Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Talkspace first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Janine Sapine. Please go ahead.

Good morning and welcome to Talkspace's earnings conference call for the first quarter of 2025. I hope you've had the opportunity to access the press release we posted on Talkspace's IR website and the presentation of our earnings results. We'll use the presentation to walk you through today's remarks. Leading today's call are our CEO, Dr. John Cohen, and our CFO, Ian Harris. Management will offer their prepared remarks and will then take your questions. Certain measures we'll discuss on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of one-off items. Reconciliations of these non-GAAP measures are included in our earnings release and on our website, Talkspace.com. I also want to remind you that we will be discussing forward-looking information today, which may include forecasts, targets, and other statements regarding our plans, goals, strategic priorities, and anticipated financial results while these statements represent our best current judgment about future results and performance as of today our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect important factors that may affect our future results are described in our most recent sec reports in today's earnings press release for more information please review our safe harbor disclaimer on slide to. Now I will turn it over to Dr. John Cohen. Good morning and thank you for joining the call

today to review our first quarter results. We had a good start to the year with revenue growing 15 percent, session volume up 23 percent, and EBITDA up 153 percent over the first quarter of last year. May is Mental Health Awareness Month. This year, we are reaffirming our commitment to breaking down barriers to care for millions of Americans with our Let's Face It campaign, where we demonstrate how Talkspace members use our platform to confront what may be holding them back. As a leading behavioral health provider with meaningful scale and reach, we are actively leveraging multiple channels, several of which I'll touch on today, to raise awareness and drive members to our solution. We view the work we do across all areas of our business as part of a cohesive strategy aimed at building the most comprehensive approach to delivering behavioral health care to more Americans. With nearly two-thirds of Americans having access to Talkspace through their insurance plans or their employee assistance plans, we remain focused on the most significant opportunity, which is driving engagement within that population. We took meaningful steps in the quarter to optimize our funnel through a variety of technological improvements aimed at getting more people onto the platform, but even more importantly, delivered better quality of care by keeping them engaged in their therapeutic journey. Specifically, we enhanced our real-time benefits verification with proprietary algorithms to overcome user and eligibility errors at the onset of registration. These efforts have reduced our drop-off rate by more than 12% at the early stage of the funnel, driving additional new registrations this quarter. No matter how a member pays for Talkspace, they are able to seamlessly switch to other payment methods and keep their same provider. Coverage may change, as is often the case each January, but the continuity of care with the provider won't. An example of this optimization is the creation of a new easy button for our EAP members to convert to their employer's behavioral health insurance coverage when they exhaust their EAP plan session. Users are now notified when EAP sessions are running low, thus reducing friction related to checking coverage benefits and making a switch while continuing with their existing provider. This is an incredibly important step to facilitate our members' continuation on the platform as well as to ensure the continuity and quality of care. These are just a few examples of the work our product team is implementing to improve our customer experience and provide care for as long as clinically necessary. We also remain relentlessly committed to delivering high-quality care and positive outcomes for users of Talkspace. Through our more than 30 peer-reviewed studies, we have consistently shown outcomes at parity with in-person traditional therapy, serving as proof of our efforts to show efficacy and quality across multiple modalities, while ensuring this work is all backed by third-party academic reviews. The high-quality care our network of therapists provides remains a key differentiator for Talkspace as a service provider as opposed to just a directory of providers. This is very important to our payer partners, especially as value-based contracts become more prevalent. As I have discussed in the past, we use qualitative and quantitative data and metrics across five key areas to assess our providers and our network. Armed with that data, we work extensively to ensure the highest quality care platform through rigorous hiring and onboarding standards, extensive training, education, and outreach, continued network and quality management activities, and risk management support. During the first quarter, we made progress in broadening the reach of Talkspace as an affordable option for care, now with nearly 200 million covered lives. As a result of our broad member access and our high levels of clinical quality, we are working diligently with our payer partners better integrate our solutions into their online member experiences to make it easier for members to discover Talkspace, and I am extremely pleased with our progress in this area. In January, we rolled out additional military coverage, launching TRICARE West. Talkspace now covers all of TRICARE's 10.5 million members, including families and dependents. Our reach into various military