Talkspace Inc. (NASDAQ: TALK) interim CEO and Chairman Doug Braunstein says that it can capitalize on data and analytics it hasn’t yet taken advantage of to pursue new opportunities in the value-based care space.
Braunstein made the case that Talkspace’s wide range of virtual mental health services and its analytic capabilities makes the company a prime partner in the quest to improve health outcomes and lessen health care spending.
“We have not begun to take advantage of [this] at all, but I think it is clearly in our plans,” Braunstein said. “We have great data and analytics and we are very well positioned to be a leader in value-based care for behavioral and I do not believe others are similarly situated.”
Beyond that, Braunstein did not elaborate further on the company’s value-based care ambitions.
Several executives in the space have previously told Behavioral Health Business that increased use of technology — such as telehealth, electronic health records and data analytics — is a must for successful value-based care adoption.
Talkspace offers synchronous, asynchronous and self-guided therapy products through its website and apps. Talkspace also offers therapy for adults (couples and individuals) and teens as well as psychiatry and medication management.
In a similar vein to value-based care, Talkspace is trying to prove its value to employer customers through studies that Braunstein said would validate that the company’s services reduce turnover, increases satisfaction and reduces medical costs within a workforce.
Talkspace’s B2B shift drove growth in Q1
On the whole, Talkspace is deepening its focus on large B2B customers, especially health plans and large payers. Braunstein said this focus on expanding its B2B customer pipeline drove quarterly increases in the company’s revenue, sessions completed and the number of people who have access to Talkspace products.
Talkspace grew revenue by 11% to $30.2 million year-over-year in the first quarter, slightly beating a Yahoo Finance analyst average estimate of $29.2 million. Talkspace’s net loss deepened by about 60% to $20.4 million or 13 cents per share. Analyst estimates called for a 14-cent per-share loss.
The company also expanded in the first quarter the number of people who can access Talkspace through an employer or a health plan to 76.5 million, a 54% increase from a year ago. This reflects the 20% increase in new B2B accounts in the first quarter of 2022 compared to the fourth quarter of 2021.
The company added Beacon Health Options, one of the nation’s largest behavioral health managed care and clinical services companies, as a client and expanded its relationship with Optum, the services and technology arm of health insurance giant UnitedHealth Group (NYSE: UNH).
Overall, revenue growth came from increased utilization in the aggregate of both segments, driven by the B2B segment. Active members in the quarter grew by 10% to 64,500.
However, the shifts in utilization and revenue figures reflect the increased emphasis on the B2B segment and a decreased investment on the B2C segment. Year over year, B2B revenue increased 50% to $12.9 million while B2C revenue decreased by 7% to $17.3%. Still, the majority (57%) of Talkspace’s revenue in the first quarter came from the B2C segment.
The number of sessions completed in the B2B segment increased 68% to 90,600. On the B2C side, the number of active members shrank to about 22,200, a 34% reduction compared to the same period last year.
Reduction in spending on the d2c business addresses key concern
Braunstein tied the reduction in B2C active users and revenue to the company’s diminished spending on marketing its B2C services. Since the third quarter of 2021, Talkspace has reduced its marketing spend for the B2C segment by 34%.
This is part of a wider effort to improve the company’s customer acquisition costs and reduce costs, a key recurring point in Talkspace’s earnings calls.
“We believe that we made modest improvements in conversion and customer acquisition metrics compared to last quarter,” Braunstein said. “ In fact, this is the first positive quarterly trend in our conversion data in the past four quarters for the company.”
Talkspace has faced significant turbulence since going public via a special purpose acquisition company (SPAC) in June 2021. Its stock closed at $9.19 on the first day of trading. It now sits at about $1.38 during after-trading hours on Tuesday.
The company parted ways with its co-founders — CEO Oren Frank and Clinical Services Head Roni Frank — after its third-quarter financial result revealed that it was failing to reach growth projections and was having customer acquisition challenges. It pulled its long-term 2021 guidance.
The Franks founded Talkspace in 2012 and led the company through its IPO.
In that third-quarter earnings conference call, Braunstein laid out a four-point turnaround plan — optimizing the synergies between its B2B and B2C lines, especially with customer acquisition; reprioritizing its product roadmap; investing more and improving its online marketing; and adding more staff therapists to its workforce.
Braunstein’s prepared remarks and the Q&A sessions with analysts didn’t again raise the prospect of Talkspace selling nor did the topic of finding a permanent CEO come up. Talkspace announced that it retained Los Angeles-based executive search and consulting firm Korn Ferry to advise on the search for a new CEO in November, when it announced the Franks were out of the business.
During the fourth-quarter earnings conference call, Braunstein hedged whether or not Talkspace was interested in being acquired, saying that company leadership was interested in whatever delivered value to shareholders.
An analyst note from Jefferies Research Services said that Talkspace could be a prime acquisition target for any number of potential buyers seeking to jump into the booming virtual behavioral health space.
The company is also facing a lawsuit seeking class-action status over allegations that Talkspace misled investors during its IPO process.
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