What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-02 compared with 2025-06-03 · 103 added, 82 removed, 349 unchanged (35% of the section changed)

14 unchanged sentences

The core of our offerings is the HSA, a financial account through which consumers spend and save long-term for healthcare expenses on a tax-advantaged basis.

As of April 30, 2025, we administered 9.9 million HSAs, with balances totaling $31.3 billion, which we call HSA Assets, as well as 7.2 million complementary CDBs.

We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.1 million as of April 30, 2025.

As of July 31, 2025, we administered 10.0 million HSAs, with balances totaling $33.1 billion, which we call HSA Assets, as well as 7.2 million complementary CDBs.

We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.1 million as of July 31, 2025.

We reach consumers primarily through relationships with their employers, which we call Clients.

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The average family premium for employer-sponsored health insurance has risen by 24% since 2019 and 52% since 2014, resulting in increased participation in HSA-qualified health plans and HSAs and increased consumer cost-sharing in health insurance more generally.

We believe that continued growth in healthcare costs and related factors will spur continued growth in HSA-qualified health plans and HSAs and may encourage policy changes making HSAs or similar vehicles available to new populations such as individuals in Medicare.

In July 2025, the “One Big Beautiful Bill Act” was signed into law, which extended HSA availability to individuals with Bronze and Catastrophic health plans and expanded HSA eligibility to include a broader range of healthcare services.

We believe that continued growth in healthcare costs and related factors will spur continued growth in HSA-qualified health plans and HSAs and may encourage additional policy changes making HSAs or similar vehicles available to new populations such as individuals in Medicare.

However, the timing and impact of these and other developments in U.S.

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Our sales force calls on enterprise and regional employers in industries across the U.S., as well as potential Network Partners from among health plans, benefits administrators, and retirement plan record keepers.

Our Network Partners are a key

channel through which we gain access to Clients and members.

Our Network Partners are a key channel through which we gain access to Clients and members.

Our Network Partners collectively employ thousands of sales representatives and account managers who promote both the Network Partners' products and our products and services.

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We believe that increased participation in our Enhanced Rates offering, diversification of Depository Partners and insurance company partners, varied contract terms, and other factors reduce our exposure to short-term fluctuations in prevailing interest rates and mitigate the short-term impact of sustained increases or declines in prevailing interest rates on our custodial revenue.

In addition, as further described in Note 10—Derivative financial instruments and hedging activities, the Company uses Treasury bond forwards to hedge a portion of the benchmark interest rate risk of expected future transitions of HSA cash from our Basic Rates offering to our Enhanced Rates offering.

Over longer periods, sustained shifts in prevailing interest rates affect the amount of custodial revenue we can realize on custodial assets and the interest retained by our members.

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

For example, we are making investments in the architecture and infrastructure of the technology that we use to provide our services to improve our transaction processing capabilities and support continued account and transaction growth, as well as in data-driven personalized engagement to help our members spend less, save more, and build wealth for retirement.

For example, we are continuing to

make investments in the architecture and infrastructure of the technology that we use to provide our services to improve our transaction processing capabilities and support continued account and transaction growth, as well as in data-driven personalized engagement to help our members spend less, save more, and build wealth for retirement.

In addition, we are investing in technology solutions to meet the evolving needs of our members, Clients and Network Partners.

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 AI tools including the Expedited Claims tool, leveraging chip-enabled stacked cards, and mobile wallet.

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 AI tools including the Expedited Claims and HSAnswers tools, leveraging chip-enabled stacked cards, and mobile wallet.

Our Purple culture

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The following table sets forth our HSAs, CDBs, and Total Accounts as of and for the periods indicated:

(in thousands, except percentages) April 30, 2025 April 30, 2024 % Change January 31, 2025

(in thousands, except percentages) July 31, 2025 July 31, 2024 % Change January 31, 2025

HSAs 9,989 9,383 6 % 9,889

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The number of our HSAs and CDBs are key metrics because our revenue is driven by the amount we earn from them.

The number of our HSAs increased by 0.8 million, or 9%, from April 30, 2024 to April 30, 2025, driven by new HSAs from sales and new HSAs added through the BenefitWallet HSA portfolio acquisition.

The number of our CDBs increased by 0.3 million, or 4%, from April 30, 2024 to April 30, 2025, primarily driven by an increase in HRA and FSA accounts, partially offset by a decrease in other CDBs.

