Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health 3rd Quarter 2025 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. 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, 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, 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 five 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, healthcare. 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%, 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%, 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 healthcare, 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 healthcare. To that end, I'm excited to share three 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 back or 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 therapist 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 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 rely on subjective 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 hinge 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 weed AI throughout our entire organization to drive efficiency and innovation. One example I'd 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 one, increased code output by 120% and pushed new features live three times 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 sign 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 finalized 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 fairs 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 lives. 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 hinge select 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 contracted with over 3,300 high-quality provider locations across all 50 states, creating comprehensive coverage for our members, and we expect to to significantly increase our footprint over the next 12 months. Currently, 86% of our lives live within the Hinge Select 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've already committed to Hinge 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 Hinge Select 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 who see Hinge Select as a differentiator and existing clients looking to expand their relationship with us. Moreover, we're in advanced discussions with multiple health plans and PBM partners to streamline Hinge Select adoption with our mutual clients. With that commercial update, let me turn over 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 three key drivers lives yield and average price lives 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 three 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 to 143 million due to strong billings performance stemming from the continued strength of our underlying fundamentals we saw solid performance across all three 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 double 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 member challenges this summer to encourage movement during seasonally slower months where members could earn rewards and badges for meeting their goals. These 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 had 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 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 improvements 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 three 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 to 157 million representing 33 year-over-year growth at the midpoint for non-gap income from operations we're projecting 34 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 to 574 million, which represents 47% year-over-year growth at the midpoint. This is a meaningful increase from the 548 to 552 million range we provided last quarter. For full-year non-gap income from operations, we now expect $106 to $108 million, a 19% margin at the midpoint, and also a meaningful raise from our prior guidance of $77 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 target. 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 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 will continue to be thoughtful in how we manage dilution over Finally, I want to remind everyone that our lockup expires at the end of the day on November 17th, with shares free to trade on November 18th. 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 lockup release, and the remaining 77 million are being unlocked. 41 million of those shares, however, are either invested and and ineligible to trade, or 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.

DANNY WARSHAYS Thanks, James. I'd like to emphasize a 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 gap profitability. That means we see stock-based compensation is a real expense. And just like any other expense, we're going to manage it closely. Indeed, we've brought dilution down for three straight years and will 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 healthcare delivery. Physical therapy is only 1.2% of total healthcare spend, yet is a $60 billion-plus market in the United States. As we automate other aspects of care outside of PTE, 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.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Rishi Jalura from RBC Capital Markets. Your line is open. Please go ahead.

Oh, wonderful. Thanks so much for taking my questions. 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 enterprises, maybe a little bit risk averse around AI, especially when it comes to data, How you're balancing the kind of desire to, you know, drive innovation here, bring AI into the product and ultimately drive better customer success and better patient outcomes and work with, you know, 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. Thanks for that. And you're absolutely right. There's 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 Health, we're really focused on some bread and butter applications of AI that could, you know, make the member experience more convenient, more personalized, make our care team more efficient so we can increase the throughput. And then, you know, our investments in our core AI threaded throughout the rest of our organization to make the business more more efficient as well. So I 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, you know, 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 of prioritized 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, you know, particularly our health time partners, sharing with them our roadmap, sharing with them our thinking, and sharing with them our outcomes. Now, our movement analysis is a phenomenal step forward in how outcomes should be within musculoskeletal orthopedic care. You know, typically outcomes in orthopedic care can be tracked by particularly patient reported outcomes is very subjective. It's how has your pain 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, you know, 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 shortens the time. And so for the for the members. So, you know, we've just to sum up, we've we agree that there's more challenges in health care. We've we've approached it with that level of humility and really focus on the bread and butter application. And that's the patient facing aspects. I haven't mentioned, you know, the company facing aspects of AI, which you've seen are driving a lot of our operational efficiencies.

Awesome. No, that's that's super helpful and really appreciate that color. And then, you know, you talked a little bit about open enrollment at the very beginning of your statement. And maybe, you know, as we're in the middle of open enrollment season and, you know, here in California, I think it just opened up today, maybe can you walk us through kind of what set of assumptions you're thinking in terms of, you know, this open enrollment season as we think about the Q4 guide and, you know, how are you thinking about it relative to prior years? And now that you have, you know, in your arsenal, greater ENSO traction, you've got Hinch Select 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, you know, over federal tax credits as a result of the current government shutdown going on.

