Talkspace, Inc. (TALK) Q4 2022 Earnings Call Transcript

Talkspace, Inc. (NASDAQ:TALK) Q4 2022 Earnings Conference Call February 22, 2023 8:30 AM ET

Company Participants

Jeannine Feyen - Director of Communications

Jon Cohen - Chief Executive Officer

Jennifer Fulk - Chief Financial Officer

Conference Call Participants

Lucas Romanski - Cowen

Jack Senft - William Blair

Stephanie Davis - SVB Securities

Daniel Grosslight - Citi

Operator

Good morning. My sanction is Adra and I will beryllium your convention usability today. At this time, I would for illustration to invited everyone to nan Talkspace Fourth Quarter and Full Year 2022 Earnings Conference Call. Today's convention is being recorded. [Operator Instructions]

At this time, I'd for illustration to move nan convention complete to Jeannine Feyen from Talkspace.

Jeannine Feyen

Good greeting and invited to Talkspace's net convention telephone for nan 4th fourth and twelvemonth extremity 2022. I'm Jeannine Feyen, Director of Communications. I dream you've had nan opportunity to entree nan property merchandise we posted connected Talkspace's IR website and nan position of our net results. We'll usage this position to locomotion you done today's remarks. Leading today's telephone are our CEO, Dr. Jon Cohen; and Jennifer Fulk, Chief Financial Officer. Management will connection their prepared remarks and we'll return your questions astatine that point.

Certain measures we'll talk connected this telephone are expressed connected a non-GAAP ground and person been adjusted to exclude nan effect of one-off items. Reconciliations of these non-GAAP measures are included successful our net merchandise and connected our website, talkspace.com. I besides want to punctual you that we will beryllium discussing forward-looking accusation coming which whitethorn see forecasts, targets and different statements regarding our plans, goals, strategical priorities and anticipated financial results. While these statements correspond our champion existent judgement astir early results and capacity arsenic of today, our existent results are taxable to galore risks and uncertainties that could origin existent results to disagree materially from what we expect. Important factors that whitethorn impact our early results are described successful our astir caller SEC reports and today's net property release. For much information, please reappraisal our Safe Harbor disclaimer connected Slide 2.

Now, I will move it complete to Dr. Jon Cohen.

Jon Cohen

Thanks, Jeannine and invited to Talkspace 4th fourth and afloat twelvemonth 2022 net call. Thank you each for joining america today. As this is my first afloat 4th net telephone since becoming CEO backmost successful November, I want to reiterate my continued optimism astir nan existent and early authorities of nan business. As you will perceive connected this call, our affirmative results from nan past quarter, nan sustained trajectory done January and our affirmative guidance for 2023 confirms my impressions connected nan affirmative early of this business. I'd for illustration to walk a infinitesimal discussing really consciousness for intelligence wellness has drastically changed successful nan short word and nan affirmative tailwinds we proceed to spot for nan industry.

The national government, aggregate state, ample employers, colleges and people schools person each announced caller backing initiatives successful support of intelligence wellness services. Barely a time goes by erstwhile location is not immoderate news arena highlighting nan request for enhanced intelligence wellness services successful nan country. Talkspace was created arsenic a technology-driven level to reside nan basal deficiency of entree and a important stigma related to intelligence wellness care. The first marketplace maturation was accelerated by nan COVID-19 situation erstwhile we saw incident rates of worry and slump emergence significantly. Telehealth solutions were importantly accelerated by COVID and telehealth intelligence wellness emerged quickly arsenic an effective strategy to present intelligence wellness services.

Two weeks ago, Talkspace released our early findings that matter therapy was highly effective for frontline wellness attraction workers astatine nan onset of nan COVID-19 pandemic. Over 600 wellness attraction workers from awesome hospitals crossed nan United States participated. We recovered that 56% of wellness attraction workers recorded clinically important improvements successful their worry and slump symptoms pinch conscionable 3 weeks of therapy.

Our business exemplary allows america to return advantage of nan ample increasing underpenetrated addressable market. Our highly beardown marque and occurrence from exceptional outcomes helps bring successful much imaginable users. Our marque spot built connected our acquisition is simply a basal portion of our competitory separator successful nan market. And for illustration our competitors, Talkspace is simply a pure-play intelligence wellness company. We connection nan afloat spectrum of intelligence wellness services, self-guided texting, voice, unrecorded video, aggregate subspecialties and psychiatric services. In Q4, Verywell Mind conducted a broad study of integer therapy platforms to thief readers find options that suit their individual needs to service arsenic a starting constituent arsenic to wherever to begin. They awarded Talkspace arsenic nan champion ample work of 2022 retired of 55 online therapy companies evaluated.

