Talkspace, Inc. Q1 FY2025 earnings call

• Revenue grew 15%, session volume up 23%, and EBITDA up 153% year-over-year. - Reaffirmed commitment to 'Let’s Face It' campaign during Mental Health Awareness Month. - Leveraging multiple channels to raise awareness and drive members. - Enhanced real-time benefits verification to reduce drop-off rate. - Expanded military coverage to all TRICARE's 10.5 million members. - Saw growth in Medicare registration with 84% of Medicare members showing clinical improvement. - Reconfigured team to refine and relaunch psychiatry offering for individuals 18 and older. - Expanded relationship with ZocDoc for psychiatry offering. - Partnership with Bark Technologies to make Talkspace available on Bark phone and app users. - Developed AI initiatives including augmented intake systems, client engagement tools, and risk assessment tool. - Strong Direct to Enterprise pipeline with renewals and new additions.

Total revenue for Q1 was $52.2 million, a 15% increase from Q1 2024. Payor business revenue was up 33% from Q1 2024, with Payor sessions totaling approximately 350,000, up 23% year-over-year. Unique Payor members completing a session grew 17% year-over-year to over 101,000. DTE revenue for the quarter was $9.6 million, down 3% year-on-year and flat sequentially from Q4. Consumer revenue declined by over $2 million versus Q1 2024. Gross profit was $23.3 million, up 7% from the previous year, with gross margin at 44.6%. Total operating expenses were $24.4 million, an increase of $1 million versus Q1 2024, with total OpEx at 46.7% of revenue. GAAP net income was $300,000, an improvement from a $1.5 million loss one year ago. Adjusted EBITDA for Q1 was $2.0 million, up $1.2 million from the same period last year.

• Reiterated full-year revenue guidance of $220 million to $235 million, representing 21% growth at the midpoint. - Adjusted EBITDA guidance of $14 million to $20 million, an increase of 144% at the midpoint. - Confident in continued demand for in-network care and full year guidance.

• Actual results may differ from expectations due to many risks and uncertainties. - Important factors affecting future results described in recent SEC reports and earnings press release. - Not directly affected by tariffs, insulated from potential changes to Medicaid programs.

Q: How has patient retention changed over the last six months to 12 months as technology enhancements are made?

A: Session velocity metric was up 5% year-on-year in Q1. Technology enhancements like Talkcast have positive impact on retention, but it takes several quarters to see full change.

Q: What portion of 2025 revenue guidance is expected to come from Medicare and military?

A: Internally, there's a range of outcomes and no specific breakdown; military has exceeded expectations with good traction.

Q: How broadly is the easy button for switching between EAP and coverage rolled out?

A: Rolled out plan by plan, employer by employer, and has a significant impact on engagement.

Q: How does the Bark partnership work?

A: Talkspace app loaded onto Bark phone, and embedded in 3,700 schools; provides easy access for parents and kids, with parental alerts for mental health issues.

Q: Is the Payor revenue per session sustainable for high single-digit growth?

A: Influenced by contractual increases, mix of BH vs EAP, CPT codes, and RCM efforts; Q1's 8% year-on-year is a good proxy for the rest of the year.

Q: What are the biggest drivers of reacceleration in remaining quarters to achieve revenue guidance?

A: New populations like Medicare, Medicare Advantage, and TRICARE, along with increased marketing investments and pull-through of new user engagement.