Talkspace, Inc. (TALK) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the last day of the 44th Annual JPMorgan Healthcare Conference. My name is Ta-Von Wilson, a member of the Healthcare group based in New York. I'm pleased to introduce Mr. Jon Cohen, who's the CEO of Talkspace; and Ian Harris, the CFO.

Good morning, and thank you for the invitation this morning. So the market remains incredibly large and unpenetrated for mental health services. The -- I'm sorry. The -- if you look at the market specifically, there are 46 million Americans that are -- have an issue with mental health services, which is 23% of the adult commercial population, 2 million military of the 10 million population in the military, 17 million or 25% of the 66 million who have Medicare coverage and upwards of 10 million of the 20 million teens, 50% in the ages of 13 to 17. And 40% of Talkspace patients, despite this are new to therapy. The #1 requested employer benefit is mental health services and the biggest motivator for people coming to Talkspace is the need for coverage or actually the fact that they have coverage is the reason they come. And 44% are aware of Talkspace that actually have insurance that they can use it for their benefit. With our 200 million covered lives, commercial lives, including the Medicare and now 10 million TRICARE lives, and our teen initiatives, we remain uniquely positioned to continue to serve this growing and underserved market. Starting 3 years ago, about right after the -- prior 8 months, we began our pivot to the commercial insurance part of the business, fee-for-service market, which has fueled constantly our growth over the last several years. Revenue growth is annualized rate of about 23% over that period of time, driven by payer session growth of almost 30% per year. In 2025 -- 2025 marks our second year of EBITDA positive performance, which at the midpoint of our guidance basically has doubled since last year from $7 million to approximately $15 million. Our operating expenses as a percentage of revenue continues to go down, driving improvement in EBITDA and operating leverage. Our continued growth in the payer segment is driven by 2 major factors. Although we already cover over 200 million lives, we will continue to add more regional and local plans throughout the year. More importantly, our initiatives to activate these 200-plus covered lives is specific to 5 different strategies, which I'll discuss in more detail. First, we are driving growth by increasing our consumer awareness. We remember that only 44% of people know that Talkspace is a covered service and this includes 4 specific channels to drive the growth. Paid media where we target the right person at the right time with AI insights to optimize what people most likely will -- the people who will most likely need therapy. Secondly, through organic growth, is to find more people that will -- that are utilizing LLMs for search. We have specifically designated people who have devoted their time to SEO, search to optimize, strategies to increase our visibility. Our marketing and payer partnerships continue to drive high-intent users to us and our brand recognition continues to increase with our relationship with Michael Phelps and others, but most importantly, what happens has happened over the last several -- 3 years actually as our awareness continues to grow, while our spending on marketing has had significant decrease over the last 3 years. Second, we are driving growth by 2 types of partnerships that drive high-intent customers to us. One is our distribution partners, such as Amazon through their health connector health conditions program and booking services such as Zocdoc. Secondly, we have strategic partnerships with over 20 different entities as mentioned here, and they refer our patients to us. As for example, our recently announced TF for women's health who refer to us because not only that their patients get access to Talkspace and mental health services for either no or very little out-of-pocket costs, but they also share our content each month with their entire population. Third, we are driving growth with our deepening relationship with the payers. This includes their recognition of the following: fast therapist matching and appointment, quality oversight of the provider network, which includes different quality metrics, including service quality, clinical quality, productivity, client experience and documentation. We have defined measured outcomes. We have surveys that reflect very positive member experience. We've had significant integration with our AI capabilities and they're extremely happy that we are in network nationally with Medicare. As a result, we do designated credentialing and perform credentialing for the payers. We developed value-based contracts for them in partnership with them. And importantly, we now have full directory integration with multiple of the large payers across the system. Fourth, we are driving growth with our targeted innovations across every stage of the patient journey, which has delivered measurably significant improvements, including a 22% increase in checkouts and almost a 50% increase in what we refer to as 3 and 30, which means a patient