Good morning, everyone. Thank you so much for joining us this morning. My name is Chris Aholt. I'm an associate in the Healthcare Investment Banking group at J.P. Morgan. Today, we have the opportunity to hear from Talkspace. We'll be hearing from Dr. Jon Cohen and Jennifer Fulk, the CEO and CFO, respectively, of the company. They've planned for about a 20-25-minute presentation, followed by Q&A, so we look forward to any questions that you may have. Thank you so much.
Thanks. Thanks, Chris. Wow! Good morning. First off, I wanna thank all of you for attending this early morning session on the last day of the conference, so doesn't go unrecognized. As you probably know, the United States is facing a behavioral health crisis. There's not a day that goes by when some mental health, behavioral health issue that's not in the news. The presence of behavioral health issues is actually quite staggering, with 32% of adults reporting symptoms of anxiety or depression in 2023. Furthermore, the economic cost and the loss of productivity to the country for mental health issues is close to $50 billion.
The projected growth of behavioral health market is close right now to about a 5% CAGR, estimated to be $137 billion by 2032. Yet, affordability and insurance access remain a major challenge for behavioral health, with 42% of the population with a diagnosed condition cannot access treatment. And of those who actually have access or have insurance, 34% of those people, one in three, have difficulty finding a therapist to accept their insurance. Most recently, some of you may have noticed the New York Attorney General reported recently on what we call the ghost networks that are occurring all around the country, particularly in New York, for behavioral health, where investigators actually found that 86% of providers were ghosts, meaning that they were unreachable, not in-network, and not accepting new patients.
It is our vision, and has been, to be the solution of choice, which means to provide accessible, affordable, and effective mental health support to all. Today, I'm excited to share our journey, our impact, and the roadmap for the future. What Talkspace is, it provides several different solutions. First and foremost is therapy. We match a therapist within one to two days. Frequently, it's actually within several hours. Our therapists treat multiple conditions, listed as possibly 120+ conditions that they are able to treat. But most importantly, Talkspace, which did most of the pioneering work on texting and messaging, provides asynchronous therapy, which is really texting and messaging, which occurs, although not, as I said, exactly when someone reaches out, but it is available essentially 24/7. We also provide live video and live audio.
The texting and the messaging part of Talkspace is really one of the big differentiators in the market. So when you look at a lot of the telehealth providers out there who say that they provide telehealth mental health services, it's true, but most of them are providing video, and most of them do not have the platform to provide messaging and asynchronous care. The coverage, which I'll get into in more depth, is by insurance, your EAP program, employers, schools, and then, of course, we still have a consumer business where people have cash pay. We also have a self-guided, Talkspace self-guided called Talkspace Go. It's a whole slew of personalized courses, daily journaling, prompts every day, live classes with a therapist, and literally hundreds of different sessions that we offer.
And with, as I said, messaging, sometimes that only need to do five minutes a day with an easy referral, if need be, to therapy. And the third, though a small part of our growing business, is psychiatry, which is available in all 50 states. It includes psychiatric evaluation, prescriptions, and ongoing medication management. We right now don't provide, we only provide it for people 18 years old and older, and we do not prescribe controlled substances, as of right now. It's made up of a 200+ network of nurse practitioners and physicians. In terms of, you know, our therapy network, the network is growing substantially. We now have about, if not more than 5,000 therapists on the network.
As I said, we're covering all 50 states, and within the last year, within the last year, our network grew 60%. It's approximately 1,600 therapists were added onto the network in the last year. It's a hybrid network. What do we mean by that? It's a combination of people who get paid through the 1099s or about 200+, who are full-time and work for us, work for us only, as in-house, full-time providers. As I mentioned earlier, there's a huge number of conditions that we treat. The most common, of course, is anxiety, depression, family issues, grief, trauma, loneliness, eating disorders, and others.
It's interesting, of course, after you match, usually you will see a therapist within 24 hours, and if you want a live video, it'll take you somewhere between three and five days to get scheduled. It, of course, addresses the client's needs, particularly around language, ethnicity, and LGBTQ needs of the particular member. Meaning that, of course, for our therapists, and the reason that people are joining Talkspace and why we've had such a significant increase, it is what we believe, one, if not the platform of choice. It is meaningful work for the therapists.
We obviously pay them what we think is, what they and us think is appropriate, but we also provide them with an environment for learning and an environment for development, an environment to be part of a bigger community, and a really, an environment to be part of the ongoing culture that exists at Talkspace. And of course, the most, probably the most important thing is it addresses what I talked about earlier, is the issue of availability. If you look at Talkspace, we have two very distinct, although obviously somewhat related, growing lines of businesses. There is the payer side of the business, and then there's the direct-to-enterprise side of the business. The payer side of the business, we continue to maintain that right now, we are the largest in-network telehealth mental health provider in the country.
Recently, we announced the addition of, through Anthem, another 15 million lives, which brings our total now up to 130 million covered lives throughout the country. That means that all of the national players on the payer side are in-network, plus many, several of the Blues across the country. And in 2024, and I'll get into it a little bit more later, but we will increase that another significant amount by adding more Blues, more regional coverage, and then Medicare, which I said as I'll get into in a couple of minutes. But it's not just about the covered lives. It's very important that even though it's covered, that we capture...
We have what's called a capture rate, where we actually have to get people noted, identify the fact that they're actually covered, and actually sign up. And then it's an issue of how do we increase utilization by providing a better service so that they stay on the platform and get as much coverage as they need. The major emphasis in 2024 is not just the adding lives, but actually increase the capture rate and increase utilization. And then, of course, we still do offer cash pay. People come to us, they find Talkspace, and we say, "Well, you know, if you would like, you can pay for it out of pocket, as we've done in the past. But by the way, let us determine your eligibility." And by determining eligibility, obviously moves them towards the payer side of the equation.
If you look at the other side of the business, which is the Direct-to-Enterprise side, as I said, we're one of the leaders in providing enterprises to employers, schools, government, and multiple entities. We have listed some of them here, which includes retail, healthcare, technology, hospitality, and I'll talk a little bit more in a minute about education. These are some of the targeted verticals, but we obviously serve very large and small employers. The financial relationship on the Direct-to-Enterprise is usually either a per member per month, meaning really a per employee per month fee or a per student per month fee, depending if it's a school, teen, college, or a university. We literally serve hundreds of clients from large corporations to small corporations to small businesses.
And then, as I said, we have a significant amount of business related to employers that are looking for a solution. We, we've been clear about it, we've been public about it. We know that if someone has a true mental health offering, if that mental health offering is through Talkspace, there is an increase in productivity, decrease in costs, decrease in absenteeism, and increase in retention rate for people, employees. So let me turn a little bit more towards the education piece and go a little bit deeper into combating the youth mental health crisis. The U.S., as again, many of you have seen, is truly facing a dire crisis among our youth. It's in the press again, mostly every day. You've probably seen the Surgeon General report.
The Surgeon General has said that mental health is the defining public health crisis of our time, and that social media addiction is the greatest threat to the lives of our children and teens, more so than in the past than cigarette smoking was, to give you an idea. 40% of teenagers, 40% say that they struggle with persistent feelings of sadness or actually hopelessness, and 62% has been the number in terms of an increase in suicide rate, suicide rate among young people between the ages of 10 and 24, from 2007 to 2021. You hear a lot about the problem, but quite honestly, there has not been, up till now or recently, a lot of solutions that have, gone on the table.
We know that the schools have a lot of counselors, and those counselors truly do an amazing job. But if you speak to the counselors, you'll find that they are just incredibly overwhelmed. They cannot handle the volume of what's coming through the students relative to schools. President Biden, you probably saw recently, committed another $1 billion to be invested in schools in support of mental health. If you look at what we've done, we're a big believer in public-private partnerships. So recently, we announced two big announcements. November fifteenth, we announced our relationship and partnership with the City of New York.
Our relationship with the City of New York is contracted to provide every single teenager between the age of 13 and 17, 465,000 teenagers in New York, access to Talkspace on a direct contract with New York City. Four weeks later, we announced a contract with the Baltimore City School System, where we are now providing Talkspace to every single high school student in Baltimore. Those two announcements obviously are very important, not just for the moral imperative that we have to provide what we can for teenagers, but important for the company relative to the issues, the issue of mental health for teenagers and us, quote, "leaning in" on that vertical. I've been asked about the market before for teenagers and, you know, again, 13 to 17 year old roughly, and it's conservatively approximately a $500 million market.
Now, if I could do this right, I'm gonna play a 30-second video about making a difference in teens.
I gave it a shot with Talkspace, and I really liked it. It really did help. It was very organized and set my goals and expectations of this therapy. I was able to understand more about myself, as well as building specific exercises.
I was going through it emotionally, and I just felt like I did not have anyone to talk to until I came across Talkspace.
Talkspace kind of just allowed me to get the care that I needed at the time that I needed it, when I needed it.
Not having to go in person to a therapy appointment is really nice. And also just knowing that I can text my therapist whenever I need, and she can get back to me as soon as she can, is also really comforting. Honestly don't know where I'd be today if I hadn't started using Talkspace.
Those are real-
I gave it a shot with Talkspace.
Sorry.
I gave it a shot with-
So those are real. Those are a couple of clips we took from our recent, you know, initiative relative to talking to teens in some of the focus groups. It just, it's just incredibly impactful what these kids are going through and how much you can help them. So I want to, I wanna move now on to innovation. Talkspace has, has had a very strong history of innovation and pioneering the original work on messaging therapy. Innovation and technology is core to who we are. We are in an unusual position to accelerate our clinical efficiency and operational excellence. We will lean in on artificial intelligence this year in multiple different applications.
Our AI tools are meant to be assistance to our therapists, helping them to be more efficient, but not replacing them, integrating the power of AI insights with the expertise of human therapy. As an example, in our proprietary machine learning model, it alerts our therapists when the patient may be at risk for self-harm. It detects language patterns consistent with high-risk behaviors that place individuals at risk for self-harm or suicide. It is 83% accurate. We reported it in 2019, and since 2019, we have flagged 32,000 patients since the launch, who are at risk for suicide. The model has been revalidated recently for teens, and moving forward, we will look to add additional clinical to the clinical alerts.
It improves the therapist's workflow, and it increases the comprehensive notes and intake summaries, something we'll do, and we will also increase our business operations and customer support tools. To give you an idea of our structured and unstructured data set, our data contains approximately 4 billion words sent by 1.4 billion users over 75 million messages. Our messages contain 26 million audio messages and 400,000 video messages. The de-identified data is also augmented by other data types that provide a holistic view of our users and their behavioral health. It is an incredible data set. At Talkspace, we believe that digital therapy provides an unprecedented opportunity for us to improve mental health through data science and machine learning, all securely HIPAA-compliant. Our goal is to leverage our unique data to identify patterns and improve the way that behavioral health is delivered.
So in reviewing 2023, you can see basically we did what we said we would do, and the results speak for themselves. In terms of EBITDA, we took it down from $60 million- $16 million in 2023. Our reduction in operating costs went from $120 million- $88 million. We grew the network by 60%. We increased covered lives from 92 million to now 130 million lives. We increased our payer sessions, essentially doubling them from 2022 to 2023 to 830,000. And as I said, we've launched two major teen initiatives for New York and Baltimore.
We've also talked about a business development process and partnerships, and possibly a little bit later in the Q&A, we'll talk about what those two partnerships look like, with a lot more to come. In terms of what 2024 looks like and where we're headed: First off, this quarter, after 12+ years, Talkspace in existence, this quarter, in the Q1, we will be break even and then profitable. We will also maintain our very strong cash position with greater than $120 million of cash on the books. We will continue to grow profitability, we will substantially grow covered lives, we will maintain our strength with employers, and we will continue our momentum... Sorry about that.... Sir. Continue our momentum in teens in public schools.
As I said a couple of minutes ago, we will make pioneering investments in clinical AI tools, and we will launch a whole bunch more of what we call needle-moving strategic partnerships. So in addition to our big initiative in AI, the other really important announcement we're making this morning is that in 2024, we will be a Medicare provider for both standard Medicare and Medicare Advantage. We will roll it out in all 50 states by the end of 2024. Medicare has 62 million lives: 34 million standard Medicare, 32 million in Medicare Advantage. The importance of the Medicare, you know, mental health changes in the 65-year-old is, again, hopefully obvious. Currently, it's increased 2.5 times since 2020, the number of people that have said there are mental health challenges.
61% of those 65 years old and older have a cell phone, and if you look at the data a little differently, from 60 to 70 year old, have 80% of them. I would say that for anyone who thinks that seniors don't use their cell phones, you have not been a grandparent. I'm fortunate enough to have a four and seven year old, two grandchildren, and the amount of time that we've already began to spend with them FaceTiming with their parents' phones or just talking to them, as I said, just look at any grandparent. The major communication route right now is through the cell phone, for those of you who don't believe that seniors use cell phones. We believe that is a really, really important initiative.
We might be, we're not sure, but we might be the first and possibly the only telehealth mental health provider to be in-network with Medicare across the country. I wanna close by restating, we've had an amazing and terrific year. The market continues to grow. Our solution addresses the criticality of accessibility, availability, and affordability. With our payer and DTE strategies and the way the businesses are going, we are looking forward to another great year in 2024. Thank you.
Are there any questions from the audience just yet? Maybe up here in the front row.
Thank you for the talk. When you mentioned the mental health crisis among the youth population. What is the most pressing issue when we talk about the mental health crisis, specifically, that you guys are most focused on? Is it really just, you know, having talk therapy accessible that you think will be the solution to whatever those the top one is or the top two?
Sure. So, so we have done a bunch of other school systems before, but we did a fairly significant amount of focus groups relative to talking to teens and trying to... What is it that you want? What is it that's going on? And the message is very clear. One, I wanna be able to talk to somebody, like, now. Two, I want it to be really available, so I can talk to them anywhere. I want the privacy, I want it to be at my convenience, and of course, I don't wanna have to pay for it, right? The Talkspace solution addresses all those issues. Frequently, texting on your phone, and by the way, it's 24/7. We match with a therapist. We know already on the data from New York, we're matching therapists within an hour, available.
What they're saying is, you know, "We want to vent. We want somebody to talk to. We want it available now," and it addresses those issues. And by the way, in New York, just for the record, it is with parental consent, which is part of the workflow.
I think the text messaging platform is really good because it's really kind of allows you to triage-
Yeah
... the acute patients from the ones that can, you know, wait or have a different level of care. For the patients that need more acute care from a psychiatrist, maybe in person, how are you guys?
Sure
... bridging that relationship or that need?
So we've always had in place SOP, standard operating procedures. We have devoted partners who are specifically available for what we call a warm handoff. If the therapist gets into an issue where they think that they cannot deal with it, which is unusual, by the way, 'cause the therapists deal with a lot of these issues all the time, we will hand off to partners for people that need acute care, which is usually crisis management. And it's not just 988. 988 is part of it in New York City, but there are other partners that we have that deal specifically with this issue for a warm handoff if the child needs it. And that includes ongoing therapy, possibly emergency room visit, urgent care visit, or actually admission to a hospital.
We have all those resources available as part of the standard operating procedure for the therapist.
Hi, good morning. What do you expect from a consolidation perspective in the industry? 'Cause we at Asabys, we're investors in healthcare companies, and we're receiving, for the past two years, a lot of mental health companies, some of them smaller, focused on treating particular disorders within mental health, let's say PTSD, anxiety, obesity. Is that something that can sometimes confuse the user, or the consumer when you have so many options out there that you could use. Is Talkspace expecting, like, more consolidation in the industry? Are you willing to kinda, like, keep the M&A acquisition and, yeah, the acquisition path, or?
So, it's a great question, 'cause there are smaller businesses that are delivering services to a very specific need. You said, like PTSD, OCD. Then there are a bunch of, there are hundreds of other, which we're gonna talk about on the partnership side, that are looking for therapy: weight loss, diabetes management, cancer diagnosis, cardiovascular. You can go through, and what's happening is all of these smaller companies frequently are looking for therapy. So the first part of your question is yes, if there is somebody out there that's looking to be part of Talkspace, then we certainly would talk to them and say: Does it make sense for us to get together on that kind of relationship?
On the other side, because we're national, because we're in-network, we are what I call the obvious solution for all these other populations that need coverage and need therapy. And what we've seen as a result of that is a lot of incoming, as you can imagine, people talking to us saying, "I have this group of patients. We're treating them for X, but by the way, they need therapy." If we go to Talkspace, it doesn't cost them anything. Well, it costs them $20 out of pocket if it's a copay, but basically, they can get therapy anywhere, all 50 states, and it doesn't cost them anything.
Maybe I'll just elaborate, because I think it's-
Yeah
... it's, it also speaks to our conviction and others that we're really at the beginning stages of mental health care and what that could mean. We talked a minute ago about, you know, the higher acuity end of the spectrum. There's also a lower acuity, so when it comes to digital services to support this market. But I think you will continue to see players come in, just given how massive we believe this addressable market is and how rapidly it's growing.
Thanks for your talk.
Sure.
With the 60% growth that you've had in therapists, I'm just wondering how you're thinking about onboarding. Do you do training, standardization? And then as a second part to this, just sort of quality measures. Are you doing rating scales with patients, or how are you thinking about that?
Sure. So what we found is the therapists I mentioned earlier they like coming onto the network because they— One is we have a whole standard set of, you know, parameters and training that they need to go through to get on. Once they get on, they like the community, they like being part of it, and quite honestly, when they come onto Talkspace, they know there's a pretty good chance they're gonna get pretty busy. So that helps them, too, in terms of knowing that there's gonna be a, quite honestly, a, you know, a funds flow. So that's the way, you know, that's the way we're visualizing the network work, which is probably the, at least some of the reasons that it grew substantially.
Hi. I wanted to ask, how are you tracking outcomes? What outcomes are you tracking?
Yeah.
How are you tracking them?
Sure. So it's a little bit second part of your question. So we track every three weeks on how they're doing. Actually, two months ago, we hired a new Chief Medical Officer. She's responsible for clinical oversight and clinical outcomes. So that's a. It's the whole quality, quality metrics, clinical outcomes is a very, very important part of it. I mean, there are two things we do. Well, it's one of two things we do, but basically, our product is our therapists and how they deliver care. So if we don't get the therapists right and how they deliver care and the outcomes being good, then we shouldn't be doing what we're doing, and it will reflect in how people come to the network. So it's a really big deal for us, to be quite perfectly frank.
I'm a physician by training, you may know. So clinical outcomes and quality, you know, metrics is really, really important to us.
I'm also a physician at a healthcare-
Yeah
... startup, so I, you know, I, I really champion the fact that we do see more MDs in the CEO position in healthcare companies. Because I really feel, you know, I don't know how it is with you speaking to other non-MD CEOs of other healthcare startups, but I, I really think that the bottom line is putting patient care first and then that will take care of the bottom line. Are you feeling that when you speak to other people that are not MDs, and excuse my bias here, in your position, that, you know, they're missing the mark in terms of delivering care first and patient care and the revenue second?
Yeah, I'm not gonna take the bait on criticizing other CEOs to be perfectly frank. But I'll give you my perspective is there's a lot of good people who lead companies who do it a lot of different ways. I think that as a physician leader, the difference is, let's put it this way: You bring a clinical bent to the discussions that are happening in the room with your executive team. I practiced for 20 years, you know, so the-
So psychiatry?
No, so don't... I'm a vascular surgeon by training, so, so it has a total irrelevance to, to psychiatry. But but it is an important, you know, it is an important piece of the pie relative to when we're talking about clinical outcomes and what's important. But you could get there a lot of different ways. But yeah, I, you know, it's, it has been important for me personally in terms of, you know, how I lead. Another question?
Dr. Cohen, just in the past few months, I understand that you've announced a couple of strategic partnerships, and I know that you kind of hinted at that earlier in your presentation. Would you like to just speak about that a little bit?
Sure. So one of the things we did last year, which was on the list, is we put in place a business development process, and put somebody in charge of really doing business development, which we hadn't really done that much in the past, and that means it was talking to... So I would say we were just getting started. We announced two partnerships recently, one with this, with a company called Evernow. And what it is, is for women who are helping to manage their journey through menopause. And what it is, is we're now the therapy partner for Evernow to provide therapy to women who as they navigate through that journey. The second one, which was announced, was Oura Ring. And Oura Ring is the ring, you know, people wear to measure a whole bunch of biometric data.
But what it is for there is their the Oura Ring shares their sleep data with the therapist for people who are on the treatment, so that the therapists are able to help navigate patients relative to what their sleep cycle looks like. So Oura Ring and Evernow were announced within the last couple weeks, couple of months. But there's a ... I will tell you, this year, there's a lot more to come. You know, there's it's a, the list is fairly extensive right now, so.
Any other questions from the audience? Maybe one more here in the middle.
When you're looking for strategic partners, what are you seeking with the partnerships? Are there scales of impact that you're seeking-
Sorry, just-
That's all right. So when you're seeking partnerships with different groups-
Sure.
What are you seeking in those partnerships? Is it to reach more audience, or is it to impact certain audience groups? Like, what is it that you're seeking in your partnerships right now?
Quite honestly, it's like Jennifer likes to say, like, everybody wants mental health therapy or, you know, therapy in some way or another. So the reason I say that is we're not limiting it in any way to who's talking to us. Now, we have specific areas we might be interested in. I would say interestingly enough, on the primary care side, primary care physicians, primary care physician groups, how do they refer to us, et cetera. But there are multiple, multiple other areas, whether it's a mental health disease specific or outside that, like I said, that are people looking for it. So, it's really built... We have just a tremendous amount of inbound right now. And then in addition, there are some particular areas that we might be looking for.
I would say the physician referral thing is a big, important interest of ours to get physicians to understand that by referring their patients to Talkspace, it doesn't cost their patients anything 'cause if they're in-network, and it's an easy button for them. So we've built a mechanism for them to be able to refer to us and to send them back a note and integrate it into their electronic medical record. So that's an important initiative of ours going forward.
Well, just being cognizant of time, I want to thank you both for being here-
Thank you.
And thank everybody here in the audience. And just see if you had any closing comments for us. Thank you.
All right. Thanks.
Thank you.