communities through a series of specialized grassroots efforts has been very successful and very cost-effective to date with significant numbers of military personnel and their family members engaging in therapy. We are seeing that this audience relies extensively on word of mouth and loyalty from recommendations within their communities and are very open to therapy. In January, we also began to deploy initiatives to address the Medicare population and as a result, we are seeing growth in our Medicare registrations. In addition, we are witnessing strong patient outcomes with this population, as 84% of Medicare members showed clinical improvement, surpassing typical expectations of around 70%. We will continue to focus on initiatives that seed organic awareness that Talkspace is now covered for Medicare beneficiaries. In fact, we just announced last week that Gary Livingston, a fan favorite from the popular Golden Bachelor franchise, is our Medicare spokesperson as we enter Mental Health Awareness Month. We believe that psychiatry is an important growth opportunity for the company. In the first quarter, we reconfigured a dedicated team to refine and relaunch our psychiatry offering for individuals 18 and older, which include medication initiation and management for commonly treated conditions such as anxiety and depression. As a covered benefit, we have seen a significant increase in demand for this offering from our partners and from internal referrals via our own providers treating therapy members that need this additional level of care. In addition, we recently expand our relationship with ZocDoc to include our psychiatry offerings. Our direct-to-enterprise pipeline remains strong, including a renewal with the City of Memphis and meaningful contributions from recent additions, including U.S. rowing, the U.S. Navy, and most recently, students at the University of Alaska, Anchorage. Last week, we announced another exciting agreement with Bark Technologies, the leader in online safety technology for kids. Through their phone and app, Bark covers 7 million children. Along with their technology installed in over 3,700 school computers, they provide safety alerts in 45 different categories and scan messages in over 30 social media apps, web browsers, and emails. They have detected and alerted parents to over 2.7 million episodes of possible severe self-harm situations. Talkspace will now be available on all Bark phone and Bark app users and will come preloaded on Bark phones, connecting teens and parents to Talkspace to help them navigate the many emotional challenges these teens face today. This partnership with BARC, in addition to our teen initiatives with multiple cities and schools around the country, builds on our commitment to addressing the teen mental health crisis in the country. In the past several months, we have announced several AI applications, including artificial intelligence augmented intake systems that surface key symptoms, psychosocial contacts, and diagnostic considerations, streamlining client onboarding and clinical assessments, including real-time clinical documentation, summarization, and decision support to reduce administrative burden. Client engagement tools that increase therapeutic adherence and continuity, including TalkCast, our personalized podcast feature for adults over the age of 18. Our goal with this product is to drive member engagement between sessions, keep members focused on their progress, and ultimately assist in clinical improvement. We have generated 6,000 podcasts in the first several weeks and are already receiving very positive member and provider feedback. In the last several weeks, we have validated a new risk assessment tool, a homicide violence ideation algorithm that is over 90% accurate in determining risks for violent behavior including homicidal ideation and surfaces this risk to clinicians in real time. I am purposely highlighting these AI initiatives in the context that utilizing advanced technology to deliver better mental health care solutions has been at the core of Talkspace since its inception when we developed asynchronous messaging as an effective method for delivering therapy. The next chapter in innovation and growth is to further integrate AI to deliver even better mental health support. With over a decade of experience in applying advanced technology to behavioral health care and owning the largest behavioral health data sets in the industry, we are now actively working on the development of a first-of-its-kind foundational large language model. Talkspace is uniquely positioned to build this foundational model trained on de-identified clinical data aligned with evidence-based therapeutic frameworks. Unlike horizontal general purpose models, this vertical AI platform will not only enhance existing Talkspace services, but also serve as a launchpad for future AI applications and behavioral services, unlocking new possibilities in clinical innovation. Finally, I'd like to proactively address a common question we've received amid recent market volatility. Our business is not directly affected by tariffs. More importantly, our long-term strategy has shifted the core of our business to an insured patient base, reducing reliance on out-of-pocket spending. As an in-network provider for nearly 200 million covered lives, we remain accessible and affordable. We are a national provider for Medicare, including Medicare Advantage, and continue to benefit from the federal investment in senior mental health. Since we're not in Medicaid, we are insulated from potential changes to those programs. To conclude my comments, I am very pleased with how we started the year and confident in our trajectory for the course of 2025. We expect continued demand for our convenient, affordable, in-network care and remain confident and our full-year guidance. And now I turn it over to Ian.

