Fiscal year 2023 earnings conference call. My name is Richard Putnam, and I do investor relations here for HealthEquity. Joining me today we have Jon Kessler, who is our President and CEO, Dr. Steve Neeleman, who is our Vice Chair and founder of the company, and Tyson Murdock, the company's Executive Vice President and CFO. Before I turn the call over to Jon, I have two important reminders. First, a press release announcing our financial results for the Q2 of fiscal year 2023 was issued after the market closed this afternoon. The financial results in the press release include contributions from our wholly owned subsidiary, WageWorks, and the accounts it administers. The press release also includes definitions of certain non-GAAP financial measures that we will reference here today. A copy of today's press release, including the reconciliation of those non-GAAP measures with comparable GAAP measures, and a recording of this webcast, can be found on our investor relations website, which is ir.healthequity.com. Second, our comments and responses to your questions today reflect management's view as of today, September 6th 2022, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, or other information that might be considered forward-looking. There are many important factors relating to our business which could affect the forward-looking statements made today. These forward-looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from statements made here today. We caution you against placing undue reliance on these forward-looking statements, and we also encourage you to review the discussion of these factors, as well as other risk factors that may affect our future results or the market price of our stock, and they are detailed in our latest annual report on Form 10-K and subsequent periodic reports filed with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. At the conclusion of our prepared remarks, we will open up the call for Q&A with the help of our operator. Let's get started by turning this over to our CEO, Jon Kessler. Thank you, Richard, and thanks, everyone, for joining us this afternoon. Today we are announcing solid results for HealthEquity's fiscal 2023 Q2 on the back of strong performance in our core HSA business, and we're also raising our full year outlook. I will discuss Q2 operating results, and Tyson will review the financial results in detail and provide updated guidance. Steve is here for Q&A. Let's start with the five key metrics that drive our business. As always, revenue of $206.1 million grew 9% versus the Q2 last year, driven by strong organic and acquisitive growth in HSA members and assets, and that was notwithstanding non-recurring regulatory drivers of CDB service fees in the year ago period. Excluding these non-recurring factors, revenue grew 15% year-over-year. Adjusted EBITDA of $67.0 million grew 2% versus the Q2 of last year, weighed down by the absence of those regulatory drivers and the timing of synergies from the Further acquisition. Total accounts grew to 14.5 million, up 11% compared to Q2 last year. HSA members reached 7.5 million, up 26% year-over-year, and HealthEquity's HSA members grew their assets to a record $20.5 billion at quarter's end, which is up an even larger 33% from a year ago. Team Purple continued its strong FY 2023 sales effort, adding 196,000 HSAs, which is 9% more than we added in the Q2 of last year. Organic account growth of 12% over the past year is, we believe, well ahead of the market. Looking forward to year-end, we are particularly excited about pipeline growth from network partners, conversion of enterprise cross-sell opportunities, and enterprise uptakes of Max Enroll, which is our package of virtual education and live support for clients' employees considering stepping up to an HSA-qualified health plan and an HSA during this open enrollment season. Despite more volatile market conditions, HSA invested assets grew $111 million in the quarter. HSA investing members grew 28%, and the average balance of our HSA members overall grew 5% year-over-year. Custodial revenue growth was very strong. On top of the small favorable impact of in-quarter increases in the overnight Fed funds rate, robust adoption by HSA members of HealthEquity's Enhanced Rates offering in Q2 puts us on track to meet or exceed our target of having 20% of HSA cash in Enhanced Rates by the end of the fiscal year. Both macro conditions and the team's efforts are, we believe, creating the opportunity for years of custodial growth to come. Robust card fee growth suggests that inflationary pressures in the broader economy have not put a dent in consumption of medical and other covered services by consumers to date. As you may recall, card fees in the year ago period were high due to the timing of pandemic extended runoffs, particularly FSAs and HRAs. We're of course carefully monitoring for signs of inflation or a COVID resurgence crimping member spend beyond the usual seasonality that we see in Q3. Today's results and the guidance Tyson will detail in a moment would be even stronger, but for softness in CDB administration services. As you know, HealthEquity offers CDB services to increase core HSA opportunities and indeed, cross-selling and bundled selling have helped drive record HSA sales, as I discussed a moment ago. However, service fees from CDBs themselves declined through the first half of fiscal 2023 versus the same period in fiscal 2022, primarily due to one-time COBRA subsidy driven income in the year ago period and greater than expected CDB fee attrition from the now completed WageWorks platform migrations. Service costs declined sequentially in Q2 as promised, and we believe there is more opportunity in efficiencies as well as commuters' slow but steady recovery. As pandemic and WageWorks integration impacts finally recede, we believe that CDBs can bring net unit growth and a larger contribution to growth profits alongside the great things that are happening in the HSA core. With that, I will turn it over to Tyson to review the financial details and give us some guidance. Thank you, Jon. I'll review our Q2 GAAP and non-GAAP financial results. A reconciliation of GAAP measures to non-GAAP measures is found in today's press release. Q2 revenue increased 9% year-over-year, with lower service revenue more than offset by robust custodial and interchange growth. Service revenue was $103 million, down $6.1 million or 6% year-over-year. Last year's Q2 included approximately $10 million of non-recurring revenue attributed to the COBRA subsidy. Excluding the non-recurring subsidy impact, Q2 service revenue grew approximately 4%, primarily from strong HSA growth and an uptick in commuters returning to work, offsetting about $5 million of FSA and COBRA revenue attrition that Jon mentioned. Custodial revenue grew 34% to $65.6 million in the Q2, benefiting from 30% growth in average HSA cash and 37% growth in average HSA investments, combined with an uptick in the annualized yield on HSA cash. The annualized interest rate yield on HSA cash was 180 basis points during the Q2 of this year and 175 basis points year to date, compared to 177 and 178 respectively for last year. This yield is a blended rate for all HSA cash during the quarter and represents a better than expected yield due to rate hikes in June and July, impacting the variable rate portion of our HSA cash, combined with higher enhanced rate balances in the quarter. Interchange revenue grew 20% to $37.5 million, compared to $31.1 million in the same quarter last year. As Jon mentioned, interchange revenue in the year ago period benefited from accelerated spend as FSA rollover extensions expired. Year-over-year growth in Q2 benefited from growth in average total accounts with cards and increased spend per account. Gross profit was $117.8 million, compared to $112 million in the Q2 of last year. Gross margin was 57% in the Q2 this year versus 59% in the year ago period. Service costs decreased $6 million sequentially as we executed on our commitment to address our overstaffing in member services as we discussed with you approximately 90 days ago. However, we have work to do to bring our expectations of service costs in line with revenue in future periods. This includes realizing additional efficiency from the integration work and managing the impact of inflation on service costs. In addition, we are committed to delivering the $15 million of synergies connected to the Further integration, the bulk of which is associated with the exit of the transition services agreement and the consolidation of the platform expected to be realized in fiscal 2024 and 2025. Operating expenses were $120.2 million or 58% of revenue, including amortization of acquired intangible assets and merger integration expenses, which together represented 15% of revenue. Loss from operations was $2.4 million. Net loss for the Q2 was $10.7 million or a loss of $0.13 per share on a GAAP EPS basis compared to a net loss of $3.8 million or $0.05 per share in the prior year. Our non-GAAP net income was $28.1 million for the Q2 this year, compared to $33.4 million a year ago. Non-GAAP net income per share was $0.33 per share compared to $0.40 per share last year. Adjusted EBITDA for the quarter was $67 million and adjusted EBITDA margin was 33%. For the first six months of fiscal 2023, revenue was $411.8 million, up 10% compared to the first six months of last year. GAAP net loss was $24.3 million or $0.29 per share, diluted share. Non-GAAP net income was $50.8 million or $0.60 per diluted share, and adjusted EBITDA was $125.4 million, up 1% from the prior year, resulting in 30% adjusted EBITDA margin for the first half of this fiscal year. Turning to the balance sheet. As of July 31st 2022, we had $177 million of cash and cash equivalents with $928 million of debt outstanding net of issuance costs. This includes $346 million of variable rate debt. There are no outstanding amounts drawn on our $1 billion line of