to do so on a timely basis or if we are unable to implement new applications, features and services that enhance our customers’ experience without disruption to our existing applications, features and services, or if we encounter technical obstacles that result in the technology not operating properly, we may lose potential and existing Clients and Network Partners.

If we are unable to do so on a timely basis or if we are unable to implement new applications, features and services that enhance our members’ and Clients' experience without disruption to our existing applications, features and services, or if we encounter technical obstacles that result in the technology not operating properly, we may lose potential and existing Clients and Network Partners.

We rely on a combination of internal development, strategic relationships, licensing, and acquisitions to develop our content offerings, products and services.

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The ability of our team members, members, Network Partners, and Clients to access our technology platforms is critical to our business.

We cannot ensure that the measures we have taken will be effective to prevent or minimize interruptions to our operations.

We cannot ensure that the measures we have taken to enable access to our technology platforms will be effective to prevent or minimize interruptions to our operations.

Our technology platforms are hosted by third-party data centers.

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• actions or events caused by or related to third parties.

We attempt to mitigate these risks through various business continuity efforts, including redundant infrastructure, 24/7/365 system activity monitoring, backup and recovery procedures, use of a secure storage facility for backup media, separate test systems, and change management and system security measures, but our precautions may not protect against all potential problems.

media, separate test systems, and change management and system security measures, but our precautions may not protect against all potential problems.

Our data recovery centers are equipped with physical space, power, storage and networking infrastructure and Internet connectivity to support our technology platforms in the event of the interruption of services at our data centers.

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We have experienced interruptions and delays in service and availability for data centers, and bandwidth and other technology issues in the past.

Frequent or persistent system failures that result in the unavailability of our technology platforms or slower response times could reduce our members', Clients' and Network Partners' ability to access our technology platforms, impair the delivery of our products and services, and harm the perception of our platforms as reliable, trustworthy, and consistent.

Any future errors, failure, interruptions or delays experienced in connection with these third-party technologies could delay access to our products by members, Clients and Network Partners, which would harm our business.

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Any unscheduled interruption in our service could negatively impact our financial results.

Frequent or persistent system failures that result in the unavailability of our technology platforms or slower response times could reduce our members, Clients and Network Partners' ability to access our technology platforms, impair the delivery of our products and services, and harm the perception of our platforms as reliable, trustworthy, and consistent.

Our insurance policies provide only limited coverage for service interruptions and may not adequately compensate us for any losses that may occur due to any failures or interruptions in our systems.

In addition, our insurance policies provide only limited coverage for service interruptions and may not adequately compensate us for any losses that may occur due to any failures or interruptions in our systems.

Our technology platforms may link to or utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

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Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.

Failure to adequately protect our brands and the intellectual property rights related to our products and services, and infringement of the intellectual property rights of others, would negatively impact our business.

We believe that the HealthEquity and WageWorks brands are critical to the success of our business, and we utilize trademark registration and other means to protect these brands.

Failure to adequately protect our brands and other intellectual property rights, and infringement of the intellectual property rights of others, would negatively impact our business.

We believe that our brands are critical to the success of our business, and we utilize trademark registration and other means to protect these brands.

Our business would be harmed if we were unable to protect our brands against infringement and the value of our brands was to decrease as a result.

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If this were to occur, we could lose revenue as a result of competition from products infringing or misappropriating our technology and intellectual property and we may be required to initiate litigation to protect our proprietary rights and market position.

do not protect proprietary rights to the same extent.

copyright, trademark, and trade secret laws offer us only limited protection and the laws of some foreign countries do not protect proprietary rights to the same extent.

Accordingly, defense of our intellectual property and proprietary technology may become an increasingly important issue as we continue to expand our operations.

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If we are unable to promote our brands effectively, our business may suffer.

We believe that promoting our brands in an effective manner is critical to achieving widespread acceptance of our products and services, attracting new customers and strategic partners, and integrating the WageWorks business and Clients.

Brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brands.

If we fail to successfully promote our brands, or incur substantial expenses in doing so, we may fail to attract or retain a sufficient number of Clients and Network Partners necessary for us to realize a sufficient return on our brand-building efforts, to achieve the widespread brand awareness that is critical for broad customer adoption of our products and services, or to fully and effectively integrate the WageWorks business and clients.

We currently own the web domain names www.healthequity.com and www.wageworks.com, among others, which are critical to the operation of our business.

