Q1 2025 Talkspace Inc Earnings Call
Kelvin: Good morning, ladies and gentlemen, and thank you for spanning by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Talkspace for Squart Through 2025 earnings call.
Kelvin: All lines have been placed on mute to prevent any background noise.
Kelvin: After the speakers are marked, there will be a question and answer session. If you would like to ask a question during this time, seem to press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Oh, now I'd like to turn the call over. Do you need time to pine? Please go ahead.
Jeannine Feyen: Good morning and welcome to Talkspace's earnings conference call for the first quarter of 2025.
Jeannine Feyen: 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
Speaker Change: We'll use the presentation to walk you through today's remarks. Leading today's call are our CEO , Dr. Jon Cohen and our CFO , Ian Harris. Management will offer their prepared remarks and we'll then take your questions.
Speaker Change: 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. Reconciliation of these non-GAAP measures are included in our earnings release and on our website Talkspace.com.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release.
Speaker Change: For more information, please review our Safe Harbor Disclaimer on Slide 2.
Now, I will turn it over to Dr. Jon Cohen.
Jon Cohen: Good morning, and thank you for joining the call today to review our first quarter results.
Jon Cohen: We had a good start to the year with revenue growing 15%, fashion volume up 23%, and even up 153% over the first quarter of last year.
Jon Cohen: May is Mental Health Awareness Month. This year, we are reaffirming our commitment to breaking down barriers to care for millions of Americans with our Let's Face It campaign.
Jon Cohen: where we demonstrate how Talkspace members use our platform to confront what may be holding them back.
Jon Cohen: As a leading behavior health provider with meaningful scale and reach, we are actively leveraging.
Jon Cohen: Multiple channels, several of which I'll touch on today to raise awareness and drive members to our solution.
Jon Cohen: We view the work we do across all areas of our business as part of a cohesive strategy aimed at building the most comprehensive approach to delivering behavioral health care to more Americans.
Jon Cohen: With nearly two-thirds of Americans having access to Talkspace through their insurance plans or their employee assistance plans, we remain focused on the most significant opportunity, which is driving engagement within that population.
Jon Cohen: It took meaningful steps in the quarter to optimize our funnel through a variety of technological improvements aimed at getting more people onto the platform, but even more importantly, delivered better quality of care by keeping them engaged in their therapeutic journey.
Jon Cohen: Specifically, we enhanced our real-time benefits verification with proprietary algorithms to overcome user and eligibility errors at the onset of registration.
Jon Cohen: These efforts have reduced our drop-off rate by more than 12 percent at the early stage of the funnel driving additional new registrations this quarter.
Jon Cohen: No matter how a member pays for Talkspace, they're able to seamlessly switch to other payment methods and keep their same provider
Jon Cohen: Coverage may change, as is often the case each January , but the continuity of care with the provider will.
Jon Cohen: An example of this optimization is the creation of a new, easy button for our EAP members to convert to their employer's behavioral health insurance coverage when they exhaust their EAP plan sessions.
Jon Cohen: Users are now notified when EAP sessions are running low, thus reducing friction related to checking coverage benefits and making a switch, while continuing with their existing provider.
Jon Cohen: This is an incredibly important step to facilitate our members' continuation on the platform as well as to ensure the continuity and quality of care.
Jon Cohen: These are just a few examples of the work our product team is implementing to improve our customer experience and provide care for as long as clinically necessary.
Jon Cohen: We also remain relentlessly committed to delivering high-quality care and positive outcomes for users of Talkspace
Jon Cohen: Through our more than 30 peer-reviewed studies, we have consistently shown outcomes at parity within person traditional therapy, serving as proof of our efforts to show efficacy and quality across multiple modalities while ensuring this work is all backed by third-party academic review.
Jon Cohen: The high-quality care our network of therapists provides remains the key differentiator for Talkspace as a service provider as opposed to just the directory of providers. This is very important to our payer partners, especially as value-based contracts become more prevalent.
Jon Cohen: As I have discussed in the past, we use qualitative and quantitative data and metrics across five key areas to set our providers and our network.
Jon Cohen: Armed with that data, we work extensively to ensure the highest quality care platform through rigorous hiring and onboarding standards, expensive training, education and outreach.
Continued network and quality management activities and risk management support.
Jon Cohen: During the first quarter, we made progress in broadening the reach of Talkspace as an affordable option for care now with nearly 200 million covered lives.
