Hinge Health, Inc. (HNGE) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance with raised guidance, significant market expansion, and operational efficiency gains. AI initiatives and new product developments bolster the outlook. The Q&A session reveals positive sentiment towards growth in key markets and effective strategies for TAM expansion. Despite some uncertainties in long-term revenue impacts, the overall narrative is optimistic, suggesting a stock price increase in the near term.
Key Financial Performance
Q4 Revenue $171 million, representing 46% year-over-year growth. The increase was driven by strong demand for Hinge Health's services.
Full Year 2025 Revenue $588 million, up 51% compared to 2024. This growth reflects the growing demand for Hinge Health's offerings.
Last 12 Months Calculated Billings $671 million, up 44% compared to the same period in 2024. This indicates strong client engagement and adoption.
Q4 Gross Margin 85%, reflecting scalability of the technology-driven care model.
Full Year 2025 Gross Margin 83%, demonstrating operational efficiency and scalability.
Q4 Operating Margin 28%, showing the impact of investments in automation and operational efficiency.
Full Year 2025 Operating Margin 20%, reflecting progress towards the target of 25%+ operating margin.
Q4 Free Cash Flow $62 million, representing a free cash flow margin of 36%. This was driven by operational efficiency and strong revenue growth.
Full Year 2025 Free Cash Flow $180 million, with an annual free cash flow margin of 31%. This achievement was ahead of the IPO target.
Rule of 40 Metric 81% for the full year and 82% in Q4, significantly exceeding the standard of 40. This reflects the combination of revenue growth and free cash flow margin.
Net Dollar Retention Well above 110% for 2025, driven by high client retention and yield improvements.
Q4 Income from Operations $48 million, with an operating margin of 28%, up from 18% in Q4 2024.
Full Year 2025 Income from Operations $119 million, with an operating margin of 20%, a significant improvement from negative 7% in 2024.
Q4 Diluted Net Income Per Share $0.49, highlighting the earnings power of the business.
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Operating Highlights
AI-powered tools: Rolled out improvements that help clinicians work more effectively and handle more members without compromising care quality. Automated AI-powered communications for routine messaging were introduced, leading to a 28% reduction in care team time spent in asynchronous sessions from Q3 to Q4 2025. Robin, the AI care assistant, received a 92% positive rating from members.
HingeSelect: Launched a high-performance provider network available to several hundred thousand eligible lives in Q4. Early data shows 85% of members moved forward with conservative care plans, often digital physical therapy, reducing low-value spend like imaging and surgeries.
Contracted Lives: Added 4.8 million net new contracted lives in 2025, ending the year with 24.6 million contracted lives, a 25% year-over-year growth. Significant growth in fully insured Medicare Advantage and federal employee programs.
Client Base: Clients now represent 53% of the Fortune 100 and 45% of the Fortune 500, showcasing trust from leading organizations.
Revenue Growth: Q4 revenue reached $171 million, a 46% year-over-year growth. Full-year 2025 revenue was $588 million, up 51% from 2024.
Operational Efficiency: Gross margin was 85% in Q4 and 83% for the full year 2025. Operating margin reached 28% in Q4 and 20% for the full year. Free cash flow margin was 36% in Q4 and 31% for the full year.
AI and Automation: Investments in AI-powered tools and automation have significantly improved care delivery efficiency and member satisfaction.
HingeSelect Expansion: Building a two-sided marketplace with high-quality providers, expected to become a competitive advantage by 2027.
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Risk or Challenges
Regulatory Risks: The company operates in a highly regulated space, and any changes in regulations or failure to comply with existing regulations could adversely impact operations and financial performance.
Market Competition: The company faces competitive pressures, including the risk of losing clients to competitors or failing to attract new clients in a highly competitive market.
Supply Chain and Network Expansion: Building and scaling the HingeSelect provider network is a long-term effort that may face challenges, including delays or difficulties in creating a two-sided marketplace.
Economic Uncertainty: Economic downturns or uncertainties could impact the company's ability to attract and retain clients, particularly in the self-insured and Medicare Advantage segments.
