Hinge Health Stock

Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health Second Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Bianca Buck, Head of Investor Relations. Bianca, please go ahead.

Good afternoon, and welcome to Hinge Health's Second Quarter 2026 Earnings Call. I'm Bianca Buck, Head of Investor Relations. With me on the call are Daniel Perez, our Co-Founder and CEO; Jim Pursley, our President; and James Budge, our CFO. I want to thank everyone for joining us.

As a reminder, this conference call is being recorded. All relevant materials are available on the Investor Relations section of our website. Today's discussion will include forward-looking statements, which are subject to various risks, uncertainties and assumptions. These statements reflect our current views and expectations regarding future events, including expected performance of our business, future financial results and growth strategies.

While these statements represent our good faith judgment and beliefs, actual results may differ materially from those projected or implied. We undertake no obligation to update any forward-looking statements, except as required by law. For a detailed discussion of the risks, please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2025, and our quarterly reports on Form 10-Q. We expect to file our quarterly report on Form 10-Q in the coming days.

All income statement measures discussed today other than revenue are non-GAAP. These measures should be viewed in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are included in the appendix to our earnings release.

With that, I'll turn it over to Dan.

Thanks, Bianca. Q2 was another strong proof point that our vision of automating care delivery is working. We delivered excellent financial results, made meaningful progress on our product roadmap and are set up well heading into the sales season and beyond. Today, we'll walk you through a few key areas.

First, I'll give you a snapshot of our Q2 financial performance and why we feel great about how the business is tracking.

Second, I'll share updates on our product expansion, specifically how we're moving from being a clear leader in automating care for MSK conditions to automating care across conditions with real traction in Migraine and our entry into gastrointestinal health.

After that, I'll hand it over to Jim, who will dive into the commercial side, our pipeline strength, the wins we're seeing in both enterprise and SMB and how our multi-product strategy is driving deeper relationships with clients.

Then James will take you through the financials in detail and share our updated guidance for the year. And of course, we'll open it up for your questions at the end.

With that, let me jump into the numbers.

Q2 was an outstanding quarter across the board. We delivered revenue of $213 million, which represents 53% year-over-year growth. Our last 12 months calculated billings came in at $862 million, up 52% from last year. These numbers reflect the strength of our business model and the value we're delivering to our members and clients.

On profitability, we're seeing substantial operating leverage. Our operating income more than doubled from a year ago to $62 million, and operating margin expanded to 29% from 19%. We also generated 3x more free cash flow in Q2 this year at $100 million compared to $33 million last year. That was a 47% free cash flow margin in Q2 compared to 23% in Q2 last year.

James will walk you through all the details in a bit, including our updated expectations for the rest of the year. But the short version is the fundamentals of the business are strong, execution remains solid, and we're continuing to build a platform that delivers clinical outcomes, growth and cash flow.

Now let me shift to what we're building on the product side.

Over the past 12 years, we've built Hinge Health into a leader in musculoskeletal care. We serve nearly 3,000 clients, including more than half the Fortune 100, and we've helped millions of people reduce their pain and avoid unnecessary procedures. Our foundation in MSK is incredibly strong, but what's even more powerful is that the platform enabling it isn't limited to MSK alone. It was designed to scale across multiple conditions.

Our vision has always been to use technology to automate the delivery of care within MSK and beyond. And this quarter, I'm excited to share that we're making that vision even more real. We're not just talking about TAM expansion. We're proving the vision with real products, real client demand and real member engagement.

Let me walk you through two big areas of progress.

First, Migraine.

Last quarter, we launched our Migraine Care Program. We now have over 450 clients signed up, covering more than 5 million lives. This is meaningful adoption in a short period of time, and it shows that employers see Migraine as a real pain point they need to solve. The early signals on the member side are strong as well. Both enrollment and early engagement metrics are coming in as expected, and we're excited to continue building on this baseline.

Our Migraine Care Program has gained traction quickly because we've built our capabilities as reusable components that can be customized for new indications while sharing the same go-to-market motion we've built over a decade at MSK. Essentially, we've been very intentional about not just what we build or what we sell, but how we build and how we sell.

When we roll out new products, we benefit from existing platform capabilities and an established distribution footprint, meaning we can build and sell new products much faster versus starting from zero every time.

As with everything else we do, we intend to hold our Migraine Care Program and all future programs to the same standard of clinical rigor that we have brought to MSK.

Second, gastrointestinal, or GI, our next big adjacency.

We're following the same playbook we used with MSK and Migraine, identifying an area of unmet clinical need and then apply technology to automate care delivery.

GI checks all those boxes. Digestive health issues affect 1 in 4 U.S. adults and drive $135 billion in annual medical spend. Traditional care is fragmented and hard to access. 69% of U.S. counties don't even have a gastroenterologist. People cycle through primary care and urgent care visits without a clear treatment plan. We hear consistently from our clients that GI is a major challenge they're struggling to address.

To accelerate our entry into this space, we've signed a definitive agreement to acquire Cylinder Health for $105 million in cash, essentially the free cash flow from Q2 alone. This acquisition gives us a strong foundation to build from in GI. Cylinder has nearly 100 clients across 2 million lives and has already treated 150,000 people with a clinically validated ROI. They also have established partnerships with two of the three largest PBMs and three of the top five national health plans. They've done great work reinventing the paradigm of care for GI, and we're excited to integrate their capabilities into our platform.

GI conditions are also highly comorbid with the MSK, pelvic floor and Migraine conditions we already treat. They share the same gut brain and central sensitization mechanisms and a large share of the people we're already serving are also managing chronic digestive conditions, which makes this a natural extension of our care model.

We anticipate GI will have a modest contribution to this year's sales season with a broader rollout targeted for 2027. There's still much work to do on the product side, and we need to integrate it into our tech stack, but we're moving quickly.

This acquisition reflects the commitment I made in my IPO letter where we said we'd move with urgency to further solidify and extend our current position while also developing several new products to scale and automate other aspects of care. That's one of the many reasons that gives us confidence in the durability of our revenue. And because we can build these products efficiently and sell them through the same commercial motion and the same distribution channels, it becomes a compounding advantage. Multi-product isn't just a yield lever, it is a moat. We're extending our platform to address multiple high-impact conditions, and we're doing it in a way that drives all aspects of the triple aim, better outcomes, better experience and lower cost.

With that, let me hand it over to Jim to talk about what we're seeing on the commercial side.

Thanks, Dan. These exciting new capabilities give me confidence in our continued momentum in the market.

Starting with this year's sales season, our active pipeline remains ahead of last year. Converting this pipeline as we move through the back half of the year will be a key driver of our 2027 billings growth. Our win rates continue to be up year-over-year, which leaves me optimistic as we enter the peak months of our sales season.

This quarter, we saw a strong momentum in our enterprise business, highlighted by a notable win with a Fortune 15 company where we displaced a competitor to secure nearly 300,000 lives.

Beyond our continued large enterprise success, our strategic investments in SMB distribution late last year are also paying off, where lives have grown more than 100% in the first half year-over-year. We've also recently been selected as a default solution for a large national health plan SMB segment, specifically their under 3,000 lives book of business, where, again, we replaced a competitor. This will function as an opt-out model, whereby clients will automatically get Hinge Health unless they elect not to participate, and we'll begin seeing these clients add in early 2027.

These investments take us deeper into one of our lowest penetrated categories, SMB, where deals close fast, and it complements our large enterprise wins. So we're winning across the board from smaller employers all the way up to the biggest names out there.

The third area I want to highlight is how our multi-product strategy is driving deeper relationships with our clients as we can impact a wider array of outcomes and therefore, drive greater cost savings. This is the land-and-expand motion we've been talking about.

Only a couple of months since its introduction, HingeSelect with surgery has been well received. We already have clients signed up for an anticipated 2027 launch, which signals that the market wants a unified solution that covers the full MSK journey from physical therapy all the way through surgery and recovery. We've also expanded our provider network spanning over 5,000 locations now.

On Migraine, as Dan mentioned, we have over 450 clients and 5 million lives covered already. And what's exciting is that more than 10 health plans have turned on Migraine for clients sitting underneath those partnership contracts. That's the power of our distribution model. When we launch something new, we can activate it rapidly across a huge footprint.

Moving to GI. This is a need we hear about consistently from employers. It's a real pain point, and they're excited that we're bringing another solution that furthers the triple aim, better member experience, better outcomes and lower costs. We're planning to integrate GI into this year's sales season and roll it out more broadly in 2027.

Through all of this, our client satisfaction and retention remains incredibly strong. Our clients stick with us because we deliver results. And as we add more products, we become even more embedded into their healthcare strategy.

We also hold ourselves to a high bar for clinical evidence. We just published our 23rd clinical study, or ROI analysis, this one on our fall prevention program. Published in the Journal of Comparative Effectiveness Research, it found that among adults aged 65 and older at risk for falls, those using Hinge Health's fall prevention program reported 37% fewer falls and 57% lower odds of an emergency room visit at three months versus the control group. We hold every one of our care programs to the same standard, and you should expect us to keep publishing as we expand the platform.

So to wrap it up, the pipeline is strong. SMB is scaling fast. Enterprise continues to perform, and our multi-product platform is driving outcomes and expansion within our client base. We feel great about where we are and where we're headed and look forward to sharing more about this year's sales season in the coming quarters.

With that, I'll turn it over to James to walk you through the financials.

Thanks, Jim. Let me walk you through the financial details for the quarter and what's driving our strong performance.

First, a quick reminder on our model, starting with how our billings work. Our calculated billings are determined by three key levers: the number of average eligible lives we have, multiplied by our yield, multiplied by our average selling price per member or ASP. We recognize revenue ratably over the subscription period, while billings reflect when members engage. So billings are a leading indicator of future revenue growth.

Looking at Q2's performance, our LTM calculated billings reached $862 million, up 52% year-over-year from $568 million in Q2 last year. This strong billings growth sets us up well for continued revenue momentum.

Revenue for Q2 came in at $213 million, representing 53% growth compared to $139 million in Q2 2025. That's well above our guidance range of $200 million to $202 million.

The revenue beat was driven by better-than-expected billings, which came from stronger yields. These yield improvements importantly, are durable coming from the initiatives we discussed at our Movement conference, clinically targeted enrollment campaigns, member-to-member referrals and member renewals to name a few. These are programs we've built into our operating rhythm, and they're delivering consistent results quarter after quarter.

Lives and ASP came in as expected in our prior guidance, so the upside was all yield driven.

On gross margin, we delivered 87% in Q2, up over 400 basis points from 83% in Q2 last year. This improvement reflects continued care team efficiency gains as we leverage AI and automation to deliver high-quality care at scale. We also benefited from a onetime tariff refund, which provided about 100 basis point boost this quarter.

We're also seeing strong operating leverage across the business. Total operating expenses were 58% of revenue in Q2, down from 64% in the same period last year. We're growing more efficient in every part of the organization.

That efficiency naturally translated into strong bottom line profitability. We delivered $62 million of income from operations above our guidance range of $50 million to $52 million. Operating margin came in at 29%, up from 19% in Q2 last year. For those keeping score, that's 1,000 basis points of margin expansion year-over-year.

On cash generation, we produced $100 million in free cash flow in Q2 compared to $33 million in Q2 2025. That's a free cash flow margin of 47%, up from 23% last year. The business is not only growing quickly, it's generating substantial cash, which gives us enviable optionality.

We ended the quarter with $476 million in cash and equivalents on the balance sheet. During Q2, we repurchased around 480,000 shares for $26 million as part of our ongoing capital allocation strategy.

Our weighted average diluted share count for the quarter was 83.4 million shares, and our diluted net income per share attributable to common shareholders for the quarter was $0.59.

One important note on the cash position I just mentioned. That $476 million does not yet include the $105 million cash outlay for the Cylinder Health acquisition, which we expect to close later this quarter. This acquisition was not part of our guidance at our Investor Day, and we're treating it as incremental to our plan. It's still early, but we're excited about what this acquisition brings to our multi-product strategy. We expect Cylinder to contribute approximately $7 million to $8 million in revenue for the remaining approximate four months of 2026 and meaningfully more in 2027 onwards as we integrate and scale the offering. We want to be clear. We're playing the long game in GI, and we'll be investing to ensure we can drive incredible outcomes while delivering a great experience and reducing costs for our clients.

So, to summarize Q2, strong billings growth, revenue well ahead of guidance, driven by continued durable yield improvements, expanding margins, significant free cash flow generation, TAM expansion with GI Care and a solid balance sheet that gives us flexibility to invest in growth, both organically and inorganically.

Now let me turn to our outlook for the rest of the year.

Given the strong performance we just walked through, we're confident in raising our guidance.

For Q3 2026, we're guiding to revenue of $223 million to $225 million. At the midpoint of $224 million, that represents 45% growth year-over-year. We're also guiding to income from operations of $61 million to $63 million, which is a 28% operating margin at the midpoint.

For the full year 2026, we're raising our revenue guidance to $856 million to $860 million. At the midpoint of $858 million, that's 46% growth compared to 2025. We're also raising our income from operations guidance to $236 million to $244 million, representing a 28% operating margin at the midpoint, up from our prior guidance of $217 million to $227 million or a 27% margin.

Let me walk you through what's driving these numbers.

On the top line, eligible lives are tracking in line with what we've shared before. ASP is also expected to track in line with what we've shared, which is essentially flat to last year.

What continues to trend higher is yield. The initiatives we've been running are delivering consistent results, and we're seeing that flow through in our billings and revenue. We're now expecting yield to come in around 4.45% for the year, and that's the primary driver of our revenue raise.

On profitability, the increase in income from operations and margin comes from two places. First, from the benefit of that top line outperformance I just described. And second, we've been able to temper some costs without compromising our growth trajectory. That discipline is showing up in our margins.

On share count, we're expecting to end 2026 with 85 million to 87 million diluted shares outstanding, higher than where we ended in Q2, primarily due to the conversion of the remaining preferred shares into common. The expected share count also reflects the buyback activity we've done year-to-date, though it does not include any potential repurchases in the second half.

On that note, our Board of Directors has approved a new $300 million share repurchase authorization. This reflects our confidence in the business and commitment to returning capital to shareholders when market conditions warrant. And the amount is roughly in line with the free cash flow we've generated over the past four quarters.

We've said for several quarters now that our capital allocation strategy would be: first, organic investments into our product portfolio to improve outcomes for our members, clients and partners; second, inorganic investments, particularly tuck-in acquisitions of technologies or businesses that accelerate our impact on members, clients and partners; and third, to return capital to investors principally through a share repurchase program. Thanks to our robust free cash flows, we are pleased to have executed all three of these objectives already in 2026, and this will remain our strategy going forward.

With that, let me turn it back to Dan to wrap up.

Thanks, James. Let's bring this all together.

We feel very good about where Hinge Health is headed, not just for the rest of 2026, but for many years ahead.

First, the fundamentals of our business have never been stronger. We're growing revenue 45% this year while expanding margins and generating significant free cash flow. That is a rare combination at our scale, and it speaks to the quality of the model we have built and the discipline of our team.

Second, we are showing that our platform strategy works. Our MSK program remains by far the market-leading product for a decade now whose cash flows are allowing us to invest in new product lines. Migraine is gaining traction. GI gives us another meaningful adjacency. And with every new program, we believe we are making the platform more relevant to members, more valuable to clients and more durable over time.

Third, the broader environment continues to play to our strengths. Employers are under pressure to drive more value from healthcare spend. Buyers are asking tougher questions and looking for proof, not promises. We think that favors companies that can deliver measurable outcomes, real ROI, durable engagement and a care experience that works in the real world.

So while we are pleased with the quarter, we are focused on something bigger than any single quarter. We are building a company that can grow for years to come, and we're making investments today that will pay off tomorrow for our members, clients and investors. Our story is just getting started.

Thank you to our team for another outstanding quarter, to our clients and members for trusting us with their care and to all of you on the call for your continued support.

With that, I'll turn it back to Bianca for Q&A.

Thanks, Dan. Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Ryan MacDonald with Needham & Company.

Congrats on an excellent quarter. Maybe just to start on the big news with GI and the entrance into the market. Obviously, a massive opportunity here. But can you talk about sort of the replicability of the core Hinge Health care model as you move into GI? I think initially thinking it seems like GI space would be something that maybe requires a little bit more of live sort of virtual sessions or maybe an in-person component. But can you just kind of talk about some of the moving parts there and maybe what you can take from the core Hinge model and how you can apply it to GI and Cylinder moving forward?

Sure. Great question. So there's quite a bit of reasons why we were very interested in GI broadly and Cylinder specifically. Again, with GI, it's a huge area of unmet clinical need, and we felt confident that we could have a big impact. And not only that our clients kept talking to us about it. In our annual business reviews with so many of our clients, they kept telling us how is the top cost driver and that it's growing, particularly with the prevalence of GLP-1s, which essentially cause gastroparesis.

The GI symptoms are rising in prevalence, but the access to care is only becoming more and more acute. So what's also interesting about Cylinder in particular is that they're company and the product is very analogous to what we're doing. We can map just about every single one of Cylinder's function to a pre-existing function here at Pine Health, which means that the integration will be a lot smoother than buying any other company out there. And they're selling to the same customers, have the same go-to-market motion, have the same partners, distribution partners that we do. They have three of the top five national health plans as partners, two of the top three pharmacy benefit managers as partners. We share each of those partners as well as nearly 100 employer customers with significant overlap with Pine Health.

So we saw that there was just a lot of analogous functions between Cylinder and us. Now when it comes to the product experience, our vision is to use technology to automate and scale delivery of care. And again, given how constrained access to GI care in America, this need is particularly acute here.

So similar to MSK and Migraine programs, our GI care program will first be tech and AI-driven at its core. So we're going to deliver best-in-class GI care through an AI-led experience, personalized nutrition guidance, easy tracking of what members eat, how their bodies respond, intelligent identification of triggers behind their digestive issues to get clear personalized plan instead of the fragmented care that's typical today.

Second, we're going to pair that technology with improved access to GI specialists. So members can get human support when they need it. And third, we'll build on the strong product foundations we've already established, the same ones that drive engagement, outcomes, enrollment and ultimately, ROI across our programs. And what's great about Sinder is that it buys us 18- to 24-month head start for entering the digestive health sector.

Super helpful there. Appreciate it. And then maybe as a follow-up one for Jim. Great to hear about how strong the selling season has been going across core, Migraine, HingeSelect. But I would be curious to sort of get your commentary and thoughts about one of your main competitors, the CEO, was out last week talking about also elevated win rates. I think they had put up 70.5% this year in the selling season. But you obviously noted in the script as well that your win rates are up. But can you just kind of help us sort of flesh out what's happening in the market competitively here and maybe how concerning or not that is from increasing competition from other vendors?

Yes. Brian, thank you for the question. I can't comment on our competitors and how they calculate their win rate. So, I'll let them speak for themselves. I think what I can tell you is we've never felt better about our competitive positioning. Our data, which we think is very accurate, incredibly transparent, would tell you that our win rates are an all-time high. We could rattle off quite a few accounts, which we've taken from our competition here in the last couple of months. I referenced some of that in our prepared remarks. And we feel really good about the active pipeline. I think what is leading to that, which is part of your question, is the product is showing incredibly well.

We've invested a tremendous amount in the product experience. Our members love Hinge Health more than ever. As a result, they're using it. That level of engagement produces strong clinical outcomes. Those clinical outcomes are leading to real measurable cost savings. That flywheel, which we continue to invest in, is being recognized by the market.

Additionally, as you look at large buyers, governments, Fortune 100 employers, the operational rigor, the performance at scale, things like data security and privacy, those elements become increasingly important. I think our investments there and our demonstrated market leadership has haven recognized and really has contributed to our strong win rates here over the last quarter and the last year. So yes, thanks for the question, and we feel really good about our improving win rate.

And just to emphasize as well on that point, as a public company, we take the data points we put out there very seriously. And as a private company, people could just put whatever they want out there. And look, we believe we're about 3 to 4x larger than second place, but the competitor you mentioned has been claiming a 70% win rate for five years, and yet we remain so much larger. So, I think somebody's math is adding up. You can see the strength in the numbers.

Your next question comes from the line of Saket Kalia with Barclays.

Great to see these results. Numbers speak for themselves, so well done. Dan, maybe to start with you. First of all, congrats on Cylinder. I was wondering if you could just go one level deeper into the difference in yields between Cylinder and Hinge. I think James mentioned about, from Cylinder's perspective, about 150,000 members. I heard two million lives in there as well. So, it seems like a little bit of a higher yield. And you correct me there if I'm wrong. But why do you think that is? And is there more opportunity there over time?

Good question. And to clarify, the 150,000 members are lifetime members. So, it's not members in a given year that they've treated, but they have experience of having across their lifetime treated 150,000 members. And so long term, we see the yield of GI digestive health care being comparable to our yields with digital physical therapy because the burden is there. About 25% of adults are dealing with chronic digestive health conditions in any given year, and we think we can have a very, very large impact.

We don't think out of the gate, their yields will be as large as our digital physical therapy yield. But as part of our diligence, we dug really, really deep into their motions and into how they enroll members, how they engage members. It was actually one of the confidence building exercises in terms of this, going through the acquisition. It was because we saw a lot of low-hanging fruit to be picked in that there's a lot of best practices that we do, a lot of technology that we have built to identify members, to enroll members to then engage members and then repeatedly engage members in their care that Cylinder hasn't yet adopted, which is fine. It's nothing that they're, but that we've refined over many, many years, and we're excited to bring these best practices over to Cylinder. And we're going to learn a lot from them, and we think they've got a lot to learn from us, and we're really excited about this partnership.

Got it. That sounds great. James, maybe for my follow-up for you, just to stay on Cylinder. You gave some really helpful bread thumbs on the business in your prepared remarks. I was wondering if you could just go one level deeper just into the model, whatever you can provide, understanding that the deal hasn't closed yet, whether that's go-to-market, revenue growth, profitability, any sort of broad brushes that could help? And maybe as part of the question, can you just clarify, does the guide include Cylinder for the remainder of this year?

Yes. Thanks for the follow-on. So, I'll just take the last question first. So, the guide does include the $7 million to $8 million that we expect for Cylinder. We expect it to close, call it, end of August, and early September. So that gives us about 4 months. So that $7 million to $8 million is only for the four months. So that implies about a $20 million to $25 a year business this year in 2026, of which we'll capture about $7 million to $8 million of that. That goes up somewhat higher next year, but it really starts to expand in 2028 after we get through a full selling season with our expanded sales force. So that's the year we're really looking towards to see it take off.

You'll see it do a number of things. You'll see revenue contribution, obviously, where is that going to come from? It's going to come from yield improvements. So, it's going to be yet another capability on top of Migraine and other things we have to continue to grow yield up over time. And we see it as a big potential market for us with yields approaching what we already have, as Dan mentioned, in MSK. The go-to-market is very similar. It's one of the reasons Dan mentioned, we really like this acquisition. It's got a very similar go-to-market, similar partners, similar GTM, similar customer profiles. So it's got a lot to like, and we think we can take what is already a good business and with the additional resources we have turned into something outstanding.

Your next question comes from the line of Scott Schoenhaus with KeyBanc.

Following up on Cylinder, it looks like there's a large diagnostics side to this acquisition. Maybe talk about how that is going to be monetized on your platform? And maybe talk about future growth opportunities within diagnostics if this is the launching point.

Good question. There is currently a gut microbiome component of the product, which we're evaluating whether to continue. But generally speaking, diagnostics, in-person diagnostics is an important part of the workup for somebody with GI symptoms. It's not required for every workup, but it is an important component that we actually like the fact that we're licensed in all 50 states, and we have to refer you out to give you an order to grab them last request or give you an order to grab some of that core, we're able to do that. And it really helps us to better understand what might be going on with a given member. But I think what you're referring to is their gut check component of their product and that the gut microbiome, which we're evaluating what the future of that component of the product may be in 2027 and beyond.

And then one just last follow-up on Cylinder. Any areas of geographical strength that this acquisition brings to you? Or is there a certain density where the members are located or the employers are based?

That's one of the interesting things about digital health is that unlike a health system where you might be a very large employer in a given metropolitan because there's so much physical infrastructure as a digital health solution, you're really competing across all 50 states in the United States. And while Cylinder is a younger company, that is they have more revenue concentration across their logos than we would. I suppose there may be a few geographies that have a higher amount of lives, but nothing that stood out to us.

So we think the bigger sort of concentration or footprint that an asset that we could build upon is their distribution partnerships with health plans and pharmacy benefit managers. And they have really strong partners. We diligenced all of them, spoke to all of them as well as all of their largest customers. And the enthusiasm that these partners have with the leadership of Cylinder, the product of Cylinder and the need for better digestive health gave us a lot of confidence as well as their confidence in this acquisition, and they felt this was good for them, good for their members and good for Cylinder and Hinge Health.

Your next question comes from the line of Stan Berenshteyn with Wells Fargo.

Can you maybe just walk us through how the Cylinder deal came about? And can you comment on what's your appetite for additional M&A? Are there any other potential deals on the table here?

Thank you. So we've actually been looking at Cylinder from for quite a while and admiring the business that they've built, admiring their team and their product and hearing from our joint clients. We share several dozen clients together. And so we've been able to get feedback from clients over time. And we get inbound some weeks with two or three companies inbound looking to potentially get a part of him. So we are constantly looking at potential opportunities.

With Cylinder, we started conversations together several months ago in earnest about this, and we got a chance to get to know their leadership team. Terry, who we were very impressed with us to know their investors, and we have, it's a small community. So our leadership team, particularly Jim already knew their investors. And we just dug deeper into the product and the opportunity, spoke to quite a few of our clients as well who consistently mentioned how big of an opportunity it is for us to address GI health. And that's what gives us a lot of to move on. Jim, anything to add?

Dan, I think what you already had spoken about in a previous question was really just that strength of the signal from the market, GI being a real pain point for our clients that looking actively solve. And that demand has really only intensified with the rise of GLP-1s, which you frequently cause GI side effects. So you look at the unmet clinical need, you look at the cost that's driving and you look at what clients have come to expect from Hinge, which is that triple aim, that delivering a delightful and highly engaging member experience, proven clinical outcomes and measurable cost savings.

It just felt like the right time and the right market to approach and Cylinder, as Dan mentioned, really became the clear choice for how to do that, and we're really excited about it.

Just to put a finer point on that, again, what we're getting with [Indiscernible] is a solid product foundation and clinical expertise built across almost a decade of delivering care and Digestive Health. Secondly, we're inheriting a meaningful number of climate channel partners. And again, there's going to be a lot of work to unify the two products, but we are easily accelerating our product and go-to-market time line versus a De Novo build by 18 to 24 months.

More broadly, our strategy is usually to build organically, and you've seen it with Migraine, but we're open to M&A when it accelerates our time line. And we've got a track record of integrating technologies quickly and building them out into something much more robust than what we inherited. We've also been blessed with a strong balance sheet and meaningful free cash flow. So if the right opportunity comes along that fits our strategy and meets our return thresholds, we will absolutely consider it. And as I mentioned, we get several inbound opportunities a month. We review each, but we have a very high bar.

Appreciate the color. And maybe just as a follow-up on the competitive takeaway you called out, just any details or context on why you were able to win? Was it pricing, product, any combination thereof? Any color would be helpful.

Yes. What I would say, I think our typical buyer goes through, the product actually trials the product themselves, and they typically do that with multiple vendors that they're looking at and evaluating. And the quality of that experience, the interaction with the product, things like our Enso product, working with our physical therapists, engaging with the digital forward elements of our program really I think, showcased the breadth and depth of the Hinge offering. I would say it was really probably the product experience that won the day in that one. In fact, there were some other elements that we probably were playing at a disadvantage and playing from behind. So I think it was really affirming for us as a team to see how strong the product performed in that regard.

Your next question comes from the line of Brian Peterson with Raymond James.

Congrats on a really strong quarter. So I wanted to clarify on the selling season. It seems like this is the second year in a row where there's been really strong pipeline build, but the conversion is going to be back half weighted. Is that the new normal that we should expect? Do you think there's anything that's driving that?

Yes. Thanks, Brian, for the question. I appreciate it. I do think that's, the seasonality is normal, and we don't anticipate it changing much. What's driving that, it's probably a number of things. I think the current buyers have a high bar for ROI, for evidence, again, things like data security and privacy, their procurement teams are involved in going through it. So that may add a little bit of time to their evaluation process.

Again, the great news is when those things, when scrutiny in those areas increases, I think what you're seeing is our win rate increases as well because we are able to demonstrate those types of results at a scale that is unrivaled, and we're able to bring the investments in the organization to bear in a way that gives our buyers a lot of confidence. So yes, we feel great about the current sales season. The second half of the year is always the big half of the year. So stay tuned, but we feel great about how things are shaping up and look forward to sharing more details with you guys in a future call.

Yes. And just, it is very normal that benefits buyers make their decisions in the second half for benefits that go live on 1/1. We'd say 70% plus of decisions are made second half of Q3 into the first half of Q4. But that is the decision window for employers for benefits going live in the next year.

Understood. Maybe just following up on seasonality again. The free cash flow was really strong this quarter. Is there anything that's timing related in the second quarter? And maybe how we should be thinking about conversion in the second half?

Not really on cash flow, good question. Probably the only thing unusual from an expense perspective was the tariff refund wasn't that big, but it did contribute about 100 basis points to gross margin. There's a little bit left in the second half, but not enough to really make any difference one way or the other. But generally speaking, our free cash flow is typically a little bit higher in the third quarter than the second, just a little bit, and then it dips back down a little bit in the fourth quarter. As you've probably typically seen already, the first quarter for us is still a great quarter from a cash flow perspective, but the least strong of the four quarters. So yes, back half looks great.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

I had a question about Cylinder Health. Just in terms of the integration, thank you, Dave, for the comments about the revenue contribution. If we think about the integration, does it run sort of similar to your core business in terms of margin profile? Are there any integration costs or sort of R&D expenses that you would expect to incur just to bring it into the broader Hinge platform?

And then from a selling season perspective, given that it closes in the third quarter, I heard obviously what you guys just said about the contribution in the back half of the year to the selling season for your core product. Do you think it's like the 2027 revenue growth is largely predicated on what Cylinder has sold year-to-date? Or is that something you feel like you can actually add to your customer base and cross-sell through in that sort of fourth quarter and then obviously, as we go through into 2028 and beyond?

Yes. Thanks, Liz. Let me maybe start with that, and we'll see if I capture everything there, and Dan may add some perspective as well. I think the first question you had there was on the bottom line or expense side or integration costs or anything special to call out there. Yes, good. I meant to add that to the revenue discussion earlier. glad you brought that back up again. So yes, I mean, as you can imagine, as a slightly less mature company, they were running at a little bit of a loss. We expect to bring that up to our profile in short order, short order not being three months, but shorter being like a year to two years.

As Dan mentioned, we are going through some product integration over the next nine months or so that we expect to have complete by the summer of next year. That will certainly probably have some integration costs. I don't think too meaningful between now and then. But once we get past that, it will look pretty normalized and just fold right into the business.

We're not changing anything with our long-term profit margin profile. So we've mentioned 35% plus at our Investor Day. We're still sticking to that even though this is initially going to pose some losses to us, but we can absorb that given the strength of the rest of the business.

To add in is we spent several years building our core technology platform in such a way that we could reuse many of the components. And that's one of the reasons we were able to bring Migraine to market with, in such a capital-efficient manner, and we believe the integration of this product into our core Hinge Health platform will be similarly capital efficient and which is one of the reasons we were so attracted to this. We could use it, again, the same sales team, same client success team, same member enrollment team, same finance team, we aim to harmonize pricing over time to give our customers more value. But the product build itself will also be, and product integration itself will also be very capital efficient. That's going to be a we will be reaping that we had shown many years ago, and you're going to see that. You really saw it with Migraine and how quickly we're able to bring that to market and how efficiently we've been able to sell it.

Super helpful. And I assume all those costs are already in your guidance, so from that.

Modest. It's not substantial increase in cost, yes. It's actually relatively modest given how efficient our R&D build is.

Your next question comes from the line of Jailendra Singh with Truist Securities.

So just a quick clarification question on Cylinder. So on 100 clients they have, can you share how many of them already have virtual MSK offerings in place and how many of them are Hinge clients? And following up on the question Elizabeth asked about integration of Cylinder Health. And obviously, one of the most important part of these benefit companies integration is around integration of accounts and sales management. So curious if you can share any thoughts around ensuring a smooth transition there. Will the leadership team also come over? Have they committed to staying for any particular length of time?

Just to touch the last bit, yes, we anticipate nearly all of Cylinder's employees will be transitioning over, and we've had really strong and robust and collaborative discussions with their leadership and have several long-term roles for their go-to-market leadership in particular because they know how critical those relationships are. And frankly, we've been extremely impressed with the level of talent on Cylinder's leadership team.

