Earnings call transcript: Talkspace Q1 2025 reports revenue growth, stock falls

Talkspace Inc. (TALK) reported a 15% increase in revenue for Q1 2025, reaching $52.2 million, surpassing the forecast of $51.94 million. Despite this growth, the company’s stock fell by 8.47% to $2.865 in pre-market trading. According to InvestingPro data, the company maintains strong financial health with an overall score of "GREAT" and has demonstrated impressive revenue growth of 25.02% over the last twelve months.

Key Takeaways

• Revenue for Q1 2025 reached $52.2 million, a 15% increase year-over-year.
• The stock price dropped by 8.47% despite positive revenue growth.
• Talkspace launched innovative features, including TalkCast and AI-augmented systems.
• The company expanded Medicare and military coverage, targeting new market segments.

Company Performance

Talkspace demonstrated strong performance in Q1 2025, with a significant year-over-year revenue increase. The payer business saw a 33% rise, and payer sessions grew by 23%. Unique payer members increased by 17%, underscoring the company’s expanding reach in the mental health care sector.

Financial Highlights

• Revenue: $52.2 million, up 15% YoY
• Gross profit: $23.3 million, up 7% YoY
• Gross margin: 44.6%
• Adjusted EBITDA: $2 million, an increase of $1.2 million YoY
• Cash and equivalents: $108 million

Market Reaction

Despite strong financial results, Talkspace’s stock fell by 8.47% in pre-market trading. This decrease contrasts with the company’s positive revenue performance and may reflect investor concerns about broader economic conditions or sector-specific issues.

Outlook & Guidance

Talkspace provided a full-year revenue guidance of $220-$235 million, projecting a 21% growth at the midpoint. The company expects adjusted EBITDA to range between $14 million and $20 million. InvestingPro data indicates that net income is expected to grow this year, with analysts predicting the company will remain profitable. The stock currently trades at a P/E ratio of 419.36, reflecting high growth expectations. For detailed analysis and additional insights, including 8 more exclusive ProTips, consider accessing the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

Dr. John Cohen, CEO, emphasized the company’s commitment to innovation and quality care, stating, "We are a full-fledged HIPAA compliant health care provider." Ian Harris, CFO, highlighted the strategic focus on ROI, saying, "We’re solving for the best ROI."

Risks and Challenges

• Potential impact of federal funding cuts on the healthcare sector.
• Market saturation in the virtual behavioral health space.
• Broader macroeconomic pressures affecting investor sentiment.

Q&A

During the earnings call, analysts focused on the company’s Medicare Advantage outcomes and marketing strategies. Talkspace reassured stakeholders of its flexible, ROI-driven marketing approach and downplayed concerns over potential federal funding cuts.

Full transcript - Talkspace Inc (TALK) Q1 2025:

Kelvin, Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Talk Space First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer question Thank you.

I would now like to turn the call over to Janine Filippoine. Please go ahead.

Janine Filippoine, Investor Relations, Talkspace: Good morning, and welcome to earnings conference call for the first quarter of twenty twenty five. I hope you’ve had the opportunity to access the press release we posted on Talkspace’s IR website and the presentation of our earnings results. We’ll use the presentation to walk you through today’s remarks. Leading today’s call are our CEO, Doctor. John Cohen and our CFO, Ian Harris.

Management will offer their prepared remarks, and we’ll then take your questions. Certain measures we’ll discuss on this call are expressed on a non GAAP basis and have been adjusted to exclude the impact of one off items. Reconciliations of these non GAAP measures are included in our earnings release and on our website, toxbase.com. I also want to remind you that we will be discussing forward looking information today, which may include forecasts, targets and other statements regarding our plans, goals, strategic priorities and anticipated financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect.

Important factors that may affect our future results are described in our most recent SEC reports and today’s earnings press release. For more information, please review our Safe Harbor disclaimer on Slide two. Now, I will turn it over to Doctor. John Cohen.

Dr. John Cohen, CEO, Talkspace: Good morning and thank you for joining the call today to review our first quarter results. We had a good start to the year with revenue growing 15%, session volume up 23% and EBITDA up 153% over the first quarter of last year. May is Mental Health Awareness Month. This year, we are reaffirming our commitment to breaking down barriers to care for millions of Americans with our Let’s Face It campaign, where we demonstrate how Talkspace members use our platform to confront what may be holding them back. As a leading behavior health provider with meaningful scale and reach, we are actively leveraging multiple channels, several of which I’ll touch on today, to raise awareness and drive members to our solution.

We view the work we do across all areas of our business as part of a cohesive strategy aimed at building the most comprehensive approach to delivering behavioral health care to more Americans. With nearly two thirds of Americans having access to Talkspace through their insurance plans or their employee assistance plans, we remain focused on the most significant opportunity, which is driving engagement within that population. We took meaningful steps in the quarter to optimize our funnel through a variety of technological improvements aimed at getting more people onto the platform, but even more importantly, delivered better quality of care by keeping them engaged in their therapeutic journey. Specifically, we enhanced our real time benefits verification with proprietary algorithms to overcome user and eligibility errors at the onset of registration. These efforts have reduced our drop off rate by more than 12% at the early stage of the funnel, additional new registrations this quarter.