The number of our HSAs increased by 0.6 million, or 6%, from July 31, 2024 to July 31, 2025, driven by new HSAs from sales.

The number of our CDBs increased by 0.3 million, or 4%, from July 31, 2024 to July 31, 2025, primarily driven by an increase in HRA and FSA accounts, partially offset by a decrease in other CDBs.

The following table sets forth HSA Assets as of and for the periods indicated:

(in millions, except percentages) April 30, 2025 April 30, 2024 % Change January 31, 2025

(in millions, except percentages) July 31, 2025 July 31, 2024 % Change January 31, 2025

HSA cash $ 17,035 $ 16,368 4 % $ 17,435

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Measuring HSA Assets is important because our custodial revenue is directly affected by average daily custodial balances for HSA Assets that are revenue generating.

HSA cash increased by $1.2 billion, or 8%, from April 30, 2024 to April 30, 2025, due to net HSA contributions from new and existing HSA members and HSA cash added through the BenefitWallet HSA portfolio acquisition, partially offset by transfers to HSA investments.

HSA investments increased by $2.8 billion, or 24%, from April 30, 2024 to April 30, 2025, due to the increased market value of invested balances, transfers from HSA cash, and HSA investments added through the BenefitWallet HSA portfolio acquisition.

Total HSA Assets increased by $4.0 billion, or 15%, from April 30, 2024 to April 30, 2025, primarily due to net HSA contributions from new and existing HSA members, the increased market value of invested balances, and HSA Assets added through the BenefitWallet HSA portfolio acquisition.

The following table summarizes the amount of HSA cash held by our Depository Partners and insurance company partners that is expected to reprice by fiscal year and the respective average annualized yield currently earned on that HSA cash as of April 30, 2025:

HSA cash increased by $0.7 billion, or 4%, from July 31, 2024 to July 31, 2025, due to net HSA contributions from new and existing HSA members, partially offset by transfers to HSA investments.

HSA investments increased by $3.0 billion, or 23%, from July 31, 2024 to July 31, 2025, due to the increased market value of invested balances and transfers from HSA cash.

Total HSA Assets increased by $3.7 billion, or 12%, from July 31, 2024 to July 31, 2025, primarily due to the increased market value of invested balances and net HSA contributions from new and existing HSA members.

Year ending January 31, (in billions, except percentages) HSA cash expected to reprice Average annualized yield

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Total (1) $ 16.4 3.5 %

(1) Excludes $0.7 billion of HSA cash held in floating-rate contracts as of April 30, 2025.

(1) Excludes $0.6 billion of HSA cash held in floating-rate contracts as of July 31, 2025.

Client-held funds

(in millions, except percentages) April 30, 2025 April 30, 2024 % Change January 31, 2025

(in millions, except percentages) July 31, 2025 July 31, 2024 % Change January 31, 2025

Client-held funds $ 818 $ 817 0 % $ 896

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The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA for the periods indicated:

Three months ended April 30,

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

(in thousands) 2025 2024 2025 2024

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Costs associated with unused office space 723 806 1,575 1,596

Other (27) (101) (27) 658

Adjusted EBITDA $ 151,074 $ 128,287 $ 291,282 $ 245,722

The following table sets forth our net income as a percentage of revenue:

Three months ended April 30,

(in thousands, except percentages) 2025 2024 $ Change % Change

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

(in thousands, except percentages) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Net income $ 59,854 $ 35,822 $ 24,032 67 % $ 113,769 $ 64,635 $ 49,134 76 %

As a percentage of revenue 18 % 12 % 17 % 11 %

Our net income increased by $25.1 million, or 87%, from the three months ended April 30, 2024 to the three months ended April 30, 2025, primarily due to an increase in gross profit and a decrease in operating expenses, partially offset by an increase in income tax provision and interest expense, as described more fully in the section entitled "Comparison of the three months ended April 30, 2025 and 2024."

Our net income increased by $24.0 million, or 67%, from the three months ended July 31, 2024 to the three months ended July 31, 2025, primarily due to an increase in gross profit and a decrease in operating expenses and other expense, partially offset by an increase in income tax provision, as described more fully in the section entitled "Comparison of the three and six months ended July 31, 2025 and 2024."

