What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-12-03 compared with 2025-09-02 · 97 added, 90 removed, 362 unchanged (34% of the section changed)

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

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

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

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 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.

As of October 31, 2025, we administered 10.1 million HSAs, with balances totaling $34.4 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 17.3 million as of October 31, 2025.

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

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

We have increased our share of the growing HSA market from 4% in December 2010 to 21% as of December 2024, measured by HSA Assets.

According to the 2024 Year-End Devenir HSA Research Report, as of December 2024, we were the largest HSA provider by number of accounts and the second largest HSA provider by HSA Assets.

We have increased our share of the growing HSA market from 4% in December 2010 to 20% as of June 2025, measured by HSA Assets.

According to the 2025 Midyear Devenir HSA Research Report, as of June 2025, we were the largest HSA provider by number of accounts and the second largest HSA provider by HSA Assets.

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

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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 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.

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 and HSAnswers tools, 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, providing our members access to healthcare solutions through our marketplace platform, 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) July 31, 2025 July 31, 2024 % Change January 31, 2025

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

HSAs 10,108 9,508 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 0.6 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 number of our HSAs increased by 0.6 million, or 6%, from October 31, 2024 to October 31, 2025, driven by new HSAs from sales.

The number of our CDBs increased by 0.2 million, or 3%, from October 31, 2024 to October 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) July 31, 2025 July 31, 2024 % Change January 31, 2025

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

HSA cash $ 16,910 $ 16,386 3 % $ 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 $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.

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 July 31, 2025:

HSA cash increased by $0.5 billion, or 3%, from October 31, 2024 to October 31, 2025, due to net HSA contributions from new and existing HSA members, partially offset by transfers to HSA investments.

HSA investments increased by $3.9 billion, or 29%, from October 31, 2024 to October 31, 2025, due to the increased market value of invested balances and transfers from HSA cash.

Total HSA Assets increased by $4.5 billion, or 15%, from October 31, 2024 to October 31, 2025, primarily due to the increased market value of invested balances and net HSA contributions from new and existing HSA members.

HSA cash maturity schedule

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

(1) Excludes $0.5 billion of HSA cash held in floating-rate contracts as of October 31, 2025.

Client-held funds

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

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

Client-held funds $ 803 $ 748 7 % $ 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 July 31, Six months ended July 31,

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

(in thousands) 2025 2024 2025 2024

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

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

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

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

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As a percentage of revenue 16 % 2 % 17 % 8 %

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."

Our net income increased by $46.0 million, or 806%, from the three months ended October 31, 2024 to the three months ended October 31, 2025, primarily due to an increase in gross profit and a decrease in operating expenses.

The decrease in operating expenses was primarily due to a non-recurring $30.0 million expense during the three months ended October 31, 2024 to settle a lawsuit related to a lease termination (the "Lease Settlement"), as described in Note 6 to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

These changes were partially offset by an increase in income tax provision and are described more fully in the section entitled "Comparison of the three and nine months ended October 31, 2025 and 2024."

Our net income increased by $95.1 million, or 135%, from the nine months ended October 31, 2024 to the nine months ended October 31, 2025, primarily due to an increase in gross profit and a decrease in operating expenses.

The decrease in operating expenses was primarily due to the non-recurring Lease Settlement during the nine months ended October 31, 2024.

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

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

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

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

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As a percentage of revenue 44 % 39 % 44 % 41 %

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 Adjusted EBITDA increased by $23.6 million, or 20%, from the three months ended October 31, 2024 to the three months ended October 31, 2025, primarily due to an increase in total revenue, a decrease in costs incurred to reimburse members impacted by outside fraud activity, efficiencies resulting from our technology investments, and a decrease in professional services expenses, partially offset by increases in software costs and costs to support the increase in Total Accounts and member interactions.

Our Adjusted EBITDA increased by $69.1 million, or 19%, from the nine months ended October 31, 2024 to the nine months ended October 31, 2025, primarily due to an increase in total revenue, efficiencies resulting from our technology investments, a decrease in professional services expenses, and a decrease in costs incurred to reimburse members impacted by outside fraud activity, 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 July 31, Six months ended July 31,

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

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

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Costs associated with unused office space 654 812 2,229 2,408

Loss on extinguishment of debt — 1,576 — 1,576

Total adjustments to income before income taxes - GAAP 49,357 86,298 140,880 201,934

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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 $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 non-GAAP net income increased by $18.3 million, or 26%, from the three months ended October 31, 2024 to the three months ended October 31, 2025, primarily due to an increase in total revenue, a decrease in costs incurred to reimburse members impacted by outside fraud activity, efficiencies resulting from our technology investments, and a decrease in professional services expenses, 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 $52.1 million, or 24%, from the nine months ended October 31, 2024 to the nine months ended October 31, 2025, primarily due to an increase in total revenue, efficiencies resulting from our technology investments, a decrease in professional services expenses, and a decrease in costs incurred to reimburse members impacted by outside fraud activity, 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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Service revenue.