No matter how a member pays for Talkspace, they’re able to seamlessly switch to other payment methods and keep their same provider. Coverage may change as is often the case each January, but the continuity of care with the provider won’t. An example of this optimization is the creation of a new easy button for our EAP members to convert to their employer’s behavioral health insurance coverage when they exhaust their EAP plan session. Users are now notified when EAP sessions are running low, thus reducing friction related to checking coverage benefits and making a switch while continuing with their existing provider. This is an incredibly important step to facilitate our members’ continuation on the platform as well as to ensure the continuity and quality of care.

These are just a few examples of the work our product team is implementing to improve our customer experience and provide care for as long as clinically necessary. We also remain relentlessly committed to delivering high quality care and positive outcomes for users of Talkspace. Through our more than 30 peer reviewed studies, we have consistently shown outcomes at parity with in person traditional therapy, serving as proof of our efforts to show efficacy and quality across multiple modalities while ensuring this work is all backed by third party academic review. The high quality care our network of therapists provides remains a key differentiator for Talkspace as a service provider as opposed to just the directory of providers. This is very important to our payer partners, especially as value based contracts become more prevalent.

As I have discussed in the past, we use qualitative and quantitative data and metrics across five key areas to assess our providers and our network. Armed with that data, we work extensively to ensure the highest quality care platform through rigorous hiring and onboarding standards, extensive training, education, and outreach, continued network and quality management activities and risk management support. During the first quarter, we made progress in broadening the reach of Talkspace as an affordable option for care now with nearly 200,000,000 covered lives. As a result of our broad member access and our high levels of clinical quality, we are working diligently with our payer partners to better integrate our solution into their online member experiences to make it easier for members to discover Talkspace, and I am extremely pleased with our progress in this area. In January, we rolled out additional military coverage launching TRICARE West.

Talkspace now covers all of TRICARE’s ten point five million members including families and dependents. Our reach into various military communities through a series of specialized grassroots efforts has been very successful and very cost effective to date with significant numbers of military personnel and their family members engaging in therapy. We are seeing that this audience relies extensively on word-of-mouth and loyalty from recommendations within their communities and are very open to therapy. In January, we also began to deploy initiatives to address the Medicare population and as a result, are seeing growth in our Medicare registration. In addition, we are witnessing strong patient outcomes with this population as eighty four percent of Medicare members showed clinical improvement surpassing typical expectations of around seventy percent.

We will continue to focus on initiatives that seed organic awareness that Talkspace is now covered for Medicare beneficiaries. In fact, we just announced last week that Gary Livingston, a fan favorite from the popular Golden Bachelor franchise, is our Medicare spokesperson as we enter Mental Health Awareness Month. We believe that psychiatry is an important growth opportunity for

Ian Harris, CFO, Talkspace: the company. In the first quarter, we reconfigured a dedicated team to refine and relaunch our psychiatry offering for individuals 18 and older, which include medication initiation and management for commonly treated conditions such as anxiety and depression.

Dr. John Cohen, CEO, Talkspace: As a covered benefit, we have seen a significant increase in demand for this offering from our partners and from internal referrals via our own providers treating therapy members that need this additional level of care. In addition, we recently expand our relationship with ZocDoc to include our psychiatry offering. Our direct to enterprise pipeline remains strong, including a renewal with the city of Memphis and meaningful contributions from recent additions including U. S. Rowing, the U.

S. Navy and most recently students at the University of Alaska Anchorage. Last week, we announced another exciting agreement with BART Technologies, the leader in online safety technology for kids. Through their phone and app, BART covers 7,000,000 children. Along with their technology installed in over 3,700 school computers, they provide safety alerts in 45 different categories and scan messages in over 30 social media apps, web browsers, and emails.

They have detected and alerted parents to over 2,700,000 episodes of possible severe self harm situations. Talkspace will now be available on all Barq phone and Barq app users and will come preloaded on Barq phones, connecting teens and parents to Talkspace to help them navigate the many emotional challenges these teens face today. This partnership with Barq, in addition to our teen initiatives with multiple cities and schools around the country, builds on our commitment to addressing the teen mental health crisis in the country. In the past several months, we have announced several AI applications including artificial intelligence augmented intake systems that surface key symptoms, psychosocial contacts, and diagnostic considerations, streamlining client onboarding and clinical assessments including real time clinical documentation, summarization and decision support to reduce administrative burden. Client engagement tools that increase therapeutic adherence and continuity including Talkcast, our personalized podcast feature for adults over the age of 18.

Our goal with this product is to drive member engagement between sessions, keep members focused on their progress, and ultimately assist in clinical improvement. We have generated 6,000 podcasts in the first several weeks and are already receiving very positive member and provider feedback. In the last several weeks, we have validated a new risk assessment tool, a homicide violence ideation algorithm that is over 90% accurate in determining risk for violent behavior, including homicidal ideation and surfaces this risk to clinicians in real time. I am purposely highlighting these AI initiatives in the context that utilizing advanced technology to deliver better mental health care solutions has been at the core of Talkspace since its inception when we developed asynchronous messaging as an effective method for delivering therapy. The next chapter in innovation and growth is to further integrate AI to deliver even better mental health support.

