Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures
Management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of January 31, 2023, the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on such evaluation, our CEO and our CFO have concluded that as of January 31, 2023, the Company's disclosure controls and procedures were effective at the reasonable assurance level.
Management's report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2023 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) (“COSO Framework”) .
Based on that assessment, management has concluded that, as of January 31, 2023, the Company’s internal control over financial reporting was effective.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of January 31, 2023. Its report appears in Part II, Item 8 of this Annual Report on Form 10-K.
Remediation of Previously Reported Material Weakness
As previously reported, the WageWorks subsidiary had material weaknesses related to process level and monitoring controls in the areas of the contract-to-cash process and information technology general controls (ITGCs).
During the fiscal year ended January 31, 2023, the Company completed the following remedial actions designed to address the previously identified material weakness in the contract-to-cash process:
• incorporated certain WageWorks processes into the Company’s process-level controls, including implementing complex and/or non-standard billing arrangements;
• executed its plan to consolidate service platforms related to the contract-to-cash cycle, which reduced a significant number of manual business process controls;
• completed its redesign of existing controls, where applicable, and implemented additional controls to further strengthen the control environment;
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• formalized the assessment of the relevancy of information and data used in key controls, including the design or augmentation of controls to incorporate the review of the accuracy and completeness of such items; and
• monitored the operating effectiveness of the existing entity-level controls.
During the fiscal year ended January 31, 2023, the Company completed the following remedial actions designed to address the previously identified material weakness in ITGCs:
• executed its plan to consolidate service platforms related to the contract-to-cash cycle, which reduced the number of ITGCs in the areas of logical access and change management;
• completed its redesign of existing controls, where applicable, and implemented additional controls to further strengthen the control environment;
• implemented enhancements to monitor design and operating effectiveness of controls related to logical access and change management for relevant applications and systems;
• implemented recurring training of control owners on the appropriate evidence and documentation for IT dependencies and logical access controls; and
• monitored the operating effectiveness of the process-level and redesigned controls.
Management evaluated the design and operating effectiveness of the process level controls associated with the remediation activities above. Management has concluded that, as of January 31, 2023, such controls are operating effectively and the previously reported material weaknesses in the contract-to-cash process and ITGCs have been remediated.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended January 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other information
None.
Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections
Not applicable.
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PART III.
Item 10. Directors, executive officers and corporate governance
The information required by this Item 10 of Form 10-K is found in our 2023 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company's 2023 Annual Meeting of Stockholders is incorporated by reference to our 2023 Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates.
Code of business conduct and ethics
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our team members, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. The full text of our Code of Business Conduct and Ethics is posted on our website at www.healthequity.com in the Corporate Governance section of our Investor Relations webpage. We intend to post any amendments to our Code of Business Conduct and Ethics, and any waivers of our Code of Business Conduct and Ethics for directors and executive officers, on the same website.
Item 11. Executive compensation
The information required by this Item 11 of Form 10-K is incorporated by reference in our 2023 Proxy Statement.
Item 12. Security ownership of certain beneficial owners and management and related stockholder matters
The information required by this Item 12 of Form 10-K is incorporated by reference in our 2023 Proxy Statement.
Item 13. Certain relationships and related transactions, and director independence
The information required by this Item 13 of Form 10-K is incorporated by reference in our 2023 Proxy Statement.
Item 14. Principal accounting fees and services
The information required by this Item 14 of Form 10-K is incorporated by reference in our 2023 Proxy Statement.
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Part IV.
Item 15. Exhibits, financial statement schedules
(a) Documents filed as part of this report
(1) All financial statements
Index to consolidated financial statements Page
Consolidated balance sheets as of January 31, 2023 and 2022
52
Consolidated statements of operations and comprehensive income (loss) for the years ended January 31, 2023, 2022 and 2021
53
Consolidated statements of stockholders' equity for the years ended January 31, 2023, 2022 and 2021
54
Consolidated statements of cash flows for the years ended January 31, 2023, 2022 and 2021
55
Notes to consolidated financial statements
57
(2) Financial statement schedules
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K.
