All right. Hi, everybody. Thanks so much for joining us for those of you online and here. My name is Elizabeth Anderson. I'm the Healthcare Technology and Distribution Analyst here at Evercore. I'm very happy to be joined by Jennifer Fulk, who's CFO of Talkspace, who I'm sure many of you know. So maybe just starting off, last time we had you, you were, I think, only a couple of weeks into the, into the, you know, into the role in your last time we're here. Can you talk about sort of the evolution of the business since the IPO? I mean, you've just gone through so many, like, lifetimes of, like, things just in that period. Like, I think it would be helpful to, to level set everybody. Yeah. Well, first of all, thank you so much for- Yeah, thanks for having me. for having us here today. It's a great conference. Yeah, so, so we've had quite a journey over the last couple of years, and maybe I'll just start, for those not familiar with, with Talkspace and the story- Sure. I'll start with just a brief background. Mm-hmm. So Talkspace was founded as a consumer mental health care online provider, and we're about 12 years old, and was really the pioneer of one, just having a brand in mental health care, but also asynchronous therapy, and that's what really fueled much of the growth, I would say, prior to COVID. Mm-hmm. And I break at the COVID area because there were a few tailwinds that COVID brought to the company that ultimately ended up with what it was, you know, us going public in 2021. So the couple of tailwinds were, first of all, Talkspace started as an online, you know, therapy offering. With COVID, everyone went online, right? Sure. Yep. Yep. So just online healthcare became the norm. And at the same time, you know, COVID also brought both increased mental health care issues- Mm ... but also increased awareness of those issues, and, you know, people started talking about it some more. So there were a few tailwinds that really drove a lot of the business for the couple of years through COVID and ultimately ended up with the company going public via a SPAC transaction in June of 2021. So, with that, when I came to the organization, with the company going public, there were a few things that we leveraged, the investments and the new executive team to drive from there on out, and it was really a holistic, strategic plan to be able to set up the company operationally, but for us to approach strategically what we saw as an enormous opportunity for us at Talkspace in the mental health care area. So there were a couple of things that we prioritized there, which was one, ensuring we had the core capabilities for what we saw as the biggest driver to mental health care, which was in, you know, for with members having their therapy subsidized through payers. Mm-hmm. And we'll talk more about that 'cause it's a really important part of what we're doing now. Yep. And we also focused... I'll give you another example, but a really important one that we've made a ton of progress on, kind of, you know, making sure we had a really healthy supply chain, and I say our network of providers and- Mm-hmm ... and therapists. Yep. So there was a lot we needed to do there to ensure we could, we could scale. And then I'll say, just the third thing we did was just more broadly, was really look at our operations across the company and just make sure that we were, not only building the core capabilities for scale, but also finding efficiencies, throughout our investment base, to make sure we were set up, to be able to drive, ultimately operating leverage as we go into the future. So that's where we are today, is we're now, you know, two years into, I think, making a ton of progress against that strategic plan that we set two years ago. Mm-hmm ... and we are now several quarters into those, the results of those efforts translating into our financial statements, and so we're really excited about where we are now and what we have in front of us. Yeah, which also must be very gratifying from your perspective, given all the work you've put in to finally see it come through in the numbers. Maybe just to also level set people from, like, a demand perspective, or, how should we think about the current state of mental health needs? I mean, you know, we talked about it early, you know, the pandemic, everyone went online, et cetera. But, you know, as we start to be a couple of years out from the start of the pandemic. Yeah. So, you know, undoubtedly, and we can talk about some proof points, but undoubtedly, the mental health care market is enormous, and- Yeah ... our belief is, even with the growth that we've had in the last several years, that it's still in its infancy, as far as actually, you know, the TAM and, you know, how big we believe it will get. I think it's important to understand, and if you're not super familiar with the background of mental health care, Talkspace was founded as a consumer brand and a cash out-of-pocket offering because that is actually where most of the mental health care was happening. Mm-hmm. There was simply no access to therapists that took insurance. Yep. And, you know, with COVID and post-COVID, I would say there's really a cultural movement that not only, not only is the prevalence of mental health care issues there, people are talking about it, people understand that