Jon Cohen: As a result of our broad member access and our high levels of clinical quality, we are working diligently with our payer partners to better integrate our solution into their online member experiences to make it easier for members to discover Talkspace.
Jon Cohen: And I am extremely pleased with our progress in this area.
Jon Cohen: In January , we rolled out additional military coverage launching TriCare West.
Jon Cohen: Talkspace now covers all of TriCare's 10.5 million members including families and dependents.
Jon Cohen: Our reach into various military communities through a series of specialized grassroots efforts has been very successful and very cost effective to date with significant numbers of military personnel and their family members engaging in therapy
Jon Cohen: We are seeing that this audience relies extensively on word of mouth and loyalty from recommendations within their communities and are very open to therapy.
Jon Cohen: In January , we also began to deploy initiatives to address the Medicare population, and as a result we are seeing growth in our Medicare registration.
Jon Cohen: In addition, we are witnessing strong patient outcomes with this population at 84% of Medicare members showed clinical improvement surpassing typical expectations of around 70%.
Jon Cohen: We will continue to focus on initiatives that feed organic awareness that Talkspace has now covered for Medicare beneficiaries. In fact, we just announced last week that Gary Livingston, a fan favorite from the popular Golden Bachelor franchise, is our Medicare spokesperson as we enter mental health awareness month.
Jon Cohen: We believe that psychiatry is an important growth opportunity for the company. In the first quarter, we reconfigured a dedicated team to refine and relaunch our psychiatry offering for individuals 18 and older, which include medication initiation and management for commonly treated conditions such as anxiety and depression.
Jon Cohen: As a covered benefit, we have seen a significant increase in demand for this offering from our partners and from internal referrals via our own providers treating therapy members that need this additional level of care.
Jon Cohen: In addition, we recently expand our relationship with Doc Doc to include our psychiatry offering.
Jon Cohen: Our direct-to-enterprise pipeline remains strong, including a renewal with a city of Memphis and meaningful contributions from recent editions, including US Rowling, the US Navy, and most recently students at the University of Alaska Anchorage.
Jon Cohen: Last week we announced another exciting agreement with BARC Technologies, the leader in online safety technology for kids.
Through their phone and app, Bart covers 7 million children.
Jon Cohen: Along with their technology installed in over 3,700 school computers, they provide safety alerts in 45 different categories and scan messages in over 30 social media apps, web browsers and emails.
Jon Cohen: They have detected and alerted parents to over 2.7 million episodes of possible severe
Jon Cohen: Talkspace will now be available on all BARC phone and BARC app users and will come preloaded on BARC phones, connecting teens and parents to Talkspace to help and navigate the many emotional challenges these teens face today.
Jon Cohen: This partnership would bark in addition to our teen initiatives with multiple cities of schools around the country, builds on our commitment to addressing the teen mental health crisis in the country.
Speaker Change: Artificial Intelligence Augmented Intake Systems that surface key symptoms, cycle social contacts, and diagnostic considerations.
Jon Cohen: Streamlining client onboarding and clinical assessments including real-time clinical documentation, summarization
Jon Cohen: Client engagement tools that increase therapeutic adherence and continuity including Talkspace, our personalized podcast feature for adults over the age of 18.
Jon Cohen: Our goal with this product is to drive member engagement between sessions, keep members focused on their progress, and ultimately assist in clinical improvement.
Jon Cohen: We have generated 6,000 podcasts in the first several weeks and are already receiving very positive member and provider feedback.
Speaker Change: In the last several weeks we have validated a new risk assessment tool.
Jon Cohen: A homicide violence ideation algorithm that is over 90% accurate in determining risk for violent behavior, including homicidal ideation and surfaces this risk to clinicians in real time.
Jon Cohen: that utilizing advanced technology to deliver better mental health care solutions.
has been at the core of Talkspace since its inception. [inaudible]
Jon Cohen: when we develop asynchronous messaging as an effective method for delivering therapy.
Jon Cohen: The next chapter in innovation and growth is to further integrate AI to deliver even better mental health support.
Jon Cohen: With over a decade of experience in applying advanced technology to behavioral health care and owning the largest behavioral health data sets in the industry, we are now actively working on the development of a first of its kind, foundational large language model.
Jon Cohen: Talkspace is uniquely positioned to build this foundational model trained on de-identified clinical data, aligned with evidence-based therapeutic frameworks.
Jon Cohen: Unlike horizontal general purpose models, this vertical AI platform will not only enhance existing Talkspace services, but also serve as a launchpad for future AI applications and behavioral services unlocking new possibilities in clinical innovation.
