HQY 10-K & 10-Q changes, risk factors and insider trading

Failure to adequately place and safeguard HSA cash and Client-held funds, or the failure of any of our depository or insurance company partners,partners or Depository Partners, could materially and adversely affect our business, financial conditioncondition, and results of operations.

As a non-bank custodian, we rely on our insurance company partners and federally insured custodial Depository Partners and our insurance company partners to hold HSA cash that we custody. The portion of HSA cash held by our insurance company partners continues to increase with the increasing adoption of our Enhanced Rates program. The HSA cash held through our insurance company partners is not federally insured, and our members bear the risk of loss with respect to either the failure of the insurance company partner holding their HSA cash or the breach by the insurance company partner of its obligations to guarantee principal or pay interest thereon. In addition, we deposit Client-held funds with our Depository Partners in interest-bearing demand deposit accounts, and federal deposit insurance may not be available for certain Clients.

If any material adverse event were to affect one of our Depository Partners or our insurance company partners,partners or Depository Partners, including a significant decline in its financial condition, a decline in the quality of its service, a loss of deposits, its inability to comply with applicable insurance, banking, insurance or other regulatory requirements, systems failurefailure, or its inability to return principal or pay interest thereon, our business, financial conditioncondition, and results of operations could be materially and adversely affected. In addition, in the event of such a failure of, or breach by, one of our insurance company partners, the HSA cash held through that insurance company partner would be at risk and no assurance can be given that our contractual arrangements with that insurance company partner would be sufficient for our members to fully recover their HSA cash, which would in turn result in reputational and financial harm to the Company.

In addition, certain of our insurance company partners have commitments to us with respect to the interest rates paid; however, some of these commitments are conditional upon certain market events and/or the satisfaction of our obligations to the partner. A reduction of the interest rate payable, or a requirement that we post collateral in lieu of any such reduction, could have a material and adverse impact on our business, financial conditioncondition, and results of operations.

Failure to adequately manage the liquidity of the custodial assets held by our Depository Partners and insurance company partners and Depository Partners could materially and adversely affect our business, financial condition, and results of operations.

Certain of our arrangements with our Depository Partners and insurance company partners and Depository Partners require that we keep a minimum amount of HSA cash with such partner. If we fail to comply with those minimum HSA cash requirements, including as a result of withdrawals by our members, we may be subject to penalties payable to our partners or a reduction in the interest paid to us under such arrangements. Such penalties or reductions, if imposed, could have a material and adverse impact on our business, financial conditioncondition, and results of operations, and we may not have sufficient capital on hand to pay such penalties.

We partner with our Depository Partners and insurance company partners and Depository Partners to hold our HSA Assets and other Client-held funds. We earn a substantial portion of our revenue from fees we earn from our Depository Partners and insurance company partners,partners and Depository Partners which comprised approximately 48%, 45%, 39%, and 30%39% of our revenues during the fiscal years ended January 31, 2026, 2025, 2024, and 2023,2024, respectively. A decline in prevailing interest rates would negatively impact our business by reducing the yield we realize on our HSA Assets and other Client-held funds. In addition, if we do not offer competitive interest rates on HSA Assets, our members may choose another HSA custodian. Any such scenario could materially and adversely affect our business and results of operations.

If the value of the invested HSA Assets that our members hold declines, whether due to market conditions or other factors, our fees,fees received on invested HSA Assets, which are based on a percentage of the asset values, would be adversely affected, which would in turn negatively impact our results of operations.

The market for our products and services is subject to rapid and significant change and competition. The market for administering HSAs and other CDBs is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs, existing competition, price sensitivity, and the entrance of non-traditional competitors. In addition, there may be a limited-time opportunity to achieve and maintain a significant share of this market due in part to our rapidly evolving industry, industry consolidation, and the substantial resources available to our existing and potential competitors. In order to remain competitive, we are continually involved in a number of projects to develop new services or compete with these new market entrants. These projects carry risks, such as cost overruns, delays in delivery, performance problems, and lack of acceptance by our Clients, Network PartnersPartners, marketplace partners, and members.

We believe that many consumers are not familiar with, or do not fully appreciate, the tax-advantaged benefits of HSAs and other CDBs. Our success depends on the willingness of consumers to increase their use of HSAs and other CDBs, our ability to increase engagement, and our ability to demonstrate the value of our services to our existing and potential Clients, Network PartnersPartners, and members.

If our members do not fully use their HSAs or CDBs, if employers reduce or cease to offer HSAs or other CDB programs, if the rate of adoption of these accounts decreases, if existing Clients, Network PartnersPartners, and members do not recognize or acknowledge the benefits of our services or we do not drive engagement, then the market for our services might decline or develop more slowly than we expect, which could adversely affect our operating results.

The expanding use or anticipated use of AI technologies, including generative AI, by us or third parties, may increase or create new operational and competitive risks.

AI technologies – including generative AI –present numerous opportunities, such as benefits from increased operational efficiencies and innovative new products. We expect the use of AI technologies in the marketplace to increase as we, our service providers, and our competitors seek to leverage and maximize those benefits. However, the development and deployment of such technologies also posespose certainsignificant risks. For example, new products and services incorporating or utilizing AI and machine learning may raise technological, security, legallegal, reputational, and other risks and challenges related to, among other items, the use of personal information or the information of clients who have not granted permission for the use of their data in such AI systems, flaws in our models or training datasets that may result in biased or inaccurate resultsresults, or other unanticipated outcomes, ethical considerations regarding AI, potential infringement of third-party intellectual property rights, exposure of data, and our ability to safely deploy and implement governance and controls for AI systems. We are also exposed to risks arising from the use of AI technologies by bad actors, who may use such technologies to commit fraud, misappropriate funds, and facilitate cyberattacks. Further, our competitors may adopt AI or generative AI more quickly or more effectively than we do, causing competitive harm. AI is subject to rapidly evolving domestic and international laws and regulations, the scope and requirements of which may be inconsistent across jurisdictions and which could impose significant costs and obligations on us. Any of these risks could negatively impact our reputation, the demand for our products and services, and our financial condition and results of operations, and otherwise draw adverse regulatory scrutiny.operations.

