Talkspace at Canaccord Conference: Strategic Shift Towards Payer Model

On Tuesday, 12 August 2025, Talkspace (NASDAQ:TALK) presented at Canaccord Genuity’s 45th Annual Growth Conference, unveiling its strategic pivot towards a payer-focused business model. While the company is optimistic about its growth, challenges persist in transitioning from a direct-to-consumer approach. Talkspace is also investing heavily in artificial intelligence to enhance its mental health platform.

Key Takeaways

• Talkspace reported a 35% increase in its payer segment and an 18% rise in overall revenue.
• The company added 10,000 net new users in Q2, the largest growth in over two years.
• A proprietary Large Language Model (LLM) is in development to ensure safe mental health support.
• The company is focusing on value-based contracts with payers, emphasizing metrics like NPS scores and churn rate.
• Talkspace maintains a strong financial position with over $100 million in cash reserves.

Financial Results

• Payer segment growth was 35% year-over-year.
• Overall consolidated top-line revenue grew by 18%.
• Direct-to-consumer revenue remains steady at approximately $4 million per quarter.
• Psychiatry sessions increased by about 40%.
• Coverage includes 200 million insured lives in the U.S., excluding Medicaid and VA.

Operational Updates

• The in-network insurance strategy is a key driver for user growth.
• Significant agreements signed with Texas Blues and Illinois Blues in Idaho.
• Success noted in the TRICARE market, especially with military families.
• Ongoing efforts to penetrate the Medicare market, learning to reach diverse subpopulations.

Future Outlook

• Continued emphasis on growing the payer segment and strengthening payer relationships.
• Investments in AI and LLM development to improve member engagement and therapist efficiency.
• Exploration of greater presence in psychiatry and adaptation in the Medicare market.

Q&A Highlights

• Payers are narrowing networks, focusing on quality and value.
• Expansion into TRICARE and Medicare markets with distinct strategies.
• Flexibility in marketing spend, adapting to channel performance.
• Development of a proprietary LLM to ensure safety and clinical oversight in mental health support.

Readers are invited to refer to the full transcript for a detailed understanding of Talkspace’s strategic initiatives.

Full transcript - Canaccord Genuity’s 45th Annual Growth Conference:

Richard Close, Analyst, Canaccord: All right. We’ll go ahead and get started. Good afternoon. Thank you for attending the Canaccord Conference. I’m Richard Close covering digital and tech enabled health here at Canaccord.

Excited to have Talkspace with us for the August conference. We’ve had the company virtually before as well as at our November conference. So, I appreciate them being here in person today. And from Talkspace CEO, John Cohen and CFO, Ian Harris are with us. And thank you both for coming and having a conversation with us.

So, maybe John, Ian, to begin with, you know, was a whirlwind last week for us in terms of earnings season. You reported the second quarter last week. So, I was just curious maybe to start off, set the table in terms of a quick snapshot on the quarter and what investors should be focused on the update and outlook?

Ian Harris, CFO, Talkspace: Yes. I can start and maybe John can jump in. I think we saw higher annual growth than we did in Q1. So there’s a lot of appreciation around the acceleration of both consolidated top line and that was obviously led by our payer line of growth, which today is our largest line of revenue and our fastest growing. So we did 35% growth in payer and 18% growth overall.

We also I think pointed to our KPIs within payer just to give attention and sort of proper credence to the visibility we have in the continued acceleration in our overall growth through the rest of the year. So, one key KPI we pointed out was again within our in network insurance focused strategy, we actually saw the largest increase in net new users in Q2 than we’ve seen in over two years. So we saw 10,000 net new users add the platform. That was obviously over the course of Q2. And so we entered July in many ways on the payer business sort of firing on all cylinders.

The second aspect we pointed to was a little bit of a delayed from Q2 to Q3 in our direct to enterprise, which are sort of our direct to employer and increasingly so are SaaS contracts to schools, municipalities, other sort of quasi public associations, trade unions. A couple of those slipped in timing from Q2 to Q3, but given they’re on the finish line, we actually announced three material ones on earnings. We expect those to be implemented in Q3 and we’ll obviously start recognizing the SaaS revenue from that through the rest of the year. I think the third area, which I’ll let John comment on, was a lot of excitement around the CapEx investments, the really material CapEx investments we’ve been public about around our AI and sort of our LLM strategy.