Our net income increased by $49.1 million, or 76%, from the six months ended July 31, 2024 to the six months ended July 31, 2025, primarily due to an increase in gross profit and a decrease in operating expenses, partially offset by an increase in income tax provision and other expense, as described more fully in the section entitled "Comparison of the three and six months ended July 31, 2025 and 2024."

The following table sets forth our Adjusted EBITDA as a percentage of revenue:

Three months ended April 30,

(in thousands, except percentages) 2025 2024 $ Change % Change

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

(in thousands, except percentages) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Adjusted EBITDA $ 151,074 $ 128,287 $ 22,787 18 % $ 291,282 $ 245,722 $ 45,560 19 %

As a percentage of revenue 46 % 43 % 44 % 42 %

Our Adjusted EBITDA increased by $22.8 million, or 19%, from the three months ended April 30, 2024 to the three months ended April 30, 2025, primarily due to an increase in total revenue, partially offset by increases in personnel-related costs and professional fees.

Our Adjusted EBITDA increased by $22.8 million, or 18%, from the three months ended July 31, 2024 to the three months ended July 31, 2025, primarily due to an increase in total revenue and efficiencies resulting from our technology investments, partially offset by increases in software costs and costs to support the increase in Total Accounts and member interactions.

Our Adjusted EBITDA increased by $45.6 million, or 19%, from the six months ended July 31, 2024 to the six months ended July 31, 2025, primarily due to an increase in total revenue and efficiencies resulting from our technology investments, partially offset by increases in software costs and costs to support the increase in Total Accounts and member interactions.

Our use of Adjusted EBITDA, including as a percentage of revenue, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

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The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to non-GAAP net income for the periods indicated:

Three months ended April 30,

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

(in thousands, except per share data) 2025 2024 2025 2024

7 unchanged sentences

Costs associated with unused office space 723 806 1,575 1,596

Loss on extinguishment of debt — —

Total adjustments to income before income taxes - GAAP 48,058 55,138 91,523 115,636

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The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occurring that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

Our non-GAAP net income increased by $15.5 million, or 22%, from the three months ended April 30, 2024 to the three months ended April 30, 2025, primarily due to an increase in total revenue, partially offset by increases in personnel-related costs, professional fees, and interest expense.

Our non-GAAP net income increased by $18.3 million, or 24%, from the three months ended July 31, 2024 to the three months ended July 31, 2025, primarily due to an increase in total revenue and efficiencies resulting from our technology investments, partially offset by increases in software costs and costs to support the increase in Total Accounts and member interactions.

Our non-GAAP net income increased by $33.8 million, or 23%, from the six months ended July 31, 2024 to the six months ended July 31, 2025, primarily due to an increase in total revenue and efficiencies resulting from our technology investments, partially offset by increases in software costs and costs to support the increase in Total Accounts and member interactions.

Our use of non-GAAP net income has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

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With respect to our Network Partners and Clients, our fees are generally based on a fixed tiered structure for the duration of the relevant service agreement and are paid to us on a monthly basis.

In addition, once a member’s HSA cash balance reaches a certain threshold, the member is able to invest his or her HSA Assets through our investment partner from

which we earn recordkeeping and advisory fees, calculated as a percentage of the member's HSA investments.

In addition, once a member’s HSA cash balance reaches a certain threshold, the member is able to invest his or her HSA Assets through our investment partner from which we earn recordkeeping and advisory fees, calculated as a percentage of the member's HSA investments.

We recognize revenue on a monthly basis as services are rendered to our members and Clients.

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Technology and development.

Technology and development expenses include personnel and related expenses for software development and delivery, licensed software, information technology, data management, product, and security.

Technology and development expenses include personnel and related expenses for software development and delivery, licensed software, information technology, data management, product, and

Technology and development expenses also include software engineering services, the costs of operating our technology infrastructure, depreciation, amortization of capitalized software development costs, stock-based compensation, and common expense allocations.

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Amortization of acquired intangible assets results primarily from intangible assets acquired in connection with business combinations.

The assets include acquired customer

relationships, acquired developed technology, and acquired trade names and trademarks, which we amortize over the assets' estimated useful lives, estimated to be 7-15 years, 2-5 years, and 3 years, respectively.

The assets include acquired customer relationships, acquired developed technology, and acquired trade names and trademarks, which we amortize over the assets' estimated useful lives, estimated to be 7-15 years, 2-5 years, and 3 years, respectively.

We also acquired intangible HSA portfolios from third-party custodians.

