What changed in this filing

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Item 1. Financial Statements

2024-12-09 compared with 2024-09-03 · 100 added, 84 removed, 394 unchanged (32% of the section changed)

3 unchanged sentences

Condensed consolidated balance sheets

(in thousands, except par value) July 31, 2024 January 31, 2024

(in thousands, except par value) October 31, 2024 January 31, 2024

Current assets

Cash and cash equivalents $ 322,163 $ 403,979

Accounts receivable, net of allowance for doubtful accounts of $ 2,831 and $ 3,947 as of July 31, 2024 and January 31, 2024, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2,516 and $ 3,947 as of October 31, 2024 and January 31, 2024, respectively

106,712 104,893

23 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2024 and January 31, 2024, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 87,324 and 86,127 shares issued and outstanding as of July 31, 2024 and January 31, 2024, respectively

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2024 and January 31, 2024, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 86,823 and 86,127 shares issued and outstanding as of October 31, 2024 and January 31, 2024, respectively

Additional paid-in capital 1,893,088 1,829,384

7 unchanged sentences

comprehensive income (unaudited)

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands, except per share data) 2024 2023 2024 2023

34 unchanged sentences

Condensed consolidated statements of stockholders’ equity (unaudited)

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2024 2023 2024 2023

8 unchanged sentences

Stock-based compensation 21,123 21,662 74,717 59,939

Repurchases of common stock ( 15,637 ) — ( 15,637 ) —

Ending balance 1,893,088 1,808,695 1,893,088 1,808,695

1 unchanged sentence

Beginning balance 270,263 164,591 205,628 149,916

Repurchases of common stock ( 44,376 ) — ( 44,376 ) —

Net income 5,703 14,673 70,338 29,348

5 unchanged sentences

Condensed consolidated statements of cash flows (unaudited)

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2024 2023

24 unchanged sentences

Principal payments on long-term debt ( 536,875 ) ( 54,375 )

Payment of debt issuance costs ( 3,748 ) —

Repurchases of common stock ( 58,513 ) —

Settlement of client-held funds obligation, net 3,188 ( 183 )

8 unchanged sentences

Condensed consolidated statements of cash flows (unaudited) (continued)

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2024 2023

5 unchanged sentences

Purchases of property and equipment included in accounts payable or accrued liabilities 106 98

Repurchases of common stock included in accrued liabilities 1,500 —

Non-cash purchase consideration related to acquisitions of HSA portfolios 20,325 —

14 unchanged sentences

The following table presents the impact of the reclassifications:

Three months ended July 31, 2023 Six months ended July 31, 2023

Three months ended October 31, 2023 Nine months ended October 31, 2023

(in thousands) Prior presentation Reclassifications Current presentation Prior presentation Reclassifications Current presentation

13 unchanged sentences

Basis of presentation

The accompanying condensed consolidated financial statements as of July 31, 2024 and for the three and six months ended July 31, 2024 and 2023 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting.

The accompanying condensed consolidated financial statements as of October 31, 2024 and for the three and nine months ended October 31, 2024 and 2023 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting.

In the opinion of management, the interim data includes all adjustments necessary for a fair presentation of the results for the interim periods.

18 unchanged sentences

We are currently evaluating the ASU to determine its impact on our income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses .

The ASU requires a public business entity to disclose additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods.

The ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the ASU to determine its impact on our disclosures.

Net income per share

The following table sets forth the computation of basic and diluted net income per share:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands, except per share data) 2024 2023 2024 2023

10 unchanged sentences

Diluted $ 0.06 $ 0.17 $ 0.79 $ 0.34

For the three months ended July 31, 2024 and 2023, 0.1 million and 1.6 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share as their inclusion would have been anti-dilutive.

For the six months ended July 31, 2024 and 2023, 0.1 million and 0.9 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share as their inclusion would have been anti-dilutive.

For the three months ended October 31, 2024 and 2023, 0.1 million and 0.6 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share as their inclusion would have been anti-dilutive.