With over a decade of experience in applying advanced technology to behavioral health care and owning the largest behavioral health datasets in the industry. We are now actively working on the development of a first of its kind foundational large language model. TalkSPACE is uniquely positioned to build this foundational model trained on de identified clinical data aligned with evidence based therapeutic frameworks. Unlike horizontal general purpose models, this vertical AI platform will not only enhance existing TalkSpace services, but also serve as a launch pad for future AI applications and behavioral services unlocking new possibilities in clinical innovation. Finally, I’d like to proactively address a common question we’ve received amid recent market volatility.

Our business is not directly affected by tariffs. More importantly, our long term strategy has shifted the core of our business to an insured patient base, reducing reliance on out of pocket spending. As an in network provider for nearly 200,000,000 covered lives, we remain accessible and affordable. We are a national provider for Medicare, including Medicare Advantage, and continue to benefit from the federal investment in senior mental health. Since we’re not in Medicaid, we are insulated from potential changes to those programs.

To conclude my comments, I am very pleased with how we started the year and confident in our trajectory for the course of 2025. We expect continued demand for our convenient affordable in network care and remain confident in our full year guidance. And now I turn it over to Ian. Thank you, John, and good morning, everyone. We’re pleased to

Ian Harris, CFO, Talkspace: be reporting a solid first quarter in line with our expectations. Our total revenue for Q1 was $52,200,000 representing a 15% increase compared to the first quarter of twenty twenty four. This growth was driven by strength in our payer business, which was up 33% from Q1 last year and demonstrated continued strong performance across key metrics, including payer sessions, which totaled approximately 350,000 in the quarter, an increase of 23% year over year. Unique payer members completing a session in the quarter grew 17% year over year, reaching more than 101,000 in the quarter, and completed sessions per active member increased 5% versus a year ago. As it relates to our payer business, beginning this quarter, we will no longer be providing regular updates on our total covered lives figure.

As John mentioned, we grew our covered lives by over 40% versus a year ago and now cover nearly 200,000,000 lives, a milestone we’ve spoken about previously and one of which we are incredibly proud. We do expect to continue growing our covered lives, mainly through additional regional plans, including two of the largest ones that we expect to add later this quarter. However, we do not view this metric as particularly relevant for driving sustainable growth given all the success we’ve had in scaling to nearly 200,000,000. Activating and engaging this large base of members who already have Talkspace as a covered benefit will be incrementally more important to our growth. Turning to DTE.

DTE revenue for the quarter came in at $9,600,000 down 3% year on year and flat sequentially from Q4. Overall, our DTE pipeline remains strong across both the employer and youth segments, and we expect positive momentum in bookings throughout the rest of the year. Consumer revenue, which covers people choosing to pay out of pocket, declined by just over 2,000,000 versus the same quarter in 2024 as the overwhelming majority of new members are utilizing their insurance coverage at checkout. Gross profit for the quarter was 23,300,000.0, up 7% from the previous year. Our gross margin came in at 44.6% compared to 44.2% in Q4 twenty twenty four and forty seven point eight percent a year ago.

This is a continuation of the trend we expect to see as we continue to shift overall revenue mix more towards our payer business, which will benefit the company given the superior long term economics and lifetime value for members under the payer focused strategy. During the quarter, we also maintained our focus on operational efficiency. Total operating expenses were $24,400,000 an increase of $1,000,000 versus Q1 of last year due to the increased investments in marketing we’ve spoken about previously. As a percentage of revenue, total OpEx was 46.7% versus 51.5% in the first quarter of last year. We achieved a GAAP net income of $300,000 in the quarter, an improvement from a $1,500,000 loss one year ago.

Adjusted EBITDA for Q1 was $2,000,000 an increase of $1,200,000 versus the same period last year. Turning to the balance sheet. As I’ve mentioned previously, one

Steven Valiquette, Analyst, Mizuho Securities: of

Ian Harris, CFO, Talkspace: our key attributes is the strength of our balance sheet. We ended the first quarter with $108,000,000 in cash and cash equivalents including available for sale securities, a decrease from $118,000,000 in the fourth quarter. The $10,000,000 sequential decline was primarily driven by our repurchase activity under our previously announced share repurchase program. In Q1, we bought back approximately $7,000,000 of stock, bringing our total repurchase activity to $18,000,000 since our initial authorization of the program one year ago. Turning to our outlook for the year.

We are reiterating the full year financial outlook provided on our last call, which consists of revenue between $220,000,000 and $235,000,000 representing 21% growth at the midpoint and adjusted EBITDA of 14,000,000 to 20,000,000 an increase of a 44 at the midpoint. Talkspace remains a leader in the behavioral health market and our commitment to high quality care continues to resonate with our payer partners, our customers, our network of therapists and most importantly with our members. I’m very pleased with our solid start to the year and look forward to building on our momentum throughout the remainder of the year. With that, we can open up the call for questions. Operator?

