Good day, everyone. And welcome to HealthEquity's Third Quarter of Fiscal 2018 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Richard Putnam, Investor Relations. Go ahead, Mr. Putnam.

Thank you, Sandra. Good afternoon, everyone. We welcome those who are joining us for HealthEquity's fiscal year 2018 third quarter earnings conference call. With me today, I have Jon Kessler, who is our President and CEO and we also have Dr. Steve Neeleman, who is the Founder and Vice Chairman of our Company; and Darcy Mott, who is our Executive Vice President and Chief Financial Officer at HealthEquity. We will be referencing the earnings release and the accompanying financial information that was issued earlier today. You can find a copy posted on our Investor Relations Web site at ir.healthequity.com. In the earnings release and during our conference call today, we will be making forward-looking statements, which include projections, expectations, estimates or other information that might be considered forward-looking. Our forward-looking statements are subject to risk and uncertainties that may cause our actual results to differ materially from the statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. In connection with those forward-looking statements will present some important factors relating to our business, which could affect those forward-looking statements. We 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, which you can find detailed in our Annual Report on Form 10-K filed with the SEC on March 30, 2017, and in subsequent periodic or current reports filed with the SEC. We are not obligating ourselves to revise or update these forward-looking statements in light of new information or future events. Now, I know you didn't tune in just to hear me go through the Safe Harbor statement. So without further ado, I'll turn the call over to Jon.

And yet, you did a fantastic job. Thank you, Richard. And thanks everyone for joining us; happy holidays. We began the fiscal year with a commitment to outpace market growth and another commitment at the same time to have the chance to grow margins. And the team very much delivered on these commitments in Q3. During the quarter, the four key metrics that drive our business grew at a rate of between 27% and 46%, extending a record setting year-to-date. Revenue grew 31% year-over-year to $56.8 million; adjusted EBITDA grew at even larger, 46% year-over-year to $21.2 million; HSA members at quarter-end topped $3 million for the first time and were up 27% from a year ago; and custodial assets at quarter's end were $5.6 billion up an even larger 30% from a year ago. Turning to sales; HealthEquity opened 109,000 new HSAs during the quarter, and that’s 23% more than during the third quarter of fiscal 2017; HSA members added $150 million in custodial assets during Q3 and that’s 81% more than the third quarter fiscal '17; in addition to those new accounts and assets, we also on-boarded another 14,000 HSAs and $55 million in custodial assets from our friends at First Interstate Bank for a total of 123,000 additional HSAs and $205 million in custodial assets in the quarter. Our members continue to respond to HealthEquity's focus on building health savings. The number of members investing grew 69% year-over-year and invested custodial assets grew an even faster 73% year-over-year, reaching $1 billion for the first time. Last month, Kiplinger's named HealthEquity best HSA, following similarly favorable reviews from MorningStar and the New York Times and some others. Our members’ investments are fully integrated into HealthEquity's proprietary platform. And as we’ve discussed in the past, proprietary platform ownership, which is something our largest competitors do not have, means that HealthEquity can offer more we can keep fees low and we can retain value for you, our shareholders. Our team is now in the fick of busy season that coincides with open enrollment and the new plan year many employers start in January. All of our new full-time team members are on-board, either in training or on-the-job, accounts are opening cards are shipping to new members, and so forth. And you will see the results of all this, along with the successful on-boarding of previously announced aligned credit unit HSA portfolio acquisition when we report our Q4 results after the first of the year. This is the point in our call where Steve, one of executive leaders, would ordinarily provide some additional color commentary. Now, Steve is here with us for Q&A from an undisclosed location but he told me I couldn’t disclose it that’s why its undisclosed. But with the holidays upon us, we’re going to give you the gift of time and gravity, and jump straight to Darcy who will review the quarter and year-end financial results in detail, and provide our revised outlook. Mr. Mott.