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Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized.

As of April 30, 2025, we have not recorded a valuation allowance on federal deferred tax assets, but we have recorded a valuation allowance on certain state deferred tax assets.

We maintain an overall net federal and state deferred tax liability on our condensed consolidated balance sheet.

Comparison of the three months ended April 30, 2025 and 2024

As of July 31, 2025, we have not recorded a valuation allowance on federal deferred tax assets, but we have recorded a valuation allowance on certain state deferred tax assets.

We maintain an overall net federal and state deferred tax liability in our condensed consolidated balance sheet.

Comparison of the three and six months ended July 31, 2025 and 2024

The following table sets forth our revenue for the periods indicated:

Three months ended April 30,

(in thousands, except percentages) 2025 2024 $ Change % Change

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

(in thousands, except percentages) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Service revenue $ 117,873 $ 116,720 $ 1,153 1 % $ 237,657 $ 234,934 $ 2,723 1 %

3 unchanged sentences

Service revenue.

The $1.6 million, or 1%, increase in service revenue from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to the increases in the number of Total Accounts and the amount of HSA investments, partially offset by lower average service fees per account.

The $1.2 million, or 1%, increase in service revenue from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to the increases in the number of Total Accounts and the amount of HSA investments, largely offset by lower average service fees per account.

The $2.7 million, or 1%, increase in service revenue from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to the increases in the number of Total Accounts and the amount of HSA investments, largely offset by lower average service fees per account.

We expect service revenue to continue to increase, primarily due to an increase in Total Accounts, partially offset by lower average service fees per account.

Custodial revenue.

The $34.8 million, or 29%, increase in custodial revenue from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to an increase in average annualized yield on HSA cash from 2.93% for the three months ended April 30, 2024 to 3.50% for the three months ended April 30, 2025 (due to both higher market interest rates and increased participation in our Enhanced Rates offering) and the $1.9 billion, or 12%, increase in the average daily balance of HSA cash, as described above, partially offset by a decrease in interest rates on the portion of our Client-held funds held by our Depository Partners in interest-bearing demand deposit accounts that have a floating interest rate.

The $21.2 million, or 15%, increase in custodial revenue from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to an increase in average annualized yield on HSA cash from 3.10% for the three months ended July 31, 2024 to 3.51% for the three months ended July 31, 2025 (due to both HSA cash placed with Depository Partners at higher yields and increased participation in our Enhanced Rates offering) and the $0.7 billion, or 4%, increase in the average daily balance of HSA cash, as described above, partially offset by a decrease in interest rates on the portion of our Client-held funds held by our Depository Partners in interest-bearing demand deposit accounts that have a floating interest rate.

The $56.0 million, or 22%, increase in custodial revenue from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to an increase in average annualized yield on HSA cash from 3.02% for the six months ended July 31, 2024 to 3.51% for the six months ended July 31, 2025 (due to both HSA cash placed with Depository Partners at higher yields and increased participation in our Enhanced Rates offering) and the $1.3 billion, or 8%, increase in the average daily balance of HSA cash, as described above, partially offset by a decrease in interest rates on the portion of our Client-held funds held by our Depository Partners in interest-bearing demand deposit accounts that have a floating interest rate.

On an annual basis, assuming the current interest rate environment continues, we expect our average annualized yield on HSA cash to further increase as our existing agreements with our Depository Partners are renewed or replaced with agreements with higher rates, resulting in higher custodial revenue.

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Interchange revenue.

The $6.9 million, or 14%, increase in interchange revenue from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to an increase in Total Accounts and an increase in spend per account using our payment cards.

The $3.6 million, or 8%, increase in interchange revenue from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to an increase in Total Accounts and an increase in spend per account using our payment cards.

The $10.4 million, or 11%, increase in interchange revenue from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to an increase in Total Accounts and an increase in spend per account using our payment cards.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect interchange revenue to continue to increase, primarily due to an increase in Total Accounts.

Total revenue.

Total revenue increased $43.2 million, or 15%, from the three months ended April 30, 2024 to the three months ended April 30, 2025 due to the increases in custodial, interchange, and service revenues, described above.

Total revenue increased $25.9 million, or 9%, from the three months ended July 31, 2024 to the three months ended July 31, 2025 due to the increases in custodial, interchange, and service revenues, described above.

