Health In Tech, Inc. ($HIT)

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Health In Tech Fourth Quarter and Full Year of 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. [Operator Instructions] Now I will turn the call over to Lori Babcock, Chief of Staff for the company. Ms. Babcock, please proceed.

Thank you, operator, and hello, everyone. Welcome to Health In Tech's fourth quarter and full year of 2025 earnings conference call. Joining us today are Mr. Tim Johnson, Chief Executive Officer; and Ms. Julia Qian, Chief Financial Officer. Full details of our results can be found in our earnings press release and in our related Form 10-K filed with the SEC. These documents will be available on our Investor Relations website at healthintech.investorroom.com. As a reminder, today's call is being recorded, and a replay will be available on our IR website as well. Before we continue, please note that today's discussion includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on information available as of today and involve risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied including those discussed in our annual report on Form 10-K for the period ended December 31, 2025, filed with the SEC. Please review the forward-looking and cautionary statements section at the end of our earnings release for various factors that could cause actual results to differ materially from forward-looking statements made today during our call. Except as expressly required by federal securities laws, we undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA for comparison purposes only. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. With that, I will now turn the call over to our CEO, Mr. Johnson.

Thank you, Lori, and good afternoon, everyone. We appreciate you joining us today. 2025 was a pivotal year for Health In Tech. It marked our first year as a public company. But more importantly, it was a year in which we demonstrated that our AI-enabled underwriting marketplace, distribution-led growth model and technology platform can scale within a large underpenetrated self-funded health insurance market. For the full year 2025, revenue increased 71% to $33.3 million, reflecting strong execution across our core growth drivers. When we look at what drove this performance, three factors stand out: distribution expansion, platform advancement and program innovation. First, distribution. Our business scales through distribution with brokers and TPAs serving as the primary channel for which employers access self-funded health plans. As a result, the breadth and productivity of our distribution network are directly correlated with our growth trajectory. In 2025, we expanded our network to 858 brokers, TPAs and agency partners representing a 34% year-over-year increase. Importantly, we believe we remain at a very early stage of market penetration. There are approximately 1.1 million insurance brokers in the United States. And even over 800 distribution partners in our platform, our penetration remains well below 1/10 of 1%. Similarly, within an estimated $0.9 trillion of self-funded health care market, our current scale represents only a fraction of the total addressable opportunity. The key takeaway is that while we delivered strong growth in 2025, we believe that the long-term runway for expansion remains substantial, particularly as we continue to scale distribution and increase engagement across our partner network. Second, platform development. A core inefficiency in this industry is that underwriting remains highly manual, time-intensive and difficult to scale, particularly in a large employer segment. In 2025, we expanded our enhanced Do-it-Yourself Benefit Systems, or eDIYBS to support employers with over 100 employees, extending our capabilities beyond the small group market, where we initially established strong product market fit. This is a meaningful step-up market. Larger group and underwriting is characterized by long sales cycles, fragmented workflows and significant operational friction. Our platform addresses these challenges by compressing underwriting time lines for larger employees with approximately 3 months to roughly 2 weeks, which enhances broker productivity, improves the client experience and increases placement efficiency. We believe this speed and automation represent a durable competitive advantage, particularly as the market increasingly demands faster, data-driven decision-making. Before I move on, I want to address one of the most important questions we hear from investors. What is our AI advantage? And why is it not easily replicable? The short answer is that our advantage is not just the AI model itself, it is the combination of proprietary data and integrated workflow and distribution. On data, we have been applying AI within our platform since 2021, well before AI became a headline theme. Because we operate within employer-sponsored insurance, we have built a HIPAA governed data set tied directly to real underwriting activity and planned design structures rather than relying on generic or publicly available health care data. As employer groups renew over time, we continuously incorporate new cohorts and real-world outcomes, which allows our models to improve through ongoing feedback loops embedded in actual production environments. On workflow, many solutions in the market focus on narrow point applications of AI, for example, automating a single administrative function or a discrete vendor process. While those tools can provide incremental efficiency, they do not address the broader structural inefficiencies in the system. What we have built is a fully integrated platform that connects underwriting, plan design, stop-loss administration and vendor coordination in a single workflow. This enables brokers to move from quote to bindable execution-ready solution significantly faster, while reducing fragmentation for employers. In other words, our AI is most valuable because it is embedded within an operating marketplace not deployed as a stand-alone tool. On distribution, technology alone is not sufficient. Distribution is critical. We have established a growing network of brokers, TPAs and carrier integrations actively using the platform, and that real-world uses drives continuous data generation improves model performance, increases platform stickiness over time. As we scale, the data becomes richer. The workflow becomes more efficient and the competitive advantage compounds. Third, program development. We continue to advance our 3-year rate stabilization program, which is designed to address one of the most persistent challenges in the employer-sponsored health care space. Pricing volatility. Employers are increasingly focused on predictability, while brokers are seeking solutions to improve retention and simplified long-term planning. Our program is structured to provide greater pricing stability over a multiyear period, supported by a fixed remittance framework and stop-loss protection. Strategically, we believe this offering can deepen client relationships improve retention and support expansion into larger employer segments, where budgeting stability is a critical decision factor. Now let's talk about 2026 strategic priorities and outlook. As we move into 2026, our priorities remain focused on scaling the platform and accelerating adoption. First, we will continue to expand our distribution footprint. Second, we are continuing to invest in platform development and AI capabilities with the goal of evolving into a fully integrated marketplace that extends beyond underwriting to include claims administration, cost containment solutions and broader plan management capabilities. In January 2026, we enhanced the platform to offer more the 100 pre-configured customized stop-loss programs, translating complex underwriting and plan design into a scalable, repeatable framework. This drives shorter sales cycles, improved conversion visibility and greater scalability while maintaining flexibility over the employer-specific needs. We are providing full year 2026 revenue guidance of $45 million to $50 million, representing approximately 35% to 50% year-over-year growth. Our confidence is supported by our ability to compress time to revenue, enabling new features to scale within 1 to 2 quarters compared to 12 to 24 months in traditional insurance environments. We are also strengthening our technology foundation through our partnerships with Ciklum, an AWS advanced tier service provider. We are building more integrated AI-driven platforms. And with that, I'll turn it over to Julia Qian, our CFO.

