Omada Health (OMDA) Q3 2026 Earnings Call Transcript

Strong enrollments early in the quarter and a mixed shift toward our higher valued programs helped revenue exceed our expectations. The cardiometabolic platform we have built continues to deliver for our members and for our customers. Also want to spend a moment to share a member quote that highlights what matters most to us here at Omada. And that is the people we serve. I am so excited. I have changed what I am eating and the way I am exercising differently. My new labs today are improved, and my A1c is 6.6% down from 7.3% 3 months ago. My cholesterol also improved. I have more information about diabetes and how to monitor and manage it.

I am confident using the tools including taking my blood glucose, and I have really benefited emotionally. from being able to ask questions of my health coach and the diabetes coach. Stories like that are why we exist. As we talk about our strong financial performance, 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 is the mission that continues to drive us. Lastly, as we announced last quarter, on January 1, 2027, Wei-Li Shao will become Omada's Chief Executive Officer, and I will become executive chair.

I look forward to remaining closely involved focused on our long term mission, key partnerships, and strategic initiatives. 15 years ago, I started Omada with a simple belief that the space between doctor's visits, where health is won or lost, deserved real care. When I look at what this team has built, I am humbled. My commitment to this mission remains the same, even with my evolving position in this company. I have extraordinary confidence in Wei-Li and this team. The foundation is strong, and I am excited to keep building on it together. With that, I will hand things over to Weili.

Wei-Li Shao:Thanks, Sean, and hello, everyone. Sean, thank you for 7 years of partnership. For the foundation you built, and for continuing to lead Omada alongside me as executive chair. I am proud of what we have accomplished this quarter. We ended Q3 with over 1.1 million total members, up 36% year-over-year, reflecting continued demand for our cardiometabolic platform. Our diabetes and hypertension programs continue to lead our growth, members stayed with us longer, and our ability to provide personalized care at scale reached a new level of efficiency. As we shared last quarter, we deepened our work with health care Services Corporation or HCSC, 1 of the largest Blues plans in the country.

An agreement to extend our prevention and hypertension programs into its fully insured book in 3 additional states. Which is expected to potentially reach an additional estimated 1.5 million covered lives at launch in 2027 and in the fully insured business, the program is embedded at the benefit level, so clinically eligible members can enroll directly once it launches. Without a downstream employer sales cycle. On the PBM side, we have commercial relationships with the 3 largest PBMs in the country. Which together processed an estimated 80% of prescription claims in 2025. Our prescribing program is in the market now with Optum. These relationships give us the broadest distribution in Omada's history for our programs.

Our work across a diverse set of partners and channels also gives us insight into a range of employer needs and priorities, I want to share what we are seeing in the marketplace and how it is shaping our outlook. The GLP 1 market remains dynamic. A number of employers have been spending more time making GLP-1 coverage in obesity care decisions. Given the size of the commitment, the range of solutions, and the importance of getting these decisions right. Health care costs are also rising, creating pressure across health plans, PBMs, and employers. Importance of outcomes and ROI is top of mind for buyers even more so than before.

Omada has a history and reputation of publishing peer reviewed research on both our outcomes and ROI. This kind of evidence has always been central to Omada's approach, and we believe it has been important in this year's selling cycle. We observed both of these factors extending the selling season deeper into Q4. Covered lives are the foundation and enrollment is how they become members. 2 things shaped enrollment and growth this quarter. The first and most important is the strength of our cardiometabolic core. Our diabetes and hypertension programs, along with a broader suite around them, delivered strong results again in Q3. The mix shift toward these programs contributed to our revenue growth.

These are programs where members have tended to stay engaged with us longer because of the chronic nature of the disease, which supports higher lifetime value for Omada. The second is the pace of enrollment. Strong enrollments in July and August contributed to our record Q3 revenue. As we have discussed, new enrollments have typically been strongest in the first quarter when employers launch new benefits and moderated as the year progresses. We expect new enrollments to decline sequentially in Q4 consistent with that pattern. The comparison with last year is different.

