Operator: Our next question comes from David Larsen with BTIG. Please go ahead.
Jon Kessler: Hi, David.
David Larsen: Hey. How are you? Can you please talk about health card revenue and also commuter revenue? How is that trending this quarter relative to expectations and what’s baked in the guidance? And I think sort of the peak headwind year, there was like a €“ there is about a $30 million headwind for those two businesses. Just any color around how that’s trending relative to your expectations? Thanks a lot.
Tyson Murdock: I mean, I think overall, they’re in the range of how we think about forecasting them. They’re definitely not exceeding our expectations in the event, but their stuff is kind of slowly coming back through, and I’m not going to really ever think about getting ahead of that again. I think it kind of is what it is. It’s becoming a very small part of the business when you think about low single-digit contribution even though it is a high margin from a perspective of the product. And from a card perspective, we’re talking about this a little earlier in the Q&A, probably a little late in Q3. But again, within the range of reasons we’re talking about a few hundred thousand dollars a month for us where it’s just kind of a little bit below expectations.
So I don’t know what to make of that. It’s hard to forecast any way because it’s transactional. And so I think it was, again, in the realm of reasonable was in Q4 is interesting because that’s the user to lose a quarter, and so you kind of see what people do and then that’s the heaviest quarter of spend. And I guess the last thing I’d say is, I think €“ and Jon has already mentioned this, again more on the FSA side versus the HSA side. The HSA side seems to be very steady €“ people use that in a much more steady way because it’s a longer-term account. You get the volatility on the FSA side when you kind of get the reactionary things to whether it be legislation or use it release it.
David Larsen: Thanks very much. And then in terms of wage synergies, I think the guidance had called for $80 million in annual synergies. Where are you at that $80 million? And how much sort of incremental benefit are you expecting for next year for fiscal 2024?
Tyson Murdock: I mean, we’ve done the work. We hit the number. We reported that $80 million. So as far as like the contribution, it’s in there and it’s full run rate through. So that $80 million is there. What I would say, too, is there’s €“ when you think about revenue, there’s not a revenue synergy as part of the $80 million. So when you think about the bundled sales approach and the fact that we’re selling HSAs up in the $900,000 range over the last years versus down $700,000 range. There’s a macro element to that. There’s also the strategy change that came from wage. So that’s a benefit of that along with other things that just to get from scale, whether it be better rates on interchange, whether it be other things that we can get relative the scale, including, I think, the enhanced rate partnerships and having enough cash to really go out and get multiple partners in that area, too.
So there’s a lot of synergies that aren’t quantified there. But as far as the $80 million, we’re done with that. And we’re also done with the spend as well relative to the wage deal and you see the further spend, which was a much smaller number working its way through, but decreasing. And so therefore, the cash that comes from that, the business generates more cash, thanks to the decreasing merger and integration spend.
David Larsen: Okay. As a unified product, your go-to-market strategy, I think, is probably more effective, it’s certainly more sales. That’s great. And then just my last question. In terms of like the overall interest rate environment, I think the federal funds rate is at about 3.8% right now. If you look at the Fed’s projections, they were calling for around 4.8% by the end of like calendar 2023. That’s 100 basis points up. We’re at 6% core inflation. They want to get it to 2%. So my view is interest rates might go up well above 100 basis points next year. Any thoughts around that, just broadly speaking? And then let’s say we do end up at around 5% as the federal funds rate. Does that mean your yield is going to be 500 basis points at some point in time? Thanks
Jon Kessler: Well, you’re getting into fiscal 2025 guide. The consistent message there were, as we said before on this call, is we’ll be replacing those contracts that were negotiated in that zero interest rate environment with whatever the rates are at that time. So if they’re higher at that time, not this January, but next, that’s going to be great for the business. And if there continues to be high for 2026, 2027, 2028, eventually, you’ve got to do the math and things. You’re not necessarily wrong, it’s just math, right? But it works its way through the latter both ways, up and down. So it’s a reasonable thing to talk about. It’s just €“ it’s not really there.