We currently own several web domain names that are critical to the operation of our business.

The acquisition and maintenance of domain names, or Internet addresses, is generally regulated by governmental agencies and their designees.

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Healthcare laws and regulations are rapidly evolving and may change significantly in the future, which could adversely affect our financial condition and results of operations.

For example, the Affordable Care Act, which includes a variety of healthcare reform provisions and requirements that have become effective at varying times, substantially changed the way healthcare is financed by both governmental and private insurers and may significantly impact our industry.

Further changes to the Affordable Care Act and related healthcare regulation remain under consideration.

In addition, proposals to implement a single payer or "Medicare for all" system in the U.S., if adopted, could have a material adverse effect on our business.

In addition, proposals to implement a single payer or "Medicare for all" system in the U.S.

or in individual states, if adopted, could have a material adverse effect on our business.

The full impact of healthcare reform and other changes in the healthcare industry and in healthcare spending is unknown and may be affected by President Biden's administration and a Democratically controlled Congress.

Accordingly, we are unable to predict what effect healthcare reform measures will have on our business.

Changes in applicable federal and state laws relating to the tax benefits available through tax-advantaged healthcare accounts such as HSAs and other CDBs could materially adversely affect our business.

The efforts of governmental and third-party payers to raise revenue or contain or reduce the costs of healthcare as well as legislative and regulatory proposals aimed at changing the U.S.

healthcare system, which could include restructuring the tax benefits available through HSAs, HRAs, FSAs, and similar tax-advantaged healthcare accounts, may adversely affect our business, operating results, and financial condition.

For example, the federal government or states may seek to raise revenues by enacting tax laws that eliminate the tax deductions available to individuals who contribute to HSAs.

In addition, our business, operating results, and financial condition could be negatively impacted by changes to the federal and state tax laws related to our non-healthcare CDBs, such as our commuter product.

Our business is substantially dependent on the tax benefits available through HSAs and other CDBs.

In addition, changes to the regulatory landscape impacting our products may require substantial time and costs for us to ensure our products are compliant.

For example, regulatory changes related to our FSA and COBRA products enacted in the wake of the COVID-19 pandemic have created uncertainty and additional workload on our team members, which could reduce our operational efficiency and result in additional costs.

We cannot predict if any new tax reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be.

If the laws or regulations are changed to limit or eliminate the tax benefits available through these accounts, such a change would have a material adverse effect on our business.

The restatement of WageWorks’ previously issued financial results resulted in securities class action and stockholder litigation, which could have a material adverse impact on us.

Our subsidiary WageWorks and certain of its former directors and officers are subject to securities class action and stockholder litigation relating to its previous public disclosures.

See Note 7—Commitments and contingencies of the Notes to consolidated financial statements for a description of these legal proceedings and investigations.

While we have signed a term sheet to settle the securities class action, the settlement is subject to notice to class members and approval of the Court, the other stockholder litigation continues, and additional stockholder litigation was initiated subsequent to the end of the fiscal year ended January 31, 2021.

These lawsuits may result in substantial liability and other adverse consequences to us.

In addition, WageWorks could become subject to additional private litigation or investigations arising out of alleged misstatements in its previously issued financial statements.

Our management team may be required to devote significant time and attention to these matters, and these and any additional matters that arise could have a material adverse impact on our results of operations, financial condition, liquidity, and cash flows.

We have incurred and may continue to incur significant additional expenses in connection with these proceedings and investigations in order to defend this litigation and to fulfill indemnification obligations to former officers and directors of WageWorks.

Changes in applicable federal and state laws relating to HSAs and other CDBs could materially adversely affect our business.

HSAs and other CDBs exist as a result of provisions in the Internal Revenue Code and other laws and regulations.

Changes to the regulatory landscape impacting our products may require substantial time and costs for us to ensure our products are compliant.

For example, regulatory changes related to our FSA and COBRA products enacted in the wake of the COVID-19 pandemic created uncertainty and additional workload on our team members and resulted in additional costs.

In addition, federal or state governments could impose laws that limit the eligibility requirements for our products, which could limit our ability to grow or cause us to lose existing members, or such governments could change the eligibility requirements we must meet to maintain the licenses we need to offer our products.

We cannot predict if any new reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be, and such reforms could have a material adverse effect on our business.