Strategic Execution Risks: The company is making significant investments in AI and new product initiatives, which may not yield the expected returns or could face implementation challenges.
Client Retention and Yield: While client retention is high, any decline in retention rates or failure to improve yield could negatively impact financial performance.
Pricing Model Transition: The transition to an engagement-based pricing model could pose risks if not managed effectively, potentially impacting revenue.
Technology and Data Risks: Reliance on AI-powered tools and proprietary data introduces risks related to data security, privacy, and potential technological failures.
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Guidance & Outlook
Revenue Projections for 2026: Hinge Health expects revenue to be in the range of $732 million to $742 million for the full year 2026, representing 25% year-over-year growth at the midpoint.
Q1 2026 Revenue Guidance: Revenue is projected to be in the range of $171 million to $173 million, representing 39% year-over-year growth at the midpoint.
Operating Margin for 2026: Non-GAAP income from operations is expected to be $151 million to $156 million, representing a 21% margin at the midpoint, which is a 100 basis point improvement over 2025.
Gross Margin Outlook: Gross margin is anticipated to improve by approximately 100 basis points in 2026 over 2025, driven by AI efficiency tools, though offset by broader Enso deployments.
Member Base Growth: Average LTM eligible lives for full year 2026 are expected to be 24.4 million lives, with growth driven by new lives already won.
Yield and Pricing Expectations: Yield is expected to remain flat in 2026, with a clear roadmap for incremental improvements over time. Average selling price is also expected to stay flat.
AI and Efficiency Investments: Hinge Health plans to keep the care team size flat in 2026, leveraging AI-powered tools to improve efficiency and member experience. Investments will focus on research and development and sales and marketing to support HingeSelect expansion and growth in small and medium business markets.
HingeSelect Revenue Impact: HingeSelect is not expected to have a significant revenue impact until at least 2027, but it is anticipated to become a major competitive advantage once scaled.
GAAP Profitability: Hinge Health expects to be GAAP profitable in 2026, continuing the trend from Q4 2025.
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Shareholder Return Plan
Share Repurchase Program: In November, the Board authorized a share repurchase program of up to $250 million. In Q4, the company repurchased 1.4 million shares for $65 million. The program is expected to be executed as market conditions warrant.
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Key Q&A
Q:How does Hinge Health view its competitive advantages against potential AI threats?
A:Hinge Health believes its competitive advantages extend beyond software, including proprietary data from 100 million treatment sessions, established distribution channels, a product experience that integrates hardware and in-person care, and clinical validation through long-term outcome studies.
Q:What is the impact of the new engagement-based pricing model on revenue recognition?
A:Under the new model, billing occurs as usage happens over a 2-3 month period instead of upfront. However, revenue recognition starts on day 1 of treatment under both the old and new models, so there is no difference in revenue recognition.
Q:What are the drivers for yield improvements in 2025 and expectations for 2026?
A:Yield improvements in 2025 were driven by product-led growth investments and targeted enrollment efforts based on prior claims history, which increased enrollment by over 160% year-over-year. For 2026, yield improvements are expected to be driven by a portfolio of efforts rather than any single initiative.
Q:How does Hinge Health view industry consolidation and its M&A strategy?
A:Hinge Health does not see recent competitor consolidations as materially impacting its business. The company focuses on organic growth but is open to smaller acquisitions that align with its vision of automating healthcare delivery. It receives 2-3 inbound M&A opportunities weekly and evaluates all of them.
Q:What factors contributed to Hinge Health winning a large enterprise client with 200,000 employees?
A:Key factors included the unified care model integrating physical and digital care, a superior product experience with continuous innovations, and strong clinical outcomes and ROI. Clients who trial Hinge Health's program often switch due to higher engagement and better ROI.
Q:What is Hinge Health's strategy for the fully insured Medicare Advantage (MA) and federal employee markets?
A:Hinge Health has seen over 100% growth in these markets in 2025, driven by strong relationships with health plans and proven cost savings. These markets are expected to be important drivers of future growth.
Q:How does Hinge Health view its Total Addressable Market (TAM) expansion?