Thanks, Tim. Good afternoon, everybody. I appreciate you joining us today. I will work through our fourth quarter and full year 2025 financial performance. Then we'll provide additional context around our operating model margin profile, capital allocation priority and ongoing product investments. Before we continue to the number, I want to briefly address seasonality and timing dynamics. Employer decision cycles, particularly around the renewals do not always align cleaning with the [indiscernible] quarter, which can create some variance in the quarter's results. As such, we believe year-over-year performance is a more meaningful way to evaluate the business rather than sequentially. So on that basis, our trend remains strong throughout 2025. Importantly, our revenue model is contractually driven and recognized over a 12-month policy period, which support forward-looking revenue visibility and increased recurring revenue profile. Turning to revenue now. For the full year 2025, the total revenue increased 71% year-over-year to $33.3 million. In the fourth quarter, the revenue increase to $53 million increased -- excuse me, increased to 53% to $7.5 million. Lease performance reflects continued adoption of our AI-enabled underwriting marketplace, supported by expansion in both distribution and inroad employees. Our distribution network grew to 885 brokers, TPAs and agencies, increased 34% year-over-year. [ Enrolling ] employees increased to 22,515, increased 23% year-over-year. As more partner onboard to the platform, we are seeing increased quoting activity, higher [ band ] ratio and improved conversion efficiency, reinforcing this capability of our model. As Tim mentioned, we are providing full year 2026 revenue guidance of $45 million to $50 million, that representing about 35% to 50% growth year-over-year. Leases supporting by the visibility, and how our recurring revenue flow through from the prior year and the remaining of the year as the same as the strong distribution and full deploy our platform capability. When we look at the profitability, we continue to demonstrate operating leverage as the business scales. Adjusted EBITDA for the full year was $4.1 million, which is about 12.3% of the revenue, increased 81% year-over-year. Net income, adjusted EBITDA most comparable GAAP measure for the full year was $1.2 million, representing about 4% of the revenue increased 91% year-over-year. For the fourth quarter, adjusted EBITDA was $0.3 million compared to the $0.5 million in the prior year. Net income for the first quarter was was negative $0.3 million compared with negative $0.1 million of the prior year. Again, our GAAP results and the reconciliation of the GAAP to non-GAAP measurement can be found in our earnings release. The first quarter reflects planned reinvestment in going to market initiatives, broker engagement, program development, along with the peak enrollment activity as well as the investments supporting new product launches. Full year pretax income was $1.7 million. Fourth quarter pretax loss was $0.4 million, reflect the timing of the investment. Turning to the operating expenses. We continue to drive improved operating efficiency while maintaining disciplined investment in growth initiatives. Total operating expenses were $19.4 million for the full year, representing 58% of the revenue, a 16% improved year-over-year. In the fourth quarter, operating expenses were $4.3 million 57% of the revenue. Breaking out these down. For the full year, sales and marketing expenses was $4.2 million, about 13% of the revenue reflecting our efficiency in the distribution-led go-to-market strategy. General and admin expenses was $13.7 million, 41% of the revenue in full year-over-year as we scale. Research and development investment, including $3.2 million in capitalized software development and $1.6 million expenses, representing approximately 5% of the revenue as we expense. Our R&D investments are focused on the platform expansion, underwriting automation and scalability across the marketplace ecosystem. As we think about the growth beyond 2025, we are continuing to increase the high-value capability into our existing platform. We plan to initiate the beta testing of new data-driven solution that integrates [indiscernible] data to generate actionable value insights. We believe this represents a very meaningful step forward, enhancing decision-making across underwriting and plant management. More broadly, these initiatives reflect our strategy of building additional value-added service top of already commercialized scuba platform, which we expect to support durability of the growth and increase operating leverage even further. AI remains a core investment initiative alongside our other programs. We believe that the applying AI within a regulator [ in ] prior sponsored insurance environment can materially improve the speed, consistency and decision quality across both underwriting and member-facing workflows. We will continue investing in AI-driven automation and underwriting support. We are maintaining appropriate human oversight where it matters the most. For financial perspectives, when lease investments are directly aligned with our model, they support a faster adoption, higher retention, improved efficiency and automated great operating leverage as we grow. Turning to the cash flow and the balance sheet. For the full year, '25, we generated $3.1 million of positive operating cash flow. Accounts receivable reduced to 14 days in '25 from already very efficient 29 days in '24, demonstrate the [indiscernible] and efficiency of cash class in our business model. We invest $3.2 million in platform development of the software part and through our generated positive cash flow from operations, and the ending of the year with $7.7 million in cash and cash equivalents. With that, I now turn back to the operator for Q&A.