In 2025, we added a significant number of new customers and members as part of a new GLP 1 offering from an existing channel partner that included our prevention and weight health program, which supported unusually strong enrollment during a period of time that does not reflect our typical seasonal pattern. Member engagement is where the durability of our model shows up. We shared at Investor Day in September, member retention has improved to 58%. Up from 43% in Q4 of 2024. That improvement is largely driven by our mix toward diabetes and hypertension, where members have tended to stay with us longer as well as continuingd enhancements to our member experience and app.

At the end of Q3, average tenure in our program reached a record of roughly 2 years and 4 months, up 10% year-over-year and over 30% compared with 3 years ago. That represents an increase of roughly 2.5 months compared with a year ago. Longer engagement gives members time to turn early progress into lasting improvements in their health. We provide more intensive clinical care early on to help members establish strong habits, and continue to adapt their care as their habits take hold. When members can sustain their progress with less frequent and less intensive support, our cost to serve declines, and margins improve while billing remains tied to the care we continue to provide.

We also have new evidence of the clinical value of our care, Recently, published peer reviewed research found that members in our GLP-1 care track lost nearly twice as much weight as GLP-1 users in non omotic care at 12 weeks. a 6% average weight loss compared with 3.3%, with about twice the reduction in body fat and greater preservation of muscle mass on average. These results speak to the value of pairing medication, with the type of care our GLP 1 care track provides. Delivering these outcomes consistently requires development of our care model and the technology that supports it. We previously said that 2026 was shaping up to be what we feel is our most innovative year.

Many of this year's enhancements launched in Q3, We improved onboarding to help members start care sooner with goals tailored to their circumstances. As care continues, personalized reminders and the recommendations help them get timely guidance and stay on track. Also strengthen nutrition support and meal reviews that combine human and AI feedback. Helping members build healthier eating habits that can support lasting improvements in their health. Our work in cholesterol management, GLP-1 prescribing, and FlexCare are aimed at further deepening engagement in 2027.

Our focus is on bringing personalized care to more members as we scale As we shared at investor day, automation and AI have given our care teams more capacity to apply their clinical expertise and tailor care to each member's needs. That has helped to support more members per care team while continuing to deliver even more personalized care. Our cost of care as measured by non GAAP cost of revenue per total member on a trailing 12 month basis reached an all time low of $81 in Q3, down from $85 in Q2, and $94 in Q3 of 2025. This quarter shows what we have built at Omada. Our commercial relationships give us broad reach.

Our cardiometabolic programs have driven growth. Our program mix has supported longer member tenure, and our cost to serve has decreased. All of which contributed to another solid quarter's performance. Our platform gives customers a choice of programs to meet the needs of their covered populations. Recently published research suggests that roughly 188 million insured American adults have a condition we treat, and 1-third of our customers already work with us across more than 1 condition. This year, we added prescribing offering and cholesterol as a condition area, further broadening the options available to our customers. This quarter also strengthened our financial position. We have been profitable for 2 straight quarters.

We have had a strong balance sheet and no debt. And that gives us real flexibility in how we deploy capital. We plan to continue to invest in our care model, technology, and commercial reach. While remaining open to other opportunities that strengthen the business. As I step into the CEO role, my focus is simple. Execute with discipline, stay close to our partners and members, accelerate innovation, and keep pushing on our mission to bend the curve of chronic disease. Sean, thank you again, and to our teams across Omada and our channel partners, thank you for everything you do. Together, we are making a difference in people's lives.

With that, I will turn it over to Steven to discuss Q3 financial performance in more detail.

Steven L. Cook:Thank you, Weili. Hello, everyone. I will start with revenue. Q3 revenue reached $91 million, up 34% year-over-year and approximately 4% sequentially from $88 million in Q2. Revenue exceeded our expectations for 3 reasons. First, strong enrollments early in the quarter meant those new members contributed revenue for more of the period. Second, the mix shifted towards programs that carry higher value, And third, engagement increased across our member base. Together, these drove the course outperformance and support our higher full year revenue outlook. As we look to Q4, we expect new enrollments to moderate sequentially consistent with historic seasonality. On a trailing 12-month basis, revenue per total member was $294 in Q3.

