−Removed: You should carefully consider the risks described below together with the other information set forth in this Annual Report on Form 10-K, which could materially affect our business, financial condition, and future results.
+Added: You should carefully consider the risks described below together with the other information set forth in this Annual Report on Form 10-K.
+Added: If any of the risks described below are realized, our business, financial condition, results of operations, and prospects could be materially and adversely affected.
The risks described below are not the only risks facing our company.
Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.
−Removed: If any of the following risks are realized, our business, financial condition, results of operations, and prospects could be materially and adversely affected.
−Removed: In that event, the trading price of our common stock could decline.
Risk factors summary
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Risks relating to our business and industry
−Removed: • The COVID-19 pandemic has materially impacted our business and this impact may continue.
−Removed: • Our acquisition strategy and the integration of our recent and future acquisitions may not be successful.
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
+Added: • Failure to adequately place and safeguard our custodial assets and Client-held funds, 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.
+Added: • Integration of our recent acquisitions may not be successful.
+Added: • A decline in interest rate levels, including an environment of negative interest rates, would 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.
1 unchanged sentence
• Developments in the rapidly changing healthcare industry could adversely affect our business.
+Added: • The COVID-19 pandemic and resulting societal and economic changes has materially impacted our business and this impact may continue.
• If our members do not continue to utilize our payment cards, our results of operations, business, and prospects would be materially adversely affected.
−Removed: Risks relating to our service and culture
−Removed: • 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.
−Removed: • We rely on our management team and team members and our business could be harmed if we are unable to retain qualified personnel.
−Removed: • 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.
+Added: • Failure to maintain effective internal control over financial reporting could have a material adverse effect on our reputation, results of operations and financial condition.
Data security, technological, and intellectual property risks
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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.
−Removed: • Any disruption of service at our facilities or our third-party data centers could interrupt or delay our customers’ access to our products and services.
+Added: • Any disruption of service at our facilities or our third-party data centers and cloud providers could interrupt or delay our customers’ access to our products and services.
• Interruption or failure of our information technology and communications systems could impair our ability to effectively deliver our products and services.
1 unchanged sentence
• 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.
−Removed: • If we are unable to promote our brands effectively, our business may suffer.
−Removed: • Confidentiality arrangements with team members and others may not adequately prevent disclosure of trade secrets and other proprietary information.
Legal and regulatory risks
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• If we are unable to meet or exceed the net worth test required by the IRS, we could be unable to maintain our non-bank custodian status.
+Added: Risks relating to our service and culture
+Added: • 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.
+Added: • We rely on our management team and team members and our business could be harmed if we are unable to retain qualified personnel.
+Added: • 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.
Risks relating to our partners and service providers
3 unchanged sentences
Growth-related risks
+Added: • Our acquisition strategy may not be successful.
• We may not be able to operate, integrate, and scale our technology effectively to match our business growth.
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General risk factors
−Removed: • Our ability to secure insurance may not be sufficient to cover potential liabilities.
−Removed: • 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.
−Removed: • Our quarterly operating results may fluctuate significantly from period to period, which could adversely impact the value of our common stock.
−Removed: • We do not intend to pay regular cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
+Added: • Natural disasters, pandemics or other epidemics, acts of terrorism, acts of war, adverse economic conditions, and other unforeseen events, may cause damage or disruption to us or our customers.
• Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
1 unchanged sentence
Risks relating to our business and industry
−Removed: The COVID-19 pandemic has materially impacted our business and this impact may continue.
−Removed: Our business has been, and may continue to be, materially and adversely affected by the COVID-19 pandemic.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: For example, regulatory changes related to our COBRA product created uncertainty and additional workload on our team members.
−Removed: Further regulatory changes could reduce our operational efficiency and result in additional costs.
−Removed: Our financial results related to certain of our products have also been adversely affected.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In the event of new lockdowns or restrictions on elective medical procedures, our interchange revenue and service revenue could again be negatively impacted.
−Removed: As a result of the ongoing pandemic, substantially all of our team members have been working from home.
−Removed: Sales opportunities have been impacted by the lack of travel and in-person meetings, with some opportunities delayed and most now being held virtually.
−Removed: In addition, we have had to support Client open enrollment activities virtually.