Thank you, John, and good morning, everyone. We're pleased we're reporting a solid first quarter in line with our expectations. Our total revenue for Q1 was $52.2 million, representing a 15% increase compared to the first quarter of 2024. This growth was driven by strength in our payer business, which was up 33% from Q1 last year and demonstrated continued strong performance across key metrics, including payer sessions, which totaled approximately 350,000 in the quarter, an increase of 23% year-over-year. Unique payer members completing a session in the quarter grew 17% year-over-year, reaching more than 101,000 in the quarter, and completed sessions per active member increased 5% versus a year ago. As it relates to our payer business, beginning this quarter, we will no longer be providing regular updates on our total covered lives figure. As John mentioned, we grew our covered lives by over 40% versus a year ago, and now cover nearly 200 million lives, a milestone we've spoken about previously, and one of which we are incredibly proud. We do expect to continue growing our covered lives, mainly through additional regional plans, including two of the largest ones that we expect to add later this quarter. However, we do not view this metric as particularly relevant for driving sustainable growth given all the success we've had in scaling to nearly $200 million. Activating and engaging this large base of members who already have Talkspace as a covered benefit will be incrementally more important to our growth. Turning to DTE. DTE revenue for the quarter came in at $9.6 million, down 3% year-on-year and flat sequentially from Q4. Overall, our DTE pipeline remains strong across both the employer and youth segments, and we expect positive momentum and bookings throughout the rest of the year. Consumer revenue, which covers people choosing to pay out of pocket, declined by just over two million versus the same quarter in 2024 as the overwhelming majority of new members are utilizing their insurance coverage at checkout gross profit for the quarter was 23.3 million up seven percent from the previous year our gross margin came in at 44.6 percent compared to 44.2 percent in q4 2024 and 47.8 a year ago this is a continuation of the trend we expect to see as we continue to shift overall revenue mix more towards our payer business which will benefit the company given the superior long-term economics and lifetime value for members under the payer focus strategy during the quarter we also maintained our focus on operational efficiency total operating expenses were 24.4 million an increase of 1 million versus q1 of last year due to the increased investments in marketing we've spoken about previously As a percentage of revenue, total OPEX was 46.7% versus 51.5% in the first quarter of last year. We achieved a gap net income of $300,000 in the quarter, an improvement from a $1.5 million loss one year ago. Adjusted EBITDA for Q1 was $2.0 million, an increase of $1.2 million versus the same period last year. Turning to the balance sheet. As I've mentioned previously, one of our key attributes is the strength of our balance sheet. We ended the first quarter with $108 million in cash and cash equivalents, including available for sale securities, a decrease from $118 million in the fourth quarter. The $10 million sequential decline was primarily driven by our repurchase activity under our previously announced share repurchase program. In Q1, we bought back approximately $7 million of stock, bringing our total repurchase activity to $18 million since our initial authorization of the program one year ago, turning to our outlook for the year. We are reiterating the full-year financial outlook provided on our last call, which consists of revenue between $220 and $235 million, representing 21% growth at the midpoint, and adjusted EBITDA of $14 to $20 million, an increase of 144% at the midpoint. Talkspace remains a leader in the behavioral health market, and our commitment to high-quality care continues to resonate with our payer partners, our customers, our network of therapists, and most importantly, with our members. I'm very pleased with our solid start to the year and look forward to building on our momentum throughout the remainder of the year. With that, we can open up the call for questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment, please, for your first question. Your first question comes from the line of Ryan Daniels of William Blair. Please go ahead.