Compared with $280 in Q3 of last year, and $284 in Q2. That reflects the shift toward our higher priced diabetes and hypertension programs. Partially offset by lower billing frequency among longer tenured members. This measure can move modestly up or down in any given quarter. We entered approximately 43 thousand net-new members in Q3, bringing our total member base to a record 1.13 million up 36% year-over-year. To support continued growth, our commercial teams are focused on building our pipeline and closing new business for the next benefit year as the selling season continues. Turning to profitability. GAAP gross margin for Q3 was 76%, up from 66% in Q3 of last year.

On a non GAAP basis, gross margin was 78%, up from 68%. Gross margin expansion this quarter reflects a lower cost to serve our members, driven by lower care team delivery cost and the maturation of our longer tenured cohorts. It also reflects seasonality since enrollment volume drives care team and device costs in the first quarter, has historically been when those costs are highest. Next, we will cover operating expenses. On a GAAP basis, operating expenses were 71% of revenue, compared with 70% a year ago. On a non GAAP basis, they were 64% compared with 65%.

The improvement in non GAAP operating expenses reflects the drivers we have consistently pointed to, including scaling through channel partnerships, getting more from our existing Salesforce, tight spending discipline across the rest of our business, and AI. The timing of headcount additions in Q3 benefited the quarter's expenses. We expect R&D expenses to increase in Q4 as we add staff to support development of our platform. That brings us to the bottom line. GAAP net income for Q3 was nearly $7 million compared with a GAAP net loss of approximately $3 million in Q3 of last year.

An improvement of approximately $10 million Adjusted EBITDA for Q3 was $12 million an improvement of approximately $10 million year over year and a quarterly record for Omada. Representing an adjusted EBITDA margin of approximately 14%. These results reflect revenue growth and a lower cost to serve as well as seasonal cost and the timing of hiring I just discussed. Our strength and profitability profile has continued to contribute to a strong balance sheet. We ended Q3 with cash and cash equivalents of approximately $243 million and continue to carry no debt. Now let me turn to our full year outlook.

Our Q3 performance and our visibility into the Fourth Quarter give us the confidence to raise our full year 2026 revenue and adjusted EBITDA outlook. We expect full year revenue to range from $344 million to $346 million, up from our prior guidance of $334 million to $340 million. At the midpoint, this represents approximately 33% revenue growth compared with 2025. We are also raising full year adjusted EBITDA guidance to $32 million to $34 million, up from prior guidance of $21 million to $27 million. At the midpoint, this represents an improvement of approximately $27 million compared with 2025 or roughly 5.5x our 2025 adjusted EBITDA. A few factors shape our expectations for the Fourth Quarter.

Our outlook anticipates Q4 revenue below our Q3 level, reflecting the lower new enrollment and engagement activity we have historically seen during the holidays. We expect revenue to come primarily from continued engagement among existing members. On adjusted EBITDA, our higher outlook reflects our performance year to date and the operating leverage in our model. We expect Fourth Quarter adjusted EBITDA to moderate from Q3 as we add R&D headcount to support development of our platform and ramp care team staffing for the 2027 benefit launch. In summary, Q3 is a strong quarter for Omada with 34% revenue growth, our highest gross margins, and our most profitable quarter to date.

We are raising our full year outlook on the strength of those results. With that, we will open the call for questions.

Operator:Thank you. At this time, we will conduct the question and-answer session. To ask a question, you will need to press 'star 1' on your telephone and wait for your name to be announced. To withdraw your question, please press 'star 1' again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ryan MacDonald from Needham and Company. Ryan, your line is now open.

Ryan MacDonald:Hi, thanks for taking my questions and congrats on a great quarter. Wei-Li, maybe to start with you and Sean, sorry, both of you. You talked about sort of the selling season activity about GLP-1 coverage decisions top of mind with buyers right now, but that is sort of maybe pushing or extending the selling season deeper into the fourth quarter relative to last year. Can you just talk about as you think about sort of coverage adoption or adding GLP-1 coverage versus discontinuing, is there 1 scenario versus the other which is more favorable to Omada? Sort of where are you with those discussions with those. With your clients? Thanks.

