PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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 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 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 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 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 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 million48 - As of March 31, 2025, $22.1 million remained available under the share repurchase program48 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 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 members85 - 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 margins88 Non-GAAP Financial Measures 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 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 debt100 - The Board of Directors has authorized a total of $40.0 million for the Share Repurchase Program103 - In Q1 2025, the company repurchased $7.0 million of its stock, leaving $22.1 million available for future repurchases104 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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-K125 Item 4. Controls and Procedures 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 period126 - No material changes to internal controls over financial reporting occurred during the first quarter of 2025127 PART II. OTHER INFORMATION Item 1. Legal Proceedings 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, 2025130 Item 1A. Risk Factors 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, 2024131 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 The company reports no defaults upon senior securities - None134 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable135 Item 5. Other Information 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, 2025136 Item 6. Exhibits 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 documents138
TALKSPACE EQUITY WARRANT(TALKW) - 2025 Q1 - Quarterly Report