Yeah, guys, good morning, and thanks for taking the questions. First off, maybe a question around Medicare Advantage that's twofold, and I'll start with the first one, just given the very positive clinical data you're seeing that's above expectations. I'm curious how you use that to market to other MA plans to perhaps expand your entry into those. Can you comment on that? Thanks. So for the MA plans, we're seeing

a lot of, you know, interest and participation in the MA plans through multiple payers and regional plans. You know, our view right now is the MA plans are viewing it as standard Medicare. in other words, they're offering it to their MA members. We suspect that at some point in the future, we'll develop deeper relationships with some specific MA plans relative to possibly a PMPM-type offering. We haven't done that yet in terms of a, quote, value-based contract in that way. But we are seeing a significant amount of interest. Okay. And then also on Medicare

Advantage or Medicare fee-for-service, have you guys delineated maybe the marketing budget for the year. I know you've talked about being a new market, not knowing what channels will resonate or what the lifetime value will look like. So I'm curious as we're approaching the fifth month of the year, if you've got a little bit more data and have kind of honed in what your advertising outlook is for that segment. Hey, Ryan, it's Ian. Good morning.

Morning. We're pretty, as we've talked about in the past, we're very much taking a portfolio approach in our go-to-market overall which is reflected in our in our ad spend in our media planning so you know we start the year with the general framework across sort of core commercial military and then medicare and ma we're as we've i think touched on before very data driven around that right so that those budgets and those relative allocations can change fairly substantially quarter to quarter and even month to month so there's no number i'd put out for you in terms of pegging it to we're effectively solving for the best roi while at the same time understanding as it relates to medicare specifically it's a new cohort it'll take several quarters um to figure out so in that case we are willing to you know lean in a little bit more on investments and understanding that it'll take time to figure out the roi on the contrary military i'd say has actually really exceeded our highest expectations. And so that's also a newer cohort. That one, just given the sort of location-based media channels we can pursue, sort of the on-base media channels and outlets, the sort of community engagement platforms, we've seen really, really good traction and success in the military. So while that one is new, I would expect us to lean in there more just given the returns we're seeing.

Okay, perfect. And then last one, I'll hop off. Just on the kind of technology improvements for benefit checking, and you mentioned the easy button to switch between EAP and kind of coverage. How broadly is that rolled out? It seems like it's having, you know, pretty reasonable impact on either use or continuation of engagement. So I'm curious if you rolled that out broadly or if it was more of a pilot with certain employers or payers. Any color there would be great. Thanks and congrats again.

Thanks. We're in that process now of rolling it out. Basically, plan by plan, meaning employer by employer. And it is, as per your observation, it does have a significant impact. The whole idea of not having to switch over, re-enter, single sign-on, whatever you want to call it, does make it much easier for people to switch over to their benefits. So we're in a very big way leaning in on this right now, and it is having a positive impact.

Great. Thanks again, guys. Sure. Your next question comes from the line of Stephen Detrick

of KeyBank Capital Markets. Please go ahead. Hey, guys. Thanks for the questions. First, how has patient retention changed over the last maybe six or 12 months as you continue to add technology enhancements? And then secondly, the follow-up, can you remind us what portion of your 2025 guidance, your revenue guidance is expected to come from Medicare and then military? Thanks.

Hey, Steve. On the second question, we don't break that out. Again, you know, internally we have a range of outcomes in terms of where the volumes ultimately come from. So there's no shortage of sort of combinations and permutations of sort of how we get to plan. as you can imagine we take a pretty conservative approach in discounting um the various sort of end markets right so um i wouldn't i wouldn't peg a hard number to it if again if we're not seeing the returns in one area we'll we'll pivot spend to another while we figure out that former and sort of go at it proactively like that um your first question i think was on retention what what technology is doing for that yeah so i would point out you know the session velocity metric that we point to um is one indicator from for that so that was up five percent year on year in the first quarter again it's one good indicator going forward we're actually kind of seeing the marketing investments we started in q1 really start to have an impact as we exit in March and seeing really strong checkouts in April. And so that actually, the session velocity metric, I just want to flag, make it a little bit skewed because of that increase in new users. But as a general matter, things like TalkCast and these other sort of product enhancements we're making, we do track and measure the retention impact. So it's all positive to LTV. It does, however, when we roll out a new feature, take several quarters for us to really see that change in sort of average duration of the user, right? We've got to make sure time goes by and see how much longer those folks stay on the platform, but all indications so far are positive.

