Talkspace Inc (TALK) 2025 Q3 法說會逐字稿

At this time, I'd like to welcome everyone to the talk space third quarter 2025 earnings call. After the speaker's emerged, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press start, followed by the number one on your telephone keypad.

You would like to withdraw your question? Let's start one again.

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 our CEO Doctor John Cohen and CFO Ian Harris.

Management will offer their prepared remarks and then take your questions.

Chief Technology Officer Gil Margole will join for the question-and-answer section of the call.

Certain measures that will be discussed on today's call are expressed on a non-GAAP financial 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 represented the best 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 on and today's earnings press release.

For more information, please review the Safe Harbor disclaimer on slide two.

Now, I will turn the call over to Doctor John Cohen.

Good morning and thank you for joining the call today to review our third quarter results. We delivered record revenue of $59.4 million and adjusted EBITDA of $5 million. I am pleased to report that active payer members grew 8% sequentially and 29% year over year and payer sessions increased 12% sequentially and 37% year over year.

This acceleration in the quarter is a reflection of the focused approach we initiated this year on all aspects of the patient journey. As I look back at the quarter, I'll call out a few specific areas where we've seen this strategy have a significant impact.

The number of clients activating and attending the third session in the 1st 30 days on the platform is up over 50%, driven mostly by improvements to our matching algorithm, ease of scheduling, and improved provider capacity.

In addition, we continue to see strong results and improve the efficiency on our marketing spin by targeting specific new audiences such as military and their dependents. We are also utilizing AI-driven tactics to further optimize media and test new marketing investments.

In the third quarter, we became in-network with several new blues plans, including Illinois and Massachusetts, and we won a competitive takeaway of one of the largest national EAPs which we launched earlier this month.

We've also made meaningful progress embedding talk space into our payer partner ecosystems by focusing on the areas that matter most to them.

We continuously manage and curate our network of around 6,000 clinicians to make sure that top quality providers are available to our members and to ensure that each clinician is highly engaged and motivated.

This is a key differentiator for TalkSpace and has helped drive deeper integration with our payer partners, including directory integrations to facilitate patients sign on as a seamless experience.

Our brand awareness has also improved as we are now the most recognized insurance coverage focused brand for mental health, with over 35% of people recognizing the Talkspace name according to third-party surveys. This makes our integration into payer directories even more effective as people are more likely to recognize TalkSpace and seek care from us.

Pay revenue in this quarter also benefited from strength in our psychiatry business which we re-launched earlier this year to address the needs of our high acuity users and those that need medication.

As a result of these initiatives, psychiatry initial session volume increased 46% in the quarter. Further, we grew our psychiatry network of providers by nearly 50% from Q2, and we will continue growing that part of the network given the demand trends we are seeing.

We continue to focus on optimizing the internal referral funnel between therapy and psychiatry services, and we expect continued growth in the coming quarters.

To round out our comprehensive mental health services, earlier this month, we announced our acquisition of Wiso Health, a clinically proven AI powered social health platform specializing in peer to peer community and coaching support.

Wiso has supported over 500,000 adults to date on their platform and utilizes AI to match this population with appropriately trained peers and group coaching for emotional support, companionship, and shared experiences that improve health outcomes, increase adherence and engagement rates, and reduce total cost of care for its health plan clients.

With those particularly applicable to many Medicare patients who have reported a 21% decrease in loneliness and exhibited reductions of up to 10% in emergency room, urgent care, and inpatient visits after joining WisDO.

We anticipate that many of the WisDO users may also benefit from referrals to therapy, just one of the many avenues where we see the synergies of being able to provide patients with a more complete set of behavioural health solutions. I am also excited to announce that next month WisDO will begin supporting Novo Nordisk's new We Go Together app for patients on Wagovi for obesity or overweight.

Within the app, wisDO powers the group coaching experience that helps participants build sustainable habits, share encouragement, and stay emotionally supported as they work toward their health goals.

Our direct to enterprise or DTE business remains solid, particularly with organizations serving youth and young adults, specifically our two year deal with the North Carolina Department of Health and Human Services to provide talk space to 20,000 teenagers impacted by the justice system first launched in July. And course spaces which provides student housing options on college campuses to 36,000 students at 32 different universities launched in late August. While both of these launched a bit later in the quarter than anticipated, they are now up and running and progressing nicely. Additionally, this was a strong quarter for contract renewals, including Baltimore County Public Schools and Colby College, which has renewed its contract three times now for its eight years with TalkSpace.