The first part of your question was around the overlap with the clients. Our account is 52 of their clients are currently in clients as well. And so we were able to see a really strong signal from our book that quite a few of their clients, quite a few of our clients already buying Cylinder as well as quite a few of our partners, our health plan and PBM partners were partnering with [Indiscernible].

Great. And then my quick follow-up on yield now expected at 4.45% versus prior 4.3% and the new update is almost like up 60 basis points year-over-year. Curious if you can bifurcate that between your existing client base yield improvement you're seeing or whether your new member yield is also improving by that much. Just give us a little breakdown between your existing and new membership yields.

Sure. So, our yield improvements are broad-based. It's not just one distant [Indiscernible], it's several and those distance aren't even at full speed yet. Some notable drivers, as mentioned in prior quarters as well, target enrollment but also members referring their family and colleagues as well as members returning for additional care as we improve our care experience and expand our portfolio. Today, almost all enrollment yield is from digital physical therapy. Look, about 9% of people see a PT in a given year. We believe with better access, that number for digital PT could be, that number of people seeking PT overall, digital and in-person should be closer to 12% to 15%.

As you know, we're on pace of 4.45%, almost all of which is from digital PT. Migraine just launched, but both 1 in 6 working age adults are impacted with Migraine. And with GI, it's one in four. So, we see improved performance across our legacy book and our new clients with regards to yield, and we see a path to increasing yields for many, many years to come.

I think maybe, Jailendra, also what you might have been referring to is last year, we had a particularly strong improvement in our first year yields. over prior years that continues this year. But as Dan mentioned, it's a little more balanced this year. Existing clients and new clients all are coming on at higher yields.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

As you prepare to launch Migraine on a broader basis, are there any parallels to other product rollouts? So, for example, you saw yield expansion from programs in women's health that just provide kind of a look at the opportunity to drive yield expansion in '27 and beyond.

Yes. Look, our first and primary goal is expanding the impact and the clinical impact we have in our populations so we could improve outcomes for more people. With Migraine, there are net new people coming on board who wouldn't have engaged with Pine Health otherwise, and we not have Migraine. So, some people are engaging with Migraine and our MSK program. And you could argue they would have engaged already with our MSK program. The majority are engaging for the first time with Migraine. So, we see Migraine as a way of expanding our impact within our clients' population and a downstream impact as well on our financials that we have more members that are engaging and therefore, it impacts our revenue.

Just a reminder, Craig, from Investor Day, we made a point that we expected Migraine to contribute about 10 to 20 basis points of yield improvement in 2027. We don't have any change to that expectation. So, we see it as a very strong additional capability as we roll into 2027. expect wherever we believe yields are going to go through the year, we think a good 10 to 20 of that's going to come from Migraine.

That's helpful. And then just as a follow-up on the study that was published last week about Hinge Health, a significantly lower fall risk in adults 65 and older. The Medicare market doesn't get nearly as much attention as the employer market. So just wanted to dig deeper into that in terms of the implications to that study and just the longer-term opportunity you see in that age population.

Yes. Yes, Craig, thanks for the question. So as you know, we have relationships with dozens and dozens of large health plans. Those health plans, almost all of them operate meaningful Medicare Advantage business. It's definitely an area of strong interest from them. And we have an offering, our fall prevention offering, we refer to as Balance, which is a customized offering for seniors who we've deployed across our MA book, and we're seeing great results. We're really pleased and proud to publish the study. And we think that MA is going to be a continued growth area for us in the quarters and the years ahead, and we're going to continue to invest. And what's great about, again, that market is it allows us to ride on the rails that we've already built with the existing relationships with these health plans. And so yes, a lot of momentum building there, and the results just continue to be more and more positive as we continue to pursue that market.

Your next question comes from the line of Jessica Tassan with Piper Sandler.

So I wanted to follow up on Craig's question about Migraine. Dan, you mentioned most Migraine members are engaging for the first time, and we know obviously, 10 to 20 bps incremental yield from Migraine in '27. But as we think about kind of the overlap between active members in Migraine and in MSK, will we see concurrent Migraine and MSK show up as 2 distinct active members? Or for concurrent active members, will Migraine just increase ASP? And then in terms of member workflow on Migraine, are we operating on a single unified app at this point? And if not, when should we expect to see that?

Great questions. So first of all, when it comes to Migraine and MSK together and the member engagement with both, we charge at the member level. This is one of the values we want to deliver to our clients, particularly as we continue to expand our impact across multiple indications is that a given member is not charged for two different subscriptions. They come in with Hinge Health as they get essentially all they could or unlimited care from Hinge Health when they become a subscribing member. And that's a key value to our clients and part of our engagement building model. Migraine is part of our engagement building model. Both of the apps are now, the Migraine is on the same app as our digital physical therapy. So you could actually have concurrent enrollment, treat your back pain and your Migraine, and that's been rolling out and to our clients right now.

That's what we want to continue to be doing across all of our products as well is to ensure anything we launch will be part of our unified platform. I don't think a person with back pain and digestive health issues and Migraine wants to download three different apps and deal with three different logins, and we wouldn't either. And so we want to make sure that you could come to Hinge Health for increasing amounts of your care in one destination.

Okay. That's really helpful. And congrats. That's great to hear. And then I was wondering if maybe you all could talk a little bit about the Migraine trial that you're running. When should we expect to see results from that? What are you all looking for? And is that expected to support Migraine sales for calendar '27? Or is it more of a 2028 catalyst in the employer market?

Great. When it comes to Migraine, our approach to Migraine with neuromodulation actually is a newer experimental. There's actually decades of clinical research and multiple randomized trials showing that trigeminal nerve stimulation reduces Migraine frequency and severity for both acute relief and prevention. So FDA granted a 510(k) clearance and also reviewed that established body of evidence when clearing Enso for Migraine. So we're actually already building upon years of prior research. So I do want to clarify that. We're expanding beyond that foundation with our own proprietary waveforms, our AI-powered trigger tracking exercise therapy for prevention and access to expert clinician. It's not a point solution delivers one piece. We're delivering the whole system, and we'll be publishing additional research into our impact for Migraine in 2027.

Your next question comes from the line of David Grossman with Stifel.

You mentioned in your prepared remarks a push into the SMB market. And just wondering, how does the ramp, the yield progression, the ASPs differ, if at all, with the enterprise market?

Yes. Thank you, David. Appreciate the question. The ramp is very fast. The buying cycle in SMB tends to be shorter and more compressed than in large enterprises. The economics of the market are very favorable, and we tend to get a lot of latitude in how we engage membership. So I think the SMB market kind of recognizes us as the clear market leader and the expert in how to engage people. And so they extend a lot of trust and confidence in us. So the economics are very favorable. The sales cycles are compressed. It's a market that's just really underpenetrated because a lot of companies just haven't made the decision to invest there, given both our direct investments and the relations of our health plans, we're able to serve that market very cost effectively. So it's been a great strategic investment for us that we're going to keep investing in and continues to pay off.

Great. And then I know this has come up a couple of times about the yields. Obviously, a surprise even versus where you were two months ago. So with that kind of upward volatility, if you will, can you provide any parameters that may inform how we should think about the cadence of improvement in 2027 versus historical gains, particularly given all these new products that you're introducing that are going to have bearing impact on 2027?

Yes. Thanks, David. Maybe to answer that, I'll just remind kind of what the last two years of cadence have been. We started, when we first went public, we were suggesting a 3.4% yield. We ended the year at 3.9%. And again, as a reminder, that's how we generally view our guidance. Our guidance is typically based on what we see in front of us. So the yield that we have been experiencing plus the lives we already have from prior year sales season. So in 2025, we went from 3.4% to 3.9%. This year, we started at 3.9%, and we're up to 4.45%. So roughly between the two, about 50 basis points. And we feel really good about where the yield is going. Dan talked about sort of the North Star metric, which is used to be 9%, but we think we can take it up to 12% to 15% and all these extra capabilities like Migraine and GI and other capabilities we have certainly help us believe that the TAM expansion takes it even higher.

It gives us, you can expand with obviously product improvements. We've really invested in how to identify and enroll members and engage them. And of course, with every product we launch, it gives us another shot on goal to deliver value to members and to improve their care and more opportunities to engage people with their care.

We have time for one last question. This question comes from the line of Rishi Jaluria with RBC

Wonderful. Really great to see continued strong execution. Look, I know we've been talking a lot about Cylinder and GI, but obviously, I think we're just all excited about the market opportunity there. So maybe one question there and then maybe one a little bit more broadly speaking.

So look, if we think about the markets that you've been in, no one is doubting the size of GI, but the markets that you've been in and have a right to succeed in are ones where technology is a clear enabler and more importantly, your own proprietary technology is a clear enabler. With MSK, it's obviously the TrueMotion, the motion capture technology as well as the Enso device that very much differentiates it from just a physical therapy is getting on Zoom and watching a customer or a patient with Migraine, obviously, Enso becomes a differentiating factor there, and that's your own proprietary IP. What is the equivalent where your own proprietary technology is a differentiator on the GI side versus a patient going to a GI specialist and meeting with them virtually.

And then just kind of as an expanded beyond that, Dan, as we think about this, you clearly have a lot of growth drivers that you're going at. Can you help us understand how you intend to kind of keep the focus and not kind of let your eye off the ball as you're juggling all these different initiatives simultaneously?

Great question. And as I mentioned earlier, our vision is to scale and automate the delivery of health care. And a key challenge in any area we enter is asking ourselves, can technology meaningfully move to deliver care while meaningfully moving outcomes experience and cost? And it is a challenge in any area we enter. And you're right to point out that within physical therapy, it's very clear that you could automate via computer vision and AI exercise therapy component of treatment for musculoskeletal care. With GI program, we do believe that you can automate.

Now a lot of the care and interventions still have to be patient-led. That is the patient needs to make particular dietary changes or changes to their lifestyle. But what we're able to do with best-in-class GI care is making sure that we're giving them those insights that is we're able to better understand their symptoms what's going in as well, both the food as well as the symptom profile, give them a clear differential either diagnosis or interventions that we believe they should be doing, particularly around personalized nutrition guidance, certain lifestyle factors because this has such a downtrend impact on your overall GI symptoms, right?

It's your gut health, and it's often driven by what you're eating or when you're eating and how you're eating, but it also could be autoimmune mediated as well. And then we want to be able to easily track member symptoms thereafter and be able to tie that to treatment as well as adjustments to their care plan.

Yes, there will be access to specialists. But what's helpful is that today, even access to a virtual specialist is a substantial step up from a status quo, you're almost competing with nonconsumption. And these non-touch interactions are very, very amenable to AI-driven automation, which we're really excited about the ability to do that. And the main benefit there is that we could give members a lot more access, a lot quicker access, and we could lower costs because when somebody is spoiling about and going to different specialists or the ER or their primary care and trying to figure out what's wrong, our aim is to short circuit that process.

Of course, we're going to continue to have access to specialists very efficiently, whether it's a dietitian or a gastroenterologist or a nurse practitioner. The third aspect is that it's kind of a men capability you will need, whether it's Migraine or digital physical therapy or GI is how do we engage people in their health such that they want to do something that they may not want to do, which is focus on their gut health today or focus on their knee pain or focus on their headache.

We've built a really strong foundation of tactics such that, and a product foundation where we can get people to actually engage with their health, engage with their providers so we can move their outcomes so that people don't engage, we're not going to have a very good shot at steering their outcomes to become better. But absolutely, the product experience for GI will be different from digital physical therapy, but we're very confident we can make a big impact on outcomes.

That is all the time we have for questions. I will now turn the call back to Daniel Perez for closing remarks.

Just want to end by saying thank you, everybody, for tuning in. As you see from our future results, our core business is very, very strong with digital physical therapy. We are very blessed and fortunate to remain by far the market leader in our space. We've built a very sustainable business that is driving very meaningful free cash flow and it allows us to invest both in organic investments, which you see with Migraine, inorganic investments, which you see with, similar as well as to return capital to shareholders, as you saw with our $300 million share buyback program, which we announced today. A

We are planting seeds that we hope we will be able to sow in the future, seeds such as Migraine, which is a big challenge, and we think has hit the ground running with 450 clients across covering 5 million members. We still have many millions, tens of millions of members to go to upsell a Migraine product to and now with GI care as another seed that we're planting.

So we're really excited about many plentiful harvests up ahead. So thank you for tuning in, and we look forward to speaking to you again in about 90 days.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you, everyone, for being on time. I really appreciate that. You make my life a lot easier. So welcome to our inaugural Investor Day here in Chicago at our Customer Conference movement. And thank you to those on the webinar that are joining. We have an exciting A couple of hours for you where you'll hear from various leaders across the company, walking you through some of the exciting momentum we're seeing here at Hinge Health.

First, you'll hear from Dan who will ground us in the strategy and vision Next, Jim and Aaron will discuss some commercial momentum and how our distribution delivers scale and runway. Next, Linda and Gabriel, our product leads, will talk about some of our new product initiatives and take you a layer deeper into how we're building things at Hinge Health. And then finally, we'll wrap up with James and Jeff, to connect all of what you heard today back to the numbers and the model, which I know is what you care about most.

We ask that you hold your questions until the end. We will have plenty of time for Q&A for all of the speakers at the end. So please hold your thoughts so then. And lastly, as a quick reminder. We will be discussing forward-looking statements today, so please review the disclaimer at the start of the presentation.

With that, over to you, Dan.

Welcome to Chicago, everybody. Really appreciate everybody coming here. I still remember the feeling of waiting leading rooms, waiting for an appointment to be booked waiting to figure out what came next and at Hinge Health our vision is to -- or we're trying to remove that feeling from everybody who's getting care. So our vision overall is to use technology to automate and scale the delivery of care. And our goal is simple, a unified end-to-end care platform from prevention to recovery, care that moves with the member, and we're solving this in 3 key ways.

First is through digital care. Members can access personalized care anytime, anywhere from our industry-leading app, and it's a single app delivering all of their care programs. Second is with specialist visits. Easy access to specialists who could perform evaluations, create treatment plans, even make in personal referrals when needed. And third way is in-person care itself. When face-to-face care is essential and it often is, we coordinate directly with high-quality prevetted providers.

And why this matters. Musculoskeletal conditions impact 1 in 2 American adults every year, but only a fraction of us actually go to physical therapy. And that's because it's very onerous to seek physical therapy. You have to take time off work. You got to pay a co- pay parking fee, maybe get child care. So many of us resort to a quick fix such as opioids or surgery or injections or we delay care altogether until we get to end stage. And that's why musculoskeletal conditions remains a top 3 cost driver most of the employees that you will meet during this conference. And we try to close these care gaps by seamlessly blending automated and in-person care resulting in higher adherence and better outcomes.

And when you think about some of these typical care experience, we're using technology to replicate that. So our intake creates a personalized care plan, computer vision powered exercise therapy gives people real time feedback. Enso or electrical nerve stimulation device gives people a technology alternative for rates and when hands-on care is essential, Hinge Select brings in-person care into their care team directly. And all of this available through a member's fingertip through a single app.

We offer convenience that you're really not going to find convenience as well as comprehensiveness. We do not think you will find any other digital health company out there, whether in MSK or outside of MSK. And with Hinge Health, members don't have to navigate a system. The system moves around them. And that's the through line you will see today in this presentation as well as in the rest of our presentations across this conference.

But ultimately, as investors, you know that long-term success requires profits that are not competed away or arbitraged away, which itself requires enduring competitive advantages. And we've really focused on building and finishing our competitive advantages. Firstly, is our product. Yes, we're very good at software development. You'll hear from Linda, how we've built consumer-grade AI-first member experience, all available through a single app. But software alone will not automate care delivery. That's why we've also invested in breakthrough hardware such as Enso that moves outcomes, and we are not afraid of hardware. We think hardware will have a really big impact on health care long term. We've also invested in-person care through Hinge Select.

Secondly is our distribution. It's not enough to build a great product in health care, you must get paid for it. And we have a repeatable go-to-market motion that consistently retains 97% of our customers while adding hundreds of new customers every year. We also, thanks to our preferred partnerships have preferential access to new customers.

Lastly, when you put together the market's best product with incredible distribution, you get scale. We're not only about 3x larger than second place, but our proprietary data set of 100 million-plus treatment sessions and having treated over 2 million members, coupled with our peer-reviewed articles plus ROI studies that we've done has created a compounding loop that's extending our lead.

We're also being very deliberate in how we build our platform. Firstly, going deep in MSK from digital to in-person care; second, using the infrastructure we've built for musculoskeletal conditions to lateralize into adjacent areas, allowing us to achieve both wider depth and deeper -- wider breadth and deeper depth than any other health tech company.

So PT is a $60 billion market, migraine has $25 billion itself of direct medical spend. Combined, they are still just a fraction of total health care spend in the U.S. So we are not done adding new products. While AI has made us -- allowed us to move a lot faster it's also made our distribution that much more important.

Next, Jim, our President, will walk you through how our go-to-market engine turns innovation into rapid adoption. Over to you, Jim.

Thank you, Dan. And thank you, everybody, for joining us. This is probably my favorite time of the entire year, our Movement Conference. It is a chance to spend time with our clients, our partners, our members. They're walking around with pink lanyards, I encourage you to stop them and hear about their experience firsthand.

But as Dan mentioned, my name is Jim Pursley, I'm our President here, and I run our commercial organization along with Aaryn Pure our Chief Commercial Officer, who you'll hear from shortly. So let's talk about how we translate that vision that Dan just walked us through into durable growth.

So we've developed an enterprise style go-to-market motion, what may be familiar for those of you who look at SaaS companies, but we've added a health care advance that. Our partnerships make buying fast and easy. So our employer clients can contract within weeks, leveraging those existing partnerships and also implement very quickly with no long implementation cycles.

What's nice also is our partners not only help grease the skids and help with imitation. They also co-sell alongside of us. And what happens is we develop success proof points and success in those clients, the health plans and our partnership to see that, and they start to add us in the other at-risk parts of their business. We've talked about this before, fully insured FEP, Medicare advantage.

These are actual rigorous heavily scrutinized parts of their business that they only add to after demonstrate success. And this creates that virtuous cycle. As the market leader, we get more partnerships, we close more business. That business produces more evidence that evidence produces more partnerships and the flywheel continues to accelerate.

So that model is also very efficient. It allows us to go to market in a couple of ways. First and foremost, we do have a dedicated sales force that we've talked about, and they go out and they engage the market directly. And it gives our clients the option to contract directly with us. With that said, though, most of our clients decided to go through a partnership for the benefits and the reasons we just discussed, easy to contract. The wheels agrees to implementation is faster. They get to leverage existing contracts, and they can stand up Hinge Health within weeks as opposed to months and sometimes years that are typical with health care. And they act like an expand sales force as well.

Our partners go out there and they engage the market, actively surfacing new opportunities and co-selling new prospects with us. And so it's a kind of a multifactorial force that going out with making it very cost effective for us and leading to a lot of scale very quickly. From a partnership perspective, as I stand here on the stage today, we have over 60 health plan PBM and ecosystem partners, including 5 of the 5 largest national health plans and all 3 of the nation's largest PBMs.

But the number I think I'm most proud of is our client -- our partner retention number at 100%. These partners are very hard to win but are very sticky by design. We've invested a tremendous amount over the years in these relationships and the technology that is not easy to replicate or to replace. There are multimillion dollar switching costs inherent and standing up a new partner. And so we've built a nice moat that is not a first-mover advantage, but really a trust-based credentialing process that would take years, again to replicate I know that you can't have a presentation.

I'll talk about AI today, but this is not a moat that AI can replicate. This is -- our health plan partners only add new distribution partners like us after years of outcomes data and is really built and earned on trust. And so we're really excited about that. And the results on this slide here. Today, as I stand today, we have over 2,800 clients, 53% of the Fortune 100, 45% of the Fortune 500. Our clients enjoy a Net Promoter Score of 88, and we have a client retention of 97%. So this has not happened overnight. It's not happened by accident, but rather a deliberate and intentional effort over many, many years.

So now that we've won a client, what comes next. So after we win a client, we focus on both building awareness and driving enrollment. And we only get paid, as you know, when a member enrolls and then engages with Hinge Health. So we built this dual engine, 2 parts of the engine. First is product-led growth, and you'll hear from Linda here shortly, but think about things like our women's pelvic health expansion, okay?

The second part of that engine is awareness and we use proprietary data like claims data and prior authorization data, and we'll talk about that. We use both -- we utilize both paid and unpaid channels, and we use that proprietary data and our analytics teams. They're constantly iterating and experimenting to get better and better and more effective. We're also really focused on reengagement programs to make sure that Hinge Health stays relevant for our members throughout their lifetime. And all of this together, combined has allowed us to improve our yield from 2% 5 years ago to over 4% today, and that's showing up in our financials.

On the awareness side, we're running a focused measurement-driven playbook that we're constantly innovating and iterating with new channels. I wanted to call just 3 that we want to highlight today. And the first is member referrals, which might be one of my favorite because it's so affirming when somebody feels so passionate that they're going to talk to their peers about it. We've introduced new in-app features that allows members to share their story with other prospective numbers when they had that great experience.

Second, as member renewals. We've added new outreach path to reengage those who haven't used the product in a while, again, staying relevant to our members throughout their lifetime. And the last one, simple but profound something like e-mail where we refine our messaging, we've used pro proprietary data to become more personalized, more targeted and more individual, increasing our conversion rates consistently over time. All this together, more of an outreach, tighter targeting, better channel breast all compounding higher yield while reducing our acquisition costs. And the flywheel is paying off. No. Yes. Okay.

So we know that when engagement goes up, pain goes down. And we know when pain goes down, avoidable cost decrease, which translates into real hard dollar savings for our clients. And you know that's important, as you heard this morning from my main stage discussion earlier today. I'm excited to tell you that we just released a new control match study where we engage over 1,000 employers across 23 industries and over 200,000 participants and the results that we saw were over $2,900 of MSK savings per year. That translates into over a 3 ROI for our clients.

The biggest cost driver of that, as you might imagine, is surgery, but we also saw meaningful reductions in imaging, injections, durable medical equipment and outpatient visits. So again, this flywheel, it's taken years to build, but it provides a durable hard to replicate moat.

Now I'm going to hand off to Aaryn Pure, our Chief Commercial Officer, to walk us through the long runway that we still have to grow in the markets that we already serve and own today. I've worked with Aaron for over 12 years, and I can tell you that nobody knows the market and what matters to it more than Aaryn Pure. Aaryn, come on up.

Thanks, Jim. You're always so complementary. Appreciate it. All right. Aaryn Pure, nice to meet everyone. As Jim shared, we have a repeatable motion that scales and that gives us something rare, and that's visibility into a long runway. When you look at our partners, 1 by one, the amount of room to expanding in each one of them is significant. Even our most tenured partner on this slide, we're only 25% penetrated today. all our major partners are not only here in attendance at the conference, but many are tacking on extra days to have growth sessions and strategy reviews.

The next turn of the crank isn't really new partners per se, although there are several that we would like to add and are in the process of doing so, it's really taking advantage of the partners that we have 110 million lives in our existing channels and it's just about converting them to clients at this point. Now zooming out across our existing markets that we serve today, we have roughly 25 million lives contracted. That's the figure at the end of 2025. We're seeing about 215 million plus lives in total TAM in these existing markets. So that's nearly 90% white space or 10x growth opportunity in our existing markets today. We've seen some very strong traction over the last 2 years in the non-ASO space or still less than 5% penetrated.

Digging into fully insured in particular, which is about 60 million total covered lives, we have 2 dozen health plans today that offer us to their fully insured book of business. when a health plan puts us into their fully insured book of business, they own the medical risk. They are underwriting our outcomes into their P&L. So this is not just a procurement decision or a medical decision. This is an actuarial decision that they're choosing to add Hingel. As the primary partner to the majority of the largest health plans across the country, we're well positioned as the incumbent to win these lines of business like fully insured.

In terms of this year's performance more broadly, year-to-date and active opportunities for 2026, this sales season is the most active sales season I've been a part of in my 4.5 years at Hinge Health. Our momentum hasn't ever been stronger. On that note, within self-insured or our self-funded clients, our most penetrated market, the pattern repeats. And while when you look at the Fortune 100 or Fortune 500, we're about 50% penetrated. There are still many large 100,000-plus life groups still left to convert. So enterprise is still far from saturated, large and mid-market segments or earlier still an S&B and public sector around 15%. So across the board, we're less than 30% penetrated in our core self-funded market.

We're focused across the board, but we have made some investments this year in the SMB market to accelerate growth. We've added sales capacity. We're creating a more scalable sales motion with a streamlined trial program for these smaller clients and we have invested more in broad demand generation campaigns. And lastly, and probably most excitingly, we have a number of TPA and health plan partners that are working with us on embedded models and opt-out models for their SMB groups. This allows us to penetrate these smaller clients with a much faster velocity than going one by one. So really excited about that.

So we're already seeing the early successes of these investments in SMB. Our SMB pipeline is up over 100% year-over-year. And we very much expect our total number of clients added this year to be higher than years past because of these investments. Why do we win? It's consistent. It's the product experience. It's unified care. It's AI personalization, combined with the go-to-market strategy that we've been talking about the last 10 or so minutes, and our scale. Scale is our brand. It's our data. It's our clinical validation that takes years to build. Together, these attributes remove friction for our buyers and these advantages get stronger with every new life and logo we at.

Thank you very much. I'm going to ask Jim to come back up and talk more about Unified Care and Hinge Select.

Thank you, sir. All right. You heard Dan today earlier today on the main stage, talk about our promise to bridge in-person and digital care and Hinge Select has made that promise real benefiting every participant in the ecosystem. For our members, they get quoted high-quality care at low or no cost to them.

Our clients enjoy rates, 30% to 50% below commercial benchmarks, and our provider partners have clean, high-quality referrals and faster payment. And for Hinge Health, it gives us the ability to improve outcomes and drive a higher ROI, which, again, allows us to increase yields and add the new revenue stream for our business. 1 platform, 1 team, 1 unified experience for our members.

To do that, we've built a network of [indiscernible] work today, 4,100 providers and growing nationwide. So matching the right member to the right provider is fast. And our digital program evolves alongside of it when in-person care progresses. And here's the thing, though. They're more than just providers. These are our partners. There are partners and they are an extension of our care team and they're invested in that unified experience. It's what makes it feel like 1 system, 1 unified experience. And the good news is that's working.

Thousands of members have now gone through Hinge Select. As you heard Audrey talk about this morning, 9.4 out of 10 client -- or member satisfaction rating, members report that they feel cared for, in some cases, for the very first time. Cost barriers are gone, and they leave knowing exactly what to do next. And outcomes are happening. More members are getting the right care, less unnecessary imaging, fewer avoidable procedures and the result is over 20% lower MSK costs for our clients. That's a 60% reduction in imaging and surgery utilization, really exciting. And today, we're excited to announce that we'll extend that same coronation to surgery, the largest cost bucket in the MSK ecosystem, 1 team, 1 platform, 1 unified experience. Surgery drives 2/3 of all MSK costs and half of those procedures are medically unnecessary.

So you've obviously seen the impact of Hinge Select at scale, avoiding unnecessary spend. And the good news is that surgery is going to be when it's the right choice. We're going to get our members to the same core we get them the same coronation and get them guided through the experience, much like we're doing today with nonsurgical. By adding orthopedic surgeons to the Hinge Select network, we continue to go full continuum of care from digital through nonorthopedic all the way through surgery. And this is what buyers are asking for. This is what our clients are asking for.

One accountable system, routing and coordinating care, digital, in-person, surgery. They don't want to add new vendors, they don't want to enter into new contracts. They don't want more friction. So high-value care now is easy to access. We're able to lower cost and prenegotiated rates. We create incremental revenue per member for our business, and it's the flywheel again, continues to accelerate.

At this point, I'm going to invite Linda to the stage our VP of Product, who's going to walk us through how we make that experience effortless for our members. Linda?

Thanks, Jim. For those of you who I haven't met, my name is Linda Leung, and I lead our digital care product organization. Now Jim and Aaryn have just walked you through how we go out and bring members onto the platform. my job is to make sure that members actually show up and that they then come back every single day. One of the ways that we're doing that is by redesigning the app to be truly consumer-grade and we're bringing something that I'd like to call energetic momentum. They do things like lively transition, the animations and the complete overhaul of our exercise therapy experience.

Now these user experience changes encourage members to come back more often. And that's very important because when members come back, they complete sessions, and then we learn a little bit more. We learn a little bit more about what -- how they move, how they respond and what they need. And that signal is what allows our AI to make care continually more personalized to their needs. And we know that people remain loyal and are increasingly loyal to products that feel truly built for them.

Engagement also does something else really important. It delivers outcomes. So when members come back to complete treatment sessions, we see that their pain goes down. And when pain goes down, that also means that costs go down for our clients. And so that's why engagement is one of our key metrics that we look out for. And that's why we designed every single surface of our product to be easy to use, personalized and have it for me.

So what actually makes that personalization possible at scale? It's the data. And [indiscernible] a decade that we have spent building a data set that no 1 else can replicate. We have treated over 2 million members. We have delivered over 100 note sessions. We have collected over 39 million outcome loss and integrated DHR data across 750,000 providers. That is not data, but you can just scrape off the Internet is completely proprietary to us. But the volume is not the headline here. What actually matters is the quality of that data and how it's going to be used to be to deliver care.

So every day, our physical therapists, on making small, high-impact clinical adjustments for real members in real time. We capture that as structured human evaluation data that trains the agent system that we have built. This is exactly the kind of signal that data annotation companies will manufacture and deliver to the big foundation model companies. That difference is that ours comes from live care delivery and has generated on human clinician at a time by a clinician who has been operating at scale for almost a decade. and Gabriel's going to come in a few minutes and talk a little bit -- we'll talk a little bit more about that next.

Now we are using that data to up-level Robin, our AIT member. Robin brings help in moments that count. So we started by having Robin reach out when members are experienced moments of high need such as when they're having a pain flare. And we have seen we've been able to greatly compress the time to care with Robin. And now Robin is going to be truly a members' fingertips at the front line for care. Robin can help understand -- Robin can now understand the member's intent Robin has expanded capabilities such as being able to handle tech support, deliver instant answers to members about their program, be able to explain exercises and why they help escalate to a human clinician, if necessary, and suggest alternative exercises if it's appropriate.

Now we've seen very strong satisfaction with Robin moving from a reactive triage to a proactive in-session coach, and there's a lot more coming. We'll be adjusting exercises with voice and expanding contact awareness so that members can finish today's plan even if they're having an imperfect day.

Another breakout tool that we launched last year was movement analysis. I hope you all have the opportunity to try it out which turns thoughts of -- like "I think I'm getting better" to actually saying, "I can see that I'm getting better". So we measure range of motion with computer vision and pair it with augmented reality captured pain information to create a single Hinge score that members can track over time and see their progress. Now -- and you can see with the video that we just showed, how a member can log their pain feedback with simply the movement of their hand and never having to go touch the screen.

Now we launched movement analysis last year with pain and range of motion scores. And this year, we are expanding into new dimensions of strength and insurance. to new dimensions that are very important to our members. Clear objective progress is a powerful engagement tool. And when people see improvement, they stick with it and then outcomes follow. And this year, we have a new area that we are very excited about migraine. So migraine is a massive underserved market that has been hiding in plain sight. One in 6 Americans live with migraine, probably some of you, and it impacts women twice as often as it does mean. So that's on the order of 15 million people in the U.S. alone.

A single person with migraine drives about $16,000 of direct per year in combined medical and pharmacy spending. That's more than twice someone who lives migraine-free. And at a macro level, migraine cost U.S. businesses, an estimated $25 billion annually in direct medical spend. This is a very large, frequent and costly opportunity, and it's squarely within our wheelhouse. And the reason that we are so excited about migraine is because it is adjacent to the chronic pain that we already do so well.

75% of people with migraine also have co-occurring MSK pain, often in the neck. And that -- and the core tools that have worked really well in MSK, things such as exercise therapy, neurostimulation, education, guided breathing and human-led lifestyle coaching are also the recommended best practices for migraine management by leading authorities. So we have spent over a decade building deep expertise with each of these tools. And we pair that with the scale distribution through over 2,800 clients and more than 60 health plans and PBM partners.

So let's take a moment and walk through what's included in this program. The member experience we're delivering is going to be comprehensive and live inside the same Hinge Health app that our employers already know and trust. First, we're going to deliver relief, relief within minutes with our FDA-cleared Enso for migraine. In clinical testing, we saw 56% of participants see a significant pain drop when using Enso for migraine. And Enso was almost 2.5x more effective than placebo alone.