All right, thanks.

Your next question comes from the line of Charles Reed of TD Web Bank. Please go ahead.

Yeah, thanks, guys, for taking the question. Hey, just wanted to follow up maybe a little bit on sort of sales and marketing expense. If we think about that, converting people that have access to Talkspace and getting them engaged, I think sales and marketing expense was a little bit lower than we kind of expected, obviously up a little bit year over year. And Ian, I get that you're saying that you want to see how some of the programs are tracking. But any reason not to maybe push the pedal a little bit more aggressively here, or is this something that we could expect as certain channels work better than others, we could see more aggressive spend? Because it seems like this is the big opportunity, and if the demand is as great as we all think it is, it's just getting people aware of what's available to them.

Yeah, thanks, Charles. The short answer to your question is yes, absolutely. I mean, we're solving the overall budget underneath of that ad spend. It's very competitive and nimble, sort of going from one channel is not the right term, but sort of one end area of focus to another. I would say expect Q2 to be similar to Q1, right? So think of it as more like a first half or heavier on marketing investments, and then we see the benefits of that sort of get pulled through given the longer duration of a payer life relative to what you may have seen from us with a pure consumer model several years So yes, absolutely. I mean, a lot of it, Charles, is just the balance as we go month to month. So in general, the ROIs are very positive. We've been very transparent publicly that we're leaning in and making greater investments in this area. Where the timing falls month to month, it can hinge on a variety of things, right? what's going on in the environment uh what the rois are in in certain channels new things that we're testing and then also candidly new product things right if if we're delayed two weeks on a product rollout that we think will have meaningful conversion benefits then maybe we shift the marketing accordingly so it's i wouldn't read too much into um the quarter to quarter perspective i I would flag the first half is going to be sort of the heavier marketing spend. And then we reap the benefits starting in Q2, really, where you'll see a step up in growth thanks to those investments we made in Q1 and then see that pull through for the remainder of the year also.

But if the ROIs are very positive, any reason not to just continue spending in sales and marketing to drive growth? Throughout the year, you mean?

Yeah, exactly.

Like, yeah, I mean, I understand, you know, you can pull through benefits, but any reason not to just continue to drive a greater conversion.

Yeah. Yeah, we may. It's something we talk about all the time. And honestly, it's like it gets down to like the day to day. How many holidays are there in in this, you know, this month and what other events do you need to be mindful of? Things like that. So like mental health awareness month in May, this will be a very active month for us. If you're asking about the back half of the year, absolutely, right? But because we have both top and bottom line substantial growth in the plan and in our financial guidance, that's just the balance we need to manage, right? It's like it takes time to see the benefit, the R of that investment, right? So it's always just balancing those two factors.

Got it. And maybe just a quick – I'm sorry, go ahead, John.

You know, I was just going to say, remember, it's also not somewhat of the total, but a lot of it is specifics about where we spend it, right? So we know we need to spend, we're going to spend more on military. We know we're going to, there's other, some other subpopulations we're looking at. So it's not just where it is, but it's, you know, it's how it gets distributed across the social media channels, how it gets distributed across the search channels. So it's a significant number, but it's not just like it needs to increase. To us, actually, it's more about how you distribute the money.

