8-K
Talkspace, Inc. (TALK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 8, 2022
Talkspace, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-39314 | 84-4636604 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
| Address Not Applicable | Address Not Applicable | |
| (Address of principal executive offices) | (Zip Code) |
(212) 284-7206
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange<br><br>on which registered |
|---|---|---|
| Common stock, $0.0001 par value per share | TALK | Nasdaq Global Select Market |
| Warrants to purchase common stock | TALKW | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
Talkspace, Inc. (the “Company”) issued a press release on November 8, 2022 announcing its financial results for the third quarter ended September 30, 2022. A copy of the press release issued in connection with this announcement is furnished as Exhibit 99.1 attached hereto.
The information in this Item 2.02, including the information contained in Exhibit 99.1 of this Current Report on Form 8-K, is being furnished hereby and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Press Release issued by Talkspace, Inc. dated November 8, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| Talkspace, Inc. | |||
|---|---|---|---|
| Date: | November 8, 2022 | By: | /s/ Jennifer Fulk |
| Jennifer Fulk<br><br>Chief Financial Officer |
EX-99.1
Exhibit 99.1
Talkspace Reports 2022 Third Quarter and Nine Months Results
Strong acceleration in B2B revenue growth
Added ~9 million eligible lives and 10 new enterprise accounts in the quarter
Meaningful actions taken to reduce operating expense run-rate and drive efficiencies
NEW YORK, November 8, 2022 – Talkspace, Inc. (Nasdaq: TALK), a leading virtual behavioral healthcare company, today reported 2022 third quarter and nine months results as summarized below. All financial results refer to 2022 third quarter or nine months and the related prior-year period unless otherwise stated.
| Three Months | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period ended September 30, 2022 | Results | Variance from Prior Year % | Results | Variance from Prior Year % | ||||||||
| (In thousands unless otherwise noted) | Unaudited | Unaudited | ||||||||||
| Number of B2B eligible lives (in millions) | 86.1 | 52 | % | 86.1 | 52 | % | ||||||
| Number of completed B2B sessions | 111.4 | 56 | % | 298.0 | 55 | % | ||||||
| Number of B2C active members 1 | 17.9 | (36 | )% | 17.9 | (36 | )% | ||||||
| Total revenue | $ | 29,332 | 11 | % | $ | 89,326 | 6 | % | ||||
| Gross profit | $ | 14,595 | 3 | % | $ | 44,163 | (13 | )% | ||||
| Gross margin % | 49.8 | % | (4.0) pts | 49.4 | % | (10.7) pts | ||||||
| Operating expenses | $ | 34,446 | (13 | )% | $ | 106,290 | (8 | )% | ||||
| Net loss | $ | (17,983 | ) | * | $ | (61,365 | ) | (47 | )% | |||
| Adjusted EBITDA 2 | $ | (15,463 | ) | 26 | % | $ | (50,835 | ) | (17 | )% | ||
| Cash and cash equivalents | $ | 152,639 | (32 | )% | $ | 152,639 | (32 | )% |
(1) Reflects active members at the end of the period.
(2) Adjusted EBITDA is a non-GAAP financial measure. For a definition of the measure and a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Results to GAAP Results.”
* Percentage not meaningful.
“Our third quarter performance was characterized by a significant acceleration in business-to-business (“B2B”) revenue growth, driven by higher penetration of our in-network services and new enterprise client wins, offset by an anticipated decline in business-to-consumer (“B2C”) revenue as we continue to optimize consumer marketing spend,” said Chief Financial Officer, Jennifer Fulk. “We are working with renewed emphasis on downsizing our cost base and extracting operating efficiencies, while continuing to focus on our B2B franchise and investing in compelling and profitable growth initiatives.”
Nine Months Key Performance and Financial Metrics
• Revenue grew 6% to $89 million, driven by a 72% growth in B2B revenue, partially offset by a 24% decline in B2C revenue. B2B revenue performance was driven by growth in eligible lives and a greater number of completed B2B sessions. B2C revenue declined, as expected, due to our decision to continue to optimize marketing spend.
