Health In Tech, Inc. (HIT) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to Health In Tech's third quarter 2026 earnings conference call. [Operator Instructions] I will now turn the call over to Lori Babcock, Chief of Staff. Lori, please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Health In Tech's third quarter 2026 earnings call. Joining us today are Tim Johnson, our founder and executive chairman, Sanjay K. Shrestha, our chief executive officer, and Julia Qian, our chief financial officer. The details of our results are in today's earnings release and our related Form 10-Q to be filed with the SEC. Both will be available on our investor relations website at healthintech.investorroom.com, where a replay of this call will also be posted. Please note that today's discussion includes forward-looking statements under the safe harbor provision of the federal securities laws. These statements reflect our current expectations and involve risks and uncertainties that could cause actual results to differ materially. Please refer to our earnings release and SEC filings for the applicable risk factors. We undertake no obligation to update these statements except as required by law. We may also discuss non-GAAP measures including adjusted EBITDA. The relevant definitions and reconciliations to GAAP measures will be provided in our earnings release. With that, I turn the call over to Tim.

Thanks, Lori. Before we discuss our business performance and outlook, I would like to take a moment to highlight an important leadership transition at Health In Tech and formally introduce Sanjay K. Shrestha as our new chief executive officer. Since founding Health In Tech, my vision has been to transform the health insurance industry through technology, innovation, and vertical integration. Over the years, we have built a differentiated technology platform designed to simplify complex processes, improve efficiency, and create greater transparency across the health insurance marketplace. As we look towards the next chapter of our growth, I believe the company has reached an important stage in its evolution. While innovation and technology development will always remain central to our business, our next phase requires an even greater emphasis on commercial execution, operational scalability, business expansion, and the ability to capitalize on strategic growth opportunities. What is the rationale behind our leadership transition? By separating the roles of executive chairman and chief executive officer, we are creating a leadership structure that allows us to dedicate greater focus and resources to two equally important priorities: continuing to innovate and build for the future while accelerating execution and scaling the business we have established. In my role as executive chairman, I will remain actively involved in shaping the company's long-term strategy, advancing technology innovation, and guiding product development. I will also continue to leverage my industry experience and relationships to identify emerging opportunities and help position Health In Tech for long-term success. Sanjay, as CEO, will lead our day-to-day operations and be responsible for driving commercial execution, strengthening our organizational capabilities, scaling our existing business, and improving overall operating performance. Importantly, Sanjay will also lead our efforts to identify and evaluate potential strategic acquisitions, partnerships, and other business expansion opportunities. We believe that combining organic growth with disciplined strategic acquisitions could provide additional avenues to expand our capabilities, strengthen our market position, and create meaningful long-term value for our shareholders. Sanjay brings extensive experience in public company leadership, capital markets, corporate strategy, and business development. Having previously served on our board and worked closely with our leadership team, he already has a strong understanding of our business, our technology, and the opportunities ahead. I believe his experience and capabilities complement my own, and that together we can strengthen Health In Tech's ability to translate our innovation and strategic vision into sustainable business growth. I also want to emphasize that my transition to executive chairman is not a step away from Health In Tech. My commitment to the company, our employees, our partners, and shareholders remains as strong as ever. This transition allows me to focus more of my time and energy on long-term strategy, innovation, and the next generation of products and opportunities while Sanjay provides dedicated leadership to execute and scale our business. Ultimately, this is about building a stronger Health In Tech, one with the leadership capacity to innovate, execute, expand, and pursue opportunities that enhance long-term shareholder value. I'm excited about this next chapter and confident in the leadership team we are building. With that, it is my pleasure to welcome Sanjay K. Shrestha as chief executive officer of Health In Tech. Sanjay, I turn it over to you.