Wei-Li Shao:Yes. Hi, Ryan. Great to hear your voice. Thanks for the question. Regarding the GLP-1 marketplace, you are correct. The market still for GLP-1s is dynamic. And certainly our employer clients are taking the time they need to make those particular decisions. We have seen, per your question, some reports come out regarding GLP-1 coverage in the employer marketplace. Seemingly to decrease heading into 2027 and it is hard to think about or hard to exactly quantify the degree that is happening. So I guess we will have to see after the turn of the New Year exactly where the numbers actually fall, but it seems to be happening.

Per your question in terms of favorability for Omada, the way I would put it is that we have carefully constructed our go-to-market or GLP-1 product strategy. To actually straddle both sides of the coverage decision, meaning if employers are covering GLP-1s, we have a suite of prescribing and lifestyle support GLP-1 Care Track solutions that are covered in a number of PBMs and health plans. And so we can serve those employer clients that way. For the employers that are actually deciding not to cover GLP-1s a couple of years ago, we thought about this particular scenario and anticipated that this could actually be the case.

And we concepted at that time that our GLP-1 FlexCare products, which we actually announced and launched earlier this year in March, And that particular program is interesting in the sense that it provides the same level of prescribing, clinical expertise, services as well as lifestyle support for GLP-1 users But in an environment where the employer is not covering the GLP-1, the employer is realizing that regardless of coverage decision, their employees are increasingly seeking GLP-1s from elsewhere. And so that is interesting fact point number 1.

Interesting fact point number 2 is the reaction as we are educating and selling the GLP-1 FlexCare product into the marketplace employers are understanding potential upside for ROI and merits to the program for a couple of reasons. The first is that you get amplified weight loss. The second is that the weight loss is of higher quality, meaning more fat loss in preservation of lean mass. The third is greater adherence on GLP-1s for the patients or employees that should be on. And then the fourth, of course, is that if you stop a GLP-1, literally a little to no weight regain as proven by our data 12 months.

And they are looking at that data and saying that gosh, we are not covering GLP-1s but might there be a potential ROI providing Omada as clinical services and support? And for our employees on GLP-1s to get that ROI. And that interest seems to be growing. And so even though it is been a partial selling year for us, as an example and proof point, we closed a large relatively large financial institution midyear and they have actually decided to accelerate and launch in-year, and the feedback we are getting from members is trending positive.

So we are really looking forward to 2027 in the sense that being able to service and help create value for our employers that are covering and not covering And we look forward to a full selling year cycle for our GLP-1 FlexCare program.

Ryan MacDonald:I appreciate all the color there, Weili. And then maybe just as a follow-up, Steven, can you just clarify the comment on total member count for the fourth quarter in the implied in the guidance? I think early on, I think, Wei-Li might have said in his prepared remarks declines, you said moderation. Can you just flesh that out for us a bit? Thanks.

Steven L. Cook:Yeah. that is exactly right, Ryan. You know, compared to last year, we did see acceleration in the back half of last year as we were launching our new GLP 1 product with 1 of our new channel partners. 2026 is more typical of our seasonal. Our normal seasonality where we see a big influx of members in the first quarter, and then that starts to moderate as you go throughout the year. The current implication is that we will step down slightly going into the Fourth Quarter on a total member basis, and we are really focused on just execution, building a pipeline with our employer clients, our health plan and PBM partners.

To make sure that we get off to a strong start going into 2027 and

Ryan MacDonald:Awesome. Appreciate the color. Thanks.

Operator:Our next question comes from the line of Saket Kalia from Barclays. Hi.

Carly:You have Carly Buecker on for Saket. Thanks for taking our question here. Steven, if we think about the growth drivers in 2027 beyond in the context of your 20%+-plus growth target, there is a ton to talk about with the white space available on the market, a growing Amada platform, greater adoption of higher priced programs, and more commercial partnerships. So can you break down that 20%+-plus growth for us a bit? How much could come from member growth versus ARPU growth? And what are some of the puts and takes that could make that growth formula look different year to year as different products and commercial partnerships ramp?

Steven L. Cook:Yeah. Carly, thank you for the question. You know, what-- where we spend a lot of time, namely Investor Day, was really focusing across the 3 main growth levers with our business. I continue to expand covered lives, continue to drive improved enrollment rate, as well as continuing to focus on engagement and making sure that folks are staying in program longer. So as it pertains to the distribution of the 3, we are gonna be focusing next year on driving all 3. We would have mentioned up top, the addition of 1.5 million covered lives with HCSC.