credit. We are providing the following revision to our guidance for fiscal 2023. We are increasing our revenue estimates for fiscal 2023 to range between $834 million and $844 million. We are maintaining non-GAAP net income to be between $103 million and $111 million, reflecting increased interest expense offsetting the benefit of higher operating income. This results in non-GAAP diluted net income between $1.23 and $1.32 per share based upon an estimated 84,000,000 shares outstanding for the year. We are raising our adjusted EBITDA estimate to be between $252 million and $262 million. Today's guidance includes our most recent estimate of service, custodial, and interchange revenue and expense based on results today. On service revenue, today's guidance reflects the continued solid performance of core HSA offsetting the full year impact of the roughly $5 million per quarter of CDB service fee attrition observed in the first half. We remain cautious on increased commuter uptake based on the strong sales outlook Jon discussed, and continuing labor market tightness. Today's guidance assumes incremental service costs during peak season comparable to those experienced in prior years. On custodial revenue, today's guidance assumes a full year yield on HSA cash of at least 180 basis points, pointing to a stronger second half based upon current conditions. As in the past, our guidance does not assume further increases in the Fed funds rate or other changes in macroeconomic policy for the remainder of the fiscal year. Additional rate hikes would have only a modest impact this year, but would have a much greater impact on fiscal 2024 and beyond as we roll over fixed rate contracts and place new HSA cash from growth at the end of the fiscal year. In the same vein, today's guidance reflects additional interest expense on HealthEquity's variable rate debt for the second half of fiscal 2023 based on current conditions, but not further rate hikes. On interchange, we want to remind you that Q3 has historically been our weakest interchange revenue quarter. We expect the normal sequential decline in spend in Q3 with a rebound in Q4 due to use or lose spending and January growth. Finally, we assume a projected statutory income tax rate of approximately 25% and a diluted share count of 84 million in our calculation of non-GAAP net income and earnings per share. As we've done in recent reporting periods, our full year guidance includes a detailed reconciliation of GAAP to the non-GAAP metrics provided in the earnings release, and a definition of all such items is included at the end of the earnings release. In addition, while the amortization of acquired intangibles is being excluded from non-GAAP net income, the revenue generated from those acquired intangible assets is not excluded. With that, I'll turn the call back over to Jon for some closing remarks. You should have a button that just says that. Yeah. It's like a little recorded button. Anyway, so I'd like to just take a second on behalf of Team Purple to thank Ted Bloomberg, who is our former COO. I truly appreciate everything that Ted has done in furtherance of our mission to connect health and wealth. Through the WageWorks integration, the pandemic, the acquisition of Further, launch of Enhanced Rates, and other milestones. We all truly wish Ted the best. The team and our partners and clients are all now focused on delivering a Deep Purple open enrollment and onboarding season. Hopefully, that will not get me in copyright trouble. I've said before that present sales are the best predictor of future sales. On that basis, given what I've said today, and what we're reporting today, we expect a very busy and productive rest of the fiscal year. Thank you. Operator? Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile a Q&A roster. Our first question comes from C. Gregory Peters with Raymond James. You may proceed. Mr. Peters. If your phone is on mute, please unmute. He doesn't have a mute button. That's not how he rolls. Why don't we go to the next one? We'll come back. Can you hear me? Can you hear me? Can you hear me? We can now. Now we can. Holy smokes. My God. All right. Sorry about that. I guess my AirPods weren't working. I guess, let's start off with the sales result. Just trying to unpack the strong new HSA number that you reported for the Q2, and trying to figure out the components of what are existing customers, just new employees, new accounts coming on board. Just trying to break apart what led to the I would think, better than expected result there. Yeah, it's a great question. Thank you, Greg. Just kind of for the sake of summary, if I look at the first half of the year as a whole, we've added 355,000 accounts, or opened 355,000 accounts, and account closures have been very much under control. That 355,000 is 20%+ relative to last year, which itself was obviously the best year we've ever had for the first half. Kind of if you know, you've been with us kind of from the beginning here, and you know, you remember when we would report you know, 400,000 for a year and be pretty happy about it. Reporting this kind of number for the first half feels pretty good. To your question, if I look at the components of that, and try and break it down, as we said at the end of the Q1, the fact that the labor market has remained strong is definitely a factor. Hello? One moment, please. Something happened to my phone? Please remain on the line. Your conference will resume shortly. Please remain on the line. Your conference will resume shortly. The conference will begin shortly. To raise your hand during Q&A, you can dial star one one. With that intermission, can you hear? I'm not sure that Greg will still be on the microphone, so I'm gonna answer his question, then operator will go to the. We'll have to work on getting Greg's part B through L. Greg is now on an open line. Jon, can you hear me? Is Greg back? Yeah. Can you hear me? Okay. We can hear you. Awesome. All right. Well, this was fun. So let- You know, when we were doing this. Let's start over. When I was doing this in my neighbor's bedroom right at the pandemic start, it was much more reliable than what we got going on now that we're all back, you know, traveling the way we used to. Anyways, Greg, your question, why don't you re-ask the first part of your question, and I'll start the answer over. My question was focused on the net new sales result for HSAs in the Q2, and definitely running stronger than probably what most were looking for. The question was about unpacking what caused that result to be so strong. Was there some anomalies in some existing accounts with new employees coming on that won't repeat itself? Were there new accounts, new employers that came on that bolstered the result? Just trying to unpack the components of the sales result for new HSAs. Yeah. To repeat a little bit, and then I'll get to new stuff. If I look at the first half of the year as a whole, we added 355,000. We opened 355,000 new accounts. That's 20% year-over-year, and obviously, last year was pretty good too. As your question suggests, Greg, the strong labor market in particular, you know, continued strong job ads, as people come back into the workforce and so forth, definitely played a role. You can see that in the growth of existing clients, that is existing logos at the client level. As we said, after we reported. Truthfully, after we reported the Q4 and again after we reported the first, we did wanna caution people, you know, kinda not to go crazy with this because, obviously, you know, that can turn around on us. That having been said, even without that factor, we had a very strong quarter. There wasn't anything in particular, you know, no 50,000 account thing that came on or anything along those lines. Rather, you know, in particular, what continues to perform well, Greg, is our, you know, our. If I look across our channels, you know, the stuff that focuses on the middle market, where you can see new adds in the middle of the year, new client logos in the middle of the year, you know, continues to perform well. You know, parenthetically, we're reporting HSAs, but as I look, you know, as commented in the prepared remarks, from a pipeline perspective, as I look towards the end of the year, I'm also, you know, quite enthusiastic, notwithstanding the current softness about the new sales on the CDB side. We have some really good opportunities to close here, and, you know, close meaning ultimately get the member input from them. You know, we'll also see if we get some. Finally see some, you know, post-pandemic rebound in the FSAs that we haven't yet seen. There isn't some single factor outside of obviously employment growth giving us a boost here that we commented on the Q1 as well. Okay. Got it. I guess the second question's probably directed more towards Tyson, but probably Steve you'll or Jon you'll chime in on this, so you've raised your revenue guidance for the year. You've raised your adjusted EPS guidance, but your adjusted EBITDA guidance, but you've kept your EPS guidance flat. I'm just trying to reconcile the different moving parts, why two components are going up and the other isn't. Does that make sense? Tyson? Yeah. There we go. Yeah, I mean, this is really about the interest expense that we have on the other side, right? That compounded with the fact that you tax effect non-GAAP net income, and then also just going back to the service cost that we talked about as well, and really building in, you know, those are in there, plus some additional travel costs. There just was a place where we were like, we don't wanna get ahead of ourselves on that, even though we're generating a lot of good high margin revenue. We realize that that is not falling down to the bottom line. Those are the reasons why. You know, it's really thinking about that debt cost coming in and the rates increasing on the $350 million TO A. A way to think about it is, yeah, we raised EBITDA by three. You know, you've