Omada Health, Inc. (OMDA) Earnings Call Transcript & Summary

Thank you. Good day and thank you for standing by. Welcome to the Omada Health second quarter 2026 conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you'll need to press star 11 on your telephone, you'll automated message advising that your hand is raised. To withdraw your question, please press star one one again. be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Craig Gracie, Vice President and Chief Accounting Officer. Please go ahead.

Thank you. Good afternoon. Welcome to Amada Health second quarter 2026 earnings conference call. Joining me today are Sean Duffy, our co-founder and CEO, Weili Xiao, our president, and Steve Cook, our CFO. Before we begin, I'd like to note that we will be discussing non-GAAP financial measures that we consider evaluating a model's performance. You can find details on how these relate to our gap measures, along with the reconciliations in the press release that is available on our website. We will also make forward-looking statements based on our current expectations and assumptions, which are subject to risk and uncertainties, including factors listed in our press release and in the risk factors found in our filings with the SEC. actual results could differ materially and we assume no obligation to update these forward-looking statements. With that, I'll turn the call over to Sean.

Thank you, Craig. Good afternoon, everyone, and thank you for joining us. We are excited to be speaking with you today to discuss two significant points in Omada's journey to bend the curve in healthcare. First, we just reported our strongest quarter ever, reaching a record number of members and our highest revenue and gross margin to date. With more than 2 million lifetime members commercial relationships with the nation's three leading PDMs and a proven and profitable model, Omada is in its strongest position since the company's founding. Second, this strong foundation is why, after founding Omada over 15 years ago, I'm ready to pass the leadership baton. On January 1, 2027, Omada's president, Wei-Li Hsiao, will become the chief executive officer. Wei-Li is known to many of you. Seven years ago, he joined Omada as chief commercial officer. and for over four years has served as our president. Wei Li has cultivated the trust of the team and our partners delivering not only reliable performance, but new innovations that have put Omada on what we believe is a durable long-term trajectory. I'm excited to watch Omada accelerate into its next chapter under Wei Li's leadership. I am equally excited to move into my new role as Executive Chair, where I will continue as part of the management team, focusing on long-term strategy, catalyzing partnerships, and other opportunities we believe will create the greatest value for Omana over the long Before I hand it over to Weili to discuss our operational performance, I want to spend a moment to highlight what matters most to us here at Omada, and that's the people we served. I'm glad my organization provided OMADA as a health option. Over the past year, the helpful resources, daily tracking, and guidance from my diabetes specialist and my health coach helped me achieve major milestones. Thanks to them, I reached my target weight, put my diabetes in full control, and completely reversed my hypertension by transforming my lifestyle. I am incredibly grateful for the support. Stories like that are why we exist. As we When we talk about revenue margins and membership growth, which are important indicators of the business we're building, I want to remind everybody that behind those numbers is someone working to live healthier, avoid disease progression, and get the support they need between visits with their physician. That's the mission that continues to drive us. With that, I'll turn it over to Wei Li to discuss the.

