Online therapy company Talkspace is doubling down on its strategy to grow its business with payers and employers with a focus on providing services to teens and seniors.
The company, which went public in 2021 via a special purpose acquisition company deal, reported strong revenue growth in 2023, bringing in $150 million, up 25% from 2022. For the fourth quarter in 2023, Talkspace's revenue grew 40% to reach $42 million, driven by a 138% year-over-year increase in payer revenue, according to its fourth-quarter and full-year 2023 earnings results announced this week.
The company's board authorized a share repurchase program of up to $15 million over the next 24 months.
The company started in 2012 with a consumer focus, but, two years ago, it shifted its focus to a B2B model as part of a larger turnaround effort.
That strategy shift appears to be paying off as the virtual mental health company says it is accelerating its path toward profitability.
The company reported a 123% year-over-year increase in payer revenue in 2023 and a 19% year-over-year increase in direct-to-enterprise revenue working with employers. On the flip side, Talkspace's consumer business continues to decline, with 2023 revenue down 35% year over year.
The company's stock was up about 20% Thursday after it released fourth-quarter and 2023 financial results.
For 2024, Talkspace expects revenue to be in the range of $185 million to $195 million, representing about 25% year-over-year growth. The company forecasts adjusted EBITDA to be in the range of $4 million to $8 million.
"2023 was a pivotal year for Talkspace, demonstrating our commitment to strategic execution. Our achievements and streamlined strategy have significantly fortified our foundation for 2024. We're poised for substantial growth in payer revenue and continue to lead in covered mental healthcare. The opportunities in direct-to-enterprise are vast, and with our scalable infrastructure, we are set for profitable expansion," Jon Cohen, M.D., Talkspace's CEO, said during the earnings call.
Talkspace connects people via an app with therapists who provide counseling remotely, either over the phone, by video chat or by text. The company has 5,000 licensed providers and says it covers approximately 131 million lives as of Dec. 31 through its partnerships with employers, health plans and paid benefits programs.
Talkspace tapped Cohen as CEO back in November 2022, capping off a year’s worth of leadership shake-ups. He is a surgeon and a veteran healthcare executive who had served on the company’s board.
The company aims to broaden its reach among Medicare beneficiaries as its mental health services can help address loneliness and depression among elderly seniors, Cohen told investors during the earnings call.
"In 2023, we laid the groundwork to be a Medicare provider for both standard Medicare and Medicare Advantage. We will roll it out in all 50 states throughout 2024. Medicare has 65 million lives, 33 million standard Medicare and 32 million in Medicare Advantage. The number of people over 65 years old who have said they have mental health challenges has increased 2.5 times since 2020," Cohen said during the call.
"We will be, we believe, the primary, if not only, large national telehealth medical provider that's going to be providing that service to the Medicare population," he added.
Talkspace also has been strategically building out its partnerships with cities, counties and schools to offer tele-mental health services to adolescents and teens as part of its broader direct-to-enterprise push.
In November, the company inked a $26 million, three-year contract with the NYC Department of Health and Mental Hygiene to operate a new program, called TeenSpace. That service provides free virtual mental health services to more than 400,000 adolescents and teens in New York City.
Late last year, Talkspace also finalized a partnership with Baltimore County Public Schools to provide free, unlimited telehealth therapy for all BCPS high school students ages 13 and above, or more than 32,000 students.
The American Federation of Teachers also signed a partnership with Talkspace for discounted access to therapy and mental health resources for the organization's more than 1.7 million members, including educators, paraprofessionals, nurses, health professionals and retirees.
'In 2024, we will continue to pursue multiple opportunities in the direct-to-enterprise space with employers, governments, universities and teams. We are in conversations with multiple other school districts and will continue to aggressively pursue this market. Our goal is to be the national leader in addressing the teen mental health crisis," Cohen said.
Talkspace's services are now available "from teens to seniors," he noted on the earnings call.
"It's not just a matter of getting into Medicare, it's really a strategy to get Medicare patients, people over the age of 65, to actually utilize the service. We know the mental health challenges among seniors, so the challenge for us, which we are ready to address because we put an enormous amount of effort and planning into this, is addressing the needs of Medicare patients and getting them to use the platform as we're doing with teens. How do we make sure that they come onto the platform? We've actually proven we're able to do this with teens and I'm very confident we'll be able to do on the Medicare population also," Cohen told investors.
The company also is eyeing referral partnerships to help grow in-network revenue. It has teamed up with Bicycle Health, a virtual opioid use disorder treatment provider, to expand access to care for its patient populations through referrals.
Talkspace also recently unveiled a partnership with virtual care platform Wheel to offer patients access to board-certified general practitioners and licensed behavioral health providers across the U.S. The companies say the partnership provides their clients, including employers, payers and life sciences companies, with a single solution to more effectively screen for, and support, patients holistically addressing a wide range of needs, from general wellness to mental health.
In 2023, Talkspace shrunk its losses from a loss of $80 million in 2022 to a loss of $19 million, primarily driven by lower operating expenses and an increase in revenue. Operating expenses were $98 million in 2023, down 32% year over year.
In the fourth quarter, the company reported a net loss of $1.3 million, down significantly from a loss of $18 million during the fourth quarter of 2022.
Adjusted EBITDA loss for the fourth quarter was $300,000, a 97% improvement, and for the full year, it was $13.5 million, a 77% improvement. Talkspace says it will be EBITDA positive in 2024.
"Financially, we will achieve a significant milestone in 2024 by reaching breakeven and transitioning into profitability for the first time in the 12-year history of the company and we enter the year with a robust cash reserves of $124 million,' Cohen told investors. "Importantly, Talkspace will grow profitably this year, which provides the board and management with the flexibility to determine the best use of that capital given the size of the yet substantially untapped and growing mental health care market and our solutions to address those needs with our existing product offerings."
Talkspace does not require M&A to grow and will continue to deploy capital internally to grow the business organically, he added.
"However, we will take a disciplined approach to considering inorganic opportunities if they make sense to enhance our existing product set," he said.
The online therapy provider plans to ramp up investment in technology, including artificial intelligence, executives said.
The company developed an AI algorithm that can detect language patterns consistent with high-risk behaviors that place individuals at risk for self-harm. The analysis runs real-time on messages sent by patients in their secure and encrypted virtual therapy room and triggers an urgent alert to the therapist. Since 2019, when it was introduced onto the platform, Talkspace’s proprietary model has flagged approximately 32,000 members whose written messages to their therapists have shown signs of suicidality or risk of self-harm.
"This year, we're excited to push the boundaries further, integrating AI to not only continue our tradition of innovation, but also to redefine the standards of mental health care delivery. Our AI tools will be utilized to assist our therapists, helping them to deliver better care and be more efficient, but not replacing them. We will continue to explore the power of AI and how to use it to improve quality of our services," Cohen said during the earnings call.
"We believe that digital therapy provides an unprecedented opportunity for us to improve mental health through data science and machine learning, all securely HIPAA compliant. We intend to make investments in AI in pursuit of our goals to leverage our unique data to identify patterns and improve the way behavioral health is delivered," he said.