Hinge Health

Thesis

Written 2026-08-23.

Hinge Health is growing at nearly 50% and is already properly profitable, which is a combination I rarely get to buy. Most companies compounding at this rate are still spending their way toward a margin. This one is not, and that is the reason I own it.

Q2 2026, which is what convinced me. Revenue of $212.8m, up 53% and ahead of the company's own guidance. Operating income of $62m, more than doubled. Operating margin of 29%, against 19% a year earlier — the margin is expanding while growth stays high, which is the hard combination. Adjusted gross margin reached 87%. Free cash flow was $100m against $33m a year before.

Full-year guidance was raised to $856-860m, about 46% growth, at roughly a 28% operating margin. Growth plus margin comes to about 74 on the usual rule-of-forty test. That is the "attractive rate" I was describing, expressed as a number rather than a feeling.

It is leading a category that barely existed a few years ago. Digital musculoskeletal care sold to employers, with wearable sensors and licensed physical therapists behind it. Being first and largest in a young category is worth more than being fourth in an old one, and the company is extending the same distribution into migraine and gastrointestinal care, including an agreement to acquire Cylinder Health for $105m in cash. Every new condition sold to an existing employer client is revenue that costs comparatively little to win.

I know this business has a cyclical side. Employers cut benefits budgets in a downturn, and I am not pretending otherwise — I just do not think it changes what this company is worth over the period I intend to hold it.

What I am watching

I am bullish, and these are the things that would change that.

I bought this near its high, and I should say so. The all-time high was $93.13 on 11 August 2026 and the low was $30.08 in February — roughly a tripling inside six months. Buying after a move like that means the growth has to keep arriving, because very little of it is still in the price as a discount.

Billings rather than revenue. Last-twelve-month calculated billings were $862m, up 52%. Billings lead recognised revenue in a subscription business, so this is the line that shows a slowdown first. It ran with revenue rather than behind it, which is what I want to see.

Whether margin expansion continues or stalls. Nineteen to 29% in a year is a big step. The thesis needs it to keep going, or at least hold, while revenue grows.

Integrating Cylinder, and the cost of new categories. Migraine and GI are new clinical areas, not just new SKUs. Expansion is the growth story and it is also the most likely source of a margin disappointment.

What would make me wrong

• Billings growth dropping below revenue growth, which would mean the pipeline is thinning.
• Operating margin going backwards while growth also slows.
• Employer client churn rising, or net retention falling, in a soft benefits market.
• The new categories arriving late or materially below the economics of the core.

Latest movements

• 2026-08-21 — Opened at $88.14.