Great. Good morning, everyone. Thanks for attending the Canaccord Genuity Growth Conference this year. We really appreciate it. I'm Richard Close with an equity research here at Canaccord covering digital and tech-enabled health. We're excited to have Omada Health here, first time at the conference. Um, and, uh, from management, uh, we have, uh, Steve Cook, uh, CFO, uh, and the rest of the finance team here, um, to discuss Omada. Um, you know, I think I first met Omada back in 2018. It was shortly after the company, uh, rolled out diabetes and hypertension. And it's really been pretty remarkable to see how the company has evolved since then and last year's IPO. So, Steve, maybe first, thanks for coming, but just for investors that are maybe newer to the Omada story, just walk through us the journey real quick and where the company has come from to what it is today. including, you know, maybe the programs that you guys currently address.

Yeah, absolutely. Good morning, everyone. Back in 2010, Sean and Adrian founded the business with the explicit intent to bend the curve on metabolic disease. So their kind of future state vision is a day where the epidemiologists can actually see like the bending of the curve because the mod itself is actually making an impact on everyone in the country. So at the beginning, Sean and Adrian, they like literally sat in the homes of people struggling with obesity. struggling with a lot of these disease states and just wanted to understand how we could best best serve them us today we're now at 1.1 million members uh you know we're partnered with all three of the major pbms multiple of the largest health plans uh across the world and then per your point you know a big part of our strategy was up until 2018 we just had a single product it was prevention and weight health and then 2018-2019 time frame we entered diabetes we entered hypertension. Then we acquired into MSK through our Frazera acquisition in 2020. And now we've recently released our cholesterol program as well as our GLP-1 product offering. And so our intent and the way we've been really just realizing a lot of economic benefit is selling across the entire condition type. So we listen to our customers. Costco is probably our most kind of brand name example. We started with them in 2013. They work with us across all of our product categories. And every time we've released a new product, we've gone back to them and they've picked it up or they've asked us to go into some of the categories sometimes. And so we always start with listening to our customers. And if they want us to go into a specific area, then we really take that seriously. We underwrite an investment protocol and then determine if we want to go in there. So the future is bright right now.

Excellent. We're lucky enough or maybe unlucky but you know we're just exiting second quarter reporting season last week was crazy to say the least for us but you know you just reported results last Thursday before we go deeper into the story it would be good to just level set in terms of you know what maybe you think the big takeaways are from the quarter you just reported, but also you had a management change, which comes pretty quickly after the IPO last year. And just sort of talk a little bit about that as well.

Yeah, maybe I'll start there and then we can go back to the quarterly performance. Sean, our co-founder CEO, announced a transition last week. He's going to become our executive chairman. And then Wei Li, who's been his predecessor for some time, he's moved the company for the better part of seven years. He became president four years ago. He was going to take the CEO mantle. So Whaley is a very, very seasoned operator. He was at Lilly for two plus decades and just like an amazing execution vehicle through him. Sean's still going to be like super actively involved in the business. He's going to be the rainmaker, so to speak. He wants to be out there like really going and talking to like all the big health plans and making sure he's just on the front face and like really building up the Omada story externally. So I think this has been like a natural progression, evolution in our business. I'm really excited about that. From Q2, you know, a record, a record quarter for us, highest ever revenue, $88 million, 43% growth on a year-over-year basis, highest ever gross margin, 74%. And then we printed $10.8 million of adjusted EBITDA. So we've really been, especially in this like digital healthcare category, been trying to demonstrate, you know, the durability of these assets. I think a lot of investors, you know, got burned in kind of that 2021 time frame with like false promises. And so we've just been like quarter in, quarter out trying to keep the growth high, but then also really display like margin expansion across both gross margin and EBITDA. So Q2 is a really good proof point there. I think Q2, you know, most notably, it wasn't any single thing that carried the day. It was a broad based win across all product types, diabetes and hypertension, which are our highest priced products. and they actually have the strongest LTV. We're the fastest growing. So it's not, you know, I think a lot of investors, they think it's like we're just riding this GLP-1 tailwind oftentimes and that's like really not the case. It's the GLP-1 conversation is acting as a tip of the spear and then we can go and cross sell across our entire product suite, which is really how we've been winning in market for the past couple of years. So yeah, just awesome, awesome quarter overall.

