Omada Health (NASDAQ:OMDA) highlighted record second-quarter revenue and margin performance at the Canaccord Genuity Growth Conference, while outlining its strategy to expand across cardiometabolic conditions, deepen channel partnerships and use GLP-1-related demand to broaden customer relationships.
Steve Cook, Omada’s CFO, said the company was founded in 2010 with the goal of addressing cardiometabolic disease. The company began with its Prevention & Weight Health offering before entering diabetes and hypertension in the 2018-2019 period. Omada later expanded into musculoskeletal care through its 2020 Physera acquisition and has more recently introduced cholesterol and GLP-1-related offerings.
Leadership transition and quarterly performance
Cook discussed a leadership change announced the prior week. Co-founder and CEO Sean will transition to executive chairman, while President Wei Shao will become CEO. Cook said Shao has been with Omada for nearly seven years, became president four years ago and previously spent more than two decades at Eli Lilly and Company.
Sean will remain actively involved with the business, focusing on external relationships with health plans and other stakeholders, according to Cook.
For the second quarter, Cook said Omada reported record revenue of $88 million, up 43% year over year. The company also reported a record gross margin of 74% and adjusted EBITDA of $10.8 million.
Cook said growth was broad-based across Omada’s product portfolio, with diabetes and hypertension among the company’s fastest-growing offerings. Those products carry higher pricing and stronger lifetime value, he said.
“The GLP-1 conversation is acting as a tip of the spear, and then we can go and cross-sell across our entire product suite,” Cook said.
Engagement-based business model and seasonality
Omada’s revenue model is tied to member engagement rather than a traditional per-employee-per-month structure, Cook said. The company charges when members actively use its programs through activities such as communicating with a coach, using connected devices or participating in a community.
Omada bills through fee-for-service mechanisms as a covered entity, he said. Cook noted that the company’s co-founder obtained what he described as the first digital-specific Category III CPT code from the American Medical Association, enabling Omada to bill on provider-style rails. Members face no out-of-pocket costs, he added, with expenses handled through health plans and employers.
Cook said Omada’s typical seasonality includes stronger enrollment in the first quarter, when employers launch new benefit plans. That influx can initially weigh on gross margin because care-delivery and device costs are incurred earlier in a member’s journey. Revenue tends to be stronger in the first half of the year, while new-member additions taper in the second half, he said.
Members who remain engaged over multiple years may generate less annual revenue than in their first year, but can be among the company’s most profitable members because many costs are front-loaded. Cook said trailing 12-month revenue per member increased 2% year over year to $284.
Channel expansion and profitability
Cook reiterated Omada’s IPO-era objectives of generating more than 20% revenue growth, gross margin above 70% and adjusted EBITDA margin above 20% over the foreseeable future. He said the midpoint of the company’s current revenue guidance implies 30% growth, following 53% growth in the prior year.
The company is expanding through relationships with CVS, Optum and Health Care Service Corporation. Cook said Omada recently announced an expansion into three additional states with Health Care Service Corporation, representing another 1.5 million covered lives. Omada had 25 million covered lives overall, he said.
Cook said the company’s direct sales organization includes about 25 people across channel and employer sales, while partner sales teams at PBMs and other channels help distribute Omada’s products. He said the economics of channel and direct sales are generally similar, but channel relationships allow Omada to maintain a smaller internal sales force.
On profitability, Cook attributed margin expansion to improved product mix, staffing efficiencies, supply-chain discounts and use of artificial intelligence tools for care teams. He said Omada’s health coach count declined year over year as the company refined staffing models. The company has also used AI-powered contact summarization to help coaches review member information more quickly.
GLP-1 strategy
Cook emphasized that Omada does not view itself solely as a GLP-1 company. At the time the company last disclosed its GLP-1 membership, 150,000 of 886,000 members, or about 15%, were using GLP-1-related programs, he said.
Omada offers Core GLP-1 Care Track, Enhanced GLP-1 Care Track and GLP-1 Flex Care programs. Cook said the offerings are designed for employers whether or not they cover GLP-1 medications. In some cases, employers that do not cover the drugs have adopted Omada’s broader cardiometabolic offerings instead.
The company also plans to begin rolling out a prescribing offering through the Optum channel next year. Cook said Omada had already secured a large client for the product earlier than expected, with a launch planned before the typical annual benefits cycle.
About Omada Health (NASDAQ:OMDA)
Omada Health is a digital health company that specializes in the prevention and management of chronic conditions through personalized, technology-driven programs. The company’s platform combines data analytics, behavioral science and human coaching to support individuals at risk for or living with conditions such as prediabetes, type 2 diabetes, hypertension and musculoskeletal disorders. Participants access the program via a mobile app or web portal, where they receive tailored curriculum, feedback on health metrics and ongoing virtual coaching.
In addition to its core disease-management offerings, Omada Health has expanded its services to include mental health support and digital therapeutics for weight management.
