Talkspace Inc Stock

At this time, I'd like to welcome everyone to the Talkspace Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] The press release and presentation of earnings results can be accessed on Talkspace's IR website. The presentation will be used to walk you through today's remarks.

Leading today's call are CEO, Dr. Jon Cohen; and CFO, Ian Harris. Management will offer their prepared remarks and then take your questions. Certain measures that will be discussed on today's 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 the earnings release and on the website, talkspace.com.

As a reminder, the company will be discussing forward-looking information today, which may include forecasts, targets and other statements regarding plans, goals, strategic priorities and anticipated financial results. While these statements represent the company's best current judgment about future results and performance as of today, actual results are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Important factors that may affect future results are described on Talkspace's most recent SEC reports and today's earnings press release. For more information, please review the safe harbor disclaimer on Slide 2. Now I will turn the call over to Dr. Jon Cohen.

Good morning, and thank you for joining the call today to review our fourth quarter and full year 2025 results. When I joined Talkspace at the end of 2022, the strategic pivot had already begun shifting from our Consumer model to a Payor fee-for-service model. Today, I am proud to look back at the progress we've made financially, operationally and towards our mission to deliver comprehensive, personalized mental health care to all.

Since 2022, we have grown revenue at a CAGR of 24%, driven by Payor Sessions annualized growth of about 56%. During this time, our operating expenses as a percentage of revenue continued to decline, helping to drive operating leverage and improved EBITDA margins. For the full year of 2025, we delivered revenue of approximately $229 million, an increase of 22% year-over-year, driven by payer growth of 38%. In addition, we more than doubled adjusted EBITDA, growing from about $7 million in 2024 to $15.8 million in 2025, which represents an adjusted EBITDA margin of 7%.

Our growth in Payor, where we now cover well over 200 million lives through insurance and employer benefits is driven by 2 factors: one, strategic initiatives we have put in place to bring people to Talkspace, including targeted efforts to increase awareness and drive high-intent referrals as well as deepen partnerships with the Payors to improve the patient journey and make it easier to find care; and two, our expanding offerings within the Payor channel to cater to new populations and differing levels of acuity. Both of these initiatives are underpinned by our continuous improvements to the member journey and our clinical network.

We continue to drive increased consumer awareness through our paid media strategies, search optimization, partnerships and scaling brand recognition. Our awareness campaigns have been very successful over the last 3 years as recognition of the Talkspace brand continues to go up, while our spending on marketing has significantly decreased over the same period. Our initiatives to drive high-intent referrals has been successful with increasing volumes month-over-month from Amazon, Zocdoc and our strategic partners. We're also seeing a strong and growing presence of Talkspace in large language models due to the work our team has done to optimize on and off our website for increased visibility and citations.

In the fourth quarter, general purpose LLMs drove an increasing percentage of traffic and checkouts as we continue to expand this new and growing channel. Recognizing that we provide high-quality clinical care, the Payors have partnered with us on several new initiatives to further simplify the patient experience. This includes directory integrations with several of our Payor partners and some utilizing single sign-on so that patients can log into both platforms with ease.

Others are embedding Talkspace scheduling into their directories so that patients can book sessions without leaving the Payor site. We are currently working with one partner to launch the capability for their care coordinators to schedule Talkspace appointments on behalf of patients, a tool we will expand with other partners and Payors.

During the year, we also expanded our offerings within the Payor channel. We invested in our psychiatry business, grew both military and Medicare enrollment and acquired Wisdo, the lower acuity AI-powered social health platform specializing in peer-to-peer community and coaching.

On military, our enrollment continues to grow month-over-month following our January 2025 launch as does patient engagement through our direct-to-enterprise contract with the Navy. Our Medicare enrollment also continues to grow. And with the acquisition of Wisdo, we've seen increased interest in Medicare Advantage plans given Wisdo's proven impacts on loneliness and social isolation. In addition, Wisdo's partnership with Novo Nordisk to provide group coaching for patients on GLP-1s opens a new door for us into a previously untapped category of pharma partnerships.

Our youth programs, which we initially launched at the end of 2023 across major markets, including New York, Baltimore, Seattle and North Carolina continue to deliver strong measurable impact on scale. In New York City alone, more than 45,000 teens are enrolled in our Teenspace program. 66% of enrolled teens showed measurable clinical improvement with the most common presenting needs being anxiety, depression, relationship challenges and stress management. The program is reaching historically underserved communities with nearly 45% of participants living in areas with high health and income disparities and 82% identifying as BIPOC.

Engagement remains very strong with over 90% of teams actively texting with their therapists and more than half choosing messaging as their exclusive modality. The results of these programs reinforce Teenspace as a scalable public-private partnership model and Talkspace's leadership in youth mental health solutions. Specifically, in psychiatry, we expanded our network of psychiatry providers to over 400 providers, and we made a number of improvements to the patient journey to streamline processes like simplifying medication management workflow to be able to send medications directly to the member's pharmacy of choice.

In April, we launched our integration with Amazon Pharmacy, allowing members to seamlessly fill prescriptions from their Talkspace provider and get fast free home delivery, making for a more convenient patient experience. Further, we created an easy pathway for members using Talkspace for therapy to receive an internal referral to a Talkspace psychiatrist, an investment through which we are seeing strong traction.

Turning to AI. We are continuing to utilize the technology to improve business operations and incorporate AI enhancements into the platform to further improve the patient journey and provider workflow. These enhancements have reduced friction in several areas, lowering the number of registration drop-offs and leading more patients to successfully begin their care journey. Once a member is onboarded, we have also made it easier to schedule their appointments, increasing the number of patients that continue care after a first session. These efforts have resulted in an increase in the number of checkouts and a 49% increase in the number of patients completing a third session in the first month of care.

Another factor contributing to our increase in session growth has been the success of Talkcast, our individualized AI-generated podcast that I've talked about in the past. When members open a Talkcast episode between their first and second sessions, they are 20% more likely to complete a second and third session. To date, we have produced over 76,000 episodes, which have been overwhelmingly well received. 95% of provider reviews and 92% of client reviews have been positive. In addition, our network management strategy has brought continued focus on curating our network of clinicians to optimize for the specific utilization trends we are seeing, ensuring that we have clinicians available in the right space at the right times to align with patient demand.

Now let me turn to the TalkAI agent that we have been developing over the last year. Although general purpose large language models are now being utilized by a huge number of the global population, they were never built to support mental health. While these models have democratized access for millions, which is a good thing, they have unfortunately led to a rash of reported harmful outcomes. Mental health support requires something far more specialized and nuanced, including challenging distorted thinking, recognizing delusions and identifying risk in real time.

The TalkAI agent we have built is designed to be the first safe AI agent specifically developed for mental health support, utilizing clinically recognized standards of care with continuous human oversight and privacy HIPAA protection. The LLM is trained and fine-tuned on Talkspace's massive mental health data set, identifies 10 areas of risk in real time, supports appropriate decision-making and avoids the pitfalls already seen in general purpose LLMs. It keeps clinicians constantly in the loop with clear escalation pathways to connect users at risk to a licensed human clinician in real time.

TalkAI does not replace clinicians, but rather extends their reach, adhering to strict clinical standards while identifying new users who may need human interaction. I believe that the need for human care by trained therapists will increase as millions more people will be identified that need professional help beyond what our agent will provide. We are currently beta testing this quarter with the expectation to be in the market late in Q2.

In summary, as you can see, we have come a long way in 3 years. There remains a tremendous opportunity in front of us and one we are positioned to continue to aggressively pursue. In addition to the core business, we believe we have strategically positioned ourselves to be a leader in the application of AI to mental health services in this rapidly moving current environment. I am pleased with the Q4 results and our full year business performance. Looking ahead to 2026, I am very optimistic about our capability and opportunity to continue to grow the business, expand profitability, and I'm encouraged by the strong momentum we have seen thus far in 2026. And now I'll turn the call over to Ian.

