What changed in this filing

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Item 1. Business

2024-03-22 compared with 2023-03-30 · 134 added, 115 removed, 241 unchanged (51% of the section changed)

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We use our innovative technology to manage consumers' tax-advantaged health savings accounts (“HSAs”) and other consumer-directed benefits (“CDBs”) offered by employers, including flexible spending accounts and health reimbursement arrangements (“FSAs” and “HRAs”), and to administer Consolidated Omnibus Budget Reconciliation Act (“COBRA”), commuter and other benefits.

As part of our services, we provide consumers with healthcare bill evaluation and payment processing services, personalized benefit information, including information on treatment options and comparative pricing, access to remote and telemedicine benefits, the ability to earn wellness incentives, and investment advice to grow their tax-advantaged healthcare savings.

As part of our services, we provide consumers with payment processing services, personalized benefit information, the ability to earn wellness incentives, and investment advice to grow their tax-advantaged healthcare savings.

We believe the shift to greater consumer responsibility for healthcare costs will require a significant portion of consumers under the age of 65 with private health insurance in the United States to use offerings such as ours.

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We reach Clients primarily through relationships with benefits brokers and advisors, integrated partnerships with a network of health plans, benefits administrators, benefits brokers and consultants, and retirement plan recordkeepers, which we call Network Partners, and a sales force that calls on Clients directly.

As of January 31, 2023, our platforms were integrated with more than 200 Network Partners, and we serve more than 120,000 Clients.

We have increased our share of the growing HSA market from 4% in December 2010 to 20% as of December 2022, measured by HSA Assets.

According to Devenir, as of December 2022, we are the largest HSA provider by both accounts and HSA Assets.

As of January 31, 2024, our platforms were integrated with more than 200 Network Partners.

We have increased our share of the growing HSA market from 4% in December 2010 to 20% as of June 2023, measured by HSA Assets.

According to Devenir, as of June 2023, we were the largest HSA provider by both accounts and HSA Assets.

In addition, we believe we are the largest provider of other CDBs.

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We earn service revenue mainly from fees paid by our Network Partners, Clients, and members for the administration services we provide in connection with the HSAs and other CDBs we offer.

We earn custodial revenue mainly from HSA Assets held at our members’ direction in federally insured cash deposits, insurance contracts or mutual funds, and from investment of Client-held funds, which are deposits remitted by Clients and held by us on their behalf to pre-fund and facilitate administration of CDBs.

We earn custodial revenue primarily from HSA cash held by our federally insured bank and credit union partners, which we collectively call our Depository Partners, HSA cash held by our insurance company partners, and Client-held funds deposited with our Depository Partners.

We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system.

See “Key components of our results of operations” for additional information on our sources of revenue, including the adverse impacts caused by the societal and economic changes arising out of the COVID-19 pandemic.

See “Key components of our results of operations” for additional information on our sources of revenue.

Recent acquisitions

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(“HealthSavings”) HSA portfolio, which consisted of $1.3 billion of HSA Assets held in approximately 87,000 HSAs in exchange for a purchase price of $60 million in cash.

BenefitWallet HSA portfolio acquisition.

In September 2023, we entered into an agreement to acquire the BenefitWallet HSA portfolio from Conduent Business Services, LLC, for a purchase price of $425.0 million and reimbursement of up to $20.0 million of Conduent's transfer-related expenses.

In addition, we expect to incur approximately $7.0 million of transaction costs associated with the acquisition.

The agreement contemplates a transfer of approximately 665,000 customer accounts and their approximately $2.8 billion of HSA Assets and includes a mechanism to adjust the purchase price based on the amount of HSA Assets actually transferred.

The transfer is expected to close in multiple tranches during the first half of fiscal 2025, subject to the satisfaction of certain customary closing conditions.

We expect to pay approximately 50% of the purchase price and associated costs using cash on hand, with the remainder paid using our revolving credit facility with the actual percentages to be determined in connection with the payment for each tranche.

On March 7, 2024, the first of the three HSA Asset transfers occurred, with approximately 266,000 HSAs and $1.1 billion of HSA Assets transferring to HealthEquity’s custody.

In connection with this transfer, HealthEquity paid the applicable purchase price of $163.9 million using cash on hand.

Our products and services

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Investment platform and advisory services.

We offer a mutual fund investment platform and access to an online-only automated investment advisory service to all of our members whose account balances exceed a stated threshold.