We are subject to privacy regulations, including regarding the access, use, and disclosure of personally identifiable information.

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as a result, the covered entities direct HIPAA compliance matters in the event of a security breach, which complicates our ability to address harm caused by the breach.

As a result of the WageWorks Acquisition, we now obtain substantially more HIPAA data than before the WageWorks Acquisition.

In addition, our increased offering of CDBs means we now obtain substantially more HIPAA data.

Additionally, as we have in connection with prior security incidents, we may be required to report breaches to partners, regulators, state attorney generals, and impacted individuals depending on the severity of the breach, our role, legal requirements, and contractual obligations.

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Continued compliance with current and potential new privacy laws, rules, and regulations and meeting consumer expectations with respect to the control of personal data in a rapidly changing technology environment could result in higher compliance and technology costs for us, as well as costly penalties in the event we are deemed to not be in compliance with such laws, rules, and regulations.

Legislative, regulatory, and legal developments involving taxes could adversely affect our results of operations and cash flows.

We are subject to U.S.

federal and state income, payroll, property, sales and use, and other types of taxes in numerous jurisdictions.

Significant judgment is required in determining our provisions for income taxes.

Changes in tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities could result in substantially higher taxes.

For example, recent tax proposals have included proposals to increase the U.S.

corporate income tax rate and impose a new alternative minimum tax on book income.

If these or similar taxpayer unfavorable proposals are ultimately enacted, they could materially impact our tax provision, cash tax liability and effective tax rate.

We do not collect sales and use taxes in all jurisdictions in which our customers are located, other than from sales of certain commuter services, based on our belief that such taxes are generally not applicable to our services.

Sales and use tax laws and rates vary by jurisdiction and such laws are subject to interpretation.

In those jurisdictions and in those cases where we do believe sales taxes are applicable, we collect and file timely sales tax returns.

Currently, such sales taxes apply to certain commuter services, but otherwise are minimal to the rest of our services.

Jurisdictions in which we do not collect sales and use taxes may assert that such taxes are applicable, which could result in the assessment of such taxes, interest, and penalties, and we could be required to collect such taxes in the future.

Such additional sales and use tax liability could adversely affect the results of our operations.

Changes in laws and regulations relating to interchange fees on payment card transactions could adversely affect our revenue and results of operations.

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As such, it must comply with the requirements of the Advisers Act and related SEC regulations and is subject to periodic inspections by the SEC staff.

Such requirements relate to, among other things, fiduciary duties to clients, disclosure obligations, recordkeeping and reporting requirements, marketing restrictions, limitations on agency cross and principal transactions between the adviser and its clients, and general anti-fraud prohibitions.

anti-fraud prohibitions.

The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from fines and censure to termination of an investment adviser’s registration.

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Any claim of non-compliance, regardless of merit or ultimate outcome, could subject us to investigation by the HHS, the DOL, the SEC, the Wyoming Division of Banking, or other regulatory authorities.

This in turn could result in additional claims or class action litigation brought on behalf of our members or Network Partners, any of which could result in substantial cost to us and divert management’s attention and other resources away from our operations.

This in turn could result in additional claims or class action litigation brought on behalf of our members, Clients or Network Partners, any of which could result in substantial cost to us and divert management’s attention and other resources away from our operations.

Furthermore, investor perceptions of us may suffer, and this could cause a decline in the market price of our common stock.

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In particular, certain of our Network Partners enjoy significant market share in various geographic regions.

If these Network Partners choose to partner with our competitors, or otherwise reduce offering, or cease to offer, our products and services, our results of operations, business, and prospects could be materially adversely affected.

In certain geographies, we have multiple Network Partners that may be competing against each other for the same business, which may result in our inability to bid for certain business or could result in us upsetting a Network Partner that we choose not to partner with in a certain bid or that expects us to bid exclusively with them.

If these Network Partners choose to instead partner with our competitors, or otherwise reduce offering, or cease to offer, our products and services, our results of operations, business, and prospects could be materially adversely affected.

A change in relationship with any of our bank identification number sponsors, or the failure by these sponsors to comply with certain banking regulations, could materially and adversely affect our business.

We rely on a limited number of bank identification number, or BIN, sponsors in relation to the payment cards we issue.

We rely on a limited number of bank identification number ("BIN") sponsors in relation to the payment cards we issue.