• Gross profit declined 13% to $44 million, and gross margin declined to 49.4%, due primarily to the revenue mix shift toward the B2B business, in line with our strategy, and higher therapist hourly compensation expense.
• Net loss was higher compared to the prior period at $61 million as lower marketing spend was offset by higher cost of revenues driven in part by higher therapist-related expenses, and a decrease in gains resulting from the revaluation of warrant liabilities. Adjusted EBITDA loss was $51 million, compared to $43 million in the prior-year period.
Third Quarter 2022 Key Performance and Financial Metrics
• Revenue grew 11% to $29 million, driven by a reported 117% growth in B2B revenue, partially offset by a 33% decline in B2C revenue.
• Gross profit declined 3% to $15 million, and gross margin declined to 49.8%.
• Net loss was $18 million, compared to net income of $2 million in the prior-year period, driven primarily by lower marketing spend, offset by higher cost of revenues and a decrease in gains resulting from the revaluation of warrant liabilities. Adjusted EBITDA loss was $15 million, compared to $21 million in the prior-year period.
Conference Call, Presentation Slides, and Webcast Details
The conference call will be available via audio webcast at investors.talkspace.com and can also accessed by dialing (888) 330-2391 for U.S. participants, or +1 (240) 789-2702 for international participants, and referencing participant code 2348878. A replay will be available shortly after the call’s completion and remain available for approximately 90 days.
About Talkspace
Talkspace (Nasdaq: TALK) is a leading virtual behavioral healthcare company committed to helping people lead healthier, happier lives through access to high-quality mental healthcare. At Talkspace, we believe that mental healthcare is core to overall healthcare and should be available to everyone.
Talkspace pioneered the ability to text with a licensed therapist from anywhere and now offers a comprehensive suite of mental health services from self-guided products to individual and couples therapy, in addition to psychiatric treatment and medication management. With Talkspace’s core psychotherapy offering, members are matched with one of thousands of licensed providers across all 50 states and can choose from a variety of subscription plans including video, text or audio chat sessions and/or unlimited text messaging.
All care offered at Talkspace is delivered through an easy-to-use, fully-encrypted web and mobile platform that meets HIPAA, federal, and state regulatory requirements. Talkspace covered approximately 86 million lives at September 30, 2022, through our partnerships with employers, health plans, and paid benefits programs.
For more information, visit www.talkspace.com.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking, including statements regarding our financial condition, anticipated financial performance, achieving profitability, business strategy and plans, market opportunity and expansion and objectives of our management for future operations. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast”, “future”, “intend,” “may,” “might”, “opportunity”, “plan,” “possible”, “potential,” “predict,” “project,” “should,” “strategy”, “strive”, “target,” “will,” or “would”, the negative of these words or other similar terms or expressions. The absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many important factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to: our history of losses; the rapid evolution of our business and the markets in which we operate; our ability to continue growing at the rates we have historically grown, or at all; the development of the virtual behavioral health market; COVID-19 and its impact on business and economic conditions; a deterioration in general economic conditions as a result of inflation, increased interest rates or otherwise; competition in our industry; and our relationships with affiliated professional entities to provide physician and other professional services. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described under the caption “Risk Factors” in our Annual Report on Form 10-K for the annual period ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022, and our other documents filed from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and we assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. We do not give any assurance that we will achieve our expectations.
Contacts
For Investors:
Jeannine Feyen
Director, Communications
(917) 748-5325
jeannine.feyen@talkspace.com
For Media:
SKDK
John Kim
310-997-5963
jkim@skdknick.com
Talkspace, Inc.