We offer an investment platform and access to an online-only automated investment advisory service to all of our members whose account balances exceed a stated threshold.

These services are entirely elective to the member.

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HealthEquity Advisors, LLC provides investment advice to its clients exclusively through the Advisor tool on an interactive website.

Members who utilize our mutual fund investment platform or subscribe for Advisor services pay asset-based fees, which include the cost of the advisory service and all other expenses associated with transactions made through these online tools.

Members who utilize our investment platform or subscribe for Advisor services pay asset-based fees, subject to a monthly fee cap, which include the cost of the advisory service and all other expenses associated with transactions made through these online tools.

Advisor provides investment education guidance and management, including maintaining HSA cash (liquidity) in amounts directed by the member, targeting risk appropriate portfolio diversification, and mutual fund selection.

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• Self-driven:

For members who do not subscribe for Advisor, we provide a mutual fund investment platform to invest HSA balances.

For members who do not subscribe for Advisor, we provide an investment platform to invest HSA balances.

Neither we nor Advisor provides advice to members in respect of investments among funds on the platform;

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Healthcare FSAs are employer-sponsored CDBs that enable employees to set aside pre-tax dollars to pay for eligible healthcare expenses that are not generally covered by insurance, such as co-pays, deductibles and over-the-counter medical products, as well as vision expenses, orthodontia, and medical devices.

Healthcare FSAs can be customized by employers so they have the freedom to

determine what eligible expenses may be reimbursed under these arrangements.

Healthcare FSAs can be customized by employers so they have the freedom to determine what eligible expenses may be reimbursed under these arrangements.

Our employer Clients also realize payroll tax (i.e., FICA and Medicare) savings on the pre-tax contributions made by their employees.

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All amounts paid by employers into HRAs are deductible for tax purposes by the employer and tax-free to the employee.

We offer COBRA continuation services to employer clients to meet the employer’s obligation to make available continuation of coverage for participants who are no longer eligible for the employer’s COBRA covered benefits, which include medical, dental, vision, HRAs and certain healthcare FSAs.

We offer federal COBRA and state continuation services to employer clients to meet the employer’s obligation to make available continuation of coverage for participants who are no longer eligible for the employer’s COBRA covered benefits, which include medical, dental, vision, HRAs, and certain healthcare FSAs.

COBRA requires employers to make health coverage available for qualified beneficiaries for a period of up to 36 months post-termination.

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The maximum monthly federal (and sometimes state) tax free exclusion is indexed for inflation.

For 2023, the maximum pre-tax monthly limits are $300 for qualified transit and $300 for qualified parking.

Our Luum technology platform provides employers with various commuter services, including access to real-time commute data, to help them design and implement flexible return-to-office and hybrid-workplace strategies and benefits.

Our technology

Technology platforms.

We provide multiple cloud-based platforms, accessed by our members online via a desktop or mobile device, through which individuals can make health saving and spending decisions, pay healthcare bills, compare treatment options and prices, receive personalized benefit and clinical information, earn wellness incentives, grow their savings and make investment choices.

The platforms provide users with access to services we provide as well as services provided by third parties selected by us or by our Network Partners.

Our delivery model for these platforms eliminates the need for our Clients to install and maintain hardware and software in order to support HSA and other CDB programs and enables us to rapidly implement product enhancements across our entire user base.

Among other features, our HSA platform includes the capability to present to users medical bills upon adjudication by a health plan, including details such as the amount paid by insurance, specific nature of the medical service provided, and diagnostic code.

Users of our HSA platform can pay these bills from an account of ours or from any bank account, online, via a mobile device, or using our payment card.

All users of our HSA platform gain access to our healthcare consumer specialists, available every hour of every day, via a toll-free telephone number or email.

Our specialists can assist users with such tasks as optimizing the use of tax-advantaged accounts to reduce medical spending or selecting from among medical plans offered by an employer or health plan.

We acquired an additional technology platform as part of the Luum Acquisition, which provides Clients with various commuter services, including access to real-time commute data, to help Clients design and implement flexible return-to-office and hybrid-workplace strategies and benefits.

As of January 31, 2023, we had substantially completed our efforts to phase out certain technology platforms that we acquired in the acquisition of our wholly owned subsidiary, WageWorks, Inc.

(the "WageWorks Acquisition"), and migrate the associated clients to one of our other technology platforms.

We are working to phase out a technology platform that we acquired in the Further Acquisition, which requires us to migrate the associated clients to one of our other technology platforms.