[Operator Instructions] And the first question will come from Allen Klee with Maxim Group.

Good quarter. I wanted to start with your larger employer offering, which you've rolled out. Could you give us kind of the feedback you've gotten and kind of what you're hearing from your partners that are involved in selling it.

Sure, Allen...

I can take that. Continue to talk about the business part. And I can talk about the financials. So we announced the entry to the large employee space last year. And the financial is not -- it's a very [indiscernible] on the financial '25 is reported because that is starting on the Q3 and the officially launched in September, and you will see more benefits in 2026. So Tim can answer business related to the question.

Yes. As Julia said, the sales cycle on those are pretty long. So we're just now really starting to pick up some sales through it. the speed through it. We have a product launch coming up at the end of next month where it really helps speed the process up for the large groups. Right now, we just agreed to underwrite a large group, bringing them in to make sure that we had a really good process. And then the system that we've built is coming up next month. We've tested it a lot with a lot of brokers and internally and the speed with which it's performing is really helpful for anybody that uses it.

Okay. Okay. And then for the 3-year rate stabilization offering, which is extremely valuable in today's market. What is the fee -- you're in beta right now. So what -- how do you -- anything you can say about the feedback, and how you're thinking about the potential interest and when that interest? I know you said second half, but any thoughts on how that might how you think about the inflection of how that might ramp?

Yes. It's really an attention grabber for government entities municipalities, these entities that rely on budgeting heavily. So they have to understand through the tax base, what they got to budget for. So when you could do that for 3 years, there are a lot of cities, states, governments, counties. They're all interested in looking at it. And we're -- right now, we're just starting to put together some information so we can gather some of their submission data, start to put some programs together for them, making sure that it looks right and fine-tune it. So there's a lot of attention around it. Seriously, we just got it started 1 month, 1.5 months ago, and what we could go out and talk about it with our partner, our insurance carrier that putting it up and we're working with. So there's a lot of attention around it. But you're right, we haven't really started the quoting process yet where we've got so much going on that we can put some business on the books.

Yes. So Allen, that is exactly what we said before. We anticipate it's going to go well. The beta tests a lot of traction should be officially launched announced with all the partners involved second half of the year, I think it's pretty still on track. We try to see whether we can do third quarter, hopefully, the end of second quarter and the beginning of third quarter, this is something we are looking at.

