Q1 2022 Talkspace Inc Earnings Call

new accounts in the quarter for our DTE or direct to employer.

For our DTE or direct to employer business <unk>.

including large national towns such as Kempton Hotels & Resorts and Restaurants.

Including large national accounts, such as Kimpton hotels, and resorts and restaurants.

and two significant broker houses, Gallagher and Alliance.

And two significant broker houses Gallagher and alliance.

Our b to C business was down year over year, but was essentially flat quarter on quarter. Despite another sequential reduction in our advertising spend.

Our B2C business was down year over year, but was essentially flat quarter on quarter despite another sequential reduction.

We implemented several changes to the funnel in March that have begun to yield modest improvements in our conversion metrics and reduced.

We implemented several changes to the funnel in March that have begun to yield modest improvements in our conversion metrics and reduced our customer acquisition costs.

Our customer acquisition costs.

So if you turn to slide four.

You'll recall that in January we outlined six strategic priorities that the management team would be focused on.

You'll recall that in January we outlined six strategic priorities that the management team would be focused on to improve our performance.

Page four highlights some of the items we introduced in Q1 that we believe represent progress towards these priorities and impacted the performance and the KPIs we track in the first quarter. So first, we began...

Four highlights some of the items, we introduced in Q1 that we believe represent progress towards these priorities and impacted the performance and the Kpis, we track in the first quarter.

So first.

We began beta testing in March unifying our funnel Sn.

essentially making it easier for B2C and B2B customers to find a provider directly through our consumer website to now.

Essentially making it easier for <unk> customers define to provider directly through our consumer website and apps.

As a reminder, we have several million non-unique visitors to our site each quarter. And the early results from these.

As a reminder, we have several million non unique visitors to our site each quarter and.

And the early results from these tests are encouraging.

We believe.

We believe that this can drive both penetration and utilization in our B2B business over time.

This can drive both penetration and utilization in our <unk> business over time.

In addition, we made an important change to our matching process based on consumer research and we made that change in March as well.

based on consumer research, and we made that change in March as well.

This change which uses our proprietary algorithm to deliver quick.

This change, which uses our proprietary algorithm to deliver quick.

And appropriate matches drove a higher conversion rate and a lower tech in March which favorably impacted quarterly results.

drove a higher conversion rate and a lower tech in March, which favorably impacted quarterly results.

Second.

We continue to make progress towards expanding capacity and increasing satisfaction of our clinical...

We continue to make progress towards expanding capacity and increasing satisfaction of our clinical network.

The marketplace for clinical talent, as you know, is undoubtedly competitive.

The marketplace for clinical talent as you know is undoubtedly competitive today.

And we're taking steps to make Talkspace a platform of choice for providers.

And we're taking steps to make talk space a platform of choice for providers.

We've accelerated multi-state licensing, we improved our provider dashboard, and we adjusted our clinical compensation.

We've accelerated multistate licensing.

We improved our provider dashboard.

And we adjusted our clinical compensation policies, making it both more transparent as well as more responsive to the current market environment.

making it both more transparent as well as more responsive to the current market environment.

As a result of these actions, we're seeing early signs of improving therapist satisfaction and our most recent surveys.

We're seeing early signs of improving therapist satisfaction in our most recent survey.

We grew our average hourly engagement from our existing therapist during the quarter.

grew our average hourly engagement from our existing therapists during the quarter.

And we had our strongest recruiting month in March for new contracted therapists.

And we had our strongest recruiting month in March new contracted therapist over the past year.

Third.

We're continuing to add customers, resources, focus, and products to our B2B.

We're continuing to add customers resources focus and products to our <unk> business.

We introduced a bundled offering product late in the first quarter for a B2B part.

We introduced a bundled offering product late in the first quarter for our <unk> partners.

which now includes our new Talkspace self-guided...

Which now includes our new cost base self guided product.

And we grew our <unk> sales team over 25% in the quarter.

And we grew our B2B sales team over 25%.

Improved targeting and focus in our DTE business introduced in Q1 is helping us to build a pipeline of larger DTE customers.

improved targeting and focus in our DTE business introduced in Q1 is helping us to build

Our average contract size was up in Q1, and we signed our first large million dollar plus account.

Our average contract size was up in Q1.

And we signed our first large million dollar plus account this year.

while the cycle time for these larger clients is often longer and the revenue growth

While the cycle time for these larger clients is often longer than the revenue growth can be lumpier.

Targeting these opportunities today more directly with our sales force.

targeting these opportunities today more directly with our sales force.

Fourth.

We continue to optimize our consumer businesses to deliver improved efficiencies as I mentioned, we implemented a number of changes to the funnel in early March that we believe for a modest improvement in conversion.

We continue to optimize our consumer businesses to deliver improved efficiency.

As I mentioned, we implemented a number of changes to the funnel in early March. So we believe for modest improvements. InMoira

and customer acquisition metrics compared to last quarter.

Customer acquisition metrics compared to last quarter.

In fact, this is the first positive quarterly trend in our conversion data in the past four quarters.

In fact this is the first positive quarterly trend in our conversion data in the past four quarters for the company.

So while media spend was reduced by 19% sequentially pursuant to our plans coming into the quarter.

So while media spend was reduced by 19% sequentially, pursuant to our plans coming into the quarter, adjusted

Adjusted sequential revenues were flat.

as we saw increased traction for our highest service.

As we saw increased traction for our highest service video products.

We do expect to continue to reduce aggregate B to C media spend going forward as we...

We do expect to continue to reduce aggregate b to C media spend going forward.

As we better manage our cash flows.

And that should result in a smaller revenue base for this business. But we believe management can implement changes to further improve our members experience while also increasing efficiency.

And that should result in a smaller revenue base for this business, but we believe management can implement changes.

Further improve our members' experience, while also increasing efficiencies in both tax and unit economics.

Our fifth strategic priorities, continuing to innovate and enhance our product suite.

Our fifth strategic priority is continuing to innovate and enhance our product.

Minor changes like simplifying our onboarding process for our MBE each members in their initial evaluation sessions as well as more significant product launches like park space self guided you.

Minor changes like simplifying our onboarding process for our NVH members in their initial evaluation sessions as well as more significant product launches like TalkSpace self-guided.

do allow us to build towards a better member experience and offer a broader solution set for our B2B customers.

To allow us to build towards a better member experience and offer a broader solution set.

For our <unk> customers.

And finally as.

as we continue to focus on optimizing cash flow across the business. As I mentioned on our last call, we believe we have ample cash flow across the business.

As we continue to focus on optimizing cash flow across the business as I mentioned on our last call.

We believe we have ample cash resources to enhance and expand our capabilities.

In ways that both deliver operating leverage over time as well as value to our shareholders.

ways that both deliver operating leverage over time as well as value to our shareholders.

The basic operating progress like introducing Kpis scorecards real time reporting.

like introducing KPIs, scorecards, real-time reporting.

have been both adopted and embraced throughout the broader organization.

Have been both adopted and embraced throughout the broader organization.

And it has allowed us to make timely or data driven adjustments to our business plan.

and it has allowed us to make timelier, data-driven adjustments to our business plan.

As an example.

Actions taken this quarter generated efficiencies in our cash collections that positively reduced work.

Actions taken this quarter generated efficiencies in our cash collections it positively reduce working capital.

So while management clearly understands that we've got plenty of ongoing work ahead of us.

So while management clearly understands that we've got plenty of ongoing work ahead.

We believe that the actions we've taken in the first quarter reflect the first important step.

We believe that the actions we've taken in the first quarter reflect the first important steps in our path towards building shareholder value and delivering on our mission.

our path towards building shareholder value and delivering on our mission.

So with that I'll turn the call over to Jennifer to provide details on our operating and financial performance Jennifer over to you.

So with that, I'll turn the call over to Jennifer to provide details on our operating and financial performance. Jennifer, over to you. Thanks, Doug.

Thanks, Doug and good evening everyone.

I'll focus my comments on sequential results as we continue to believe this presentation is most useful to understand our performance beginning in November 2021, given the new management team, our evolving revenue mix, and the significant operational initiatives we identified at that time.

I'll focus my comments on sequential results as we continue to believe this presentation is most useful to understand our performance beginning in November 2021, given the new management team, our evolving revenue mix and the significant operational initiatives, we identified at that time.

Starting with slide five first quarter revenue was $30 $2 million.

Starting with slide five, first quarter revenue was $30.2 million, up 3% sequentially on a reported basis from the fourth quarter.

Up 3% sequentially on a reported basis from the fourth quarter.

First quarter basis, <unk> revenue was $17 $3 million.

First quarter B2C revenue was $17.3 million, up 5% from the fourth quarter, with three percentage points of growth related to a $500,000 one-time non-cash reversal in deferred revenue associated with customers no longer active on the platform.

5% from the fourth quarter with three percentage points of growth related to a $500000. One time noncash reversal in deferred revenue associated with customers no longer active on the platform.

The remaining two percentage points of sequential growth were driven by improved mix in consumer plans partially offset by a lower number of active users.

The remaining two percentage points of sequential growth were driven by improved mix and consumer plans, partially offset by a lower number of active users.

<unk> revenue was $12 $9 million up 1% on a reported basis from Q4.

B2B revenue was $12.9 million, up 1% on a reported basis from Q4.

You will recall that Q4 2021 results included a favorable impact from revenue reserve on receivables of eight.

You will recall that Q4 2021 results included a favorable impact from revenue reserve on receivables of $800,000 from prior periods.

$100000 from prior periods.

Normalizing for that adjustment, sequential growth was 8%, driven primarily by growth in B2B sessions and to a lesser extent, additional DTE customers.

Normalizing for that adjustment sequential growth was 8%.

Driven primarily by growth in <unk> sessions and to a lesser extent additional DTE customers.

Our first quarter gross profit declined 6% sequentially to $15 million, with a gross margin of 49.8%.

Our first quarter gross profit declined 6% sequentially to $15 million.

The gross margin of 49, 8%.

Down compared to Q4, primarily due to higher clinician costs.

down compared to Q4, primarily due to higher clinician costs and a revenue mix shift within the B2B business.

And a revenue mix shift within the <unk> business.

Turning to slide six.

First quarter 2022, GAAP operating expenses were $36 million compared to $45 million in the fourth quarter.

First quarter 2022 GAP operating expenses were $36 million compared to $45 million in the fourth quarter.

This reduction was due to lower stock-based compensation and the elimination of non-recurring severance costs but thank you for.

This reduction was due to lower stock based compensation and the elimination of nonrecurring severance costs booked in Q4.

Excluding nonrecurring items first quarter operating expenses were down slightly from the fourth quarter as lower media spend and lower employee related expenses were partially offset by higher professional services fees.

Excluding non-recurring items, first quarter operating expenses were down slightly from the fourth quarter, as lower media spend and lower employee related expenses were partially offset by higher professional services fees.

Fourth quarter net loss was $20 million and adjusted EBITDA loss was $18 million.

Fourth quarter net loss was $20 million and adjusted EBITDA loss was $18 million.

Our cash balance as of March 31st was $184 million, a reduction of $14 million from the year end.

Our cash balance as of March 31 was $184 million a reduction of $14 million from the Europe yearend.

We benefited in this quarter from actions taken to reduce the DSO for our receivables, which generated a one-time benefit of approximately $4 million.

We benefited in this quarter from actions taken to reduce the DSO for our receivables, which generated a one time benefit of approximately $4 million.

We expect cash burn to generally match, our EBITDA going forward.

We expect cash burn to generally match our EBITDA going forward.

Turning to slide seven for a closer look at our <unk> performance.

Turning to slide seven for a closer look at our B2B performance.

As I mentioned earlier <unk> revenue for the quarter grew 8% on a normalized basis.

As I mentioned earlier, D2D revenue for the quarter grew 8% on a normalized basis, reflecting an increase in covered lives and sessions, as well as growth in our DTE customer base.

Selecting an increase in covered lives and sessions as well as growth in our DTE customer base.

We ended the quarter with approximately 76 and a half million eligible lives, an increase of 11% versus the prior quarter.

We ended the quarter with approximately $76 5 million eligible lives and increase of 11% versus the prior quarter.

Number of sessions completed also increased 11% sequentially to almost 91,000.

Numerous sessions completed also increased 11% sequentially.

Most 91000.

We believe we have significant opportunities to continue to grow our <unk> business as we execute our operational agenda to drive penetration in our covered lives expand our relationships with existing health plan partners and launch coverage with new payers.

We believe we have significant opportunities to continue to grow our B2B business as we execute our operational agenda to drive penetration in our covered lives, expand our relationships with existing health plan partners, and launch coverage with new pairs.

Enterprise revenue was up 5% sequentially driven by the addition of 31 customers in the first quarter, partially offset by the loss of a large municipal customer that no longer had funding available for our program.

Enterprise revenue was up 5% sequentially, driven by the addition of 31 customers in the first quarter, partially offset by the loss of a large municipal customer that no longer had funding available for our program.

We continue to see strong demand in our pipeline from employers seeking expanded mental health benefits for their employees.

We continue to see strong demand in our pipeline from employers seeking expanded mental health benefits for their employees.

Turning to slide eight for a closer look at our B2C performance revenue group 5% sequentially of which 3% is related to the deferred revenue adjustment mentioned earlier.

Turning to slide eight for a closer look at our <unk> performance.

<unk> grew 5% sequentially of which 3% is related to the deferred revenue adjustment mentioned earlier.

The revenue increase was driven by higher RPM.

The revenue increase is driven by higher ARPU as our members continue to migrate toward higher subscription tiers with a greater number of video sessions, partially offset by a 7% reduction in active members.

