GlobeNewswire Inc | Aug 9, 2021 04:05PM EDT

August 09, 2021

Q2 Net revenue grew 73% year-over-year to approximately $31 million

Q2 Total active members grew more than 40% year-over-year to approximately 61,500

Reaffirm FY 2021 Net revenue guidance, expecting 64% year-over-year growth

NEW YORK, Aug. 09, 2021 (GLOBE NEWSWIRE) -- Talkspace, Inc. (Talkspace) (Nasdaq: TALK), a leading virtual behavioral healthcare company, today reported financial results for the second quarter ended June 30, 2021.

Oren Frank, Co-founder and CEO of Talkspace, said, We continued to experience broad-based momentum throughout our business in the second quarter, driven by significant demand tailwinds and a generational shift to virtual care. Our differentiated and comprehensive product portfolio continues to resonate in the marketplace, and we are seeing traction in both expanding our offering within existing clients as well as adding new clients. We are ideally positioned to address the vast, unmet and growing demand for mental health services in innovative ways, and we are excited to keep executing on our strategy.

Second Quarter 2021 Financial Highlights

The following table summarizes the Companys performance during the second quarter of 2021, compared to the same period in 2020:

Three Months Ended June 30, Period-Over-Period(amounts in thousands, 2021 2020 Changeexcept percentages)Number of B2B eligible 56,039.0 33,560.5 67.0% lives at period endTotal number of active 61.5 43.5 41.5% members at period end Net revenue $ 30,983 $ 17,877 73.3% Gross profit 19,286 12,307 56.7% Gross margin % 62.2% 68.8% (660) basis pointsOperating expenses 46,847 12,948 261.8% Net loss 30,441 646 *Adjusted EBITDA (1) $ (11,872 ) $ (291 ) *

* - not meaningful(1) Adjusted EBITDA is a non-GAAP financial measure. Refer to Reconciliation of Non-GAAP Results to GAAP Results table below.

Outlook for Third Quarter 2021 and Full Fiscal Year 2021

The Company is reaffirming its net revenue guidance of $125 million for the full year ending December 31, 2021. The Companys outlook for net revenue is $32 million for the third quarter ending September 30, 2021.

Conference Call Details

The Company will host a conference call at 5:00 p.m. E.T. to discuss these results and managements outlook for future financial and operational performance. A live audio webcast will be available online at https://investors.talkspace.com/. The conference call can also be accessed by dialing (800) 773-2954 for U.S. participants, or (847) 413-3731 for international participants, and referencing participant code 50201358. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

Key Business Metrics

Active Members We consider members active (i) in the case of our B2C members, commencing on the date such member initiates contact with a provider on our platform until the term of their monthly, quarterly or bi-annual subscription plan expires, unless terminated early, and (ii) in the case of our B2B members, if such members have engaged on our platform during the preceding 25 days, such as sending a text, video or audio message to, or participating in a video call with, a provider, completing a satisfaction or progress report survey or signing up for our platform.

B2B Eligible Lives: We consider B2B lives eligible if such persons are eligible to receive treatment on the Talkspace platform, in the case of its enterprise clients, for free when their employer is under an active contract with Talkspace, or, in the case of health plan clients, at an agreed upon reimbursement rate through insurance under an employee assistance program or other network behavioral health paid benefit program.

About Talkspace

Talkspace is a leading virtual behavioral healthcare company enabled by a purpose-built technology platform. As a digital healthcare company, all care is delivered through an easy-to-use and fully encrypted web and mobile platform, consistent with HIPAA and other state regulatory requirements.

Today, the need for care feels more urgent than ever. When seeking treatment, whether it's psychiatry or adolescent, individual or couples therapy, Talkspace offers treatment options for almost every need. With Talkspace, members can send their dedicated therapists text, video, and voice messages anytime, from anywhere, and engage in live video sessions. As of June 2021, over 2 million people have used Talkspace, and over 55 million lives were covered for Talkspace through insurance and employee assistance programs or other network behavioral health paid benefit programs.

For more information about Talkspace commercial relationships, visit https://business.talkspace.com. To learn more about online therapy, please visit https://www.talkspace.com/online-therapy.