A BIN sponsor is a bank or credit union that provides the BIN that allows a prepaid card program to run on one of the major card brand networks (e.g., VISA, MasterCard, Discover or American Express).

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If we were required to change BIN sponsors, we could not accurately predict the success of such change or that the terms of our agreement with a new BIN sponsor would be as favorable to us, especially in light of the regulatory scrutiny of the payment card industry, which has rendered the market for BIN sponsor services less competitive.

A business failure in any of our federally insured custodial depository partners would materially and adversely affect our business.

As a non-bank custodian, we rely on our federally insured custodial depository partners to hold the vast majority of our custodial cash assets.

If any material adverse event were to affect one of our federally insured depository 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 pay us fees, our business, financial condition, and results of operations could be materially and adversely affected.

If we were required to change depository partners, we could not accurately predict the success of such change or that the terms of our agreement with a new depository partner would be as favorable to

us as our current agreements, especially in light of the consolidation in the banking industry, which has rendered the market for federally insured retail banking services less competitive.

Replacing our third-party vendors would be difficult and disruptive to our business.

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We may also be unable to establish comparable new third-party relationships on as favorable terms or at all, which could materially and adversely affect our business, financial condition, and results of operations.

Acquisition and growth-related risks

Our acquisition strategy may not be successful.

There is no assurance that we will be successful in consummating such acquisitions, or even if consummated, realize the anticipated benefits of these or any future acquisitions.

The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.

There are inherent risks in integrating and managing acquisitions.

If we acquire additional businesses, we may not be able to assimilate or integrate the acquired personnel, operations, and technologies successfully or effectively manage the combined business following the acquisition, and our management may be distracted from operating our business.

We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including, without limitation:

• unanticipated costs or liabilities associated with the acquisition;

• incurrence of acquisition-related costs, which would be recognized as a current period expense;

• inability to earn sufficient revenue to offset acquisition or investment costs;

• the inability to maintain relationships with customers and partners of the acquired business;

• the difficulty of incorporating acquired technology and rights into our technology platforms and of maintaining quality and security standards consistent with our brand;

• the need to integrate or implement additional controls, procedures, and policies;

• harm to our existing business relationships with customers and strategic partners as a result of the acquisition;

• the diversion of management’s time and resources from our core business;

• the potential loss of key team members;

• use of resources that are needed in other parts of our business and diversion of management and employee resources;

• our ability to coordinate organizations that are geographically diverse and that have different business cultures;

• our inability to comply with the regulatory requirements applicable to the acquired business;

• the inability to recognize acquired revenue in accordance with our revenue recognition policies;

• use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.

Generally, if an acquisition fails to meet our expectations, our operating results, business, and financial condition may suffer.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of additional debt, which could adversely affect our

business, results of operations, or financial condition.

Even if we are successful in completing and integrating an acquisition, the acquisition may not perform as we expect or enhance the value of our business as a whole.

In the event the stay of the Vaccine Mandate is lifted, the Vaccine Mandate would require that certain of our third-party vendors also require their employees to be vaccinated.

While we continue to evaluate the impact of the Vaccine Mandate on our third-party vendors, compliance with the Vaccine Mandate could result in certain key third-party vendors terminating their arrangements with us or in increased employee turnover at our third-party vendors, delays in performance by our third-party vendors, or increased costs for us.

Such impacts could have a material and adverse impact on our business, results of operations and financial condition.

Growth-related risks

We may not be able to operate, integrate, and scale our technology effectively to match our business growth.

Our ability to continue to provide our products and services to a growing number of customers, as well as to enhance our existing products and services, attract new customers and strategic partners, offer new products and services, and continue the integration of the WageWorks business into our business, is dependent on our information technology systems.

Our ability to continue to provide our products and services to a growing number of customers, as well as to enhance our existing products and services, attract new customers and strategic partners, offer new products and services, and continue the integration of acquired businesses into our business, is dependent on our information technology systems.

If we are unable to manage the technology associated with our business effectively, we could experience increased costs, reductions in system availability, and customer loss.

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As of January 31, 2022, we had approximately 7.2 million HSAs and $19.6 billion in HSA assets representing growth of 25% and 37%, respectively, from January 31, 2021.

For the fiscal year ended January 31, 2021, our total revenue and Adjusted EBITDA were approximately $733.6 million and $240.8 million, respectively, which represents year-over-year annual growth rates of approximately 38% and 23%, respectively.