Total revenue increased $69.2 million, or 12%, from the six months ended July 31, 2024 to the six months ended July 31, 2025 due to the increases in custodial, interchange, and service revenues, described above.

Cost of revenue

The following table sets forth our cost of revenue for the periods indicated:

Three months ended April 30,

(in thousands, except percentages) 2025 2024 $ Change % Change

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

(in thousands, except percentages) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Service costs $ 75,156 $ 76,915 $ (1,759) (2) % $ 163,161 $ 159,262 $ 3,899 2 %

3 unchanged sentences

Service costs.

The $5.7 million, or 7%, increase in service costs from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to increases in costs to support the increase in Total Accounts and member interactions and an increase in costs incurred to reimburse members impacted by outside fraud activity, partially offset by efficiencies resulting from our technology investments.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect service costs to decrease as a result of our technology investments in security and further operational efficiencies, partially offset by costs resulting from an increase in Total Accounts.

The $1.8 million, or 2%, decrease in service costs from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to efficiencies resulting from our technology investments

and a decrease in costs incurred to reimburse members impacted by outside fraud activity, partially offset by increases in costs to support the increase in Total Accounts and member interactions.

The $3.9 million, or 2%, increase in service costs from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to increases in costs to support the increase in Total Accounts and member interactions, partially offset by efficiencies resulting from our technology investments.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect service costs to decrease as a result of our technology investments in security and further operational efficiencies, partially offset by higher costs resulting from an increase in Total Accounts.

Custodial costs.

The $1.7 million, or 19%, increase in custodial costs from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to the $1.9 billion, or 12%, increase in the year-over-year average daily balance of HSA cash, as described above and an increase in the average annualized rate of interest retained by HSA members on HSA cash from 0.22% during the three months ended April 30, 2024 to 0.23% during the three months ended April 30, 2025.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect custodial costs to increase due to an increase in the year-over-year average daily balance of HSA cash, an increase in the average annualized rate of interest retained by HSA members on HSA cash, and an increase in fees charged by our Depository Partners.

The $1.0 million, or 10%, increase in custodial costs from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to the $0.7 billion, or 4%, increase in the year-over-year average daily balance of HSA cash, as described above, as well as an increase in the average annualized rate of interest retained by HSA members on HSA cash from 0.23% during the three months ended July 31, 2024 to 0.24% during the three months ended July 31, 2025.

The $2.7 million, or 14%, increase in custodial costs from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to the $1.3 billion, or 8%, increase in the year-over-year average daily balance of HSA cash, as described above, as well as an increase in the average annualized rate of interest retained by HSA members on HSA cash from 0.23% during the six months ended July 31, 2024 to 0.24% during the six months ended July 31, 2025.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect custodial costs to increase due to an increase in the year-over-year average daily balance of HSA cash and an increase in the average annualized rate of interest retained by HSA members on HSA cash.

Interchange costs.

The $1.3 million, or 14%, decrease in interchange costs from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to efficiencies resulting from the transition to a single card processor, partially offset by an increase in Total Accounts.

The $1.9 million, or 22%, decrease in interchange costs from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to efficiencies resulting from the transition to a single card processor, partially offset by an increase in Total Accounts.

The $3.2 million, or 18%, decrease in interchange costs from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to efficiencies resulting from the transition to a single card processor, partially offset by an increase in Total Accounts.

Total cost of revenue.

Cost of revenue as a percentage of total revenue decreased to 32.2% for the three months ended April 30, 2025 compared to 34.9% for the three months ended April 30, 2024, due to total revenue increasing at a significantly higher rate (15%) than total cost of revenue (6%).

Cost of revenue as a percentage of total revenue decreased to 30.4% for the six months ended July 31, 2025 compared to 33.4% for the six months ended July 31, 2024, due to total revenue increasing at a significantly higher rate (12%) than total cost of revenue (2%).

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect that our cost of revenue will decrease in dollar amount, primarily due to a decrease in service costs.

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The following table sets forth our operating expenses for the periods indicated:

Three months ended April 30,

(in thousands, except percentages) 2025 2024 $ Change % Change

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

(in thousands, except percentages) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Sales and marketing $ 19,922 $ 21,525 $ (1,603) (7) % $ 45,906 $ 45,019 $ 887 2 %

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Sales and marketing.

The $2.5 million, or 11%, increase in sales and marketing expenses from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to increases in personnel-related expenses and professional services expenses.