And John, maybe I had a follow-up on the BARC partnership. Can you talk a little bit about how that works? Because it looks like BARC members get sort of the free mental wellness tools, sort of talk this talk space go and then you know they're getting some some discounts off their first month if they subscribe uh to talk space can you talk a little bit more about how this partnership works and maybe sort of the economics from your end and it is just available to all the seven and a half

million bark members off the bat yeah so um you know there's you know from there's a couple parts of it one is uh is of course there's the bark phone so we're going to have the talk space app will be loaded onto the bar phone so essentially when a parent gets some sort of notification they have easy access to talk space that's part of it the the second is will is they are on you probably saw you know literally 3 700 schools have their software embedded so that kids can only go certain places when they're using the school software so um we don't we're not we won't disclose the actual financial relationship between BARC. But we do think that, you know, the whole area of parental alerts because of our experience on the suicide ideation. And if you saw, we now have a homicide violence ideation, which we're rolling in. It's a really important, not just, you know, moral imperative for us, but it's a really potentially bigger channel for us to get referrals. If you're into or if you're looking at the whole parental protection issues, it's pretty remarkable, actually, because it's not just the suicide ideation and violence. It's, you know, they're monitoring for sex condoms, cyberbullying, risky applications, dangerous challenges, hate speech, drug, alcohol abuse. So, you know, there's a huge amount that they're looking at, which gives us an opportunity to be part of that as parents are looking for help for their kids when they find something they don't like.

Yeah, that's helpful. Okay, I appreciate it. Thanks, guys.

Your next question comes from the line of Bobby Brooks of Northland Capital Markets. Please go ahead.

Hey, good morning, guys. Thank you for taking the question. So it's been a little more than a full month since you've launched TalkCast. I was just really curious to hear, is this something that's being used for every client across the board? And if not, how is it decided who gets these personalized, intermeeting, personalized podcasts?

So, you know, you heard me talk about it. So just in the first couple weeks, we've launched about 6,000 podcasts. But the way it works is that the podcast is generated, and then it's given to the therapist. The therapist then reads through it and makes a decision about whether or not they will give that to the individual member or patient. Then after that, the patient member decides whether or not they're going to listen to it or not. So we're looking at that data now, but it is a decision that is up to the therapist about whether it's important or not to release to the individual patient. We are seeing, you know, some very positive feedback from both the providers and members who have used it. So early days, but it is available to everybody, to their therapist, and then the therapist decides.

Okay, that makes sense. So in that 6,000 number you're using, those are ones where therapist greenlit it and then the patient eventually listened to it?

That's correct, yeah.

Got it, got it. And then I was just really curious on the EAP switching to insurance. um could you just could you just maybe talk about a little bit like financially like remind us all like financially like how how different uh eap eap patient is versus one who then switches over through insurance i i you know i think that the insurance is probably a bit better for you guys

financially so i think that'd be helpful well so the so the eap program is a very different right You could have, your employer could say you could get three sessions to your EP program. You could say they could get 10 sessions or one a month. It's very variable depending on the plan. The important thing is, is that when you exhaust them, if you have three or five things that you want to stay with your therapist, because we are covering 200 million, roughly, you know, Americans, there's a very, very significant chance that you're going to be covered by your insurance, which is also your employer, right? So what we've done is we've made it easier to switch over from your EAP benefits now to keep your therapist and switch into your insurance plan, which then you submit like any other insurance claim to an insurer which is covered. So the easy button here is that if you're in an EAP program that your employer bought, but your insurance does not cover you, then what happens is basically you have to start over with a new therapist. And that's what we've addressed.

with this okay got it and then could you maybe just touch on like the different because isn't the the revenues that you receive through ea eap plans isn't that fixed and then on insurance obviously you're getting paid on a per session basis is that the right assumption there no so

hey bobby so eap is there it shows up in our pay revenue first of all and it's it's fee for service the same way uh an insurance coverage session would be got it thank you for clarifying and then and then just on your on your on your i think you had a pricing margin question generally speaking um so not not always the case uh the the rates but also the sort of session structure and so this gets into like length of sessions and flexibility you have on the insurance side that may not be the case in eap generally it's a higher priced session under the bh right of pure insurance coverage versus eap it tends to be because it's a limited menu oftentimes it's only 45 minute sessions allowed and then to john's point you're capped on sessions right and so your lifetime value is artificially constrained whereas now if we can facilitate for those who want to keep going after they exhaust their whatever it may be three six eight sessions allotted to them through their employer benefits and you know crucially you want to stay with your same provider we make that very easy to just have continued care and and let that lifetime value