The market for our products and services is highly competitive. We view our competition in terms of direct and indirect competitors. Our direct HSA competitors are well-known retail investment companies, such as Fidelity Investments, HSA custodians and administrators that include state or federally chartered banks, such as Webster Bank and Optum Bank, insurance companies, and non-bank custodians approved by the U.S. Treasury. We also have numerous indirect HSA administration competitors, including benefits administrators and health plans, that license technology platforms and partner with other HSA custodians to provide "white label" HSA offerings. Our other CDB administration competitors include health insurance carriers, human resources consultants and outsourcers, payroll providers, national CDB specialists, regional third-party administrators, and commercial banks, and these competitors have entered, and others may also enter, the HSA market or expand existing HSA offerings to compete with us. Our marketplace initiative also faces competition from telehealth companies with whom we are not affiliated, other providers of similar marketplaces, the producers of products and services competitive with the products and services made available through our marketplace, as well as from similar initiatives by our direct HSA competitors.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could materially adversely affect our ability to compete effectively. Our competitors have and may continue to establish or strengthen cooperative relationships with our current or future Network PartnersPartners, marketplace partners, or other strategic partners, thereby limiting our ability to promote our solution with these parties. We have seen an increase in Network Partners that have decided to offer HSAs or other CDBs directly to their customers, and a continuation of this trend would significantly reduce our channel partner opportunities and result in account attrition.

We derived 15%, 16%,15%, and 17%16% of our total revenue during the fiscal years ended January 31, 2026, 2025, 2024, and 2023,2024, respectively, from interchange fees that are paid to us when our customers utilize our payment cards. These fees represent a percentage of the expenses transacted on each card. For example, the COVID-19 pandemic had a materially adverse impact on the interchange fees generated due to decreased usage of our payment cards in our commuter product and in healthcare spending. If our customers do not use these payment cards at the rate we expect, if they elect to withdraw funds using a non-revenue generating mechanism such as direct reimbursement, or if other alternatives to these payment cards develop, our results of operations, business, and prospects would be materially adversely affected.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our reputation, results of operationsoperations, and financial condition.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraudfraud, and operate successfully as a public company. Any failure, whether in connection with our growth, acquisitions, or otherwise, to execute on our internal controls and continue to maintain effective internal controls, to timely implement any necessary additional improvement to our internal controlscontrols, or to effect remediation of any future material weakness or significant deficiency could, among other things, result in losses from fraud or error, harm our reputationreputation, result in regulatory fines, penalties, or investigations, or cause investors to lose confidence in our reported financial information, all of which could have a material adverse effect on our reputation, results of operations, or financial condition.

Cyber-attacks,Cyber attacks, including ransomware attacks, or other privacy or data security incidents could materially adversely impact our business.

As one of the largest providers of HSAs and other CDBs, our proprietary technology platforms enable the exchange of, and access to, sensitive information. As a result, we are frequently the target of cyber-attacks,cyber attacks, including ransomware attacks, which means we must continue to monitor and take steps to secure each of our technology platforms, making sure these platforms are aligned to our industry benchmark security posture. In addition, geopolitical events, including the war between Russia and Ukraine, have resulted in, and may continue to result in, an increase in cyber-attacks.cyber attacks.

Our ability to ensure the security of our technology platforms and sensitive customer and partner information is critical to our operations. We rely on standard Internet and other security systems to provide the security and authentication necessary to effect secure transmission of data. Despite our security measures, our information technology and infrastructure are vulnerable to cybersecurity threats, including attacks by hackershackers, AI-powered threats, human error, insider threats, and other malfeasance.malfeasance or outages. Such threats could result in actual security events that compromise our networks, or those of third-party service providers on which we rely, and result in the information stored or transmitted there to be accessed, modifiedmodified, or used in an unauthorized manner, publicly disclosed, lost, or stolen. Such access, use, disclosure, or other loss of information may result in regulatory scrutiny, and legal claims and liability, including under laws that protect the privacy of personal information, as it has in the recent past. Cybersecurity events disrupt our operations and the services we provide to our Clients, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, operations, and competitive position.

Security breaches, including a major breach of our network security and systems, could result in serious negative consequences for our business, including the loss of sensitive information, theft or loss of actual funds, litigation, indemnity obligations to our Clients, fines, penaltiespenalties, regulatory scrutiny, and other liabilities, including under laws that protect the privacy of personal information, and disrupt our operations and the services we provide to our members, Clients and Network Partners. We have been the victim of such breaches, which have damaged our reputation and caused a loss of confidence in our products and services, and which may lead to a reduction in demand and result in an unwillingness of members, Clients, Network PartnersPartners, and other data owners to provide us with their payment information or personal information, and otherwise harm our brand. Furthermore, when third parties improperly obtain and use the personal information of our members, we are required to expend significant resources to investigate and resolve these problems.

While we have security measures in place, we have experienced data privacy incidents in the past, including an incident in 2024 in which a business partner's user account containing personally identifiable information was breached. As a result of the incident, we are now subject to severala consolidated putative class action lawsuits seeking unspecified damages, and we are subject to regulatory inquiries related to the incident.incident, which may lead to fines or other enforcement by these regulators. Whether as a result of these incidents, or if our security measures are breached again or unauthorized access to data is otherwise obtained as a result of third-party action, team member errorerror, or otherwise, our reputation could be significantly damaged, our business may suffersuffer, and we could incur substantial liability, which could result in loss of sales, Clients and Network Partners.

Because techniques used to obtain unauthorized access to or sabotage systems change frequently and such novel techniquestechniques, including by use of AI technologies by threat actors, may not be identified until they are launched against a target, we may be unable to anticipate, or to implement adequate preventative measures to address, these techniques. Any or all of these issues could negatively impact our ability to attract new, or increase engagement by, members, Clients and Network Partners, and subject us to third-party lawsuits, regulatory actions or fines, contractual liability, and other action or liability, thereby harming our operating results or financial condition.

