Thank you, May and good afternoon. Welcome to HealthEquity’s second quarter fiscal year 2022 earnings conference call. My name is Richard Putnam. I do Investor Relations here for HealthEquity and joining me today is Jon Kessler, our President and CEO; Dr. Steve Neeleman, our Vice Chair and Founder of the Company; Tyson Murdock, the company’s EVP and CFO; and Ted Bloomberg, EVP and COO. Before I turn the call over to Jon, I have two important reminders. First, a press release announcing our financial results for the second quarter of fiscal year 2022 was issued after the market closed this afternoon. The metrics reported in the press release include contributions from our wholly owned subsidiary WageWorks and the account 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 reconciliations of these 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 08, 2021, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates and 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 risk and uncertainties that may cause the actual results to differ materially from the statements made here today. As a result, we caution you against placing undue reliance on these forward-looking statements and we also encourage you to review the discussion of these factors and other risks 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 in subsequent periodic reports that we file 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 turn the call over to the operator to provide instructions and to host our Q&A. With that, I'll turn the call over to our CEO, Jon Kessler.

Thank you, Richard. Gets better every time. Hello everyone, and thanks for joining us this afternoon. Today we have good news to report. We're announcing strong results for HealthEquity second quarter of fiscal '22 ended July 31 and we are reaffirming guidance for the fiscal '22 full year. I will discuss our Q2 results and pending acquisitions. Ted will review operations and integration progress, and Tyson will review the financial details of the quarter and provide updated guidance for fiscal '22. Steve is here to join us for Q&A. As always, let's start with the five key metrics that drive our business. The team delivered strong year-over-year growth in HSA members and assets while commuter yield headwinds continue to impact revenue. Revenue of $189.1 million grew 7% versus the second quarter of last year due to improving year-over-year HSA member asset and other CDB growth along with one time COBRA subsidy revenue that hit largely in Q2 and that was all partially offset of course, by lower custodial yields and commuter benefit utilization, which remains well below pre-pandemic revenue levels. Adjusted EBITDA if $65.5 million grew similarly sequentially, and up from the second quarter of last year of $60.0 million. Total accounts ended the quarter at $13.1 million, which does not include the nearly 700,000 commuter accounts that went into suspense since the beginning of the pandemic. HSA members at quarter's end reached 6.0 million up 11% year-over-year and HSA assets at quarter's end reached a record 15.5 billion up a larger 27% from a year ago. The team delivered very strong first half sales results, including a fiscal second quarter record of 180,000 new HSAs up 67% from 108,000 opened in Q2 last year. To date this fiscal year, we have welcomed 295,000 new HSA members up 38% year…

Thanks, Jon. As Jon mentioned, we're pleased to report that second quarter new HSA sales were up 67% year-over-year and 56% sequentially from the first quarter this year. As you know, we recently promoted Steve Lindsay, a 15-year HealthEquity veteran to the position of Executive Vice President of Sales and Relationship Management. Steve has led the teams responsible for successful cross-selling efforts, expanding our partner relationships, including launching our record keeper partnership effort and delivering high quality service to enterprise clients, making them want to do more business with us. In fact, Steve and his team recently forged a partnership with Health Care Service Corporation, better known as HCSC to bring HealthEquity's, total health solution bundle to HCSC's Blue Cross and Blue Shield licensees in five states. Factoring in the further acquisition, we will soon be working together with approximately two thirds of Blue Cross Blue Shield licenses to connect health and wealth. Steve is purple through and through has demonstrated his capabilities and we look forward to benefiting from his impact in this expanded role. As we move into open enrollment with our clients and partners, we are optimistic as employers and employees reengage with their benefit programs. The marketing and engagement programs we have built are working. Our clients we have spoken with are overwhelmingly supportive of deploying them, and we believe we can successfully educate our members and perspective members on the benefits we help their employer offer. We are also excited about Fifth Third and Further. We expect to complete the close and migration of Fifth Third before the end of Q3. They have been an exceptional partner supporting the transition and referring new business to us already. With respect to Further, we've gotten to know their team and couldn't be more impressed. Planning efforts are…