With that, fto maine move to our near-term strategical initiatives. In nan past respective months, we person aligned nan institution astir our wide privilege to execute profitability while making Talkspace nan level of prime for group seeking therapy, enterprises seeking to supply their constituents entree to therapy and to providers. We person developed 4 circumstantial strategical objectives to attraction nan guidance squad and labor to present connected nan financial plan. These objectives person a clear operational programme and metrics down them to present connected that plan. Number one, turn our behavioral wellness and worker assistance scheme personnel business. The finance of resources to found Talkspace arsenic an in-network supplier has been important and is nan instauration of our competitory separator to service nan intelligence wellness attraction addressable marketplace now and successful nan future.

Let maine elaborate connected immoderate aspects of this important capability. First, we were capable to onboard payer lives efficiently while supporting often analyzable method requirements erstwhile integrating pinch nan payers. Second, we person established vigorous credentialing processes for our clinicians to service arsenic in-network providers. And third, we person built our gross rhythm capabilities including real-time eligibility assessments and in-house claims processing to efficaciously build and cod from nan payers. These are captious competencies that return years to build and thief found our competitory separator successful nan market.

Our circumstantial goals to turn this portion of nan business see expanding gross from existing covered lives, adding caller covered lives, expanding sessions per time and expanding therapist ratings. Second, our volition to build a bigger and much focused direct-to-enterprise business solutions. More specifically, attraction our income teams connected some mini and ample companies, universities, schools and authorities entities. Our goals see improving and upgrading nan talent wrong nan statement and improving nan merchandise offerings. Along those lines, we precocious hired a caller Senior Vice President, Steve Smallidge, who brings a wealthiness of acquisition to nan HR benefits assemblage specifically and to lead nan DTE income organization, caller merchandise innovations to thief trim nan clash and take and usage, including Talkspace's Switch [ph] solution. This is our offering for employers who want a low-cost solution to thief labor summation knowledge of and appropriately utilize their behavioral wellness benefits from their worker assistance plans and their behaviour wellness plans.

We thief them pinch 2 products. Talkspace Engage, a merchandise for quality assets executives. Engage is an full intelligence wellness engagement suite that helps HR professionals beforehand intelligence wellness consciousness internally and thrust worker utilization. It does this via a step-by-step, monthly consciousness scheme to prop their group to return action. A immense action of unrecorded and on-demand therapy workshops and downloadable worksheets pinch intelligence wellness exercises.

Next is nan Talkspace Self-Guided a merchandise for nan employees. Talkspace Self-Guided is 1 of nan astir celebrated self-guided wellness apps successful nan market. It provides users pinch regular reflections, a immense action of self-guided sessions connected topics for illustration burnout, depression, parenting, constituent abuse, et cetera and 5 unrecorded workshops each week, each led by licensed clinicians. Third of our awesome objectives is to proceed to beryllium nan level of prime for providers pinch nan circumstantial goals of expanding nan web hours work, improving NPS people and decreasing monthly churn. Talkspace has thousands of licensed providers crossed each 50 states, each of which has a monolithic grade aliases higher and person connected mean 9 years of experience. And of course, each is required to walk a thorough screening and onboarding process.

For nan 4th quarter, we continued to turn our supplier network, expanding nan full number of providers 11% quarter-over-quarter. Utilization and productivity from our full-time therapists trended positively arsenic we saw an 11% summation successful their billable hours quarter-over-quarter. Provider retention rates improved arsenic good arsenic monthly churn has astir halved successful nan 4th fourth versus nan anterior period. And finally, nether nan past bucket, we importantly improved our time-to-access metrics pinch mean lucifer times declining by much than 50% successful Q4 versus Q3.

Fourth nonsubjective is, arsenic Jennifer will dive much profoundly into, we will proceed to activity connected achieving operational and compliance excellence which entails focusing much connected our costs structure, postulation rates and compliance. As we person antecedently said, our attraction connected driving down operating expenditures see labour costs efficiencies, optimizing marketplace walk for gross and profit growth, vendor statement renegotiations, income unit productivity, web productivity and streamlining firm spend. Going forward, we will proceed to adopt a disciplined attack to spending, leveraging nan scalable quality of our fixed costs ground which enables maturation astatine little costs.

