Ladies and gentlemen, thank you for joining us, and welcome to the Hinge Health's Fourth Quarter 2025 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Bianca Buck, Head of Investor Relations. Bianca, please go ahead.

Good afternoon, and welcome to Hinge Health's Fourth Quarter and Full Year 2025 Earnings Call. I'm Bianca Buck, Head of Investor Relations. With me on the call are Daniel Perez, our Co-Founder and CEO; Jim Pursley, our President; and James Budge, our CFO. I want to thank everyone for joining us today. We'll be walking you through our Q4 and 2025 annual performance, sharing updates on our product innovations and commercial momentum and providing expectations for our Q1 and full year 2026 revenue and operating profit. As a reminder, this conference call is being recorded. All relevant materials are available on the Investor Relations section of our website. Today's discussion will include forward-looking statements which are subject to various risks, uncertainties and assumptions. These statements reflect our current views and expectations regarding future events, including expected performance of our business, future financial results, and growth strategies. While these statements represent our good faith judgment and beliefs, actual results may differ materially from those projected or implied. We undertake no obligation to update any forward-looking statements, except as required by law. For a detailed discussion of the risks please refer to our SEC filings, including our most recent quarterly report on Form 10-Q filed on November 7, 2025, and our annual report on Form 10-K, which will be filed in the coming weeks. All financial measures discussed today are non-GAAP, except for revenue, which is GAAP or as otherwise indicated. These measures should be viewed in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are included in our earnings release appendix available on the Investor Relations section of our website. With that, I'll turn it over to Dan.

Thanks, Bianca, and good afternoon, everyone. I'm excited to share our fourth quarter and full year 2025 results and provide an update on our overall progress. 2025 was an exceptional year that demonstrated the power of our vision to automate health care delivery through technology. We delivered outstanding financial performance while making meaningful advancements in our AI-related investments and expanding our market reach to nearly 25 million contracted lives in the best year we've ever had. Today, we will walk you through the following areas: First, I'll give you a high-level recap of our financial performance for the fourth quarter and full year, highlighting the continued momentum in our core metrics and strong finish to 2025. Second, I'll share some exciting product updates particularly around our AI initiatives that are transforming how we deliver care to our members as well as an update on HingeSelect, our high-performance provider network. Third, Jim will discuss our commercial progress, including the tremendous success of our sales season and some encouraging market developments. Next, James will walk you through the detailed financials and our outlook for 2026 and lastly, I'll wrap up with thoughts on why we're so bullish about our business and our future before we open up to your questions. Let me start with our financial results. We delivered $171 million in revenue for Q4, representing 46% year-over-year growth. For the full year 2025, revenue reached $588 million, up 51% compared to 2024. Our last 12 months calculated billings reached $671 million, up 44% compared to the same period in 2024. These results demonstrate the growing demand for Hinge Health from our clients. Our operational efficiency remains strong as well. Gross margin was 85% in Q4 and 83% for the full year 2025 reflecting the scalability of our technology-driven care model. Operating…

Thanks, Dan. As a quick reminder, our sales cycle aligned with corporate benefits planning, with most new contracts signed during the second half of the year as companies finalize their employee benefits packages. These newly contracted clients typically go live in the first half of the following year, creating a predictable cadence that underpins our billings and revenue growth model. I'm thrilled to report that our 2025 sales season was exceptional. We added 4.8 million net new contracted lives to end the year at approximately 24.6 million contracted lives across over 2,800 clients. This represents 25% year-over-year growth at the client level and 24% year-over-year growth on a contracted lives basis. That breaks down to 22 million self-insured lives and 2.6 million lives across fully insured Medicare Advantage and federal employee programs, known as FEP. Within the non-self-insured segment, we saw a 135% increase from the 1 million lives we had at the end of 2024, with the largest growth coming from fully insured and FEP. For many of our fully insured Medicare Advantage and FEP clients, we take a staged approach to roll out targeting partial population similar to a land and expand model. In 2025, due to our success and the strong ROI outcomes we delivered, we're able to unlock several existing fully insured and Medicare Advantage clients, bringing with them hundreds of thousands of lives and expansions. On the enterprise side, our clients now represent 53% of the Fortune 100 and 45% of the Fortune 500. This demonstrates the scale of trust we've earned from leading organizations nationally, representing an enviable asset from which to bring our future products to market. Moreover, it shows the scale of white space remaining, given our roughly 25 million lives under contract is but a fraction of the approximately 215 million…