Jon Cohen: Finally, I'd like to proactively address a common question we've received amid recent market volatility. Our business is not directly affected by tariffs. More importantly, our long-term strategy has shifted the core of our business to an insured patient base, reducing reliance on out-of-pocket spending.
Jon Cohen: As an in-network provider for nearly 200 million covered lives, we remain accessible and affordable. We are a national provider for Medicare, including Medicare Advantage and continue to benefit from the federal investment and senior mental health.
Jon Cohen: Since we're not in Medicaid, we're insulated from potential changes to those programs.
Jon Cohen: To conclude my comments, I am very pleased with how we started the year and confident in our trajectory for the course of 2025. We expect continued demand for our convenient, affordable, in-network care and remain confident in our full-year guides and now I turn it over to Ian.
Thank you, Jon. Good morning, everyone.
Ian Harris: for please reporting a solid first quarter in line with our expectations. Our total revenue for Q1 was 52.2 million, representing a 15% increase compared to the first quarter of 2024.
Ian Harris: and demonstrated continued strong performance across key metrics, including payer sessions.
Ian Harris: which totaled approximately 350,000 in the quarter, an increase of 23% year over year.
Ian Harris: Unique payer members completing a session in the quarter grew 17% year-over-year reaching more than 101,000 in the quarter.
Ian Harris: and completed session's proactive member increased 5% versus a year ago.
Ian Harris: As it relates to our pair of business, beginning this quarter, we will no longer be providing regular updates on our total covered lives figure.
Jon Cohen: As Jon mentioned, we grew our covered lives by over 40% versus a year ago and now cover nearly 200 million lives, a milestone we've spoken about previously and one of which we are incredibly proud.
Jon Cohen: We do expect to continue growing our covered lives, mainly through additional regional plans, including two of the largest ones that we expect to add later this quarter.
Jon Cohen: However, we do not view this metric as particularly relevant for driving sustainable growth given all the success we've had in scaling to nearly 200 million.
Jon Cohen: Activating and engaging this large base of members who already have Talkspace as a covered benefit will be incrementally more important to our growth.
Turning to DTE [inaudible]
Jon Cohen: DTE Revenue for the Quarter came at 9.6 million, down 3% year-on-year, and flat sequentially from Q4. Overall, our DTE pipeline remains strong across both the employer and youth segments, and we expect positive momentum and bookings throughout the rest of the year.
Jon Cohen: Consumer Revenue, which covers people choosing to pay out a pocket, declined by just over 2 million versus the same quarter in 2024, as the overwhelming majority of new members are utilizing their insurance coverage at checkout.
Jon Cohen: Gross profit for the quarter was 23.3 million, up 7% from the previous year.
Jon Cohen: Our gross margin came in at 44.6% compared to 44.2% in Q4 2024 and 47.8% a year ago.
Jon Cohen: This is a continuation of the trend we expect to see as we continue to shift overall revenue mix more towards our pair business which will benefit the company given the superior long-term economics and lifetime value for members under the pair focus strategy.
Jon Cohen: During the quarter, we also maintain our focus on operational efficiency.
Jon Cohen: Total operating expenses were 24.4 million, an increase of 1 million versus Q1 of last year due to the increase investments in marketing we've spoken about previously.
Jon Cohen: As a percentage of revenue, total optics was 46.7% versus 51.5% in the first quarter of last year.
Jon Cohen: We achieve the gapment income of 300,000 in the quarter and improvement from a 1.5 million dollar loss one year ago.
Jon Cohen: Adjusted a bit off for Q1 was 2.0 million, an increase of 1.2 million versus the same period last year.
Turning to the balance sheet.
Jon Cohen: As I mentioned previously, one of our key attributes is the strength of our balance sheet.
Jon Cohen: We ended the first quarter with 108 million cash and cash equivalents, including available for sale securities, a decrease from 118 million in the fourth quarter.
Jon Cohen: The $10 million sequential decline was primarily driven by our repurchase activity under a previously announced Sherry Purchase Program.
Jon Cohen: In Q1, we bought back approximately seven million of stocks, bringing our total repurchase activity to 18 million since our initial authorization of the program one year ago.
Turning to our outlook for the year.
Jon Cohen: We are reiterating the full year financial outlook provided on our last call, which consists of revenue between 220 and 235 million, representing 21% growth at the midpoint.
Jon Cohen: and adjusted EBITDA of $14 to $20 million, an increase of 144% at the midpoint.