Cloud-based solution.

Our proprietary technology is deployed as a cloud-based solution that is accessible to customers online and through our mobile app.

We utilize a multi-tenant architecture that allows changes made for one Network Partner to be extended to all others.

This architecture provides operating leverage by reducing costs and improving efficiencies, enabling us to maximize the utilization of our infrastructure capacity with a reduction in required maintenance.

We are increasing investment in our technology and communications systems to support new opportunities and enhance security, privacy, and platform infrastructure.

Our solution is delivered via cloud-based services and hosted in third-party data centers or on a virtual private cloud with an ability to scale on demand.

This allows us to quickly support our current and projected growth.

We utilize regional cloud failover and multiple redundant third-party data centers to ensure continuous access and data availability.

The data centers are purpose-built facilities for hosting mission critical systems with multiple built-in redundancy layers to minimize service disruptions and meet industry-standard measures.

Data security and protection.

Due to the sensitive nature of our customers’ data that we hold, we have a heightened focus on data security and protection.

We maintain administrative, technical, and physical safeguards designed to protect confidential data.

Our Risk and Security team identifies security risks by working with state and federal law enforcement, security information-sharing organizations, and 24/7 system surveillance through internal and external detection and response teams.

In the event a security risk is detected, or a breach occurs, we are prepared with appropriate response protocols based on National Institute of Standards & Technology ("NIST") guidelines.

Our Security Incident Response Plan defines roles and responsibilities, incident severity levels, key contacts, post-incident steps, and guidelines for testing.

Our procedures cover response steps for phishing attacks, ransomware, data breaches, and major vulnerabilities.

Lastly, we have an organic threat model that evaluates our security controls to help protect against attacker tactics, techniques, and procedures.

To help ensure our approach to customer privacy and security is effective and in line with industry standards, we follow risk management standards established by the Statement on Standards for Attestation Engagements 18 (SSAE-18) and Service and Organization Controls (SOC 1 and 2) reporting.

Our competitive landscape

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In addition, numerous indirect competitors, including benefits administration service providers, partner with banks and other HSA custodians to compete with us.

Our Network Partners may also choose to offer competitive services directly, as some health plans have done.

Our Network Partners and ecosystem partners may also choose to offer competitive services directly, as some health plans have done.

Our success depends on our ability to predict and react quickly to these and other industry and competitive dynamics.

As a result of the societal and economic changes arising out of the COVID-19 pandemic, we have seen a significant decline in the use of commuter benefits due to many of our members working from home, which has negatively impacted both our interchange revenue and service revenue, and this "work from home" trend, or hybrid work environments, may continue indefinitely.

Our competitive strengths and strategy

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Market leadership.

We have established a defensible leadership position in the HSA industry through our focus on innovation and differentiated capabilities.

Our leadership position is evidenced by the increase in our market share (measured by HSA Assets), from 4% in December 2010 to 20% in December 2022, as reported in the 2022 year-end Devenir HSA Research Report, which indicates we are the largest HSA custodian measured by both accounts and HSA Assets.

We have established a leadership position in the HSA industry through our focus on innovation and differentiated capabilities.

Our leadership position is evidenced by the increase in our market share (measured by HSA Assets), from 4% in December 2010 to 20% in June 2023, as reported in the June 2023 Devenir HSA Research Report, which indicates we are the largest HSA custodian measured by both accounts and HSA Assets.

Differentiated consumer experience.

We have designed our solution and support services to deliver a differentiated consumer experience, which is a function of our culture and technology.

We believe this provides an advantage relative to legacy competitors, which we believe prioritize transaction processing and benefits administration.

We call our culture "Purple," which we define by our four Purple values — Do the Right Thing, Be Remarkable, Make a Difference, and Celebrate People.

We believe this provides an advantage relative to legacy competitors.

We seek to provide remarkable experiences for our members, Clients and Network Partners through what we call our "Purple" service.

We believe our Purple culture is a significant factor in our ability to attract and retain customers and to address opportunities in the rapidly changing healthcare sector.

• Technology:

Our technology helps us deliver on our commitment to provide Purple service.

We believe our technology helps us drive member outcomes and deliver on our commitment to provide Purple service.

We tailor the content of our technology platforms and the guidance of our experts to be timely, personal, and relevant to each member.

For example, our technology generates health savings strategies that are delivered to our members when they interact with our platforms or call us.

For example, our technology generates health savings strategies that are delivered to our members when they interact with our platforms or contact us.