Criminals are using increasingly sophisticated methodsmethods, including AI, to obtain personal information, which they then use to commit fraud. As a non-bank custodian of HSAs, we are frequently targeted by sophisticated and persistent bad actors for fraudulent activity, through various tactics such as high-volume credential stuffing attacks, denial of service attacks, and social engineering attacks, among others. WeFor haveexample, in the fiscal year ended January 31, 2025, and the fiscal quarter ended April 30, 2025, we experienced a significant increase in the volume and sophistication of outside fraudulent activity targeting member accounts, resulting in a significant loss to us as we incurred service costs to reimburse and protect impacted members. Losses due to fraud committed against us and our Clients, members, and Network Partners may not be covered by insurance policies, and losses not covered by insurance may be material. Even in the event that losses relating to fraudulent activity are covered by insurance, premiums and/or deductibles related to our insurance coverage may increase or the scope of our coverage may decrease, any of which could have an adverse impact on our financial results.

We rely on certain cloud-based software licensed from third parties to run our business. This software may experience outages, may not continue to be available to us on commercially reasonable terms and any loss of the right to use any of this software could result in, among others, delays in producing our financial statements, risks to our security environment, or the provisioning of our products and services until equivalent technology is either developed by us, or, if available, identified, obtained, and integrated into our systems and processes, which would likely take a significant amount of time and harm our business. In addition, we have service level agreements with certain of our Clients and Network Partners for which the availability of this software is critical. Any decrease in the availability of our services as a result of errors, defects, a disruptiondisruption, or failure of our licensed software may require us to provide significant fee credits or refunds to our customers. Our software licensed from third parties is also subject to change or upgrade, which may result in us incurring significant costs to implement such changes or upgrades and interruptions or delays in our services as a result of such changes or upgrades.

Attracting and retaining new Clients and Network Partners requires us to continue to improve the technology underlying our proprietary technology platforms and requires our technology to operate as expected. In addition, potential Clients and Network Partners are increasingly seeking a bundled solution, encompassing a wide range of features. We are currently investing in a modernization of our proprietary technology platforms to support new opportunities and enhance security, privacyprivacy, and platform infrastructure, while maintaining existing applications, features, and services. If we are unable to do so on a timely basis or if we are unable to implement this modernization without disruption to our existing applications, featuresfeatures, and services, or if we encounter technical obstacles that result in the technology not operating properly, we may lose potential and existing Clients and Network Partners. We rely on a combination of internal development, strategic relationships, licensing, and acquisitions to develop our content offerings, productsproducts, and services. These efforts may be more expensive than expected, take longer to develop and implement, and require additional personnel and resources.

New products and services, including those incorporating or utilizing AI and machine learning, may raise technological, security, legallegal, and other risks and challenges related to, among other items, the use of personal information in such AI systems, flaws in our models or training datasets that may result in biased or inaccurate results or other unanticipated outcomes, ethical considerations regarding AI, potential infringement of third-party intellectual property rights, and our ability to safely deploy and implement governance and controls for AI systems. Realization of these risks could negatively impact our reputation, the demand for our products and services, our financial condition and results of operations, and otherwise draw adverse regulatory scrutiny.

•network environment disruptions such as computer viruses, hackinghacking, and similar problems in our own systems and in other systems;

We attempt to mitigate these risks through various business continuity efforts, including redundant infrastructure, 24/7/365 system activity monitoring, backup and recovery procedures, use of a secure storage facility for backup media, separate production and test systems, and change management and system security measures, but our precautions, even after previous incidents, may not protect against all potential problems. Our data recovery centers are equipped with physical space, power, storage and networking infrastructure and Internet connectivity to support our technology platforms in the event of the interruption of services at our data centers. Even with these data recovery centers, our operations can be interrupted during transition processes when our primary and other data centers experiencedexperience failures. Disruptions at our data centers may cause disruptions to our technology platforms and lead to data loss or corruption. We have experienced interruptions and delays in service and availability for data centers, and bandwidth and other technology issues in the past. Frequent or persistent system failures that result in the unavailability of our technology platforms or slower response times could reduce our members', Clients'Clients', and Network Partners' ability to access our technology platforms, impair the delivery of our products and services, and harm the perception of our platforms as reliable, trustworthy, and consistent. Any future errors, failure, interruptionsinterruptions, or delays experienced in connection with these third-party technologies could delay access to our products by members, Clients and Network Partners, which would harm our business. This could damage our reputation, subject us to potential liability or costs related to defending against claims or cause our members, Clients and Network Partners to cease doing business with us, any of which could negatively impact our financial results.

Healthcare laws and regulations are rapidly evolving and may change significantly, which could adversely affect our financial condition and results of operations. These changes may accelerate under the new U.S. administration (and through reactions to the administration) in ways we cannot predict. In addition, proposals to implement a single payer or "Medicare for all" system in the U.S. or in individual states, if adopted, could have a material adverse effect on our business. The full impact of healthcare reform and other changes in the healthcare industry and in healthcare spending is unknown. Accordingly, we are unable to predict what effect healthcare reform measures will have on our business.

HSAs and other CDBs exist as a result of provisions in the Internal Revenue Code and other laws and regulations. Changes to the regulatory landscape impacting our products require substantial time and costs for us to ensure our products are compliant. For example, regulatory changes related to our FSA and COBRA products enacted in the wake of the COVID-19 pandemic created uncertainty and additional workload on our team members and resulted in additional costs. In addition, federal or state governments could impose laws that limit the eligibility requirements for our products, which could limit our ability to grow or cause us to lose existing members, or such governments could change the eligibility requirements we must meet to maintain the licenses we need to offer our products. We cannot predict if any new reforms will ultimately become law, or if enacted, what their terms or the regulations promulgated pursuant to such reforms will be, and such reforms could have a material adverse effect on our business.

We are subject to privacy regulations, including regarding the access, use, and disclosure of personally identifiablepersonal information, and the privacy breaches that we or our third-party service providers have experienced or may experience in the future could result in substantial financial and reputational harm, including possible criminal and civil penalties.

Regulatory changes and changes in the enforcement environment under the new U.S. administration may have an adverse result on our business.

The new U.S. administration has already made, and expectsChanges to further make, many changes to the federal government and federal law and enforcement. These include changes to federal workforce headcount, a high volume of executive orders, and many new or modified regulations and guidance.the Suchenforcement changesenvironment create uncertainty around our business and our Clients. In addition, changes to the legal, regulatoryregulatory, or political environment may require management's attention, divert resources from other areas, and expose us to potential liability.