Excellent. We'll dive deeper into GLP-1s later on. One of the things that's interesting about Omada is how the revenue model changed over time from maybe your first cohorts of contracts back in the day with pre-diabetes and I think even with some of the diabetes. Can you just tell us how you make money essentially on the top line?

Yeah, look, I think we've had a couple of different pricing models through time, but the most important thing and the way like Sean envisioned, you know, billing when we started this business was to always make our revenue connected to some sort of economic, like some sort of outcome, like either it'd be clinical or activity, something that's actually driving like health change. And so I think, you know, the billing models of past were like PEPMs. Like Ryan and I dealt with this at One Medical for years where you have this weird incentive, like kind of conflict where your incentive as the provider of that benefit is actually to lower your performance as much as possible to then increase margin. So our flavor of billing is we only charge people when they're actively engaged in our program. It's very simple. It's very simple to contract with plans and employers. If they stop using the program, we stop charging for it. So we have a direct incentive to make our product experience as compelling as possible so that folks are staying actively engaged with that. So that's the most common flavor that we've sold exclusively for the past six or seven years is that could be engaging with your coach. It could be utilizing your devices. It could be joining a community. These are all logged as activities. And then if you trip that billing threshold, we then in turn file a claim and recognize revenue for that. So you bill as a medical provider? Yeah, we bill as a full covered entity. Sean took our trials to the American Medical Association, I think this is early teens, and was issued the first ever digital-specific CPT code, so it's a CAAT-free code. That's what allows us to bill on fee-for-service rails just like we're a provider. That's really how the entire business model works. The end cost to our end users is zero. We bypass HTHP, bypass deductible, and do everything through the plans and then through the employers. That's really helpful.

And that sort of feathers into the next question, which there were several questions in the analyst follow-up from the second quarter. I guess my headline raised some questions with respect to the guidance, the forward guidance. In terms of the second half of the year, you mentioned the strong revenue you posted in the second quarter, but if you look at the rest of the year guidance, it implies a step down in terms of revenue for third and fourth quarter off of that second quarter levels. Can you explain that a little bit? Because I think it factors into what we just talked about in terms of the revenue model.

Yeah, 100%. Our typical seasonality pattern is such that we spend H2 building a pipeline, closing new employer clients, and then we really see the biggest influx of new members in the first quarter. That's associated with you guys are all part of employers, you're launching the new benefit cycle, you get these new benefits, and typically employers bias launching new benefits in that first quarter. That's been our typical pattern. You'll see Q1 spike in terms of net new member ads. That is the dynamic that actually presses gross margin down because we have higher care delivery costs, we have higher device costs in the first quarter, and then as you go throughout the year you see gross margin climb. So what you'll typically observe in our business is like more a stronger H1 and the back half tends to taper a little bit as there's just like less net ads throughout the course of the year. And now we're focused this year especially just on building a pipeline with Optum with CVS to make sure that we start strong again in 2027. 2024 and 2025 were slightly atypical. We were building into a new channel relationship with across multiple business lines. And we actually saw acceleration in the back half of both of those years. And we grew 53% last year. So it is a little bit of a tough comp on a year-over-year basis. But having a year that's still with the midpoint of the guide at 30%, we feel that's well above what we committed, which was 20% at the beginning.

Is it a little bit where maybe these new members on board and they're engaged for three or four months, five months in the first half of the year And then, you know, since you bill on a, you know, engagement perspective, they might not engage in July or August, but do come back, you know, at some point. Is that a factor in it at all?