Thank you, Ted. I'll review our second quarter GAAP and non-GAAP financial results. A reconciliation of GAAP measures to non-GAAP measures is found in today's press release. Second quarter revenue grew 7% as Jon with each of our revenue components posting year-over-year gains. Service revenue grew 5% to $109.2 million representing 58% of total revenue in the quarter. The second quarter growth in service revenue is primarily attributable to 8% growth in average total accounts driven by growth in Cobra, partially offset by commuter accounts in suspense, from the impact of the pandemic. While there remains an opportunity to provide additional Cobra services in the second half of fiscal '22, most of the upfront work and nearly all the subsidiary revenue was recognized in Q2. Custodial revenue grew 4% to $48.8 million in the second quarter, compared to $46.9 million in the prior second quarter, 18% growth in average HSA cash with yield at 88% growth in average HSA investments with yield more than offset a 33 basis point decline in the annualized yield on HSA cash. The annualized interest rate you yield was 177 basis points on HSA cash with yield during the second quarter of this year. This yield is a blended rate for all HSA cash with yield during the quarter. The HSA assets table of today's press release provides additional details. Interchange revenue grew 23% to $31.1 million representing 16% of total revenue in the quarter. The interchange revenue increase was primarily due to a rebound in a spend across our platforms in the quarter and growth in average total accounts. Gross profit was $112 million compared to $101.8 million in the second quarter of last year and gross margin was 59% in the quarter. Earning expenses were $112.8 million or 60% of revenue, amortization of…

Thanks Tyson. The story of this call, I think is around improved deficiency as Tyson mentioned, as well as of course sales performance in Q2 and for the entire first half and these are both team sports and in this case, particularly thinking about sales, the team includes everyone at HealthEquity, our network partners, our clients and their benefits advisors. And I wanted to say a brief thank you to that group who have worked very hard with us over this period of time where there's a lot of uncertainty to really produce good results and so with that let's open call lot the questions operator.

[Operator instructions] Your first comes from the line of Greg Peters of Raymond James. Your line is open

Good afternoon, everyone at HealthEquity. Well thank you for the call. And I guess I'm supposed to ask one question with one follow up. Is that the rules you didn't really,

You're in Florida. I don't think anyone follows any rules anyway, so…

Well, but yes, exactly. Well, I'm going to try and be respectful of my peers. I'll stick to one question one follow up. So let's focus on custodial revenue and I think many are focused on, or are paying attention to where the three-year jumbo CD rate is. It really hasn't moved much and more importantly, the data coming out of the banking industry suggests there's just not a lot of new loan demand. And so I thought I'd just provide you the opportunity to talk about your perspective on the cash yield that you're going to be able to generate, beyond just this year with your depository partners.

Yeah. Well, why don't we -- Tyson, why don't you start with just a discussion of where we are on guidance -- from a guidance perspective for this year and how we're thinking about the remainder of this year, and I'll opine a little bit on our longer term strategy.

Yeah. So, Hey Greg so 177 bips for Q2, and then of course the guide of one of 175 and that includes -- we stayed there even though rates have come down, obviously like you've just mentioned because we're competent in our ability to place, season's getting a little closer to make those play instruments. We're watching that very closely and we feel like we've created some demand having more depository partners and of course some of our other partners that we work with and so feel good about the guidance that we had before and now.

So yeah. And so thinking about, going forward while obviously I'm not going to offer multi-year guidance here right. One of the things that is I think making us feel decent about fundamentally about our business model, which going back to the first time we met, we talked about the fact that one of the nice things about our model being not attached to a particular bank or a particular insurance company or a particular investment firm or what have you, is that we have a lot of flexibility to pivot and do what's best for our members and then for us in terms of being able to deliver them value and keep other fees down. And so what I see there is a couple of things happening, first of all we -- as we get into kind of placement season here, we are as we do from the bank perspective playing the field and that seems to be going about as expected. Obviously the banking sector is going to be in our view, long term challenged but nonetheless in terms of basically it's not just the loan demand, but effectively being pushed to buy treasuries by the sort of cumulative effect of various government regulations and that's not so helpful. However what I also see happening here is and we've talked about this a little bit in the last couple of calls is, I see a mix shift occurring within our cash assets between the products that we offer. As you know, we offer our FDIC deposit product and we also offer an enhanced rates product that we've historically called Yield Plus that's an annuity product that generates higher as the name implies higher rates for our members and higher rates for us. With the Further acquisition, we'll be…

Yeah, that makes sense. As my follow up and it's going be a pivot but the investment community is I'm sure you're not -- will not be surprised by, there's a lot of speculation going into your earnings print regarding just what's going on with high deductible health plan adoption this year in the industry and with new HSAs. And there were some out there suggesting that the growth in just the industry adoption for high deductible health plans and HSAs just isn't what it used to be. Maybe you could speak on your opinion on what the industry outlook is for this beyond just this year. And I know you spoke optimistically about the outlook and your strong second quarter results. So, I'm not trying to diminish that. I'm just curious about your perspective for the industry outlook.

Well, I guess my, my basic perspective is that there's -- what I see is a divergence of providers between those that have scale and scope and can really meet the needs in terms of both potential distribution partners as well as ultimately employers members and those where they're more limited. And I think know if you look at, what's been printed out there in terms of our results now, as well as other results that have been printed, you can kind of see that. And so that's what I see. And so I think when folks look at this thing, obviously the ultimate market answer is going to be somewhere between the winners and everyone else. And our job is to be one of the winners. And so I think, I feel good about where we ended up for the first half of this year in that regard, we'll see what others have to say you know, Devon year and others as they print, but certainly relative to the prints you've seen that that feels like it's the case.