Thanks, Jon. I will discuss our results on both a GAAP and non-GAAP basis. The reconciliation of the non-GAAP result that we discuss here and in the press release to our nearest GAAP measurements is provided in the press release that was published earlier today. I will begin by reviewing our third quarter results and then I'll update you on our business outlook for the full fiscal year 2018. Revenue for the third quarter grew 31% year-over-year to $56.8 million. Breaking down the revenue into our three components; we continue to see growth in each of service, custodial and interchange revenue during the quarter with custodial revenue continuing to gain prominence as anticipated; service revenue grew 22% year-over-year to $23 million in the third quarter; service revenue, as a percent of total revenue, declined to 40% in the quarter down from 43% of total revenue that it represented in the third quarter last year. As the custodial revenue stream became more predominant. Service revenue growth was attributable to 27% year-over-year increase in average HSAs during the quarter, partially offset by a 3% decrease in service revenue per average HSA. On a year-to-date basis, the decrease in service revenue per average HSA was 4% compared to the prior year, which is at the low end of the estimated 5% to 10% decrease we expected as we discussed in our previous guidance. Custodial revenue was $22.1 million in the third quarter, representing an increase of 48% year-over-year. Custodial revenue growth was fuelled by 24% growth in average custodial cash in the quarter, for the quarter combined, with the higher annualized interest rate yield on custodial cash of 1.85% during the quarter compared to 1.57% in the third quarter last year. A 73% year-over-year increase in invested custodial assets also contributed to custodial…

Lot of gaps in that sense, but they've all had great -- as always, I think, Darcy has always --. Look the credit for the results that we've discussed today belongs to our fellow HealthEquity team members in Draper, in Price, in Kansas City and around the nation who are delivering remarkable what we call purple service every hour every day; and to our partners and their teams, hard at work during open enrollment season doing the same thing. And while we wish everyone a happy and restful holiday season, one thing that you all can rest assured about is that during the holidays, we will not be resting and we'll be working our hardest to get every last member on boarded and get ready for what we expect to be an even better year ahead. With that, operator, let's take some questions.

[Operator Instructions] Our first question comes from the line of Lisa Gill with JPMorgan. Your line is now open.

Do I get extra points if I can guess where Dr. Neumann is this afternoon?

I think you would get extra points, yes.

So I'm wondering if he's in DECREASE, because my first question would be around tax reform. And I think as many of us haven't had the chance to read the 700 pages and all the scribbled notes on the sidelines, any expectations around any changes in tax reform that will impact HSAs.

I'll get started on this one and then throw to Steve without revealing his location. I think, the short answer we say is that -- there're obviously some broad stroke potential impacts. I mean, like a lot of companies, obviously, the change in corporate tax rate, that kind of thing that will affect HealthEquity. And with regard to the specific items on healthcare, I think the right way to look at it is on the whole -- they won’t have a substantial impact, one way or the other; although, there are still items that are being discussed in conference and so forth it could have an impact. These builds as written pretty much maintain the status quo as it relates to the loss surrounding HAS’s and related benefits. And that’s generally what we think. Steve, if you would like to add further or talk about some of the color around the debate back and forth on how we got here again with regard to tax reform.

Thank you, Lisa for the question and I'm not DC. But I'm sure that you can keep guessing, anyway. Now, I think Jon is right. There is nothing here that’s going to have an immediate impact. I think that it kind of like sure you expect about the dog that didn’t bark. And the dog didn’t bark on this one was that they didn’t do really anything to change the Cadillac, as an example. And so our sense is it’ll be business as usual. There's still a strong motivation for companies to continue to get more and more of their folks in the consumer directed plans with HSAs kind of being the all-star of those plans. And that’s right now that by 2020 if they don’t do so there could be some Cadillac tax ramifications, but there’s always been the thought that that might get push down the road anyway. So we don’t think really any impacts from this current legislation on the growth in health savings accounts.

And then my second question is just would be for Darcy. Darcy, as I look at the guidance of into the metrics that you laid out EBITDA midpoint stays the same but you took the $1 million off of the upper end. How do we think about what's changed since last quarter? And as you look out to the fourth quarter, what you’re seeing to bring that guidance inward?

As far as the EBITDA is concerned, we’re just narrowing it into our midpoint there. We feel pretty confident about that.

But generally, the midpoint staying the same, right. So you will just say, hey we feel confident and the midpoint that we had before and so we’re just narrowing the upper end of that. There is nothing more to really read inside. I just want to make sure I understand that.

Yes, that’s correct.

And our next question comes from the line of Greg Peters with Raymond James. Your line is now open.

I just wanted to follow-up on the last question coming from a different way. I think in the previous conference call, you highlighted the fact that the third and fourth quarter results would be affected by higher service delivery costs. And I'm just curious how they manifest themselves in reported numbers this third quarter. And what you're thinking about that specific item as we think about the fourth quarter?