For the nine months ended October 31, 2024 and 2023, 0.1 million and 1.0 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share as their inclusion would have been anti-dilutive.

Supplemental financial statement information

1 unchanged sentence

Prepaid expenses

As of July 31, 2024 and January 31, 2024, the Company had prepaid expenses of $ 42.7 million and $ 31.2 million, respectively, which are included within other current assets on the Company's condensed consolidated balance sheets.

As of October 31, 2024 and January 31, 2024, the Company had prepaid expenses of $ 42.1 million and $ 31.2 million, respectively, which are included within other current assets on the Company's condensed consolidated balance sheets.

Property and equipment

Property and equipment consisted of the following:

(in thousands) July 31, 2024 January 31, 2024

(in thousands) October 31, 2024 January 31, 2024

Leasehold improvements $ 13,879 $ 14,455

4 unchanged sentences

Property and equipment, net $ 3,890 $ 6,013

Depreciation expense was $ 1.3 million and $ 2.7 million for the three and six months ended July 31, 2024, respectively, and $ 2.0 million and $ 4.5 million for the three and six months ended July 31, 2023, respectively.

Depreciation expense was $ 1.0 million and $ 3.7 million for the three and nine months ended October 31, 2024, respectively, and $ 1.8 million and $ 6.4 million for the three and nine months ended October 31, 2023, respectively.

Contract balances

2 unchanged sentences

Alternatively, when payment precedes the related services, the Company records a contract liability, or deferred revenue, until its performance obligations are satisfied.

As of July 31, 2024 and January 31, 2024, the balance of deferred revenue was $ 22.6 million and $ 6.2 million, respectively.

The balance as of July 31, 2024 relates primarily to a contract with a depository partner, which the Company assumed in conjunction with the BenefitWallet HSA portfolio acquisition, as described in Note 5—Commitments and contingencies.

The remainder of the balances as of July 31, 2024 and January 31, 2024 relates to cash received in advance for interchange and custodial revenue arrangements, other up-front fees and other commuter deferred revenue.

As of October 31, 2024 and January 31, 2024, the balance of deferred revenue was $ 19.2 million and $ 6.2 million, respectively.

The balance as of October 31, 2024 relates primarily to a contract with a depository partner, which the Company assumed in conjunction with the BenefitWallet HSA portfolio acquisition, as described in Note 5—Commitments and contingencies.

The remainder of the balances as of October 31, 2024 and January 31, 2024 relates to cash received in advance for interchange and custodial revenue arrangements, other up-front fees and other commuter deferred revenue.

The Company expects to recognize approximately 61 % of its balance of deferred revenue as revenue over the next 12 months and the remainder thereafter.

Amounts expected to be recognized as revenue within a period of 12 months or less are classified as accrued liabilities on the Company's condensed consolidated balance sheets, with the remainder included within other long-term liabilities.

Revenue recognized during the three and six months ended July 31, 2024 that was included in the balance of deferred revenue as of January 31, 2024 was $ 1.3 million and $ 2.8 million, respectively.

Revenue recognized during the three and nine months ended October 31, 2024 that was included in the balance of deferred revenue as of January 31, 2024 was $ 1.1 million and $ 3.9 million, respectively.

The Company expects to satisfy its remaining obligations for these arrangements.

The components of operating lease costs were as follows:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands)

5 unchanged sentences

Other income, net, consisted of the following:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2024 2023 2024 2023

Interest income $ 3,897 $ 3,713 $ 10,881 $ 7,795

Other income (expense), net 11 272 ( 466 ) 502

Other income, net 851 28 385 530

Total other income, net $ 4,748 $ 3,741 $ 11,266 $ 8,325

Interest expense

Based on the application of Accounting Standards Codification ("ASC") 470-50, Debt - Modifications and Extinguishments , the Company recorded a $ 1.2 million loss on extinguishment of debt due to the prepayment of $ 50.0 million under the Company's Prior Term Loan Facility (as defined in Note 6—Indebtedness) in April 2023, which is included within interest expense in the condensed consolidated statement of operations and comprehensive income for the six months ended July 31, 2023.

