Hinge Health Q2 2026 Earnings Call

Ladies and gentlemen, thank you for joining us and welcome to the Hinge Health Second Quarter 2026 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 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 Persley, 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 and migraine and our entry into gastrointestinal health after that i'll hand it over to jim who'll 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 Hinch 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 with an 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 migrant 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 area of unmet clinical need, and then apply technology to automate care delivery. GI checks all those boxes. Digestive health issues affect one in four 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 a 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. Multiproduct 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 the default solution for a large National Health Plans SMB segment. Specifically, their Under-3,000 Lives book of business, where again, we replace the 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 added 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 running 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, Hinge Select 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 age 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 over 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 rateably 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 percent year-over-year from 568 million in Q2 last year. This strong billings growth sets itself well for continued revenue momentum. Revenue for Q2 came in at 213 million, representing 53 percent growth compared to 139 million in Q2 2025. That's well above our guidance range of 200 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 one-time tariff refund, which provided about a 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 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 59 cents. 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 seven to eight million dollars 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 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 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 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 to $244 million, representing a 28% operating margin at the midpoint, up from our prior guidance of $217 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 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 does not include any potential repurchases in the second half on that note our board of directors has approved a new 300 million dollars share repurchase authorization this reflects our confidence in the business and commitment to returning capital to shareholders when market conditions weren't 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. 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 nine to raise your hand and star six to unmute please stand by while we compile the q a roster your first question comes from the line of ryan mcdonald with Needham and Company.

Your line is open. Please go ahead.

Hi, thanks for taking my questions and 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, you know, 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. And 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. But not only that, our clients kept talking to us about it. In our annual business reviews of so many of our clients, they kept telling us how it's a 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 their company and their product is very analogous to what we're doing. We could map just about every single one of Cylinder's function to a pre-existing function here at Hinge Health, which means that the integration will be a lot smoother than buying any other company out there. They're selling to the same customers, have the same go-to-market motion, have the same 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 within child. So we saw that there was just a lot of analogous functions between Cylinder and us. Now, when it comes to the product experience, Howard 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, you know, 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. They 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 Cylinder 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, you know, great to hear about how strong the selling season has been going across core, migraine, hinge select, but we'd be curious to sort of sort of get your commentary and thoughts about, you know, 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, you know, 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 flush out what's happening in the market competitively here and maybe, you know, how concerning or not that is from increasing competition from other vendors?

Yeah, Ryan, 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 at 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, and those clinical outcomes are leading to real measurable cost savings. And 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. And I think our investments there and our demonstrated market leadership has been recognized and really has contributed to our strong win rates here over the last quarter and the last year. So, yeah, thanks for the question, and we feel really good about our improving win rate.

And just to emphasize as well on that point, you know, 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 three to four times 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 isn't adding up.

Appreciate the color clear. You can see the strength in the numbers. Thanks.

Your next question comes on the line of Sakit Kalia with Barclays. Your line is open. Please go ahead.

Okay, great. Hey guys, thanks for taking my questions here and 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. You know, I think James mentioned about, from Cylinder's perspective, about 150,000 members. I heard 2 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?

Great 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 the gate their yield will be as large as our digital physical therapy yield. But as part of our diligence, we dug really, really deep into their emotions and into how they enroll members, how they engage members. And it was actually one of the confidence-building exercises in terms of this, of going through the acquisition. And 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 Silica hasn't yet adopted, which is fine. It's no knock on them. They're a younger company than us, but that we've refined over many, many years. and we're excited to bring these best practices over the 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, got it. That sounds great. James, maybe for my follow-up for you, just to stay on Cylinder, you gave some really helpful breadcrumbs on the business in your prepared remarks. I was wondering if you could just go one little 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?

Thanks for the follow-on. So I'll just take the last question first. So the guide does include the $78 million that we expect for Cylinder. We expect it to close, call it end of August, early September. So that gives us about four months. So that $7 million to $8 million is only for the four months. So that implies about a $20 million to $25 million a year business this year in 2026, of which will 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's 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 PBMs, 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.

Super helpful. Congrats again, guys. Thank you.

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

Hi, guys. Thanks for taking my question. And 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.

Quick question. There is currently a gut microbiome component of the product, which we're evaluating whether to continue. um it's uh but generally speaking diagnostics in-person diagnostics is it is an important part of the workup for somebody with uh with gi symptoms it's not it's not required for for every um workup but it is a is an important component that we actually like the fact that we're you know we're licensed in all 50 states and we have to you know refer you out or give you a give you an order to grab some labs at quest or give you some more an order to grab some labs at lab court 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's a gut microbiome, which we're evaluating whether, you know, 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 out of?

You know, that's one of the interesting things about digital health is that unlike a health system where, you know, 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 Cylinders 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. And so, no, we don't say we think of the bigger sort of concentration or footprint that's an asset that we could build upon is their distribution partnerships with health plans and pharmacy benefit managers. And, you know, these are they have really strong partners. We diligence 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 at Cylinder, the product at 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 Hinchot.