John Cohen, CEO, Talkspace: Yeah. No surprise, significant interest given what’s going on in the market and where we’ve positioned ourselves relative to the two major beyond initiatives in the company. One is the AI support of the existing business, and every part of the member journey now has been impacted by AI initiatives between sessions, keeping people engaged, improving therapists, you know, with our algorithms relative to suicide, homicide violence, soon to be some others. So that’s that we’ve had going with an AI team for probably a year and a half now. And then, of course, the bigger thing is our decision to build the the an LLM LLM’s model around mental health, which was gonna be very unique relative to what’s going on in the marketplace.

And we could certainly get into that in more depth, but that’s a CapEx investment on our side and a decision to really build something that is safe.

Richard Close, Analyst, Canaccord: Good. I do want to jump into that a little bit later, but maybe just to get into how the business has transitioned. You highlighted in some of your comments there, but since the very beginning when it originally de SPAC, but just, you know, your thoughts. There’s been a huge amount of investment in mental health over the last five years, the top clinical area in digital health. And you guys have been around for a good chunk of time.

You’re one of the only companies that have scale in the area. So, just curious, you know, how you transitioned the business, how difficult it was, and, you know, where you are in terms of the three areas: direct to payer, direct to consumer, and direct to enterprise or the payer business, I should say?

John Cohen, CEO, Talkspace: So I’ll start. The journey started three or four years ago. It is a long arduous journey to move with just huge impact on the business. A insurance based model is just completely different consumer. The member journey is different.

How you approach the patient is different. It’s just the whole idea is to get people on the platform and keep them on the platform. It’s very different than a consumer model. So having done that and then getting a a real curated network of providers that we have significant oversight, monitor their quality, watch what they’re doing, being part of community. So you have that.

Then you have to have all the therapists be qualified and be credentialed to the payers. We meet with the payers twice a year and join operating committees, and then we’re we have people designated for each payer that are talking to them daily. Then there’s so there’s the patient journey. There’s the the the the network that needs to be built for a payer. And then quite honestly, there’s the issue of getting into network and being able to build the payers, negotiating rates.

You know, we were we just announced that we got into the floor the Texas Blues and the Illinois Blues in Idaho. I’ll tell you those discussions have been going on for a year and a half. So it’s a so in terms of the journey, it’s a long one. And it’s just a completely different business than it is being a consumer.

Richard Close, Analyst, Canaccord: And then, Ian, maybe on direct to consumer. I mean, that’ll always be part of the business to some extent. But, you know, how do you think in terms of is this steady state around where we are now?

Ian Harris, CFO, Talkspace: Well, it’s smiling because you asked about how painful, how easy, how hard is that transition. And I would say, look at our share price over that timeframe and the P and L. I think the to trade out intentionally so high margin consumer revenue, which on the flip side is very high churn, so think of that as sort of cheap calories where you need to constantly refill the top of the marketing funnel There’s certainly direct to consumer models that are continuing down that path. But to swap that out for much lower gross margin payer revenue, which is on a fee for service basis, the positive trade off really comes in the long term unit economics where there’s a long tail of revenue coming from those payer members.

So it’s a trade off that makes total economic sense. It’s just when you’re a public company reporting out each quarter, it can be very painful in that interim period. So you’ve seen I think in 2022, 2023, 2024 really robust payer growth, small part of that coming from the cannibalization of our what had there to been our pure business model of direct to consumer. So that’s now kind of run rating in the low 4 millions per quarter. So our hypothesis is for whatever reason, there’ll always be someone marginal, coverage that we don’t cover, anonymity, some sort of preference of wanting an unlimited plan and paying out of pocket.