Not as much. I mean, billing is kind of a function of a couple things. It's what channel you came through, what product you're on, and then your tenure in the program. So, you know, what we observed, especially in the first quarter, is we were actually seeing members in their fifth year with Omada staying engaged. But when you're like five years out in your journey with Omada, you're not billing like you were in year one. In year one, you're probably billing 11, 10, 11 months on average. In the fifth year, you're probably billing two or three months. So you're still in the member count because you're an active billable member, but you're driving overall less revenue. But what's most important is if you get in that fifth year of the curve, those are some of our most profitable members. there's very little incremental like associated costs with like continuing to build that revenue because all the cost was front loaded. You've already spent the money on the devices. A lot of the care delivery cost was up front. So those are some of our highest gross margin members, but they can have a dilutive effect on trailing 12 month revenue per member.

Yeah. And that's what you brought up. I think some people thought that was a red flag last quarter in terms of maybe the average revenue per member, you know, decreasing a little bit. and that's just the different cohorts. Can you talk a little bit more about the different cohorts and then the lifetime value of a member in diabetes and hypertension and just dive a little bit more deeper into that?

Yeah, sure. I mean, we actually saw trailing 12-month revenue per member increase 2% year over year, so we're at $284. This is mostly a function of mix. So again, And diabetes and hypertensive members are their highest-priced products, roughly $100 list price. And then for the chronic conditions like diabetes and hypertension, they actually stay in program the longest. So we've actually motioned our team where we give the sales team incremental kickers if they're able to close more diabetic and hypertensive deals out there. And so that's what we've been working on is making sure that we have a bigger portion of our total member base in those conditions because they're able to drive higher LTV and better union economics for the business overall.

Okay. You had mentioned the growth acceleration the last couple of years. And then obviously there's some normalization. Talk a little bit about that normalization. Is it just law of large numbers or how are you thinking about that when investors ask you?

You know, our commitment during the IPO was threefold. It was to grow 20-plus percent for the foreseeable future, 70% gross margin, and then 20% plus adjusted EBITDA margin. So we backed that up with 53% last year. The midpoint of the guide is now 30%. And, you know, we really like the setup for next year. Again, we announced our CVS relationship just over a year ago. We just announced our Optum relationship about six months ago. So we just announced a massive expansion with HCSC where we're expanding into three additional states going into next year, another 1.5 million covered lives. So now our sales teams, they're really excited because they get to go like open these like new channels, these new greenfield opportunities. So we're going to stay with our 20 plus percent commitment for the foreseeable future and then increment up from there as we get more, more, more intel. What's most important on these newer channels, especially relative to some of our older business with like Cigna is that we're in there with typically like slightly more favorable price points and we're also in there with more products. And often notably, we're in there with our prescribing product. That's going to be our highest price product. It's roughly two and a half times more than our older prevention line item. And so as our reps are able to start closing these deals in 2027, 2028, you're going to see that start to materialize in the P&L.

Can you talk a little bit about, I mean, obviously the growth has been huge over the last couple of years. You just mentioned channel partnerships. How do you think about like the channel partnerships versus direct sales and organization? Maybe give some color in terms of how the direct organization has changed over the last couple of years.

Yeah. The direct versus channel distinction is usually a procurement decision on behalf of the employer. Sometimes they just want it on their own paper. Economically speaking, it's agnostic. It doesn't really matter from a pricing perspective. We like going through the channels because what we're able to do is keep a pretty small sales team. Our direct sales force is 25 people across a channel sales team specifically and then an employer sales team. These are just high-end SWAT and Navy SEAL type folks, very senior salespeople that go in and close these big channel relationships. And then we go work with Optum. And then we go work with CVS and we work with their sales team and then they sell Omada on our behalf. And so we extracted a ton of sales leverage because of that dynamic. So more recently, I mean, the majority of our business now flows through that center line where we're going through the PBMs or through the channel partners and less through like from a direct perspective.

And the channel partnerships see Omada as adding value to their customer.