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, 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; 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 in under the caption Risk Factors in our prospectus dated July 12, 2021 (File No. 333-257686), as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 to be filed with the SEC, 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 assumes 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: Westwicke, an ICR Company Bob East / Asher Dewhurst / Jordan Kohnstam 443-213-0500 TalkspaceIR@westwicke.com

For Media: SKDK John Kim 310-997-5963 jkim@skdknick.com

Talkspace, Inc.Condensed Consolidated Statements of Loss (Unaudited)

Three months ended Variance Six months ended Variance June 30, June 30, 2021 2020 $ % 2021 2020 $ % ($ in thousands) ($ in thousands) Revenues $ 30,983 $ 17,877 $ 13,106 73.3 $ 58,140 $ 28,997 $ 29,143 100.5 Cost of revenues 11,697 5,570 6,127 110.0 21,511 10,980 10,531 95.9 Gross profit 19,286 12,307 6,979 56.7 36,629 18,017 18,612 103.3 Operating expenses: Research and 4,781 2,400 2,381 99.2 7,745 5,128 2,617 51.0 development, netClinical operations 1,913 759 1,154 152.0 3,990 1,636 2,354 143.9 Sales and marketing 26,443 8,442 18,001 213.2 48,694 17,360 31,334 180.5 General and 13,710 1,347 12,363 917.8 16,318 2,461 13,857 563.1 administrativeTotal operating expenses 46,847 12,948 33,899 261.8 76,747 26,585 50,162 188.7 Operating loss 27,561 641 26,920 * 40,118 8,568 31,550 368.2 Financial expenses 2,870 (1 ) 2,871 * 3,043 (31 ) 3,074 * (income), netLoss before taxes on 30,431 640 29,791 * 43,161 8,537 34,624 405.6 incomeTaxes on income 10 6 4 66.7 18 9 9 100.0 Net loss $ 30,441 $ 646 $ 29,795 * $ 43,179 $ 8,546 $ 34,633 405.3

* = not meaningful

Talkspace, Inc.Condensed Consolidated Balance Sheets

June30, December31, 2021 2020 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 248,173 $ 13,248 Accounts receivable 6,617 5,914 Other current assets 4,318 1,515 Totalcurrent assets 259,108 20,677 Property and equipment, net 549 175 Deferred issuance costs - 692 Intangible assets, net 4,315 5,195 Goodwill 6,134 6,134 Other long-term assets 98 - Totalassets $ 270,204 $ 32,873 LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS? DEFICIT CURRENT LIABILITIES: Accounts payable $ 11,759 $ 7,901 Deferred revenues 7,549 5,172 Accrued expenses and other current liabilities 9,640 7,416 Totalcurrent liabilities 28,948 20,489 Warrant liabilities 38,897 - Other long-term liabilities 98 - Total liabilities 67,943 20,489 Convertible preferred stock - 111,282 STOCKHOLDERS? DEFICIT: Common stock 15 1 Additionalpaid-incapital 354,213 9,889 Accumulated deficit (151,967 ) (108,788 )Totalstockholders? deficit 202,261 (98,898 )Totalliabilities, convertible preferred stock $ 270,204 $ 32,873 and stockholders? deficit

Talkspace, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited)

Six months ended June 30, 2021 2020 Cash flows from operating activities: Net loss $ (43,179 ) $ (8,546 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 955 36 Amortization of debt issuance cost 175 ? Stock-based compensation 16,709 733 Change in fair value of warrants 3,043 ? Increase in accounts receivable (703 ) (785 )Increase in other current assets (1,784 ) (556 )Increase (decrease) in accounts payable 4,833 (326 )Increase in deferred revenues 2,377 2,068 Decrease in accrued expenses and other current (213 ) (286 )liabilitiesNet cash used in operating activities (17,787 ) (7,662 )Cash flows from investing activities: Purchase of property and equipment (449 ) (9 )Net cash used in investing activities (449 ) (9 )Cash flows from financing activities: Proceeds from reverse capitalization, net of 251,325 ? transaction costsProceeds from borrowings 6,000 ? Repayment of borrowings (6,000 ) ? Payment of debt issuance costs (50 ) ? Proceeds from exercise of stock options 1,886 62 Net cash provided by financing activities 253,161 62 Change in cash and cash equivalents 234,925 (7,609 )Cash and cash equivalents at the beginning of the 13,248 39,632 periodCash and cash equivalents at the end of the period $ 248,173 $ 32,023

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, 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 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) business combination and other financing expenses.

Talkspace, Inc.Reconciliation of Non-GAAP Results to GAAP Results

Three months ended Six months ended June 30, June 30,(in thousands) 2021 2020 2021 2020 Net loss $ (30,441 ) $ (646 ) $ (43,179 ) $ (8,546 )Add: Depreciationand 493 18 955 36 amortizationFinancialexpense 2,870 (1 ) 3,043 (31 )(income), net(1)Taxes on income 10 6 18 9 Stock-based 15,196 332 16,709 733 compensationAdjusted EBITDA $ (11,872 ) $ (291 ) $ (22,454 ) $ (7,799 )

(1) For the three months ended June 30, 2021, financial expense, net primarily consisted of $4.0 million in warrant issuance costs in connection with the close of the Business Combination, partially offset by $1.4 million in gains resulting from the revaluation of warrant liabilities. For the six months ended June 30, 2021, financial expense, net primarily consisted of $4.0 million in warrant issuance costs in connection with the close of the Business Combination, partially offset by $1.2 million in gains resulting from the revaluation of warrant liabilities.