Second, we're providing understanding. So that includes comprehensive trigger tracking across a wide variety of dimensions that includes sleep, caffeine, weather, stress and much more. Now we're going to take that data, combine that with AI-powered insights so that members can see patterns and then act differently and change their behaviors. And third, we're delivering prevention through targeted neck and upper back exercise therapy through lifestyle coaching and PT support that's going to reduce attack frequency and severity over time. It's going to be one integrated system, we're providing relief now and fewer a tax leader. And our solution is going to be delivered through channels that we already operate at scale.

Now we launched migraine about a month ago, and the feedback has been overwhelmingly positive.

Jeff will talk a little bit more in a few minutes about our client adoption and how to think about the revenue opportunity here. But for now, I'm going to pass along to Gabriel. He's our Co-Founder and CTO, and he will get into the details of our tech stack and how we're using AI throughout the entire company. Here you go Gabriel.

Thank you. Alright. My name is Gabriel. I'm the farming team here at Hinch Health and our CTO. I am excited to talk to you today but how we have been using AI. Linda walked you through a lot of the amazing innovation that has been happening on the product side. I'm going to take you behind the curtain a bit. A few things I wanted to talk through. With the high level at the surface, members see a clean, single, simple app makes the care easy for them. And underneath there are years of AI investment into hard and often invisible problems. And we've been building in this area longer than most, not just as part of the recent AI boom.

Computer vision is something that we started investing in heavily back in 2021, which is a subfield of artificial intelligence, long before the current GenAI wave. And then back in 2023 before most companies even had an LLM strategy, we launched a first Genetic product with our AI [indiscernible] system. That early investment in data and models, in expertise compounds year-over-year. I'm going to cover 4 specific topics over the next few minutes.

Talking more about the technology behind computer vision for real-time measurement. Secondly, AI for clinician scalability; third, walking you through the technical approach we are taking to building Robin, our AI [indiscernible] member; and finally, how we're embedding AI for productivity across the company and some of the impact we've seen on OpEx from that.

Starting with computer vision. TrueMotion is not a wrapper around and off-the-shelf foundation model. This has been the core of a foundational AI research for the last 5 years, it's a proprietary computer vision system. We've been training on data that only we have available because of the 2 million therapy sessions -- because of the 2 million members that we have delivered care to in their homes with pets, poor lighting, obstructive views and all.

Let me walk you through just 1 example of the type of hard problem our AI research lab has solved recently retraining TrueMotion to keep tracking you even when your body is partially out of camera view, seeing what isn't there. What you see here is a 3D model on the left that TrueMotion has built off dam where that is able to predict with a fairly high degree of accuracy, how the rest of his body is moving even when the camera can actually see it. And in these kinds of innovations that have resulted in 40 issued patents, further pending patents just for our TrueMotion but division technology.

The results of this specific improvement is a smoother experience, more precise measurement, looking at some of the metrics, specifically for scenarios where part of the body is of the screen the accuracy of key point detection has gone from 45% to 63% in those particularly challenging scenarios. The angle error is reduced by 2.2%. And again, there are tens of these kinds of hard problems that are all stacking on each other to make TrueMotion really the best AI technology for this use case that is out there. And of course, accurately always matters, but it is particularly important as we are shifting from using to motion just for exercise feedback to also using it for our Hinge Score, for functional measurement to actually be able to accurately track and measure how people are getting better over time. And we'll continue to invest in this with our AI research lab.

Secondly, let's talk about AI for clinician scalability. Our digital-first care model has always been very efficient by its nature. Traditional PT, you have 1 patient, 1 PT for 1 hour. In our digital-first model, the actual human clinician hours for delivering equivalent care has been reduced by 97% compared to this traditional model. And over the last couple of years, in particular, AI has been a big contributor to that increasing efficiency. So back in 2023, we delved fully into these new capabilities that LLMs were making available for us, focusing on human in the loop, workflows for our conditions as a safe but impactful way to really lean into these technologies.

So today, AI summarizes member, context, suggests excess action, pre-draft messages for our care team members, and humans step in when the complexity of the situation demands human judgment. Comparing Q1 this year to the same period last year, the clinical cost per member Liver Care has reduced by 50%, while our engagement and satisfaction numbers continue to look great. AI gets us that win-win, great patient experience, while we are able to lower our costs significantly. And what's more, the hundreds of cat members working for us and engaging with these systems stay in day out. effectively gives us a huge pool of expert human data annotators to make our system our AI system better and better over time. I'll talk you through what that flywheel looks like in practice.

Starting off every day, all day, close to 500 conditions interact with their AI systems. Every time they send a message without edits, every time they change the message every time they provide feedback on an AI suggestion, that turns into structured label data provided by some of the best physical therapists and health coaches in the business. trained on modern best practices, really, really clean clinical training data that we can use. Of course, the first thing that we use this data for is improving the AI care team assistant itself, but this also helps demonstrate where is the AI performing well enough that we can graduate from a human in the loop, getting a system workflow to something that Robin can actually own as our AI care team member without a human in the loop.

We graduate those tasks to Robin. And of course, what that then does, it frees up our human care team to spend more of their time on more complex, more valuable use cases, which in turn provides richer training data on those more complex use cases, which then allows us to graduate more complex use cases for Robin and so the flywheel goes on and on. Every quarter, that advantage compounds. And Robin is designed very intentionally in a way that makes it easy for us to incrementally absorb these use cases, experiment and improve. It's a multi-agent system with specialized agents coordinating in real time, built in a very modular way where we can test and evolve different pieces of the system.

Most member interactions [indiscernible] through an intial triage layer, where for member contact and member intent, we route them to a specialized agent, specialized system for a certain use case. For example, member reports, pain increase, there's a specialized agent that routes the member understanding what might be going on, recommending the right best action. If they report a problem with their Enso, the tech support agent takes care of them. And when needed, an escalation agent loops in the human care team.

We've invested heavily into the member contact layer, the data layer, making sure that each of those agents has full access to real-time member data in a way that LLMs can understand reason about and act on. And the architecture is also built for speed. As mentioned here, the modularity of it that we can test and swap different pieces of this very easily is a big part of it but also that most of this experience is driven by our back-end services rather than being coupled to our mobile app. So we can make changes in hours or days rather than waiting weeks for every 1 of our members to be on the latest up version. And this is how we build a safe, effective AI care team member while still operating at tech product speeds.

Last but not least, I want to talk about how we're using AI internally. We are fully leaned into operating as an AI-native company, starting with the engineering team where, obviously, this has been the most mature in terms of AI for productivity, but gradually growing outwards from there to the rest of the company as well.

Looking here at the left, where we're looking at PRs, units of engineering work, we grew the raw volume of work per engineer that was flowing through the system at 2.5x last year. And just in the first half of this year, we have again doubled that number. Partially as a result of this, in addition to a lot of other improvements, of course, that we've made, the R&D expense as a percent of revenue has dropped from 37% just a few years ago to 14%.

Today, for 2026 to date, and we are continuing to improve that. We work with a software engineering intelligence vendor called DX, which provides us benchmarks to a lot of other top tech companies in business. They have benchmarked us in the top 1% of their customers when it comes to AI adoption and impact in our engineering team. It is something we're very heavily leaned into, and we'll continue to do so.

Just as one example. We're looking at the migraine launch. This is something that would have taken a large team a long time. We were able to launch this in less than 6 months with a relatively small core team working on migraine itself through a combination of 2 big things. We invested a lot in paying on tech debt, decomposing the programs that we have built into these configurable lego blocks education, exercise therapy. And so each team really invested in making those components of a program, easy to rearrange, easy to configure for different use cases, and migraine was really our proving point for that strategy. put a lot of that platform work in and made it very easy and fast to launch a new member program for a new condition on this as well as obviously really leaning into AI to move faster.

This kind of work would have easily taken 3x as many people twice as long if we had attempted it just a year ago. Taking all of this together, our pace of product innovation that is only increasing, the leverage that we get from AI adoption internally and all of the commercial advantage that we have talked about. I could not be more bullish about Hinge Health merging as a clear winner from the current AI race.

Thank you very much, and over to James.

Alright. Thank you, sir. Okay. Can you still hear me? I'll just go here. Okay. I want to just make a quick comment on, I think, the coolest thing you saw here today besides we had a lot of stuff about our commercial operations great strategic piece from Dan and some cool products stuff from Linda and Gabe. But the coolest thing you saw was Dan moving on the screen, if you remember that one. Now the squats are no big deal. We can probably all crank out a few air squats and moving side to side, no big deal.

But if you saw at the very end, there was a ball coming into them from the side, he's staring forward and he caught it in his right hand. For any of you that played baseball, it's a pretty impressive feat. So give it up to Dan for that for some incredible hand-eye coordination, I know he was a basketball player growing up, but -- yes. Yes, it was. That was impressive. So well done.

Anyway, let's dive into a few numbers that I'll share the stage with here with Jeff our VP of Finance, extraordinary human being, and he'll come up and join in a few seconds. But first, a quick reminder on our model, right? So how do we build to revenue? Well, first, we build the billings. And billings is a function of our yield multiplied by our lives, multiplied by our ASP, pretty simple model. If you look at last year as an example, just over 25 million lives, a 3.9% yield multiplied by 858 in ASP, and you come out to the numbers that you see here of $671 million of billings. This is 2025.

Then that gets recognized ratably depending on when the member comes in over a 12-month period that they have access to the platform. And that last year as a comparison, that translated into $588 million of revenue. So nothing's changed with our model. It gives us tremendous visibility into our revenue streams. That's one of the reasons we like it. and it's pretty predictable. So we enjoy it, not going away from it anytime soon. It gives us really good visibility into where our business is going, which helps us make better informed investment decisions on what our model can handle.

So let's look at lives really quick. You heard some of the -- from Jim and Aaryn about where we're heading here. and where we've been. We've had tremendous success. We add roughly 400 to 500 new clients every year. We had roughly 4 million to 4.5 million lives every year. Last year was our best lives ever at 4.8 million new lives added I think one of the takeaways, hopefully took from Aaryn as he's feeling as good or better as any year that they've been selling. So maybe that will translate into more than 4.8%. We're expecting probably somewhere typically in the 4% to 5% range. Again, I think we're feeling pretty good about where that's trending to this year. We'll know a lot more.

As you know, our business, for those that do know our business well, it's more of a second half story when those lives start to actually come in. Now it's more pipeline building. And getting enthusiasm, excitement moving like at conferences here at movement and hopefully, you've been able to feel some of that energy from our clients out there. But really great work so far this year and really a testament to the success of our go-to-market team and commercial teams for building this flywheel that Jim and Aaryn talked about for why we get to enjoy continuing to add 4 million to 5 million lives every year as we have the last few years.

Maybe one small note here we've typically added anywhere from 300 to 400 to 500 new clients each year. We do have this investment that we made in our SMB business. where the flywheel moves a little bit faster. So we'll probably actually end the year with a few more clients than we added in 2025, I would imagine in 2026. So maybe the average price per client or the average amount of employees per client will come down a little bit. But overall, we'll have more clients and it all averages out to the end to adding another 4 million to 5 million lives again.

So second one, yield. This is kind of the backbone a little bit of our guidance throughout the year. We generally know the lives that we have as we come into the year. Our ASP has been pretty consistent over the last 4 to 5 years. What really changes for us as we move throughout the year, is the evolution of our yield. And it's been a very good evolution for the last really 5, 6, 7 years, only throwing -- showing a few years here, but we've added roughly 40 to 50 basis points to our yield every year that we've been out there for the last 3 years.

Officially, we said on our last earnings call that we were trending to over 4%. And if you sifted through the guidance raise that we had yesterday and sort of back mashed your way into where the billings are going, you'd see that we're not just a little bit over 4%, but we're comfortably moving ahead above 4% to where that 40 to 50 basis point expectation becomes a reality. Maybe even more, we'll see. But for now, that's where we're trending, and it feels pretty strong, another strong year on yield.

Now how do we get there? We get there, in my opinion, from 4 major reasons. We get there because we have an incredible product. You've seen from a month ago, when we announced migraine and all the enthusiasm around it again today on our main stage presentations we pack a lot of capability into our products. Secondly, we have an incredible product experience that we deliver to our clients. We have things like Robin and movement analysis that really make the experience much better for the individual that's using that information goes back and enthusiasm goes back to the buyer, and they're even more enthusiastic to stay with us as our 97% client retention continues to demonstrate.

Third, we've done a great job at building up our Hinge connects for targeted enrollments, finding those people in their moment of need, whether it's through claims data or immediate action that they're looking for. We can reach them, find them and give them alternatives and their pathway to curing whatever is feeling bad for them at the moment. And then lastly, we have these alternative pathways, one of which Jim talked about, which also happens to be my favorite 1 member-to-member referrals is tremendous. It's up over 100% for us. As far as adding new members this year, we have other pathways with partnerships that we have in addition to the traditional ones of e-mail and other ways to find members.

So different ways to find members in their moment of needs and more effective ways to find them, I think, has been super effective for us over the last few years, and it keeps getting stronger as we're rolling through 2026. So when you package all that up with our tremendous work in clients, the lives that come with them, the yield evolution that we've had and enjoyed over the last few years, a consistent ASP with opportunities to potentially even increase over time. That comes to some pretty tremendous growth at scale. So whether you like to look at billings or revenue, they're both generally good indicators of where the health of the business is as far as the growth movement. They're both -- if you look at the end of Q1, our last quarter reported, we're right around 50% on both of those measures. And -- there's nothing in the guidance that we just gave yesterday that suggests it's going backwards anytime soon.

So really strong growth across the board. We've been able to do this pretty efficiently. We have increased our margins, our gross margins, all of our margins, any efficiency measure really that you look at. including like the R&D efficiency that Gabe talked about, whether sales and marketing, whether it's our G&A, whether it's the total operating expense, our gross margin, our cost of goods sold, everything has gotten meaningfully more efficient over the last 2, 3, even 4 years. Just on a year-over-year basis, we're looking at a 400 basis point improvement in our gross margin, tremendous improvement in our operating margin and cash has gone from 3% margin in Q1 of 25% to 23% margin in Q1 of '26.

So everything is humming pretty well. We are -- I think in Q1, we were -- if you like to anchor to a rule of concept, we are a rule of 72, that's pretty healthily above Rule of 40, if that's where you're -- where you like to see that. We feel very confident of being meaningfully ahead of that from where we have been. And if I look forward over the next year or 2, I don't see any reason why we want to be comfortably well ahead of the rule of 40. If you like to look at quarterly metrics across the board, just gives you a quarterly snapshot here of the annual information on the past one. The one I like the best here is a negative 36% operating margin 2 years ago to positive 25% in the first quarter. So that's pretty massive acceleration of efficiency. And even on the gross margin level, not a lot of companies can say over a 2-year period, they went from 70-ish percent gross margins up to mid-80s. So really good strength and efficiency across the company.

If you generally in a business like ours, if you produce pretty good operating margin. You're going to see that show up in cash flow, and that's what this chart is showing you. It does show up in cash flow. Similarly, negative 41% in cash margin 2 years ago to positive 23%. So tremendous improvement over the last couple of years really on the back of just good efficient spend. Maybe just a quick reminder on how we think about cash deployment, organic investment first. We like to invest in our teams that build great product. And hopefully, the demonstrations today, and if you were here yesterday and from our earnings call around migraine and some of the human beings that are being impacted and positively affected from the products we put out there will have hopefully demonstrated that for you.

So investment into our products and into our ecosystem is our #1 priority for where we put our cash. We are generally open for business when it comes to M&A. The last 3 or 4 that we've done have been pretty small typically, if we can add a bolt-on here and there that could be interesting to us as a secondary measure for cash. And then lastly, we also want to invest back into ourselves as well by buying back some of those shares out there if there's a dislocation in price. There may still be a dislocation in price right now, but it's come up nicely over the last few weeks and months, and we're happy about that. But we're still -- we still have an active buyback program and we'll be out there when time warrants, right? So that's how our priorities are in cash.

So with everything going great, we just thought this would be a really good opportunity to kick our guidance up just a nudge and that's what we did yesterday. We've seen that we've taken our guidance up across the board both at the revenue level for Q2, the operating margin for Q2 operating profit also for the year of 2026, some what we think are some pretty meaningful improvements for a mid-quarter adjustment. So we'll still have an earnings call on April or on August 5 and 4 -- 4? 5? One of those days, some day in August, we'll jump on a call and talk to you all again. But for now, we just feel really strong about the business and felt like we could let some of that out with the announcement that we had yesterday. So hopefully, that was met with met positively.

Now this is my last thing I wanted to just pause on. Not to take a victory lap, but sort to talk about how the company is just meaningfully overperformed and we just produced a lot more than we expected when we went public a year ago. I think it's a tremendous high to everybody in the organization that's helped produce this. When we went public a year ago, we said we would do about -- just over $600 million in revenue in 2026. With the announcement yesterday, at the midpoint, we're at 821. So over $200 million more in revenue produced. When we went public a year ago, we said we'd produce about a 9% operating profit in 2026. We now said yesterday, we're going to produce 20% better than that at 27% operating margin. So a pretty significant overperformance, I think.

And again, it's all because of the great product that we have. The great ecosystem that we have with our partners and customers, the incredible capability we're delivering to our members to improve their human condition and make them feel better so they can get on with life. And all that typically, when you produce all that, that often results in some pretty great numbers.

So that's the past. I'm going to hand it over to Jeff to talk to some of our future. Jeff has been with us for, gosh, 5 years now. Is it maybe more than 5 -- yes. Okay. 5-ish. Tremendous asset, like I said, he's our VP of Finance. Hopefully, you've had a chance to meet with him yesterday or today. And we're delighted to bring them up on stage. Come Jeff.

All right. I'll try to bring the energy like James here on the financial part. So thanks for the warm [indiscernible], James. Good afternoon, everyone. Good to see you in Chicago. Well, as James detailed, we've really come a long way over the past few years, and we've delivered exceptional financial performance. And the great news is that we are just getting started. There's a lot more to be excited about in the future as we continue to innovate. As a lot of you've heard today and over the last month, what's migraine, let's start there. And I'm going to apply a financial lens to the product view that Linda shared.

So the opportunity is large, and it's adjacent to MSK. And one of the important things is that we are keeping the same usage-based pricing model. So what that allows us to do is to upsell our clients seamlessly without the need for new contracts. In fact, we already have 300 clients, which encompass greater than 3 million lives that have already approved the migraine expansion. So for migraine, we expect that it will improve both yield and ASP.

On the yield front, there's upside as migraine adoption scales across the client base. And for members who require treatment for both migraine and for MSK, there's upside for more usage on the platform. So you'll see us periodically share adoption metrics as clients turn migraine on. And just a reminder, that as far as the financial impact, migraine should really start supporting billings and revenue starting in 2027.

Hinge Select. We're very excited about this as well. Dan and Jim covered some of this previously. We're still at an early stage, but we're seeing really great progress. So financially, HIM Select, it creates incremental revenue. It also improves our ability to strengthen the ROI we deliver because it reduces expensive and invasive procedures. We're making excellent progress, expanding our provider network and signing up health plans and PBMs and groundwork for the future. And we're seeing the intended results thus far.

Hinge Select is driving members more towards preventative actions like physical therapy, nonsurgical ortho evaluation and less towards imaging and surgery. So as Hinge Select financially begins to contribute in 2027 and starts to scale more in 2028, we wanted to provide a framework for how to think about its long-term potential, including some operational benchmarks as we evolve the offering. So the first area to start with is coverage, namely what percent of our book has Hinge Select available today. Today, we're at 400,000 lives, and we're hard at work to expand that. Over time, we see Hinge Select being adopted by at least 60% of our book.

Next, there's penetration and utilization. This represents how many of our members actually use Hinge Select. We see a lot of potential here and a path to 5% as members recognize the value of the solution. From a revenue per user standpoint, we're targeting an average of $300. In particular, we're excited about announcing adding surgery. That's the largest bucket of spend opportunity, and it goes a long way to help us realize this opportunity. And finally, remember, there's a synergy back to digital. Hinge Select, it also lifts digital yield because unified care engages more members.

So I wanted to share these building blocks to underwrite over time. towards an initiative that we believe will eventually yield hundreds of millions of dollars annually. So like migraine, as Hinge Select continues to scale, we will keep you updated on our progress. All right. So having covered migraine and Hinge Select. It's a really good segue to come back to a slide you've already seen. Aaryn already presented it. but it reminds us of the substantial opportunity in white space that we still have ahead of us. 25 million lives to date is great. It's a great accomplishment. We have substantial opportunities ahead.

As James said, our expectation is that we will add between 4 million to 5 million lives per year for the foreseeable future. And yield should expand as well. We've noted we're now trending to well north of 4% in 2026. And also, as James said, we have a track record of adding around 50 basis points to our yield annually. If you think about it, 9% of people do physical therapy, we think we can expand the TAM into the mid-teens for a more convenient, lower-cost solution than traditional ones. And over time, as we add new product lines and are more relevant to more people, we think we can expand our reach even beyond that.

All right. So let's bring it all together here. We have a core business that is performing very well. We have significant opportunities ahead from our new growth drivers kicking in through the end of the decade. I'm excited to share our new target operating model. One thing to recall at IPO, we provided an operating margin target of 25% and a free cash flow margin target of 30%. We hit the free cash flow target within 7 months. And now with our updated guide are guiding ahead of the operating margin target for 2026. It's truly a testament to how quickly the economics of this business are scaling. So as such, we're going to raise the bar.

We're raising our long-term plan to annual revenue growth of 20% to 25% non-GAAP operating margin to 35%. This is on gross margins in the mid-80s. Think of this as a steady state rule of 60, the growth and margin balance that we're aiming to sustain as we compound. We have a track record of operational execution and scalability delivered by AI that we intend to sustain. And while our top priority will, for sure, continue to be durable growth, we're confident in our ability to expand profitability as we grow for the next several years. And that's exciting to us, and we hope it's also exciting to investors.

All right. With that, I'll invite Dan to come back up to the stage for some closing comments.

Thank you, Jeff, and thank you, everybody. Everybody hear me okay? Yes. Hope you saw today, we are building one system of care, digital care that meets people where they are specialist care when it's needed and an in-person care network that is weaved together with our digital and our specialist care, an intellectually honest approach to delivering an end-to-end care journey firstly in musculoskeletal care and in future indications we may enter.

Plus our distribution channels give us preferential access to customers. Our client retention remains sky high because we consistently deliver outcomes, both clinical and financial for our customers. we've weaved AI throughout each aspect of our product as well as through our company operations. And lastly, we have a long runway ahead with multiple growth vectors, lives, yield, ASP, and you're starting to see it with new products as well. So we are building for the long term.

And thank you very much for joining us, and let's start the Q&A.

[Operator Instructions]

I'll kick it off, Ryan Daniels from William Blair in the back. I wanted to ask for a little bit more detail about the streamline trial program in SMB. It seems like you've got a lot of momentum there. Love to hear a little bit more about why you changed your go-to-market approach there? Kind of what the streamline program involves? Is it literally a freight trial? And then how does that convert to a pain client? Is it retroactive? Just any more details there would be great.

Yes. So we have a thing called the trial experience program. It's a short-term trial that allows a buyer oftentimes the buyers in real pain to experience the program over 4 to 8 weeks. And in the SMB market, we can get hundreds of those requests. So we built a web-based version of the trial experience program to allow people to come on and demo the product in a way that's easy is and scales very nicely because the traditional trial experience program is higher touch and includes our physical therapist or health coaches. And so it's just more scalable. And we haven't had that to date. So we've kind of turned away a lot of SMB clients. You want to get into trial experience program, and now you have a great way for them to lean in.

And our win rate when a member -- I'm sorry, when a buyer trials our program our head-to-head win rate jumps into the low 90s. So as you've heard from multiple speakers today, the product is one of the best salespeople that we have in the entire company.

It's essentially self-serve trial program for SMB.

Great. And then one quick follow-up, if I could, and then I'll hand the mic over. Just on the Hinge Select, as you move into surgery, I can imagine part of that's the point of care. So moving to a surgical center versus a hospital. Part of it's probably quality, part of it's rate. Can you talk about how you get data for that? And then how important are partnerships like the one you announced with Lantern roughly a year ago to kind of tap in that network and their lower rates?

Great question. So we always start with quality. So the question is, [indiscernible]. So when it comes to selecting surgeons we were talking any sort of provider in our network. We're going to look at quality standards. And quality sands are going to differ depending on providers. PT is one of the most important quality standard we look at is actually consumer reviews because most PT is actually really good. But if the consumer reviews are high, that means they're not making patients wait in the waiting room, they're not rescheduling appointments. They have a friendly experience. The patient is more likely to stay adherent. If you were adherent to physical therapy, you've got a great shot of improving your outcomes.

For surgeons, there's different outcomes. Yes, we're going to look at consumer reviews and like the overall patient experience as well that's very, very important. But we can actually look at more granular outcomes and actually looking at claims data. For instance, for a given surgeon, we can actually -- claim state is public. We actually look at what has been their practice patterns for the last 100 patients that have had nerothroscopy with the surgeon, how many have had revisions for them, how many had -- looking at that for a given patients claims history before they had the surgery had exhausted conservative management first?

Or was the surgeon escalating immediately to surgery before even trialing PT right? How many times is a surgeon redoing an MRI that had already been done because every now and then, there might be a conflict of interest and maybe they own an MRI center, and hell let's redo the imaging because I just want to get a little bit of a better slice and hey, I'm not exposing them to any sort of radiation. And gosh, who would have thought I also got a little couple of economics out of this as well. And so we look at those practice patterns also rate the quality of the surge. And then there are some incredible surgeons out there.

And you don't have to get into -- and most surgeons are practicing correctly. I might be hinting some practice patterns that aren't great, that is the minority, but you want to avoid the bottom quartile surgeons in particular. And if you get to the top quartile, your surgery rate is going to be lower. They're going to be more proactive about evaluating whether the person even needs surgery. Their revision rate is also going to be a lot lower and the satisfaction rate is going to be lower. Those all typically trend to or tend to be bundled together. So that's how we're looking at surgery. We're looking at quite a few outcome measures.

And in terms of our partnership with Lantern and Karma it doesn't change. There's going to be some overlap in some of the capabilities we're able to deliver if one of our customers has [indiscernible] satisfied Karen, very happy to continue to work with them on that. What we are seeing those -- a lot of our customers like that end-to-end experience, some of them who are rapidly adopting our surgery program doing want to turn off necessarily care [indiscernible] per se. They really have them in place. they'll allow them to stay in place. But if a member is ready with Hinge Health, and they want to stay with Hinge Health through that full care journey, including through surgery, they want to allow that member to do that.

Jailendra Singh from Truist. Staying on the same topic, in Select, if I use your metrics you shared on the slide here, get to like $0.5 billion of annual revenue, maybe even higher. So maybe talk about what are your underlying assumptions there in terms of adoption of surgery benefits, is it more in-person PD side of things versus surgical? Just give us any breakdown how do we get to those metrics?

In terms of the overall revenue. Most of the revenue eventually will be driven by higher-cost procedures. A lot of the absolute volume of utilization, we want to be physical therapy. We want to be nonsurgical orthopedic specialist care, but we've spent 10 years avoiding unnecessary surgery now we want to manage the necessary ones and each surgery will drive substantially more revenue than multiple PT sessions. So longer term surgery, at least for MSK for in-person care drive about half of the revenue for MSK product line or in select.

Okay, yes. And then one quick follow-up. I mean, to Ryan's question about how do we fit a Hinge Health surgery benefit fitting the CEO partnership ecosystem? Do you expect employers to start putting mandates in place to go through a Hinge health program for MSK surgery before going for is directly just to make sure that they're following the process in place because that's what they do for some COEs. And if that happens, I'm still struggling to figure out like how do COEs fit there? I know they're expanding into other type sides, but in MSK in particular, what is the feedback from your partners on [indiscernible]?

We just announced it today, so we haven't had feedback from them just yet. But in terms of mandates, we welcome that. We welcome to be part of the conversation sooner when a member when a patient is considering a course of surgery and the feedback we've gotten from our customers is like that we don't come in at the point of surgery. Right now, we really respect our COE partners, and I think they do really good work. They do intervene when the decision has been made to go to surgery.

And there is a process as you escalate towards surgery, your pain -- focused on MSK sort your pain is increasing over time. You might escalate with some several joint injections. You might have imaging. You might have several orthopedic visits. There's bread crumbs that are piling up on your way to surgery and that you could ideally intervene much earlier by giving people nonsurgical alternatives for their pain relief and for their function improvement and for their stiffness improvement.

And a lot of our customers are saying, "Hey, the COs just intervene at the surgery they can intervene earlier. And so we're hearing really positive feedback. And we previewed this in some ways to our COE partners, and they they're very intelligent, and I think they saw the pattern of where we're going, and we're going to be professional will continue to work together.

As Dan mentioned, our clients are very excited. One of the limitations or challenges of the traditional COE model is utilization because they're so downstream. I think what excites our clients is exactly what Dan said. Those bread crumbs are building over time. And we in our role of conservative care, have access to those breadcrumbs weeks, months, years ahead of time. And so we really think that we can drive utilization substantially higher than it has been traditionally seen and have even a bigger impact on cost reduction.

So yes, it's exciting for us and our clients are really excited about it. So what that means long term for kind of the broader market is yet to be seen, but we really like our approach.

And it will take time to build out the provider network, but we like our experience in building out a digital experience. And the ground game of building out a provider network is keep your head down and just do it, and we're -- it will take a little bit of time, but we're very confident we'll be able to build a great provider number. And our initial results, and you could talk to [ Adrian ], our Head of Operations for Hinge [indiscernible] either now or later, even without surgery, we've been able to substantially reduce the rate of imaging, substantial reduce the rate of interventions like certain injections, nerve ablations and substantially reduce the rate of surgery already. just with the Hinge capabilities we've had. And that's gone a huge way, especially our orthopedic specialist.

I cannot emphasize enough how difficult it is. If you are in chronic pain, if you feel you have a slip disk if you twisted your knee or think you need a new arthroscopy or chronic hip pain to be able to speak to a sports medicine doctor to be able to speak to a posiatrist, especially if you're in a rule error, there might not be any or might be a 4 to 6 week or if not a multi-month wait time, we have people speak to a physiatrist for 45 minutes within 1 to 2 days and they're able to refer for in-person care. They were able to completely create a personalized care plan. That is having a massive impact on ROI because so much of our high-risk cases can be directed to our in-house physiatry.

Rishi Jaluria, RBC. I really appreciate the time and all the announcements. Maybe just a 2-parter and I'll ask them both at once. Number one, if we think about the long-term growth trajectory that you've given, maybe can you walk us through in your mind how much of that is attainable by the core that you've built out, how much of that requires in select, surgery, migraines to start to hit certain targets? And how much of that is dependent on future growth drivers that you have contemplated that you're working on today, you've clearly announced a lot of, I think, really impressive innovation even in just the last year. And I'd have to imagine that's only going to accelerate from here.

And then the second part of that question, similarly related to the long-term model. If we think about the margins, obviously, you're giving a really healthy margin trajectory long term, no specific time frame. But if we also think about the opportunity you have with AI, especially as these models continue to -- it seems to get a new release every single day. we saw meat to able come out yesterday. Obviously, I can imagine you're blowing through tokens pretty quickly as you kind of figure this out. Just how do you balance the kind of commitment to that long-term profitability while not want to dial back on innovation.

Sure. And just to [indiscernible], I'll take the first question just a bit and James as well in terms of what some of our product strategy is to maintain our growth profile longer term. And then Gabe and Jeff maybe could also take some of the AI spend and how we're thinking through that, and Linda could dive in on some of the product work as well. But when it comes to our long-term model, we are of the school that only the paranoid will survive. And so we want to make sure that we have resilience in the system and multiple paths to goal. We'd rather overshoot our revenue target that understood our revenue target. And so starting with our core product of digital physical therapy.

Our last 12 months revenue is around $640 million, 1% of total PT spend in America. So we want to make sure that we do not lose sight of our core runway ahead of us, which is physical therapy. We are still just 1% of the TAM in America, and we want to make sure that continues to grow by adding new lives by improving our yield by improving the engagement and therefore, our ASP overall although even if ASP is flat at a new lives and yield, we'll go a very long way towards ensuring we continue to grow in our core market of digital physical therapy.

Now we want to increase the pace given the -- where we are at to add new products. Migraine is the first manifestation of that. You -- hopefully, you start seeing a steady cadence and Hinge Select is another one. Hinge Select is a slower burn as a 2-sided marketplace, but we think it will be 1 of the most enduring moats once mature of anything because just solving a hard problem is itself amot. But we're focusing on digital care programs. Migraine is here. And yes, we are active at work on launching additional ones.