Just on that point…

And I should say in terms of both accounts and assets, so that seems pretty good.

On the account side, though, you used to talk about how the industry and we used to observe how the industry used to generate, give or take three million new accounts per year, it kind of last year with COVID. When you think about this year and next year, do you think we can get back to that three million account per year industry sort of run rate, or is it going to be it feels like it's going to be less that's the final question.

I note that you've gone full forward in on this one, but so welcome as a native welcome. But look, I don't know the answer really, and I think nobody does, and we'll go through the year and find out. What I do know is that growth of this market is going to be -- is going to occur over a long period of time. We're about 30 million accounts into a 60 million account market in my view and I've had that view in good times and bad times. And what have you, and the fundamental factors that lead us to that place haven't changed. Healthcare has that but the idea of leaving people out in the cold in terms of their ability to spend tax efficiently and save for their retirement does not seem like that's going to be one of the fads. And so I think there are -- we're going to have plenty of growth opportunity going forward and our job is to capture the most of it.

Your next question comes from the line of Anne Samuel of JPMorgan. Your line is open Ann.

Thanks for taking the question. I was hoping maybe you could provide some incremental color on the incremental conservatism around computer and interchange and then maybe as we think about the commuter business, is there any offset from loom, as commuters start to think about getting to work in different ways. Thanks,

Tyson.

Yeah. Hey Ann, how are you doing? So thanks for the question and what I would say about that is like you, I'm watching my -- watching closely how this is playing out. And as we looked at commuter over that second half based on what we had kind of thought about, 90 days ago and watched the Delta variant kind of rear its ugly head here and saw the news and looked at our own business. And when we were going to come back, looked at other businesses and how they were going to come back and also, just monitoring results as we see people start to utilize the cards and so on and so forth, it just felt better for us to be more conservative in the second half of the year given the -- given those kind of news themes. And I think every single day that goes by, it sort of even makes it a little bit more in my mind, feeling like it's going to be a conservative comeback as far as getting people back into the office. I think the same is true on the interchange side and we wanted to temper that because again, I think we're in another situation where you see case counts rising, of course, I'm looking at the same charts that you're looking at and those are rising and people are doing something different. This is still with us and so bringing in that conservatism and kind of making a point of that was important to kind of protect that second half of the year. And then your other -- the other question you asked on there as well was just about loom and we feel good about what that team's doing. In some ways they have, it's a similar impact with people, when they get back in the office, there's more utilization of that platform. There's more interest in it, but it creates a lot of really great conversations around the commuter benefits that are already integrated in there. And again, I think if you think about long term versus quarter to quarter, this is going to be something that really helps us over that period of time. So I'd kind of leave it at that Jon. Any other comments?

No. I think that makes sense. It's -- well, I'll just say, we don't know what's going to happen in the second half of the year. We feel good about having been perhaps less than others were not that we were expecting Delta, but, back in June when everything looked pretty rosy, we were cautious and we got some criticism for that. I think as it turns out that caution in terms of the pace of commuter rollback was warranted and look I don't have a crystal ball on this. So we try to guide what we see and if we can deliver better results, of course we will just, as we did this quarter.

Your next question comes from the line of George Hill of Deutsche Bank. Your line is open.

Jon, I'm going to lead the witness here a little bit, which is we look at a tough rate environment. The Delta variant slowing Commuter and interchange expect, I guess I would ask any changes in how you guys think about cap deployment.

I don't know where you're leading me to. That's my concern. I don't know. George, what do you think?

Shouldn't Jon, don't ask me, I'm a former banker. I'll sell you something.

Well, at least it's former. That's good. Look, I think as is obvious from our activity, the M&A pipeline feels like there are a lot of opportunities there. We're going to focus on going forward, I think is stuff that at least in the near term here would be stuff that looks a little, like Fifth Third, where it's portfolio acquisition, it cash flows immediately. That kind of thing. I think that's the right thing to be doing in this environment. And none of those things are going to go crazy, but I think the right way to think about it is that the capital that we have, there are going to be, we we've been saying this for years and it's been true, right? It's like, yes, we're generating cash. And yes, there are good ways to use it that generate very strong return to our shareholders and very predictable return. And I think that's likely to be what we're going to do and there does seem to be a decent pipeline for those things and so that, that's kind where we'll be. I don't see us looking at this environment we have today and doing anything that's in the nature of strategic pivot or what have you. With Further, we decided to as you, I think we decided to both sort of double down on our view about the opportunities within our health plan partners and then also, you know, we have a view that from a technology perspective, the ability to do more API work, more grey label work, more product integration is going to be good, not only in the health plan channels, but elsewhere and that makes perfect sense to me and that -- but that to me is a modest pivot. We're not going to do any big pivots anytime soon. I don't think.