Thanks, Dan.

Your next question comes from the line of Stan Bernstein with Wells Fargo. Your line is open. Please go ahead.

Yes, hi. Thanks for taking my questions. 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?

God, thank you. So, you know, we've actually been looking at Cylinder from afar 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, you know, we get inbound some weeks. It's two or three companies inbound looking to potentially get a part of it. And 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, got to know their investors, and we have, you know, it's a small community, so our leadership team, particularly Jim, already knew their investors, and, you know, we just dug deeper into the product and the opportunity. Spokes are 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 and that's what gave us a lot of comments to move on. Any, Jim, anything to add?

Just, you know, Dan, I think what you already had spoken about a previous question was really just that strength of the signal from the market. You know, GI being a real pain point for our clients that are looking to actively solve. And that demand has really only intensified with the rise of GLP-1s, which frequently cause GI side effects. So you look at the unmet clinical need, you look at the cost that it'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 then 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.

And just to put a final point on that, again, what we're getting with Cylinder 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 client and 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 timeline versus a de novo build by 18 to 24 And 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 timeline, 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 mentioned, we get several inbound opportunities a month. We review each, but we have a very high bar.

Appreciate the caller. Maybe just as a follow-up on the competitive takeaway you called out, just, you know, any details or context on why you were able to win?

Was it, you know, pricing, product, any combination thereof, any caller would be helpful. yeah but i would say i think um you know our typical buyer goes through a uh the product actually trials the product themselves and they typically do that with you know multiple vendors that they're um that they're looking at and evaluating and the the quality of that experience you know the interaction with the product um things like uh our enso product you know working with our physical therapists engaging in the with uh with the digital uh you know forward elements of our of our program really i think showcased the breadth and depth of the hinge offering and uh and i would say it was it was really probably the product experience that that uh that won the day uh in that one and um and in fact there were some other elements that we probably were playing at a disadvantage and playing from behind and so i think it was really affirming for us as a team to see how strong the product performed in that regard. Great. Thank you.

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

Hey, guys. Congrats on the really strong quarter. So I wanted to clarify in 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 halfway. Is that the new normal that we should expect? And do you think there's anything that's driving that?

Yeah, thanks, Brian, for the question. I appreciate it. I do think that's, you know, the seasonality is normal, and we don't anticipate it changing You know, what's driving that? You know, it's probably a number of things. I think, you know, the current buyers have a high bar for ROI, for evidence. Again, you know, things like data security and privacy, you know, their procurement teams are involved in going through it. And so, you know, that may 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 of the organization to bear in a way that gives our buyers a lot of confidence. And so, yeah, we feel great about the current sales season and the second half of the year is always, you know, that's always the big half of the year. So, you know, 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.

Yeah. And just, you know, 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, you know, 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. You know, is there anything that's timing related in the second quarter? Maybe how we should be thinking about conversion in the second half?

Thanks, guys. 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 you know 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 in the fourth quarter as you probably typically seen already the first quarter for us is still a great quarter from a cash flow perspective but the least uh strong of the four quarters so yeah back out looks uh looks great your next question comes from the line of elizabeth

anderson with evercore isi your line is open please go ahead hi guys thanks so much for the question this afternoon um i had a question about cylinder health um just in terms of the integration Thank you, Jim, for the comments about the revenue contribution. If we think about the integration, do you think, 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 encourage us to bring it into the broader Hint platform? And then from a selling season perspective, you know, 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. Does that also, 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. Thanks so much.

Yeah, thanks, Liz. Let me maybe start with that and we'll see if I capture everything there. 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. Yeah, good. I meant to add that to the revenue discussion earlier. Glad you brought that back up again. So yeah, 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 short order being like a year to two years. As Dan mentioned, we're going through some product integration over the next nine months or so that we expect to have complete by the summer of next year. And 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'll look pretty normalized and just fold right into the business. We're not changing our 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. um just yeah to add in is uh you know we've spent several years building our core technology platform um in such a way that we could reuse many of the components and that's one of the reasons we were able to bring migraines to market with uh in such a capital efficient manner and we believe the integration of this product into our core um 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 it's it's you know we aim to harmonize um uh 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 and that's that's going to be a seed we will reaping we'll be reaping that we had we had sold many years ago and you're going to see a see that and you already saw it with migraine of 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 it's modest um it's not it's not substantial um increased in in cost ads it's actually relatively modest given

how um how efficient our r&d build is great thank you so much your next question comes from the line of Jaylindra Singh with Truist Securities. Your line is open. Please go ahead.

Thank you, and thanks for taking my questions. And congratulations on a very strong quarter here. So first, 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 hinged client? And following up on the question Elizabeth asked about integration Cylinder held, 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, yeah, we anticipate nearly all of Simulator's employees will be transitioning over. And we've had really strong and robust and collaborative discussions with our leadership. and have several long-term roles for their go-to-market leadership in particular because we know how critical those relationships are and, frankly, we've been extremely impressed with the level of talent on Cylinder's leadership team. And the first part of your question was around how the overlap of the clients. Our count is 52 of their clients are currently in Chels' clients as well. And so we were able to see a really strong signal from our book that quite a few of their clients were, quite a few of our clients were already buying Cylindor, as well as quite a few of our partners, our health plan and PBM partners were partnering with Cylindor.