Speaker Change: Talkspace remains a leader in the behavioral health market and our commitment to high quality care continues to resonate with our payer partners, our customers, our network of therapists, and most importantly with our members. I'm very pleased with our solid start to the year and look forward to building on our momentum throughout the remainder of the year.
Jon Cohen: With that, we can help up the call for questions. Operator? Thank you.
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question, please press star followed by the number one on telephone keypad. If you would like to withdraw your question, please press star one again. One moment please for your first question.
Speaker Change: The first question comes from the line of Ryan Daniels of William Blair. Please go ahead.
and others. Thank you. Thank you. Thank you. Thank you.
Guys, can you hear me?
Good Bye.
Can you hear me now?
Speaker Change: Yeah, I can hear you now, could you hear my question? Yeah, I got I got the question
Okay, we couldn't hear you [inaudible]
Yeah, so uh...
Speaker Change: So for the MA plans, we're seeing a lot of a lot of you know interest and participation in the MA plans to multiple payers and
Regional Plans. [inaudible]
Speaker Change: You know, possibly a PM PM type offering, we haven't done that yet in terms of a quote value based contract in that way, but we are seeing a significant amount of interest.
Okay.
Speaker Change: And then also on Medicare Advantage or Medicare fee for service. Have you guys delineated maybe the marketing budget for the year? I know you've talked about
Speaker Change: Being a new market, not knowing what channels will resonate or what the lifetime value will look like. Some curious is we're approaching the fifth month of the year. If you've got a little bit more data and it's kind of honed in what you're advertising outlook is for that segment.
Speaker Change: Hey Ryan, it's Ian. Good morning. Good morning. We're pretty, we're pretty, as we talked about in the past, we're very much taking a portfolio approach.
Speaker Change: in our go-to-market overall, which has reflected in our as-spend, in our media planning. So, you know, we start the year with the general framework across sort of core commercial, military, and then Medicare and MA.
Speaker Change: We're, as we've, I think touched on before, very data driven around that, right? So that those budgets and those relative allocations can change.
Speaker Change: It's really substantially cord to cord and even months to month, so there's no number I've set out for you in terms of pegging it to we're effectively solving for the best ROI.
Speaker Change: understanding that it'll take time to figure out the ROI. On the contrary, military I'd say has actually really defeated our highest expectations. And so that, well, that's also a near cohort, that one, one given the sort of
Speaker Change: Location-based media channels we can pursue for the on-base media channels and outlets to sort of community engagement platforms.
Speaker Change: We've been really, really good traction and success in military. So while one is new, I would expect us to lean in there more just given the returns we're seeing.
Okay, perfect.
Speaker Change: and then last one I'll hop off just on the kind of technology improvements for benefit checking and you mentioned the easy button to switch between the EAP and
Speaker Change: Kind of coverage. How broadly is that rolled out? It seems like it's having pretty reasonable impact on either use or continuation of engagement. Some curious if you've rolled that out broadly or if it was more of a pilot with certain employers or payers. Any color there would be great. Thanks and congrats again.
Thanks. We're in that process now. We're rolling it out.
Basically, you know, climb by, you know, climb by, by meeting employer, by employer [inaudible]
I'll be right back.
Speaker Change: Yeah, and it is, as per your observation, it does have a significant impact, you know, the whole idea of not having to switch over, re-enter a single sign on, but I'm going to call it.
Speaker Change: Does make it much easier for people to switch over to their benefits. So we're we're in a very big way leaning in on this right now and it is having a positive impact.
Great, thanks again guys. Sure.
Speaker Change: Your next question calls from the law and Steven Dechert of Keyman Capital Markets. Please go ahead.
Speaker Change: Hey guys, thanks for the questions. First, how is patient retention change over the last maybe six or 12 months as you continue to add technology enhancements?
Speaker Change: and then secondly, the follow-up. Do you remind us what portion of your 2025 guidance, your revenue guys, is expected to come from Medicare and then military? Thanks.
A.C.'s on the second question.
Speaker Change: We don't break that out. Again, internally we have a range of outcomes.
in terms of where the volumes ultimately come from.
So there's no shortage of sort of-
Speaker Change: Cominations and permutations are sort of how we get to plan. As you can imagine we take a pretty conservative approach in discounting. Um.
Speaker Change: The various sort of end markets, right? So I wouldn't I wouldn't pay a hard number to it. If again if we're not seeing returns in one area, we'll we'll pivot spend to another while we figure out that former and sort of go at it proactively like that.