See “Key financial and operating metrics” for the definition of Adjusted EBITDA and a reconciliation of net income, the most comparable measure under accounting principles generally accepted in the United States of America, or GAAP, to Adjusted EBITDA.

Our growth strategy contemplates further increasing the number of our HSAs, CDBs and our HSA Assets at relatively higher growth rates than industry averages.

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Any future determination that these assets are carried at greater than their fair value could result in substantial non-cash impairment charges, which could significantly impact our reported operating results.

Risks relating to our service and culture

Any failure to offer high-quality customer support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.

Our customers depend on our support and customer education organizations to educate them about, and resolve technical issues relating to, our products and services.

We may be unable to respond quickly enough to accommodate short-term increases in customer demand for education and support services.

Increased customer demand for these services, without a corresponding increase in revenue, could increase costs and adversely affect our operating results.

In addition, our sales process is highly dependent on the reputation of our products, services, and business and on positive recommendations from our existing customers.

Further, WageWorks uses third-party vendors for its call centers and COBRA claims and transaction processing, including certain offshore vendors for member chat service, which vendors may not provide the same quality of support services for our Clients and members.

We promote 24/7/365 education and support along with our proprietary technology platforms.

Interruptions or delays that inhibit our ability to meet that standard may hurt our reputation or ability to attract and retain customers.

We rely on our management team and key 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 founder and senior management 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 stock options and other equity-based awards that vest over time or based on performance.

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

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.

For example, competition for qualified personnel in our field and geographic market 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 employee turnover as a result of the WageWorks Acquisition and expect to continue to experience employee 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.

If our retention efforts are not successful or our employee turnover rate increases in the future, our business will be harmed.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success.

We believe that a critical component to our success has been our corporate culture.

We have invested substantial time and resources in building our team.

As we continue to grow, including through the integration of WageWorks team members, we may find it difficult to maintain these important aspects of our corporate culture.

Any failure to

preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

Financing, tax and related risks

Financing and related risks

Our substantial debt could limit our ability to fund operations, expose us to interest rate volatility, limit our ability to raise additional capital and have a material adverse effect on our ability to fulfill our obligations under our Credit Agreement and Indenture and to our Network Partners, Clients and members.

We are party to a credit agreement (the "Credit Agreement") among the Company, as borrower, each lender from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent and the Swing Line Lender (as defined in the Credit Agreement), and each L/C Issuer (as defined therein) party thereto.

Our Credit Agreement consists of (i) a five-year senior secured term loan A facility in the aggregate principal amount of $350 million (the "Term Loan Facility") and (ii) a five-year senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”), in an aggregate principal amount of up to $1 billion.

We have also issued $600 million of 4.50% unsecured Senior Notes due 2029 (the "Notes").

Under the Credit Agreement, we have the right to request additional commitments for new term loans and increases to then-existing term loans and revolving credit commitments in an amount up to the sum of (i) $300 million, plus (ii) an unlimited additional amount so long as the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 3.85 to 1.00 (assuming any such new or increased revolving commitments are fully borrowed).

We also have the right to incur additional debt from time to time, subject to the restrictions contained in the Credit Agreement and the indenture under which the Notes were issued (the "Indenture") .

The substantial debt we have outstanding, combined with our other financial obligations and contractual commitments, has important consequences, including the following:

• our level of debt may make it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the Credit Agreement or the Indenture and the agreements governing such other debt;

• we will be required to use a substantial portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances and other general corporate requirements;

• our interest expense could increase if interest rates increase because any outstanding borrowings under our Credit Facilities will be based on variable interest rates;

• the interest rate on our Revolving Credit Facility is based on LIBOR, and although the Credit Agreement provides an alternative mechanism for determining the applicable interest rate when LIBOR is no longer

available, the interest rates we pay may be adversely affected as a result of potential disruptions in connection with the LIBOR phase-out;

• the interest rate on our Revolving Credit Facility will depend on the level of our specified financial ratios, and therefore could increase if such specified financial ratios increase;

• such substantial debt could leave us vulnerable to general economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;

• our debt service obligations could limit our flexibility to plan for, or react to, changes in our business and the industry in which we operate;

• our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and joint ventures and other general corporate requirements;

• our level of debt may prevent us from raising the funds necessary to repurchase all of the Notes tendered to us upon the occurrence of a change of control, which would constitute an event of default under the Indenture;

• a potential failure to comply with the financial and other restrictive covenants in any of our debt instruments, which, among other things, require us to maintain specified financial ratios, could, if not cured or waived, have a material adverse effect on our ability to fulfill our obligations under the Notes and on our business and prospects generally.