Kelvin, Conference Operator: Thank Your first question comes from the line of Ryan Daniels of William Blair. Please go ahead.

Ryan Daniels, Analyst, William Blair: Yes, guys. Good morning and thanks for taking the questions. First off, maybe a question around Medicare Advantage that’s twofold, and I’ll start with the first one. Just given the very positive clinical data you’re seeing that’s above expectations, I’m curious how you’ll use that to market to other MA plans to perhaps expand your entry into those. Can you comment on that?

Thanks. Guys, can you hear me?

Janine Filippoine, Investor Relations, Talkspace: Goodbye.

Dr. John Cohen, CEO, Talkspace: Hi. Can you hear me now?

Ryan Daniels, Analyst, William Blair: Yeah. I can hear you now. Could you hear my question?

Dr. John Cohen, CEO, Talkspace: Yeah. I got I got the question.

Ryan Daniels, Analyst, William Blair: Okay. Yeah. We couldn’t hear you.

Dr. John Cohen, CEO, Talkspace: Yeah. Yeah. Yeah. So so for the MA plans, we’re seeing a lot of a lot of, you know, interest and participation in the MA plans through multiple payers and regional plans. You know, our view right now is is the the MA plans are viewing it as standard Medicare.

In other words, they’re offering it to their MA members. We suspect that at some point in the future, we’ll develop deep relationships with some specific MA plans relative to, you know, possibly a PMPM type offering. We haven’t done that yet in terms of a quote value based contract in that way. But we are seeing a significant amount of interest.

Ryan Daniels, Analyst, William Blair: Okay. And then also on Medicare Advantage or Medicare fee for service, have you guys delineated maybe the marketing budget for the year? I know you’ve talked about being a new market, not knowing what channels will resonate or what the lifetime value will look like. So I’m curious as we’re approaching the fifth month of the year, you’ve got a little bit more data and have kind of honed in what your advertising outlook is for that segment.

Ian Harris, CFO, Talkspace: Hey, Ryan. It’s Ian. Good morning. Morning. We’re pretty we’re pretty as we talked about in the past, we’re very much taking a portfolio approach in our go to market overall, which is reflected in our in our ad spend and our media planning.

So, you know, we start the year with a general framework across sort of core commercial, military, and then Medicare and MA. We’re, as we’ve, I think, touched on before, very data driven around that. Right? So that those budgets and those relative allocations can change fairly substantially quarter to quarter and even month to month. So there’s no number I’d put out for you in terms of pegging it to.

We’re we’re effectively solving for the best ROI while at the same time understanding as it relates to Medicare. Specifically, it’s a new cohort. It’ll take several quarters to figure out. So in that case, we are willing to, you know, lean in a little bit more on investments and understanding that it’ll take time to figure out the ROI. On the contrary, military, I’d say, I has actually really exceeded our highest expectations.

Mhmm. And so that well, that’s also a newer cohort. That one, one, just given the sort of location based, media channels we can pursue through the on base, media channels and outlets to sort of community engagement platforms, we’ve seen really, really good traction and success in military. So while that one is new, I would expect us to lean in there more just given the returns we’re seeing.

Ryan Daniels, Analyst, William Blair: Okay. Perfect. And then last one, I’ll hop off. Just on the kind of technology improvements for benefit checking, and you mentioned the easy button to switch between EAP and kind of coverage. How broadly is that rolled out?

It seems like it’s having pretty reasonable impact on either use or continuation of engagement. So I’m curious if you’ve rolled that out broadly or if it was more of a a pilot with certain employers or payers. Any color there would be great. Thanks, and congrats again.

Dr. John Cohen, CEO, Talkspace: Thanks. We’re we’re we’re in that process now of rolling it out, Basically, plan by, you know, plan by plan, meaning employer by employer. Yeah. And it is as per your your observation, it does have a significant impact. You know, the the whole idea of of not having to switch over, reenter, single sign on, whatever you wanna call it, does make it much easier for people to switch over to their benefit.

So we’re in a very big way leaning in on this right now, and it is having a positive impact.

Ryan Daniels, Analyst, William Blair: Great. Thanks again, guys. Sure.

Kelvin, Conference Operator: Your next question comes from the line of Steven Detrick of KeyBanc Capital Markets. Please go ahead.

Steven Detrick, Analyst, KeyBanc Capital Markets: Hey, guys. Thanks for the questions. First, how has data retention changed over the last maybe six or twelve months as as you continue to add technology enhancements? And then secondly, a follow-up, can you remind us what portion of your 2025 guidance, your revenue guidance is expected to come from Medicare and then military? Thanks.

Ian Harris, CFO, Talkspace: Hey, Steve. On the second question, we don’t break that out. Again, you know, internally, have a range of outcomes in terms of where the volumes ultimately come from. So there’s no shortage of sort of combinations and permutations of sort of how we get to plan. As you can imagine, we take a pretty conservative approach in discounting the various sort of end markets.

Right? So I wouldn’t I wouldn’t peg a hard number to it. If again, if we’re not seeing the returns in one area, we’ll we’ll pivot spend to another while we figure out that former and sort of go at it proactively like that. Your first question, I think, was on retention, what what technology is doing for that. Yeah.