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

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

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.

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Service costs.

Service costs are comprised of costs related to servicing accounts, managing Client and Network Partner relationships and processing reimbursement claims.

Service costs are primarily comprised of costs related to servicing accounts, managing Client and Network Partner relationships and processing reimbursement claims.

Expenditures include personnel-related costs, depreciation, amortization, stock-based compensation, common expense allocations (such as office rent, supplies, and other overhead expenses), costs to reimburse members from outside fraud activity, new member and participant supplies, and other operating costs related to servicing our members.

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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 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.

As of October 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

Comparison of the three and nine months ended October 31, 2025 and 2024

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

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

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

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

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Service revenue.

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.

The $1.1 million, or 1%, increase in service revenue from the three months ended October 31, 2024 to the three months ended October 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 $3.8 million, or 1%, increase in service revenue from the nine months ended October 31, 2024 to the nine months ended October 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 increases in Total Accounts and HSA investments, partially offset by lower average service fees per account.

Custodial revenue.

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.

The $18.1 million, or 13%, increase in custodial revenue from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to an increase in average annualized yield on HSA cash from 3.17% for the three months ended October 31, 2024 to 3.53% for the three months ended October 31, 2025 (due to both HSA cash placed with Depository Partners at higher yields and increased participation in our Enhanced Rates offering) and the $0.5 billion, or 3%, increase in average daily 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 $74.1 million, or 18%, increase in custodial revenue from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily due to an increase in average annualized yield on HSA cash from 3.07% for the nine months ended October 31, 2024 to 3.51% for the nine months ended October 31, 2025 (due to both HSA cash placed with Depository Partners at higher yields and increased participation in our Enhanced Rates offering) and the $1.0 billion, or 6%, increase in average daily 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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As Basic Rates contracts mature, we intend to transfer the associated HSA cash into Enhanced Rates contracts unless the HSA member affirmatively opts to remain in the Basic Rates offering.

Refer to the HSA cash maturity schedule in the section entitled “Key financial and operating metrics.”

Interchange revenue.

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.

The $2.5 million, or 6%, increase in interchange revenue from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to an increase in Total Accounts.

The $12.9 million, or 10%, increase in interchange revenue from the nine months ended October 31, 2024 to the nine months ended October 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 $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.

Total revenue increased $21.7 million, or 7%, from the three months ended October 31, 2024 to the three months ended October 31, 2025 due to the increases in custodial, interchange, and service revenues, described above.

Total revenue increased $90.9 million, or 10%, from the nine months ended October 31, 2024 to the nine months ended October 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 July 31, Six months ended July 31,

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

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

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Service costs.

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.

The $10.0 million, or 11%, decrease in service costs from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to a decrease in costs incurred to reimburse

members impacted by outside fraud activity and efficiencies resulting from our technology investments, partially offset by increases in costs to support the increase in Total Accounts and member interactions.

The $6.1 million, or 2%, decrease in service costs from the nine months ended October 31, 2024 to the nine months ended October 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.

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 $1.0 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.

The $0.6 million, or 6%, increase in custodial costs from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to the $0.5 billion, or 3%, increase in average daily 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 October 31, 2024 to 0.24% during the three months ended October 31, 2025.

The $3.4 million, or 11%, increase in custodial costs from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily due to the $1.0 billion, or 6%, increase in average daily 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 nine months ended October 31, 2024 to 0.24% during the nine months ended October 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 average daily HSA cash and an increase in the average annualized rate of interest retained by HSA members on HSA cash.

Interchange costs.

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.

The $28 thousand, or less than 1%, increase in interchange costs from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to an increase in Total Accounts, offset by efficiencies resulting from the transition to a single card processor.

The $3.2 million, or 13%, decrease in interchange costs from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily due to efficiencies resulting from the transition to a single card processor, partially offset by an increase in Total Accounts and an increase in spend per account using our payment cards.

Total cost of revenue.

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%).

Cost of revenue as a percentage of total revenue decreased to 30.0% for the nine months ended October 31, 2025 compared to 33.8% for the nine months ended October 31, 2024, due to total revenue increasing at a significantly higher rate (10%) 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 July 31, Six months ended July 31,

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

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

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Sales and marketing.

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.

The $1.8 million, or 8%, increase in sales and marketing expenses from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to increases in advertising expenses, partially offset by decreases in personnel-related expenses.

The $2.7 million, or 4%, increase in sales and marketing expenses from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily due to increases in advertising expenses, partially offset by decreases in personnel-related expenses.

We expect our sales and marketing expenses to increase as we continue to focus on brand awareness and 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 $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.

The $5.7 million, or 10%, increase in technology and development expenses from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to increases in software costs and personnel-related expenses.

