Earnings Call Transcript
Talkspace, Inc. (TALK)
Earnings Call Transcript - TALK Q4 2025
Operator, Operator
At this time, I'd like to welcome everyone to the Talkspace Fourth Quarter and Full Year 2025 Earnings Call. The press release and presentation of earnings results can be accessed on Talkspace's IR website. The presentation will be used to walk you through today's remarks. Leading today's call are CEO, Dr. Jon Cohen; and CFO, Ian Harris. Management will offer their prepared remarks and then take your questions. Certain measures that will be discussed on today's 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 the earnings release and on the website, talkspace.com. As a reminder, the company will be discussing forward-looking information today, which may include forecasts, targets and other statements regarding plans, goals, strategic priorities and anticipated financial results. While these statements represent the company's best current judgment about future results and performance as of today, actual results are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Important factors that may affect future results are described on Talkspace's most recent SEC reports and today's earnings press release. For more information, please review the safe harbor disclaimer on Slide 2. Now I will turn the call over to Dr. Jon Cohen.
Jon Cohen, CEO
Good morning, and thank you for joining the call today to review our fourth quarter and full year 2025 results. When I joined Talkspace at the end of 2022, the strategic pivot had already begun shifting from our Consumer model to a Payor fee-for-service model. Today, I am proud to look back at the progress we've made financially, operationally and towards our mission to deliver comprehensive, personalized mental health care to all. Since 2022, we have grown revenue at a CAGR of 24%, driven by Payor Sessions annualized growth of about 56%. During this time, our operating expenses as a percentage of revenue continued to decline, helping to drive operating leverage and improved EBITDA margins. For the full year of 2025, we delivered revenue of approximately $229 million, an increase of 22% year-over-year, driven by payer growth of 38%. In addition, we more than doubled adjusted EBITDA, growing from about $7 million in 2024 to $15.8 million in 2025, which represents an adjusted EBITDA margin of 7%. Our growth in Payor, where we now cover well over 200 million lives through insurance and employer benefits, is driven by two factors: one, strategic initiatives we have put in place to bring people to Talkspace, including targeted efforts to increase awareness and drive high-intent referrals as well as deepen partnerships with the Payors to improve the patient journey and make it easier to find care; and two, our expanding offerings within the Payor channel to cater to new populations and differing levels of acuity. Both of these initiatives are underpinned by our continuous improvements to the member journey and our clinical network. We continue to drive increased consumer awareness through our paid media strategies, search optimization, partnerships and scaling brand recognition. Our awareness campaigns have been very successful over the last three years, as recognition of the Talkspace brand continues to go up, while our spending on marketing has significantly decreased over the same period. Our initiatives to drive high-intent referrals have been successful with increasing volumes month-over-month from Amazon, Zocdoc and our strategic partners. We're also seeing a strong and growing presence of Talkspace in large language models due to the work our team has done to optimize on and off our website for increased visibility and citations. In the fourth quarter, general purpose LLMs drove an increasing percentage of traffic and checkouts as we continue to expand this new and growing channel. Recognizing that we provide high-quality clinical care, the Payors have partnered with us on several new initiatives to further simplify the patient experience. This includes directory integrations with several of our Payor partners and some utilizing single sign-on so that patients can log into both platforms with ease. Others are embedding Talkspace scheduling into their directories so that patients can book sessions without leaving the Payor site. We are currently working with one partner to launch the capability for their care coordinators to schedule Talkspace appointments on behalf of patients, a tool we will expand with other partners and Payors. During the year, we also expanded our offerings within the Payor channel. We invested in our psychiatry business, grew both military and Medicare enrollment, and acquired Wisdo, the lower acuity AI-powered social health platform specializing in peer-to-peer community and coaching. On military, our enrollment continues to grow month-over-month following our January 2025 launch, as does patient engagement through our direct-to-enterprise contract with the Navy. Our Medicare enrollment also continues to grow. And with the acquisition of Wisdo, we've seen increased interest in Medicare Advantage plans given Wisdo's proven impacts on loneliness and social isolation. In addition, Wisdo's partnership with Novo Nordisk to provide group coaching for patients on GLP-1s opens a new door for us into a previously untapped category of pharma partnerships. Our youth programs, which we initially launched at the