Maybe just following up on my first 2 questions. With most -- is it -- what are your thoughts in terms of the amount of renewals you think will be available for both the large employer and the 3-year rate stabilization. Do you think that most of it will come more at the end of '26 when plans renew? Or do you think that there's a good opportunity kind of in the second half of '26?

So Allen today, we do not in the large group business -- so -- right? So most of our business is a small medium-sized group, but we only started last year September. And when we have functionality going on and then we start to pick up some pace this year. So we don't really have a renewal from any prior year business book, but we can see that we gain the market share and from other places. So we get a new customer, those will be all new customers...

Yes. But what I [indiscernible] like if most plans renewed like in January, does that mean that there won't be a [indiscernible] will be available...

Yes, you're correct. So July 1 and January 1 are the -- especially for municipalities on their effective dates. They start on July and January. So again, we're probably not going to get a lot of business on July with the municipalities in that. We'll pick up some other clients. But January is clearly going to be the biggest effective date for us on that.

Okay, that's great. And then I'll ask one more, then I'll get back in the queue. You mentioned you initiated beta testing of physiological data and claims data to get insights. Could you just expand into about that a little more?

Yes. So physiologic data is when people wear the devices to track the physiologic information, the hard rate and the broad pressure release. And then we have a client data, a lot of associates with individuals health information. So when we get the data, hopefully it can produce insights. We just get the started beta test for this year. That is something the product will watch for. It can be very interesting. On data part, it will help -- really will help the user and to get more additional insights of the correlation, their health condition versus their medical condition. So we just get the beta test, and we will share with the market the due cost.

The next question will come from M. Marin with Zacks.

So I'm wondering, you're talking a little bit about your entrance now into the large organizations spectrum of sales. And the sales cycle, as you said, is long. Do you expect that there'll be any difference versus smaller organizations in terms of stickiness or retention? Or from what you know about the overall industry, do you think it will be pretty much comparable to what you've already variance in your business?

Yes, I think that the stickiness will come because of the ease of use of the system, the tool dibs, it is extremely easy and efficient. The brokers get -- it's easier for a broker to provide a submission to an underwriter through the system. The system uses a lot of AI technology to organize all of that and parses the data into an organized fashion for the underwriter. It's a layup for the underwriter to -- when they eventually comes out to the other end of the system to underwrite to do their job, which is all they want to do. So once we can show that the turnaround time on one, getting the information in, understanding the information and then getting a proposal back, we're really trying to reduce that time frame significantly. And if you're in this business, that a lot of times, it takes a long time for various reasons. But the system that we have built, we really think we can dramatically -- I say, we're going to easily cut it in half, if not more.

Okay. And -- so I know you -- it's very, very early in the process because you just really completed the beta testing not that long ago. But are you surprised at the level of interest or potential interest that you're expecting or seeing in your pipeline amongst that sector of the the overall customer base?

Yes. We were just talking about that earlier today. In fact, the way that we have positioned ourselves and the people that we are already talking to about it, just trying to get feedback and get to all the beta. Internally, my underwriter can now look at "up to 20 groups in a week." She used to be able to do that in a month, and now she does it in a week and just conversations like that around other people in that space in the underwriting space, they're very excited to see it and test it out. So yes, we hope it's going to be a big splash.

Okay. And switching gears a little bit. I think over the past several quarters, you've announced a number of different partnerships or business affiliations to expand the services you can offer or expand distribution. Do you have an ongoing pipeline of other potential affiliations that you're looking at and considering in order to further expand your service offerings?

Yes. The tool itself is really expanded who we traditionally thought our market was. So now besides just brokers and TPAs using the system to quote groups, we're looking at other industries or other vendors within our industry that want to use the tool because it makes their job even easier. We're all in this business, and we designed the product to help us because we underwrite, we do all these things. But it's expanding beyond just us to where other people want to use the tool. And that kind of goes back to my other answer on the other question you asked. But yes, it's expanding a lot.