And now fto maine move to nan afloat 2022 financial highlights which nan results demonstrates that we are delivering connected nan strategical priorities and business transformation.

Beginning pinch revenue. Year-over-year gross grew 5%. Total B2B gross which includes some personnel payer which is nan worker assistance programme and behavioral wellness and direct-to-employer aliases endeavor accrued 66% year-over-year, while user revenues decreased 26% during nan aforesaid period. For nan year, we grew our covered lives by 33% to 92 cardinal covered lives. B2B payer convention measurement grew 56% and we grew nan B2B DTE relationship guidelines complete 43%. Of those, we ended nan twelvemonth pinch B2B gross representing much than half of nan company's gross for nan year, an inflection constituent that started successful nan 3rd 4th and widened successful this quarter's results.

So now fto maine move to nan 4th fourth results. In nan 4th fourth of 2022, gross for B2B which includes payer, nan EAP and behavioral wellness and nan direct-to-employer accrued 52% complete nan aforesaid play 4th fourth for 2021 a twelvemonth agone and 15% sequentially. In nan 4th quarter, we added an further 6 cardinal caller covered lives while besides launching different nationalist wellness behavioral payer. We proceed to acquisition meaningful maturation successful sessions successful nan 4th fourth compared to nan 4th fourth of past twelvemonth arsenic good arsenic complete nan erstwhile quarter. It is important to statement that we achieved these beardown results successful what is traditionally a slower 4th owed to seasonality which includes nan therapists going connected vacation aliases decreasing their activity hours and users skipping their sessions complete nan holidays.

From a profitability standpoint, you could spot nan tremendous activity nan squad has achieved successful reducing our adjusted EBITDA nonaccomplishment successful nan 4th fourth arsenic compared to nan aforesaid play a twelvemonth agone connected nan backmost of our attraction connected reducing operating expenses that were not driving gross maturation aliases efficiencies successful nan business. Jennifer will grow much connected our financial results successful her conception but I want to statement our committedness that we will stay very disciplined successful our spending pinch a attraction connected ratio and backing only our highest privilege investments.

And pinch that, let's move to our guidance. With nan disciplined and focused scheme we person put successful spot to present connected our fiscal 2023 goals, we are providing nan pursuing breakeven guidance. We will beryllium wrong a scope of $125 cardinal to $135 cardinal successful gross pinch a minus $32 cardinal to minus $28 cardinal successful adjusted EBITDA nonaccomplishment for nan afloat twelvemonth of 2023. These guideposts will thief people our advancement connected nan measurement to breakeven adjusted EBITDA pinch a rate equilibrium of astatine slightest $95 cardinal by nan extremity of nan first half of 2024. Note that this targeted attack to rate preservation while connected our way to profitability provides america pinch capable room for further strategical initiatives.

I will now move nan telephone complete to Jennifer for a much elaborate chat of results and outlook.

Jennifer Fulk

Thank you, Jon and bully morning, everyone. My chat coming will beryllium based connected 4th fourth results connected a sequential quarter-over-quarter basis. I will screen highlights crossed our financial results, supply much item connected our firm operational objectives and lastly, I will stock immoderate guideposts for our expected breakeven clip line, including 2023 guidance.

Starting connected Slide 7. Revenue for nan 4th fourth was $30.2 million, an summation of 3% from nan 3rd 4th of 2022. This summation was driven by continued beardown momentum successful payer sessions and DTE revenue, partially offset by continued and anticipated little user revenue. Our 4th fourth gross separator was 53.5% and gross profit grew astir 11% sequentially to $16.2 million, chiefly owed to nan afloat 4th effect of Q3 value improvements successful DTE and higher supplier productivity from actions finalized successful nan web successful nan 3rd quarter. These benefits were partially offset by nan operation displacement toward B2B gross categories.

On Slide 8, you will spot nan breakout of our 3 gross categories. Consumer gross was $11 million, down 13% from nan erstwhile quarter, driven by a 14% simplification successful progressive user members from nan extremity of Q3 to nan extremity of Q4. This is nan consequence of continued optimization of nan portion economics successful this category. We further reduced media successful nan 4th which is now down 60% from Q3 2021, pinch revenues down 41% complete nan aforesaid period.