Thank you, Tim, and good afternoon, everyone. It is a pleasure to join you today for my first earnings call as chief executive officer of Health In Tech. I would like to use this opportunity to share my perspective on the business, the opportunities ahead of us, and, importantly, the priorities I believe will be critical to translating those opportunities into sustainable growth and long-term shareholder value. Having served on Health In Tech's board and subsequently as a strategic advisor, I have had the opportunity to develop a strong understanding of the company's technology, business model, industry relationships, and long-term potential. Stepping into the CEO role, however, provides an even closer perspective on our day-to-day operations, commercial execution, and opportunities to strengthen our performance. And one thing that has become very clear to me: we believe Health In Tech has built a strong foundation. Our key focus and strategic priority now is to translate that foundation into scalable commercial growth and stronger financial performance. As it relates to 2026, this really is a year of investment and building for the future. Now let me begin by putting 2026 into perspective. Again, as I said, this has been an important year of investment and capability building for Health In Tech. We have invested in expanding our sales and distribution network, strengthening relationships with brokers, carriers, managing general underwriters (MGUs), and strategic partners, and continuing to develop the underlying technology that supports our marketplace. At the same time, we have advanced several significant initiatives, including the recently launched HitRix, HITChain, and our three-year rate stabilization program. Each of these initiatives addresses substantial market opportunities in areas of the healthcare insurance ecosystem where we believe there has been relatively limited technological innovation. Our objective has not been solely to maximize near-term revenue. We have been building the technology, distribution relationships, financial infrastructure, and product capabilities that we believe can support a much larger and more diversified business over time. That said, we recognize that certain initiatives frankly have taken longer than originally anticipated. Product commercialization has required more time, bringing additional carrier capacity online has taken longer than expected, and coordinating the multiple participants required to launch some of our newer products has introduced additional complexity. As a result, the financial contribution from several important initiatives has been pushed beyond our original expectations. I want to be very clear: we are not satisfied with our current revenue performance. Investment is necessary, but investment alone does not create value for all stakeholders. Ultimately, those investments need to be translated into customer adoption, transaction volume, revenue growth, and improved financial performance. This is the standard by which we intend to measure our progress going forward. I have been fortunate enough to work with businesses where the market opportunity was substantial, but realizing that opportunity required aligning commercial execution, operational discipline, organizational capabilities, and capital allocation. I have substantial operating experience scaling new products from incubation to meaningful commercial scale, including large-scale process plants and large-scale renewable assets on a global basis. I share that experience not to suggest that Health In Tech will follow the same trajectory or timeline, but because I've seen firsthand what becomes possible when a compelling business opportunity is supported by the right strategy, people, execution capabilities, and disciplined capital allocation. And based on that, my first priority is to be laser-focused on re-accelerating our core business to improve outcomes for all stakeholders, which includes our carrier partners, MGUs, brokers, third-party administrators (TPAs), and more importantly, our clients who are looking for attractive and economical health coverage. I will discuss in more detail our new initiatives that we believe will offer substantial future opportunities. I believe it is important to reiterate that we have an existing core business with meaningful commercial activity and a growing network of distribution partners focused on execution and re-accelerating this business as we look into 2027. Our existing platform and MGU-related solutions support the self-funded medical stop-loss market, including employers across small and large group segments. These offerings provide an established commercial foundation upon which we believe we can expand. Just to put some numbers in context, as of October 30, 2026, our platform had approximately $150 million in potential annualized revenue associated with coding activity for policies with anticipated effective dates in November '26, December '26, and January '27. Approximately 70% of that pipeline was associated with January 1, 2027, anticipated policy effective dates. I want to emphasize that this pipeline represents potential business opportunities, not contracted or recognized revenue. Actual conversion will depend on underwriting, pricing, broker and employer decisions, carrier capacity, and successful policy placement. This creates a clear and immediate execution priority. We need to focus on converting qualified opportunities into bound policies and ultimately recognized revenue. That means working more proactively with brokers, distribution partners, carriers, and MGUs to identify and resolve obstacles that may delay or prevent conversion. We are placing greater emphasis on active pipeline management, stronger follow-through, improved coordination, and accountability throughout the coding and placement process. Rather than measuring success simply by the volume of opportunities entering the platform, we need to focus on how effectively those opportunities progress through the commercial process. This includes tracking conversion rates, identifying bottlenecks, strengthening partner engagement, and improving the overall efficiency of underwriting and policy placement. We also see opportunities to better integrate the products and capabilities within our broader ecosystem. Our existing eDIS and SMR platforms, MGU-related solutions, HitRix, and three-year rate stabilization program address complementary needs across the self-funded insurance marketplace. Together, they create opportunities to serve a broader range of employers, strengthen partner relationships, and potentially capture additional value throughout the insurance distribution and underwriting process. Our goal is to make it easy for our partners to conduct business through Health In Tech and to build a marketplace that becomes increasingly valuable as participation and transaction activity grow. This is where I believe disciplined commercial execution can have a meaningful impact on our near-term performance. Priority number two is really focused on commercializing and accelerating our new growth initiatives. As we remain focused on driving our base business, we're equally excited about moving our newer products and strategic initiatives from development into commercialization. We believe there