Yeah, I think you saw exactly where I was leading you. I think that the more direct question would've just been like, do you see more opportunity in the businesses you're currently in, or is there a chance to take greater share of wallet with the clients you serve with new offerings? But I think you gave me the answer pretty clearly. Thank you.

Yeah. I think we have plenty of wallet share opportunity within the products we have from a cross-sell perspective. And that was helpful in this quarter. It's been helpful for the last year and that's probably let's go and get the wallet share we can with our existing products and one nice thing about that and maybe in a further question, Ted will have a chance to elaborate on this is, is we're really honing our skills in that area and so if there are other opportunities later down the line, great.

Okay. I'll hop. I can. Thank you.

Your next question calls from the line of Donald Hooker of KeyBanc. Your line is open.

Great, good afternoon. Thank you for this question here. So I'm sorry if I missed this, but you talked about the Cobra subsidies benefiting the quarter. Did you size them, or was that the entirety of the sort of upside to your expectations?

Yeah, I think the way to look at that, Don, thanks for the question is just when you saw us go through guidance increases over the course of the spring. So you saw us raise for Cobra and loom, you know, early on. And then, as, as it started materialize a little bit more in there. And so that was the way that we sort of sort of messaged that, but we didn't go out and just specifically size the increase. But those things kind of played out like, like we expected and it was you know, probably a little better and that was good. So a lot of hard work by the team to get it done and, and to do it right. And so I think it proved a lot of things in our business as well about what we're are capable of doing

Super, maybe one quick follow up. You guys commented going into the enrollment season here, you, you had some learnings from last year from the COVID environment around self-service training and technology and whatnot. Are there one or two things you would highlight to us that could be sort of some, give us some room for optimism this benefits enrollment season from what you learned last year?

Yeah. Ted, why don't you take that one?

I had a feeling that that pitch was coming from Jon. Yeah, I would say there's two or three things that give me great optimism. The first one is that is the, the way that we do virtual education and open enrollment support. In previous years we were constrained a little bit by how physically proximal we could get to our members and perspective members. And it was fairly inefficient. And I think one of the great things that, you know, COVID helped us with in that we were on top of was moving to a virtual model. We can serve more people, help more people create more content be with the families when they want to engage with the content. Like we don't have to show up at work. We can, you know, we can create content on demand and support that with team members where if you want to sit down with your spouse and go through your benefits where they are to support that effort. And the results that we saw last year were really a cause for optimism. And we're off to an equally good, if not better start this year. So I think the pivot to virtual open enrolment and the way we were able to support that and the way our clients kind of jumped on board with partnering with us to support that is one big cause for optimism. I think second big cause for optimism is maybe a little bit less sexy on the revenue side, but equally important, which is, we don't have 22 platforms anymore. That really helps, right? We've done a lot of work over the last two years. We've, we've done 18 migrations. You know, that doesn't mean yet we've sunset 18 platforms because some of those migrations are multi-step, but we're serving far fewer platforms with, you know, far more robust and capable cross training, far better awareness of what both our clients and members are asking us for. And it's helping us service people more effectively and without, stuff kind of fall through the cracks. I think that puts us in a better position to have a successful busy season. So those would be the two points I would make one on the growth side.

And then, one on both the cost containment and service side that are exciting from my chair. I don't if you have anything to add there.

I think if you take all that together and throw in the discussion that we've had over the last few quarters here with, with regard to technology investments in both API based infrastructure and, and, and also from a data perspective, I, I mean, I, I think it's not very OB from the results in recent quarters with all the noise around COVID and other factors. But you know, underneath the covers, what we are trying to do is the way we look at this is we are in a market that from a secular perspective is going to have decent growth and certainly steady growth. And we're going to outperform the way we can turn that into, you know, spectacular outperformance, particularly from a margin perspective that is growing revenue and serving people efficiently is you know, by maintaining our roots as a true technology company. And you're going to see those who watch closely, very closely have already seen investments in that area. And, and, and you're going to see more in terms of both, both, both people and feature functionality and so forth as we begin to integrate further there there's, there is a lot of opportunity to apply technology to a market that is going to be there for us. We feel very confident about that and that we're already able outperform to, to kind of make that even better. And an opening moment is just kind of one great example of that, but for good luck with that.

Thanks, Don.

Your next question comes from the line of Sean Dodge of RBC Capital Markets. Your line is open

I guess first, just a quick clarification on the guidance. Is there a revenue contribution from fifth third and this round that was not included in the last quarters guidance. Nice. And you want to hit that one?