We also celebrated two years of our New York City TalkSpace program. Looking at the results over that time period, we have over 40,000 youths enrolled in the program, notably, 93% of the participants use messaging, highlighting that our approach to accessibility allows us to meet teens where they are.

Our suicide risk algorithm identified over 500 potential elevated risk incidents, which is incredibly important in a population experiencing anxiety and depression as their most prominent mental health challenges.

Switching to AI, we continue to make significant progress integrating our work on AI into all aspects of our business with multiple initiatives to improve the customer member journey.

This includes LLM search engine optimization, AI assistance in improving eligibility determination for insurance, Smart insights for providers in preparation of their sessions, comprehensive smart evaluation that provides the providers with a HIPAA compliant AI draft of a biopsychosocial evaluation after intake sessions. Smart notes providing post-session summaries for the clinicians.

Our talkcast individualized podcast that I've talked about in the past and now our AI that helps review the medical records, which has been extraordinarily helpful to the compliance and clinical quality teams.

We have data demonstrating the value of our AI innovations. When providers use SmartInsights ahead of their second session with a member, those members are more than 30% more likely to book a third session within 30 days and 31% more likely to complete their third session within 30 days of registration.

Recent results from our data on Talkcast indicate that 21% of people are more likely to book and complete a third session after listening to their podcast.

We've also launched three additional proprietary risk algorithms to add to our suicide risk algorithm. These include risk for violence or homicidal ideation, homicidal intent or homicidal plan.

Risk for substance use disorder and maltreatment risk determination, which identifies behaviour or circumstances that may lead to harm, neglect, or ongoing abuse.

Finally, I'm very excited to announce that the talk space develop behavioural health specific large language model I alluded to on our Q2 earnings call has proven to outperform current AI chatbot agents in our alpha testing.

Our proprietary LLM has been trained on hundreds of millions of anonymized therapy transcripts and rigorously tested for safety and therapeutic quality, and we envision it will serve as a therapy companion and clinical support tool. With that in mind, I want to address the issue of AI and mental health and the crisis that has emerged generating the recent headlines of high profile cases in the press of significant injury and fatalities as a result of people interacting with general purpose LLMs to address mental health issues.

Many have noted that the chatbots can be dangerous as they provide instant unrestricted validation and reassurance to users are too empathetic or sycophantic, are constantly affirming bad behaviour, and are always cheerfully adaptive during conversation that flatters rather than challenges ongoing issues.

This has resulted in social deskilling and an erosion of real world interactive skills. They fail to challenge delusions or reinforce reality, lack real-time risk identification, lack clinical oversight, and there is no HIPAA protection.

We would note that even as companies work to address some of these issues, they do not have all of the necessary capabilities or experience to more fully protect users. We recognize that these inadequacies of others is a unique opportunity for us. Our significant investment in an AI model combined with our other capabilities will offer individuals a significantly better and safer experience.

This new model that we have developed sets a new standard for both therapeutic efficacy and user safety, unlike general purpose LLMs available today. Utilizing our database, the model was trained on hundreds of millions of tokens from anonymized and graded talks-based therapy transcripts.

In testing, the model consistently outperforms both open-source baselines and state of the art models in responding to high risk mental health situations including self-harm, hallucinations, OCD, mania, and delusions. In fact, in a recent test, our model, when compared to general purpose models without this specialized fine tuning, delivered a 50% improvement in identifying and responding to high-risk behaviours, a 47% higher therapeutic quality score on the cognitive therapy rating scale, and a three times higher user satisfaction than the base model. We expect that these early results will get even better over time as we refine the model in further testing cycles.

More importantly, our product is being built with significant clinical oversight, real-time risk determination, immediate referral to a live therapist, human in the loop, and with HIPAA protection to protect patients' personal information.

These are unique and core skills that are already available to our tox space members through their personal interactions with their therapists.

Additionally, our model can be used as an engagement tool for intake screening for multiple different types of patients and as an engagement tool in between sessions.

We see the development of our safe talk space AI agent proprietary LLM as a large new opportunity with significant potential upside for our existing business and significant opportunity for new products. We expect to launch a full product offering in the first half of 2026, but believe there are a number of unique and significant commercial opportunities in the near term.

We expect to focus initially on several of these near term opportunities that take advantage of our existing commercial infrastructure and brand presence, including as an affordable alternative for consumers and an attractive alternative for employers to provide a low cost alternative to their employees.

Over time we anticipate being able to work with our existing payer partners to offer to their network members a reimbursable alternative.

