Jon Kessler: The key issue is that one of the things that we really do get benefit of if you think about it. I appreciate your point about three years, but think about like the duration contracts, you think about what we’re going to be replacing next year, those duration contracts next year will be the first ones that we’re replacing, right, that are pandemic era. So the stuff that’s being repriced is going to be repriced in very favorably. And beyond that, if I take current market projections about where rates will be in a year or what have you as sort of consistent with your question, we will still be placing new money at rates well above our current guide of 3%. And so, those will continue to be, I think, pretty significant tailwinds for yield for quite some time actually.
Again, without wanting to give particular guidance, I mean those are the key factors, and it’s what you can replace money at relative to what you had at that before and what you’re placing new money at. And both of those appear to be tailwinds for quite a while under any current reasonable scenario over the course of the next several years.
David Larsen: Okay. Great. And I think Richard will allow me one more maybe. So, it was nice to see the interchange revenue up, I think, 7% year-over-year. For service revenue, I think it was down maybe 1% year-over-year, but I think there’s some unusual things causing that. When should we expect to see growth in service revenue sort of return to a more normalized rate? What is the driver of that? And what would you expect sort of that longer term normalized service revenue growth rate to be? Thanks very much.
Jon Kessler: You want to hit that one, Jim?
James Lucania: Yeah. Sure. I can take that one. Yeah. So I think — yeah, you really hit right on the story for Q3. We’ve effectively held serve on that line with revenue slightly down, cost slightly down, the margin is slightly up, but there’s a lot of moving parts and stories within that within those headline numbers. So, if you sort of look at it, and we do look at it by product and you see a price volume mix story occurring there where price has been a headwind, especially in RA as buyers look at this as a bundle, really. They understand we’re making a much higher revenue on the custodial cash and the HSA cash. They understand we’re making good margin on the interchange, and this is the release valve on price. So, we’re seeing a little bit of price per unit price headwind.
We see the impact of the mix shift, especially towards HSAs. We’re growing HSA significantly higher. That’s always been the lowest fixed dollar fee product as it’s got the highest percentage of interchange and custodial revenue attached to it. So as our business mix towards that, we’re going to see that pressure on the revenue line and that margin line. And you can call that sort of the half-and-half impact price and mix and then being offset by our much higher volumes. So negative price, negative mix, positive volume, that’s out to just about $1 million delta on the revenue line.
Richard Putnam: Thanks David.
Operator: The next question is from Anne Samuel with JP Morgan. Please go ahead.
Anne Samuel: Hi, guys. Congrats on the quarter, and thanks for the question. In the past, you’ve kind of talked about a gradual increase for your deposits going into the enhanced rates product, but with BenefitWallet, you’re going to see kind of a big jump up in that mix. Are you where you want to be now? Or should we expect that to continue to kind of increase as a percentage of the mix over time? Where are you hoping to get with that?
Jon Kessler: You should expect it to increase as a percentage of the mix over time. And we — if you’re willing to make the step out of Salt Lake City or listen in, I think we’ll talk more about that, so people can get a clear view of it over time. But we’re extremely pleased with a couple of aspects of this program. And one is that is that on a voluntary basis, there’s — the consumer adoption has been great. I think consumer acceptance of what we’re trying to do has been great. I feel like employers who — those who pay attention to this, understand that the fact that we’ve done this has really kept us from having to impose other costs on them and also see us reinvest in the business. I’m extremely pleased with — I just don’t have to say it with the — any other way with the work that the team has done to educate the best possible partners we can have for this product.
I mean, we went into this with the biggest question in our mind was actually — what’s going to be the receptivity within — what is appropriately a very conservative market on the insurance side to a product that has a lot of great attributes for them, but they just haven’t had before. And the receptivity has been great. It’s been great among very high-quality NIMs and the stable there continues to grow. And so, we’re absolutely looking at options to accelerate, if anything, the shift into this product, and we’ll talk a little more about that. I’m guessing at the Investor Day and its impact in the out years.
Anne Samuel: That’s really helpful then. And I guess, as we kind of think about as you get bigger and bigger with this product, is it still right to think of it as kind of a 50 to 75 basis point premium to your kind of traditional yield? Or can that change over time as well?
Jon Kessler: I think that’s still probably right. And it’s — I think that’s still probably right answer.
Richard Putnam: Thanks Anne.
Operator: The next question comes from George Hill with Deutsche Bank. Please go ahead.
George Hill: Hey, good evening guys.
Jon Kessler: Hey, George.
George Hill: Good evening. And just a couple of housekeeping questions actually for me. I guess, number one, Jon or Jim, could you guys talk about the expected EBITDA contribution from BenefitWallet in fiscal 2025. And my follow-up is, I know you guys have some lumpiness of cash rolling off to be redeployed as we look out over the next 12 to 18 months. Can you just kind of remind us on the big pieces that kind of come off being committed and get recommitted and so, we can kind of fine tune our models around the waterfall effect of that. Thanks.