We, and the banks that issue our prepaid debit cards, are subject to Payment Card Industry Data Security Standards and Visa association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us, including card processors. Failure to comply with these rules and standards could result in significant fines, other penalties, or the termination of our interchange revenue agreements. The termination of the card association registrations held by us or any of the banks that issue our cards, or any changes in card association or other debit network rules or standards, including interpretation and implementation of existing rules, participants deciding to use PIN networks, standardsstandards, or guidance that increase the cost of doing business or limit our ability to provide our products and services, or limit our ability to receive interchange fees, could have a material adverse effect on our results of operations, financial condition, business, and prospects. In addition, from time-to-time, card associations increase the organization or processing fees that they charge, which could increase our operating expenses, reduce our profit marginmargin, and materially adversely affect our results of operations, financial condition, business, and prospects.

As we continue to innovate and improve our products and services by leveraging automated decision making, machine learninglearning, and AI, our business model may be affected by global trends and laws that regulate the use of these developing technologies. Such laws or regulations may restrict or impose burdensome and costly requirements on our ability to use AI and machine learning and also may impact our ability to use certain data for developing our products and services.

Compliance with regulatory requirements requires resources and takes significant time and effort. Any claim of non-compliance, regardless of merit or ultimate outcome, could subject us to investigation by the HHS, the DOL, the SEC, the Wyoming Division of Banking, or other regulatory authorities. This in turn could result in additional claims or class action litigation brought on behalf of our members, Clients or Network Partners, any of which, regardless of merit or ultimate outcome, could result in substantial cost to us and divert management’s attention and other resources away from our operations. Furthermore, investor perceptions of us may suffer, and this could cause a decline in the market price of our common stock. Our compliance processes may not be sufficient to prevent assertions that we failed to comply with any applicable law, rulerule, or regulation. In addition, all of our business is subject, to varying degrees, to fiduciary and other service provider obligations under ERISA, the Internal Revenue Code, and underlying regulations. A failure to comply with these or other regulatory and compliance obligations could subject us to disgorgement of profits, excise taxes, civil penalties, private lawsuits, and other costs, including reputational harm.

Any failure to offer high-quality member, ClientClient, and Network Partner support services could adversely affect our relationships with our members, Clients, and Network Partners and our operating results.

Our members, ClientsClients, and Network Partners depend on our support and education organizations to educate them about, and resolve technical issues relating to, our products and services. We may be unable to respond quickly enough to accommodate short-term increases in demand for education and support services. Increased demand for these services, without a corresponding increase in revenue, could increase costs and adversely affect our operating results.

Our sales process is highly dependent on the reputation of our products, services, and business and on positive recommendations from our existing members, Clients and Network Partners. Further, we use third-party service providers for certain call centers and COBRA claims and transaction processing, including certain offshore service providers for member chat service, which service providers may not provide the same quality of support services for our Clients and members. Any failure to maintain high-quality education and technical support, or a market perception that we do not maintain high-quality education support, could adversely affect our reputation, our ability to sell our products and services to existing and prospective customerscustomers, and our business and operating results. We promote 24/7/365 education and support along with our proprietary technology platforms. Interruptions or delays that inhibit our ability to meet that standard have hurt our reputation and ability to attract and retain customers, and any such interruptions or delays in the future would likely also do so.

We rely on our management team (including our new CEO) and team membersmembers, and our business could be harmed if we are unable to retain qualified personnel.

Our success depends, in part, on the skills, working relationships and continued services of our executive team, including our new CEO,team and other key personnel. While we have entered into employment agreements with our executive officers, all of our team members are “at-will” employees, and their employment can be terminated by us or them at any time, for any reason, and without notice, subject, in certain cases, to severance payment rights. In order to retain valuable team members, in addition to salary and cash incentives, we provide equity-based awards that vest over time or based on performance. The value to team members of these awards will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract offers from other organizations. The departure of key personnel could adversely affect the conduct of our business. In such event, we would be required to hire other personnel to manage and operate our business, and there can be no assurance that we would be able to employ a suitable replacement for the departing individual, or that a replacement could be hired on terms that are favorable to us. Volatility or lack of performance in our stock price may affect our ability to attract replacements should key personnel depart.

Our success also depends on our ability to attract, retain, and motivate additional skilled management personnel and other team members. For example, competition for qualified personnel in our field is intense due to the limited number of individuals who possess the skills and experience required by our industry. New hires require significant training and, in most cases, take significant time before they achieve full productivity. New team members may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our retention efforts are not successful or our team member turnover rate increases, our business, results of operationsoperations, and financial condition could be materially and adversely affected.

We are a leader and an innovator in providing technology-enabled services that empower consumers to make healthcare savingsaving, spending, and spendinginvesting decisions. We use our innovative technology to manage consumers' tax-advantaged HSAs and other CDBs offered by employers, including FSAs and HRAs, and to administer COBRA, commuter and other benefits. As part of our services, we provide consumers with payment processing services, personalized benefit information, the abilityaccess to earnhealthcare wellnesssolutions incentives,through our marketplace, and investment advice to grow their tax-advantaged healthcare savings.

The core of our offerings is the HSA, a financial account through which consumers spendsave, spend, and saveinvest long-term fortheir healthcare expensesdollars on a tax-advantaged basis. As of January 31, 2025,2026, we administered 9.910.6 million HSAs, with balances totaling $32.1$36.5 billion, which we call HSA Assets, as well as 7.17.2 million complementary CDBs. We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.017.8 million as of January 31, 2025.2026.

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. As of January 31, 2025,2026, our platforms were integrated with more than 200 Network Partners.

We have increased our share of the growing HSA market from 4% in December 2010 to 21%20% as of June 2024,2025, measured by HSA Assets. According to the 20242025 Midyear Devenir HSA Research Report, as of June 2024,2025, we were the largest HSA provider by bothnumber of accounts and the second largest HSA provider by HSA Assets. In addition, we believe we are the largest provider of other CDBs. We seek to differentiate ourselves through our service-driven culture, product breadth, ecosystem connectivity, and proprietary technology.technology, which enables our members to better save, spend, and invest their healthcare dollars. Our proprietary technology allows us to help consumers optimize the value of their HSAs and other CDBs and gain confidence and skills in managing their healthcare costs as part of their financial security.