Yes, there is actually. And so we have, we've included that that was, you know, we, we talked about that is essentially sort of the offset in there to kind of maintain I hadn't. So you do have that, you know, organic growth located in there, but it's, but it's relatively small. Okay. There's just like a couple million. We haven't put a number out there. Yeah. I mean, I'm going a number out, but it's smart. Think about it this way. We won't get, but a couple of months of it and it's not a huge number either way, so.

Okay. Fair enough and then another kind of quick one on a further and fit there. There's, like I said, about 700,000 HSA is between the two. Is this a, it's like a net estimate, or do you have a sense of the net contribution of the quality HSA is that this'll bring, net of account duplicate zero balance accounts and nutrition and stuff with the migration that I think you saw with WageWorks?

I think the answer to that is roughly yes. There are I want to think about particularly with further where we are less, you know, because we're not in both cases we're not closed yet in, for, in the case of further because of antitrust and all kinds stuff. There's a little bit of probably information that we're missing that, that makes that imperfect, but order of magnitude of the answers.

Your next question comes from the line of David Larsen of BTIG. Your line is open.

Hi, can you talk about your EBITDA margin expectations going forward you know, longer term in the medium term and also maybe your costs overall? It looks like as a percentage of revenue on a year-over-year basis sales and marketing and tech and development, and G&A are all up. And they're also obviously up sequentially. So just any, any thoughts there and, and like the 80 million in cost synergies, that's a really big number. That's like one quarters worth of full adjusted EBITDA. So just any, any thoughts on what your expectations are for EBITDA margin expansion going forward? We are very helpful. Thank you.

Tyson, why don't you hit this one and I can preview, but go ahead.

Sounds good. What we continue to talk about terminally and externally is that we'll continue to grow revenue at a steady clip, you know, into double digits as account growth occurs, and obviously asset growth is another, another counter to that. And then growing EBITDA margin even a little bit more quickly than that. And so that's getting to the efficiencies and, and John was mentioning this earlier, and that's really about how we service our clients for our biggest cost lie. And so you think about the virtualization of enrolment, you think about self-service opportunities you think about the consolidation of the platforms, which as you mentioned, that relates largely to that cost synergy that's occurring is that we consolidate those platforms. Everything around those platforms is, was located in that synergy related to particularly service, but at all other aspects. And even if you think about, like you said, sales and marketing technology in G and a, you know, there are, there are efficiency opportunities, I think even beyond that's energy estimate, as we've said before. And then I think just to kind of hit into the operating parts of the operating expenses and your question was broad. So I'm trying to make sure I took a couple of little scrolling notes here, but let me know if I missed something here, of course, on the technology side, there's large investments that are occurring that are capitalized, but of course, then the amortization starts to occur on that. There's also the talent that we have within technology and, you know, paying for that. So you've got the related to top comp in there as well. You get the right talent into the doors, we merged platforms. And as we try to get down to essentially single platform, which…

Okay, great. No, that's very helpful. Thank you very much. And then just any color around the health card spend, which would be great. And are you seeing volumes come back up both on the inpatient side and on the ambulatory side?

So I'll start and then throw to Tyson. We, you know, we, we said last quarter that we felt like looking at spend that spend for the first quarter of our fiscal year had kind of reached back to pre-pandemic levels. And that was true. You know, things were a little more, well, maybe I'll just answer, but things were a little more patchy in the second quarter in the sense that we had good months and then particularly, you know as we got towards the end of the quarter and you saw a little more potentially effect from Delta a little bit softer, not, not anything like the pandemic period of time but, but a little bit softer. And I think that's consistent with what other folks have reported in terms of utilization and the life. I don't know that to be true, but I suspect it to be true. And we did take a little bit off the table for the second half of the year and thinking about this just cause like, we don't know what's going to happen, but overall we're kind of, as I think this was said a couple of times in the prepared remarks, and then we kind of feel like we've, we've plateaued at this level. And then, just we just have to think about it as do you, as you forecast remainder of the year that, you know, pre pandemic seasonally, the first and fourth quarters are our strongest. And the second in particular, the third quarters are our weakest just because of people's spending patterns. And so those are other factors that are out there.

Okay. Thanks very much. Congrats on a good quarter.

Your next question comes from the line of Scott Schoenhaus of Stephens. Your line is open.

Thanks for taking my questions. So my first question is on the new HSA member growth looks like it's the largest new member as in any two Q going back in my model in recent years. Can you provide us on any color where this is coming from? Is it more on the cross selling opportunities that you're executing on, on the WageWorks client base? Any color would be great.

Sure. Thanks for the question. I think it's really three things. I think the first one is some deals that were stock last year getting unstuck which helps I think a second place would be sort of general channel performance. The record keeper channel is really showing some growth for us, but we're also doing very well with our health plans and with our benefits advisors and brokers and consultants. I think that's another place where we're winning. I think maybe there's four, the third one is just really good net hiring from existing clients. A lot of our clients are experiencing an economic recovery and therefore you know, adding team members and those team members open HSS, which is super helpful. And then when we continue to have, as you alluded to a strong trunk cross-sale year as well, especially in the, in the enterprise in the enterprise space, meaning our largest clients, I would say those four things.