operational momentum we have seen across the business. Thanks, Sean. Before we turn to the quarter, I want to express my gratitude for the opportunity to become Omada's CEO in January. It's a genuine honor. This is a defining moment for Omada as three powerful forces converge to shape our next chapter. First, the commercial reach we are building allows us to bring high-quality clinical care to more and more Americans, allowing us to further our mission to bend the curve. Second, GLP-1s and adjacent therapies are powerful new tools that complement what we treat and how we treat it. And third, the rapid evolution of AI is reshaping how personalized care can be delivered at scale. My focus as CEO will be translating these forces into better health outcomes for millions of Americans. We have shown our model works and our results support our ambitions. Now is the time to push even harder on our mission to bend the curve of chronic disease in America. As Sean mentioned, this was a record-setting quarter that we're incredibly proud of. Q2 caps off an exceptional first half of 2026 for Omada. Year over year, we delivered 43% revenue growth and expanded gross margin by 700 basis points to 73% on a GAAP basis and by 600% on a GAAP basis. points to 74% on a non-GAAP basis. We also generated $5 million in net income and $11 million in adjusted EBITDA versus a loss a year ago. Once again, we exceeded consensus, enabling us to raise our full year outlook. More importantly, we saw strong momentum across our programs, bringing the total numbers as of the end of the second quarter to 1.1 million, up 45% year over year. I will walk through our Q2 execution through the four parts we are focused on, covered lives, enrollment, engagement, and operating efficiency. Covered Lives represents the individuals with benefits coverage to apply for and enroll in one or more of our programs through our employer, health plan, pharmacy benefit manager, and other customers. We update this figure annually. As of December 2025, we had more than 25 million estimated eligible Covered Lives and we are building off that base as we set up for 2027. A quick reminder on the typical seasonality of our commercial year. The first half is when we build new customer relationships. The second half is historically when we close them. And January is when the annual benefit cycle launches. Q2 sits at the front end of that cycle. Our commercial progress in Q2 continued to be strong like we saw last year. During the quarter, we added new customers spanning food service, national retail, public sector education, and industrial employers. These wins support the pipeline we expect to close the rest of the year, and we have seen particular strength in our new products, including our GLP-1 suite and cholesterol. The breadth here reflects something fundamental to our business. The need for chronic care support is broad and diverse across the types of employers and categories of conditions we are positioning. to treat. Turning to our newer PBM channels, we also saw continued progress in Q2. One channel, now in its second year, has built a strong customer pipeline into the second half and tracking ahead of our expectations. The other, which is also our first partner to include our prescribing program, is in the very early stages of its sales motion with encouraging signs. We also deepened our footprint inside customers we already serve. The expansion I'm most excited to talk about this quarter is with the Healthcare Services Corporation, or HCSC, one of the largest Blues Plans in the country and a partner we have worked with for several years across our prevention and hypertension programs. we extended those programs into HCSC's fully insured book of business in three additional states, reaching an additional 1.5 million covered lives launching in 2027. This expansion matters for a couple of reasons. First, HCSE is an example of the kind of longstanding partner we can expand with over time as we prove our results across successive programs. And second, the fully insured component is embedded at the benefit level, which means members can enroll directly without a downstream employer sales cycle. This is the kind of channel dynamic we are working to build for scale. We believe Q2 was a strong quarter for the front end of our commercial cycle. We saw new customer wins spanning diverse industries, meaningful progress in our newer PBM channels, and