So I would point out, you know, the session velocity metric that we point to is one indicator from for that. So that was up 5% year on year in in the first quarter. Again, it’s one good indicator. Going forward, we’re actually kind of seeing the marketing investments we started in q one really start to have an impact as we exit in March and seeing really strong checkouts in April. And so that actually the session velocity metric, I just wanna flag, make it a little bit skewed because of that increase in new users.

But as a general matter, things like TalkCast and these other, sort of product enhancements we’re making, we do track and measure the retention impact. So it’s all positive to LTV. It does, however, when we roll out a new feature, take several quarters for us to really see, that change in sort of average duration of the user. Right? We gotta make sure time goes by and and see how much longer those folks stay on the platform, but all indications so far are positive.

Alright. Thanks.

Kelvin, Conference Operator: Your next question comes from the line of Charles Rhyee of TD Bank. Please go ahead.

Charles Rhyee, Analyst, TD Bank: Yes. Thanks, guys, for taking the question. Hey, just wanted to follow-up maybe a little bit on sort of sales and marketing expense. If if we think about that, you know, converting, you know, member you know, you know, people that have access to Talkspace and get getting them engaged. You know, I I think, know, sales and marketing expense was a little bit lower than we kind of expected, obviously, up a little bit year over year.

And, Ian, I get that you’re saying that, you know, you you you wanna see how some of the programs are tracking. But any reason not to maybe push push the the pedal a little bit more aggressively here, or is this something that we could expect as, you know, certain, you know, channels work better than others, we could see more aggressive spend? Because it it seems like this is the this is the big opportunity. And if the demand is as great as we all we all think it is, know, it’s just getting people aware of what’s available to them.

Ian Harris, CFO, Talkspace: Yeah. Thanks, Charles. The short answer to your question is yes. Absolutely. I mean, we’re solving the overall budget underneath of that ad spend.

It it’s very competitive and and nimble sort of going from one, channel’s not the right term, but sort of one end area focus to another. I would say expect q two to be similar to q one. Right? So of it as more like a first half. We’re we’re heavier on our marketing investments, and then we see the benefits of that, sort of get pulled through given the longer duration of a payer life relative to what you may have seen from us with a pure consumer model several years ago.

So yes. Absolutely. I mean, a lot of it, Charles, is just the balance as we go month to month. So in general, the ROIs are very positive. We’ve been very transparent publicly that we’re leaning in and making greater investments in this area.

How you know, where the timing falls month to month, it it can hinge on a variety of things. Right? What’s going on in the environment, what the ROIs are in in certain channels, new things that we’re testing, and then also, candidly, new product things. Right? If if if we’re delayed two weeks on a product rollout that we think will have meaningful conversion benefits, then maybe we shift the marketing accordingly.

So it’s I wouldn’t read too much into, the quarter to quarter perspective. I would I would flag the first half as gonna be sort of the heavier marketing spend, and then we reap the benefits starting in q two, really, where you’ll see a step up, in growth, thanks to the those investments we made in q one and then see that pull through for the remainder of the year also.

Charles Rhyee, Analyst, TD Bank: But if if if the ROAs are very positive, any reason not to just, continue spending in sales and marketing to drive growth?

Ian Harris, CFO, Talkspace: Throughout the year, you mean?

Charles Rhyee, Analyst, TD Bank: Yeah. Exactly. Like Yeah. I mean, I understand, you know, you can pull through benefits, but any reason not to just continue to No. We you know, to drive

Ian Harris, CFO, Talkspace: You may.

Charles Rhyee, Analyst, TD Bank: It’s greater conversion. Yeah.

Ian Harris, CFO, Talkspace: Yeah. We may. It’s something we talk about all the time. And, honestly, it’s like it gets down to, like, the day to day. How many holidays are there in in this, you know, this month, and, what other events do we need to be mindful of, things like that.

So it’s like mental health awareness month in May. This will be

Dr. John Cohen, CEO, Talkspace: a

Ian Harris, CFO, Talkspace: very, active month for us. If you’re asking about the back half of the year, absolutely. Right? But we because we have both top and bottom line substantial growth, in the plan and and in our financial guidance, that’s just the balance we need to to manage. Right?

It’s like, it takes time to see the benefit, the r of that investment. Right? So it just it’s always just balancing those two factors.

Charles Rhyee, Analyst, TD Bank: Got it. And and maybe just a quick quick I’m sorry. Go ahead, John. You know, I

Dr. John Cohen, CEO, Talkspace: was just gonna say, remember, it’s also not it’s somewhat of the total, but a lot of it is is specifics about where we spend it. Right? So we know we need to spend we’re gonna spend more on military. We know we’re gonna there’s other some other subpopulations we’re looking at. So it’s it’s not just where it is, but it’s, you know, it’s how it gets distributed across the social media channels, how how it gets distributed across the search channels.

So the it’s a it’s a it’s a significant number, but it’s not just like it needs to increase. It’s it’s actually it’s more about how you distribute the money.