And then we have a lot of investment that is going into next year to continue to drive improved enrollment rate efficacy across email channel as well as continuing to leverage direct marketing. that is a channel that is continued to drive incremental enrollments for us, where we have just. We have done over 100 plus 100-plus million emails over the last 12 months. So we continue to AB test with that medium, getting more folks in the door in a compromised basis and enrolling more folks on aggregate. As we go quarter by quarter.

And Wei-Li also mentioned up top in the prepared remarks, now we are seeing folks on average in our programs for 2 years and 4 months. that is up 10% on a year over year basis. that is a result of continuing to drive multi-product adoption, having more folks who are diabetic and hypertensive in our programs. Those are some of our highest priced products. We have the strongest LTV, as folks stay in program longer. As we go into next year, we are going to continue to focus on pushing our prescribing capabilities. that is gonna be our highest price product.

And as you see more of those members start to roll through our base, you are going see an increase in expectation in overall trailing 12 month revenue per member. So it is really the core drivers that we laid out in the Investment Day that we are going to be focused on next year.

Carly:Thank you. Very helpful. Thank you.

Operator:Our next question comes from the line of David Larsen from BTIG.

David Larsen:Hey. Congratulations on the great quarter. Can you maybe just talk a little bit about the MSK business, behavioral health and women's health? Obviously, there is a lot of demand for obesity health in GLP-1s, but those seem to be, like, very important markets. So thanks a lot.

Wei-Li Shao:Yeah. Hi, David. Weili here. Thanks for the question. As it relates to each of those 3 different categories, they are very, very different. And let me provide a little bit of context around some of them. Regarding MSK, it is true. We have been in the MSK business for several years now. It makes up a relatively small proportion of our revenue, but it is a strategically important asset for our cardiometabolic strategy. What do I mean by that? Our strategy is less about standalone MSK and more about how do we continuously serve with a greater experience and greater outcomes and ROI for our cardiometabolic segment.

We know, for example, that people with diabetes, about 40% of them have a bona fide MSK condition. Which may not be surprising when we think about what is going on metabolically. Oftentimes, with diabetes are overweight or obese. And as a result, there is a lot of weight on hips, backs and knees. And that creates an MSK condition. And that is a important because if there is reduced mobility or reduced ability to exercise, it is 1 lever that is taken away from the patient or the member. To improve their diabetes condition. And so our strategy really with MSK is to fully integrate that with our cardiometabolic platform for the aforementioned reasons.

And we are going to continue to invest in integration. We have some new things coming next year that we hope to talk to you about after the turn of the year. But rest assured that is 1 particular area that we are continuing to invest in. In terms of the other areas like menopause, this 1's kind of interesting in terms of women's health. I mean, obviously, when you take a look at the GLP 1 utilization, the demographics just writ-large across the United States, the majority of the users are women. That are falling into a particular age group that is perimenopausal. We are acutely aware of that.

We actually have outreach campaigns towards the perimenopausal and menopausal segment. Specifically because whether they are on GLP-1s or not, there is a lot of basically chemical changes going on and hormonal changes in the body. That people are wanting to learn about. And so that is been resonating strongly with our customers. Then we also as part of that have women's health or menopause learning tracks to help the female population within our GLP-1 and non-GLP-1 programs. So suffice it to say when we see these things overlaps significantly with our cardiometabolic segment as well as our strategy, We fold them in as necessary to best serve the outcomes and ROI for our members and our clients.

David Larsen:Thanks very much. Great quarter. Congratulations.

Operator:Our next question comes from the line of Elizabeth Anderson from Evercore ISI. Elizabeth, your line is now open.

Ayush Vyas:Hey, guys. This is Ayush on for Elizabeth. Congrats on the quarter. You called out in your prepared remarks that there was a strong July and August enrollment. And you saw improvements to onboarding launch during Q3. Just curious, did faster onboarding materially shorten the time from enrollment to the first billing event and maybe contribute to any of the revenue outperformance this quarter, or was the benefit, primarily more people enrolling?