In our first and second quarters, as you know Greg that we talk a lot about the fact that we had spent some more money and intend to spend some more money, both in the fraud prevention area and then we hired some additional people to respond to that, and so and so forth. And because those people were on board that we expected that it would have a tendency to flatten it out a little bit, but those costs would still be there in the third and fourth quarter. And so far as the year through the first three quarters that played out pretty much as we expected in that regard. In the fourth quarter, as you know what we tried to emphasize on our last call and I would reiterate it now is that the fourth quarter still will have lower margins overall, particularly with respect to service revenue because we will now have this full gamut of these new service delivery people on board for the full expanse of the fourth quarter. And those costs are incurred before we generate revenues largely. I mean we will generate some revenues in January, but what we've hired will be there. So we believe that generally speaking what we're trying to tell last quarter and also this quarter is there'll still be a decrease in gross margins in the fourth quarter, and will be somewhat similar to what we've seen in the past and maybe it's moved slightly from the third to fourth quarter, but generally speaking the bigger picture is yes that we will expect the same patterns to exist as we've had in the prior years.

Also, Greg, this is Job, as a reminder. The fourth quarter is also where we incur on the OpEx side of things, is where we incur significant sales, variable sales compensation expenses as we capture on-board and so forth. So that's a big part of what you always see in the fourth quarter and what we'll see this fourth quarter.

And just circling back on bigger picture issues, and I know in the past you've talked about Anthem and you've talked about other competitors in the marketplace. And I think this should be a good opportunity for you to provide us an updated perspective on the competitive posture of the market and if there's any implications to your business from the CVS announcement, or other changes that are going on in the marketplace. I think Optum talked about their relationship with employer retirement. So any color there would be helpful?

I think, generally the best way to assess competition is ultimately the level of growth you're seeing relative to competition. And obviously, while a lot of these folks don't report numbers certainly those that do -- I think you would agree that we’ve widened gap a little bit over the -- certainly first three quarters this year. I think if I look at in the marketplace, Greg, my general take is that you are starting to see a little bit of a winnowing of who is really in this and who really isn't and why. And I think it is the customers, both ultimately at the consumer level but as well as the employer level are starting to see that. And I think some of the activity reflects that. So we've obviously been able to do some M&A on the portfolio side of things and that's one way to look at that equation. Another is that there're folks who are going to try and be in it and try and be good competitors, and that's okay too. I am not surprised to see Optum following some of what we've done in terms of trying to integrate well into the equation. As we said last quarter, we absolutely think it's the right thing to do. We think it's good for the industry. I'd love to see them follow us more closely in terms of their approach to the line-up they offer and the cost and so forth, but that's a different issue. With regard to Aetna and CVS, I guess, we don't really have any comment at this point that would be much more than speculation. But since you invited me to do so, we do compete with that Aetna’s platform to some extent. I wouldn't say it's kind of right…

That's excellent color. Just as a follow up to that answer Jon. As you point out the market maybe seemingly self selecting who's the long term viable solution for HSAs in the market and versus who isn't. I'm just curious has there been any change in the M&A pipeline or the smaller banks out there that have the services that are finally coming to the realization that they may not have the best long term platform.

We don't comment on the specifics, as you know. But if I rewind to where we were at this announcement a year ago, I believe I said that the market at that time I used some metaphor like ice-cold or very cold or something cold. And that was in light of the election results and all of the discussion that came around the election results and so forth. What's clearly happened over the course of the year since then is as we’ve all regained our footing and to some extent understand a little better what is coming and so forth, I do think people have -- that that has started to sort itself out. And so you do see M&A activity and we do anticipate M&A activity and we've tried to reflect that in any number of different ways, we're obviously not going to include M&A growth in our guidance. But we do see the market continuing to thaw out and providers that are not likely to make the investments that we've made and expect, continue to make, are likely to sort themselves out. And the way we're going to approach those is the way we always do, which is to think about each potential transaction in terms of the incremental return to our shareholders rather than any form of strategy or what have you. And thus far everything that we've done since the IPO and before, I think if you looked at it in isolation, you would find that the return to our shareholders on those expenditures has been very high. And at the same time, we've managed to avoid shareholder dilution and we're sitting on $225 million of cash at the close of this quarter. So I feel like that's an area where we're in really good shape and we’ll let the pipeline continue to come to us as opposed to try and bit it into existence. But we certainly feel like there is going to be opportunity here.