And I hope you see with the adoption that we're able to drive for migraine, the benefit that our commercial rails gives us to drive rapid adoption of new digital care programs that we launch. And anything to add in terms of our product strategy to ensure longer-term growth?

Yes. Maybe I'll just add to that 1 and then we'll talk about the tokens piece. Maybe a small nuance, but a year ago when we went public, we said we'd be about a 18% to 20% grower sort of for the long term. Now it's a range of 20% to 25%. Last year, we didn't -- we had just begun to start talking about Hinge Select, and it was only in the world of in-person physical therapy and a little bit of imaging and now you've had surgery we didn't have migraine a year ago. There will be a new migraine-like thing a year from now, just like we punch out every year.

So all of those kind of capabilities in select I think it was [indiscernible] or somebody probably most of you did some math that said off of Jeff's slide, that adds up to about $500 million of revenue. Certainly, if that's something we get to in the next 5 to 6 years, that's going to produce a healthy percentage of our revenue. But the core product, as Dan said, is still the key driver to the vast majority of our revenue over time.

Long term, we hope in 5 years, you could see a product portfolio of multiple products eats driving $100 million plus of revenue and each growing robustly along with the core product, digital physical therapy, still remaining 25-plus percent grower every year. And spinning off cash in 1 of the reasons we're now in a position to add new products is because our core product is efficient, and we could use that cash flow to invest in new products.

Okay. I can go first. Two question about how we're using AI to balance are like productivity and our profitability. So we are definitely blowing through tokens. I think Gabriel and I were joking other day on like being able to see the increase in our token growth over time. But we are not at the point yet. We're not even close to the point yet where the increase in use of AI is actually coming at the cost of our margins. every use case that we have had for AI has been very purposeful and has delivered returns. So our first use case of specifically like LLM type of has been with our care team assistant that has drastically shortened the time it takes for our care team to be able to respond back to messages and just very quickly understand what's going on with their members.

And that's enabled us to be able to grow while maintaining a relatively lean and very experienced care team. Similarly, I think with the improvements we've been seeing with Robin, this is not a company that is just using AI for AI's sake. We have a very real member needs in a very real like member use case, where AI happens to be a great fit. So every 1 of these like models that comes out, it will just be an enabler for us to be able to do more and more.

Gabriel, do you want to add?

Yes. Just very briefly on AI for productivity. I mean, it's something that I'm monitoring very closely. And when I'm managing the engineering budget, the R&D budget, I'm effectively putting head count spend and token spend to the same budget. And if 1 goes up, the other 1 needs to go down. in very much managing that together. We've invested a lot in tooling that makes all of this much more measurable. I mentioned Dx, the software engineering intelligence vendor that we use have added a lot of features recently for much more granular tracking of what individual people are doing with if they're using it correctly, if they're not using it correctly, doing more cost accounting, how much are we spending on tokens per PR that given engineered ships.

So we get a lot of more measurement capabilities from that. We switched our project management tool from Jira to linear in large part because it gives us much better visibility into project level execution, where we're not just measuring these individual pieces of work that an engineer ships or where you say, are more projects of a given size moving through the pipeline, how long does given project take end-to-end, how does the different stages of that breakdown?

And I always think about the full funnel, right? Like right now, we're measuring is activity, activity has gone up 5x over the last 2 years, the input into the system. Then the next step in the funnel is, does this actually translate into features moving faster. We have a lot of indications that, yes, it is translating around faster future delivery, but we need much cleaner data so we can directly manage through those metrics. And then, of course, making sure that the projects that we do launch translate into metrics impact. That is obviously something that Linda and her team focus on a lot, but really closing the cycle.

We want to make sure that we can draw a complete through line from token spend on the inputs business impact at the very end, just getting much more sophisticated about the cost accounting. I think that's something that you'll start seeing in a lot of companies. I think a lot of companies have had a real budget shock in the first 2 quarters of this year. blowing through token budgets in the first few months. And we're not in the -- at a stage where we want to reduce the spend. We still want to increase the spend, but we want to make sure that for every incremental dollar we spend, we can point at the I think there's -- we've just scratched the surface on what we can do with velocity and productivity there.

I just want to point out that this year, we're going to produce at least $821 million of revenue. In 2023, we produced $293 million of revenue. We have the same head count today that we had in 2023. So when Gabe talked about going all in our whole product based on AI dating back many years to really going all in operationally in 2023. It's no coincidence that you're seeing the massive efficiency gains that we've had on the back of not only just great work from the humans that we have working for the company, but a lot of really good technology like AI that we've plugged in as well.

Craig Hettenbach with Morgan Stanley. Two questions. First, on migraine, really strong numbers out of the gate. 3 million lives and 300-plus customers. How are you thinking about go-to-market, whether it's marketing, just driving awareness to build further momentum. And then second question for Gabriel on AI, just to dig deeper there. I know the company likes to remind people that you're doing a lot of this stuff pre-cat GBT to stay ahead of the curve. Technology is moving really fast. What does some things top of mind for you to kind of continue to stay ahead of the curve.

So from a migraine standpoint, it's become a very easy conversation with our existing clients. So we've done a number of expansions over the years. Dan, correct me if I'm wrong, we're the first 2 joints that hip and knee.

Knee and back.

Knee and back, added hip, elbow, shoulder. You may recall women's petichealth. So we've been expanding the different pathways of our solution. And so our clients are kind of in this rhythm of what's the next thing that you're bringing out for us to adopt. No contract changes, just yes, we'd like to add this tee that up on the back end. We begin the communication strategy. And as members enroll, we onboard them into the migraine program. So it's a pretty frictionless process for existing clients. For net new clients, it just gives us something new to talk about as part of our growing platform.

And I think we were all excited about migraines, but probably just very surprised at how much more excited the buyers have been in terms of is a huge problem and both financially, but also from a personal standpoint, the amount of anecdotes and stories that we hear in these meetings, like you heard this morning we hear throughout our days and weeks on the migraine front.

And I think just to add to that, we're also hearing like relief from our clients, I think you get migraine through us. they were not looking for a stand-alone migraine vendor, and that's probably 1 of the reasons there hadn't been enough adoption. And the more products we launch, the more likely or future products will be adopted as well because clients like the idea of consolidating with the vendor. It's been a theoretical item in the past because no 1 vendor had market-leading products across multiple indications. We've developed a brand with our customers.

We hope to maintain that brand that when we ship something, it's at a very, very high quality and that they could trust that our products work that they improve outcomes. They deliver great experience for their members that their members love it and that they're going to save costs. And we want to maintain that brand, which allows us to get more and more products approved over time.

What was your second question, do you...

Just the AI for Gabriel.

Just the AI?

[indiscernible]

The answer is yes. The question is to restate that, kind of like what we're excited about what we're looking forward to with AI next year. So I would say 2 big buckets. I'm focusing on more on AI in the product experience for now. versus democratizing AI internally. Right now, it's still somewhat specialist skill sets, some of the systems require certain expertise to work with -- so while we're doing great work in this, it's still somewhat limited to 2 specific teams that are working on this. So something that I feel very passionate about is making it just a standard part of every team's toolkit.

In the same way that we have full stack teams, they can work on our back-end services and on a mobile app, I want every team to be able to add both generative AI as well as traditional ML to this full stack. Every team should be able to work with this. And probably the biggest thing that we're investing in for that is our member data platform. That means ensuring that every piece of member data that's important to us flows through our system is real-time events, they get aggregated in real-time process is something that agents can understand so raw exercise therapy, completion events get translated into a string that says this member has completed 3 exercise therapy sessions this past week, something that an agent can reason about.

And at the same time, from a traditional ML, these Roy events get transformed in real time into what's called features, which basically just means it's a piece of information and ML model can use to predict things. And we want to make that really, really easy where this complete, well structured and real-time member context is available to every single team on tap, making it very, very easy to build ML models to build agents themselves. For example, a design partner with Databricks, our data platform vendor on some of the new real-time MLN Friends products that they're working on which I'm very excited about.

So again, like democratizing and making this available to every team to build into their products. The other thing that I think is going to become really interesting is this multimodal convergence, right? We have ML that does personalization of the member experience. We have computer vision, AI that sees what the member does. We have conversational AI with Robin. And you can start all of these starting to fit together. Where you have an AI system that can see you, that can talk to you that can customize careful, you get care for you. As those different strands of AI start coming together. I think that will make for really, really rich and compelling member experiences.

Yes. Yes, I'd just like to add, along those 2 lines. I think every member of our product team and our design team has ship code at this point and then the predominant feeling that everybody has had afterwards was, wow, this was a lot easier than I thought it was going to be. And now I feel much more empowered to go build things by myself. So it's -- and we've seen a lot of PM and designers. PM and designers really like embrace that type of attitude and just start being more like full stack builders which is, I think, a good direction to go into for the industry as a whole.

And then I think the theme that we're starting to move into and I think a lot of other companies are moving to in terms of AI, it's just like seeing a lot more diversity in the different types of AI that get blended together into 1 like coherent system. So we have CV. We have standard traditional reinforcement learning. We have LLM, agent -- there's a lot of ways in which we can actually string those together into 1 experience. So we can take reinforcement learning to figure out what might be the next best action that we want a member to take. We can use CV as the eyes to help a member understand what is like going on in their context.

We can use Robin, LLM and identic AI in order to actually have like conversations with the member in order to help them go take that action. I think this combination like hybrid approach of pulling all these things together on top of this member data platform is the very most exciting thing in terms of like where we want to go with AI and the product.

Overall that whether Careful on the terms you used for -- because they're protected terms, but an AI that can deliver care and the limitation in the future will be licensure. We'll be medical bodies who are essentially you're creeping up on what their capabilities are, but the AIs will be able to automate all connate tasks. That is all nontouch aspects of health care will be automated. Ordering medications, ordering referrals, interpreting imaging, all of that, we're moving to not just hinghealth, but the field overall, which is really exciting.

Ryan MacDonald with Needham and that was a pretty smooth pass from Bianca and some acrobatics back there. Appreciate it.

Maybe for James and Jeff, as I think about sort of the drivers of member growth going into 27, I'm trying to understand maybe how you're thinking about HingSelect relative to migraine. I want to in select obviously, smart starting smaller from a cover to live perspective, but I can see an instance where with Hinge Connect, you have access to all of the existing in-person PT employees with your customers and maybe that yield could go to 9% right away. So are there any gating factors there and why a client wouldn't immediately move their existing in-person PT?

And then on the migraine side, like -- what kind of magnitude of uptick would you expect from a yield rate? Can you just remind us on sort of new supplemental products if you expect sort of that it goes right to that 4% blended rate right away? Or if it starts is like a traditional ramp of the 1% to 2% to 3% sort of thing.

Do you want me to go? Yes. Okay. I'll start, and Jeff can correct me if I veer off course here, which is what he's really good at. Yes. I mean, so 40 to 50 basis points has been our historical trend for adding. Do I think we potentially get more than that next year on the back of if you just look at yield on the back of in-select customers starting to come on and migraine, yes, there probably is an opportunity in '27 to see that go beyond 40 to 50 basis points. You kind of expect that. If our normal business is cranking out 40, 50 basis points, and then we add something extraordinary like migraine, that adds a little bit of a kicker on top of that.

I'd say over time, and I think it was even on 1 of the slides here, we see migraine adding at least 1% to 2% in yield. That's not all going to come in 27, of course, but over time, call it, time being 4 to 6 years, that should be accountable to something in that range. And then the number Jeff gave on the slide was over time, we get about 5.5% of our population coming into use us in some way, shape or form because of Hinge Select.

Again, that's over time, not going to happen all in 2027. So I think 2027 -- if I boil that down, 2027, shows progress towards that accelerating yield number. Maybe it's not the typical 40 although 40 to 50 points is pretty awesome. I mean that's a big number already.

Yes, that's right. That's right. That's right. Yes. But yes, you'd expect as we're marching towards the 9%, how do you get from 9% to 15%, like these are all elements that help us get there, no question. Anything to add? Steal out thunder. [indiscernible] quoted his slide.

Scott Schoenhaus with KeyBanc. Just wanting to drill in more on to Hinge Select. So you've talked about the $300 per member revenue contribution. I'm assuming that the take rate for surgery would be a little bit lower than maybe the take rate on in-person PT, given the just amount of dollars. So kind of want to drill into that for more color. And then is there a room for negotiation to take rates up with providers over time as you're providing them with more consistent volumes.

Great question. And the take rate were -- is not from providers so much as there's an admin fee that is charged to the employer, and we negotiate rates strictly with providers at a lower rate. And even with our admin fee charged to employers, it still delivers to the employer a substantially reduced rate. And it's -- we try to just -- to be simple, we keep the admin fee as a percentage of total claims, is consistent, whether it's an MRI or a PT visit or a steroid injection or surgery, it's very consistent the admin fee.

[indiscernible]

Yes, possibly. Yes. We're more interested in getting new lives and driving more providers in the network and more overall utilization. And in the future, that could be a toggle for us to drive more revenue for Hinge Select. But it is not top of mind at the moment, but it is a potential toggle in the future. I think our admin fee is competitive right now. And -- but the main goal would be putting it all together, having digital care, in-person care and driving a lot of recurring usage there. Great question though.

Stan Berenshteyn, Wells Fargo. Just maybe going back on adoption yield. Obviously, you're rolling out a lot of new products, new services. I'm just curious, are you finding it easier for are to drive awareness with existing members that already use the platform or with new members that are coming online and now they're aware of all these products and services. Like where is it easier to drive engagement?

We're early days with migraine. And you mean in terms of driving new enrollments for like our new products. Early days for both our existing members know us the best, and we're able to market directly to them. Their [indiscernible] already assigned member -- signed up member and we're making it easier than ever for them and we can make it easier still for them to switch between programs. And -- but for migraine, one of the biggest interest level was from existing members to sign up and us making sure that they could quickly add migraine to their existing program. So they could do migrate an MSK pain concurrently.

So we're seeing both of those. And we've structured our subscription model as well for employers, such that it's all the same subscription. So they don't necessarily pay a separate subscription fee to do migraine and back pain and women's pelvic health together. Obviously, the ASP for that individual member or the total fees for that individual member might go up but they don't pay an additional enrollment fee, and it's one of our -- the value adds we give to our customers. It's kind of all you can eat. And every time we add a new program, it just enhances the value of that subscription, and we want that flywheel to keep spinning.

This is Vikram Kesavabhotla with Baird. You talked about engagement being a key metric that you follow and the basis for some of the redesigned app experiences. So can you talk more about what you're observing there, whether it's frequency of log-ins or time spent or any other metrics that you follow? And just how that behavior across your member base has evolved over time.

Yes. Great question. So we look at engagement in many different ways. So how quickly it takes someone to onboard and get started in the app, how often they come back how many activities they do in terms of -- at different intervals. So in the first week, second week, third week, fourth week because we do look at engagement across cohorts so that we see if people are not just engaging in a certain point in time, but throughout a point in time. And we also look at outcomes.

So we make sure that when people are engaging, they're also able to like tell us whether or not their pain is reducing or if they're like surgery likelihood is going to go down. So we look at all of those things as our like signposts leading up to what we call like engagement and retention. And then there's other like Gabriel talked a little bit about like features. These are the things that are like little micro events that we track that tell us what's going on with the member. And we have a wide variety of other features that we like log and look at.

So whether or not people are skipping their exercises, if they're completing their default exercise therapy session, how long and how often are they using their Enso. These are all like variants of different like features that we might look at that give us a little bit of a ladder up to like overall engagement and retention. You'd also mentioned time spent. So I come from consumer tech where time spent is something that is a very good indicator of whether or not you're doing your core job well because consumer products it is about like getting people's time and attention and using it as much as possible.

Time spend is a very poor indicator of performance for us. for several reasons. One is that Enso, which is 1 of the key differentiators for our product, our hardware product does not like time spent calculations do not work very well with Enzo. You usually turn it on and then you go about the rest of your day. So it's a little bit different than when you're like maybe watching TikTok or Instagram or something. And then our goal is not to get people to just use the app to use that's sake. We are trying to get people to come in, do their exercise therapy, make it as painless and delightful as possible because if you've gone through PT, it's usually not incredibly delightful.

So we're trying to do our best and make it as delightful as possible. And then we want people to go about the rest of their day. So we're purposely not trying to get people to just dwell on the app. I think that creates like a much more like adverse incentives compared to what we're trying to do, which is ultimately drive outcome, value for our members and like value for our clients.

And engagement on a per member basis is up meaningfully year-over-year, and we've continued to do go up meaningfully year-over-year. And we look at that both not just enrollment, but while we're enrolling a record number of people, Linda's team is also ensuring that the number of exercise therapy sessions is also up meaningfully year-over-year, and we track that on a weekly daily basis.

Jessica Tassan from Piper. I appreciate all of the detail today. It's been really helpful. So maybe for Jim, can you just elaborate on the SMB sales initiatives, which are the most important? When did these sales initiatives like the TPA opt-out model launch? And just how should we think about the economics or sales and marketing expense for every dollar of SMB revenue versus enterprise kind of in light of these new commercialization efforts?

Yes. So I'll start with the last question first. The economics of SMB are very attractive. They tend to be standardized. There tends to be less incentives, less customization, less product feature requests. So the economics of SMB is really attractive. And it's encouraging to us as we see that market grow, the economics are accretive to the business. The question about what is kind of most impactful from an SMB strategy perspective. It would be hard to say which is most impactful. I think you heard about 3 or 4 major initiatives. Some is hiring. And so building out the SMB direct sales force, things like the self-serve model that we talked about for the trial experience program allowing thousands of more people to experience Hinge health for the first time in the buying process has been very important.

Our health plan relationships, this opt-out model that is not trivial for a health plan to agree to. And that is built on, again, years of demonstrated outcomes and trust where they go to the point where this is just how we operate and our clients are going to follow us in this way. And if you want to opt out, you can but this is how we operate. So that's a great tool or vehicle for us to get big chunks of lives, hundreds of thousands, millions of lives in 1 fell swoop. And so that's really exciting. And then just some targeted, again, and focused demand in the SMB, which we haven't historically. That's not a market where we spend a lot of energy and effort.

So the combination of all those things together is producing results again, pipeline is up over 100%. And I think you'll see it have a very accretive contribution to the overall business here in 2026.

One thing I'll just add to that. We also have a team internally in R&D focused on driving efficiency for the commercial team, building out tools and [indiscernible], in SMB, there's a big opportunity, right? We talked about the self-serve demo, where we're working on similar days for self-serve reporting, self-serve uploads of eligibility files and contact data, making all of the process totally streamlined and self-serve for the smaller clients so that it becomes viable without an enterprise customer success kind of motion after the close as well.

Got it. That's really helpful. One quick follow-up kind of unrelated. Can you help us understand how billing for members who are concurrently enrolled in migraine and MSK kind of works? And then just how migraine stands to potentially increase ASP over time.

I'll take the billing question. So engagement-based billing, which now the majority of our clients are on engagement-based billing, that's a billable session. You're engaging an [indiscernible] therapy session, you're engaging in migraine care and that would be looked at as a bill possession. So as Dan said, it's not a separate program with additional enrollment cost. It's just you're engaging in Hinge Health. And therefore, that triggers a billable exercise therapy session or a billable Enso session. And so it's really easy for the client to understand and say yes, too. And then as it relates to the impact of migrant ASP to be determined.

So I have 3 questions. First off is, do you have a separate way of marketing or handling spouses, independents versus the actual employee member Second question, and is it a greater challenge to effectively reach out or manage the spouses or dependents. And then now that you're offering surgery, does that kind of model the message potentially of here we are, we're trying to minimize your surgical costs, but now we're also perhaps not champion, but helping out with surgery.

And then the third one is like what's out of balance for Hinge, like with oncology be a bridge too far to help manage the costs and walking the employee through all the horrible decisions and events that they have to go through.

So I think I got all 3, but focus on the spouses and dependence on the plan. It is harder for us to reach them sometimes, but the product experience is no different. And sometimes we don't always get the contact information for the spouse when we get the e-file years are all the above 18 on the file because we treat adults 18 and plus. And we get everybody's name, data of birth, we get the contact information, but we often some only get the e-mail for the primary sponsor of the plan, which is typically the employee.

And so we have a little bit more work to do to reach the spouses, but they spend just as much money as the employee when it comes to health care costs and the employers just equally on the hook for both of their health care costs. And so for them, it's an industry inducible to us and our care team. Are you an employee or you're a dependent. And I think you'll meet many members today. I'd say they're almost half and half between independents and employees. And so -- and their engagement is no different. It's just we have to work a little bit harder to reach them and enroll them.

But we do get their home addresses, which does help when it comes to -- I got your third question. Your second question was I don't think there's a comp. Ultimately, our aim is to just to deliver the best care possible. We want to improve outcomes, have a great experience and reduce cost. I don't want to stand up here and say surgery is never required. I think Kaiser has published data and many others have published data that 1 in 2 MRIs, particularly for spine and lower extremities for must health indices are not indicated. But that means 1 and 2 are indicated. 1 and 2 elective surgeries often do not perform better than a coin toss in terms of outcomes and they don't perform as well as sham surgeries.

But there are some [indiscernible] that are very effective. And I think most orthopedic surgeons do operate appropriately. Overwhelmingly, most orthopedic surgeons operate appropriately and seek the best outcomes for their patients. And we do think that orthopedic surgeries are still vastly overutilized and overcharged. And you actually kind of saw it during COVID. When hospitals shut down they were losing a lot of money because elective surgeries drives such a huge operating profit. It is something like a 60% to 70% gross margin for the hospital, some of these surgeries.

And so there's a high financial incentive to do more surgeries, but there's a recognition that they're overutilized. But that doesn't mean that they should go down to 0. And so we want to make sure that if a surgery is appropriate, that we get you to the right surgeon. And we've helped clear you upfront, and then we feel clinically, it is appropriate that we could support you. And once we're on board, the heysurgery is the best option for you. We want to make sure you get baseline imaging if it hasn't already been done. And that you go to a reputable surgeon and who we've contracted with, and we have clear quality SLAs with to make sure that you have a very successful outcome. And so does that answer your question?

Okay. And then -- and the third one is what area may we not enter.

Specifically [indiscernible]

Yes. We -- we're not going to be -- we won't become an AI cloud provider. We're not going to be renting out our GPO.

[indiscernible] you guys can.

So that won't happen. But look, whether it's -- I tell people, if you forecast out 200 years from now, all of health care should be automated. If you get to the like Star Trek level of future. And now the real question is, what is the slope of that curve. How quickly could we automate more and more aspects of care. And I think health care in the next 2 decades is going to look a lot different in 2 decades after that, it's going to look a lot different. And how quickly could we continue to chip off areas of care to automate more aspects of it.

I guess I should rephrase it just slightly. Is migraine maybe doable because you're using maybe neck pain is a cause or a bridge to effectively helping reduce migraines. So with some other areas like ophthalmology or oncology, just be like, no, this is beyond our...

I think you're getting to an important point as you expand your products, where might you have the best brand permission today to collateralize. And we think about that a lot. The -- our customers are -- have a lot of needs and high-cost areas. -- and we don't necessarily have brand permission in all areas. And I think our reputation gives us maybe the benefit of the doubt for many areas. But we have more brand permission for certain areas. But as we expand, for instance, you could -- you're identifying something very, very strategic, migraine was a stepping stone away from musculoskeletal conditions because of the comorbidity with neck pain.

Now that we have a beachhead within neurology. There's a lot of stepping stones for migraine that were not necessarily obvious from neck pain or from MSK pain. And so every time we do a stepping stone away from MSK, we create additional opportunities for additional stepping stones where we're expanding the brand and the permission. So we would we are very much looking at additional areas within neurology that are maybe 2 to 3 stepping zones from MSK but only 1 or 2 stepping stones away for migraine if that makes sense. And so absolutely.

So using your oncology example, not on our road map now, but maybe in 10 years, there might be 1 or 2 stepping zones before we get in there. But we may eventually want to have an opinion on oncology and impact the care outcomes there as well as the cost, given how difficult it is. It wouldn't be a direct shot from MSK. Great question.

Elizabeth Anderson, Evercore. Can we circle back to Hinge to the surgery and imaging parts that you're adding on to Hinge Select? How long one, I guess, how long do you sort of see the process taking to build out the provider network? And if I think about it, in general, I'd love to hear a little bit more about how the economics there work? Is it similar to the to the hint select on the PT side. And if I'm an orthopedic surgeon and I might be reticent partnering with somebody who's trying to reduce my surgical volume by half, but maybe on a higher quality basis, like is that something you've encountered in providers? And how do you sort of bring them into the fold there?

When we contract with high-quality providers, they are already turning away patients who are not surgical candidates. And those are the types of providers we like to work with. And we're able to add a lot of value to these providers in other ways as well and that particularly for surgeons, there's a lot of prior auths and paperwork they have to fill out just to get a surgery approved. And from their perspective, there could be some [indiscernible] about that because, hey, I practice the right way. the reason I had to fill out these prior offs is because the bottom quartile surgeons have not been behaving appropriately.

And once you select for quality, you could kind of gold card your network. And therefore, when we do send you somebody, we've already preagreed that or predecided ourselves that they are appropriate, you don't have to ask us permission if you want to precede resurgery, no paperwork needed. We're going to send you high-quality volume, and we're reducing all of that administrative overhead that you might have to worry about. And when it comes to billing when you send us the claim, and we've agreed on a bundled fee. So we've agreed upfront, the surgery costs this much. We're not going to add a bunch of other stuff.

We've agreed very clearly and have clarity on the bill is how much surgery will be. And when you send us a bill, we're going to try to pay you within 2 weeks and often, we try to beat that to get to within 5 to 7 days even. And so you -- for you as maybe a small business owner running on ASC or a few -- as we're going to really -- or a PT clinic it's 1 or 2 or 5 PT clinics, we're going to really help your cash flow because we're not going to wait 90 days to pay you and certainly not 180 days, we're going to pay you fast. -- when you send us that claim, we're going to try to turn it around as fast as possible.

And then do you coordinate also with the employer's benefit plan if it's an ASO like they're insured with an ASO to like that PA that our PA is maybe better than their rate or something like that or...

They go to a select, we don't have to go through their main health plans PA. So it kind of opiates that. Great question.

We got Scott or David, and then we've got 1 more over here.

1 David Grossman from Stifel. First for you, James. Just it was a pretty big step up in your operating margin target model from where you were or where you think you're going to be, just -- is pricing an element of that? Or do you think you can just get to that 35% without incremental pricing just on normal growth and mix in the business?

Yes, the assumption there, yes, pretty much keeps ASP flat for the next foreseeable future. We do have some levers. I think as we see engagement start to spike up with things like migraine and Hinge Select, that does give us an opportunity to go back and see the ASP go up a little bit more, but I wouldn't count on much increase in the pricing there. I think it's really just coming from more lives and more yield from our traditional programs just driving higher top line growth and keeping our costs relatively flat over time.

2 Got it. And then as you continue to add new products, you're assuming more of the continuum of care. And I'm just wondering, longer term, at what point do you become a one-stop shop, if you will, for MSK. And if that's really the ultimate goal, what needs to evolve, if anything, in terms of pricing go-to-market or anything else I may not be thinking of?

Yes. So I would venture to say that we're pretty much there as now with the Hinge Select and add additional surgery, we should be able to meet the onwhelming majority of a client's MSK needs. So as Dan talked about, you create that domain expertise, you go very, very deep. You create capabilities then that can lateralize. But I think from an MSK perspective, we've come almost all the way there as far as being the sole MSK partner for a client needs. If you look at all the companies that somebody make contracts with today, and they may have an imaging COE, they may have a surgical COE, they may have a digital physical therapy provider. They may have a direct provider and person relationship. All those now become encompassed by our core product offering plus Hinge Select. So we're pretty excited about that.

What was the second part of your question?

To build on that, I think other than nonemergency MSK because you don't have an ER if you have a fall off ladder, you got to go to the ER, I think we're about 85%, 90% would be my estimate of nonemergency MSK spend that we could handle. And so you could stay with us throughout any sort of procedure you may need through like network. Obviously, we need to build network density but we have the capabilities and the and the procedures that we've contracted for to cover about 90% of nonemergency MSK spend.

Yes. And I think the second question was economics maybe pricing. And we've talked internally and maybe I'll let James discuss this. There's probably other metrics other than ASP that will start to make more sense because the revenue will look diverse. And so there's revenue per life or there's other, I think, metrics that will probably begin to make more sense than the traditional EY and ASP because of the scale and diversity of the revenue within a client base, but...

We don't want to change your metrics just yet. But yes, it's as we think about how 3 to 4 years, the revenue per life would probably be a more relevant metric in 3 to 4 years.

Final question over here.

[indiscernible] When you walk around the conference and you're talking to the consultants, employers, it is very clear that MSK is more top of mind than ever just because the costs have exploded. So your actionable TAM is getting easier than ever. Then when you think about converting that actionable TAM, your yield is improving 50 bps a year. You're cross-selling additional solutions like migraine, Hinge Select, so I know you haven't mathematically like disclosed this, but your sales efficiency has to be an order of magnitude better than it was even a couple of years ago, just as a result of the improvements you guys made, how the environment has turned out.

How do you think -- but at the same time, James, what you talked about is you've kept head count the same, you've gotten all these efficiency gains. How do you think about balancing sort of that tremendous sales efficiency and reinvesting even further into accelerating growth and investing in the head count of the sales team or maybe the self-serve solutions that you're putting out are so good that you don't need to do that and not all flows through the bottom line.

Did you say a tremendous sales efficiency?

Yes, exactly.

We'll have Jeff and [indiscernible].

It's always good to have my partners here. I have product and R&D talking about cost efficiencies. I've got AP talking about sales efficiencies, that's great. They've been trained well. tremendous. Yes. Great word. I think we can keep trying to do it all. I think we can keep trying to do it all. And I think one of the things we have had tuck-ins where we talk about investing in SMB.

We've had -- we're select -- we make select investments under the hood, but we believe that we can keep going with this and based on the momentum that you're calling out the energy that you're feeling here that we can continue to drive that growth pretty far in excess of the growth of the sales and marketing, keeping that sales efficiency tremendous.

Can I just add. It does help with you're selling to the same customers. And it won't -- like account management, for instance, an account manager managing a customer with digital physical therapy. We don't need 2 account managers want to manage the digital physical therapy in the migraine product. So like your client success efficiency goes up. We will eventually, as the revenue per customer goes up, probably we want to reduce the panel sizes of our account managers, we call them client success managers here just because as the revenue per client goes up, as you're adding new products, the need to retain those customers and the attention you want to give them goes up as well.

So it won't be like 0 additional investments as we add new products, but it's the same sales team selling migraine and digital physical therapy, same account management team selling [indiscernible] digital fiscal therapy. Same marketing team, marketing the 2, right? And we'll expand them, we definitely will not expand them linearly with revenue, which is what you're getting at. And so the sales and marketing should continue to, I think, get more efficient. I wouldn't call it tremendous actually -- with a small t, maybe. But I think we have more room to grow to become more efficient. And we want to continue to invest in sales and marketing, but it will not grow linearly with revenue.

So it's a great point. But same with the rest of the business, which is really nice, like tech support our care team will not have to grow linear will -- hasn't grown much. Well venture start growing again, but not linearly with revenue. because we've extracted so many efficiencies from our care team. But yes, tech support should be the same tech support team for digital physical therapy in migraine and product C that we may launch. And the team that does our enrollment that builds out our enrollment flow did just build out an enrollment flow for digital physical therapy for 10 years. Now they're building an enrollment full for digital fiscal therapy in migraine and so we're able to reuse those components as well.

So across the board, the business is being matrixed and being modularized to be able to serve all of these different products. And so it's becoming more efficient across the board.

Yes. I was going to give something similar to what Dan said, but he said it much more eloquently, but some evidences of that is that we've -- those efficiencies and just being able to take multiple products to the same buyer with the same person to make it easier and more cost effective. As the slide you saw from Gabe at the end where our R&D cost as a percent of revenue have gone from 37% to 14%. Probably we'll do better than that.

But the same chart for sales looks like 100% of revenue in that same period 3, 4 years ago, and it's trending towards 30% now. In the last 12 months, we've added a fairly decent sized team to go capture the SMB market. and or go deeper in the SMB market and an entire provider sales team. And even with that, we still managed to get much more efficient on the sales front because of all the reasons that Dan mentioned there.

All right. With that, Dan, do you want to say any final words to everyone.

No. Thanks for coming. We'll be around for the rest of the day if you want to come and you could -- the reason we try to be a transparent business. We want you to know what we would want to know if the tables reflect okay? And so we try to be intellectually honest. And so you walk up to any 1 of our team members. You can walk up to any of our clients here and your some members as well and ask them about the business and get to know the business, try not to ask some confidential financial information, you shouldn't know it, but please. But we try to be transparent because we want you to know the business and we want you to be able to invest for the long haul and we're definitely in it for the long haul as well. So thank you very much.