That's great. And I guess my follow-up question is around that last cross sell opportunity, particularly on the wage work side. I believe when you guys were acquired wage, less than 3% of their clients had an HSA account, where's that today. And then how has COVID impacting the cross selling opportunity for the HSA business given the current impaired commuter market?

Yeah. I'm happy to take that one Jon. Thanks. Sorry. So I think from, I think it's a crosswind COVID a crosswind from a cross sell perspective on the one hand, I think we're the beneficiary of some vendor and partner consolidation that might come from an overtaxed people department. And so I think we're winning some cross sell deals and, and pulling some cross sell deals through the pipeline faster because vendor consolidation is attractive to overburdened HR departments. I think on the flip side, we're seeing, a little bit of paralysis saying, yeah, we want to go with you guys, but we just can't make a move this year, which we actually think sets us up well in, in the future and, you know, with respect to cross, I don't have that number. We can try to follow up with you on what percentage of ways works clients legacy WageWorks clients offer NHSA but I would just highlight two things. The first one is our, is an HSA home. We're actually experiencing a lot of other consumer directed benefit account cross sell into legacy health equity base. And then and then, you know, that HSA cross sell into the wage base. And I would say the biggest opportunity remaining that we haven't quite cracked the code on is sort of that below the enterprise space. Cross-sell we meaning our top several hundred clients, but the few thousand clients below that space I think that we're sort of just revving up the engines there. So to me, that's one of the places, one of the reasons for optimism, thanks very much.

Your next question comes from the line of Allen Lutz of Bank of America. Your line is open

Thanks for taking the questions. Hey, Jon, I'm going back to the service revenue. There was a nice step up sequentially, I guess, the outside Cobra and then outside of adding new accounts, is there anything that increased sequentially in there that we should think about?

I texted him, I hit this one. I think sequentially, you know, you're in, you're specifically stating that there's, I mean, I would be pretty consistent when you think about, you know other things like commuter interchange, obviously interchange, we call it out as more stabilized commuters, you know, pretty flat sequentially, if you will, other than maybe the card swipes, starting the app and with the users that are already in there, but that's pretty small. And so it's really just that big, that big Cobra piece of revenue that kind of causes that to be you know, kind of an anomaly for the year relative to someone's just smoothing out the rest of the quarters. And so, I call it that I tried to kind of pick that apart even a little bit more. I, you know, like, like I said, HFAs are largely set up the beginning of the year. Obviously we had a good Q2, so that adds in a lot, but most of the HSA is going to come in and season. Right I still got two twos pretty big. So anyway, I, I would say that's about it. I don't know, Jon, any other thoughts you have?

Yeah, I did just, I think you have all the right factors, Alan. I mean, the big picture is that, that, that in terms of the winds that are out there is biggest picture is we have a bundle strategy and our bundle strategy is about while that may produce a slight headwind to per unit service fees. It, it's a boon to margin profit, total revenue. However you want to think about and apropos Ted's last answer, looking more specifically at this period this year know, basically look at the first half you've got if you just divide services like total account you've, you're down 5% year over year. Well, what's going on there you are. On the one hand you've got the commuter accounts that are in suspense that really hurt because they are from a servicing perspective, our highest pro account product. And then on the other side, Cobra subsidy, someone else and, you know, both of those things are going to abate over time and you know, it you'll be, we'll be right back where we started, which is, you know, by and large, our basic view of, of service fees is that they're pretty steady. With the effect of, of, you know, in total with, you know, things like bundling and make shifts and so forth, that may happen from time to time you're having an impact.

That's great. And then on the selling season, is there any way to quantify how the selling season is going maybe versus fiscal 21 and fiscal 20, you know, is it reasonable to expect account growth you know, to be in terms of new account ads to be at similar levels or you know, whatever you can provide there.