And our next question comes from the line of Sandy Draper with SunTrust. Your line is now open.

Just a one quick housekeeping for Darcy first, I didn’t catch Darcy. The growth account add versus the net number. Can you provide that last couple quarters, I didn’t catch that?

Yes, I think Jon gave that numbers 109,000 plus the 14,000 from the FIB.

Then the bigger picture question and Jon or Steve or Darcy can answer this on a recent quarter nine month basis. I'm just trying to get a sense for when you think about the accounts that are coming on, not really short term but longer-term. Are you seeing a shift towards more than new accounts are coming from existing partners? And so this is really the growth we’re seeing now as penetration from people who've already signed up on a low go basis, but now the light bulb is going off. I just know, anecdotally and might from them, the plan to keep getting more and more push to drive high deductibles and so that's -- its pushing there? Or is this still very much of a adding new logo type of situation? Any type of commentary around that would be really appreciated? Thanks.

I'll invite Steve to add, but I would say the answer is, there is a third bucket and they’re coming from all three. The third bucket is the takeaway business, if that makes any sense. And I think the answer is they are coming from all three. We, I think would, as we think about the sales season that we’re ending here, there's plenty of new logo activity. Obviously, in middle of the year and most of the growth does come from existing logos at the high end and then from your small and midsize groups that come through the channels. But I think in general there's both plenty of clearly existing and then new logo activity, both in terms of employers as well as our health plan and other channel partners that I think will be -- will be pleased with whether you will be will see. And then on the takeaway front, one of the hallmarks of the sales season is we are seeing cases that have been in HSAs for a long, long time and really are looking to take that next step forward and even from some very few competitors, I think we’ll end up this year with some nice takeaway wins as well. So those -- you got the right buckets but I don’t really see anything in terms of -- the question might suggest that a little less on the new logo and a little more on the growth from the existing logos. I don't really see that. I mean, obviously, in any given year most of our new accounts come from existing logos for obvious reasons. But I think in terms of the general trend, there's plenty of the new run-way to keep rolling down.

This is Darcy. Sandy, I would just add to that that we usually comment this on an annual basis about this split. But I think it's fair to say that in the first three quarters, most of that is coming from existing partners.

As it always…

A lot of the new names are coming on in that fourth quarter when they go through the open enrollment on our new partners.

And our next question comes from the line of Mark Marcon with R.W. Baird. Your line is now open.

With regard to just the effective yield that you ended up achieving during this quarter, how should we -- rates are obviously going up. How should we think about the casing of the effective yield, vis-à-vis, say fed funds over the next six to 12 months?

Well, first of all, we’ve commented on this quite a bit in the past that that's maybe next week…

But it's been a little bit better than what we were looking for?

Yes, I think that our comment last quarter is that we gave full year guidance to be in that 180 range, but we came in the quarter, is consistent with that. And if you played out for the full year, we think that we're trying to be in that same range. And so the only guidance we have given Mark is for this current fiscal year. With respect to what rate increases mean for next year, we'll comment on that when we comment on next year's guidance. But as we've said in the past, if there is 25 bp increase say in Fed rates or in general rates. I mean, ours isn’t necessarily geared up and put that Fed rate. But as rates increase, as you know, we will get the benefit of that throughout our ladder depending on what's expiring and what we bring on in new. And so we don't get that full impact for the full portfolio but in any given year, we may get it on 30%; so 20% that’s rolling off and maybe some portion that’s coming on new. And so, we'll see some uplift there but it's spread out over our duration, which we’ve said is generally in that three year range, give or take.

And then with regards to just the -- obviously, you had a strategic push towards increasing the growth of the investment accounts and investments under management. And that's clearly working. In terms of the really rapid growth that we're seeing there now, how would you -- how much of that is just the message coming across as opposed to certain accounts getting up to certain higher balances where they shift a portion. I am just trying to understand if there's any active switch among the lower balance accounts or any behavioral switch there?