Charles Rhyee, Analyst, TD Bank: Got it. And, John, maybe I can follow-up on the, Bark, partnership. Can can you talk a little bit about how that works? Because, you know, it it looks like Bark members get sort of the the free mental wellness tools, sort of talk this TalkSpace Go, and then, you know, they’re getting some some discounts off their first month if they subscribe to Talkspace. Can you talk a little bit more about how this partnership works and maybe sort of the economics from your end?

And and is this available to all the seven and a half million of our members off the bat?

Dr. John Cohen, CEO, Talkspace: Yeah. So, you know, there’s, you know, from there’s a couple parts of it. One is a is, of course, is the Bark phone. So we’re gonna have the Talkspace app will be loaded onto the Bark phone. So, essentially, when a parent gets some sort of notification, they have easy access to Talkspace.

That’s part of it. The the second is we’ll is they are on you probably saw, you know, literally 3,700 schools have their software embedded so that kids can only go certain places when they’re using the school software. So we don’t we’re not gonna we won’t disclose the actual financial relationship between Barq, but we we do think that, you know, the whole area of parental alerts because of our experience on the suicide ideation. And if you saw, we know we still we now have a homicide violence ideation, which we’re rolling in. It’s a it’s a really important, not just, you know, moral imperative for us, but it’s a really potentially bigger channel for us to get referrals.

If you have if you’re into if you’re looking at the whole parental protection issues, it’s it’s pretty remarkable actually because it’s not just the suicide ideation and violence. It’s, you know, they’re monitoring for sex condoms, cyberbullying, risky applications, dangerous challenges, hate speech, drug, alcohol abuse. So the you know, there’s a huge amount that they’re looking at, which gives us an opportunity to to be part of that as parents are looking for help for their kids when they find something they don’t like.

Charles Rhyee, Analyst, TD Bank: Yes, that’s helpful. Okay, appreciate it. Thanks guys.

Kelvin, Conference Operator: Your next question comes from the line of Bobby Brooks of Northland Capital Markets. Please go ahead.

Bobby Brooks, Analyst, Northland Capital Markets: Hey, good morning, guys. Thank you for taking the question. So it’s been a little more than a full month since you’ve launched TAUCAS. I was just really curious to hear, is this something that’s being used for every client across the board? And if not, could you how is it decided who gets these personalized, intermeeting personalized podcasts?

Dr. John Cohen, CEO, Talkspace: Sure. So, you know, if you if you know, you heard me talk about it. So we’ve just in the first couple weeks, we’ve launched about 6,000 podcasts. But the way it works is that the podcast is generated, and then the it’s given to the therapist. The therapist then reads through it and makes a decision about whether or not they will give that to the individual, member or patient.

Then after that, the patient if member decides whether or not they’re gonna listen to it or not. So we’re we’re looking at that data now, but it is a decision that is up to the therapist about whether it’s important or not to release to the individual patient. We are seeing, you know, some very positive feedback from both the providers and members who have used it. So early days, but it is available to everybody through their therapist and then the therapist decides.

Bobby Brooks, Analyst, Northland Capital Markets: Okay. That makes sense. So that’s and that 6,000 number you’re using, those are ones where therapist greenlit it and then the patient eventually listened to it?

Dr. John Cohen, CEO, Talkspace: That’s correct. Yeah.

Bobby Brooks, Analyst, Northland Capital Markets: Got it. Got it. And then I was just really curious on the the switch the EAP switching to insurance. Could you could you just maybe talk about a little bit, like, financially like, re re remind us all, like, financially, like, how how different a e a pay EAP patient is versus one who then switches over through insurance? I I, you know, I think that the insurance is probably a bit better for you guys financially, so that

Ian Harris, CFO, Talkspace: would be that would be helpful.

Dr. John Cohen, CEO, Talkspace: Well, so the so the EAP programs are very different. Right? You could have your employer could say you could get three sessions to your EAP program. You could say they could get 10 sessions or one a month. It’s very variable depending on the plan.

The important thing is is that when you exhaust them, if you have three or five things that you wanna stay with your therapist, because we are covering 200,000,000 roughly, you know, Americans, there’s a very, very significant chance that you’re gonna be covered by your insurance, which is also your employer. Right? So what we’ve done is we’ve made it easier to switch over from your EAP benefits now to keep your therapist and switch into your insurance plan, which then you then you submit like any other insurance claim to an insurer, which is covered. So the the easy button here is is that if you’re in an EAP program that your employer bought, but your insurance does not cover you, then what happens, basically, you have to start over with a new therapist. And that’s that’s what we’ve addressed with this.

Bobby Brooks, Analyst, Northland Capital Markets: Okay. Got it. And then could you maybe just touch on, like, the different, because isn’t the the revenues that you received through e a EAP plans isn’t that fixed? Then on insurance, obviously, you’re getting paid on a per session basis. Is that the right assumption there?

Ian Harris, CFO, Talkspace: No. So hey, Bobby. So EAP is very it it shows up in our pay revenue, first of all, and it’s it’s fee for service the same way, an insurance coverage session would be.

Bobby Brooks, Analyst, Northland Capital Markets: Got it. Thank you clarifying that.