end of 2023 across major markets, including New York, Baltimore, Seattle and North Carolina continue to deliver strong measurable impact on scale. In New York City alone, more than 45,000 teens are enrolled in our Teenspace program. Sixty-six percent of enrolled teens showed measurable clinical improvement with the most common presenting needs being anxiety, depression, relationship challenges and stress management. The program is reaching historically underserved communities with nearly 45% of participants living in areas with high health and income disparities and 82% identifying as BIPOC. Engagement remains very strong with over 90% of teams actively texting with their therapists and more than half choosing messaging as their exclusive modality. The results of these programs reinforce Teenspace as a scalable public-private partnership model and Talkspace's leadership in youth mental health solutions. Specifically, in psychiatry, we expanded our network of psychiatry providers to over 400 providers, and we made a number of improvements to the patient journey to streamline processes like simplifying medication management workflow to be able to send medications directly to the member's pharmacy of choice. In April, we launched our integration with Amazon Pharmacy, allowing members to seamlessly fill prescriptions from their Talkspace provider and get fast free home delivery, making for a more convenient patient experience. Further, we created an easy pathway for members using Talkspace for therapy to receive an internal referral to a Talkspace psychiatrist, an investment through which we are seeing strong traction. Turning to AI. We are continuing to utilize the technology to improve business operations and incorporate AI enhancements into the platform to further improve the patient journey and provider workflow. These enhancements have reduced friction in several areas, lowering the number of registration drop-offs and leading more patients to successfully begin their care journey. Once a member is onboarded, we have also made it easier to schedule their appointments, increasing the number of patients that continue care after a first session. These efforts have resulted in an increase in the number of checkouts and a 49% increase in the number of patients completing a third session in the first month of care. Another factor contributing to our increase in session growth has been the success of Talkcast, our individualized AI-generated podcast that I've talked about in the past. When members open a Talkcast episode between their first and second sessions, they are 20% more likely to complete a second and third session. To date, we have produced over 76,000 episodes, which have been overwhelmingly well received. Ninety-five percent of provider reviews and ninety-two percent of client reviews have been positive. In addition, our network management strategy has brought continued focus on curating our network of clinicians to optimize for the specific utilization trends we are seeing, ensuring that we have clinicians available in the right space at the right times to align with patient demand. Now let me turn to the TalkAI agent that we have been developing over the last year. Although general purpose large language models are now being utilized by a huge number of the global population, they were never built to support mental health. While these models have democratized access for millions, which is a good thing, they have unfortunately led to a rash of reported harmful outcomes. Mental health support requires something far more specialized and nuanced, including challenging distorted thinking, recognizing delusions and identifying risk in real time. The TalkAI agent we have built is designed to be the first safe AI agent specifically developed for mental health support, utilizing clinically recognized standards of care with continuous human oversight and privacy HIPAA protection. The LLM is trained and fine-tuned on Talkspace's massive mental health data set, identifies 10 areas of risk in real time, supports appropriate decision-making and avoids the pitfalls already seen in general purpose LLMs. It keeps clinicians constantly in the loop with clear escalation pathways to connect users at risk to a licensed human clinician in real time. TalkAI does not replace clinicians, but rather extends their reach, adhering to strict clinical standards while identifying new users who may need human interaction. I believe that the need for human care by trained therapists will increase as millions more people will be identified that need professional help beyond what our agent can provide. We are currently beta testing this quarter with the expectation to be in the market late in Q2. In summary, as you can see, we have come a long way in three years. There remains a tremendous opportunity in front of us and one we are positioned to continue to aggressively pursue. In addition to the core business, we believe we have strategically positioned ourselves to be a leader in the application of AI to mental health services in this rapidly moving current environment. I am pleased with the Q4 results and our full year business performance. Looking ahead to 2026, I am very optimistic about our capability and opportunity to continue to grow the business, expand profitability, and I'm encouraged by the strong momentum we have seen thus far in 2026. And now I'll turn the call over to Ian.