As our members continue to migrate toward higher subscription tiers with a greater number of video sessions, partially offset by a 7% reduction in active members.

Advertising spending was down 19% sequentially as we continued to optimize our marginal ROI.

Advertising spending was down 19% sequentially as we continued to optimize our marginal ROI.

The combination of modestly improved conversion and reduced advertising spend led to a modest improvement in quarterly contributions.

The combination of modestly improved conversion and reduced advertising spend led to a modest improvement in quarterly contribution.

Turning to our conclusion on slide nine, as Doug mentioned in his remarks, we continue to believe the initiatives we are focused on as a management team will drive growth and profitability and deliver shareholder value over time. We look forward to keeping you updated on our progress.

Turning to a conclusion on slide nine as Doug mentioned in his remarks, we continue to believe the initiatives. We are focused on as a management team will drive growth and profitability and deliver shareholder value over time.

We look forward to keeping you updated on our progress.

With that we'll open the call to questions.

If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.

If you'd like to ask a question at this time, please press the star, then the number one key on your touch tone telephone. To withdraw your question, press the pound key.

To withdraw your question press the pound key.

Our first question comes from Charles <unk> with Cowen.

Yeah, thanks for taking the questions, Doug and Jennifer. You know, if I could start with on the BDC side, obviously, results, you know, look much better than we were expecting and just wanted to get your sense.

Yes, thanks for taking the questions Doug and Jennifer.

If I could start.

With the BDC.

PVC side, obviously results.

Look much better than we were expecting.

And just wanted to get your sense.

You know, the performance is holding up here. You kind of mentioned more video visits. You know, maybe can you talk about some trends that you're seeing here? Obviously you are reducing your marketing spend. Maybe your thoughts on the ads, you know, sort of that – the ad market and the pricing there. Obviously your larger competitor, you know, highlighted that recently last week and just wanted to get your thoughts on what you're seeing right now in the market as it relates to –

The performance is holding up here you kind of mentioned more video visits.

Maybe can you talk about some trends that youre seeing here.

Obviously, you are reducing your marketing spend maybe maybe your thoughts on the ads.

The AD market and the pricing there obviously.

Larger a larger competitor highlighted that recently last week and I just wanted to get your thoughts on what Youre seeing right now in the market as it relates to that.

Charles, thanks for the question. Actually, it felt like quite a few questions, so let me try and step back and address it. We have been speaking consistently since I began making these calls about the pressures and challenges in the advertising market.

So Charles Thanks for the question.

Actually it felt like quite a few questions. So let me try and step back and address it we have been speaking consistently.

Since I began making these calls about the pressures and challenges.

In <unk>.

Advertising market.

We did not see anything unique or different in our business in the first quarter as it relates to that.

We did not see anything unique or different in our business in the first quarter as it relates to that. What we did tell you, however, is that we believed we had a number of opportunities to address and improve our customer journey through our website and the conversion of those customers as they come through the process with us.

What we did tell you. However is that we believed we had a number of opportunities to address and improve our customer journey through our web site and the conversion of those customers as they come through the process with us.

And what you see in our results in the first quarter is

And what you see in our results in the first quarter is we told you we would be reducing our advertising spend and we did that.

We told you we would be reducing our advertising spend and we did that. I did also reference, we're going to continue to improve our efficiency in this business, so you can expect some further reduction in the second quarter.

I did also referenced we're going to continue to improve our efficiency in this business. So you can expect some further reduction in the second quarter.

But importantly, we actually implemented a number of things we were working on through the beginning of the year in March that had a meaningful impact in increasing our conversion and as a result of that, reducing our cash.

But importantly, we actually implemented a number of things we were working on through the beginning of the year in March.

That had a meaningful impact in.

In increasing our conversion.

And as a result of that reducing our CAC.

And we have a number of other adjustments and additions to how customers experience.

And we have a number of other adjustments and additions to how customers experience their journey through our website and then our connected with therapist and the retention associated with that that we're going to be introducing throughout the second quarter.

their journey through our website and then are connected with therapists.

and the retention associated with that, that we're gonna be introducing throughout the second quarter that we think will continue to make us a much more efficient platform. So I can't speak to what others may or may not be doing, but I think a lot of what we have in front of us on the B2C side.

That we think will continue to make us a much more efficient platform. So I can't I can't speak to what others may or may not be doing but I think a lot of what we have in front of us on the beta side to improve our economics is completely within our control.

to improve our economics is completely within our control.

Maybe just to expand a little bit can you give an example or or so we have ample of whats.

Maybe just to expand a little bit, can you give an example or some examples of what's changed to make the conversion better?

Range to make the experience that the conversion better.

Yes, so we changed our matching function. So we did a bunch of customer research and one of the things. Charles We've said is we're going to try and.

Yes, so we changed our matching function. So we did a bunch of customer research. And you know, one of the things Charles, we've said is we're going to try and we've now got a fully staffed team, a conversion pod that is literally focused on optimizing our conversion. So we've added engineering software talent and data scientists in addition to marketing team.

We've now got a a fully staffed team a conversion pod that is literally focused on optimizing our conversion. So we have added engineering software talent and data scientists in addition to marketing team.

And where we're basically looking at our analytics and saying where can we improve conversion. So one of the big sets of feedback we got from our customers was they prefer for us to use our algorithm to match them to a therapist and so we.

And we're basically looking at our analytics and saying, where can we improve conversion? So one of the big sets of feedback we got from our customers was, they prefer for us to use our algorithm to match them to a therapist.

And so we actually went from a broader matching process to what we call the cue. We effectively used the algorithm, picked the therapist for them, got them a match both quicker, and we think actually a much more preferential way for the consumer to experience our process.

Actually win from a match a broader matching process to what we call the <unk> the Q.

Effectively use the algorithm picked a therapist for them got them a match both quicker and we think actually a much more preferential way for the consumer to experience our process and it had a meaningful impact on our conversion by the way. It also improved.

And it had a meaningful impact on our conversion. By the way, it also improved the speed of which we match, and it actually increases the capacity in the system. So it had a couple of ancillary benefits for us, but mostly it improved the customer.

The speed of which we match and it actually increases the capacity in the system. So it had a.

A couple of ancillary benefits for us, but mostly it improves the customer experience.

That's helpful. And a question for you, Jennifer, you mentioned in the...

That's helpful and a question for your agenda for you you mentioned in the.

the gross margins, the gross profit in the quarter impacted by higher costs for clinicians. Can you talk about sort of what should we expect going forward? Is this something that – and obviously wage inflation is a topic across all industries right now. Maybe give us a sense for how you're thinking about further increases in clinician payouts as we move forward.

The gross margins the gross profit in the quarter impacted by higher.

Costs for clinicians can you talk about sort of what should we expect going forward is this something that can obviously wage inflation is is a topic across all industries right now.

Maybe give us a sense for how youre thinking about.

Further increases in clinician payouts.

Just maybe your thoughts there, that would be helpful. Thank you. As we think about the second quarter and going forward.

Just maybe your thoughts there that would be helpful. Thank you as we think about second quarter and going forward yes.

Yeah, sure, Charles. So, yeah, I mentioned that we, you know, we, Doug had mentioned on a previous call, we had a lot of needs as far as addressing the network and ensuring that we were optimizing the experience for our clinicians and specifically in Q2.

Yes, sure John So yeah, I mentioned that Doug had mentioned on previous call we had.

A lot of needs as far as addressing the network and ensuring that we are optimizing the experience for our for our clinicians and specifically in Q2, we.

In Q1, we increased the wages for $10.99.

We increasingly see Q1, Q1 and Q1 the increase the wages four to 99.

therapist network and that obviously had a negative impact on margins, but as Doug mentioned, it was effective in what we were after, which was improving the satisfaction scores.

Therapists network, and obviously had a negative impact on margins, but as Doug mentioned it was effective in what we were after which was improving the satisfaction scores.

expanding the hours worked for the contract network as well as improving our recruiting capabilities. So, you know, I think, again, that was effective, the Q1 efforts were effective at doing that. Looking forward,

Expanding the hours worked for the contract network as well as improving our recruiting capabilities. So.

I think again that was affecting the Q1 and the Q1 efforts were effective at doing that.

Going forward without having specific numbers for you I think we see.

Without having specific numbers for you, I think we see opportunities to drive more optimal margin. That's specifically in our largest opportunity with regard to our W2.

Opportunities too.

It drives more optimal margin thats, specifically in our largest our largest opportunity is with regard to our W. Two.

salaried network, where we've really just begun early in the second quarter to implement initiatives to drive better productivity with regard to that, the work that they do. So we see this as having a benefit as we look forward. And in addition, more broadly, as we look at margin, we also see the need to be able to leverage the quality of our services.

Salaried network, where we have really just begun early in the second quarter to implement initiatives to drive better productivity with regard to with regard to that.

The work that they deal so we see this as having a benefit.

As we look forward.

In addition, more broadly as we look at margin.

<unk> see.

The need to be able to leverage the quality of our services.

to help offset those higher wages that we're paying in the price of our services. So these are all parts of our agenda going forward.

Help offset.

Higher wages that we're paying in the price of our services. So these are all parts of our agenda going forward.

So, net-net, as we think about the second quarter and maybe as we think about the year, is this sort of the right gross margin range you would expect, or would you expect it to trend back up a little bit? Any color there would be helpful.

So net net as we as we think about the second quarter and maybe as we think about the year is this sort of the right gross margin range, you would expect or would you expect it to trend back up a little bit any color there would be helpful. Thank you.

Yes, Charles I guess I would say, we we would we.

Yeah, Charles, I guess I would say we would, we think there are a number of additional self-help items here, much like I talked about in B to C, that we would hope to be in a position where this is the bottom of the cycle for us from a margin standpoint. Great.

We think there are a number of additional self help items here much like I talked about in B to C.

We would hope to be in a position where this is the bottom of the cycle for us from a margin standpoint.

Great.

I appreciate the comments thank you.

Okay.

Our next question comes from Vikram, I guess have a butler with Baird.

Our next question comes from Vikram Kesavavotla with Barry.

Hi, thanks for taking the question. I wanted to start on the consumer side. Can you just give us some more color on what you're seeing in the competitive landscape today? And in particular, I'm curious if you're noticing any change in the advertising behavior or the types of strategies being used in the environment today, relative to the environment that you navigated throughout last year, and maybe from a higher level, would love to get your thoughts on how you're expecting the B2C competitive landscape to evolve going forward.

Hi, Thanks for taking the question I wanted to start on the consumer side can you just give us some more color on what youre seeing in the competitive landscape today and in particular I'm curious if you're noticing any change in the advertising behavior or the types of strategies being used in the environment today relative to the environment that you've navigated throughout last year and maybe.

From a higher level would love to get your thoughts on how youre expecting the b to C competitive landscape to evolve going forward.

Yes, so vikram.

Yeah, so Vic, we're happy to do that. And, you know, Charles.

Happy to do that and Charles.

Focused on that as well so let me, let me say a couple of things.

focused on that as well. So let me say a couple things. We...

We haven't experienced in the first quarter any meaningful increase in advertising cost. Now, we have experienced over the past several quarters.

We haven't experienced in the first quarter any meaningful increase in advertising cost.

Now we have experienced over the past several quarters increased pressure largely driven through increased competition in the space.

increased pressure largely driven through increased competition in the space.

We, you know, we are certainly aware of what others are saying, but we're really focused on optimizing the spend that we participate in. And so you've seen us.

We.

We are certainly aware of what others are saying, but we are really focused on.

Optimizing the spend that we participate in and so you've seen us are trending on spend come down now sequentially for three quarters and our <unk> continues to rise sequentially for three quarters.

are trending on spend come down now sequentially for three quarters.

And ARPU continues to rise sequentially for three quarters. And we've now begun to work on improving our conversion. So as I mentioned in my opening remarks,

And we've now begun to work on improving our conversion.

As I mentioned in my opening remarks, we had the first positive trend in four quarters in an improvement in conversion and a reduction in CAC and much of that was really driven by initiatives that werent formally launched in <unk>.

We had the first positive trend in four quarters.

in an improvement in conversion and a reduction in CAC. And much of that was really driven by initiatives that weren't formally launched until March.

March.

So, and we have other things that we believe we can do to continue to improve that performance.

So our and we have other things that we believe we can do to continue to improve that performance.

I would say that...

I would I would say that.

We're striving to have a very disciplined return on invested capital with our B2C business.

We are striving to have a very disciplined return on invested capital with our D to C business.

And the other piece of the equation for us is the ability to use what is, we think, we've maintained a leading brand in the space.

And the other piece of the equation for us is the ability to use <unk>.

What is we think we've maintained it.

A leading brand in the space.

to really drive incremental conversion with our growing network of B2B customers.

To really drive incremental conversion with our growing network of B to B customers.

So, you know, you heard me talk about this and I think this is unique for us.

You heard me talk about this and I think this is unique for us.

unification of the funnel. We literally talked about that in the third quarter call. We talked again about it in the fourth quarter. We've just begun to

Unification of the funnel, we literally talked about that in.

Third quarter call, we talked it again at about it in the fourth quarter, we've just begun to.

<unk>.

implement some testing, quite extensive testing now in our consumer-driven funnel that is demonstrating some really interesting and exciting results.

Implement some testing quite.

Quite extensive testing now in our consumer driven funnel that is demonstrating some really interesting and exciting results.

to increase our penetration and utilization of our B2B customers through that channel. So we think that for us is also a unique benefit from our consumer advertising spend.

To increase our penetration and utilization of our <unk> customers through that channel. So we think that for US is also a <unk>.

<unk> benefit from our consumer advertising spend converted into be debate.

Okay. Thank you and then maybe a follow up question on the <unk> side I'm. Just curious if you can talk about how the selling process has evolved there obviously theres a lot of moving pieces in the macro environment right. Now you talked about the competitive landscape continues to evolve as well I'm just wondering how are customers adjusting their buying process.

Thank you. And then maybe a follow up question on on the B2B side. I'm just curious if you can talk about how the selling process has evolved there. You know, obviously, there's a lot of moving pieces in the macro environment right now. You talked about the competitive landscape, you know, continues to evolve as well. I'm just wondering, you know, how are customers adjusting their buying processes and decision making processes in this environment? And you know, what types of adjustments are you making to your kind of marketing approach in that environment, if any, to kind of react to that? I would great to hear your thoughts there as well. Thanks.

And decision making processes in this environment.

What types of adjustments are you, making to your marketing approach in that environment, if any to kind of react to that I would want to hear your thoughts there as well, yes. So vikram actually again I am going to tell you for us the first quarter, we added covered lives.

Yeah, so Vikram, actually, again, I'm going to tell you for us the first quarter, we added coverage.

We added sessions, we added DTE customers.

We added.

Sessions.

We added DTE customers.

We signed our first million dollar annual revenue account. We have

We signed our first million dollar.

Annual revenue account we have.

I would suggest a reasonably robust pipeline of potential customers.

I would suggest a reasonably robust pipeline of.

Potential customers to add to our DTE business coming into Q2.

to add to our DTE business coming into Q2.

We're not really seeing a change in the pace of demand for B2B services for behavioral health care, quite the opposite. It continues to be, I think, top of mind for companies and for...

We're not really seeing.

Change in the pace of demand for B to B services for behavioral health care quite the opposite.

Continues to be I think top of mind for companies.

And for payers.

And this is still, unfortunately in the US, a huge unmet medical need. And access still remains remarkably challenged. And we think our solution set, both for our DTE accounts and for our payers is actually quite powerful in addressing those needs.

And this is still unfortunately in the U S a huge unmet medical need.

And access still remains remarkably challenged and we think our solution set both.

For for our DTE accounts and for our payers is actually quite powerful in addressing those needs. So we're not we're not really seeing it change in buying patterns I will say the one caveat is.

So we're not really seeing a change in buying patterns. I will say the one caveat is, I mentioned in the introductory.

I mentioned in the introductory remarks, we are increasingly targeting larger accounts.

We are increasingly targeting larger accounts.

And, you know, the general selling cycle of those accounts, as you might expect, are longer. They have RFPs.

And.

General selling cycle of those accounts as you might expect are longer they have rfps.

You know, those tend to go through a little bit more having worked at a very large company in my prior life, there are more process driven, and they take time. So while we have a robust pipeline of those opportunities, they'll be lumpier in nature and, you know, and they can have a, you know, quarter to quarter swing on our trend line, but the trend is still up into the right.

Those tend to go to a little bit more having worked at a very large company and my prior life. There are more process driven and they take time. So while we have a robust pipeline of those opportunities there'll be lumpier in nature and.

And they can have.

Quarter to quarter swing on our trend line, but the trend is still up into the right.

Okay. Thank you.

Okay.

Our next question comes from Ryan Daniels with William Blair.

Our next question comes from Ryan Daniels with William Blair.

Yeah, guys, thanks for taking the questions. And congrats on the progress, I guess, really towards all the goals you laid out. Let me start with one, you mentioned ARPU is also increasing, which is a nice trend to see what's driving the move.

Yeah, guys. Thanks for taking the questions and congrats on the progress I guess really towards all the goals you laid out.

Let me start with the one you mentioned <unk> is also increasing which is a nice trend to see what's driving the move to more video sessions is that something youre actively pushing or marketing differently or is it just consumers adopting that more.

to more video sessions. Is that something you're actively pushing or marketing differently, or is it just consumers adopting that?

You know, it's a combination. Look, I think we're doing some smart things from a marketing standpoint because we like the higher ARPU. But honestly, it's a demand driven functionality. We're seeing that.

It's a combination look I think we're doing some smart things from a marketing standpoint, because we liked the higher <unk>.

But honestly, it's a demand driven.

Our functionality, we are seeing that by the way Ryan we're seeing that in our <unk> business as well there is an increasing as where we are re upping clients theyre moving from texting only plans to texting plus video or moving completely.

By the way, Ryan, we're seeing that in our B2B business as well. There is an increasing.

as we're re-upping clients, they're moving from texting only plans to texting plus video or moving completely to live video.

The live video.

It's.

It's for us, it is not only a positive from an ARPU standpoint, but Jennifer mentioned the opportunity for us to improve the productivity of our W-2 therapists, which is called our NPP, our National Provider Practice.

It's for US it is not only a positive from an <unk> standpoint, but Jennifer mentioned, the the opportunity for us to improve the productivity of our W. Two therapists, which is called <unk>.

<unk> a national provider practice.

One of the ways, we intend to do that is to move.

One of the ways we intend to do that is to move.

that group more towards live video, which allows us to more effectively manage their schedules.

That group more towards live video, which allows us to more effectively manage their schedules. It also allows us to do a better job with our with our members by actually doing some basic.

to do a better job with our members.

by actually doing some basic forward scheduling, regular scheduling. And so it not only has a benefit from a productivity standpoint, but we think.

Forward scheduling regular scheduling and so it not only has a benefit from a productivity standpoint, but we think it will increase utilization and retention because we're able to more more actively manage the interaction with therapists and their <unk>.

it will increase utilization and retention because we're able to more actively manage the interaction with therapists and their members.

Members alternately.

The best news in that is we think duration improves efficacy. In fact, we know that from our clinical work. And so we think this actually improves outcomes and makes our members healthier and more productive.

The best news in that is.

We think duration improves efficacy and fat.

And we know that from our clinical work and so we think this is this.

Actually improves outcomes and makes our members healthier and more productive.

You didn't mention this, but I assume the improvement in the matching algorithms is not only helping with conversion rates, but is that also driving longer lengths of treatment because you're getting them to the right therapist, it's a better experience? You know, it's an excellent question. Part of the reason I didn't mention it is we implemented it in March, so I think it would be misleading from a data standpoint. We think it will.

Helpful Color and then you didn't mention this but I assume the improvement in the matching algorithms is not only helping with conversion rates, but is that also driving longer lengths of treatment.

Because youre getting them to the right therapist, it's a better experience.

It's an excellent question part of the reason I mentioned it is where we implemented in March so I think it would be misleading from a data standpoint, we think it will.

But we don't have enough data to come back to you yet.

But we don't have enough data to come back to you yet. We're clearly keeping an eye on that. Okay.

Clearly keeping an eye on that.

We'll stay tuned and then.

You know, good news on the strength of the pipeline to D2E customers in the first million dollar sale. So congrats on that. I'm curious, with that change though, does it require any changes in the size of your sales team?

Good news on the strength of the pipeline to <unk> customers in the first million dollar sale. So congrats on that.

With that change, though does it require any changes in the size of your sales team.

the way you are going to market their pitching the product whether it's a employee benefit or ROI driven just anything like that sales force changes product needs

The way you are going to market there are pitching the product whether it's a employee benefit our ROI driven.

Anything like that Salesforce changes product yes.

Yeah. So it's a really great question. As I mentioned, actually, again, in the introductory remarks, we added about 25% more individuals to our sales team across B2B in the first quarter. That was basically our target. We were very successful in hiring and adding folks because people are excited to come to us because they see the opportunity.

Et cetera.

It's a great. It's a really great question.

We as I mentioned actually again in the introductory remarks, we added about 25% more individuals to our sales team across b to b in the first quarter we were.

That was basically our target we were very successful in hiring and adding folks because people are excited to come to us because they see the opportunity.

The other big thing we're doing is we've gotten way more rigorous in targeting. And so that's really important. And then I'll tell you the third thing that we're doing, which is we've gotten way more rigorous in targeting.

The other big thing, we're doing is we've gotten way more rigorous and targeting.

And so that.

That's really important.

And then I will tell you the third thing that we're doing which is.

We are.

We are improving Jennifer talked about our ability to respond to the increased cost of our therapists, which we thought was really important to do for a variety of reasons.

We're improving, Jennifer talked about our ability to respond to the increased cost of our therapists, which we thought was really important to do for a variety of reasons.

But we've also got increased costs across the board. Obviously everyone is dealing with the increased costs.

But we've also got increased costs across the board obviously, everyone is dealing with.

Increased cost, we're trying to drive much more effective.

We're trying to drive much more effective relationships with our customers that reflect the quality and the efficacy of our services.

Relationships with our customers that reflect the quality and the.

The efficacy of our services and we're we're having.

And we're having, you know, I would say it's early days, we're having real success with that in part.

I would say it's early days, we're having real success with that.

In part, we're going to be adding and I know this is maybe more than you asked for but we are.

We're going to be adding, and I know this is maybe more than you asked for, but we're really

We're really.

We're doing some.

We're doing some research right now that we think will help.

Research right now that.

That we think will help.

continue to validate the fact that people who use us as a benefit for their employees get reduced.

Continue to validate the fact that people who use us as a benefit for their employees get reduced turnover increased satisfaction increase morale and and reduced medical cost and so as a result of of we think.

turnover, increased satisfaction, increased morale, and reduced medical costs.

And so as a result of we think a lot of that work that's been done.

A lot of that work that's been done.

We think there's a pretty high ROI for for our employers in utilizing our services and I know I'm going on on this but I'll add one more thing, which is really exciting for us we introduced a full suite.

You know, we think there's a pretty high ROI for our employers in utilizing our services. And I know I'm going on on this, but I'll add one more thing which is really exciting for us.

We introduced a full suite.

of, and I haven't really, I didn't talk enough about this, we introduced Talkspace Self-Guided, which is a full suite of digital product that both has clinical efficacy as well as a broad set of applicability directly to our B2B customers.

And I haven't really I didn't talk enough about this we introduced talk space self guided which is a full suite of.

Digital product that is.

Both has clinical efficacy as well as a broad set of of applicability directly to our <unk> customers and it has really been driven as a b to b product set we just started introducing that as an.

and it has really been driven as a B2B product set. We just started introducing that as an offering for our both DTE and our payer customers, and the early reaction to that is really quite positive. And what it allows us to say is we've got a full suite.

Offering for our booth, PPE and our payer customers and the early reaction to that is really quite positive and what it allows us to say is we've got a full suite from self help to therapy to psychiatry. So we can be sort of a one stop.

from self-help to therapy to psychiatry, so we can be sort of a one-stop shop for behavioral needs for most of what employers are looking for.

<unk> shop for behavioral needs for most of what employers are looking for.

Okay perfect Thats very helpful. I appreciate all the color. Thanks.

Okay, perfect, that's very helpful and I appreciate all the power, thanks.

Our next question comes from Stephanie Davis with SBB Leerink.

Our next question comes from Stephanie Davis with SBB layering.

Hey guys, thank you for taking my question. I just have a quick question on the arc of the B2B business.

Hi, guys. Thank you for taking my question I just have a quick question on the arc of the <unk> business as.

As we think about the growth and evolution, how should we think about the end market demand is.

As we think about growth and evolution, how should we think about the end-market demand? Is there structurally enough...

Is there structurally enough.

wallet available for pure play employer wins or the current backdrop with employer fatigue we see greater focus on something else such as EAP enablement or a continuation from your recent pay

Wallach available for pure play employer wins or the current backdrop with the player fatigue could we see greater focus on something else.

PNM moment or a continuation from your recent payer wins.

Yes.

Yeah, I, you know, Stephanie, again, I'm not exactly sure what you're looking at or referring to. On the payer side, as we mentioned, we signed up a big national account at the end of the first quarter. We added more lives with another large national player, and we've got a pretty robust pipeline of people.

Definitely again, I am not exactly sure what you're looking at or referring to.

On the payer side as we mentioned, we signed up a big National account at the end of the first quarter. We added more lives with another large national player and we've got a pretty robust pipeline of.

New payer relationships that we have not penetrated and I would say across the board on the payer side.

new payer relationships that we have not penetrated, and I would say across the board on the payer side.

Everyone is facing significant challenges in meeting the demand of their members.

Everyone is facing significant challenges in meeting the demand of their members. So on that side. We think there's there's lots of opportunity and we haven't even we haven't even really scratched the surface of some of the <unk>.

So on that side, we think there's lots of opportunity. And we haven't even really scratched the surface of some of the things where we've got planned to drive utilization and penetration of the lives we currently now cover. On the DTE side, again, I think our

Things we have.

Got planned to drive utilization.

And penetration of the lives. We currently now cover on the DTA side again.

I.

I think our.

Pipeline is pretty robust.

We, while we're proud of all the accounts that we've added, it's an incredibly small number relative to the size of the opportunity.

We while we are a we're proud of all of the accounts that we've added.

It's an incredibly small number relative to the size of the opportunity set.

And we continue to experience inbound calls from individuals.

And we continue to experience inbound.

Calls from.

From individuals.

We continue to see circumstances where we're pitching and there's very little competition. And we continue to win more of our fair share of things where there is competition.

Continue to see circumstances, where we're pitching and there's very little competition and we continue to win more of our fair share of things where there is competition.

because people really like our product. And I just have to say the strength of the brand is really important. And I think we're making the product better every day. So I can't, I'm a little bit confused by the predicate of your question.

Because people really like our product and I have to say the strength of the brand is really important and I think we're making the product better every day.

No.

I can.

I'm a little bit confused by the predicate of your question.

But we are we remain reasonably optimistic about the opportunity set to BBB.

but we remain reasonably optimistic about the opportunity set in B2B.

So let's put this another way for my follow-up then. We are seeing in our channel checks for employers that there's a lot of fatigue for all of the different PMPM solutions that exist in the market and that they've been pitching for the past two years. So a lot of the employer facing solutions just aren't doing as well recently, candidly.

So let's go there is another way for my follow up that we are seeing in our channel checks for employers, but theres a lot of the team for all of the different PM TM solutions that exist in the market and that they can pitch during the past two years. The lives employer facing solution, just arent doing as well as recently candidly.

So is there more creative pricing beyond a rote PMPM, where you're seeing a lot of traction, such as just offering as an insured benefit, or are there alternative ways you were thought?

Is there more creative pricing beyond PM, TM, but youre seeing a lot of traction.

Offering as an insured benefits or are there alternative ways you with that market.

So there's no question for us, we've had a pretty...

So there is no question for us.

We've had a.

A pretty.

unilateral approach to our DTE business.

Unilateral approach toward DTE business.

I would say we think there's a lot of opportunity over time to drive the fact that we feel very strongly about our clinical efficacy and our outcomes data. And so are there going to be more opportunities for us to be creative? Absolutely. I think there are also more opportunities for us to become quick.

I would say, we think there is a lot of opportunity over time to drive.

The fact that we feel very strongly about our clinical efficacy and our outcomes data and so are there going to be more opportunities for us to be creative absolutely.

I think there are also more opportunities for us to become.

Because of that.

closer, better partners with our employers. And, you know, we're in active discussions with a number of them right now. So I'm not, again, fatigue would not be the adjective that I would use to describe any of our B2B business, quite the opposite. So, I can't.

Closer better partners with our employers.

And we're in active discussions with a number of them right now so I'm not again fatigue would not be the adjective that I could use to describe any of our <unk> business quite the opposite so.

I cant speak to competitors don't.

Have a view.

have a view. I can speak to what we are offering and

I can speak to what we are offering and.

You know, we have a pretty rigorously, clinically, demonstrably.

We have a we have a pretty rigorously clinically demonstrably.

good product. And I would say this digital offering we just offered is differentiated from a lot of things out there, right? It's got some real clinical efficacy to it. It also incorporates

Good product and I would say this this digital offering we just offered is differentiated from a lot of things out there right.

It's got some real clinical efficacy to it it also incorporates.

workshops and sessions with life therapists. There's a lot. And then it has the natural extension for those individuals that need more to move right into our therapy product. So, you know, I, I

Workshops and sessions with life therapist, there is a lot and then it has the natural extension for those individuals that need more to move right into our therapy product.

No.

I remain pretty.

Look, it's, you know, it's, it's a tough world out there, but I remain pretty optimistic. Jennifer, you want to add something? I just wanted to add, you know, so there's the new business and expanding relationships with payers, but

Okay.

It's a tough world out there, but I remain pretty optimistic Jennifer you wanted to add something I just wanted to add.

So there is the new business and expanding relationships with payers, but.

You know, as Doug mentioned, a huge opportunity for us is with the 76 million covered lives that we have in hand. And I just want to write, we grew sessions 11% quarter over quarter. This is where we have, I think, the largest opportunity. And this is where the efforts that we have, as we've described in the operational agenda, related to the product and ensuring we're optimizing that customer experience, unifying the funnel, making it easier for those covered patients to use Talkspace.

Doug mentioned that huge opportunity for us is with the 76 million covered lives that we have in hand.

Alright, we grew sessions, 11% quarter over quarter.

This is where we have I think the largest opportunity and this is where the efforts that we have as we've described in the operational agenda relating to the product and ensuring we're optimizing that customer experience unifying the funnel, making it easier for those covered kind of a patient's T. His talk space. These are all efforts that we see playing out in driving helping us.

These are all efforts that we see playing out and driving, helping to drive growth in the future. Helpful, thank you.

Hi, Chris.

In the future.

Helpful. Thank you.

As a reminder that is star then one to ask a question.

Our next question comes from Glen Santangelo with Jefferies.

Yes, Thanks for taking my question, Doug I hate to do this but I do want to follow up on this PVC side, one more time.

Yeah, thanks for taking my question. Hey, Doug, I hate to do this, but I do want to follow up on this B to C side one more time, but I think it was a good question.

Sure.

of people. You know, I think if you listen to, you know, one of your competitors last week, they talk about, you know, a private player potentially doing some irrational things, and I think everyone, including yourself, is obviously aware of some of the financing that's gone on on the private side, and in particular, some more recent financings, and now you've seen some meaningful share shift, and I guess that leaves people sort of wondering

People I think if you listen to one of your competitors last week they talk about <unk>.

As a player potentially doing some irrational things and I think everyone, including yourself is obviously aware of some of the financing that's gone out on the private side and in particular as some more recent financings and that you've seen some meaningful share shift and I guess that these people sort of wondering.

you know, about the barriers to entry into this business and and you're at a time where where cost space is trying to cut costs and become more.

About the barriers to entry into this business in and you're at a time, where we're basically trying to cut cost and become more.

you know, financially efficient, lower the CAC at a period where others seem to be investing sort of very heavily and seem to be taking some shares. So I was just wondering if you could maybe, you know, provide your thoughts on that dynamic on how that plays out on both, not only the B2C side, but also, you know, if that ultimately spills into the B2B side. So...

Financially efficient and lower the CAC at a period, where others seem to be investing very heavily and seem to be taking some share. So I was just wondering if you could maybe provide your thoughts on that dynamic on how that played plays out on both not only the b to C side, but also.

Ultimately spills into the <unk> side.

So.

Yes, I think.

Look I can I can.

Let me just reiterate and start off with the facts of where March was for us, which we made a number of changes that improved.

Let me just reiterate and start off with the facts of where March was for us, which we made a number of changes that.

Proved conversion and reduced CAC and those two facts.

conversion and reduced CAC. And those two facts that I would not have been able to say that for the preceding four quarters.

I would not have been able to say that for the preceding four quarters.

So I can't tell you what the world will look like going forward, but I can tell you that.

So.

I can't tell you what the world will look like going forward, but I can tell you that.

We believe there are still a number of things within our control to improve conversion and reduce CAC.

We believe there are still a number of things within our control to improve conversion and reduce cash.

We want our share to be focused on.

We want our share to be focused on...

high return investments.

High return investments.

That's where we are and we're going to continue to drive towards, you know, it's going to take us

Where we are and we're going to continue to drive towards its going to take us.

Where were we.

You know, we had a better quarter from a cash standpoint. We have our own set of expectations to continue to improve our cash efficiency, and we're going to be working on that every day.

We had.

A better quarter from a cash standpoint.

We have our own set of expectations to continue to improve our cash efficiency and and we're going to be working on that every day.

I, you know, we've got a unique, I will just say we have a what I believe is a unique product.

We've got a unique I will just say we have a what I believe is a unique product.

And others have that have generated, you know, raised a lot of capital have different

And others have that have generated.

Raised a lot of capital have different.

Approaches to the market.

Some of those have attracted a fair amount of press coverage in the last few days.

Some of those have attracted a fair amount of press coverage in the last few days.

That's not a path that we've chosen to go on. We're really focused on these digital self-help capabilities, therapy, and an approach to psychiatry which is different than others.

That's not a path that we've chosen to go on we're really focused on.

These digital self help capabilities therapy.

And an approach to psychiatry, which is different than others.

No.

Our objective is to spend our shareholder money wisely.

Our objective is to spend our shareholder money wisely and generate

And generate a good return.

Over time, for us, I think that means more of our business comes out of the B2B side, where we've got a really good presence today, and we've got really good product, and we've got really solid momentum.

Over time for US I think that means more of our business comes out of the B to B side.

Sure.

We've got a really good presence today and we've got really good product and we've got really solid momentum.

And so, and the last piece I'm going to just say, which we have not begun to take advantage of at all, but I think it is clearly in our plans. We have great data.

And so and the last piece I'm going to just say, which we have not begun to take advantage of it all but I think it is clearly in our <unk>.

Plans, we have great.

Data and analytics and <unk>.

And eventually, I think we are very well positioned to be a leader in value-based care for behavior.

<unk>.

I think we are very well positioned to be a leader in value based care for behavioral.

And I do not believe others are similarly situated.

And and I do not believe others are similarly situated.

Hey, Doug maybe just follow up on the balance sheet right. There is still no guidance.

Hey, Doug, maybe I can just follow up on the balance sheet, right? There's still no guidance, and so as you look forward, I mean, I'm guessing you don't want to give us too much of a clue, but, you know, we're sitting with $184 million in cash. The company lost $20 million this quarter. It's unclear to us if it stabilizes from here or gets better from here and how we should think about, you know, that cash burn rate relative to the capital structure, you know, of the company today, and, you know,

And so as you look forward.

I guess, you don't want to give us too much of a clue.

But.

We're sitting with $184 million in cash or the company lost $20 million. This quarter. It is unclear to us if it stabilizes from here it gets better from here and how we should think about that cash burn rate relative to the capital structure.

Yes company today.

Sorry, did I cut you off? No, no, it's a really good question. So let me just make sure we're clear on the underlying for the quarter.

Sorry.

No no.

Really good question. So let me just make sure we're clear on the underlying for the quarter. So we we actually because we are focused on cash across the income statement and the balance sheet we burned.

So we actually, because we are focused on cash across.

The income statement and the balance sheet, we burned a little more than 13 million in cash this quarter because we actually drove some real efficiency in our working capital.

A little less than a little more than $13 million in cash. This this quarter, because we actually drove some real efficiency in our working capital.

And that was again, part of a very proactive management team.

And that was again part of a very proactive management team finding new ways to optimize use of cash.

finding the ways to optimize use of cash.

Second thing, I think what Jennifer said was you should think that over time, cash should better track EBITDA, and EBITDA for the quarter was a loss of about $18.5 million, if I remember the number off the top of my head.

Second thing I think what what Jennifer said was you should think that over time cash.

Better a better track EBITDA and EBITDA for the quarter was.

A loss of about $18 $5 million, if I'm remembering the number of top of my it's correct.

And then the last thing I just said is we are going to continue to drive more efficiency out of the business in a variety of ways.

And then the last thing I. Just said is we are going to continue to drive.

More efficiency out of the business.

Variety of ways.

So our expectation is that you will see cash burn coming down over time. As we continue to implement a lot of these changes, they're both good for the customer, they're good for our members, they're good for our employees, and they're ultimately have to be good for our balance sheet. So that's.

Our expectation is that you will see cash burn coming down overtime.

As we continue to implement a lot of these changes they are both good for the customer. They are good for our members. They are good for our employees and their ultimately have to be good for our balance sheet. So that's.

That's sort of what I'm going to say, we're really highly focused on cash and having all the resources, we need to get to a place where the shareholders are in a lot of value.

That's sort of what I'm going to say. We are really highly focused on cash and having all the resources we need to get to a place where the shareholders are seeing a lot of value.

Okay. Thanks for the Thomas.

That concludes today's question and answer session I would like to turn the call back to Dr. <unk> for closing remarks.

That concludes today's question and answer session. I'd like to turn the call back to Doug Bromstein for closing remarks.

Yes, so I want to thank everybody for listening we look forward to.

Yeah, so I want to thank everybody for listening. We look forward to, you know, continue to engage and make progress. I do want...

<unk>, new engage and make progress I do want folks to remember.

folks to remember, you know, we're on a journey together. I think we've made some really good steps forward. I hope you're starting to see that in the financials.

We're on a journey together I think we've made some really good steps forward I hope you are starting to see that in the financials.

We have more room to go and your expectations should be consistent with mine, which the management team is really focused on creating value for the shareholders and.

We have more room to go and your expectations should be consistent with mine which the management team is really focused on creating value for the shareholders and you know we hope to continue to demonstrate that progress in the quarters going forward.

We hope to continue to demonstrate that progress in the quarters going forward. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Good day and thank you for standing by. Welcome to the Talkspace First Quarter 2022 Earnings Conference Call. At this time, all participant lines are in listen-only mode.

Good day, and thank you for standing by and welcome to the <unk> first quarter 2022 earnings Conference call.

At this time all participant lines are in listen only mode.

After the presentation, there will be a question and answer session.

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I'd now like to turn the conference over to Mike Lovell, Investor Relations Director.

I would now like to turn the conference over to Mike Lovell Investor Relations Director.

Good evening, everyone. Thanks for joining Talkspace's 2022 First Quarter Earnings Call. I hope you've had the opportunity to

Good evening, everyone. Thanks for joining talks basis 2022 first quarter earnings call.

I hope you've had the opportunity to access the press release.

We have a presentation of our earnings materials that you should see on talk spaces IR site.

We have a presentation of our earnings materials that you should see on Talkspace's IR site. We'll use the presentation to walk you through today's remarks.

We'll use the presentation to walk you through todays remarks.

We will begin with comments from Chairman and Interim Chief Executive Officer Doug Braunstein, followed by Chief Financial Officer Jennifer Falk. Both are available for questions.

We will begin with comments from chairman and interim Chief Executive Officer, Doug Braunstein.

<unk>, followed by Chief Financial Officer, Jennifer <unk>.

We're available for questions following the prepared remarks.

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.

Certain measures we will 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, Talkspace.com.

Reconciliations of these non-GAAP measures are included in our earnings release and on our website talk space Dot com.

I also want to remind you that we'll be discussing forward-looking information today, which may include forecasts, targets, and other statements regarding our plans, goals, strategic priorities, and anticipated financial results.

I also want to remind you that we'll 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 in 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.

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.

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 2. And now I'll turn the call over to Doug, who will begin on slide 3.

For more information Please review, our safe Harbor disclaimer on slide two.

And now I'll turn the call over to Doug who will begin on slide three.

Thanks, Mike and thank you all for joining us today to discuss our first quarter 2022 results.

Thanks, Mike, and thank you all for joining us today to discuss our first quarter 2022 results.

I'm going to begin with a snapshot of the first quarter financial performance and then discuss

Im going to begin with a snapshot of the first quarter financial performance and then discuss the progress we're making towards the operational and execution priorities, we outlined during our fourth quarter earnings call.

progress we're making towards the operational and executional priorities we outlined during our fourth quarter.

So you can see on slide three, the revenue grew 11% year over year.

So you can see on slide three EBIT revenue grew 11% year over year.

driven by an expansion of our B2B franchise.

Driven by an expansion of our <unk> franchise.

which demonstrated year-over-year and quarterly growth in revenues, in sessions.

Which demonstrated year over year and quarterly growth in revenues and <unk>.

Sessions in covered lives.

We added Beacon, a significant new national account, at the end of the quarter. And we expanded our relationship with Optum.

We had begin a significant new national account at the end of the <unk>.

Quarter.

And we expanded our relationship with Optum in Q1.

We also added 31 new accounts in the quarter for our DTE or direct to employer.

We also added 31, new accounts in the quarter for our DTE or direct to employer business, including large national accounts, such as Kimpton hotels in resort and restaurants.

including large national towns such as Kempton Hotels and Restaurants.

and two significant broker houses, Gallagher and Align.

Two significant broker houses Gallagher and alliance.

Our B to C business was down year over year, but was essentially flat quarter on quarter despite another sequential reduction.

Our b to C business was down year over year, but was essentially flat quarter on quarter. Despite another sequential reduction in our advertising spend.

We implemented several changes to the funnel in March that have begun to yield modest improvements in our conversion metrics and reduced our customer acquisition costs.

We implemented several changes to the funnel in March that have begun to yield modest improvements in our conversion metrics.

And reduced our customer acquisition costs.

So if you turn to slide four.

You'll recall that in January , we outlined six strategic priorities that the management team would be focused on.

You will recall that in January we outlined six strategic priorities that the management team will be focused on to improve our performance.

Page four highlights some of the items we introduced in Q1 that we believe represent progress towards these priorities and impacted the performance and the KPIs we track in the first quarter. So first, we began.

Four highlights some of the items, we introduced in Q1 that we believe represent progress towards these priorities.

Impacted the performance and the Kpis, we track in the first quarter.

So first.

We began beta testing in March unifying our funnel SM.

Essentially making it easier for B2C and B2B customers to find a provider directly through our consumer website and app.

Essentially making it easier for <unk> customers to find to provider directly through our consumer website and apps.

As a reminder, we have several million non-unique visitors to our site each quarter. And the early results from these.

As a reminder, we have several million non unique visitors to our site each quarter.

And the early results from these tests are encouraging.

We believe that this can drive both penetration and utilization in our B2B business over time. In addition.

We believe.

That this can drive penetration and utilization in our <unk> business over time.

In addition, we made an important change to our matching process based on consumer research and we made that change in March as well.

based on consumer research, and we made that change in March as well.

This change which uses our proprietary algorithm to deliver quick.

This change, which uses our proprietary algorithm to deliver quick and

Appropriate matches drove a higher conversion rate and a lower CAC in March which favorably impacted quarterly results.

drove a higher conversion rate and a lower TAC in March, which favorably impacted quarterly results.

Second.

We continue to make progress towards expanding capacity and increasing satisfaction of our clinical.

We continue to make progress towards expanding capacity and increasing satisfaction of our clinical network.

The marketplace for clinical talent, as you know, is undoubtedly competitive.

The marketplace for clinical talent as you know is undoubtedly competitive today.

And we're taking steps to make Talkspace a platform of choice for providers.

And we're taking steps to make talk space a platform of choice for providers.

We've accelerated multi-state licensing, we improved our provider dashboard, and we adjusted our clinical compensation.

We've accelerated multi state licensing we improved our provider dashboard.

And we adjusted our clinical compensation policies, making it both more transparent as well as more responsive to the current market environment.

making it both more transparent, as well as more responsive to the current market environment.

As a result of these actions, we're seeing early signs of improving therapist satisfaction and our most recent surveys.

We're seeing early signs of improving therapist satisfaction in our most recent survey.

grew our average hourly engagement from our existing therapists during the quarter.

We grew our average hourly engagement from our existing therapist during the quarter.

and we had our strongest recruiting month in March for new contracted therapists.

And we had our strongest recruiting month in March for new contracted surface over the past year.

Sure.

We're continuing to add customers, resources, focus, and products to our B2B business.

We're continuing to add customers resources focus and products to our <unk> business.

We introduced a bundled offering product late in the first quarter for a B2B party.

We introduced a bundled offering product late in the first quarter for our <unk> partners, which now includes our new cost base self guided product.

which now includes our new cost-based self-guided.

And we grew our B2B sales team over 25%.

And we grew our <unk> sales team over 25% in the quarter.

Improved targeting and focus in our DTE business introduced in Q1 is helping us to build a pipeline of larger DTE customers.

Improved targeting and focus in our DTE business introduced in Q1 is helping us to build

Our average contract size was up in Q1, and we signed our first large million-dollar-plus account.

Our average contract size was up in Q1.

And we signed our first large million dollar plus account this year.

while the cycle time for these larger clients is often longer and the revenue growth.

While the cycle time for these larger clients is often longer than the revenue growth can be lumpier.

targeting these opportunities today more directly with our sales force.

Targeting these opportunities today and work directly with our sales force.

Four.

We continue to optimize our consumer businesses to deliver improved efficiency.

We continue to optimize our consumer businesses to deliver improved efficiencies as I mentioned, we implemented a number of changes to the funnel in early March that we believe are modest improvements in conversion.

As I mentioned, we implemented a number of changes to the funnel in early March that we believe are modest improvements in conversion rates.

and customer acquisition metrics compared to last quarter.

Customer acquisition metrics compared to last quarter.

In fact, this is the first positive quarterly trend in our conversion data in the past four quarters.

In fact this is the first positive quarterly trend in our conversion data in the past four quarters for the company.

So while media spend was reduced by 19% sequentially, pursuant to our plans coming into the quarter, adjusted.

So while media spend was reduced by 19% sequentially pursuant to our plans coming into the quarter.

Adjusted sequential revenues were flat.

as we saw increased traction for our highest service.

As we saw increased traction for our highest service video products.

We do expect to continue to reduce aggregate B2C media spend going forward as we

We do expect to continue to reduce aggregate b to C media spend going forward.

As we better manage our cash flows.

And that should result in a smaller revenue base for this business, but we believe management can implement changes to further improve our members experience while also increasing efficiency.

And that should result in a smaller revenue base for this business, but we believe management can implement changes.

Further improve our members' experience, while also increasing efficiencies in both tax and unit economics.

Our strategic priority is continuing to innovate and enhance our product.

Our fifth strategic priorities, continuing to innovate and enhance our product suite.

minor changes like simplifying our onboarding process for our MBH members in their initial evaluation sessions, as well as more significant product launches like Talkspace Self-Guided.

Minor changes like simplifying our onboarding process for our MBE each members in their initial evaluation sessions as well as more significant product launches like park space self guided.

do allow us to build towards a better member experience and offer a broader solution set for our B2B customers.

Do allow us to build towards a better member experience and offer a broader solution set for our <unk> customers.

And finally as.

as we continue to focus on optimizing cash flow across the business. As I mentioned on our last call, we believe we have ample cash.

As we continue to focus on optimizing cash flow across the business as I mentioned on our last call. We believe we have ample cash resources to enhance and expand our capabilities.

in ways that both deliver operating leverage over time, as well as value to our shareholders.

In ways that both deliver operating leverage over time as well as value to our shareholders.

The basic operating progress like introducing Kpis scorecards real time reporting.

like introducing KPIs, scorecards, real-time reporting.

have been both adopted and embraced throughout the broader organization.

Have been both adopted and embraced throughout the broader organization.

and has allowed us to make timelier, data-driven adjustments to our business plan.

And it has allowed us to make timely or data driven adjustments to our business plan.

As an example.

Actions taken this quarter generated efficiencies in our cash collections that positively reduced work

Actions taken this quarter generated efficiencies in our cash collections positively reduced working capital.

So while management clearly understands that we've got plenty of ongoing work ahead of us.

So while management clearly understands that we've got plenty of ongoing work ahead.

We believe that the actions we've taken in the first quarter reflect the first important step.

We believe that the actions we've taken in the first quarter reflects the first important steps in our path towards building shareholder value and delivering on our mission.

our path towards building shareholder value and delivering on our mission.

So with that, I'll turn the call over to Jennifer to provide details on our operating and financial performance. Jennifer, over to you. Thanks, Doug.

So with that I'll turn the call over to Jennifer to provide details on our operating and financial performance Jennifer over to you.

Thanks, Doug and good evening everyone.

I'll focus my comments on sequential results as we continue to believe this presentation is most useful to understand our performance beginning in November 2021, given the new management team, our evolving revenue mix, and the significant operational initiatives we identified at that time.

Focus my comments on sequential results as we continue to believe this presentation is most useful to understand our performance beginning in November 2021, given the new management team, our evolving revenue mix and the significant operational initiatives, we identified at that time.

Starting with slide five first quarter revenue was $32 million.

Starting with slide five, first quarter revenue was $30.2 million, up 3% sequentially on a reported basis from the fourth quarter.

Up 3% sequentially on a reported basis from the fourth quarter.

First quarter B2C revenue was $17.3 million, up 5% from the fourth quarter, with three percentage points of growth related to a $500,000 one-time non-cash reversal in deferred revenue associated with customers no longer active on the platform.

First quarter <unk> revenue was $17 $3 million.

5% from the fourth quarter with three percentage points of growth related to a $500000 onetime noncash reversal in deferred revenue associated with customers no longer active on the platform.

The remaining two percentage points of sequential growth were driven by improved mix in consumer plans partially offset by a lower number of active users.

The remaining two percentage points of sequential growth were driven by improved mix and consumer plans, partially offset by a lower number of active users.

B2B revenue was $12.9 million, up 1% on a reported basis from Q4.

<unk> revenue was $12 $9 million up 1% on a reported basis from Q4.

You will recall that Q4 of 2021 results included a favorable impact from revenue reserve on receivables of $800000 from prior periods.

You will recall that Q4 2021 results included a favorable impact from revenue reserve on receivables of $800,000 from prior periods.

Normalizing for that adjustment, sequential growth was 8%, driven primarily by growth in B2B sessions, and to a lesser extent, additional DTE customers.

Normalizing for that adjustment sequential growth was 8%.

Driven primarily by growth in <unk> sessions and to a lesser extent additional DTE customers.

Our first quarter gross profit declined 6% sequentially to $15 million with a gross margin of 49.8%.

Our first quarter gross profit declined 6% sequentially to $15 million.

The gross margin of 49, 8%.

down compared to Q4 primarily due to higher clinician costs and a revenue mix shift within the B2B business.

Down compared to Q4, primarily due to higher clinician costs.

On a revenue mix shift within the <unk> business.

Turning to slide six.

First quarter 2022, GAAP operating expenses were $36 million.

First quarter 2022 GAAP operating expenses were $36 million compared to $45 million in the fourth quarter.

Compared to $45 million in the fourth quarter.

This reduction was due to lower stock-based compensation and the elimination of non-recurring severance costs booked in Q4.

This reduction was due to lower stock based compensation and the elimination of nonrecurring severance costs.

In Q4.

Excluding non-recurring items, first quarter operating expenses were down slightly from the fourth quarter as lower media spend and lower employee-related expenses were partially offset by higher professional services fees.

Excluding nonrecurring items first quarter operating expenses were down slightly from the fourth quarter as lower media spend and lower employee related expenses were partially offset by higher professional services.

Fourth quarter net loss was $20 million and adjusted EBITDA loss was $18 million.

Fourth quarter net loss was $20 million and adjusted EBITDA loss was $18 million.

Our cash balance as of March 31st was $184 million, a reduction of $14 million from the year end.

Our cash balance as of March 31 was $184 million a.

A reduction of $14 million from the year of yearend.

We benefited in this quarter from actions taken to reduce the DSO for our receivables, which generated a one-time benefit of approximately $4 million.

We benefited in this quarter from actions taken to reduce the DSO for our receivables, which generated a one time benefit of approximately $4 million.

We expect cash burn to generally match, our EBITDA going forward.

We expect cash burn to generally match our EBITDA going forward.

Turning to slide 7 for a closer look at our B2B performance.

Turning to slide seven for a closer look at our <unk> performance.

As I mentioned earlier.

As I mentioned earlier, B2B revenue for the quarter grew 8% on a normalized basis, reflecting an increase in covered lives and sessions, as well as growth in our DTE customer base.

<unk> revenue for the quarter grew 8% on a normalized basis.

<unk> seen an increase in covered lives and sessions as well as growth in our DTE customer base.

We ended the quarter with approximately 76.5 million eligible lives, an increase of 11% versus the prior quarter.

We ended the quarter with approximately $76 5 million eligible lives and increase of 11% versus the prior quarter.

Number of sessions completed also increased 11% sequentially to almost 91,000.

Number of sessions completed also increased 11% sequentially to almost 91000.

We believe we have significant opportunities to continue to grow our B2B business as we execute our operational agenda to drive penetration in our covered lives, expand our relationships with existing health plan partners, and launch coverage with new payers.

We believe we have significant opportunities to continue to grow our <unk> business as we execute our operational agenda to drive penetration in our covered lives expand our relationships with existing health plan partners and launch coverage with new payers.

Enterprise revenue was up 5% sequentially, driven by the addition of 31 customers in the first quarter, partially offset by the loss of a large municipal customer that no longer had funding available for our program.

Enterprise revenue was up 5% sequentially driven by the addition of 31 customers in the first quarter, partially offset by the loss of a large municipal customer that no longer had funding available for our program.

We continue to see strong demand in our pipeline from employers seeking expanded mental health benefits for their employees.

We continue to see strong demand in our pipeline from employers seeking expanded mental health benefits for their employees.

Turning to slide eight for a closer look at our B2C performance, revenue grew 5% sequentially, of which 3% is related to the deferred revenue adjustment mentioned earlier.

Turning to slide eight for a closer look at our <unk> performance.

<unk> grew 5% sequentially of which 3% is related to the deferred revenue adjustment.

I mentioned earlier.

The revenue increase was driven by higher <unk>.

The revenue increase was driven by higher ARPU, as our members continued to migrate toward higher subscription tiers with a greater number of video sessions, partially offset by a 7% reduction in active members.

As our members continue to migrate toward higher subscription tiers with a greater number of video sessions, partially offset by a 7% reduction in active members.

Advertising spending was down 19% sequentially as we continued to optimize our marginal ROI.

Advertising spending was down 19% sequentially as we continued to optimize our marginal ROI.

The combination of modestly improved conversion and reduced advertising spend led to a modest improvement in quarterly contributions.

The combination of modestly improved conversion and reduced advertising spend led to a modest improvement in quarterly contribution.

Turning to our conclusion on slide nine, as Doug mentioned in his remarks, we continue to believe that initiatives we are focused on as a management team will drive growth and profitability and deliver shareholder value over time. We look forward to keeping you updated on our progress.

Turning to a conclusion on slide nine as Doug mentioned in his remarks, we continue to believe the initiatives. We are focused on as a management team will drive growth and profitability and deliver shareholder value over time.

We look forward to keeping you updated on our progress.

With that we'll open the call to questions.

If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone to withdraw your question press the pound key.

If you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. To withdraw your question, press the pound key.

Our first question comes from Charles <unk> with Cowen.

Yeah, thanks for taking the questions Doug and Jennifer. You know, if I could start with, on the BDC side, obviously, results, you know, look much better than we were expecting. And just wanted to get your sense

Yes, thanks for taking the questions Doug and Jennifer.

If I could start with on the BD.

PVC side, obviously results.

Look much better than we were expecting.

And.

I just wanted to get your sense.

The performance is holding up here. You kind of mentioned more video visits. Maybe can you talk about some trends that you're seeing here? Obviously, you are reducing your marketing spend. Maybe your thoughts on the ad market and the pricing there. Obviously, your larger competitor highlighted that recently last week. And just wanted to get your thoughts on what you're seeing right now in the market as it relates.

The performance is holding up here you kind of mentioned more video visits maybe can you talk about some trends that youre seeing here.

Obviously, you are reducing your marketing spend maybe maybe your thoughts on the ads.

The AD market and the pricing there obviously.

Larger a larger competitor highlighted that recently last week and I just wanted to get your thoughts on what Youre seeing right now in the market as it relates to that.

So Charles, thanks for the question. Actually, it felt like quite a few questions. So let me try and step back and address it. We have been speaking consistently since I began making these calls about the pressures and challenges in the advertising market.

So Charles Thanks for the question.

Actually it felt like quite a few questions. So let me try and step back in and address it.

<unk> been speaking consistently.

Since I began making these calls about the pressures and challenges.

In <unk>.

Advertising market.

We did not see anything unique or different in our business in the first quarter as it relates to that. What we did tell you, however, is that we believed we had a number of opportunities to address and improve our customer journey through our website and the conversion of those customers as they come through the process with us.

We did not see anything unique or different in our business in the first quarter as it relates to that.

What we did tell you. However is that we believed we had a number of opportunities to address and improve our customer journey through our web site and the conversion of those customers as they come through the process with us.

And what you see in our results in the first quarter is.

And what you see in our results in the first quarter is we told you we would be reducing our advertising spend and we did that.

We told you we would be reducing our advertising spend, and we did that. I did also reference we're going to continue to improve our efficiency in this business, so you can expect some further reduction in the second quarter.

I did also referenced we're going to continue to improve our efficiency in this business. So you can expect some further reduction in the second quarter.

But importantly, we actually implemented a number of things we were working on through the beginning of the year in March that had a meaningful impact in increasing our conversion, and as a result of that, reducing our cash.

But importantly, we actually implemented a number of things we were working on through the beginning of the year in March.

That had a meaningful impact in.

In increasing our conversion.

And as a result of that reducing our CAC.

And we have a number of other adjustments and additions to how customers experience.

And we have a number of other adjustments and additions to how customers experience their journey through our website and then our connected with therapist and the retention associated with that that we're going to be introducing throughout the second quarter.

their journey through our website and then are connected with therapists.

and the retention associated with that, that we're gonna be introducing throughout the second quarter, that we think will continue to make us a much more efficient platform. So I can't.

That we think will continue to make us a much more efficient platform. So I can't I can't speak to what others may or may not be doing but I think a lot of what we have in front of us on the beta side to improve our economics is completely within our control.

I can't speak to what others may or may not be doing, but I think a lot of what we have in front of us on the B to C side.

to improve our economics is completely within our control.

Maybe just to expand a little bit, can you give an example or some examples of what's changed to make the experience of the conversion better?

Okay.

Maybe just to expand a little bit can you give an example, or or so samples of what's changed to make the experience of the conversion better.

Yes, so we changed our matching function. So we did a bunch of customer research. And, you know, one of the things Charles, we've said is we're going to try and we, we've now got a, a fully staffed team, a conversion pod, that is literally focused on optimizing our conversion. So we've added engineering software talent and data scientists, in addition to a marketing team.

Yes, so we changed our matching function. So we did a bunch of customer research and one of the things. Charles We've said is we're going to try and.

We've now got a a fully staffed team a conversion pod that is literally focused on optimizing our conversion. So we have added engineering software talent and data scientists in addition to marketing team.

And we're basically looking at our analytics and saying, where can we improve conversion? So one of the big sets of feedback we got from our customers was they prefer for us to use our algorithm to match them to a therapy.

And where we're basically looking at our analytics and saying where can we improve conversion. So one of the big sets of feedback we got from our customers was they prefer for us to use our algorithm to match them to a therapist and so we.

And so we actually went from a match, a broader matching process.

Actually win from a match a broader matching process to what we call the the Q.

to what we call the Q. We effectively use the algorithm, pick the therapist.

Effectively use the algorithm picked a therapist for them got them a match both quicker and we think actually a much more preferential way for the consumer to experience our process and it had a meaningful impact on our conversion by the way. It also improved.

got them a match both quicker and we think actually a much more preferential way for the consumer to experience our process.

and it had a meaningful impact on our conversion.

By the way, it also improved the speed of which we match, and it actually increases the capacity in the system. So it had a couple of ancillary benefits for us, but mostly it improves the customer experience.

The speed of which we match and it actually increases the capacity in the system. So it had a.

A couple of ancillary benefits for us, but mostly it improves the customer experience.

That's helpful. And a question for you, Jennifer, you mentioned in the

That's helpful and a question for your agenda for you you mentioned in the.

the gross margins, the gross profit in the quarter impacted by higher costs for clinicians. Can you talk about sort of what should we expect going forward? Is this something that, you know, obviously wage inflation is a topic across, you know, all industries right now. Maybe give us a sense for how you're thinking about, you know, further increases in clinician payout. Thank you. Thank you.

The gross margins the gross profit in the quarter impacted by higher.

Costs for clinicians can you talk about sort of what should we expect going forward is this something that can obviously wage inflation is is a topic across all industries right now.

Maybe give us a sense for how youre thinking about.

Further increases in clinician payouts.

Just maybe your thoughts there, that would be helpful. Thank you. As we think about the second quarter and going forward.

Just maybe your thoughts there that would be helpful. Thank you as we think about second quarter and going forward yes.

Yeah, sure, Charles. So yeah, I mentioned that we, you know, we, Doug had mentioned on a previous call, we had a lot of needs as far as addressing the network and ensuring that we were optimizing the experience for our for our clinicians and specifically in Q2, we increased wages in Q1, in Q1, we increased the wages for 1099.

Yes, sure. So yes, I mentioned that we Doug had mentioned on previous call we had.

A lot of needs as far as addressing the network and ensuring that we are optimizing the experience for our for our clinicians and specifically in Q2.

We increased wages.

In Q1, and Q1 the increase the wages four to 99.

therapist network. And that obviously had a negative impact on margins, but as Doug mentioned, it was effective in what we were after, which was improving the satisfaction scores.

Therapists network, and obviously had a negative impact on margins, but as Doug mentioned it was effective in what we were after which was improving the satisfaction scores.

expanding the hours worked for the contract network as well as improving our recruiting capabilities. So, you know, I think, again, that would affect the Q1 efforts were effective at doing that. Looking forward...

Expanding the hours worked for the contract network as well as improving our recruiting capabilities. So.

Yes.

I think again that was affecting the Q1. The Q1 efforts were effective at doing that.

Looking forward with that.

Without having specific numbers for you, I think we see opportunities to drive more optimal margin. That's specifically in our largest opportunities with regard to our W-2.

Having specific numbers for you I think we see.

Opportunities to drive more optimal margin thats, specifically in our large and our <unk>.

This opportunity is with regard to our W. Two.

salaried network, where we've really just begun early in the second quarter to implement initiatives to drive better productivity with regard to that, the work that they do. So we see this as having a benefit as we look forward. And in addition, more broadly, as we look at margin, we also see the need to be able to leverage the quality of our services.

Salaried network, where we have really just begun early in the second quarter to implement initiatives to drive better.

Productivity with regard to with regard to that.

The work that they deal so we see this as having a benefit as we as we look forward.

In addition, more broadly as we look at margin.

<unk> see.

The need to be able to leverage the quality of our services.

To help offset, you know those higher wages that we're paying in the price of our services So these are all parts of our agenda going

Help offset those higher wages that we're paying in the price of our services. So these are all parts of our agenda going forward.

So, net-net, as we think about the second quarter and maybe as we think about the year, is this sort of the right gross margin range you would expect or would you expect it to trend back up a little bit? Any color there would be helpful.

So net net as we as we think about the second quarter and maybe as we think about the year is this sort of the right gross margin range, you would expect or would you expect it to trend back up a little bit any color there would be helpful. Thank you.

Yeah, Charles, I guess I would say we think there are a number of additional self-help items here, much like I talked about in B2C, that we would hope to be in a position where this is the bottom of the cycle for us from a margin standpoint. Great.

Yes, Charles I guess I would say, we we would we.

We think there are a number of additional self help items here much like I talked about in B to C.

We would hope to be in a position where this is the bottom of the cycle for us from a margin standpoint.

Great that's helpful.

I appreciate the comments thank you.

Okay.

Our next question comes from Vikram Kesavavotla with BEARS.

Our next question comes from Vikram, Gustavo Butler with Baird.

Hi, thanks for taking the question. I wanted to start on the consumer side. Can you just give us some more color on what you're seeing in the competitive landscape today? And in particular, I'm curious if you're noticing any change in the advertising behavior or the types of strategies being used in the environment today relative to the environment that you navigated throughout last year. And maybe from a higher level, we'd love to get your thoughts on how you're expecting the B2C competitive landscape to evolve going forward.

Hi, Thanks for taking the question I wanted to start on the consumer side can you just give us some more color on what youre seeing in the competitive landscape today and in particular I'm curious if you're noticing any change in the advertising behavior or the types of strategies being used in the environment today relative to the environment that you've navigated throughout last year and maybe.

A higher level would love to get your thoughts on how youre expecting the <unk> competitive landscape to evolve going forward.

Yes, so vikram.

Yeah, so Vic, we're happy to do that. And Charles.

Happy to do that and Charles.

focused on that as well. So let me, let me say a couple things. We

Focused on that as well so let me let me say a couple of things we.

We haven't experienced in the first quarter any meaningful increase in advertising costs. Now, we have experienced over the past several quarters.

We haven't experienced in the first quarter any meaningful increase in advertising cost.

Now we have experienced over the past several quarters increased pressure largely driven through increased competition in the space.

increased pressure largely driven through increased competition in the space.

We, you know, we are certainly aware of what others are saying, but we're really focused on optimizing the spend that we participate in. And so you've seen us.

We.

We are certainly aware of what others are saying, but we are really focused on.

Optimizing the spend that we participate in and so you've seen us are trending on spend come down now sequentially for three quarters and our <unk> continues to rise sequentially for three quarters.

are trending on spend come down now sequentially for three quarters.

And our ARPU continues to rise sequentially for three quarters. And we've now begun to work on improving our conversion. So as I mentioned in my opening remarks,

And we've now begun to work on improving our conversion.

As I mentioned in my opening remarks, we had the first positive trend in four quarters in an improvement in conversion and a reduction in CAC and much of that was really driven by initiatives that werent formally launched in <unk>.

we had the first positive trend in four quarters.

in an improvement in conversion and a reduction in CAC. And much of that was really driven by initiatives that weren't formally launched until March. So, and we have other things that we believe we can do to continue to improve that performance.

March.

So our and we have other things that we believe we can do to continue to improve that performance.

I would, I would say that,

I would I would say that.

We're striving to have a very disciplined return on invested capital with our B2C business.

We're striving to have a very disciplined return on invested capital with our D to C business.

And the other piece of the equation for us is the ability to use what is, we think, we've maintained a leading brand in the space.

And the other piece of the equation for us is the ability to use <unk>.

What is we think we've maintained.

A leading brand in the space.

to really drive incremental conversion with our growing network of B2B customers.

To really drive incremental conversion with our growing network of B to B customers.

So, you know, you heard me talk about this and I think this is unique for us.

So you heard me talk about this and I think this is unique for us.

unification of the funnel. We literally talked about that in the third quarter call. We talked again about it in the fourth quarter. We've just begun to

Unification of the funnel, we literally talked about that in.

Third quarter call, we talked it again at about it in the fourth quarter, we've just begun to.

Yes.

implement some testing, quite extensive testing now, in our consumer-driven funnel that is demonstrating some really interesting and exciting results.

Implement some testing quite extensive testing now in our <unk>.

Sumer driven funnel that is demonstrating some really interesting and exciting results.

to increase our penetration and utilization of our B2B customers through that channel. So we think that, for us, is also a unique benefit from our consumer advertising spend converted into

To increase our penetration and utilization of our <unk> customers through that channel. So we think that for US is also.

<unk> benefit from our consumer advertising spend converted into be debate.

Okay.

Thank you. And then maybe a follow-up question on the B2B side. I'm just curious if you can talk about how the selling process has evolved there. You know, obviously, there's a lot of moving pieces in the macro environment right now. You talked about the competitive landscape, you know, continues to evolve as well. I'm just wondering, you know, how are customers adjusting their buying processes and decision making processes in this environment? And, you know, what types of adjustments are you making to your kind of marketing approach in that environment, if any, to kind of react to that? It would be great to get your thoughts there as well. Thanks.

And then maybe a follow up question on the <unk> side I'm. Just curious if you can talk about how the selling process has evolved there obviously theres a lot of moving pieces in the macro environment right. Now you talked about the competitive landscape continues to evolve as well I'm just wondering how are customers adjusting their buying processes and decision making processes in this <unk>.

<unk> and what types of adjustments are you, making to your marketing approach in that environment, if any to kind of react to that I would want to get your thoughts there as well thanks.

Yeah, so Vikram, actually, again, I'm going to tell you for us the first quarter, we added coverage.

So vikram actually again I am going to tell you for us the first quarter.

We added covered lives we added.

We added sessions. We added DTE customers.

Sessions, we added DTE customers.

We signed our first million dollar annual revenue account. We have

We signed our first million dollar.

Annual revenue account we have.

I would suggest a reasonably robust pipeline of potential customers.

I would suggest a reasonably robust pipeline of.

Potential customers to add to our DTE business coming into Q2.

to add to our DTE business coming into Q2.

We're not really seeing a change in the pace of demand for B2B services for behavioral healthcare, quite the opposite. It continues to be, I think, top of mind for companies and for

We're not really seeing.

Change in the pace of demand for <unk> services for behavioral health care quite the opposite it continues to be I think top of mind for companies.

And for payers.

And, you know, this is still, unfortunately, in the U.S., a huge unmet medical need and access still remains remarkably challenged. And we think our solution set, both for our DTE accounts and for our payers, is actually quite powerful in addressing those needs.

And this is still unfortunately in the U S a huge unmet medical need.

And access still remains remarkably challenge and we think our solution set both.

For for our DTE accounts and for our payers is actually quite powerful in addressing those needs. So we're not we're not really seeing a change in buying patterns I will say the one caveat is.

So we're not really seeing a change in buying patterns. I will say the one caveat is, I mentioned in the introduction.

I mentioned in the introductory remarks.

we are increasingly targeting larger accounts.

Our increasingly targeting larger accounts.

And the general selling cycle of those accounts, as you might expect, are longer, they have RFPs.

And.

The general selling cycle of those accounts as you might expect are longer they have rfps.

You know, those tend to go through a little bit more, having worked at a very large company in my prior life, there are more process driven, and they take time. So while we have a robust pipeline of those opportunities, they'll be lumpier in nature and, you know, and they can have a, you know, quarter to quarter swing on our trend line, but the trend is still up into the right.

Those tend to go through a little bit more having worked at a very large company and my prior life. There are more process driven and they take time. So while we have a robust pipeline of those opportunities there'll be lumpier in nature and.

And they can have.

Quarter to quarter swing on our trend line, but the trend is still up into the right.

Okay. Thank you.

Okay.

Our next question comes from Ryan Daniels with William Blair.

Our next question comes from Ryan Daniels with William Blair.

Yeah, guys, thanks for taking the questions. And congrats on the progress, I guess, really towards all the goals you laid out. Let me start with one, you mentioned ARPU is also increasing, which is a nice trend to see what's driving the move.

Yeah, guys. Thanks for taking the questions and congrats on the progress I guess really towards all the goals you laid out.

Let me start with the one you mentioned <unk> is also increasing which is a nice trend to see what's driving the move.

to more video sessions. Is that something you're actively pushing or marketing differently, or is it just consumers adopting that?

Two more video sessions is that something youre actively pushing or marketing differently or is it just consumers adopting that more.

You know, it's a combination. Look, I think we're doing some smart things from a marketing standpoint because we like the higher ARPU. But honestly, it's a demand driven functionality. We're seeing that.

It's a combination look I think we're doing some smart things from a marketing standpoint, because we liked the higher <unk>.

But honestly, it's a demand driven.

Functionality, we're seeing that by the way Ryan we're seeing that in our B to B business as well there is an increasing as where we are re upping clients. They are moving from texting only plans to texting plus video or moving completely to lie.

By the way, Ryan, we're seeing that in our B2B business as well. There is an increasing.

as we're re-upping clients, they're moving from texting-only plans to texting plus video, or moving completely to live video.

Video.

It's.

It's for us, it is not only a positive from an ARPU standpoint, but Jennifer mentioned the opportunity for us to improve the productivity of our W-2 therapists, which is called our NPP, our National Provider Practice.

It's for US it is not only a positive from an <unk> standpoint.

But Jennifer mentioned the opportunity for us to improve the productivity of our W. Two therapists, which is called our.

<unk> a national provider practice.

One of the ways, we intend to do that is to move.

One of the ways we intend to do that is to move.

that group more towards live video, which allows us to more effectively manage their schedules. It also allows.

That group more towards live video, which allows us to more effectively manage their schedules. It also allows us to do a better job with our with our members by actually doing some basic.

to do a better job with our members.

by actually doing some basic forward scheduling, regular scheduling. And so it not only has a benefit from a productivity standpoint, but we think.

Forward scheduling regular scheduling and so it not only has a benefit from a productivity standpoint, but we think it will increase utilization and retention because we're able to more more actively manage the interaction with therapists and their <unk>.

it will increase utilization and retention because we're able to more actively manage the interaction with therapists and their members.

<unk> ultimately.

The best news in that is we think duration improves efficacy. And in fact, we know that from our clinical work. And so we think this actually improves outcomes and makes our members healthier and more productive.

The best news in that is.

We think duration improved efficacy and in fact, we know that from our clinical work and so we think this is this this actually improves outcomes and makes our members healthier and more productive.

You didn't mention this, but I assume the improvement in the matching algorithms is not only helping with conversion rates, but is that also driving longer lengths of treatment because you're getting them to the right therapist, it's a better experience? You know, it's an excellent question. Part of the reason I didn't mention it is we implemented it in March, so I think it would be misleading from a data standpoint. We think it will.

For color and then you didn't mention this but I assume.

Improvement in the matching algorithms is not only helping with conversion rates, but is that also driving longer lengths of treatment.

Because youre getting them to the right therapist, it's a better experience.

It's an excellent question part of the reason I mentioned it is we implemented in March So I think it would be misleading from a data standpoint, we think it will.

But we don't have enough data to come back to you yet. We're clearly keeping an eye on that. Okay.

But we don't have enough data to come back to you yet we'll keep we're clearly keeping an eye on that okay. We'll stay tuned and then.

You know, good news on the strength of the pipeline to D2E customers in the first million dollar sale. So congrats on that. I'm curious, with that change though, does it require any changes in the size of your sales team?

Good news on the strength of the pipeline to TV customers in the first million dollar sale. So congrats on that.

Yes.

That changed though does it require any changes in the size of your sales team.

uh... the way you are going to market their pitching the product whether it's a is a employee benefit or or why driven not just anything like that salesforce changes product me

The way you are going to market there are pitching the product whether it's a employee benefit our ROI driven gist.

Just anything like that Salesforce changes product knee, yes et cetera.

Yeah. So it's a great, it's a really great question. We, as I mentioned, actually, again, in the introductory remarks, we added about 25% more individuals to our sales team across B2B in the first quarter. We were, you know, that was basically our target. We were very successful in hiring and adding folks because people are excited to come to us because they see the opportunity.

So it's a great. It's a really great question.

We as I mentioned actually again in the introductory remarks, we added about 25% more individuals to our sales team across b to b in the first quarter we were.

That was basically our target we were very successful in hiring and adding folks because people are excited to come to us because they see the opportunity.

The other big thing we're doing is we've gotten way more rigorous in targeting and so that's really important. And then I'll tell you the third thing that we're doing, which is we

The other big thing, we're doing is we've gotten way more rigorous and targeting.

And so.

That's really important and then I'll tell you the third thing that we're doing which is.

We are.

We're improving, Jennifer talked about our ability to respond to the increased cost of our therapists, which we thought was really important to do for a variety of reasons.

We are improving Jennifer talked about our ability to respond to the increased cost of our therapists, which we thought was really important to do for a variety of reasons.

Well, we've also got increased costs across the board. Obviously, everyone is dealing with, you know, increased costs.

But we've also got increased costs across the board obviously, everyone is dealing with.

Increased cost, we're trying to drive much more effective.

We're trying to drive much more effective relationships with our customers that reflect the quality and the efficacy of our services.

Relationships with our customers that reflects the quality and.

The efficacy of our services and we're we're having.

And we're having, you know, I would say it's early days. We're having real success with that in part.

I would say it's early days, we're having real success with that.

In part, we're going to be adding and I know this is maybe more than you asked for but we are we're really.

we're going to be adding, and I know this is maybe more than you asked for, but we're

We're doing some research right now that we think will help.

We're doing some.

Research right now that.

That we think will help.

continue to validate the fact that people who use us as a benefit for their employees get reduced.

Continue to validate the fact that.

People, who use us as a benefit for their employees get reduced turnover increased satisfaction increase morale and and reduced medical cost and so as a result of of we think a lot of that work that's been done.

turnover, increased satisfaction, increased morale, and reduced medical costs.

And so as a result of we think a lot of that work that's been done.

You know, we think there's a pretty high ROI for our employers in utilizing our services. And I know I'm going on on this, but I'll add one more thing, which is really exciting for us.

We think there's a pretty high ROI for for our employers in utilizing our services and and I know I'm going on on this but I'll add one more thing, which is really exciting for us we introduced a full suite.

We introduced a full suite.

and I haven't really, I didn't talk enough about this, we introduced Talkspace Self-Guided, which is a full suite of digital product that both has clinical efficacy as well as a broad set of applicability directly to our B2B customers.

And I haven't really I didn't talk enough about this we introduced talk space self guided which is a full suite of.

Digital product that is.

Both has.

Clinical efficacy as well as a broad set of of applicability directly to our <unk> customers and it has really been driven as a b to B product said, we just started introducing that as an offering for our booth.

and it has really been driven as a B2B product set. We just started introducing that as an offering for our both DTE and our payer customers, and the early reaction to that is really quite positive. And what it allows us to say is we've got a full suite.

PPE and our payer customers and the early reaction to that is really quite positive and what it allows us to say is we've got a full suite from self help to therapy to psychiatry. So we can be sort of a one stop shop for behavioral.

from self-help to therapy to psychiatry, so we can be sort of a one-stop shop for behavioral needs for most of what employers are looking for.

Leads for most of what employers are looking for.

Okay, perfect Thats very helpful and I appreciate all the color. Thanks.

Okay, perfect, that's very helpful and I appreciate all the power, thanks.

Okay.

Our next question comes from Stephanie Davis with SBB Leerink.

Our next question comes from Stephanie Davis with SBB Layering.

Hey guys, thank you for taking my question. I just have a quick question on the arc of the B2B business.

Hi, guys. Thank you for taking my question I just have a quick question on the arc of the <unk> business as.

As we think about growth and evolution, how should we think about the end-market demand? Is there structurally enough...

As we think about the growth and evolution, how should we think about the end market demand.

Is there structurally Nelson.

wallet available for pure play employer wins or the current backdrop with employer fatigue we see greater focus on something else such as EAP enablement or a continuation from your recent pay

Mike available for pure play employer wins or the current backdrop with the player fatigue, we see greater focus on something else that is.

PNA moment or a continuation from your recent payer wins.

Yeah, I, you know, Stephanie, again, I'm not exactly sure what you're looking at or referring to on the payer side, as we mentioned, we signed up a big national account at the end of the first quarter, we added more lives with another large national player, and we've got a pretty robust pipeline of

Yes.

Stephanie again, I am not exactly sure.

What you're looking at or referring to on the payer side as we mentioned, we signed up a big National account at the end of the first quarter. We added more lives with another large national player and we've got a pretty robust pipeline of.

new payer relationships that we have not penetrated, and I would say across the board on the payer side.

New payer relationships that we have not penetrated and I would say across the board on the payer side.

everyone is facing significant challenges in meeting the demand of their members.

Everyone is facing significant challenges in meeting the demand of their members. So on that side. We think there is there is lots of opportunity and we haven't even we haven't even really scratched the surface of some of the <unk>.

So on that side, we think there's lots of opportunity. And we haven't even really scratched the surface of some of the things where we've got planned to drive utilization and penetration of the lives we currently now cover. On the DTE side, again, I think our

Things, we've got planned to drive utilization.

And penetration of our lives. We currently now cover on the DTA side again.

I think our.

Pipeline is pretty robust.

We, while we are proud of all the accounts that we've added, it's an incredibly small number relative to the size of the opportunity.

We while we are a we're proud of all of the accounts that we've added.

It's an incredibly small number relative to the size of the opportunity set.

And, you know, we continue to experience inbound calls from individuals.

And we continue to experience inbound.

Calls from.

From individuals we continue to see circumstances, where we're pitching and there's very little competition and we continue to win more of our fair share of things where there is competition.

We continue to see circumstances where we're pitching and there's very little competition. And we continue to win more of our fair share of things where there is competition.

because people really like our product. And I just have to say the strength of the brand is really important. And I think we're making the product better every day. So I can't, I'm a little bit confused by the predicate of your question.

Because people really like our product.

I just have to say the strength of the brand is really important.

And I think we're making the product better every day so.

I can.

I'm a little bit confused by the predicate of your question.

but we remain reasonably optimistic about the opportunity set in B2B.

But we are we.

We remain reasonably optimistic about the opportunity set to BBB.

So let's put this another way for my follow-up then. We are seeing in our channel checks for employers that there's a lot of fatigue for all of the different PMPM solutions that exist in the market and that they've been pitched over the past two years. A lot of the employer-facing solutions just aren't doing as well recently, candidly.

So let's call. This another way for my follow up that we are seeing in our channel checks for employers, but theres a lot of the team for all of the different <unk> solutions.

Exist in the market and I think you touched in the past two years.

Employers inclusion just arent doing as well as recently candidly.

So is there more creative pricing beyond a rote PMPM where you're seeing a lot of traction, such as just offering as an insured benefit, or are there alternative ways, you were saying?

So is there more creative pricing beyond PM TM, but youre seeing a lot of traction.

Offering hasnt insured benefit or are there alternative ways right.

So, so there's no question for us. We've, we've had a pretty

Okay.

So there is no question for us.

We've had.

A pretty.

unilateral approach to our DTE business.

Unilateral approach to our DTC business.

I would say we think there's a lot of opportunity over time to drive the fact that we feel very strongly about our clinical efficacy and our outcomes data. And so are there going to be more opportunities for us to be creative? Absolutely. I think there are also more opportunities for us to become quick.

I would say we think there is a lot of opportunity over time to drive that.

The fact that we feel very strongly about our clinical efficacy and our outcomes data and so are there going to be more opportunities for us to be creative absolutely.

I think there are also more opportunities for us to become.

Because of that.

closer, better partners with our employers, and, you know, we're in active discussions with a number of them right now. So I'm not, again, fatigue would not be the adjective that I would use to describe any of our B2B business, quite the opposite. So I can't.

Closer better partners with our employers and we're in active discussions with a number of them right now so I'm not again, a fatigue would not be the adjective that I could use to describe any of our <unk> business quite the opposite so.

I cant speak to competitors.

have a view. I can speak to what we are offering and

Have a view.

I can speak to what we are offering and.

You know, we have a pretty rigorously, clinically, demonstrably.

We have a we have a pretty rigorously clinically demonstrably.

good product. And I would say this digital offering we just offered is differentiated from a lot of things out there. It's got some real clinical efficacy to it. It also incorporates

Good product.

And I would say this this digital offering we just offered is differentiated from a lot of things out there right.

It's got some real clinical efficacy to it it also incorporates.

workshops and sessions with life therapists. There's a lot. And then it has the natural extension for those individuals that need more to move right into our therapy product. So, you know, I, I

Workshops and sessions with life therapists Theres a lot and then it has the natural extension for those individuals that need more to move right into our therapy product. So.

I remain pretty low.

Look, it's, you know, it's, it's a tough world out there. But I remain pretty optimistic. Jennifer, you want to add something? I just wanted to add, you know, so there's the new business and expanding relationships with pairs, but

Okay.

It's a tough world out there, but I remain pretty optimistic Jennifer you wanted to add something I just wanted to add.

So there is the new business and expanding relationships with payers, but as Doug mentioned.

You know, as Doug mentioned, a huge opportunity for us is with the 76 million covered lives that we have in hand. And I just want to write, we grew sessions 11% quarter over quarter. This is where we have, I think, the largest opportunity. And this is where the efforts that we have, as we've described in the operational agenda, related to the product and ensuring we're optimizing that customer experience, unifying the funnel, making it easier for those covered patients to use Talkspace.

<unk> mentioned, a huge opportunity for us is with the 76 million covered lives that we have in hand.

We grew sessions, 11% quarter over quarter.

This is where we have I think the largest opportunity and this is where the efforts that we have as we've described in the operational agenda related to the product and ensuring we're optimizing that customer experience unifying the funnel, making it easier for those covered conversations. He has talk space. These are all efforts that we see playing out in driving helping to drive.

These are all efforts that we see playing out and driving, helping to drive growth in the future. Helpful, thank you.

Yes.

In the future.

Helpful. Thank you.

As a reminder that is star then one to ask a question.

Our next question comes from Glen Santangelo with Jefferies.

Yes, Thanks for taking my question, Doug I hate to do this but I just want to follow up on the PVC side, one more time.

Yeah, thanks for taking my question. Hey, Doug, I hate to do this, but I do want to follow up on this B to C side one more time, but I think this is a good question.

Question for people.

of people. You know, I think if you listen to, you know, one of your competitors last week, they talk about, you know, a private player potentially doing some irrational things. And I think everyone, including yourself, is obviously aware of some of the financing that's gone on, on the private side, and in particular, some more recent financings. And now you've seen some meaningful share shift. And I guess that leaves people sort of wondering

If you listened to one of your competitors last week they talk about.

Private player potentially doing some irrational things and I think everyone, including yourself is obviously aware of some of the financing thats come out on the private side and in particular as some more recent financings and now you've seen some meaningful share shift and I guess that these people sort of wondering.

you know, about the barriers to entry into this business and you're at a time where where Talkspace is trying to cut costs and become more...

About the barriers to entry into this business and you're at a time, where we're cost basis trying to cut cost and become more.

you know, financially efficient and lower the CAC at a period where others seem to be investing sort of very heavily and seem to be taking some shares. So I was just wondering if you could maybe, you know, provide your thoughts on that dynamic on how that plays out on both, not only the B2C side, but also, you know, if that ultimately spills into the B2B side. So...

Financially efficient and lower the CAC at a period, where others seem to be investing very heavily and seem to be taking some share. So I was just wondering if you could maybe provide your thoughts on that dynamic on how that played plays out on both not only to b to C side, but also if that ultimately spills into the <unk> side.

So.

Yeah I think.

Look I can I can.

Let me just reiterate and start off with the facts of where March was for us, which we made a number of changes that improved.

Let me just reiterate and start off with the facts of where March was for us, which we made a number of changes that improved.

conversion and reduced CAC. And those two facts that I would not have been able to say that for the preceding four quarters.

Conversion and reduced CAC and those two facts.

I would not have been able to say that for the preceding four quarters. So.

So I can't tell you what the world will look like going forward, but I can tell you that.

No.

I can't tell you what the world will look like going forward, but I can tell you that.

We believe there are still a number of things within our control to improve conversion and reduce cash.

We believe there are still a number of things within our control to improve conversion and reduce CAC.

We want our share to be focused on...

We want our share to be focused on.

high return investments.

High return investments.

That's where we are and we're going to continue to drive towards, you know, it's going to take us.

That's where we are and we're going to continue to drive towards its going to take us.

We had a better quarter from a cash standpoint. We have our own set of expectations to continue to improve our cash efficiency, and we're going to be working on that every day.

Where were we.

We had.

A better quarter from a cash standpoint.

We have our own set of expectations to continue to improve our cash.

<unk> C and and we're going to be working on that every day.

I, you know, we've got a unique, I will just say we have a what I believe is a unique product.

Yes.

We've got a unique I will just say we have a what I believe is a unique.

<unk>.

Um, and others have that have generated, you know, raised a lot of capital have different.

And others have that have generated.

Raised a lot of capital have different.

Approaches to the market.

Some of those have attracted a fair amount of press coverage in the last few days.

Some of those have attracted a fair amount of press coverage in the last few days.

That's not a path that we've chosen to go on. We're really focused on these digital self-help capabilities, therapy, and an approach to psychiatry which is different than others.

That's not a path that we've chosen to go on we're really focused on.

These digital self help capabilities.

Therapy, and an approach to psychiatry, which is different than others.

So.

Yeah.

Our objective is to spend our shareholder money wisely and generate

Our objective is to spend our shareholder money wisely.

And generate a good return.

Over time, for us, I think that means more of our business comes out of the B2B side, where we've got a really good presence today, and we've got really good product, and we've got really solid momentum.

Over time for us.

Think that means more of our business comes out of the B to B side.

There.

We've we've got a really good presence today and we've got really good product and we've got really solid momentum.

And the last piece I'm going to just say, which we have not begun to take advantage of at all, but I think it is clearly in our plans, we have great data.

And so and the last piece I'm going to just say, which we have not begun to take advantage of it all but I think it is clearly in our.

Plans, we have great.

Data and analytics.

And eventually, you know, I think we are very well positioned to be a leader in value-based care for behavior.

<unk>.

I think we are very well positioned to be a leader in value based care for behavioral.

And I do not believe others are similarly situated.

And I do not believe others are similarly situated.

Hey, Doug maybe just follow up on the balance sheet right. There is there is still no guidance.

Hey, Doug, maybe I can just follow up on the balance sheet, right? There's still no guidance, and so as you look forward, I mean, I'm guessing you don't want to give us too much of a clue, but, you know, we're sitting with $184 million in cash. The company lost $20 million this quarter. It's unclear to us if it stabilizes from here or gets better from here and how we should think about, you know, that cash burn rate relative to the capital structure, you know, of the company today, and, you know,

And so as you look forward.

I guess, you don't want to give us too much.

<unk>.

We're sitting with $184 million in cash of the company was $20 million. This quarter. It is unclear to us if it stabilizes from here or gets better from here and how we should think about that cash burn rate relative to the capital structure.

Yes company today.

Sorry, did I cut you off? No, no, it's a really good question. So let me just make sure we're clear on the underlying for the quarter.

Sorry, Greg.

It's a really good question. So let me just make sure we're clear on the underlying for the quarter. So we we actually because we are focused on cash across the income statement and the balance sheet we burned.

So we actually, because we are focused on cash across.

The income statement and the balance sheet, we burned a little more than 13 million in cash this quarter because we actually drove some real efficiency in our working capital.

A little less than a little more than $13 million in cash. This this quarter, because we actually true some real efficiency in our working capital.

And that was again, part of a very proactive management team.

And that was again part of a very proactive management team finding the ways to optimize use of cash.

finding the ways to optimize use of cash.

Second thing, I think what Jennifer said was you should think that over time cash should better track EBITDA, and EBITDA for the quarter was a loss of about $18.5 million, if I'm remembering the number off the top of my head.

The second thing I think what what Jennifer said was you should think that over time cash.

Good better better track EBITDA and EBITDA for the quarter was <unk>.

Lots of about $18 $5 million, if I'm remembering the number or am I incorrect.

And then the last thing I just said is we are going to continue to drive more efficiency out of the business in a variety of ways.

And then the last thing I. Just said is we are going to continue to drive.

More efficiency out of the business in a variety of ways.

So our expectation is that you will see cash burn coming down over time as we continue to implement a lot of these changes. They're both good for the customer, they're good for our members, they're good for our employees, and they ultimately have to be good for our balance sheet. So that's.

So our expectation is that you will see cash burn coming down over time.

As we continue to implement a lot of these changes they are both good for the customer. They are good for our members. They are good for our employees and their ultimately have to be good for our balance sheet. So that's.

That's sort of what I'm going to say. We are really highly focused on cash and having all the resources we need to get to a place where the shareholders are seeing a lot of value.

That's sort of what I'm going to say, we're really highly focused on cash and having all the resources, we need to get to a place where the shareholders are seeing a lot of value.

Okay. Thanks for the Thomas.

That concludes today's question and answer session. I'd like to turn the call back to Doug Bromstein for closing remarks.

That concludes today's question and answer session I would like to turn the call back to Dr. <unk> for closing remarks.

Yeah, so I want to thank everybody for listening. We look forward to, you know, continue to engage and make progress. I do want

Yes, so I want to thank everybody for listening we look forward to.

Continuing to engage and make progress I do want folks to remember we're on a journey together I think we've made some really good.

folks to remember, you know, we're on a journey together. I think we've made some really good steps forward. I hope you're starting to see that in the financials.

<unk> forward I hope youre, starting to see that in the financials.

We have more room to go and your expectation should be consistent with mine which the management team is really focused on creating value for the shareholders and you know we hope to continue to demonstrate that progress in the quarters going forward.

We have more room to go and your expectations should be consistent with mine, which the management team is really focused on creating value for the shareholders and.

We hope to continue to demonstrate that progress in the quarters going forward.

<unk>.

This concludes today's conference call. Thank you for participating. You may now disconnect.

This.

Today's conference call. Thank you for participating you may now disconnect.