Talkspace, Inc. Q3 FY2025 earnings call

• Recorded record revenue of $59.4 million and adjusted EBITDA of $5 million in Q3. - Payer business saw active payer members grow 29% YOY and payer sessions up 37% YOY; became in network with new Blues plans and won a large EAP; psychiatry business relaunched with initial session volume up 46% YOY and provider network grew nearly 50% QoQ. - Acquired Wisdo Health, a social health platform, which will synergize with Talkspace's services, especially for Medicare patients. - Significant AI integration progress, including LLM search, AI assistance in eligibility determination, smart insights for providers, and a behavioral health-specific LLM; AI has positively impacted session bookings and completion rates. - Talkspace is the most recognized insurance coverage-focused mental health brand, with over 35% recognition.

Total net revenue for the third quarter was $59.4 million. Payer revenue was $45.5 million, up 42% year-over-year and 12% sequentially, contributing approximately 76.6% of total revenue. Direct-to-enterprise revenue was $9.3 million, down 1% year-over-year and 2% sequentially, contributing ~15.7% of total revenue. Consumer revenue was $4.6 million, up QoQ but down YOY, contributing ~7.7% of total revenue. Active payer members grew 29% year-over-year to over 120,000, and payer sessions increased 37% year-over-year to over 432,000.

• Now expects 2025 revenue to be between $226 million and $230 million, representing 20%-23% year-over-year growth, narrowing from prior range. - Adjusted EBITDA now expected to be between $14 million and $16 million, narrowing from prior range. - Anticipates continued strong growth in 2026 with at least 20% revenue growth and moving towards low double-digit EBITDA margins, with detailed annual guidance to be provided next quarter.

• General purpose LLMs lack clinical oversight, real-time risk identification, and HIPAA protection, but Talkspace's AI model is designed with these safeguards, presenting an opportunity. - Delays in product launches (e.g., some DTE launches moved from Q3 to Q4) and potential challenges in scaling Medicare and other payer integrations.

Q: How will LLMs be integrated into the Talkspace app and monetized?

A: Integration into the network with clinical oversight, different monetization models for consumers, employers, etc., with launch expected in early 2026.

Q: Changes to matching algorithms driving retention?

A: Simplified registration flow, network management considering supply/demand, and improved scheduling to drive retention.

Q: Comfort with credential therapist network?

A: Comfortable with current network, but constantly pruning and adding based on expertise, geography, etc.

Q: Run rate of marketing spend?

A: Marketing spend down QoQ but up YOY, with efficiency and ROI driving continued investment.

Q: Impact of Wisdo Health on Medicare?

A: Wisdo's group coaching can drive uptick in Medicare population, especially for GLP-1 program with Novo Nordisk.

Q: Timing of Medicare impact on results?

A: Still a work in progress, with continued refinement of strategy, expecting impact in 2026 and beyond.

Q: Factors driving payer growth acceleration?

A: New user sign-ups, cohort retention, supply capacity planning, and cross-referral between therapy and psych services.

Q: Guidance range tightening for EBITDA?

A: Tightening due to delayed Q3 launches moving to Q4 and strategic investment in growth for 2026.

Q: Long-term guidance for 2026?

A: Anticipates 20%+ revenue growth in 2026 and moving towards low double-digit EBITDA margins, with detailed guidance to be provided next quarter.