−Removed: New COVID-19 variants may result in continued impacts to these activities.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Our acquisition strategy and the integration of our recent and future acquisitions may not be successful.
−Removed: 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.
−Removed: 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.
−Removed: The pursuit of potential acquisitions may divert the attention of management and cause us to incur
−Removed: various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Generally, if an acquisition fails to meet our expectations, our operating results, business, and financial condition may suffer.
−Removed: 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.
−Removed: We may fail to fully realize the anticipated synergies associated with successfully integrating our acquisitions.
−Removed: 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 .
−Removed: 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.
−Removed: 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.
−Removed: The Further business is being carved out from the operations of its parent company.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The challenges associated with the platform migration process may result in Client dissatisfaction, potentially impairing our long-term relationships with our Clients.
−Removed: We may also face challenges in integrating the back-office systems and people associated with these technology platforms.
−Removed: 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.
−Removed: 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.
−Removed: Our management has determined that our internal control over financial reporting was not effective due to the existence of material weaknesses arising out of the WageWorks Acquisition.
−Removed: See Item 9A - Controls and Procedures.
−Removed: Until fully remediated, these material weaknesses may materially adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: If we are unable to transition ownership of controls effectively, the effectiveness of our internal controls may be negatively impacted.
−Removed: We cannot be certain that changes to our internal control over financial reporting will be effective for any period, or on an ongoing basis.
−Removed: If we are unable to accurately report our financial results in a timely manner or are unable to assert that our internal controls over financial reporting are effective, our business, financial condition and results of operations, and the market perception thereof, may be materially adversely affected.
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.
6 unchanged sentences
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 .
−Removed: 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.
+Added: Failure to adequately place and safeguard our custodial assets and Client-held funds, 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.
+Added: In addition, we deposit Client-held funds with our depository partners in interest-bearing, demand deposit accounts that have a floating interest rate and no set term or duration, and for certain Clients these amounts exceed maximum federal deposit insurance levels.
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.
−Removed: The HSA Assets held through our insurance company partners are not federally insured.
−Removed: 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.
−Removed: 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.
+Added: The HSA Assets held through our insurance company partners are not federally insured, and our members bear the risk of loss with respect to either the failure of the insurance company partner holding their HSA Assets or the breach by the partner of its obligations to guarantee principal or pay interest thereon.
+Added: In the event of such a failure of, or breach by, one of our insurance company partners, the HSA Assets held through that partner would be at risk and no assurance can be given that our contractual arrangements with that partner would be sufficient for our members to fully recover their HSA Assets, which would in turn result in reputational harm to us and 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.
−Removed: 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.
3 unchanged sentences
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.
−Removed: 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.
+Added: Integration of our recent acquisitions may not be successful.
+Added: The success of our recent acquisitions depends in part on our ability to realize the anticipated business opportunities from combining the operations of the acquired businesses with our business in an efficient and effective manner.
+Added: Integration of our acquisitions could take longer and be more costly than anticipated, and it 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.
+Added: We may fail to fully realize the anticipated synergies associated with successfully integrating our acquisitions.
+Added: 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 .
+Added: 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.
+Added: If we are not able to achieve these objectives and realize the synergies expected from these acquisitions within the anticipated timing or at all, our business, financial condition, and operating results may be adversely affected.
+Added: Our management team and other team members are spending significant amounts of time on integration efforts relating to the Further Acquisition.
+Added: Similar to the work completed to integrate the WageWorks Acquisition, as part of the Further Acquisition integration process we are working to migrate certain Clients and Network Partners to different technology platforms.
+Added: In connection with the WageWorks technology platform migrations, we experienced the following challenges, all of which could also occur in connection with the Further technology platform migration:
+Added: • we experienced Client and Network Partner attrition when we were unable to meet Client or Network Partner expectations or technical requirements;
+Added: • certain Clients and Network Partners refused to cooperate with the platform migration process, resulting in delays to and additional costs associated with this process and the loss of certain of those Clients and Network Partners;
+Added: • we experienced Client and Network Partner dissatisfaction, which may have impaired our long-term relationships with impacted Clients and Network Partners;
+Added: • we faced challenges in integrating the back-office systems and people associated with these technology platforms.