Thanks. Yeah, we're trying to -- I will say Allen, we're trying to get out of the business of which we got into during the pandemic so that people could really understand what's going on. We started providing some pipeline information and you'll know we didn't do it here. I think I promised last quarter that we would try and get out of this business. And so we are and so, so let me not do that. I could, and I'm sure you'd like it, but what I, I think here, here's the way I'd look at it is if you look at the first half of the year, we opened 295,000 HSHS and, you know, grew CDB business by about 3%. How we'll do in this, you know, the implication would be if you sort of follow out prior years that you know, as we've talked about already in this call that, that we're going to do better when all is said and done this year than in prior years. And you know, that's a great implication, but we have to deliver on it and delivery on it involves, I think in practice three factors, the first is, is you know, kind of running through the finish line in terms of sales, particularly with, you know, our health plan partners that, that get the sales later in the year with smaller customers and so forth. And in that regard the, point Ted made about adding HCSC you know, it was kind of nice. It's a new partner to work with. This'll be the first year, so it won't be crazy, but it's, but it's all new and that's really good. That's the second thing we have to do is execute on open enrollment and that's also Ted talked about that, and I think we're very well positioned to do that this year. We opened enrollment really delivered for us last year when all was said and done, and things were looking a lot less great prior to open enrollment. And, and so we've kind of doubled down on that and we'll see how it goes, but obviously you know, I think we're, we, we have all the right like soldiers and cannons and I'm have a strategic board in my head on the field. And then lastly, macroeconomics matters. The hiring that occurred among benefit eligibles over the course of the first particularly the first half of the year, it was definitely helpful, certainly relative to last year. And so that helps too when our, our clients expand that means more business for us and we've seen some of that. And so we'll see how the second half goes in total. But those are the factors that will really matter. The first two we control the third we don't. And so we'll work on the ones we control.

Your next question comes from the line of Stephanie Davis with SVB Leerink. Your line is open

For a minute I thought we weren't going to hear from you. I couldn't believe this is actually a joy all for Stephanie. She was on. Come on, come on.

Well, thank you for taking my question. I'm good. I'm good. one of the positives for a lower interest rate environment is that your competitive landscape is becoming more favorable with that in mind. How should we think about the cadence of portfolio acquisitions going forward? Can we expect us continuation of that piece of two acquisitions within five months? Like you've done with harder and the third and can you talk about what the pipeline looks like for potential targets?

Yeah, we don't operate with any particular cadence, as you know, we don't want to price stuff into the market that isn't there and people are like, Ooh, will you promise? So I guess you know, but, and I will say that further is a little bit different in the sense that it has also a, you know, a technology element and a strong, strong panel element that, that kind of I think make it a larger transaction along with the, the product and the, of course, the ability to really scale out our, our enhanced rates product. And, and so that problem, but I think if I look at like the fifth, third type transactions, we'd love to be doing those kinds of things at that size we're below all day. And what I expect that you will see from us over the course of the next couple of quarters are in particular, I think what you're going to see is we're going to try and, and, and w I think we're going to try and do everything we can to position the company to be able to do those. And one of the things that's, I think, remarkable and you know, we will, as I, as iconic that entitle average on a little bit in the call or in the prepared remarks, I should say you know, we, we, we the I'm going to focus on fifth, third per second, fifth, third will be closed pretty shortly here. And close means that the migration happened in that transaction. So, oh, yes, we're still doing wage works and we're working to gear up further. And those are, you know, real transactions involving people and processes and so forth. But, oh, by the way, there's a well-oiled machine there that is serving new customers, working with a new partner to make their customers happy, making them happy, bringing them onboard doing it in a compliant way and that's, I think in terms of our opportunities to outperform the market, if we can outperform organically and then, oh, by the way, have a steady stream of these over the long term that really bodes well in terms of our ability to generate ultimately to generate a cash flow that reflects in the value of the shares. So I guess without committing to a cadence, my answer is that we are certainly going to try and set the company up to continue to do these things, you know, as they materialize and your premise that is you know, low for long environment, there should be more of them is right. And our ability both through cross sell and through a broader product set and through enhanced rates, so forth to really capitalize on these transactions in a low for long environment is I think better than anyone else in the market.

That's very helpful color. One more follow-up from me on your connecting health and wealth strategy, given that one of your competitors is expand it into the retired retiree, reimbursement arrangements market. Can you provide some color on if your current product suite includes that offering, or if it's an area you want to expand into?

It does. I wasn't, I was, I have to know, I'm not sure what the point of the press release was, but we read the same press release and I mean, I don’t know, it's probably a good argument for doing fewer rather than more press releases, which we, we have tried to embrace. But maybe, you know, the answer is yes. And there are these are typically HRA accounts. There are some other flavors obviously the VBA business that we'll be picking up with further is a sort of a form of those accounts as well. And those are out there. I don't know that there a particular, you know magic area of market wide growth. What I do know is that what we want to be there to do is to provide total solutions to our clients, into our partners, so that our partners, aren't running around looking for one from here and one from there and whatnot, and, and, and having those capabilities really helps do that.

Your next question comes from the line…

I note the non-denial on the idea that Stephanie's in the Hampton. So take that for what do you obviously had a great quarter in terms of HSA ads. I'm wondering if you can talk a little bit about what you're seeing in terms of the competitive environment on the whole you know, there's obviously one large competitor out there that some people focus on, but on the flip side, there's, it's a fragmented market and there's a lot of players that probably aren't being super aggressive. So when you, when you think about the entire competitive environment, how, how would you net it out in terms of, you know, for this, this coming, selling season and, and going into you know, next year, and then I have a follow-up. Yeah, I think I would go to and I'm going to ask pat if he would like to elaborate where Steve for that matter.