A:Hinge Health sees significant TAM expansion opportunities by focusing on the $60 billion physical therapy market and developing new products to address adjacent healthcare spend. The company aims to upsell existing customers and ensure high-quality offerings.
Q:How is Hinge Health leveraging AI in its operations?
A:Hinge Health uses AI to personalize member programs, improve care team efficiency, and enhance product development. AI has doubled the efficiency of its R&D team and contributed to a 2,000 basis point improvement in operating costs as a percentage of revenue in 2025.
Q:What is the impact of the usage-based pricing model on member engagement and ASPs?
A:The model provides pricing clarity for customers transitioning to it, ensuring no price increase in the first year. Member engagement and satisfaction are at all-time highs, and ASPs are expected to remain flat with potential for slight increases over time.
Q:What is Hinge Health's perspective on the CMS ACCESS program?
A:Hinge Health is excited about the program's potential to address 30 million traditional Medicare lives. However, the program's pricing structure is still evolving, and meaningful contributions are expected in 2027 and beyond.
Q:What is the strategy for HingeSelect and its expected revenue impact?
A:HingeSelect focuses on building a provider network in key geographies to steer members toward high-value, lower-cost care. The company does not expect significant revenue from HingeSelect in 2026 but anticipates meaningful impact starting in 2027.
Q:How does Hinge Health view TAM capture versus TAM expansion?
A:Hinge Health prioritizes capturing the $60 billion physical therapy market while developing adjacent products. The company aims to intervene early in care journeys to prevent downstream costs while maintaining focus on reimbursable services.
Q:What is the difference in yield between new and tenured clients?
A:In 2025, first-year client cohorts achieved a 3.3% engagement rate, significantly higher than previous years. Yield improvements are expected to continue as new clients ramp up over time.
Q:What data sources does Hinge Health use for targeted enrollment efforts?
A:Hinge Health uses claims data, pharmacy data, and prior authorization data to identify members in active MSK care episodes or at risk of becoming high-cost claimants, steering them toward its digital physical therapy program.
Q:What is Hinge Health's approach to proactive versus reactive physical therapy?
A:Hinge Health focuses on treating clinical needs early in the care journey to prevent downstream costs. While the company acknowledges the value of proactive care, it prioritizes reimbursable services to ensure ROI for customers.
Q:What is Hinge Health's approach to stock-based compensation (SBC) and dilution?
A:Hinge Health aims to reduce shareholder dilution, which was below 3% in 2025 and is expected to decrease further in 2026. SBC expenses are expected to remain consistent with Q4 2025 levels for the next 4-8 quarters.
Q:What is Hinge Health's strategy for the mid-sized employer market?
A:Hinge Health sees significant growth potential in the mid-sized employer market, aiming to achieve similar penetration rates as in the Fortune 500. The company views this market as underpenetrated and a key area for expansion.
Q:What are the utilization trends for HingeSelect members?
A:It is too early to determine specific utilization trends for HingeSelect members, but initial data shows a strong trend toward steering members to high-value, lower-cost care.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the algorithms used for targeted enrollment efforts, citing the proprietary nature of the data and methods. Additionally, they did not provide clear guidance on the expected revenue impact of the CMS ACCESS program or HingeSelect in 2026, emphasizing long-term potential instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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HNGE Transcript
Hinge Health, Inc. (HNGE) Q4 2025 Earnings Call Transcript
Positive2-10
The earnings call indicates strong financial performance with raised guidance, significant market expansion, and operational efficiency gains. AI initiatives and new product developments bolster the outlook. The Q&A session reveals positive sentiment towards growth in key markets and effective strategies for TAM expansion. Despite some uncertainties in long-term revenue impacts, the overall narrative is optimistic, suggesting a stock price increase in the near term.
Hinge Health, Inc. (HNGE) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call summary and Q&A indicate strong operational efficiency through AI, robust cash flow, and strategic enrollment initiatives. Despite some unclear responses, the company shows positive yield improvements and a growing pipeline. The federal shutdown has had no impact, and the company is addressing cost pressures effectively. Overall, these factors suggest a positive market reaction.
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