are three of those strategic initiatives that have the potential to meaningfully expand our addressable market and diversify and complement our future revenue opportunities: our three-year rate stabilization program, HitRix, and HITChain. Let me briefly walk you through each of them, their commercial potential, and where we are in the development cycle. Three-year rate stabilization program. I want to spend a little bit more time on our three-year rate stabilization program because it represents a particularly compelling opportunity and involves a sophisticated structure that requires careful coordination among multiple participants. Traditionally, employers face annual uncertainty, as many of you know, in healthcare insurance costs. For a self-funded employer, this can create significant challenges in budgeting, financial planning, and managing healthcare expenditures. Our three-year rate stabilization program is designed to address that challenge through an innovative structure connecting employers, insurance carriers, capital market participants, and financial distribution partners. The objective is pretty straightforward: to provide employers with greater predictability in their healthcare insurance costs over a three-year period. For employers, this program is designed to deliver greater budget certainty and improve visibility into healthcare expenses. For participating insurance carriers, it offers the opportunity to establish a more secure and longer-term customer relationship and evaluate insurance exposure over a three-year horizon subject to defined underwriting parameters and risk management safeguards. For investors, the structure contemplates notes supported by credit enhancement from a financial institution with scheduled principal and interest payments governed by the transaction documents. Health In Tech's role is to serve as the technology and administrative platform connecting these participants. We coordinate program administration, documentation, communication, collection, and integration with the financial and insurance underwriting process. Our distribution partners manage employer relationships and coordinate the insurance underwriting process. As you can appreciate, successfully launching a program of this complexity requires precise coordination across insurance underwriting, financial structuring, capital markets execution, regulatory requirements, and technology infrastructure. That complexity also illustrates the importance of disciplined implementation. We've already secured our first client under a medical stop-loss agreement and are working towards the capital market launch. The program financing associated with this initial client remains subject to final structuring and market conditions. Beyond this transaction, we believe there is substantial market interest and opportunity in the program. Importantly, any program financing amount and pipeline value should not be confused with revenue to Health In Tech. Our immediate objective and our goal is to complete the first end-to-end program launch by the end of 2026. A successful initial transaction would establish an important operational and commercial foundation for broader deployment. Looking into 2027, our focus will be on converting qualified pipeline opportunities into contracted programs and expanding adoption through our distribution partners. While the timing and ultimate conversion are subject to underwriting, contractual, financing, and execution requirements, we believe this program has the potential to become a meaningful new business line for Health In Tech over the next several years. Now the second initiative under our new product line: HitRix, our AI-powered large group insurance marketplace. Our second major initiative is HitRix, an AI-powered platform designed to modernize the quoting, underwriting submission, and placement process for large employer health plans. Today, large group insurance placements remain highly fragmented and manually intensive. Brokers routinely manage substantial volumes of employee census data, historical claim information, plan documents, and supporting underwriting materials across multiple formats and systems. They must prepare submissions for different insurance carriers and MGUs, track responses, compare proposals, and coordinate the placement process. This creates considerable administrative work, inefficiencies, and delays. HitRix is designed to transform that workflow. Using AI-powered document intelligence, the platform can ingest, extract, normalize, and structure information from files brokers already receive, reducing the need for manual data entry and repetitive formatting. It then enables brokers to manage submissions across multiple carriers and MGUs, track market activity, organize proposals, and compare alternatives within a unified environment. The objective is to allow brokers to spend less time managing documents and spreadsheets and more time advising their clients and growing their business. What makes HitRix particularly compelling is its integration with Health In Tech's broader underwriting and marketplace infrastructure. Rather than functioning simply as a document management or a submission tool, HitRix is designed to connect data processing, market access, analytics, underwriting workflow, and transaction execution. We believe this positions us to address a large existing market where billions of dollars in annual premiums are supported by workflows that remain heavily dependent on manual processes. Equally important, we're not bringing this product to market without an established distribution foundation. As of September 30, 2026, our ecosystem included 984 brokers, third-party administrators, and agency partners, representing almost 16% year-over-year growth. These are relationships we have invested years in building. By introducing HitRix, we have an opportunity to offer additional capabilities to partners who already understand our marketplace and business model. We also see an opportunity to deepen our relationships with participating carriers and MGUs, expand market access, and support more efficient policy placement. Over time, as transaction activity increases, HitRix could also generate a growing base of structured underwriting and placement data, supporting future analytics, automation, and AI-enabled capabilities. Our current objective is to launch the minimum viable product in the first quarter of 2027 and progressively expand its capabilities and commercial adoption throughout the year. Now let me touch on HITChain, which we believe is transforming healthcare claims administration. This is our third major new product launch. It addresses another significant source of inefficiency in the healthcare system: the administrative complexity associated with claims processing, reconciliation, and provider payments. The U.S. healthcare system incurs substantial administrative costs, with industry estimates placing the broader healthcare administration opportunity in the hundreds of billions of dollars annually. We believe blockchain-enabled verification with AI-powered automation has the potential to significantly improve the speed, transparency, and efficiency of certain claims administration processes. HITChain is designed to connect healthcare providers, third-party