got roughly two of, you know, of. That translates into about two after tax, and that's about the same as the interest expense increase that we're projecting. Again, in both cases without the assumption of future Fed rate hikes. Right. Just a point of clarification on that, Tyson. How much of the debt is variable? $350 million. If you think about how that calculates out, that's about $2.5 million of additional interest cost. And then you think about the other piece of that is the, you know, the tax effect of the rest of stuff falling down through non-GAAP EPS. That's about $3 million worth of items that don't get added back in that reconciliation versus they do in the EBITDA reconciliation. Got it. Thanks for the answers. Thanks, Greg. Thank you. One moment for questions. Lost them all. Our next question comes from Allen Lutz with Bank of America. You may proceed. Hi, Allen. Hey, everyone. Thanks for taking the questions. I guess my first question here on the sequential increase in custodial revenue, about $6 million here. Is there any way to frame what percent of that is coming from that increase in the Fed funds, Jon, you mentioned, and then what percent is coming from enhanced yield, and if there's anything else that's in there too? Yeah. You basically have it right in terms of the two contributors. When you look at the rate increases from the Fed, I just sort of generally think about those as policy factors. You know, those are contributing the bulk of it. As a reminder, right, where we get the benefit of those is really on the variable cash that we have out there, you know, which can be as high as $1 billion. It starts to dwindle off as we get towards the end of the year a little bit. In any event, that factor, if you do the math, is more than 50% of it. Enhanced Rates is, if you kind of think about it, what really accounts for the rest. Enhanced Rates, we're really pleased with where we are. I mean, you know, this is something where I think if these trends continue, we'll be in really great shape at the end of the year. Of course, most of that won't show up as benefit in the current year. You know, there are three things that are performing well here. Operationally, the product is performing well in terms of all of the, you know, liquidity controls and the like that we wanna have on it. Secondly, in terms of rate performance for HealthEquity and the members, it's. The product is doing precisely what we predicted. You know, then I think third in terms of uptake, which is this thing I highlighted in the comments, we're, you know, very confident about our 20% goal for the end of the year and hoping to give you more than that. The benefit of that, as I said earlier, will be as you look out into 2024, 2025, et cetera, I mean, these are, you know, you know the term of these agreements, so we're kind of locking in benefits at a very fortuitous time, I think, for a long period of time to come. Thank you. Then, kind of on the core HSA business, you know, obviously we have a Devenir report coming out soon. You know, in 2020 and 2021, the industry was growing, call it mid-single digits. As we think about kind of what you think the industry grew at so far year to date, is there any reason to think that we've deviated from there? I know you mentioned that kind of the mid-market was strong to HealthEquity, but is there anything that you're seeing there that would kinda make you think that the market growth rate is changing one way or another? I wouldn't be surprised if we saw a little bit of an uptick in market growth, you know, maybe high single digits, but they don't send us an advanced copy. They're more likely to send you an advanced copy. I'm hoping they're not doing that either, but you never know. I think that wouldn't surprise me on the basis of our results. As I said in answer to Greg's question, look, I think there's a piece of that is growth in labor. You know, we're like I said, last quarter, we were almost back to pre-pandemic levels of total benefits eligible employment or total civilian employment, and we're now kind of just a little bit above those, which is great. We also have a lot more people who've reentered the labor force and haven't yet found work, but given the availability of jobs, they're likely to find work, which is great. You know, from my perspective, I wouldn't be surprised to see a little bit of an uptick, but you know, I'm not sure it matters that much either way. Either way, if you look at it on an organic basis, we're I mean, obviously, we reported 26% growth year over year in total, 12% organic growth year over year in accounts. That's gonna be well ahead of whatever the market delivers. You know, when you combine that with very high asset growth, notwithstanding market volatility, that's kind of what we're trying to deliver. That's great. Thank you. Thank you. Thanks, Allen. Thank you. One moment for questions. I feel like the bounciness of the questions is in direct proportion to how nice of a summer people had. Don't you think? Like, that could be. Could be. 'Cause Greg was pretty bouncy, so I'm thinking a lot of time on the beach in St. Petersburg. Allen, very bouncy. Thank you. However that goes. Our next question comes from Stephanie Davis with SVB Securities. You may proceed. Oh, I'll bet Stephanie had a great summer. Stephanie, what's up? I had a great summer, but guys, I have a pretty high bar now on the bounciness. I gotta keep the pep up. Talk to me about your commuter revenues. You're in the office, you're having IT issues. I'm in the office. My team's in the office. Are you seeing commuter fully come back? And what are you baking into guidance? I must first say for my IT team that we are not in the office. We are at a other bank's conference. I won't name them so as not to throw anyone's IT under the bus. This is one case where the HealthEquity technology team and corporate infrastructure team, hardworking and long-suffering, are off the hook. Fully acknowledged. They were quick to ask if we needed help, though. There were a lot of immediate texts. In any event, commuter. Look, you know, commuter revenue continues to grow at a kinda modest but steady clip. You see the growth on the interchange side, which as you know, is the smaller component of commuter revenue. Obviously on the service fee side and the, you know. As you know, we just took a look at this, actually. You know, if I look throughout the pandemic period and so forth, you know, pricing on commuter has held up really well. Some of the things we tried to do to even out for the future for the next, you know, I don't know what's after Omicron, Mu. I don't know what's next. Is it Mu? Mu. I don't know. I think it's whatever the next one is, you know, we've tried to set it up so things will be much more even, if not perfectly even. So I, you know, I have, Stephanie, very high hopes for commuter. That having been said, hope is not a plan. So from a forecasting perspective, we're gonna continue to be, as we said, when we gave our first guidance for the year. You know, what is that once bitten, twice bitten? I don't know how many times we've been bitten by this, but a couple of times. We're very shy and we're gonna just kinda see what we get each quarter and then bake that level into our forecast and, you know, that's that. It is. It's certainly after HSA, you know, in percentage terms, our fastest-growing component of the book. We did a lot of work over the pandemic to, A, improve ultimately margins from that business as it grows, and then B, you know, make it a more flexible product as you know. I, you know, I think there's a lot of opportunity there. It's a product that, you know, if you had asked me six months ago, I probably would've said, in fact, I did say, you know, while ultimately, you know, it will recover, you know, who knows where it's gonna be. I feel somewhat more optimistic about where this product really ends up than I would've six months ago. It's not that I really think people are being dragged back to the office full-time. Clearly, that's not happening. When you look at our cases that have been around a while, as people kinda get used to the hybrid thing and figure out how to use the commuter benefit, recognizing that most of the revenue comes from service fees, those service fees are starting to come back. Again, slow, relative to what one might have expected a while back, but feeling somewhat optimistic about the trajectory there. Got it. Thrice bitten, incredibly shy, but still more optimistic than we were before. We're just not baking it in yet. Yeah. With that. As you know, we're all pretty shy people around here anyway. Of course. Wait, with that in mind, then I look at your guidance and you raised by more than the beat, which is pretty uncommon versus what you guys historically did. I can't argue [crosstalk. Tyson, is that a change in philosophy? You know. What was that? In the Mott years, that wouldn't. No. Tyson, you wanna speak to this? No, I [crosstalk]. Yeah. That's very not Mott of you. Yes. I think what it is is it just kinda calculates out. If you think about what we've said about the variable portion of the cash, which is $500 million-$1 billion. If you kinda go to the midpoint, do the math on the raises, you get a number that's, you know, underneath that 7+ the enhanced rate portion that comes in there. In my mind, it's just, you know, it's just the math working out. Like I said before, it's just how much can we get to come down to margin. As we get more acceleration, we get placements at the end of the year, we're gonna make more and more progress against that. We just need the rates to just stay where they're at or get a little better, and that's a very positive thing for us, all in. All right. Positive change in philosophy. Well, thank you, guys. Appreciate it. [crosstalk]. Congrats again. I don't know about that. Let's not go crazy with the positive change in philosophy. It does pencil out. I mean, it is. If you look at the