Based on the application of Accounting Standards Codification ("ASC") 470-50, Debt - Modifications and Extinguishments , the Company recorded $ 1.6 million and $ 1.2 million of loss on extinguishment of debt during the nine months ended October 31, 2024 and 2023, respectively, which is included within interest expense in the condensed consolidated statements of operations and comprehensive income.

Supplemental cash flow information

Supplemental cash flow information related to the Company's operating leases was as follows:

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2024 2023

5 unchanged sentences

The gross carrying amount and associated accumulated amortization of intangible assets were as follows:

July 31, 2024

October 31, 2024

(in thousands) Gross carrying amount Accumulated amortization Net carrying amount

15 unchanged sentences

Total amortizable intangible assets $ 1,437,450 $ ( 601,502 ) $ 835,948

Amortization expense was $ 42.3 million and $ 79.9 million for the three and six months ended July 31, 2024, respectively, and $ 36.3 million and $ 72.8 million for the three and six months ended July 31, 2023, respectively.

There were no changes to the carrying value of goodwill during the six months ended July 31, 2024.

Amortization expense was $ 39.7 million and $ 119.5 million for the three and nine months ended October 31, 2024, respectively, and $ 36.0 million and $ 108.8 million for the three and nine months ended October 31, 2023, respectively.

There were no changes to the carrying value of goodwill during the nine months ended October 31, 2024.

Commitments and contingencies

10 unchanged sentences

The BenefitWallet HSA portfolio acquisition was accounted for as an asset acquisition, and related acquisition costs were capitalized as part of the cost of the asset, which is included within intangible assets, net, on the Company's condensed consolidated balance sheet.

The Company capitalized $ 27.2 million of transaction costs associated with the acquisition during the six months ended July 31, 2024, which includes the reimbursement of $ 20.0 million of Conduent's transfer-related expenses.

The Company capitalized $ 27.2 million of transaction costs associated with the acquisition during the nine months ended October 31, 2024, which includes the reimbursement of $ 20.0 million of Conduent's transfer-related expenses.

In addition, in May 2024, the Company assumed a contract with a depository partner representing approximately 7 % of the total HSA Assets added through the acquisition, which provides a custodial yield that is below current market rates and expires in June 2026.

The Company recorded deferred revenue of $ 20.3 million in May 2024 as a result of the assumed contract, which will be recorded as an increase to custodial revenue over the life of the assumed contract.

There were no other material changes during the six months ended July 31, 2024, outside of the ordinary course of business, in the Company's commitments from those disclosed in its Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

On November 27, 2024, the Company agreed to pay $ 30.0 million to settle a lawsuit related to a lease termination, as described below in the section entitled "Legal matters."

There were no other material changes during the nine months ended October 31, 2024, outside of the ordinary course of business, in the Company's commitments from those disclosed in its Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

Contingencies

10 unchanged sentences

On January 4, 2022, WageWorks filed an amended complaint, seeking a declaratory judgment that the Lease was properly terminated and recourse against Union Mesa for breach of contract, breach of the duty of good faith and fair dealing, and conversion, including return of the funds drawn under the letter of credit.

June 2022, Union Mesa filed an answer, counterclaim, and third-party complaint against WageWorks and the Company, denying WageWorks' claims and separately seeking recourse against WageWorks for breach of contract and breach of the implied covenant of good faith and fair dealing, as well as against the Company under the terms of its guaranty of WageWorks' obligations under the Lease.

On July 21, 2022, WageWorks and the Company filed an answer to the counterclaim and the third-party complaint on its declaratory judgment claim that WageWorks' termination was improper under the Lease.

On December 8, 2023, representatives from the parties participated in a court-ordered mediation held in Phoenix, Arizona, which was unsuccessful.