run its natural course very helpful thank you and just the last one for me so sequentially you guys added about 5 000 plus payer patients i was just really curious to kind of hear what the makeup of that was obviously you talked about kind of military being a strong uh vertical for you guys in the quarter was that mostly military ads or just any more color you could provide on that

thank you it's across the board it's i think driven by military medicare but then also just uh organic growth and some of our existing commercial plans thank you very much and

congrats on the strong quarter guys i'll return to the queue your next question comes from the

line of Ryan McDonald of Needham and Company. Please go ahead.

All right. Thanks for taking my questions. John, maybe I'll start with you. Great to hear about the strong outcomes you're seeing in the Medicare population. And it made me curious, as you're measuring for quality in terms of the quantifiable metrics, can you talk about what a few of those metrics are? And have you been able to use sort of those outcomes in negotiations around rates with insurers? And are we at a point yet where we're starting to see sort of discussions around value-based care contracting at this point? Thanks.

So thanks. It's a great question. So without getting too deep, we have five basic areas of measure quality, service quality, clinical quality, client experience, productivity, and documentation. Now, within each of those, there are a bunch of other metrics and data points that we look at. And now we're also looking now at, you know, report cards and the feedback to the therapist and how we do that in a better way so that they see what's going on and how well they compare to the other therapists. So that's the broad base of the quality measurements and how we look at it. It's a really important function for us because, quite honestly, we think it's a big differentiator for us in the market. You know, I like to tell you, we're not a matching service. We are a full-fledged HIPAA-compliant healthcare provider, which monitors our quality and the quality of our therapy network. That's a, you know, a really big, big deal for us. So, what was the second part of your question? Was I wondering if you're starting to see Yeah. Yeah. Yeah. And I was impacting rates. Yeah. So right now, the answer is no. Although we do have I think, you know, we talk about publicly, we do negotiate with some increases in rates with the payers. Part of that negotiation when we are negotiating with the payers, quite honestly, is a very substantial quality discussion because we are gauged by the payers based on quality metrics in addition to other metrics such as first time to appointment, first time to second appointment, no shows, et cetera. So it's a basket of different indicators that they use, quality being a very important part of that because what the payers do is they will do audits for us. And they actually look, because we have a full-fledged EMR, you know, they look at our notes, they look at our quality notes, they look at how good the therapists are doing in terms of delivering care. So this whole issue around both renegotiation and contractual rates is very much related to what we're talking about. We do have some early value-based contracting. Most of it's very straightforward, which is stuff we've been doing for a long time, because a lot of it is related to first-time appointment, first-time second appointment, et cetera. But the payers are getting more sophisticated relative to monitoring who delivers better care.

Super helpful there. And maybe as a follow-up, it's great to hear sort of no tariff impact or nothing sort of on Medicaid with no exposure there. But one of the sort of, I guess, topics of discussion with the Trump administration has really been, you know, within the new budget, you know, there's, I think, about a $28 to $29 billion cut on behavioral health funding across a number of different organizations. We've seen sort of freezing of funding to schools, which is, I think, about a billion. Just given that you have sort of city, state, municipality, sort of school district exposure, you know, we've been a bit surprised at sort of the sources of funding that those entities sort of pull. Are you seeing any impact from sort of the freezing or the cuts here on behavioral health from the new administration on whether it's on sales cycles or contracting, any spend