continued expansion inside customers we already serve. This is the Covered Lives base we will seek to activate through the 2027 benefit cycle. and we believe that the momentum is here setting up for a strong second half. Turning now to enrollment. Enrollment is where we turn covered lives into OMADA members. Let me highlight three things for the quarter. The first and most important is the breadth of our enrollment growth. As in Q1, growth in Q2 was broad-based through our cardiometabolic suite, reinforcing that our momentum extends well beyond a single program. Since our last earnings call, we reached two important milestones that speak to the breadth ahead. First, we launched cholesterol as a standalone care track for the first time with one of the largest retailers in America, and that early engagement is an encouraging proof point of demand. Second, we have advanced prescribing discussions with channel partners and employers, including our first closed prescribing customer that will launch in 2027, which gives us an early signal on market fit for this program. Building on that same theme, revenue growth from our diabetes and hypertension programs continue to meaningfully outpace our prevention and weight health program in Q2, reflecting a healthy shift in mix toward our higher value programs. As we continue to expand the platform to the likes of our GLP-1 suite and cholesterol, we believe we can continue to increase enrollment over time. The second is the effectiveness of our enrollment engine. Our email campaigns are the primary channel through which employees learn about and enroll in our programs, and they converted approximately 20% higher year over year. We believe this is a leading indicator of the health of the enrollment efforts, reflecting improvements in targeting, personalization, and engagement. and messaging on the same audience. The third is seasonality. Q1 was exceptionally strong, and that strength pulled enrollments earlier into the year. That is a benefit over the balance of the year, because enrollments from Q1 are already in active care and generating revenue sooner. Specifically, total member base continues to grow throughout the year, but Q1 remains our strongest new enrollment period as employers launch new benefits programs. Our next major inflection comes with the 2027 benefits cycle, where we expect millions of Americans will get the opportunity to enroll with OMADA and receive treatment. which now brings me to engagement engagement is where members receive care from Omada and where the durability of our business shows up one important signal from q2 is worth highlighting members have stayed in active treatment with Omada nearly 10% longer than a year ago driven by growth in our GLP-1 diabetes and hypertension programs in which members have typically engaged engaged on our platform longer. This builds on the ongoing investments in our platform, including Omada Spark and Mealmap, in the increasing personalization and clinical depth we bring to member care. Longer tenure in our programs generally reflects more billable months per member, higher lifetime value, and stronger margin per member over time. Finally, let's now talk about how we deliver care and support this mission as a company. Our cost to serve has declined over 10% year-over-year as measured by cost of revenue per member on a trailing 12-month basis. This has been driven by increased efficiency in delivering both digital and human care. On human care delivery, we have continued to see rising capacity per care team member as we scale. We are putting AI and machine learning to work throughout our support for the care team, from smarter tooling for our coaches to better prediction of member demand standardized ways of working across our number facing teams. Beyond the decline in the cost to deliver care, the broader business has also become more efficient in support of our mission. Despite significant investments to stand up new programs and channel partners, we have delivered 41% incremental adjusted EBITDA margin and lowered non-GAAP operating expenses from 68% of revenue a year ago. ago, 62% this quarter. We believe that this demonstrates our ability to invest in Omada's growth at increasing rates of return, and it is the operational engine behind the margin expansion Steve is about to walk through. With that operational picture in mind, let me turn it over to Steve for the financials.