+Added: A decline in interest rate levels, including an environment of negative interest rates, would 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 33%, 27%, and 26% during the fiscal years ended January 31, 2023, 2022, and 2021, respectively.
−Removed: 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.
+Added: A decline in prevailing interest rates has in the past and may again in the future negatively affect our business by reducing the yield we realize on our HSA Assets and other Client-held funds.
+Added: A negative interest rate environment would also reduce 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.
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We view our competition in terms of direct and indirect competitors.
−Removed: 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.
+Added: Our direct HSA competitors are HSA custodians and administrators that include state or federally chartered banks, such as Webster Bank and Optum Bank, insurance companies, well-known retail investment companies, such as Fidelity Investments, and non-bank custodians approved by the U.S.
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.
−Removed: 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.
−Removed: 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.
−Removed: Our competitors may also offer reduced fee or no-fee HSAs, which may permit them to increase market share in our market and lead to Client and Network Partner attrition or cause us to reduce our fees;
−Removed: 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.
+Added: 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 have entered, and others may also enter, the HSA market or expand existing HSA offerings to compete with us.
+Added: An 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.
+Added: This risk would be compounded if legal requirements or administrative rules are interpreted in a way that makes compliance more onerous for us than for our competitors.
+Added: Some of our competitors also offer reduced fee or no-fee HSAs, which has enabled them to increase market share in our market, has led to the loss of certain Client and Network Partners, and in some circumstances has caused us to reduce our fees.
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.
−Removed: 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.
+Added: Our competitors have and may continue to 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.
4 unchanged sentences
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.
−Removed: 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.
+Added: As a result, some of these competitors are 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 have also used advertising and marketing strategies (including loss-leaders) that achieve broader brand recognition or acceptance.
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.
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Developments in the rapidly changing healthcare industry could adversely affect our business.
−Removed: Substantially all of our revenue is derived from healthcare-related saving and spending by consumers, which could be affected by changes affecting the broader healthcare industry, including decreased spending in the industry overall.
+Added: Substantially all of our revenue is derived from healthcare-related saving and spending by consumers, which could be affected by changes affecting the broader healthcare industry, including decreased spending in the industry
General reductions in expenditures by healthcare industry participants could result from, among other things:
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We cannot assure you that the demand for our products and services will continue to exist at current levels or that we will have adequate technical, financial, and marketing resources to react to changes in the healthcare industry.
+Added: The COVID-19 pandemic and resulting societal and economic changes has materially impacted our business and this impact may continue.
+Added: Our business has been adversely affected by the COVID-19 pandemic, and we may continue to be adversely affected by the societal and economic changes arising out of the pandemic.
+Added: For example, we saw a significant decline in the use of commuter benefits during the outbreak, and the "work from home" trend, or hybrid work environments, may continue indefinitely, which would further delay, or materially negate, the recovery of use of these commuter benefits.
+Added: We also saw an increase in regulatory changes related to our products due to government responses to the COVID-19 pandemic, and we may see additional regulatory changes in the future related to new developments with COVID-19.
+Added: For example, the National Emergency Concerning COVID-19, which tolled certain deadlines related to COBRA and other CDBs, resulted in increased complexity in administering these programs and decreased usage of these products by our members.
+Added: This national emergency is expected to expire on May 11, 2023, and so we now must use resources to reverse the processes and systems established to address the national emergency, which requires team member time and resources, which could have otherwise been focused on more important areas of our business and strategy.
+Added: Outbreaks of new COVID-19 variants or other future pandemics may result in us being unable to meet our service level commitments to our Clients and Network Partners as a result of disruptions to our workforce and disruptions to third-party contractors that we rely on to provide our services.
+Added: The extent to which the COVID-19 pandemic and the societal and economic changes arising out of the 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.
If our members do not continue to utilize our payment cards, our results of operations, business, and prospects would be materially adversely affected.
1 unchanged sentence
These fees represent a percentage of the expenses transacted on each card.
−Removed: 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.
−Removed: 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.
−Removed: Risks relating to our service and culture
−Removed: 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.
−Removed: Our customers depend on our support and customer education organizations to educate them about, and resolve technical issues relating to, our products and services.
