Talkspace, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree 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 2024 earnings 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw the question again, press the star one. I would now like to turn the conference over to Janine Fayenne, Director of Communications. You may begin.

Good morning and welcome to Talkspace's earnings conference call for the fourth quarter and full year of 2024. 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 the presentation to walk you through today's remarks. Leading today's call are our CEO, Dr. John Cohen, and our CFO, Ian Hurst. Management will offer their prepared remarks, and we'll 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, 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 press release. For more information, please review our safe harbor disclaimer on slide two. Now I will turn it over to Dr. John Cummins.

Good morning. I'm proud to share that 2024 was another great year for Talkspace. We achieved strong growth with revenue growing 25%, session volume of 45%, and EBITDA making a strong improvement of $20.5 million from a $13.5 million loss in 2023 to a $7 million gain in 2024, all while reducing operating expenses by $7 million. These results align with our vision as we continue to expand our reach, drive awareness and adoption, and deliver the best in class care. In 13 years since our inception and three years as a public company, Talkspace has built a sustainable, profitable business model offering a comprehensive solution that gives us a powerful competitive edge in the marketplace. And with the mental health needs only growing, the future is bright for Talkspace. Over the past three years, we have meaningfully advanced our strategic shift from a consumer subscription-only model to a payer-focused approach. As a result, we have expanded our total covered lives to 179 million people and shifted our member acquisition strategy to support unlocking this audience. Our reach now extends beyond commercially insured adults to include teens, seniors through Medicare, and active military members and their dependents. Throughout this journey, we have remained committed to the four pillars that define success as a high-quality healthcare provider, availability, affordability, accessibility, and sustainability. Starting with pillar one, availability. We have built a curated network of 6,000 experienced and available licensed providers, an increase of about 10% in 2024 across all 50 states, focusing on over 150 different areas of expertise. Our focus is on maintaining a best-in-class, provider-centric experience with a commitment to measuring and monitoring quality across five areas, service quality, clinical quality, client experience, documentation, and productivity. We've shifted our marketing model to one of awareness and performance marketing to potential members who are in the market for therapy and likely covered in some way. We're asking that people simply check their coverage to unlock the benefits they probably did not know they had. In fact, every January 21st is now known as National Check Your Coverage Day, which was a new day founded by Talkspace to encourage people to check their coverage early in the year when there is typically a desire to set up change for the year. We want people to know that we are available to them and they are likely covered. Moving to pillar two, affordability. Affordability is one of the most significant barriers to seeking and getting care. Our shift to a payer-covered model addressed this issue, as over 60% of people with commercial insurance have a $0 copay or just $15 on average. As of last week, we are now live in the contiguous 48 states across the U.S. with traditional Medicare and are adding significant numbers of Medicare Advantage lives monthly. The largest Medicare Advantage plan in the U.S. is now live. With this now near national coverage, we are starting to see significant traction. With our military expansion, after successfully launching TRICARE East in August, we extended our reach to TRICARE West in January, making talk space available to approximately 9.5 million active duty and retired military personnel and their dependents as an in-network benefit with minimal out-of-pocket costs. As with Medicare, Adoption is gaining momentum, and we're excited about the impact ahead. Our recently announced partnership with U.S. Rowing strengthens our commitment to mental health in high performance sports, complementing our existing collaboration with the Professional Tennis Players Association. Like Michael Phelps, these initiatives reinforce our dedication to supporting athletes in their mental demands of their sport. In the team population, Over 500,000 teens in the U.S. now have free access to Talkspace through their city, county, or school. That includes New York City, Baltimore County, multiple private schools, and as announced in December, the city of Seattle, with more than 55,000 teens and young adults between the ages of 13 and 24, now having access to CAT. We continue to partner with city governments, including the city of Memphis, with whom we recently entered our fifth consecutive year providing mental health support to their 8,000 employees, and for the first time this year, to their dependents, including teens. Our asynchronous platform is a significant differentiator for us, as 95% of teens on the platform utilize texting to access therapy. In addition, we are engaging teens in traditionally hard-to-reach communities as 57% of teens accessing therapy live in areas of high economic disparities. The availability of the therapist network and affordability only work if people can easily and effectively access a provider. To improve the third pillar of accessibility, one of the most important initiatives we are carrying over from 2024 into this new year is our focus on using technology to optimize and improve the member journey, from checking eligibility to registration and scheduling to session experience and finally to billing. Every phase of the member journey is being evaluated for improvement. As a result of some new technology efforts among certain test populations, we've seen an 18.5% decrease in no-show rates, a 30% increase in patients completing three sessions within one month, and an increase of 15% in sessions per member. Improvements such as these are clinically backed to demonstrate better outcomes for members. Our AI innovation team continues to develop tools across four areas within the company, namely to assist providers as well as improve clinical and network quality, operational excellence, and the member experience. I'm very excited about our recent development of TalkCast, a new personalized podcast feature for adults over the age of 18 that will help drive member engagement between sessions, keeping them focused on their own progress and ultimately assist in their clinical improvement. Essentially, providers will be able to generate a three- to five-minute audio episode tailored to their clients. reinforcing key takeaways and themes from their therapy sessions. This is yet another tool in our expanding provider AI toolkit, which leverages one of the largest mental health databanks in the world, with over 10 billion proprietary clinical data points helping to power our AI engine. This clinical databank is designed to analyze redacted session transcripts to build detailed, anonymized client vignettes and map care paths. By categorizing interventions and identifying significant patterns across therapy journeys, the Data Bank provides the insights to personalized care. Our longstanding relationship in virtual care delivery and innovation is reflected in our financial performance, which gets us to the fourth pillar of sustainability. As you can see in our financials, we have built a model that is scalable and profitable all of which Ian will comment on along with his review of the Q4 and full year results. In conclusion, we believe we have a competitive advantage in the marketplace because of the comprehensive nature of our solution, a highly qualified clinical network of 6,000 therapists, in-network coverage approaching 200 million lives, all virtual modalities to deliver care, a robust infrastructure to deliver high-quality clinical care, and an advanced technology platform, including AI and a data set to support and grow a profitable business. And now I turn it over to Ian.