administrators, employers, and other authorized participants through secure, verifiable data and transaction workflows. For hospitals, clinics, and other healthcare providers, the opportunity is to shorten payment cycles, streamline reconciliation requirements, and improve working capital efficiency. Our longer-term vision is to reduce certain payment processes that traditionally take weeks to a much shorter settlement period, potentially approaching next-day settlement where the necessary conditions are met. For TPAs, the platform is intended to automate aspects of claims administration, improve processing efficiency, and reduce manual intervention. For employers, HITChain could provide greater transparency into claims activity, more timely access to information, and opportunities to benefit from faster payment arrangements and improved cost management. We believe the combination of AI-driven processing and verifiable transaction infrastructure offers a meaningful opportunity to modernize part of the healthcare payment ecosystem. Our objective is to launch an initial minimum viable product during the second half of 2027. As with our other new initiatives, our focus is on validating the technology, establishing the necessary ecosystem relationships, and creating a clear path towards commercialization. Taken together, these three initiatives illustrate the breadth of opportunity we see ahead for Health In Tech. But the most important point is that we're moving from a period primarily focused on building new capabilities towards one increasingly focused on bringing those capabilities to market and generating measurable commercial results. And finally, my third and somewhat obvious priority is strengthening operational discipline and financial performance. This is pretty critical to how we operate the business and allocate capital. We have invested significantly in technology, product development, sales capabilities, and infrastructure. As a result, our operating cost structure reflects the investments we've made to support future growth. Going forward, we need to be increasingly disciplined about where we deploy resources and how we measure the returns on those investments. The questions I'll be asking are straightforward: Where are we generating the greatest commercial return? Which initiatives are positioned to contribute most meaningfully to revenue and profitability? Do we need additional capabilities to accelerate execution? And where can we improve efficiency, simplify processes, or redeploy capital to higher-value opportunities? This is not about cutting our way to growth. It is about building an organization where investment decisions, operating priorities, and financial outcomes are closely aligned. We will also be focused on strengthening our organizational capabilities, improving accountability, and establishing clear performance metrics across the business. On the financial side, working capital management, cash flow, and capital allocation will remain important priorities. We have seen sequential improvement in operating cash usage from the first quarter to the second and third quarters of 2026, which is encouraging. However, we recognize that continued improvement will require disciplined execution and careful management of our financial resources. As we commercialize our new products and expand our existing business, we will evaluate the appropriate level of investment, timing of capital deployment, and the potential return associated with each opportunity. In addition to organic growth, we will evaluate strategic acquisitions, investments, and partnerships that could complement our technology platform, strengthen our market position, expand our capabilities, and/or accelerate our growth strategy. We will be disciplined in evaluating those opportunities with a focus on strategic fit, risk, capital requirements, and long-term shareholder value creation. Our objective is not growth for its own sake. It is to build a business capable of generating sustainable growth, improving profitability, and delivering attractive returns on invested capital. As I look ahead, I am encouraged by the opportunities in front of us, but I am equally focused on the work required to realize them. Health In Tech has established an innovative technology foundation, developed meaningful industry relationships, and invested in several initiatives that we believe address significant market opportunities. The next phase is all about execution. In the near term, that means improving conversion across our existing business, continuing to bring our three-year rate stabilization program to market, and maintaining disciplined operational and financial management. As we move into 2027, our priorities for Health In Tech truly include scaling HitRix, advancing HITChain, expanding our distribution capabilities, and evaluating strategic growth opportunities that can further strengthen the business while simultaneously remaining laser-focused on re-accelerating our existing base of business. We will measure our progress not simply by the size of the market we address or opportunities in our pipeline, but by our ability to convert those opportunities into revenue, operating performance, cash generation, and long-term shareholder value. I am very excited to work closely with Tim, our board, and the entire Health In Tech team as we move into the next chapter. Now, before I turn it over to Julia, let me just talk about what you should all expect for the remainder of 2026 and how we are thinking about 2027. As you saw in our press release, we updated our full-year 2026 revenue outlook to approximately $30 million. For the balance of 2026, our focus is really on execution ahead of the renewal and placement cycle. We want to get brokers using the products, expand participation from underwriting partners, work through the opportunities already in front of us, and be better positioned as those policy effective dates come around. As we move into 2027, we believe there is an opportunity for these initiatives to make a more meaningful contribution. That's our current view. But I also want to put an important qualifier around it. I've been in the CEO role only for a short time here, and this is still an ongoing review. Some of the priorities, sequencing, and capital decisions may change as we learn more. I am not presenting a finalized 2027 plan today. What I would like to do is come back to investors with a more detailed discussion of our operating priorities and how we intend to measure progress when we report our full-year 2026 results, subject of course to completing that review. Look, I think there is a lot of work to work with here: technology that's been built, products that address real problems, and relationships across the self-funded market. But we've got to turn those assets into more consistent commercial results, and we've got to do it with the right financial discipline. That's what I'm focused on. Tim will continue to spend his time on innovation and the longer-term direction of the platform, as he just touched on. My job is to connect that vision to the operating decisions so that we can move this business forward. I look forward to working with the team and keeping you updated as that work progresses. With that, it's my pleasure to turn it over to Julia.