Thank you, Haley. Hello, everyone. Q2 is the strongest second quarter in Amada's history. We set quarterly records for revenue at $88 million, gross margin at 73% on a gap basis and 74% on a non-gap basis. That income at $5 million and adjusted EBITDA at $11 million. Q2 also marked our second quarter of gap net income profitability, following the fourth quarter of 2025. These are meaningful milestones for the business, and we believe they reflect the structural profitability of the model we are building. I will walk through Q2 with the four operational drivers Whaley just covered in mind, then turn to guidance and the balance sheet. Starting with revenue, Q2 revenue was $88 million, up 43% year over year, and up 13% sequentially from Q1, driven by continued strength across our GLP-1 care track, increased multi-condition penetration across our cardiometabolic suite, and continued progress in enrollment effectiveness. Revenue growth in our diabetes and hypertension programs continue to outpace our overall revenue growth of 43%, consistent with the enrollment breadth Whaley described. Our growing member base is a direct result of that revenue driving activity, and it brings me to something new we are sharing this quarter. We end the Q2 with approximately 1.1 million total members, up 45% year over year, reflecting the enrollment effectiveness Whaley described. As a reminder, we define a member for this purpose as a person enrolled in one of our virtual care programs who generated a billing event in the preceding 12 months. Because we primarily bill on the care activity our members receive rather than on a flat subscription, we believe the most representative measurement of our unit economics is trailing 12-month revenues set against that same 12-month member base. On that basis, trailing 12 month revenue per total member was $284 in Q2 compared with $279 in Q2 of last year. We believe this evaluates the unit economics of our member base, and we would typically expect this metric to move modestly up or down in any given quarter as cohort mix, pricing mix and seasonality shift at the margin. The consistency we have seen here continues to reflect the durability of our per member economics. Turning to gross margin, GAAP gross margin for Q2 was 73%, up from 66% in Q2 of last year, representing approximately 700 basis points of year-over-year expansion. On a non-GAAP basis, gross margin was 74%, up from 68% in Q2 of last year. Gross margin expansion this quarter reflects a lower cost to serve our members, driven by the lower care team delivery cost and reinforced by deeper multi-condition engagement and the maturation of our longer tenure cohorts. We have previously said we believe there is a path to exceed our current long-term target of 70% annual gross margin. Our Q2 result is consistent with that trajectory, and we will update our long-term financial framework, including gross margin, at Investor Day. Moving to operating expenses, we drove significant operating leverage this quarter. On a GAAP basis, operating expenses fell approximately four percentage points as a percentage of revenue from 73% to 69%. On a non-GAAP basis, they fell approximately six percentage points from 68% to 62%. That leverage reflects the drivers we have consistently pointed to, scaling through channel partnerships, getting more from our existing sales force, and tight spending discipline across the rest of the business. AI continue to be an increasingly important driver of our operating leverage as well. As we shared last quarter, we are evaluating AI tooling across every function of the company, not just any one area. As AI adoption deepens, we believe it can continue to support operating leverage as we look toward 2027 and beyond. Gap netting for Q2 was more than $5 million compared with a gap net loss of approximately $5 million in Q2 of last year, representing an improvement of approximately $11 million year over year. This is our second quarter of GAAP Net Income Profitability following the fourth quarter of 2025. Adjusted EBITDA for Q2 was approximately 11 million, an improvement of approximately 11 million year over year and a quarterly record for OMADA. We believe this level of adjusted EBITDA in the second quarter reflected the structural profitability of our model playing out at scale. And it is a meaningful contributor to the improved full year adjusted EBITDA outlook I will discuss in a moment. Our strength and profitability profile has continued to contribute to a strong balance sheet as well. We ended Q2 with cash and cash equivalents of approximately $222 million and continue to carry no debt. Now, let me turn to our outlook. Our extraordinary second quarter performance and continued visibility into the second half give us the confidence to raise our full year 2026 outlook on both revenue and adjusted EBITDA. We are raising full-year revenue guidance to $334 million to $340 million, up from the prior guidance of $322 million to $330 million. At the midpoint, this represents approximately 30 percentage point revenue growth compared with 2025. We're raising full year adjusted EBITDA guidance to 21 million to 27 million, up from prior guidance of 14 million to 20 million. At the midpoint, this represents an improvement of approximately 18 million compared with 2025, or roughly four times our 2025 results. Our race outlook reflects both the extraordinary strength of Q2 and a more measured second half growth trajectory based on the historic seasonality and contracted visibility. As Whaley described earlier, our business has historically followed a typical seasonal pattern where typically Q1 is our strongest new enrollment period, followed by continued revenue contribution from that member base through the balance of the year. Consistent with that pattern, our year-over-year growth rate is expected to moderate in the second half as we follow an exceptionally strong first half enrollment period. We expect those first half enrollments to continue to generate revenue at healthy per member economics to sustain a strong margin profile through the rest of 2026. enrollment remains our strongest enrollment period each year as employers launch new benefit programs and the next significant enrollment inflection point comes with the 2027 benefit cycle. At our Investor Day on September 10th, we will lay out an updated long-term financial framework, including the growth, gross margin, and operating leverage trajectories that will inform how we manage this business over the next several years. With that, we will open it up for questions.