Thanks. So another really point, a good question. So right now, the cuts that have been announced have been for all, for what we've read and seen, has all been in-person therapy. In other words, they're school-based counselors and in-person therapy programs. In addition to some related to gun violence, none of that impacts on us because of our virtual network. We actually believe that because we are much less expensive and we have a larger ability to scale, that it may actually be an opportunity for school districts to move from a dominant in-person model to a virtual model. So right now, we are looking at that. We are obviously very acutely aware of what's going on, but we have not seen – first of all, we have not seen any picture. Now, in terms of the discussions with school districts, we have not – we haven't seen it yet. So I haven't – you know, I've been in a room on a lot of discussions with the person who runs this – the vertical for us. We haven't heard from a school district yet that has said, oh, because of the cuts in funding, et cetera, we're not going to do anything. The corollary of that is our pipeline remains very, very substantial on the school side. But I would tell you, having said all that, I don't think anybody could really predict what's going to happen in the next three to six months on this. But right now, our view has been, I would say, neutral to positive on what's happened relative to mental health support for kids.

I understand. Appreciate all the color there, John. Thanks.

Your next question comes from the line of Stephen Valleket of Mizuho Securities. Please go ahead.

Great, thanks. Good morning, John and Ian. So I have two questions. I'll just ask him one at a time. I guess just the first one, the number of completed payer sessions came in a little bit lower relative to our modeling. But then conversely, though, the payer revenue per session came in higher. I think formulaically that was up about 8% year over year. I guess the first question is, you know, is that a sustainable run rate that the payer revenue per session for the full year, you know, could be up high single digits? Just wanted to get some more color on that.

I think you're referencing sort of the implied price per session and how that shows up. That's correct, yeah. Yeah, that's all formal leg. It wasn't provided a number of formal leg. Correct, yeah. So to sort of contextualize and remind folks, so that sort of implied payer price is subject to a few different variables. One is obviously contractual increases and sort of what the RAC rate is we're able to negotiate. So we've talked about some positive developments there in the past, and so we did have some effective Jan 1 benefits there. it's also just going back to bobby's question on bh versus eap sort of relative price per session it's very much influenced by mix of of bh versus eap the specific customer and also the specific cpt code which is largely correlated to the duration of session which again ph is uh tends to be longer and higher price and so you know the easy button thing should be accretive to this metric uh it also reflects our sort of rcm efforts our collection efforts and the improvements we've seen there so we had a whole bunch of favorability you know not by chance we're all we're pushing it all the right direction which you saw come through in that sort of eight percent year-on-year for Q1. I would say, you know, assuming sort of a flattish, if you model it that way, sort of price per session, I think where we end up in Q1 is a sort of good proxy for the rest of the year.

Okay. All right. That's perfect. Okay. Then the second question, I mean, I apologize that I missed this earlier. I think some of the questions were kind of geared towards this to some degree, but I think at the end of the day, the low end of the revenue guidance at $220 million implies, as you know, 17% growth year-over-year, you know, so with 1Q coming in at 15%, just remind us again of some of the biggest drivers of the reacceleration that's implied in the remaining quarters of the year to achieve the low end of the full-year revenue guidance.

Yeah, thanks, Steve. I mean, a lot of it is, which we've talked about the last couple quarters, the sort of very large new populations we've added over the last several quarters, right, namely Medicare, Medicare Advantage, and TRICARE in two parts, August and January, which we really waited until Q1 to start going after from a sort of engagement and marketing perspective. So that's underway in Q1, which are, again, completely new populations, and we'll see benefits as we ramp there throughout the year. And then it's also just on our commercial, I don't want to say core, But commercial sort of cohort and plans we have, the increased marketing investments we're making, which you can see is a pretty big step up from last year, a million bucks in just Q1. And to Charles' question, we'll keep our foot on the gas a little bit in Q2. And given the sort of longer duration, longer, better retention dynamics of a payer member, it takes time for that marketing investment to pay off, which we've already started to see in March and are very much seeing in April. So Q2, Q3, and Q4 revenue growth, I do expect to be substantially higher than the year-on-year growth we saw in Q1. And that's largely baked as a function of it takes a couple quarters to see the pull through of that one new user checking out and joining the platform, getting acquainted with his or her new therapist, and then the pull through longer tail sessions you see from that new user.

Okay. Got it. Okay. All right. Thank you very much.

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