Thanks, Jim. Let's dive into our fourth quarter and full year 2025 financial performance. As a reminder, our billings model is built on 3 key drivers. Lives represents the number of people eligible for our program. Yield is the percentage of those eligible people who actually enroll and engage with us and price is what we charge per engaged member. When you multiply these 3 factors together, the result is our calculated billings, which is the foundation of our revenue model. For the fourth quarter, our LTM calculated billings reached $671 million representing strong 44% year-over-year growth compared to $468 million at the end of Q4 2024. Q4 revenue came in at $171 million, up 46% year-over-year from $117 million in the prior year fourth quarter and well ahead of our guidance range of $155 million to $157 million. For the full year 2025, revenue reached $588 million, representing 51% year-over-year growth over the $390 million in 2024 also coming in well above our guidance range of $572 million to $574 million and representing a cumulative 15% beat above analyst expectations at IPO. This revenue outperformance demonstrates the continued strength in our underlying business fundamentals. The revenue beat was driven by better-than-expected billings, stemming from stellar yield improvements of over 50 basis points year-over-year from 3.4% as of the end of 2024 to 3.9% as of the end of 2025. We ended the year with 20.1 million LTM average eligible lives. This resulted in over 783,000 members as of the end of the year, a 47% increase from 2024. On the pricing side, our average selling price stayed essentially flat as expected. As of the end of Q4, about 50% of our eligible lives had moved to the new engagement-based pricing model. Our high client retention that Jim spoke to,…

Thanks, James. Looking at our results this quarter and the trajectory of our business, I couldn't be more excited about what lies ahead for Hinge Health. 2025 was an exceptional year that demonstrates the power of our vision. We launched HingeSelect, our high-performance in-person provider product and added thousands of providers to our network. We introduced new AI-powered care tools that are driving deeper personalization and quality for our members and efficiencies for the business. We grew our reach to 25 million people across over 2,800 clients spanning every industry you can imagine, manufacturing, retail, hospitality, tech, public sector and more. And of course, we began trading on the New York Stock Exchange, embracing the high standard of public accountability that comes with it. The momentum we're seeing across every aspect of our business reinforces my conviction that we're executing on a generational opportunity. Our platform is becoming more intelligent with every interaction powered by the proprietary data we've built across more than 1.5 million members and over 100 million sessions insights that allow us to deliver a complete clinically proven offering that now extends from software and connected hardware into high-quality in-person networks. At the same time, we've spent more than a decade building deep trusted partnerships across the health care ecosystem, embedding ourselves with health plans and employers who value working with a proven market leader in a highly regulated outcomes-driven space. The compounding impact of these investments is clear, higher member satisfaction, stronger clinical outcomes and durable client retention, all working together to drive long-term growth. As we look ahead, I'm energized by the breadth of opportunities in front of us, we have a clear road map to expand our impact, the financial strength to continue investing in innovation and a team that's proven we can execute at scale. The health care system needs what we're building, and we're just getting started. Thank you for joining us today and for your continued partnership. With that, I'll turn it back to Bianca to open up the call for your questions.

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

[Operator Instructions] And your first question comes from the line of Ryan Powderly-Gross with Barclays.

Great. Ryan Powderly on for Saket Kalia, Barclays. Congrats on the strong finish to the year. Dan, maybe for you, just to start off. We've seen a lot of software stocks responding negatively to fears around AI, potentially being able to replicate what these companies can do. How do you think about Hinge's moats? And how would you respond to that view these days?

