HEALTHEQUITY, INC.HQY
HEALTHEQUITY, INC. Stock Compensation Disclosure
Stock-based compensation
The following table shows a summary of stock-based compensation in the Company's consolidated statements of operations and comprehensive income (loss) during the fiscal years presented:
| Year ended January 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of revenue | $ | 14,955 | $ | 16,462 | $ | 13,591 | |||||||||||
| Sales and marketing | 15,623 | 13,182 | 9,821 | ||||||||||||||
| Technology and development | 25,002 | 20,891 | 13,828 | ||||||||||||||
| General and administrative | 40,845 | 26,616 | 25,374 | ||||||||||||||
| Total stock-based compensation expense | $ | 96,425 | $ | 77,151 | $ | 62,614 | |||||||||||
The following table shows stock-based compensation by award type:
| Year ended January 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Restricted stock units | $ | 66,986 | $ | 60,688 | $ | 46,590 | |||||||||||
| Performance restricted stock units | 29,439 | 16,384 | 15,120 | ||||||||||||||
| Stock options | — | 79 | 882 | ||||||||||||||
| Restricted stock awards | — | — | 22 | ||||||||||||||
| Total stock-based compensation expense | $ | 96,425 | $ | 77,151 | $ | 62,614 | |||||||||||
Stock award plans
Incentive Plan. During the fiscal year ended January 31, 2025, the Company adopted the HealthEquity, Inc. 2024 Equity Incentive Plan (the "Incentive Plan"), which provides for the issuance of stock awards to team members, consultants, and directors of the Company. Subject to adjustment as provided in the Incentive Plan, as of January 31, 2025, the aggregate number of shares of the Company’s common stock reserved and available for issuance pursuant to awards granted under the Incentive Plan was 3.8 million. No further awards will be made under the Company’s 2014 Equity Incentive Plan.
Stock options
Under the terms of the Incentive Plan, the Company has the ability to grant incentive and nonstatutory stock options to team members, including officers, non-employee directors and consultants of the Company, and Company affiliates. Such stock options are to be exercisable at prices, as determined by the board of directors, which must be equal to no less than the fair value of the Company's common stock at the date of the grant. Stock options granted under the Incentive Plan generally expire 10 years from the date of issuance or are forfeited 90 days after
termination of employment. No stock options were granted during the fiscal years ended January 31, 2025, 2024, or 2023.
A summary of stock option activity is as follows:
| Stock options | |||||||||||||||||||||||||||||
| (in thousands, except for exercise prices and term) | Number of options | Range of exercise prices | Weighted- average exercise price | Weighted- average contractual term (in years) | Aggregate intrinsic value | ||||||||||||||||||||||||
| Outstanding as of January 31, 2024 | 726 | $14.00 - 73.61 | $ | 36.91 | 2.5 | $ | 28,067 | ||||||||||||||||||||||
| Exercised | (356) | $14.00 - 73.61 | $ | 25.33 | |||||||||||||||||||||||||
| Forfeited | (1) | $25.45 - 25.45 | $ | 25.45 | |||||||||||||||||||||||||
| Outstanding as of January 31, 2025 | 369 | $21.27 - 73.61 | $ | 48.13 | 2.5 | $ | 22,957 | ||||||||||||||||||||||
| Vested and expected to vest as of January 31, 2025 | 369 | $ | 48.13 | 2.5 | $ | 22,957 | |||||||||||||||||||||||
| Exercisable as of January 31, 2025 | 369 | $ | 48.13 | 2.5 | $ | 22,957 | |||||||||||||||||||||||
The aggregate intrinsic value in the table above represents the difference between the fair value of common stock and the exercise price of outstanding, in-the-money stock options. The total intrinsic value of options exercised during the fiscal years ended January 31, 2025, 2024 and 2023 was $21.7 million, $10.1 million, and $7.2 million, respectively. As of January 31, 2025, there was no unrecorded stock-based compensation expense associated with stock options, and all outstanding stock options were vested.
Restricted stock units
The Company grants RSUs to certain team members, officers, and directors under the Incentive Plan, which vest upon service-based criteria and performance-based criteria. The weighted-average fair value of RSUs granted during the fiscal years ended January 31, 2025, 2024 and 2023 was $86.07, $64.16 and $75.64 per share, respectively.
Service-based restricted stock units. Service-based RSUs generally vest 25% on the first anniversary of the vesting commencement date, which is generally the first day of the fiscal quarter of the grant date, with the remaining portion vesting ratably over the following 12 calendar quarters. Service-based RSUs are valued based on the Company's closing stock price on the date of grant less the present value of future expected dividends discounted at the risk-free interest rate.
Performance restricted stock units. During the fiscal year ended January 31, 2025, the Company awarded 182,044 performance restricted stock units ("PRSUs") subject to a market condition based on the Company’s total shareholder return relative to the Russell 2000 index as measured on January 31, 2027. The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was $20.2 million. Compensation expense is recorded over the requisite service period if the service condition is met regardless of whether the market condition is satisfied. The market condition allows for a range of vesting from 0% to 200% based on the level of performance achieved. The PRSUs cliff vest upon approval by the Talent, Compensation and Culture Committee of the board of directors.
In addition, during the fiscal year ended January 31, 2025, the Company awarded 60,682 PRSUs subject to the achievement of certain financial criteria measured on January 31, 2027. The PRSUs cliff vest upon approval by the Talent, Compensation and Culture Committee. The Company records stock-based compensation related to PRSUs over the requisite service period when it is considered probable that the performance conditions will be met. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 200% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals.
Each of the PRSUs granted during the fiscal year ended January 31, 2025 contains a provision such that upon the award holder's eligible retirement, the PRSUs would remain outstanding and eligible to vest based on achievement of their respective market or performance conditions without regard to the award holder’s continued employment on the vesting date. Based on the application of ASC 718, Compensation - Stock Compensation, expense is recognized over the requisite service period, which ends on the earlier of (1) the date of approval by the Talent, Compensation and Culture Committee or (2) the date the award holder becomes eligible for retirement (defined as at least 55 years old with least 10 years of service at the Company). As a result, the expense associated with PRSUs granted to retirement-eligible individuals was recorded on the grant date.
A summary of RSU and PRSU activity is as follows:
| RSUs and PRSUs | |||||||||||
| (in thousands, except weighted-average grant date fair value) | Shares | Weighted-average grant date fair value | |||||||||
| Outstanding as of January 31, 2024 | 3,363 | $ | 67.96 | ||||||||
| Granted | 1,146 | 86.07 | |||||||||
| Vested | (1,400) | 64.17 | |||||||||
| Forfeited | (227) | 70.33 | |||||||||
| Outstanding as of January 31, 2025 | 2,882 | $ | 76.82 | ||||||||
During the fiscal years ended January 31, 2025, 2024 and 2023, the aggregate intrinsic value of RSUs vested was $118.8 million, $69.3 million, and $50.7 million, respectively.
As of January 31, 2025, total unrecorded stock-based compensation expense associated with RSUs was $147.2 million, which was expected to be recognized over a weighted-average period of 2.0 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.