Ian Harris, CFO
Good morning, and thank you for joining us. I want to first echo Jon's sentiment that we ended the year with some really solid momentum, and we are well positioned for that to continue. Today, I'll review our fourth quarter financial results before walking you through our financial outlook for 2026. Turning to the fourth quarter results. Total revenue for the quarter was $63.0 million, representing a 29.3% year-over-year increase. Our Payor business continued to be the primary growth driver with revenue of $47.7 million, up 41% year-over-year. Growth was driven by increased session volume and expansion across existing clients. Specifically, the number of sessions for the quarter was 450,000, representing a 36.3% year-over-year increase. Furthermore, the number of unique active Payor members for the quarter was 124,000, representing a 29.7% year-over-year increase. Within direct-to-enterprise, revenue was $11.6 million, an increase of 21.8% year-over-year. As we noted on our third quarter call, several new launches shifted from the third quarter into the fourth, and DTE also benefited from the inclusion of the Wisdo acquisition, which closed on October 1 and benefited from revenue associated with implementation work for certain new accounts. Consumer revenue was $3.7 million year-on-year, consistent with our intentional prioritization of both Enterprise and Payor channels. Gross profit was $26.9 million, up 24.4% year-over-year, resulting in a gross margin of 42.7% in the quarter. This was down 169 basis points year-over-year, primarily reflecting revenue mix shift towards Payor. Operating expenses were $23.1 million, an increase of 9.6% year-over-year. Importantly, operating expenses as a percentage of revenue improved meaningfully to 36.7%, down 660 basis points compared to the fourth quarter in 2024. Adjusted EBITDA was $6.6 million, representing 147.1% year-on-year growth with an adjusted EBITDA margin of 10.4%, up nearly 500 basis points versus the prior year. Turning to the balance sheet. We ended the quarter with $92.6 million in cash, a decrease of $25.2 million year-on-year, driven primarily by our share repurchases, which totaled $17.2 million in 2025 for the full year as well as the acquisition of Wisdo. For the full year 2026, we are providing initial guidance as follows: we expect revenue to be in a range of $275 million to $290 million, representing 20% to 27% year-on-year growth. We expect adjusted EBITDA to be in the range of $30 million to $35 million, representing growth of 90% to 122%. Looking back at our 3-year outlook introduced in early 2024 and which extends through this year, we expect to deliver a 3-year revenue CAGR of approximately 23% using the midpoint of our 2026 guidance, which is consistent with the 3-year outlook stated target of 20% to 25%. From a profitability perspective, we anticipate exiting 2026 with EBITDA margins in the mid-teens towards the high end of our 12% to 15% target range from that outlook. I want to share a few points on the underlying assumptions behind our outlook. From a quarterly cadence perspective, we anticipate revenue growing over the course of the year and similar to last year with the first half representing a little less than 50% of annual revenue as active Payor members and sessions grow throughout the year. In terms of our revenue mix, we expect Payor revenue growth to be in line with the Payor growth rate we experienced in 2025, driven by the activation strategies Jon outlined earlier. As we've discussed in the past, the Payor business brings a high degree of visibility given the longer retention of a Payor member compared to someone paying out of pocket and a material portion of our 2026 Payor revenue will actually come from Payor members already on the platform as of year-end 2025. We expect D2E to grow in the low single-digit percentages again this year. As a reminder, the first quarter historically has the highest number of accounts up for renewal and therefore, sees the highest attrition of any quarter in the year. Q4 performance also benefited from certain implementation revenue. So we would expect D2E revenue in Q1 to be sequentially lower than Q4. And finally, Consumer revenue will continue to decline by design. However, it's a much smaller headwind overall given the less material starting point in 2026. While the midpoint of 2026 revenue guidance represents 23% growth year-over-year, our Q4 run rate revenue, which is over $250 million, implies 12% growth at the midpoint. This is thanks to the accelerating growth we drove over the course of 2025. These trends, along with the internal efficiency measures that we continue to implement, will drive further operating leverage through the P&L. Specifically, for adjusted EBITDA margins, we anticipate starting the year in the high single-digit percentages and exiting 2026 in the mid-teens, which will result in a similar quarterly cadence of adjusted EBITDA as we saw in 2025. In summary, we believe Talkspace is well positioned for sustainable growth and continued margin expansion, supported by strong momentum in our Payor business, improving operating leverage and increasing visibility into future demand.