• Customer service and education:

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Our Clients and their benefits advisors increasingly seek HSA providers that can deliver an integrated offering of HSAs and complementary CDBs.

With our CDB capabilities, we can provide employers with a single partner for both HSAs and complementary CDBs, which is preferred by the vast majority of employers, according to research conducted for us by Aite Group.

We believe that the combination of HSA and complementary CDB offerings significantly strengthens our value proposition to employers, health benefits brokers and consultants, and Network Partners as a leading single-source provider.

We believe that our ability to provide a combination of HSA and complementary CDB offerings significantly strengthens our value proposition to employers, health benefits brokers and consultants, and Network Partners as a leading single-source provider.

Large and diversified channel access.

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Health plan Network Partners have been, and continue to be, a key channel through which we gain access to Clients and members.

The Further Acquisition expanded the number of health plan Network Partners with which we work and is providing greater access to clients and members.

We work directly with our Network Partners and Clients to reach the consumer in various ways.

Our health plan and administrator partners collectively employ thousands of sales representatives and account managers who promote both the health plan and administrator partner’s health insurance products, such as HDHPs, and our HSAs.

Our Network Partners collectively employ thousands of sales representatives and account managers who promote both the health plan and administrator partner’s health insurance products, such as HDHPs, and our products and services.

Our Clients collectively employ thousands of human resources professionals who are tasked with explaining the benefits of our HSAs to their employees.

Our sales and account management teams work with and train the sales representatives and account management teams of our Network Partners and the human resource professionals of our Clients on the benefits of enrolling in, contributing to, and saving and spending through our HSAs, and our Network Partners and Clients then convey these benefits to prospective members.

As a result of this collaboration,

we develop relationships with each member who enrolls in an HSA with us.

Our sales and account management teams work with and train the sales

representatives and account management teams of our Network Partners and the human resource professionals of our Clients on the benefits of enrolling in, contributing to, and saving and spending through our HSAs, and our Network Partners and Clients then convey these benefits to prospective members.

As a result of this collaboration, we develop relationships with each member who enrolls in an HSA with us.

This personalized engagement with our members constitutes our B2B2C channel strategy.

Proprietary and integrated technology solution.

We have a proprietary cloud-based technology solution, developed and refined during more than a decade of operations, which we believe is differentiated in the marketplace for a number of key reasons:

We have a proprietary cloud-based technology solution, which we believe is differentiated in the marketplace for the key reasons described below.

We are currently investing in a significant modernization of our proprietary technology platforms to support new opportunities and enhance security, privacy and platform infrastructure, while maintaining existing applications, features, and services.

• Complete solution for managing consumer healthcare saving and spending:

Our members utilize our technology platforms in a number of ways and in varying frequencies.

We believe our technology platforms drive member outcomes by enabling our members to use this technology based on their own needs and desires.

For example, our members utilize our HSA platform to evaluate and pay healthcare bills through the member portal, which allows members to pay their healthcare providers, receive reimbursements and learn of savings opportunities for prescription drugs.

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• Purpose-built technology:

Our solution was designed specifically to serve the needs of healthcare consumers, health plans and employers.

We believe they provide greater functionality and flexibility than the technologies used by our competitors, many of which were originally developed for banking, benefits administration or retirement services.

We believe we are one of few providers with a solution that encompass all of the core functionality of healthcare saving and spending in integrated, secure, and compliant systems, including custodial administration of individual savings and investment accounts, card and electronic funds transaction processing, benefits enrollment and eligibility, electronic and paper medical claims processing, medical bill presentment, tax-advantaged reimbursement account and health incentive administration, HSA trust administration, online investment advice, and sophisticated analytics.

Our technology solution was designed specifically to serve the needs of our members, Network Partners, other ecosystem partners and our Clients.

We believe our technology enables us to both provide remarkable experiences and drive member outcomes by providing greater functionality and flexibility than the technologies used by our competitors, many of which were originally developed for banking, benefits administration or retirement services.

We believe we are one of few providers with a solution that encompasses all of the core functionality of healthcare saving and spending in one integrated, secure, and compliant system, including custodial administration of individual savings and investment accounts, card and electronic funds transaction processing, benefits enrollment and eligibility, electronic and paper medical claims processing, medical bill presentment, tax-advantaged reimbursement account and health incentive administration, HSA trust administration, online investment advice, and sophisticated analytics.

