Virtual mental health company Talkspace (NASDAQ: TALK) projects it will reach profitability within a year, driven by an increased focus on the B2B market.
This is big news for the digital health company, which has struggled on the public markets over the last year and is still at risk of being delisted from NASDAQ.
“Talkspace has a defined, very significant path to profitability, within a very, very short period of time,” Dr. Jon Cohen, CEO of Talkspace, said Tuesday during the company’s Q1 earnings call., “And [we] will maintain a very strong cash position as a result of both the path to profitability and the cash that we currently have on hand.”
Among the tailwinds that Talkspace has working in its favor: a vast total addressable market and the fact there’s still has “tremendous demand” for services like the company’s virtual platform, Cohen noted.
Specifically, the company is continuing to double down on its strategy to address the need for behavioral health services in the B2B market.
Late last year, Talkspace announced that it would be focusing on the employer market and cooling on the direct-to-consumer business. Its behavioral health business line is focused on contracting with employers or employee assistant programs (EAPs).
Talkspace announced that its overall revenue increased 11% year over year to $33.3 million in Q1. Additionally, B2B revenue accounted for 70% of the company’s total revenue last quarter.
The company also reported that it completed 171 million B2B therapy sessions in the first quarter of the year, a 90% increase from the previous year.
Talkspace reported an $8.8 million net loss compared with $20.3 million during the same quarter in 2022, suggesting the company is, indeed, gaining ground on its profitability goals.
The company plans to drive its B2B business using a multipronged approach. The first initiative aims to increase the number of covered lives, both with new contracts and through its insurer partners adding new members. The company is also looking to improve the capture rate by marketing to employees and health care members with Talkspace as a covered benefit.
Talkspace is also looking to drive the B2B business through changes in pricing, Cohen said.
“For those of you who’ve been in health care a long time, it’s unusual to actually have the payers interested in something that you have and are actually willing to pay for it,” Cohen said. “And actually are quite honestly appropriately sitting at the table with us as we tell them our prices. And what we need to do in terms of increased pricing because of the cost of a therapy.”
The provider does project that D2C will always be a part of the business, but going forward, the company will give potential clients a list of options to check if Talkspace is covered by their insurance, employer or EAP program.
Cohen said he doesn’t have a specific number on how much of the business D2C will make up in the future, but he did note that out-of-pocket costs can drive down utilization.
“The No. 1 issue that stops people from getting health care is if they have to pay for it,” Cohen said. “I’m not just talking therapy; I’m talking about across the board. So the minute you put dollars in front of people that requires them to get a service, whatever service it is, it significantly decreases their relationship with the health care system.”
In addition to boosting its revenue stream, Talkspace has focused on driving down its cost of operations.
“The measures that have been taken … are labor cost efficiencies, which is how much is your headcount and how much you can survive with or without optimizing the marketing spend, which was a big deal,” Cohen said. “For those who follow Talkspace, you know, we’ve significantly decreased our marketing spend, consolidated renegotiating vendor contracts, focusing on sales, force, productivity, improving the network productivity, and, of course, a disciplined corporate spend.”
Provider efficiency, member utilization and provider satisfaction are three main focuses going forward, Cohen continued.