Operator, Operator
And we'll take our first question from Steven Dechert.
Steven Dechert, Analyst
Congrats on a solid quarter. Just around your large language model that you're currently in beta testing, what do you see as the key challenges in getting people that are currently using the general purpose large language models using yours as you roll it out?
Jon Cohen, CEO
Thanks, Steve. This is obviously very much a work in progress. As we mentioned, we are currently in beta with people signing up to test what this looks like. It's difficult to say at this stage how it will be received, what kind of users we will attract compared to other large language models. This is still a developing situation. So my main point is to stay tuned. We will provide a lot more information once we complete the beta. We've seen some initial results, but for now, I encourage you to stay tuned and see how it unfolds. It will be positioned differently from general purpose large language models. I'm not downplaying that; it's just that we are still in the early stages and have a lot of interesting insights at the moment, and we will discuss it further as the coming months progress.
Steven Dechert, Analyst
Got it. Yes, totally understand. And Ian, you just mentioned on the '26 guide that most of the revenue is already from members in the platform. So I guess I'm wondering, does the high end of the guide that's from additional new members that aren't currently on the platform? Just maybe what gets us to the high end of the guide said more simply?
Ian Harris, CFO
Yes. Steve, just to clarify, I think in my prepared remarks, I said a material amount of Payor revenues from existing members on the platform. I want to call that out just because people forget, right, under the Payor model, that sort of longer lifetime on the platform and that sort of longer tail of revenue allows us from a visibility standpoint to have a much higher level of conviction in terms of modeling out the Payor revenue, right? So as we start Jan 1, it's not a majority, but think of it as a 30% to 50% range of our Payor revenue is actually coming from folks we already have on the platform. But in addition to that, obviously, we're going to, to Jon's comments, keep driving both from paid marketing work, additional organic work we're doing on the marketing front, which there's a lot of really exciting LLM sort of optimization work we're doing. And then very importantly, the direct integrations we're doing with the Payors and getting sort of more embedded with the Payors to lower that friction for people that find us through their insurance portal. So that will all drive new users throughout the year as we've done sequentially throughout '25, which then obviously has that long tail of sessions pulling through as well.
Operator, Operator
We'll take our next question from Ryan MacDonald with Needham.
Ryan MacDonald, Analyst
Congrats on a great quarter. Maybe just to sort of double down on the Directory integrations. Obviously, showing some great success with the first Payor partner that you've rolled that out with. Can you just remind us on sort of how many additional sort of deep integrations you'll have sort of with additional partners this year? And I guess, what have you learned from the first partner that can be replicable to sort of continue that strong utilization with you?
Ian Harris, CFO
Yes, I can start, and then I'll hand it over to Jon. I mean on the first Payor, like you said, it's been extremely successful. They're happy in so far as they're bringing a much friendlier consumer experience to their members and making it easier and candidly less frustrating, right, that sort of finding your care journey. And we view it as, obviously, from a CAC perspective, very accretive, right, to get that incremental conversion and additional traffic coming from the Payor. So it's early in '26, Ryan. So we're obviously working hard to do more. I would say line of sight we have today, there's probably, depending on how you look at it, call it, 3 directory integrations we're doing in the early part of '26. So for sure, at least 3. I think in terms of what that represents materiality-wise versus one last year, it's probably about a similar size all in all, population-wise, maybe a little bit bigger in the aggregate, the 3. So as big or bigger of an opportunity as we saw with the integration in '25. What we're learning is, it's interesting. Some of these directories, it's sort of the first time they're doing these integrations. So we are sort of in this beneficial position where we're working in tandem with them on the design of how the directory works, which obviously gives us a level of influence to sort of shape what that experience looks like from our own knowledge, having done this for a decade as a marketplace business ourselves. So they really appreciate the sort of edification we're able to bring there, but also helps us candidly, in terms of the algorithm, what helps screen providers hire? Is it quality? Is it schedule and sort of how that sort of search algorithm is designed? We sort of have a seat at the table for that.