Speaker Change: Your first question I think was on retention, what what technology is doing for that?
It's gonna be fun.
Speaker Change: Yeah, so I would point out, you know, the section velocity metric that we point to is one indicator for that so that was up five percent. You're on your in the first quarter.
Speaker Change: Again, it's one good indicator. Going forward, we're actually kind of...
Speaker Change: seeing the marketing investments we started in Q1 really start to have an impact as we exit in March and seeing really strong checkouts in April . And so that actually the section velocity metric I just want to flag make it a little bit skewed because of that increase in new users. And so that's it for today.
Speaker Change: What are the general matters, things like talk-cath and these other-
Speaker Change: That change and sort of average duration of the user, right? We got to make sure time goes by and see how much longer those folks stay on the platform, but all indications so far are positive.
All right. Thanks.
Speaker Change: The next question comes from the line of Charles Rhyee of TD Web Back. Please go ahead.
You know, converting, you know, member, you know, you know, [inaudible]
People that have access to Talkspace and getting them engaged.
Speaker Change: You know, I think, you know, says the marketing expense was a little bit lower than we kind of expected obviously up a little bit year-to-year and Ian, I get that you're saying that.
Speaker Change: You know, you want to see how some of the programs are tracking, but any reason not to...
Speaker Change: May push the pedal a little bit more aggressively here, or is this something that we could expect as certain channels work better than others? We could see more aggressive spend because it seems like this is the
Speaker Change: This is a big opportunity and if the demand is as great as we all think it is, it's just getting people aware of what's available to them.
Speaker Change: Yeah, thanks Charles. The short answer to your question is yes, absolutely. I mean, we're solving the overall budget underneath of that ad spend it's it's very very competitive and nimble sort of going from one
Speaker Change: I would say expect Q2 to be similar to Q1, right? So think of it as more like a first half or heavier on marketing investments and then we see the benefits of that sort of get pulled through given the longer duration of a pay-er-life relative to what you may have seen.
Speaker Change: from us with a pure consumer model several years ago. So, yes, absolutely. I mean, a lot of it.
Charles: Charles is just the balance as we go month to month. So in general the ROI's are very positive. We've been very transparent publicly that we're leaning in and making greater investments in this area. Yeah.
Charles: How, you know, where the timing falls months to months, it can hinge on a variety of things, right? What's going on in the environment?
What the RIs are in certain channels? [inaudible]
New things that we're testing, and then also Candelete.
New Product Things, right?
Charles: If we're delayed two weeks on a product rollout that we think will have meaningful conversion benefits.
Charles: The maybe we shift the marketing accordingly. So it's I wouldn't read too much into
Charles: The Court, the Court, the perspective, I would flag the first half is...
Charles: It's going to be sort of the heavier marketing spend and then we reap the benefits starting in Q2 really where you'll see a step up in growth. Thanks to those investments we made in Q1 and then see that poll series for the remainder of the year also.
Charles: But if they are always a very positive, any reason not to just-
Continues spending sales and marketing to drive growth
You know, this month and one of their events is going to be mindful of things like that. So like mental health awareness month in May, this will be a very active month for us.
Charles: If you're asking about the back half of the year, absolutely, but because we have both top and bottom line substantial growth in the plan and in our financial guidance, that's just a balance we need to manage.
Charles: Right, it takes time to see the benefit, the R of that investment. So it's always just balancing those two factors.
Jon Cohen: Got it. And maybe just a quick quick, I'm sorry, go ahead, Jon. You know, I was just going to say remember it's also not it's
Speaker Change: somewhat of the total, but a lot of it is specifics about where we spend it, right? So we know we need to spend more on military. We know there's some other some populations we're looking at. So it's not just where it is, but it's how it gets distributed across the social media channels, how it gets distributed across the search channels.
Speaker Change: So it's a significant number, but it's not just like it needs to increase. It's actually more about how you distribute the money.
Jon Cohen: John , and John Mayfair, it's follow up on the BARC partnership.
Speaker Change: Can you talk a little bit about how that works? Because, you know, it looks like bark members get sort of the the free mental wellness tools, sort of talk this talk space go. And then, you know, they're getting some
Speaker Change: Some discounts off their first month if they subscribe to Talkspace. Can you talk a little bit more about how this partnership works and maybe sort of the economics from your end and it is available to all the 7.5 million mark members.