Thank you. Great, great question. So in terms of open enrollment, so a lot of our new clients that 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 then implementation cycle of new clients. And they typically go live with a new plan here, which starts in 1.1. So over the course of Q1, we'll have clients going live on 1.1, 1.15, 2.1, you know, 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, you know, pre-signups for upcoming benefits. And they mention, hey, you know, coming up in Q1, you're going to have a new mental health benefit, a new musculoskeletal benefit, you know, 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 could take that in terms of its impact on a short answer is not much impact so far.

Yeah, 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 it's ever been. This is our best year ever in the federal space. And we expect that trend to continue. So, yeah, no impact to the shutdown on the business today.

And I just clarify that while salaries, unfortunately, are paused, health benefits, dental benefits and vision are not paused. And so those continue to be paid for throughout the government shutdown. And if this extends into one one, I actually I don't know. I don't have an answer for you of how health benefits, what happens to health benefits after after one one. But throughout the end of the year, they are absolutely funded.

Wonderful. Really helpful. Thank you so much.

Your next question comes from the line of Jess Tassan with Piper Sandler. Ms. Tassan, please press star six to unmute.

Thanks for taking the question, and congrats on the quarter. I'm hoping you can maybe explain some of the seasonal and comp, year-over-year comp dynamics behind your four Q25 yield assumptions, and wondering if the guide implies that active members actually decline sequentially, and if so, why would that occur?

Yeah, thanks, Jess. Yes, 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, where in 2024, we had a ton of pent-up marketing demand going into the back half of the year, specifically into Q4, that drove a ton of engagement. And this year looks more like our normal seasonality that we typically have.

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 Enzo this year may be something else in 2026. Thanks again, and congrats again.

Great question. So this is Dan. So with regards 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 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 in as real time as possible. And notably, building these pipes also requires effort from the 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 years-long collaboration and simply standing up these bidirectional data transfers, cleaning up and standardizing the data, and then using it to effectively identify and enroll high-risk members. And that has a big impact on ROI that we can deliver our clients. And I suspect we are far ahead of most everyone else with regards 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 Sakit Kalia from Barclays. Mr. Kalia, your line is open. Please go ahead.

Okay, great. Hey, guys, thanks for taking my questions here. Nice quarter. Thanks, sir. Absolutely. Dan and Jim, maybe for you. You know, it was great to hear about the strength this 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, Saka, 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 of this quarter. I think you said it was 81 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 put that outperformance into perspective a little bit yeah 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 is pretty awesome um so yeah 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 on when something might be going awry 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 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.

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

Well, it shows. Thanks very much.

Your next question comes from the line of Jalendra Singh with Truist Securities. Your line is open. Please go ahead.

Thank you. Thanks for taking my questions. 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 plans being pulled forward and what are driving those type of shifts any and also like related to that can you share in 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 hey jillinder thank you uh very

much for the question. No, I would say this year looks fairly traditional from a rhythm perspective, as we've touched on, you know, 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 1-1 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 velocity 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 every bit as 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 better understand how some of the recent AI tools you have launched are helping you to further improve your member to FTE ratio.

Great question. Thanks, Shalandra. 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 grills, organic grills to capture this opportunity. But it's important to note we are building our product much more efficiently thanks to AI. You know, 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. That is, you know, despite increasing revenue in 2026, our care team will be at worst flat. You could, you know, 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.

Perfect. Thanks a lot.

Great question.

Your next question comes from the line of Scott Schoenhaus with KeyBank. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my question. I just wanted to touch more on your new product offerings, Robin AI and movement analysis. It seems like it also could drive increased yields, but also as you move to a more utilization-based model, which is, you know, 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 was flat. So maybe walk us through the dynamics of these new two product, AI product offerings on the yield side and potentially on the ARPU side. Thanks.

Great question. So, you know, improving our core member experience is something we're always focused on, allows us to just better retain the triple aim of improved outcomes, experience and costs. And we're at, you know, 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 is trended to flat this year, which is where we expected because we modeled that into our contractual commitments for our new billing model to begin with. We knew that even increased engagement would 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 curve user engagement, not just improving the enrollment to the program, but improving the engagement of those who enroll. And we want to continue to do that at Hinge Health. And it's going to be, you know, similar to our yield improvements, a portfolio approach of singles and doubles. You know, I actually don't see a movement analysis in a home run. I see this like a double, might be a triple, actually, but 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.