We expect our sales and marketing expenses to increase as we continue to focus on our cross-selling and member engagement programs.

The $1.6 million, or 7%, decrease in sales and marketing expenses from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to decreases in personnel-related expenses.

The $0.9 million, or 2%, increase in sales and marketing expenses from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to increases in professional services expenses, partially offset by decreases in personnel-related expenses.

We expect our sales and marketing expenses to increase as we continue to focus on our Client and member engagement programs, including campaigns to reach individuals who are newly eligible for HSAs under recent legislative expansion.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect our sales and marketing expenses to remain relatively steady as a percentage of our total revenue.

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Technology and development.

The $5.3 million, or 10%, increase in technology and development expenses from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to increases in personnel-related expenses and software costs.

The $6.2 million, or 11%, increase in technology and development expenses from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to increases in software costs and personnel-related expenses.

The $11.6 million, or 10%, increase in technology and development expenses from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to increases in software costs and personnel-related expenses.

We expect our technology and development expenses to increase as we continue to invest in the development and security of our proprietary technology, including our ongoing modernization project described earlier.

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General and administrative.

The $12.7 million, or 33%, decrease in general and administrative expenses from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to a decrease in stock-based compensation expense resulting from the retirement of our former chief executive officer, partially offset by increases in personnel-related expenses.

The $2.3 million, or 7%, decrease in general and administrative expenses from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to a decrease in professional services expenses, partially offset by increases in personnel-related expenses.

The $15.0 million, or 21%, decrease in general and administrative expenses from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to a decrease in stock-based compensation expense resulting from the retirement of our former chief executive officer and a decrease in professional services expenses, partially offset by increases in personnel-related expenses.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect our general and administrative expenses to decrease, primarily due to a decrease in stock-based compensation expense, partially offset by additional demands on our legal, compliance, and finance functions as we continue to grow our business.

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Amortization of acquired intangible assets.

The $1.5 million, or 6%, increase in amortization of acquired intangible assets from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to the new intangible assets added through the BenefitWallet HSA portfolio acquisition.

The $4.0 million, or 13%, decrease in amortization of acquired intangible assets from the three months ended July 31, 2024 to the three months ended July 31, 2025 was due to a smaller carrying amount of intangible assets that have not been fully amortized.

The $2.5 million, or 4%, decrease in amortization of acquired intangible assets from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to a smaller carrying amount of intangible assets that have not been fully amortized, partially offset by amortization of intangible assets added through the BenefitWallet HSA portfolio acquisition during the six months ended July 31, 2024.

On an annual basis, relative to the fiscal year ended January 31, 2025, we expect amortization of acquired intangible assets to decrease, primarily due to a smaller carrying amount of intangible assets that have not been fully amortized.

Merger integration.

Merger integration expenses decreased by $0.9 million, or 41%, from the three months ended April 30, 2024 to the three months ended April 30, 2025.

Merger integration expenses during the three months ended April 30, 2025 consisted of professional fees, including expenses incurred in conjunction with the migration of accounts, technology-related expenses directly related to the Further acquisition and certain ongoing merger integration expenses related to the acquisition of WageWorks, Inc.

Merger integration expenses decreased by $0.5 million, or 29%, from the three months ended July 31, 2024 to the three months ended July 31, 2025.

Merger integration expenses during the three months ended July 31, 2025 consisted primarily of professional fees, including expenses incurred in conjunction with the migration of accounts and technology-related expenses directly related to the Further acquisition.

Merger integration expenses decreased by $1.4 million, or 35%, from the six months ended July 31, 2024 to the six months ended July 31, 2025.

Merger integration expenses during the six months ended July 31, 2025 consisted primarily of professional fees, including expenses incurred in conjunction with the migration of accounts and technology-related expenses directly related to the Further acquisition.

On an annual basis, we expect merger integration expense to continue to decrease as we complete the remaining merger integration activities.

Interest expense

The $3.1 million, or 26%, increase in interest expense from the three months ended April 30, 2024 to the three months ended April 30, 2025 was primarily due to a higher average principal balance, partially offset by a lower average interest rate on borrowings with variable interest rate terms.

As of April 30, 2025, borrowings under our revolving credit facility were $461.9 million and had a stated interest rate of 5.92%.

As of April 30, 2024, borrowings under our prior credit agreement were $336.9 million and had a stated interest rate of 6.67%.