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(3) Exhibits required by Item 601 of Regulation S-K
Exhibit Index
Incorporated by reference
Exhibit
no. Description Form File No. Exhibit Filing Date
3.1 Amended and Restated Certificate of Incorporation of the Company
8-K 001-36568 3.2 July 6, 2018
3.2 Amended and Restated By-laws of the Company
8-K 001-36568 3.1 February 10, 2023
4.1 Description of Securities of the Company
10-K 001-36568 4.1 March 31, 2020
4.2 Form of Common Stock Certificate.
S-1/A 333-196645 4.1 July 16, 2014
4.3 Amended and Restated Registration Rights Agreement, dated August 11, 2011, by and among the Company and certain of its stockholders.
S-1 333-196645 4.2 June 10, 2014
4.4 Indenture, dated as of October 8, 2021, by and among the Company, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, including the form of 4.500% Senior Notes due 2029
8-K 001-36568 4.1 October 12, 2021
10.1 Form of Indemnification Agreement by and between the Company and its directors and officers.
S-1/A 333-196645 10.1 July 16, 2014
10.2† HealthEquity, Inc. 2014 Equity Incentive Plan and Form of Award Agreement.
S-1 333-196645 10.2 June 10, 2014
10.3† HealthEquity, Inc. 2014 Amended and Restated Equity Incentive Plan and Form of Award Agreement.
S-1/A 333-196645 10.3 July 16, 2014
10.4† Amendment No. 1 to the HealthEquity 2014 Equity Incentive Plan, as amended and restated
8-K 001-36568 10.3 August 30, 2019
10.5† Restricted Stock Unit Award Agreement
10-Q 001-36568 10.4 December 6, 2018
10.6† Restricted Stock Award Agreement
10-K 001-36568 10.30 March 28, 2019
10.7† HealthEquity, Inc. and WageWorks, Inc. 2010 Equity Incentive Plan (Amended and Restated in August 2019)
8-K 001-36568 10.2 August 30, 2019
10.8† Forms of Stock Option Agreements under the HealthEquity, Inc. and WageWorks, Inc. Amended and Restated 2010 Equity Incentive Plan
S-1 333-173709 10.3 July 19, 2011
10.9† HealthEquity, Inc. Section 409A Specified Employee Policy.
S-1 333-196645 10.23 June 10, 2014
10.10† Employment Agreement, dated June 10, 2014, by and between the Company and Jon Kessler.
S-1 333-196645 10.24 June 10, 2014
10.11† Amendment No. 1 to Employment Agreement between the Company and Jon Kessler, dated April 1, 2017
10-Q 001-36568 10.2 June 4, 2020
10.12† Employment Agreement, dated June 10, 2014, by and between the Company and Stephen D. Neeleman, M.D.
S-1 333-196645 10.25 June 10, 2014
10.13† Employment Agreement, dated June 25, 2020, by and between the Company and Tyson Murdock
8-K 001-36568 10.1 April 1, 2021
10.14† Employment Agreement, dated May 15, 2018, by and between the Company and Edward R. Bloomberg
10-Q 001-36568 10.1 September 6, 2018
10.15† Employment Agreement, dated November 9, 2018, by and between the Company and Larry Trittschuh
10-K 001-36568 10.17 March 31, 2022
10.16† Amendment No. 1 to Employment Agreement, dated December 4, 2018, by and between the Company and Larry Trittschuh
10-K 001-36568 10.18 March 31, 2022
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Incorporated by reference
Exhibit
no. Description Form File No. Exhibit Filing Date
10.17†+ Amendment No. 2 to Employment Agreement, dated December 31, 2022, by and between the Company and Larry Trittschuh
10.18†+ Employment Agreement, dated January 19, 2022, by and between the Company and Elimelech Rosner
10.19 Lease Agreement, dated May 15, 2015, by and between the Registrant and BG Scenic Point Office 2, L.C.
10-Q 001-36568 10.1 June 11, 2015
10.20 Amended and Restated Lease Agreement, dated May 15, 2015, by and between the Registrant and BG Scenic Point Office 1, L.C.