−Removed: We may be unable to respond quickly enough to accommodate short-term increases in customer demand for education and support services.
−Removed: Increased customer demand for these services, without a corresponding increase in revenue, could increase costs and adversely affect our operating results.
−Removed: We have experienced team member turnover as a result of the ongoing "great resignation"
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Our sales process is highly dependent on the reputation of our products, services, and business and on positive recommendations from our existing customers.
−Removed: 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.
−Removed: 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.
−Removed: We promote 24/7/365 education and support along with our proprietary technology platforms.
−Removed: Interruptions or delays that inhibit our ability to meet that standard may hurt our reputation or ability to attract and retain customers.
−Removed: We rely on our management team and team members and our business could be harmed if we are unable to retain qualified personnel.
−Removed: Our success depends, in part, on the skills, working relationships and continued services of our executive leadership team and other key personnel.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The departure of key personnel could adversely affect the conduct of our business.
−Removed: 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.
−Removed: Volatility or lack of performance in our stock price may affect our ability to attract replacements should key personnel depart.
−Removed: Our success also depends on our ability to attract, retain, and motivate additional skilled management personnel and other team members.
−Removed: 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.
−Removed: 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.
−Removed: New hires require significant training and, in most cases, take significant time before they achieve full productivity.
−Removed: 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.
−Removed: For example, it has become more difficult for us to hire entry-level team members in our member service and client service teams.
−Removed: 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.
−Removed: In September 2021, the President of the United States signed the Vaccine Mandate.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We believe that a critical component to our success has been our corporate culture.
−Removed: We have invested substantial time and resources in building our team.
−Removed: 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.
−Removed: 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.
+Added: For example, the COVID-19 pandemic 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.
+Added: We have continued to see decreased usage of our payment cards in our commuter product as a result of societal changes arising out of the COVID-19 pandemic.
+Added: 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 societal changes arising out 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.
+Added: Failure to maintain effective internal control over financial reporting could have a material adverse effect on our reputation, results of operations and financial condition.
+Added: Effective internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company.
+Added: During the fiscal year ended January 31, 2023, the Company remediated several material weaknesses at the WageWorks subsidiary level and implemented several new controls as part of the remediation efforts.
+Added: Any failure to execute on our new controls and continue to maintain effective internal controls, to timely implement any necessary additional improvement to our internal controls or to effect
+Added: remediation of any future material weakness or significant deficiency could, among other things, result in losses from fraud or error, harm our reputation or cause investors to lose confidence in our reported financial information, all of which could have a material adverse effect on our reputation, results of operations, or financial condition.
+Added: Management reviews and updates our systems of internal controls and procedures, as appropriate.
+Added: Any system of controls is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
+Added: Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our reputation, results of operations and financial condition.
Data security, technological, and intellectual property risks
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In addition, recent geopolitical events, including the war between Russia and Ukraine, may result in an increase in cyber-attacks.
−Removed: The majority of our work force now works remotely, and we expect this to continue even after the COVID-19 pandemic.
+Added: Substantially all of our workforce works remotely.
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.
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We rely on standard Internet and other security systems to provide the security and authentication necessary to effect secure transmission of data.
−Removed: Despite our security measures, our information technology and infrastructure is vulnerable to cybersecurity threats, including attacks by hackers and other malfeasance.
+Added: Despite our security measures, our information technology and infrastructure are vulnerable to cybersecurity threats, including attacks by hackers and other malfeasance.
Such security breaches could compromise our networks and result in the information stored or transmitted there to be accessed, publicly disclosed, lost, or stolen.
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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.
−Removed: 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.
−Removed: The continued integration of the WageWorks technology platforms with our technology platforms may create further vulnerabilities in our systems.
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.
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Criminals are using increasingly sophisticated methods to capture personal information in order to engage in illegal activities such as counterfeiting and identity theft.
−Removed: Even if we can secure our systems against these activities, we are vulnerable through third parties.
−Removed: 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.
+Added: Even if we can secure our systems against these activities, we
+Added: are vulnerable through third parties.
+Added: We rely upon third parties for certain services, such as some transaction processing services and data feeds, 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.
−Removed: We may make our members whole for losses sustained when using our payment cards, even in instances where we are not directly responsible
−Removed: for the underlying cause of such loss.
