Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39314 TALKSPACE, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction ...

Exhibit 99.1 Talkspace Announces Third Quarter 2025 Results 3Q 2025 Total revenue grew 25% year-over-year to $59.4 million driven by 42% year-over-year growth in Payor revenue 3Q 2025 Net income of $3.3 million and adjusted EBITDA1 of $5.0 million 3Q 2025 Share repurchases of $8.8 million 1 Third Quarter 2025 Key Performance Metrics Financial Guidance The following guidance is based on current market conditions and expectations and the information available to the Company today. For 2025 Talkspace has updat ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited condensed consolidated financial statements as of June 30, 2025, show decreased total assets and equity, a narrowed net loss, and a shift to net cash outflow from operations, with increased Payor revenue Condensed Consolidated Balance Sheets Summary (Thousands of USD) | Assets/Liabilities | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | $54,342 | $76,692 | | Marketable Securities | $48,427 | $41,118 | | Total Current Assets | $120,667 | $130,182 | | **Total Assets** | **$132,786** | **$138,677** | | **Liabilities and Stockholders' Equity** | | | | Total Current Liabilities | $18,540 | $19,023 | | **Total Liabilities** | **$19,845** | **$21,282** | | **Total Stockholders' Equity** | **$112,941** | **$117,395** | Condensed Consolidated Statements of Operations Summary (Thousands of USD) | Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $54,310 | $46,058 | $106,492 | $91,474 | | Operating Loss | $(1,790) | $(3,486) | $(2,875) | $(5,165) | | Net Loss | $(541) | $(474) | $(223) | $(1,940) | | Net Loss Per Share | $(0.00) | $(0.00) | $(0.00) | $(0.01) | Condensed Consolidated Statements of Cash Flows Summary (Thousands of USD) | Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash (Used in)/Provided by Operating Activities | $(1,590) | $1,418 | | Net Cash Used in Investing Activities | $(11,386) | $(2,150) | | Net Cash Used in Financing Activities | $(9,374) | $(8,263) | | Net Decrease in Cash and Cash Equivalents | $(22,350) | $(8,995) | Revenue by Source (Thousands of USD) | Revenue Source | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Payor | $40,501 | $29,945 | $78,343 | $58,453 | | Direct-to-Enterprise (DTE) | $9,403 | $9,628 | $18,986 | $19,541 | | Consumer | $4,406 | $6,485 | $9,163 | $13,480 | | **Total Revenue** | **$54,310** | **$46,058** | **$106,492** | **$91,474** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a strategic shift to Payor business, driving significant revenue growth and improved profitability, with Adjusted EBITDA more than doubling, alongside active share repurchases - The company strategically shifted its marketing focus to attract Payor members, resulting in significant Payor revenue growth and a corresponding decrease in Consumer revenue[95](index=95&type=chunk)[96](index=96&type=chunk) Key Business Metrics | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Payor Completed Sessions (Thousands) | 735.1 | 582.8 | | Health Plan Clients (Period End) | 31 | 24 | | Enterprise Clients (Period End) | 165 | 187 | | Active Consumer Members (Thousands, Period End) | 6.6 | 10.7 | Summary of Operating Results and Year-over-Year Changes (Thousands of USD) | Item | H1 2025 | H1 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$106,492** | **$91,474** | **$15,018** | **16.4%** | | Payor Revenue | $78,343 | $58,453 | $19,890 | 34.0% | | Consumer Revenue | $9,163 | $13,480 | $(4,317) | (32.0)% | | Total Costs and Operating Expenses | $109,367 | $96,639 | $12,728 | 13.2% | | Operating Loss | $(2,875) | $(5,165) | $2,290 | 44.3% | | Net Loss | $(223) | $(1,940) | $1,717 | 88.5% | Reconciliation of Adjusted EBITDA to Net Loss (Thousands of USD) | Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Loss | $(223) | $(1,940) | | Add: Depreciation and Amortization | 1,368 | 421 | | Add: Stock-Based Compensation Expense | 4,688 | 5,359 | | Add: Net Interest Income | (2,851) | (3,422) | | Add: Income Tax Expense | 199 | 197 | | Add: Non-Recurring Expenses | 1,057 | 1,338 | | **Adjusted EBITDA** | **$4,238** | **$1,953** | - The company expanded its share repurchase program on August 1, 2024, increasing the total authorized repurchase amount to **$40 million**[114](index=114&type=chunk) - As of June 30, 2025, **$20.6 million** remained available for repurchase under the plan[115](index=115&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk disclosures for the six months ended June 30, 2025, compared to its 2024 Annual Report on Form 10-K - Market risk information has not materially changed compared to the 2024 fiscal year annual report[136](index=136&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during Q2 2025 - Management assessed that the company's disclosure controls and procedures were effective as of June 30, 2025[137](index=137&type=chunk) - No material changes occurred in internal control over financial reporting during Q2 2025[138](index=138&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company has no material pending legal proceedings - As of June 30, 2025, the company has no material pending legal proceedings, claims, or litigation[141](index=141&type=chunk)[49](index=49&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred in the company's risk factors for the six months ended June 30, 2025, compared to the 2024 Annual Report on Form 10-K - Risk factors have not materially changed compared to those discussed in the 2024 10-K report[142](index=142&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities for the three months ended June 30, 2025, including the repurchase of 541,268 shares in April 2025 Summary of Share Repurchases for Q2 2025 | Period | Total Shares Repurchased | Average Price Paid | Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Plan (Thousands of USD) | | :--- | :--- | :--- | :--- | | April 1 - 30 | 541,268 | $2.62 | $20,632 | | May 1 - 31 | — | — | — | | June 1 - 30 | — | — | — | | **Total** | **541,268** | | | [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities occurred[145](index=145&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[146](index=146&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted, modified, or terminated 10b5-1 trading arrangements during Q2 2025[147](index=147&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including executive certifications and XBRL data files - Report exhibits include certifications by the Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350, along with Inline XBRL documents[150](index=150&type=chunk)

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Talkspace reported strong Q2 2025 top-line growth and improved profitability, fueled by Payor revenue and strategic investments [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Talkspace reported strong Q2 2025 top-line growth, with total revenue up 18% to $54.3 million, driven by Payor revenue gains Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | % YoY Change | | :--- | :--- | :--- | | Total Revenue | $54.3M | 18% | | Payor Revenue | $40.5M | 35% | | Consumer Revenue | $4.4M | (32)% | | Net Loss | $(0.5)M | (14)% | | Adjusted EBITDA | $2.3M | 94% | Q2 2025 Key Operational Metrics (vs. Q2 2024) | Metric | Q2 2025 | % YoY Change | | :--- | :--- | :--- | | Completed Payor Sessions | 385.1 thousand | 29% | | Unique Active Payor Members | 111.2 thousand | 25% | - The company repurchased **$1.4 million** of its shares during the second quarter of 2025[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted positive operational momentum in Q2 2025, attributing it to technology and marketing investments - Management highlighted **positive momentum** from technology and marketing investments made in H1 2025[2](index=2&type=chunk) - The company achieved **10% sequential growth** in unique active payor members and completed payor sessions, indicating a strong trajectory for the second half of the year[2](index=2&type=chunk) [Financial Guidance](index=2&type=section&id=Financial%20Guidance) The company reaffirmed its full-year 2025 financial guidance for total revenue and Adjusted EBITDA ranges [Full Year 2025 Outlook](index=2&type=section&id=Full%20Year%202025%20Outlook) Talkspace reaffirmed its full-year 2025 financial guidance, expecting total revenue between $220 million and $235 million and Adjusted EBITDA between $14 million