What changed in this filing

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Item 1A. Risk Factors

2022-06-08 compared with 2021-12-09 · 7 added, 92 removed, 26 unchanged (79% of the section changed)

2 unchanged sentences

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

The integration of the Further business may not be successful.

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 an executive order, and related guidance was published that, together, require certain COVID-19 precautions for federal contractors, including mandatory COVID-19 vaccines for employees of federal contractors (subject to medical and religious exemptions) (the “Vaccine Mandate”).

We are classified as a federal contractor due to a number of our agreements and believe we will be subject to the Vaccine Mandate.

In order to comply with the Vaccine Mandate and based on current guidance provided by the federal government, HealthEquity is requiring all of its team members to show proof of vaccination or qualify for an applicable exemption by January 2022, although the timing of implementation of the executive order may be affected by additional guidance issued, including any extensions of time granted to comply.

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

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

We have entered into contracts with third-party vendors to provide critical services relating to our business, including the redesign of our technology platforms, fraud management and other customer verification services, transaction processing and settlement, telephony services, call centers and card production.

In addition, WageWorks uses third-party vendors for its COBRA transaction processing and also uses one of our competitors for card processing and other services.

In the event that these service providers fail to maintain adequate levels of support, do not provide high quality service, increase the fees they charge us, discontinue their lines of business, terminate our contractual arrangements or cease or reduce operations, we may suffer additional costs and be required to pursue new third-party relationships, which could harm our reputation, materially disrupt our operations and our ability to provide our products and services, and could divert management’s time and resources.

A transition to a new vendor could take a significant amount of time and resources and, if we are unable to complete a transition to a new provider on a timely basis, or at all, we could be forced to temporarily or permanently discontinue certain services, such as our payment card services, which could disrupt services to our customers and adversely affect our business, financial condition, and results of operations.

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.

The Vaccine Mandate requires that certain of our third-party vendors also require 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.

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 the Notes and on our business and prospects generally.

We are party to a $1.35 billion credit agreement (the "Credit Agreement"), which consists of (i) a five-year senior secured term loan A facility in the aggregate principal amount of $350 million and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of up to $1 billion.

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

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.

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, including the Notes, 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 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 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.

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.

Natural disasters, pandemics or other epidemics (including the current COVID-19 pandemic), acts of terrorism, acts of war, adverse economic conditions, 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 (including the current war between Russia and Ukraine), terrorist attacks, the escalation of military activity in response to such attacks, adverse economic conditions (including the recent increase in inflation), or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, market disruptions, increased costs to operate our business, reduced economic activity among our clients, and job losses.

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

Moreover, the potential for future terrorist attacks and the national and international responses to such threats could affect the business in ways that cannot be predicted.

The effect of any of these events or threats could have a material adverse effect on our business, financial condition, and results of operations.

Incorporate by reference

1 unchanged sentence

Exhibit Filing Date

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

8-K 001-36568 2.1 September 8, 2021

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

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

8-K 001-36568 2.2 September 8, 2021

2.3† Amendment to Stock Purchase Agreement dated as of October 31, 2021 by and between HealthEquity, Inc.

and Evan McCordick as Sellers’ representative

8-K 001-36568 2.1 November 1, 2021

4.1 Indenture, dated as of October 8, 2021, by and among the Company, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee

8-K 001-36568 4.1 October 12, 2021

10.1† Credit Agreement, dated as of October 8, 2021, by and 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 therein), and each L/C Issuer (as defined therein) party thereto.

8-K 001-36568 10.1 October 12, 2021

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

10 unchanged sentences

101.PRE Inline XBRL Taxonomy presentation linkbase document

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

104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, formatted in Inline XBRL.

+ Filed herewith.

1 unchanged sentence

# These certifications are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference in any filing the registrant makes under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.

† Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

HealthEquity hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HEALTHEQUITY, INC.

December 9, 2021 By:

June 8, 2022 By:

/s/ Tyson Murdock

2 unchanged sentences

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

What changed 10-Q

Item 1A. Risk Factors