Importantly, all of these early products will remain HIPAA compliant and provide real-time clinical oversight with the availability for immediate referral to a live therapist in our existing network. We look forward to providing updates on this important initiative over the coming months.

I'm proud of all our team has accomplished so far this year. And no, we are set up for even greater success ahead. Now I'll turn the call over to Ian to review the financials in more detail.

Thanks, John, and good morning everyone.

In the third quarter, we continue to execute on our growth and profitability objectives while maintaining strong operational discipline.

First, I'll review our quarterly financial performance and then provide an update on our outlook for the remainder of the year.

Starting with the third quarter results, total net revenue was $59.4 million, an increase of 25% year over year and 9% sequentially.

The accelerating momentum in our payer business is a result of our strategic product investments over the last several quarters as well as our efficient marketing approach throughout the year.

Payer revenue grew 42% year on year and 12% sequentially to $45.5 million.

This performance reflects the continued adoption and our collaboration with payer partners resulting in higher member engagement within our payer populations.

During the quarter, we completed more than 432,000 payer sessions, up 12% sequentially and up 37% year over year.

The strong session growth was driven by a 29% increase in unique active payer members to over 120,000, which represents our highest quarterly figure since the company's inception.

And reflects one of the benefits of the payer business line, where past cohorts compound over time as members exhibit longer retention rates than out of pocket members.

Direct to enterprise revenue was $9.3 million, down 1% year on year and 2% sequentially.

Similar to last quarter, our renewal rates were strong, but as John mentioned, we experienced slight delays in a couple of material launches that were moved from Q3 to Q4.

We have high visibility into sequential growth for Q4 thanks in part to the Q4 launches of those third quarter new client wins.

Consumer revenue from people paying out of pocket totalled $4.6 million in the quarter, up from $4.4 million last quarter, but a declined versus $6 million a year ago as we now cover more Americans via in-network benefits and we optimize our checkout funnel to direct members to use their covered benefits.

Adjusted gross profit was $24.6 million, up 13% year over year and up 5% sequentially, representing a 41.5% gross margin compared to 43.1% in the prior quarter.

The sequential decline in gross margin was driven in part by the continued overall mix shift toward payer revenue.

As well as the timing of selective network hiring in certain areas in anticipation of increased demand, which we expect to normalize in Q4.

Total operating expenses were $22.4 million, down 11% sequentially and up 4% year over year.

As a percentage of revenue, OpEx, excluding stock-based comp and non-recurring expenses, declined to 34% versus 40% in Q2 and 41% a year ago, driven by disciplined expense management and continued operating leverage as revenue growth outpaces a relatively fixed cost base.

Augustadi Baag grew 111% year over year to $5.0 million compared to $2.3 million in Q2 and $2.4 million a year ago.

Adjusted margin expanded to 8.4% versus 5% a year ago, again demonstrating the operating leverage inherent in the business.

Turning to the balance sheet.

We ended the quarter with $96 million in cash and equivalents, including available for sale securities and restricted cash.

This was down $7 million sequentially, primarily due to our share repurchase activity.

We bought back nearly $9 million of stock in the quarter, bringing our year-to-date share repurchases to $17.2 million.

Finally, turning to our outlook, we are narrowing our full year guidance ranges for 2025 as follows.

We now expect revenue to be between $226 million and $230 million, which represents year to year growth of 20% to 23%.

This compares to the prior range of $220 million to $235 million.

We now expect adjusted IBADA to be between $14 million and $16 million versus the prior range of $14 million to $20 million.

As we've shared today and is evident in our improving KPIs and accelerating revenue growth, especially in our payer business.

The strategic investments we've made in both marketing and to improve our technology and product platforms over the course of 2025 are paying off.

While these investments impact our near-term profitability, as reflected in the updated guidance, they also lay the groundwork for sustainable growth for both our top and bottom lines in the near term as well as into 2026.

We've made meaningful progress across the company so far this year, both from a clinical and operational standpoint.

I believe we're ending the year on a very solid foundation.

With that operator we can open the call for questions.

At this time, I would like to remind everyone, in order to ask a question, please press star, followed by the number one on a telephone keypad.

Your first question comes from the line of Steven Dechert with KeyBanc, please go ahead.

Hey, thanks guys. .

Around the large language models, how will those be integrated into the Talkspace app and then How do you plan to monetize that? Will that, will there be like a subscription or just something that will be included if you're an existing patient for free? Thanks.

So, thanks for the question. It will be integrated into our network.