change that we made in yield guide on the custodial side and run that out, it kinda explains what we did. If you run that out, I actually get $9 million above $5 versus including the 2QB. You're using $1 billion to do the calculation. As I said earlier somewhere, the marginal cash starts dwindling off a little as you get to the end of the year. There's less, you know. It's not $1 billion as you get to the end of the year. All right, I'll allow it. Thank you, guys. You know. Thanks, Stephanie. You give them an inch, and they want a mile. Thank you. Our next question comes from David Larsen, BTIG. You may proceed. Hi, David. Hi. Hey, hey, guys. Congratulations on a very, very good quarter here. What was the revenue and earnings contribution from Health Savings Administrators and also Further? We've broken out health savings on an annual basis, and it contributed for most of this quarter, maybe all of it, actually. It's small. I mean, you're talking about $1 million or $2 million, something like that, a couple million bucks. With regard to Further, Tyson, you wanna hit that one? Yeah. I mean, I just go back to what we'd stated at the beginning. We haven't really come out and given refreshes on that, but it was about a $60 million business with a 20% EBITDA margin. We're working on improving that margin with the $15 million of synergies that'll come in over time. It gets to be like a 40% margin at some point off of that, off of those dollars. Right now we're in the middle of getting through the TSA, and we'll do a technology platform shift in 2024 and 2025. We'll make those improvements there. That'll help not only the servicing costs get better, you know, also revenue improvement, there as well, but also the technology line item will get better because of those synergies. I mean, one of the flip sides, I'll just say, of the sales side of things that we talked about is, we're seeing very good production and good partnership from the 10 new health plans that we became partners with as a result of the Further acquisition. A piece of that is having taken, I think, a very collaborative approach to how we're approaching the platform work that we have to do, the features they're gonna get, you know, talking to them about how we can deliver more value, being able to deliver the full, you know, CDB bundle that they kinda didn't really have with Further. We had a meeting. It was actually our first live customer event since pandemic back in July with all of our Blues partners. You know, obviously that group makes up a big chunk of that. I think that taking it a little bit slow on the Further synergy, which we said we would take slow at the very outset, is paying dividends on the sales side. That seems like it's okay. Great. So it sounds like you're generating good revenue synergies from both of those transactions. That's great. Then there's a lot of chatter in the market about the risk of a recession, you know, potential slowdown in hiring. I mean, are you seeing any of this at all, or is this actually working to your benefit with people maybe saving more and obviously an increase in interest rates? Any thoughts there would be great. Yeah. I love this question 'cause I get to play like macroeconomist, which is a joke, but especially if you ever try to teach me macro. First, I would say the slowdown in hiring does not appear in our data and does not appear in the national data. I mean, you know, last month's numbers were 350,000 new jobs. I think consensus was like 352, right? You know, those are. When you think about that like steady state is something, you know, given current demographics, between 100-150, you know, what's really happening is people are coming back into the labor force and those jobs are being created. I don't, I mean, we have not seen that in the data. But I think, you know, ultimately, there is, as Chairman Powell said, you know, employment is going to be a piece of the pain, right? The relevant question is not so much for us, is not so much the unemployment rate. You know, it's the pace of job creation. You know, a way to look at that within our book of business is to say, okay, you know, are we going to grow our new HSAs by, you know, 20% year-over-year? I don't think so. I mean, that would be a tremendous outcome. But you know, to do that, you would have to see the second half, you know, have as much, you know, job creation as the first, and I don't think that's the idea. I would certainly, you know, when we do our forecasting, you know, we're looking at having a very, by historical standards, a very strong end of the year. I don't think we're expecting to have this tailwind for the full fiscal year. As I say, you know, even if you look at August, neither our data nor the national data tell the story of reduced employment growth, or of much reduced employment growth. That. The second part of your question was about spend. I do think that what you would expect is in the context of inflation, right, that the balance growth on a per HSA basis would slow down, and that's exactly what we've seen, right? We grew balances on average about 10%, 11%, 12% in the last few years. On a year-over-year basis this year, we're looking at about 5%. I mean, a big piece of that is simply reduction in equity net asset values during the quarter. Nonetheless, it's still the case that when you have an inflationary period, people are less, you know, savings rates go down. In the end, it's a little bit counterintuitive, but you know the same thing that you know when you have a quick economic shock, savings rates go up. We've seen that average balance growth, you know, trickle back into the single digits, but still at very healthy levels, again, particularly when you factor in that, during the quarter, there were significant reductions in asset value, and now we're at the place where, you know, roughly a third of total assets are in debt and equity securities. That's kinda what's going on there. Great. Thanks very much. Congrats on a very good quarter. Thank you. Thank you. One moment for questions. Our next question comes from Glen Santangelo with Jefferies. You may proceed. Oh, yeah. Thanks, and good evening. Thanks for taking the questions. Hey, Jon, I want to ask you know, about the service fee portion of the business. I mean, it seems like there's obviously a lot of good things going on on the HSA and custodian side. But if I think I heard you correctly, it kinda sounds like some of that strength is being offset by lower service fees. I think, Tyson, your prepared remarks, you suggested you're seeing $5 million a quarter in service fee deterioration. I think you gave some numbers on a year-over-year basis, you know, normalizing for the COBRA subsidies that you got last year. I was wondering if you could just elaborate a little bit more, you know, on the service fee portion of the business and kind of what you're seeing and assuming for the balance of the year. Thanks. Why don't you start this one, Tyson? Yeah, I mean, we wanted to lay those out pretty concisely in the script, and I think you did a good restatement of it, Glen, so appreciate that. I won't regurgitate that back. Really, what we're trying to say is that there is, you know, some revenue decline related to migration, some of the attrition that occurred there as we got that done. We wanna make sure people are aware of that. Just calling out specifically the CDBs relative to that $5 million decline per quarter. I mean, the thing you need to keep in mind, too, is it's really there's headwind automatically there because you have the $10 million of subsidy revenue from last Q2 on the COBRA side from the legislation that's not there this year. Then you also have that decline we're talking about on the COBRA side. COBRA comes down quite a bit because of low unemployment rate and the subsidy coming off. Then you have some FSA decline because of the way that we you know did the migrations and just you know some falloff there. We wanted to call that out. You know, we called out service expense in Q1 as a little overstated. We got that under control. That was the $5 million-$7 million. I still think there's opportunities there when you think about bringing that service cost in line with that revenue. I know that wasn't particular to your question necessarily, but it really, to me, is kind of. Yep. Wholesale running that part of it. I don't know, maybe there's a follow on there. Jon can add to that. Yeah, I mean, I would just. You know, the way I sort of look at it, and again, I think this is consistent with the prepared remarks, is. Let me actually back up. First of all, this is all in the HSA side of service fees, which is the minority of service fees, but nonetheless is something we talk about a lot and have answered many questions on over the years, was rock solid, Q2 and Q1. HSA, if you were to look at it, and we don't break down, you know, service revenue by product, et cetera. It would be very difficult for us to do that in a way that we could consistently report to you. Suffice it to say that in you know in rough terms, HSA attributable service revenue grew by the same percentage as HSA accounts. That's a good news story, and I think reflects a lot of work on the team's part to make sure that the revenue efficiency associated with our HSA business remains strong. Now that's notwithstanding the obvious increase in rates. What we had is really two factors on the CDB side. Now I'm thinking about the full first half and just extending out for the full year. One that I think is easy to understand is the COBRA subsidy that we had last year, we didn't have this year. I think everyone understood that, about $10 million and in the Q2, and obviously there is no COBRA subsidy this year, so no $10 million. That's easy. The second factor is that as we kinda got into this year, and then this was reflected in our earlier guidance. It's not a surprise to us at this point. As we got into the year, it was clear that, you know, in our work