Date: 2026-02-22 Quarter: Q4 FY25 (Dec-25) Thesis: First earnings review — establishing baseline
Hinge Health is one of those companies where I have to step back and say — these results are just extraordinary. Revenue up 46% in Q4, 51% for the full year, with 85% gross margins and 28% non-GAAP operating margins. That Rule of 40 score is 82. The EPS beat consensus by 250%! And they have a 97% client retention rate plus NDR above 110%. I have been around a long time and I know what exceptional looks like. This qualifies.
Position: Initiating coverage. Thesis Intact. Strong Hold / Add on pullbacks.
Here is the revenue trajectory — I follow the money, the results:
| | Q124 | Q224 | Q324 | Q424 | Q125 | Q225 | Q325 | Q425 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---| | Revenue ($m) | 82.7 | 89.8 | 100.6 | 117.3 | 123.8 | 139.1 | 154.2 | 170.7 | | YoY % | 37.8% | 28.7% | 23.6% | 43.9% | 49.7% | 54.9% | 53.3% | **45.5%** | | QoQ % | 1.5% | 8.6% | 12.0% | 16.6% | 5.5% | 12.4% | 10.9% | 10.7% | | GM % [Non-GAAP] | 71% | 77% | 79% | 82% | 81% | 83% | 83% | 85% | | OpM % [Non-GAAP] | -16% | -4% | -4% | 18% | 12% | 19% | 20% | **28%** | | FCF ($m) | — | — | 25.0 | 37.3 | 23.0 | 14.0 | 81.0 | 61.5 | | FCF Margin | — | — | 24.9% | 31.8% | 18.6% | 10.1% | 52.5% | 36.0% |
Now, the deceleration from 55% to 45% in Q4 is something I need to address honestly. Saul's first principle is revenue growth — accelerating is good, decelerating is a warning. But here the context matters enormously. First, this was Q4, which tends to be the big enterprise signing quarter. Second, FY full-year growth was 51% — that is incredible for a company doing $588 million in revenue. Third — and this is the part that tells me the guide is sandbagged — TTM calculated billings grew 44% to $671 million against TTM revenue of $588 million. Billings lead revenue. They contracted more than they recognized. So who cares what the guide says???
The FY26 guide of 25% looks scary on the surface. That would be a real deceleration. But let me apply some common sense: billings of $671M already imply $700M+ revenue run-rate, client additions accelerated in Q4 to +270 net new (versus ~200/quarter prior run-rate), and non-ASO lives grew 130% year-over-year to 2.6 million. That non-ASO segment is barely in the revenue yet. I would not be surprised to see FY26 come in at 32-38%.
I spent a long career avoiding SaaS-is-the-only-path thinking — and HNGE proves my point. This is not traditional SaaS but the revenue durability is equivalent. Here is what they have:
97% client retention. That means of their 2,830 employer clients, 97% renewed. That is better than most SaaS companies I have ever owned! Employers don't cancel programs their employees love and that demonstrably reduce healthcare costs. This is as sticky as it gets.
NDR above 110%. Net dollar retention above 110% means existing clients are spending more every year. I have owned many companies where NRR was the key metric and 110% is solid, healthy SaaS territory. It isn't 130%+ like a Snowflake at its peak, but for a company this early in its commercial life it is very reassuring.
Revenue per engaged member (yield) expanded from 340% to 390% annualized. That is the economic engine — they are charging more per member who actually uses the product, and more members are engaging. The engagement-based pricing model now represents 50% of revenue. That is a brilliant structure: employers only pay when members use the service, which drives adoption AND creates a natural upsell as Hinge improves engagement.
The thing that just blows me away is what happened to operating margins. This company went from -61% operating margins in Q1 FY23 to +28% in Q4 FY25. That is 89 percentage points of improvement in less than three years!!!
And the reason is fascinating: their AI care assistant (Robin) now allows them to serve 47% more members while holding care team costs FLAT. The members got a 92% positive rating on the AI assistant — higher response rates than human care teams. So the quality didn't suffer. They grew faster while spending the same. That is exactly the operating leverage I want to see.
Gross margin went from 62% in Q1 FY23 to 85% in Q4 FY25. That is extraordinary margin expansion at scale.
Full year FCF was $179.6 million on $587.9 million revenue — a 31% FCF margin. For a company growing 51%, that is truly exceptional. I follow the money. The money is there.
They authorized a $250 million share buyback — and then completed $665 million in Q4 repurchases. That exceeded their authorization! It tells me management believes the stock is cheap at current prices. Stock-based compensation dilution was below 3% for full year 2025. When a company is growing 50% and diluting you less than 3% while buying back stock aggressively, management is treating shareholders right.
The CEO and team built 21 peer-reviewed clinical studies. That is not marketing — that is differentiation that takes years to replicate. When an employer's HR team has to justify a benefits decision, peer-reviewed studies in academic journals are what they bring to their CFO. Competitors have 5-7 studies. Hinge has 21. That moat compounds.
Win rate at an all-time high. Displaced a large competitor with 200,000+ lives in December 2024. These are not the words of a company losing ground.
| Metric | Value |
|---|---|
| Revenue (Q4) | $170.7m (+46% YoY) [Non-GAAP] |
| Revenue (FY25) | $587.9m (+51% YoY) [Non-GAAP] |
| Gross Margin | 85% [Non-GAAP] |
| Operating Margin | 28% [Non-GAAP] |
| FCF Margin | 36% [Non-GAAP] |
| Rule of 40 | 82 |
| NRR | >110% |
| Client Retention | 97% |
| Clients | 2,830 |
| Members | 782,890 (+47% YoY) |
| Contracted Lives | 24.6M (+24% YoY) |
| TTM Billings | $671M (+44% YoY) |
The FY26 guide of 25% revenue growth is the thing I am watching. I believe it is sandbagged for the reasons I laid out. But if Q1 comes in at $172M (the midpoint of guidance) and growth is only 39%, and Q2 and Q3 don't accelerate significantly, then the deceleration narrative becomes harder to dismiss. I need to see them beat Q1 guidance meaningfully and raise the full-year. If they guide to 25% and deliver 25%, the deceleration is real and I will have to reassess.
The secondary concern is concentration — this company does over 95% of its revenue from musculoskeletal therapy. They are expanding into pelvic floor health (via Progyny partnership) and non-ASO markets, but those are early. A single product company can be wonderful (see Datadog for years), but it creates vulnerability if the core market dynamics shift.
Atlas pegged this at 5.6x TTM revenue. For a company growing 50% with 85% gross margins and 31% FCF margins, that is genuinely cheap. In the SaaS world of 2021, this would have traded at 20-30x revenue. Even in the post-bubble world of 2024-2025, comparable quality businesses trade at 8-12x.
Let me be clear about what I think of this: I pay no attention to GAAP results normally, but even GAAP net income was positive in Q4 ($32.1M). This company is profitable by every measure that matters. At 5.6x revenue growing 50% — the growth-adjusted multiple is around 0.11x. That is not just cheap; for this quality of business, it is shocking.
Hinge Health delivered an exceptional Q4. The profitability inflection is real and structural — AI-driven leverage that allows 47% more members with flat costs is not a one-time thing, it compounds. The client retention (97%) and NDR (>110%) confirm the durability of the revenue. The valuation is cheap for the quality of business.
The FY26 guide of 25% deserves skepticism — I believe they will beat it. But I will watch Q1 closely and hold management accountable to the billings trends they have set up.
Thesis: Intact. Strong Hold. Add on pullbacks.
Best, Saul