I think it’s probably just, you know, famous last words, just about sort of bottomed in this sort of low 4 range and I would expect that to continue. And then payer, to John’s point, you know, we stopped disclosing this metric a quarter ago when we got to approximately 200,000,000 covered lives. Compare that to where we ended Q2 last year, sort of in the 130,000,140 million range. And so the we’ve effectively now cover all of the insured U. S.

Ex Medicaid and VA. And so all of our marketing messaging is targeted towards the in network check your eligibility messaging, which is why you’re seeing sort of that message resonate, which comes through in better CAC and those higher users we saw.

Richard Close, Analyst, Canaccord: John, I’m curious in terms of going back to that, you know, scale and, you know, all these companies that were funded that don’t have scale, you have all these payer relationships. There was, you know, a big rush by the managed care to, fill these networks. And you’ve talked a little bit about ghost networks in the past. How do you think that all shakes out with some call out on higher behavioral health spending by some of the companies?

John Cohen, CEO, Talkspace: Yeah. The payers have made it very clear that they’re now in the process of narrowing their networks. They’ve said, okay. They had all these in. I don’t think they’re that interested for when I hear bringing new ones on, and they’re changing and they’re narrowing the ones that exist.

The next phase for the payers is we do some value based contracting now, and it’s pretty, honestly, rudimentary. It’s, you know, time to first appointment, time to second appointment, you know, NPS scores, you know, how good are the therapists, churn rate, etcetera. But they’re really looking for a quality network, you know, because when they they audit us, they audit us every six months, if not more often. They take a 100 or 200 charts. They look and see what the documentation is.

We’re just like a primary care provider. So so I think what’ll what’ll happen is is the networks will narrow, and they will begin to concentrate more on value, which they’ve all said they will do, as opposed to people out there who are what I’ll call matching services, who just match with the therapist and don’t do anything else relative to the therapy network. So that’s pretty much what I think what I’m sure is going to happen now.

Richard Close, Analyst, Canaccord: Since you brought up matching, there was news this morning, if I’m not mistaken. You had a partnership Yes. Announced this

John Cohen, CEO, Talkspace: It’s something express. It’s another provider type matching network. So the it’s an ability it’s a national network where you can actually go online and get and make it easier for you schedule. So we’re in network now with that express matching service. I think it’s more important it’s as important, but it’s important to understand that the relationship between the payers and the payer directory is a big initiative for us.

So when you have a full integration with a payer directory, meaning when you go on to Optum or Aetna or Cigna, whoever it is, and you find us, Talkspace, what we’re working now is is that at the same time that they you find us, you can then make an appointment with us. That’s a huge plus for the payers and for us because it makes the patient journey extremely easy. Otherwise, you have to go on. You you may go on and say, okay. I I wanna have mental health support.

I find Talkspace. Then you have to leave just like you’re finding your doc, and you have to go to Talkspace. Right? Here, what happens is if we’re fully integrated at the time that you find us, we’ll say, oh, do you wanna make an appointment? So you don’t have to leave.

You have to leave the site. That’s a really big and we’ve seen it on other provider directors. We had a huge uptick as a result of those kind of relationships.

Richard Close, Analyst, Canaccord: Which is extremely important in behavioral health and so it’s reaching you at at a

John Cohen, CEO, Talkspace: It’s like any time

Richard Close, Analyst, Canaccord: you need.

John Cohen, CEO, Talkspace: It’s like a purchasing decision. Right? You want when high intent is a good time to get people to sign up.

Richard Close, Analyst, Canaccord: So part of your business over the last, you know, call it two years in terms of going through the process, but you’ve signed TRICARE and Medicare. These are two new patient populations for you. Can you talk a little bit about the differences in those two businesses and like the go to market in terms of Sure. Outreach and whatnot? I think that it’s they’re both distinctive.

John Cohen, CEO, Talkspace: Yeah. So the I’ll talk about the military first. It’s a little easier. The military has 10,000,000 lives. Try it’s TRICARE East and West.

We’re in for both the Yakkin military and their families. Mostly uptick has been on the family side. And it’s it’s even early on, it’s been very successful. Now the reason there’s a lot of reasons for the most of our reason is we know where you are. We know where we know where the bases are.