Ryan MacDonald, Analyst
Really helpful color there, Ian. And then obviously, a lot of the success that you've had in the Payor business to date has been on the commercial side and obviously, in the military. Curious to get your thoughts about sort of the potential opportunity within Medicare sort of in 2026, particularly with CMS rolling out this access program. Is this sort of a potential opportunity to sort of supercharge or sort of fuel deeper Medicare efforts or to drive better utilization there? And are you intending to participate in the program?
Jon Cohen, CEO
Yes, thank you for the question. The answer regarding the access program is affirmative. We are very aware of this initiative and have discussed it. We have submitted our interest in participating, and since it's outcome-based, we are comfortable with the model it presents. Additionally, as I've mentioned, the acquisition of Wisdo in the Medicare and MA market has been very positive and continues to grow. It's important to note that while we've seen increases, the market can be challenging to penetrate due to its widespread nature across all 50 states. However, we are making progress. With Wisdo, the access program, and our ongoing efforts, we remain confident in our growth potential.
Operator, Operator
We'll move next to Richard Close with Canaccord Genuity.
Richard Close, Analyst
Congratulations on a strong year and outlook. Jon, at the end of your comments, you said something about momentum already here in '26. And I was just curious if you could go a little bit deeper in terms of what you're seeing already through almost 2 months, the basis of that comment?
Jon Cohen, CEO
At the beginning of the year, things do change somewhat because as people return, they are looking for assurances and starting to reengage at various levels. Our focus is mainly on the number of people joining the platform and conducting sessions. Therefore, my comment aimed to emphasize that we expect to see this momentum continue as we move out of 2025 into early 2026.
Ian Harris, CFO
Yes. And Richard, as you know, we take January as an opportunity to do a bunch of sort of marketing campaigns, right, post holidays, post New Year's resolution season. So a lot of sort of wood behind the ball from a marketing effort standpoint. The momentum Jon is alluding to is just that, right? The checkouts we're seeing, the CAC environment we're seeing, getting in front of folks and all of that's contemplated in the guide, consistent with the guidance.
Richard Close, Analyst
Okay. Second question would be just like overall behavioral health care costs, I know we've talked about this in the past, but I mean, you look at some of the benefit brokers and they cite increased behavioral health as one of the top expenses. And obviously, some of that's inpatient, but outpatient playing a role as well. I'm just curious your conversations with Payors in terms of rising health care costs. And you just did mention with respect to Medicare, you're comfortable with outcomes-based and whatnot. Just curious how you're thinking about potential utilization management or reimbursement changes and just the overall marketplace with respect to behavioral health?
Jon Cohen, CEO
Yes, I believe this aligns with previous discussions. We're closely observing the rising health care costs and the increased premiums people are paying. It's important to consider that engaging more people in mental health services not only expands the market but also leads to savings on medical expenses. There's substantial evidence indicating that effective mental health support can reduce overall healthcare costs. Additionally, most of the costs being analyzed relate to in-hospital situations and diagnoses, rather than our outpatient services, which currently represent a small portion of national healthcare spending. Furthermore, when the Talk AI agent is fully operational, it will offer a more affordable option, which payers are already aware of. Overall, I see many positives in our strategy, and I don't believe that broader national health care issues will adversely affect us. In fact, I anticipate growth in this area, as more individuals will benefit from mental health support.
Richard Close, Analyst
As a follow-up to that, do you think your ability to demonstrate outcomes and the data you possess sets you apart in a way that might lead Payors to narrow the number of providers or vendors they use for these services?
Jon Cohen, CEO
Absolutely. We currently have a few basic value-based contracts in place, focusing on metrics like time to the first appointment, time to the second appointment, and attendance rates. We feel confident working with anyone interested in value-based arrangements because we have these fundamentals established. Our comfort largely stems from our curated network, which is crucial as it allows us to monitor the quality of care and the actions of therapists. This oversight is essential for value-based contracts because measuring outcomes effectively requires control over the network and an understanding of the quality of care being provided. Having these systems in place is vital for successfully executing a value-based contract, and we are quite confident in our capabilities.