booking 3 sessions within the first 30 days. So we've dissected every single step of the journey throughout the last year and includes AI integration in almost every single one of those steps, including eligibility, registration, scheduling, sessions and in between sessions and billing. As a more specific example, as you may remember, last year, we announced at this conference Talkcast, which is our individualized personalized podcast, which has resulted in an 8% increase in booking of second sessions and a 14% increase in booking of third sessions. We also provide now for the therapist smart evaluations on intake which has had significant improvement in their time to devoting more time to patient quality and patient services. And we've also developed smart insights, which has resulted in a 20% increase in booking a third session and a 21% increase in third session -- I'm sorry, 20% in the second and 21% in the third. Fifth and finally, we are driving growth by expanding our offerings. Last year, I talked to -- more recently in the last several quarters about our initiative around psychiatry. Psychiatry is mostly of medication management system. We spoke about that throughout the year, and we now have, as a result of those initiatives, approximately 300 prescribers who are qualified to prescribe drugs mostly anti-anxiety and mostly an antidepressant. And as a result of that initiative, we've seen almost a 50% growth in the last several quarters in the psychiatry business. In addition, as you know, we did an announcement and with a partnership with Amazon through Amazon Rx, which helps our medication adherence. And almost as importantly, we developed a mechanism to make it incredibly easy for our own therapists to refer to our own psychiatrists when patients need medication management. We also announced recently our acquisition of Wisdo. Wisdo is a lower acuity, peer-to-peer and coaching platform. It opens up particularly the area and addresses the needs of Medicare patients and seniors because their offering is particularly applicable to patients who are suffering from loneliness, who look forward -- who look to peer-to-peer and coaching groups to help them through those journeys. In addition, we were very proud that Wisdo announced their relationship with Novo Nordisk. What that is, is they provide a coaching journey for patients who are taking GLPs and helps patients getting through their weight management because they're particularly looking for other people who are going through the journey to help them get through -- which helps, of course, renewal of the drug. Third, we've seen a significant increase in the number of patients in TRICARE and the military, particularly their families, which continues to grow. And Medicare continues to grow month over month as a result of being in both standard Medicare and Medicare Advantage. And finally, I do want to mention youth, our youth program, although it's not related to the payer business, we now have over 500,000 teenagers throughout the country who have free access to Talkspace because of our contractual relationships with governments. This includes New York City, Baltimore, City of Seattle. And recently, the state of North Carolina, we're providing the children who -- teens actually who are part of the juvenile justice system access to Talkspace. In addition, multiple other private schools and multiple other charter schools. So we're particularly proud of what we've done for the teen mental health crisis across the country. So I want to pivot now to AI and what's going on relative to mental health chat bots -- mental health chat bots or AI agents. And I think most of you, hopefully, will have seen that not a week -- sorry, let me go back. All right, not a week goes by, essentially, where you don't read something in the press or you see some broadcast study about what's going on relative to the mental health issues and the harm that has occurred with several of the large general AI chat bots that are out there. The general purpose LLMs, which is the ones that are out there now mostly, now utilized by approximately 10% of the world's population, 800 million people or more have been incredibly successful because they are always available. They're low cost, they're anonymous, easy to access. And essentially, it makes them the default option if you want to have a mental health conversation or basically anything that's bothering you for the day. They do excel at being incredibly fluent, engaging and very responsive to almost any type of prompt. Unfortunately -- well, let me say fortunately, first, that we do believe -- I believe that in some sense, this is a very good thing relative to the democratization of mental health meaning millions of more people now have access to some sort of support. However, despite the fact that all these millions of people have access the general-purpose LLMs were never built to support mental health, leading to what I referred to earlier as a rash of reported harmful outcomes. Mental health support requires something much more specialized and nuanced, including challenging distorted thinking, recognizing delusions and identifying risk in real time. So we made a decision about a year ago now to