Ian Harris, CFO, Talkspace: And then and then just on your on your on your I think you had a pricing margin question. Generally speaking, so not not always the case, the the rates, but also the sort of session structure and some of this gets into, like, length of sessions and flexibility you have on the insurance side that may not be the case in EAP. Generally, it’s a higher priced session under the BH rate of pure insurance coverage versus EAP, tends to be because it’s a limited menu. Oftentimes, it’s only forty five minute sessions allowed. And then to John’s point, you’re capped on sessions.

Right? And so your lifetime value is artificially constrained. Whereas now, if we can facilitate for those who wanna keep going after they exhaust their, whatever it may be, three, six, eight sessions allotted to them through their employer benefits, and, you know, crucially, you wanna stay with your same provider, we make that very easy to just have continued care and and let that lifetime value run its natural course.

Bobby Brooks, Analyst, Northland Capital Markets: Very helpful. Thank you. And just the last one for me. So sequentially, you guys added about 5,000 plus payer patients. I was just really curious to kind of hear what the makeup of that was.

Obviously, you talked about kind of military being a strong vertical for you guys in the quarter. Was that mostly military ads? Or just any more color you could provide on that?

Ian Harris, CFO, Talkspace: It’s across the board. It’s, I’d say, driven by military, Medicare,

Dr. John Cohen, CEO, Talkspace: but

Ian Harris, CFO, Talkspace: then also just organic growth in some of our existing commercial plans.

Bobby Brooks, Analyst, Northland Capital Markets: Thank you very much and congrats on the strong quarter guys. I’ll return to the queue.

Kelvin, Conference Operator: Your next question comes from the line of Ryan MacDonald of Needham and Company. Please go ahead.

Ryan MacDonald, Analyst, Needham and Company: Hi, thanks for taking my questions. John, maybe I’ll start with you. Great to hear about the strong outcomes you’re seeing in the Medicare population. And it made me curious, as you’re measuring for quality in terms of the quantifiable metrics, can you talk about what a few of those metrics are? And have you been able to use sort of those outcomes in negotiations around rates with insurers?

And are we at a point yet where we’re starting to see sort of discussions around value based care contracting at this point? Thanks.

Dr. John Cohen, CEO, Talkspace: So thanks. It’s a great question because, so just some of the so without getting too deep, we five basic areas to measure quality, service quality, clinical quality, client experience, productivity, and documentation. Now within each of those, there are a bunch of other metrics as a data points that we look at. And now we’re we’re also looking now at, you know, report cards and and the feedback to the to the therapist and how we do that in a better way so that they see what’s going on and how well they compare to the other therapist. So that’s that’s the broad base of of the the quality measurements and how we look at it.

It’s a it’s a really important function for us because quite honestly, we think it’s a big differentiator for us in the market. You know, I like to say we’re not we’re not a matching service. We are a full fledged HIPAA compliant health care provider, which monitors our quality and the quality of our therapy network. It’s a that that’s a, you know, a really big big deal for us. So what was the second part of your question?

Ryan MacDonald, Analyst, Needham and Company: Was wondering if if you’re servicing the diagnosis. Yeah. Yeah. And and it’s impacting rate. Yeah.

Yeah.

Dr. John Cohen, CEO, Talkspace: So right now the answer is no. Although, we do have think, you know, we talked about publicly, we do negotiate with some increases in rates with the payers. Part of that negotiation when we are negotiating with the payers, quite honestly, is a very substantial quality discussion, because we are we are gauged by the payers based on quality metrics in addition to other metrics such as first time to appointment, first time to second appointment, no shows, etcetera. So it’s a it’s a basket of different, indicators that they use, quality being a very important part of that because what the payers do is they will do audits for us. They actually look because we we have a full fledged EMR.

You know, they look at our notes. They look at our quality notes. They look at how good the therapists are doing in terms of delivering care. So this this whole issue around both the go renegotiation and contractual rates is very much related to what we’re talking about. We do have some early value based contracting.

Most of it’s very straightforward with which is stuff we were doing for a long time because of a lot of it is related to first time to appointment, first time to second appointment, etcetera. But the payers are getting more sophisticated relative to monitoring who delivers better care. Super

Ryan MacDonald, Analyst, Needham and Company: helpful there. And maybe as a follow-up, under great to hear sort of no tariff impact or nothing sort of on Medicaid with no exposure there. But one of the sort of, I guess, topics of discussion with the Trump administration has really been within the new budget, there’s, I think, about 28,000,000,000 to $29,000,000,000 cut on behavioral health funding across a number of different organizations. We’ve seen sort of freezing of funding to schools, which is, I think, about $1,000,000,000 Just given that you have sort of city, state, municipality, sort of school district exposure, we’ve been a bit surprised that sort of the sources of funding that those entities sort of pull. Are you seeing any impact from sort of the freezing or the cuts here on behavioral health from the new administration on whether it’s on sales cycles or contracting any spend there?

Thanks.