• Data integration:

Our technology solution allows us to integrate data from disparate sources, which enables us to seamlessly incorporate personal health information, clinical insight, and individually tailored strategies into the consumer experience.

We currently have more than 20,000 distinct integrations with health plans, pharmacy benefit managers, employers, and other benefits provider systems.

Many of our partners’ systems rely on custom data models, non-standard formats, complex business rules, and security protocols that are difficult or expensive to change.

Our technology solution allows us to integrate data from disparate sources, which enables us to seamlessly incorporate personal health information and individually tailored strategies into the consumer experience.

We utilize application programming interfaces (APIs) to integrate with health plans, pharmacy benefit managers, employers, and other benefits provider systems.

A key part of our strategy is to integrate into our partners' ecosystems, rather than requiring them to conform to ours, as many of our partners’ systems rely on custom data models, non-standard formats, complex business rules, and security protocols that are difficult or expensive to change.

We believe that this integration will enable us to deepen our partnerships with our Network Partners and other ecosystem partners.

• Configurability:

Our flexible technology solution enables us to create a unique solution for each of our Network Partners.

For example, a HealthEquity team member can readily configure product attributes, including integration with a partner’s chosen healthcare price transparency or wellness tools, single sign on, sales and broker support sites, branding, member communication, custom fulfillment and payment card, savings options and interest rates, fees, and mutual fund investment choices.

For example, a HealthEquity team member can configure product attributes, including integration with a partner’s chosen healthcare price transparency or wellness tools, single sign on, sales and broker support sites, branding, member communication, custom fulfillment and payment card, savings options and interest rates, fees, and investment choices.

• Innovation:

We continue to invest in technology solutions to meet the evolving needs of our Network Partners, Clients and members.

Our current innovation efforts include, among others, increasing member and client self-service capabilities, developing APIs, driving electronic communication rather than paper, increasing straight-through processing, improving overall process times utilizing both traditional robotic process automation, and increasingly through artificial intelligence ("AI") tools, leveraging stacked cards, and mobile wallet.

Scalable operating model.

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After initial on-boarding and a period of education, our service costs for any given customer typically decline over time.

Our opportunity to earn high-margin revenue from existing HSA members grows over time because as our HSA members’ balances grow, our custodial revenue is increased without equivalent incremental cost to us.

Our opportunity to earn high-margin revenue from existing HSA members grows over time because as our HSA members’ balances grow, our custodial revenue and recordkeeping and advisory service revenues are increased without equivalent incremental cost to us.

Enhanced Rates.

We partner with large, highly rated insurance company partners to hold, through group annuity contracts or other similar arrangements, HSA cash.

We refer to this as our Enhanced Rates offering.

Enhanced Rates is our default HSA cash offering, and a significant portion of new HSA cash is placed in Enhanced Rates.

An increase in the percentage of HSA cash held in our Enhanced Rates offering positively impacts our custodial

revenue, as we generally receive a higher yield on HSA cash held by our insurance company partners compared to cash held by our Depository Partners.

In addition, increased participation in our Enhances Rates offering reduces our exposure to short-term fluctuations in prevailing interest rates because contract repricing occurs gradually, at approximately 10% per year.

The percentage of HSA cash held in our Enhanced Rates offering has increased, and we expect that it will continue to increase.

Beginning in the fiscal year ending January 31, 2025, as our Basic Rates contracts expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates.

Strong retention rates.

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Selective acquisition strategy.

We have historically acquired HSA portfolios and businesses that strengthen our business.

We expect to continue this growth strategy and regularly evaluate opportunities.

We have historically acquired HSA portfolios and businesses that strengthen our service offerings.

We expect to continue this growth strategy, including through the BenefitWallet HSA portfolio acquisition, and are regularly engaged in evaluating different opportunities.

We have developed an internal capability to source, evaluate, and integrate acquisitions that have created value for stockholders.

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We believe they may look to divest these assets and, in certain cases, be limited from making acquisitions due to depository capital requirements.

Our technology

Technology platforms.

We provide multiple cloud-based platforms, accessed by our members online via a desktop or mobile device, through which our members can make health saving and spending decisions, pay healthcare bills, receive personalized benefit information, earn wellness incentives, grow their savings, and make investment choices.

The platforms provide users with access to services we provide as well as services provided by third parties selected by us or by our Network Partners.

Users of our HSA platform can pay these bills from an account of ours or from any bank account, online, via a mobile device, or using our payment card.