Yeah, sometimes you're in these books of business with more competitors. And so you need to stand out amongst the competition, these books of business. But that's on us. And we think we, especially in some of the more recent books in the Optum book, I think we stand to really benefit from the competitiveness in that channel.

Is there anything we should really take into account in terms of economics of channel versus direct?

Yeah, direction, no. There's really no distinction channel versus direct. But I do think channel-wise, as we've gone through time, we have gotten there with more products. We're on both CVS and Optum across multiple products, across multiple lines of business. And then as we displayed in the Cigna book, when you demonstrate success in a self-insured ASO book, they have a higher willingness to write you into their fully insured books. And that pattern has played out really beneficially for us over time.

But with respect to the opportunity going forward, where do you think we are in terms of penetration, in terms of self-insured employers, health plans and whatnot? How do you look at, like, you know, the TAM opportunity and where you are penetrated?

Yeah, I still think it's early innings. I mean, we have 25 million covered lives today. We're still very early days with both CVS and with Optum. and so we have our investor day next month on September 10th and what we're planning to do there is actually spend quite a bit of time like kind of articulating how we built into both the Cigna and the ESI book over time and then help folks investors really from an illustrative perspective start to think through hey how is CVS how do we expect CVS and Optum and HCSC to also build through time but these are massive lines of business and we're just like literally not even at first base in terms of what we can do in those lines of business.

Okay. So to end maybe the sales and marketing or market opportunity, probably a question more for Wei Li on this, but just any thoughts on the commentary of last week and like pipeline and the opportunity for the rest of the year in terms of new business. We're entering the season when new business closes really?

Yeah no we've been looking at our pipeline reports and I think what you're seeing is a really healthy distribution across a lot of the new channel opportunities. I mean especially compared to years past you're seeing obviously a lot of new pipeline build with Cigna and ESI and now you're seeing some of the other channel partners become a bigger portion of that mix. And so one of the questions we get from investors a lot or it just comes up on X and other things is just like the customer concentration across these two channels because we have disclosed it's like 60 plus percent of our revenues through Cigna and through Evernor, so people are like, hey, when does that kind of like normalize? Do you have concentration risk there? And so we really like how the pipeline is building across these new opportunities. CVS is about a year ahead compared to Optum, but we are in there with favorable economics. I think through time, you'll see that start to normalize. But yeah, no sales teams are feeling really good about the the overall pipeline.

Great. So let's move on to the exciting part and the CFO part of our discussion. You have to be really proud of the margins that you guys are posting. You mentioned record level here in the second quarter gross margin. I think when I first started talking with Sean, back in 2017 or 18, you know, margins were 40% or something like that. So talk about the journey from that to where we are today. And I don't want to steal your thunder for the investor day, you know, coming up in September, but just think about that progression and, you know, maybe thoughts going forward.