Thank you, Sanjay. Good afternoon, everyone. We believe our reported results in this quarter do not yet reflect the opportunities we are building towards. I want to help bridge the gap by starting with forward-looking metrics that show where the commercial activities on our platform actually stand today and then talking through what sits underneath the reported numbers. Let me begin with our forward revenue visibility. Contracted revenue, which represents revenue that is already contractually committed under active in-force policies, but that has not yet been fully recognized under GAAP accounting principles, totaled $32.7 million for the first nine months of 2026. Of that, $24.4 million has already been recognized as GAAP revenue through September 30, 2026, before enrollment adjustments and refund liabilities, with $6.1 million scheduled to be recognized in the fourth quarter and $2.2 million flowing into 2027 per GAAP accounting. We have already secured $30.5 million of 2026 revenue, with the remaining $2.2 million providing visibility as a starting point for 2027. On what is already contracted, our pipeline revenue, representing policies currently in quoting or binding stages as of quarter end, stood at $156.4 million as of October 30, 2026. Those are quoting policies for the three months only: November '26, December '26, and January '27. Obviously, with January representing about 70% of the total current pipeline, of which $2.6 million was already contracted subsequent to quarter end, and the remaining $153.8 million carrying an expected conversion rate of 3% to 7%, meaning it would generate $9.3 million to $10.7 million in revenue just for these three-month policies. And our platform placed plan value (PPPV), which matches the aggregate contract value of the plans on our platform, including premiums, client funds, and administrative fees, stood at $91.8 million as of September 30. I want to put this number in context. Our sales pipeline grew meaningfully, driven by the full completion of onboarding new carriers and entering the peak season of our sales cycle, which is December and January effective-date policies. Now the next step is laser-focused on driving the conversion rate of pipeline revenue to contractual revenue, as Sanjay mentioned. Our distribution channels rely on close collaboration between our internal sales team and our network of broker partners. As we introduce new products and expand our marketplace capabilities, making sure our brokers fully understand these solutions and how to bring them to market becomes increasingly important. Following the recent launch of HitRix, we are placing great emphasis on internal sales training and broker education to strengthen this collaboration. Our goal is to equip our team to better support brokers throughout the submission and placement process, helping move more opportunities toward complete placement. As we enter the year-end renewal season, we believe these efforts, together with broader carrier participation, will help improve the conversion rate of our existing pipeline revenue to contracted business and ultimately the revenue for us to recognize under GAAP accounting. Our distribution footprint also continues to expand as we invest. We ended the quarter with 984 distribution partners, compared with 849 a year ago, which is approximately a 15.9% year-over-year increase. This tells you that the brokerage, TPA, and agency network that brings business into our platform continues to grow, even though this transition period has slowed things slightly. Now turning to reported GAAP revenue. Total revenue for the third quarter was $6.6 million, compared with $8.5 million a year ago, and for the first nine months of this year, revenues were $23.4 million, compared with $25.8 million last year. Our SMR fee revenue, which is earned on a per-enrolled-employee-per-month (PEPM) basis across our platform, was essentially unchanged year-over-year on a nine-month basis at $20.04 million, compared with $19.99 million in the prior year period. Our underwriting model revenue, which is our ICE subsidiary and represents a certain percentage of carrier premium, declined more sharply to $3.37 million for the first nine months of '26, compared with $5.83 million a year ago. In other words, our largest revenue line, the enrollment-based SMR fee, held essentially steady year-over-year even through the carrier transition. The compression in reported revenue was concentrated in the premium-based ICE fee rather than a broad-based weakness across the business. So the pressure on reported revenue reflects timing in recognizing carrier transitions, which in our view is now substantially behind us. Gross margin for the third quarter was 46.5%, compared with 16.6% a year ago, and for the first nine months of 2026 was 49.1%, compared with 65.1% in the prior year. As mentioned last quarter, beginning in January '26, we introduced pre-designed plans that combine our platform capabilities with additional services, including plan administration provided by TPAs and their vendors. Under this expanded service model, related TPA and vendor fees are included in our cost of revenue. As a result, we are now delivering a more comprehensive solution to our customers but also incurring additional direct service costs, which has contributed to the year-over-year decline in gross margin, even though the underlying economics of the business have not changed. And we see this as a trade-off as we expand our service offerings and make it easier for brokers and employers to access a more integrated solution. We believe our gross margin will maintain a range of 45% to 50% in the coming quarters. Moving to operating expenses. Total operating expenses for the third quarter were $11.5 million, compared with $4.7 million a year ago. The $6.8 million year-over-year increase was mainly driven by a provision charge of $5.3 million, higher sales and marketing expenditures of $1 million, and R&D development expenses of $0.7 million, partially offset by G&A cost reductions. Sales and marketing expenses were $2.1 million for the quarter, compared with $1 million a year ago. The increase is almost entirely variable in nature, tied to our expanding distribution channels through third-party agencies, which are variable-based payouts. The fixed component of sales and marketing expenditures remains disciplined, consistent, and mainly flat. General and administrative expenses were $3.1 million for the quarter, compared with $3.5 million a year ago, and $10.1 million for