design what we refer to now as the first safe AI agent specifically designed for mental health support develop clinically recognized standards of care and incredibly important, it's privacy, HIPAA protected for all the information and discussions that a patient has. I'll talk about our database in a second. The LLM is trained and fine-tuned on Talkspace's massive mental health data set to improve risk recognition, support appropriate decision-making and avoid the pitfalls already seen with general purpose AI systems. It keeps clinicians in the loop constantly with clear escalation to pathways to connect users to real human therapists as needed. It does not replace clinicians, but it actually extends their reach. It adheres to strict clinical guidelines, standards and while identifying millions of new users who will require human intervention. I do believe that the need for human care by trained therapists will actually increase as millions more people will be identified that need professional help beyond that, that could be provided by an AI agent. So I just mentioned a couple of things here relative to what it is, how to use it and maybe what people use it for just briefly. What is it? It can share your fears or insights at any time. It's a space to work things out and get clarity. It's a space where you can fight without judgment or time limits, and it provides fast support and lasting progress. People return to it because it's trusted and science backed. You can talk to it as a reality check and stop spiraling or avoid burnout and you may want to vent with it instead of blowing up on your group chat. It's for those people who are seeking clarity without judgment, for those searching for answers in the wrong places and for those whose friends have stopped listening to them. Other possible use cases for the Talkspace LLM AI agent is as something to be used for guiding a patient through an interactive Q&A and matching them to the right therapy and the right therapist. It could be used to engage patients between sessions to support adherence to their care plan. It could be used to screen postpartum mothers for depression and guide their early therapy. It could be used by primary care physicians, identifying mental health concerns and guiding patients to therapy. We like to refer to it as something that is always on, always available, available 24/7 to every postpartum woman, available to every college student as needed, available to every active military, a companion for cancer patients as they go through their journey. It is what we consider the first real safe mental health LLM and to reiterate, and I'll talk about -- show you the model in a minute. It is trained on our database, one of the largest mental health databases in the country. It is, I'll reiterate HIPAA-protected and patient consented. It has within it proprietary algorithms that we've developed since -- actually before 2019, these proprietary algorithms run in the background and they actually predict and alert the therapist to suicide risk, homicide violence risk, the possibility that someone is being abused at home, substance use and 6 other specific clinical entities, all running in the background to identify risk. Because of those identifications, we have continuous monitoring with live professional therapists, watching what goes on, on all the interactions and as needed escalate patients out of the AI agent and into real therapy. This is a picture of what our database looks like. This is what we use to fine-tune the LLM. It's 8 billion words, 140 million messages, 4.3 million psych notes, 3 million therapist ratings, 1.5 million treatment goals and close to 4 million clinical interventions. It is a massive specific mental health database that we use to train the LLM. There's a picture of the model. Essentially, it works that on the -- right at the beginning in terms of intake, we make a decision about whether or not a patient is appropriate for an AI agent or not. So specifically, if someone comes in and says they're thinking about suicide, we're not going to put them into the AI agent. So there is a screen before you can get to the AI agent. Once you're in, people have the conversation. And as I said, it is being continuously monitored for any risk. If there's any risk it goes off to the monitoring clinician. And then the clinician decides if we need to escalate it further to live therapy and to stop the conversation. It is currently in beta testing mode and it will be live sometime in the first half of 2026. So as you can see, we have come a very long way in 3 years in a very, very positive journey. However, there remains a tremendous opportunity in front of us and we are positioned to continue to aggressively take advantage of that opportunity. In addition to the core business, we believe we are strategically positioned ourselves to be a leader in the application of AI to mental health services in this rapidly moving current environment. As we close out 2025, we have continued to see strong growth and profitability in Q4, and we are pleased that we ended up for the year -- where we have ended up for the year and continued to see strong momentum into 2026. And with that, I'll open it up to questions.