Good morning, and thank you for joining us. I want to first echo Jon's sentiment that we ended the year with some really solid momentum, and we are well positioned for that to continue. Today, I'll review our fourth quarter financial results before walking you through our financial outlook for 2026.

Turning to the fourth quarter results. Total revenue for the quarter was $63.0 million, representing a 29.3% year-over-year increase. Our Payor business continued to be the primary growth driver with revenue of $47.7 million, up 41% year-over-year. Growth was driven by increased session volume and expansion across existing clients. Specifically, the number of sessions for the quarter was 450,000, representing a 36.3% year-over-year increase. Furthermore, the number of unique active Payor members for the quarter was 124,000, representing a 29.7% year-over-year increase.

Within direct-to-enterprise, revenue was $11.6 million, an increase of 21.8% year-over-year. As we noted on our third quarter call, several new launches shifted from the third quarter into the fourth, and DTE also benefited from the inclusion of the Wisdo acquisition, which closed on October 1 and benefited from revenue associated with implementation work for certain new accounts.

Consumer revenue was $3.7 million year-on-year, consistent with our intentional prioritization of both Enterprise and Payor channels. Gross profit was $26.9 million, up 24.4% year-over-year, resulting in a gross margin of 42.7% in the quarter. This was down 169 basis points year-over-year, primarily reflecting revenue mix shift towards Payor.

Operating expenses were $23.1 million, an increase of 9.6% year-over-year. Importantly, operating expenses as a percentage of revenue improved meaningfully to 36.7%, down 660 basis points compared to the fourth quarter in 2024. Adjusted EBITDA was $6.6 million, representing 147.1% year-on-year growth with an adjusted EBITDA margin of 10.4%, up nearly 500 basis points versus the prior year.

Turning to the balance sheet. We ended the quarter with $92.6 million in cash, a decrease of $25.2 million year-on-year, driven primarily by our share repurchases, which totaled $17.2 million in 2025 for the full year as well as the acquisition of Wisdo.

For the full year 2026, we are providing initial guidance as follows: we expect revenue to be in a range of $275 million to $290 million, representing 20% to 27% year-on-year growth. We expect adjusted EBITDA to be in the range of $30 million to $35 million, representing growth of 90% to 122%. Looking back at our 3-year outlook introduced in early 2024 and which extends through this year, we expect to deliver a 3-year revenue CAGR of approximately 23% using the midpoint of our 2026 guidance, which is consistent with the 3-year outlook stated target of 20% to 25%. From a profitability perspective, we anticipate exiting 2026 with EBITDA margins in the mid-teens towards the high end of our 12% to 15% target range from that outlook.

I want to share a few points on the underlying assumptions behind our outlook. From a quarterly cadence perspective, we anticipate revenue growing over the course of the year and similar to last year with the first half representing a little less than 50% of annual revenue as active Payor members and sessions grow throughout the year. In terms of our revenue mix, we expect Payor revenue growth to be in line with the Payor growth rate we experienced in 2025, driven by the activation strategies Jon outlined earlier.

As we've discussed in the past, the Payor business brings a high degree of visibility given the longer retention of a Payor member compared to someone paying out of pocket and a material portion of our 2026 Payor revenue will actually come from Payor members already on the platform as of year-end 2025. We expect D2E to grow in the low single-digit percentages again this year. As a reminder, the first quarter historically has the highest number of accounts up for renewal and therefore, sees the highest attrition of any quarter in the year. Q4 performance also benefited from certain implementation revenue. So we would expect D2E revenue in Q1 to be sequentially lower than Q4.

And finally, Consumer revenue will continue to decline by design. However, it's a much smaller headwind overall given the less material starting point in 2026. While the midpoint of 2026 revenue guidance represents 23% growth year-over-year, our Q4 run rate revenue, which is over $250 million, implies 12% growth at the midpoint. This is thanks to the accelerating growth we drove over the course of 2025. These trends, along with the internal efficiency measures that we continue to implement will drive further operating leverage through the P&L. Specifically, for adjusted EBITDA margins, we anticipate starting the year in the high single-digit percentages and exiting 2026 in the mid-teens, which will result in a similar quarterly cadence of adjusted EBITDA as we saw in 2025.

In summary, we believe Talkspace is well positioned for sustainable growth and continued margin expansion, supported by strong momentum in our Payor business, improving operating leverage and increasing visibility into future demand. With that, we'll open the call for questions. Operator?

[Operator Instructions]

And we'll take our first question from Steven Dechert.

Congrats on a solid quarter. Just around your large language model that you're currently in beta testing, what do you see as the key challenges in getting people that are currently using the general purpose large language models using yours as you roll it out?

Thanks, Steve. This is obviously very much work in progress. As we stated, we're in beta with people registering as we speak to go through that testing of what this thing looks like. Where this thing is positioned as a place to have a serious conversation where your information is protected and where you have both security and safety behind you, I can't tell you yet because it's such early days about what kind of movement we'll have, what kind of people will use this versus the other LLMs. That is just absolutely a work in progress.

So my message right now is to stay tuned. We will have a lot more information once we finish the beta. We've seen a little bit early results. But right now, my answer really is to stay tuned and let's just see what happens. It is being -- it will be positioned as somewhat different than the general purpose LLMs. I'm not obviously trying to [indiscernible]. I'm just telling you it's just early days, and we have a lot of interesting information right now, but we're certainly going to talk about it more as the next several months evolve.

Got it. Yes, totally understand. And Ian, you just mentioned on the '26 guide that most of the revenue is already from members in the platform. So I guess I'm wondering, does the high end of the guide that's from additional new members that aren't currently on the platform? Just maybe what gets us to the high end of the guide said more simply?

Yes. Steve, just to clarify, I think in my prepared remarks, I said a material amount of Payor revenues from existing members on the platform. I want to call that out just because people forget, right, under the Payor model, that sort of longer lifetime on the platform and that's sort of longer tail of revenue allows us from a visibility standpoint to have a much higher level of conviction in terms of modeling out the Payor revenue, right?

So as we start Jan 1, it's not a majority, but think of it as 30% to 50% range of our Payor revenue is actually coming from folks we already have on the platform. But in addition to that, obviously, we're going to, to Jon's comments, keep driving both from paid marketing work, additional organic work we're doing on the marketing front, which there's a lot of really exciting LLM sort of optimization work we're doing. And then very importantly, the direct integrations we're doing with the Payors and getting sort of more embedded with the Payors to lower that friction for people that find us through their insurance portal. So that will all drive new users throughout the year as we've done sequentially throughout '25, which then obviously has that long tail of sessions pulling through as well.

We'll take our next question from Ryan MacDonald with Needham.

Congrats on a great quarter. Maybe just to sort of double down on the Directory integrations. Obviously, showing some great success with the first Payor partner that you've rolled that out with. Can you just remind us on sort of how many additional sort of deep integrations you'll have sort of with additional partners this year? And I guess, what have you learned from the first partner that can be replicable to sort of continue that strong utilization with you?

Yes, I can start, and then I'll hand it over to Jon. I mean on the first Payor, like you said, it's been extremely successful. They're happy in so far as they're bringing a much friendlier consumer experience to their members and making it easier and candidly less frustrating, right, that sort of finding your care journey. And we view it as, obviously, from a CAC perspective, very accretive, right, to get that incremental conversion and additional traffic coming from the Payor.

So it's early in '26, Ryan. So we're obviously working hard to do more. I would say line of sight we have today, there's probably, depending on how you look at it, call it, 3 directory integrations we're doing in the early part of '26. So for sure, at least 3. I think in terms of what that represents materiality-wise versus one last year, it's probably about similar size all in all, population-wise, maybe a little bit bigger in the aggregate, the 3. So as big or bigger of an opportunity as we saw with the integration in '25.

What we're learning is, it's interesting. Some of these directories, it's sort of the first time they're doing these integrations. So we are sort of in this beneficial position where we're working in tandem with them on the design of how the directory works, which obviously gives us a level of influence to sort of shape what that experience looks like from our own knowledge, having done this, right, for a decade as a marketplace business ourselves. So they really appreciate the sort of edification we're able to bring there, but also helps us candidly, in terms of the algorithm, what helps screen providers hire? Is it quality? Is it schedule and sort of how that sort of search algorithm is designed, we sort of have a seat at the table for that.