Great question. Thanks, Ryan. Since the start of our existence, we always had potential new entrant threats, either large tech companies, incumbent health care companies or new start-ups. But we've thwarted those off and thrive because our competitive advantages go well beyond just a code base. Those advantages include our proprietary data, our distribution channels, a product experience that extends beyond software and our clinical validation. So let's start with our product -- our proprietary data. Even if open AI and Gemini scrape the entire Internet, they have not conducted 100 million treatment sessions like we have. Simply put, we may have the largest and most granular data set for MSK conditions in the entire world. Two, is our distribution channels. We've spent a decade building deep relationships with health plans, PBMs, employers, this requires not just work on our end, but substantial work on their end. And three, is that our product experience extends beyond software to also include hardware and in-person care. When it comes to automating health care, you won't do it with software alone. You're going to need hardware as well as in-person care elements. And fourthly is our clinical validation. You could build some apps in a day or build some apps in a weekend, but a 2-year outcome study still takes 2 years no matter how much AI you put into it. So look, we're incredibly excited about AI and believe we have a meaningful entry barriers that extend well beyond software development.

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

Yes. Yes. Thanks, Ryan, for the questions. And we're delighted it's gotten to 50%. We think it aligns interest between us and our clients really well. And we see that 50% ticking up a little bit as we move throughout 2026 as well. So to your question, the upfront model, obviously, on the billing side, you would get paid mostly upfront. Maybe there are some delayed billings occasionally, but you would have gotten billed out the door on day 1. Now the bills are going out as the usage happens, which, as you can imagine, someone who has something ailing them they want to solve it as quickly as possible. So it usually extends over a 2- to 3-month period instead of billed up front. So a minor difference in when the cash or when the bill goes out, the cash comes in from a revenue recognition perspective, the revenue starts on day 1 of the treatment, so under either method. So it makes no difference on the revenue side.

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

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

Good question. Thanks, Jailendra. And you're right. Our go-forward forecast, you could see that lives have been inputted into that, but we've been -- we're assuming a flat year-over-year yield. But we had a great Q4 and particularly with regards to our member enrollment, our enrollment yield. And 2 key drivers we're talking about. One was our continued investment in product-led growth, which has helped us very efficiently enroll, engage and retain members. We have evergreen investments in product-led growth that are constantly landing singles, doubles and the occasional home run, which we -- which we hope to talk about maybe in our next earning call, but second was targeted enrollment efforts. These are enrolling members based on their prior claims history. And that ended 2025 up over 160% year-over-year. And our target enrollment also helps us substantially improve the ROI we deliver for our clients and partners because these are what we call ROI rich members. So we view yield improvements overall, Jailendra, as a continuous long-term investment rather than the result of any single initiative. And so the progress will continue to be driven by a portfolio of efforts and that creates more durable and resilient system. And our strategy designs that overall performance doesn't depend on any 1 initiative to deliver results. You saw in Q4, a lot of these initiatives came together very effectively, and you could bet in 2026. We've got several dozen additional things we're working on, again, to improve our resilience in this regard.

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

Great question. And so we briefly looked at the Kaia acquisition and ultimately decline to proceed. And we've been fortunate to see many customers from both of them switch over to Hinge Health in the past 12 months, and our head-to-head competitive win rate is actually up strongly year-over-year. And in fact, the customers switching over to Hinge Health has been some of their largest customers who have switched over to Hinge Health. So our revenue remains multiples larger than both of them combined. So we're just going to focus on continuing to widen our lead by remaining focused on our clients, new prospects and our road map, but I don't know, Jim, anything to add?

Yes, I think that's right. I think when you look at the outcomes that we're delivering both clinically, the ROI, you look about the product initiative that we brought out. We don't think that the recent merger will have any material bearing on our business. And yes, I remain really excited about 2026 and beyond.

