00:00 Speaker A

We’re going to talk about Hinge Health. Hinge Health reported a beat in second quarter earnings after the bell Tuesday. It’s the first report since the company went public in late May. Revenues coming in at $139 million in the second quarter. That’s a jump of 55% year over year. It also beat Wall Street’s expectations of $125 million. Since going public, the company’s stock is up more than 80%. Let’s send it back over now to senior health reporter Angelique Molani who’s standing by with the Hinge Health CEO and co-founder, Daniel Perez.

00:31 Angelique Molani

That’s right. Thanks so much, Julie. Daniel, so good to see you again. Uh the last time we were down at the exchange ringing that bell. Um, clearly some good news for the street today. You’re beating, you’ve gotten some growth in, and considering this is the first earnings after the IPO, talk to me about how you’re feeling about that and having to even have the visibility right now that everyone has into your books.

01:01 Daniel Perez

Well, look, we appreciate the transparency. We were, we’ve been operating internally like a public company for multiple quarters pre-IPO, and we like to show that, you know, there’s a lot of potential here in digital health, and our vision is to use technology to scale and automate the delivery of care. And I hope this first quarter out of the gates shows that there’s a lot of momentum at our backs and that this is going to be a long process of using technology to scale what hitherto has been very manual one-on-one interactions with providers, and we’re excited about the future ahead.

01:58 Angelique Molani

Talk to me about the growth and subscription because that also drives your revenue. Um, I know that that has been part of the focus for many platforms like yours, and there’s been sort of a test if you will. And that’s why the spotlight is on you. I recall down on the exchange floor, you and I chatted during the IPO. You said you got a number of calls from Digital Health companies because this was going to be proof in the pudding on whether or not the market is back and interested. What can you tell us about whether or not you’re seeing that right now? And whether or not this growth that you’re seeing in subscribers is sort of par for the course or did it jump after the IPO?

02:57 Daniel Perez

No, I don’t think the IPO had a big impact on our subscribers. I haven’t seen that yet. I would say for digital health companies, you really got to focus on being intellectually honest about what you’re bringing to market. We try to make sure our products really improve clinical outcomes, that patients or members love using it. And thirdly, that they actually save costs. If you do that, you’re going to get a lot of enterprise customers, health plans, employers, fully insured plans, Medicare management interested in your product. And then secondly, if you build a delightful experience, members are going to sign up. They’re going to choose you over their many other alternative options, including alternative in-person care options. And you’ve got to run a layer underneath all of that, a foundation of a sustainable business. And frankly, there’s a, if you have a digital health company that’s delivering on that triple aim and healthcare, which is experience, outcomes, and costs, and you’re able to build a foundation of a sustainable business underneath that, then the markets are open for you.

04:32 Angelique Molani

I know that we talked about the growth. I want to talk about the one sort of cautionary flag in the report today, and that was the gap loss from operations, about half a billion there. What can you tell us about that and what you’re expecting for the rest of the year?

04:51 Daniel Perez

You know, when we go public, we issued a bunch of RSUs, restricted stock units before IPO. None of them vest. So as soon as you IPO, just a ton of RSUs that have been built up over multiple years vested. And so the reason the market somewhat, I think, I’m not the banker, has somewhat shrugged that off is because it’s expected of a first earnings report when you IPO that you’re going to have a ton of stock that’s kind of built up over time just vest, and that’s going to look like a very, very large gap loss. I think what a lot of investors are focused on, however, is our free cash flow, which was our non-GAAP free cash flow was $33 million for about a 23% non-GAAP free cash flow margin. And I think we’re slightly ahead of schedule of what was expected of a company one quarter out the gate in terms of our free cash flow margin. And at the end, what matters is how much cash is the business generating, and we’re excited to show that relatively early on, we’re able to actually generate cash for the business, which is great. But you should expect our stock burn to go down over time because half a billion dollars is not sustainable. And so I hope to certainly beat that in Q2 or Q3 earnings reports and moving forward.

06:30 Angelique Molani

Yeah, well, the street’s certainly loving it right now, up more than 20% on the market right now.

06:42 Daniel Perez

20%? Wow. That’s not bad. I hadn’t noticed. Okay.

07:00 Angelique Molani

Well, now you know. Talk to me about keeping up the momentum though, because it always is that sort of, you know, that spotlight on you, the sort of shakiness of getting out the gate, and then keeping up that momentum. We’ve seen companies, you know, start off strong and then maybe plateau over time. So what can you tell us about how you’re planning on keeping up that momentum?

07:25 Daniel Perez

That’s a great question because look, we had a strong quarter, but that’s just one quarter, and we largely baked this quarter a while ago through the efforts that we’ve made here at the company. And we recognize that we want to build a company that’s going to become an iconic organization that lasts long term, and that’s going to require sustainable growth over a long period of time, not just one quarter. That’s why we try not to look at the numbers, the stock price, how it gyrates up and down on any given day. And we try to remain paranoid. We’re a founder-led company, and we think long term. This company, in all of our meetings, we’re constantly thinking long term and try to be very intellectually honest in the products we bring to market and our go-to-market strategies, and where we spend our money. And we’re evaluating the business up and down. And so I’m confident in what we got in the pipeline, as well as the runway ahead of us. We have about a $500 million runway for digital physical therapy for what we believe is a $70 billion market. So a lot of runway in digital physical therapy, but this model of applying software and connected hardware to automate the delivery of care itself is a model we want to apply to other areas of healthcare. And so you’re going to see us over time peeling away more aspects of in-person care and using technology to automate, say, 60-70% of it in version one, with the aim of getting to where we are today with digital physical therapy, where we’ve automated away about 95% of provider interactions. And what’s exciting about healthcare is that, you know, just about every market that you look at in healthcare is $10-20 billion plus. And so it is, even relatively small markets and healthcare are really big TAMs and give us a big opportunity to have an impact on patient outcomes, as well as cost reduction.

09:36 Angelique Molani

Yeah, absolutely. We’re going to have to bring you back at the end of the next quarter to see how this all pans out. Daniel Perez, CEO of Hinge Health. Thank you so much for joining us.

09:47 Daniel Perez

Thank you, Angelique.