Talkspace, Inc.

Thank you for standing by. My name is Benjamin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Talkspace first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would like to turn the call over to Janine Fayan, Director of Communications. Please go ahead.

Good morning, and welcome to Talkspace's earnings conference call for the first quarter of 2024. I hope you've had the opportunity to access the press release to be posted on Talkspace's IR website and the presentation of our earnings results. We'll use the presentation to walk you through today's remarks. Leading today's call are our CEO, Dr. John Cohen, and our CFO, Jennifer Falk. 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-GAAP basis and have been adjusted to exclude the impact of one-off items. Reconciliations of these non-GAAP measures are included in our earnings release and on our website, Talkspace.com. 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 on 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. John Cohen.

Thanks, Janine. And thank you all for joining us today. We began 2024 with another strong set of results driven by continued execution across the business. This quarter, we delivered revenue of $45.4 million, up 36% year over year, and an adjusted EBITDA of $800,000, which marks our first quarter of profitability in the 13-year history of the company. This is a testament to the focus and dedication of our team. The continued momentum in our top line and our continuous rigorous focus on our cost structure provide a strong base to build upon, and we are confident in our ability to maintain profitable growth going forward. Let me cover our progress in the first quarter by strategic priority. First, In our payer category, revenue grew 92% year-over-year. This growth is the result of our focused efforts to expand our covered lives, increase capture rates, and increase utilization. Our expansion into Anthem commercial lives, which we announced last November, contributed to our strong revenue growth in the quarter and is progressing as expected. We also continue to see favorable member acquisition metrics from our marketing investments and our product work to enhance both capture rate and utilization. In addition, we have entered into strategic conversations with other payers regarding value-based arrangements. The Talkspace platform was built to continuously improve quality and increase efficacy in the delivery of mental health care. Our ability to measure these parameters and report them is a competitive advantage as we discuss value-based arrangements. Medicare, as we mentioned, is a significant opportunity with 65 million lives. We expect to go live in multiple states later this month within traditional Medicare, representing more than 10 million lives at launch. The reception from payers has been very positive, and we are in advanced discussions to expand within their Medicare Advantage networks. We continue to expect to be in network with Medicare in all 50 states by the end of the year, further cementing our position as the behavioral health company with the most covered lives across the United States. With Medicare, we will continue to lead as the platform advancing affordable behavioral health care. We've also expanded our brand and referral partnerships significantly in 2024. Notable collaborations include our new partnership with 30 Madison, a specialty telemedicine company operating Keeps, Cove, and Nurex, and an expansion of our provider directories on ZocDoc and Healthgrades. Additionally, we launched our Health Collective Marketplace, offering members access to a comprehensive and growing suite of whole health digital providers and services. This platform will provide members with clinically vetted and curated resources and member benefits across the entire health spectrum with the goal of expanding accessibility to high quality and holistic care. Some of those first partners include Aura, EverNow, Conceive, and FitOn. Moving to direct to enterprise. We are encouraged by the early progress of our offering in New York City and Baltimore launched in Q4. Results of the first months around engagement and effectiveness indicate that we are reaching diverse populations as well as previously underserved communities. Many thousands of kids have already received help from their toxic therapist, and we know that our suicide risk alerts are working as intended. We also know of several occurrences where therapist intervention for teens in crisis has made a dramatic impact on their lives. We are very proud of the impact we're already having on these students. These two partnerships, the first of their kind, exemplify our commitment to addressing the teen mental health crisis. We believe providing teens with access to quality care through a platform that meets them where they are will drive better outcomes for all. The reception and inbound interest we have received from other public health entities as a result of these initiatives has been high. On the employer side of our DTE category, while we did have a number of renewals and new wins in Q1, we also experienced headwinds with respect to account attrition. This was in part due to businesses continuing to review their budgets in the current inflationary environment as well as an increased competition. We believe our ability to demonstrate value for employers is a meaningful differentiator, and last month we released our ROI calculator aimed at doing just that. This independently validated tool provides enterprises with the ability to measure the impact of offering virtual mental health services and validates potential enterprise savings in three areas. Medical savings, time savings with respect to employee commute, and absenteeism savings related to the number of workdays missed by employees due to depression. We are also investing in new technology and digital capabilities to further enhance the offerings and features of our platform for the DTE category, specifically focused on the teens market. I'd like to call out that our platform remains attractive to partners for their members because of the comprehensive nature, including psychiatry and therapy across all stages of life, including teens, couples, soon-to-be seniors, with multiple modalities leading with text-based therapy and live video and audio. so that their members can use Talkspace from anywhere, anytime, for any need that comes up. We are excited about our growing DTE pipeline, particularly when it comes to the teens vertical, and look forward to sharing more throughout the year. Moving to our provider network, we continue to build out our network of providers and ended the quarter with over 5,600 therapists, up 6% sequentially. We continue to see strong demand to join the Talkspace network and believe this is a testament to the investments we continue to make in our platform to enhance the provider experience and deliver exceptional clinical outcomes. These outcomes were recently highlighted in a study published in the Journal of the American Medical Association. Using machine learning, researchers from Talkspace and Lyson analyzed more than 20 million de-identified messages between therapists and their clients to find that more supportive, empathetic, and warm the therapist was, the stronger the patient's outcomes and the higher their satisfaction with therapy overall. This supports what we know, that the higher the quality of the relationship with the provider, the better the member's experience and outcomes. We also continue to focus on the innovation of our platform for the benefit of both our members and providers. During the quarter, we launched an AI capability that generates a comprehensive, succinct summary for the provider, a smart note, which reduces the administrative burden on clinicians. The initial response from our providers has been exceptionally positive, and we estimate that it is eliminating for our full-time providers up to four hours per week of administrative work, optimizing the time they could spend on therapy with members. The AI team is working on multiple other features to improve the therapist's workflow and enhance their ability to deliver better clinical care. While we are committed to continuing to invest in new tools such as these, we will, of course, do so in a clinically-led, responsible, and secure manner that protects the privacy and data integrity of our members. Investments such as these not only expand provider productivity, but also improve the member experience and are emblematic of our commitment to innovation and operational excellence. In addition to these new AI initiatives, we will continue to make technology enhancements supporting payer capture rate and utilization and investment in DTE digital capabilities to increase the value proposition of Talkspace's offerings. Before I turn the call over to Jennifer, I'd like to note that May is Mental Health Awareness Month, and we join others across the industry to underscore the importance of self-care and making quality mental health care more accessible. This month, we have unveiled a new brand identity on our corporate and investor websites. Our new brand is a bold, design-forward look and feel that captures the company's core beliefs that therapy and mental health support should be a routine, positive part of anyone's life, and that everyone deserves access to high-quality mental health services. It is my belief that complete health is both physical health and mental health. As everyone should have access to a primary care physician, everyone should have access to a mental health therapist. You will see that our Mental Health Awareness Month campaign encourages people to talk it out through therapy. The campaign features our own members telling their stories of the pivotal and profound insights they gained while working with their Talkspace therapists. You will also see our new TV spot featuring the relationship with the therapist and member and highlighting a key differentiating for us, which is that our therapists have, on average, over 10 years' experience. With that, I'll turn the call over to Jennifer.