the first nine months of '26, compared with $10.5 million in the prior year. For both the quarter and the nine-month period, G&A actually came in slightly below last year, reflecting disciplined cost management of our corporate functions. With mixed operating divisions, expenses decreased year-over-year as a result of workforce optimization initiatives we have been implementing, partially offset by higher division costs because of stock-based compensation. Taken together, this demonstrates our commitment to manage our cost base. We will continue to invest in what matters for us for the long term. Now, the provision for credit losses was $5.3 million. This is very substantial—that's why you can look at the total expense increase. So for this quarter, it was $5.3 million, and $6.1 million for the first nine months, compared to nil last year. I want to talk about this a little bit more in detail. The provision reflects management's updated assessment on the collectibility of our current book. Specifically, $2.4 million reflects deferred administration surplus receivables associated with a legacy arrangement, for which we took a full allowance. $1.9 million of bad debt expense relates to accounts receivable connected with carrier transition reconciliations still in progress, and $0.9 million relates to loan receivable write-offs. As we take priority focus on the U.S. market, we are no longer focusing on overseas operations. With these limitations, we are taking this charge. As we look to the future, this is the right discipline for us heading into the leadership transition and fresh strategic plan. Research and development expenses were $0.9 million, compared with $0.2 million a year ago. This increase is a compositional shift rather than a step-up in overall technology investment. If you look at our total technology spend—meaning R&D expenditures plus capitalized software development together—the total is broadly consistent year-over-year. What changes is where it sits on the financial statement: what is on the balance sheet versus the P&L. Our development activity during 2026 has been weighted more towards gathering business requirements, identifying features, and evaluating alternatives as we scope our next-generation platform and AI-empowered capabilities. Under GAAP accounting, these early-stage planning and evaluations do not meet the criteria for capitalization and instead flow through the income statement as R&D expenses. So the increase in the R&D line reflects the development cycle, not an overall increase in total technology spend. That brings me to profitability: adjusted EBITDA. For the quarter, it was negative $3.9 million, compared with positive $1 million a year ago. And for the first nine months of '26, it was negative $6.6 million, compared with positive $3.8 million in the prior year period. Net loss for the quarter was $7.1 million, which included $5.3 million in one-time credit provisions as I just discussed, translating to $(0.11) per basic and diluted share, compared with net income of $0.5 million, or $0.01 per diluted share, in the prior year quarter. For the first nine months, the net loss was $11.2 million, which included $6.1 million in one-time credit loss provisions, or $(0.18) per basic and diluted share, compared with net income of $1.6 million, or $0.03 per diluted share, in the prior year period. Excluding the one-time provision, the remaining year-over-year decline reflects lower revenue due to the timing of policy effects when we had carrier transitions; plan administration service costs tied to the new self-funded plan administration services launched in January; and our continued investment in sales, marketing, and distribution. All the investments we are making this year will support long-term growth, and financing-related charges tied to capital rights were completed or are being completed in this quarter. Turning to cash flow, our operating cash flow has improved every single quarter this year. We had negative $3.3 million in operating cash use in the first quarter, negative $2.9 million in the second quarter, and negative $1 million in the third quarter. We continue to improve operating cash burn quarter by quarter, representing approximately a 68% reduction from the first quarter to the third quarter. The sequential improvement in the third quarter was driven by collections of accounts receivable. In fact, accounts payable paid down through the third quarter also generated working capital improvement, not a cash preservation story. For the first nine months of '26 as a whole, operating cash use was $7.3 million. We expect further improvements in operating cash flow as we commercialize new services and products in 2027. We invested $1.8 million in software development during the first nine months of '26, reflecting our continued commitment to platform investment. Heading to the balance sheet, we ended the quarter with $10.1 million in cash and cash equivalents, compared with $7.7 million at the end of 2025, after absorbing $7.3 million in operating cash use and $1.8 million in software investments through the first nine months. Our cash position is approximately $2.5 million higher today than it was at the beginning of the year. The headline message is that we built the capital base we need, and we are entering 2027 from a stronger balance sheet position than we entered 2026, with multiple new products that have completed major development and are targeted for commercialization in 2027. We are confident that 2027 will be a very different year. To close, this was a transitional quarter and a transitional year. The reported numbers reflect three things happening at the same time: carrier timing dynamics, as we described last quarter and this call; a business mix shift that compressed gross margins without changing underlying economics; and balance sheet provisions that we continuously monitor very closely. Meanwhile, our distribution network expanded by approximately 15.9%, operating cash flow continuously improved by approximately 68% from the first quarter to the third quarter of the year, and our cash position ended the quarter higher than at the start of the year. We built the balance sheet capabilities to support our continued execution. As Sanjay mentioned, we are completing a comprehensive review of 2027 under his leadership, and we expect to come back to the market at next quarter's earnings call to provide a more detailed view of what 2027 will look like for Health In Tech. With that, I now turn the call back to Sanjay.