Yeah, I think, you know, a couple of thoughts here, again, during the IPO, our commitment was 70% plus gross margin on an annualized basis, and then 20 plus percent on adjusted EBITDA. We are going to be revisiting those targets at Investor Day next month. And I think a couple of things have happened. The first is just top line. As we've added more products with higher revenue per member, the mix is improving. You're just actually carrying forward more revenue at better gross margin profiles. And then on the cost of revenue side, our cost of revenue is kind of two main things. It's our care teams. These are typically health coaches. They're W-2 hourly employees. They work 35 to 45 hours a week, and then the devices that we ship. And so on a year-over-year basis, our health coach count is actually down. And that's kind of like threefold. That's just extracting more core efficiencies from a staffing perspective. So we've experimented with dozens of staffing models. We structured them hourly because when Q1 spikes, we can work them towards, like they work towards the higher end of that range. And then when Q2 and the rest of the year start to taper a little bit, we can lower that and to match the supply and demand. What you don't want to have happen is we're just carrying sunk labor costs where there's actually not enough demand to meet the supply. And so that model, which we've experimented with over multiple years, we finally got that really dialed in. And then through time, across our devices or across our supply chain, we've been able to negotiate a lot of volume-based discounts across our shipping partners, across our entire device ecosystem, across scales and continuous glucose monitors and our blood pressure cuffs. as you do more volume they're going to give you like more volume based discounts and so that's benefited us all tremendously and then AI is obviously the the third the third lever you know when we thought through AI we wanted to attack it from a perspective like stack ranking it go across the biggest population with the most consistent workflows where we could start to create like automation and so we've done that with our care delivery teams they're using this daily where we did that we just released contact summarization which could take an entire members kind of like life cycle in our portal in our homegrown ERP where it shows their nutritional patterns, their behavior patterns, their exercise patterns and they distill that down into like a quick recommendation where usually that previously that was extremely manual they have to read it all and then distill it down and now that's happening in a matter of seconds versus what used to take quite a bit of time so that's really leading to the the margin expansion then on OpEx you know there's kind of three levers a sales marketing and then our ERP source sales team we talked about very small sales footprint That's because we're levering the channels to sell our product. On marketing, the main way we get folks in the door, you're not going to see like, you don't see a lot of billboards out there. That's not what we do. We do email marketing. We did 100 million plus emails last year, 5,000 different campaigns. We've got really good at this. We A-B test these things like through and through. We have a playbook for every type of employer. And so we really know what's working. And we've been able to see like over 20% plus increases last year and this year in enrollment rate conversion within our employers. So email is extremely cost-effective. We will use direct mail for targeted populations if we like the CAC LTV. And then lastly is our ERP, which is our homegrown platform that our coaches use every day. We've spent tens of millions of dollars standing this thing up over the past 15 years. And when we want to add a new product, it's very seamless. We stood up our GLP-1 care track on our existing tech stack in three months. And so we didn't have to pour in incremental millions of dollars to standing that up. So people are really good across that, the entire dimension there.

Okay. Why don't we just close out? We have a couple minutes here left. Just go a little bit deeper on the GLP-1. Maybe the programs that you are offering, obviously you saw a lot of inter-year membership last year. I assume a bunch of that was GLP-1s. since it was so new to everyone and employers grappling. So what do you offer, and how do you sit in this GLP-1 ecosystem?

Yeah, I think what's most important is we are not like a GLP-1 play. I mean, when we last announced our GLP-1 membership, we had 150,000 members on GLPs across 886,000 total, so like 15%. So I think the most important takeaway for folks is, again, GLPs are this tip of the spear conversation where employers are really focused on cost mitigation and how to have a GLP-1 program, whether they actually cover it or not. And so now with our current offerings, we have our core GLP-1 care track, we have our enhanced care track, and then we have our flex care. So we can partner with any employer if they're covering the GLP or if they're not covering the GLP-1. and even if they aren't covering it it's actually creating more pressure for them to have some sort of like solution for their employee population and so we're seeing a lot of wins where the you know an employer will elect not to cover GLP and then we'll go in there and actually just close them with our core cardiometabolic offering and so that's been the design intent is to have a really flexible suite of products where if folks are prescribing or if it folks are off covering it we can support them if they're not covering it we can also support them there and now more recently we uh and we mentioned our intent to go into prescribing which we'll start to see roll out through the opt-in book uh next year and you have an you mentioned you have a new client you're launching on that yeah we just closed a pretty big jumbo client on on that and the we didn't expect any any wins in 2026 folks typically bias launching in in the following year but someone wants to start early so that was a that was a nice surprise yeah But again, that's fostered, the GLP-1 efforts have fostered increased interest in the core products. A hundred percent. That's the entire intent. We can get in there with any product. This used to be prevention and weight health just because that's where we got our start. And then you cross all the diabetes, cross all the hypertension. Now it's folks want to have a GLP-1 conversation. Then you can have a broader conversation across the entire cardiomyobolic speed, across cholesterol. And so that's been really, really cool.

Awesome. Thanks for joining us today and giving us your time. Of course. Thank you. Thank you.