Really helpful color there, Ian. And then obviously, a lot of the success that you've had in the Payor business to date has been on the commercial side and obviously, in the military. Curious to get your thoughts about sort of the potential opportunity within Medicare sort of in 2026, particularly with CMS rolling out this access program. Is this sort of a potential opportunity to sort of supercharge or sort of fuel deeper Medicare efforts or to drive better utilization there? And are you intending to participate in the program?

Yes. Thanks for the program. So the answer to that is on the access program is yes. We are acutely aware of the access program. We talked about it. We are -- class, we are -- we have submitted. We want to be part of it. It is outcome-based. We're very comfortable with what an outcome-based model would look like. So the answer to that is yes. We -- also, as you heard me say, we're -- the Wisdo acquisition on Medicare and MA has been very positive and continues to grow.

And as we said in the past, we increases. It's been no surprise as I've talked about in the past. It's a relatively difficult market to penetrate only because it's so ubiquitous and it's across all 50 states. But we are making -- let's say we are making progress. But between Wisdo, access program, the stuff we're doing on the ground, we continue to be confident in how it will grow.

We'll move next to Richard Close with Canaccord Genuity.

Congratulations on a strong year and outlook. Jon, at the end of your comments, you said something about momentum already here in '26. And I was just curious if you could go a little bit deeper in terms of what you're seeing already through almost 2 months, the basis of that comment?

I would -- the comment is because at the beginning of the year, it really does somewhat change things because people coming back on, they're looking at the assurances, they're beginning to reengage at a bunch of different levels. But most of what we're gauging everything is people coming on to the platform and doing sessions. So my comment was purposeful that we're continuing as we exit 2025 to see the momentum continue early on in '26.

Yes. And Richard, as you know, we take January as an opportunity to do a bunch of sort of marketing campaigns, right, post holidays, post New Year's resolution season. So a lot of sort of wood behind the ball from a marketing effort standpoint. The momentum Jon is alluding to is just that, right? The checkouts we're seeing, the CAC environment we're seeing, getting in front of folks and all of that's contemplated in the guide, consistent with the guidance.

Okay. Second question would be just like overall behavioral health care costs, I know we've talked about this in the past, but I mean, you look at some of the benefit brokers and they cite increased behavioral health as one of the top expenses. And obviously, some of that's inpatient, but outpatient playing a role as well. I'm just curious your conversations with Payors in terms of rising health care costs. And you just did mention with respect to Medicare, you're comfortable with outcomes-based and whatnot. Just curious how you're thinking about potential utilization management or reimbursement changes and just the overall marketplace with respect to behavioral health?

Yes. I think it's consistent with some prior discussions. We know -- obviously watching what's going on in health care costs, people paying more for their premiums. But remember, the mental health, not just the TAM, the market, but the more people engage in mental health, it actually saves people. As you know, there's a huge amount of data out there already that a good mental health support program saves people on the medical side. So that's one.

Number two is the majority of costs that people are looking at to reiterate is really on the in-hospital side and the in-hospital diagnosis. It's really not -- it's not on what we're doing on the outpatient side. The outpatient side of mental health is a very, very small piece of the pie right now for the health care spend nationally. And then we -- some of the other products, when the talk AI agent comes to fruition. It will be a lower cost option. The Payors already know that. So I think there's a lot of positives from what we're doing. But I think that -- I don't think the global or national issues relative to the health care cost should have any impact on us. I just continue to see this to grow because it's actually a win-win for everybody, more people get mental health.

As a follow-up to that, do you think your ability to show outcomes and the data that you have is a differentiator where maybe Payors skinny down the number of providers that they're -- or vendors that they're actually utilizing for these services?

Absolutely. So we already have a couple of early value-based contracts. They're relatively rudimentary, quite honestly. It's time to first appointment, time to second appointment, how many people show up. But -- so all of those things we have in place. So we're very comfortable with anybody almost that comes to us for a value-based arrangement because we already have that in place.

And one of the reasons that we are so comfortable because of the network. So the curated network is a really big deal, meaning we monitor -- as you know, we monitor the quality, we look at what therapists are doing. That's really important on a value-based contract because you have to be able to measure outcomes. And to measure outcomes, you got to be able to control the network. You got to be able to look and see what the quality is that's being delivered. So having those -- having all of that in place is really, really important to be able to deliver on a value-based contract. So we're pretty comfortable with all that.

And that dynamic you alluded to, Richard, I think that is exactly what is playing out with the directory dynamics, right? It's no coincidence we're being tapped to do these initial embedded directories. It's a function of years and years of providing them that data exactly as you allude to, the clinical oversight, the QBRs we do with the Payors, the audits. So they're, in some ways, rewarding us in that sort of -- I don't know if you use this phrase, Richard, but narrowing the network a little bit. Clearly, by doing these directories with us, we would expect, as we saw with that one Payor last year to take sort of outsized portion of share of their Payor portal traffic. So it's sort of indirectly them doing exactly what you're hypothesizing.

We'll take our next question from Charles Rhyee with TD Cowen.

Jon, I wanted to ask a question, right? You kind of made the comment earlier, right? A lot of people are now seeking out information, but they're not just going to a search engine anymore, right? They're going into ChatGPT or something and asking them. And so you've talked about how do you optimize to be picked up by these LLMs so that people can get directed to you.

And it sounds like is this like the new SEO? Like is even search engine optimization as much of a thing? Is it really now how do you optimize to be picked up by LLMs? Because it's something that we've heard from other companies as well more recently. And then connected to that really is, how do you then connect from maybe that kind of initial outreach by patient who is -- a patient who is going through a chat like an LLM or a ChatGPT or something and get them to your AI bot, right, which would be more a protected environment for patients. How do we bridge those 2? Or how do we get them to search you first? Let me just start there.

Right. So great question. So actually, just -- I don't know if you've seen it, there's an article in New York Times this morning all about search engine optimization through LLMs. And I have talked about this. We have put in place. Our marketing folks have been aware of this for quite some time. So we actually have people who just are working through LLM search strategies so that we do appear on whether it's Gemini or Claude or ChatGPT.

So we have been optimizing -- there's another term for it. It's called generic -- I think it's called generative optimization as opposed to SEO. But however, saying that we are not only aware of it that what we put in place mechanisms to make sure that people do find us. And we track it also, by the way. So we have seen this go up month to month to month. People who are finding us on the other LLMs, the number of people, it continues to increase month-to-month. So one, that's what we're doing on the SEO, very comfortable about where we are relative to that strategy.

In terms of people finding us is an interesting question because we have not gone to market yet. We do have a fairly fully baked initial marketing plan so that people will find us depending on what they're looking for. Now there's a lot of nuances to that. We don't have time here to probably talk about all that. But meaning are they really looking for therapists? Are they looking to have a serious conversation. There's a lot of different things that people look for.

We -- so as I mentioned a couple of minutes ago, our view on this is that if you want to have a serious conversation that's confidential, particularly around relationships or other issues that may be bothering you and your information is protected, if you're protected, and we have significant clinical background, that people will then make a decision about where they will go depending on what they want. We don't -- the answer, of course, is we don't have the answer yet. But we are being positioned. We are -- we'll start off being positioned in a little bit different mode than the others.

But the -- I can't even say the jury is out because we haven't gone yet. So we will know more, as I said, once we finish the beta in terms of why people are coming to it, how people are using it, which will be a significant bunch of data points about how we relatively -- how we go to market after that.

We'll have a separate marketing initiatives and budget just for the LLM product, right? So in the guide, there's little to no revenue associated with TalkAI revenue, which, as Jon alluded to, we'll launch this summer publicly. But there'll also be a separate marketing effort there. While we don't historically disclose traffic or conversion numbers on our core platform, suffice it to say, if you just look at even the best-in-breed e-com brands, you can imagine there's a ton of traffic coming to our site who never check out, right?

So we actually view based on the research we've done, the TalkAI product is going to be absolutely TAM expansionary for us because there's a lot of people who are curious about therapy, they come, they search. But as you know, it's not sort of a fleeting decision somebody makes just to buy something, right, to enter therapy. So a lot of people actually come to -- and we actually think this is going to capture, I don't want to call it a lower intent, but maybe a group of people who are not quite ready to see a human-to-human therapy session, but are willing to take on sort of this more of a GPT type interface. So we'll have a separate marketing effort around that from a paid standpoint.

But I also want to flag just from organic, we think there's a lot of folks coming to our site today who are not monetizing at all that we will retain once we have a TalkAI product. And that -- and this is completely separate from the GEO, the generative engine optimization work, which I would agree with your succinct take. It is sort of like the new frontier for SEO, which honestly, we're benefiting a lot from our historical strength in SEO. And so it's -- as Jon said, it's a small but growing very fast sort of channel for us on the core side.

Okay. That's really helpful. And that kind of clarifies some of my thoughts because I was just curious how do you transition people if they're searching through a ChatGPT, but it's -- what you're saying is that the low-hanging fruit is all the people that come to your website already that you want to monetize. So at least you have this initial base, and it seems like people are getting to you in some fashion.

My second question, though, is maybe -- have you had any discussions with like a Humana? When we think about the MA opportunity, we've obviously seen now the advanced rate notice for 2027 is actually quite poor, and we're looking at potentially another round of benefit cuts from plans going into -- not this year, but going into next year. Where does behavioral health, do you think in your partners' minds sit in terms of benefits? Is that something that you think they might look to cut back on? Or is this something that you think is pretty safe?

Yes. I mean if you're alluding to employers, I can't answer you. We have a -- most of that is through...

I was thinking about Medicare Advantage for '27 just because of the...

Yes. Our view right now is that Payors continue to be very interested in what we're offering and MA continues to grow. But we'll continue to talk to whoever is out there. I think that Humana is another whole question about how they're going to approach the market now. But I can't tell you anything more except that we still continue to have interest on the MA side.

We'll take our next question from Bobby Brooks with Northland Capital Markets.

As we think about how you guys are mapping out driving higher utilization into 2026, what are the 3 or so most important levers you feel you have at your disposal to help drive that?

Well, no particular order. We've talked at length already about the directory integration. I think you've heard me talk about the change that we made had a very, very significant impact on the number of people that are booking checkouts, booking for session, second and third. That's been a really big [ add ].

And so I think as I talked about before, that's a never-ending journey. There are literally -- you can't believe how many more things you could do to test and to change to make sure that you actually get more people through to the funnel and through the funnel. So that's the second.

I would say, again, no particular order, the third is partnerships. You've heard us talk about the growth in both Amazon, Zocdoc and the 20-plus other partners that we've announced. We will continue to lean in on the partnership expansion because a lot of it -- it's beneficial for both the partners and for us to get the referrals. So I would say that those 3 levers, journey, partnership and certainly directories. And probably in a general sense, [ that number ] is just our ongoing relationship with the Payors.

Got it. And then just curious to hear more on the beta testing of TalkAI. And obviously, it's still early, but wanted to know -- wanted to hear more what's the plan -- like what -- how are you thinking of early plans of commercializing it? Are you -- and maybe are you in any active conversations with kind of the larger LLMs of potentially licensing it? Just trying to get a sense on that.

Yes. Our go-to-market is to be direct-to-consumer first, which is what we've talked about is the launch and then -- and test all the different models about who's coming, why they're coming, what sort of price point makes sense. So that whole direct-to-consumer is the #1 focus. We are in discussions with multiple -- to be honest, with several other entities about their interest in our LLM. And I would just say just TBD -- but there are other discussions going on with other people.

On the early learnings of the beta, which, call it, a little bit shy of 1,000 users at the moment, we've been -- I don't want to say pleasantly surprised, but it's been really interesting to see just how engaged folks are with the product. And this has been well covered in sort of general reporting on LLMs, but the willingness of people to share with the AI therapy product -- therapeutic product as opposed to a human has been quite astonishing. So very, very, I'd say, promising sort of engagement and retention thus far.

And then as Jon said, the intention would be like any sort of product-led growth strategy, start with D2C right, sort of an out-of-pocket revenue model, take the learnings from that and that initial data from those initial cohorts, which will then inform how we would approach it more on the enterprise side, talking to whether that's employers, other large groups.

That's super helpful. And then just last one for me. Jon, when we were on the road in December, I thought you made a really interesting remark that I think would be good to hear on the call about, obviously, you've had a long career in the medical field and have seen -- have been in kind of a couple of different spaces of it. And you mentioned how another -- in your past slides, you've never seen -- people -- insurance companies are always coming to ask for lower prices, but that's not what you've seen. Could you maybe reiterate that comment?

Sure. So -- yes, we talked about we expect single-digit increases -- increases in our Payor reimbursements on our fee-for-service. So we are negotiating. We are going back with them. There are several coming up where we'll look for small increased rates. What you're alluding to is, yes, the prior industries where I've been, whether it's physician networks, hospital, ERGs, laboratories, it's usually the reverse. They're usually looking for how much less they're going to pay you.

It just turns out that the mental health space is something that the Payors really, really continue to be interested in promoting and supporting relative to their relationship with the employers and their employees. So because we are, as I said, not just available, accessible, but an affordable option for them and significantly scalable, we remain very attractive to the Payors, so -- which, as Ian alluded to, which is why the partnerships and everything else are really, really important to us. So the long-winded answer to, yes, I'm very happy that we get increased rates. It's a bit of a surprise to me.

We'll move next to Steven Valiquette with Mizuho Securities.

A couple of questions here. First on the '26 revenue guidance, obviously coming in pretty strong versus the high end of the range that you targeted 3 years ago. I guess, are you able to provide any color or just remind us roughly how much revenue you're expecting from Wisdo in '26? I'm just trying to get a sense for just rough approximation for like the organic versus the inorganic growth this year. I'll let you answer that one first, and I'll ask the follow-up after that.

Steve, yes, we haven't broken out Wisdo separately. It will show up depending on the type of contract, most likely in D2E or the Payor lines of business and to a lesser extent, a little bit of the consumer there. So it's embedded in the 3 business lines we report out. I would think of it if you're -- I understand the question sort of inorganic benefit from them. It's fairly modest, so single-digit millions contribution for '26.

Okay. Got it. Okay. And then yes, the next question here. I guess with the industry environment rapidly moving right now, which you kind of alluded to, not just in relation to AI, but other factors as well. Does this increase your appetite and/or need to look at additional external assets or possibly do additional tuck-in acquisitions this year? I know it's always hard to answer those questions, but I guess the question would be, are you well positioned the way you think you are right now with your own enhancements on the internally developed TalkAI agent and recent Wisdo addition. But I just wanted to get your sense for that.

Yes. No, we appreciate the question. I mean, certainly, we have the wherewithal to do more tuck-ins, right? We ended the year with almost $93 million of cash and equivalents on the balance sheet. I would say, given we just did the Wisdo acquisition, we want to make sure that's a successful outcome. It's the first tuck-in we've done in a number of years and for this management team, our first. So our main priority is to make sure that one is successful.

I would say the excitement and resources and attention that we're dedicating to the TalkAI project is very substantive. And so the sort of de novo organic internal developed growth opportunities is probably where I would -- if I had to bet, we'll spend most of the time. So nothing immediate in terms of our portfolio that feels like a gaping hole that we need to address inorganically. I would say we feel very good about the hand we have today sort of already under our roof.

And then as you know, just on that cash point, we bought back $17 million of stock in 2025, still have a very good amount of capacity under our existing buyback program. So in terms of uses of cash, that's another one. We obviously have that sort of arrow in our quiver for '26.

Yes. I would add that on the -- it's an interesting question you have there on the TalkAI and even all of our other AI initiatives to improve the business and patient journey. Just as a reminder that Talkspace has been around 14 years and it's always been an innovative company quite honestly. I mean, it was -- they did most of the original work for texting and messaging and then got approval for that.

So when we made the decision to further invest in AI initiatives, again, just to remind you, the company reported out AI risk algorithms back in 2018 and 2019. So this -- the reason I bring that up is we have a fair degree of significant expertise on the inside relative to our ability to do this kind of work. Obviously, you don't have everything and you go outside and you get other people to help on a consulting basis, whatever you need. But the core Talkspace technology capability is very, very high.

We'll take our next question from Peter Warendorf with Barclays.

Just curious, given the anticipated growth this year, if you guys are comfortable with the size of the provider network as it is right now? And if there are any specific pockets that you feel like you might need to address?

Peter, the short answer is yes. We feel very good about it. We actually -- Jon had some notes in his prepared remarks about what we call the curated network. So we're actively pruning, engaging, trying to activate. And I think it was, maybe Bobby's question, sort of the rank ordering of how we're activating folks.

One of the indirect components of that, which I think is not as obvious because really on the supply side is making sure we're engaging the network to have adequate availability such that when someone comes in and they want a certain day at a certain time, a certain type of therapists, we have that, right? And there's a lot of creative ways we're working on the product to make sure we're capturing that sort of consumer intent in real time.

So short answer is we feel very good about where it is. It will grow here and there. It's very specific state by state. If we add a big partner with a certain type of population, do we need to ramp up hiring there? We've had numerous examples where our recruiting team has proven again and again, they're very effective and very nimble in ramping up supply when and if needed. But as sort of a run rate basis, we feel very good about where we are.

The one area I would flag which we grew quite a bit in 2025 was on the psych side. So Jon talked about it as one of the more exciting sort of newer service offerings for us, psych. And what we mean by that is really medication management has been a very small-ish, but very fast-growing component of our Payor business. And so you'll see, I think in our 10-K, we ramped up our provider network on the psych side quite a bit in '25.

Got it. Okay. And then one quick one on the consumer side. The DTC revenue obviously is becoming a smaller headwind every year. But just curious how much of that you guys think you're capturing elsewhere on the Payor side of the business as that revenue kind of continues to fade away?

Yes. I would say most of it we capture. I mean, as you go through the registration flow, we make it pretty unavoidable for a prospective consumer -- prospective member, I should say, to not share with us your insurance info. So we very much lead with that intent to capture you on the Payor side. Now that said, there's always for whatever reason, the long -- small tail folks we don't cover or they just rather pay out of pocket for whatever reason. There is always that option. But we surmise we're capturing most of that consumer attrition. And then, yes, to your point, it will be less of a headwind on a dollar basis in '26, just given the smaller starting point in the year. So quickly becoming sort of more and more immaterial.

And that does conclude the Q&A portion of today's call. And this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Goodbye.

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.

At this time, I'd like to welcome everyone to the Talkspace Third Quarter 2025 Earnings Call. [Operator Instructions] The press release and presentation of earnings results can be accessed on Talkspace's IR website. The presentation will be used to walk you through today's remarks. Leading today's call are CEO, Dr. Jon Cohen; and CFO, Ian Harris. Management will offer their prepared remarks and then take your questions. Chief Technology Officer, Gil Margolin, will join for the question-and-answer section of the call.

Certain measures that will be discussed on today's call are expressed on a non-GAAP financial basis and have been adjusted to exclude the impact of one-off items. Reconciliations of these non-GAAP measures are included in the earnings release and on the website, talkspace.com. As a reminder, the company will be discussing forward-looking information today, which may include forecasts, targets and other statements regarding plans, goals, strategic priorities and anticipated financial results. While these statements represent the company's best current judgment about future results and performance as of today, actual results are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Important factors that may affect future results are described on Talkspace's most recent SEC reports and today's earnings press release. For more information, please review the safe harbour disclaimer on Slide 2. Now I will turn the call over to Dr. Jon Cohen.

Good morning, and thank you for joining the call today to review our third quarter results. We delivered record revenue of $59.4 million and adjusted EBITDA of $5 million. I am pleased to report that active payer members grew 8% sequentially and 29% year-over-year and payer sessions increased 12% sequentially and 37% year-over-year. This acceleration in the quarter is a reflection of the focused approach we initiated this year on all aspects of the patient journey. As I look back at the quarter, I'll call out a few specific areas where we've seen this strategy have a significant impact.

The number of clients activating and attending their third session in the first 30 days on the platform is up over 50%, driven mostly by improvements to our matching algorithm, ease of scheduling and improved provider capacity. In addition, we continue to see strong results and improve the efficiency on our marketing spend by targeting specific new audiences such as military and their dependents. We are also utilizing AI-driven tactics to further optimize media and test new marketing investments. In the third quarter, we became in network with several new Blues plans, including Illinois and Massachusetts, and we won a competitive takeaway of one of the largest national EAPs, which we launched earlier this month. We have also made meaningful progress embedding Talkspace into our payer partner ecosystems by focusing on the areas that matter most to them.

We continuously manage and curate our network of around 6,000 clinicians to make sure that top quality providers are available to our members and to ensure that each clinician is highly engaged and motivated. This is a key differentiator for Talkspace and has helped drive deeper integration with our payer partners, including directory integrations to facilitate patient sign-on as a seamless experience. Our brand awareness has also improved as we are now the most recognized insurance coverage focused brand for mental health with over 35% of people recognizing the Talkspace name according to third-party surveys. This makes our integration into payer directories even more effective as people are more likely to recognize Talkspace and seek care from us.

Payer revenue in this quarter also benefited from strength in our psychiatry business, which we relaunched earlier this year to address the needs of our high acuity users and those that need medication. As a result of these initiatives, psychiatry initial session volume increased 46% in the quarter. Further, we grew our psychiatry network of providers by nearly 50% from Q2, and we'll continue growing that part of the network given the demand trends we are seeing. We continue to focus on optimizing the internal referral funnel between therapy and psychiatry services, and we expect continued growth in the coming quarters.

To round out our comprehensive mental health services, earlier this month, we announced our acquisition of Wisdo Health, a clinically proven AI-powered social health platform specializing in peer-to-peer community and coaching support. Wizzo has supported over 500,000 adults to date on their platform and utilizes AI to match this population with appropriately trained peers and group coaching for emotional support, companionship and shared experiences that improve health outcomes, increase adherence and engagement rates and reduce total cost of care for its health plan clients. Wiz is particularly applicable to many Medicare patients who have recorded a 21% decrease in loneliness and exhibited reductions of up to 10% in emergency room, urgent care and inpatient visits after joining Wisdo. We anticipate that many of the Wisdo users may also benefit from referrals to therapy, just one of the many avenues where we see the synergies of being able to provide patients with a more complete set of behavioral health solutions.

I am also excited to announce that next month, Wisdo will begin supporting Novo Nordisk's new WeGo Together app for patients on Wegovy for obesity or overweight. Within the app, Wisdo powers the group coaching experience that helps participants build sustainable habits, share encouragement and stay emotionally supported as they work toward their health goals. Our direct-to-enterprise or DTE business remains solid, particularly with organizations serving youth and young adults. Specifically, our 2-year deal with the North Carolina Department of Health and Human Services to provide Talkspace to 20,000 teenagers impacted by the justice system first launched in July and corespaces, which provides student housing options to on college campuses to 36,000 students at 32 different universities launched in late August. While both of these launched a bit later in the quarter than anticipated, they are now up and running and progressing nicely.

Additionally, this was a strong quarter for contract renewals, including Baltimore County Public Schools and Colby College, which has renewed its contract 3 times now for its 8 years with Talkspace. We also celebrated 2 years of our New York City Teen Space program. Looking at the results over that time period, we have over 40,000 youth enrolled in the program. Notably, 93% of the participants use messaging, highlighting that our approach to accessibility allows us to meet teams where they are. Our suicide risk algorithm identified over 500 potential elevated risk incidents, which is incredibly important in a population experiencing anxiety and depression as their most prominent mental health challenges.

Switching to AI. We continue to make significant progress integrating our work on AI into all aspects of our business with multiple initiatives to improve the customer member journey. This includes LLM search engine optimization, AI assistance in improving eligibility determination for insurance, smart insights for providers in preparation of their sessions, comprehensive smart evaluation that provides the providers with a HIPAA-compliant AI draft of a biopsychosocial evaluation after intake sessions, Smart notes providing post-session summaries for the clinicians, our talkcast individualized podcast that I've talked about in the past and now our AI that helps review the medical records, which has been extraordinarily helpful to the compliance and clinical quality teams.

We have data demonstrating the value of our AI innovations. When providers use smart insights ahead of their second session with a member, those members are more than 30% more likely to book a third session within 30 days and 31% more likely to complete their third session within 30 days of registration. Recent results from our data on talkcast indicate that 21% of people are more likely to book and complete a third session after listening to their podcast.

We've also launched 3 additional proprietary risk algorithms to add to our suicide risk algorithm. These include risk for violence or homicidal ideation, homicidal intent or homicidal plan, risk for substance use disorder and mouth treatment risk determination, which identifies behavior or circumstances that may lead to harm, neglect or ongoing abuse.

Finally, I'm very excited to announce that the Talkspace developed behavioral health-specific large language model I alluded to on our Q2 earnings call has proven to outperform current AI chatbot agents in our alpha testing. Our proprietary LLM has been trained on hundreds of millions of anonymized therapy transcripts and rigorously tested for safety and therapeutic quality, and we envision it will serve as a therapy companion and clinical support tool. With that in mind, I want to address the issue of AI and mental health and the crisis that has emerged generating the recent headlines of high-profile cases in the press of significant injury and fatalities as a result of people interacting with general purpose LLMs to address mental health issues.

Many have noted that the chatbot can be dangerous as they provide instant unrestricted validation and reassurance to users are too empathetic or sycophantic are constantly affirming bad behavior and are always cheerfully adaptive during conversation that flatters rather than challenges ongoing issues. This has resulted in social deskilling and an erosion of real-world interactive skills. They fail to challenge delusions or reinforce reality, lack real-time risk identification, lack clinical oversight and there is no HIPAA protection. We would note that even as companies work to address some of these issues, they do not have all of the necessary capabilities or experience to more fully protect users.

We recognize that these inadequacies of others is a unique opportunity for us. Our significant investment in an AI model, combined with our other capabilities will offer individuals a significantly better and safer experience. This new model that we have developed sets a new standard for both therapeutic efficacy and user safety unlike general purpose LLMs available today. Utilizing our database, the model was trained on hundreds of millions of tokens from anonymized and graded tox-based therapy transcripts. In testing, the model consistently outperforms both open source baselines and state-of-the-art models in responding to high-risk mental health situations, including self-harm, hallucinations, OCD, mania and delusion.

In fact, in a recent test, our model when compared to general purpose models without this specialized fine-tuning delivered a 50% improvement in identifying and responding to high-risk behaviors, a 47% higher therapeutic quality score on the cognitive therapy rating scale and a 3x higher user satisfaction than the base model. We expect that these early results will get even better over time as we refine the model and further testing cycles. More importantly, our product is being built with significant clinical oversight, real-time risk determination, immediate referral to a live therapist, human in the loop and with HIPAA protection to protect patients' personal information. These are unique and core skills that are already available to our Talkspace members through their personal interactions with their therapists. Additionally, our model can be used as an engagement tool for intake screening for multiple different types of patients and as an engagement tool in between sessions.

We see the development of our Safe Talkspace AI agent proprietary LLM as a large new opportunity with significant potential upside for our existing business and significant opportunity for new products. We expect to launch a full product offering in the first half of 2026, but believe there are a number of unique and significant commercial opportunities in the near term. We expect to focus initially on several of these near-term opportunities that take advantage of our existing commercial infrastructure and brand presence, including as an affordable alternative for consumers and an attractive alternative for employers to provide a low-cost alternative to their employees.

Over time, we anticipate being able to work with our existing payer partners to offer to their network members a reimbursable alternative. Importantly, all of these early products will remain HIPAA compliant and provide real-time clinical oversight with the availability for immediate referral to a live therapist in our existing network. We look forward to providing updates on this important initiative over the coming months. I'm proud of all our team has accomplished so far this year and know we are set up for even greater success ahead. Now I'll turn the call over to Ian to review the financials in more detail.

Thanks, Jon, and good morning, everyone. In the third quarter, we continued to execute on our growth and profitability objectives while maintaining strong operational discipline. First, I'll review our quarterly financial performance and then provide an update on our outlook for the remainder of the year. Starting with the third quarter results.

Total net revenue was $59.4 million, an increase of 25% year-over-year and 9% sequentially. The accelerating momentum in our payer business is a result of our strategic product investments over the last several quarters as well as our efficient marketing approach throughout the year. Payer revenue grew 42% year-on-year and 12% sequentially to $45.5 million. This performance reflects the continued adoption and our collaboration with payer partners, resulting in higher member engagement within our payer populations.

During the quarter, we completed more than 432,000 payer sessions, up 12% sequentially and up 37% year-over-year. The strong session growth was driven by a 29% increase in unique active payer members to over 120,000, which represents our highest quarterly figure since the company's inception and reflects one of the benefits of the payer business line where past cohorts compound over time as members exhibit longer retention rates than out-of-pocket members. Direct-to-enterprise revenue was $9.3 million, down 1% year-on-year and 2% sequentially.

Similar to last quarter, our renewal rates were strong, but as John mentioned, we experienced slight delays in a couple of material launches that were moved from Q3 to Q4. We have high visibility into sequential growth for Q4, thanks in part to the Q4 launches of those third quarter new client wins. Consumer revenue from people paying out of pocket totaled $4.6 million in the quarter, up from $4.4 million last quarter, but a decline versus $6 million a year ago as we now cover more Americans via in-network benefits and we optimize our checkout funnel to direct members to use their covered benefits.

Adjusted gross profit was $24.6 million, up 13% year-over-year and up 5% sequentially, representing a 41.5% gross margin compared to 43.1% in the prior quarter. The sequential decline in gross margin was driven in part by the continued overall mix shift towards payer revenue as well as the timing of selective network hiring in certain areas in anticipation of increased demand, which we expect to normalize in Q4. Total operating expenses were $22.4 million, down 11% sequentially and up 4% year-over-year.

As a percentage of revenue, OpEx, excluding stock-based comp and nonrecurring expenses, declined to 34% versus 40% in Q2 and 41% a year ago, driven by disciplined expense management and continued operating leverage as revenue growth outpaces a relatively fixed cost base. Adjusted EBITDA grew 111% year-over-year to $5.0 million compared to $2.3 million in Q2 and $2.4 million a year ago. Adjusted EBITDA margin expanded to 8.4% versus 5% a year ago, again, demonstrating the operating leverage inherent in the business.

Turning to the balance sheet. We ended the quarter with $96 million in cash and equivalents, including available-for-sale securities and restricted cash. This was down $7 million sequentially, primarily due to our share repurchase activity. We bought back nearly $9 million of stock in the quarter, bringing our year-to-date share repurchases to $17.2 million. Finally, turning to our outlook.

We are narrowing our full year guidance ranges for 2025 as follows. We now expect revenue to be between $226 million and $230 million, which represents year-over-year growth of 20% to 23%. This compares to the prior range of $220 million to $235 million. We now expect adjusted EBITDA to be between $14 million and $16 million versus the prior range of $14 million to $20 million.

As we've shared today and is evident in our improving KPIs and accelerating revenue growth, especially in our payer business, the strategic investments we've made in both marketing and to improve our technology and product platforms over the course of 2025 are paying off. While these investments impact our near-term profitability as reflected in the updated guidance, they also lay the groundwork for sustainable growth for both our top and bottom lines in the near term as well as into 2026. We've made meaningful progress across the company so far this year, both from a clinical and operational standpoint. I believe we're ending the year on a very solid foundation. With that, operator, we can open the call for questions.

[Operator Instructions] Your first question comes from the line of Steven Dechert with KeyBanc.

Just want to ask around the large language models. How will those be integrated into the Talkspace app? And how do you plan to monetize that? Will that be like a subscription? Or is this something that will be included if you're an existing patient for free?

So thanks for the question. It will be integrated into our network. We also have -- we're also building this clinical oversight piece of it. So we'll be able to watch for anybody that needs off-ramping. So that's part of the new patient journey that will be part of this, depending on which population uses it. We have multiple areas you may have seen that we can monetize this, whether it's large populations, consumers, employers. So the model and the patient journey for each of those will be different. So my answer to your question is really stay tuned until we're ready to really bring it to market, which will be early 2026. But each one of those will have actually a different impact on us relative to the -- how we commercialize that particular entity.

Okay. And then maybe as a follow-up, could you talk about some of the changes you've made to the matching algorithms driving the strong retention that you're seeing?

I think the most important part there is that we get people in and we actually tell them that we're going to make an appointment for them. Subsequently, we then, in some circumstances, find an appropriate match for them as opposed to matching them right off the bat. So that's one initiative. The second is our ability to schedule people for multiple sessions or into time slots of what they're looking for has significantly improved to help drive that part of the registration process.

Yes, Steve, it's Ian. I wouldn't say there's really one or even a handful of things we can point to directly that impact it. It's really a multitude of small tweaks that all have a really positive compounding effect when stacked together. So it's dramatically simplifying our registration flow. It's network management, where we're dynamically looking at supply/demand and sort of having that supply management outlook, where we're looking both in the near term, 1, 2 weeks ahead, but also from a broader network planning quarters ahead. Even we're getting at specific like days of the week, times of the day, which states and making sure that we're engaging our network to open up schedules and availability such that when people come in, we know in addition to costs, which we've talked about in the past, we know that scheduling is a huge criteria in terms of that consumer choice to go through with their decision to proceed or not.

Your next question comes from the line of Charles Rhyee with TD Cowen.

This is Ethan on for Charles. So it looks like payer KPIs are doing pretty well. And are you guys comfortable, do you think, with the number of credential therapists you have right now in your network? Or do you think you might have to potentially grow that number in the near or medium term?

Yes, we're definitely comfortable with where we stand today. I mean every -- again, we're meeting even at the senior executive level weekly on this exact issue for capacity planning because obviously, it's core to what we do. I'd say, in general, we feel good about where we are. We're constantly pruning, adding. It's hard to talk about it sort of in the aggregate because we're getting down very specific to what are they credential for realms of expertise, are they at $10.99 versus a W-2? What's their ultimate capacity and what geographies are they in? Just to name a few of the variables we have to plan around. But I touched on that actually in my prepared remarks around our gross margin, the sequential change from Q2 to Q3. Some of that was actually -- we did some hiring in our network sort of to get out in front of anticipated demand, which we saw in Q3. And candidly, what we're seeing in Q4, more of the same of that very strong payer demand. So that was a little bit of a drag on gross margins in Q3 as we hired sort of ahead of that demand. But where we stand today, we feel very good about the health of the network overall.

Okay. That's super helpful. If you don't mind me taking a quick follow-up. So it looks like S&M ramped down in the quarter, and this is pretty consistent with what you guys have been messaging. But just how should we think about the run rate of marketing spend going forward?

Yes. So it was down a little bit sequentially, obviously, up, I think, about $1 million year-on-year. And what I would reiterate is we're very -- I say this like it's a very high bar for marketing. We don't spend it lightly. And so we were comfortable adding versus a year ago because of the efficiency and the very strong ROI we're seeing. And I think that came through in the KPIs for payer last quarter and again, this quarter, just looking at the new user growth, which is a very good forward indicator of sessions that are going to come and obviously, in a fee-for-service model, therefore, payer revenue that's to come. So going forward, I think kind of where we are in Q3 is an okay proxy for Q4. We'll obviously come back to you all on sort of '26 guidance next quarter. What I would say is the sort of -- in our narrow guidance for '25, that 20% to 23% growth range, I would expect for next year another 20% plus top line growth, which obviously requires some marketing to support it, but it wouldn't be too dramatically different from this year.

Your next question comes from the line of Ryan MacDonald with Needham.

On the continued success in the payer channel. If we kind of break down sort of the growth in active members utilization, can you just talk about sort of how much you attribute to sort of the core commercial population versus obviously, the continued growth in lives in the Medicare population thus far?

Yes. I think as you can imagine, the significant growth continues to be on the commercial side of the business. We are seeing continued growth in Medicare. We are seeing, I would say, significant uptake on the military initiatives that we're doing right now. So all of it is moving at the same almost the same pace. But there's no question that the commercial payer orbit is significantly contributing to the increase in both registration and sessions.

That's helpful. And then as you think about the Wisdo Health acquisition and starting to integrate that, how can you -- what can that do to help sort of open up more of the Medicare opportunity for you or drive more sort of active engagement there? And then is there anything from a marketing perspective you're doing during open enrollment here to really try to ramp up those efforts this year?

Yes, it's a great question. So -- so there's no question that the Wisdo integration into our Medicare strategy, we think will provide some significant uptick because of the group coaching that they offer. We are finding that a significant number of seniors like the idea of group coaching and peer-to-peer and people who have experienced what they have, particularly around the loneliness issue. So we do think that as a significant uptick relative to the Medicare population. I'm not -- I understand your question relative to open enrollment. I'm not sure what the impact of that would be. It's certainly unknown relative to the Medicare Advantage population. So I don't -- I can't answer that. It's to be seen about what happens in open enrollment. But remember, our core issue is pitching directly to patients once they've signed up.

I would also -- I just want to reiterate a little bit on the Wisdo. The Novo Nordisk announcement that we made as part of it is really a significant positive issue relative to the Wisdo go-to-market strategy. It was very clear that the people who are taking GLPs relative to weight management are really looking for a group coaching solution to help them get through it by seeing and interacting with other people who are going through the journey.

Ryan, a quick modeling on that point. So the Wizz revenue will show up for something like the GLP-1 program with Novo and their Wego app, that will show up in DTE revenue. And then to your earlier question, signing up our existing payers, which I would say to date, the receptivity and interest from Talkspace's existing payer partners has really pleasantly surprised us. Their interest in potentially adding on Wisdo as another benefit. That will obviously show up in payer revenue. So it won't be broken out separately per se.

The next question comes from the line of Richard Close with Canaccord Genuity.

Congratulations on the results and all the update here. Just maybe to pull a thread on Wisdo and the pharma opportunity. Can you just talk a little bit about how you see that playing out? Is this just a one-off with Novo? Or how are you thinking about really penetrating that market?

Yes. I won't discuss the specifics of the relationship with Novo. I would tell you that, as you can imagine, the number of people that are getting Wegovy and what percentage of them are going to -- are really looking for this kind of application to help them get through their journey. What it does is it really helps people develop the habits to continue to stay on the drug. We are -- we will look at other similar opportunities in the pharma space in a general sense, but we need to get this one, honestly, right the first time around. So I would say more to come on that.

Okay. And then just maybe on the AI front, I appreciate the comments there and calling out, I guess, some of the downfall of other LLM models and dealing with mental health. Are there -- do you see opportunities for Talkspace as maybe partnering with some of those other companies in terms of providing the clinical oversight that's associated with your offering? Just any thoughts there in terms of partnership opportunities?

Yes. So the answer is absolutely yes. We do have significant -- you've heard me talk about it. I think we have a significant differential advantage relative to the other LLMs, specifically that we have the provider network. we actually know how to deal with mental health journeys. And I think what's nuanced a little bit is if you're in another LLM and you need therapy and you need to see a therapist, we're a network. So what that means is if we have a continued seamless journey relative to the others, patients who need therapy essentially are going to be probably covered. So they don't have to pay more. If you're on one of the other LLMs and you need therapy or need to go outside the network, the question is who's going to pay for that. So it's a long-winded answer to -- I do think there are licensing and other potential opportunities with other players out there.

Your next question comes from the line of Bobby Brooks with Northland Capital Markets.

It was great to see a second straight quarter where all the year-over-year growth KPIs on utilization for payer accelerated. And I was just curious if we could dive a little bit deeper of the factors that were driving that. I know over the last 2 quarters, you had mentioned new monthly record sign-ups for new users, and that was sort of the key. Is that still occurring? Just hoping to get a little more color on that.

Bobby, thanks for the question. The short answer is yes. So I think what you're referring to last quarter, sequentially, in terms of quarterly unique active payer members, we saw about a 10,000 user step-up from Q1 to Q2 and saw pretty much the same step-up Q2 to Q3. And as I mentioned earlier, that's a really good leading indicator for payer revenue. We have very high visibility into sort of the retention of a new group adding on to the platform in a month and sort of what those cohort curves look like. So from a supply capacity planning standpoint, that's very helpful.

And yes, I mean, you saw it again this quarter, which obviously putting 2 and 2 together there, bodes very well for our visibility into payer revenue for Q4, where, again, we grew 29% the users this quarter versus a year ago. The sessions also grew 37%. And then you can do the math. You saw a little bit of a benefit year-on-year sort of mid-single digits in terms of sessions per member. And again, some of that is around the product changes we're doing to engage folks. Some of that is actually, in Jon's remarks, he talked about a relaunch of psych. And as part of that, we're doing a much better job, much more concerted effort in sort of that cross referral between therapy and psych that a year ago, we were candidly not very focused on. So sessions per member also going up, price going up, users going up, and that's why you're getting that really -- that 42% growth in payer is sort of a function of all that.

Just to double-click on the new user piece, marketing for us gets -- we've touched on and again, the efficiency metrics and ROIs we're seeing there are still very good. We're very pleased with it, and that's why we had sales and marketing up about $1 million from a year ago. We've talked in the past, less so this quarter, but the level of collaboration and candidly the sort of effort and resources from our payer partners that they're dedicating to making it a more seamless integration to get to Talkspace has been also a very big benefit in terms of new users.

So when we talk about the directory integrations and getting more embedded into their payer portals to make it a more seamless transition, that's been, I mean, years and years in the making to get to the point where all the clinical quality, all the safety, all the outcomes data that we're sharing with them and they've been pleased with for multiple years. You can imagine these managed care or it's a very long list of priorities to be able to get that dedicated resource and attention from them to go through these sort of technological integrations, it's a very high hurdle, and I think it's a testament to the job we're performing for them. So that leads to significant user growth as well.

Got it. That's super helpful. And then just maybe double responding to the directory integration. I know in the past, you had talked -- I think it was like you were integrated with one payer system. It seems like maybe that's now expanded to some others. Just any thoughts on that?

Yes. We -- so the answer is yes. We will be in several other national players, most likely probably in Q4 and rolling into 2026. But those are really close, I'll tell you to the finish line, which will, as I said, probably happen in Q4, which will continually have a significantly positive impact on the ability of people to book sessions without having to leave the payer platform.

I think what you're asking is that those new additions are only come. Those are not reflected in the Q3 results.

That's helpful color. And then I'm sorry if I missed this if you discussed it earlier, but could you maybe just discuss the factors underpinning the guidance range tightening, specifically on EBITDA? Is it -- are you just spending a little bit more in anticipation of more -- I know your gross margins are lower on some selective hiring, anticipating more demand. Is that Okay. So that's kind of the driver for the EBITDA change.

Yes, exactly. So on the revenue tightening, we just -- as you can see, tighten around the midpoint. I guess the new midpoint is a little bit higher than prior. And then a couple of million down on the EBITDA range, which is a couple of factors. One is actually a function of the sort of DT commentary Jon laid out where some of our Q3 launches got delayed to October. So they're live now, and we'll see it in Q4, but you lose up to a quarter of revenue and EBITDA from that. And then it's also in assessing sort of our classic sort of growth versus profitability, given the returns we're seeing and the acceleration in our KPIs, right, payer going from low 30s at beginning of the year annualized growth to low 40s and wanting to continue that given the opportunity set is there, we decided a couple of million bucks on EBITDA to ensure that we're growing at least 20% in 2026 is a trade-off that makes a ton of sense.

I would agree with that logic.

Your next question comes from the line of Stephen Valiquette with Mizuho.

Let me offer my congrats on the results as well. I guess my question is just kind of thinking ahead of next year, 2026 is the third year of your 3-year guidance you gave at the beginning of 2024. Just wondering if there's any plans right now to provide any sort of new long-term guidance sometime next year or if that's still kind of TBD? Or are you going to just revert back to annual guidance? Just curious as you think about visibility on the business, how you're going to tackle the kind of the forward look. Just any preliminary thoughts around that might be helpful.

Yes. Thanks, Steve. I think TBD for now. But yes, to your point, the 3-year outlook we put out early '24 was for '24, '25, '26 we've largely delivered across that 3-year plan, right? So just to remind folks, it was a 20% to 25% top line CAGR, which we grew 25% in '24 year 1. The narrow guidance is for low 20s in this year '25. And so even to hit that outlook, we could have much lower growth in '26, but I want to make sure you hear, we think '26 will look a lot like '25 or potentially better, so at least 20% growth again in 2026 and then getting to that sort of low double-digit 12.5% to 15% EBITDA margin. So that's also very much the plan for '26. Obviously, we will give more detailed annual guidance next quarter or potentially at JPMorgan in January. But in terms of the longer-term outlook, I will not make any promises, but I know that's always helpful for you guys, so duly noted.

Your last question comes from the line of Ryan Daniels with William Blair.

This is Matthew Mardula on for Ryan Daniels. So regarding Medicare, there have been many different subsectors and just the overall larger market of Medicare. But since you've had a couple of quarters under your belt, when do you believe Medicare will start to meaningfully impact results? Do you think it could be 2026 or later on? I'm just trying to understand the ramp that could come from adding patients in Medicare.

Yes. So as I talked before, it continues to be a work in progress. We see increasing sessions, registrations each quarter. We are continuing to refine the strategy around reaching seniors. I think the unknown right now will be the impact of Wisdo, which we think will have an impact in addressing that population. So the short answer is it's still a work in progress as we work through state by state and subpopulation by subpopulation. I think you've heard me talk about before the over 75 engagement is very different than the 65- to 75-year-old, which is very different than the actual 55- to 65-year-old that may or may not be on, let's say, dialysis, et cetera. So we continue to work through it. So I would just say it's stay tuned for the Q4 and 2026 as we refine the strategy each quarter.

Got it. And I understand that over the past couple of quarters, you've been using AI applications on the administrative side. And in your prepared remarks, you mentioned some. Now regarding the benefits of AI, have you seen any financial impact on an administrative level? And if so, if you can kind of give us some color into that. And I'm just trying to understand if there will be a certain time where you believe you will see a meaningful lift financially in terms of either productivity or savings regarding usage of AI applications on the administrative side.

So as we reported in the remarks, we've already seen significant impact of AI. We've integrated it to almost every part of the patient journey from the top of the funnel through first session, second session, third session. So the impact has actually been significant. We've talked about 30% more people looking now to book a third session within 30 days, 31% more likely to complete the third session. The talkcast have had a positive impact of 20%, 21% of people more likely to book a third session. All of those are just examples of how AI actually is integrated into the patient journey with whether it's the risk algorithms, smart notes, summary notes that I talked about on the comments, all of that already has had a very, very remarkable impact on the number of sessions that we're seeing and people rebooking.

And on the corporate side for G&A, I'd say we are already using AI a ton to ensure that operating leverage comes through. So we grew 25% this quarter. I think this is probably in the adjusted EBITDA bridge when you look at the OpEx that impacts -- excluding SBC that impacts EBITDA, it's effectively flat year-on-year. So the benefits of a lot of what we're doing on a corporate level are definitely embedded in that minimizing OpEx.