B2B and payer gross was $10.7 million, up 13% compared to nan 3rd 4th arsenic sessions completed by members covered done their EAP use aliases their security accrued 15% to 128,000 sessions successful nan 4th quarter. As Jon mentioned, we had anticipated a imaginable simplification successful sessions successful Q4 owed to seasonality arsenic providers return clip disconnected for nan holidays and members trim their consumption. We were pleased pinch only a mean effect connected convention maturation successful nan 4th and arsenic Jon mentioned, we spot bully momentum successful sessions truthful acold successful Q1 arsenic much and much members are leveraging our in-network wellness benefits to entree Talkspace.

Lastly, B2B drift-to-enterprise [ph] gross for nan 4th fourth was $8.6 million, driven successful ample portion by caller accounts which totaled $226 cardinal astatine year-end arsenic good arsenic nan afloat 4th effect from Q3 relationship renewals connected favorable terms.

Turning to Slide 9. Fourth 4th GAAP operating disbursal accrued to $37.2 million, chiefly owed to a nonrecurring disbursal of $6.1 cardinal for nan impairment of goodwill arsenic good arsenic an estimate for one-time ineligible expenses. Excluding these charges, different favorable nonrecurring items and stock-based compensation, Q4 expenses were astir $25 cardinal compared to $30 cardinal successful nan 3rd 4th and demonstrating important advancement that we person made not only successful optimizing advertizing walk but successful driving efficiencies crossed our full disbursal base.

As planned, we reduced advertizing walk 16% from 3rd 4th levels successful anticipation of seasonal adjustments to measurement described earlier and higher advertizing portion costs. As I antecedently mentioned, we person made meaningful strides to optimize nan economics successful our user category. We now person unified our merchandise funnel, trading usability and advertizing walk to leverage our brands, postulation and expansive covered unrecorded guidelines to thrust personnel growth. We are very encouraged pinch nan early trends we are seeing and this is reflected successful our guidance which I will talk successful a moment.

Besides nan continued simplification successful advertizing walk and arsenic we highlighted connected our past call, successful nan 4th quarter, we took important actions to further trim our costs guidelines which came chiefly done a simplification successful firm worker headcount and done nan elimination of respective third-party vendors. The 4th fourth adjusted EBITDA nonaccomplishment narrowed to $8.9 million, an betterment of $6.6 cardinal compared to nan 3rd quarter, driven chiefly by these costs reductions.

Turning to nan equilibrium sheet. Cash pain for nan 4th outpaced adjusted EBITDA nonaccomplishment by astir $5 million, of which $4 cardinal is attributable to nonrecurring rate flows, including nan timing of definite vendor and customer invoices. As a result, we ended nan twelvemonth pinch a very patient equilibrium expanse pinch $138.5 cardinal of rate and rate equivalents. Going forward, we expect our rate travel to inclination mostly successful statement pinch adjusted EBITDA, pinch nan objection of nett moving superior description related to our increasing payer business wherever nan claims process typically takes a fewer weeks.

Turning to Slide 10. I would for illustration to stock nan cardinal elements of our strategical privilege addressing operational excellence. Importantly, we person an operational scheme successful spot that comprehensively supports our financial plan. This intends that each worker has objectives that necktie straight to our institution priorities. This is important to america arsenic it drives engagement and accountability and execution astatine each level.

Next is operating efficiency, ensuring our fixed costs guidelines is commensurate pinch our gross profit. As Jon described, we made meaningful investments successful 2022 to our systems, processes and controls to guarantee our expertise to leverage and standard nan operations arsenic we grow. And we proceed to optimize superior allocation crossed nan business, prioritizing our astir compelling and profitable maturation initiatives.

Third, we proceed to negociate our advertizing walk pinch nan purpose of maximizing full institution profit astatine nan personnel level, leveraging analytics applied to our level pinch elastic programmatic finance channels and optimize imaginative and targeting to proceed to maximize ROI. And finally, gross rhythm guidance is an important halfway competency and arsenic Jon described, a competitory advantage. We person invested important clip and effort to build this captious usability to service payer clients which is captious arsenic we standard nan B2B payer business. We're besides difficult astatine activity continuing to build retired our Sarbanes-Oxley compliance program, refining processes and controls crossed nan business.

Turning to Slide 11. I would for illustration to connection immoderate discourse for nan guidance we are providing today. For 2023, we expect gross to beryllium betwixt $125 cardinal and $135 cardinal and we expect adjusted EBITDA nonaccomplishment to constrictive wrong a scope of $32 cardinal to $28 million. Each of these points are supported by what we person discussed passim this telephone and highlighted successful nan strategical priorities that Jon described.