All users of our HSA platform gain access to our healthcare consumer specialists, available every hour of every day, via a toll-free telephone number or email.

Our commuter platform provides Clients with various commuter services, including access to real-time commute data, to help Clients design and implement flexible return-to-office and hybrid-workplace strategies and benefits.

We are working to phase out a technology platform that we acquired in the Further Acquisition, which requires us to migrate the associated Clients to one of our other technology platforms.

For a description of our cybersecurity risk management framework for our technology platforms, see Item 1C.

Cybersecurity.

Cloud-based solution.

Our proprietary technology is deployed as a cloud-based solution that is accessible to customers online and through our mobile app.

We utilize a multi-tenant architecture that allows changes made for one Network Partner to be extended to all others.

We are increasing investment in our technology and communications systems to support new opportunities and enhance security, privacy, and platform infrastructure.

Our solution is delivered via cloud-based services and hosted in third-party data centers or on a virtual private cloud with an ability to scale on demand.

This allows us to quickly support our current and projected growth.

We utilize regional cloud failover and multiple redundant third-party data centers to ensure continuous access and data availability.

The data centers are purpose-built facilities for hosting mission critical systems with multiple built-in redundancy layers to minimize service disruptions and meet industry-standard measures.

Government regulation

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IRS regulations

We are subject to applicable IRS regulations, which lay the foundation for tax savings and eligible expenses under the HSAs, HRAs, and FSAs we administer.

We are subject to applicable IRS regulations, which lay the foundation for tax savings and eligible expenses under the HSAs, HRAs, tax-advantaged commuter benefits, and FSAs we administer.

The IRS issues guidance regarding these regulations regularly.

In addition, we are subject to conflict of interest and other prohibited transaction rules that are enforced through excise

taxes under the Internal Revenue Code.

In addition, we are subject to conflict of interest and other prohibited transaction rules that are enforced through excise taxes under the Internal Revenue Code.

Although the excise taxes are enforced by the IRS, the underlying rules are promulgated by the Department of Labor.

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Department of Treasury to act as a passive non-bank custodian, which allows HealthEquity, Inc.

to hold custodial assets for individual account holders.

to custody HSA Assets for individual account holders.

In July 2017, HealthEquity, Inc.

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Department of Treasury to act as both a passive and non-passive non-bank custodian, which allows HealthEquity, Inc.

to hold custodial assets for individual account holders and use discretion to direct investment of such assets held.

to custody HSA Assets for individual account holders and use discretion to direct investment of such assets held.

As a passive and non-passive non-bank custodian, the Company must maintain net worth (assets minus liabilities) greater than 2% of passive custodial funds held at each fiscal year-end and 4% of the non-passive custodial funds held at each fiscal year-end in order to take on additional custodial assets.

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Privacy and data security regulations

In the provision of HSA custodial services and directed TPA services for FSAs and HRAs, we are subject to the Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act or GLBA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act), and similar state laws.

In the provision of HSA custodial services and directed third-party administration services for FSAs and HRAs, we are subject to the Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act or GLBA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act), and similar state laws.

GLBA imposes financial privacy and security requirements on financial institutions that relate to the collection, storage, use, and disclosure of an account holder’s nonpublic personal information.

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For example, nonpublic personal information includes information submitted by a prospective account holder in an application, an account holder’s name and contact information, and transaction information.

Because part of our business is the administration of financial products such as HSAs, we are required under the Consumer Financial Protection Bureau’s financial privacy rule under GLBA to send a notice of privacy practices to account holders and to comply with restrictions on the disclosure of nonpublic personal information to non-affiliated third parties.

Because part of our business is the administration of financial products such as HSAs, we are required under the Consumer Financial Protection Bureau’s financial privacy rule under GLBA to send a notice of our privacy practices to account holders and to comply with restrictions on the disclosure of nonpublic personal information to non-affiliated third parties.

We are also required under GLBA to establish reasonable administrative, technical, and physical safeguards to protect the security, confidentiality, and integrity of nonpublic personal information pursuant to the Federal Trade Commission’s safeguards rule.

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Both civil and criminal penalties apply for violating HIPAA, which may be enforced by both the Department of Health and Human Services’ Office for Civil Rights and state attorneys general.

Violations of HIPAA may also subject us to contractual remedies under the terms of agreements with covered entities.

Various states also have laws and regulations that impose additional restrictions on our collection, storage, and use of personally identifiable information.