Thank you, Julia. And again, before we open it up for Q&A, I just want to emphasize that we're not satisfied with weaker revenue and higher expenses. We believe in the opportunity ahead of us, but the responsibility to turn that opportunity into results is ours. We know the market will measure us by the progress we deliver in the coming quarters. We welcome that, and we look forward to updating you with our results. With that, let's turn it over to the operator to start Q&A.

[Operator Instructions] The first question will come from Allen Klee with Maxim Group. Please go ahead.

Hi. So I just want to understand a little bit about the revenue being down year-over-year. I understand that some of your initiatives got pushed out, but in the core small market, how much of it is due to your carrier not being available, or is there a change in the competitive environment or something to do with execution? Just a little more color on that would be helpful. Thank you.

So, Allen, I can take this question. Thank you, it's a great question. So, we're adding a new carrier this year, which resulted in a temporary delay in implementing and onboarding. Because partially a lot of the setup in the system that the new carrier needed takes time, that really slowed down—temporarily slowed down—the intake of business, including converting business from quotes to contracted revenue. As you can see from the pipeline, we have very substantial pipeline building up. To us, it's really about timing. When the new carrier comes on, that will be the transition period, and all service vendors take a much longer time than we anticipated. In simple words, there is a certain period of time where sales are very, very slow because a lot of system things need to be taken care of. We have to do additional manual processes to help compensate for the slowed implementation of adding carriers and putting them on the system. Now with these substantially completed, we should look forward to coming back to the expected trajectory of being processed through the system at our normal speed.