+Added: 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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We rely on certain cloud-based software licensed from third parties to run our business.
−Removed: This software may not continue to be available to us on commercially reasonable terms and any loss of the right to use any of this software could result in delays in the provisioning of our products and services until equivalent technology is either developed by us, or, if available, identified, obtained, and integrated, which would likely take a significant amount of time and harm our business.
+Added: This software may experience outages, may not continue to be available to us on commercially reasonable terms and any loss of the right to use any of this software could result in, among others, delays in producing our financial statements, risks to our security environment, or the provisioning of our products and services until equivalent technology is either developed by us, or, if available, identified, obtained, and integrated, which would likely take a significant amount of time and harm our business.
In addition, we have service level agreements with certain of our Clients and Network Partners for which the availability of this software is critical.
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In addition, potential clients and Network Partners are increasingly seeking a bundled solution, encompassing a wide range of features.
−Removed: Accordingly, we must continue to develop new and updated applications, features, and services, and maintain existing applications, features, and services.
+Added: Accordingly, we are continuing 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 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.
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In addition, material performance problems, defects or errors in our existing or new software may occur in the future, which may harm our operating results.
−Removed: Any disruption of service at our facilities or our third-party data centers could interrupt or delay our customers’ access to our products and services.
+Added: Any disruption of service at our facilities or our third-party data centers and cloud service providers could interrupt or delay our customers’ access to our products and services.
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 to enable access to our technology platforms will be effective to prevent or minimize interruptions to our operations.
−Removed: Our technology platforms are hosted by third-party data centers.
−Removed: Our facilities and our third-party data centers are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including, without limitation:
+Added: Our technology platforms are hosted by third-party data centers, and we increasingly rely on third-party cloud service providers to support our technology platforms.
+Added: Our facilities, our third-party data centers, and our cloud service providers are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including, without limitation:
• extended power loss;
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• actions or events caused by or related to third parties.
−Removed: 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
−Removed: media, separate test systems, and change management and system security measures, but our precautions may not protect against all potential problems.
+Added: 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.
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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Interruptions in our service could negatively impact our financial results, and our reputation could be damaged if our systems are viewed as unreliable.
−Removed: Our systems and operations are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, break-ins, hardware or software failures, telecommunications failures, computer viruses or other attempts to harm our systems, and similar events.
+Added: Our systems and operations are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, break-ins, hardware or software failures, failures from third-party vendors who support our systems and operations, telecommunications failures, computer viruses or other attempts to harm our systems, and similar events.
Any unscheduled interruption in our service could negatively impact our financial results.
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We rely on a combination of trademark and copyright laws, trade secret protection, and confidentiality and license agreements to protect the intellectual property rights related to our products and services such as our technology platforms, applications and the content on our website.
−Removed: We also rely on intellectual property licensed from third parties.
+Added: We also rely on intellectual property licensed from third
We may unknowingly violate the intellectual property or other proprietary rights of others and, thus, may be subject to claims by third parties.
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The loss of our intellectual property or the inability to secure or enforce our intellectual property rights or to defend successfully against an infringement action could harm our business, results of operations, financial condition, and prospects.
−Removed: If we are unable to promote our brands effectively, our business may suffer.
−Removed: 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 acquired businesses and Clients.
−Removed: 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.
−Removed: 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 our acquisitions.
−Removed: We currently own several web domain names that are critical to the operation of our business.
−Removed: The acquisition and maintenance of domain names, or Internet addresses, is generally regulated by governmental agencies and their designees.
−Removed: The regulation of domain names in the U.S.
−Removed: is subject to change.
−Removed: Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.
−Removed: Furthermore, it is unclear whether laws protecting trademarks and similar proprietary rights will be extended to protect domain names.
−Removed: Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or otherwise decrease the value of our brands, trademarks and other proprietary rights.
−Removed: We may not be able to successfully implement our business strategy of establishing strong branding if we cannot prevent others from using similar domain names or trademarks.
−Removed: This failure could impair our ability to increase our market share and revenue.
−Removed: Confidentiality arrangements with team members and others may not adequately prevent disclosure of trade secrets and other proprietary information.
−Removed: We have devoted substantial resources to the development of our technology, business operations and business plans.
−Removed: In order to protect our trade secrets and proprietary information, we rely in significant part on confidentiality arrangements with our team members, independent contractors, advisors, customers, and other partners.
−Removed: These arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
−Removed: In addition, others may independently discover trade secrets and proprietary information, and in such cases we would not be able to assert trade secret rights against such parties.
−Removed: The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality.
−Removed: In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights.
−Removed: Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Legal and regulatory risks
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or in individual states, if adopted, could have a material adverse effect on our business.
−Removed: 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.
+Added: The full impact of healthcare reform and other changes in the healthcare industry and in healthcare spending is unknown.
Accordingly, we are unable to predict what effect healthcare reform measures will have on our business.
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HSAs and other CDBs exist as a result of provisions in the Internal Revenue Code and other laws and regulations.
−Removed: Changes to the regulatory landscape impacting our products may require substantial time and costs for us to ensure our products are compliant.
+Added: Changes to the regulatory landscape impacting our products 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.
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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.
−Removed: State and federal laws and regulations govern the collection, dissemination, access, and use of personally identifiable information, including HIPAA and HITECH, which govern the treatment of protected health information, and the Gramm-Leach Bliley Act, which governs the treatment of nonpublic personal information.
−Removed: In the provision of services to our customers, we and our third-party vendors may collect, access, use, maintain, and transmit personally identifiable information in ways that are subject to many of these laws and regulations.
+Added: State and federal laws and regulations govern the collection, dissemination, access, and use of personally identifiable information, including HIPAA and HITECH, which govern the treatment of protected health information,
+Added: and the Gramm-Leach Bliley Act, which governs the treatment of nonpublic personal information.
+Added: In the provision of services to our customers, we and our third-party vendors collect, access, use, maintain, and transmit personally identifiable information in ways that are subject to many of these laws and regulations.
Although we have implemented measures to comply with these privacy laws, rules, and regulations, we have experienced data privacy incidents.
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Privacy regulation has become a priority issue in many states, and as such the regulatory environment is continually changing.
−Removed: For example, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
−Removed: The CCPA requires companies, such as ours, that process information on California residents to make new disclosures to consumers about their data collection, use, and sharing practices, and allows consumers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.
−Removed: We expect further privacy requirements to be applicable to us as a result of the recently passed California Privacy Rights Act, as it significantly modifies the CCPA by expanding consumers’ rights with respect to certain sensitive personal information.
−Removed: Other governmental authorities are also considering legislative and regulatory proposals concerning data protection.
+Added: For example, the CPRA became effective on January 1, 2023.
+Added: The CPRA requires companies, such as ours, that process information on California residents to make new disclosures to consumers about their data collection, use, and sharing practices, and allows consumers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.
+Added: We expect further privacy requirements to be applicable to us as a result of additional recently passed, and likely upcoming, state privacy laws, which will expand consumers’ rights with respect to their personal information.
+Added: The Federal government is also considering legislative and regulatory proposals concerning data protection.
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.
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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.
−Removed: For example, recent tax proposals have included proposals to increase the U.S.
−Removed: corporate income tax rate and impose a new alternative minimum tax on book income.
−Removed: 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.
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Failure to comply with, or changes in, payment card industry, credit card association or other network rules or standards set by Visa or MasterCard, or changes in card association and debit network fees or products or interchange rates, could materially adversely affect us.
−Removed: We, and the banks that issue our prepaid debit cards, are subject to Payment Card Industry Data Security Standards and Visa and MasterCard association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us, including card processors.
+Added: We, and the banks that issue our prepaid debit cards, are subject to Payment Card Industry Data Security Standards and Visa and MasterCard association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us,
+Added: including card processors.
Failure to comply with these rules and standards could result in significant fines, other penalties, or the termination of our interchange revenue agreements.
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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.
−Removed: 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
−Removed: anti-fraud prohibitions.
+Added: 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.
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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Our subsidiary HealthEquity Trust Company is a non-depository trust company and subject to regulation and supervision by the Wyoming Division of Banking.
−Removed: Compliance with regulatory requirements may divert internal resources and take significant time and effort.
+Added: Compliance with regulatory requirements requires resources and takes significant time and effort.
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.
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If we are unable to meet or exceed the net worth test required by the IRS, we could be unable to maintain our non-bank custodian status.
−Removed: As a non-bank custodian, we are required to comply with Treasury Regulations Section 1.408-2(e), or the Treasury Regulations, including the net worth requirements set forth therein.
+Added: As a non-bank custodian, we are required to comply with Treasury Regulations Section 1.408-2(e), including the net worth requirements set forth therein.
If we should fail to comply with the Treasury Regulations’ non-bank custodian requirements, including the net worth requirements, such failure would materially and adversely affect our ability to maintain our current custodial accounts and grow by adding additional custodial accounts, and it could result in the institution of procedures for the revocation of our authorization to operate as a non-bank custodian.
+Added: Risks relating to our service and culture
+Added: 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.
+Added: Our customers depend on our support and customer education organizations to educate them about, and resolve technical issues relating to, our products and services.
+Added: We may be unable to respond quickly enough to accommodate short-term increases in customer demand for education and support services.
+Added: Increased customer demand for these services, without a corresponding increase in revenue, could increase costs and adversely affect our operating results.
+Added: In addition, as substantially all of our team members in our support and customer education
+Added: areas now work remotely, it is more difficult to train and manage these team members, which could adversely affect the service we provide.
+Added: Our sales process is highly dependent on the reputation of our products, services, and business and on positive recommendations from our existing customers.
+Added: 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.
+Added: 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.
+Added: We promote 24/7/365 education and support along with our proprietary technology platforms.
+Added: Interruptions or delays that inhibit our ability to meet that standard have in the past hurt our reputation and ability to attract and retain customers, and such interruptions or delays in the future would likely also do so.
+Added: We rely on our management team and team members and our business could be harmed if we are unable to retain qualified personnel.
+Added: Our success depends, in part, on the skills, working relationships and continued services of our executive leadership team and other key personnel.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The departure of key personnel could adversely affect the conduct of our business.
+Added: 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.
+Added: Volatility or lack of performance in our stock price may affect our ability to attract replacements should key personnel depart.
+Added: Our success also depends on our ability to attract, retain, and motivate additional skilled management personnel and other team members.
+Added: For example, competition for qualified personnel in our field is intense due to the limited number of individuals who possess the skills and experience required by our industry, particularly in technology-related fields where we have recently experienced significant turnover.
+Added: New hires require significant training and, in most cases, take significant time before they achieve full productivity.
+Added: 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.
+Added: If our retention efforts are not successful or our team member turnover rate increases in the future, our business, results of operations and financial condition could be materially and adversely affected.
+Added: 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.
+Added: We believe that a critical component to our success has been our corporate culture.
+Added: We have invested substantial time and resources in building our team.
+Added: 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.
+Added: In addition, it is difficult to instill our culture in our now predominantly remote workforce.
+Added: 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.
Risks relating to our partners and service providers
If our Network Partners choose to partner with other providers of, or otherwise reduce offering or cease to offer, our products and services, our business could be materially and adversely affected.
−Removed: Our business depends on our Network Partners’ willingness to partner with us to offer their customers and/or employees our products and services.
+Added: Our business increasingly depends on our Network Partners’ willingness to partner with us to offer their customers and/or employees our products and services.
In particular, certain of our Network Partners enjoy significant market share in various geographic regions.
−Removed: 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.
+Added: In other geographies, we have multiple Network Partners that compete against each other for the same business, which at times results in our inability to bid for certain business or 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.
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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.
−Removed: 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.
−Removed: 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.
+Added: In the past, certain of these service providers have failed to maintain adequate levels of support, did not provide high quality service to us and our members, increased the fees they charge us, discontinued their lines of business, terminated our contractual arrangements or ceased or reduce operations, and as a result, we suffered additional costs and were required to pursue new third-party relationships, which resulted in reputational harm, material disruption of our operations and our ability to provide our products and services, missed service-level agreements with Clients and Network Partners, and diverted management’s time and resources, and these events and consequences could happen with our current vendors moving forward.
+Added: Transitioning to a new vendor often takes 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.
−Removed: 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.
−Removed: 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.