to assure that we completed our migrations as promised, you know, we have made a big deal both internally and externally to say, "We are gonna complete the WageWorks-related platform migrations work," you know, in... We said we had a big deal of saying we were gonna substantially complete that in fiscal 2022, to the point where we told you, for example, that we would not include those costs, any WageWorks integration costs in the integration add back after the end of fiscal 2022, and we haven't. In fact, just to that point, when you finally get to look at our detailed reporting, you'll see that we're actually spending just a teeny bit less than we thought on integrations and you kinda get the idea. Having done all of that work and really focused on getting it done, for the benefit of our customers, for the benefit of our team, et cetera, you know, as we look at it and how it all unfolded, we have about $5 million in each quarter of this year, $5 million in the first, $5 million in the second. Our guidance reflects the idea that this will continue in the third and fourth. That is primarily FSA and then also some COBRA revenues that we're not gonna see, notwithstanding the fact that accounts, CDB accounts are basically flat to slightly up. You know, I could go into the details if someone was really interested, except that. What I'll start by saying is simply that, when you kind of get into the nuances of platform movements, there are decisions that we made to make sure we could get this done and get it done right for customers. You know, as we made those decisions, while obviously, you know, revenue efficiency was a material factor, we also wanted to make sure we were doing right, that we weren't leaving people in you know, weird pricing setups or what have you, and that we were focused on delivering great service. You know, that does seem to be paying off for us in terms of cross-sell and the fact that even on the CDB side, sales look very strong this year. The way I would look at it go forward beyond this year is now we're done with this, and we're You know, we told you that the WageWorks When we first told you the WageWorks thing would take into fiscal 2023, and we finished it at the end of fiscal 2022. It's done. Now what I think you should be asking of us, it's up to you in terms of what you should expect, but what you should be asking of us is that the CDB business as a whole, which is primarily made up of service fees and then some interchange, and a little bit of custodial, that the CDB business as a whole contributes to the overall growth story, right? Which we didn't expect it to, and in fact, it hasn't in either fiscal 2021 or fiscal 2022, and that was before the pandemic, which did its own damage. As I get into fiscal 2024, that's the way I sort of look at it, is the bar that we are setting is that CDB as a whole starts to contribute to growth, and I think it can. But there's still some work to do. As Tyson mentioned, while if I sort of at cost, basically cost per seat per account, you know, are you know, basically flat, right, which is great. I mean, service costs per account, you know, that's great. We managed to take care of our teammates from an inflation perspective, get some efficiencies and so forth. You know, we can do a little better than that. The ways we can do a little better than that are, one, by ultimately completing the Further integration that we still have left to do, which will, you know, is more safe-focused obviously, but you know, does have real savings in service and tech. Then secondly, by continuing to get advantages from an efficiency perspective from all of the streamlining that we've done over the last couple of years here. Then obviously [crosstalk] by rolling the portion of it in margin. Anyways, yeah. Yeah. I really appreciate all that detail. Thanks so much. Super helpful. I just wanted to ask one quick follow-up on fiscal 2024. I know you don't want to comment or give any guidance, but obviously everybody's, you know, so focused on the rate curve. If you look at the current rate curve and you go back and compare it to December 2019, I mean, we're conservatively up 120-130 basis points plus from where we were. You know, I think what most people want to do is look at your three-year duration portfolio and assume you're gonna replace or reinvest, you know, roughly $4 billion at these much higher rates, right? We can do the math and assume the type of impact that'll have on the overall yield curve of your portfolio. Is that logic correct? I mean, or should we think about it any differently? I know you don't want to get in the business of forecasting future rates or giving guidance. I'm just sort of looking at where rates are today. I mean, I think the basic logic is correct. The only thing I would, in terms of the potential for custodial growth, the only thing I would be cautious about is it's not 1/3 of our current portfolio, it's 1/3 of what our portfolio was at that time. Yeah. I have to admit, I don't have the numbers sitting in front of me. I'm not trying to guide to it. As you do the math, you want to look at what our cash looked like three years ago and say, well, roughly 1/3 of that got repriced. That'll be helpful in fiscal 2024. You know, well, I'll just stop there. That'll be helpful in fiscal 2024. I think the basic logic is right. It's just a question from my perspective of getting right, A, what we replace at, and B, you know, having the right number rolling over. Great. Thanks for all the details. Sure. Thank you. One moment for questions. Our next question comes from Stan Berenshteyn with Wells Fargo. You may proceed. Hi. Thanks for taking my questions. I guess not surprising to see the revenue guidance went up on variable rate exposure. I was a little surprised that EBITDA guidance was not up as much. I thought a lot of that would maybe go through to the bottom line. Is there anything offsetting EBITDA guidance from moving higher on your end? I think the biggest factor is the one we've mentioned, which is that it's really back to that service revenue component. I'll ask Tyson to elaborate since it's kind of a guidance question. You know, in the prepared remarks, I said that, you know, I think both the quarter we delivered and the full year, I think in the initial draft I used some word like spectacular, and then Richard got a hold of it and said maybe that wasn't the best thing. You know, that's the other factor that is really out there. Again, it's not really a cost problem, it's really that we're doing the work, but you know, we made some decisions that you know, as we wanted to get these platforms integrated, you know, declare victory and move on and optimize for future sales, that you know, in the short term, cost us a little bit of revenue and you know, that is what it is. That's the only other factor that's out there. I guess maybe I would just say one other thing, which is as we thought about particularly you know, as you trace this down to EBITDA and then you know, go down to, as Tyson commented, down to non-GAAP net income and then so forth you know, we are. Well, if I thought that we were under, you know, from a cost perspective, massive inflation pressure, I would say so. We are gonna do what we need to do to take care of our team, and in particular to take care of our customers during busy season. We were probably more detailed in the prepared remarks here than we've ever been in terms of what we've assumed about the amount we will spend at the end of the year. Now, I think we've been cautious in that regard. We basically assumed, as Tyson said in the prepared remarks, that the spending increase that you'll see in Q4 over Q3 in the service line is kind of, you know, give or take the same as last year. As you will recall, you know, last year had some really unique factors. You know, I think that's an area where we're being cautious to give ourselves room to not be having a discussion that is, like, "Hey, we need to serve our customers, but we need that last penny of non-GAAP EPS." You know, that's probably another factor that's just out there, recognizing that, the flip side of the sales numbers being good is we're ramping up to take care of those customers. Now, I think we can ultimately do a little better than we forecast, but, you know, we wanna have those contingencies so we're never talking about, you know, trading service levels for a quarterly beat or not beat. Tyson, anything [crosstalk] to add? I think that's right. I mean, the only thing I'd keep in mind is when we're talking about back-end cost numbers, just that obviously there's more accounts, even from the acquisitions than what we've added over the course of the first couple of quarters and what we will add going through there. Then I would say you can't go without saying that there's additional travel. Jon mentioned the partner conference. We're seeing all of our teammates out in the field. We're just, you know, we're doing things a little bit different like everybody else, and so I've got to build in some wiggle room for us to be able to do that. As we hire people over the course of this year, I think there is a little bit of inflationary pressure on payroll as we do that, and then we'll have to get into next year and see how that plays out. That's why you don't see that fall down. I think as time goes by, you'll, you know, we're gonna figure out how to have more and more of that fall down to the bottom line. Got it. Maybe just a quick one on member growth and your sales pipeline. On membership, obviously it was pretty strong this quarter. Is there any change in the mix of employers that are offering high deductible health plans or maybe the mix of employees that are adopting those plans versus maybe historical trends? Can you maybe also comment on the RFPs that you're seeing? Are there any differences in what employers are requesting versus, let's say, a year or two ago? Steve, do you wanna take this one? Sure, as long as you can