We know exactly, you know, who they are and how to get to them, both on the marketing side and resources on the ground and, you know, what bars they go to and what movies they watch. Like, in other words, we know a lot about the military, so it’s really easy to target to get them to know about Talkspace. Medicare is a much bigger challenge because it’s 65, 66,000,000 Americans, half of which are in Medicaid Advantage. So I’ll move the MA aside for a second. It’s very diffuse, and there are very significant subpopulations with Medicare.

So we’re still we’re doing well. We keep growing Medicare each month. But they’re really subpopulations with the Medicare. There’s, you know, there’s the pickleball crew. Right?

Literally. There’s the dialysis crew. There are people, quite honestly, over the age of 75 or 80 who are not gonna come on to Talkspace probably for therapy, or it’s going to be hard to get to them. Then it’s diffuse. They are in every state, in every community.

They may be in repairing communities. And so it’s it’s a much harder population to penetrate relative because of how big it is, as opposed to the military where we know exactly where you are. The good news is we’re learning every month about what works and what doesn’t work.

Richard Close, Analyst, Canaccord: And, Ian, maybe as you think about guidance in terms of, you know, it’s a pretty decent you kept the ranges after this last quarter. Is how you attack Medicare or TRICARE, is that like sort of baked into those upper and lower end? How do you think about that?

Ian Harris, CFO, Talkspace: It is implicitly. I’ve said before, we take a sort of portfolio approach to our marketing allocation. So we when we it’s funny, we time to time check-in on sort of the makeup of our quarterly revenue cadence based on where we were thinking during our forecasting at the beginning of the year. So we certainly had goals in mind for both military and Medicare. What we’ve always said though is both being new populations, I’m not going to force my way to success at the expense of lower contribution margin, right?

So the marketing team works very closely with the financial team. I talk to the CMO every day. We’re very, very nimble, not quite day to day, but almost day to day, week to week in terms of pivoting our spend, making sure the channels we’re leaning into have the sort of return thresholds, the payback periods that we’re underwriting to. And if they’re not there, we’ll pivot somewhere else. So, you know, if military CAC goes way up and we’re not having success, we’re going to pause and sort of reset and as we figure that out, reallocate that spend to a channel that is working to make sure that we’re continuing to drive the new user growth that we need to hit our numbers.

So it I have a lot of flexibility in sort of how we land within our guidance. And so, it’s a little bit fungible is the answer.

Richard Close, Analyst, Canaccord: And then maybe how do you think about, you know, therapists, recruitment, retention? I mean, that’s a big thing in the industry as well. And does it get easier in terms of if some of these companies go away? Just any general thoughts on the clinician side?

John Cohen, CEO, Talkspace: I would just say that right now, this has not been a supply side issue. It hasn’t been an issue with us. Yes. I mean, I think we do we are making changes to some of the reimbursement that we’re allocating to certain regions of the country that are more expensive than others, Quinonesia. So we’re going through that process now.

But right now, we’ve had no trouble matching. We’re still matching people within hours. If you wanna text or message us, you’re gonna do within twenty four. And if you need a you want a video, it’s gonna be probably five to seven days. So right now, the supply side has not been issued.

There are therapists that work on multiple platforms. I don’t think many of them do more than two. And then there are a lot of them who are doing this. There are several of them. Certain percentage are doing part time, certain percentage have a small practice on-site in addition to this.

And then a fair number of them only work with us. So but the the supply side has not been an issue right So we’re not having any issues addressing the need.

Richard Close, Analyst, Canaccord: And are you thinking about a greater presence in psychiatry and other areas? Sure.

Ian Harris, CFO, Talkspace: Yeah. So we don’t give it a ton of airtime to our fault which we’re trying to correct for that this year. But we do have actually a pretty sizable, call it 10% of payer revenue psych business. Think of it as meds management effectively. So we don’t prescribe controlled substances, but otherwise think of it as a traditional medication management platform.