Our ability to assist consumers is enhanced by our capacity to securely share data in both directions with others in the health, benefits, and retirement ecosystems. Our commuter benefits offering also leverages connectivity to an ecosystem of mass transit, ride hailing, and parking providers.

We earn revenue primarily from three sources: service, custodial, and interchange. We earn service revenue mainly from fees paid by our Clients, Network Partners, Clients, and members for the administration services we provide in connection with the HSAs and other CDBs we offer. Service revenue also includes revenues earned from invested HSA Assets and our marketplace. We earn custodial revenue primarily from HSA cash held by our insurance company partners, HSA cash held by our federally insured bank and credit union partners, which we collectively call our Depository Partners, HSA cash held by our insurance company partners, and Client-held funds deposited with our Depository Partners. We earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and on our virtual payment system. See “Key components of our results of operations” for additional information on our sources of revenue.

BenefitWallet HSA portfolio acquisition. In fiscal 2025, we acquired the BenefitWallet HSA portfolio, comprised of approximately 616,000 HSAs plus other accountsaccounts, andwhich collectively totaled $2.7 billion of HSA Assets, from Conduent Business Services, LLC for a purchase price of $425.0 million. We paid the purchase price using $225.0 million of borrowings under our revolvingRevolving creditCredit facility,Facility, with the remainder paid using cash on hand.

Our selective acquisition and integration strategy

We have historically acquired HSA portfolios and businesses that we believe strengthen our service offerings. We planexpect to continue this growth strategy and are regularly engaged in evaluating different opportunities. We have developed an internal capability to source, evaluate, and integrate acquiredacquisitions. We believe the nature of our competitive landscape provides significant acquisition opportunities. Many of our competitors view their HSA portfolios.businesses as non-core functions. We believe they may look to divest these assets and, in certain cases, be limited from making acquisitions due to depository capital requirements. Our success depends in part on our ability to successfully integrate acquired businesses and HSA portfolios with our business in an efficient and effective manner.

We derive revenue primarily from healthcare-related saving and spending by consumers in the U.S., which are driven by changes in the broader healthcare industry, including the structure of health insurance. TheAccording to the 2025 KFF Employer Health Benefits Survey, the average family premium for employer-sponsored health insurance has risen by 24%26% since 20192020 and 52%53% since 2014,2015, resulting in increased participation in HSA-qualified health plans and HSAs and increased consumer cost-sharing in health insurance more generally. In July 2025, the “One Big Beautiful Bill Act” was signed into law, which expanded 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. healthcare are uncertain. Moreover, changes in healthcare policy, such as "Medicare for all" plans, could materially and adversely affect our business in ways that are difficult to predict.

We believe we have a diverse distribution footprint to attract new Clients and Network Partners. 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 integrations with Network Partners areprovide 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. Our sales representatives and account management teams work with and train the sales representatives and account management teams of our Network Partners.

We are the largest custodian and administrator of HSAs, as well as a market-share leader in administering HSAs and each of the major categories of complementary CDBs, including FSAs and HRAs, COBRA and commuter benefits administration.benefits. Our Clients and their benefits advisors increasingly seek HSA providers that can deliver ana integratedbundled offering of HSAs and complementary CDBs. With our CDB capabilities, we can provide employers with a single partner for both HSAs and complementary CDBs, which is preferred by the vast majority of employers, according to research conducted for us by Aite Group. We believe that the combination of HSA and complementary CDB offerings significantly strengthens our value proposition to employers, health benefits brokers and consultants, and Network Partners as a leading single-source provider.

As a non-bank custodian, our members’ custodial HSA cash assets are held by either our insurance company partners through group annuity contracts or other similar arrangements (our "Enhanced Rates" offering) or by our federally insured Depository Partners (our "Basic Rates" offering), pursuant to contractual arrangements we have with these Depository Partners, or by our insurance company partners through group annuity contracts or other similar arrangements (our "Enhanced Rates" offering). For the reasons described below, we have encouraged our members to place more of their HSA cash in our Enhanced Rates offering.Partners. As our Basic Rates contracts continue to expire, the HSA cash held in those Basic Rates contracts will transition to Enhanced Rates contracts, subject to our members retaining the right to keep their HSA cash in Basic Rates.

HSA members who place theirallocate HSA cash intoto our Enhanced Rates offering retain a higher yield compared to our Basic Rates offering. An increase in the percentage of HSA cash held in our Enhanced Rates offering also positively impacts our custodial revenue, as we generally receiveearn a higher yield on HSA cash held by our insurance company partners compared to cash held by our Depository Partners. As with our Depository Partners,The yields paid by our insurance company partners are impacted by the prevailing interest rate environment, which in turn is driven by macroeconomic factors and government policies over which we have no control. Such factors, and the responseresponses of our competitors to them, also determine the amount of interest retained by our members.

We believe that increased participation in our Enhanced Rates offering, diversification of Depository Partners and insurance company partners,partners and Depository 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 11—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 placements of HSA cash. 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.

We believe that innovations incorporated in our technology differentiate us from our competitors and help drive our growth by enabling us to better assist consumers to make healthcare saving and spending decisions and maximize the value of their tax-advantaged benefits. Our full suite of CDB offerings complements our HSA solution and enhances our leadership position within the HSA sector. 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 makingcontinuing 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 direct competitors are HSA custodians and other CDB providers. Many of these are state or federally chartered banks and other financial institutions for which we believe benefits administration services are not a core business. Some of our direct competitors (including well-known retail investment companies, such as Fidelity Investments, and healthcare service companies such as UnitedHealth Group's Optum and Webster Bank) are in a position to devote more resources to the development, sale,sale and support of their products and services than we have at our disposal. Our other CDB administration competitors include health insurance carriers, human resources consultants and outsourcers, payroll providers, national CDB specialists, regional third-party administrators, and commercial banks. In addition, numerous indirect competitors, including benefits administration service providers, partner with banks and other HSA custodians to compete with us. Our Network Partners and ecosystem partners may also choose to offer competitive services directly, as some health plans have done. The products, programs, and services made available through our marketplace are part of highly competitive markets and introduce new and sophisticated competitors to us. Our success depends on our ability to predict and react quickly to these and other industry and competitive dynamics.