Steven L. Cook:No. that is exactly right. You know, we made a tactical shift earlier in the quarter to be able to enroll folks instead of in weekly groups as they sign up. As a result of that, we just saw immediate more pick up in conversion to our enrollment rate improvements. And so that translated into us just realizing immediate conversions, especially earlier in the quarter, and that is what led to. Partially led to the revenue beat in the quarter.

Ayush Vyas:Got it. Thank you. Thank you.

Operator:Our next question comes from the line of Sean Dodge from BMO Capital Markets. Sean, your line is now open.

Sean Dodge:Yes, thanks. Maybe just going back to the selling season and just thinking about across, like, all of Omada, so inclusive of GLP-1 and your other offerings. I know you have a number of your larger kind of initial PBM relationships still continuing to mature. But just any updates you can share on like how the selling season overall has progressed or is progressing? Just any preliminary dimensioning you can do on how much you would expect covered lives to expand heading into next year?

Wei-Li Shao:Yes. Hi, Sean. Weili here. Thanks for the question. Yeah. There are a couple of things I will comment on covered lives as we are finishing out the closing season. But before that, let me provide a little bit of framing in context. As mentioned in the prepared remarks, we are observing and keeping a close eye to a couple of things in the market. 1 is the dynamism in the GLP-1 marketplace and financial decisions that employer clients have to make in the second 1, of course, is the overall rate of rising healthcare costs and how health plan buyers health services buyers are deliberating a little bit more.

The reason that is important is because both those factors are extending the selling season later in Q4. This is something that we typically do not see, which is why we brought that up. But it is important to note because it is hard to quantify or characterize exactly where we are ending the year at this point in time because we have a significant amount of pipeline yet to close because of the extension of the buying, selling, and selling season and closing season. So I cannot characterize the actual amount Obviously, we turn over past the New Year, we will come back to this and add a little bit more color on that.

But I understand and appreciate the question in terms of what it means for 2027 and So maybe in lieu of providing a quantitative answer, I can provide maybe some color on exactly what happened in Q3 and how Q4 is shaping up as it relates to selling season or pipeline. We headed into the selling season or actually the selling year this year with 2 primary objectives aligned to our strategy. So not surprisingly, number 1 is multi condition sales. And number 2 is diversifying our channel mix across our partners. We are executing on both of them on the multi condition front even in Q3, consistent with what we have said before.

New deals that we have closed, 40% to 50% of them are for multi condition or more products being purchased by the buyer. We like that because that is obviously better for us, but most importantly, it is better for our clients. Clients because people with cardiometabolic disease oftentimes suffer from 2 or more conditions. So we are just able to provide a better seamless care experience.

On the channel mix side of things, you know, you look at kind of our pipeline in Q3 and our later stage deals in Q4 that we are still actioning against it is a pretty even distribution, And again, that reflects CVS and Optum coming up a little bit more than in previous periods as well as our preexisting channels that we are still selling into. So pretty even distribution across the channels across our pipe. And really both our performances on that channel mix as well as multi condition is reflection of the intention as well as the execution by the sales force. So more to come.

Stay tuned on how the pipe shapes up in the finality as we turn the New Year.

Sean Dodge:Okay. that is great. Thanks for all the color there. And then highlighted again the win with HCSC's fully insured book where your offerings are embedded at the benefit level. I know it is still early there, but how much do you think being embedded like that can push your enrollment or conversion levels higher? And are they the only payer you have this type of relationship with this point? And then just kind of what is the pipeline like for adding more of those?

Wei-Li Shao:Yeah. I think it will help to maybe characterize the dynamics of the deal in terms of how we are going to market. Think maybe that will help answer the question as it relates to 2027 and what we can expect So. Yeah. So basically, about 1.5 million lives expansion into 3 additional states across our hypertension prevention programs. We will begin going live directly on January 1, which means that we will start working in partnership with HCSC to outreach directly to the members in the covered lives within that 1.5 million. That said, we will not do it all at once. It will phase throughout the entire year.

