Good F1Q:27 Results; F2027E Guidance Increased as HQY Creates a Comprehensive Health-Tech Ecosystem

Research evidence excerpt

Good F1Q:27 Results; F2027E Guidance Increased as HQY Creates a Comprehensive Health-Tech Ecosystem

Investment Thesis

HealthEquity is the largest healthcare savings provider in the United States on an account basis and is well-positioned to take

advantage of a growing market, in our view. The broader healthcare market is trending in such a way that supports the business

model of HealthEquity. The average deductible that individuals and families need to pay has been consistently growing and as

a result, more plans fall under the HDHP umbrella. This means that HQY’s Total Addressable Market has been expanding and its

potential customer base is growing. Furthermore, HQY has been able to grow faster than the overall healthcare savings market,HEALTHCARE and we expect it to be able to capitalize on the growing TAM. Yields on Custodial Assets should rise over the next three years.

IT We also expect Commuter revenue and Interchange revenue to grow as more people return to work and increase the number of

services they receive at hospitals and providers, due to delayed care activity during the pandemic. While the stock is trading above

peers, our view is that this premium is deserved. We like the WAGE acquisition, and we like how other deals that should driveAND margin growth can be layered into the overall platform. Given the core fundamentals of the business, we rate HQY Buy.

Upcoming Catalysts Price Performance

■ HSA account and asset growth both from organic wins and recent acquisitions. $140DIGITAL ■ Release of pent-up demand for healthcare utilization. $130

■ Selling season update, with improved portal functionality and platform. $120

■ Possible improvement in regulations around FSA and HSA spending. $110

■ Ancillary benefits drive increasing demand for HSAs.