Key financial and operating metrics

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 1.20.7 million, or 14%,7%, from January 31, 20242025 to January 31, 2025,2026, driven by new HSAs from sales and new HSAs added through the BenefitWallet HSA portfolio acquisition.sales. The number of our CDBs increased by 0.1 million, or 2%,1%, from January 31, 20242025 to January 31, 2025, primarily2026, driven by an increase in FSA and HRA accounts.

HSA Assets includesinclude our HSA members’ custodial assets, which consistsconsist of the following components: (i) HSA cash, which includes member cash held by our Depository Partners and our insurance company partners,partners and Depository Partners, and (ii) HSA investments, which includes member investments held by our custodial investment partner. 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 $2.4$0.5 billion, or 16%,3%, from January 31, 20242025 to January 31, 2025,2026, due to HSA cash added through the BenefitWallet HSA portfolio acquisition and net HSA contributions from new and existing HSA members, partially offset by transfers to HSA investments.

HSA investments increased by $4.5$3.8 billion, or 44%,26%, from January 31, 20242025 to January 31, 2025,2026, due to the increased market value of invested balances,balances and transfers from HSA cash, and HSA investments added through the BenefitWallet HSA portfolio acquisition.cash.

Total HSA Assets increased by $6.9$4.4 billion, or 27%,14%, from January 31, 20242025 to January 31, 2025,2026, primarily due to the increased market value of invested balances, HSA Assets added through the BenefitWallet HSA portfolio acquisition,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 and Depository Partners that is expected to reprice by fiscal year and the respective average annualized yield currently earned on that HSA cash as of January 31, 20252026:

Service revenue. We earn service revenue primarily from the fees we charge our Clients, Network Partners, Clients, and members for the administration services we provide in connection with the HSAs and other CDBs we offer. Service revenue also includes revenues earned from invested HSA Assets and our marketplace. With respect to our Network PartnersClients and Clients,Network Partners, 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 hertheir HSA Assets through our investment partner from which we earn recordkeepingrecordkeeping, advisory, and advisoryother 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.

Custodial revenue. We earn custodial revenue primarily from HSA cash held by our Depositoryinsurance Partnerscompany partners or our insuranceDepository company partnersPartners and Client-held funds held by our Depository Partners. HSA cash held by our insurance company partners is held in group annuity contracts or similar arrangements. HSA cash is held by our Depository Partners pursuant to contracts that (i) typically have terms ranging from three to five years, (ii) provide for a fixed or variable interest rate payable on the average daily cash balances held by the relevant Depository Partner, and (iii) have minimum and maximum required balances. HSA cash held by our insurance company partners is held in group annuity contracts or similar arrangements. Client-held funds held by our Depository Partners are held in interest-bearing demand deposit accounts that have a floating interest rate and no set term or duration. We earn custodial revenue on HSA cash and Client-held funds that is based on the interest rates offered to us by these Depository Partners and insurance company partners.partners and Depository Partners.

Service costs. Service costs are primarily comprised of costs related to servicing accounts, managing Client and Network Partner relationshipsrelationships, 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.

Interchange costs. Interchange costs are comprised of costs we incur in connection with processing payment transactions initiated by our members. Due to the substantiation requirement on FSA/FSA- and HRA-linked payment card transactions, payment card costs are higher for FSA and HRA transactions than for HSA transactions. In addition to fixed per card fees, we are assessed additional transaction costs determined by the amount of the transaction.

Our gross profit is our total revenue minus our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue. Our gross margin has been and will continue to be affected by a number of factors, including interest rates, the amount we charge our Clients, Network Partners, Clients, and members, the mix of our sources of revenue, how many services we deliver per account, and payment processing costs per account.

We are subject to federal and state income taxes in the United States based on a January 31 fiscal year end. We use the asset and liability method to account for income taxes, under which current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current fiscal year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carryforwards, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. As of January 31, 2025,2026, we havehad not recorded a valuation allowance on federal deferred tax assets,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 consolidated balance sheet.

We evaluate our tax positions in accordance with Accounting Standards Codification (“ASC”) 740-10-25, Accounting for Uncertainty in Income Taxes, which prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return.

Service revenue. The $22.6$6.7 million, or 5%,1%, increase in service revenue from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to the increases in the number of HSAsTotal Accounts and the amount of HSA investments, partiallylargely offset by lower average service fees per account.

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

Custodial revenue. The $158.8$91.4 million, or 41%,17%, increase in custodial revenue from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to an increase in average annualized yield on HSA cash from 2.49% for the fiscal year ended January 31, 2024 to 3.11% for the fiscal year ended January 31, 2025 to 3.53% for the fiscal year ended January 31, 2026 (due to both higher market interest rates and an increase inincreased participation in our Enhanced Rates offering from 32%49% of HSA cash as of January 31, 20242025 to 49%58% as of January 31, 20252026 and HSA cash placed with Depository Partners at higher yields), the $2.1$0.9 billion, or 15%,5% increase in the average daily balance of HSA cash, as described above, andpartially anoffset increaseby 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.

Assuming the current interest rate environment continues, we expect our average annualized yield on HSA cash to further increase as our remaining existing agreements with our Depository Partners are renewed or replaced with agreements with higher rates, resulting in higher custodial revenue. In addition, we expect an increase in the percentage of HSA cash held in our Enhanced Rates offering to continue to positively impact our average annualized yield and thus our custodial revenue. As our Basic Rates contracts mature, we intendcontinue to transferexpire, the associated HSA cash intoheld in those Basic Rates contracts will transition to Enhanced Rates contractscontracts, unlesssubject to our members retaining the right to keep their HSA cash in Basic Rates. Refer to the HSA membercash affirmativelymaturity opts to remainschedule in the Basicsection Ratesentitled offering.“Key financial and operating metrics.”

Total revenue. Total revenue increased by $200.2$113.7 million, or 20%,9%, from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 2025,2026, due to the increases in custodial, service,interchange, and interchangeservice revenues, described above.