Thanks, Dan. 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, you know, higher up, you know, higher level, where we should be able to see operating margins continue to progress as you, you know, infuse more in AI across your business.

Yeah. Well, between the improvements in gross margin over a year ago and the improvements in operating margin, that's about 2,600 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. But the people around that have also gotten more efficient as a result.

And 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 on saying, hey, you know, when one one 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 headcount you planned 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 caused a lot of teams to encourage a lot of teams to experiment with new AI tools, new processes, and just problem solve in new ways such that we could solve problems with technology and brain cells instead of having to solve problems by adding new heads.

Yes. And maybe, Scott, that's one thing I'd add. I think maybe implicit in your question also is that we're probably by anyone's standards, we're well ahead of our march towards our target model of 25 percent EBIT and 30 percent free cash flow margins. So maybe implicitly 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'll come in 2026. But today, as of today, no change to our target models that we have. Thank you.

Your next question comes from the line of David Grissman with Stifo. Your line is open. Please go ahead.

Good afternoon and thank you. You know, 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 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, independent of size. And so, no, the short answer is I would not anticipate any variation.

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

Great question. And so, you know, a lot of our R&D is focused on enhancing our core product of digital physical therapy. About 40% of people have musculoskeletal pain in a given year, 9% see a physical therapist. We think it should be closer to like 12 or 15. And, you know, 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 healthcare, you know, even half the size of physical therapy, and physical therapy is 1.2% of healthcare spend, so it's about 60 plus billion dollars. If we peeled off an area of healthcare even half the size of PT, it would represent tens of billions of dollars at TAM, and we're working on a new product right now. But we will only enter spaces where we have confidence, where we will be either number one or number two,

and preferably number one. Thank you. Your next question comes from the line of Brad Stills

from Bank of America. Your line is open. Please go ahead. Oh, great. Thank you so much. 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. Yeah. Thanks, Brad. The way we think about fully insured, by the way, might be a little bit different than others. So we count a fully insured client as one client with the health plan. So the health plans, fully insured book of business, even though there's thousands of clients, small employers that typically constitute that health plan. So no, we think about that as a singular client from a county or client's perspective. So fully insured was not a meaningful contributor from a kind of a number of logos perspective, if you will. But it is a meaningful contributor to our business growth. And I think, again, as we mentioned in our prepared remarks, the actuarial rigor that fully insured organizations use to evaluate solutions like Hinge is tremendously validating when you pass those hurdles and become the adopted 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, in the fully insured,

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, you know, 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.

Yeah, yeah, 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. By the time we got to the second quarter call three 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 suggests it's trending even higher than that. So we're pretty comfortable that it'll end the year at least at 3.65 and, you know, opportunity to improve even above that as we finish out the year here. Wonderful to hear. Thanks, James.

your next question comes from the line of elizabeth anderson from evercore isi your line

is open please go ahead hi guys uh congrats on a really nice quarter and thanks for the question um 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 the need to continue to ramp that? 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, you know, 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 pieces to that. So let me start on how we evaluate provider quality. And then if you could to repeat a few other parts of the question just just to it was it was there were a bunch in there so thank you we did it um and uh so first of all on the on the provider uh quality front that is is one of the most uh important elements of hinge select is actually um assessing for provider quality as well as for cost by the way so that's overall value is is is it includes cost and quality and so different providers are going to evaluate them for for quality in different ways And you can look at, you know, 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 costs. And so if you just get somebody to conservative management orthopedic care, conservative 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 costs. It could be the time constraints for having to take time off work, et cetera. And so we're really focused on expanding 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 therapists is really high. Now, when it comes to other provider types, it actually really helps to look at claims data. For instance, with a surgeon, you could actually look, there's, you know, data sources out there, and we've partnered with several data sources to actually look at, you know, what is somebody's practicing philosophy and what is their, you know, what does the data show in terms of how they practice care? For instance, if they're doing a knee 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 concerted management care before the surgeon operated on them? What was the downstream claims that happened after the surgery? Were there a lot of revisions? And so there's various ways where you could look at what's the quality of a particular surgeon. And it's so, you know, it's going to depend on the provider type, but, you know, just giving you examples of surgeons in that sense. And then from after assessing for quality, we're not looking for like, we don't necessarily need the top 1%. If you actually go, you know, eliminate the bottom 25% for particular orthopedic surgeons, or even bias to the top quartile, you're going to have really good orthopedic surgeons who are not overoperating 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 five. 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 plans network as we build that network. For physical therapists, of course, we want a lot more density than five in Atlanta. We want several dozen.