Violations of HIPAA may also subject us to contractual remedies under the terms of business associate agreements with covered entities.

Various states also have laws and regulations that impose additional restrictions on our collection, storage, use, and disclosure of personal information.

Privacy regulation in particular has become a priority issue in many states and with the Federal government.

For example, the California Privacy Rights Act ("CPRA") became effective on January 1, 2023.

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.

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.

The Federal government is also considering legislative and regulatory proposals concerning data protection.

For example, the California Consumer Privacy Act (“CCPA”) protects certain privacy rights of California consumers and requires companies, such as ours, that process information on California residents, to make 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 private right of action for data breaches.

The CCPA does not generally apply to data subject to GLBA or HIPAA.

We expect further privacy requirements to be applicable to us as a result of additional recently passed, and likely upcoming, state privacy laws similar to CCPA, which may expand consumers’ rights with respect to their personal information.

Several of these

laws do not apply to entities or data subject to GLBA.

The Federal government is also considering legislative and regulatory proposals concerning privacy, data protection, and cybersecurity, which may require us to implement and maintain additional operational or compliance measures.

Our private-sector clients’ FSAs, HRAs, COBRA continuation insurance, and other account-based retirement plans are covered by the Employee Retirement Income Security Act of 1974, as amended, or ERISA, which governs “employee benefits plans.” Title I of ERISA does not generally apply to HSAs.

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and employers and third-party administrators that have authority or discretion over management, administration, or investment of plan assets are subject to fiduciary responsibility under ERISA.

requirements affect our FSAs, HRAs, and COBRA administration businesses.

ERISA's requirements affect our FSAs, HRAs, and COBRA administration businesses.

The Department of Labor can bring enforcement actions or assess penalties against employers, investment advisers, administrators, and other service providers for failing to comply with ERISA’s requirements.

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Human capital

HealthEquity is comprised of people dedicated to empowering consumers to connect health and wealth by delivering Purple service.

HealthEquity is comprised of people dedicated to empowering consumers to spend, save, and invest for healthcare by delivering Purple service.

We believe that our culture is a key differentiator that drives the success of our company through, among other things, attracting and retaining top talent.

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The Talent, Compensation and Culture Committee of our board of directors acts on behalf of the board to review and determine executive compensation plans, policies, and programs;

oversee the Company’s culture and related strategies,

programs, and risks;

oversee the Company’s culture and related strategies, programs, and risks;

and oversee the Company’s talent management, development, and retention efforts, including with respect to diversity and inclusion.

As of January 31, 2024, we had 3,126 full-time team members and 24 part-time team members.

As January 31, 2023, our team members had the following demographic characteristics:

Leadership Team People Leaders All HealthEquity

As of January 31, 2024, our team members had the following demographic characteristics:

Leadership Team (1) All Other

People Leaders All Other HealthEquity

Team Members (2)

Women 31 % 59 % 66 %

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People of color 18 % 26 % 37 %

Diversity and inclusion

We embrace diversity as a powerful strength.

We recognize the power of diverse workplaces to produce innovative ideas and foster a more productive work environment.

We also know that building a culture of inclusion and belonging for all team members helps promote their financial and emotional health, and answers a nationwide demand for employers such as ourselves that value diversity, equity, and inclusion ("DE&I").

Created Equal is our DE&I initiative.

Focused on rooting DE&I in all aspects of our Purple culture, Created Equal is committed to supporting process development that will allow all team members equal opportunity.

Created Equal is run by HealthEquity team members who identify opportunities, guide solutions, and hold the Company accountable in the integration of DE&I practices.

At the heart of our Created Equal efforts is the Created Equal Council, which is a group of cross-functional team members with representation from key stakeholder teams, including People, Legal, and Talent, who serve as an advisory body and provide research, recommendations, engagement support, and policy guidance to the Company.

The council works to integrate best DE&I practices into the policies, procedures, culture, and programs at HealthEquity.

Talent acquisition

Our commitment to DE&I remains integral to us, especially as we grow.

To sustain and strengthen our values-based culture of inclusion, our Talent Partner team and others are actively engaged in uprooting bias and centering DE&I in the talent acquisition process.

This begins with preparing our Talent Partner team with the latest information on DE&I in the workplace.

Each member of the Talent Partner team has successfully completed the “Diversity, Inclusion, and Belonging for All” course from LinkedIn, as well as the Harvard Implicit Bias Test focused on race, disability, and gender.