So we do not expect, like, all the lives to come into the marketplace immediately. They will be again phased throughout the year. And that should yield results from that next year and we look forward to reporting on. In terms of other lines of business, your question of do we have other kind of direct to member like arrangements like fully insured books of business elsewhere? The answer is yes. We have those across some other fairly large scale partners. So it is a motion that we are familiar with and we have had success with in executing.

And can certainly follow-up with more details if you like but we do have those in other books of business as well.

Sean Dodge:Okay. Okay. that is great. Thanks again.

Operator:Our next question comes from the line of John Penny from Canaccord Genuity. John, your line is now open.

John:Hi, John on for Richard Close. Thanks for the questions and congrats on the quarter. I just want to dig in more on the like the high-- the benefit year-- I mean, year enrollments that you had here. You said that it was it benefited a bit from you know, real time enrollment rather than this weekly batching. But I guess, is there anything different that you have done this year as far as, like, outreach and to the, like, the covered lives base that, you know, has helped with that? Did you hear anything that may say you have done a little bit better than last year that now led to these better results in enrollment.

Wei-Li Shao:Yeah. Hi, John. Wei-Li here. Thanks for the question regarding enrollment performance. Regarding like what are we doing differently? Are we doing something differently? Maybe let me share with you a little bit of historical context. In terms of year to date performance. We have seen a yield rate or enrollment rate year to date grow about 10% compared to last year and we certainly saw that carry through in Q3 as well. So it was good to see that persistent effect. And that certainly has helped some of the tailwinds into the Q3 performance. Regarding are we doing anything differently? And what does that mean for the go forward?

Each year, we undergo a fairly extensive AB testing optimization process. It usually begins in H2 after we see the kind of the enrollment and yield performance in H1. We have done that this year too as well. We have run dozens of tests both in email, direct mail as well as other channels. We have been doing more in the social channel and we are seeing some moderate uptake and improvement there. And performance there, but nothing of significant material to note. But it represents an area where we are experimenting with and seeing some green shoots.

So in terms of overall optimization of our campaigns, like I said, that is an exercise that we have started in H1 or H2 rather. And will continue throughout the end of the year. And so we will look to characterize a little bit more about that enrollment yield improvement next year at the appropriate time.

Steven L. Cook:The only build I would I would just offer there is you know, across our 25 million covered lives, we are using direct mail on a very selective basis. We could directly track the ROI and the cat LTV on these campaigns. So for some subpopulations where they might not have email access, we have seen some efficacy on using direct mail to get more folks in the door. We will specifically target the higher acuity conditions, especially the diabetic and hypertensive populations where we can reach out to them directly and get those folks in the door. So that is been another tool in the toolkit where we have seen some progress across 2026 as well.

John:Alright. Thanks for the color. I guess 1 follow-up here. You. Steven, you mentioned with you know, it is a yearly occurrence that you kinda gear up for, you know, care team headcount going into the new year. But I guess I am just kinda curious of where you are at with your care team right now. Like, do you do you feel like you are kinda hitting capacity and you need to actually gain more capacity? Or is this just, like, know, typical getting ready for the new benefit year? Or just any commentary you can provide there would be great.

Steven L. Cook:No. I mean, on a year-over-year basis, we have realized so much efficiency across core operations and across standardized work. Jennifer Becker, our care delivery. Chief Care Delivery Officer has done an amazing job at making that organization very efficient. And now that we are leveraging more AI, we have actually seen net headcount decrease on a year over year basis there. So we do plan to potentially gear up just a little bit for Q1 because we do see a spike in 1 in terms of net new enrollments, but that is all in support of hitting our longer-term gross margin target of 80%.

And we really believe that, you know, over the better part of the last 5 years, we have really optimized the way we stack that organization, being able to match the supply and demand really, like, optimally. Over time and feel good about the setup going into next year.

John:Great. Thanks. Congrats again.

Operator:Our next question comes from the line of Craig Hettenbach from Morgan Stanley.

Jay:Hi. This is Jay on for Craig Hettenbach. Thanks for taking my question. So with some competitors marketing, like, a 100% fees at-risk for cardiometabolic programs, starting next year. Just wondering if you are seeing a higher proportions of RFPs mandate those outcome based risk sharing. And for your existing book of business, can you remind us what share of revenue today is subject to clinical performance guarantees versus, like, basic baseline engagement milestone fees.