On December 29, 2023, the Superior Court issued an order denying Union Mesa’s motion for partial summary judgment after finding that genuine issues of material fact exist.

A trial is scheduled to start on December 9, 2024.

WageWorks is seeking damages relating to Union Mesa’s breach of the Lease and conversion of the letter of credit, including consequential damages, pre-judgment interest, and its attorneys’ fees.

Union Mesa has denied liability for these damages.

Through its claims, Union Mesa is seeking direct and consequential damages in an amount to be proven at trial and an award of its reasonable attorney fees, plus interest, until any damages or fees that are awarded are paid.

According to Union Mesa, these damages include (i) all rent payments due under the Lease accruing from December 2, 2020 (including abated rent), (ii) late charges of 3 % on past due amounts, (iii) interest on past due amounts at an interest rate of the prime rate plus 5 %, (iv) costs incurred in reletting the premises, (v) attorneys’ fees negotiating the lease and related agreements, and (vi) any other amounts necessary to compensate Union Mesa for the detriment proximately caused by WageWorks’ alleged breach of the Lease.

In addition, Union Mesa states that it intends to re-assert periodic actions against WageWorks to seek all amounts due from time to time through the remaining term of the Lease or until the premises are successfully relet.

The Company is subject to several putative class action lawsuits seeking unspecified damages as a result of a cybersecurity incident earlier this year in which a business partner's user account containing personally identifiable information was breached.

On November 27, 2024, the parties agreed to settle the lawsuit, with Union Mesa retaining the $ 2.8 million from the letter of credit and HealthEquity and WageWorks jointly agreeing to pay an additional $ 30.0 million to Union Mesa.

The $ 30.0 million settlement amount was recorded as merger integration expense during the three months ended October 31, 2024, and is included within accrued liabilities on the Company's condensed consolidated balance sheet as of October 31, 2024.

The $ 2.8 million letter of credit was previously recorded as merger integration expense during the period in which it was drawn by Union Mesa.

As a result of a cybersecurity incident earlier this year in which a business partner's user account containing personally identifiable information was breached, the Company is subject to multiple putative class action lawsuits that have been filed in federal court in the District of Utah.

The plaintiffs allege that the Company failed to implement reasonable data security practices, which resulted in a breach and disclosure of plaintiffs' and others' personally identifiable information and protected health information.

The plaintiffs are seeking, among other damages, unspecified monetary damages, equitable relief, costs and attorneys' fees arising out of the incident.

On August 22, 2024, the court issued an order granting a motion to consolidate the class action lawsuits.

On October 15, 2024, a consolidated class action amended complaint was filed.

The Company intends to vigorously defend these lawsuits.

3 unchanged sentences

As required under GAAP, the Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

No loss accrual relating to these matters was recorded because, based on currently available information, the Company does not believe that any liabilities relating to these matters are probable or that the amount of any resulting loss is estimable.

Except with respect to the Lease settlement, described above, no loss accrual relating to these matters was recorded because, based on currently available information, the Company does not believe that any contingent liabilities relating to these matters are probable or that the amount of any resulting loss is estimable.

However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future.

1 unchanged sentence

Long-term debt consisted of the following:

(in thousands) July 31, 2024 January 31, 2024

(in thousands) October 31, 2024 January 31, 2024

4.50 % Senior Notes due 2029

$ 600,000 $ 600,000

Revolving Credit Facility 486,875 —

Prior Term Loan Facility — 286,875

Prior Revolving Credit Facility 225,000 —

Principal amount 1,086,875 886,875

3 unchanged sentences

Long-term debt, net $ 1,081,039 $ 874,972

(1) In addition to the $ 10.5 million and $ 11.9 million of unamortized discount and issuance costs related to long-term debt as of July 31, 2024 and January 31, 2024, respectively, $ 2.0 million and $ 2.5 million of unamortized issuance costs related to the Company's Prior Revolving Credit Facility (as defined below) are included within other assets on the condensed consolidated balance sheets as of July 31, 2024 and January 31, 2024, respectively.

(1) In addition to the $ 5.8 million and $ 11.9 million of unamortized discount and issuance costs related to long-term debt as of October 31, 2024 and January 31, 2024, respectively, $ 8.1 million and $ 2.5 million of unamortized issuance costs related to the Company's Revolving Credit Facility and Prior Revolving Credit Facility (as defined below) are included within other assets on the condensed consolidated balance sheets as of October 31, 2024 and January 31, 2024, respectively.

4.50 % Senior Notes due 2029

4 unchanged sentences

Interest on the Notes is payable on April 1 and October 1 of each year.

As of July 31, 2024 and January 31, 2024, the balance of accrued interest on the Notes was $ 9.0 million and $ 9.3 million, respectively, which is included within accrued liabilities on the Company's condensed consolidated balance sheets.

As of October 31, 2024 and January 31, 2024, the balance of accrued interest on the Notes was $ 2.3 million and $ 9.3 million, respectively, which is included within accrued liabilities on the Company's condensed consolidated balance sheets.

The effective interest rate on the Notes is 4.72 %.

1 unchanged sentence

The Notes are redeemable at the Company’s option, in whole or in part, at any time on or after October 1, 2024, at a redemption price if redeemed during the 12 months beginning (i) October 1, 2024 of 102.250 %, (ii) October 1, 2025 of 101.125 %, and (iii) October 1, 2026 and thereafter of 100.000 %, in each case of the principal amount of the Notes being redeemed, and together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The Company may also redeem some or all of the Notes before October 1, 2024 at a redemption price equal to 100 % of the principal amount of the Notes, plus the applicable “make-whole” premium as of, and accrued and unpaid interest, if any, to, but excluding, the date of redemption.

In addition, at any time prior to October 1, 2024, the Company may redeem up to 40 % of the aggregate principal amount of the Notes issued under the Indenture on one or more occasions in an aggregate amount equal to the net cash proceeds of one or more equity offerings at a redemption price equal to 104.500 % of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

Furthermore, the Company may be required to make an offer to purchase the Notes upon the sale of certain assets or upon specific kinds of changes of control.

The Company may be required to make an offer to purchase the Notes upon the sale of certain assets or upon specific kinds of changes of control.

The Indenture contains covenants that impose significant operational and financial restrictions on the Company;

5 unchanged sentences

The Revolving Credit Facility may be used in the future for working capital and general corporate purposes, including the financing of acquisitions and other investments.

As of August 23, 2024, the outstanding balance under the Revolving Credit Facility was $ 511.9 million.

As of October 31, 2024, the outstanding balance under the Revolving Credit Facility was $ 486.9 million, which is included within long-term debt, net of issuance costs, on the condensed consolidated balance sheet.

The maturity date of the Revolving Credit Facility is August 23, 2029.

Subject to the terms and conditions set forth in the Credit Agreement (including obtaining additional commitments from one or more new or existing lenders), the Company may in the future incur additional loans or commitments under the Credit Agreement in an aggregate principal amount of up to $ 450 million, plus an additional amount so long as the Company’s pro forma first lien net leverage ratio would not exceed 3.85 to 1.00 as of the date such loans or commitments are incurred.

1 unchanged sentence

The Company is also required to pay certain fees to the Lenders, including, among others, a quarterly commitment fee on the average unused amount of the Revolving Credit Facility at a rate ranging from 0.25 % to 0.50 %, with the applicable rate also determined by reference to a leverage-based pricing grid set forth in the Credit Agreement.

As of October 31, 2024, the interest rate on the Revolving Credit Facility was 6.34 %.

The loans under the Revolving Credit Facility may be prepaid, and the commitments thereunder may be reduced by the Company without penalty or premium, subject to the reimbursement of customary “breakage costs.”

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, in each case, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains financial performance covenants, which require the Company to maintain (i) a maximum total net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 5.00 to 1.00 beginning with the fiscal quarter ending January 31, 2025, and (ii) a minimum consolidated interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 3.00 to 1.00 beginning with the fiscal quarter ending January 31, 2025.

The Company continues to be in compliance with all covenants under the Credit Agreement through the filing date of this Quarterly Report on Form 10-Q.

1.00 beginning with the fiscal quarter ending January 31, 2025, and (ii) a minimum consolidated interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 3.00 to 1.00 beginning with the fiscal quarter ending January 31, 2025.

The Company was in compliance with all covenants under the Credit Agreement as of October 31, 2024 and for the period then ended.

The repayment obligation under the Credit Agreement may be accelerated upon the occurrence of an event of default thereunder, including, among other things, failure to pay principal, interest or fees on a timely basis, material inaccuracy of any representation or warranty, failure to comply with covenants, cross-default to other material debt, material judgments, change of control and certain insolvency or bankruptcy-related events, in each case, subject to any certain grace and/or cure periods.

7 unchanged sentences

As a result, borrowings under the Prior Credit Agreement as so amended bore interest at an annual rate equal to, at the option of the Company, either (i) Term SOFR, plus a 0.10 % credit spread adjustment, plus a margin ranging from 1.25 % to 2.25 %, or (ii) an alternate base rate, plus a margin ranging from 0.25 % to 1.25 %, with the applicable margin determined in either scenario by reference to a leverage-based pricing grid set forth in the Prior Credit Agreement (as amended).

As of July 31, 2024, the stated interest rate on the Prior Credit Facilities was 6.70 % and the effective interest rate on the Prior Term Loan Facility was 7.46 %.

The Company was also required to pay certain fees to the Prior Lenders, including, among others, a quarterly commitment fee on the average unused amount of the Prior Revolving Credit Facility at a rate ranging from 0.20 % to 0.40 %, with the applicable rate also determined by reference to a leverage-based pricing grid set forth in the Prior Credit Agreement.

As of July 31, 2024, the Company had $ 225.0 million outstanding under its Prior Revolving Credit Facility and $ 286.9 million under the Prior Term Loan Facility.

The Prior Credit Agreement contained significant customary affirmative and negative covenants.

The Company was in compliance with all covenants under the Prior Credit Agreement as of July 31, 2024, and for the period then ended.

The Company continued to be in compliance with all covenants under the Prior Credit Agreement through the date on which the Prior Credit Agreement was terminated.

The Company was in compliance with all covenants under the Prior Credit Agreement through the date on which the Prior Credit Agreement was terminated.

On August 23, 2024, in connection with the entry into the Credit Agreement, the Company repaid all outstanding obligations in the amount of $ 511.9 million under the Prior Credit Agreement and terminated all commitments thereunder.

1 unchanged sentence

Accordingly, management estimated the effective annual tax rate and applied this rate to pre-tax income through the end of the latest fiscal quarter to determine the interim income tax provision.

For the three and six months ended July 31, 2024, the Company recorded an income tax provision of $ 10.8 million and $ 15.2 million, respectively.

This resulted in an effective income tax rate of 23.2 % and 19.1 % for the three and six months ended July 31, 2024, respectively, compared with an effective income tax rate of 25.6 % and 39.4 % for the three and six months ended July 31, 2023, respectively.

For the three and six months ended July 31, 2024 and 2023, discrete tax items impacting the effective tax rate were primarily due to differences in tax deductible stock-based compensation compared to GAAP stock-based compensation expense.

As of July 31, 2024 and January 31, 2024, the Company’s total gross unrecognized tax benefit was $ 21.2 million and $ 19.2 million, respectively.

If recognized, $ 18.1 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of July 31, 2024.

For the three and nine months ended October 31, 2024, the Company recorded an income tax provision of $ 0.5 million and $ 15.7 million, respectively.

This resulted in an effective income tax rate of 8.3 % and 18.3 % for the three and nine months ended October 31, 2024, respectively, compared with an effective income tax rate of 30.4 % and 35.2 % for

the three and nine months ended October 31, 2023, respectively.

For the three and nine months ended October 31, 2024, discrete tax items impacting the effective tax rate were primarily due to differences in tax deductible stock-based compensation compared to GAAP stock-based compensation expense, return-to-provision adjustments on research and development tax credits, and an increase in unrecognized tax benefits.

For the three and nine months ended October 31, 2023, discrete tax items impacting the effective tax rate were primarily due to return-to-provision adjustments on research and development tax credits, an increase in unrecognized tax benefits, adjustments from settlement of an Internal Revenue Service examination, and differences in tax deductible stock-based compensation compared to GAAP stock-based compensation expense.

As of October 31, 2024 and January 31, 2024, the Company’s total gross unrecognized tax benefit was $ 24.0 million and $ 19.2 million, respectively.

If recognized, $ 20.7 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of October 31, 2024.

The Company files income tax returns with U.S.

4 unchanged sentences

The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive income during the periods presented:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2024 2023 2024 2023

6 unchanged sentences

Incentive Plan.

During the six months ended July 31, 2024, the Company adopted the HealthEquity, Inc.

During the nine months ended October 31, 2024, the Company adopted the HealthEquity, Inc.

2024 Equity Incentive Plan (the "Incentive Plan"), which provides for the issuance of stock awards to team members, consultants, and directors of the Company.

Subject to adjustment as provided in the Incentive Plan, the aggregate number of shares of the Company’s common stock reserved and available for issuance pursuant to awards granted under the Incentive Plan is 4.1 million.

As of July 31, 2024, 4.1 million shares were available for grant under the Incentive Plan.

Subject to adjustment as provided in the Incentive Plan, as of October 31, 2024, the aggregate number of shares of the Company’s common stock reserved and available for issuance pursuant to awards granted under the Incentive Plan was 4.1 million.

No further awards will be made under the Company’s 2014 Equity Incentive Plan.

10 unchanged sentences

Exercised ( 249 ) $ 14.00 - 47.21

Outstanding as of July 31, 2024 507 $ 21.27 - 73.61

Outstanding as of October 31, 2024 477 $ 21.27 - 73.61

$ 46.47 2.6 $ 18,499

Vested and expected to vest as of July 31, 2024 507 $ 45.38 2.8 $ 16,780

Exercisable as of July 31, 2024 507 $ 45.38 2.8 $ 16,780

Vested and expected to vest as of October 31, 2024 477 $ 46.47 2.6 $ 18,499

Exercisable as of October 31, 2024 477 $ 46.47 2.6 $ 18,499

Restricted stock units

6 unchanged sentences

Forfeited ( 192 ) 71.02

Outstanding as of July 31, 2024 3,271 $ 73.74

Outstanding as of October 31, 2024 3,053 $ 74.54

Performance restricted stock units.

During the six months ended July 31, 2024, the Company awarded 182,044 PRSUs subject to a market condition based on the Company’s total shareholder return relative to the Russell 2000 index as measured on January 31, 2027.

During the nine months ended October 31, 2024, the Company awarded 182,044 PRSUs subject to a market condition based on the Company’s total shareholder return relative to the Russell 2000 index as measured on January 31, 2027.

The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was $ 20.2 million.

2 unchanged sentences

The PRSUs cliff vest upon approval by the Talent, Compensation and Culture Committee of the board of directors.

During the six months ended July 31, 2024, the Company awarded 60,682 PRSUs subject to the achievement of certain financial criteria measured on January 31, 2027.

In addition, during the nine months ended October 31, 2024, the Company awarded 60,682 PRSUs subject to the achievement of certain financial criteria measured on January 31, 2027.

The PRSUs cliff vest and are issued upon approval by the Talent, Compensation and Culture Committee.

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The vesting of the PRSUs will ultimately range from 0 % to 200 % of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals.

Each of the PRSUs granted during the six months ended July 31, 2024 contain a provision such that upon the award holder's eligible retirement, the PRSUs would remain outstanding and eligible to vest based on achievement of their respective market or performance conditions without regard to the award holder’s continued employment on the vesting date.

Each of the PRSUs granted during the nine months ended October 31, 2024 contains a provision such that upon the award holder's eligible retirement, the PRSUs would remain outstanding and eligible to vest based on achievement of their respective market or performance conditions without regard to the award holder’s continued employment on the vesting date.

Based on the application of ASC 718, Compensation - Stock Compensation , expense is recognized over the requisite service period, which ends on the earlier of (1) the date of approval by the Talent, Compensation and Culture Committee or (2) the date the award holder becomes eligible for retirement (defined as at least 55 years old with least 10 years of service at the Company).

As a result, the expense associated with PRSUs granted to retirement-eligible individuals was recorded on the grant date.

Stockholders' equity

Stock repurchase program

In September 2024, the Company announced that its Board of Directors authorized a common stock repurchase program.

Under the program, the Company may purchase up to $ 300.0 million of its common stock, as market conditions warrant.

The common stock may be repurchased at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion.

Such repurchases may be effected through open market purchases, privately negotiated transactions or otherwise, including repurchase plans that satisfy the conditions of Rule 10b5-1 under the Securities Exchange Act of 1934.

The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and the program may be suspended or discontinued at any time.

The following table sets forth the common stock repurchased and subsequently retired during the periods presented:

Three months ended October 31, 2024 Nine months ended October 31, 2024

(in thousands)

Shares Amount Shares Amount

Common stock repurchases (1) 732 $ 60,013 732 $ 60,013

(1) Shares repurchased include unsettled repurchases as of October 31, 2024.

All repurchases were made in open market transactions.

The excess of repurchase price over par value was allocated between additional paid-in capital and retained earnings.

As of October 31, 2024, $ 240.0 million of common stock remained authorized for repurchase under the Company's stock repurchase program.

Fair value measurements are made at a specific point in time based on relevant market information.

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Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

Observable inputs reflect data obtained from

independent sources, while unobservable inputs reflect the Company’s market assumptions.

Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.

These two types of inputs have created the following fair value hierarchy:

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The Notes are valued based upon quoted market prices and are considered Level 2 instruments because the markets in which the Notes trade are not considered active markets.

As of July 31, 2024, the fair value of the Notes was $ 565.1 million.

Borrowings under the Prior Credit Facilities were considered Level 2 instruments and recorded at book value in the Company's condensed consolidated financial statements.

The Prior Credit Facilities repriced frequently due to variable interest rate terms and entailed no significant changes in credit risk.

As a result, the fair value of the Prior Credit Facilities approximated carrying value.

As of October 31, 2024, the fair value of the Notes was $ 571.0 million.

Borrowings under the Revolving Credit Facility are considered Level 2 instruments and recorded at book value in the Company's condensed consolidated financial statements.

The Revolving Credit Facility reprices frequently due to variable interest rate terms and entails no significant changes in credit risk.

As a result, the fair value of the Revolving Credit Facility approximates carrying value.

Subsequent events

As described in Note 6—Indebtedness, on August 23, 2024, the Company entered into the Credit Agreement, under which the Company borrowed $ 511.9 million to repay all outstanding obligations under the Prior Credit Agreement.

On September 3, 2024, the Company announced that its Board of Directors authorized a common stock repurchase program.

Under the program, the Company may purchase up to $ 300 million of its common stock, as market conditions warrant.

The common stock may be repurchased at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion.

The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and the program may be suspended or discontinued at any time.

As described in Note 5—Commitments and contingencies, on November 27, 2024, the Company agreed to settle a lawsuit related to the termination of an office lease and agreed to pay $ 30.0 million as part of the settlement.

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

What changed 10-Q

Item 1. Financial Statements