TALKSPACE EQUITY WARRANT(TALKW) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q2 2024 financials show strong revenue growth, reduced net loss, and cash decrease from share repurchases Condensed Consolidated Balance Sheets Total assets decreased to $133.8 million as of June 30, 2024, driven by reduced cash, with total liabilities also declining | (U.S. dollars in thousands) | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $128,769 | $139,800 | | Total assets | $133,790 | $142,221 | | Total current liabilities | $17,779 | $21,648 | | Total liabilities | $19,746 | $23,575 | | Total stockholders' equity | $114,044 | $118,646 | Condensed Consolidated Statements of Operations Q2 2024 revenues increased 29.2% to $46.1 million, significantly narrowing net loss to $0.5 million year-over-year | (U.S. dollars in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $46,058 | $35,645 | $91,474 | $68,981 | | Gross profit | $20,951 | $17,812 | $42,682 | $34,560 | | Operating loss | $(3,486) | $(6,408) | $(5,165) | $(15,447) | | Net loss | $(474) | $(4,704) | $(1,940) | $(13,462) | | Net loss per share (Basic & Diluted) | $(0.00) | $(0.03) | $(0.01) | $(0.08) | Condensed Consolidated Statements of Cash Flows H1 2024 net cash from operations was $1.4 million, a significant improvement, with a $9.0 million net decrease in cash due to share repurchases | (U.S. dollars in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,418 | $(13,748) | | Net cash (used in) provided by investing activities | $(2,150) | $18 | | Net cash (used in) provided by financing activities | $(8,263) | $1,289 | | Net decrease in cash and cash equivalents | $(8,995) | $(12,441) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail revenue by channel, highlighting strong Payor growth, and significant share repurchase programs approved in 2024 Revenue by Source (in thousands) | Revenue Source | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Payor | $29,945 | $18,539 | +61.5% | | DTE | $9,628 | $8,039 | +19.8% | | Consumer | $6,485 | $9,067 | -28.5% | | Total revenue | $46,058 | $35,645 | +29.2% | - In February 2024, the Board approved a share repurchase program of up to $15.0 million During Q2 2024, the company repurchased 2,948,892 shares for $8.0 million[48][49] - Subsequent to the quarter end, on August 1, 2024, the Board approved an additional share repurchase program authorizing up to $25.0 million of its common stock and warrants[63] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 revenue grew 29.2% driven by Payor segment, achieving positive Adjusted EBITDA of $1.2 million with strong liquidity and no debt Key Business Metrics Key metrics show strong Payor business growth, with eligible lives at 145.3 million and Payor sessions up 56.6% year-over-year | Metric | As of/For Six Months Ended June 30, 2024 | As of/For Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Number of eligible lives (in millions) | 145.3 | 109.6 | | Number of completed Payor sessions | 582,800 | 372,200 | | Number of Consumer active members | 10,700 | 13,700 | Results of Operations Q2 2024 total revenue increased 29.2% driven by Payor, gross margin contracted to 45.5%, and net loss improved to $0.5 million - The increase in Q2 revenue was principally due to a 61.5% increase in Payor revenue and a 19.8% growth in DTE revenue, partially offset by a 28.5% decline in Consumer revenue, which was an intentional strategic decision[92] - Gross margin for Q2 2024 was 45.5%, down from 50.0% in Q2 2023 The decline was driven by a shift in revenue mix towards Payor, as consumer sessions tend to provide higher margins[96] - R&D expenses decreased by 48.1% in Q2 2024, primarily due to the capitalization of $1.9 million in internal-use software development costs[98] Non-GAAP Financial Measures Adjusted EBITDA, a key non-GAAP measure, improved significantly to positive $1.2 million in Q2 2024 from a $4.0 million loss in Q2 2023 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net loss | $ (474) | $ (4,704) | | Depreciation and amortization | 220 | 302 | | Financial (income), net | (3,044) | (1,712) | | Taxes on income | 32 | 8 | | Stock-based compensation | 3,107 | 2,129 | | Non-recurring expenses | 1,338 | — | | Adjusted EBITDA | $ 1,179 | $ (3,977) | Liquidity and Capital Resources The company maintains strong liquidity with $114.9 million cash and no debt, with $32.0 million authorized for share repurchases - The company's Board of Directors approved an initial $15.0 million share repurchase program in February 2024 and an additional $25.0 million program in August 2024[114][116] - For the six months ended June 30, 2024, net cash from operating activities was positive at $1.4 million, compared to a use of $13.7 million in the prior year period, driven by a lower net loss and favorable working capital timing[118][119] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported for the six months ended June 30, 2024 - There were no material changes to the market risk information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[136] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls during Q2 2024 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[138] - No changes occurred during the second quarter of fiscal year 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[139] PART II. OTHER INFORMATION Item 1. Legal Proceedings As of June 30, 2024, the company reports no material pending legal proceedings - The Company has no material pending legal proceedings as of June 30, 2024[143] Item 1A. Risk Factors No material changes to risk factors were reported during the six months ended June 30, 2024 - During the six months ended June 30, 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, 2023[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details Q2 2024 stock repurchase activity, with 2,948,892 shares repurchased and $32.0 million total repurchase authority available Stock Repurchases for Q2 2024 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 - 30 | — | $ — | | May 1 - 31 | 1,780,512 | $2.76 | | June 1 - 30 | 1,168,380 | $2.64 | | Total | 2,948,892 | | Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during Q2 2024 - No "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" was adopted, modified or terminated during the fiscal quarter ended June 30, 2024 by the company's directors and Section 16 officers[149]