And thank you to the hundreds online watching as well.

Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health First Quarter 2026 earnings call.

[Operator Instructions]

I will now hand the conference over to Bianca Buck, Head of Investor Relations. Bianca, please go ahead.

Good afternoon, and welcome to Hinge Health's first quarter 2026 earnings call. I'm Bianca Buck, Head of Investor Relations. With me on the call are Daniel Perez, our Co-founder and CEO, and James Budge, our CFO. Our President, Jim Pursley, is spending this week advancing relationships with some of the largest state and local governments in the country, so can't be with us today. I want to thank everyone for joining us. As a reminder, this conference call is being recorded. All relevant materials are available on the investor relations section of our website. Today's discussion will include forward-looking statements, which are subject to various risks, uncertainties and assumptions. These statements reflect our current views and expectations regarding future events, including expected performance of our business, future financial results, and growth strategies.

While these statements represent our good faith judgment and beliefs, actual results may differ materially from those projected or implied. We undertake no obligation to update any forward-looking statements except as required by law. For a detailed discussion of the risks, please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2025. We expect to file our latest quarterly report on Form 10-Q in the coming days. All income statement financial measures discussed today are non-GAAP, except for revenue, which is GAAP. These measures should be viewed in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are included in our earnings release appendix.

With that, I'll turn it over to Dan.

Thanks, Bianca. I'm excited to share our first quarter 2026 results. We had a strong start to the year. Let me tell you why. I'll cover 3 things today. First, our Q1 financial performance, which came in well above expectations. Second, the launch of our migraine care program, our first expansion beyond muscle and joint pain, and a proof point that our platform can automate care delivery across multiple conditions. Third, where we stand commercially as we head into the sales season. I'll hand it over to James to go deeper in our financials and updated guidance. After that, we'll take your questions. Let's get into it. We delivered strong results across all key financial metrics this quarter, outperforming our expectations and demonstrating the continued strength of our business.

Starting with revenue, we generated $182 million in Q1, representing 47% year-over-year growth compared to $124 million in the first quarter of 2025. This performance came in well above our guidance range of $171 million to $173 million, showing the continued strong demand we're seeing across our client and member base. Our last 12 months calculated billings reached $770 million, up an impressive 52% from $507 million in the prior year period, reflecting the continued expansion of our member base and strong engagement with our platform. On profitability, we achieved a gross margin of 85%, demonstrating continued care team and hardware efficiency as we scale our platform.

Our operating margin was 25%, generating $46 million in operating income, exceeding our guidance range of $30 million to $32 million for the quarter. Our free cash flow performance was excellent once again. At $42 million, it was 10x higher year-over-year for a free cash flow margin of 23%. These are strong numbers, and they reflect something important. Our business is scaling efficiently. Our AI and automation investments are driving real operating leverage. We're serving more members, delivering improved outcomes, and reducing costs for clients, all while expanding margins. That's the triple aim in action, and it's also what makes this model durable in a world where every company is being asked what AI means for their business. For us, AI is an accelerant, helping us better deliver the triple aim whilst building a uniquely efficient business.

We've spent over a decade building the #1 rated digital MSK app, leveraging data from the millions of members we served to develop technology that automates over 95% of clinician hours associated with traditional PT. Combine that with our distribution, almost 3,000 clients, 60-plus health plans, PBMs, TPAs, and ecosystem partnerships, and we have a double walled moat, advanced platform capabilities on one side, difficult to replicate commercial reach on the other, and frankly, in the age of AI, when things are easier to build than ever, proprietary data and preferential access to clients is a recipe for outsized returns. James will unpack the financials in more detail shortly, including our raised guidance for the year. Let me shift to product and an expansion I've been waiting a long time to talk to you about.

Our vision is to use technology to automate care, transforming outcomes, improving experiences, and reducing costs. We've proven this in MSK. Over 2 million people served, 21 peer-reviewed papers with demonstrable outcomes, and the top-rated digital musculoskeletal app. Here's the thing: We've spent years building a unified platform for our core technical and clinical capabilities from enrollment to treatment, outcomes collection, member engagement, nerve stimulation, and more. Combined with a leading go-to-market motion, we're well-positioned to extend into adjacent conditions. This quarter, I'm excited to share that we're launching our migraine care program. Migraine is a form of chronic pain that shares neurological roots with the neck and spine conditions we already treat.

The nerves in the neck and head converge in a shared pain processing center, so not surprisingly, roughly 75% of people with migraine also have MSK pain. Our existing neck program members have already reported fewer migraine days and lower medication usage simply from engaging with our existing product. The scale of the problem is massive. One in six American adults has migraine, and the prevalence rate is twice as high for women. On average, migraine sufferers drive more than $16,000 in annual healthcare spend, over double that of people without migraine. Nationally, migraine costs U.S. businesses an estimated $78 billion each year and drives absenteeism and reduced productivity. Our migraine care program delivers 3 things. First, rapid drug-free pain relief using our groundbreaking neuromodulation device, Enso. What's more, we just received 510(k) clearance from the FDA to extend Enso into migraine care.

This means for many people, we could deliver drug-free migraine relief in minutes. AI-powered tracking that helps members identify personal triggers across environmental, lifestyle, and dietary factors. Proactive prevention through exercise therapy and clinically proven lifestyle guidance from our care teams, designed to reduce both the frequency and severity of attacks. Our Migraine Care Program will roll out later this month. The client response has been overwhelming. In just a few weeks, we've had over 125 clients adopt the program, representing more than 2 million eligible lives. Time and again, our clients mention that they themselves or a family member or someone they know is afflicted with migraine. We expect revenue contribution to be minimal this year, with a more meaningful impact beginning in 2027. But the real significance is what this demonstrates.

We didn't come this far with digital physical therapy to stop at digital physical therapy. Migraine is a compelling data point in the broader applicability of our platform. The clinical overlap is strong, our capabilities translate directly, and the speed of client adoption, over 2 million lives approved within weeks, underlines the credibility we've built with our clients and partners. This is exactly the kind of innovation that gets us excited about the decades of work ahead. We're building infrastructure to automate healthcare delivery across multiple conditions. Migraine is our next step, but it won't be the last. With that, let me now speak to our commercial progress. As many of you know, our sales cycle follows a predictable seasonal pattern.

The first half of the year is primarily focused on building our pipeline and nurturing prospects, and we typically close the majority of new clients during the second half of the year as employers finalize their benefits decision for the following year. This quarter, we created substantially more pipeline compared to Q1 2025, which gives us confidence as we look ahead to the back half of the year. The interest level from prospects continues to be strong, and we're seeing good momentum across our client verticals and markets. Our investments in the SMB space are also paying off, where we're seeing substantially more pipeline generated in that category than in years past. We also continue to win at record rates, and the competitive takeaway trends we saw last year have also persisted, which speaks to the strength of our platform and the value proposition we're delivering to clients.

Our Hinge Select offering is also seeing positive momentum. We ended Q1 with 4,100 provider locations, and we're also thrilled to share that we recently expanded Hinge Select access through 1 of our national PBM partners and 3 of the 5 largest national health plans by self-insured lives. We expect this to help accelerate client adoption during our sales season in the second half of the year. While I don't want to get ahead of ourselves, the fundamentals we're seeing gives us good reason to be optimistic. We expect the combination of strong pipeline development, solid win rates, and the added value we can now offer through our migraine care and Hinge Select programs to position us well for the foreseeable future.

With that, let me turn it over to James.

Thank you, Dan. Let me start by reminding everyone how our billings model works. Our calculated billings are driven by three key components: the number of average eligible lives multiplied by our yield, which is the percentage of those lives that actually engage with our programs, multiplied by our average selling price per engaged member. For Q1, our LTM calculated billings reached $770 million, representing an exceptional 52% year-over-year growth rate compared to $507 million in the prior year period. Revenue came in at $182 million, up 47% from $124 million in Q1 2025. This result meaningfully exceeded our guidance range of $171 million to $173 million. This revenue beat was driven by better-than-expected billings stemming from strong performance in both yields and lives.

On the yield front, we're seeing two continuing and encouraging trends. We are converting members from new clients at a faster rate, and our legacy clients are also growing yields. This demonstrates that our platform continues to resonate with members across all cohorts and that our AI-powered personalization and targeted enrollment improvements are driving real results. On the lives side, we've seen two beneficial drivers. First, as in prior years, newly launched clients have come in with more lives than we anticipated. Second, our legacy clients have also increased in size overall, suggesting no impact on our business from any AI-driven employee displacement. This increase in eligible lives speaks to the diversification of our client base across industries and the essential nature of MSK Care and employee benefits packages to create better outcomes for members and lower costs for clients.

Moving to pricing, as of the end of Q1 2026, around 80% of our contracted lives were using our new engagement-based pricing model. We expect this percentage to stay consistent throughout the rest of the year. Moving to profitability metrics, our gross margin for Q1 was 85%, up from 81% in Q1 2025. This 400 basis point improvement reflects our continued care team efficiency gains as we leverage AI and automation to serve more members without proportional increases in care delivery costs, all while sending Enso to more members than in prior years. We achieved strong operating leverage across all expense categories. Total operating expenses were 60% of revenue in Q1, down from 69% in the prior year period, demonstrating our ability to continue to scale efficiently as we grow.

This translated to strong profitability with $46 million in income from operations, well above our guidance range of $30 million to $32 million for Q1. Our operating margin was 25% compared to 12% in Q1 2025, an improvement of over 1,300 basis points year over year. Free cash flow performance was excellent at $42 million for Q1 compared to $4 million in Q1 2025. This represents a free cash flow margin of 23%, up from 3% in the prior year period, primarily driven by higher billings and improved efficiency. From a balance sheet perspective, we ended Q1 with $407 million in cash and cash equivalents. During the quarter, we continued executing on our share repurchase program, purchasing 2.5 million shares for $105 million.

Our diluted weighted average share count as of Q1 dropped to 82.4 million shares, down 2.5% compared to the ending 2025 figure. Our diluted net income per share attributable to common shareholders for the quarter was $0.45. Looking forward, based on our strong Q1 performance and strong outlook for the remainder of the year, we're raising the expected outcomes for all elements of our guidance. For Q2 2026, we expect revenue to be in the range of $194 million to $196 million, representing 40% year-over-year growth at the midpoint. For income from operations, we're projecting $47 million to $49 million for the second quarter or a 25% margin at the midpoint.

For the full year 2026, we're raising our revenue guidance to $798 million to $804 million, up from our previous guidance of $732 million to $742 million. At the midpoint of $801 million, this represents 36% year-over-year growth, up from the 25% previously expected at the midpoint. We're also raising our full year income from operations guidance to $205 million to $215 million, or a 26% margin at the midpoint, up from our previous range of $151 million to $156 million, or a 21% margin at the midpoint. Several factors are driving this upward revision to our guidance.

Average eligible lives for the year are expected to be slightly higher than what we previously shared, as we're seeing stronger than anticipated growth from both new client launches and expansion within our existing client base. Additionally, our yield is trending up to slightly north of 4% as both new and legacy clients are seeing better member yields than we initially projected. Of our guidance raise, approximately half is attributable to yield improvements and half from lives growth. The increase in our income from operations and margin expansion comes from two primary sources. First, the top-line outperformance, and second, some slower hiring than anticipated as AI has increased our efficiency across all operating categories.

We do still expect to catch up on hiring as we move throughout the year, and in the meantime, these savings give us additional operating leverage while still maintaining our commitment to investing and expanding our product portfolio and commercial reach. For share count expectations in 2026, we anticipate ending the year with 82 million to 84 million diluted shares outstanding, which does not include the impact of the continued execution of our share repurchase program.

Before I turn it back to Dan, I want to remind everyone that we'll be hosting our annual client conference Movement in Chicago on June 10. This year, we're excited to welcome analysts and investors to attend our inaugural investor track alongside the main conference. You'll have the opportunity to hear directly from leaders across our company and get to mingle with the people who make Hinge Health a success, our clients, members, and partners.

You can register on our investor relations website, where we also just uploaded an agenda, and we'd love to see you there.

With that, let me turn it back over to Dan to wrap up.

Thanks, James. Looking at our strong Q1 performance and the trajectory we're on, I'm incredibly optimistic about Hinge Health's future. We're bullish on our business for several key reasons. First, our core MSK market remains massive and under-penetrated. We have a tremendous runway for growth even before expanding into new areas. Second, our expansion into migraine care and strong client demand in this space signifies that our platform can successfully automate healthcare delivery for other conditions. Our distribution affords us uniquely powerful paths to market, and we're deepening the value we deliver to clients. AI now lets us build faster than ever, but our distribution channels turn innovation into adoption at scale. Third, our financial performance continues to demonstrate the scalability and durability of our business model. We're generating strong cash flows, investing innovation and growth, all while returning capital to shareholders.

What excites me most is that we're just scratching the surface of what's possible. Healthcare remains one of our economy's last redoubts of manual labor, and we have the opportunity to transform how care is delivered across multiple conditions. Our vision to build a new health system that uses technology to scale and automate care delivery isn't just a long-term aspiration. It's happening right now, one condition at a time, and we're moving with urgency to extend our leadership position. Our journey is just getting started. We have decades of work ahead. I'm confident our best days are still in front of us. Thank you all for joining us today and for your continued support of our mission.

Bianca, let's open it up for questions.

Thanks, Dan. Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Saket Kalia with Barclays. Your line is open. Please go ahead.

Can you hear me okay?

Yes, we got you.

Okay, excellent. Great start to the year. Congrats.

Thank you.

Dan, I'd love to start with you and maybe dig into the migraine program a little bit. I'm curious, how do you think about the market opportunity here for Hinge in that market? I'm sure you went through some exhaustive testing there. What were some of your findings on sort of how effective Enso and sort of the combined offering was in addressing that problem?

Great question. Overall, our vision is to transform outcomes, experience, cost by using technology to automate care delivery, and we see migraine as just a natural extension of that vision. The clinical need for better migraine care is pretty overwhelming. 1 in 6 American adults suffer from migraine, yet there's only, like, 700 headache specialists in the entire country to serve tens of millions of people. Our early outcomes and member demand have been very strong. A big unmet clinical need alone wouldn't have justified our entry. We're also extending into migraine because our existing platform that we've built makes us very uniquely capable of delivering care well and at scale. You could see that with our 125 customers who have bought into migraine so quickly.

It tells us 1, the clinical need is as acute as we believed, secondly, our enterprise reputation and distribution are doing real work there. Just to underline for a second, distribution, because I think there's a lot of anxiety right now of AI disruption, whether it's software or healthcare specifically. Focusing on healthcare, the hardest part in healthcare isn't actually building the product, it's getting paid for it. We've spent a decade plus building a client base of nearly 3,000 logos, 60 plus health plan, PBM and other partner relationships. That's just not something a new entrant, AI native or otherwise, replicates in a quarter or even a year. That requires contracts, clinical evidence, trust, integrations built over time.

When you put that together, our migraine launch really sits on top of our clinical evidence base, which takes years to build our proprietary data, which is still compounding with every member, and our hardware that unlike software in the age of AI, isn't coming out of the tap. Again, the distribution mode I just mentioned. Those ingredients are really a recipe for a durable competitive advantage in our view, and you're seeing it show up in our free cash flow and our return on invested capital.

With regards to the outcomes we were seeing as well, 56% of people in our trial that demonstrated that their pain went down from severe or moderate down to mild or none, with at least one of our Enso waveforms. When we compared it to placebo, we were 1.9x more likely to reduce pain with our Enso device versus placebo device. We're seeing really, really strong impact. We submitted our packet to FDA in December. Really excited to get clearance from FDA in April of this year.

That's awesome. Super helpful and exciting outcomes. James, maybe for my follow-up for you, I'm staying on that topic, and maybe it's early to ask this, but how do you think about pricing for the migraine program just from a high level? I guess I ask that just because physical therapy has ongoing exercises through your, your device where this is kind of more Enso based. I'm curious how you would maybe compare and contrast the pricing models.

Yes. Maybe I'll give a few tidbits, and then Dan can add as well, because he's got some good insights there also. I would just remind a few of the comments we made in our prepared remarks, which is that in the models this year, don't expect a lot of revenue, but due in 2027. This is about getting signups this year. We've already got a number of clients, Dan mentioned over 125, with 2 million-plus members attached to them. Signups are going great so far. We think this sets us up well for 2027. And just generally more usage and more consumption with 80% of our clients now on the usage-based model or engagement model, however you want to think about that.

The more usage we have through Enso, connections for migraine or any other indications means more opportunities to build.

Yes. With regards to our billing model for migraine as well, just to dip in, it'll be the same as our digital physical therapy model. We want to keep things as simple for our clients as possible. As James mentioned, it'll be our usage-based model, 80% of our books already on it. You know, we have in-app treatment sessions for digital physical therapy, and in-app treatment sessions for migraine. For migraine, you're right that a lot of our treatment sessions are mediated by our FDA-cleared neuromodulation device, Enso. However, we also have exercise treatment sessions for migraine, as 75% of migraine sufferers also have musculoskeletal pain or comorbid musculoskeletal pain, particularly neck pain.

Overall, we want to make sure that those with a comorbid musculoskeletal condition could still be treated for their musculoskeletal condition, and those treatment plans will be blended. Our aim is to just have a bigger impact with our clients so we can improve their outcomes, experience and lower their costs.

Your next question comes from the line of Jailendra Singh with Truist Securities.

Congrats on a very strong quarter. It is very encouraging to see consistent yield improvement and outperformance now slightly north of 4% in the quarter. Given what you've seen, you've been seeing in legacy clients, as well as trends in new lives and all the impact from your initiatives, how do you think about the long-term view on where yields can get to? What is the ceiling there? Will that be dependent on you guys rolling out new programs like migraine, or you can achieve that with your existing offerings and solutions?

Great question. This is Dan. The way we see it is about 90% of people see a physical therapist in any given year. We think with better access, lower cost, that should be closer to 12% to 15% of people should see a physical therapist. After all, about half of us have a musculoskeletal condition in any given year. We are currently trending towards a little over 4% yield this year for additional physical therapy program. You can see where we're targeting long term at the low end, the 9% and we think we're expanding the TAM of people who could see a physical therapist.

Migraine, however, simply expands that opportunity while de-risking our ability to continue growing yield overall by giving us more shots on goal. Overall, what we're really chasing is clinical impact. We want to help more people every day with our care programs, we can transform outcomes, experience, and the cost structure.

Got it. My follow-up on the ACCESS, CMS ACCESS Model. Can you expand on what you needed to see to participate in that program? It seems the company had an intent to apply to the program, but ultimately decided against it.

Great question. Look, we applaud CMS's goal of expanding access to evidence-based care, and it's great to see CMS be entrepreneurial. You're right, we did not apply. We believe that the ACCESS program, as currently designed, will not deliver any aspect of the AAA. Moreover, it's structured in such a way as to necessitate the removal of any clinical oversight, putting one of the most vulnerable patient populations, in our opinion, Medicare, at risk. Even for employer populations who are a full generation younger, we provide a care team. Notably, we've had conversations with CMS. We're hopeful they'll continue to iterate and develop models that increase access to high-quality care for Americans on Medicare, Right now we will stay on the sidelines.

Your next question comes from the line of Richard Close with Canaccord Genuity.

Congratulations. Dan, I was wondering if you could put some added details on the commentary with respect to the pipeline being substantially higher, and then I have a follow-up for James.

Sure. We're seeing broad-based interest across several different client segments, from SMB employers to large enterprises. Our SMB segment, we recently hired several new reps, and they're delivering very strongly. The number of lives we've added to the pipeline in that segment in Q1 is up over 100% year-over-year. What's particularly encouraging is the interest in our expanded capabilities as well. Prospects as clients who haven't yet bought Hinge Health have been on the sideline or they're with a different solution, are very excited about our Migraine Program and Hinge Select, which gives us a lot more ways to add value and to start conversations with prospective clients. Again, our sales cycles haven't materially changed.

This is they still follow a seasonal pattern, where most decisions will happen on the back half of the year as it's happened in the full decade we've been in business. The quality of conversations has improved because we're solving more problems for our clients.

Okay. As a follow-up, James, maybe walk us through the eligible lives coming in higher than anticipated and then driving the guidance revision as well. How does that work? I mean, don't you know the lives, like when you're signing a client and is it just coming in with more lives, when all is said and done? Or how does all that work there?

Yes, great question. Let me break it into two. We're obviously, if you added, call it rounding to 5 million new lives last year, about 80% of our new lives coming into this year came from existing clients. Half of our upside in lives comes from those existing clients when they give us the new files coming into the new year. They just showed up with a lot more lives than we expected. Our clients are growing in headcount, and that's a great thing for them and obviously a great thing for us. Sort of goes against the narrative that everybody's getting rid of their employees. At least for our clients, it's the opposite right now. Then the other half is our new clients that come on board.

What we do is when we sign them up, we take an estimate of the number of employees, obviously informed by the people that we've done a contract with at the client. They'll give us an estimate of the number of employees, but we don't get the final count until we get their official files when we get into the launch sequence with them early in the year. We generally, we always have taken a pretty low estimate, just so we always come in above that. That happened again as we came to 2026. We got an estimate of what we thought those aggregate lives would look like for those new clients, when the final files came in, they came in quite a bit higher.

Your next question comes from the line of Ryan Daniels.

Congrats on the strong results. Thanks for taking the question. Just one on Hinge Select. Looks like continued momentum there, both in number of providers and covered lives. Can you talk a little bit more about what you're hearing in the marketplace about demand for that offering? I'd be curious about your intentions on expanding that to other areas like ambulatory surgery centers or even broader patient navigation opportunities.

Great question. I'll start with our focus areas on Hinge Select. Our key focus areas as we continue to invest in this program or this product is, one, improving the density of our provider network. We've hit over 4,100 provider locations. We want to get that substantially higher over the course of the year. Expanding access within our book of business, particularly making Hinge Select available via our distribution partners. We're very proud to say that now, through the top five national health plans, are allowing Hinge Select to be bought via our partnership with them and with our shared clients as well. We want to continue to expand that, the distribution of Hinge Select. It's also having a big impact.

We're seeing about 85% of members who are able to engage are able to move forward with conservative care. That is, they're avoiding low-value, high-cost care, imaging, procedures, elective surgeries, and these are the highest risk members to begin with, which is exactly the outcomes we're going for, and it really allow us to expand the ROI conversations we're having with our clients. It's one of the top discussions we're having with prospects as well as our existing clients, Hinge Select. We anticipate most of the pipeline that we close for Hinge Select will be in the second half of the year. Undoubtedly, it's a more complicated sale than migraine.

Okay, perfect. Very helpful. As my follow-up just as you look at the product expansion recently obviously the focus on chronic pain, you've now got the migraine program. It seems like there's a lot of correlation there to maybe broader behavioral health or mental health conditions, and I'm curious what your thoughts are on that as a potential expansion area or adjunct to kind of what you're moving into today. Thanks.

Great question. You know, our again, our vision is to use technology to scale and automate the delivery of care, and we think most care will eventually be amenable to care delivery itself will be amenable to automation. It's it's going to take many years, many decades even, to capture most of healthcare. We've $640-ish million of trailing twelve months revenue. We're only about 1% of the PT market in America. Itself is just 1% of total healthcare spend in America. We're 1% of 1%. We got a lot of growth to do, or growth ahead of us, within health. We're looking at our roadmap.

One of the few things I could say with confidence that is not at least in the near or medium term roadmap, is mental health, however. It's a crowded space. We're excited about the way it's evolving. There's a lot of other areas where you're almost competing with non-consumption. Neurology is an area that's vastly underserved, and that is long overdue care automation, and we're really excited about planting a flag here in neurology, as well as several other areas we're looking at. We're not saying never to mental health. The plans might change in 4 years, 5 years, certainly 10 years. At the moment, it's not on our roadmap.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open. Please go ahead.

Just have a question on the continued progress on member yield expansion. Any other details you can share, be it Hinge Connect, kind of effective marketing campaign strategies, just some of the things that are keeping that momentum going?

Sure. On new clients, we're seeing faster member adoption, which we attribute to a more fulsome, better product as they're launching with our latest product features from day one. This is combined with our improved outreach techniques, including our targeted enrollment initiatives that leverage our Hinge Connect data. For legacy clients, the yield growth is similarly coming from improved product and member experience. You know, we're capturing more members needing care while bringing members back at higher rates than historically we've seen, coupled with those improved marked enrollment initiatives. We really like these trends. That's why we're raising yield expectations to slightly north of 4%. You know, I do want to emphasize it's not just enrollment that's performing well.

We've invested enormously in our post-enrollment engagement because after all, if somebody signs up or enrolls but doesn't do their treatment, we simply won't have a good shot at improving their outcomes and reducing costs. Our post-enrollment engagement is performing really, really well. We believe it's trending 2 to 3x higher than second place, and that's where we're able to drive so much of our ROI for our clients.

Got it. Just as my follow-up question, you could see it in the numbers and performance in terms of the AI efficiencies that you're delivering. What's the confidence in the ability to sustain that? When I think about kind of the care team, it's been running roughly flattish. How are you thinking about AI and technology continuing to scale as your members continue to increase?

You know, we are investing in AI, like many businesses out there, up and down our organization. We're fortunate that 1/3 of our headcount already is in R&D, such that we have a lot of folks who are using AI in every facet of their job, day to day, and that's allowing us to weave that throughout the organization. In terms of our care team efficiencies, there's a lot more room to grow in terms of those efficiencies, but not just on our care team. You know, we're looking at a lot of other efficiencies for our cost structure. We also like where our cost structure is right now to begin with.

At an 85% gross margin, we're at the point where we want to continue to invest in the product experience and not just run up the score on gross margin. I don't think that's the right long-term decision for a business of our scale. We want to continue to reinvest in the product, inclusive of the care team experience, but reinvest in the product, even if that means treading water on gross margin moving forward.

Yes. Maybe I'd just add to that, Craig. I think as a reminder, we doubled the distribution percentage of our Enso devices in 2025 relative to 2024. We've said that we're going to send even more Enso devices in 2026. That's the competing factor against the care team efficiencies that sort of flattens out gross margin a little bit around 85%, maybe a little bit more room to grow there because of the care team efficiencies. We are going to be sending more Enso devices because it produces better outcomes and more opportunities to use our product. I think we said in a past conversation that the engagement in our product on the therapy sessions goes up dramatically more when someone uses, when someone uses Enso, which improves the ROI story there. A lot of, a lot more Enso coming out this year.

Where I do think there's opportunity still, quite a bit, is in the operating margin line. We've largely hit our target margins. If you recall back to our IPO, our gross margin target was 82% to 85%. We're already at the high end of that, and we're getting really close already to our operating margin. In fact, actually at 25%, we are at our operating margin target that we had. Well ahead of schedule. That is one of the topics we'll be addressing at the Investor Day at Movement. We'd love for everyone to come. We'll give an updated model, and you can sort of reasonably conclude there will be higher targets, at least at the operating margin level than what we have today out there.

Your next question comes from the line of Jessica Tassan with Piper Sandler.

Congrats on the results. We're looking forward to the Movement conference. I guess on the migraine product, I'm interested to know, how are you all delivering ROI there? Are you helping clients avoid prescription drugs? Are you helping mitigate some of that incremental $8,000 of average healthcare spend per migraine patient per year? Just how are you thinking about delivering ROI, and are you holding your new products to that same 2.4:1 ROI standard that we know is prevailing across the existing MSK product?

Great questions. Yes, you're right. A lot of the migraine costs are driven by peripheral healthcare costs of people with migraine. They're not sleeping as well sometimes. They're just not as healthy. If you could address their migraine, you could hopefully address overall total healthcare spend as well. You're also right to say a big component of direct migraine spend is these new migraine drugs that have come out, which by the way, we're not opposed to. These drugs are effective. For many people, they could provide very meaningful relief. However, they are very pricey. They could be $800 to $1,400 per month, these migraine drugs. They do not come without side effects.

By giving people a non-pharmaceutical option in their toolkit to address their migraine pain, our hope is that they it's a good complement to their pharmaceutical regimen, such that they do not have to use these drugs as frequently, and they could reduce costs overall on there as well. With regards to our ROI studies, we'll actually be hopefully publishing ROI studies in the near future on our impact for migraine.

Okay, great. Just second question would be on Hinge Select. As you guys go to the market with that product, during your selling season, can you just give us an update on how you're planning to kind of price or commercialize this offering? Should we think about it as increasing or as kind of one of the sessions within the existing ARPU number for clients within Hinge? Just how should we think about layering it into the model for '27 as you start to kind of accelerate sales heading into next year? Thanks.

Sorry, just to clarify, you're asking, like, how we'll model the impact of Hinge Select in our client base or our revenue model or?

Yes, exactly. Basically asking will a Hinge Select in-person physical therapy session just appear within that ARPU number and be priced effectively the same as an Enso session or a virtual MSK session into that?

You know, there is an admin fee attached to every in-person session delivered, whether we send them to in-person physical therapy or imaging or a doctor visit in person. There is an admin fee that is charged, and that is added to our revenue there for us brokering that in-person visit as part of our network. We're actually going to share a lot more about Hinge Select model at our investor conference at Movement as well. You're thinking about it in the right way, in that there is a certain admin fee attached. It's not a PEPM, it's only.....

Your next question comes from the line of Rishi Jaluria with RBC Capital Markets

Great to see continued strong execution of the business, especially given the uncertain environment, to say the least, that we're in. Dan, I wanted to start with you and continue on the migraine side. A really exciting announcement. Obviously a huge opportunity ahead. If you think about the incremental investments that you have to make there, maybe can you walk us through what do those investments look like? What does the timeline to get kind of quote "market ready" look like? For example, is a current Enso device ready for that, or do you need to kind of retool it, for to make it a little bit more migraine specific? If you think about marketing campaigns and driving awareness within your existing customers, what do those investments look like?

Help us understand some color there, and then I got a quick follow-up for James.

Great. Great question, and something we've thought a lot about, and I think more digital health companies are thinking about as they become multi-product companies. We've actually spent the last several years preparing for this moment. First of all, it's actually investing in our tech infrastructure and our key capabilities to what's determined in something now is called platforming your capabilities so they can be mixed and matched and used for future products. That's like platforming from your enrollment capability to your enrollment, or I should say your member outreach capabilities, your outcomes collection, your treatment conditions, or treatment delivery. Everything has been platformized such that they could be they become reusable components.

Migraine is the exemplification of that strategy, it largely leverages what we've already built. There are some new things that you have to build, I'd say 75% was already built in our infrastructure, which is really great. The long pull specifically for migraine, whereas as you point out hardware, that is always slower than software. We had a head start, it was adjusted for migraine, our neuromodulation device. Of course from there another long pull is our data gathering. From there, our FDA submission and discussion with FDA leading up to the clearance. We're always evaluating other areas where we could automate care.

We'll look for conditions with meaningful spend where we feel we could transform outcomes and experience at a fraction of today's cost. Ideally where we think we could move with haste. I'd say that the resources needed for migraine, it was very efficient relative to the resources needed to build digital physical therapy where it is today. We anticipate future products to be similarly capital efficient, given they will continue to leverage capabilities that we've already built.

Okay, got it. Super helpful. James, if we think about the growing portion of your customer base that's on the consumption or engagement model, so to speak. Can you speak a little bit about what are you observing in terms of metrics within your existing customer base? You know, be it, are those on the engagement model, do they exhibit higher yield, because there's maybe lower cost to adoption? Is it helping on the ARPU side as they get over that kind of 13-session barrier or break-even point I think you've talked about prior? Or is it even helping with landing new customer logos as well because the view of the startup cost is seen as lower? Maybe just help us understand what you've observed so far in your business. Thanks.

Yes, great question. All of those observations you made would be relevant at the client level, the benefits leader, the person making the decision on whether to go with the engagement model or the paid-upfront model. For the member that's actually using the product, they see no distinction. They probably don't even know whether the company they work for is on the consumption model or on the paid-upfront model. From a usage perspective, there's no distinguishable difference between the two.

I'd say it does help in our client conversations in that there's a lot of, I think rightful cynicism sometimes in the digital health space or healthcare space that products are built and sold to employers or sold to health plans or Medicare managed plans. There's not a lot of engagement, yet they're paying a case rate, right? They might be paying upfront for the case, and the case rate is there, or they're paying a PEPM, and the service provider isn't really on the hook to ensure people are actually using the product and getting better. What our engagement model demonstrates is our confidence that we will actually engage people, that we are not just going to enroll people, that people are going to use our product, and they're going to get better.