The increase in principal was due to $175.0 million of borrowings to pay a portion of the BenefitWallet HSA portfolio acquisition purchase price, partially offset by prepayments of $50.0 million during the twelve months ended April 30, 2025.

The $0.5 million, or 3%, decrease in interest expense from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due a lower average interest rate on borrowings with variable interest rate terms and a lower average principal balance.

The $2.6 million, or 10%, increase in interest expense from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily due to a higher average principal balance, partially offset by a lower average interest rate on borrowings with variable interest rate terms.

As of July 31, 2025, borrowings under our revolving credit facility were $411.9 million and had a stated interest rate of 5.96%.

As of July 31, 2024, borrowings under our prior credit agreement were $511.9 million and had a stated interest rate of 6.70%.

The decrease in principal was due to prepayments of $100.0 million during the twelve months ended July 31, 2025.

The interest rate on our revolving credit facility is variable and, accordingly, we may incur additional expense if interest rates increase in future periods.

Other income, net

The $0.7 million decrease in other income, net, from the three months ended April 30, 2024 to the three months ended April 30, 2025 was due to a decrease in interest income on corporate cash, partially offset by a decrease in other miscellaneous expense, net.

The $0.3 million increase in other income, net, from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily due to an increase in interest income on corporate cash.

The $0.4 million decrease in other income, net, from the six months ended July 31, 2024 to the six months ended July 31, 2025 was due to a decrease in interest income on corporate cash, partially offset by a decrease in other miscellaneous expense, net.

Income tax provision

For the three months ended April 30, 2025 and 2024, we recorded an income tax provision of $17.0 million and $4.4 million, respectively.

The increase in income tax provision was primarily the result of an increase in pre-tax book income and a decrease in tax deductible stock-based compensation compared to GAAP stock-based compensation expense, partially offset by a decrease in nondeductible executive compensation.

The $7.4 million increase in income tax provision from the three months ended July 31, 2024 to the three months ended July 31, 2025 was primarily the result of an increase in pre-tax book income, partially offset by a decrease in nondeductible executive compensation and an increase in tax deductible stock-based compensation compared to GAAP stock-based compensation expense.

The $20.0 million increase in income tax provision from the six months ended July 31, 2024 to the six months ended July 31, 2025 was primarily the result of an increase in pre-tax book income and a decrease in tax deductible stock-based compensation compared to GAAP stock-based compensation expense, partially offset by a decrease in nondeductible executive compensation.

Seasonal concentration of our growth combined with our recurring revenue model create seasonal variation in our results of operations.

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We rely on cash provided by operating activities to meet our short-term liquidity requirements, which primarily relate to the payment of corporate payroll and other operating costs, interest payments on our long-term debt, and capital expenditures.

As of April 30, 2025 and January 31, 2025, cash and cash equivalents were $287.9 million and $295.9 million, respectively.

As of July 31, 2025 and January 31, 2025, cash and cash equivalents were $304.5 million and $295.9 million, respectively.

Capital resources

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In addition, we may conduct concurrent or other financings at any time.

Our credit agreement includes a senior secured revolving credit facility in an aggregate principal amount of up to $1.0 billion, which matures on August 23, 2029 and may be used in the future for working capital and general

corporate purposes, including the financing of acquisitions and other investments.

For a description of the terms of the credit agreement, refer to Note 6—Indebtedness.

As of April 30, 2025, the outstanding balance under the revolving credit facility was $461.9 million.

We were in compliance with all covenants under the credit agreement as of April 30, 2025, and for the period then ended.

As of July 31, 2025, the outstanding balance under the revolving credit facility was $411.9 million.

We were in compliance with all covenants under the credit agreement as of July 31, 2025, and for the period then ended.

We continue to be in compliance with all covenants under the credit agreement through the filing date of this Quarterly Report on Form 10-Q.

During the three months ended April 30, 2025, we used $59.1 million for common stock repurchases.

See Note 9—Stockholders' equity for additional information related to our stock repurchase program.

Capital expenditures for the three months ended April 30, 2025 and 2024 were $16.1 million and $13.8 million, respectively.

During the six months ended July 31, 2025, we used $125.8 million for common stock repurchases.

See Note 9—Stockholders' equity for additional information related to our stock repurchase programs.

During the six months ended July 31, 2025, we prepaid $50.0 million under our credit agreement.