Thank you, Jon. I appreciate your remarks and the presentation. For the audience, well, if you have any questions, please we invite you to ask. I have a few prepared questions here so we can at least start the conversation. Jon, maybe just to kind of start from the beginning of your presentation, we'll talk about covered lives. So you've mentioned that like now Talkspace has a covered benefit for over 200 million people. So when you look into 2026, where do you think Talkspace can go from there?

So as I mentioned, began, we will continue to add on regional plans. As you may know, there's literally hundreds and hundreds of the plans out there. We have a separate team that's set up, a commercial organization that just does payer relationships and the payer contracts. So I think we'll continue to see growth, but we're at that top part of the curve where it's not as imperative as it was before. Our whole strategy is actually to activate the 200-plus million lives we have.

Sure, sure. And maybe turning now towards Talkspace from a segment of its peers and also looking at it from that lens. What do you think just sets you apart from your peers and we know Talkspace is one of the only pure-play public company. So just what makes you different?

It's a great question. So I think one of the most important differences for us is we have -- or we refer to as, and I talked a little bit about the quality oversight, a real curated network. And what I mean by that is we are not a matching service or a marketplace as a service. So because of our payer relationships, we have a substantially deep relationship with our therapists, both 1099s and W-2s and we really treat them -- treat them the same. And what I mean by that is we have a community of therapists. We have continuous medical education for the therapists. But most importantly is we hold them to a certain standard based on the 5 quality metrics as I mentioned earlier, to provide therapy that is acceptable to our patient population. And because of our relationship with the payers, they audit us for that. We have joint operating committee meetings with them as frequently as needed. It's not once or if not more, where they actually look at the network and they look at our notes and they look at what's being submitted. So it's a really, really, to us, a very significant differentiator in the market. Of course, the other is, we are really the only publicly traded mental health service that is in network with 200 million lives. I wouldn't really miss if I didn't say that the big strategic differentiator also for us is -- which I think has been recognized is our -- not just our investment, but our capabilities on the AI side.

Yes and I was going to ask a question -- actually, I could go into that. I think one of the things that I took away from this was just the LLM that you're putting together and that's in beta mode, right? And so maybe we could talk a little bit into that, like what do you think is the go-to-market strategy for the LLM, TalkAI? And how do you just see broadly like AI playing into your sort of broader growth into the next few years?

Yes. So -- we haven't -- we're not -- we haven't discussed or talked about what the impact will be relative to the financial part of the company. We're just not ready to talk about that yet. So in terms of the go-to-market, there are multiple different -- so at least 4 or 5 different areas for commercialization. We will first go direct-to-consumer to test and learn who's using it, why they're using it and what does this pricing strategy look like on the consumer side. So there's going to be a lot of learnings that will go once we go -- once we go out to the market after the beta testing is done. So there'll be a lot of learnings there. We do believe that, as I mentioned, relative to the populations that we think are using, we think that there will be -- the possibility of significant opportunities relative to segments of the population, whether it's University of military, oncology or women's health, whatever it is, that those populations are definitely possible in terms of applicability. We don't know what will happen on the employer/employee side because of -- it will be a less expensive alternative to providing mental health services to employees. I think the licensing is a question discussion come up to other people who want to use it. And to preempt a question, I think that at some point, the payers will probably get interested in what we're doing, not right now but sometime soon.

But even on the direct-to-consumer component sort of who uses it and how and where they may migrate within Talkspace platform, that's also something we're going to learn a lot from. So for example, thanks to having been a pioneer in the space, the benefit of the brand awareness that we have of being in the market for over a dozen years. We have a lot of people who come to us, come to our site, actually start the registration flow and for whatever reason, never end up sort of getting all the way, right? So there's already a very, very large volume of people who come to us who are not yet ready to be face-to-face with an actual individual therapist, would they be more likely to engage with a -- now with [indiscernible] of ChatGPT or something very familiar in app style or whatever it is, the anonymity, the fear of judgment, some of those obstacles are not as challenging for somebody to sort of fully check out, if you will. For many of those people, that sort of what we're calling sort of lower acuity or subacuity care through the LLM will be plenty and absolutely satisfies sort of what they need, and they will stay there. At the same time, and it gets into the clinical oversight component, what percentage we don't yet know, but many, we are sure will -- it will be appropriate for them to actually refer into in-person care, right? So in some ways, it's sort of like a gateway into therapy and also going the other way, right? Somebody have been in therapy for a long time, and this LLM can act as sort of like a maintenance plan of, "Hey, I no longer need to see my therapist weekly or every other week, but just in case, makes up your mind like again, I have this tool to turn to." But the third option sort of going back to the personalized podcast where we've made this available to the existing therapeutic members and saw a really nice retention uptick, thanks to this engaging tool as an in between session sort of way to engage with therapy in a form that's much more exciting than sort of your typical journal or exercise, if you will, there's also the potential that we would make this available to the existing therapy members as sort of an ancillary tool to their in-person therapy.