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended <br>September 30, | Variance | Nine Months Ended <br>September 30, | Variance | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||
| (in thousands, except percentages, share and per share data) | ||||||||||||||||||||||
| B2B revenue | $ | 16,793 | $ | 7,728 | 117.3 | $ | 45,129 | $ | 26,213 | 72.2 | ||||||||||||
| B2C revenue | 12,539 | 18,631 | ) | (32.7 | ) | 44,197 | 58,286 | ) | (24.2 | ) | ||||||||||||
| Total revenue | 29,332 | 26,359 | 11.3 | 89,326 | 84,499 | 5.7 | ||||||||||||||||
| Cost of revenues | 14,737 | 12,187 | 20.9 | 45,163 | 33,698 | 34.0 | ||||||||||||||||
| Gross profit | 14,595 | 14,172 | 3.0 | 44,163 | 50,801 | ) | (13.1 | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development, net | 6,182 | 4,278 | 44.5 | 16,793 | 12,023 | 39.7 | ||||||||||||||||
| Clinical operations | 2,222 | 1,896 | 17.2 | 6,314 | 5,886 | 7.3 | ||||||||||||||||
| Sales and marketing | 18,375 | 26,431 | ) | (30.5 | ) | 58,714 | 75,125 | ) | (21.8 | ) | ||||||||||||
| General and administrative | 7,667 | 6,794 | 12.8 | 24,469 | 23,112 | 5.9 | ||||||||||||||||
| Total operating expenses | 34,446 | 39,399 | ) | (12.6 | ) | 106,290 | 116,146 | ) | (8.5 | ) | ||||||||||||
| Operating loss | (19,851 | ) | (25,227 | ) | 21.3 | (62,127 | ) | (65,345 | ) | 4.9 | ||||||||||||
| Financial income, net | 1,885 | 26,743 | ) | (93.0 | ) | 889 | 23,700 | ) | (96.2 | ) | ||||||||||||
| (Loss) income before taxes on income | (17,966 | ) | 1,516 | ) | * | (61,238 | ) | (41,645 | ) | ) | (47.0 | ) | ||||||||||
| Taxes on income | 17 | 11 | 54.5 | 127 | 29 | 337.9 | ||||||||||||||||
| Net (loss) income | $ | (17,983 | ) | $ | 1,505 | ) | * | $ | (61,365 | ) | $ | (41,674 | ) | ) | (47.3 | ) | ||||||
| Net (loss) income per share: | ||||||||||||||||||||||
| Basic | $ | (0.11 | ) | $ | 0.01 | ) | * | $ | (0.39 | ) | $ | (0.64 | ) | 39.1 | ||||||||
| Diluted | $ | (0.11 | ) | $ | 0.01 | ) | * | $ | (0.39 | ) | $ | (0.64 | ) | 39.1 | ||||||||
| Weighted average number of common shares: | ||||||||||||||||||||||
| Basic | 158,330,684 | 152,267,870 | 156,056,900 | 64,638,182 | ||||||||||||||||||
| Diluted | 158,330,684 | 165,179,012 | 156,056,900 | 64,638,182 |
All values are in US Dollars.
* Percentage not meaningful
Talkspace, Inc.
Consolidated Balance Sheets
| September 30, 2022 | December 31, 2021 | |||||
|---|---|---|---|---|---|---|
| (in thousands) | (Unaudited) | |||||
| ASSETS | | |||||
| CURRENT ASSETS: | | | ||||
| Cash and cash equivalents | $ | 152,639 | $ | 198,256 | ||
| Accounts receivable, net | 8,692 | 5,512 | ||||
| Other current assets | 4,606 | 9,562 | ||||
| Total current assets | 165,937 | 213,330 | ||||
| Property and equipment, net | 845 | 624 | ||||
| Intangible assets, net | 2,714 | 3,436 | ||||
| Goodwill | 6,134 | 6,134 | ||||
| Other long-term assets | — | 82 | ||||
| Total assets | $ | 175,630 | $ | 223,606 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | ||||
| CURRENT LIABILITIES: | | | ||||
| Accounts payable | $ | 10,360 | $ | 7,429 | ||
| Deferred revenues | 5,458 | 7,186 | ||||
| Accrued expenses and other current liabilities | 13,206 | 12,562 | ||||
| Total current liabilities | 29,024 | 27,177 | ||||
| Warrant liabilities | 3,649 | 4,070 | ||||
| Other long-term liabilities | 288 | 86 | ||||
| Total liabilities | 32,961 | 31,333 | ||||
| Commitments and contingencies | ||||||
| STOCKHOLDERS’ EQUITY: | | | ||||
| Common stock | 15 | 15 | ||||
| Additional paid-in capital | 375,549 | 363,788 | ||||
| Accumulated deficit | (232,895 | ) | (171,530 | ) | ||
| Total stockholders’ equity | 142,669 | 192,273 | ||||
| Total liabilities and stockholders’ equity | $ | 175,630 | $ | 223,606 |
Talkspace, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (61,365 | ) | $ | (41,674 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation and amortization | 1,006 | 1,458 | ||||