So that has been a in in many ways up until a year ago where where John really made clear we had to have a a sort of stated focus on this business, have a divisional leader who’s leading it, have a senior executive team overseeing it. Up until then, had really been sort of this orphaned asset that by accident, we sort of came across it was growing, you know, at a significant premium to where the overall business is growing. So, you know, in this past quarter, we saw Sessions grow to the tune of just about 40%. So very, very nice clip and there’s a lot of opportunities there given the sort of lack of focus historically. So for example, making it easier both for the the underlying consumer and the provider to cross reference, cross referral from therapy into psych or vice versa.

The investment we made in having Amazon Pharmacy as our preferred pharmacy partner to make it very convenient for the provider and the consumer to sort of one click fulfill. A lot of things like that, you know, two years ago we would have never considered. Just jumping back to the supply question because I do want to flag, which I don’t think is the most obvious or easily appreciated by investors. The complexity around the sort of network operations and infrastructure is, you know, we’re sitting we’re joking this morning sitting here at a technology growth conference. It’s not the sexiest topic with investors, but I do think in terms of a defensive moat, it’s really material.

I mean, there’s a reason why as you point out a lot of the venture money kind of that’s come to the industry the last five years have pursued more of a marketplace sort of capital light model because actually build out, manage, train, credentialize, have the clinical safety and oversight managing a network and actually be the HIPAA interfacing HIPAA compliant interfacing provider to the payers. It’s a huge regulatory operational logistical undertaking, which candidly, I did not appreciate sort of that workload from the outside in.

Richard Close, Analyst, Canaccord: So we have about three and a half minutes left. John, so let’s go into the AI a little bit deeper because there’s two two things here. Right? There’s the internal, what you’re doing internally, and then the external aspect to it, how you’re keeping the individual, the member, patient engaged throughout their care journey. So just want to hit on that a little bit.

And then the LLM that you were talking about, what are the opportunities?

John Cohen, CEO, Talkspace: So as I said, the internal, probably the best example is you may have heard we launched a personalized podcast in between sessions, which has been very successful, where you we personalize what you’ve told the therapist. We’ve and it gets generated by the AI engine into a personalized two to five minute podcast that’s just for you. It gets cut it gets reviewed by the therapist before it gets released, and then you listen to it, and it’s it’s all about you and what you should do between sessions. It’s quite honestly, it’s remarkable. We’ve had a 15% uptick between sessions one and two as a result of it and almost 25, 30% uptick between sec two and three just with the pocket.

Just to give an example of how impactful some of the AI capabilities are. And that’s and then we’re saving the therapist four hours a week right now on just administrative issues because of smart notes, intake notes, summary notes, etcetera, submitting bills and all that. The LLM is different. The LLM, we’ve decided to build this LLM model, for mental health, which we would which we believe should have significant clinical oversight and some other HIPAA related issues. We want it to be very safe.

We have five, ten use models without even thinking much about it where it can apply. And then then beyond that, I think there’s probably multiple other uses for the idea that for us is as an innovation company who really put texting and messaging therapy on the map ten years ago is to continue to lead in innovation mental health. And we believe that a specific LLM trained on a dataset that’s one of the largest in the country or the world is the right way to go. What’s going on right now in terms of people accessing chat GPT, Anthropic, etcetera for therapy is totally inappropriate. And I think you’ve if you listen to any of the podcast by by any of the leaders in AI, they will tell you the same thing.

They they will tell you, do not go to these LLMs right now for mental health therapy because it is basically dangerous. So we decided that we will build one that is safe. So that’s our plan right now. We’ve made a capital investment. We, you know, we are you probably know, Talkspace is profitable with essentially no cash burn.

But we are taking our 100 plus million in cash, and we’re gonna make some part of part of that investment into the LLM model, which I don’t know when it’ll be out in market yet, but we’re trying to get something out relatively soon to test it and see where it goes. It’s pretty exciting, to be honest.

Richard Close, Analyst, Canaccord: Well, thank you for being here today and sharing your time and thoughts on Couchbase.

John Cohen, CEO, Talkspace: Thank you. Thank you for the invite.

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