Ian Harris, CFO
The dynamic you mentioned, Richard, is exactly what we are experiencing with the directory trends. It’s no accident that we are being chosen for these initial embedded directories. This is a result of years of providing that data, including clinical oversight, the quarterly business reviews with the payors, and the audits. In a way, they are rewarding us by somewhat narrowing the network. By collaborating with us on these directories, we anticipate, as we did with that one payor last year, capturing a significant share of their payor portal traffic. This is indirectly reflecting what you proposed.
Operator, Operator
We'll take our next question from Charles Rhyee with TD Cowen.
Charles Rhyee, Analyst
Jon, I wanted to ask a question, right? You kind of made the comment earlier, right? A lot of people are now seeking out information, but they're not just going to a search engine anymore, right? They're going into ChatGPT or something and asking them. And so you've talked about how do you optimize to be picked up by these LLMs so that people can get directed to you. And it sounds like is this like the new SEO? Like is even search engine optimization as much of a thing? Is it really now how do you optimize to be picked up by LLMs? Because it's something that we've heard from other companies as well more recently. And then connected to that really is, how do you then connect from maybe that kind of initial outreach by patients who are going through a chat like an LLM or a ChatGPT or something and get them to your AI bot, right, which would be more a protected environment for patients? How do we bridge those two? Or how do we get them to search you first? Let me just start there.
Jon Cohen, CEO
Great question. I recently came across an article in the New York Times discussing search engine optimization using large language models. We've been proactive about this and have dedicated resources focused on LLM search strategies to ensure we appear in searches from platforms like Gemini, Claude, and ChatGPT. We are implementing what is referred to as generative optimization in addition to traditional SEO. We're not only aware of this trend but have established mechanisms to enhance our visibility, and we track the results, noticing a steady increase in users discovering us through various LLMs each month. Regarding our visibility strategy, it's interesting to note that we haven't fully entered the market yet. However, we have developed a well-thought-out initial marketing plan to help people find us based on their specific needs. There are many nuances to consider, such as whether individuals are seeking therapists or need to discuss serious topics confidentially. Our belief is that if someone wants to engage in a confidential conversation about personal issues while ensuring their information is secure, they will choose our services based on our strong clinical expertise. We don't have all the answers right now, but we are positioning ourselves differently from our competitors. Since we haven’t launched yet, we’ll gain valuable insights once we complete our beta testing regarding user engagement and how people utilize the platform, which will inform our future marketing strategies.
Ian Harris, CFO
We will have a dedicated marketing initiative and budget specifically for the LLM product. In our guidance, there is minimal revenue linked to TalkAI, which we plan to launch publicly this summer. Additionally, there will be a distinct marketing effort for this product. Although we do not usually share traffic or conversion rates from our main platform, it's important to note that even leading e-commerce brands experience substantial site traffic with a significant number of visitors who do not complete purchases. Based on our research, we believe the TalkAI product will significantly expand our total addressable market since there are many individuals interested in therapy who search for it but may not be ready to commit to traditional therapy sessions. We anticipate that some prospective users might not be fully prepared for in-person therapy but are open to engaging with a GPT-like interface. Therefore, we will implement a dedicated paid marketing strategy for this product. Additionally, we recognize that many visitors currently coming to our site are not being monetized, but we expect to retain them once we offer the TalkAI product. This initiative is distinct from our generative engine optimization efforts, which are indeed a new frontier for SEO, and we are benefiting from our historical strengths in this area. As Jon mentioned, this represents a small but rapidly growing channel for our core operations.
Charles Rhyee, Analyst
Okay, that's really helpful. It clarifies some of my thoughts because I was curious about how you transition people if they're searching through a ChatGPT. What you're saying is that the easy opportunities are with the people who already visit your website that you want to monetize. So at least you have this initial base, and it seems like people are reaching you in some way. My second question is whether you have had any discussions with a company like Humana. When considering the Medicare Advantage opportunity, we've seen that the advanced rate notice for 2027 is quite poor, and we are anticipating potentially another round of benefit cuts from plans for next year. Where do you think behavioral health sits in your partners' minds regarding benefits? Is that something you believe they might consider cutting back on, or do you think it's relatively safe?
