Omada Health, Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon. Welcome to Omada Health second quarter 2026 earnings conference call. Joining me today are Sean Duffy, our Co-founder and CEO, Wei-Li Shao, 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 helpful in evaluating Omada's performance. You can find details on how these relate to our GAAP 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 risks 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. 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. 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 served, commercial relationships with the nation's three leading PBMs, 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 Shao, 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, 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 Omada over the long term. Before I hand it over to Wei-Li to discuss our operational performance, I want to spend a moment to highlight what matters most to us here at Omada. 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 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. 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 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 positioned 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 in 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 Health Care Service 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. In Q2, 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, HCSC is an example of the kind of long-standing partner we can expand with over time as we prove our results across successive programs. 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 continued 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 through 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 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. Typically, 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 benefit cycle, where we expect millions of Americans will get the opportunity to enroll with Omada and receive treatment. 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 on our platform longer. This builds on the ongoing investments in our platform, including Omada Spark and Meal Map and 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.