Capital expenditures for the six months ended July 31, 2025 and 2024 were $27.3 million and $26.8 million, respectively.

We expect to continue our current level of capital expenditures for the remainder of the fiscal year ending January 31, 2026 as we continue to invest in improving the architecture and functionality of our proprietary systems.

Capital expenditures to improve the architecture of our proprietary systems include computer hardware, personnel and related costs for software engineering, and outsourced software engineering services.

As a result of accelerated tax deductions enabled under the “One Big Beautiful Bill Act,” which was signed into law on July 4, 2025, we expect that corporate income tax payments for the fiscal years ending January 31, 2026 and January 31, 2027 will be significantly reduced.

We believe our existing cash, cash equivalents, and revolving credit facility will be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months.

To the extent these current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may need to raise additional funds through public or private equity or debt financing.

To the extent these current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may need to

raise additional funds through public or private equity or debt financing.

In the event that additional financing is required, we may not be able to raise it on favorable terms, if at all.

The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods:

Three months ended April 30,

Six months ended July 31,

(in thousands) 2025 2024

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Net cash provided by (used in) financing activities (164,768) 228,388

Decrease in cash and cash equivalents (8,054) (152,750)

Increase (decrease) in cash and cash equivalents 8,513 (77,086)

Beginning cash and cash equivalents 295,948 403,979

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Cash flows from operating activities.

Net cash provided by operating activities decreased by $0.7 million from the three months ended April 30, 2024 to the three months ended April 30, 2025 primarily due to an increase in cash payments with respect to personnel-related costs and professional fees, largely offset by increased cash receipts with respect to our custodial, interchange, and service revenues.

Net cash provided by operating activities increased by $27.0 million from the six months ended July 31, 2024 to the six months ended July 31, 2025 primarily due to increased cash receipts with respect to our custodial, interchange, and service revenues, partially offset by the timing of cash payments for personnel-related costs.

Cash flows from investing activities.

Net cash used in investing activities decreased by $253.8 million from the three months ended April 30, 2024 to the three months ended April 30, 2025 due to a $256.1 million decrease in cash used to acquire HSA portfolios and a $0.6 million decrease in cash used for purchases of property and equipment, partially offset by a $3.0 million increase in cash used for purchases of software and capitalized software development costs.

Net cash used in investing activities decreased by $451.7 million from the six months ended July 31, 2024 to the six months ended July 31, 2025 due to a $452.2 million decrease in cash used to acquire HSA portfolios and a $0.6 million decrease in cash used for purchases of property and equipment, partially offset by a $1.1 million increase in cash used for purchases of software and capitalized software development costs.

Cash flows from financing activities.

Net cash used in financing activities was $56.6 million during the three months ended April 30, 2025, compared to $51.8 million of net cash provided by financing activities during the three months ended April 30, 2024.

The change was due to a $59.1 million increase in cash used for repurchases of common stock, a $50.0 million decrease in proceeds from long-term debt, and a $1.4 million decrease in proceeds from the exercise of common stock options, partially offset by a $2.0 million increase in net cash received in the settlement of client-held funds obligations.

Net cash used in financing activities was $164.8 million during the six months ended July 31, 2025, compared to $228.4 million of net cash provided by financing activities during the six months ended July 31, 2024.

The change was due to a $225.0 million decrease in proceeds from long-term debt, a $125.8 million increase in cash used for repurchases of common stock, and a $50.0 million increase in principal payments on our long-term debt, partially offset by a $6.2 million increase in proceeds from the exercise of common stock options and a $1.4 million increase in net cash received in the settlement of client-held funds obligations.

Contractual obligations

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Off-balance sheet arrangements

As of April 30, 2025, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

As of July 31, 2025, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Critical accounting policies and significant management estimates

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Our significant accounting policies are more fully described in Note 1 of the accompanying unaudited condensed consolidated financial statements and in Note 1 to our audited consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

There have been no significant or material changes in our critical accounting policies during the three months ended April 30, 2025, as compared to those disclosed in “Management’s discussion and analysis of financial condition and results of operations – Critical accounting policies and significant management estimates” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

There have been no significant or material changes in our critical accounting policies during the six months ended July 31, 2025, as compared to those disclosed in “Management’s discussion and analysis of financial condition and results of operations – Critical accounting policies and significant management estimates” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

Recent accounting pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis