Full Year 2023 Talkspace Inc Earnings Call

Operator: Good morning, my name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Talkspace fourth quarter and full year 2023 earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Andre and I will be your conference operator today.

At this time I would like to welcome everyone to the tax states fourth quarter and full year 2023 earnings conference call.

Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Janine Sayan, Director of Communications.

If you would like to withdraw your question Press Star one again.

At this time of likes to the conference over to Janine fan Director of Communications. Please go ahead.

Janine Fyne: Good morning, and welcome to Talkspace's fourth quarter and full year 2023 earnings conference call. I am Janine Fyne, Director of Communications. I hope you've had the opportunity to access the press release we posted on Talkspace's IR website and the presentation of our earnings results. We'll use this presentation to walk you through today's remarks. Leading today's call are our CEO, Dr. John Cohen, and our CFO, Jennifer Fuller. Management will offer their prepared remarks and will then take your questions. Certain measures we'll discuss on this call are expressed on a non-GAP basis and have been adjusted to exclude the impact of one-off items.

Good morning, and welcome to Tox basis fourth quarter and full year 2023 earnings Conference call I'm, James <unk> Director of Communications I Hope you've had the opportunity to access the press release, we posted on toxicity IR website and the presentation of our earnings results.

Well use this presentation to walk you through todays remarks, leading today's call are our CEO, Dr. Jon Cohen, and our CFO Jennifer Fox.

Management will offer their prepared remarks, and we'll then take your questions.

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.

Janine Fyne: Reconciliations of these non-GAAP measures are included in our earnings release and on our website, investors.talkspace.com. I also want to remind you that we will be discussing forward-looking information today, which may include forecasts, targets, and other statements regarding our plans, goals, strategic priorities, and anticipated financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. Important factors that may affect our future results are described in our most recent SEC reports and today's earnings preference. For more information, please review our Safe Harbor disclaimer on-slide. Now, I will turn it over to Dr. John.

Reconciliations of these non-GAAP measures are included in our earnings release and on our website investors DOCSIS dotcom.

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

While these statements represent our best current judgment about future results and performance as of today. Our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect.

Important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release.

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

Now I will turn it over to Dr. Jon Cohen.

Dr. John Cohen: Thanks, Janine, and thank you all for joining us today. I am excited to discuss our strong Q4 results and the successes we had in 2023. We will then provide financial guidance for 2024 and, for the first time, discuss a longer-term outlook as to how we believe the business will perform over the next three years. Overall, 2023 was a year of important achievements for us, and I'm proud of the way we executed against our strategic goals outlined early last year.

Thanks Judy.

Thank you all for joining us today.

To discuss our strong Q4 results and the successes we had in 2023.

We will then provide financial guidance for 2024 and for the first time discuss our longer term outlook as to how we believe the business will perform over the next three years overall.

Overall 2023 with a year of important achievements for us and I'm proud of the way we executed against our strategic goals outlined early last year.

Dr. John Cohen: Financially, it was a year of solid growth and operational refinement, which positioned us well entering 2024. We increased revenue in 2023 by 25% year over year while significantly reducing operating expenses, resulting in an adjusted EBITDA loss of $13.5 million and an improvement from a $59 million loss in 2022. The improvement in our financial performance developed sequentially throughout the year, and our adjusted EBITDA loss in Q4 narrowed to just $300,000.

Financially it was a year of solid growth and operational requirements, which positions us well entering 2024, we increased revenue in 2023 by 25% year over year, while significantly reducing operating expenses, resulting in an adjusted EBITDA loss.

$13 5 million and improve it for about $59 million loss in 2022.

The improvement in our financial performance develop sequentially throughout the year and our adjusted EBITDA loss in Q4 narrowed to just $300000.

Dr. John Cohen: With our top line momentum and rationalized cost structure, we are poised to grow profitably in 2024 and beyond, and Jennifer will elaborate on this later. Now, let me review in more detail each of our strategic initiatives that we outlined at the beginning of 2023. Our first initiative was to grow payer revenue. We delivered on this objective, more than doubling our payer revenue compared to the prior year. As we laid out in our objectives, this strong growth was driven by both an increase in covered lives from 92 million to 131 million lives, as well as through expanding our same basis capture rate, which grew by almost 50%. As a result, we nearly doubled our session volume.

With our top line momentum and rationalized cost structure, we are poised to grow profitably in 2024 and beyond and Jennifer will elaborate on this later.

Let me review in more detail each of our strategic initiatives that we outlined at the beginning of 2023.

Our first initiative was to grow payer revenue.

We delivered on this objective more than doubling our payer revenue compared to the prior year.

As we laid out in our objectives. This strong growth was driven by both an increase in covered lives from $92 billion to 131 million lives as well as through expanding our same basis capture rate, which grew by almost 50%.

As a result, we nearly doubled our session with volume.

Dr. John Cohen: We have also established a business development process to engage new partners and increase referrals to Talkspace by leveraging our in-network status. We are pleased with the early traction we are seeing on these efforts. Our first relationships include Evernow, a partnership to provide mental health support with menopausal care or a ring to provide sleep data to therapists to help support therapy, and Bicycle Health to expand access to mental health care for patients with opioid use disorder. Our second strategic priority was to grow our direct-to-enterprise business. A significant part of our DTE strategy was based around providing services to help combat the youth mental health crisis. The Surgeon General has said that mental health is the defining public health crisis of our time and that social media addiction is the greatest threat to the lives of our children and teens, more so than cigarette smoking in the past.

We also established a business development process to engage new partners and increased referrals to talk space by leveraging our in network status we.

We are pleased with the early traction we are seeing these efforts. Our first relationships include ever know a partnership to provide mental health support with menopausal care.

Or a rig to provide sleep data to therapists to help support therapy.

Bicycle health to expand access to mental health care for patients with opioid use disorder.

Our second strategic priority was to grow our direct to enterprise business.

Good part of our DTE strategy was based around providing services to help combat the youth mental health crisis the.

Surgeon General has said that among teens mental health is the defining public health crisis of our time and that social media addiction is the greatest threat to the lives of our children and teens more so the cigarette smoking in the past.

Dr. John Cohen: Since joining Talkspace a little over a year ago, we have rebuilt our DTE sales team, which has already begun to demonstrate success. On November 15th, we announced our partnership with the City of New York to provide every single teenager between the ages of 13 and 17, approximately 465,000 teenagers, access to therapy. In December, we announced a similar partnership with the Baltimore County School System, where we are now providing access to Talkspace to all high school students in Baltimore County.

Since joining talk space, a little over a year ago, we have rebuilt our DTE sales team, which has already begun to demonstrate success.

On November 15th we announced our partnership with the city of New York to provide every single teenager between the age of 13 in 2017, approximately 465000 teenagers access to therapy.

December we announced a similar partnership with the Baltimore County School system, where we are now providing access to talk space to all high school students and Baltimore County.

Dr. John Cohen: In addition to the students, we are also actively supporting teachers. We recently entered a partnership with the state of Vermont to provide Talkspace services to all educators throughout the state. In addition, we recently announced our partnership with the American Federation of Teachers to enhance mental health support for its more than 1.7 million members. As a reminder, Talkspace delivers therapy via live video, voice, and asynchronous messaging and text.

In addition to the students. We are also actively supporting teachers. We recently entered a partnership with the state of Vermont to provide <unk> services to all educators throughout the state.

In addition, we recently announced our partnership with the American Federation of teachers to enhanced mental health support to <unk> more than $1 7 million members.

As a reminder.

Talk space delivers therapy by live video voice and asynchronous messaging the textbooks.

Dr. John Cohen: Asynchronous therapy continues to be a significant differentiator in the market, as many of our competitive providers of telehealth mental services utilize video only and do not have the platform to provide messaging and asynchronous care. As part of our improvement in the DTE offering, we invested in and improved our self-guided products called Talkspace Go, which can be integrated into our therapy platform depending on the client's needs. It includes daily reflections, informational learning modules, and live classes. Content is curated by the client. For instance... For teens, there is a two-week course covering mental health foundations, feelings, relationships, and identity, and live classes with a therapist about forgiving, healthy relationships, kind communication, and many others.

Asynchronous therapy continues to be a significant differentiated market as many of our competitive providers of telehealth dental services utilize video only and do not have the platform to provide messaging and asynchronous care.

As part of our improvement in the DTE offering we invested and improved our self guided products called talk space go which can be integrated into our therapy platform, depending on the clients' needs.

It includes daily reflections information of learning modules and live classes content curated by the clients' needs for instance.

For teens Theres, a two week course, covering mental health foundation's feelings relationships and identity and live classes with a therapist about forgiving healthy relationships kind communication and many others members can easily move from self guided to therapy as needed.

Dr. John Cohen: Members can easily move from self-guided to therapy at any time. Our revenue performance in 2023 would not have been possible without our world-class network of therapists, and in 2023, we aggressively pursued our third strategic initiative, which is to be the platform of choice for providers by improving the therapist experience and focusing on the quality of clinical care. We grew our network during the year by 75%, adding 2,300 therapists to now over 5,300 therapists across all 50 states, while at the same time improving our provider satisfaction. In pursuit of our fourth initiative, Operational Excellence, we reduced our total operating expenses by 32% from $143 million to $98 million.

Our revenue performance in 2023 would not have been possible without our world class network, a therapist and at 2023, we aggressively pursued our third strategic initiative, which will be the platform of choice for providers by improving the therapist experience and focusing on the quality.

<unk> of clinical care.

We grew our network during the year by 75%, adding 2300 therapists to now over 5300 therapists across all 50 states while at the same time, improving our provider satisfaction rates.

In our pursuit of our fourth initiative operational excellence, we reduced our total operating expenses of 32% from $143 million to $98 million.

We also improved our revenue cycle management to above industry standards have made important investments in our compliance and control processes.

Dr. John Cohen: We also improved our revenue cycle management to above industry standards and made important investments in our compliance and control processes. The resulting rationalized and refined expense base positions us to realize continuing operating leverage going forward. In addition to these four strategic initiatives, we made a number of key investments in our leadership team during the year. This included hiring a new chief medical officer, rebuilding our direct-to-enterprise business through new senior hires, and strengthening our corporate governance by adding two new independent directors to our board. Swati Abbott and Liat Ben-Zur

The resulting rationalized a refined expense base positions us to realize continuing operating leverage going forward.

In addition to these four strategic initiatives, we made a number of key investments in our leadership team during the year.

This includes hiring a new chief Medical officer.

Rebuilding our direct to enterprise business through new senior hires and strengthening our corporate governance by adding two new independent directors to our board.

Swati Abbott and Lee at beds or why he was previously the CEO of Blue Health Intelligence Health care data and analytics company.

Dr. John Cohen: Swati was previously the CEO of Blue Health Intelligence, a healthcare data and analytics company funded out of the Blue Cross Blue Shield Association. Liat has over 27 years of digital product experience in healthcare, software, and consumer business. She most recently served as the Corporate Vice President of Consumer Services at Microsoft, where she led efforts to reshape the company's consumer service business. Thanks to the hard work in 2023 executing against the strategic priorities I walked, we enter 2024 with a very robust foundation of operational excellence. We will maintain that focus but enhance our fourth strategic pillar to include investment in innovation and technology. At the heart of this initiative is our commitment to leveraging artificial intelligence across various applications, aiming to enhance our clinical efficiency and operational excellence. Innovation is deeply ingrained in our DNA at Talkspace.

Spun out of the Blue Cross Blue Shield Association.

Lee has over 27 years of digital product experience at healthcare software and consumer businesses. She most recently served as corporate Vice President of consumer services at Microsoft where she led efforts to reshape the Companys consumer service businesses.

Thanks to their hard work in 2023 executing against the strategic priorities I've walked through we enter 2024 with a very robust foundation of operational excellence we.

We will maintain that focus but enhance our fourth strategic pillar to include investments in innovation and technology.

At the heart of this initiative is our commitment to leveraging artificial intelligence across the various applications.

To enhance our clinical efficiency and operational excellence <unk>.

Innovation is deeply ingrained in our DNA and talk space.

Dr. John Cohen: We're proud of our legacy as innovators, having led the way in messaging therapy. This year, we're excited to push the boundaries further, integrating AI to not only continue our tradition of innovation but also to redefine the standards of mental health care delivery. Our AI tools will be utilized to assist our therapists, helping them to deliver better care and be more efficient, but not replace them. We will continue to explore the power of AI and how to use it to improve the quality of our service. As an example, our proprietary machine learning model alerts our therapist when a patient may be at risk for self-harm. It detects language patterns consistent with high-risk behaviors that place individuals at risk for self-harm or suicide and is 83% accurate.

We're proud of our legacy as innovators, having led the way and messaging therapy.

This year, we're excited to push the boundaries further integrating AI to not only continue our tradition of innovation, but also to redefine the standards of mental health care delivery.

Our AI tools will be utilized to assist our therapists, helping them to deliver better care and be more efficient, but not replacing them. We will continue to explore the power of AI and how to use it to improve quality of our services as an example.

Proprietary machine learning model alerts or therapist, when a patient may be at risk for cell phones.

It detects language patterns consistent with high risk behaviors that placed individuals at risk for self harm or suicide and is 83% accurate.

Dr. John Cohen: We published the results of this algorithm in 2019, and since then, we have flagged 32,000 patients since the launch who are at risk for suicide. The model has been very validated recently, to give you an idea of a structured and unstructured data set. Our data contains approximately 4 billion words from over 75 million users... The de-identified data is also augmented by other data types that provide a holistic view of our users and their behavioral health. It is an incredible data set. At Talkspace, we believe that digital therapy provides an unprecedented opportunity for us to improve mental health through data science and machine learning, all securely HIPAA compliant. We intend to make investments in AI in pursuit of our goal to leverage our unique data to identify patterns and improve the way behavioral health is delivered.

We published the results of this algorithm in 2019 and since then we have flagged 32000 patients since the launch who are at risk for suicide.

The model has been very validated recently for teams to give you an idea or a structured and unstructured datasets.

Our data contains approximately 4 billion words drove over 75 billion messages. The de identified data is also augmented by other data types that provide a holistic view of our users and their behavioral health.

It is an incredible dataset.

<unk> space, we believe that digital therapy provides an unprecedented opportunity for us to improve mental hull to data science and machine learning all securely HIPAA compliant.

We intend to make investments in AI in pursuit of our goal to leverage our unique data to identify patterns and improve the way behavioral health is deliberate.

In summary, I am very pleased with our execution against our strategic initiatives.

Dr. John Cohen: In summary, I am very pleased with our execution against our strategic initiative. Based on our progress in 2023 and where we stand today, we are incredibly excited about the year ahead as Talkspace is poised to grow profitably in 2024 and to demonstrate continuing operating leverage while maintaining a robust and liquid balance sheet to responsibly invest in our technology, people, and growth to serve our customers even better. 2024 will be another year of continued payer revenue growth as we are uniquely positioned to capture the opportunity in this growing market, which is estimated to grow at a 5% CAGR through 2032 to about $137 billion. Affordability and access to insurance remain challenges for behavioral health patients, as 42% of the population with a diagnosed condition cannot access their treatment, and of those who actually have access to it, 34% of those people have difficulty finding a therapist to accept their insurance. Two months ago, the Attorney General of New York issued a report on the ghost behavioral health networks that are occurring all around the country, where investigators found that 86% of providers were ghosts, meaning that they were unreachable, not actually in-network or in-network but not accepting new patients.

Based on our progress in 2023, and where we stand today. We're incredibly excited about the year ahead talk space is poised to grow profitably in 2024 and to demonstrate continuing operating leverage while maintaining a robust and liquid balance sheet to responsibly invest in our technology people and.

Growth to serve our customers even better.

2024 will be another year of continued payer revenue growth as we are uniquely positioned to capture the opportunity in this growing market, which is estimated to grow at a 5% CAGR through 2032 to about 137 billion.

Affordability and access to insurance remain challenges for behavioral health patients at 42% of the population with a diagnose conditions cannot access their treatment.

Those who actually have access to insurance, 34% of those people have difficulty finding a therapist to accept their insurance.

Two months ago, the Attorney General of New York issued a report on the Ghost behavioral health networks that are occurring all around the country, where investigators found that 86% of providers where it goes.

Meaning that they are unreachable, not actually in network or in network, but not accepting new patients.

Dr. John Cohen: It is our vision to continue to be the solution to this problem by maintaining our leading position as the largest in-network telehealth mental health provider in the country. To achieve this, we expect to substantially add to the number of covered lives with additional Blues plans, other regional plans, and Medicaid. In 2023, we will lay the groundwork to be a Medicare provider for both standard Medicare and Medicare Advantage. We will roll it out in all 50 states throughout 2024. Medicare covers 65 million lives, 33 million in standard Medicare and 32 million in Medicare Advantage. The importance of mental health support for the elderly, particularly loneliness and depression, has surfaced as a critical issue in their overall health.

It is our vision to continue to be the solution to this problem by maintaining our leading position as the largest in network telehealth mental health provider in the country.

To achieve this we expect to substantially add to the number of covered lives with additional blues plans other regional plans and Medicare.

In 2023, we paid the groundwork to be a Medicare provider for both standard Medicare have Medicare advantage, we will roll it out in all 50 states throughout 2020 for Medicare.

Medicare has 65 million lives $33 million standard Medicare at $32 million in Medicare advantage, the importance of mental health support for the elderly, particularly lowliness and depression surfaced as a critical issue and their overall health.

Dr. John Cohen: In addition, we will continue to pursue and launch needle-moving strategic partnerships to increase referrals, such as the partnership we announced yesterday with WHEEL, the foremost virtual care platform delivering consumer-centric primary care, giving patients access to both primary care and behavioral health conveniently and virtually. We are also excited about our momentum and deep. In 2024, we will continue to pursue multiple opportunities in the DTE space with employers, governments, universities, and we are in conversations with multiple other school districts and will continue to aggressively pursue this market. Our goal is to be the national leader in addressing the teen mental health crisis, and we look forward to updating you on our progress throughout the year.

The number of people over 65 years old that have said they have natural health challenges has increased to five times since 2020.

In addition, we will continue to pursue a large needle moving strategic partnerships to increase referrals such as the partnership we announced yesterday with wheel the foremost virtual care platform delivering consumer centric primary care, giving patients' access to both primary care and behavioral health conveniently and.

Actually.

We are also excited about our momentum at DTE and 2024, we will continue to pursue multiple opportunities in the DTE space with employers governments universities and teams. We are in conversations with multiple other school districts and we will continue to aggressively pursue this market.

Our goal is to be the national leader in addressing the teen mental health crisis, and we look forward to updating you on our progress throughout the year.

Dr. John Cohen: Financially, we will achieve a significant milestone in 2024 by reaching breakeven and transitioning into profitability for the first time in the 12-year history of the company, and we enter the year with a robust cash reserve of $124 million. Importantly, Talkspace will grow profitably this year, which provides the board and management with the flexibility to determine the best use of that capital, given the size of the yet substantially untapped and growing mental health care market and our solutions to address those needs with our existing product offering. We do not require M&A to grow, and we will continue to deploy capital internally to grow the business organically. However, we will take a disciplined approach to considering inorganic opportunities, if they make sense, to enhance our existing product set. This quarter, the board approved a share repurchase plan of $15 million.

Financially, we will achieve a significant milestone in 2024 by reaching breakeven and transitioning into profitability for the first time and the 12 year history of the company.

And we entered the year with a robust cash reserve of $124 million.

Importantly cost base will grow profitably this year, which provides the board and management with the flexibility to determine the best use of that capital.

Given the size of the yet substantially untapped and growing mental health care market and our solutions to address those needs with our existing product offerings. We do not require M&A to grow and we will continue to deploy capital internally to grow the business organically. However, we will take a disciplined approach to consider.

Inorganic opportunities if they make sense to enhance our existing product set.

This quarter the board approved a share repurchase plan of $15 million. This initial authorization will be used to mitigate the impact of stock based employee compensation over time. The board will continue to evaluate optimizing the return on excess capital for our shareholders, but this initial authorization reflects.

Jennifer Fuller: This initial authorization will be used to mitigate the impact of stock-based employee compensation. Over time, the board will continue to evaluate optimizing the return on excess capital for our shareholders, but this initial authorization reflects the confidence we all share in the future profitability of the company. With that, I'll turn the call over to Jennifer. Thank you, John, and good morning, everyone.

Confidence, we all share in the future profitability of the company.

With that I'll turn the call over to Jennifer.

Jennifer Fuller: We are pleased with our fourth quarter and 2023 results, which reflect our continued execution across our company priorities, translating into strengthening financial performance. Today, I'll primarily focus on the fourth quarter results on a sequential quarter-over-quarter basis and 2023 on a year-over-year basis, unless otherwise stated. Let's begin with our top line performance.

Jennifer Fuller: Fourth quarter revenue was $42.4 million, a 10% increase from the previous quarter and a 40% increase year over year. For 2023, our total revenue amounted to $150 million, or 25% growth over 2022. Gap's net loss was $1.3 million in Q4 and $19.2 million in 2023. Adjusted EBITDA loss was approximately $300,000 in the fourth quarter and $13.5 million in 2023.

Dollars in the fourth quarter and $13.5 million in 2023.

And as of December 31st 2023 are cash and cash equivalents totaled $123.9 million.

Moving to revenue results by category.

Her fourth quarter revenue maintain strong growth with an increase of 15% sequentially to $25.4 million.

Jennifer Fuller: And as of December 31st, 2023, our cash and cash equivalents totaled $123.9 million. Moving on to Revenue Results by Category. Hare fourth quarter revenue maintained strong growth with an increase of 15% sequentially to $25.4 million. Payer sessions completed by behavioral health and EAP members grew 9% sequentially to almost 250,000, and unique payer members completing sessions grew sequentially by 5% and year-over-year by 67% to 79,200. We will provide both sessions completed and active payer members within each quarter going forward as these metrics are key indicators to progress against both capture rate and utilization in the payer category. Also of note, in Q4, there was a one-time net revenue and gross profit benefit of $1.5 million from year-end reconciliations and further progress on collections from prior periods. For the full year 2023, payer revenue more than doubled from the prior year to $80.8 million.

Pair sessions completed by behavioral health and E. A P members grew 9% sequentially to almost 250000.

[noise] unique payer members completing session.

[noise] sequentially by five per cent in year over year by 67 per cent to 79200.

We will provide both sessions completed and active pair members within each quarter going forward as these.

Metrics are key indicators to progress against both capture rate and utilization and the pair category.

Also of note in queue for there was a one time net revenue in gross profit benefit of $1.5 million from your end reconciliations and further progress on collections from prior periods.

For the full year 2023 pair revenue more than doubled from the prior year to $80.8 million.

Covered lives grew 42% year over year and sessions in 2023, nearly doubled to 850000 driven by additional covered lives as well as an increase of almost 50 per cent in the same basis capture right.

Net price screwed 12 per cent and 20 twenty-three, partly reflecting our investments and revenue cycle management, which drove improvement of our collections rate to 94% in the fourth quarter.

And the direct to enterprise category fourth quarter revenue was $8.9 million up 11% sequentially, primarily due to the new launches in the quarter.

Jennifer Fuller: Covered lives grew 42% year-over-year, and sessions in 2023 nearly doubled to 850,000, driven by additional covered lives as well as an increase of almost 50% in the same-basis capture rate. Net price grew 12% in 2023, partly reflecting our investments in revenue cycle management, which drove improvement of our collections rates to 94% in the fourth quarter. In the direct-to-enterprise category, fourth-quarter revenue was $8.9 million, up 11% sequentially, primarily due to the new launches in the quarter. For 2023, DTE revenue was up 19% year over year to $33.6 million.

For 2023 D. T E revenue was up 19% year over year to $33.6 million.

Turning to the consumer category remembers are paying out of pocket revenue was $8.2 million in the fourth quarter of 4% sequential decline in $35.6 million in 2023, 35% year over year decline.

These results are lined with our expectations.

We've previously discussed our approach has increasingly centered on attracting pair members with more attractive conversion rates through our marketing initiatives.

While we do not have dedicated resources for the consumer category. It continues to have a positive contribution to our financial results.

Jennifer Fuller: Turning to the consumer category, where members are paying out-of-pocket, revenue was $8.2 million in the fourth quarter, a 4% sequential decline, and $35.6 million in 2023, a 35% year-over-year decline. These results are in line with our expectations. As we've previously discussed, our approach has increasingly centered on attracting payer members with more attractive conversion rates through our marketing initiative. While we do not have dedicated resources for the consumer category, it continues to make a positive contribution to our financial results. Moving to gross profit, our fourth quarter gross profit grew 11% sequentially to $21 million. Gross margin for the 4th quarter was 49.4%, slightly higher than the 3rd quarter gross margins, primarily due to the non-recurring payer revenue benefit that I mentioned earlier, partially offset by a mixed net revenue shift towards the payer category. For the full year 2023, gross profit grew approximately 23% to $74.4 million. Moving to OPEX, in the fourth quarter, our GAAP operating expenses were lowered by almost $500,000 sequentially to $23.6 million. For 2023, gap operating expenses decreased by 32% year over year to $97.6 million.

Moving to gross profit our fourth quarter gross profit group, 11% sequentially to $21 million.

Gross margin for the fourth quarter was 49.4% slightly higher than the third quarter gross margins, primarily due to the nonrecurring revenue benefit that I mentioned earlier, partially offset by net revenue mix shift towards the pair category.

For the full year 2023, gross profit grew approximately 23% to $74.4 million.

Moving to Opex in the fourth quarter or gap operating expenses were lower by almost $500000 sequentially to $23.6 million.

For 20, twenty-three GAAP operating expenses decreased by 32% year over year to $97.6 million.

Excluding stock based compensation and non-recurring benefits operating expenses were $21.6 million in queue for an $89.2 million in 2023.

Which was a 27% year over year decrease.

Cost savings achieved in 2023 were driven by notable progress across several areas.

First in marketing and efficiency.

We have streamlined and optimized or marketing expenditure enhancing the efficiency of our advertising spend to lower the cost of acquiring numbers.

Simultaneously, increasing the lifetime value of these members through product improvements.

We focused our marketing investments and channels that drive brand strength and awareness.

Leaning into storytelling or social media.

Jennifer Fuller: Excluding stock-based compensation and non-recurring benefits, operating expenses were $21.6 million in Q4 and $89.2 million in 2023, which was a 27% year-over-year decrease. Cost savings achieved in 2023 were driven by notable progress across several areas. First in marketing efficiency. We have streamlined and optimized our marketing expenditure, enhancing the efficiency of our advertising spend to lower the cost of acquiring members while simultaneously increasing the lifetime value of these members through product improvement. We focused our marketing investments and channels that drive brand strength and awareness by leaning into storytelling through social media, partner marketing, and integrated campaigns with influencers, ensuring that Talkspace is top of mind as the highest quality affordable therapy solution available.

Partner marketing and integrated campaigns with Influencers.

Ensuring that talk spaces top of mind as the highest quality affordable therapy solution available.

Second, we built scalable capabilities and processes across the company.

For purpose revenue cycle management, and efficiencies and operational processes have enabled us to streamline our cost base.

Lastly, we have developed a culture of discipline and prioritization.

We are fortunate to have a considerable amount of organic growth opportunities and our teams excel at identifying and executing the most promising unprofitable projects.

These optimization measures have resulted in not only improved financial performance, but also position us to drive greater operating leverage over time.

Turning to our 20th 24 financial guidance.

First as we've previously guided we continue to expect to exit Q1 with breakeven adjusted EBITDA.

For the full year, we expect revenue to be in the range of $185 million to $195 million, an increase of 23% to 30% year over year.

Jennifer Fuller: Second, we've built scalable capabilities and processes across the company. Built-for-purpose revenue cycle management and efficiencies, and operational processes have enabled us to streamline our costs. Lastly, we have developed a culture of discipline and prioritization. We are fortunate to have a considerable number of organic growth opportunities, and our teams excel at identifying and executing the most promising and profitable projects. These optimization measures have resulted in not only improved financial performance but also position us to drive greater operating leverage over time. Turning to our 2024 financial guidance. First, as we've previously guided, we continue to expect to exit Q1 with break-even adjusted EBITDA. For the full year, we expect revenue to be in the range of $185 to $195 million, an increase of 23 to 30% year over year, and we expect adjusted EBITDA to be in the range of positive four to eight million dollars, an improvement in profitability of approximately $18 to $22 million compared to 2023. Let me expand on these.

And we expect adjusted EBITDA to be in the range of positive $4 million to $8 million.

An improvement in profitability of approximately $18 million to $22 million compared to 2023.

Let me expand on these.

First on revenue based on queue for performance were exiting 2023 at an annualized run rate of $165 million.

We expect we can continue to grow payer session volume, including the benefit of the covered lives that were added in December.

Also as John highlighted we expect to add more covered lives throughout the year, including Medicare.

We also expect meaningful revenue growth N D. T E driven by a recent launches in New York City in Baltimore.

Well as converting additional ones from our growing pipeline.

Further monetizing are broadening product offerings.

We continue to believe that we have a significant unprofitable opportunity impair over the longterm of note. These large scale pair contracts represent significant volume opportunities.

Typically come at lower gross margin rates as compared to our consumer offering.

For that reason, we anticipate overall gross margin to be lower in gross profit to grow at 18% to 23% moderately slower than revenue in 2024.

We also expect that we can continue to manage our operating expenses at current levels on an absolute basis. This year by continuing to be diligent about optimizing resourcing across the business.

Jennifer Fuller: First on revenue, based on Q4 performance, we are exiting 2023 at an annualized run rate of $165 million. We expect we can continue to grow payer session volumes, including the benefit of the covered lives that were added in December. Also, as John highlighted, we expect to add more covered lives throughout the year, including Medicare.

Regarding capital expenditures and as John noted, let me see a number of organic opportunities to invest in technology and AI and have an initial estimate for capex in 2024 of $3 million to $4 million.

These investments will be focused on our priority technological areas, including AI features that support our therapist.

Jennifer Fuller: We also expect meaningful revenue growth in DTE, driven by our recent launches in New York City and Baltimore, as well as converting additional wins from our growing pipeline and further monetizing our broadening product offering. We continue to believe that we have a significant and profitable opportunity in Payer over the long term. Of note, these large-scale Payer contracts represent significant volume opportunities but also typically come at lower gross margin rates as compared to our consumer offerings. For that reason, we anticipate overall gross margin to be lower and gross profit to grow at 18 to 23 percent, moderately slower than revenue in 2020. We also expect that we can continue to manage our operating expenses at current levels on an absolute basis this year by continuing to be diligent about optimizing resourcing across the business.

Operational efficiencies.

Further development of the product ecosystem for D. T E members.

Moving to our early view on a three year financial outlook. We believe we should be able to sustain compounded revenue growth in a range of 20% to 25%.

And deliver adjusted EBITDA margin and a range of 12 to 15 per cent by 2026.

This outlook is based on continued expansion of our pair segment, achieving higher capture rates by fine tuning, our marketing strategies and brought in in our referral networks.

Reaching more people more effectively.

Second by elevating the DTE experience.

Investing in our digital capabilities within our product suite to provide not only therapy that a holistic mental health care journey.

We expect that these enhanced digital offerings support meaningful gross margin opportunities and will contribute to both revenue and profitability over this timeframe.

Jennifer Fuller: Regarding capital expenditures, and as John noted, we see a number of organic opportunities to invest in technology and AI and have an initial estimate for CapEx in 2024 of 3 to 4 million dollars. These investments will be focused on our priority technological areas, including AI features that support our therapists, operational efficiencies, and further development of the product ecosystem for DTE members. Moving to our early view on a three-year financial outlook, we believe we should be able to sustain compounded revenue growth in a range of 20 to 25 percent and deliver an adjusted EBITDA margin in a range of 12 to 15% by 2026. This outlook is based on continued expansion of our payer segment, achieving higher capture rates by fine-tuning our marketing strategies and broadening our referral network, reaching more people more effectively. Second, by elevating the DTE.

And we continue to believe we can deliver on both of these go to market opportunities with only moderate growth in our operating expense space.

Again this is a preliminary view based on our current assessment of the business and we will update this over time.

In conclusion, we are excited about the growth prospects in pear revenue and our position as a leader and covered mental health care we.

We are equally excited about the significant opportunities in D. T E and we believe our highly scalable infrastructure creates a foundation for profitable growth in 2024 in years to follow.

With that we will open the call for questions.

Thank you at this time I would like to remind everyone in order to ask a question press start and the number one on your telephone keypad.

We'll take our first question from Charles right at T D Cowan.

Oh, yeah, Thanks for taking my questions and congrats on the on the corner.

Really want to talk a little bit more about your outlook. Your you know <unk> you.

Jennifer Fuller: Investing in our digital capabilities within our product suite to provide not only therapy but a holistic mental health care journey. We expect that these enhanced digital offerings will support meaningful gross margin opportunities and will contribute to both revenue and profitability over this timeframe. And we continue to believe we can deliver on both of these go-to-market opportunities with only moderate growth in our operating expense base. Again, this is a preliminary view based on our current assessment of the business, and we will update this over time. In conclusion, we are excited about the growth prospects in payer revenue and our position as a leader in covered mental health care. We are equally excited about the significant opportunities in DTE, and we believe our highly scalable infrastructure creates a foundation for profitable growth in 2024 and years to follow. With that, we will open the call for questions. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad.

You talked about.

These digital channels that you're looking to use to leverage to really fueled growth no. One of your peers, you know kind of talked about.

Cause, particularly you confirm the social media channels be doctor for growth maybe.

Maybe you could you talk about the difference.

Look to deploy.

Different types of marketing channels on your particularly through in conjunction with your <unk> clients as well as G. G clients and Ah maybe what the differences are there when you deploy these kind of solutions into your customer base verses, maybe a pure direct to consumer model.

Yeah, Thanks, Charles so.

So first on the.

Remember acquisition costs that we've talked about for a few quarters now where our marketing efforts are really channel that driving kind of your overall member acquisition and driving the lifetime value of those members that we acquire and so I would say on the on the pier category and specifically related to the outlook will continue to focus those dollars on on acquiring.

Operator: We'll take our first question from Charles Reilly at TD Calendars. Yeah, thanks for taking the questions and congrats on the quarter. I really want to talk a little bit more about the outlook here. You know, Jennifer, you talked about sort of these digital channels that you're looking to use to leverage to really fuel growth. You know, one of your peers kind of talked about customer acquisition costs, particularly for social media channels, being a gating factor for growth. Maybe you could talk about the difference in how you look to deploy different types of marketing channels on your end, particularly in conjunction with your retail clients as well as your GT clients and maybe what the differences are when you deploy these kinds of solutions into your customer base versus maybe a pure direct-to-consumer model. Yeah, thanks, Charles.

Those members I think we've made a lot of really good progress and driving down that cost of acquisition over the last several quarters.

And we continue to expect that I would say I would come back to the references we made earlier in the call on our opportunity with referral partnerships and that being what we see is a big catalyst for us, particularly in the three year timeframe to be able to drive that member acquisition at a really effective cost.

On the digital capabilities that I mentioned related to the drug to enterprise category, that's more related to our product offering and how we're enhancing the sweet of offering them for that category. So we see those to go to markets as <unk> of course highly related but really incremental opportunities for.

Jennifer Fuller: So first, the member acquisition cost that we've talked about for a few quarters now, where our marketing efforts are really channeled at driving overall member acquisition and driving the lifetime value of those members that we acquire. And so I would say, in the payer category, and specifically related to the Outlook, we'll continue to focus those dollars on acquiring those members. I think we've made a lot of really good progress in driving down the cost of acquisition over the last several quarters, and we continue to expect that.

For us over the long term.

Great.

You know you you spend a lot of time talking about teens and children and obviously, that's a it's a big.

Challenge in the country as well as an opportunity.

Photog space.

You've talked about Ah School systems is a big opportunity as well can you give us an update their mora M <unk>.

Jennifer Fuller: I would say, I would come back to the references we made earlier in the call on our opportunity with referral partnerships and that being what we see as a big catalyst for us, particularly in the three-year timeframe, to be able to drive that member acquisition at a really effective cost. On the digital capabilities that I mentioned related to the direct to enterprise category, that's more related to our product offering and how we're enhancing the suite of offerings for that category. So we see those two go-to markets as, of course, highly related, but really incremental opportunities for us over the long term. Great

How much is.

This year or in the pipeline.

Are these opportunities sitting there right now.

Maybe kind of give us a sense of them on the average size of one of those kind of feels it is it.

Is it on par with a C. T E. R is that even larger maybe get a symptoms scope and scale.

Sure. So we've we have had a <unk>.

Very significant interest since we moved those two announcements that it it's it's variable between school systems, what else is school districts.

Dr. John Cohen: And John, you know, you spent a lot of time talking about teens and children, and obviously that's a big challenge in the country as well as an opportunity for Talkspace. You talked about school systems as a big opportunity as well. Can you give us an update there more? I mean, how much in sort of this year or in the pipeline are these opportunities sitting there right now? And maybe kind of give a sense of the average size of one of those kind of fields.

There is the cities.

The state and the counties so much.

A bunch of different entities that are looking.

To improve the medical help of too. So it really is is quite honestly is quite variable <unk> the Baltimore for instance.

And contract with them with the with the Baltimore County School system, whereas in New York City weren't contract with the Department of Health <unk> just to give you an idea of a difference. So we're we're we are seeing significant interest in terms of.

Dr. John Cohen: Is it on par with a DTE, or is it even larger? Maybe that gives us a sense of scope and scale. Sure. So we've, uh, we have had, uh, you know, very significant interest since we made those two announcements, and it's variable between school systems, what I'll say is school districts, and then there are the cities and then actually the states and or the counties. So all there are many different entities that are looking to improve the mental health of teens. So it really is, quite honestly, it's quite variable from entity to entity. Baltimore, for instance, we are in contract with them through the Baltimore County School System, whereas in New York City, we're in contract with the Department of Health in New York City, just to give you an idea of the difference.

The teams and what our pipeline look for it so the <unk>.

Answer is to stay tuned in terms of the size and scope. It it always comes down to how many.

How many kids there are that we need to cover.

Could be it it is really quite variable I mean, you see the size of New York City contract before the 64000 kids.

It's obviously for Baltimore for the.

They were doing that or 20 30000. So it's it goes anywhere between that and can scale either way. So it's they are quite variable is what I'm for ya.

Great and then maybe one last on the guidance Jennifer if we look at the did you get a sense of how we should think about <unk>, obviously, we're close to break even though the fourth quarter.

Dr. John Cohen: So we are seeing significant interest in terms of the teens and what our pipeline looks like. So the answer is to stay tuned in terms of the size and scope. It always comes down to how many kids there are that we need to cover. And it could be, it is really quite variable. I mean, you've seen the size of the New York City contract for 465,000 kids.

We think of it as fairly linear in terms of profitability improvement as revenues colors sequentially increase to be yours is there any seasonality that we should be aware of.

Yeah, It's Charles I would say for now and without giving a specific you know quarterly number I would I would I would we expect that we'll be able to deliver quarterly sequential improvement and adjusted EBITDA through the year. So a fairly smooth estimated is contemplated in our guy.

Jennifer Fuller: It's obviously less for Baltimore for the whatever number we do there, 20,000, 30,000. So it's, it goes anywhere between that and can scale either way. So it's, they are quite variable, is what I'm talking about. Great, and then maybe one last on the guidance, Jennifer. If we look at the, maybe get a sense of how we should think about the adjusted EBITDA, is that obviously we're close to breakeven in the fourth quarter. Should we think of it as fairly linear in terms of profitability improvement as revenues kind of sequentially increase through the year, or is there any seasonality that we should be aware of?

<unk>.

Okay, Great <unk>. Thanks.

Thank you. Thank you.

We'll move to our next question from Ryan Daniels that William Blair.

Yeah, Hey, guys. This is Jack Daniel.

Thanks for taking my question I'm Congrats on the solid here. This is kind of a follow up on the previous questions here, but for the three of your guidance.

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Significantly.

24 bitcoin.

Jennifer Fuller: Yeah, Charles, I would say for now, and without giving a specific, you know, quarterly number, I would, I would, we expect that we'll be able to deliver quarterly sequential improvement and adjusted EBITDA through the year. So a fairly smooth estimate is contemplated in our guidance. Okay, great. Congratulations again.

You've been emergency about three per cent. So first may.

Can Utah.

Most of <unk>.

<unk> emergency.

That confidence really quick.

Decreased appetite margin.

Try to figure out how much more you can kind of go.

Operator: Thanks. Thank you. We'll move to our next question from Ryan Daniels at William Blair. Yeah, hey guys, this is Jack Thompson for Ryan Daniels.

And then just a bit.

Follow up there too how to rethink about the progression of margins maybe not on accordingly.

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Operator: Thanks for taking my question and congrats on a solid year. This is kind of a follow-up on the previous question here, but with the three-year guidance you noted, even the margins are.... line. Yeah, so thanks, Jack.

Would you be kind of.

You know kind of going up next week.

We appreciate it.

Mmm.

Oh.

Yeah. So.

Jack So so so first on 2024.

Jennifer Fuller: So first, on 2024, and you know, I talked earlier about some specifics there. For 2024, our guidance assumes that the payer category continues to be the largest driver of our revenue growth, and I mentioned that comes at a lower gross margin relative to the other categories. So we mentioned a moderately slower growth in the gross margin as a result in 2024. As we look further, and again, this is a preliminary long-term outlook that we've provided, and it was in response to several inquiries we got from investors on, you know, what is our view of the longer-term profitability of the business, given that, you know, 2023 was such a year of important progress toward profitability. 2024 is still a transitional year as we grow into profitability.

And you know, we we I I talked earlier about some specifics there and 2024, our guidance assumes that the Payor category continues to be the largest driver to our revenue growth and I mentioned that comes at a lower gross margin relative to the other categories. So we mentioned that moderate.

At least slower growth in the gross margin as a result in 2024.

As we look further and again this is a preliminary longterm outlook that we provided and it was it was in response to several inquiries. We got from investors on you know what is what is our view of the longer term profitability of the business given that you know 2023 with such.

A year of important progress towards profitability 2024, Uhm is still a transitional year as we grow into profitability Uhm. We wanted to give this three year view and I'll just come back to the couple of elements that way in there which is you know continued.

Jennifer Fuller: We wanted to give this three-year view, and I'll just come back to the couple of elements that weigh in there, which is, you know, continued progress in the payer category, and that's really in the long-term against our capture rate opportunity. So we mentioned how big of a volume opportunity we see there, and then in direct-to-enterprise, that playing a bigger part in contributing to both the top line and the bottom line over the next three years. And it's, you know, the things we referenced earlier as far as the digital capabilities, and very importantly, all the opportunities that John mentioned we have, we see in the teams market. Yeah, I would just reiterate that the majority of operating costs are taken out.

Progress in the peer category and that's really in the longterm against our capture right opportunities. So we mentioned how big of a volume opportunity we see there.

And then indirect enterprise that plane, a bigger part to contributing to both the top line and the bottom line over the next three years and it's you know the things we referenced earlier as far as the digital capability and very importantly, all the opportunities that John has mentioned, we have we see in the teens market.

I would just just to reiterate that the the the the majority of the operating costs are taken out you know we're relatively stable <unk>. It's the it's the top line growth, where we see a lot of opportunity now, which we think is going to have the biggest impact on the longer range plan.

Dr. John Cohen: You know, we're relatively stable on the OPEX side. It's the top-line growth that we see a lot of opportunity for now, which we think is going to have the biggest impact on the longer-range plan because the opportunity is so big. So it's not like you're going to see us take a lot more out of operating costs. It's going to be much more the ability and the opportunity before us to grow the top line. Okay, understood. I appreciate that color.

Cause the opportunity so big so it's not like you're gonna see us.

Pig.

A lot more out of the operating costs, it's gonna be much more the ability and the opportunity before us to grow the telephone.

Okay understood. It appreciate that color just a quick follow up here.

Dr. John Cohen: Just a quick follow-up here too. I know you've grown the clinician network to about 5,300, or up about 75%. Can you maybe just talk about therapist turnover, clinician turnover? I'm kind of curious what you're seeing on that front. And you know, are you seeing good traction from clinicians on the artificial intelligence front? Or is there something else that you see clinicians citing that, you know, that they really like?

The network 5300 grew up about 75 per cent could you maybe just talk about.

Therapists turnover condition turnover, just curious what you're seeing on that front.

Are you seeing good traction from conditions with the <unk>.

Artificial artificial intelligence <unk>.

That they really like.

Yeah. So we don't <unk>. The the turnover is low we don't you know it's it's it's really not an issue. The reason it's growing it was because of all the.

The time and effort, we put in to be the employer of choice mm mm any interest rehab for people you know coming onto the platform because of all the things to talk so he's actually actually does offer a chance to grow their practice.

Dr. John Cohen: Yeah, so we know that turnover is low, but we don't, you know, it's, it's, it's really not an issue. And the reason it's growing is because of all the time and effort we put in to be the employer of choice and the interest we have from people, you know, coming on to the platform because of all the things that Talkspace actually does offer a chance to grow their practice in an environment where they like the people they're talking to, they like the community, they like the education we're providing them. So the success there has been, as you can see, quite extraordinary in terms of growing the market. I would say that the AI thing we know will be very positive for the therapist.

Vitamin where they they like the people that are talking to they like the community that like the education, we're providing them so the.

The success there has been as you can see quite extraordinary in terms of growing the market I would say that the the a I think.

We know will be very positive for the therapist, we we only have anecdotal information quite honestly, but.

The very early experiences that are really really excited about the idea to have the summary available to them both on sessions that they've completed.

Dr. John Cohen: We only have anecdotal information, quite honestly, but in the very early experiences, they were really, really excited about the idea of having the summary available to them, both on sessions that they'd completed and soon to have the summary of the intake information to be able to make it much easier for them. So those two documentation issues, we know are very popular. The third is gonna be the ability to help them provide better care, which is what we're doing with self-harm and suicide, and we're gonna lean in on developing other algorithms that will help them deliver better care. It doesn't substitute in any way for them, but it gives them, it really makes it better for them as clinicians to provide better care.

And that's soon to have the summary of the intake information to be able to make it much easier for them. So.

So those two documentation issues. We know are very popular the the the third is gonna be the ability to help them provide actually better care, which is what we're doing with the self harm and suicide and we're gonna waited on developing other algorithms, which will help them deliver Medicare if it doesn't and social.

Two it in any way for them, but it gives them.

Really makes it better for them as clinicians to provide better care. So we're seeing a lot of interest in that to say the least.

Okay, perfect. Thanks, guys and congrats again.

Thank you.

We'll go next to Stephanie Davis at Barclays.

Hey, guys. Congrats on my card I. Thank you for taking my question.

Dr. John Cohen: So we're seeing a lot of interest in that, to say the least. Okay, perfect. Thanks, guys, and congrats again. Thank you. We'll go next to Stephanie Davis at Barclays.

John you have been very busy since my garden leave you have talked about going into the student population.

And government population and populations.

Operator: Hey guys, congrats on the quarter. Thank you for taking the time to answer my question. John, you have been very busy since my garden leave; you have talked about going into the student populations, and government populations, and some payer populations. Should I think about the majority of your expansion into new markets as done, and now you've made your proof points, and you're going to go on a kind of a hunting spree? Or are there other markets you're looking at and thinking, well, why don't we do that? Well, first, Stephanie, thanks for that.

I think about the majority of your expansion into new markets as Dawn and now. It's you you made your proof point and you're going to go on a kind of a hunting spree or are there further market, you're looking at and thinking well why don't we do that.

Well first definitely thanks for that I would say.

That was is.

His focus is a is a really big issue for us. It always is not getting diverted I would say the other yes. We've landed on teams we've talked about the all the respect in terms of government cities counties is all relative to teams. So it's the it's the same market that we're after it's just a matter of who the customer.

Dr. John Cohen: I would say that one is focus, which is a really big issue for us; it always is, not getting diverted. I would say the other is respect, which is all relative to teens. So it's the same market that we're after. It's just a matter of who the customer is going to be. I would say, though, the other big one for us was our announcement about Medicare. We will be, we believe, the primary, if not only, large national telehealth mental health provider that's going to be providing that service to the Medicare population. As a result of that, you know, we like to think now it's from teens to seniors, right? So the senior, it's not just the matter of getting into Medicare, which, as you heard me talk about, is both the regular Medicare or standard Medicare and Medicare Advantage.

It is going to be I would say, though the other big one for US was our announcement for Medicare.

We are we will be we believe the primary if not only large national telehealth medical provider, that's gonna be providing that service to Medicare, but the the Medicare population as.

As a result of that you know we like to think now it's from teens to seniors right. So the senior it's not just a matter of getting into Medicare, which is you heard me to talk about is both the.

Regular Medicare or stand a Medicare, but Medicare advantage, it's really a strategy to get Medicare patients people over the age of 65, usually to actually utilize the service. So so given we know the mental challenges of the seniors. The question is the challenge for.

Us.

Which we are ready to address because we put enormous amount of effort and planning into this is to is to address the needs of the Medicare patient and get them to use the platform as we're doing with teams right. So it's.

Dr. John Cohen: It's really a strategy to get Medicare patients, people over the age of 65, usually, to actually utilize the service. So given we know the mental health challenges of seniors, the question is, the challenge for us, which we are ready to address, because we put an enormous amount of effort and planning into this, is to address the needs of the Medicare patient and get them to use the platform as we're doing with teens, right? So you have the product, and now we have to figure out how to make sure that they come onto the platform, which we've actually proven we're able to do with teens, and I'm very confident we'll be able to do with the Medicare population also. So maybe we can tease that out a little bit more. Is there any color you can share on these revenue models and what sort of offsetting costs you're going to have to try to experiment with engagement for these populations?

If you have the product and now we have to figure out how to make sure that they come onto the platform, which we actually proven we're able to do with teens and I'm very confident we'll be able to do on the Medicare population also.

Alright, let's tease that out a little bit more how is there any color you can share on these revenue model and what sort of offsetting costs are going to have to try to experiment around 10 engagement rings population.

So so I would say that.

The Payors R V.

Very interested in it as being in Medicare and Medicare advantage. So for us that's a really important advantage quite honestly, because we're ready in network with all the majors. So in terms of that is that the the investment for us a Medicare was to get us ready just to get us ready to go into all 50 states to get it you know make sure.

Sure that the therapist to sign up and then.

Dr. John Cohen: So, I would say that the payers are very interested in us being in Medicare and Medicare Advantage. So for us, that's a really important advantage, quite honestly, because we're already in network with all the majors.

And then it's available some marketing plan.

To go and try different channels the.

We know the opportunity is pretty big So you know the date is 2025 per cent of seniors say that they're you know how significant loneliness and slash depression.

Dr. John Cohen: So in terms of that, it's not, the investment for us at Medicare was to get us ready to go into all 50 states, to get to, you know, make sure that the therapists are signed up, and then, and then develop some marketing plan to go and try different channels. We know the opportunity is pretty big. You know, the data is, you know, 20-25% of seniors say that they're experiencing significant loneliness and slash depression.

So we know that the market is there is reiterate what I said earlier. The question is how do we get to them to get them to to sign up. We we think it's gonna be a big opportunity at 65 million people, but it's it's obviously not even early days, we just we haven't even just barely gotten out of the gate.

Understood I have another question. Then this is my last one I'm just broader sizing of your your consumer opportunity.

Dr. John Cohen: So we know that the market is there, as I'll reiterate what I said earlier, the question is, how do we get to them to get them to sign up? We think it's going to be a big opportunity for 65 million people. But it's obviously not even early days; we just haven't just barely gotten out of the gate.

How old are you looking at historical top of final investments and what the what the steady state could look like giving you do have an established brand.

So great question.

You know we've talked to has been around for you know 12 years. It has a very strong brand and continues to have so in the market.

Dr. John Cohen: Okay. I have another question, Ben. This is my last one on just the broader sizing of your consumer opportunity. How are you looking at historical top of funnel investments and what the steady state could look like given you do have an established brand? So a great question. You know, Talkspace has been around for, you know, 12 years. It has a very strong brand and continues to have so in the market. What we're seeing on the consumer side, as we've talked about before, is that there continues to be pressure on consumers, right? I mean, I think everybody would say no one's going to predict where the market is going, where the economy is going, but you can see that consumer spending is, you know, very, very, I would say, very much up in the air relative to how much you're going to spend and how much you're not.

What we're seeing on the consumer side as we've talked about before is.

Is.

There there continues to be pressure on consumers right I mean, they pick everybody would say nobody's going to predict where the market is going where the economy is going but you can see.

Consumer spending you know it was very very I.

I would say much up in the air relative to how much you're gonna spend <unk>.

You know our our pivot two years ago to appear strategy. We know is working because when people come to find talk space and they have a choice between pay.

Paying out of pocket or determining eligibility and then having the payers pay for it we.

We know is a very strong movement towards the payer side cause they're gonna pick their insurance given the choice that's a big differentiator for us and the mortgage the other.

Dr. John Cohen: You know, our pivot two years ago to a payer strategy is working because when people come to find Talkspace and they have a choice between paying out of pocket or determining eligibility and then having the payers pay for it, we know it is a very strong movement towards the payer side because they're going to pick their insurance given the choice. That's a big differentiator for us in the market, to consider that the consumer, we know, will spend less time on the platform than a person that has insurance. That's a big deal because the long-term value of that individual patient relative to what it took for us to get that person onto the platform is much, much better than that of a consumer. Essentially, if insurance is paying for your therapy, there's a pretty good chance you're going to stay on and continue to get therapy for as long as you need it without the overhang of, oh, am I going to continue to need to pay for it?

To consider on that is the consumer.

We know we'll spend less time on the platform that a person that has insurance.

That's a big deal because the longterm value of that individual patient relative to what it took for us to get that person onto the platform is much much better than a consumer.

Essentially if if insurance is paying for your therapy pretty good chance are you gonna stay on and continue to get therapy for as long as you need it.

Without the overhang of Oh am I gonna continue to need to pay for it.

So.

So we you know that's a big differentiator for us relative to.

Being in the consumer market.

Got it so cannibalization, but welcome cannibalization. Thank you for taking my questions.

Thank you and.

There are no further questions at this time I'd like to turn the conference over to John calling for closing remarks.

Thank you for everybody for being on in closing our achievements in 2023 in or out with for 2024 reflect unwavering commitment to providing easily accessible readily available and affordable high quality mental health care. We are poised for continued success and we'd.

Dr. John Cohen: So... So we, you know, that's a big differentiator for us relative to being in the consumer market. Got it. So cannibalization, but I welcome cannibalization. Thank you for taking my questions. Thank you. There are no further questions at this time. I'd like to turn the conference over to John Cohen for closing remarks. Thank you everybody for being on. In closing, our achievements in 2023 and our outlook for 2024 reflect our unwavering commitment to providing easily accessible, readily available, and affordable high-quality mental health care. We are poised for continued success, and we look forward to sharing our progress with you. Thank you again for joining us today. And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Look forward to sharing our progress with Ya. Thank you again for joining us today.

And this concludes today's conference call. Thank you for your participation you may now disconnect.

Please wait the conference will begin shortly.

[music].

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