Hinge Health wrapped up another strong quarter—its second as a public company—as its results beat Wall Street expectations and the company boosted its 2025 outlook.
The virtual physical therapy company, which went public in late May, brought in third-quarter revenue of $154 million, up 53% from the same period a year ago. Wall Street analysts expected revenue of $142 million.
Hinge's third-quarter revenue performance exceeded the high end of its guidance range of $141 million to $143 million "due to strong billings performance stemming from the continued strength of the company's underlying fundamentals," the company's chief financial officer James Budge told investors and analysts on the company's third-quarter earnings call Tuesday.
The company's client base grew to 2,560 in the third quarter, up 25% year over year. The company also reported the last 12 months calculated billings reached $624 million, representing 50% growth year over year, which executives said was a leading indicator of revenue. The company surpassed 1.5 million lifetime members in the third quarter, executives said.
"Q3 showed what our strategy is built to do—automate care delivery to improve outcomes, experience and reduce costs—all while underpinning a strong business," Daniel Perez, co-founder and CEO of Hinge Health, said during the third-quarter earnings call. "The results demonstrate the strength of our current execution and highlight the incredible opportunity ahead in automating the largest services industry in the United States, healthcare."
Hinge, which launched in late 2014, developed software combined with artificial intelligence to automate physical therapy services for joint and muscle health. The company has designed its platform to address a broad spectrum of musculoskeletal (MSK) care, including acute injury, chronic pain and postsurgical rehabilitation. To address the automation of care, Hinge has developed AI-powered motion tracking technology, a proprietary FDA-cleared wearable device called Enso and an AI-supported care team to deliver scalable and personalized MSK care.
Hinge's non-GAAP income from operations was $30.4 million in the third quarter, representing a significant turnaround from a non-GAAP loss of $3.7 million in the third quarter of 2024. The company reported a loss from operations of $6.1 million, which widened from a loss of $3.9 million a year ago.
The company generated record free cash flow of $81.3 million compared to free cash flow of $27.5 million in the third quarter of 2024, representing a free cash flow margin of 53%, executives said.
Hinge ended the quarter with total cash, cash equivalents, marketable securities and restricted cash totaling $496.9 million.
The company's strong free cash flow allows it to continue investing in organic growth while giving it the option to evaluate and execute targeted M&A opportunities and return capital to stockholders, Perez told investors and analysts.
Hinge sees big opportunities to automate other aspects of healthcare delivery and plans to expand beyond musculoskeletal care. "Physical therapy is only 1.2% of total healthcare spend yet is a $60 billion-plus market in the United States. As we automate other aspects of care outside of PT, even a similarly sized slice can represent tens of billions of dollars in [total addressable market]," Perez said.
The company substantially improved its operational efficiency year over year, Perez noted.
The company's adjusted gross margin was 83% compared to 79% a year ago, "reflecting the scalability of Hinge Health's technology-driven care model," Perez said.
"Operating margin reached 20%, a significant improvement from negative 4% in Q3 last year, showing how quickly our investments in automation and AI are driving meaningful leverage across our growing business," he noted.
"We built an incredibly efficient business. The product is humming. Our competitive win rate is actually up, showing that we're widening our lead over competitors," Perez told Fierce Healthcare in an interview prior to the earnings call. "The number of people enrolling in our care programs and the usage per person is also up year over year."
The company continues to build out its AI capabilities. Last month, it rolled out new AI-powered features to better track MSK care outcomes and to provide members with 24/7 support. Hinge developed an AI-based movement analysis tool that uses computer vision technology to guide members through targeted movements, capturing joint angles, symmetry and endurance.
And it launched an AI care assistant, named Robin, that provides 24/7 support to help quickly triage patients who have pain flare-ups. The AI assistant can collect more details, share resources and summarize the situation for the member’s physical therapist to help accelerate care.
Hinge also is "weaving" AI throughout the entire organization, particularly its engineering teams, to drive efficiency and innovation, Perez told investors.
"We've increased code output by 120% and pushed new features live three times faster in Q3 2025, compared to Q3 2024. We've increased AI adoption among our engineers from around 20% in Q1 to close to 100% today. We've also seen a 32% improvement in developer experience scores from April through October," he said during the earnings call. "Our engineering team is not only more productive, they're happier too. These improvements are already impacting our operating margin, and we're just getting started."
The adoption of AI is having a faster impact on business operations than the company predicted a year ago, Perez told Fierce Healthcare.
"It's allowing us to grow revenue fast without having to add much new headcount, and we are rapidly approaching GAAP profitability," he said, adding, "We are committed, unlike maybe other early-stage IPOs, to both revenue growth and managing this business to get to profitability."
As it adds new clients, the company is seeing strong performance with "jumbo clients," or large self-insured groups with more than 100,000 lives, said Hinge President Jim Pursley during the call. "We're seeing great traction in the federal space, including having our best year ever with federal employee programs. Our fully-insured segment continues to perform well, which is particularly validating since health plans themselves are the purchasers in this segment, and as actuaries by profession, their adoption validates the real cost savings we're able to deliver."
In June, Hinge launched a referral network of in-person providers to complement its virtual physical therapy platform. The curated provider network for MSK care, called HingeSelect, includes imaging centers and brick-and-mortar physical therapy providers to help bridge the gap between in-person and digital care.
The company went live with its first Hinge Select clients this quarter, and the provider network currently has 3,300 provider locations in all 50 states, Pursley said.
"The initial feedback and learnings are very positive. This gives us confidence as we prepare for broader market rollout," he said. "We expect to significantly increase our footprint over the next 12 months. Currently, 86% of our lives live within the Hinge Select network footprint, which positions us well for our continued rollout."
With Hinge Select, the company is building a two-sided marketplace that gives the company an "enduring moat and an enduring competitive advantage" in the market, Perez said.
The company raised its full-year 2025 guidance with revenue expected to come in between $572 million and $574 million, reflecting 47% growth at the midpoint and up significantly from its previous outlook of between $548 million and $552 million. Hinge also increased its non-GAAP income from operations outlook to be between $106 million and $108 million, compared to non-GAAP loss from operations of $26 million in 2024.
In the fourth quarter, Hinge Health is projecting revenue between $155 million and $157 million and non-GAAP income from operations to be between $34 million and $36 million.
Management boosted the fourth-quarter and 2025 outlook based on its strong third quarter and year-to-date billings performance and the results of its AI initiatives, CFO Budge said. "The operational efficiency gains we're achieving through AI initiatives are flowing through to the bottom line faster than we previously expected. Given this over performance and the strong cash position we have, we are prioritizing investments in growth and expanding our market reach as we continue building the future of healthcare," he said.