First, arsenic demonstrated successful our Q3 and Q4 results and further supported by our position that nan intelligence wellness attraction marketplace maturation will beryllium chiefly driven by description of entree and members leveraging wellness benefits, we judge B2B payer gross maturation will outpace different gross categories. This will beryllium driven chiefly done continued maturation successful utilization arsenic good arsenic description successful covered lives. We besides expect that user gross will statesman to stabilize this twelvemonth arsenic a consequence of our betterment to nan personnel experience.

Over nan people of nan year, we expect gross separator to inclination somewhat little from nan Q4 2022 level arsenic nan gross operation displacement towards B2B categories, partially offset by value optimization initiatives and continued summation successful supplier web efficiency. We besides judge we person important operating leverage from our existent infrastructure and person nan expertise to proceed to optimize our costs to present connected our way to profitability. We expect nan institution to scope breakeven adjusted EBITDA by nan extremity of nan first half of 2024 and we'll person much than $95 cardinal of rate remaining connected nan equilibrium expanse astatine this time. This rate equilibrium factors successful nan summation successful nett moving superior required by our increasing B2B class and besides nan investments we will make to proceed to turn gross and profitability complete time.

As Jon noted, this ample rate reserve provides america pinch nan elasticity to set to immoderate marketplace trends while capitalizing connected early strategical initiatives. We judge these 4 points outlined successful our guidance show our enthusiasm astir nan fundamentals of our B2B payer and DTE categories and our assurance successful our expertise to leverage our OpEx guidelines to standard nan business to profitability.

And pinch that, I'll move nan telephone backmost complete to Jon.

Jon Cohen

Thanks, Jennifer. In summary, we are excited by our opportunity to leverage our existing operating guidelines and capabilities to capitalize connected nan increasing intelligence wellness full addressable marketplace and displacement towards members leveraging their wellness attraction benefits. By driving maturation crossed our B2B payer arsenic good arsenic nan DTE categories, focusing connected becoming nan level of prime for providers and striving to execute operational excellence, we person put ourselves connected a way that we judge will alteration america to scope breakeven adjusted EBITDA by nan extremity of nan first half of 2024, while maintaining a beardown rate equilibrium that provides america pinch nan operational elasticity to opportunistically capitalize connected our different strategical initiatives.

With that, we will unfastened it up to Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We'll spell first to Charles Rhyee astatine Cowen.

Lucas Romanski

Hi, this is Lucas connected for Charles. Your guidance, 2023 gross guideline implies astir 5% to 13% year-over-year growth. Obviously, there's immoderate moving pieces betwixt nan B2B and B2C segments. If we presume B2C gross stays astatine this rate, astatine nan 4Q complaint done 2023 implies B2B gross is increasing location successful nan vicinity of 30% to 35%. One, is that nan correct measurement we should deliberation astir nan guidance? And past two, tin you springiness america immoderate item connected what you guys are seeing successful position of underlying request successful nan B2B market, particularly fixed nan macro uncertainty that employers and consumers are facing?

Jennifer Fulk

Yes. Thanks for nan question, Lucas. So I'll commencement pinch conscionable benignant of highlighting immoderate points astir nan gross guidance that we've provided and past I'll walk it to Jon connected what we're seeing arsenic acold arsenic request successful nan B2B segment. So first of all, for illustration I said, user revenues, we spot that stabilizing this year. We spot our merchandise enhancements helping to offset immoderate unit that we could spot successful user spending which is simply a factor, of course, arsenic these are members that are paying retired of pouch for Talkspace therapy.

In nan DTE space, this is an breathtaking class for us. Jon will talk much astir that successful a infinitesimal and grow connected nan comments that we've already made. This is also, though, our benignant of lumpier gross categories. As we've talked before, location we're pursuing larger employers and enterprises which thin to person longer lead times, arsenic good arsenic we're factoring successful a macroeconomic facet that could conscionable make those lead times beryllium a spot longer. Having said that, we still spot intelligence wellness attraction sum for labor being nan highest privilege for determination makers for companies.

On nan B2B, payer revenue, for illustration I said, we see, this being our biggest maturation driver, becoming nan largest information of our gross guidelines going forward. This is -- we've seen really beardown maturation successful sessions completed successful this class successful nan past respective quarters. And for illustration we said, we proceed to spot this maturation successful Q1.

So pinch that, I'll walk it to Jon.