That's a good question. I am not sure that I have the answer sitting in front of me but I'll give something that's close to it. And we're happy to get back to you on this one. But I think what generally we're seeing is the first point you made, which is this message getting through to a broader audience. And what is interesting is if you look at that audience, it does cut across both in-term demographics, as well as balanced demographics. I mean, yes of course it's true that some of it is always going to be folks finally getting to a balance where they can begin investment. But I think fundamentally it's what is I suppose from a long term perspective quite hardening to me is that when you look at who is investing, you don't see really substantial income or other economic demographic type concentrations nor do you see above minimum thresholds, a lot of concentration around balance. And what that indicates to me is that there's a long run-way for this and that it's just -- it's still a matter of large numbers of people, not yet seeing the HSA as an addition to be a mechanism to spend less today also being a mechanism to save very effectively for tomorrow. And so that's that. The future seems pretty blunt there, is the way I would put it rather than okay you're mining one vein and then that vein is tapped and that's the end of that.

I mean, any concern at all in terms of potentially the average cash balance potentially going down at some point if the behavior shift is too successful.

I mean, that would be a high class problem to have in the sense that there're always going to be instances where -- here's what I would put at, Mark, is you really show who you are at some level when you do have to make trade-offs between media profitability and admission, recognizing that state permission and long run profitability are quite well aligned. And so I think this is an example. And in fact I was at an event recently where I heard somebody from the industry comment about how they approach this and essentially the commentary was look, we're in the cash business and that's the way we think about it and that is not the way we think, when you think about HealthEquity. We want to give people choices and we want one of those choices to be for them to be able to use this, even if you're totally focused on cash, it's appropriate to use this thing as a long term savings vehicle. And the data that hold us at the beginning that for the most part, the investing was additive to cash as the investing population has grown that data hasn't really changed. If anything those patterns have gotten stronger. So I guess basically we look at it as the vast majority of it is additive rather than a substitute for the cash balances.

I would add to that that from an average cash balance, the decrease is that you may see from time-to-time occur, that it's not coming from the investors. Investors have higher average cash balances than the non-investors do. Where you see that impact happening and is when you bring on new accounts that have lower average cash balances in their first year that then grow from year-to-year, to year. And so we actually see that the investor population has higher average cash balances than all the other members.

That's what I expected. And then one last one just with regards to the cadence of the increased service costs, you've mentioned you've got the full slew now and you're going to have it for the full quarter and the fourth quarter. And then we obviously have the security cost. When we look at this year-over-year increase in terms of the service cost, do you feel like we had a step function and now we're going to leverage that again? Or how should we think about that?

I think that from a step function, I think that the biggest function to look at is to compare how it moved from third quarter last year to fourth quarter, that's probably a bigger impact than looking at what we spent on, fraud prevention or whatever; although, that's a factor in there. It’s year-over-year we will have spent maybe an extra $3 million or something that we on a run rate through all the quarters, but we've had some improvements also to offset that a little bit. So, on a full year basis you might be looking at 1% or whatever. But the function that will happen between Q3 and Q4 is still going to be intact, there's going to be more cost relative and less margin in the fourth quarter than there was in the third quarter just like there was last year.

Yes. I mean that’s just a function of bringing new people on and setting them up.

Exactly…

I think we're maybe Mark and part your questions going is recognizing what we did have and indicated before we have them that we would have over the course of the first, particularly two quarters, one might think of it as one-time expenses in this area, is there leverage on those expenses for the longer term looking out for fiscal '19 and so forth. I mean I think the answer in short is yes. But it's something we have to keep working on because I think particularly as you think about security, we all know that what people expect in terms of security, both in terms of the protection and so forth, but also that protection coming alongside ease-of-use. Those are good investments to make and they will benefit to us from a leverage perspective over a longer term. And that’s the way we look at it. So if we’re spending money in a given quarter and the reason for spending that is so that people can have greater security on their accounts and we can avoid account takeover or whatever it might be, but at the same time we were able to deliver a better user experience and certainly something that people would feel good about relative to what they're experiencing at a financial institution over the life, much less that benefit provider or a health plan then that’s going to rebound to our benefits for the long term. And there is leverage in those expenses. But I think as Darcy points out that doesn’t mean we won't spend more in the fourth quarter than in the third on service because we always did.

Thank you. And our next question comes from the line of Donald Hooker with KeyBanc. Your line is now open.