The $17.3 million, or 10%, increase in technology and development expenses from the nine months ended October 31, 2024 to the nine months ended October 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 $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.

The $0.9 million, or 3%, decrease in general and administrative expenses from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due to a decrease in professional services expenses, partially offset by increases in personnel-related expenses.

The $15.9 million, or 16%, decrease in general and administrative expenses from the nine months ended October 31, 2024 to the nine months ended October 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 $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.

The $1.3 million, or 5%, decrease in amortization of acquired intangible assets from the three months ended October 31, 2024 to the three months ended October 31, 2025 was due to a smaller carrying amount of intangible assets that have not been fully amortized.

The $3.9 million, or 5%, decrease in amortization of acquired intangible assets from the nine months ended October 31, 2024 to the nine months ended October 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 nine months ended October 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 $0.5 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.

Merger integration expenses decreased by $33.3 million, or 97%, from the three months ended October 31, 2024 to the three months ended October 31, 2025, primarily due to the non-recurring Lease Settlement during three months ended October 31, 2024.

Merger integration expenses during the three months ended October 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 $34.7 million, or 90%, from the nine months ended October 31, 2024 to the nine months ended October 31, 2025, primarily due to the non-recurring Lease Settlement during nine months ended October 31, 2024.

Merger integration expenses during the nine months ended October 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 $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 $4.1 million, or 23%, decrease in interest expense from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily due a lower average interest rate on borrowings with variable interest rate terms and a lower average principal balance.

The $1.5 million, or 3%, decrease in interest expense from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily due a lower average interest rate on borrowings with variable interest rate terms and a lower average principal balance.

As of October 31, 2025, borrowings under our revolving credit facility were $386.9 million and had a stated interest rate of 5.32%.

As of October 31, 2024, borrowings under our prior credit agreement were $511.9 million and had a stated interest rate of 6.34%.

The decrease in principal was due to prepayments of $100.0 million during the twelve months ended October 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 $0.3 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.

The $1.9 million decrease in other income, net, from the three months ended October 31, 2024 to the three months ended October 31, 2025 was due to decreases in interest income on corporate cash and other miscellaneous income, net.

The $2.3 million decrease in other income, net, from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was due to decreases in interest income on corporate cash and other miscellaneous income, net.

Income tax provision

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.

The $15.3 million increase in income tax provision from the three months ended October 31, 2024 to the three months ended October 31, 2025 was primarily the result of an increase in pre-tax book income and a decrease in research and development tax credits, partially offset by a decrease in nondeductible executive compensation.

The $35.3 million increase in income tax provision from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 was primarily the result of an increase in pre-tax book income, a decrease in tax deductible stock-based compensation compared to GAAP stock-based compensation expense, and a decrease in research and development tax credits, 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 July 31, 2025 and January 31, 2025, cash and cash equivalents were $304.5 million and $295.9 million, respectively.

As of October 31, 2025 and January 31, 2025, cash and cash equivalents were $309.3 million and $295.9 million, respectively.

Capital resources

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

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.

As of October 31, 2025, the outstanding balance under the revolving credit facility was $386.9 million.

We were in compliance with all covenants under the credit agreement as of October 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 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.

During the nine months ended October 31, 2025, we used $218.2 million for common stock repurchases.

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

During the nine months ended October 31, 2025, we prepaid $75.0 million under our credit agreement.

Capital expenditures for the nine months ended October 31, 2025 and 2024 were $38.4 million and $39.7 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.

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

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2025 2024

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Cash flows from operating activities.

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.

Net cash provided by operating activities increased by $75.1 million from the nine months ended October 31, 2024 to the nine months ended October 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 and accrued liabilities.

Cash flows from investing activities.

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.

Net cash used in investing activities decreased by $453.2 million from the nine months ended October 31, 2024 to the nine months ended October 31, 2025 due to a $451.9 million decrease in cash used to acquire HSA portfolios, a $1.1 million decrease in cash used for purchases of software and capitalized software development costs, and a $0.1 million decrease in cash used for purchases of property and equipment.

Cash flows from financing activities.

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.

Net cash used in financing activities was $287.2 million during the nine months ended October 31, 2025, compared to $146.0 million of net cash provided by financing activities during the nine months ended October 31, 2024.

The change was due to a $736.9 million decrease in proceeds from long-term debt, a $159.7 million increase in cash used for repurchases of common stock, and a $2.6 million decrease in net cash received in the settlement of client-held funds obligations, partially offset by a $461.9 million decrease in principal payments on our long-term debt, a $3.7 million decrease in debt issuance costs associated with long-term debt, and a $0.4 million increase in proceeds from the exercise of common stock options.

Contractual obligations

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Off-balance sheet arrangements

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.

As of October 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 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.

There have been no significant or material changes in our critical accounting policies during the nine months ended October 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