We put our fees at risk for ROI, we put our fees at risk for clinical outcome, and we put our fees at risk to ensure that people are actually using the product. The fact that other digital health companies, including MSK, have struggled to match this pricing model, which is so favorable of client-friendly and so many clients prefer the model. The fact that they've failed to match us really underlines the fact that they don't have the engagement that we do. You know, as mentioned before, we feel like we probably have 2 to 3x higher engagement on a per member basis than anybody else in digital MSK. You know, we build products that people want to use, and you see it in our numbers.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

Dan, you just mentioned it in passing in your prior comment. I was wondering if you could talk a little bit more about your MA and sort of full risk strategy. I know that's not as key as some other parts of the story. Still an important area of expansion for the business. Just wanted to hear sort of your updated thoughts on that and sort of how you see things going and the sort of plan into 2027.

Great question. We are, there's you could say in the U.S. there's 3 key groups of covered lives that we're targeting, your self-insured lives, fully insured and Medicare Advantage. Medicare Advantage is the area that is going through a lot of change right now. Original Medicare has been a particular Medicare Advantage. I think a lot of the sponsors in here have been going through a lot of change as well. We've been particularly focused on our self-insured and fully insured group. Our fully insured group, I think last year was up the highest it's ever been. In Q1 probably contributed more to new lives than just about any Q1 that we've ever had before.

We're also seeing strong growth in our federal plans as well, which is a separate subgroup of self-insured employers given it's a different decision-making process with federal. Yes, fully insured and ASO are growing very robustly, particularly fully insured. It really underlines, by the way, the ROI we're able to deliver. We forecast we probably have like a logarithm, more fully insured customers than second place in digital MSK. What we like best about a fully insured customer buying Hinge Health is that these are actuaries for a living. That means they've really looked at our numbers, they've looked at the ROI we're able to deliver, and they have underwritten the cost of Hinge Health for these fully insured lives.

That really is a powerful validation of our approach and our outcomes.

Your next question comes from the line of Brian Peterson with Raymond James.

All my congrats on the strong quarter. I'll keep it to one. I know you mentioned that you have 80% of customers on the new pricing model, and I thought you said that, that would stay about at the same rate. I'm curious, why wouldn't that migrate closer to 100%? Is there anything keeping that from a customer perspective? Just wanted to make sure I understand that dynamic.

To be honest, it's just status. Some customers will move slower, some customers will move faster. What we're seeing is that it's going to continue to tick up, but it's not like the biggest priority to change billing models for some customers. They have, like, they're changing their health plan, they're changing their PBM. Maybe they're trying to onboard a new mental health vendor, and to change billing models sometimes requires, like, legal input to update the contract, et cetera. It's just not the highest priority for some customers.

You can probably safely say, Brian, the last couple years after we introduced the model, which is last year and this year's selling season, close to 100% have come on under the engagement model. The legacy, some of those older clients, to Dan's point, it just hasn't been a top priority for them.

Yes, almost no new customer is on the older billing model. Almost all new customers are engaged in consumption model.

Your next question comes from the line of David Grossman with Stifel.

We will move on to the next question. Your next question comes from the line of Scott Schoenhaus with KeyBank.

I wanted to talk about the new Migraine program. I guess, Dan, you talked about, obviously you think 12% to 15% yield was your prior kind of ceiling. Maybe talk about where that is now with the Migraine program. My follow-up, I'll bundle it all together, is how do you effectively target these customers in this new program? You know, historically, you've leveraged claims data and EHR data. What else are you doing to target these people in your Migraine enrollment program?

Great question. For traditional physical therapy, again, about 9% of people see a physical therapist in a given year. That's relatively consistent across employer types. Some employers, a little more, some employers, a little less, but it's roughly around 9% of adults. Yes, you're right. Our opinion is that that's underutilized and that there is more demand and more need, frankly, for physical therapy in America than is currently being delivered, and that access is as constrained utilization for physical therapy. We also see physical therapy as high-value spend. The more you spend on physical therapy in America, whether it's digital or in person, by the way, the lower your downstream cost.

We would like to continue to increase or improve access to PT so that more people use it. For PT in particular, Yes, we'd like to expand the TAM from 9 to 12, 15. Migraine gives us a parallel path for traditional enrollments. Some will be enrolling in Migraine and digital physical therapy, some will enroll in only digital physical therapy, and some will enroll in just Migraine. Time will tell where our yields forecast, we'll share more at our investor conference in Movement and more over time. As it's a new product.

With 1 in 6 adults impacted by migraine about 20% of women, about 10% of men, we are confident that there is a large unmet clinical need there. Did I cover all the question or did I miss part of it?

Targeting. How are you effectively targeting? You know, for the PT patient, you've leveraged medical claims data historically and then live EHR data. You know, how are you targeting these people that have migraine issues?

It's similar. Pharmaceuticals is a little bit more of a relevant data point as well for migraine that is not always as relevant for physical therapy and musculoskeletal care. A lot of meds in musculoskeletal care relatively few people actually do receive opiates, so some people are just taking TYLENOL and Advil, which won't show up in the data. Obviously, it is over-the-counter, but some of these migraine meds are not over-the-counter, and so they will be showing up in the Rx spend.

It'll be very similar approaches that we've taken with our digital physical therapy product, both broad awareness for people suffering in silence or just going to a primary care physician, looking at claims, looking at pharmacy spend, as well as member to member enrollment or referrals. You know, basically leveraging all of our similar channels for driving awareness that we do for digital physical therapy with slightly more emphasis as well on Rx data.

Your next question comes from the line of Ryan MacDonald from Needham & Company.

Congrats on an amazing quarter. I've got two on the migraine, one for Dan and one for James. Dan, as you're talking to your clients that are already initially adopting migraine, the 125 thus far, I'm curious at what are those conversations look like as those customers balance sort of upfront, managing upfront healthcare costs with sort of ROI in the back end. Are they thinking about migraine care in a way where they're going to have clinical eligibility requirements? because when we look at the TAM, obviously it's a much smaller population that are sort of clinically diagnosed with migraine. Are they sort of, I guess, capping sort of utilization in the early stages as they experiment on it?

James, for you, given that Enso is sort of a core component of the migraine program moving forward, how should we think about the rate with which sort of Enso deployment grows within the member base as we start getting into next year and what potential impact that could have on gross margins over time?

I'll start on the migraine enrollment and the sales process. You know, when we're having very productive conversation with our employer customers. Overwhelmingly, when we speak to somebody, either they or somebody on the team or a spouse is afflicted with migraine. I've gotten more inbound from customers who are on LinkedIn since our announcement saying, "Hey, I'm impacted. How soon can I personally sign up?" Or, "My wife is impacted. How soon can my wife or my spouse sign up?" We really struck a nerve, a pun unavoidable, with our migraine care program. When we speak to our employer customers, there's a recognition that, yes, their costs have gone up.

In fact, I was in one conversation where they immediately pulled up their pharma spend and said this was one of their largest or fastest growing areas of spend. There's a recognition that this is an unmet clinical need that they have not been able to deliver good care for. There's a huge amount of dissatisfaction with the status quo. I think 3 in 5 people are dissatisfied with their current level of their migraine care, in particular because it takes them so long to speak to a specialist. There's a recognition from employers that when somebody does have migraine, whatever their job is, they are not going to show up to work that day. If they're working remote, they're not going to be very productive.

They're going to be in a dark room, with the door closed and not looking at a screen. Whether they're blue collar or white collar, they're pretty much out of commission for that day. There's a recognition of its impact on their overall employer or employee base. We've had pretty straightforward conversations. There is a need for ROI. There's also a recognition that their members or employees as well as the dependents on the plan, need access to better care. James.

Yes. I'll just add on to the second question, maybe just a quick reminder that when our cost of goods sold, about half of it comes from Enso cost and about half from the care team. Largely any Enso increases have been offset by efficiencies in the care team. We see that again in '26 and likely again in '27. Specific to your question, though, we did increase our Enso distributions in '25 by about 2x over 2024 as far as percentage of members that received it. I imagine this year we will probably bounce up again about 40% increase over last year, given what we're already planning plus migraines. You can imagine when we're planning this year, we already had an idea of migraines, it's not like something brand new to us in the last month.

We already factored that into our forecast for the year.

Awesome. Appreciate all the color. Congrats again.

For your final question today, we will go to Stan Berenshteyn with Wells Fargo. Your line is open. Please go ahead.

Maybe two quick ones for me. First, for the 20% of lives still on the subscription pricing, have there been any changes in pricing at renewal? I have a follow-up.

No. No. Short answer is the pricing has remained the same for on the upfront model for several years now.

Okay, great. On the pipeline, you called out Q1 substantially higher versus prior year. I think you also called out SMB as materially stronger. Is the sales cycle any different for SMBs versus maybe larger enterprise accounts? Any color there will be helpful. Thank you.

Sure, Yes. SMB, the sales process is much faster. It's just that smaller organizations make decisions much quicker, and it's just a much faster, more efficient sale.

Hey, maybe if I could just add, Stan. I just want to make a reminder. We talked about adding more capacity and more personnel on our SMB team a couple of different conference calls last year. For me anyway, I think it's just great to see that when we put our minds to investing, we make smart decisions on where to put those investing dollars, whether it's product to put out things like migraine or whether it's in the SMB space in our commercial side to drive more pipeline there. I think we're pretty wise around here on how we, how we choose to invest.

That is all the time we have for questions. I will now turn the call back to Daniel Perez for closing remarks.

First of all, thank you, everybody, for dialing in and for learning more about our business and for our investors who have put their capital into our business as well. We are, as you can see from our quarters, and our expanding product portfolio, we are not standing still. There's a lot of runway ahead. As I mentioned briefly, we are just 1% of 1% right now in terms of the total TAM that we believe we've tackled. It'll take us many decades ahead, but we're excited about the progress.

Hopefully you're going to see a lot more at our client conference Movement, where we also have our investor conference on June 9 and 10, as well as in the coming quarters as we share more products. Hope you have a good rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health's Fourth Quarter 2025 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions]

I will now hand the conference over to Bianca Buck, Head of Investor Relations. Bianca, please go ahead.

Good afternoon, and welcome to Hinge Health's Fourth Quarter and Full Year 2025 Earnings Call. I'm Bianca Buck, Head of Investor Relations. With me on the call are Daniel Perez, our Co-Founder and CEO; Jim Perse, our President; and James Budge, our CFO. I want to thank everyone for joining us today.

We'll be walking you through our Q4 and 2025 annual performance, sharing updates on our product innovations and commercial momentum and providing expectations for our Q1 and full year 2026 revenue and operating profit. As a reminder, this conference call is being recorded. All relevant materials are available on the Investor Relations section of our website. Today's discussion will include forward-looking statements with respect to various risks, uncertainties and assumptions. These statements reflect our current views and expectations regarding future events, including expected performance of our business future financial results and growth strategies. While these statements represent our good faith judgment and beliefs, actual results may differ materially from those projected or implied.

We undertake no obligation to update any forward-looking statements, except as required by law. For a detailed discussion of the risks please refer to our SEC filings, including our most recent quarterly report on Form 10-Q filed on November 7, 2025, and our annual report on Form 10-K, which will be filed in the coming weeks. All financial measures discussed today are non-GAAP, except for revenue, which is GAAP or as otherwise indicated. These measures should be viewed in addition to and not as a substitute for our GAAP results.

Reconciliations to the most comparable GAAP measures are included in our earnings release appendix available on the Investor Relations section of our website.

With that, I'll turn it over to Dan.

Thanks, Bianca, and good afternoon, everyone. I'm excited to share our fourth quarter and full year 2025 results and provide an update on our overall progress. 2025 was an exceptional year that demonstrated the power of our vision to automate health care delivery through technology. We delivered outstanding financial performance while making meaningful advancements in our AI-related investments and expanding our market reach to nearly 25 million contracted lives in the best year we've ever had.

Today, we will walk you through the following areas: First, I'll give you a high-level recap of our financial performance for the fourth quarter and full year, highlighting the continued momentum in our core metrics and strong finish to 2025. Second, I'll share some exciting product updates particularly around our AI initiatives that are transforming how we deliver care to our members as well as an update on Hinge Select, our high-performance provider network. Third, Jim will discuss our commercial progress, including the tremendous success of our sales season and some encouraging market developments.

Next, James will walk you through the detailed financials and our outlook for 2026 and lastly, I'll wrap up with thoughts on why we're so bullish about our business and our future before we open up to your questions.

Let me start with our financial results. We delivered $171 million in revenue for Q4, representing 46% year-over-year growth. For the full year 2025, revenue reached $588 million, up 51% compared to 2024. Our last 12 months calculated billings reached $671 million, up 44% compared to the same period in 2024. These results demonstrate the growing demand for Hinge health from our clients.

Our operational efficiency remains strong as well. Gross margin was 85% in Q4 and 83% for the full year 202 reflecting the scalability of our technology-driven care model. Operating margin reached 28% in Q4 with a full year 2025 operating margin of 20% demonstrating the impact of our investments in automation and how far along we are in achieving our target of 25% plus operating margin.

Perhaps most notably, we generated $62 million in free cash flow in Q4, representing a free cash flow margin of 36%. For the full year, we generated $180 million in free cash flow for an annual free cash flow margin of 31% and reaching the target free cash flow margin we showed at IPO much sooner than anticipated. In 2025, our performance on the Rule of 40 metric, which combines revenue growth and free cash flow margin was 81% for the full year and 82% in Q4, more than double of 40 standard. We anticipate significantly exceeding the Rule of 40 again in 2026.

To put our numbers into context, in the last 10 years, I think there's only been less than 10 other public tech companies with over $500 million of revenue, over 50% growth and 30% free cash flow margin. We're a very unique company and still on the first page of our story, poised to significantly expand our platform and market presence in 2026.

Before I dive into our product updates, I want to emphasize what drives everything we do at Hinge Health. We're using technology to automate health care delivery, starting with musculoskeletal conditions. This quarter, we surpassed 100 million lifetime member activity sessions with 41 million of those sessions completed in 2025 alone. Every session generates data that helps us improve our programs, making our care more effective for the next member. We build around the triple aim, delivering better health outcomes creating a superior experience and reducing overall health care costs.

The more members we serve, the smarter our platform becomes and the better we can deliver on all 3 of those goals. This quarter, I want to highlight 2 key areas where we've made significant progress. First, our AI-powered tools are transforming the efficiency of our care delivery while also improving our member experience. We've rolled out improvements that help our clinicians work more effectively and handle more members without compromising care quality. The results have been remarkable. In 2025, we served 47% more members while keeping care team costs flat. One major driver of this improvement was our successful rollout of automated AI-powered communications for routine messaging freeing up our care team to focus on higher-value human interactions where they can make the biggest difference.

This led to the average time our care team spends in asynchronous sessions supporting members falling by 28% in just 1 quarter from Q3 to Q4 2025. A key contributor to both our care team efficiency and member satisfaction has been Robin, our AI Care assistant. While still early in the rollout, members engaging with Robin are giving it a 92% positive rating, and we're seeing higher response rates compared to interactions with our human care team, an early indication of the trust and comfort members are building with these AI-driven experiences.

While we're driving these efficiency gains, our member NPS scores are at an all-time high. This shows we can deliver better care at a lower cost. Moreover, given our tech investments, we're currently planning to keep the size of the care team flat once again in 2026, this will allow us to invest more in the member experience, such as increasing the percentage of members who receive an Enso, notably when a member receives an Enso, their NPS score goes up meaningfully, and they complete about 70% more exercise therapy sessions because it's hard to do your exercises when in pain.

Second, HingeSelect, our high-performance provider network was available to several hundred thousand eligible lives in the fourth quarter. Multiple ecosystem partners have recognized HingeSelect's potential and included the offering in our co-selling agreements and we have major momentum with our health plan and PBM partners with 1 of the largest 5 national plans by self-insured lives already approving HingeSelect to be sold into their self-insured client base. And while it's still early in our launch, the data is promising. We're seeing a mix of member experiences, some do in-person physical therapy only, some do 1 or 2 in-person sessions then transition to our digital platform.

And most excitingly, we've had members who thought they were heading for surgery, but were able to avoid elective surgeries altogether after consultations with our orthopedic specialists. Notably, about 85% of HingeSelect members were able to move forward with a conservative care plan, most often digital physical therapy. This demonstrates HingeSelect can bend the cost curve. When you compare our data to commercial benchmarks, members that have used HingeSelect on average, have more good spend such as nonsurgical orthopedic evaluations and physical therapy and less low-value spend, such as imaging, procedures and surgery.

As a reminder, we're building what's essentially a two-sided marketplace, connecting members with high-quality providers. These take time to build. But once built, they create lasting moat through network effects. We're not expecting much revenue impact from HingeSelect until at least 2027, but we firmly believe that once scaled, this will become 1 of our most enduring competitive advantages.

With that, let me turn it over to Jim to discuss the outcomes of our sales season.

Thanks, Dan. As a quick reminder, our sales cycle aligned with corporate benefits planning, with most new contracts signed during the second half of the year as companies finalize their employee benefits packages. These newly contracted clients typically go live in the first half of the following year, creating a predictable cadence that underpins our billings and revenue growth model.

I'm thrilled to report that our 2025 sales season was exceptional. We added $4.8 million net new contracted lives to end the year at approximately 24.6 million contracted lives across over 2,800 clients. This represents 25% year-over-year growth at the client level and 24% year-over-year growth on a contracted lives basis. That breaks down to 22 million self-insured lives and 2.6 million lives across fully insured Medicare Advantage and federal employee programs, known as FEP.

Within the non-self-insured segment, we saw a 135% increase from the 1 million lives we had at the end of 2024, with the largest growth coming from fully insured and FEP. For many of our fully insured Medicare Advantage and FEP clients, we take a staged approach to roll out targeting partial population similar to a land and expand model. In 2025, due to our success and the strong ROI outcomes we delivered, we're able to unlock several existing fully insured and Medicare manage clients, bringing with them hundreds of thousands of lives and expansions.

On the enterprise side, our clients now represent 53% of the Fortune 100 and 45% of the Fortune 500. This demonstrates the scale of trust we've earned from leading organizations nationally, representing an enviable asset from which to bring our future products to market. Moreover, it shows the scale of white space remaining, given our roughly 25 million lives under contract is but a fraction of the approximately 25 million people in our cure markets. We end the year with an overall head-to-head competitive win rate at an all-time high, which speaks to both the strength of our value proposition and our team's execution. While the majority of our wins continue to come from organizations that are adopting a digital MSK solution for the first time, in 2025, we also saw a meaningful number of competitive conversions, where clients chose to move to Hinge Health from an existing provider. One notable example was a large enterprise with over 200,000 lives that made the decision to leave a competitor and partner with us in the final month of the year, reflecting the strength of our product breadth and demonstrated ROI.

Combined with our annual client retention rate of 97% in 2025, we believe this underscores the long-term value we deliver to our clients. This success is a testament not only to our product but also to our partners. We added additional partners in 2025 and now have more than 60 health plans, pharmacy benefit managers, third-party administrators and ecosystem partners. These partnerships provide validated distribution channels reduce the complexity for prospects to purchase Hinge Health and position us as the incumbent to win their other lines of business.

Notably, 3 out of 5 of the largest national health plans by self-insured lives now also offer Hinge Health to their own employee populations, 2 of which were won in 2025. This is a powerful validation of our platform's effectiveness and demonstrates our partners' confidence in our ability to deliver meaningful outcomes for their most important stakeholders, their own employees. Finally, this quarter, we published our 21st peer-reviewed research study in outcomes analysis. This study showed that participants in our chronic back program had 60% fewer imaging visits such as x-rays and MRIs for low back pain at 3 months compared to a similar control group. This peer-reviewed study published in the Journal of Health Economics and Outcomes Research reinforces our value proposition of reducing unnecessary medical interventions while improving outcomes.

With that commercial update, let me turn to James to walk through our financial results and outlook.

Thanks, Jim. Let's dive into our fourth quarter and full year 2025 financial performance. As a reminder, our billings model is built on 3 key drivers. Lives represents the number of people eligible for our program. Yield is the percentage of those eligible people who actually enroll and engage with us and price is what we charge per engaged member. When you multiply these 3 factors together, the result is our calculated billings, which is the foundation of our revenue model.

For the fourth quarter, our LTM calculated billings reached $671 million representing strong 44% year-over-year growth compared to $468 million at the end of Q4 2024. We Q4 revenue came in at $171 million, up 46% year-over-year from $117 million in the prior year fourth quarter and well ahead of our guidance range of $155 million to $157 million. For the full year 2025, revenue reached $588 million, representing 51% year-over-year growth over the $390 million in 2024 also coming in well above our guidance range of $572 million to $574 million and representing a cumulative 15% beat above analyst expectations at IPO.

This revenue outperformance demonstrates the continued strength in our underlying business fundamentals. The revenue beat was driven by better-than-expected billings, stemming from stellar yield improvements of over 50 basis points year-over-year from 3.4% as of the end of 2024 to 3.9% as of the end of 2025. We ended the year with 20.1 million LTM average eligible lives. This resulted in over 783,000 members as of the end of the year, a 47% increase from 2024.

On the pricing side, our average selling price stayed essentially flat as expected. As of the end of Q4, about 50% of our eligible lives had moved to the new engagement-based pricing model. Our high client retention that Jim spoke to, combined with our strong yield improvements were the main contributors to our net dollar retention being well above 110% for 2025. As a reminder, on net dollar retention, we believe anything above 110% is the measure of success for our industry. Moving to our operating efficiency. Our gross margin reached 85% in the fourth quarter. up from 82% in Q4 2024 and 83% for the full year 2025 compared to 78% in 2024.

This improvement was driven by continued care team efficiency gains enabled by our AI-powered tools, offset partially by the increase in the percentage of members that received Enso. We saw strong leverage across all operating expense categories. Total operating expenses were 57% of revenue in Q4, down from 64% in Q4 2024 and 63% of revenue for the full year 2025, down from 84% in 2024. Operating leverage translated to strong profitability and cash flow. We generated $48 million in income from operations for Q4, which came in well above our guidance range of $34 million to $36 million, with an operating margin of 28% compared to 18% in Q4 2024.

For the full year 2025, we generated $119 million in income from operations with an operating margin of 20%, a substantial improvement from negative 7% in 2024. We Free cash flow performance was exceptional. We generated $62 million in free cash flow in Q4, representing a free cash flow margin of 36%. For the full year, we generated $180 million in free cash flow compared to $45 million in 2024 with an annual free cash flow margin of 31% compared to 12% in 2024. For all of 2025, we generated $2.12 of free cash flow per share using our Q4 diluted weighted average shares outstanding of $85 million.

I'll remind you, as Dan did that in our May IPO, we set a target model for ourselves for a 30% free cash flow margin, and we've already achieved it only 7 months after becoming public. We ended the quarter with $479 million in cash and equivalents compared to $497 million at the end of Q3. Our strong cash flow generation was offset by the amount deployed through our share repurchase program announced in Q4.

As a reminder, in November, our Board authorized a share repurchase program of up to $250 million that we expect to execute as market conditions warrant. In Q4, we repurchased 1.4 million shares for $65 million. And speaking of shares, as we move beyond our IPO year and diluted share counts normalized in 2026, we will now also begin reporting earnings per share. Our diluted net income per share in Q4 with now normalized share counts was $0.49, which we believe highlights the earnings power of the business as we head into 2026. The overall trend in our financial results reflects the scalability and efficiency of our business model. As we continue to grow our member base and deliver outstanding member outcomes and cost savings to our clients, we are delivering top and bottom line performance.

Looking ahead to 2026, I'm pleased to provide our guidance for the first quarter and full year, which reflects the strong foundation we've built and our continued confidence in the business. For the first quarter of 2026, we expect revenue to be in the range of $171 million to $173 million, representing 39% year-over-year growth at the midpoint. For non-GAAP income from operations, we're projecting $30 million to $32 million in Q1 or 18% margin at the midpoint.

As a reminder, our margins are typically lowest in the first quarter of the year and dipped down from Q4 given the costs incurred to launch new clients while the full revenue benefit has yet to be realized. For the full year 2026, we expect revenue to be in the range of $732 million to $742 million which represents 25% year-over-year growth at the midpoint and is $39 million higher than the current sell-side estimate consensus. For full year non-GAAP income from operations, we expect $151 million to $156 million or 21% margin at the midpoint, which is $18 million higher than the current sell-side estimate consensus and represents a 100 basis point improvement over 2025 despite all the meaningful investments we expect to make in 2026.

Several key factors are driving our 2026 outlook. We currently expect average LTM eligible lives for full year 2026 to be 24.4 million lives. This forms the baseline for our financial guidance with the growth coming from the new lives we already won. While our guidance today assumes a flat yield, we have a clear road map to continue driving incremental improvements over time. We remain well below the roughly 9% of U.S. adults who see a physical therapist, which we view as a realistic long-term benchmark with an opportunity to close and potentially surpass over time with our easier to access and lower cost of member solution.

On the pricing side, we expect our average selling price to stay essentially flat. We're viewing 2026 as a year to incrementally invest given the strong margins we achieved in 2025. These include head count investments in research and development to accelerate our new product initiatives as well as targeted investments in sales and marketing to support in select expansion and accelerate our growth in the small and medium business markets. These investments position us to capture the significant long-term opportunities we see ahead. At the gross margin level, any further improvement we see from our AI efficiency tools for the care team will likely be mostly offset by broader Enso deployments.

Given this, we anticipate around 100 basis point improvement in 2026 over 2025. As we move beyond our IPO year, we will transition to discussing GAAP-based weighted average diluted shares rather than the total diluted shares granted and outstanding. For 2026, we expect our GAAP-based diluted weighted average share count to be in the range of 85 million to 87 million shares, excluding the impact of any additional buybacks. And a further word on GAAP, we believe GAAP profits are important and expect to be GAAP profitable in 2026 as we were in Q4 2025.

Our annual dilution from stock grants has declined each of the last 3 years, and we expect to manage to a further decline again in 2026, before I turn it back to Dan, I want to highlight an exciting opportunity for our analyst and investor community. We are hosting our annual client conference movement in Chicago on June 9 and 10, and we're launching our inaugural investor track. You'll hear from some of our leaders and mingle with those who make Hinge Health success, our clients, members and partners. Please reach out to Bianca after this call to express your interest in attending. The combination of our commercial momentum robust cash generation and strategic investments positions us well for the continued growth and market leadership. And we look forward to sharing more results in the coming quarters and at the investor event at movement.

With that, let me turn it back over to Dan for some closing thoughts.

Thanks, James. Looking at our results this quarter and the trajectory of our business, I couldn't be more excited about what lies ahead for Hinge Health. 2025 was an exceptional year that demonstrates the power of our vision.

We launched HingeSelect, our high-performance in-person provider product and added thousands of providers to our network. We introduced new AI-powered care tools that are driving deeper personalization and quality for our members and efficiencies for the business. We grew our reach to 25 million people across over 2,800 clients spanning every industry you can imagine, manufacturing, retail, hospitality, tech, public sector and more.

And of course, we began trading on the New York Stock Exchange, embracing the high standard of public accountability that comes with it. The momentum we're seeing across every aspect of our business reinforces my conviction that we're executing on a generational opportunity. Our platform is becoming more intelligent with every interaction powered by the proprietary data we've built across more than 1.5 million members and over 100 million sessions insights that allow us to deliver a complete clinically proven offering that now extends from software and connected hardware into high-quality in-person networks.

At the same time, we've spent more than a decade building deep trusted partnerships across the health care ecosystem, embedding ourselves with health plans and employers who value working with a proven market leader in a highly regulated outcomes-driven space. The compounding impact of these investments is clear, higher member satisfaction, stronger clinical outcomes and durable client retention, all working together to drive long-term growth. As we look ahead, I'm energized by the breadth of opportunities in front of us, we have a clear road map to expand our impact, the financial strength to continue investing in innovation and a team that's proven we can execute at scale.

The health care system needs what we're building, and we're just getting started. Thank you for joining us today and for your continued partnership. With that, I'll turn it back to Bianca to open up the call for your questions.

Thanks, Dan. Operator, you may open the call for questions.

Thank you.

[Operator Instructions]

And your first question comes from the line of Ryan Powderly gross with Barclays. Okay.

GreatRyan Powderly on for SacaCalia Barclays. Congrats on the strong finish to the year.

Dan, maybe for you, just to start off. We've seen a lot of software stocks responding negatively to fears around AI, potentially being able to replicate what these companies can do. How do you think about Hinge's moats? And how would you respond to that view these days?

Great question. Thanks, Ryan. Since the start of our existence, we always had potential new entrant threats, either large tech companies, incumbent health care companies or new start-ups. But we've started those off and throughout because our competitive advantages go well beyond just a code base. Those amendments include our proprietary data, our distribution channels, a product experience that extends beyond software and our clinical validation.

So start of our product -- our proprietary data. Even if open AI and Gemini script to the entire Internet, they have not conducted 100 million treatment sessions that we have. Simply put, we may have the largest and most granular data set from SK conditions in the entire world. Two is our distribution channels. We've spent a decade building deep relationships with health plans, PBMs, employers, this requires not just work on our end, but substantial work on their end.

And three, is that our chronic experience extends beyond software to also include hardware and in-person care. When it comes to automating health care, you won't do it with software alone. You're going to need hardware as well as in-person care elements. And fourthly is our clinical validation. You could build some apps in a day or build some apps in a weekend, but a 2-year outcome study still takes 2 years no matter how much AI you put into it.

So look, we're incredibly excited about AI and believe we have a meaningful entry barriers that extend well beyond software development.

Excellent. That's super helpful perspective then. James, maybe my follow-up for you. Very helpful color around half the base using the new engagement based pricing model. since a bigger portion of the base is now utilizing this, can you just recap for us when you typically see engagement levels hitting their highest billable milestones and how the shape of revenue recognition differs from the old model, if at all?

Yes. Yes. Thanks, Ryan, for the questions. And we're delighted it's gotten to 50%. We think it aligns interest between us and our clients really well. And we see that 50% ticking up a little bit as we move throughout 2026 as well.

So to your question, the upfront model, obviously, on the billing side, you would get paid mostly upfront. Maybe there are some delayed billings occasionally, but you would have gotten built out the door on day 1. Now the bills are going out as the usage happens, which, as you can imagine, someone who has something ailing them they want to solve it as quickly as possible. So it usually extends over a 2- to 3-month period instead of build up front.

So a minor difference in when the cash or when the bill goes out, the cash comes in from a revenue recognition perspective, the revenue starts on day 1 of the treatment, so under either method. So it makes no difference on the revenue side.

Your next question comes from the line of [indiscernible] Singh with Truist.

Congrats on a very strong quarter end to the year. I would ask about yield, which was 1 of the key drivers for the outperformance in 2025. you guys are expecting is to remain flat in 2026. Maybe talk about puts and takes there. You did say that you have a clear road map to drive incremental improvements. But maybe talk about some initiatives you're putting in place, which could drive up cycle and metric.

Good question. Thanks, [indiscernible] And you're right. Our go-forward forecast, you could see that lives have been inputted into that, but we've been -- we're assuming a flat year-over-year yield. But we had a great Q4 and particularly with regards to our member enrollment to our enrollment yield. And 2 key drivers we're talking about. One was our continued investment in product-led growth, which has helped us very efficiently enroll, engage and between members.

We have evergreen investments in product-led growth that are constantly landing singles, doubles and the occasional home run, which we -- which we hope to talk about maybe in our next earning call, but second was enrollment efforts. These are enrolling members based on their prior claims history. And that ended 20 over 160% year-over-year. And our target enrollment also helps us substantially improve the ROI we deliver for our clients and partners because these are what we call ROI rich members. So we view yield improvements overall, as a continuous long-term investment rather than the result of any single initiative. And so the progress will continue to be driven by a portfolio of efforts and that creates more durable and resilient system. And our strategy design that overall performance doesn't depend on any 1 initiative to deliver results.

You saw in Q4, a lot of these initiatives came together very effectively, and you could bet in 2026. We've got several dozen additional things we're working on, again, to improve our resilience in this regard.

Great. That's helpful. And then my follow-up is around your kind of recent developments around industry consolidation. You guys called out some competitive wins last selling season. But do you see the consolidation among your competitors impacting the landscape in any ways for Hinge Health and if you can see on M&A topic, maybe talk about your focus in terms of M&A, where do you think the operation is there?

Great question. And so we briefly look at the [ Caya ] acquisition and ultimately decline to proceed. And we've been fortunate to see many customers from both of them switch over to Hinge Health in the past 12 months. and our head-to-head competitive win rate is actually up strongly year-over-year. And in fact, the customer switching over to Hinge Health is in some of their largest customers of with storage. So our revenue remains multiples larger than both of them combined.

So we're just going to focus on continuing to widen our lead by remaining focused on our clients, new prospects and our road map, but I don't know James, anything to add.

Yes, I think that's right. I think when you look at the outcomes that we're delivering both clinically, the ROI, if you look about the productive issue that we brought out. We don't think that the recent merger will have any material bearing on our business.

And yes, I remain really excited about 2026 and beyond.

And your question as well about RMA opportunity. So we got several inbound opportunities a week, maybe 2 to 3 on an average week or so. Now we try to look at after all of that. And our robust cash flows just gives us a lot of optionality for tuck-ins. Our main focus is organic growth, where we're always interested in entrepreneurs who've built innovative products that can help us achieve our vision of automating health care delivery.

We've historically focused on like smaller acquisitions where we've acquired a [ kernel ] technology and potent team, particularly in R&D team and build it out from there. So I'd say unlikely many listen to the earnings calls, but if you're in that's building something that's relevant to us, we'd love to chat. And we do look at every opportunity that comes fires.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

Following up on the competitive backdrop. And Jim, you mentioned the displacement of a large enterprise, 200,000 employees. Can you just maybe give a little bit more in terms of that discussion and process and kind of what got you over the hump to kind of win that business?

Sure. Sure. I think most of our -- the strength of our competitive win rate and our competitive convergence is around a couple of key themes. First, as you think about him selectiveness move into unified care, the ability to elegantly integrate the physical and digital and powerful ways to deliver a great member experience and delivering even better and bigger cost savings in an environment where cost savings is really critical.

I think this concept of unified care is really resonating both with our existing clients, prospective clients and our competitors' clients. And so that's 1 element. Second, I would say, is the product experience. If you think about all the investments Dan mentioned dozens of little innovation to every year. that just delivers a better experience, whether it's bring your own device, whether it's unification multiple programs into a single app experience, whether it's our end zone, the delightful transformative impact. And so as you kind of add all those up in totality and you have a really compelling offering.

And then lastly, I would say it's our clinical outcomes and our when you start to build results at scale year-after-year client or client industry after industry, I think it starts to again pay a very compelling picture that's very attractive to a lot of our competitors' clients. And so if you put those 3 things together in aggregate, that will give you some good sense of what our perspective clients are thinking about when they make the decision to switch and just to add to that as well.

Just 1 quick thing is when clients cast our product and I to take it for a spin and actually trial our program and trial competitors for our win rate actually goes up, and so we actually encourage that because we're so confident in our front of experience -- and when we -- when a client has -- had made the unfortunate past decision to not select Hinge and then years later, they do trial our program and compare it to their existing solution. We're in very, very good position to win that client over to our end. And that's what you're seeing here. Our engagement is typically -- our enrollment is typically much higher. Our engagement on a per member basis is much higher. And then, of course, our ROI that we're to deliver flows from that.

Got it. And then just as my follow-up, the fully insured MA and FAP markets tend to get overlooked just by the sheer size of the members today, but just it is an important driver of kind of the durability of growth. So just wanted to touch on kind of what you're seeing in those markets? What's resonating? And anything from kind of a go-to-market to catalyze further growth there?

Yes. Yes. Thanks for the question. As you heard us say, non-ASO grew over 100% this past year. I think that's driven on a couple of things. One is the strength of those relationships, fully insured and Medicare Advantage specifically, really all 3 and federal have a health plan component to it. And so as we continue to do a really great job for our health plan partners, we service their clients wells. We deliver fantastic results. We build trust. Those relationships become a key lever and then secondly and related is exactly that those outcomes, those organizations are oftentimes influenced heavily by actuaries and underwriters and they're really looking at cost savings with a very critical eye as we continue to deliver great outcomes for those clients, we're seeing growth in fully insured in Medicare Advantage, in our federal employee program.

So it is -- as you noted, it's going to be an important part of our future growth. We're really excited by the products we made in 2025 and feel like we're just getting started though in those markets for 2026 and beyond.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

Maybe just to pay back of Craig's question a little bit further. Like 1 thing that we hear sometimes from investors is sort of just better understanding the TAM expansion story. Some others in the market have gone into multiple products and to see that the pathway, can you just talk about and remind some of us again, how do you see that TAM expansion following up besides self-insured and then the fully insured populations.

Sure. There's a couple of ways to slice the 10. And so 1 key things just sort of you just started this global health care spend. About 50%, 45 or so percent of global health care spend is spent in the United States. If you lose the United States, you're in a pretty bad spot when it comes to winning your category. Another way of selecting it is what is the indication you address? And how big is that? So for us, even focusing on physical therapy out physical therapy is about a $60 billion market or more just in the United States at about $600 million of revenue, we have got just a sliver of the overall physical therapy market.

So just focusing on this, we have a massive amount of runway ahead of us. to capture physical therapy here in the United States, and we want to make sure we capture that opportunity. And at the same time, we are starting to already develop and we've been developing for quite some time, our next product that will come after that, that will allow us to ship off another portion of health care spend because well, physical therapy is $60 billion of overall spend, that's about 1%, 1.2% of total health care spend.

And so if we ship off another 0.5 point of health care spend, that will be another $30 billion TAM and we're able to upsell our existing customers because we drop so much trust in them to these new products that we launched that we're continuing to peel away aspects of care and using software infective hardware to automate portions of that care. We can transform outcomes, experience and costs. And so that's how we see TAM expansion is both adding new lives, but adding new indications and then upselling our customers to those, but we want to be very thoughtful with anything we bring to market.

We want to have confidence that we'll be #1 or #2 over time, and we've built enough reputation with our customers that they know that anything we bring will be very quality.

Yes. And Lisa, just to add to that, too, as you heard Dan mention the size of the physical therapy market, that's within the context of a broader MSK market as well. So you think about all the challenges that the market faces in a complex landscape that includes imaging and surgery other nonsurgical orthopedic care. It's a huge TAM. And we always start to scratch the surface within digital physical therapy.

So we think the best way to deliver value to our clients and to the market is to really focus on big problems that have a lot of room and have complexity for us to have an impact. We think MSK is really -- is a market that fits that definition. While we I think judiciously look at things that are adjacent and leverage our strengths beyond MKS, but I think that gives you some sense of how we think about it.

But you'll see it district. We're going to be -- we're moving the taste, but just matters. And you can kind of our results, the impact that focus has had on our business.

Yes. That makes a ton of sense. And maybe just as a follow-up. We've talked a little bit about in the first -- response to the first question about sort of AI and the potential impact on your business.

Can you elaborate into on how you see AI in terms of the R&D function, do you see that as your efficiency driver? Does that allow you to do more in another way? How -- can you talk about sort of the internal R&D functionality of that?

Great question. So when it comes to R&D and the overall product, we see it as -- maybe I could break it out in 3 key ways. One is like the consumer experience and the proper able deliver to our end user, the second is with our care team efficiency. And the third is just how we build product. When we walk you through each 1 of those.

So first is the actual product experience. The core of our product experience is driven by AI. When you first sign up, we use -- we personalize the program to each 1 of our members. Our computer vision is actually a subfield of AI and human polls estimation is a subfield to computer vision. And I'll remind you all, listening, we moved in the computer vision AI well before the Chat GPT create. So we were not just following some bad wagon here. We've been investing in for many years. But that is a core aspect of our private experience, and we're lateralizing that to also having our AI care team assistant, Robin. But it is fundamental to how we deliver care is AI.

Secondly is with our care team. So we have used AI to substantially increase the throughput of our care team, and you saw that 2 our member base grew by just under 50% a 47% increase in members served and yet our care team costs were flat in 2025. And that just gives you a sense of just the incredible efficiencies we've been able to drive in our -- in the delivery of our care team via AI.

And now the third bit is how we build our product. Now we're not unique to this. I think that the industry has shown that the most mature applications of AI right now are in software development. And we are -- we operate at the speed of a startup. And we have implemented my co-founder has been leading this chart himself as CTO of the business, AI adoption across our engineers, data scientists, product managers and designers and just to use the largest head count of those are engineers, their throughput, which is would be measured with pool request per engineer per week is up 2x basically in 2025. And so we have doubled by that metric, the efficiency and the output of our R&D team. It's 1 of the reasons we are moving so much faster than ever before and it's only increasing over time, thanks to the use of AI.

Last thing I'd add, which you didn't ask, but I'll give you anyways is we've also -- we've a throughout the rest of the business, finance, HR, operations, supply chain. And you see that in that in 2024, our operating cost as a percentage of revenue was 8% and in 2025, it dropped to 64%. That's a 2,000 basis point improvement, and that's thanks to a lot of the efficiency gains we're realizing from AI across the business.

Your next question comes from the line of Ryan MacDonald with Needham & Company.

Congrats on a great quarter and great close to a fiscal year. Dan, James, much has been made about the current model shift towards the usage-based pricing model. the potential impact that may have on member usage and ASPs over time.

Now your guidance assumes flat ASPs in 2026. But I think based on some of the commentary from the call, the 1 million sessions in '25 over 783,000 active members. You're averaging 52 sessions per member per year at this point. So can you speak to your confidence in the flat ASP assumptions for 2 any potential for upside? And if you're -- whether you're seeing any material differences in the average number of sessions for a member across the usage model versus the upfront model?

Great question. So we actually structured the model to give customers pricing clarity, so they wouldn't see a price increase in the first year of adopting the model. And so that's actually fundamental to how we to how we transition customers to the model. We wanted to give them pricing clarity, particularly year-over-year pricing clarity in the first year as we're transitioning to the model, and that was just baked into our forecast. And so you're right. As we continue to improve engagement, it will continue to improve ASP over time, and it gives us headroom to do that.

Yes. I might just add there, Ryan, for sure, everything Dan just mentioned. And that's why you saw our ASPs largely flat from '24 to '25. As we look forward, the engagements are so strong right now. There is potential for it to creep up a little bit. I wouldn't I wouldn't consider it growing much more than just a little bit each year over the next several years. And I would say we're essentially all-time highs for member engagement and member satisfaction. And we expect that to continue as we keep rolling out new capabilities like our movement analysis and Robin as well as just making those incremental improvements to singles and doubles to our experience. And ultimately, our ultimate aim for all of these investments is to improve member experience and through outcomes and lower cost for our customers.

Super helpful. And then maybe as a follow-up, curious about in terms of TAM expansion. CMS is launching the access program later this year, which I think you have the opportunity to open up the Medicare population or for Medicare population for Hinge, which is an area you haven't focused too much on historically.

Can you just talk about how interesting this access program is any intent to sort of apply or have you been accepted to the program yet? And if so, sort of when should we expect any sort of contribution from this? Is this more of a back half of 26% or more of a 27 and beyond opportunity?

Yes. Thanks for the question, Ryan. As the market leader in digital [indiscernible] care, we're absolutely excited and to be considered for the program. applications are currently being received, and no news has come out yet, but the potential scale of traditional Medicare with roughly 30 million addressable lives is clearly an attractive long-term opportunity for us.

That said, the process is still big applications are coming in. Medicare CMS is has not issued the price and structure of the offering. And so while rates get be finalized, we would assume that if the pricing makes sense, we're going to participate I wouldn't expect a meaningful contribution in the back half of 2016. I think this would be more of a 2027 and beyond contribution.

Your next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

I wanted to dive more into HingeSelect. So you've outlined that this year will be a year of incremental investment and expansion of this product. How are you looking at the opportunity and strategy here? Are you targeting certain populations in your eligible lives, specifically higher acuity patients expanding into geographic densities with more imaging centers, orthopedic specialties, clinics, et cetera. Maybe just walk us through the strategy.

Great question. So a lot in your question right there. And it goes to building a 2-sided marketplace is a hard problem, but solving hard problems are themselves key entry barriers and chemos. And so we are targeting our existing customers as well as prospects to upsell them to HingeSelect, and we are aiming to build our provider network in selected Geos, both from customers who buy up to HingeSelect as well as from where our existing customer base is, and they're pretty much covering most large Geos. And we're focusing especially on physical therapy clinics, imaging, outpatient orthopedic specialists.

And in the coming quarters, we'll be expanding into other specialists within musculoskeletal care as well. But yes, I mean, if we close a customer and they have a high density in a particular metro we then focus on that metro to make sure that we could build the provider density that we need. What's helpful is that we do not need or nor are we trying to approximate the provider density of our health plan partners. This is very much complementary to a national plan or our health plan partners in that this is a precision network. And if you want to go to the PT around the corner, you could use your main health plan if you're willing to drive, say, 5 to 10 minutes, you could go to the HingeSelect physical therapists and we're able to waive your co-pay and give you a priority selection in terms of your appointment time and same thing for imaging. And so it's giving members that additional choice and nudging them towards these high-value providers that isn't going to be a sense in a given metro, but there's a financial incentive for them. And we've got thousands of clinics now that we closed.

That's very color, Dan. And maybe a follow-up here is then how should we think about the incremental revenues attached here, not just in terms of incremental utilization but maybe down the road, potentially taking higher take rates by providing more volumes to these clinics or just the overall higher contributions on the same take rate on the higher cost like an MRI scan or specialist visit.

So we're being conservative overall in our revenue, and not assuming really any revenue from HingeSelect and so this is -- we anticipate we just start seeing meaningful impact in 2027 still to work by the impact of our digital physical therapy solution. But given our free cash flow, this is a solution that we knew would take several years to build, but that once built would be 1 of our most enduring moats for the business. And we're willing to be patient on planting the seed. We know it's going to take a few years for the seed to become a sapling and then to become a big tree, but we're able to be patient. We're being -- we're also being disciplined in terms of the spend and we're not going too crazy, but we're -- we like -- we really like the market momentum.

Next question comes from the line of Jessica Tassan with Piper Sandler & Company.

I was hoping maybe you could talk about the relative difference in yield at clients who are new to Hinge or in their first year of deployment versus those in maybe year 2 or 3, just interested to know, is there a saturation point? Or are you still tending to see kind of steady improvements in yield at tenured clients over time with new clients coming online slightly lower and ramping over time?

Yes. Jess, this is James. Thanks for the question. So we actually saw some incredible progress in 2025 on that exact question. Before 2025, our typical first year cohort that would come in would land around 1.3% engagement by the end of 6 months and up to about 2.5% at the end of the year. the 2025 cohort ended at 3.3% for the first year. So that gives us a tremendous amount of confidence that when that continues to climb, like every year has climbed over the last 5 to 6 years, we're going to see yield momentum continue into 2026.

And then just I wanted to ask about the targeted enrollment efforts. Can you just elaborate on what types of conditions you all targeted to generate some of the yield upside in '25 and then any new conditions, that you might be rolling out in 2016. Do you want to give us a preview on.

Great. Great question. So I can't go into too much specifics around some of the algorithms we use as we are ingesting so much data. I would say we are investing very meaningful resources and we're having a really good output from those investments and the resources, as you could see in both the members enrolled as well as the impact on ROI. It's something that a lot of digital health companies and others in our space have been trying to do for a long time. We now have the scale. We're learning a lot from our data, and we're also getting multiple data sources. The most comminative sources we're getting from our employer and health cloud partners is claims data. We're also getting pharmacy data we're getting prior off and pretty of data, and we're trying to increase the overall coverage from those.

But it's multiple different data sources and it's allowing us to identify people who we think are in an active MSK- care episode or at risk for becoming a high-cost claimant and giving them an opportunity to take part in our digital physical therapy program so we could both improve their outcomes and give them a great experience, but steer them away from low-value, high-cost care, and we're seeing that.

Your next question comes from the line of Rishi Jaluria with RBC Capital Markets.

Two for me, if I may. Firstly, I want to maybe take a step back and think about -- we're talking about TAM and some of the expansion opportunities. And look, I appreciate that you're focused on TAM expansion, thinking about things conservatively. I'd have to imagine, given your value proposition where you are making physical therapy more accessible to people who may not otherwise have the time or access, is there an opportunity to go beyond just kind of this reactive physical therapy paradigm that we've been in where it's someone has an issue, they have a pain, they're trying to avoid surgery, and that's where they do physical therapy versus at least 1 is a little bit more proactive that even the health plans themselves may incentivize to prevent future problems from appearing down the line, and I'd imagine insurers and your own corporate customers will be really well aligned with that.

Maybe how should we just be thinking about that on a longer-term basis? And then I've got a quick follow-up.

I think that's a great question. And so kind of like stepping back and thinking about like lifestyle medicine generally, movement is almost never contraindicated. It is whether you're in knee pain or not moving your joints and moving our ethos good. Cartilage doesn't actually -- it's avascular and so there's not actually blood flow to your cartilage. So when you move your joints, you're actually exchanging waste and bringing in nutrients. And so we should always be moving about not just when we need it. And so you're absolutely right there. And we want inshell or movement to become a lifestyle choice for a lot of our members overall. And so we are focused right now on capturing more and more of the outpatient physical therapy market.

Again, it's a $60 billion market ahead of us, even without leaving physical therapy, which, again, we're developing new products that are PT adjacent right now, which we hope to talk about in the coming months. But we don't want to lose -- and we could talk about TAM expansion on, we don't want to lose side of the TAM capture, and the capture of our existing TAM. It's a $60 billion market. We're at about $600 million of revenue in 2025 or $588 million, and we want to make sure we capture the heat out of the $60 billion market ahead of us and then start capturing lateral markets next to it and then start making of a lifestyle choice.

Now what makes health care price points achievable in many ways is that you are treating an actual condition that ends up being very expensive. And once you start moving beyond that, you have to think through what the impact could be on ROI when it becomes more of a prevention solution. And ROI in prevention, I think, is very real, but it could be more difficult to attribute and it could take a bit longer. And so we are -- we remain focused on physical therapy and folks who have a real clinical need. I don't think that's perfect because you're right. We don't want just sick care in many ways where you're only treating folks, but we do feel like we're intervening early enough in their care journey that we're preventing a lot of downstream costs.

Now you could always intervene even earlier, get people to just deliver a healthier lifestyle, those are harder to get reimbursed for, but we're trying to intervene as early in the condition as possible, while still being reimbursement. Does that answer your question, okay, sir?

Yes, absolutely. No, that's really helpful. And then 1 for James. Look, I appreciate you talked about maybe targeting stronger GAAP profitability, thinking about things in GAAP terms, putting aside, obviously, the mismatch between revenue and expenses in a SaaS model with the GAAP income statement. I think, especially in this environment, it's increasingly becoming appreciated.

Maybe what's kind of your mental model that we should be thinking, not necessarily in terms of the guide for 2026. But in terms of just how we should be thinking about SBC and dilution going forward? Is there kind of a part dilution rate target SBC as a percent of revenue, and that can be like over the next several years, again, not holding any 1 to it, but just a mental model would be helpful.

Yes, yes. Let me speak to both those points. As we mentioned in the prepared remarks, our dilution has come down each of the last 3 or 4 years. We were below 3% in 2025. We expect that to be even lower in 2026. So from a shareholder dilution, we're pretty committed to that. And I think we've demonstrated that with the amount of shares that we push out to our employees.

From an SBC side, you saw sort of in that range of around $20 million to $25 million in this past quarter. That's fairly reflective of what you'll see in the coming quarters. Obviously, there was that big giant amount that we had in the second quarter and a little bit of trickle effect into the third quarter from all of that pent-up stock-based comp that was waiting for us to go public. But the fourth quarter is a pretty decent representation of what you should expect on a quarterly basis going forward for probably at least the next 4 to 8 quarters.

But I just tack on like we view SBC as a real expense. And we we are committed to GAAP profitability. And you could see from our share repurchase program as well, we look at total shares outstanding. And that's something that we're looking at. And we're managing the business towards -- or a metric that we look at internally is free cash flow per share, and we want free cash flow per share to continue to go up, and it's going to go up both by improving the numerator that is the free cash flow, but as well as reducing the denominator that is the total shares outstanding. And we want to continue to work on both the numerator and the denominator.

And your final question comes from the line of Stan Berenstein with Wells Fargo.

First, on the sales pipeline, you mentioned moving into the midsize employer market. How much of your sales pipeline do you expect this midsized employers to account for? And do you anticipate more competitive takeaways here? Or is there more greenfield opportunity?

Yes, Sam, thank you for the question. While we don't break out or provide specifics in our pipeline by market segment, we do think that if you think about our position in Fortune 500, having almost 50% of Fortune 500 as clients. We think that, that penetration rate can absolutely be achieved in other markets beyond just the Fortune 500. So we see a lot of what we consider under penetration in the large market in the midsized market, SMB and a bunch of others that we're currently planning. So we see a lot of growth there, and think that, again, we can bring similar penetration rates to those other markets beyond just Fortune the majority of Americans work for smaller employers.

So that's actually where the majority of people that you'll be able to access ours and smaller employers.

Appreciate that. And then for the follow-up, on HingeSelect, so obviously, you have some incremental economics for you, but curious if we think about your platform, is there any difference in utilization rates among members that use HingeSelect versus members that don't.

It's too early to tell right now, some of those trends. What we are seeing is that very strongly trending towards we're able to reduce or steer people towards lower cost that is high-value, lower-cost care and away from lower value higher cost of care.

Now 1 of the key capabilities is we can connect our orthopedic patches in-house. We can quickly shift to between in-person and digital care. And we hope to continue to scale up intellectually to share more of the specific slices of the data that you're asking for.

Thank you. This now concludes the question-and-answer session. I will now turn the call back to Daniel Perez for closing remarks.

Thank of all, thank you, everybody, for dialing in and for taking the time to learn more about our company and how we perform in 2025. I just want to leave people just saying that just putting again our 2025 performance in the context. In the last decade, there has been less than 10 companies who have delivered over $500 million of annual revenue, still growing at over 50% with 30% free cash flow margin, and we are #9 or #10 of that.

Just to see just how unique our print was in 2025 and where we stand a pretty elite company, and we're not done yet. This is a generational opportunity ahead of us to automate health care delivery and I think digital health in many other ways, hasn't delivered, and we're going to show you that Hinge is an end of 1 company, and we are different. So thank you very much, and see you next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health Third Quarter 2025 Earnings Call. [Operator Instructions]. I will now hand the conference over to Bianca Buck, Head of Investor Relations. Bianca, please go ahead.

Good afternoon, and welcome to Hinge Health's Third Quarter 2025 Earnings Call. I'm Bianca Buck, Head of Investor Relations. With me on the call are Daniel Perez, our Co-Founder and CEO; and Jim Pursley, our President; and James Budge, our CFO. I want to thank everyone for joining us today.

We'll be walking you through our Q3 performance and sharing key updates on our product innovations and commercial momentum. As a reminder, this conference call is being recorded. All relevant materials are available on the Investor Relations section of our website. Today's discussion will include forward-looking statements, which are subject to various risks, uncertainties and assumptions. These statements reflect our current views and expectations regarding future events, including expected performance of our business, future financial results and growth strategies. While these statements represent our good faith judgment and beliefs. Actual results may differ materially from those projected or implied. We undertake no obligation to update any forward-looking statements, except as required by law.

For a detailed discussion of the risks, please refer to our SEC filings, including our most recent quarterly report on Form 10-Q. All income statement financial measures discussed today are non-GAAP, except for revenue, which is GAAP. These measures should be viewed in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are included in our earnings release appendix. With that, I'll turn it over to Dan.

Thanks, Bianca, and good afternoon, everyone. Q3 showed what our strategy is built to do. automate care delivery to improve outcomes, experience and reduce costs, all while underpinning a strong business. we'll cover 5 topics today. Firstly, our results. I'll give you a high-level view of the quarter and the momentum in our core metrics. Second, I'll share key product updates particularly our AI initiatives transforming how we deliver care to our members. This includes our AI care assistant, Robin, our new movement analysis capability and how we're using AI to drive efficiency across our entire organization. Third, Jim will cover sales season progress and updates on Hinge Select, our high-performance provider network.

From there, James will walk you through the detailed financials and our updated guidance for the remainder of the year. And lastly, I'll wrap up with thoughts on why we're so confident about the path ahead before we open it up for your questions. Let's dive in. First, let me start with the numbers that really tell the story of our momentum in automating care delivery. We delivered $154 million in revenue for Q3, representing 53% year-over-year growth. Our last 12 months calculated billings reached $624 million up 50% compared to the same period last year. These results demonstrate the strength of our current execution and highlight the incredible opportunity ahead in automating the largest services industry in the United States, health care. Our operational efficiency improved substantially year-over-year. Gross margin was 83% this quarter, up from 79% in Q3 of last year, reflecting the scalability of our technology-driven care model.

Operating margin reached 20%, and a significant improvement from negative 4% in Q3 last year, showing how quickly our investments in automation and AI are driving meaningful leverage across our growing business. And notably, we generated $81 million in free cash flow this quarter compared to $28 million in Q3 of 2024. This represents a free cash flow margin of 53% and highlighting the strength of our business model and operational efficiency. Now, before I dive into our product updates, I want to remind everyone of our core mission. We're building technology to automate the delivery of health care. Starting with musculoskeletal conditions. This quarter, we reached an important milestone, surpassing 1.5 million lifetime members who have trusted us with their care. Everything we do is centered around the triple aim using technology to transform outcomes, experience and costs in health care.

To that end, I'm excited to share 3 key product areas where we've made significant progress this quarter. First, our always-on AI care assistant, Robin, that's transforming how we support our members. Think of Robin as a smart and increasingly capable companion that's available 24/7 to help members navigate their care. Now a typical care journey for backward joint pain isn't linear. People will have good days and bad. When someone experiences a pain flare up, Robin recognizes this through member reported data and immediately gathers important details. shares helpful resources and alerts their physical therapists so care can be delivered faster. Beyond pain events, Robin will soon provide instant support answer common questions and proactively check in with members to keep them on track with their recovery. This isn't just convenience for our members.

It's technology that delivers immediate support at the exact moment people need it most while laying the infrastructure for an AI agent that doesn't just answer, it acts. For our clients, this allows us to drive higher member engagement improved health outcomes and therefore, cost savings, which directly benefit Hinge Health through improved client retention, demonstrable ROI and higher member enrollment yields. Secondly, we've built the ability to perform an automated movement analysis using our True Motion computer vision technology. There are many measurement tools to track outcomes in MSK care, while valuable, almost all reliance objective questions and are therefore self-report only. Our new movement analysis uses our advanced computer vision technology to capture joint angles symmetry and endurance across a short battery of movements to produce high scores that are objective and comparable over time.

Pairing these objective measurements with a few targeted questions gives clinicians and members a fuller and more actionable picture of their joint health. Members simply use the front-facing camera on their phone and our technology does the rest. Finally, we're continuing to lead AI throughout our entire organization to drive efficiency and innovation. One example I'd love to highlight is how we've used AI to transform how we build our product. Gabriel, my co-founder, has been personally threading AI throughout our engineering team. I'm proud to say that we've won increased code output by 120% and push new features live 3x faster in Q3 2025 compared to Q3 2024. Two, we've increased AI adoption among our engineers from around 20% in Q1 to close to 100% today.

And finally, three, we've also seen a 32% improvement in developer experience scores from April through October. Our engineering team is not only more productive, they're happier too. These improvements are already impacting our operating margin, and we're just getting started. With that, let me turn it over to our President, Jim to discuss our market momentum.

Thank you, Dan. As highlighted, our continued product innovation allows us to measurably improve health outcomes, delight members and lower medical costs, directly translating to client retention, which is the foundation for our commercial success. Before diving into our Q3 performance, I'd like to remind everyone about our sales cycle and seasonality. The majority of our clients signed contracts with us in the second half of the calendar year, aligning with the typical employee benefit enrollment period. Most of these clients then launch in the first half of the following year, which creates a predictable rhythm to our business. I am pleased to report that our sales season is progressing very well, and we're ahead of where we were at this point last year.

We ended Q3 with a strong base of 2,560 contracted clients, up 25% year-over-year and we expect that number to grow substantially in Q4 as we finalize contracts with clients who gave us verbal commitments during Q3. What's nice about our model is that even when contracts aren't finalized yet, clients still promote Hinge Health during their benefits fares and open enrollment periods. Additionally, since our majority of our clients are contracted through our health plan partnerships, there's limited negotiation or legal complexity in contracting because the terms are pre-agreed and standardized. Year-to-date, our head-to-head win rate is up year-over-year, which speaks to the strength of our value proposition and our widening lead. We're seeing strong performance in several key markets.

First, we're winning with jumbo clients. Those large self-insured groups with over 100,000 lines. Second, we're seeing great traction in the federal space, including having our best year ever with federal employee programs. Third, our fully insured segment continues to perform well, which is particularly validating since health plans themselves are the purchasers in this segment. And as actuaries by profession, their adoption validates the real cost savings we're able to deliver. We look forward to sharing more detailed metrics on these wins in our full year earnings report next quarter after the completion of our sales season. Now let me provide an update on HingeSelect. Our high-performance provider network that creates a unified experience by combining our digital platform with high-quality in-person care when needed. This quarter, we went live with our first clients. And while it's still in the early days, the initial feedback and learnings are very positive. This gives us confidence as we prepare for broader market rollout.

Our provider network is coming together nicely. At the end of Q3, we had a contract with over 3,300 high-quality provider locations across all 50 states, creating comprehensive coverage for our members, and we expect to significantly increase our footprint over the next 12 months. Currently, 86% of our lives live within the HingeSelect network footprint, which positions us well for our continued rollout. On the client adoption front, we have clients representing hundreds of thousands of eligible lives who have already committed to in Select. These clients are either launching the program now or planning to launch next year. And importantly, all of them are existing clients of our core digital program, which validates HingeSelect as a natural extension of our offering. Beyond these committed clients, we have clients representing millions of lives in our pipeline where we have active discussions. This includes both new prospects that we see HingeSelect as a differentiator in existing clients looking to expand their relationship with us.

Moreover, we're in advanced discussions with multiple health plans and PBM partners to streamline in-select adoption with our mutual clients. With that commercial update, let me turn over to James to walk through our detailed financial results and outlook.

Thanks, Jim. Let's break down our third quarter financial performance a bit. As a reminder, our billings model is built on 3 key drivers: lives, yield and average price. Live represents the number of people eligible for our program. Yield is the percentage of those eligible lives who actually enroll and engage with us as a member and price is what we charge per engaged member. When you multiply these 3 factors together, the result is our calculated billings, which is the foundation of our revenue model. For the third quarter, our LTM calculated billings reached $624 million, representing 50% year-over-year growth compared to $417 million in Q3 2024. Revenue came in at $154 million, up 53% year-over-year from $101 million in Q3 last year.

This revenue performance exceeded the high end of our guidance range of $141 million to $143 million. due to strong billings performance stemming from the continued strength of our underlying fundamentals. We saw solid performance across all 3 drivers of our billings formula. Eligible lives came in as expected, reflecting the healthy growth in our client base and the successful launches of new clients throughout the year. Yield was also a strong contributor to Q3 billings. Our targeted enrollment initiatives are particularly noteworthy. We saw enrollees from our targeted enrollment activities this quarter more than doubled compared to Q3 2024. Targeted enrollment is where we use data from our HingeConnect platform to reach members at their highest point of need. We also rolled out a number of challenges this summer to encourage movement during seasonally slower months, where members could earn rewards and badges for meeting their goals. These initiatives contributed to strong engagement and overall excellent yield performance.

On the pricing side, our new engagement based pricing model continues to perform as expected, with our average selling price remaining essentially flat for the year. As of the end of Q3, about 48% of our eligible lives have opted for the new pricing model. Moving to our operating efficiency. Our gross margin reached 83% in the third quarter, up from 79% in Q3 last year. This 400-plus basis point improvement was driven by continued enhancements in care team efficiency largely enabled by the initiatives Dan mentioned, like our AI-powered tools that help our clinicians work more effectively and handle more members without compromising quality care. We also saw strong operating leverage across all expense categories. Total operating expenses were 63% of revenue in Q3, down from 83% in the same quarter last year, demonstrating our continued focus on operational efficiency even though we made deliberate investments to fund more long-term growth opportunities such as new products, improved enrollment and our go-to-market functions.

This operating leverage translated into strong profitability. We generated $30 million in income from operations, significantly ahead of our guidance range of $17 million to $21 million. And with a 20% operating margin, a substantial improvement from negative 4% operating margin in Q3 2024. As we continue to grow and evolve, we are consistently looking for ways to become more efficient. And one of the many areas where we have seen improvement is in collections. Improved collections, combined with the billings over performance and overall cost discipline drove our all-time high free cash flow margin of 53% this quarter, generating $81 million in free cash flow. Through the first 3 quarters of 2025, we've generated $118 million in free cash flow, which represents approximately $1.25 of free cash flow per share using our Q3 fully diluted shares outstanding of $94.5 million. We ended the quarter with $497 million in cash, up from $415 million in cash at the end of Q2.