10-Q 001-36568 10.2 June 11, 2015
10.21 First Amendment to Lease Agreement, dated November 3, 2015, by and between the Company and the Landlord.
10-Q 001-36568 10.1 December 8, 2016
10.22 First Amendment to Amended and Restated Lease Agreement, dated June 1, 2016, by and between the Company and the Landlord.
10-Q 001-36568 10.1 June 8, 2017
10.23 Second Amendment to Lease Agreement, dated September 16, 2016, by and between the Company and the Landlord.
10-Q 001-36568 10.2 December 8, 2016
10.24 Second Amendment to Amended and Restated Lease Agreement, dated May 31, 2017, by and between the Company and the Landlord.
10-Q 001-36568 10.2 June 8, 2017
10.25 Third Amendment to Lease Agreement, dated September 26, 2018, by and between the Company and the Landlord
10-K 001-36568 10.31 March 28, 2019
10.26 Lease Agreement, dated September 27, 2018, by and between the Company and the Landlord
10-Q 001-36568 10.1 December 6, 2018
10.27 Third Amendment to Amended and Restated Lease Agreement, dated September 27, 2018, by and between the Company and the Landlord
10-Q 001-36568 10.2 December 6, 2018
10.28 Fourth Amendment to Lease Agreement, dated September 27, 2018, by and between the Company and the Landlord
10-Q 001-36568 10.3 December 6, 2018
10.29 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
10.30+ Non-Employee Director Compensation Policy
21.1 List of Subsidiaries
10-K 001-36568 21.1 March 31, 2022
23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
24.1+ Power of Attorney (included in the signature page to this Annual Report).
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
31.2+ Certification of the Principal Financial 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
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Incorporated by reference
Exhibit
no. Description Form File No. Exhibit Filing Date
32.1*# Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*# Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†† XBRL Instance document
101.SCH†† XBRL Taxonomy schema linkbase document
101.CAL†† XBRL Taxonomy calculation linkbase document
101.DEF†† XBRL Taxonomy definition linkbase document
101.LAB†† XBRL Taxonomy labels linkbase document
101.PRE†† XBRL Taxonomy presentation linkbase document
104 The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023, formatted in Inline XBRL.
+ Filed herewith
* Furnished herewith
# 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.
† Indicates management contract or compensatory plan.
††
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections.
** 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.
Item 16. Form 10-K Summary
None.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Draper, State of Utah on this 30th day of March, 2023.
HEALTHEQUITY, INC.
Date: March 30, 2023 By: /s/ Jon Kessler
Name: Jon Kessler
Title: President and Chief Executive Officer
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Power of attorney
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below hereby constitutes and appoints Jon Kessler and Tyson Murdock, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, with full power of each to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or her or their substitutes, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 30, 2023 By: /s/ Robert Selander
Name: Robert Selander
Title: Chairman of the Board, Director
Date: March 30, 2023 By: /s/ Jon Kessler
Name: Jon Kessler
Title: President and Chief Executive Officer (Principal Executive Officer), Director
Date: March 30, 2023 By: /s/ Tyson Murdock
Name: Tyson Murdock
Title: Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date: March 30, 2023 By: /s/ Paul Black
Name: Paul Black
Title: Director
Date: March 30, 2023 By: /s/ Frank Corvino
Name: Frank Corvino
Title: Director
Date: March 30, 2023 By: /s/ Adrian Dillon
Name: Adrian Dillon
Title: Director
Date: March 30, 2023 By: /s/ Evelyn Dilsaver
Name: Evelyn Dilsaver
Title: Director
Date: March 30, 2023 By: /s/ Debra McCowan
Name: Debra McCowan
Title: Director
Date: March 30, 2023 By: /s/ Rajesh Natarajan
Name: Rajesh Natarajan
Title: Director
Date: March 30, 2023 By: /s/ Stephen Neeleman
Name: Stephen Neeleman, M.D.
Title: Vice Chairman and Director
Date: March 30, 2023 By: /s/ Stuart Parker
Name: Stuart Parker
Title: Director
Date: March 30, 2023 By: /s/ Ian Sacks
Name: Ian Sacks
Title: Director
Date: March 30, 2023 By: /s/ Gayle Wellborn
Name: Gayle Wellborn
Title: Director
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