And then my quick follow-up on yield now expected at 4.45% versus prior 4.3%. That 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 piston firing to Lender. It's several, and I'd say those pistons 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. And look, about 9% of people see a PT in a given year. We believe with better access, that number for digital PT could be, you know, that number of people seeking PT overall, digital and in person, should be closer to 12 to 15%. And as you know, we're on pace for 4.45%, almost all of which is from digital PT. Migraine just launched, but look, one in six working age adults are impacted with migraine. And with GI, it's one in four. So we see improved performance across our legacy, both and our new clients with regards to yield. And we see a path to increasing yield for many, many years to come.

I think maybe, Jalendra, 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 yield.

Perfect. Thanks a lot. Yep.

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

Yes, thank you. As you prepare to launch Migraine on a broader basis, are there any parallels to other product rollouts? So for example, you saw a 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?

Yeah, but 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. And with migraine, there are net new people coming on board who wouldn't have engaged with Hinch Health otherwise had we not had 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 client's population and a downstream impact as well as on our financials that we have more members that are engaging and therefore it impacts our revenue.

Maybe I'll just add 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. I 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 for that study and just the longer-term opportunity you see in that age population.

Yeah. Yeah, 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, yeah, it's 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, yeah, a lot of momentum building there, and the results just continue to be more and more positive as we continue to pursue that market. Great. Thank you.

Your next question comes from the line of Jessica Tassan with Piper Sandler. Your line is open. Please go ahead.

Thanks very much for taking the question, and thanks again for hosting us at Movement. It was a really excellent event. 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 BIPs 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 two 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 migrant and MSK together and a member engaging with both, we charge at the member level, and 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, you know, a given member is not charged for two different subscriptions. They come in with Hinch Health and they could get essentially all they could or unlimited care from Hinch Health when they become a subscribing member. And so and that's a key value to our clients and part of our engagement building model. And Migrant is part of our engagement building model. You have that up. both of the apps are now migraines is on the same app um as uh as our digital physical therapy so you could actually have concurrent enrollment treat your back pain and your migraine and that's that's been rolling out and to our clients right now and that's what we want to continue to be doing for 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. Thank you, 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? Thanks again.

Great. Well, 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 us a 510K clearance and also reviewed that established body of evidence when clearing Enzo for migraine. So we're actually already building upon years of prior research. So I do want to clarify that. And we're extending 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 delivered to one piece, we're delivering the whole system, and we'll be publishing additional research into our impact for migraine in 2027.

Thank you.

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

Thank you. Good afternoon. 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?

Yeah. 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 the 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. And so the economics are very favorable. The sales cycles are compressed. And 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 relationship of our health plans, we're able to serve that market very cost effectively. And 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 yield. 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 varying impact on 2027?

Yeah. Thanks, Dave. I'll just, maybe the answer that I'll just remind kind of what the last two years of cadence have been. We started, 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's 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.

Yeah, it gives us a, you know, you can expand yield with, you know, 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.

Great. All right. Thanks very much.

We have time for one last question. This question comes from the line of Rishi Jalaria with RBC. Your line is open. Please go ahead.

Oh, wonderful. Thanks for squeezing me in. Really appreciate it and 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's 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 With MSK, it's obviously the true motion, the motion capture technology, as well as the Enso device that very much differentiates it from just a physical therapist getting on Zoom and watching a customer or a patient with migraines. Obviously, Enzo 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 expander Beyond that, you know, 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? Thank you so much.

Great question. And, you know, we, as mentioned earlier, we are, 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, could 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 a GI program, we do believe that you could 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 the status quo. You're almost competing with non-consumption. 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, we could give members a lot more access, a lot quicker access, and we could lower costs. Because when somebody is flailing 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. And of course, we're going to continue to have access to specialists very efficiently, whether it's a dietician or gastroenterologist or a nurse practitioner. Um, and the, the, the third aspect is that it's kind of a, a medic 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, you know, they, they want to do something that they may not want to do is just focus on their gut health today or focus on their knee pain or focus on their, on their headache. And 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 that we can move their outcomes. So that if 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.

Very helpful.

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 can see from our Q2 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. It's the, 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 cylinder, as well as to return capital to shareholders, as you saw with our $300 million share buyback program, which we announced today. And we are planting seeds that we hope we'll be able to sow in the future. seeds such as migraine which will be which is a big challenge and we we think is hit is hit the ground running with 450 clients across with covering 5 million members we still have many millions tens of millions of members to go to upsell our migraine product to um and now with a gi care as a as another seed that we're planting and so we're really excited about many plantable harvests up ahead so thank you for tuning in and uh we look forward to speaking new again in about 90 days.

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