Speaker Change: Yeah, so there's a couple of parts of it. One is, of course, is the barcphone. So we're going to have the Talkspace app will be loaded onto the barcphone. So essentially when a parent gets
Speaker Change: Some sort of notification. They have easy access to Talkspace. That's part of it. The second is will is they are on you probably saw literally 3,700 schools have their software embedded so that kids can only go certain places when they're using a school software. So.
Speaker Change: We won't disclose the actual financial relationship between Barth, but we do think that
Speaker Change: You know, the whole area of parental alerts because of our experience on the suicide ideation. And if you saw we know we so we now have a homicide violence ideation, which we're rolling in.
Speaker Change: It's a really important not just moral imperative for us but it's a really potentially bigger channel for us to get referrals if you're into or if you're looking at the whole parental protection issues, it's pretty remarkable actually because it's not just
Speaker Change: Kate Speech Drug Alcohol Abuse, so that there's a huge amount that they're looking at which gives us an opportunity to be part of that as parents are looking for help for their kids when they find something they don't like.
Yeah, that's helpful. Okay, appreciate it. Thanks, thanks guys.
Bobby Brooks: Here next question comes from the line of Bobby Brooks of Northland Capital Markets. Please go ahead.
Hey, good morning, Dad. Thank you for taking me question
Bobby Brooks: So, it's been a little more than a full month since you've launched Talkcast. I was just really curious to hear, is this something that's being used for every client across the board, and if not, how has it decided who gets these personalized intermeeting personalized podcasts?
Bobby Brooks: Sure, so you know if you know you heard you talked about it, so we just in the first couple of weeks we've launched about 6,000 podcasts, but the way it works is that the podcast is generated and then it's given to the therapist, the therapist then reads through it and makes a decision
Bobby Brooks: about whether or not they will give that to the individual member or patient.
Bobby Brooks: Then after that, the patient, your member decides whether or not they're going to listen to it enough. So we're looking at that data now, but it is a decision that is up to the therapist about whether it's important or not to release to the individual patient.
You know...
Bobby Brooks: Some very positive feedback from both the providers and members who have used it. So early days, but it is available to everybody to their therapist and the therapist's size.
Bobby Brooks: Okay, that makes sense. So, but in that 6,000 number, you're using those are ones where therapists have screen-led it and then the patient eventually listen to it. That's correct. Yeah.
Bobby Brooks: Got it, got it. And then I was just really curious on this switch, the EAP switching to insurance.
Bobby Brooks: Could you just maybe talk about a little bit like financially, remind us all like financially, like how different EAP patient is versus one who then switches over through insurance.
Bobby Brooks: I think that the insurance is probably a bit better for you guys financially, so that would be helpful.
Bobby Brooks: Well, so the EAP programs are very different, right? You could have your employer could say you could get three sessions to your EAP program, you could say they could get ten sessions or one a month, it's very variable depending on the plan.
Bobby Brooks: The important thing is is that when you exhaust them, if you have three or five things you want to stay with your therapist because we are covering 200 million roughly, you know, Americans.
Bobby Brooks: There's a very, very significant chance that you're going to be covered by your insurance, which is also your employer, right?
Bobby Brooks: So what we've done is we've made it easier to switch over from your EAP benefits now to keep your therapist and switch into your insurance plan which then you then you submit like any other insurance claim to ensure which is covered.
Bobby Brooks: So that the easy button here is that up here in an EAT program.
Bobby Brooks: that your employer bought, but your insurance does not cover you? Then what happens basically you have to start over with a new therapist. And that's what we've addressed with this.
Speaker Change: Okay, got it. And then could you maybe just touch on like the...
Speaker Change: The revenues that you received through EAP plans isn't that fixed, and then on insurance, obviously you're getting paid on a per session basis. Is that the right assumption there? No, so, hey Bobby, so EAP is, it shows up in our pay revenue first of all, and it's the same way an insurance coverage session would be. Thank you.
Speaker Change: Thank you for clarifying. And then I think you had a pricing margin question, generally speaking, so not always the case.
Speaker Change: The rates, but also the sort of session structure and some of this gets into like length of sessions and flexibility you have on the insurance side that may not be the case.
Speaker Change: E-N-E-A-P, generally it's a higher priced session under the BH, right, Appear Insurance coverage versus E-A-P It tends to be because it's a limited menu.
Often times it's only 45-minute seconds allowed.
Speaker Change: and then to Jon's point, you're capped on sessions, right? And so your lifetime value is artificially constrained. Whereas now, if we can facilitate for those who want to keep going after they exhaust their whatever it may be, three, six, eight sessions allotted to them through their employer benefits.