and $20 million Full Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $220M - $235M | | Adjusted EBITDA | $14M - $20M | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements detail Q2 2025 revenue growth, improved operating loss, solid liquidity, and cash flow [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 total revenue grew 17.9% to $54.3 million, driven by Payor revenue, with a narrowed loss from operations Revenue Breakdown (Q2 2025 vs Q2 2024) | Revenue Stream | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Payor revenue | 40,501 | 29,945 | 35.3% | | DTE revenue | 9,403 | 9,628 | (2.3)% | | Consumer revenue | 4,406 | 6,485 | (32.1)% | | **Total revenue** | **54,310** | **46,058** | **17.9%** | Profitability Metrics (Q2 2025 vs Q2 2024) | Metric ($ thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Loss from operations | (1,790) | (3,486) | 48.7% | | Net loss | (541) | (474) | (14.1)% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Talkspace maintained a solid liquidity position with strong cash and marketable securities balances Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,342 | $76,692 | | Total current assets | $120,667 | $130,182 | | Total assets | $132,786 | $138,677 | | Total liabilities | $19,845 | $21,282 | | Total stockholders' equity | $112,941 | $117,395 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For H1 2025, net cash used in operating activities was $1.6 million, with significant usage in investing and financing Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,590) | $1,418 | | Net cash used in investing activities | $(11,386) | $(2,150) | | Net cash used in financing activities | $(9,374) | $(8,263) | | **Net decrease in cash** | **$(22,350)** | **$(8,995)** | - The company repurchased **$8.4 million** of common stock for retirement during the first six months of 2025[19](index=19&type=chunk) [Non-GAAP Financial Measures and Reconciliation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation) This section defines Adjusted EBITDA as a key non-GAAP metric and reconciles it from net loss, detailing key adjustments [Definition and Use of Non-GAAP Measures](index=9&type=section&id=Definition%20and%20Use%20of%20Non-GAAP%20Measures) Adjusted EBITDA is a key non-GAAP metric used for assessing operating performance and business planning, excluding non-core items - Adjusted EBITDA is a key performance measure used by management for evaluating operating performance and for business planning purposes[20](index=20&type=chunk) - The company defines Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation, net financial income, income tax, and certain non-recurring expenses[24](index=24&type=chunk) [Reconciliation of Net Loss to Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20EBITDA) Q2 2025 GAAP net loss of $0.54 million was reconciled to Adjusted EBITDA of $2.28 million, adjusted for stock-based compensation and non-recurring expenses Reconciliation of Net Loss to Adjusted EBITDA (Q2 2025 vs Q2 2024, in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net loss** | **$ (541)** | **$ (474)** | | Depreciation and amortization | 718 | 220 | | Stock-based compensation | 2,355 | 3,107 | | Financial income, net | (1,325) | (3,044) | | Income tax expense | 76 | 32 | | Non-recurring expenses | 999 | 1,338 | | **Adjusted EBITDA** | **$ 2,282** | **$ 1,179** | - Non-recurring expenses for Q2 2025 primarily consisted of severance costs, one-time legal fees, and other one-time expenses[26](index=26&type=chunk) [Other Information](index=3&type=section&id=Other%20Information) This section covers earnings call details, Talkspace's virtual healthcare services, and disclosures on forward-looking statements [Conference Call and Webcast Information](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Information) The Q2 2025 earnings conference call was held on August 5, 2025, with a replay available for 90 days - The earnings conference call was held on August 5, 2025, at 8:30 a.m. E.T., with a replay available for 90 days[5](index=5&type=chunk) [About Talkspace](index=3&type=section&id=About%20Talkspace) Talkspace is a leading provider of virtual behavioral healthcare, offering therapy and psychiatric treatment via a secure platform - Talkspace offers a comprehensive suite of virtual mental health services, including therapy and psychiatric treatment, through a fully-encrypted web and mobile platform[6](index=6&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements regarding financial condition and future performance, subject to risks and uncertainties - The report contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. The company directs readers to its SEC filings, such as the Form 10-K, for a full list of risk factors[9](index=9&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for Q1 2025 show a shift from net loss to net income, driven by Payor segment growth, despite a strategic decline in Consumer revenue [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, cash and cash equivalents decreased to $60.1 million due to share repurchases and investments, while total assets and equity also slightly declined Balance Sheet Summary (as of March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (Unaudited, in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $60.1 | $76.7 | | Marketable securities | $48.3 | $41.1 | | Total current assets | $124.1 | $130.2 | | Total assets | $134.2 | $138.7 | | Total current liabilities | $19.1 | $19.0 | | Total liabilities | $20.8 | $21.3 | | Total stockholders' equity | $113.4 | $117.4 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 total revenues increased by 14.9% to $52.2 million, achieving a net income of $0.3 million, a significant improvement from a prior year net loss Income Statement Summary (Three Months Ended March 31) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Revenues | $52.2 | $45.4 | | Gross Profit | $23.3 | $21.7 | | Loss from operations | ($1.1) | ($1.7) | | Net income (loss) | $0.3 | ($1.5) | | Basic EPS | $0.00 | ($0.01) | | Diluted EPS | $0.00 | ($0.01) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased to $1.2 million, while investing activities used $9.0 million and financing activities used $6.4 million, primarily for share repurchases Cash Flow Summary (Three Months Ended March 31) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($1.2) | ($3.4) | | Net cash used in investing activities | ($9.0) | ($0.4) | | Net cash (used in) provided by financing activities | ($6.4) | $0.1 | | Net decrease in cash and cash equivalents | ($16.6) | ($3.6) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation showing strong Payor growth, single reportable segment, and the $7.0 million share repurchase program - The company operates as a single operating and reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM)[26](index=26&type=chunk) Revenue by Source (Three Months Ended March 31) | Revenue Source | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Payor | $37.8 | $28.5 | | DTE (Direct-to-Enterprise) | $9.6 | $9.9 | | Consumer | $4.8 | $7.0 | | **Total revenue** | **$52.2** | **$45.4** | - During Q1 2025, the company repurchased and retired **2,519,170 shares** of its common stock for a total of **$7.0 million**[48](index=48&type=chunk) - As of March 31, 2025, **$22.1 million** remained available under the share repurchase program[48](index=48&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2025 revenue growth to a 32.7% increase in Payor revenue, achieving a net income of $0.3 million and Adjusted EBITDA of $2.0 million, while maintaining strong liquidity [Overview and Key Business Metrics](index=17&type=section&id=Overview%20and%20Key%20Business%20Metrics) Talkspace's Q1 2025 key metrics show strong Payor segment growth, with completed sessions increasing to 350,000, while Consumer metrics declined due to strategic shifts Key Business Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Number of completed Payor sessions | 350.0 | 284.2 | | Number of health plan customers | 31 | 23 | | Number of enterprise customers | 173 | 195 | | Number of Consumer active members | 6.9 | 11.1 | | Unique Payor active members | 101.2 | 86.3 | [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q1 2025 revenue grew 14.9% to $52.2 million, primarily from a 32.7% increase in Payor revenue, despite a strategic 32.0% decline in Consumer revenue - The increase in revenue was principally due to a **32.7% increase in Payor revenue**, offset by a **32.0% decline in Consumer revenue** resulting from a strategic decision to optimize marketing efforts towards Payor members[85](index=85&type=chunk) - Gross margin declined from **47.8% to 44.6%** year-over-year, driven by a shift in revenue mix towards the Payor segment, as Consumer sessions typically provide higher margins[88](index=88&type=chunk) [Non-GAAP Financial Measures](index=21&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a key non-GAAP measure, significantly improved to **$2.0 million** in Q1 2025 from **$0.8 million** in Q1 2024, reflecting enhanced operating performance Reconciliation of Net Income (Loss) to Adjusted EBITDA | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (loss) | $0.3 | ($1.5) | | Depreciation and amortization | $0.6 | $0.2 | | Stock-based compensation | $2.3 | $2.3 | | Financial income, net | ($1.5) | ($0.4) | | Income tax expense | $0.1 | $0.2 | | Non-recurring expenses | $0.1 | $0.0 | | **Adjusted EBITDA** | **$2.0** | **$0.8** | [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company maintained strong liquidity with **$60.1 million** in cash and **$48.3 million** in marketable securities, with no debt, and repurchased **$7.0 million** in stock - The company had **$60.1 million** in cash and cash equivalents and **$48.3 million** in marketable securities as of March 31, 2025, with no debt[100](index=100&type=chunk) - The Board of Directors has authorized a total of **$40.0 million** for the Share Repurchase Program[103](index=103&type=chunk) - In Q1 2025, the company repurchased **$7.0 million** of its stock, leaving **$22.1 million** available for future repurchases[104](index=104&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its quantitative and qualitative disclosures about market risk during the three months ended March 31, 2025, as compared to the information provided in its Annual Report on Form 10-K for the year ended December 31, 2024 - There were no material changes to the market risk disclosures from the company's 2024 Annual Report on Form 10-K[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period[126](index=126&type=chunk) - No material changes to internal controls over financial reporting occurred during the first quarter of 2025[127](index=127&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2025, the company reports no material pending legal proceedings - The Company has no material pending legal proceedings as of March 31, 2025[130](index=130&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - During the three months ended March 31, 2025, there were no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[131](index=131&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity for the first quarter of 2025, with 2,519,170 shares repurchased and $22.1 million remaining under authorization Share Repurchases for Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Dollar Value Remaining in Program (End of Period, in millions) | | :--- | :--- | :--- | :--- | | January 1 - 31 | — | $— | $29.0 | | February 1 - 28 | 1,052,509 | $2.85 | $26.0 | | March 1 - 31 | 1,466,661 | $2.70 | $22.1 | | **Total** | **2,519,170** | | **$22.1** | [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[134](index=134&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[135](index=135&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the first quarter of 2025 - No directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[136](index=136&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - The exhibits filed with this report include CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350, as well as Inline XBRL documents[138](index=138&type=chunk)

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) This section provides an overview of Talkspace's financial results for Q1 2025 and its full-year 2025 guidance [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) Talkspace reported strong Q1 2025 results with a 15% year-over-year revenue growth to $52.2 million, primarily driven by a 33% increase in Payor revenue. The company achieved profitability with a net income of $0.3 million, a significant improvement from a $1.5 million net loss in the prior-year period. Adjusted EBITDA also grew substantially by 153% to $2.0 million, and the company executed $7.0 million in share repurchases Q1 2025 Key Financial Metrics | Metric | Q1 2025 Results | % Variance from Prior Year | | :--- | :--- | :--- | | Total Revenue | $52.2 million | 15% | | Gross Profit | $23.3 million | 7% | | Net Income | $0.3 million | N/A (vs. loss) | | Adjusted EBITDA | $2.0 million | 153% | | Payor Sessions Completed | 350.0 thousand | 23% | | Unique Active Payor Members | 101.2 thousand | 17% | - Revenue growth was fueled by a **33% year-over-year increase in Payor revenue**, which was partially offset by a 32% decline in Consumer revenue[5](index=5&type=chunk) - Gross margin declined to **44.6%** from 47.8% in the prior-year period, driven by a shift in revenue mix towards the Payor segment[5](index=5&type=chunk) - The company repurchased **$7.0 million** of its shares during the first quarter of 2025[1](index=1&type=chunk) [Full Year 2025 Financial Guidance](index=2&type=section&id=Financial%20Guidance) Talkspace reaffirmed its full-year 2025 financial guidance, expecting total revenue to be in the range of $220 million to $235 million and adjusted EBITDA to be between $14 million and $20 million Full Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $220 million - $235 million | | Adjusted EBITDA | $14 million - $20 million | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the detailed consolidated statements of income, balance sheets, and cash flows for the company [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q1 2025, total revenue increased 14.9% YoY to $52.2 million, driven by a 32.7% rise in Payor revenue. Despite a 22% increase in cost of revenues, the company achieved a net income of $0.3 million, a significant turnaround from a net loss of $1.5 million in Q1 2024. Basic and diluted net income per share was $0.00 Q1 2025 Revenue Breakdown (in thousands) | Revenue Stream | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Payor revenue | $37,842 | $28,508 | 32.7% | | DTE revenue | $9,583 | $9,913 | (3.3%) | | Consumer revenue | $4,757 | $6,995 | (32.0%) | | **Total revenue** | **$52,182** | **$45,416** | **14.9%** | Q1 2025 Profitability Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gross Profit | $23,281 | $21,731 | | Total Operating Expenses | $24,366 | $23,410 | | Loss from Operations | $(1,085) | $(1,679) | | **Net Income (Loss)** | **$318** | **$(1,466)** | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Talkspace reported total assets of $134.2 million, a slight decrease from $138.7 million at year-end 2024. The company maintained a strong liquidity position with $60.1 million in cash and cash equivalents and $48.3 million in marketable securities. Total liabilities were $20.8 million, resulting in a healthy stockholders' equity of $113.4 million Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $60,077 | $76,692 | | Total current assets | $124,119 | $130,182 | | **Total assets** | **$134,245** | **$138,677** | | Total current liabilities | $19,119 | $19,023 | | **Total liabilities** | **$20,827** | **$21,282** | | **Total stockholders' equity** | **$113,418** | **$117,395** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash used in operating activities improved to $1.2 million from $3.4 million in Q1 2024. Investing activities used $9.0 million, primarily for purchases of marketable securities. Financing activities used $6.4 million, driven by $6.5 million in common stock repurchases. This resulted in a net decrease in cash of $16.6 million, with the quarter-end cash balance at $60.1 million Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,239) | $(3,391) | | Net cash used in investing activities | $(9,019) | $(385) | | Net cash (used in) provided by financing activities | $(6,357) | $146 | | **Net decrease in cash and cash equivalents** | **$(16,615)** | **$(3,630)** | - The primary use of cash in financing activities was the repurchase of common stock for retirement, amounting to **$6.5 million**[19](index=19&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of GAAP financial results to non-GAAP measures, specifically Adjusted EBITDA [Reconciliation of GAAP Results to Non-GAAP