Dr. John Cohen, CEO, Talkspace: So, yeah, another really point of good question. So right now, the cuts that have been announced have been for all for what we’ve read and seen has all been in person therapy. In other words, they’re school based counselors and and in person therapy programs in addition to some related to gun violence. None of that impacts on us because of our virtual America. We actually we actually believe that because we are a much we are much less expensive and we have a larger ability to scale that it may actually be an opportunity for school districts to move from a a dominant in person model to a virtual model.

So right now, we we are looking at that. We we are obviously very acutely aware of what’s going on, but we have not seen first of we have not seen any pick. Now in terms of the discussions with school districts, we have not we haven’t seen it yet. So we I have you know, I’ve been in the room on a lot of these discussions with the person who runs this the vertical for us. We haven’t heard from school district yet that has said, oh, because of the custom funding, etcetera, we’re not gonna do anything.

The the color of that is our pipeline remains very, very substantial on the school side. But I would tell you, having said all that, I don’t think anybody could really predict what’s gonna happen in the next three to six months on this. But right now, our view has been, I would say, neutral to positive on what’s happened relative to mental health support for kids.

Ryan MacDonald, Analyst, Needham and Company: Understand. Appreciate all the color there, John. Thanks.

Kelvin, Conference Operator: Your next question comes from the line of Steven Valiquette from Mizuho Securities. Please go ahead.

Steven Valiquette, Analyst, Mizuho Securities: Great. Thanks. Good morning, John and Ian. So I have two questions. I’ll just ask them one at a time.

I guess just the first one, the number of completed payer sessions came in a little bit lower that relative to our modeling. But then conversely, though, the payer revenue per session came in higher. I think, formal likely, that’s up about 8% year over year. So I guess the first question is, you know, is that a sustainable run rate that the payer revenue per session for the full year could be up high single digits? Just wanted to get some more color on that.

Ian Harris, CFO, Talkspace: Hey, Steve. I think you’re referencing sort of the implied price per session and how that how that should That’s correct. Yeah. Yeah. Yeah.

Steven Valiquette, Analyst, Mizuho Securities: The false formula, like, it wasn’t provided number before the labeling. Correct. Yep.

Ian Harris, CFO, Talkspace: Exactly. So so sort of contextualize and remind folks, so that sort of implied payer price is subject to a few different variables. One is obviously contractual increases and sort of what the rack rate is we’re able to negotiate. So we talked about some positive developments there in the past, and so we did have some effective gen one benefits there. It’s also just going back to Bobby’s question on BH versus EAP sort of relative price per session.

It’s very much influenced by mix of of b h versus e a p, the specific customer, and also the specific CPT code, which is largely correlated to the duration of session, which, again, b h is tends to be longer and higher priced. And so, you know, the easy button thing should be accretive to this metric. It also reflects our sort of RCM efforts or collection efforts and the improvements we’ve seen there. So we had a whole bunch of favorability, you know, not by chance. We’re all we’re pushing it all the right direction, which you saw come through in that sort of 8% year on year for q one.

I would say, you know, assuming sort of a a flattish, if you model it that way, of price recession, I think where we end up in q one is a sort of good proxy for the rest of the year.

Steven Valiquette, Analyst, Mizuho Securities: Okay. Alright. That’s perfect. Okay. And the second question, I mean, I apologize if I missed this earlier.

I think some of the questions were kind of geared towards this to some degree. But I think at the end of the day, low end of the revenue guidance at $220,000,000 implies 17% growth year over year. So with 1Q coming in at 15%, just remind us again of some of the biggest drivers of the reacceleration that’s implied in the remaining quarters of the year to achieve the low end of the full year revenue guidance. Sure.

Ian Harris, CFO, Talkspace: Yes. Thanks, Steve. I mean, a lot

Dr. John Cohen, CEO, Talkspace: of it

Ian Harris, CFO, Talkspace: is which we’ve talked about the last couple quarters, the sort of very large new, populations we’ve added over the last several quarters. Right? Namely Medicare, Medicare Advantage, and TRICARE in two parts, August and January, which we’ve we really waited until q one to start going after from a sort of engagement and marketing perspective. So that’s underway in q one, which are, again, completely new populations, and we’ll see benefits as we ramp there throughout the year. And then it’s also just on our commercial, I don’t wanna say core, but commercial sort of cohort and plans we have, the increased marketing investments we’re making, which you can see is a pretty big step up from last year, a million bucks in just q one.

And to Charles’ question, we’ll we’ll keep our foot on the gas a little bit in q two. And given the sort of longer duration, longer better retention dynamics of a payer member, it takes time for that marketing investment to pay off, which we’ve already started to see in March and and are very much seeing in April. Right? So so q two, three, and four revenue growth, I do expect to be substantially higher than the year on year growth we saw in q one. And that’s largely, you know, baked as a function of, it takes a couple quarters to see the pull through of that one user checking out and joining the platform, getting acquainted with his or her new therapist, and then the sort of pull through longer tail sessions you see from that new user.

Steven Valiquette, Analyst, Mizuho Securities: Okay. Got it. Okay. Alright. Thank you very much.

Kelvin, Conference Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today’s conference call. We thank you for participating and ask that you please disconnect your lines.

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