The Indenture and the Credit Agreement contain covenants that impose significant operational and financial restrictions on us, and the failure to comply with these covenants would result in an event of default under these instruments.

The Indenture and the Credit Agreement impose on us operating and other restrictions.

These restrictions affect, and in many respects limit or prohibit, among other things, our ability to:

• incur additional debt and issue certain capital stock;

• create liens;

• make investments or acquisitions;

• enter into transactions with affiliates;

• sell assets;

• guarantee debt;

• declare or pay dividends or other distributions to shareholders;

• repurchase equity interests;

• redeem debt that is subordinated in right of payment to certain debt instruments;

• enter into agreements that restrict dividends or other payments from subsidiaries;

• consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis.

The terms of the Revolving Credit Facility in the Credit Agreement also require us to achieve and maintain compliance with specified financial ratios.

The restrictions contained in the Credit Agreement:

• limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans;

• adversely affect our ability to finance our operations, strategic acquisitions, investments or alliances or other capital needs or to engage in other business activities that would be in our interest.

A breach of any of these restrictive covenants or our inability to comply with the required financial ratios would result in a default under some or all of the debt agreements.

During the occurrence and continuance of a default, lenders under our Credit Facilities may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, which would result in an event of default under the Indenture.

The lenders will also have the right in these circumstances to terminate any commitments they have to provide further borrowings.

Additionally, our Credit Agreement contains a cross-default provision, which generally causes a default or event of default under the Credit Agreement upon a qualifying default or event of default under any other debt instrument (including under the Indenture) and the Indenture contains a cross-acceleration provision.

If we are unable to repay outstanding borrowings when due, the lenders under our Credit Facilities will also have the right to proceed against the collateral granted to them to secure the debt.

If lenders under the Credit Facilities accelerate the debt thereunder, then the obligations under the Notes would be accelerated.

We cannot provide assurance that, if the indebtedness under our Credit Facilities or the Notes were to be accelerated, our assets would be sufficient to repay in full that indebtedness and our other indebtedness.

If not cured or waived, such acceleration could have a material adverse effect on our business and our prospects.

We may be unable to generate or obtain sufficient capital to fund our business and growth strategy.

To fund our expanding business and growth strategy, we must have sufficient working capital to continue to make significant investments in our service offerings, advertising, technology, and other activities.

As a result, in addition to the revenue we earn from our business, we may need additional equity or debt financing to provide the funds required for these endeavors.

As a result, in addition to the cash flow from operations we generate from our business, we may need additional equity or debt financing to provide the funds required for these endeavors.

If such financing is not available on satisfactory terms or at all, we may be unable to operate or expand our business in the manner and at the rate desired.

For example, our existing credit agreement may make it more challenging to incur additional debt, as it includes prohibitions against incurring additional debt without approval from our existing lenders, and other lenders may not be willing to take on the risk of adding to our existing leverage, In addition, debt financing increases expenses, may contain covenants that restrict the operation of our business and must be repaid regardless of operating results.

For example, the Credit Agreement may make it more challenging to incur additional debt, as it includes prohibitions against incurring additional debt without approval from our existing lenders, and other lenders may not be willing to take on the risk of adding to our existing leverage, In addition, debt financing increases expenses, may contain additional covenants that restrict the operation of our business and must be repaid regardless of operating results.

Equity financing, or debt financing that is convertible into equity, could result in additional dilution to our existing stockholders, and any new securities we issue could have rights, preferences, and privileges superior to those associated with our common stock.

Our inability to generate or obtain the financial resources needed to fund our business and growth strategies may require us to delay, scale back or eliminate some or all of our operations or the expansion of our business, which may have a material adverse effect on our business, operating results, financial condition, and prospects.

The terms of our credit facility require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility.

We are party to a $1.6 billion credit agreement, which consists of (i) a five-year senior secured term loan A facility in the aggregate principal amount of $1.25 billion and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of up to $350 million.

The credit agreement is secured by a lien covering substantially all of our assets.