Results](index=10&type=section&id=Reconciliation%20of%20GAAP%20Results%20to%20Non-GAAP%20Results) The company reconciled its GAAP net income to the non-GAAP measure of adjusted EBITDA. For Q1 2025, a net income of $0.3 million was adjusted for items including depreciation, stock-based compensation, and financial income, resulting in an adjusted EBITDA of $2.0 million. This represents a significant increase from the $0.8 million adjusted EBITDA reported in Q1 2024 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net income (loss)** | **$318** | **$(1,466)** | | Depreciation and amortization | $649 | $201 | | Stock-based compensation | $2,333 | $2,252 | | Financial income, net | $(1,526) | $(378) | | Income tax expense | $123 | $165 | | Non-recurring expenses | $58 | $— | | **Adjusted EBITDA** | **$1,955** | **$774** | - Adjusted EBITDA is calculated by adjusting net income (loss) to exclude depreciation and amortization, stock-based compensation, net financial income, income tax expense, and certain non-recurring expenses[24](index=24&type=chunk) [Other Information](index=3&type=section&id=Other%20Information) This section provides background on Talkspace, details on the earnings conference call, and important forward-looking statement disclaimers [About Talkspace](index=3&type=section&id=About%20Talkspace) Talkspace is a leading virtual behavioral healthcare provider that offers a wide range of mental health services, including therapy for individuals, teens, and couples, as well as psychiatric treatment and medication management. Its services are delivered via a secure, HIPAA-compliant platform and are accessible to most Americans through insurance, employee assistance programs, and other partnerships - Talkspace is a virtual behavioral healthcare provider focused on making high-quality mental healthcare accessible[7](index=7&type=chunk) - Services include therapy (individual, teen, couple) and psychiatric medication management, delivered through live sessions or asynchronous text messaging on a fully-encrypted platform[8](index=8&type=chunk)[9](index=9&type=chunk) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) The company scheduled its first quarter 2025 earnings conference call and webcast for Tuesday, May 6, 2025, at 8:30 a.m. E.T. Access details for the live call and a 90-day replay were provided - The Q1 2025 earnings conference call was scheduled for **May 6, 2025, at 8:30 a.m. E.T.**, with details available for webcast and dial-in participation[6](index=6&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section serves as a legal disclaimer, cautioning that the press release contains forward-looking statements regarding financial performance, strategy, and future operations. These statements are subject to various risks and uncertainties, and readers are advised to consult the company's SEC filings for a comprehensive understanding of these risks - The document contains forward-looking statements based on current expectations that are subject to risks and uncertainties, which could cause actual results to differ materially[10](index=10&type=chunk)

Part I [Business](index=5&type=section&id=Item%201.%20Business) Talkspace connects patients with licensed behavioral health providers through Payor, DTE, and Consumer channels, leveraging a technology platform for personalized care [Our Offerings](index=6&type=section&id=Our%20Offerings) Talkspace offers psychotherapy via text, audio, and video, and psychiatry for medication management, excluding controlled substances - Psychotherapy services involve licensed therapists treating mental health conditions through text, audio, and video-based sessions[21](index=21&type=chunk) - Psychiatry services offer expert care from prescribers for medication management. Providers can prescribe necessary medications but are prohibited from prescribing controlled substances[22](index=22&type=chunk) [Our Customers](index=6&type=section&id=Our%20Customers) The company serves a diverse customer base across all 50 U.S. states through Payor, Direct-to-Enterprise, and Consumer channels - Talkspace Payor: Contracts with health insurance plans and EAPs, where providers are in-network[24](index=24&type=chunk) - Talkspace DTE: Contracts directly with enterprises, offering services on a PMPM, PPU, or fixed-fee basis[25](index=25&type=chunk) - Talkspace Consumer: Offers monthly, quarterly, bi-annual, and annual subscriptions directly to individuals[26](index=26&type=chunk) [Competition](index=8&type=section&id=Competition) Talkspace competes with established telehealth platforms and anticipates future competition from large technology and retail companies entering the virtual health space - Key competitors include Teladoc Health, Inc., Lyra Health, Inc., Spring Care, Inc., and LifeStance Health Group Inc[34](index=34&type=chunk) - The company may face future competition from large technology companies like Apple, Meta, and Microsoft, as well as large retailers like Walmart[35](index=35&type=chunk) [Human Capital Overview](index=9&type=section&id=Human%20Capital%20Overview) As of December 31, 2024, Talkspace employed 521 individuals and contracted with 5,804 providers, focusing on talent attraction and retention Workforce Composition (as of Dec 31, 2024) | Category | Count | | :--- | :--- | | Employees | 521 | | - Employee Providers | 288 | | - Support Professionals | 233 | | Independently Contracted Providers | 5,804 | [U.S. Government Regulation](index=11&type=section&id=U.S.%20Government%20Regulation) Talkspace operations are subject to extensive U.S. federal and state regulations, including telehealth licensing, corporate practice of medicine, fraud and abuse laws, and health information privacy laws like HIPAA - The practice of medicine via telehealth requires providers to be licensed in the state where the patient is located, a compliance point the company actively manages[48](index=48&type=chunk) - The company's MSA structure is designed to comply with state laws prohibiting the corporate practice of medicine and fee-splitting by lay entities[49](index=49&type=chunk) - As some services are reimbursed by government healthcare programs, the company is subject to federal fraud and abuse laws, including the Stark Law and the Anti-Kickback Statute[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company is subject to numerous privacy laws, including HIPAA, HITECH, and state laws like the CCPA/CPRA, which govern the use, disclosure, and safeguarding of protected health information (PHI)[58](index=58&type=chunk)[63](index=63&type=chunk) - The company serves members through three primary channels: Health insurance plans (Payor), Direct-to-Enterprise (DTE), and individual subscribers (Consumer)[19](index=19&type=chunk) - Talkspace's technology platform uses a machine learning matching algorithm and a robust data ecosystem, including **8 billion words from 140 million anonymized messages**, to optimize therapist-patient matching and clinical outcomes[30](index=30&type=chunk)[31](index=31&type=chunk) - The company transitioned its provider relationship structure to operate under Management Services Agreements (MSAs) with affiliated professional entities (TPN and PC entities) to comply with corporate practice of medicine laws[36](index=36&type=chunk)[37](index=37&type=chunk) Key Business Metrics (2023 vs. 2024) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $187.6 million | $150.0 million | | Eligible Lives (Payor & DTE) | 179.4 million | 131.0 million | | Consumer Active Members | 7,200 | 11,700 | | Completed Payor Sessions | 1,229,200 | 850,600 | [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including operational challenges, intense competition, reliance on key customers, regulatory compliance, data security, intellectual property, and public company volatility [Risks Related to our Business and Industry](index=21&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Industry) Key business risks include intense competition, reliance on large customers, maintaining provider networks, marketing effectiveness, contract renewals, and platform security - The company operates in a highly competitive virtual behavioral health market, facing rivals like Teladoc, Lyra Health, and potential new entrants from large tech and retail companies[85](index=85&type=chunk)[86](index=86&type=chunk) - A material portion of revenue is derived from its largest customers. In 2024, **three customers each represented 10% or more of total revenue**. The loss of any of these customers could significantly impact results[90](index=90&type=chunk) - The company's success is dependent on its ability to recruit and retain a sufficient network of qualified therapists and psychiatrists[101](index=101&type=chunk) - Security breaches of customer or member data could lead to significant liabilities, reputational harm, and loss of business[122](index=122&type=chunk)[123](index=123&type=chunk) [Risks Related to our Legal and Regulatory Environment](index=34&type=section&id=Risks%20Related%20to%20our%20Legal%20and%20Regulatory%20Environment) Operating in a heavily regulated industry, the company faces risks from evolving telehealth laws, corporate practice of medicine challenges, and stringent data privacy regulations - The company's business model and relationships with affiliated professional entities could be challenged under state laws prohibiting the corporate practice of medicine or fee-splitting[150](index=150&type=chunk)[152](index=152&type=chunk) - Evolving government regulations for telehealth, AI, and healthcare generally may increase costs and adversely affect operations[146](index=146&type=chunk)[149](index=149&type=chunk) - Failure to comply with complex federal and state privacy laws (e.g., HIPAA, CCPA) and international laws (e.g., GDPR) regarding personal and health information could result in significant liability and reputational harm[164](index=164&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk) [Risks Related to our Intellectual Property](index=44&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) The company's success relies on protecting its intellectual property, facing risks of infringement, defense costs, and open-source software issues - The company relies on a combination of trademark, patent, and trade secret laws to protect its intellectual property, but these provide only limited protection and may be challenged[181](index=181&type=chunk) - The company could incur substantial costs defending against claims of intellectual property infringement by other parties, which could divert management attention and financial resources[189](index=189&type=chunk)[190](index=190&type=chunk) [Unresolved Staff Comments](index=56&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[230](index=230&type=chunk) [Cybersecurity](index=57&type=section&id=Item%201C.%20Cybersecurity) Talkspace implements a comprehensive cybersecurity risk management strategy, overseen by the Audit Committee, with no material impact from prior threats to date - The Audit Committee is responsible for the oversight of risks from cybersecurity threats, receiving at least quarterly updates from management[239](index=239&type=chunk) - The company's cybersecurity program is managed by the CISO and CTO and includes periodic risk assessments, third-party penetration testing, vendor risk assessments, and employee training[234](index=234&type=chunk)[236](index=236&type=chunk)[241](index=241&type=chunk) - The company states that risks from prior cybersecurity threats have not materially affected its business, strategy, or financial condition to date[238](index=238&type=chunk) [Properties](index=59&type=section&id=Item%202.%20Properties) The company's headquarters are in New York, with most employees remote, and no leased facilities are considered material to its business - The majority of the Company's employees are working remotely[243](index=243&type=chunk) - The Company does not view any of its leased facilities as material to its business[243](index=243&type=chunk) [Legal Proceedings](index=59&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2024, Talkspace reports no material pending legal proceedings, accruing for probable and estimable losses - The Company has no material pending legal proceedings as of December 31, 2024[244](index=244&type=chunk) [Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[245](index=245&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Talkspace common stock and warrants trade on Nasdaq; the company has not paid dividends and initiated a $40 million share repurchase program in 2024 - Common stock and warrants trade on Nasdaq under symbols "TALK" and "TALKW"[248](index=248&type=chunk) - The company has not paid any cash dividends to date and does not intend to in the foreseeable future[251](index=251&type=chunk) Share Repurchase Program Activity (2024) | Metric | Value | | :--- | :--- | | Total Authorization | $40.0 million | | Shares Repurchased in 2024 | 3,911,259 | | Total Cost of Repurchases | $11.0 million | | Average Price Per Share | $2.81 | | Amount Remaining Available | $29.0 million | [Reserved](index=63&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2024, Talkspace revenue grew 25.0% to $187.6 million, driven by Payor segment growth, leading to improved operating results and a net income of $1.1 million, supported by strong liquidity [Key Business Metrics](index=65&type=section&id=Key%20Business%20Metrics) Key business metrics for 2024 show increased eligible lives and completed Payor sessions, while enterprise customers and Consumer active members declined due to strategic shifts Key Business Metrics Comparison | Metric (in thousands, except where noted) | 2024 | 2023 | | :--- | :--- | :--- | | Eligible lives at year end (millions) | 179.4 | 131.0 | | Completed Payor sessions during the year | 1,229.2 | 850.6 | | Health plan customers at year end | 27 | 22 | | Enterprise customers at year end | 188 | 210 | | Consumer active members at year end | 7.2 | 11.7 | | Unique Payor active members (Q4) | 95.7 | 79.2 | [Results of Operations](index=68&type=section&id=Results%20of%20Operations) In 2024, revenues increased 25.0% to $187.6 million, driven by Payor growth, leading to a net income of $1.1 million despite a gross margin decline Consolidated Results of Operations (in thousands) | Line Item | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $187,593 | $150,045 | 25.0% | | Gross profit | $85,836 | $74,380 | 15.4% | | *Gross Margin* | *45.8%* | *49.6%* | *-3.8 pts* | | Total operating expenses | $90,333 | $97,589 | (7.4%) | | Loss from operations | ($4,497) | ($23,209) | 80.6% | | Net income (loss) | $1,148 | ($19,182) | N/A | - The **25.0% revenue increase** was primarily driven by a **$43.5 million (53.8%) increase in Payor revenue**, reflecting a higher number of completed sessions. This was partially offset by a **$10.8 million (30.4%) decrease in Consumer revenue** due to a strategic shift in marketing focus[285](index=285&type=chunk) - Gross margin declined from **49.6% to 45.8%** due to a shift in revenue mix towards the Payor segment[287](index=287&type=chunk) - Research and development expenses decreased by **40.2%** primarily due to lower employee-related costs and an increase in capitalized internal-use software development costs[289](index=289&type=chunk) [Non-GAAP Financial Measures](index=70&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA, a non-GAAP measure, which improved significantly to $7.0 million in 2024 from a $13.5 million loss in 2023 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net income (loss) | $1,148 | ($19,182) | | Depreciation and amortization | $859 | $1,285 | | Financial income, net | ($5,739) | ($4,245) | | Income tax expense | $94 | $218 | | Stock-based compensation | $9,173 | $8,395 | | Non-recurring expenses | $1,427 | $— | | **Adjusted EBITDA** | **$6,962** | **($13,529)** | [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2024, Talkspace maintained strong liquidity with $117.8 million in cash and marketable securities, generating $11.7 million in operating cash flow Liquidity Position (as of Dec 31, in millions) | Asset | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $76.7 | $123.9 | | Marketable securities | $41.1 | $0 | | **Total Liquidity** | **$117.8** | **$123.9** | Summary Consolidated Cash Flow (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,704 | ($16,393) | | Net cash used in investing activities | ($46,732) | ($141) | | Net cash (used in) provided by financing activities | ($12,188) | $1,897 | - The company repurchased and retired **3.9 million shares for $11.0 million** under its Share Repurchase Program during 2024[305](index=305&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk is primarily from interest rate fluctuations on cash and investments, with foreign currency risk deemed immaterial - The company's earnings on cash and investments are subject to market risk from changes in interest rates, but this is not considered material[326](index=326&type=chunk) - Exposure to foreign currency risk is not material due to limited operations outside the U.S. and revenue being denominated in U.S. dollars[327](index=327&type=chunk) [Financial Statements and Supplementary Data](index=76&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, with an unqualified opinion from the independent auditor on both financials and internal controls - The independent auditor, Kost Forer Gabbay & Kasierer (a member of EY Global), issued an unqualified opinion on the consolidated financial statements[331](index=331&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2024[332](index=332&type=chunk)[342](index=342&type=chunk) - The auditor identified the estimation of transaction price and variable consideration for Payor revenue recognition as a Critical Audit Matter due to the complex and judgmental nature of the estimates involved[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk) [Notes to Consolidated Financial Statements](index=86&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including revenue recognition, internal-use software, stock-based compensation, fair value measurements, and consolidation of Variable Interest Entities - Revenue Recognition (Note 3): Payor revenue is recognized at a point in time as sessions are rendered, net of estimated variable consideration (implicit price concessions). DTE revenue is recognized based on contract terms (PMPM, PPU), and Consumer revenue is recognized ratably over the subscription period[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - Stock-Based Compensation (Note 10): Total stock-based compensation expense was **$9.2 million** in 2024, up from **$8.4 million** in 2023[440](index=440&type=chunk) - Variable Interest Entities (Note 13): The company consolidates its affiliated professional entities (TPN and PC entities) as VIEs for which it is the primary beneficiary, a structure designed to comply with healthcare regulations[452](index=452&type=chunk)[456](index=456&type=chunk) - Income Taxes (Note 12): The company maintains a full valuation allowance on its net deferred tax assets due to a history of operating losses, resulting in minimal income tax expense[447](index=447&type=chunk)[448](index=448&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=108&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[459](index=459&type=chunk) [Controls and Procedures](index=108&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no material changes - Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2024[460](index=460&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2024, and the independent auditor issued an unqualified opinion on its effectiveness[464](index=464&type=chunk)[465](index=465&type=chunk) [Other Information](index=110&type=section&id=Item%209B.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q4 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q4 2024[467](index=467&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=110&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not Applicable[468](index=468&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=111&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference to the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[470](index=470&type=chunk) [Executive Compensation](index=111&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference to the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[472](index=472&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=111&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference to the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[473](index=473&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=111&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference to the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[474](index=474&type=chunk) [Principal Accounting Fees and Services](index=111&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference to the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[475](index=475&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=112&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including references to consolidated financial statements - This section provides a list of all financial statements, schedules, and exhibits filed with the Form 10-K[479](index=479&type=chunk) [Form 10-K Summary](index=112&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - None[478](index=478&type=chunk)

[Financial Highlights and Business Overview](index=1&type=section&id=Financial%20Highlights%20and%20Business%20Overview) This section summarizes Talkspace's strong 2024 financial performance, driven by strategic shifts and providing future guidance [Fourth Quarter & Full Year 2024 Performance Summary](index=1&type=section&id=Fourth%20Quarter%20%26%20Full%20Year%202024%20Performance%20Summary) Talkspace achieved strong growth and profitability in Q4 and full year 2024, driven by a strategic shift to the payor market and expanded covered lives Full Year 2024 Financial Highlights | Metric | FY 2024 (in millions) | YoY Growth | | :--- | :--- | :--- | | Total Revenue | $187.6 | 25% | | Net Income | $1.1 | * | | Adjusted EBITDA | $7.0 | * | Fourth Quarter 2024 Financial Highlights | Metric | Q4 2024 (in millions) | YoY Growth | | :--- | :--- | :--- | | Total Revenue | $48.7 | 15% | | Net Income | $1.2 | * | | Adjusted EBITDA | $2.7 | * | - The company's CEO highlighted a significant strategic shift focusing on the payor market, which has grown the total covered lives to nearly **200 million**. This strategy targets commercially insured adults, teens, seniors, and active military members[4](index=4&type=chunk) Key Operating Metrics at Year-End 2024 | Metric | Value | YoY Growth | | :--- | :--- | :--- | | Eligible Lives (millions) | 179.4 | 37% | | Completed Payor Sessions (thousands) | 1,229.2 | 45% | | Consumer Active Members (thousands, at year end) | 7.2 | (38)% | [Key Performance Metrics](index=2&type=section&id=Key%20Performance%20Metrics) This section details Q4 and full year 2024 financial drivers, highlighting revenue growth from Payor and DTE segments and improved profitability [Fourth Quarter 2024 Key Performance Metrics](index=2&type=section&id=Fourth%20Quarter%202024%20Key%20Performance%20Metrics) Q4 2024 saw 15% revenue growth, primarily from Payor segment, achieving net income and Adjusted EBITDA despite gross margin decline due to reduced operating expenses Q4 2024 Revenue Growth by Segment (YoY) | Segment | Growth Rate | | :--- | :--- | | Payor Revenue | +34% | | DTE Revenue | +7% | | Consumer Revenue | -35% | - Gross margin declined to **44.2%** from **49.4%** in the prior-year period, driven by a shift in revenue mix towards the Payor segment[7](index=7&type=chunk) - Operating expenses decreased by **11%** year-over-year to **$21.0 million**, contributing to improved profitability[7](index=7&type=chunk) Q4 2024 Profitability | Metric | Q4 2024 (in millions) | Q4 2023 (in millions) | | :--- | :--- | :--- | | Net Income (Loss) | $1.2 | $(1.3) | | Adjusted EBITDA (Loss) | $2.7 | $(0.3) | [Full Year 2024 Key Performance Metrics](index=2&type=section&id=Full%20Year%202024%20Key%20Performance%20Metrics) Full year 2024 revenue grew 25% to $187.6 million, driven by Payor segment, achieving profitability with $1.1 million net income and $7.0 million Adjusted EBITDA Full Year 2024 Revenue Growth by Segment (YoY) | Segment | Growth Rate | | :--- | :--- | | Payor Revenue | +54% | | DTE Revenue | +14% | | Consumer Revenue | -30% | - Full-year operating expenses decreased by **7%** to **$90.3 million**, improving the company's bottom line[7](index=7&type=chunk) Full Year 2024 Profitability | Metric | FY 2024 (in millions) | FY 2023 (in millions) | | :--- | :--- | :--- | | Net Income (Loss) | $1.1 | $(19.2) | | Adjusted EBITDA (Loss) | $7.0 | $(13.5) | [Financial Guidance for 2025](index=2&type=section&id=Financial%20Guidance) Talkspace projects continued strong revenue and Adjusted EBITDA growth for full year 2025, reflecting confidence in its strategic direction Full Year 2025 Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenue | $220 to $235 | | Adjusted EBITDA | $14 to $20 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents Talkspace's consolidated financial statements, including income, balance sheets, and cash flows, detailing the company's financial position and performance [Consolidated Statements of Income](index=5&type=section&id=Talkspace%2C%20Inc.%20Consolidated%20Statements%20of%20Income) The 2024 consolidated income statement shows a significant turnaround to $1.1 million net income, driven by 25% revenue growth and reduced operating expenses Revenue by Segment (Full Year) | Revenue Segment | 2024 (in thousands) | 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Payor revenue | $124,339 | $80,823 | 53.8% | | DTE revenue | $38,466 | $33,614 | 14.4% | | Consumer revenue | $24,788 | $35,608 | (30.4)% | | **Total revenue** | **$187,593** | **$150,045** | **25.0%** | Profitability Metrics (Full Year) | Metric | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Gross profit | $85,836 | $74,380 | | Income (loss) from operations | $(4,497) | $(23,209) | | Net income (loss) | $1,148 | $(19,182) | - Total operating expenses decreased by **7.4%** year-over-year, driven by a significant **40.2%** reduction in Research and development expenses and a **3.6%** decrease in Sales and marketing expenses[15](index=15&type=chunk) [Consolidated Balance Sheets](index=7&type=section&id=Talkspace%2C%20Inc.%20Consolidated%20Balance%20Sheets) As of December 31, 2024, Talkspace's balance sheet reflects strong liquidity with $117.8 million in cash and marketable securities and healthy stockholders' equity Key Balance Sheet Items (as of Dec 31) | Account (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $76,692 | $123,908 | | Marketable securities | $41,118 | $0 | | **Total current assets** | **$130,182** | **$139,800** | | **Total assets** | **$138,677** | **$142,221** | | **Total liabilities** | **$21,282** | **$23,575** | | **Total stockholders' equity** | **$117,395** | **$118,646** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Talkspace%2C%20Inc.%20Consolidated%20Statements%20of%20Cash%20Flows) In 2024, Talkspace generated $11.7 million cash from operations, used $46.7 million in investing, and $12.2 million in financing, ending with $76.7 million cash - Net cash provided by operating activities was **$11.7 million** in 2024, a positive reversal from a net cash use of **$16.4 million** in 2023[25](index=25&type=chunk) - Net cash used in investing activities was **$46.7 million**, largely due to the purchase of **$41.1 million** in marketable securities and **$5.4 million** in capitalized internal-use software costs[25](index=25&type=chunk) - Net cash used in financing activities was **$12.2 million**, driven by an **$11.0 million** repurchase and cancellation of common stock[25](index=25&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of GAAP to non-GAAP financial measures, specifically Adjusted EBITDA, to offer a clearer view of operational performance [Reconciliation of GAAP to Non-GAAP Results](index=10&type=section&id=Reconciliation%20of%20GAAP%20Results%20to%20Non-GAAP%20Results) This section reconciles GAAP Net Income to Adjusted EBITDA, showing a significant improvement to $7.0 million Adjusted EBITDA in 2024 Reconciliation to Adjusted EBITDA (Full Year) | Line Item (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | **Net income (loss)** | **$1,148** | **$(19,182)** | | Stock-based compensation | $9,173 | $8,395 | | Financial (income), net | $(5,739) | $(4,245) | | Depreciation and amortization | $859 | $1,285 | | Other adjustments | $1,521 | $218 | | **Adjusted EBITDA** | **$6,962** | **$(13,529)** | Reconciliation to Adjusted EBITDA (Fourth Quarter) | Line Item (in thousands) | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | **Net income (loss)** | **$1,214** | **$(1,306)** | | Stock-based compensation | $1,883 | $1,994 | | Financial (income), net | $(616) | $(1,330) | | **Adjusted EBITDA** | **$2,659** | **$(306)** |

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company presents its unaudited Q3 2024 financial statements, reporting a net income of $1.9 million and cash of $119.0 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets stood at $138.2 million, with cash at $119.0 million and total liabilities reduced to $20.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $118,994 | $123,908 | | Total current assets | $131,518 | $139,800 | | **Total assets** | **$138,231** | **$142,221** | | **Liabilities & Equity** | | | | Total current liabilities | $19,053 | $21,648 | | Total liabilities | $20,643 | $23,575 | | Total stockholders' equity | $117,588 | $118,646 | | **Total liabilities and stockholders' equity** | **$138,231** | **$142,221** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company achieved Q3 2024 profitability with a net income of $1.9 million, driven by a 22.6% revenue increase Statement of Income Summary (in thousands, except per share data) | Metric | Q3 2024 (Unaudited) | Q3 2023 (Unaudited) | 9 Months 2024 (Unaudited) | 9 Months 2023 (Unaudited) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$47,399** | **$38,646** | **$138,873** | **$107,627** | | Gross profit | $21,621 | $18,849 | $64,303 | $53,409 | | Income (loss) from operations | $99 | $(5,179) | $(5,066) | $(20,626) | | **Net income (loss)** | **$1,874** | **$(4,414)** | **$(66)** | **$(17,876)** | | Diluted EPS | $0.01 | $(0.03) | $(0.00) | $(0.11) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $7.6 million for the nine-month period, with a total net cash decrease of $4.9 million Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,623 | $(14,863) | | Net cash used in investing activities | $(3,837) | $(10) | | Net cash (used in) provided by financing activities | $(8,700) | $1,660 | | **Net decrease in cash and cash equivalents** | **$(4,914)** | **$(13,213)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail revenue disaggregation, a share repurchase program, and the consolidation of Variable Interest Entities (VIEs) Revenue by Source (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Payor | $32,039 | $22,112 | $90,492 | $55,462 | | DTE | $9,370 | $8,002 | $28,911 | $24,717 | | Consumer | $5,990 | $8,532 | $19,470 | $27,448 | | **Total revenue** | **$47,399** | **$38,646** | **$138,873** | **$107,627** | - The company repurchased and canceled 2,948,892 shares of common stock for **$8.0 million** in the nine months ended September 30, 2024, with **$32.0 million** remaining available under the share repurchase program[51](index=51&type=chunk) - The company consolidates several **Variable Interest Entities (VIEs)**, which are professional corporations established to comply with regulations governing the corporate practice of medicine[21](index=21&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q3 2024 performance, driven by a 22.6% revenue increase and a strategic shift to the Payor segment - The number of eligible lives covered by Talkspace's services grew to approximately **158.1 million** as of September 30, 2024, up from 112.9 million a year prior[69](index=69&type=chunk) - The company achieved its first quarterly **net income of $1.9 million** and positive **Adjusted EBITDA of $2.4 million** in Q3 2024, marking a significant milestone[90](index=90&type=chunk)[110](index=110&type=chunk) - A strategic focus on the **Payor segment** drove strong growth while leading to a corresponding decline in the Consumer segment[91](index=91&type=chunk)[92](index=92&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Q3 2024 revenue grew 22.6% to $47.4 million, driven by Payor segment growth and reduced operating expenses Q3 2024 vs Q3 2023 Revenue Change (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Payor revenue | $32,039 | $22,112 | $9,927 | 44.9% | | DTE revenue | $9,370 | $8,002 | $1,368 | 17.1% | | Consumer revenue | $5,990 | $8,532 | $(2,542) | (29.8%) | | **Total revenue** | **$47,399** | **$38,646** | **$8,753** | **22.6%** | - Gross margin for Q3 2024 was **45.6%**, down from 48.8% in Q3 2023, attributed to a revenue mix shift towards the Payor segment[96](index=96&type=chunk) - Q3 2024 operating expenses fell by **10.4% YoY**, driven by a **43.7% decrease in R&D expenses** and a **6.4% decrease in sales and marketing expenses**[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) [Non-GAAP Financial Measures](index=20&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA turned positive to $2.4 million in Q3 2024, a significant improvement from a $2.8 million loss in Q3 2023 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $1,874 | $(4,414) | $(66) | $(17,876) | | Depreciation and amortization | $231 | $305 | $652 | $913 | | Financial (income), net | $(1,701) | $(779) | $(5,123) | $(2,915) | | Taxes on income | $(74) | $14 | $123 | $165 | | Stock-based compensation | $1,931 | $1,969 | $7,290 | $6,401 | | Non-recurring expenses | $89 | $105 | $1,427 | $89 | | **Adjusted EBITDA** | **$2,350** | **$(2,800)** | **$4,303** | **$(13,223)** | [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds $119.0 million in cash with no debt and repurchased $8.0 million in shares year-to-date - The company held **$119.0 million in cash and cash equivalents** with no debt as of September 30, 2024[112](index=112&type=chunk) - The Board of Directors authorized a share repurchase program, which was amended on August 1, 2024, to increase the total authorization by an additional **$25.0 million**[50](index=50&type=chunk)[115](index=115&type=chunk) - During the nine months ended September 30, 2024, the company repurchased 2,948,892 shares for **$8.0 million**, with **$32.0 million** remaining available for repurchases[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported compared to the 2023 Annual Report on Form 10-K - There were **no material changes** to the market risk information previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[138](index=138&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2024[140](index=140&type=chunk) - **No material changes** to the company's internal controls over financial reporting occurred during the third quarter of 2024[141](index=141&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings as of the end of the quarter - The Company has **no material pending legal proceedings** as of September 30, 2024[145](index=145&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the company's 2023 Annual Report on Form 10-K - During the nine months ended September 30, 2024, there were **no material changes** to the risk factors disclosed in the Company's 2023 Annual Report on Form 10-K[146](index=146&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased in Q3 2024, with $32.0 million remaining available under the repurchase program - **No shares were repurchased** during the three months ended September 30, 2024[148](index=148&type=chunk) - As of September 30, 2024, **$32.0 million remained available** for share repurchases under the company's Share Repurchase Program[148](index=148&type=chunk) [Other Information](index=27&type=section&id=Item%205.%20Other%20Information) The Chief Technology Officer adopted a Rule 10b5-1 trading plan for the potential sale of company stock - On August 19, 2024, Chief Technology Officer Gil Margolin adopted a **Rule 10b5-1 trading plan** for the sale of up to 853,901 shares of common stock[151](index=151&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including CEO/CFO certifications and XBRL data - The report includes required certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and **Inline XBRL data files** (Exhibits 101, 104)[155](index=155&type=chunk)

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) Talkspace reported strong Q3 2024 results with **23% revenue growth to $47.4 million**, achieving GAAP Net Income and positive Adjusted EBITDA Q3 2024 Key Financial and Operational Metrics (Year-over-Year) | Metric | Q3 2024 | YoY Change | | :--- | :--- | :--- | | Total Revenue | $47.4 million | +23% | | Payor Revenue | $32.0 million | +45% | | GAAP Net Income | $1.9 million | From $4.4M Loss | | Adjusted EBITDA | $2.4 million | From $2.8M Loss | | Eligible Lives | 158.1 million | +40% | | Completed Payor Sessions | 316.4 thousand | +38% | | Consumer Active Members | 8.6 thousand | -35% | - Management attributes the strong performance to fortified relationships with key payor partners and a differentiated focus on clinical excellence[3](index=3&type=chunk) - The company has expanded its network to serve over **158 million covered lives**, with increased access for seniors, teens, and military members, positioning itself as the largest behavioral telehealth network in the U.S[4](index=4&type=chunk) [Financial Guidance](index=2&type=section&id=Financial%20Guidance) Talkspace reaffirmed full-year 2024 guidance, projecting continued strong revenue growth and sustained Adjusted EBITDA profitability Full Year 2024 Financial Guidance | Metric | Guidance Range | Implied Growth | | :--- | :--- | :--- | | Total Revenue | $185M - $195M | 23% - 30% | | Adjusted EBITDA | $4M - $8M | N/A | [Detailed Financial Performance](index=5&type=section&id=Detailed%20Financial%20Performance) Detailed financials reveal a revenue mix shift towards Payor, reduced operating expenses, leading to positive net income and cash flow from operations [Condensed Consolidated Income Statements](index=5&type=section&id=Condensed%20Consolidated%20Income%20Statements) Q3 2024 vs Q3 2023 Income Statement Highlights (in thousands) | Line Item | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | **Payor Revenue** | **$32,039** | **$22,112** | **+44.9%** | | DTE Revenue | $9,370 | $8,002 | +17.1% | | **Consumer Revenue** | **$5,990** | **$8,532** | **-29.8%** | | Total Revenue | $47,399 | $38,646 | +22.6% | | Gross Profit | $21,621 | $18,849 | +14.7% | | Total Operating Expenses | $21,522 | $24,028 | -10.4% | | **Net Income (Loss)** | **$1,874** | **$(4,414)** | **N/A** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $118,994 | $123,908 | | Total current assets | $131,518 | $139,800 | | Total assets | $138,231 | $142,221 | | Total current liabilities | $19,053 | $21,648 | | Total liabilities | $20,643 | $23,575 | | Total stockholders' equity | $117,588 | $118,646 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) - For the nine months ended September 30, 2024, net cash provided by operating activities was **$7.6 million**, a significant improvement from a net cash use of **$14.9 million** in the same period of 2023[21](index=21&type=chunk) - Net cash used in financing activities was **$8.7 million**, primarily due to an **$8.0 million** repurchase and cancellation of common stock[21](index=21&type=chunk) - The company ended the period with **$119.0 million** in cash and cash equivalents, down from **$123.9 million** at the beginning of the year[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA is presented as a key non-GAAP measure, showing significant improvement to **$2.4 million** in Q3 2024 from a prior-year loss [Definition and Use of Adjusted EBITDA](index=9&type=section&id=Definition%20and%20Use%20of%20Adjusted%20EBITDA) - Adjusted EBITDA is calculated as net income (loss) adjusted for depreciation and amortization, interest and other income/expense, taxes, stock-based compensation, and certain non-recurring expenses[27](index=27&type=chunk) - Management uses Adjusted EBITDA as a key performance measure for business planning, evaluating ongoing operations, and assessing potential acquisitions[23](index=23&type=chunk) [Reconciliation of Net Income (Loss) to Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20Net%20Income%20%28Loss%29%20to%20Adjusted%20EBITDA) Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | **Net income (loss)** | **$1,874** | **$(4,414)** | | Depreciation and amortization | $231 | $305 | | Financial (income), net | $(1,701) | $(779) | | Taxes on income | $(74) | $14 | | Stock-based compensation | $1,931 | $1,969 | | Non-recurring expenses | $89 | $105 | | **Adjusted EBITDA** | **$2,350** | **$(2,800)** | [Company Information](index=3&type=section&id=Company%20Information) This section provides an overview of Talkspace's virtual behavioral healthcare business and includes a safe harbor statement on forward-looking risks [About Talkspace](index=3&type=section&id=About%20Talkspace) - Talkspace offers a comprehensive suite of virtual mental health services, including therapy for individuals, teens, and couples, as well as psychiatric treatment and medication management for adults[10](index=10&type=chunk) - Over **158 million Americans** can access Talkspace services through health insurance plans, employee assistance programs, and other partnerships[11](index=11&type=chunk) [Forward Looking Statements](index=4&type=section&id=Forward%20Looking%20Statements) - The report contains forward-looking statements that are subject to numerous risks and uncertainties, including rapid market evolution, technological change, client contract renewals, and changes in healthcare regulations[13](index=13&type=chunk)