Jon Cohen, CEO
Yes. If you are referring to employers, I can't provide an answer. Most of that is through...
Charles Rhyee, Analyst
I was thinking about Medicare Advantage for '27 just because of the...
Jon Cohen, CEO
Yes. Our view right now is that Payors continue to be very interested in what we're offering and MA continues to grow. But we'll continue to talk to whoever is out there. I think that Humana is another whole question about how they're going to approach the market now. But I can't tell you anything more except that we still continue to have interest on the MA side.
Operator, Operator
We'll take our next question from Bobby Brooks with Northland Capital Markets.
Robert Brooks, Analyst
As we think about how you guys are mapping out driving higher utilization into 2026, what are the 3 or so most important levers you feel you have at your disposal to help drive that?
Jon Cohen, CEO
We've discussed the directory integration in detail. The changes we've implemented have had a significant impact on the number of people booking checkouts and sessions, which is a major improvement. This is an ongoing process, as there are countless ways to test and adapt to ensure more people move through the funnel. The second important lever is partnerships. We've seen growth through our collaboration with Amazon, Zocdoc, and over 20 other partners. We plan to continue our focus on expanding these partnerships because they benefit both us and our partners in terms of referrals. So, I would highlight these three key areas: the journey, partnerships, and directories, along with our continuous relationship with the payors.
Robert Brooks, Analyst
Got it. I'm curious to hear more about the beta testing of TalkAI. I understand it’s still early, but I would like to know about your plans for commercializing it. Are you currently in any discussions with larger LLMs about potentially licensing it? I’m just trying to get a better understanding of that.
Jon Cohen, CEO
Our primary strategy is to focus on direct-to-consumer initiatives, which we've mentioned regarding our launch. We are evaluating various models to understand who our customers are, their motivations for coming to us, and what pricing strategies are effective. Direct-to-consumer remains our top priority. We are having discussions with several entities interested in our LLM. The outcomes are still to be determined, but there are ongoing conversations with additional parties.
Ian Harris, CFO
On the early learnings from the beta, which currently has just under 1,000 users, we have found it quite interesting to see how engaged users are with the product. It has been surprising to observe the willingness of individuals to interact with the AI therapy product instead of a human therapist. The engagement and retention we have seen so far are very promising. As Jon mentioned, our strategy is to start with a direct-to-consumer model, focusing on out-of-pocket revenue, and we will use insights from these initial users to guide our approach for enterprise partnerships, whether that involves employers or other large organizations.
Robert Brooks, Analyst
That's really helpful. I have one last question. Jon, during our road trip in December, you made a noteworthy comment that I think would be valuable to share on the call. Given your extensive career in the medical field and your experience in various areas, you mentioned that while insurance companies typically come asking for lower prices, that hasn't been your experience. Could you please elaborate on that?
Jon Cohen, CEO
Sure. We expect to see single-digit increases in our Payor reimbursements for fee-for-service. We are currently negotiating and looking for small rate increases. In my previous experiences with physician networks, hospitals, ERGs, and laboratories, the trend was typically the opposite, with them seeking to lower payments. However, the mental health sector continues to attract significant interest from Payors, as they aim to promote their relationships with employers and employees. Since we are not only accessible but also an affordable and scalable option, we remain very appealing to the Payors. This is a key reason why our partnerships are vital. So, in summary, I'm pleased about the increased rates, which honestly comes as a bit of a surprise to me.
Operator, Operator
We'll move next to Steven Valiquette with Mizuho Securities.
Steven Valiquette, Analyst
A couple of questions here. First on the '26 revenue guidance, obviously coming in pretty strong versus the high end of the range that you targeted 3 years ago. I guess, are you able to provide any color or just remind us roughly how much revenue you're expecting from Wisdo in '26? I'm just trying to get a sense for just rough approximation for like the organic versus the inorganic growth this year. I'll let you answer that one first, and I'll ask the follow-up after that.