Thank you, Ian. Now I appreciate that. And I think even just from a general issue component, I know plenty of people who will talk in ChatGPT and I'm like, why are you asking ChatGPT and something about -- you good to talk to...

Well, it's very funny. A lot of thought leaders have been very upfront about this like Erik Larson for example where humans lie to other humans. They are not afraid to tell the truth to ChatGPT. So that's been a really insightful sort of finding of this whole proliferation the last few years. And then even just in our market research about who might be most interested in this, it's very funny the sort of generalizing demographic of that consumer, proactively searching for AI therapists actually looks very, very different than our sort of typical consumer, which tells you -- from my standpoint, this will likely be very TAM expansionary for us as opposed to a either or kind of question.

And I guess events -- like double-clicking a little bit more here. So if you're in the app and you're getting your therapy session as just talking during the day. And it then does refer you and say, "Hey, maybe you should like talk to a therapist there or some mental health provider." Does it help you maybe like fill up the forms or anything like that?

Yes, exactly. We'll make it and that's a key part of the product, maybe Jon can speak to you about that, but that's -- like very easy to fall out.

Yes. Remember, this is positioned to have a conversation. If it's not positioned for someone who wants AI therapy. I mean they don't provide that. But more in position to someone who has -- want to have a confidential, private conversation about something that's bothering them, knowing that their information is protected and that nobody is going -- nobody is going to get to it. That's how it's positioned. Now eventually, if it ends up in therapy, then, yes, the event we think we know an advantage for Talkspace is if they do need therapy, we can very quickly determine the eligibility. We're not going to turn them away. But by the way, the therapy that they need and the therapist is essentially free or covered service. So the other general purpose of LLMs, even if they were in some sense going to refer or figure out what it is, we're not sure how they're going to do that, right? We are a covered service. So it makes it -- to us, it makes it even stickier.

Right. Thank you for that. I'll just look into the audience if there's any questions particularly about the AI component of this, the innovation of the company. I think as I've listened to your presentations over the last couple of years here, I've always -- you've always innovated, right? I think last year was the...

Podcast.

The podcast. Exactly, yes. And so there's always just something new coming from the team that's like how do we use technology to reach people in a way that works for them versus trying to get them to follow our model, we're trying to get them.

Well, that requires -- the history of Talkspace is way before my time. Really, we're cutting edge in terms of making the recommendation and doing all the research than texting and messaging was adequate therapy. That was Talkspace. So we -- though the company is based in technology and innovation, right, we happen to be a health care provider of mental health services, but we do straddle being an innovative AI technology company on top of health care. We get it sometimes that your health care company does IT -- innovation in IT or you're an IT innovative company that happens to be in health care. The answer is we're both, always have them, so...

Moving on from AI, if there are no other questions. One of your primary KPIs completed sessions starting to accelerate in the back half of both last year, 2025, can you just maybe give us some sense of what you think is underpinning that? What's kind of driving that growth?

