By Katherine Hamilton

HealthEquity shares fell after the company said it is spending more on fraud prevention and mitigation due to increasing attacks.

The stock slipped 19% to $82.75 around midday Wednesday following the company's fiscal fourth-quarter earnings report. It was on pace for its largest percentage decrease since December 2021.

Executives said the company, which helps people manage health-savings accounts, has incurred additional costs to protect members from fraud, to reimburse those who were affected by it and to assist with card-processor consolidation.

Those costs contributed to a $17 million reduction in gross profit during the fiscal fourth quarter, Chief Financial Officer James Lucania said during a late-Tuesday earnings call.

HealthEquity is continuing to invest in fraud prevention and detection and expects higher costs to continue in the first half of fiscal 2026, Lucania said.

"Like other financial-services companies, we also have seen increased cyber threats and fraud attacks from bad actors using sophisticated technology, techniques and methods. The collection of these activities led to excess service expenses," Chief Executive Scott Cutler said.

HealthEquity expects adjusted per-share earnings of $3.57 to $3.74 in its fiscal 2026, the midpoint of which is below the $3.71 expected by analysts, according to FactSet.

Heavier-than-normal costs related to fraud prevention are expected to stabilize in the second half of the year, the executives said. Fraud expenses cost about $8 million in the third quarter.

"We were overly optimistic on our ability to be in front of that. So, it was more than we expected in Q4," Cutler said of the fraud costs.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

March 19, 2025 12:11 ET (16:11 GMT)

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