there is help for it, and it's efficacious. Mm-hmm. And there's no longer the acceptance that you've gotta pay cash out of pocket. So the demand is, you know, the expectation that that care will be subsidized by your insurance provider, and that you don't have to pay cash out of pocket is, I think, it's here, and it's growing, and it's a really important enabler to that growth that we see as, again, we move away from cash out of pocket. So I think, you know, this cultural movement, which I think started amongst, I'll say, consumers and members, but you've seen this, you know, it escalate, and it's become a bigger movement. You see more focus on it. We've seen this in the employer space, and we saw this in COVID, but it still exists. Even when there's pricing pressures, even when you have cost pressures, the mental healthcare needs is something that isn't going away, and it's just getting stronger, and I think the voice of the employees, voice of the members is just getting stronger. You've also seen this move into you know government and politics- Mm-hmm ... where, you know, funding is being made available, because it has become acknowledged as such a crisis. And I say acknowledged because I think our view is it has actually been... It's been a crisis. Yeah. I think it's the acknowledgement, and then the proper funding going to address it. So we think we're just in the infancy of where the mental healthcare market goes. And I think it's really exciting for us to think about just how we're positioned right now to be able to serve that market. But yeah, we've got a long way to go from here. Yep. No, that, that makes sense. I think you've you know, referred to this sort of in your, in your prior answer, but, you know, can you talk about sort of... We have the B2C, you know, historical roots of the company, you know, major expansion into getting covered care. Now you're also going into sort of, like, education systems as well. Can you talk about sort of, maybe all of those three buckets and sort of how they represent... You know, how big are they now as a percentage of the business, and sort of how do you think of them in terms of, like, growth levers of the business? Yeah. Yeah. So, I'll separate out into what we have now, which are three key categories- Yep ... of revenue. So we, we've been talking about the payer revenue category, and those are members that have coverage- Yep ... through an insurance provider. There's the consumer category, which, once they've entered the Talkspace platform, they're simply people that either don't have coverage through their insurance provider or- Mm-hmm ... are just choosing to pay cash out of pocket. Once they're within the platform, they're treated just as any payer member is treated. So we don't have any dedicated resources to the specific consumer category. It's more left at the top of the funnel when you come in, and you decide how you pay for the care. I think it's important 'cause, you know, and we'll talk more about, you know, how you get those customers, but we don't have anything separate within our business that's really focused on the difference between a payer and a consumer out-of-pocket member. Mm-hmm. And then there's the Direct-to-Enterprise category, which is where we had a tremendous success with COVID, and this was, you know, enterprises, employers specifically historically looking for, you know, "I need a mental healthcare offering. I'm not getting what I need for my member base, my employee base, from my insurance provider or for my current offerings. Mm-hmm. Talkspace DTE offering offered a direct solution, which not only includes therapy, but also includes wraparound services to help employers drive the utilization and ultimately the benefits from a mental healthcare offering. Mm-hmm. That last quarter category is where... You know, so I talked about a lot of progress in our financial statements against our operational agenda. I would say that that is still the progress there is still to come, and we announced two weeks ago a really exciting deal with the City of New York- Mm-hmm ... to cover all teens, for Talkspace, so they all have access to Talkspace for free. And not only are we really excited about that, that offering for New York City teens, but, we see the opportunity for Talkspace to be able to serve more and more jurisdictions, particularly in this age group. It's a really exciting age group for us. There's a couple of things that make that so. One is that we have the offering, the product offering- Mm-hmm ... but two, the modality, both in being online and being asynchronous, particularly, is nice to serve adolescents and the teen population. So in the DTE category, we're really excited about expansion there as we go into 2024 and beyond. That makes sense. How do we think about the unit economics for that segment of the business versus what we would think of as more your prior, you know, traditional parts? Yeah. So on the payer, in the payer category and the consumer categories, that really is a fee-for-service revenue stream. Yep. And so while we add covered lives, and at the end of the third quarter, we had 113 million covered lives, we only earn revenue when the member comes in and uses the service. Mm-hmm. They complete a session, and we submit the session to the insurance provider. The Direct-to-Enterprise category, for the most part, looks more like a Per Member Per Month revenue stream. Mm-hmm. And so if a member has access through a DTE offering, they typically have access, not only does the, you know, the management team have access to dashboards to be able to leverage Talkspace services, we also offer direct services to those management teams. But, members essentially have essentially, you know, as much as they need, as far as utilization of the therapy services. Got it. No, that makes sense. So how do we think about the size of the DTE opportunity? You know, like, how do we think about sort of the sales cycle for that and just, you know, where you know, some of the coverage they obviously have, may have through other things. So I guess help me think through that a little bit. Mm-hmm. Yeah. So we've not historically, and we still don't see any sort of sales cycle impact to our business. Okay. And I say that, on the payer side, when we add covered lives, we're added as an in-network provider- Okay ... and so it's not dependent on any, you know, beginning or end of, benefit season. On the Direct-to-Enterprise side, I'll give you the proof point, which was we launched the New York City offering, you know, in the middle of November- Yeah ... and it was really, you know, so... And, and we've continued to see that, that there doesn't—I, I think, you know, maybe going forward, there could be, maybe enterprises or companies are making decisions on a one-one basis. I still think we're in such a huge demand case, which is enterprises still figuring out how to address the mental healthcare needs, that it's more a, a function of... It's less a function of, do I have the budget for next year? And it's, how do I find the right offering and implement it for my, for my organization? That makes sense. And maybe circling back to what you just said, you, you sort of initially touched upon about adolescents in particular. How do we think about the opportunities in this market? And then, you know, what are the key differences versus adults? I think you touched upon that a little bit. And, like, it seems like that's a relatively under-penetrated area versus where some of your traditional competitors have been playing. Yeah, and you know, I think there certainly are... You know, if you think about the mental healthcare needs of adults versus adolescents and teens, of course, there could be nuances within there. I do think what we see as a huge part of it is simply just awareness and access to help. So- Mm. You know, I think you've seen this movement in other places in healthcare as far as the consumer really driving their care, and driving decision-making when it comes to care. Mm-hmm. Where Talkspace started and historically what we've seen is our, you know, our user base are, you know, adults. Unfortunately, the crisis is enormous among teens and adolescents, and I think, you know, those adults often become parents and have teens, you know? So we do think it's simply a matter of time where the crisis and needs catch up with awareness and access to mental health care. So, that's what we're really driving. That's the, you know, kind of the basis for the example of New York City, you know, is let's first create access for teens and adolescents, and then let's help teens understand that help can be had. And it's really, it's really exciting. Our marketing teams in collaboration with the city have created some really amazing awareness campaigns and some, you know, marketing materials to help drive that awareness that really speaks to the teens for them to understand, "Hey, you've got this problem," which is it gonna be a different problem than an adult would be, you know. Yeah ... problems with tests, problems with bullying. There's a, you know, a lot of, a lot of particular issues, but where therapy can really serve that need. Got it. Why have others not really entered this market? So, I think they have, you know, and here's what we kind of talk about. So we, of course, are looking at competition all the time- Yeah ... and whether it be those playing in an in-network provider space or those playing in the direct-to-enterprise space, I think it's important for us to watch, but I think it's more important to know that the... We're not, it's not a matter of share taking at this point. Mm-hmm. Yep. Truly, the TAM is getting bigger, and we see that being a much larger opportunity, addressing the growing TAM than it is trying to take share. Sure. I would just say that- Yeah ... that's kind of our- Yeah ... our focus right now. And I, given my first comments about us being in the infancy of that, I see that continuing. So I think it's important for us to pay attention, and undoubtedly, we're not the only ones that see this opportunity, and I do think it's very important that there be more than one company that serves the need. Sure. It is, it is immense. Yeah. Yeah, yeah. So I, I, I think there have been some that tried. I think, I think that, you know, if we look at, you know, COVID era, which is where you saw a lot of players come in, undoubtedly, the demand was clearly there on the employer side, and I think it's just a matter of time as, again, the, the TAM grows, this understanding of what it, what, you know, mental health care means and what the offerings are. I think it will, you know, it'll continue to get, I'll say more crowded, but undoubtedly the growing total market size will outpace the growing crowded, crowdedness of the market. That makes sense. So maybe switch over to sort of the payer growth, talking about the payer growth. Like, how do we think about the specific catalyst for that payer growth and how you guys are progressing on those? So there are two ways that we have driven and will continue to drive payer growth. So one is adding Covered Lives. Mm-hmm. I would say historically for the company, that was the most significant growth driver, getting in-network with more and more providers and continuing to expand access within those providers. So like I said, we have 113 million covered lives, and we said on our third quarter call, we expected to add another 15 million covered lives in the next few weeks here. Mm-hmm. So that is certainly, you know, one element of growth. I think the really exciting one for us, though, is the driving capture rate within those covered lives. So like I said, we don't get revenue when we add covered lives. It's really the utilization within those covered lives. Mm-hmm. That, I think we've had, we've had a lot of success over the last several quarters, and that's, you know, both from leveraging our marketing media to attract... to create awareness that Talkspace is covered by most major insurers. We saw, we, you know, we really made significant changes, I would say, you know, several quarters ago, and we continue to see great progress from that. We've also made, you know, significant, you know, product improvements, and it's throughout the funnel. But how do we go through and optimize pull through if we do, you know... You know, if we have conversion of a member, it's around, you know, utilization, et cetera. We've got several things that have been growth drivers for us this year, and we have line of sight we can continue to grow there. The part that we're, I would say, you know, just getting started on is really driving capture rate, specifically through awareness, and that's through partnerships. Mm-hmm. We see a really big opportunity for us to help, for us to find partners where they have a need to refer someone to mental health care. That would be a you know a huge, it would be you know a really big driver to us and capture rate that we have not explored yet. In our last call, we talked about a partnership with Oura, and I would describe that as a kind of a you know a smaller agreement where it's just- Yeah ... these are people that are really interested in their sleep. They tend to be people that are also, you know, interested in broader mental health care topics. Yeah. How do we find a, you know, a partnership between us? We see that as being a big opportunity for us going forward, and it's all based on our belief that people simply don't know that Talkspace is covered by insurance. Yeah. No, that makes a ton of sense. Investors, I think, broadly have been worried about consumer spending in the DTC side of mental health space. Can you talk about why this is not really a concern for you guys? Yeah, you know, we measure cost of acquisition, and we measure lifetime value. We do the basic math, just as any consumer business would do. Mm-hmm. What we do see is, for most of our members that are coming in, they're, you know, they're being subsidized by their insurance provider, so we have much higher conversion rates- Yeah ... which drives down your cost of acquisition. Yep. No, that makes- So we're actually very happy with the economics of our current spending. Mm. So, and we've not, you know, I would say it's been probably two years since we've been concerned about any specific, you know, rising rates. But I think it was more in the era where we were the consumer category and those cash out-of-pocket consumer spending, you know, sensitive members were more important to us. Mm-hmm. Now, you know, it's like I said, you're there, people are just paying very little, if not nothing, to use Talkspace once they find us, so it's significantly reduced our cost of acquisition. Yeah. No, that makes sense. And then, given that higher payer focus, like, how should investors think about the macro impact on, on the, on the business? you're referring to any kind of macro- Just from the current, people are worried about this upcoming potential recession or… Yeah, yeah ... that kind of thing. Yeah. So, you know, I don't think it's a stretch to say that we see that as a tailwind to our payer business, meaning as your dollars get stretched, and maybe yesterday you were fine paying cash out of pocket for your therapy, maybe tomorrow you're looking for something that's a little bit more cost-effective for you- Mm-hmm. researching if your benefits, you know, cover or you know, covering your therapy. So, you know, I wouldn't, you know, we're not counting on that as being our big growth driver going forward- Yeah. But we also aren't concerned that that's a threat to our, you know, what we see as a really great, you know, 2024 going forward. That makes sense. So it seems like this year you've seen some decent growth on the back of rising volumes and pricing. So I just my question is: How sustainable do you think that pricing growth is for 2024? Is there still sort of further room from optimization? You talked about some revenue cycle, you know, components. So help us understand those dynamics. Yeah. So, the price growth that we have been able to recognize this year so far has really been driven by building those capabilities around Revenue Cycle Management. Mm-hmm. We keep our revenue cycle management all in-house, and I think that's been incredibly important to this progress. We have this phenomenal center of excellence around this, which is monitoring, which in the world of claims processing is really actually pretty simple. You know, what we're doing here, we're not a big hospital system with a lot of CPT codes. We have a short list of CPT codes. Mm-hmm. But there is … For the short list of CPT codes, there's an infinite list of things that can go wrong between submitting a session- Yeah, yep ... to be paid and actually receiving the cash for it. This is what the team has been entirely focused on for the last several quarters. It will always be a challenge, again, just the nature of claims processing, but we've made significant advancements. So I would describe, you know, the price improvements we've seen as kind of step changes. I don't expect that we've got a lot left to go, only because we're, you know, close enough to collecting everything that we're submitting that, you know, we don't... You know, obviously, you only have. There's a ceiling there. So- Yep. So, I think we've seen the, you know, the step changes we've done from that capability, but of course, you know, higher collections rates will certainly serve us well going into the future. I've never heard anyone complain about higher collection. Right, so makes sense. Maybe on the supply dynamics, and therapists are, you know, in short supply, have been in short supply, how do you continue to sort of add to your pool of therapists while appropriately managing costs and also, you know, maintaining the NPS, you know, and improving the NPS scores that you guys have? Yeah. Yeah. So as of the end of September, we've added 1,800 therapists or 60% growth in our network- Mm ... which is, really significant, and- Yeah, that's great. And, we've also, you know, we've done that with also increasing net promoter scores amongst the therapists. And so I think, you know, those are the proof points, and I would say the, you know, the results of a lot of hard work and very intentional priorities around our. You know, one of our strategic pillars is to be the employer of choice for therapists, and it's meant a lot of things. One is the easy one on, you know, paying fairly and being transparent in what we pay for the therapists. But it's also been around creating a community for our therapists. Mm-hmm. Creating that, you know, working on our platform and leveraging focus groups, feedback loops with our products, so we make sure that the product is really enabling our therapists to spend most of their time on what they really wanna do, which is help people feel better. Yeah. And then taking all of the, you know, billing complexity, right? All the things that we were talking about earlier around revenue cycle, completely leaving that off the, you know, the therapist's to-do list. So I think all of those things have resulted in what we see as exciting progress around us being the employer of choice for therapists. I would also say we've got a hybrid approach to our model, so we've got some full-time therapists, and we... And most of them are 1099- Mm-hmm ... a part-time therapist. But I really like about this approach is it means we can be strategic. So in markets where with maybe higher demand or, you know, less therapists, we can go offer, you know, either one of these, employment opportunities to be able to best serve and be able to best, you know, drive the demand for therapists. So this has been a really exciting and very important capability and advancement for us, considering it's our supply chain, right? Right. Yep. Yep. It's our supply chain. Yep. So it's, it'll remain really critical, but I'm excited about the progress there. What is, like, the key component of keeping that NPS score and improving that NPS score in your perspective? Yeah, so, I'm gonna make this sound simpler than it is, but therapists really wanna help people feel better. So I think the more we've provided this environment where not only they're doing that every day, but we are also responding to them where maybe there are hindrances in their way. And I'll give you the example of, you know, complex case management, where do I have somewhere to go if I've got a particular case and I need help, right? Making sure that that community is there for them, I think has been incredibly powerful. And again, I'm oversimplifying a lot because it's... with that kind of growth in a network and driving NPS means you're doing something right holistically, and you're spending a lot of time and resources on it, which we do. But I think it's as simple as that, right? And this has all been without an increase overall in our pay for therapy. I mean, I think we definitely pay fairly, but I'm really excited by, like I said, the results of that. Yep. No, that makes, that makes sense. So as we think about your OpEx, how do we think about the investments the company needs to grow at this point? I mean, you've obviously had a significant improvement in the OpEx, but so I guess my question is also kind of linked to, like, what's the sustainability of that versus your, your longer term growth outlook? Yeah, it's a great question. So, we had about $24 million of OpEx in the third quarter this year. It was down 30% versus the prior year. There's a few things within there, and I'll just talk about it because it has been such significant work for the teams. Part of it is certainly on finding efficiencies within our marketing media spend. So as we've had, you know, higher conversion rates, and we're really, you know, measuring the most efficacious channels for us, you know, what's the right level of spend to be able to keep, you know, drive the growth? So I think we've found a lot of efficiencies there. We've also went across the organization, and where do we have vendors? You know, third-party suppliers that are maybe last year they were helping us stand up, core capabilities, or they were just, you know, maybe providing similar services across the board. So kind of your typical kind of vendor consolidation, work that we did. But, we're also... You know, I mentioned earlier, if you come into Talkspace and you're a consumer, or a payer member, or a DTE member, you're really treated the same, and it's kind of one platform. Mm-hmm. I think that meant we were able to find a lot of efficiencies in our infrastructure as a result of that. So we had historically really had, I would say, almost three different business lines that- Mm ... went further into the organization than it necessarily needed to. Yep. So we were able to find a lot of efficiencies there. So with that, we’ve made significant progress reducing our OpEx, and right now, I think we still have the capability, and, you know, we’ve got line of sight to being able to continue to make trade-offs within that OpEx space- Mm-hmm ... to be able to continue to drive organically the growth, and invest in the, in the, you know, growth opportunities that we have in hand, both across, product, as well as, you know, marketing, media, those sorts of, like, external investments. I think we're at a good place. I don't see the need for us to really invest incrementally for, kind of the growth trajectory that we've been on, and that we see going into the future, which is really exciting for us and, again, part of our, you know, part of our kind of go forward, what we're excited about, 'cause I think there's definitely operating leverage we can drive from here. Yep. No, that, that makes a ton of sense. Maybe turning to 2024, I think you're gonna be profitable by the end of Q1 with about, you know, $120 million of cash on the balance sheet. What should we be looking forward to throughout the year at this point? Yeah. So, qualitatively, of course, we see, you know, we've had with our double-digit volume growth in the payer category that we've had for at least six quarters- Mm-hmm ... we've got the highest confidence in that line. We don't see anything that's kind of standing in the way. We're super excited about the payer category. DTE, like I said, we had just announced a really big launch a couple quarters ago. We said we'd have probably another one still this quarter. We see that as being a big opportunity for us as we go into 2024, and then, you know, with the OpEx, with us being able to maintain this, you know, investment base where we are, we think we've got a lot of, you know, operating leverage from there on out. But, all that to be said, that's qualitatively, we expect we'll give 2024 guidance when we do our fourth quarter results call- Okay ... in the first quarter. That makes sense. Maybe last but not least, what do you think is the most misunderstood part of Talkspace or the Talkspace story by investors? So, you know, it's been exciting for us in the last several months. We've had a lot of new investor interest in our story. I think what has really resonated is if you, if you understand mental health care, particularly if you've got a personal connection to it, our story and where we've been really, really resonates, and the opportunity set that we have in hand really resonates. I think, you know, us, us going public via SPAC transaction has, has meant we have, you know, a, a bit more of a complicated story to tell because we get lump you know- Yep ... lumped in with other stories of SPACs. But I think it's been really exciting for Jon and I to have these conversations in the last, I would say, you know, few quarters as we've had those proof points to be able to go share our story and not only point to the proof points in our financial results as being the, you know, what, what drives our confidence, but then also in how we're you know, strategically, how we've set up the business to be able to drive it going forward. I think it's for us, we keep saying it's just it's a matter of we've gotta, you know, keep having these conversations like this. Yeah ... but, we're undoubtedly, we see so much opportunity for Talkspace, where it's definitely in the right place. We've set up this phenomenal brand, and we've got an amazing platform that we can scale from, and I think it's completely in our hands. It's about execution. It always has been. But I think we've got a super exciting future. Yeah, that's great. Thanks so much for joining me today, Jennifer. It's a pleasure. Thank you. Enjoyed the time. Thanks for having us.