Looking ahead, I'm pleased to provide our updated guidance for both the fourth quarter and full year 2025, which reflects the strength we're seeing across our business. For the fourth quarter of 2025, we expect revenue to be in the range of $155 million to $157 million, representing 33% year-over-year growth at the midpoint. For non-GAAP income from operations, we're projecting $34 million to $36 million in Q4 or a 22% margin at the midpoint. For the full year 2025, we're raising our revenue guidance to a range of $572 million to $574 million, which represents 47% year-over-year growth at the midpoint. This is a meaningful increase from the $548 million to $552 million range we provided last quarter. For full year non-GAAP income from operations, we now expect $106 million to $108 million, a 19% margin at the midpoint and also a meaningful raise from our prior guidance of $77 million to $83 million.

Several factors are driving this improved outlook. First, we're seeing continued strength in our core business fundamentals with solid performance across lives, yield and pricing. Second, our strong Q3 and year-to-date billings performance gives us confidence to raise our full year revenue targets. Third, the operational efficiency gains we're achieving through AI initiatives are flowing through to the bottom line faster than we previously expected. Given this overperformance and the strong cash position we have, we are prioritizing investments in growth and expanding our market reach as we continue building the future of health care. Indeed, we already have promising preliminary data on our next product.

Moreover, we'll continue to take a disciplined approach to capital allocation, investing in growth while remaining focused on expanding margins and driving sustainable returns. From a share count perspective, we expect our fully diluted shares outstanding to be around $95 million by the end of this year. We recognize the importance of balancing investment and growth while maintaining an efficient capital structure, and we'll continue to be thoughtful in how we manage dilution over time.

Finally, I want to remind everyone that our lockup expires at the end of the day on November 17, with shares free to trade on November 18. This represents a natural milestone in our journey as a public company. Of the 94.5 million fully diluted shares outstanding at the end of Q3, 17 million are already free to trade from the IPO and early lock-up release. And the remaining $77 million are being unlocked. 1 million of those shares, however, are either invested and ineligible to trade, we're owned by directors, officers and Board represented pre-IPO investors. The combination of our strong financial performance, robust cash generation and strategic investments positions us well for continued growth and market leadership. And we look forward to sharing more with you in the coming quarters. With that, let me turn it back over to Dan for some closing thoughts.

Thanks, James. I'd like to emphasize the point James made in our capital allocation strategy. Our team has shown that we can execute to not only grow top line but grow it efficiently. Our strong free cash flow allows us to continue investing in organic growth while giving us the optionality to evaluate and execute targeted M&A opportunities and return capital to our stockholders. You should all expect we'll continue driving both revenue growth and profitability. We are committed to managing this business to strong GAAP profitability. That means we see stock-based compensation as a real expense. And just like any other expense, we're going to manage it closely. Indeed, we brought dilution down for 3 straight years, and we'll continue to be thoughtful in this domain. As I reflect on this quarter's results and look ahead, I'm incredibly confident about our business.

Firstly, from a product perspective, there's a vast opportunity ahead in automating health care delivery. Physical therapy is only 1.2% of total health care spend, yet is a $60 billion-plus market in the United States. As we automate other aspects of care outside of PT, even a similarly sized slice can represent tens of billions of dollars in TAM. Secondly, our commercial momentum is also exciting. We're trusted by our clients and partners to build products that don't just automate care but deliver improved outcomes, better experiences and lower costs. That performance is evident in our higher win rates year-over-year. Thanks for your time and continued support of our mission. With that, I'll turn it back to Bianca to open up the call for your questions.

Thank you, Dan. Operator, we're now ready to open the line for questions.

[Operator Instructions]. Your first question comes from the line of Rishi Jaluria from RBC Capital Markets.

Wonderful. Nice to see continued strength in the business and outperformance just really across the board. I wanted to start, Dan, by digging into the recent AI announcements you made and really exciting to see the innovation there and a lot of excitement, I think, around Robin. Maybe can you help us understand as we're simultaneously hearing headlines, of enterprise is maybe a little bit risk-averse around AI, especially when it comes to data. How you're balancing the kind of desire to drive innovation here, bring AI into the product and ultimately drive better customer success and better patient outcomes and work with especially your partners in alleviating some of those concerns and driving up kind of higher AI adoption over time? And then I've got a quick follow-up.

Great question, and thanks for that. And you're absolutely right. There's a concern and rightful concern and caution from health plan partners, employers, et cetera, about AI in health care. The stakes are simply much higher in health care than in your average industry where AI is being adopted. And so at Hinge, we're really focused on some bread-and-butter applications of AI that could make the member experience more convenient, more personalized, make our care team more efficient so we can increase the throughput. And then our investments in our core AI threat throughout the rest of our organization to make the business more efficient as well.

So I'd like to start by saying like we actually published our AI care principles. This -- a few weeks ago, which actually guide our development of AI across our platform. And I think this was really important. And we feel responsible AI development is foundational to our approach and our commitments include AI that is thoughtfully designed, built responsibly and complements human care. And underpinning those commitments are principles to prioritize ethical use, privacy, security, transparency and continuous improvement. And so we've built a good reputation with our clients that they trust us when we build something new, we bring them along with particular health time partners sharing with them our road map, terms of our thinking and share with them our outcomes. Now our movement analysis is a phenomenal step forward in how outcomes be within musculoskeletal orthopedic care.

Typically, outcomes in orthopedic care can be tracked by particularly patient-reported outcomes is very subjective. It's how is your pain it been? How has your stiffness been? And there's fewer objective measurements. And so with our movement analysis, we're able to use computer vision to bring objective measurements such as endurance speed, et cetera, in terms of how somebody's joint health is trending. And with Robin, it allows us to substantially increase the throughput of our care team by allowing a member to interact and give background information to our AI care assistant who then helps bring the care team up to date. So if there's any adjustments to the care plan, it reduces the back and forth and store ends of time and so for the members. So we've -- just to stop, we agree that there's more challenges in health care. We've approached it with that level of humility and really focused on the bread and butter application. And that's the patient-facing aspects. I haven't mentioned the company facing aspects of AI, which you've seen are driving a lot of our operational efficiencies.

Awesome. No, that's super helpful. I really appreciate that color. And then, Dan, you talked a little bit about open enrollment at the very beginning of your statement. Maybe can -- as we're in the middle of opening roll in [indiscernible] and here in California, I think just opened up today, maybe can you walk us through kind of what sort of assumptions you're thinking in terms of this open enrollment season as we think about the Q4 guide? And how are you thinking about it relative to prior years? And now that you have in your arsenal greater ensotraction, you've got HingeSelect out there. Just how should we be thinking about that? And just to complicate things further, I'll toss in some of the uncertainty with our federal tax credits as a result of the current government shutdown going on.

Great, great question. So in terms of open enrollment, so a lot of our new clients that are have decided to buy us. They actually go live on in around 1/1 or throughout Q1. And so a lot of these, we have a pretty fairly predictable sales cycle and the implementation cycle of new clients, and they typically go live with a new plant here, which starts in 1/1. So over the course we'll have clients going live on 1/1, 1/15, 2/1, several days of that quarter. And open enrollment is another opportunity for our existing clients to highlight their existing benefits to their members. And some do highlight and make available pre-sign-ups for upcoming benefits, and they mentioned, hey, coming up in Q1, you're going to have a new mental health benefit, a new musculoskeletal benefit. A new PPO plan.

And so they'll lay the groundwork for members to understand, but they're typically not eligible to sign up and therefore, become a billable member until Q1. And that's how it works in health care benefits. And in terms of the federal government shutdown, maybe Jim would take that in terms of its impact on a short answer is not much impact before.

Yes, that's right. The short answer is there has not been any impact. We haven't seen any impact. In fact, our federal business is performing as strong as ever been is our best year ever in the federal space, and we expect that trend to continue. So yes, no impact to the shutdown on the business today. And I'd just clarify that while salaries unfortunately, are paused, health benefits, dental benefits and vision or not paused. So those continue to be paid for throughout the government shutdown. And if this extends into 1/1, I actually -- I don't know, I don't have an answer for you how health benefits what happens to health benefits after 1/1. But throughout the end of the year, they are absolutely funny.

Your next question comes from the line of Jess Tassan with Piper Sandler.

Congrats on the quarter. I'm hoping you can maybe explain some of the seasonal and comp. Year-over-year comp dynamics behind your 4Q 25 yield assumption. And wondering if the guide implies that active members actually decline sequentially? And if so, why would that occur?

Yes. Thanks, Jess. I'll cover some of that, and then my colleagues want to add great I would want to remind everyone what we said in the second quarter, which we'll repeat here again. which is that typically, our fourth quarter is slower than our third quarter, and it has been with the exception of 2024. That means our billings are lower in the fourth quarter than the third quarter. There's just less activity in the fourth quarter than the third quarter. Our cash flows are lower in the fourth quarter versus the third quarter. And really, with the exception of 2024, that's always been the case. So we expect that again this year. We do expect a really strong fourth quarter, but it's coming off of a really difficult comp last year.

We're in 2024, we had a ton of pent-up marketing demand going into the back half of the year, specifically in that drove a ton of engagement and this year looks more like our normal seasonality that we typically have.

SP1 Great. And then I'm hoping you can maybe describe some of the targeted enrollment initiatives that supported the 3Q yield outperformance. Was this the expanded Enzo deployment? And should we kind of expect Hinge to perpetually introduce these targeted enrollment initiatives that support yield? So end of this year, maybe something else in 2026. Thanks again and congrats again.

Great question. So this is Dan. So with regard to our yield improvements overall, we have evergreen investments in this area. And so it's not just like a single home run that's driving improvements, but a series of singles and doubles, and we like it that way, by the way. Because this portfolio approach ensures resilience in the system. And sure, we could -- we will be swinging for the fences on a few key experiments, but we never want to be dependent on a home run to achieve our yearly goals. Now specifically with regards to targeted enrollment, this has been going great. So our team has spent a lot of time and effort not just building partnerships with health plans, but also the piping to ingest the data and as real time is possible and notably building these pipes also requires effort from a health plans tech team.

And those tech teams are typically small and mighty tech teams at the health plans who have a lot of demands on their time. So part of the increase is due to our year's long collaboration and simply standing out these bidirectional data transfers. Cleaning up and standardizing the data and then using it to effectively identify and enroll high-risk members. And that is a big impact on ROI that we can deliver our clients. And I suspect we are far ahead of most everyone else with regard to the sheer amount of data we receive and therefore, the target enrollment we're able to drive with our business. And as mentioned in our earlier remarks, we're up about 2x year-over-year in terms of absolute members enrolled to be our target enrollment.

Your next question comes from the line of Saket Kalia from Barclays.

Dan and Jim, maybe for you. It was great to hear about the strength, the selling season here in the second half. Maybe just a high-level question. I'm curious, how many of your wins anecdotally, of course, are kind of greenfield versus displacing a competitor?

Yes, Saket, thank you for the question. I would say the vast majority of our wins are still greenfield today. although I will note that a greater percentage of our wins are competitive displacements, although relative to the overall win rate. Most of them are still greenfield wins.

Got it. Got it. That makes sense. Then maybe my follow-up for you, James. I think the number that surprised us most was the operating cash flow this quarter. I think you said it was $81 million or $82 million. Can you just touch a little bit on the better collections there? And whether the move to the new engagement based model is impacting billings or collections at all? Just trying to kind of put that outperformance into perspective a little bit.

Yes, thanks. And you're right, it was pretty extraordinary performance there in the third quarter on cash collections. And I would remind that's our sixth straight quarter of cash profitability. So being positive is not a new thing, but being $81 million positive is pretty awesome. So yes, we went into the new engagement model, and we took advantage like everything we do in our business, always looking for efficiencies, and that gave us an opportunity to look at everything we do in our collection process from how quickly we build to when we make calls, we deploy AI and when something might be going a rig and we engage more people and trying to get after that. We've always been good at collections but we took the opportunity to try to become great at collections. And some of that came through in the third quarter. And we -- while we will have less cash collected in the fourth quarter just because that's the seasonal trend. We will still have a very strong fourth quarter in cash collections.

Yes. And as an executive team, we are very committed to managing this business to be reliably free cash flow positive.

Your next question comes from the line of Jailendra Singh with Truist Securities.

So I want to follow up on the selling season commentary. My question is more around the rollout timing. Are you guys seeing any late 2025 clients slipping into '26 or maybe the flip side or '26 clients being pulled forward? And what are driving those types of shifts. Any -- and also, like related to that, can you share any data around what percentage of your 2026 new logos pipeline are in contracting versus late stage? And how confident you are with respect to the conversion?

Jindra, thank you very much for the question. No, I would say this year looks fairly traditional from a rhythm perspective, as we've touched on the bulk of our clients making commitments in the second half of the year using open enrollment to plan for the launch. And then as Dan mentioned, launching around 11 in the first quarter of the year. So that operating rhythm has largely played out in a traditional way this year. Specific to the shape and the loss of our pipeline, we don't give specifics on that. I appreciate the question, but we're not prepared to share data. Although the overall size of the pipeline continues to grow and is very big as it needs to be to, I think, deliver on what we're hoping to do. So thank you for the question.

Okay. Makes sense. And then my quick follow-up, just curious, at this point, do you have a view on how many care team FTEs you're going to require for 2026. Just trying to understand how some of the recent AI tools you have launched are helping you to further improve your member to FTE ratio.

Great question. And thanks, Jailendra. This is Dan. So we're in the middle of our 2026 planning. And our approach remains disciplined and targeted. Most of our headcount additions will be in R&D and some go-to-market because we want to invest in growth. organic growth to capture this opportunity. But it's important to note, we are building our product much more efficiently, thanks to AI. As mentioned in our earlier prepared remarks, our code output for engineer is up about 2x year-over-year, and we're just getting started there. Now you asked specifically about our care team. We anticipate Care team headcount to be roughly flat to down despite increasing revenue in 2026, our care team will be at worst flat to be conservative, you should model flat.

Any gross margin tailwind though from those efficiencies will likely be reinvested into the product and infrastructure. We like where our gross margin is right now, but we want to continue to invest in the product. We are still in this growth stage of the business, we want to invest in growth, invest in that member experience, including initiatives like Enzo to sustain our differentiation and our growth, and we'll share more details as plans are finalized.

Our next question comes from the line of Scott Schoenhaus with KeyBanc. Please go ahead. Mr. Schoenhaus, you have to unmute yourself locally.

Sorry about that. I just wanted to touch more on your new product offerings, Robin AI and movement analysis seems like it also could drive increased yields but also as you move to a more utilization-based model, which is, I think you said 48% of lives currently probably tracking ahead of everyone's expectations here could also drive ARPU, which I think Jim you said it was flat. So maybe walk us through the dynamics of these new 2 product AI product offerings on the yield side and potentially on the ARPU side.

Good question. So improving our core member experience is something we're always focused on, allows to just better retain the triple aim of improved outcomes, experience and costs. And we're at near all-time highs on member engagement and satisfaction scores, and we expect that to continue to roll out new things like our movement analysis like Robin. And as mentioned, our ASP has trended to flat this year, which is where we expected because we model that into our contractual commitments for our new billing model to begin with.

We knew that even increased engagement keep it flat because we wanted to commit to that to our clients. But we have now had several years running now of improving our per user engagement, not just improving the enrollment to the program, but improve the engagement of those who enroll and we want to continue to do that at Hinge. And it's going to be similar to our yield improvements, a portfolio approach of singles and doubles. I actually don't see a move analysis in a home run. I see this like a double. It might be a triple actually to put a double. And same thing with Robin, and we want to continue to roll out new capabilities that our members see value in and brings them back, but also is, of course, improving their health improving their experience and lowering costs for our enterprise customers.

And as a follow-up, is there any way to like call out the contribution of AI on the operating expense line? It seems like it was big with the engineers and coding on the R&D side? And then where you think higher level where we should be able to see operating margins continue to progress as you infuse more in AI across your business?

Yes. Well, between the improvements in gross margin over a year ago and the improvements in operating margin, that's about 260 basis points of improvement. So lots of goodness there. And I would say probably a good half of that came from AI advances. I think we've gotten more efficient in process as a result of AI. We've gotten more efficient with deploying AI versus humans. So a whole bunch of advances from AI initiatives as well the people around it have also gotten more efficient as a result.

Yes. And then as a business, we've also just run the business with constraints. I think when it comes to solving problems, particularly when you're cash rich like us, it's easy to solve problems with new headcount and when you put constraints on the business and say, hey, we're not adding new headcount to this department. Hey, we're not adding it to this department. And because we have a pretty predictable business on how it grows, we could plan months ahead and saying, hey, when 11 comes around, we know the business is going to grow quite substantially with new clients, be ready that you're not going to get all the head count you plan for, so you need to start investing in AI tools now.

And we've been laying that groundwork with our team months and months ahead of time, and that's a lot of teams to encourage a lot of teams to experiment with new AI tools, new processes and just problems all in new ways such that we could solve problems with technology and brain cells instead of having to solve problems by adding new heads.

And maybe, Scott, just one thing I'd add. I think maybe implicit in your question also is that we're probably by any one standards, we're well ahead of our march towards our target model of 25% EBIT and 30% free cash flow margin. So maybe implicit to the question is, hey, are you looking to adjust that anytime soon. I would say stay tuned on that. We're going to give our 2026 guidance in the February call that we'll have, and we'll talk about concepts like long-term margins and progress towards that when we get to our very first Analyst and Investor Day, which will be wrapped around our Movement conference in June of next year. So that will come in 2026. But today, as of today, no change to our target models that we have.

Your next question comes from the line of David Grossman with Stifel.

It sounds like you've had some really good success in the large enterprise segment of the market during the current selling cycle. So with the mix perhaps skewing to larger clients next year. Are there any considerations for yield or pricing that we should be thinking about as these clients go live next year?

Thanks, David, for the question. No, I wouldn't say that the size of the client should influence the way you think about ASP or yield. I think we've -- we have a very diverse client base actually, both from an industry perspective, we're serving with every conceivable industry around the globe as well as client type and size. So I think we've optimized our enrollment, our yields, our target enrollment kind of independent of size. And so no, the short answer is I would not anticipate any variation.

Great. And then if I heard you right in your prepared remarks that you have some promising preliminary data on your next product. And I'm not sure if I missed it, but -- can you provide any incremental context of kind of how we should be thinking about what that may be?

Great question. And so a lot of our R&D is focused on enhancing our core product of digital physical therapy. About 40% of people have musculoskeletal in a given year 9% [indiscernible] therapist. We think it should be closer to like -- and last year, we enrolled 3.4%. This year, we're trending closer to 3.6% as we continue to chip away and gather more enrollment from people seeking in-person PT. But our overall vision is to use technology to automate the delivery of care. And we want to continue to use technology to peel away aspects of in-person care and automate provider interactions. And so we think if we peeled off an area of health care even half the size of physical therapy and physical therapy is 1.2% of health care spend.

So it's about $60-plus billion if we peeled off an area of health care, even half the size of PT, it would represent tens of billions of dollars of TAM. And we're working on a new product right now. And we're -- but we will only enter spaces we have confidence where we will be either #1 or #2 and preferred by #1.

Your next question comes from the line of Brad Sills from Bank of America.

I wanted to ask about the effort to go after the fully insured segment here. Was that a key contributor to the growth in clients here? I know that going after some of those smaller firms has been more of a focus.

Yes. Thanks, Brad. The way we think about fun sure, by the way, might be a little bit different than others. So we kind of fully insured client as one client with the health plans. So the health plans in core book of business, even though there's thousands of clients, small employers that typically constitute that health plan. So no. We think about that is a singular client from accounting on a client's perspective. So fully insure was not a meaningful contributor from a kind of a number of logos perspective, if you will. But it is a tribute to our business growth.

And I think, again, as we mentioned in our prepared remarks, the actuarial rigor that fully insured organizations used to evaluate solutions like Hinge, is tremendously validating when you pass -- when you pass those hurdles and become the adaptive solution of choice. And so that just continues, I think, to affirm the impact that we're having both on clinical outcomes, on member experience and importantly, influence also on cost savings.

Wonderful. Great. And I wanted to ask a question on the yield. I think, James, you said -- you gave some kind of directional commentary on how that trended. Any more color on just the yield, where that is trending? And what are some of the key initiatives driving that? I know that there's the customer success organization that's been working hard on promotions within the member base.

Yes. Yes, it's been a great year. I think you'll recall, if I take you back through some of the evolution here that we started out the year assuming that we would be roughly flat in yields, and that's kind of the conservative nature we like to go through in the year until we see the evidence for supporting the uptick. But as when we got to the second quarter, call it 3 months ago, we were talking about it moving north of 3.5 up to closer to 3.55-ish in that range. And now clearly, the improvement that we're seeing in the Q3 results suggest it's trending even higher than that. So we're pretty comfortable that it will end the year at least at 3.65% and opportunity to improve even above that as we finish out the year here.

Your next question comes from the line of Elizabeth Anderson from Evercore ISI.

Congrats on a really nice quarter. I wanted to talk a little bit more about the Hinge select provider network. Can you talk a little bit about sort of how you're developing that network? How do you sort of see the need to continue to ramp up? And then how do you kind of evaluate what makes somebody a high-quality provider for that type of network and then sort of how you sort of see the interaction between sort of like initial visits and follow-up virtually sort of develop over the next sort of 12 months as you're getting more people on it.

Sure. And thanks for your question. A couple of pieces to that. So let me start on how we evaluate for other quality. And then if you could repeat a few other parts of the question, just to -- there were a bunch in there. So thank you. And so first of all, on the provider quality front is one of the most important elements of HingeSelect is actually assessing for provider quality as well as for cost, by the way. So that's overall value is includes cost and quality. And so different providers are going to evaluate them for quality in different ways. As you look at both the consumer experience, and this is particularly relevant for like physical therapy. Where we know that just the general practice of physical therapy is shown to reduce cost.

And so if you just get somebody to conservative management orthopedic care because the management care for their back pain for their knee pain for their hip pain, you're going to have a really good shot at reducing downstream costs. The challenge with physical therapy is access. It could be member cost, it could be the time constraints for having to take time off work, et cetera. And so we're really focused on it our physical therapy network as much as we can and making sure that we can improve adherence by ensuring that consumer experience with these in-person physical therapist is really high. Now when it comes to other provider types, actually really helped to look at claims data. For instance, with a surgeon, you could actually look there's data sources out there, and we've partnered with several data sources to actually look at what is somebody's practicing philosophy?

And what is their what does the data show in terms of how they practice care. For instance, if they're doing a near arthroscopy or a knee replacement on somebody, you could look at the claims history for that individual person. And did that individual person first exhaust conservative management of care before the surgeon operate on them. What was the downstream claims that happened after the surgeon, where there are a lot of revisions. And so there's various like ways where you could look at what's the quality of a particular surgeon. And so it's going to depend on the provider type, but just giving you examples of surgeons in that sense. And then from -- after assessing for quality, and we're not looking for like we don't necessarily need the top 1%. If you actually go eliminate the bottom 25% for project for surgeons, but particularly -- or even by us to the top quartile, you're going to have really good orthopedic surgeons who are not over operating and have really good downstream outcomes.

And we don't need to have the network density. We're not trying to have the network density of national plans. They are our partners. And this is very complementary to their overall network. We're not looking for 100 surgeons in Atlanta. We're looking for 5. And we're able to shop for the highest quality as well as the price point that makes sense for us and our customers and our members. And that gives us incredible optionality but also ensures that it is very much complementary to a health plan's network as we build that network. For physical therapists, of course, we want a lot more density than 5 in Atlanta. We want several dozen.

Yes. No, that's very helpful. And it also sounds like because given the partnership model that have, you don't have sort of a ton of upfront costs in that. So if you can scale that business as you continue to add members in certain geographies and sort of build out Hinge Select over the next couple of years. Is that the right way to think about that?

It's a 2-sided marketplace and 2-sided marketplaces are incredibly difficult to build up, but we firmly believe that solving this problem will create one of the most enduring moats and enduring competitive advantages at HingeHealth to have an in-person network that complements our overall national health plan partnerships and our regional Blues partnerships as well and solving hard problems are themselves a moat. Building a 2-sided marketplace will be a difficult problem to solve. We've made really good progress by already adding thousands of clinics and really focused on orthopedic care overall and building a technology platform that allows us to process claims we're processing claims, the claims ourselves. And so our tech platform is actually quite a bit more advanced than I think a lot of people may give us credit for or realize initially.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

Question for Jim on the selling season and really in the context of rising employer cost, looking for context of just how much ROI engagement on the platform is kind of working to your advantage and then how that's kind of resonating with the customer base.

Yes, thank you for the question. I think as anybody has seen the news, employer health care costs arising at an all-time high, low double digits in a lot of cases. which is forcing benefits leaders and employers to get really serious and tackling their top cost drivers. Fortunately, for us, as a business, musculoskeletal continues to be a top cost driver and so we're seeing interest in our business only grow as a result. They're also scrutinizing the impact that solution providers are having on those costs. and the demonstrated and repeatedly validated ROI that we have been able to show is an important part of our story. And I think it will always be an important part, but especially in these environments where you're seeing costs rising and benefits leaders having a mandate to address them. hinges a beneficiary of that dynamic, and we believe that trend will continue for the foreseeable future.

Got it. And then just as my follow-up question on Enzo. Just looking for kind of how adoption is trending with that product? And any anecdotes in terms of that potentially helping to extend engagement beyond a year on the platform.

Yes, let me just give some numbers here, Craig, and then Dan might have some commentary as well. Maybe as a reminder, a couple of years ago, our Enzo adoption rate was around 5%. Last year, it was around 15%. And we said this year, we would be expecting it to be north of 25%, and we're on that trajectory right now. So nothing meaningfully different in the numbers, and I would just reiterate the point that despite increasing cost of goods sold around Enzo, we still are producing pretty magnificent gross margins. So we're able to manage that through all the AI improvements we have in the care team. So beyond that, I'll let Dan talk about how that impacts engagement.

I'd say, first of all, at a high level, we think software is going to automate all nontouch aspects of health care, ripening symptoms, formulating and diagnosis, creating a care plan, even like potentially telemedicine visits will eventually be automated via software. However, the touch aspects of health care will require hardware. We are committed. If we -- if your vision is to automate health care, you will have to invest in connected hardware and Enzo is one of the most beloved aspects of our program. And we actually don't charge anybody to receive it. We're very thoughtful in setting those out for those who would benefit most. Members who do get escalated Enzo tend to see their activity sessions improve, not only from enzo usage, but their exercise therapy sessions improve. And their satisfaction scores are substantially higher when a member is escalated to Enzo and so we really like in people. People just love their Enzo whatever falters it took one of the first things that will reach out to our tech team to have us replace their Enzo. It's just a beloved aspect of the program. And it's a big differentiator for us in the market as well.

Your next question comes from the line of Brian Peterson with Raymond James.

And I echo my congrats on the quarter. Just following up on some prior commentary on HingeSelect, but as we think about your right to win for a customer that's looking at a digital MSK solution for the first time, how much will HingeSelect in kind of that more comprehensive view of your care offering? How much is that influencing that decision for a new customer? And maybe all this eat a follow-up now, James. As we think about the ramp trajectory of that business. Anything that you can share for us there?

Brian, thank you for the question. You talked about the right to win. I think it's a great way of thinking about it. There is something tremendously credible about the leg unification of digital and personal care. I think as we think about, as Dan talks about automating away such a vast majority of care. But recognizing in-person physical care will be required in some minority of the cases. And historically, digital health companies have been unable to elegantly integrate and unify that experience into something that members patients love and are willing to engage in. And so as we sit down with our clients, our prospective clients, and they evaluate the solutions. They are going to, one, first hold us accountable having a best-in-class digital solution. We are going to continue to invest in innovation there, and we want to continue to have the best digital solution in the market. but they're also looking beyond digital and saying, how do you, again, to really tackle back to that cost question, how do you we really tackle those costs that's that elegant unification of in-person digital.

And so it is absolutely providing a strong competitive advantage for us. And I think really enhancing our right to win as you put it.

On the second point, Brian, kind of numbers trajectory. I'll just reiterate some points that we made on the second quarter call, and nothing has really changed in the commentary. One, we'll have some increased costs at the outset as we created a team to go put this provider network together that's already embedded in the numbers in Q3. We've also added costs in the engineering team to create the product experience for our members eventually. We have been out selling it this season. As Dan mentioned, we've got Dan or Jim, we have a few hundred thousand, and we'll probably sign up for it. But the big selling season is probably going to be late 2026 when we add a number of eligible lives and the clients that come with it, and that will translate into billings and revenue not really meaningfully until we get into 2027.

So short answer there is a few added costs between now and end of 2016, which are more than embedded in any forecast that we give. And you'll start seeing some billings and revenue impact in a meaningful way. And by at a cost, we're talking like 2 dozen people or so right now, maybe more.

next question comes from the line of Richard Close with Canaccord Genuity.

Yes. Congratulations on the success here. James, maybe for you. First, how should we think about any near-term investments? I guess other than Hinge Select, is there anything big to be aware of maybe over the next several quarters? And then my follow-up would be on the new service expansion product road map that you're talking about, how are you thinking about not diluting the stellar margin profile that you guys are setting right now?

SP1 Yes. Why don't I take the first one and sort of half of the second one, and then Dan can add his perspective as well. I would mention the near-term investments we have are, again, probably similar to what we shared on the second call. We did have some near-term investments in HingeSelect specifically. That's come to pass and will continue over the next several quarters, if not indefinitely. And we also have invested a little bit more in our go-to-market function, added more capacity into the system into an area where we see lots of opportunity for growth going forward. So those are the 2 I'd identify in addition to products in general. And add to kick it over to Dan, if you want to add anything more?

Yes, we are absolutely committed to organic growth. We -- while we don't like to talk about all of our new products until we're ready to launch them to our customers. You're rest assured, we have a robust R&D team, and most of our new headcount for in 2026 is going to be towards R&D to both burnish our core product which is growing robustly. You see that in our numbers, but we want to start planting seeds, and we are planting seeds, as you could see some are visible with [indiscernible] summer are not quite visible publicly yet because we haven't announced them yet, but we want to plant seeds while our core business is still strong, knowing that it will take a little while for some of these seeds to grow into big strong trees.

Your next question comes from the line of Scott Berg with Needham Co.

Really nice quarter here. A couple for us. Dan, I wanted to start on, I guess, some commentary on Medicare Advantage. These plans really struggled with cost containment over the last 12 months, and we think this has resulted in some case in the national insurers cutting some of their supplemental benefits they offer as part of these Medicare Advantage plans. I guess, what impacts are you seeing from these cost challenges? And does this actually create an opportunity for Hinge perhaps over the next year or 2?

Sure. I'll have to turn it over to Jim, who runs at as part of our business, and he want to take that?

Sure. Thanks, Scott. Thanks for the question. You're absolutely right. We've seen in the news of last year Medicare Advantage plans being under cost pressure regarding MLR. Like you said, we see it as an opportunity. Musculoskeletal spend is a big -- is a top cost driver. And again, looking at whether it's reducing medical spend, improving Stars ratings, I think we have the ability to have a big impact on our MA clients and prospective MA clients -- we've added MA clients this year and haven't lost a single one as a result of some of the headwinds they're experiencing. So we really look at this as an opportunity again, with the validated ROI and the innovation dedicated to MA that we're investing in as well. We think it's a big opportunity, and we'll expect M&A to be a contributor to our growth in the years ahead.

Understood. Helpful. And then from a follow-up question. I know that the selling season commentary had talked about some strong winning with jumbo clients in federal in particular. But I wanted to focus on the federal side because I didn't hear a question on it yet. But with the federal government shutdown, does that impede your ability to sign any new federal, I guess, clients here in the interim? No. So the short answer is no, and it's not impeded our ability at all the evaluation and procurement of solutions like ours continues unabated, and we had our best year ever in that space and have really, I think, got a lot of momentum that we expect to continue into 2026.

Again, I would emphasize, again, health benefits are still covered during the shutdown, salaries or not. Should the shut to present to 11, all bets are off, I actually don't have an answer for that. You might have a better answer for that than I do. But we don't know what happens if the shutdown extends beyond the new year.

Daniel, that's above my pay grade, but we'll pay attention.

There are no further questions at this time. I will now turn the call back to Daniel Perez for closing remarks.

Well, first of all, thank you, everybody, for tuning in and seeing these results. We are absolutely committed to continue to apply technology to automate the delivery of care. I hope you see in our results. that we are just in the early innings of this transformation of health care. It is, again, the largest services industry in our economy. And you could see that with this with these results that we're making good progress. And just a small, small corner of health care, which is physical therapy, and we're going to continue to invest our R&D dollars to continue chipping away at the opportunity. So thanks again, and we'll see you in a couple of months.

This concludes today's call. Thank you for attending. You may now disconnect.