hear me. I know there's been a little technical issue. Hear you. All right, good. Great. Yeah. Thanks for the question. You know, I think one of the things that's been a little bit different this year is that, or over the last 18 months, is we've become much more effective in reaching individuals. We've seen some significant increase in the number of individual HSA holders, and I think it's just because a lot of people have had HSAs for a while and we think the time is right to get out there and market to them. We love the individual account holders we bring on because their balances are high and they're very committed to the product. Then we are seeing, we think, really some nice traction in the sub-500 market. I think largely this is because we're finally getting the message out about the bundle and the fact that, you know, sometimes we think of a 500-life employer as pretty small. They're really not. I mean, that's a significant employer that's fairly complex. Usually, they're understaffed when it comes to their, you know, the folks that are running their HR department and things like that. They may have three or four people that are looking after the whole group of workers. For us to be able to come to them with a complete solution that includes not just the health savings account, but also these things that are very important, whether it be COBRA or FSAs, these lifestyle accounts, I think are meaningful for even those larger employers in kind of the SMB space. I think that's where we've seen some real nice traction. We continue to have great wins in the enterprise space and in those kind of the 500-5,000 space too. Those would be the ones that I think are growing the most. I mean, Jon, do you agree with that or any other color? Yeah. I mean, this is one of the things that we. If I look at last open enrollment season, we, with all kinds of heroics and maybe over-heroics in some cases, we managed to hold it together for our members despite all of the factors, you know, the pandemic, Omicron, et cetera. We had much more difficulty with our clients and our brokers, and they themselves had their own challenges. What I guess I've been fairly gratified about, particularly in this Q2 versus the first, is hearing very positive commentary coming from the brokers that serve the market Steve is describing, about what we've been able to do as we came out of last year's busy season, again, in terms of our client service, and really, you know, stepped up to servicing them. The reason I mention all that is to say it kind of goes hand in hand with our strategy on the health plan side. I mean, the health plans talk to the brokers, the brokers talk to the health plans. Sometimes you don't exactly know which conversation it was of yours that got you the sale, but it's the sum of activities that creates, you know, relative to our competition, a brand where I think there's confidence on both sides of that equation that we actually care about these people, that, you know, we've made real decisions with real trade-offs, that have helped, you know, that are in their interest, and we'll continue to do so. I think that's something we're seeing, you know, as a notable strength, that that's helped us throughout this so far this year. Great. Thanks so much. Thanks, Stan. Thank you. One moment for questions. I feel like I wanna start calling analysts' names who haven't asked questions yet. No, there's plenty of questions. Oh, there are? Yeah. All right. Thank you. Our next question comes from Sandy Draper with Guggenheim. You may proceed. Thanks very much. Jon, I assume that was definitely gonna be the next one you were gonna call on. I mean, you know, the truth is, I don't know where you are half the time. I think you're out biking, you know, you're like raising money. You're like Superman on a bike. I'm not on a bike right now or you'd hear wind rushing, so. Okay. Most of my questions have actually been asked. I'll just do a couple of quick ones. I just wanna make sure I understand. When you're talking about the service fee attrition, is it actual accounts going away, or is it pricing pressure in that? So that's the first part. Jon, I heard you, I think in the prepared remarks, say based on the sales and some other things you expect to see CDBs starting to be a growth factor. Again, I would assume that's not the back half of this year, but you're talking about maybe next year or the year out that you would expect CDBs to start to actually be a positive growth contributor. Thanks. I really appreciate both of those questions, because it's a great opportunity to clarify. Your first question, Sandy, was is the weakness that we've seen on CDB service fees a function of account attrition or competitive fee pressure? The truth is, the answer is a lot of neither of those things. Yes, there's always a little bit of fee pressure out there, especially in you know times like these, but we've handled that pretty well. Yes, of course, we saw some incremental account attrition that offset our sales. If you look at accounts on the CDB side, exempt of COBRA, where you have some subsidy impacts, right? They're basically flat to up across all of the CDBs, and you'll see that in the published stuff. Really, what we've got here is two factors. One is the one I don't need to belabor, that is the subsidy. The second factor really is, as we move business and parenthetically, all of our CDB migrations occurred, I'll say all. Let's say substantially all of our CDB migrations occurred in the second half of fiscal 2022, sort of culminating in at the end of the year, right? As we moved all that business over and tried to do it in a scalable way so that we would be down to our go-forward platforms and we wouldn't be talking about WageWorks migrations anymore, right? We did have revenue that fell out primarily, and I guess I'm gonna without suggesting that we weren't billing what we could or what have you, I'm gonna call it fee efficiency. I'm gonna use an example to help illustrate, and Tyson will tell me when I get on thin ice. You will, right? Yes. It won't matter. I'll just keep skating. That's right. You'll tell me. That's right. I mean, even Mott couldn't. Even the sainted Darcy Mott could not. We're talking about him like he's gone. Oh, he's not. He's listening to this call. He is listening to this. Grading us. Yes. Yeah. Harshly, no doubt. In any event, an example of this point, Sandy, is we have billings for runout accounts. As you might imagine, when you're moving accounts over at the end of the year, right? You have to make decisions like, how much effort am I gonna put into migrating the runout accounts and then migrating the billing for the runout accounts? Well, it's an area where, as a team, we chose to put some effort, but, you know, recognizing that it's something that once we were through the year, we would kind of be done with. We didn't put a ton of effort into that, you know, for the purpose of maximizing billings in FY 2023, right? That factor, you know, will have, by the time we're done with the full year, you know, will have cost us a not immaterial sum. There are a couple of other items like that, where when we moved from platform A to platform B, the revenue in full just didn't follow us. It, it's not really a case of fee pressure. I mean, again, there's always some, but it's not really a case of fee pressure on the CDB side or a case of a loss of volume on net sales. It's really, you know, I think of it as revenue efficiency here, that we have. I'll make one last point, which is, there are cases where, you know, in light of some of the service challenges that we and everyone in just about every business had, particularly in the Q1, you know, there were certainly some cases where we were willing to give some fee concessions. You kind of get the idea. As you look to next year, which was the second part of your question, I do think from where we are today, there are a couple things that should help us focusing on the CDB side of the business. The first is that we won't have the negative effects of moving platforms and you do lose some accounts. You know, sales versus churn should be a net positive for us, whereas it's been basically a net neutral the last couple of years here. The second thing is that I think, when I say it, I feel confident in that in part because the sales activity on CDB has been pretty strong thus far this year. Looking at the pipeline, most of this stuff shows up on January one, as you know. The second thing that we should have going for us, but this is a sort of we'll have to show you, is from the perspective of enrollment, this is particularly in FSAs, we have not rebounded at all from the pandemic lows. In other words, look at percent uptake, right? We're still at the pandemic lows, and that's not surprising because those enrollments only happen once a year, and you had people who kind of got burned during the first pandemic year. A little bit of a bounce back there would be extremely helpful, and we're not just waiting for that to happen. Our marketing team, led by Tia Padia, and her education team, led by Leigh Scherer, a fine Florida native, I might add. There are a few of us. Though she's from, like, that northern, like, forgotten coast part, so I don't know what's going on with that. But it's not quite lower Alabama, but it's not lower Alabama, if you know what I mean. That whole team, you know, that team is putting effort into education around our existing FSA members, either those who are enrolled now to re-enroll for next year or those who are enrolled in the past to come back, and we'll see how that goes. Lastly, the pieces of the CDB business that have been healthy, again, from the perspective of post-pandemic, HRA has been healthy and of course commuter, you know, if you've reset the baseline at this point, you know, as I commented earlier, continues to grow. I think it is, you know. A way to think about it, Sandy, is, like, at the time when we kind of rebalanced