And your question as well about our M&A opportunity. So we got several inbound opportunities a week, maybe 2 to 3 on an average week or so. Now we try to look at actually all of them. And our robust cash flows just gives us a lot of optionality for tuck-ins. Our main focus is organic growth, where we're always interested in entrepreneurs who built innovative products that can help us achieve our vision of automating health care delivery. We've historically focused on like smaller acquisitions where we've acquired a [ kernel ] technology and potent team, particularly in R&D team and build it out from there. So I'd say unlikely many entrepreneurs listen to the earnings calls, but if you're an entrepreneur that's building something that's relevant to us, we'd love to chat. And we do look at every opportunity that comes by our desk.

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

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

Sure. Sure. I think most of our -- the strength of our competitive win rate and our competitive convergence is around a couple of key themes. First, as you think about HingeSelect and this move into unified care, the ability to elegantly integrate the physical and digital and powerful ways to deliver a great member experience and deliver even better and bigger cost savings in an environment where cost savings is really critical. I think this concept of unified care is really resonating both with our existing clients, prospective clients and our competitors' clients. And so that's 1 element. Second, I would say, is the product experience. If you think about all the investments Dan mentioned dozens of little innovation to every year, that just delivers a better experience, whether it's, bring your own device, whether it's unification, multiple programs into a single app experience, whether it's our Enso, the delightful transformative impact. And so as you kind of add all those up in totality and you have a really compelling offering. And then lastly, I would say it's our clinical outcomes and our ROI. When you start to build results at scale year-after-year, client after client, industry after industry, I think it starts to again paint a very compelling picture that's very attractive to a lot of our competitors' clients. And so if you put those 3 things together in aggregate, that will give you some good sense of what our prospective clients are thinking about when they make their decision to switch.

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

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

Yes. Yes. Thanks for the question. As you heard us say, non-ASO grew over 100% this past year. I think that's driven on a couple of things. One is the strength of those relationships, fully insured and Medicare Advantage specifically, really all 3 and federal have a health plan component to it. And so as we continue to do a really great job for our health plan partners, we service their clients wells. We deliver fantastic results. We build trust. Those relationships become a key lever and then secondly and related is exactly that those outcomes, those organizations are oftentimes influenced heavily by actuaries and underwriters and they're really looking at cost savings with a very critical eye as we continue to deliver great outcomes for those clients, we're seeing growth in fully insured in Medicare Advantage, in our federal employee program. So it is -- as you noted, it's going to be an important part of our future growth. We're really excited by the progress we made in 2025 and feel like we're just getting started though in those markets for 2026 and beyond.

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

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

Sure. There's a couple of ways to slice the TAM. And so one key thing is just sort of you just started this global health care spend. About 50%, 45-ish-or-so percent of global health care spend is spent in the United States. If you lose the United States, you're in a pretty bad spot, when it comes to winning your category. Another way of slicing it is what is the indication you address and how big is that? So for us, even focusing on physical therapy, physical therapy is about a $60 billion market or more just in the United States at about $600 million of revenue, we have got just a sliver of the overall physical therapy market. So just focusing on this, we have a massive amount of runway ahead of us to capture physical therapy here in the United States, and we want to make sure we capture that opportunity. And at the same time, we are starting to already develop and we've been developing for quite some time, our next product that will come after that, that will allow us to chip off another portion of health care spend because while physical therapy is $60 billion of overall spend, that's about 1%, 1.2% of total health care spend. And so if we chip off another 0.5 point of health care spend, that will be another $30 billion TAM. And that we're able to upsell our existing customers because we drove so much trust in them to these new products that we launched that we're continuing to peel away aspects of care and using software connected hardware to automate portions of that care where we can transform outcomes experience and costs. And so that's how we see TAM expansion is both adding new lines, but adding new indications and then upselling our customers to those, but we want to be very thoughtful with anything we bring to market, we want to have confidence that we'll be #1 or #2 over time. And we've built enough reputation with our customers that they know that anything we bring will be very high quality.

Yes. And Elizabeth, just to add to that, too, as you heard Dan mention the size of the physical therapy market, that's within the context of a broader MSK market as well. So you think about all the challenges that the market faces in a complex landscape that includes imaging and surgery, other nonsurgical orthopedic care, it's a huge TAM, and we've only started to scratch the surface within digital physical therapy. So we think the best way to deliver value to our clients and to the market is to really focus on big problems that have a lot of room and a lot of complexity for us to have an impact. And we think MSK is a really -- is a market that fits that definition while we, I think, judiciously look at things that are adjacent and leverage our strengths beyond MSK. But I think that gives you some sense of how we think about it.

You'll see it. We're going to be -- we're moving with haste, but focus matters. And you can see with our results, the impact that focus has had on our business.

Yes, that makes a ton of sense. And maybe just as a follow-up, we've talked a little bit about in the response to the first question about sort of AI and the potential impact in your business. Can you elaborate and sort of on how you see AI in terms of the R&D function? Do you see that as efficiency driver? Does that allow you to do more in another way? Can you talk about sort of the internal R&D functionality of that?

Great question. So when it comes to R&D and the overall product, we see it as -- maybe I could break it down in 3 key ways. One is like the consumer experience and the product we're able to deliver to our end user. The second is with our care team efficiency. And the third is just how we build product. Let me walk you through each one of those. So first is the actual product experience. The core of our product experience is driven by AI. When you first sign up, we use -- we personalize the program to each one of our members. Our computer vision is actually a subfield of AI and human pose estimation is a subfield of computer vision. And I'll remind you all listening, we moved into computer vision AI well before the ChatGPT craze. So we were not just following some bandwagon here. We've been investing in AI for many years. But that is a core aspect of our product experience, and we're lateralizing that to also having our AI care team assistant, Robin. But our -- it is fundamental to how we deliver care is AI. Secondly is with our care team. So we have used AI to substantially increase the throughput of our care team, and you saw that in 2025, our member base grew by just under 50%, 47% increase in members served and yet our care team costs were flat in 2025. And so that just gives you a sense of just the incredible efficiencies we've been able to drive in our -- in the delivery of our care team via AI. Now the third bit is, how we build our product? Now we're not unique in this. I think that the industry has shown that the most mature…

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

Congrats on a great quarter and great close to a fiscal year. Dan, James, much has been made about the current model shift towards the usage-based pricing model, and the potential impact that may have on member usage and ASPs over time. Now your guidance assumes flat ASPs in 2026. But I think based on some of the commentary from the call, the 41 million sessions in '25 over 783,000 active members. You're averaging 52 sessions per member per year at this point. So can you speak to your confidence in the flat ASP assumptions for '26. Any potential for upside? And if you're -- whether you're seeing any material differences in the average number of sessions for a member across the usage model versus the upfront model?

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

Yes. I might just add there, Ryan, for sure, everything Dan just mentioned, and that's why you saw our ASP is largely flat from '24 to '25 as we look forward, the engagements are so strong right now. There is potential for it to creep up a little bit. I wouldn't consider it growing much more than just a little bit each year over the next several years.

And I would say we're at essentially all-time highs for member engagement and member satisfaction. And we expect that to continue as we keep rolling out new capabilities like our movement analysis and Robin as well as just making those incremental improvements to singles and doubles to our experience. And ultimately -- our ultimate aim for all of these investments is to improve member experience, improve outcomes and lower cost for our customers.

Super helpful. And then maybe as a follow-up, I'm curious about in terms of TAM expansion, CMS is launching the ACCESS program later this year, which I think has the opportunity to open up the Medicare population or core Medicare population for Hinge, which is an area you haven't focused too much on historically. Can you just talk about how interesting this ACCESS program is? Any intent to sort of apply or have you been accepted to the program yet? And if so, sort of when should we expect any sort of contribution from this? Is this more of a back half of '26 or more of a '27 and beyond opportunity?

Yes. Thanks for the question, Ryan. As the market leader in individual MSK care, we're absolutely excited and to be considered for the program. Applications are currently being received and no news has come out yet, but the potential scale of traditional Medicare with roughly 30 million addressable lives is clearly an attractive long-term opportunity for us. That said, the process is still evolving. Applications are coming in. Medicare CMS has not issued the price and structure yet of the offering. And so while rates have yet to be finalized, we would assume that if the pricing makes sense, we're going to participate. I wouldn't expect a meaningful contribution in the back half of '26. I think this would be more of a 2027 and beyond contribution.

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

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

Great question. So a lot in your question right there. And it goes to building a 2-sided marketplace is a hard problem, but solving hard problems are themselves key entry barriers and key moats. And so we are targeting our existing customers as well as prospects to upsell them to HingeSelect, and we are aiming to build our provider network in select geos, both from customers who buy to HingeSelect as well as from where our existing customer base is, and they're pretty much covering most large geos. And we're focusing especially on physical therapy clinics, imaging, outpatient orthopedic specialists. And in the coming quarters, we'll be expanding into other specialists within musculoskeletal care as well. But yes, I mean, if we close a customer and they have a high density in a particular metro, we then focus on that metro to make sure that we could build the provider density that we need. What's helpful is that we do not need -- or nor are we trying to approximate the provider density of our health plan partners. This is very much complementary to a national plan or our health plan partners and that this is a precision network. And if you want to go to the PT around the corner, you could use your main health plan. If you're willing to drive, say, 5 to 10 minutes, you could go to the HingeSelect physical therapist, and we're able to waive your co-pay and give you a priority selection in terms of your appointment time and same thing for imaging. And so it's giving members that additional choice and nudging them towards these high-value providers that isn't going to be as dense in a given metro, but there's a financial incentive for them. And we've got thousands of clinics now that we've closed.

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

So we're being conservative overall in our revenue forecast and not assuming really any revenue from HingeSelect in 2026. And so this is -- we anticipate to start seeing meaningful impact in 2027, still dwarfed by the impact of our digital physical therapy solution. But given our free cash flow, this is a solution that we knew would take several years to build, but that once built would be one of our most enduring moats for the business. And we're willing to be patient on planting the seed. We know it's going to take a few years for the seed to become a sapling and then to become a big tree, but we're able to be patient. We're also being disciplined in terms of the spend. And we're not going too crazy, but we're -- we like -- we really like the market momentum.

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

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

Yes. Jess, this is James. Thanks for the question. So we actually saw some incredible progress in 2025 on that exact question. Before 2025, our typical first year cohort that would come in would land around 1.3% engagement by the end of 6 months and up to about 2.5% at the end of the year. The 2025 cohort ended at 3.3% for the first year. So that gives us a tremendous amount of confidence that when that continues to climb like every year has climbed over the last 5 to 6 years, we're going to see yield momentum continue into 2026, just like we saw in '25.

That's really helpful. And then just I wanted to ask about the targeted enrollment efforts. Can you just elaborate on what types of conditions you all targeted to generate some of the yield upside in '25? And then any new conditions that you might be rolling out in '26 that you want to give us a preview on?

Great. Great question. So I can't go into too much specifics around some of the algorithms we use as we are ingesting so much data. I would say we are investing very meaningful resources and we're having a really good output from those investments in the resources. As you could see in both the members enrolled as well as the impact on ROI. It's something that a lot of digital health companies and others in our space have been trying to do for a long time. We now have the scale where we're learning a lot from our data, and we're also getting multiple data sources. The most common data source we're getting from our employer and health plan partners is claims data. We're also getting pharmacy data. We're getting prior auth and pre-auth data, and we're trying to increase the overall coverage from those. But it's multiple different data sources, and it's allowing us to identify people who we think are in an active MSK care episode or at risk for becoming a high-cost claimant and giving them an opportunity to take part in our digital physical therapy program so we could both improve their outcomes and give them a great experience but steer them away from low-value, high-cost care, and we're seeing that.

