HealthEquity (NASDAQ:HQY) posted second-quarter fiscal 2027 results on August 27, which pushed revenue growth to 8% year over year, up from the 7% pace set over the first half of the year, a rare acceleration for a company already sitting on 10.7 million health savings accounts/HSAs. Adjusted EBITDA jumped 11% to $167 million, translating into a record 48% margin. Management raised full-year revenue and profit guidance on the back of that performance, and the numbers suggest a business getting more efficient even as it gets bigger.
A Flywheel Spinning Faster With Every Turn
The account growth alone would make for a solid quarter. New HSAs from sales rose 24% year over year to 202,000, the strongest second quarter the company has posted and its best stretch outside the fourth quarter open enrollment window. Total HSA assets reached $37.9 billion, up 14%, while HSA invested assets climbed 28% to $20.6 billion as 939,000 accounts now hold investments, a 20% increase. That distinction matters because members who invest carry balances four times larger than those who do not, so every account that starts investing compounds the relationship’s value without HealthEquity signing up a single new client.
Engagement is following the same curve. Monthly active users on the mobile app hit 1.4 million in July, up 62% year over year, and total downloads passed 5 million. Marketplace, still a small piece of the business with about 14,000 active members, is already showing that purchasers are more likely to start contributing to their HSA than members who never buy anything through it. AI-driven automation resolved 85% of routine chat inquiries and contained 55% of card-related phone contacts, helping cut human-handled service calls by 25% even as total accounts grew 4%. Gross margin expanded to 74% of revenue from 71% a year earlier, and the company returned $108.1 million to shareholders through buybacks during the quarter.
The Costs Behind The Record Numbers
Not everything is friction-free. CFO James Lucania acknowledged the competitive pressure on pricing, telling analysts there is “absolutely headline price erosion,” a year-over-year reduction that weighs on service revenue even as that segment still grew 6% to $124.4 million. GAAP net income of $65.6 million, or $0.78 per diluted share, ran well below the $103.8 million and $1.24 per share reported on a non-GAAP basis, a gap that included $3.3 million in one-time disposal costs tied to internally developed software the company no longer uses.
The custodial revenue engine, which grew 10% to $175.9 million, carries its own interest rate exposure. HealthEquity still has $2.3 billion of HSA cash in contracts set to reprice during fiscal 2027, and it has been layering forward Treasury contracts to manage that risk, effectively locking a five-year rate near 3.9% net of costs through fiscal 2029 rather than betting on where rates land. Long-term debt stood at $931.1 million net of issuance costs at quarter end, a reminder that the buybacks and growth investments are being funded alongside real leverage. And despite the attention the marketplace is getting, management itself described its revenue contribution as immaterial to the company’s overall results today.
What The Market Is Pricing In
Hedge fund ownership slipped slightly, with 36 funds holding a position in the most recent quarter versus 37 in the prior one, a marginal pullback rather than an exodus. Short interest sits at 6.52% of the float, enough to show a real bear case exists but far from crowded. As of August 31, the stock trades at a forward P/E of 20.08, a multiple that assumes steady execution rather than pricing in the kind of acceleration management just reported.
Where The Story Goes From Here
HealthEquity’s second quarter shows a company converting account growth into deeper, higher-value relationships while trimming its own cost structure through automation. The raised guidance for fiscal 2027, now $1.411 billion to $1.421 billion in revenue and $628 million to $636 million in adjusted EBITDA, reflects real momentum from the first half of the year. But the price erosion Lucania flagged and the gap between GAAP and non-GAAP earnings are reminders that competition and one-time costs can chip away at that momentum.
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