Jon Cohen

I deliberation that I've talked astir earlier nan addressable marketplace is chartless because it's truthful large. What we're seeing is to reiterate a important request connected what really calling nan endeavor and, arsenic Jennifer mentioned and EAP [ph] side. But fto maine conscionable talk astir nan endeavor side. The logic you telephone it endeavor because it's not -- there's a important number of ample employers. We disagreement it up by some ample and smaller employers, depending connected nan number of employees. We've besides seen different important liking connected nan acquisition side, universities, colleges, nationalist schools and really besides connected nan authorities side, cities and states. So nan request has been significant. We've built retired nan commercialized statement and we proceed to build retired nan commercialized statement to reside nan needs arsenic we spot them travel successful during nan year.

Operator

We'll spell adjacent to Ryan Daniels astatine William Blair.

Jack Senft

This is Jack connected for Ryan. It looks for illustration we saw a decent measurement down successful walk connected objective operations, some successful absolute and comparative position this quarter. And I'm benignant of amazed to perceive successful your prepared remarks that you besides knowledgeable double-digit supplier growth, particularly alongside this delta. Any commentary connected to what drove this little objective operating expense?

Jennifer Fulk

Thanks, Jack. So there's 2 things of note. First is nan costs of our therapists that are providing work to nan web are captured successful our costs of goods. So it will beryllium captured successful our separator line. The step-down successful objective operations connected a reported ground was nan effect of immoderate favorable -- a reversal of an accrual that was favorable to our disbursal base. That's captured successful our nonrecurring items for nan quarter.

Jack Senft

Great. And past I conjecture moving to trading spend. We besides saw a bully step-down this quarter, down astir $4.3 million. And this is thing akin to what we've seen complete nan past 5 quarters. So you're now sitting astatine astir 47% arsenic a percent of sales. Any colour into wherever you spot nan walk class benignant of bottoming out? And pinch that, immoderate penetration into nan guardant cadence of this pullback?

Jennifer Fulk

So, yes. So we described $5 cardinal removed successful our costs guidelines successful nan 4th quarter. So this included some nan expected effect that we had from immoderate important costs reductions that we described earlier successful nan 4th quarter. At this point, I would picture our tally complaint Q4 OpEx of $25 cardinal arsenic our caller precocious watermark. So we said earlier, we're going to proceed to scrutinize our costs structure, ensuring we're optimizing for efficiency. We did this pinch respective actions successful nan 4th fourth but going guardant -- and arsenic enabled by our operational scheme that we described -- eliminating little privilege activity aliases uncovering much cost-effective ways of getting activity done will beryllium nan measurement we run going forward. So this makes it to wherever we tin destruct that little privilege activity to besides money important investments that we spot arsenic we motion them successful integrated gross maturation opportunities. So, these 2 things make america assured that our existent costs guidelines provides america pinch nan operating leverage arsenic we standard nan gross line.

Operator

We'll return our adjacent mobility from Stephanie Davis astatine SVB Securities.

Stephanie Davis

I've sewage a mathematics one, truthful buckle up for this one. But erstwhile I deliberation astir your way to EBITDA breakeven successful 2Q '24, that implies not conscionable 37 points of separator description this twelvemonth but an acceleration of that gait successful nan first half of adjacent year, 22 points. And that's contempt gross margins trending down and immoderate seasonality successful nan business. And past if you look astatine it different way, it's $70 cardinal of EBITDA dollars that you request to regain to get to breakeven which represents half of your full OpEx contempt Jon's prepared comments. It sounded for illustration location were immoderate investments successful a fewer of these OpEx categories. So talk maine done this math. How are you getting there? How is this gait accelerating? And what levers are you pulling successful bid to make judge you're capable to turn while still having your OpEx halved?

Jennifer Fulk

Thanks, Stephanie. So possibly a mates of things. One, earlier, I further picture what we're seeing connected nan gross lines without getting circumstantial betwixt nan categories. We spot maturation connected B2B payer. We're excited astir our B2B DTE class and we spot a stabilization connected nan user statement of move to margin. And again, we're not getting circumstantial connected class margins but we've sewage -- we've noted before, our B2B categories person a little margin. Having said that, we've sewage a fewer efforts underway that thief to offset that. So 1 is driving productivity wrong nan network. There's a mates of items there. We took respective actions past twelvemonth related to our full-time therapist network. So eliminating little productive areas of nan network. And past going forward, only adding backmost full-time therapists arsenic we're capable to fulfill request and they're done successful an businesslike way. This leaves america pinch a batch of leverage arsenic we turn our contractor web successful a measurement that's really efficient. Essentially, it becomes a very variable, conscionable purely adaptable point connected our separator line.

