Talkspace(US:TALK)2022-11-12 20:38Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $29.3 million, down 2% sequentially, driven by strong momentum in the B2B payer business and DTE, offset by further softening in the B2C business [27][28] - B2B revenue was $16.8 million, up 15% sequentially, primarily driven by a higher number of sessions completed by behavioral health and EAP members [28][32] - B2C revenue was $12.5 million, down 18% from the second quarter, driven by a lower number of customer acquisitions and fewer renewals from smaller existing cohorts [28][29] - Gross profit was slightly up at $14.6 million, with a gross margin of 49.8%, an increase of approximately 100 basis points from Q2 [29][30] - The net loss for Q3 was $18 million, with an adjusted EBITDA loss narrowing to $15.5 million, an improvement of $1.5 million compared to the second quarter [31] Business Line Data and Key Metrics Changes - B2B revenue represented most of the company's revenue for the first time in Q3, with a year-on-year increase of over 65% [12][28] - B2C revenues declined quarter-on-quarter by 18%, marking the fourth sequential quarter of reduced advertising spend [14][22] - The enterprise franchise grew 62% year-over-year and 10% sequentially, with the addition of 10 new accounts [13][28] Market Data and Key Metrics Changes - The company added 9 million covered lives in Q3, which had a modest revenue impact due to the timing of these new lives [13][32] - The B2B segment is expected to continue growing, with strong session growth based on new lives and higher engagement [33][35] Company Strategy and Development Direction - The company is focused on moving towards cash flow breakeven, enhancing efficiency, and reducing operating expenses by approximately $4 million per quarter [19][30] - There is a strong emphasis on expanding the B2B business, which is seen as the largest and most profitable growth opportunity [36][61] - The leadership team has been strengthened with new hires in key positions, indicating a commitment to operational and financial discipline [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth opportunities for the company, particularly in expanding access to mental health care [9][25] - The macroeconomic conditions are seen as a headwind for B2C members, but the company believes that building coverage in the payer footprint will provide additional incentives for members to leverage health benefits [28][29] - Management expects continued strong session growth and engagement in the B2B segment, despite potential seasonal slowdowns [33][35] Other Important Information - The company maintains a strong balance sheet with approximately $153 million in cash as of September 30, which is believed to be sufficient to reach profitability [32] - The company is implementing product enhancements to improve margins and drive utilization across its platform [17][21] Q&A Session Summary Question: Customer acquisition costs expectations for Q4 - Management expects some additional modest pressure on customer acquisition costs (CAC) due to seasonal factors and reduced advertising spend [40][41] Question: Elasticity of the end market and inflationary environment impact - Management noted a shift towards insured products, which is anticipated to provide a competitive advantage and reduce out-of-pocket costs for consumers [44][45] Question: Clinical inefficiencies and network progress - Management reported improvements in engagement and efficiency within the W2 network, with plans to selectively add to the network in high-demand areas [46][48] Question: Enterprise and health plan adds for 2023 - Management indicated a strong pipeline for additional covered lives in 2023, with ongoing discussions and a robust backlog [50][52] Question: B2C side performance and ARPU - Management suggested that the decline in ARPU is not overly concerning and may be attributed to product mix optimization rather than a significant consumer pullback [54][55] Question: Jon Cohen's focus on B2B vs B2C - Jon Cohen emphasized that the primary opportunity lies in the B2B segment, while also recognizing the importance of reducing financial barriers for B2C services [63][64]