the business to have this CDB component, our promise to you was that we would grow the HSA business way faster than the CDB business. That happened, right? Both in accounts and revenue to the point where, you know, HSA is gonna be well over 60% of revenue this year. That will continue. We also promised you that CDB growth would be a positive number and not just a, you know, black zero. If we can get to that place in, you know, fiscal 2024, you know, and beyond, then, you know, it just makes the underlying HSA story all that better. You know, that's something we're working very hard at. I mean, if I'm you, I'm like: Well, that's great, guys. Deliver it, and then I'll be convinced of it. That's certainly the way I think about it myself. I think that's entirely reasonable given where we are. Got it. That, that's really helpful. By the way, you can just refer to that as Tom Petty's Florida or Tom Petty's part of Florida. I don't actually know that, you know. Oh, we could go on. Thanks, Sandy. Tom Petty, he's from Titusville? I think he's from Titusville. Yeah. I don't know, but I like him. I don't think she's from Homosassa Springs. I don't think that's quite Titusville. That's like outer Titusville. Way outer. Next question. Thank you. Our next question comes from Sean Dodge with RBC. You may proceed. Yep, thanks. Jon, maybe on the last point you were making about the CDBs contributing to growth. There's of course a few dimensions there, as you pointed out. To better appreciate the opportunity there, to help dimension that out, I guess maybe where should we start? Like, I guess, how has multi-product adoption changed over the last couple of years? Like, what proportion of clients have multiple products in place where we could see you know, meaningful upside as things like FSA use returns to some amount of normalcy post-pandemic? How has that multi-product adoption changed, you know, now versus where it was in 2019? Maybe where do you think it could go? Well, I mean, I think Tyson commented on this in an earlier question, and I'm gonna give you an answer and then invite, you know, Steve to, from a kind of market perspective, to elaborate. But I think that the market has largely followed us, and I'm not trying to brag in that regard. It is a statement of fact to the idea that the bundle is kind of. It's not exactly the norm in all cases, but it's getting close. You see this in terms of the percent of new deals that get signed, et cetera. I guess, you know, my view is that, you know, that's the key behavioral change at the employer level. At the employee level, on the CDB side, HSA adoption's moving along fairly swimmingly, right? We still have a ways to go to get back to pre-pandemic behavior. Whether that's expressed in terms of people enrolling in use or lose health FSAs, in dependent care FSAs, or obviously in commuter. COBRA itself is probably. Our business will continue to grow, but COBRA uptake, that is the percentage of people who actually take COBRA, which is a portion of our COBRA fees, you know, that piece is gonna be low as long as employment markets remain tight and as long as people, a lot of people have access to highly subsidized plans in the ACA marketplace, which, you know, they are going to have at least for the next few years. From an individual perspective, putting the COBRA point aside, I think the big picture is that we will eventually see some positive trend here. We're seeing that in commuter. Truthfully, I think we are. You know, in terms of accounts, we're seeing. I mean, if you look at the FSA book, it's up year-over-year, right? It's just up very modestly, and that's, you know, reflective of some of the factors I talked about earlier. The big thing that kinda I feel like we would already be talking about this as a win, but for the fact that, you know, we made decisions that prioritized getting these migrations done over sort of billing efficiency, fee efficiency, and so be it. We should reap the benefits of those going forward. Steve, you wanna add anything to that or we're all- No, Sean, just great question. Just to remind you, when we first did the deal with Wage, you know, about 10% of their book was HSAs, and they had like 7,000,000 accounts, right, in total, and about 10% of our book was CDBs, and we had about 4,000,000 accounts in total. We're just getting started on that cross-sell. Obviously, we put a premium just because of the higher revenue and, you know, the kind of the sweet spot that HSAs are to our business on cross-selling HSAs into the Wage book. But we still got a lot of wood to chop when it comes to cross-selling CDBs back into our, you know, kind of legacy HealthEquity book, even though we don't use that language really anymore around our shop. So there's just a lot of opportunity. We're just kinda getting started, and just as we were getting rolling, then COVID happened, and so it kinda slowed things down. You know, on our sales huddle today, Jon was on it, I was on it, and you know, huge amounts of activity and quite a bit of it is now starting to see that cross-sell into our really strong long-tenured HSA customers, you know, things like the CDBs, LSAs, HRAs, things like that. We're pretty excited about it. I mean, all that having been said, I mean, HSA is gonna continue to outgrow this. I wanna be clear about that, right? HSA is the growth driver of this business. It's just that, you know, if you kinda say, "Well, that's great. Now, if I can just have this thing contributing, you know, a single-digit number, right, that's not a zero, right, that's black," you're in really good shape. That's really the way to think about it. Okay. Is this the bundle is the new normal to cross-sell an opportunity? Is that the case across all client tiers, or are there nuances here where large employers are maybe approaching this a little bit different than medium size and small? The smaller the employer, the more likely you are to see bundles, what it boils down to. Okay. Particularly that, like, not quite, you know, tiny, you know, but like that 500-person group that Steve mentioned earlier. Also, my phone/watch/everything blew up. I'm sorry, fellow Gator Nation, Tom Petty is from Gainesville, and it's still been 13,700,000,000 years since the last time Utah beat Florida. All right. Thanks again. Thanks again for the help here. Thanks, Sean. Thank you. Our next question comes from Cindy Motz with Goldman Sachs. You may proceed. Hi, Cindy. Hi. How's it going? Thanks for taking my question. I really appreciate it. So you guys have given some really good detail, you know, about the revenues and everything. Just in terms of quantifying maybe what the absolute growth rate down the road, do you think it grows at, like, single digits, or is it mid to high single digits like Devenir? I had a question, too, on gross profit, Tyson, just with the service gross profit. Like, should we expect to see that you made some good progress this quarter? Like, is that gonna stay in the range of like maybe 27%-28%? Where can it go from there? Just lastly, with EBITDA margin, you know, congrats on raising the guidance on EBITDA and revenues. Just curious, 'cause it still is off, you know, from last year. Like, where do you see it going? Obviously, it depends on the mix shift, you know, with custodial taking over, it'll probably go up. If you could give us, you know, any guidance, like even if it's mid-thirties, like where you see that going, all that would be helpful. Thanks. Why don't I do top line and you go from there? How does that sound? Sounds great. Yeah. There was a lot in there. Yep. You know, from a top-line perspective, a way to look at it, Cindy, is that the COBRA subsidy top line revenue on a year-over-year basis relative to what was a, you know, in other instances, still a strong Q2 last year, was up double digits. We're actually up 9%. Take the $10 million from COBRA off and you're up, I don't know, what is it, 12% or 15%? 15. 15. That sounds good. I don't think the top line is gonna consistently grow. Well, let's say, we have not suggested that top line is gonna grow 15% year-over-year, you know, out into the terminal period. You know, we do have what we have said for a while is, and obviously we had acquisition growth, and so, you know, that's helped certainly. From my perspective, I think we have a couple of things that ultimately will help us from a top-line perspective. You know, the first is, and I mentioned this in the prepared remarks and on another question, is the health of the HSA business itself, which is again it'll end up somewhere between 60% and 70% total revenue this year, right? The fact that that business itself for us, you know, it, you know, has been growing double digits and grew double digits here. We're sort of just getting started in terms of the benefits of the rate cycle in that, and then also the benefits of our migration. Let me use that. I probably shouldn't use that word. Our you know, offering and our members' adoption of Enhanced Rates. You know, Tyson mentioned, it was kind of interesting. I'm like, that's it? When he said, well, so you know, we're up, what, three basis points from this time last year. Now that's pretty good considering when we started the year, that wasn't our plan, right? A few years ago, people were like, when you get to that fiscal 2023 at the bottom, you're gonna drop out a rate. Obviously we feel pretty good about that. It's, you know, we're just getting started in terms of those benefits. I think that's the first reason to feel that the HSA business at core is the first reason to feel good about the growth opportunity. The second, I think again, it just boils down to if the ancillary businesses can contribute a, you know, low single-digit number, that will be very helpful and they should be able to do that. If I put those two together, obviously, you know, you're gonna end up in that, you know, kind of give or take 10% range. You know, lastly, I would say is, and this is where I'll