Thank you very much. At this time we will conduct the question and answer session. As a reminder to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Hettenbach of Morgan Stanley. Craig, your line is open.

Yes, thank you. And congrats, Wei-Li and Sean, on this transition here. I want to start with just the AI efficiencies. I mean, very strong gross margin performance year over year. Steve, as you mentioned, kind of gives you confidence into longer term outlook. But anything else you can share in terms of the AI efficiencies? of how that's kind of flowing through, whether it's shaping your headcount decisions as the business continues to scale?.

Yes, hey, Craig, this is Sean here. Thanks for the congratulations. I'm thrilled for Weili here. Yes, so on AI, as we've shared in prior calls, it continues to be a source of leverage, an important driver, and this is both how we support our care teams and the member experience as well, ranging from smarter tooling to our coaches, better prediction of members member demand, more standardized ways of working across our member facing teams, as well as the whole, you know, palette of solutions we've launched for members, you know, including Yieldmap and Omada Spark. And just to punctuate some of the results we shared, highlighting the cost of revenue per member is down over 10 percent. And per Waley's remarks, members have stayed active in Omada nearly 10 percent longer than a year ago. So this is an area where we'll continue to press forward and we believe it's starting to show up in the numbers.

Great. And then just as my follow-up question, Willie, you alluded to the second PBM partner tracking ahead of expectations. Is there anything you could share in terms of what you learned through the first partner and how that evolved and is that shaping that or is there anything else influencing kind of the strong uptake on the second one?.

Yes, hi, Greg. Thanks for the question. Yes, I mean, we've been working successfully with some of the top PBMs in the country now for years. And so I'd like to think that we've got in the industry a pretty strong playbook as to how that should happen. The learnings are consistent, whether it be with one of them, two of them, or three of them. And they fall along the following lines, one of which, of course, is partnering very, very closely with their sales teams. As you all know, our sales team footprint is mighty in its capability, but small in its footprint, because we partner very, very closely with the sales teams of the PBMs and also for the health plans. And that helps to really raise the share of voice of Omada across, know, across an outsized number of potential prospects that are now showing up in our pipeline. The second thing that I think is important is also the product market fit of our products. I mean, we sit squarely in the center of almost every health benefits discussion because of our presence in GLP-1s and, of course, in the broader conversation around cardiometabolic disease. being a major, major cost driver for almost every employer in America. So the product market fit helps a ton, and that also garners a lot of interest and excitement back to the AEs or the sales personnel from the PBMs. that we deal with. I would say the last thing that is materializing is, you know, we we get products that are pretty comprehensive across the cardiometabolic spectrum. And because of that partnership, we're seeing fairly healthy build in our pipeline. from a diversity standpoint across the cardiometabolic programs that we have. So we're excited coming into the closing season, which we're just now opening up right now.

Great. Thanks so much. Thank you. One moment for our next question. Our next question comes from the line of Ryan McDonald of Needham & Company. Ryan, your line is open.

Hi, thanks for taking my questions and congrats on a great quarter and congrats, Whaley, as well. Sean, obviously, best of luck and well-deserved in being able to take a little bit of a step back here. You know, maybe just want to double down on that last point, Whaley, about sort of the diversity of your pipeline, because I think sometimes within the investment community, you know, a lot of gets just bucketed into sort of, hey, it's just a GLP-1 beneficiary, and, you know, this is a temporary sort of decision-making process. But can you just talk about sort of, clearly there's a broad discussion across multiple programs, and this isn't just GLP-1s, but what do you think is resonating within your customer base and your platform partners that's making sort of a broader cardiometabolic health discussion sort of top of mind right now.

Yes, I mean, it's a great question. We've long said strategically as we entered into the GLP-1 marketplace, you know, a few years ago, that it's a bit of a bridge to a broader cardiometabolic condition. If you talk to employers, and this bears out in the Mercer surveys, the Aon surveys every year, when they ask employers, what are the areas that you care about most and what you care about most are tied to what is driving the most cost in your organization. after year consistently cardiovascular disease, metabolic disease, obesity, diabetes, and Heart attacks and stroke are always within the top five, dominating a number of those positions. And so it's always top of mind. Then you overlay, obviously, the demand and the pull around GLP-1s. It's just amplifying the front of mind conversation around cardiometabolic. And we have the benefit of actually being able to play in both those spaces in the sense that we've got a full suite of cardiometabolic options across, you know, you know, diabetes prevention, hypertension, diabetes management. Of course, most recently we announced our cholesterol program which is doing quite well in the marketplace. And then the full suite and complement of GLP-1 care programs with the most recent launch and announcement of our prescribing program to complement our wraparound support service. And we really tailored a number of those solutions to meet the number of different needs that are out there in the GLP-1 marketplace. So when you step back into the marketplace and you take a employers take a look at, okay, how do I address those top areas of concern, what they usually find is the deepest and broadest cardiometabolic offering and solution out there is front and center with OMADA. That in combination with our channel penetration diversification across the top three PBMs and dozens and dozens of health plans makes it easy for OMADA to be installed. So it's a combination of the breadth and depth of our program, the outcomes, as well as the relatively easy way to contract and bring us into the organization. And so that's resonating a among our customer base quite a bit. So, you know, there's diversity of the pipeline in that regard. I think it's probably worth mentioning too as well that we're also seeing a greater channel diversification also. You know, we've been working quite diligently over the last few years. We brought in CVS, OptumRx, the full complement of our cardiometabolic programs as well as our GLP-1 programs, and then most recently, as we announced in our earnings press release, the expansion with HCSC. And so channel diversification also has been important, and that's a lead indicator for revenue diversification in all that is materializing in our pipeline that we're going to be converting in H2. So we're feeling good about how that sets us up for 2027. And look, Brian, I would just add, yes, just one last comment there. Per some of the prepared remarks, we did see our diabetes and hypertension books being the two fastest growing books on a year over year basis in the second quarter, both overriding the 50 percent this is really important to us these are some of our highest priced products these members stay in program the longest they have the longest duration so for glps have really been acting as that initial conversation that we'll be able to go back and then sell across the entire product suite which has been very beneficial for us economically.