Ian Harris, CFO
We haven't broken out Wisdo separately. It will appear depending on the type of contract, most likely in D2E or the Payor lines of business, and to a lesser extent, a bit in the consumer segment. So it's included in the three business lines we report on. In terms of inorganic benefit, I would consider it fairly modest, with a single-digit million contribution expected for '26.
Steven Valiquette, Analyst
Okay. Got it. Okay. And then yes, the next question here. I guess with the industry environment rapidly moving right now, which you kind of alluded to, not just in relation to AI, but other factors as well. Does this increase your appetite and/or need to look at additional external assets or possibly do additional tuck-in acquisitions this year? I know it's always hard to answer those questions, but I guess the question would be, are you well positioned the way you think you are right now with your own enhancements on the internally developed TalkAI agent and recent Wisdo addition. But I just wanted to get your sense for that.
Ian Harris, CFO
We appreciate the question. We certainly have the capability to pursue more tuck-in acquisitions. We ended the year with nearly $93 million in cash and equivalents on our balance sheet. Since we've just completed the Wisdo acquisition, our focus is on ensuring its success. This is our first tuck-in in several years and the first for this management team, so it's our top priority. We're also dedicating significant excitement, resources, and attention to the TalkAI project. In terms of growth opportunities, we will likely focus most of our efforts on organic development. Currently, we don't see any major gaps in our portfolio that need to be filled through acquisitions. We're confident in the strengths we already have. Additionally, we bought back $17 million of stock in 2025 and still have a strong capacity under our buyback program, which is another way we can utilize our cash in 2026.
Jon Cohen, CEO
Yes, I would like to add that your question about TalkAI and our other AI initiatives aimed at enhancing business and patient experiences is quite interesting. Just as a reminder, Talkspace has been operating for 14 years and has a history of innovation. They were pioneers in texting and messaging services and received approval for those innovations. When we decided to further invest in AI initiatives, it's worth noting that the company introduced AI risk algorithms back in 2018 and 2019. The reason I mention this is that we possess a significant level of expertise internally, which enables us to undertake this kind of work. Of course, we may not have every resource, and sometimes we seek outside expertise through consulting, but the core technological capabilities at Talkspace are exceptionally strong.
Operator, Operator
We'll take our next question from Peter Warendorf with Barclays.
Peter Warendorf, Analyst
Just curious, given the anticipated growth this year, if you guys are comfortable with the size of the provider network as it is right now? And if there are any specific pockets that you feel like you might need to address?
Ian Harris, CFO
Yes, we feel very confident about it. Jon briefly mentioned our curated network in his remarks. We are actively refining, engaging, and trying to activate it. One of the indirect aspects of this, which might not be immediately clear, is ensuring that we engage the network adequately so that when someone requests a specific day, time, and type of therapist, we can meet that need. We are exploring various creative approaches to capture consumer intent in real time. Overall, we are optimistic about our current position, and growth will vary by state. If we partner with a significant organization that serves a specific population, we may need to increase hiring in that area. Our recruiting team has consistently demonstrated their effectiveness and adaptability in scaling up supply when necessary. On a run-rate basis, we feel very positive about our status. One highlight from 2025 was significant growth in our psychological offerings. Jon mentioned that our medication management service has been a smaller but rapidly expanding aspect of our Payor business. You will see in our 10-K that we increased our provider network in the psychological services area quite substantially in '25.
Peter Warendorf, Analyst
Got it. Okay. And then one quick one on the consumer side. The DTC revenue obviously is becoming a smaller headwind every year. But just curious how much of that you guys think you're capturing elsewhere on the Payor side of the business as that revenue kind of continues to fade away?
Ian Harris, CFO
Yes. Most of the information is captured during the registration process, making it quite difficult for prospective members not to share their insurance details with us. We are intentionally focused on obtaining this information from the Payor perspective. However, there are always a few individuals who might choose not to share their information or prefer to pay out of pocket for various reasons. We believe we are retaining most of that customer loss. Additionally, as you mentioned, it will be less of a financial challenge in 2026 due to a smaller initial figure for the year, thus becoming increasingly negligible.
Operator, Operator
And that does conclude the Q&A portion of today's call. And this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Goodbye.