To aid in recruiting, the Talent Partner team is focused on developing relationships with diverse organizations to network, create awareness of HealthEquity, and share job postings.

The HealthEquity Talent Partner team is currently focused on making connections with groups focused on the following:

• Race and ethnicity

• Veteran and active-duty military status

(1) Our executive leadership team includes people in VP-level positions and above.

(2) Gender was not specified by 1% of team members included in this column.

Diversity, equity, and inclusion ("DE&I")

To reach our goals, we seek to create an environment that attracts, sustains, and fulfills our team members.

That starts with building and maintaining a diverse, equitable, and inclusive culture.

At HealthEquity, we embrace diversity as a strength.

We recognize the power of diverse workplaces to produce innovative ideas and foster a productive work environment.

The Created Equal Council, our DE&I initiative, is comprised of HealthEquity team members who identify opportunities, guide solutions, and hold the Company accountable in the integration of DE&I practices.

The Council is charged with researching, developing, and proposing mechanisms that will help create a supportive, positive, and inclusive work environment for all team members.

The Council has representatives from key stakeholder teams, including People and Legal.

Talent acquisition and team member development

Our People team seeks to attract, hire, and develop qualified candidates and team members.

HealthEquity has taken, and continues to take, steps to strengthen our talent:

• To improve the candidate experience and increase our focus on inclusive hiring practices, we created hiring committees within each department.

These hiring committees have been trained on, and employ, a competency-based structured interviewing framework.

• HealthEquity maintains its focus on DE&I across all departments and hierarchies by signing the Parity Pledge.

We committed to interviewing a diverse candidate for every Director-level position and above.

• We developed a Talent Partnership Program with our Employee Resource Groups (ERGs).

Started in 2023, each ERG has a dedicated Talent partner who is responsible for sharing talent acquisition news and opportunities.

• We continued an early career internship program, offering 22 positions across two key areas:

corporate business functions and technology.

To foster diversity and inclusion, we established partnerships with prominent schools classified as Historically Black Colleges and Universities (HBCUs) and Hispanic Serving Institutions (HSIs) in regions where our presence is strongest.

• We built a library of resources for our “Grow Your Career” series with the Talent Partner and Talent Operations teams.

This includes guides on how to write resumes, create a social media presence, and prepare for interviews to support team member development.

• We run the Temporary On-Project Specialist (TOPS) program, which allows Member Service Specialists to experience working in other areas of the business.

Selected individuals are able to support areas that need help while gaining experience that can assist with their personal and professional goals.

• We are implementing a leadership development program to improve team member engagement and productivity.

Pay equity is a crucial metric in assessing diversity and equal opportunity at HealthEquity.

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We also consider team member engagement an important metric of our organizational health.

We seek team member feedback, measure team member engagement, and measure our team member Net Promoter Score℠, or NPS ® , twice a year through a survey.

The team member NPS framework surveys team members to generate a total score based on the percentage of those who are promoters (responding with a score of 9 or 10), passives (a score of 7 or 8), and detractors (a score of 0 to 6).

Scores are calculated by subtracting the percentage of detractors from the percentage of promoters (the percentage of passives is not used in the formula).

Team member NPS scores can range from -100 to 100.

As of January 31, 2023, our team member NPS was 42, an increase of five points year over year and based on a participation rate of 83 percent.

Out of all responders, 58 percent were promoters, an increase of 3% year over year, 26 percent were passives, a decrease of 1% year over year, and 16 percent were detractors, a decrease of 2% year over year.

We regularly seek team member feedback and measure engagement, previously through the Net Promoter Score℠, or NPS ® , survey, which was performed twice a year.

As our Company continues to mature, we have shifted to measuring team member engagement three times per year through a survey which contains three engagement key performance indicators (KPIs) that we believe provide a comprehensive measure of team member engagement.

The KPIs are designed to determine whether our team members recommend HealthEquity as a great place to work, whether their work gives them a sense of accomplishment, and whether they are motivated to go above and beyond in their work.

As of January 31, 2024, our team member engagement score was 80.7% favorable, 11.7% neutral, and 7.6% unfavorable, based on a participation rate of 89%.

We believe that our team member engagement impacts our ability to retain our team members.

For the year ended January 31, 2024, our total team member turnover was 14.4% and our voluntary turnover was 8.4%.

NPS ® is a registered trademark of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

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Information on our website is not incorporated into this report.

Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the SEC.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

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

What changed 10-K

Item 1. Business