Yeah, no, that's very helpful. And it also sounds like because given the partnership model that you 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?

Exactly. It's a two-sided marketplace and, you know, two-sided marketplaces are incredibly difficult to build up. But we firmly believe that, you know, solving this problem will create one of the most enduring moats and enduring competitive advantages at Hinge Health to have an in-person network that complements our overall national health plan partnerships and our regional blues partnerships as well. and, you know, solving hard problems are themselves a moat and building a two-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 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.

Very helpful. Thank you.

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

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

Yeah, Craig, thank you for the question. I think as anybody who's seen the news, employer healthcare costs are rising 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 care 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 can, you know, 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?

Yeah, 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 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 ENSA, 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.

And I'd say, first of all, at a high level, we think software is going to automate all non-touch aspects of health care, you know, interpreting symptoms, formulating a diagnosis, creating a care plan, even like potentially, you know, telemedicine visits, you know, will eventually be automated via software. However, the touch aspects of health care will require hardware. We are committed. If we 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, you know, charge anybody to receive it. We're very thoughtful in sending those out for those who would benefit most. Members who do get escalated to Enzo tend to see their activity sessions improve, not only from Enzo uses, 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, and people just love their Enzo. And if, you know, it ever falters, it's one of the first things they'll 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 on the market as well.

Got it. Thank you. Great question.

Your next question comes from the line of Brian Peterson with Raymond James. Your line is open. Please go ahead.

Thanks. And I'll echo my congrats on the quarter. Just following up on some prior commentary on Hinge Select. 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 Hinge Select and kind of that more comprehensive view of your care offering? How much is that influencing that decision for a new customer? And maybe I'll just ask my follow-up now. James, as we think about the ramp trajectory of that business, anything that you can share for us there? Thanks, guys.

Brian, thank you for the question. You talk about the right to win. I think it's a great way of thinking about it. there is something tremendously credible about the elegant unification of digital and in-person 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 to having a best-in-class digital solution. We are going to continue to invest in innovation there, and we're going to continue to have the best digital solution on 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 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's really changed in the commentary. One, we'll have some increased costs at the outset as we create 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, or Dan or Jim, we have a few hundred thousand that will 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 26, 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 in 2027. And by added costs, we're talking like two dozen people or so right now, maybe a bit more.

Thanks, guys.

Your next question comes from the line of Richard Close with Canaccord Genuity. Your line is open. Please go ahead.

Yes. Thanks for the questions. 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 roadmap that you're talking about. How are you thinking about not diluting, you know, the stellar margin profile that you guys are setting right now?

Yeah, why don't I take the first one and sort of half of the second one and then Dan can 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 Hinge Select 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 two I'd identify in addition to product in general and add to kick it over to Dan if he wants to add anything.

Yeah, we are we are absolutely committed to organic growth. We well, we we don't like to talk about all of our new products until we're ready to launch them to our customers. You 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 within shellac. Some 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'll take a little while for some of these seeds to grow into big, strong trees.

Good. Thank you. Thank you.

Your next question comes from the line of Scottsburg with Needham Co. Your line is open. Please go ahead.

Hi, everyone. Really nice quarter here. A couple for us. Dan wanted to start on, I guess, some commentary on Medicare Advantage. You know, 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, you know, from these cost challenges, and does this actually create an opportunity for Hinge, you know, perhaps over the next year or two?

Sure. I'll actually turn it over to Jim, who runs that part of our business, and he wanted to take that.

Sure. 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 MA 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, I've talked about some strong winning with Jumbo clients and 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, it does not impede 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 shutdown extend to 1-1, 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. Really nice quarter, everyone.

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 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 to chipping away at the opportunity. So thanks again, and we'll see you in a couple months.

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