Speaker Change: And, you know, crucially, you want to stay with your same provider. We make that very easy to just have continued care and let that lifetime value run its natural course.
Speaker Change: Very helpful. Thank you. And just the last one for me, so sequentially you guys added about 5,000 plus payer patients. I was just really curious to kind of hear what the makeup of that was. Obviously you talked about kind of military being a strong vertical for you guys in the quarter. Was that mostly military ads or just any more color you could provide on that. Thank you.
Speaker Change: It's across the board. I think driven by military medicare, but then also just organic growth and some of our existing commercial plans.
Speaker Change: Thank you very much and congrats on the strong quarter, guys, I'll return to the queue.
Speaker Change: Your next question comes from the line of Ryan MacDonald, the Needham and Company. Please go ahead.
Ryan McDonald: All right. Thanks for taking my questions. Jon, maybe I start with you. Great to hear of the strong outcomes you're seeing in the Medicare population. And it may be curious, as you're measuring for quality in terms of the quantifiable metrics, you talk about what a few of those metrics are, and have you been able to use sort of those outcomes and negotiations around rates?
Ryan McDonald: with insurers. And are we at a point yet where we're starting to see sort of…
Discussions around value-based care contracting to this point. Thanks.
Speaker Change: So thanks. You know, it's a great question because so just some of that so without getting too deep we have five basic areas of measure quality service quality clinical quality
Client Experience, Productivity and Documentation. Now, within each of those
Speaker Change: There are a bunch of other metrics as a data point that we look at and now we're also looking now at
Speaker Change: You know, report cards and the feedback to the to the therapist and how we do that in a better way so that they see what's going on.
Speaker Change: and how well they compare to the other therapists. So that's the broad base of the quality measurements and how we look at it. It's a really important function for us because quite honestly, we think it's a big differentiator for us in the market.
Speaker Change: I like to say we're not a matching service, we are a home-fledged hippocompliant healthcare provider, which monitors our quality and the quality of our therapy network that's a really big deal for us.
What was the second part of your question?
Speaker Change: Was I wondering if you're starting to see the message? Yeah. Yeah. Yeah. And if it's impacting rates.
Speaker Change: So right now the answer is no. Although we do have, I think, you know, we talk about publicly, we do negotiate with some increases in rates with the payers. Part of that negotiation when we are negotiating with the payers quite honestly is a very substantial quality discussion.
because we are engaged by the pairs. We are engaged by the pairs.
Speaker Change: based on quality metrics is in addition to other metrics such as first time to appointment, first time to second appointment, no shows etc. So it's a basket of different indicators that they use. Quality being a very important part of that because what the payers do. .
Speaker Change: is they will do audits for us. They actually look because we have a full-fledged EMR, you know, they look at our notes, they look at our quality notes, they look at how good the therapists are doing in terms of delivering care. So this...
Speaker Change: This whole issue around both re-negotiations and contractual rates is very much related to what we're talking about.
Speaker Change: We do have some early value based contracting. Most of it's very straightforward with which is stuff we were doing for a long time because of a lot of it is related to first time to appointment, first time second appointment, etc. But the payers are getting more sophisticated relative to monitoring who delivers better care.
Speaker Change: Super helpful there. And maybe as a follow up, it's great to hear a sort of note tariff impact or nothing sort of unmedicated with no exposure there, but
Speaker Change: Well, one of the sort of, I guess, topics of discussion with the Trump administration has really been, you know, within the new budget, you know, there's, I think about a 28 to 29 billion dollar cut on behavioral health funding across a number of different organizations, we've seen sort of freezing of funding to schools, which is, I think, about a billion. You're just given that you have sort of...
Speaker Change: City, State, Municipality, School District, Exposure, we've been a bit surprised at sort of the sources of funding that be those entities sort of pull.
Speaker Change: Are you seeing any impact from sort of the freezing or the cuts here on behavioral health from the new administration on whether it's on sales cycles or contracting any spending there? Thanks.
Speaker Change: So, you know, another really point of good question. So right now, the cuts that have been announced have been for all.
Speaker Change: For what we've read, I'm seeing is all been in-person [inaudible]
We actually believe that because we are a much...
Speaker Change: We are much less expensive and we have a larger ability to scale.
Speaker Change: That it may actually be an opportunity for school districts to move from a dominant in-person model to a virtual model. So right now we...
