PART I. FINANCIAL INFORMATION This section covers the unaudited Q1 2024 financial statements, management's discussion and analysis, market risk, and internal controls Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Talkspace, Inc. as of March 31, 2024, and for the three months then ended. It includes the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with accompanying notes detailing accounting policies, revenue recognition, fair value measurements, and other financial disclosures Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets to $138.3 million and a reduction in total liabilities to $18.7 million as of March 31, 2024, compared to year-end 2023. Cash and cash equivalents stood at $120.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $120,278 | $123,908 | | Total current assets | $135,730 | $139,800 | | Total assets | $138,276 | $142,221 | | Total current liabilities | $15,686 | $21,648 | | Total liabilities | $18,698 | $23,575 | | Total stockholders' equity | $119,578 | $118,646 | Condensed Consolidated Statements of Operations For the first quarter of 2024, the company reported a significant increase in revenue and a substantial reduction in net loss compared to the same period in 2023. Revenue grew to $45.4 million, while net loss narrowed to $1.5 million, or ($0.01) per share Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $45,416 | $33,336 | | Gross profit | $21,731 | $16,748 | | Operating loss | $(1,679) | $(9,039) | | Net loss | $(1,466) | $(8,758) | | Net loss per share (Basic & Diluted) | $(0.01) | $(0.05) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity saw a slight increase during the first quarter of 2024, rising to $119.6 million. The increase was primarily driven by stock-based compensation and the exercise of stock options, which offset the net loss for the period - Total stockholders' equity increased from $118.6 million at the end of 2023 to $119.6 million as of March 31, 202414 - Key activities impacting equity included $2.3 million in stock-based compensation and $0.7 million from the exercise of stock options, which were partially offset by a net loss of $1.5 million14 Condensed Consolidated Statements of Cash Flows The company significantly improved its cash flow from operations, using $3.4 million in Q1 2024 compared to $14.0 million in Q1 2023. The quarter ended with a cash and cash equivalents balance of $120.3 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,391) | $(14,037) | | Net cash used in investing activities | $(385) | $19 | | Net cash provided by financing activities | $146 | $556 | | Net decrease in cash and cash equivalents | $(3,630) | $(13,462) | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies, revenue sources (Payor, DTE, Consumer), fair value measurements of financial instruments like warrant liabilities, commitments, capital stock details including a new share repurchase program, and information on variable interest entities (VIEs) Revenue by Source (in thousands) | Revenue Source | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Payor | $28,508 | $14,811 | | DTE | $9,913 | $8,676 | | Consumer | $6,995 | $9,849 | | Total revenue | $45,416 | $33,336 | - On February 22, 2024, the Board of Directors approved a share repurchase program authorizing the repurchase of up to $15 million of common stock over 24 months. No shares were repurchased under this program as of March 31, 202444 - The company consolidates several Variable Interest Entities (VIEs), including Talkspace Provider Network, PA and eight affiliated professional corporations, as it is determined to be the primary beneficiary525354 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q1 2024, highlighting a 36.2% revenue increase to $45.4 million, driven by a 92.5% surge in Payor revenue. The net loss narrowed significantly to $1.5 million from $8.8 million YoY, and Adjusted EBITDA turned positive at $0.8 million. The discussion covers key business metrics, operational results, liquidity, and the strategic shift towards the Payor market Key Business Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Eligible lives at period end (millions) | 131.4 | 98.0 | | Completed Payor sessions (thousands) | 284.2 | 171.7 | | Unique Payor active members (thousands) | 86.3 | 61.9 | | Consumer active members at period end (thousands) | 11.1 | 15.1 | - Total revenue increased by 36.2% to $45.4 million in Q1 2024, primarily due to a 92.5% increase in Payor revenue. This reflects the company's intentional strategic decision to focus marketing efforts on attracting payor members, which also led to a 29.0% decline in Consumer revenue82 - Adjusted EBITDA, a non-GAAP measure, was $774 thousand for Q1 2024, a significant improvement from an Adjusted EBITDA loss of $(6.4) million in Q1 202396 - Net cash used in operating activities decreased to $(3.4) million from $(14.0) million YoY, driven by a lower net loss and favorable timing of payments100101 Quantitative and Qualitative Disclosures About Market Risk The company states that there were no material changes to its market risk disclosures during the first quarter of 2024, as detailed in its 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, 2023119 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024. No material changes to internal controls over financial reporting occurred during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2024120 - No changes in internal control over financial reporting occurred during Q1 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting121 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information, including exhibits Legal Proceedings The company reports no material pending legal proceedings as of March 31, 2024 - As of March 31, 2024, the Company has no material pending legal proceedings125 Risk Factors The company states there were no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - During the three months ended March 31, 2024, 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, 2023126 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - The company reported 'None' for this item, indicating no unregistered sales of equity securities127 Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reported 'None' for this item128 Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company's business129 Other Information The company reports that no directors or Section 16 officers adopted, modified, or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended March 31, 2024 - No directors or Section 16 officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter ended March 31, 2024130 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibit index lists required filings, including certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents133
TALKSPACE EQUITY WARRANT(TALKW) - 2024 Q1 - Quarterly Report