Wei-Li Shao:Thank you. Yeah, Hi, Jay. Wei-Li here. Thanks for the question. I think it is an important question and the reason being is that obviously as healthcare costs accelerate and rise employers, health plans and PBMs, have to do their jobs and are looking very, very closely at the value in terms of return on investment or savings that any healthcare provider program can provide. And certainly, Omada is in those negotiations discussions too as well. Directly answering your question, are we seeing more performance guarantees, outcome guarantees, ROI guarantees? I would answer it by saying that for.

I would say for probably the last 3 or 4 years, they have been probably more and more prevalent in our negotiations and discussions. And that is something we have been contending with over that period of time. I think it is also noteworthy to also set the stage and frame that we have a reputation in the marketplace for being evidence based and doing a lot of clinical trials and other types of observational trials. We have got 30-plus-some odd publications that have been peer reviewed taking a look at not only the outcomes of our programs, but also the economics.

And I raise that because when we approach these negotiations, if there is a need to undergo some sort of performance or ROI or outcomes guarantee, we really stand on our data and allows us to take the appropriate risk relative to the outcomes that we can deliver. Which our aim, of course, is to meet the expectations of our buyer clients. So it is not a new thing. it is not a fixture. Obviously, with growing health care costs, see a little bit more, but we are standing pretty firm on our data and our economics and we feel like we are having some success there.

Jay:Thank you.

Operator:Our next question comes from the line of Gene Mannheimer from Freedom Holding. Gene, your line is now open.

Gene Mannheimer:Thanks. Good afternoon, and congrats on a good quarter. I just wanna dig in a little bit more on that gross margin, was really strong. So you made the comment, I think it might have been Steven, but your. As your members continue to mature, and assuming duration stays around the same level or improves, as it has been, is it fair to say the gross margin then will continue to trend higher? And I am assuming that is 1 of the elements to get to your 80% longer term target. And I am wondering if that is the main driver or if there are other components. Thank you.

Steven L. Cook:Yeah, Gene. Certainly, there is thank you for the question. there is certainly a multitude of drivers. I will start with the top line. And most importantly, on the top line is continuing to push multi product adoption, getting more folks who are diabetic and hypertensive, and now getting in market with our prescribing capabilities. As we improve the mixture of those conditions in our overall member base, that lifts gross margin and overall LTV gross profit dollars through time. The cost side of the equation, then you have 3 levers. You have our care teams making them more efficient, which we covered a little bit earlier.

You have us continue to negotiate across our supply chain with our devices as well as our shipping partners. And then you have more recently us using AI to make our care teams more efficient and more effective. So it is those 4 are the main components that directly drive it. And then to your point, the more. The longer folks stay in program, we are seeing folks in their fifth years of-- 5th and 6th years with Omada. They are further out on the engagement curve. They do not bill as much when they are that far up, but they are some of our highest gross profit members.

Because there is very little incremental cost when you are that far out on the tenure curve. So we really like those members because we are still taking care of them. We are making sure they are healthy, but they are driving incremental dollars that are going directly to the bottom line.

Gene Mannheimer:Got it. Got it. Thank you.

Operator:Our next question comes from the line of Stan Berenshteyn from Wells Fargo Securities. Sean, your line is now open.

Corey DeVito:Hi. This is Corey DeVito on for Sean. Thanks for taking my questions. You had credited diabetes and hypertension for the growth in Q3. Did GLP 1 care track numbers grow from Q2 How many employers signed up for 2027 through Flex Care or Lily Employer Connect? Thanks.

Wei-Li Shao:Hi, Corey. Wei-Li here. Let me let me tackle the second question on 2027 and how many employers are signed up. so on and so forth. As mentioned before, the closing and selling season is extending further into Q4 than normal. And so it probably would not be prudent for me to actually characterize what the total covered lives are heading into 2027 with a good amount of late stage deals being actioned as we speak. So cannot comment there. Look forward to characterizing more 2027 and that would be the case for any program as well as the GLP-1s as well.

Corey DeVito:Thank you.

Operator:This concludes the question and-answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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Omada Health (OMDA) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool