Talkspace (Nasdaq: TALK) served more patients than ever before in the second quarter of 2021 — it’s first as a publicly traded company — and the virtual behavioral health provider has its eyes set on product offering expansion in the quarters ahead.
At the same time, though, the company experienced pain points such as losses largely attributable to high customer acquisition costs in Q2.
“While our B2C revenue grew substantially, we and many other of our peers are experiencing elevated customer acquisition costs due mainly to a material increase in the cost of digital advertising,” Talkspace co-founder and CEO Oren Frank said Monday on the company’s Q2 earnings call.
Headquartered in New York, Talkspace provides a variety of virtual behavioral health services, which are available 24/7 via voice, video and text messaging in all 50 states. The company has a business-to-consumer (B2C) line, through which it serves customers directly, as well as a business-to-business (B2B) line, through which it serves enterprise clients and individual health plans.
Founded in 2012, Talkspace went public in June of this year, months after agreeing to a $1.3 billion merger with Hudson Executive Investment Corporation, a special-purpose acquisition company (SPAC).
In its first quarter as a publicly traded company, Talkspace grew its active members to approximately 61,500, up more than 40% year-over-year, hitting an all-time quarterly high for the company. Also in Q2, it saw net revenue increase to a record $31 million, up 73% from the same quarter a year earlier; that includes $21 million in B2C net revenue and $10 million in B2B net revenue, up 36% and 321% year-over-year, respectively.
“This is exactly where we want to be at this point in the year and underscores our success in moving aggressively into the enterprise arena,” Talkspace President and Chief Operating Officer Mark Hirschhorn said during the earnings call.
As such, Talkspace reaffirmed its revenue guidance for 2021, with the company on track to hit $125 billion for this fiscal year.
In the months to come, Talkspace will focus on growing its product offerings, Frank said on the call. In fact, he said the company would use the approximately $250 million of cash it ended the quarter with to finance the addition of new products and score new partnerships.
When it comes to what those new offerings will look like, Talkspace is planning to add live messaging to compliment its current phone and video features in the fourth quarter, Frank said. Additionally, it plans to expand its clinical expertise. Currently, it boasts about 20 clinical specialties in the mental health realm.
“We are planning to add forms of group therapy … ,” Frank said. “And then we look at the other vector, which is conditions and acuity, and we’re definitely very interested in helping substance use disorder patients. This is the clear request from some of our partners in the large plans.”
He went on to call the company’s services strategy as “full-stack,” noting that Talkspace hopes to become a comprehensive behavioral health provider.
Meanwhile, on a less positive note, Talkspace logged an adjusted EBITDA loss of about $12 million in the second quarter of 2021, compared to a loss of about $300,000 a year earlier. Hirschhorn and Frank pointed to the cost of acquiring customers on the B2C side as a major contributing factor to those losses.
To help address the issue, Talkspace has increased its advertising budget; enhanced its medical grade clinical capabilities; prepared to launch a number of new product features and distribution channels to drive organic growth; and undertaken a number of operational improvements to mitigate the impact of the digital advertising inflation.
“While advertising costs have dramatically increased during the first half of this year, the current environment makes it more difficult to predict when customer acquisition costs will ultimately normalize,” Hirschhorn said. “As such, we will not be providing any updates to guidance on EBITDA for the remainder of this year.”
Talkspace’s net loss for Q2 came in at about $30.4 million, compared to a net loss of about $600,000 a year earlier.
Talkspace’s stock closed at $5.93 Monday, up about 3.7%.