The credit agreement contains customary affirmative and negative covenants, including covenants related to the following subjects:

mergers and sales of assets;

limitations on the incurrence of certain liens;

limitations on certain indebtedness;

limitations on the ability to pay dividends;

certain affiliate transactions;

and financial performance covenants.

If we default under the credit agreement, the lenders will be able to declare all obligations immediately due and payable and take control of our pledged assets, potentially requiring us to renegotiate the credit agreement on terms less favorable to us or to immediately cease operations.

The lenders' rights to repayment would be senior to the rights of the holders of our common stock to receive any proceeds.

We may be adversely affected by interest rate changes due to the floating interest rate under our credit agreement.

Borrowings under our credit agreement bear interest at an annual rate equal to, at the option of the Company, either (i) LIBOR (adjusted for reserves) plus a margin ranging from 1.25% to 2.25% or (ii) an alternate base rate plus a margin ranging from 0.25% to 1.25%, with the applicable margin determined by reference to a leverage-based pricing grid set forth in the credit agreement.

As such, our financial position may be adversely affected by fluctuations in interest rates.

In addition, although the credit agreement provides an alternative mechanism for determining the applicable interest rate when LIBOR is no longer available, the interest rates we pay may be adversely affected as a result of potential disruptions in the credit market at the end of 2021 when LIBOR is scheduled to be phased out.

A decline in interest rate levels, including an environment of negative interest rates, may reduce our ability to earn income on our HSA Assets and Client-held funds and to attract HSA contributions.

We partner with our depository partners to hold our HSA Assets and other Client-held funds.

We earn a significant portion of our consolidated revenue from fees we earn from our depository partners, approximately 26%, 34%, and 44% during the fiscal years ended January 31, 2021, 2020, and 2019, respectively.

In addition, if we do not offer competitive interest rates on HSA Assets, our members may choose another HSA custodian.

Similarly, if the value of the invested funds we hold declines, whether due to market conditions or other factors, our fees, which are based on a percentage of the asset values, would be adversely affected.

Any such scenario could materially and adversely affect our business and results of operations.

Legislative, regulatory, and legal developments involving taxes could adversely affect our results of operations and cash flows.

We are subject to U.S.

federal and state income, payroll, property, sales and use, and other types of taxes in numerous jurisdictions.

Significant judgment is required in determining our provisions for income taxes.

Changes in tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities could result in substantially higher taxes.

For example, President Biden’s campaign proposals included increasing the U.S.

corporate income tax rate and imposing a new alternative minimum tax on book income.

If these proposals are ultimately enacted, they could materially impact our tax provision, cash tax liability and effective tax rate.

We do not collect sales and use taxes in all jurisdictions in which our customers are located, based on our belief that such taxes are not applicable.

Sales and use tax laws and rates vary by jurisdiction and such laws are subject to interpretation.

In those jurisdictions and in those cases where we do believe sales taxes are applicable, we collect and file timely sales tax returns.

Currently, such sales taxes are minimal.

This additional sales and use tax liability could adversely affect the results of our operations.

General risk factors

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Natural disasters, pandemics or other epidemics (including the current COVID-19 pandemic), acts of terrorism, acts of war and other unforeseen events may cause damage or disruption to us or our customers.

Natural disasters, pandemics or other epidemics (including the current COVID-19 pandemic) acts of war, terrorist attacks, and the escalation of military activity in response to such attacks or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, market disruptions, and job losses.

Natural disasters, pandemics or other epidemics (including the current COVID-19 pandemic) acts of war (including the current war between Russia and Ukraine), terrorist attacks, and the escalation of military activity in response to such attacks or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, market disruptions, and job losses.

Such events may have an adverse effect on the economy in general.

9 unchanged sentences

We currently intend to retain all our future earnings, if any, to fund our growth.

Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in our common stock will depend upon any future appreciation in its value.

Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in our common stock will depend

upon any future appreciation in its value.

There is no guarantee that our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

10 unchanged sentences

Unresolved staff comments

We do not currently own any of our facilities.

Our principal executive offices are located in Draper, Utah, and we lease additional office space in California, Arizona, Georgia, Kansas, Kentucky, New York, Texas, Missouri, and Wisconsin.

We believe that our current facilities are sufficient to meet our current needs.

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-K

Item 1A. Risk Factors