−Removed: Such impacts could have a material and adverse impact on our business, results of operations and financial condition.
Growth-related risks
+Added: Our acquisition strategy may not be successful.
+Added: 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 would complement or expand our products and services, enhance our technical capabilities, or otherwise offer growth opportunities.
+Added: 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.
+Added: The pursuit of potential acquisitions has in the past, and may in the future, 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.
+Added: 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 that are not discovered by due diligence during the acquisition process.
+Added: Generally, if an acquisition fails to meet our expectations, our operating results, business, and financial condition may suffer.
+Added: Certain of our past acquisitions also resulted in dilutive issuances of equity securities and the incurrence of additional debt, and future acquisitions could result in additional 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 not be able to operate, integrate, and scale our technology effectively to match our business growth.
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We test our goodwill for impairment each fiscal year, but we also test goodwill and other intangible assets for impairment at any time when there is a change in circumstances that indicates that the carrying value of these assets may be impaired.
+Added: This is particularly relevant to us given our recent acquisition history and the amount of goodwill and intangible assets on our balance sheet associated with those acquisitions.
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.
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• 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;
−Removed: • our interest expense could increase if interest rates increase because any outstanding borrowings under our Credit Facilities will be based on variable interest rates;
−Removed: • 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
−Removed: available, the interest rates we pay may be adversely affected as a result of potential disruptions in connection with the LIBOR phase-out;
+Added: • our interest expense has increased substantially, and could continue to increase, if interest rates continue to increase, because any outstanding borrowings under our Credit Facilities are based on variable interest rates;
+Added: • 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;
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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.
−Removed: 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.
+Added: 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.
+Added: 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.
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General risk factors
−Removed: Our ability to secure insurance may not be sufficient to cover potential liabilities.
−Removed: We maintain various forms of liability insurance coverage, including coverage for errors and omissions, fiduciary, cybersecurity, employment practices, and directors and officers insurance.
−Removed: It is possible, however, that claims could exceed the amount of our applicable insurance coverage, if any, or that this coverage may not continue to be available on acceptable terms or in sufficient amounts.
−Removed: Even if these claims do not result in liability to us, investigating and defending against them could be expensive and time-consuming and could divert management’s attention away from our operations.
−Removed: In addition, negative publicity caused by these events may affect the current market acceptance of our products and services, any of which could materially adversely affect our reputation and our business.
−Removed: 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.
−Removed: 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.
−Removed: Such events may have an adverse effect on the economy in general.
−Removed: 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.
−Removed: The effect of any of these events or threats could have a material adverse effect on our business, financial condition, and results of operations.
−Removed: Our quarterly operating results may fluctuate significantly from period to period, which could adversely impact the value of our common stock.
−Removed: Our quarterly operating results, including our revenue, gross profit, net income, and cash flows, and certain non-GAAP measures such as EBITDA and Adjusted EBITDA, may vary significantly in the future, which could cause our stock price to decline rapidly, may lead analysts to change their long-term models for valuing our common stock, could cause short-term liquidity issues, may impact our ability to retain or attract key personnel or cause other unanticipated issues.
−Removed: If our quarterly operating results or guidance fall below the expectations of research analysts or investors, the price of our common stock could decline substantially.
−Removed: Our quarterly operating expenses and operating results may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful.
−Removed: You should not rely on the results of one quarter as an indication of future performance.
−Removed: We do not intend to pay regular cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
−Removed: We have no current plans to declare and pay any cash dividends for the foreseeable future.
−Removed: We currently intend to retain all our future earnings, if any, to fund our growth.
−Removed: 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
−Removed: upon any future appreciation in its value.
−Removed: 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.
+Added: Natural disasters, pandemics or other epidemics, acts of terrorism, acts of war, adverse economic conditions, and other unforeseen events, may cause damage or disruption to us or our customers.
+Added: Natural disasters, pandemics or other epidemics, 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 and its impact on our labor and third-party vendor costs), 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, which could in turn have a material adverse effect on our business, financial condition, and results of operations.
+Added: For example, the recent COVID-19 pandemic resulted in significant disruptions to our business, operations and products, and the societal changes arising out of the COVID-19 pandemic may have long-term impacts on certain of our products, such as our commuter product .
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
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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.