Since both of them spend plenty of time out there you know, kind of in hand to hand combat I think the big picture is around scale and scope and you know, our, our, what I think of as our most significant competitors obviously fidelity we've talked about and, and then UNH, in terms of size they're great competitors, but you know what the implication of that is that there are great companies that also want to partner with us. So, they're good companies, but, you know, Vanguard is a great company and HCSC is a great company. And an ADP is a great company, and those are all companies that are partnered with us and we don't, it doesn't just have to be us and we don't have to carry all the freight. And that's always been a bit of our secret sauce and not so secret sauce. And, you know, when you look at what we're doing from technology perspective, and even from a people perspective, if you look at, at, at the move to bring Steve and Steve Lindsey into sales leadership, that's a strategy, that's a strategic calculation on our part about the value of having both the ability to go out and meet a client wherever they are, whether that's directly with their broker with they're, wanting with the health plan partner with a retirement partner, with a Ben admin partner with a payroll partner, I guess. And so I just think it's a winning formula to have somebody in the industry that does that. And we're that somebody Ted you, anything else you'd add to that?

No, you said you made the points on about district distributing through channels that I was going to, but I think Steve Neil, and then you lead the league in in the executives at finalist meetings. Would you, would you care to offer any commentary on what you're seeing out there? Sure. I wish we could be in person. I'll tell you that, but, you know, finalist means remotely aren't the best situation, but I think we're working through it, but I think the short of it is, is the more things change more. They stay the same. We know about UNH selling within their footprint. We know about fidelity, kind of trying to connect the 401ks. We've heard that for a long time, but I think with the announcement that we made today about HCSC, I mean, we really do have the broadest kind of channel partnerships in the country. And I think that for companies that don't have their own solution, which most large health plans don't, I mean the biggest do, but the most large ones and small ones, mid-sized ones and everyone's stone. And, you know, they come to health equity because they know that we're going to help them compete. And the reason why they choose this is, and we'll tell you, this is that they think that aligned with health equity, they have a better chance to win and retain business. And so we're just doubled down on that strategy. We do some direct sales, but we do a lot of channel sells. And so I don't think it's changed that much, honestly, in the last four to five years.

That's great. And then you've had a lot of time to think about further, and I'm wondering if you can add some additional comments with regards to just the technology and the, and the channel partnership that you're going to gain with further. As you've looked at it even more and gained a further appreciation of what it brings to the table, Ted, why don't you start this one?

Sure. First of all, I'll point out that whenever you're talking about further, you inadvertently used the word further, you just did it. And I do it 17 times a day. It definitely happens. But I think that the, that the, the punch line is we're incredibly excited about the distribution relationships that that they have. And these are some of the nation's best and most effective most forward thinking health plans. And we look forward to continuing to grow and develop the partnerships with them, starting on we're doing as much planning as we can while bound, obviously by the data sharing rules that are in place to ensure that we remain competitors until we close. But we're really excited about that. I think from a technology perspective, it's for me, it's a little bit less about technology and a little bit about meeting the health plan partners, where they are. Jon used the terms I hadn't heard of used before which is great labeling, right? Which is which I'm interpreting him to me. You know, it's not quite white labeling, it's lots of different choices about how health plans want to go to market with HSHS. And I think not only this further have technology that we'll be able to avail ourselves up relatively quickly, but they also have expertise in doing we're really excited about. And we think we have a lot to learn from them in terms of how which of those buttons with pressing, which of those buttons matters. Sometimes it can be a co-brand sometimes it can be getting all the way into the entire communication stream that the health plan deploys and it's really trying meet those health plan partners, where they are to make their you know, to help them take HSA and other consumer directed benefits to market as effectively as possible. I think that's what we're most excited about and then in the last one I would make, before I turn it over to John to see if he has anything to add is one of the things that constrains the growth of fast growing companies is talent. And, and, you know, and, and so you want to find consumer directed benefit, experienced, talented, capable people, wherever you can. And w that's one of the things we're really excited about with respect to the further acquisition, because we think that it's nearly 400 people who can who can help contribute right away and understand the industry and have been successful in the industry. And I think that's another, huge opportunity for us from a you know, from a closing further perspective and, you know, candidly, I just can't wait to close it and get on with it giant and Anita. No, that was awesome. Thank you.

There are no further questions at this time. I will now turn the call over to Jon Kessler for closing remarks.

Hi everyone. Thank you. Stay safe, stay sane. It's going to get better. We're all getting through this. Our team's doing a good job of getting through it. We hope you're pleased with today's results and we're hoping to deliver more of them to you over the next quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.