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

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

I think that's a great question. And so kind of like stepping back and thinking about like lifestyle medicine generally, movement is almost never contraindicated. It is whether you're in knee pain or not, moving your knee joint is good. Cartilage doesn't actually -- it's avascular. And so it's not actually blood flow to your cartilage. So when you move your joints, you're actually exchanging waste and bringing in nutrients. And so we should always be moving about not just when we need it. And so you're absolutely right there. And we want Hinge Health for movement to become a lifestyle choice for a lot of our members overall. And so we are focused right now on capturing more and more of the outpatient physical therapy market. Again, it's a $60 billion market ahead of us, even without leaving physical therapy, which, again, we're developing new products that are PT adjacent right now, which we hope to talk about in the coming months. But we don't want to lose -- and we can talk about TAM expansion all we want. We don't want to lose sight of the TAM capture, and the capture of our existing TAM. It's a $60 billion market. We're at about $600 million of revenue from -- in 2025 or $588 million, and we want to make sure we capture the hell out of the $60 billion market ahead of us and then start capturing lateral markets next to it. And then start making Hinge Health more of a lifestyle choice. Now what makes health care price points achievable in many ways is that you are treating an actual condition that ends up being very expensive. And once you start moving beyond that, you have to think through what the impact could be on ROI when it becomes more of a prevention solution. And ROI and prevention, I think, is very real, but it could be more difficult to attribute and it could take a bit longer. And so we are -- we remain focused on physical therapy and folks who have a real clinical need I don't think that's perfect because you're right. We don't want just sick care in many ways where you're only treating folks, but we do feel like we're intervening early enough in their care journey that we're preventing a lot of downstream costs. Now you could always intervene even earlier, get people to just live a healthier lifestyle. Those are harder to get reimbursed for, but we're trying to intervene as early in the condition as possible while still being reimbursable. Does that answer your question, okay, sir?

Yes, absolutely. No, that's really helpful. And then one for James. Look, I appreciate you talked about maybe targeting stronger GAAP profitability, thinking about things in GAAP terms. Putting aside, obviously, the mismatch between revenue and expenses in a SaaS model with the GAAP income statement. I think especially in this environment, it's increasingly becoming appreciated. Maybe what's kind of your mental model that we should be thinking, not necessarily in terms of the guide for 2026. But in terms of just how we should be thinking about SBC and dilution going forward? Is there kind of a target dilution rate, target SBC as a percent of revenue? And this can be like over the next several years, again, not holding anyone to it, but just a mental model would be helpful.

Yes. Yes. Let me speak to both those points. As we mentioned in the prepared remarks, our dilution has come down each of the last 3 to 4 years. We were below 3% in 2025. We expect that to be even lower in 2026. So from a shareholder dilution, we're pretty committed to that. And I think we've demonstrated that with the amount of shares that we push out to our employees. From an SBC side, you saw sort of in that range of around $20 million to $25 million in this past quarter. That's fairly reflective of what you'll see in the coming quarters. Obviously, there was that big giant amount that we had in the second quarter and a little bit of trickle effect into the third quarter from all of that pent-up stock-based comp that was waiting for us to go public. But the fourth quarter is a pretty decent representation of what you should expect on a quarterly basis going forward for probably at least the next 4 to 8 quarters.

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

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

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

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

And I think the majority of Americans work for smaller employers. So that's actually where the majority of people that you'll be able to access are, is in smaller employers.

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

It's too early to tell right now some of those trends. What we are seeing is that very strongly trending towards we're able to reduce or steer people towards lower cost, that is high-value, lower-cost care and away from lower value, higher cost care. And one of the key capabilities is we can connect to orthopedic specialists in-house. We can quickly shift you between in-person and digital care. And we hope to continue to scale up HingeSelect so we share more of the specific slices of the data that you're asking for.

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

Well, thank you, everybody, for dialing in and for taking the time to learn more about our company and how we performed in 2025. I just want to leave you with just saying that just putting again our 2025 performance into context, in the last decade, there has been less than 10 companies who have delivered over $500 million of annual revenue, still growing at over 50% with a 30% free cash flow margin, and we are #9 or #10 of that. Just to see just how unique our print was in 2025, and where we stand in a pretty elite company, and we're not done yet. This is a generational opportunity ahead of us to automate health care delivery. And I think digital health in many other ways, hasn't delivered, and we're going to show you that Hinge is an N of 1 company, and we are different. So thank you very much, and see you next quarter.

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