| Amortization of debt issuance cost | — | 175 | ||||
| Stock-based compensation | 9,386 | 20,584 | ||||
| Warrant issue costs and change in fair value | (421 | ) | (23,842 | ) | ||
| (Increase) decrease in accounts receivable, net | (3,180 | ) | 596 | |||
| Decrease (increase) in other current assets | 4,848 | (8,515 | ) | |||
| Increase in accounts payable | 2,931 | 7,113 | ||||
| (Decrease) increase in deferred revenues | (1,728 | ) | 3,130 | |||
| Increase (decrease) in accrued expenses and other current liabilities | 1,465 | (134 | ) | |||
| Increase in other long-term liabilities | 202 | — | ||||
| Net cash used in operating activities | (46,856 | ) | (41,109 | ) | ||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (254 | ) | (622 | ) | ||
| Net cash used in investing activities | (254 | ) | (622 | ) | ||
| Cash flows from financing activities: | ||||||
| (Payments) proceeds from reverse capitalization, net of transaction costs | (645 | ) | 249,428 | |||
| Proceeds from borrowings | — | 6,000 | ||||
| Repayment of borrowings | — | (6,000 | ) | |||
| Payment of debt issuance cost | — | (50 | ) | |||
| Proceeds from exercise of stock options | 2,696 | 1,970 | ||||
| Payments for employee taxes withheld related to vested stock-based awards | (558 | ) | — | |||
| Net cash provided by financing activities | 1,493 | 251,348 | ||||
| Net (decrease) increase in cash and cash equivalents | (45,617 | ) | 209,617 | |||
| Cash and cash equivalents at the beginning of the period | 198,256 | 13,248 | ||||
| Cash and cash equivalents at the end of the period | $ | 152,639 | $ | 222,865 |
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. We believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for this non-GAAP financial measure to net (loss) income, the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review our GAAP financial measure and the reconciliation of our non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities.
We calculate adjusted EBITDA as net (loss) income adjusted to exclude (i) interest and other expenses (income), net, (ii) tax benefit and expense, (iii) depreciation and amortization (iv) stock-based compensation expense and (v) certain non-recurring expenses, where applicable.
Talkspace, Inc.
Reconciliation of Non-GAAP Results to GAAP Results
(Unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Net (loss) income | $ | (17,983 | ) | $ | 1,505 | $ | (61,365 | ) | $ | (41,674 | ) | |
| Add: | ||||||||||||
| Depreciation and amortization | 309 | 503 | 1,006 | 1,458 | ||||||||
| Financial (income), net (1) | (1,885 | ) | (26,743 | ) | (889 | ) | (23,700 | ) | ||||
| Taxes on income | 17 | 11 | 127 | 29 | ||||||||
| Stock-based compensation | 3,179 | 3,875 | 9,386 | 20,584 | ||||||||
| Non-recurring expenses (2) | 900 | — | 900 | — | ||||||||
| Adjusted EBITDA | $ | (15,463 | ) | $ | (20,849 | ) | $ | (50,835 | ) | $ | (43,303 | ) |
| 1) For the three and nine months ended September 30, 2022, financial income, net, primarily consisted of $1.6 million and $0.4 million, respectively, in gains resulting from the revaluation of warrant liabilities. | ||||||||||||
| --- | ||||||||||||
| For the three months ended September 30, 2021, financial income, net primarily consisted of $26.9 million in gains resulting from the revaluation of warrant liabilities. For the nine months ended September 30, 2021, financial income, net primarily consisted of $28.3 million in gains resulting from the revaluation of warrant liabilities, partially offset by $4.2 million in warrant issuance costs in connection with the Closing of the Business Combination. |
2) For the three and nine months ended September 30, 2022, non-recurring expenses consisted of $0.6 million in legal fees and $0.3 million in general and administrative expenses.