HQY

HealthEquity is the leading HSA custodian, and FY2026 (ended January 2026) showcased the operating leverage of its recurring, fee-and-float model. Revenue grew 9.5% to $1.31B, but profitability exploded: net income jumped 122.5% to $215M, operating income nearly doubled (+98.6%) to $322M, and diluted EPS rose 125.7% to $2.46. That margin inflection — operating margin to 24.6% and gross margin to 69.5% — reflects the high incremental economics of administering tax-advantaged accounts plus rising yields on custodial HSA cash (the Enhanced Rates program). The multi-year trajectory is striking: from net losses in FY2022-23 to $55.7M, $96.7M and now $215M of net income.

The business has genuinely attractive structural features. It is asset-light (capex of just $2M), generates strong and growing cash flow ($457M operating cash flow, +34.5%), and carries a clean balance sheet (liabilities/equity 0.60x, long-term debt down 9.4% to $957M, $319M cash). Management returned capital aggressively, buying back $299M of stock (+146%) and shrinking the share count 2.3%. The secular tailwind — continued employer/consumer adoption of high-deductible health plans and HSAs — supports durable account and asset growth that compounds both fee and interest revenue.