Service costs. The $34.2$23.1 million, or 11%,7%, increasedecrease in service costs from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to efficiencies resulting from our technology investments and a $19.1 million increasedecrease in costs incurred to reimburse members impacted by outside fraud activityactivity, andpartially offset by increases in costs to support the increase in Total Accounts and member interactions, partially offset by efficiencies resulting from our technology investments.interactions.

For the fiscal year ending January 31, 2026,2027, we expect service costs to decreaseremain relatively steady as a result of our technology investments in security and further operational efficiencies,efficiencies partiallyare expected to largely offset byhigher costs resulting from an increase in Total Accounts.

Custodial costs. The $7.2$4.1 million, or 22%,10%, increase in custodial costs from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to the $2.1$0.9 billion, or 15%5% increase in the average daily balance of HSA cash, as described above, an increase in fees charged by our Depository Partners, and an increase in the average annualized rate of interest retained by HSA members on HSA cash, from 0.22% during the fiscal year ended January 31, 2024 to 0.23% during the fiscal year ended January 31, 2025.2025 to 0.24% during the fiscal year ended January 31, 2026.

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

Interchange costs. The $4.2$3.3 million, or 15%,10%, increasedecrease in interchange costs from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to efficiencies resulting from the transition to a single card processor, partially offset by higher costs due to an increase in Total Accounts and certainan costsincrease associatedin withspend per account using our transitionpayment to a single card processor during the fiscal year ended January 31, 2025, partially offset by efficiencies resulting from the transition.cards.

Total cost of revenue. Cost of revenue as a percentage of total revenue decreased to 30% for the fiscal year ended January 31, 2026 compared to 35% for the fiscal year ended January 31, 2025, due to the 9% increase in total revenue and the 5% decrease in total cost of revenue. For the fiscal year ending January 31, 2026,2027, we expect that our cost of revenue will decrease in dollar amount, primarily due to a decrease in service costs. We expect our cost of revenue to decrease as a percentage of our total revenue, primarily due to an increase in custodial revenue and a decrease in service costs,revenue, partially offset by costs resulting from an increase in Total Accounts. Cost of revenue as a percentage of total revenue decreased to 35% for the fiscal year ended January 31, 2025 compared to 38% for the fiscal year ended January 31, 2024, due to total revenue increasing at a significantly higher rate (20%) than total cost of revenue (12%). Cost of revenue will continue to be affected by a number of different factors, including our ability to scale our service delivery, Network Partner implementation, and account management functions.

Sales and marketing. The $11.5$4.5 million, or 14%,5%, increase in sales and marketing expenses from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to an increaseincreases in personnel-relatedadvertising expenses.

We expect our sales and marketing expenses to increase as we continue to focus on ourbrand cross-sellingawareness and Client and member engagement programs.programs, including campaigns to reach individuals who are newly eligible for HSAs under recent legislative expansion. On an annual basis, we expect our sales and marketing expenses to remain relatively steady as a percentage of our total revenue. However, our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our sales and marketing expenses.

Technology and development. The $20.7$23.0 million, or 9%,10%, increase in technology and development expenses from the fiscal year ended January 31, 20242025 to the fiscal year ended January 31, 20252026 was primarily due to increases in personnel-relatedsoftware expensescosts and softwarepersonnel-related costs.expenses.

We are a leader and an innovator in providing technology-enabled services that empower consumers to make healthcare saving, spending, and investing decisions. 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, access to certain healthcare solutionsproducts, programs, and services, made available in our marketplace through ourpartnerships marketplace,with third‑party providers, and investment advice to grow their tax-advantaged healthcare savings. We are increasingly using AI in our business, both to improve customer service and engagement and to increase efficiencies.

The core of our offerings is the HSA, a financial account through which consumers save, spend, and invest their healthcare dollars on a tax-advantaged basis. As of AprilJuly 30,31, 2026, we administered 10.610.7 million HSAs, with balances totaling $37.1$37.9 billion, which we call HSA Assets, as well as 7.27.0 million complementary CDBs. We refer to the aggregate number of HSAs and other CDBs that we administer as Total Accounts, of which we had 17.8 million as of AprilJuly 30,31, 2026.

The agreements with our insurance company partners have an indefinite term, with approximately 10% of the assets held in such agreements repricing per year. The lengths of our agreements with Depository Partners typically range from three to five years and may have fixed or variable interest rate terms. As with our insurance company partners, the terms of new and renewing agreements with our Depository Partners are impacted by the then-prevailing interest rate environment, which in turn is driven by macroeconomic factors and government policies over which we have no control. Such factors, and the responses of our competitors to them, also determine the amount of interest retained by our members.

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 0.70.8 million, or 8%, from AprilJuly 30,31, 2025 to AprilJuly 30,31, 2026, driven by new HSAs from sales. The number of our CDBs decreased by 24137 thousand, or less than 1%,2%, from AprilJuly 30,31, 2025 to AprilJuly 30,31, 2026.

HSA cash increased by $0.4$0.3 billion, or 3%,2%, from AprilJuly 30,31, 2025 to AprilJuly 30,31, 2026, due to net HSA contributions from new and existing HSA members, partially offset by transfers to HSA investments.

HSA investments increased by $5.4$4.5 billion, or 38%,28%, from AprilJuly 30,31, 2025 to AprilJuly 30,31, 2026, due to the increased market value of invested balances and transfers from HSA cash.

Total HSA Assets increased by $5.8$4.8 billion, or 19%,14%, from AprilJuly 30,31, 2025 to AprilJuly 30,31, 2026, 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 insurance company partners and Depository Partners that is expected to reprice by fiscal year and the respective average annualized yield currently earned on that HSA cash as of AprilJuly 30,31, 2026:

(1)Excludes $1.0$0.7 billion of HSA cash held in floating-rate contracts as of AprilJuly 30,31, 2026.

We are subject to federal and state income taxes in the United States based on a January 31 fiscal year end. We use the asset and liability method to account for income taxes, under which current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current fiscal year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carryforwards, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. As of AprilJuly 30,31, 2026, we had not recorded a valuation allowance on federal deferred tax assets but 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 and six months ended AprilJuly 30,31, 2026 and 2025

Service revenue. The $3.1$6.6 million, or 3%,6%, increase in service revenue from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to increases in marketplace revenue, theTotal amountAccounts, ofand HSA investments, and the number of Total Accounts, partially offset by lower average service fees per account.

