Talkspace's Q3 2025 Earnings Call: Contradictions Emerge in AI Monetization Strategies, Medicare Outreach Progress, and Marketing Spend Efficiency

Date of Call: October 30, 2025

Financials Results

• Revenue: $59.4M, up 25% YOY and 9% sequentially
• Gross Margin: 41.5% adjusted gross margin, down from 43.1% in prior quarter; adjusted gross profit $24.6M, up 13% YOY

Guidance:

• Full-year 2025 revenue narrowed to $226M–$230M (20%–23% YOY)
• Full-year 2025 adjusted EBITDA narrowed to $14M–$16M
• Expect at least ~20% revenue growth in 2026 and target EBITDA margin of ~12.5%–15%
• Q4 visibility improved due to launches delayed from Q3 now coming online

Business Commentary:

* Revenue Growth and Payer Engagement: - Talkspace, Inc. delivered record revenue of $59.4 million in Q3 2025, with adjusted EBITDA reaching $5 million. - Payer members grew 8% sequentially and 29% year-over-year, with payer sessions increasing 12% sequentially and 37% year-over-year. - This growth was driven by a focused strategy on improving all aspects of the patient journey, including enhancements in the matching algorithm and ease of scheduling.

• AI Integration and Patient Impact:
• Talkspace's AI initiatives, including LLM search engine optimization and smart evaluation, led to significant improvements in patient engagement.
• Providers using smart insights are more than 30% more likely to book a third session within 30 days and 31% more likely to complete it.

• The integration of AI has enhanced the efficiency of patient journeys and improved clinical quality.

• Psychiatry and New Services Expansion:

• Talkspace relaunched its psychiatry service, resulting in a 46% increase in psychiatry initial session volume.
• The psychiatry network of providers grew by nearly 50% from Q2, supporting the overall increase in psychiatric services.

• This expansion was aimed at addressing high acuity users and supporting those who need medication, contributing to payer revenue growth.

• Acquisition and Strategic Partnerships:

• Talkspace acquired Wisdo Health to expand its AI-powered social health platform, supporting 500,000 adults.
• The acquisition supports Talkspace's entrance into the Medicare market and enhances its group coaching capabilities.
• Strategic partnerships like the integration with Novo Nordisk's GLP-1 program further expand Talkspace's reach.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "record revenue of $59.4M" and adjusted EBITDA of $5.0M; active payer members +29% YOY and payer revenue +42% YOY; CFO noted adjusted EBITDA grew 111% YOY and guidance was narrowed around a higher midpoint—indicating confidence in growth and operating leverage.

Q&A:

• Question from Steven Dechert (KeyBanc Capital Markets Inc., Research Division): 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?
  Response: LLM will be integrated into the patient journey with clinical oversight and off-ramping; commercial models will vary by population (consumers, employers, payers); commercialization plans differ by segment and target launch early 2026.

• Question from Steven Dechert (KeyBanc Capital Markets Inc., Research Division): Could you talk about some of the changes you've made to the matching algorithms driving the strong retention that you're seeing?
  Response: Improved retention driven by simplifying registration, proactively scheduling appointments (sometimes deferring matching), better scheduling options and dynamic supply/demand network management to boost availability.

• Question from Charles Rhyee (TD Cowen, Research Division): Are you comfortable with the number of credentialed therapists you have now, or will you need to grow that number near/medium term?
  Response: Management is comfortable with current capacity, continually pruning/adding providers and hired ahead of demand (which slightly pressured gross margin); will continue active capacity planning.

• Question from Charles Rhyee (TD Cowen, Research Division): How should we think about the run rate of marketing spend going forward?
  Response: Marketing is efficient—Q3 spend slightly down sequentially but up ~$1M YoY; Q3 is an okay proxy for Q4 and similar spend is expected to support ~20%+ growth into 2026 without dramatic step-up.

• Question from Ryan MacDonald (Needham & Company, LLC, Research Division): How much of the payer growth is from core commercial population versus Medicare?
  Response: Growth is primarily driven by commercial payers; Medicare and military are contributing but commercial remains the dominant driver of registrations and sessions.

• Question from Ryan MacDonald (Needham & Company, LLC, Research Division): How will the Wisdo acquisition help open up more Medicare opportunity or drive active engagement, and any marketing during open enrollment?
  Response: Wisdo's group coaching and peer support should lift Medicare engagement (addresses loneliness); initial Wisdo revenue flows into DTE (e.g., Novo Nordisk) with potential payer add-ons; open enrollment impact is uncertain.

• Question from Richard Close (Canaccord Genuity Corp., Research Division): On the pharma opportunity with Novo—is this a one-off or a broader pharma strategy?
  Response: Novo is the first priority to execute well; the company will evaluate similar pharma opportunities thereafter but won't discuss specifics now.

• Question from Richard Close (Canaccord Genuity Corp., Research Division): Do you see partnership opportunities with other LLM companies to provide clinical oversight?
  Response: Yes—Talkspace sees licensing and partnership opportunities to provide clinical oversight and seamless therapist referral given its provider network and clinical expertise.

• Question from Robert Brooks (Northland Capital Markets, Research Division): Can you dive deeper into factors driving payer utilization growth—are new monthly sign-ups still occurring?
  Response: Yes—steady sequential ~10k user step-ups per quarter; growth driven by higher new-user adds, improved retention/cohort behavior, increased sessions per member from product changes and psych relaunch, and payer directory integrations.

• Question from Robert Brooks (Northland Capital Markets, Research Division): Has directory integration expanded to other payer systems?
  Response: Yes—additional national payer integrations are nearing completion and expected to roll in Q4 and into 2026; these were not reflected in Q3 results.

• Question from Robert Brooks (Northland Capital Markets, Research Division): What factors underpin the guidance tightening, specifically on EBITDA?
  Response: Tightening reflects delayed DTE launches that shifted revenue/EBITDA into Q4 and a deliberate decision to reinvest a few million to sustain higher growth into 2026, reducing near-term EBITDA.

• Question from Steven Valiquette (Mizuho Securities USA LLC, Research Division): Any plans to provide new long-term guidance for 2026 or revert to annual guidance?
  Response: TBD—company largely delivered its prior 3-year plan; expects at least ~20% growth in 2026 and aims for ~12.5%–15% EBITDA margin; more detailed annual guidance to be provided next quarter or at JPM in January.

• Question from Ryan Daniels (William Blair & Company L.L.C., Research Division): When will Medicare meaningfully impact results—2026 or later?
  Response: Medicare ramp remains a work in progress; sessions/registrations are increasing and Wisdo may accelerate adoption, but timing is uncertain—watch for Q4 and 2026 updates.

• Question from Ryan Daniels (William Blair & Company L.L.C., Research Division): Have you seen financial impact from administrative AI applications and when will meaningful lift appear?
  Response: AI is already materially improving engagement metrics (e.g., +30% likelihood to book/complete third session) and is embedded in corporate processes, producing operating leverage—G&A growth is minimized and supports flat OpEx vs revenue growth.

Contradiction Point 1

AI Integration and Monetization Strategy

It involves the strategy and timeline for integrating large language models into the app and how Talkspace plans to monetize them, which is crucial for understanding the company's growth and revenue potential.

How will Talkspace integrate its large language models into the app, and how do you plan to monetize them? - Steven Dechert (KeyBanc Capital Markets Inc., Research Division)

2025Q3: They will be integrated into the network with clinical oversight for patient safety. The model and patient journey for monetization will vary depending on the population, with different impacts on commercialization. Stay tuned for more details when ready. - Jon Cohen(CEO)

Can the company sell or license its LLM models externally? - Robert Brooks (Northland Capital Markets, Research Division)

2025Q2: The plan is to build the model and consider sales, licensing, or partnerships depending on future use cases. All possibilities are on the table, but currently, the focus is on building the model. - Jon R. Cohen(CEO)

Contradiction Point 2

Medicare Outreach and Engagement

It involves the company's strategy and progress in engaging the Medicare population, which is important for diversifying revenue streams and expanding market reach.

When do you expect Medicare to meaningfully impact results? - Ryan MacDonald (Needham & Company, LLC, Research Division)

2025Q3: Medicare engagement continues to grow, but the strategy is still a work in progress. Wisdo integration could provide a significant impact on the Medicare population. - Jon Cohen(CEO)

Can you update on Medicare outreach progress? - Richard Collamer Close (Canaccord Genuity)

2025Q2: Medicare registrations continue to grow month-over-month. The company is refining marketing efforts and exploring different states. Engagement with Medicare Advantage plans is increasing, and the company is being prudent in navigating this new demographic. - Jon R. Cohen(CEO)

Contradiction Point 3

Marketing Spend and Efficiency

It involves the company's approach to marketing spend and efficiency, which directly impacts their growth and financial stability.

How should we think about the future marketing spend run rate? - Charles Rhyee (TD Cowen, Research Division)

2025Q3: Spending is efficient with strong ROI, contributing to significant KPI improvements. Expect similar or slightly higher marketing spend next year to support continued growth. - Ian Harris(CFO)

What factors differentiate the lower and upper ends of the EBITDA range? - Richard Collamer Close (Canaccord Genuity)

2025Q2: It's always a balance between near-term profitability and future growth. Marketing spend could be reduced to drive profitability, but market conditions determine efficiency. - Ian Harris(CFO)

Contradiction Point 4

Large Language Models Integration and Monetization Strategy

It involves the company's strategy for integrating large language models into their app and how they plan to monetize them, which is crucial for understanding future revenue streams and product direction.

How will Talkspace integrate the LLMs into the app and plan to monetize them? - Steven Dechert (KeyBanc Capital Markets Inc., Research Division)

2025Q3: They will be integrated into the network with clinical oversight for patient safety. The model and patient journey for monetization will vary depending on the population, with different impacts on commercialization. Stay tuned for more details when ready. - Jon Cohen(CEO)

Can you break down the growth by Payor, DTE, and consumer in your guidance? - Ryan MacDonald (Needham & Company, LLC, Research Division)

2024Q4: Swyft is still early, but the early performance in that is very good, and we believe there will be a monetization opportunity for that in Q2. - Jon Cohen(CEO)