Yes, there's multiple. We look at these as a multiple different [indiscernible] to grow for the company. So in terms of sales distribution, just remind everybody, this 1.1 million of this sales agent in the country. And we only scratched the surface. So whatever works, we'll continue to have build high functional sales team, continue to acquire broker, provider education. One part we are adding to the large group space will help us to get the large brokerage house because the more product offers, the more stickiness, people more incline to deal with one system to use it. So this is a part of the strategy for us to [indiscernible] and more service and try to get more broker on board. We don't have some particular list because now consider the entire universe is $1.1 million. And there is a particular -- we have particular things we want to think about, and we're our high-function salesperson have the most of the relationship [indiscernible], then we will go down the list of the rest in the country. Really don't have particular things. And additionally, the new functionality we're building were surprisingly to see it can be offered as additional sales generate more revenue and the capability or needed by other users as well.

Which would also further enhance your operating leverage, you think?

Yes, definite to me. And look, when we start that, I often say we have Amazon selling in the bookstore. And some ofthe book store, and some of the books in book store. And then we realize people really like to put the store online. So we're like, okay, now, well, a lot of functionality with developing for our own use, internal use because we are part of the customers using the functionality deal with the menu process, make automation, make that easier, simpler use AI and then we realize a lot of company like earth in the market, they also suffer from the menu process, then we can offer that as the service additional service.

The next question is a follow-up from Allen Klee of Maxim Group.

If you talked about how you want to expand to roll out cost containment and claims thing. Is the business model here that kind of which you said of like you're the store and these are the different things that were added, and you would take like a fee or a percent of how would -- how do you envision like you're partnering with other firms, or how do you envision how you get paid on it.

So Allen, we are building -- we are in the marketplace. So today, the marketplace does two things: create self-funded product -- self-funded the program and put program together and also the underwriting the bundle together through AI process. So in the near future, and the marketplace function expanded. And then we will offer that as a service for other carriers, other MGU, other people want to come to the marketplace, not just purchase the product they also want to use the function entity doing their underwriting. They want to create their customized product. So these are the things we're thinking about, which we already get quite a lot of traction it's not -- have not launched currently has now launched this year, has not been the business model last year. But with more and more traction, we think we will make that variable in very near future. We have not thought about the pricing because there are so many different pricing we can chase to. We can have a set pricing, we can have a different features, different pricing. There are so many ways people willing to pay different functionality. So since this has not been launched, and we don't find -- we have not finalized the pricing. We have a lot of ideas through the conversation with potential customers.

Okay. You announced a partnership on the prescription side, I think. Well, could you talk about what that can do to -- for your offering? What I'm referring to is a vertical administrators?

Yes. the -- they're a TPA, but they just happened to be owned to buy a PBM. So we're there's just another distribution source for us.

Okay. So on the prescription side, that's not an area of focus right now, I assume, right? Not really. I mean, we're going to do what we can to manage drug cost, but as you recently saw the governments stepping in to try to make some corrections. So it's kind of in flux right now. We don't want to commit to anything and then have something taken away from us. So we're just kind of going to sit back and watch what happens for a while.

Okay. That makes sense.

Any feedback on the conference you held in Davos and any relationships or that you got out of that or just thoughts on how it went?

Yes, so look great. We met a lot of good people. Those relationships are still fruitioning. We're trying to figure out how do we take advantage of all of them. Yes, we've got a lot of good attention from that. A lot of people are still talking about it, in fact.

Okay. And then maybe lastly on the AI side. Any -- just in terms of kind of how you're looking to apply it in '26. What would you say the biggest initiatives are -- will be? The biggest initiatives for AI in '26?

Yes. it's going to be continually improving our own processes. So as we -- like I said, we're really the proof of concept for a lot of these things. And we test it before we take it out, but our system continually needs improvement. We are talking about the claims. I want to clarify. Those are the stop loss claims. Those are not first dollar TPA claims that we're looking at. Looking at how MGUs intake claims, how can AI use to make that more efficient because it's a very manual process. So everything we touch, we're looking at applying AI to it to see if we can solve the issue by speeding it up or eliminating intervention by having people get in the middle of it. There's all sorts of different ways that we're looking at AI, but it's improving that entire process of getting information, how you get it, when you get it, what you do with it, where it goes and where it's stored, and how fast can I get access to it.

Seeing no more questions in the queue. Let me turn the call back to Mr. Johnson for closing remarks.

Okay. Thank you, operator, and I thank all of you. I appreciate everyone joining the call today. If anyone has any follow-up questions, please do not hesitate to reach out to us. We appreciate your interest and look forward to keeping dialogue open. Thanks, everyone.

Thank you all again. This concludes the call. You may now disconnect.