I appreciate that important call out there, Steve. And maybe as a follow-up for you, so obviously things going extremely well in the business. We can see it in the numbers. Can you just help unpack the guidance assumptions a little bit for the back half of the year? I think as we were looking through sort of to get for the top-line guide, if you assume that the are just flat on revenues from 2Q into third quarter and fourth quarter. You actually come in at sort of the high end of the range. And so is there anything you would call out there, or is there member counts where they start to decline in the back half? Just want to understand sort of what's built into the guide for the top line here.

Thanks. Yes, I'm absolutely happy to provide some color there. And Q2 is obviously a fantastic quarter for us. For some of the prepared remarks and what Whaley said, this, you know, we expect 2026 to be a more normalized year for us. You know, our typical pattern is to spend H2 building up new pipeline, closing new employer clients. And then we launch in the first half of the next year, which is what you saw saw transpire in the first half of 2026. We had a really strong selling season in the back half of 25. And then we had north of 40% member growth in Q1 and Q2 in this year, as well as north of 40% revenue growth in board quarters as well. And so it is important to note that we are comping off what was a very strong 2025 revenue growth last year was 54% in the back half. We were ramping into one of our largest channel partners across several lines of business during that period. And so 2026 represents a more normal cadence for us from a seasonality perspective.

Thank you very much. One moment for our next question. Our next question comes from the line of Saket Kahlia of Barclays. Saket, your line is open.

Hi, you have Carly on for a second. Thanks for taking our question here and congrats to both Sean and Ray Lee. I think one of the important parts of the story here is how the prevalence of chronic conditions in the US creates a meaningful TAM for a model to go after, particularly given the multi-condition approach. looking to 2026 and beyond now, Omana has an even bigger platform to sell with GLP-1 prescription, FlexCare and the new cholesterol program.

Can you help us understand how these additional solutions are expanding the TAM for Omada and how that could play into the growth formula here at longer term? Yes, this is Sean. I mean, one of the things that we're so excited about is how really early the markets are, here not just for Omada, but for the next class of digital health companies. I mean, if you look at our progress as of the end of last year, roughly 8% of the ASO market, 10% of the fully insured market, around 1% of MA. So plenty of white space. And the expansions that we've announced, as we've shared before, are really customer-driven. Right. And what's happening is as the existing traditional healthcare system, every year just disappoints patients, disappoints clients who are paying for it. They're asking for change. Now that it changes what we've created in the form of between visit care that leverages technology, efficient care services, unique experiences. And so that's led to the expansions and As I shared on the first earnings call this year, I mean, we have launched more new program capabilities in market this year than ever in Armada's history. And we're blessed with the most robust channel landscape and selling landscape we've ever had in Armada's history. And so, all sides are of course on laying the foundations to capitalize that, not only in the back end this year but over the course of the next year. Awesome. Thanks so much.

Thank you. One moment for our next question. Our next question comes from the line of Richard Close of Concordia Genuity. Richard, your line is open.