turn to Tyson. You know, notwithstanding the fact that we wanna deliver more for you from a margin perspective, and we think we can, we're generating a good cash. You know, there were questions at the end of the Q1, if you'll recall, you know, from a operating cash flow perspective, Q1 wasn't as great. Q2 was really strong. Ultimately, that cash will be reinvested in the growth of the business. That too, you know, that's sort of the way to look at it to the extent that we're able to fund those, you know, smaller inorganic opportunities or smaller investments in organic growth, you know, that works out pretty good. All of those are reasons I think to be fairly optimistic about the long run top line of the business. Now I'll leave to Tyson to do the hard part. Yeah. Now how do we turn it into profit? Yeah. You know, I appreciate the question, the way you asked about service margins, 'cause just to reflect on custodial performance view. I'm gonna just keep on going even though I know that's down. Okay, T he margin is very high. The same is true with interchange. Those are, you know, contract-based costs. There's our treasury and banking ops team that's in there and a few other people, but it scales very well. You have those as drivers, and the rate particularly as the biggest driver of gross margin. But the real work and where most of the people in our organization are focused and where, you know, the people that are in our organization, where their costs are, is in that service cost line item. Really garnering efficiency there when you think about trying to reduce contacts but still have great service. When you think about the platform migrations that we've made and the technology improvements that we'll make over time, putting those efficiencies in there and actually getting them into a volume forecast so we have less people in there serving at a better rate is the way to improve that. I think we will improve that service margin over time. Now, if you look at the service margin and the EBITDA margin, they're both up about 500 basis points sequentially, they kind of go together because the rest of it's kind of moving along. I think we can still make improvement there. Watch for that. The Further synergies, we've already talked a lot about that, but that's another thing that will come in over time and help improve those margins. Then I'd go back to kind of one of our original statements, which is, you know, when it comes down to it, we're gonna try to grow EBITDA margins a little faster than revenue. Jon talked about revenue, and when you have interest rates at the right end of the scale, that's what helps us to accomplish that. Now, like another person had asked, I think it was Sandy, you know, those interest rates are higher than they were back in 2019. We've actually changed the way that we monetize the custodial assets when you think about Enhanced Rates and other things that we've done to improve the way we monetize. Not only do we have the higher rates, we do it in a better way, and we've changed the structure of the business to do that. I am optimistic about being able to improve margins and continue to have that tailwind over the course of the subsequent years here. Great. That's very helpful. Thanks a lot. Thanks, Cindy. Thank you. Our next question comes from Mark Marcon with Baird. You may proceed. Good afternoon. Thanks for taking my question. Just curious a little bit about the fall season coming up and, you know, how you're thinking about that, particularly in terms of some of the initiatives around, you know, medium-sized enterprises and just the approach that you're gonna take, and if there's gonna be any sort of changes, you know, with Ted not being part of the team anymore. Couple thoughts. Thank you, Mark, for the question. Let me start with where you finished there. You know, as I said in the introduction, and it was sincere, you know, Ted's helped us and supported the team and its mission through, you know, a lot of hard operational stuff. He's gonna be extremely successful wherever he goes. Our focus during this period is we have our longtime veteran, Brad Bennion, who stepped up and is, you know, serving that role on an interim basis. Brad's been with the company longer than I have, 16, 17 years, and just knows everything. Brad's focus really is on delivering for our clients, for our members, and for our team and for our fellow team members, a really outstanding peak season, right? We internally, Angelique Hill, who runs operations, is trying to get us to rename it growth season. It hasn't stuck yet, at least with me, but I'm working on it, Angelique. We think that this is the best thing we can do from the perspective of growing our business long term, of taking care of our teammates long term, and, you know, frankly, cementing the impression that our brand has. Because what I see in our industry right now is a lot of people are running around trying to do all kind of stuff to kinda, I don't know, this sounds a little bit braggy, I don't mean it this way, but to kind of catch up with some of what we've done, whether it's Enhanced Rates or being able to, or having a bundle or whatever. A lot of the. You know, it all sounds good when you're selling it. It's harder when you know, where the poop hits the fan is when you get to that peak season. We feel like whereas some of our competitors, including established competitors, are gonna struggle there, we have the opportunity, having kind of been through that, to deliver a truly differentiated experience for everyone, for the brokers, et cetera. Honestly, Mark, that's probably. We try to do that every year, of course. I think in particular with you know in this period, this for us is everything we're talking about. You know, I was gonna say to you know, we're like, for example, I'll be in Milwaukee on Wednesday, talking to and listening to our teammates. We have 200 teammates in Milwaukee and where you are and or where you are sometimes. All we're gonna be talking about is the baseball game. No, all we're gonna be talking about is really about having an outstanding peak season for all involved. I just think that's the best thing we can do in the near term. Beyond that, the other thing that I would read from the broader moves we're making, and you can see this if anyone who observes, you know, broadly the personnel changes that we've made over the last year and will continue to make, this should become apparent, is that we really believe that whereas the healthcare and benefits industries tend to be slower adopters of technology, that we are starting to see very, you know, in relative terms, rapid adoption of things like, you know, API-driven workflows and the like, that really play to our advantage as a partnering organization versus a closed garden organization. You know, kind of a walled garden. Nothing wrong with walled gardens, as we've discussed in the past, but that's not our shtick. If you look at what we're doing, we're trying to, you know, for lack of a better term, tilt the organization to have a greater focus on, you know, taking those technologies that we now have available that our partners and clients are now more interested in, deploying them more widely. The effect of that is gonna be twofold. First of all, threefold. It allows us to be a better partner. It allows us to partner more deeply and sell our services and have them consumed, you know, at different places, and we've talked about that a little bit over the course of the year. Lastly, it allows us to be more efficient from a servicing perspective because, you know, for example, I look at. You know, we made a commitment, and then I'll be done with this. We made a commitment two years ago to bring all of our live voice work onshore. We thought it was the right thing for our customers, the right thing for our country. That and that was not a cheap choice to make. That having been said, one of the ways we're able to, you know, we are increasingly able to offset those costs and will be more so in the future, is that you have more activity that's going on using chat, using AI, using technology to get people to the right person as opposed to a more generic person. All that ultimately shows up in better service and then ultimately lower service costs as well. I guess generically, I would say, a little bit of a tilt within the company towards using the technology skills that we have and our unique position as a partnering organization among the leaders in our industry to really drive that competitive advantage is what you should expect to see. Short term, peak season. Longer term, a bit of a tilt towards using tech to really drive the competitive advantages we have. Terrific. Jon, thanks a lot for the thorough response. Appreciate it. Thanks, Mark. Wednesday, Milwaukee Brewers. Be there. Ah. I'll buy you sausage. If I'm allowed to do that, if your compliance people let me do that. Thank you. See you later, Mark. Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Jon Kessler for any further remarks. Well, an hour and 39 minutes, that may be a record. Not sure one we wanna repeat, but with some interruptions. Thanks everyone for being patient with the technical difficulties that our connectivity provider had today. I was just kidding about the other firm, the firm that sponsored this conference. They had nothing to do with it. I don't say that just because they're supposedly buying me dinner later. Again, thanks everyone. We do feel like we reported a really strong quarter. We do feel as you can, I hope, tell here, like there's more work we can do to correct on some of these revenue efficiency issues on the CDB side and, but the, you know, we can do those things. I was saying this was edited out earlier. I really do think we're in a position over the next few years to report spectacular results to you, and we look forward to actually showing you that. That's it. Bye-bye. See you later. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.