Speaker Change: We are looking at that. We are obviously very acutely aware of what's going on but we have not seen, first of we have not seen any picture. Now in terms of the discussions with school districts [inaudible]
Speaker Change: We haven't seen it yet. So I've been in the room on a lot of these discussions with the person who runs this the vertical for us. We haven't heard from a school district yet that has said oh because of the custom funding etc. We're not going to do anything.
The carler of that is our...
Speaker Change: Pipeline remains very, very substantial on the school side, but I would tell you, having said all that, I don't think anybody could really predict what's going to happen in the next three to six months on this, but right now our view has been, I would say neutral to positive.
on what's happened relative to mental support for kids.
Understand, I appreciate all the color there, Jon, thanks.
Speaker Change: Your next question comes from the line at Steven Valiquette Meet Mizzouho Securities. Please go ahead.
Stephen Valliquette: Great, thanks. Good morning, Jonny. And so I have two questions. I'll just ask him one of the time. I guess it's just the first one, the number of completed pay or sessions.
Stephen Valliquette: I came in a little bit lower that relative to our modeling but then conversely though the pay or revenue per session.
Stephen Valliquette: He came in higher, I think formally it has up about 8% year over year, so I guess the first question is, is that a sustainable run rate that the pay or revenue per session for the full year could be up high single digits? Just wanted to get some more color on that.
Thank you.
[inaudible]
Speaker Change: Casey, I think you're referencing sort of the implied price procession and how that how that's correct. Yeah, yeah, yeah, that's also a link with them provided number of one way. Correct. Yeah, exactly. So
Speaker Change: to contextualize the remind folks. So that sort of implied pair price is subject to a few different variables. One is obviously contractual increases in sort of what the rack rate is we're able to negotiate. So we talked about some positive developments there in the past and so we did have some effective Jan one benefits there.
It's also just going back to Bobbie's question on-
Bobby Brooks: BH versus EAP's relative price per session. It's very much influenced by mix of BH versus EAP.
Speaker Change: The specific customer, and also the specific CPT code, which is largely correlated to the duration of fashion, which again PhDs.
can't be longer in higher price. [inaudible]
Speaker Change: You know, the easy button thing should be a creative to this metric. It also reflects
Speaker Change: Our sort of RCM efforts, our collection efforts and the improvements we've seen there. So, we had a whole bunch of favorability, you know, not by chance, we're pushing it all the right direction, which you saw come through in that sort of 8% year on year for Q1.
Speaker Change: I would say, you know, assuming sort of a flatish, if you model it that way, sort of price recession, I think where we end up in Q1 is a sort of good proxies for the rest of the year.
Okay, that's perfect. Okay.
Speaker Change: Then the second question, I apologize if I missed this earlier, I think some of the questions were kind of geared towards this to some degree but I think at the end of the day the low end of the revenue guidance at 220 million implies 17% growth year-to-year [inaudible]
Speaker Change: with one cue coming in at 15%. Just remind us again of some of the biggest drivers of the re-acceleration that's implied in the remaining quarters of the year to achieve the low end of the full year revenue. Thanks. Sure.
Yeah, thank you, Steve. And a lot of it is, um...
Thank you.
Speaker Change: Very large new populations we've added over the last several quarters, namely Medicare, Medicare Advantage.
and try care in two parts, August and January , which we've...
Speaker Change: We really waited until Q1 to start going after from a sort of engagement and marketing perspective, so that's underwing Q1.
Speaker Change: which are, again, completing new populations and we'll see benefits as we ramp there throughout the year. And then it's also just on our commercial, I don't want to say core, but commercial sort of cohort in plans we have.
Speaker Change: The increased marketing investments we're making, which you can see is a pretty big step up some last year, a million bucks in just Q1 and the Charles question will
Speaker Change: We'll keep our foot on the gas a little bit in Q2 and given the
Speaker Change: sort of longer duration, longer better retention dynamics of a payer member.
Speaker Change: It takes time for that marketing investment to pay off, which we've already started to see in March and are very much seeing in April , so Q2, 3 and 4 revenue growth, I do expect to be
It's potentially higher than the year near Griffiths on Q1.
and that's largely...
You know, big does a function of...
It takes a couple quarters to see the pull-through
of that.
One user checking out and joining the platform.
Speaker Change: getting acquainted with his or her new therapist and then the sort of pull-through longer tale of sessions you see from that new user.
Speaker Change: Okay, got him. All right, thank you very much.
Speaker Change: There are no further questions at work time. Ladies and gentlemen, this concludes today's conference call. We thank you for participating and ask you to please disconnect your lines.
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