I guess, obviously, the exciting data point is the investment assets growing so fast. And I was curious how much of that is -- I mean obviously people are putting more money in that sense. But I guess also the stock market and other investments are up. And I'm just curious if that’s partially driving that perhaps or is there a way to parse that out or…

It has an effect, but the bulk of the effect you’re seeing is actually increased inflows. And the reason for that is; one, the numbers are bigger the stock market is not [indiscernible]. But I think more importantly when you look at how these assets are deployed as you might expect, there is a preference still among investors to deploy these assets more conservatively. So less S&P 500 and growth tech and so forth and more bond funds and I'm sure you are all well aware, it hasn’t exactly been wine and roses for some of those more conservative investments over the course of last year, has been terrible. But they trail the market significantly. So while it is a little bit hard to parse it all out, because obviously in individual who seen growth might put in the last or what have you into the big picture is the bulk of the growth that we’ve seen is coming from inflows.

I guess kind of maybe a little bit of aside question and you may not have this at your fingertips. But I was intrigued on the last quarter call in terms of your workaround telemedicine and providing -- using the HAS as a way to educate your members around lower-cost uses of healthcare. And I didn’t know if there was any maybe updates there. And I know its small numbers, but it is the typical sphere. And I was curious if there's any update on those types of initiatives in telemedicine or otherwise? Thanks.

I think, the shorter answer is this is a stuff we continue to do and we'll occasionally remind about in this setting as you I think have gathered over time, we're not once for the product press release. So we’d rather have the results of that stuff show up in financials and then we can talk about it. But I do think we're seeing generally some progress in two areas. First is the one you identified, which again you might conceptually think about as a little bit more clinical in the sense of you're trying to find money with some very tangible clinically related examples. So this time of the year it's about -- the thing that's very topical it is efforts that use data to help you remind people whether that rates take plan is given flu shots for free or that kind of thing, that's very topical at this point of the year. But it's also on the financial side where we talked about some of the health and wealth stuff that we're doing, that that's again where you see the results so that is very directly in -- you've seen members progress to that point where they're investing or where their cash balances are growing. And there are some things that they're adopting the behaviors that you want to see adopted for people who are becoming confident health care consumers. So I think we're working on both sides of that particular aisle and seeing progress on both and looks like that provide updates as they seem relevant and as well as somewhere in there.

Thank you. And our next question comes from the line of Mohan Naidu with Oppenheimer. Your line is now open.

Just on the legislative changes, I guess, is there still an expectation for any regulator or administrative changes that could potentially expand the HSA eligible members in a way instead of being in the tax reform bill?

Yes, this is something we're working on pretty hard. And Steve, if you'd like to comment on some of the discussion around the regulatory stuff that'd be excellent.

Look, we still are hopeful. There's clearly a lot of work that needs to be done to either help support the current law with the subsidies and things like that that are going to people that puts just on changes or to redo it. And so what we're hearing from our friends in Washington and we do spend a lot of time there even though I am not there right now, is that as we get into the first quarter of 2018 that there's going to be a renewed effort to trying make this solution that people call Obama Care or the Affordable Care Act, it worked. And there're a lot of Americans that are losing insurance because of the subsidy issues and things like that. And so we're certainly there. We're getting some of these bills scored as we go along and we’ve talked in the past about our efforts around Medicare. We think that allowing seniors that we mentioned in the past that about 20% of people that turn 65 years old right now are currently working full time to allow these people to continue to make contributions to an HSA even if they're enrolled in Medicare. These types of bills actually score pretty well. And so those are the areas we're focusing on is how do you expand the pie, how do you get more people that are currently headed towards Medicare or even some Medicaid type arrangements to allowing to have HSAs, we talked in the past about Tricare. And I think all of these things are on the table now and candidly we’re as frustrated as I think anyone that we haven't seen more progress. But that doesn’t mean we've lost hope, it took a while to get health reform passed even in the Obama administration. We think that some things got to give at some point and the people that have really studied this know that HSAs are working for consumers, they're working for employers. There have been employers to keep your cost down. And so anything that could help benefit HSAs ought to go into these bills, especially if they're related to healthcare. It's just on the tax reform law it was pretty clear that they weren't going to mess with any healthcare stuff in the tax reform law.

Got it, thanks Steve. Maybe just a question on the general market itself. How are you guys seeing the sub-markets in here, whether it’s the employer by size or geographic region or health plan submarkets? Rick, how do you see the adoption in each of these and if there is any inflection point that is coming up in any of these submarkets that could really be a big driver for you guys in the coming years?