Interchange revenue. The $2.8$9.7 million, or 5%,4%, increase in interchangeservice revenue from the threesix months ended AprilJuly 30,31, 2025 to the threesix months ended AprilJuly 30,31, 2026 was primarily due to an increaseincreases in marketplace revenue, Total AccountsAccounts, and anHSA increase in spend per account using our payment cards,investments, partially offset by a lower average rateservice earnedfees onper payment card transactions.account.

Total revenue. Total revenue increased $23.8$24.9 million, or 7%,8%, from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 due to the increases in custodial, service, and interchange revenues, described above.

Service costs. The $9.7$2.0 million, or 11%,3%, decrease in service costs from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to efficiencies resulting from our technology investments and decreasesa decrease in costs incurred to reimburse members impacted by outside fraud activity, non-recurring consulting expenses, and self-insured medical claims expenses. These decreases were partially offset by increases in costs to support the increase in Total Accounts and member interactions.Accounts.

Custodial costs. The $0.9 million, or 8%, increase in custodial costs from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to the $0.4 billion, or 2%, increase in average daily HSA cash, as described above, and an increase in the average annualized rate of interest retained by HSA members on HSA cash from 0.23%0.24% during the three months ended AprilJuly 30,31, 2025 to 0.25%0.26% during the three months ended AprilJuly 30,31, 2026.

Interchange costs. The $0.6 million, or 7%,8%, increase in interchange costs from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to an increase in Total Accounts, an increase in spend per account using our payment cards, and an increase in costs related to the prevention of outside fraud activity.

Total cost of revenue. Cost of revenue as a percentage of total revenue decreased to 27.7%27.1% for the threesix months ended AprilJuly 30,31, 2026 compared to 32.2%30.4% for the threesix months ended AprilJuly 30,31, 2025, due to the 7% increase in total revenue and the 8%4% decrease in total cost of revenue. On an annual basis, relative to the fiscal year ended January 31, 2026, we expect our cost of revenue to decrease as a percentage of our total revenue, primarily due to an increase in custodial revenue and a decrease in service costs, partially offset by costs resulting from an increase in Total Accounts. Cost of revenue will continue to be affected by a number of different factors, including our ability to efficiently scale our service delivery, Network Partner implementation, and account management functions.

Sales and marketing. The $0.8$3.3 million, or 3%,17%, increase in sales and marketing expenses from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to increases in advertising expenses, largely offset by a decrease in personnel-related expenses.

Technology and development. The $6.3$9.1 million, or 10%,14%, increase in technology and development expenses from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to an increase in software and cloud infrastructure costs.

General and administrative. The $5.6$4.9 million, or 22%,16%, increase in general and administrative expenses from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to an increase in stock-based compensation expense resulting from non-recurring award forfeitures during fiscal 2026 related to the retirement of our former chief executive officer, partially offset by a decrease in professional servicespersonnel-related expenses.

Amortization of acquired intangible assets. The $0.5$0.7 million, or 2%,3%, decrease in amortization of acquired intangible assets from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to a smaller carrying amount of intangible assets that have not been fully amortized.

Merger integration. Merger integration expenses decreased by $0.2$0.3 million, or 13%,23%, from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026. Merger integration expenses during the three months ended AprilJuly 30,31, 2026 consisted primarily of expenses incurred in conjunction with the migration of accounts and technology-related expenses directly related to the Further acquisition.

The $2.3$2.4 million, or 15%,16%, decrease in interest expense from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to a lower average principal balance and a lower average interest rate on borrowings with variable interest rate terms.

The $0.7$1.6 million decrease in other income, net, from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to a decrease in interest income on corporate cash.

The $6.0$4.0 million increase in income tax provision from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily the result of an increase in pre-tax book income and a reduction in tax benefit from stock-based compensation expense.

The $15.5$5.8 million, or 29%,10%, increase in net income from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026 was primarily due to an increase in gross profit, partially offset by increases in operating expenses and income tax provision, as more fully described above.

Our Adjusted EBITDA increased by $24.3$15.9 million, or 17%,11%, from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026, primarily due to an increase in total revenue and lower service costs due to efficiencies resulting from our technology investments, partially offset by increases in software and cloud infrastructure costs.

Our non-GAAP net income increased by $19.3$9.2 million, or 22%,10%, from the three months ended AprilJuly 30,31, 2025 to the three months ended AprilJuly 30,31, 2026, primarily due to an increase in total revenue and lower service costs due to efficiencies resulting from our technology investments, partially offset by increases in software and cloud infrastructure costs.

Our principal sources of liquidity are our current cash and cash equivalents balances, collections from our custodial, service, and interchange revenue activities, and availability under our revolving credit facility. 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, settlement of derivative financial instruments, and capital expenditures.

As of AprilJuly 30,31, 2026 and January 31, 2026, cash and cash equivalents were $265.4$256.0 million and $318.9 million, respectively.

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 AprilJuly 30,31, 2026, the outstanding balance under the revolving credit facility was $346.9$335.0 million. We were in compliance with all covenants under the credit agreement as of AprilJuly 30,31, 2026, 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 threesix months ended AprilJuly 30,31, 2026, we used $123.3$231.1 million of cash for common stock repurchases. See Note 9—Stockholders' equity for additional information related to our stock repurchase program.

During the threesix months ended AprilJuly 30,31, 2026, we prepaid $15.0$26.9 million under our credit agreement.

Capital expenditures for the threesix months ended AprilJuly 30,31, 2026 and 2025 were $16.3$32.1 million and $16.1$27.3 million, respectively. We expect to continue our current level of capital expenditures for the remainder of the fiscal year ending January 31, 2027 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.

Cash flows from operating activities. Net cash provided by operating activities increased by $32.8$33.1 million from the threesix months ended AprilJuly 30,31, 2025 to the threesix months ended AprilJuly 30,31, 2026, primarily due to increased cash receipts with respect to our custodial, service, and interchange revenuesrevenues, andpartially aoffset decreaseby an increase in cashincome paymentstax for service costs.payments.