We're besides moving connected nan worth of our offerings successful position of nett price. I commented connected some successful nan 3rd 4th and successful nan 4th fourth having benefited from value renegotiations connected much favorable terms, peculiarly successful our DTE category. We person much opportunities here, 'll say, chiefly successful nan payer abstraction by improving our postulation rates pinch payers. We person immoderate affirmative projects underway wherever we spot that arsenic being an opportunity for us.

Having said that, past you spell to OpEx. And for illustration I said, we're going to proceed to make judge that we're managing OpEx successful nan astir optimal measurement crossed scrutinizing headcount, third-party walk but besides successful position of our advertizing walk arsenic we are focusing that walk connected making judge we're maximizing profitability crossed nan business.

Jon Cohen

Hey, Stephanie. It's Jon. Yes, I want to reiterate that if you look astatine nan OpEx trajectory, location is really -- and not conscionable successful our mind -- a scheme which is reasonably important and evident for much room for america to return retired OpEx costs. And that is portion of nan trajectory astir really we're going to get location to breakeven by, arsenic we said, nan first half of adjacent year. So nan trajectory will proceed is what I'm telling you. And we person -- truthful we person room location to proceed to return retired costs arsenic needed. At nan aforesaid time, remember, nan level is fundamentally built. It's been 10 years that we've built this guidelines of a level that functions highly well. So though location will beryllium immoderate different imaginable superior investments successful immoderate different areas, location is not a important request connected nan guidelines of operations to further amended nan product. So that's a really important issue.

We're not successful a class of a integer institution wherever we request to proceed to put important dollars successful a level to make it functional. That is not nan lawsuit here. So that is simply a really important rumor for america arsenic we move forward.

Stephanie Davis

So let's possibly excavation successful a small spot into 1 of those areas of walk that you mentioned, nan income and trading broadside of nan world, wherever it sounds for illustration you're looking astatine DTC stabilizing but possibly getting much efficiencies retired of that. How should we deliberation astir nan guardant arc of your investments successful nan DTC business?

Jennifer Fulk

Yes. So I conjecture -- and we've commented earlier astir really we're viewing investments really connected a benignant of level basis. So optimizing -- we've historically focused connected user members arsenic we've commented connected advertizing spend. You've heard america for nan past respective quarters, remark connected how, astatine this point, we person unified each aspects of our business. And that's really fixed nan marketplace trends that we described earlier. This -- nan marketplace is driven by group looking to leverage wellness attraction [indiscernible] therapy. So for us, this includes optimizing our channels for acquisitions, meaning our media walk sloppy of costs type and explicitly leveraging our advertizing messages to assistance consciousness of our expansive covered lives. And we're seeing really encouraging results truthful acold successful nan information that we've had pinch that messaging. So successful short, we're maximizing wide profit, whether that acquisition and nan denominator comes from a B2B payer aliases from a user member. And I conjecture we're seeing really bully momentum connected nan B2B payer request from these efforts.

Jon Cohen

And, again, fto maine besides reiterate nan finance successful nan trading walk is targeted to each members. It is not a breakout for illustration we're specifically targeting nan B2C market. We're targeting members arsenic that affects nan wide level of nan people. So that's -- it's a very -- obviously, it's somewhat of a different attack comparative to really we reside it but it's nary longer for illustration we're saying, this is nan magnitude of money we're going to put into trading connected nan B2C side.

Stephanie Davis

All right. Understood.

Operator

We'll spell adjacent to Daniel Grosslight of Citi.

Daniel Grosslight

Congrats connected nan quarter. I'm going to instrumentality pinch nan Steph's statement of questioning present because we excessively were amazed connected nan cadence of OpEx betterment complete nan adjacent year, 1.5 years aliases so. So possibly if I could return benignant of nan flip broadside of that coin and attraction connected gross growth. I guess, is location a measurement to dimensionalize really accelerated you person to turn nan apical statement to get to that breakeven constituent successful nan first half of '24? Because astatine immoderate point, there's only truthful overmuch juice you tin compression retired of nan costs building that you have. You're going to need, I assume, to accelerate maturation astatine immoderate constituent aliases you're going to spot immoderate type of diseconomies of scale. So tin you conscionable talk astir really overmuch maturation you will request to spot connected nan apical statement to scope that breakeven constituent successful nan first half of '24?

Jennifer Fulk

Maybe conscionable a mates of points to adhd to what we already person which is I conjecture there's an constituent of -- first of all, conscionable nan maturation successful nan B2B categories that we've already demonstrated, for illustration we said, we spot continued momentum there, moreover successful nan first quarter. I'll opportunity nan quality betwixt arsenic we adjacent this twelvemonth and our gross guidance for that versus an acceleration arsenic we spot successful nan first half would beryllium impacted by our position of imaginable seasonality that we historically see. We did spot a moderation of maturation successful nan 4th quarter. Like I mentioned, we were really pleased that we didn't spot a large effect for that but that is thing to deliberation astir arsenic you look astatine benignant of tally complaint gross successful our expectations.

Daniel Grosslight

Got it. And past possibly a bigger image mobility and nan questions astir controversies, much broadly. Not related to Talkspace specifically but there's 2 controversies that came up precocious successful integer wellness much broadly. One, location was a news article a week aliases 2 a agone -- I'm not judge if you saw this -- astir an world insubstantial written by personification who utilized ChatGPT to behaviour intelligence wellness visits without nan patients really knowing, I think. And it performed beautiful well, ChatGPT, this AI tool. So mobility 1 is really tin you aliases do you intend to usage immoderate caller AI devices that person travel to marketplace much precocious to make your supplier web much efficient? That's contention 1.

Controversy 2; conscionable connected nan usage of trackers for illustration [indiscernible] to do immoderate capacity trading to immoderate members, really are you utilizing personnel information to do capacity marketing? Are you utilizing Facebook pixels and sharing information pinch Google and different capacity marketers to advertise to your imaginable members?

Jon Cohen

It's Jon. So fto maine return nan first. We have, for rather immoderate time, been -- you whitethorn cognize we person a reasonably robust investigation team, information analytics. So we person a much than a adjacent grade of information that looks astatine issues that you're referring to astir AI. I will -- I'm going to reserve comments now to astatine slightest astir apt nan adjacent quarter. But we already person successful spot important information study to look astatine really group execute and what those messages request to beryllium for therapist. So what I mean by that is I've seen and understand precisely what you're talking astir comparative to ChatGPT. Our attack connected this is not correct now, it's not going to beryllium that a ChatGPT will supply a substitute successful immoderate measurement for nan therapists. What nan AI accusation tin do though is what it will do is thief nonstop nan therapist successful ways of which to supply amended therapy for their patients.

So that's wherever I spot nan adjacent evident spot for AI to statesman to person an effect to amended not conscionable therapy but nan capacity of nan therapists to amended nan value of nan merchandise that we're delivering to people. So that's what I judge is going to happen. And arsenic I said, I'll person much to talk astir that successful nan future. But it is -- to reply your question, it is very overmuch connected our radar. And we person important accusation and acquisition pinch it that I'll talk astir successful nan future. So that's A. B) successful position of nan information study comparative to really nan level performs connected societal media, our trading section is really, really bully astatine this. They person now -- they person and for immoderate clip been capable to analyse wherever nan trading dollars go, who really clicks through. So we will person nan accusation connected our societal -- from our societal media information astir nan analytics to beryllium capable to way really we're performing comparative to our trading spend. So that really is already successful place.

Jennifer Fulk

And conscionable to adhd to that, we do not stock pixels erstwhile nan personnel engages backmost pinch us. So we are very, very -- we're perfectly assured we're not sharing individual information. I'm acquainted pinch nan article that you're describing and I tin guarantee you that it's not -- it's not nan case. How we are operating?

Jon Cohen

It's much on nan spend. We cognize what nan click-through is truthful that we tin modify our walk rate.

Operator

And that does reason nan question-and-answer session. At this time, we'll move nan convention backmost complete to Jon for immoderate closing remarks.

Jon Cohen

Okay. Well, first off, acknowledgment to each of you again for joining america this greeting connected Talkspace 4th fourth and twelvemonth extremity 2022 net call. As I noted earlier successful nan call, our affirmative results from nan past quarter, our sustained trajectory done January and our affirmative guidance for 2023 confirms my impressions connected nan absolute affirmative early of this business. We look guardant to sharing updates connected our advancement sometime successful nan adjacent early and surely connected our adjacent net call. Thank you, erstwhile again.

Operator

And that concludes today's convention call. Thank you for your participation. You whitethorn now disconnect.