It's a great question, Mohan. I think first of all it’s worth understanding how much of the growth that you generally see how much of the new account activity is coming from which channel or submarket. And the way to think about it and is simplest is that market wide about 70% of all HSAs that are sold are sold in the context of the employer of making a specific decision that's not through the health plan. And then other 30% are in one form or another very directly related to health plan. And we play in both of those channels obviously and we want to serve both those channels really well. I think we've commented before and this is fair that as particularly as you see more HSA activity happening in the middle and upper middle market that tilts the field a little more towards the employer side of things, because those are the areas where you have as much employer action, including with their partners in the brokering community. And we saw we've seen some of that thus far this year in the current sale cycle. I expect we'll see more of it going forward. And then as far as employer side, I think it’s fairly well documented that the growth in this trend has been outpacing large group versus small group or individual and totally versus small group. I think that’s been pretty pronounced, it’s not terribly surprising; one, because that's the way virtually every trend that affects benefits rolled out over the course of an extended period of time but also in this case, because there isn’t little bit of a principle agent issue where a larger self funded employer feels the impact very, very directly whereas the impact is much more muted if you are…

Maybe it wasn't last one, if I can sneak in. I guess, BenefitGuard do not get any airtime today just running -- being for any quick updates on that one.

I appreciate you’re asking, BenefitGuard is going well. What's now HealthEquity retirement services has signed up a bunch of new accounts for the first of the year, I mean obviously it's still -- it's not terribly material or we’d be telling you about it more. But we're getting the message out there. And importantly, we’re learning. And I think frankly there is a lot of eye-opening going on there on the part of folks who are traditionalists within the retirement community about the real value here. I mean that’s really the part that strikes me is in these conversations as people are -- as they really for the first time maybe stop to think about the power of being able to educate consumers about these things together, you're talking about something very different than you have in the past. It's not about should you put your money in growth or value, which is a little bit esoteric, it's like hey, if you do this properly and waterfall this properly you're going to build savings faster. You’re going to build more of it and it's not a question of different market risk, it's just the question of leveraging the rules as they are. And that part being able to help people do that is pretty neat. Again, we’re still learning a lot about how the channel works and we’re trying to be really careful and cautious about it. But I'm sure we’ll have more to say about in future. Thank you for asking.

And our final question comes from the line of Steven Wardell with Chardan Capital Markets. Your line is now open.

You mentioned the account fees being at the -- decline being at the low-end of the potential range of decline. Can you review that again and also just tell us what do you think is behind greater or lesser account fee declines? And what's behind the current low rate of account fee decline?

Yes, this is Darcy. As you know, we have guided fairly consistently from our IPO that we expect on any given year for this to be in the 5% to 10% range. The variability I mean last year it was little bit higher than that. This year it's tracking a little bit lower than that range. But year-in and year-out, we expect this trend to be continuing. And so we’re giving a broad-brush over that to say you might see some years that it's little bit better than that or it’s a little bit higher than that. The variability depends on penetration within plans and renewals of their contracts et cetera et cetera. And so we just look at that more as a broad trend that will continue but in any one given year, you may see something little bit lower like we're seeing this year. We wouldn't read anything extraordinary into that.

Yes, I would just say if we thought it was truly some ongoing trend, we would have put it in headlines. It would have been easy to do that and we did talk about this. And our basic view is -- this isn't a number that just shows up, it's actually a number we're trying to manage through at some level, Steve, because another way to look at those declines is that's a way for us to deliver value to our partners on the employer side to pay most of these fees and on the health planning side in terms of them being able to deliver value to their customers and such -- as well as to our consumers, obviously. And to do so while still maintaining and I think over the long term growing our unit economics. And so that's the way we look at it. It's not that it just spits out of the machine, it's a number we try to manage to recognizing that there'll be ups and downs in any given year, but this is part of the value we want to deliver to people and that's why we've been guiding this way since before the IPO. And I think it's fair to say that with some variation in one direction or the other, we pretty much deliver on.

Thank you. And that does conclude today's Q&A session. And I'd like to return the call to Mr. Jon Kessler for any closing remarks.

Thank you very much, operator. And I guess. I'll just close by wishing everyone a safe and happy holiday season and we'll talk again after the 1st of the year. Thank you.

Ladies and gentlemen, thank you for participating in today's call. This does conclude the program and you may all disconnect. Everyone have a great day.