It's such a big question. I mean it's really multifaceted, but this is where we, as a management team, focus very data-driven weekly, right? So a lot of it is new user growth, which is coming from, as Jon alluded to, without ever needing to win another logo, we have a massive white space opportunity within our existing base of covered lives, and the largest challenge we have or sort of raised on veterans to get the awareness out, which, again, fortunately having had a history as a consumer-driven D2C business with deep marketing expertise, the brand awareness is very high, but we have that slide, especially relative to what we spent. So we're able to sort of leverage this sort of asset in terms of the brand value we've created over a decade where most people know of us, what they don't know is that it's actually a covered benefit now. So if you come across any of our marketing, which I'm sure if your phone is on airplane mode you will now, you'll see that the core message we leave is check your coverage, check your coverage. So no matter how you get to our site, we will push you down sort of singular funnel, which is, "Hey, give us your insurance information" because I mean this is like -- and we know that cost historically is the largest obstacle to getting care, which we've effectively solved and it's just a matter of communicating that. So that's through marketing. And then as Jon mentioned, additional referral relationships and then other sort of call like affiliate partnerships like the Amazon partnership, the Zocdoc integrations. I would also say having been in many ways, sort of a first mover in this payer strategy pivot, our view is that, that first-mover advantage is really crystalizing into a sustainable competitive advantage insofar as we've had a long history of working with the payers, again, the differentiation that we are not a marketplace, we're not an MSO, we are a full-fledged HIPAA provider, right? All the care is happening on our platform within our sort of 4 digital walls and being a true partner to the payers, they've really appreciated that. And I think proof of that appreciation is coming through the fact that we're getting deeper and deeper embedded with the payers through these embedded directories where, as you can imagine, the traffic we see coming from the insurance portal route is very, very high intent. It is a very high converting. And so working in partnership with the payers to make that sort of checkout experience as frictionless as possible has been a very big benefit we talked about it on our last earnings call in October in 2025, and we have a number of new integrations to a similar effect in early '26. So again, another way just to reach existing people who want to get to care are covered by their insurance plan 2C Talkspace space, but you may just not know it.

Got it. And I think that kind of almost segues into a question I had and this was going to be more so about where do you see Talkspace both in the medium term and long term? But I'm kind of -- as I hear you speak, I'm seeing it's going to be more integrations, more strategic partners making sure that we can get customers to have frictionless conversions into the product. It is like to be able to access the resource and help they need without as little there as possible. I guess could you maybe speak to what that medium or longer-term vision is that you would see that as?

Well, one, we will continue to improve the patient journey. It's -- compared to -- look at what it was OpenTable 10 years ago to book an appointment, right? We need to make it as frictionless as possible for patients to find us, book an appointment, stay on the platform and get better, right? And that's our primary goal. And it's always amazing to me that we go through -- every month, someone comes up with -- or more often some other different idea to actually improve the journey. You would think like, okay, we've done it and finished it. It's never finished. It's amazing how much -- how many more changes can occur to make it even better. So that's a huge goal of ours is to -- and that's a really big difference between us and a consumer. We are really -- how do we keep -- get people to keep them and keep them on the platform. So I think that -- so that's where we're focused. I'd say on the rest, it just depends on the AI we talked about. But -- so for instance, on the teen side, we continue to talk to lots and lots of other entities in school districts and counties and cities and states about how we can improve mental health services to teens. We're really -- it's a really significant initiative for us relative to what's going on, so...

I could just add on. Historically, we're known really as a therapy service provider over the course of '25, whether it's through the Wisdo acquisition and sort of bring on peer-to-peer and coachings we're going down the acuity scale or sort of relaunching early in 2025 our site business. At this point, we're much more sort of a full-scale platform for user in improving both the member journey but also the provider experience to be able to collaborate with other Talkspace providers maybe in different areas, right, so psychotherapy or therapy of psych and making sure that it's a very warm handoff and notes are shared. Historically, that was not an easy process, right? So that's been a big initiative, which Jon alluded to the 50% growth we've be seeing in psych for the last couple of years. That's in spite of sort of that lack of communication internally across the platform. So looking out to '26 and '27, there'll definitely be some revenue surges if you will on that.

I know we have under 2 minutes left. So I'll open it up again for the audience if there's any questions. And if not, Jon, Ian, any final thoughts or words you want to leave us with?

I would reiterate that we've had a great 3-year journey in a market that continues to be just enormous relative to the need. I would reiterate the fact that hundreds of millions of people have gone on to chat agents to therapy has -- is really an inflection point, quite honestly, for this industry in some respects. It's very, very different than it was a year ago and I'd like to say we're in the -- I know we're in the middle of what I'll call that Vortex right now, right in the middle of unknown about how this is going to play out, but quite honestly, we've been successful before and we've purposely positioned ourselves to address an issue which is, as I said before, which in some sense to me, is very positive. I mean now we have a lot of people who can have -- lots and lots of people who could gain access to an issue that's really predominant,so we'll see. Stay tuned.

Jon, thank you very much. Audience thank you for coming out and have a good rest of your day.

Thank you.