Thank you. Okay. And then this provision for credit losses—I think we just need to understand this. Your accounts receivable as of the end of June '26 was $8.5 million. You took a write-down of $5.3 million, so over half of your receivables. Could you explain it again: why was it so big? Is there any reason why it's going to change so we don't have to worry about this in the future? And also, I don't know if it's due to taxes or what, but if I look at your add-back in adjusted EBITDA, you're adding back a lower amount than the $5.3 million. Why is that? Thank you.

Thank you. So when we look at the provision for accounts receivable, we really took down a few things. Total provisions equal $5.3 million, which includes provision for surplus admin receivables. So surplus admin receivables are about $1.9 million. The receivables are agent-based. As I mentioned, because of adding new carriers and old carriers paying us a little bit slower, when we look at the massive reconciliation that needs to happen before the policy year-end, the aging gets longer. From a GAAP accounting prudent perspective, we take that provision. The surplus admin cost is the same thing—we are taking the provision. So total is around that amount. Then the other is the provision for loan receivables, roughly about $800,000—more than $800,000—that we also took as a provision. That was an arrangement we had before the company went public, and we also discussed various documentations on cases and cues. When we looked at that, it was advanced to an agency to help us do overseas market development, particularly in London and the U.K. Given market dynamic conditions and economic changes, we want to focus our operations in the U.S. So instead of maintaining that as a loan, we decided not to pursue the opportunity despite it being introduced. We chose to take that as a write-off. So total one-time write-offs together are about $5.3 million.

Okay. And for your three-year rate plan, is there a way to think, on average, how much higher premium rates someone would pay than if they just did a one-year policy?

Would love to come and talk to you about that in a little bit more detail when we report our Q4 numbers, because as we touched on the call, we're literally knee-deep right now. We already have a customer. We're working with a placement agent. So given that we're in the midst of all that, give us at least a quarter here, and we'll be happy to share with you a lot more detail once we actually are able to get one of these products launched in the market with bond investors.

Okay, maybe one other question. When you're working with the new initiatives—the three you mentioned—do you think that business can be added with them throughout the year, or do you think it's going to be much more weighted toward enrollment seasons later in the year?

So, as I mentioned, we're really going through a deep dive of putting together our plan for 2027 right now, and we will obviously give you a lot more detail when we report our Q4 numbers. Just on a high level, as we touched on the call earlier, HitRix is really probably a Q2 opportunity at the earliest, with some contribution from new customers. HITChain, I think, is really a second-half 2027 opportunity—that's the kind of cadence you should think about based on what we see right now. As we go deeper, we'll be more than happy to update you and keep you apprised of how things are unfolding. As it relates to the three-year paper, one of our goals is to hopefully place the first product in the market before the year is over. And look, we're heading into Thanksgiving, fully aware of the fact that then comes Christmas, so the market needs to stay open. Plus or minus a month can always be a factor in things like this, but that's really how we're thinking about it. One thing I do want to emphasize here, though: these are things that are obviously going to re-energize the business and help with the re-acceleration of growth, but our primary focus, frankly, is really how to get our base business back to growing, given the pipeline we have. We're spending a lot of time really thinking through how to improve conversion and how to really grow that base business meaningfully as we go into 2027. But again, give us one more quarter and we can articulate some more specifics on that.

[Operator Instructions] The first question will come from George Sutton with Craig Hallam. Please go ahead.

Thank you. Welcome to Sanjay. So I've got a thousand questions, but I'm going to limit it to three. First, on the three-year lock product, can you just give us an update on the financing structure? Is that set yet, or are you still working through that? And when would we expect to have a full financing structure in place?

Yes. So, George, I can take that one. I think for the three-year product, as we shared, there are two parts. One is medical insurance, which is already completed. In terms of the notes in the capital markets, it has been progressing, and probably by the end of the year we are thinking it could finish in a couple of months or slip over the month because we are heading into the holiday season, which is kind of very hard to predict. So you have to think about this as a bundled solution in terms of insurance plus capital markets. The insurance part is already done, and the capital market part has been progressing. So we have substantially completed the insurance part. However, for the official launch, the capital markets need to be done, then we can announce the official launch. So that's why we are laser-focused to push that product forward with very substantial pipelines about the three-year program. We want to make sure that gets done right.