We also have, we're also building this clinical oversight piece of it so we're able to Watch for anybody that needs off ramping. So that's part of the new patient journey that will be part of this, depending on which population uses it.

We have multiple areas you may have seen that we can monetize this, whether it's large populations, consumers, employers.

So that the model and the patient journey for each of those will be different.

So my answer to your question is really stay tuned until we're ready to really bring it to market, which will be early 2026, but each one of those will have actually, a different impact on us relative to the how we commercialize that particular entity.

Okay, and then maybe as a follow-up, could you talk about some of the changes you've made to the matching algorithm that's driving the stronger retention that you see you're seeing?

Thank you.

I think the most important part of there is the We get people in and we actually tell them that we're going to make an appointment for them. Subsequently, we then in some circumstances find an appropriate match for them as opposed to matching them right off the bat. So that's one initiative. The second is our ability to schedule people for multiple sessions.

Or into time slots of what they're looking for has significantly improved to help drive that part of the registration process.

Yeah, Steve, it's Ian. Good morning. I wouldn't say there's really one or even a handful of things we can point to directly that impact it. It's really a multitude of small tweaks that all have a really positive compounding effect when stacked together, so.

It's dramatically simplifying our registration flow. It's network management where we're, dynamically looking at supply demand and sort of having that supply management outlook we're looking both in the near term, twelve weeks ahead, but also, from a broader network planning quarters ahead.

Even you know we're getting at specifics like days of the week, times of the day, which states, and making sure that we're engaging our network to open up schedules and availability such that when people come in, we know, in addition to cost which we've talked about in the past, we know that scheduling is a is a huge criteria in terms of that consumer choice to go through with their.

A decision to proceed or not.

Okay, thanks guys.

Your next question comes from the line of Charles Ryz with TD Cowan.

Please go ahead.

Hey, this is Ethan on for Charles. Thanks for taking the question. So, it looks like KPIs are doing pretty well, and are you guys comfortable, do you think, with the number of credential therapists you have right now in your network, or do you think you might have to potentially grow that number in the near or medium term? Thanks.

Yeah, we're definitely comfortable with where we stand today. I mean every again we're meeting even at the senior executive level weekly on this exact issue for capacity planning because obviously it's quarter of what we do.

I'd say in general we feel good about where we are. We're constantly pruning, adding, it’s hard to talk about it sort of in the aggregate because we're getting down very specific to what are they credentialed for realms of expertise.

Are they a 1099 versus a W-2? What what's their ultimate capacity and what geographies are they in? Just to name a few of the variables we have to plan around, but I touched on that actually in my prepared remarks around our gross margin, the sequential change from Q2 to Q3. Some of that was actually we did some hiring in our network sort of to get out in front of anticipated demand which we saw in Q3 and. Candidly, what we're seeing in Q4, more of the same of that very strong pay demand. So that was a little bit of a drag on gross margins in Q3 as we hired sort of ahead of that demand, but where we sent it, we feel very good about the health of the network overall.

Okay, that's super helpful.

Thank you. If you don't mind me taking a quick follow-up, so it looks like S&M ramped down in the quarter and this is pretty consistent with what you guys have been messaging, but just how should we think about the run rate of marketing spends going forward?

Yeah, so it was down a little bit sequentially, obviously up, I think about a million.

Year on year and what I would reiterate is we're very, how should I say this like it's a very high bar for marketing we don't spend it lightly and so we're, we were comfortable adding versus a year ago because of the efficiency and the very strong ROI we're seeing and I think that came through in the KPIs for payer last quarter and again this quarter just looking at the new user growth which is a very good forward indicator. Of sessions that are going to come and obviously in a fee for service model therefore payer revenue that's to come.

So going forward I think kind of where we are in Q3 is a is an okay proxy for Q4, we'll obviously come back to you all on sort of 26 guidance, next quarter. What I would say is, the sort of in our narrowed guidance for 25% that 20% to 23%. Growth range I would expect for next year another 20% plus top-line growth which obviously requires some marking to support it but it wouldn't be too dramatically different from this year.

Okay, that's really helpful.

Thank you.

The next question comes from the line of Ryan McDonald with Needham.

Please go ahead.

Thanks for taking my questions.

Congrats on the continued success in the payer channel. If we kind of break down sort of the growth in active members utilization, can you just talk about sort of how much you go tribute to sort of the core commercial population versus obviously the continued growth in lives in the Medicare population thus far.

Thanks.

Yeah, I think, as you can imagine, the significant growth continues to be on the commercial side of the business.

We are seeing continued growth in Medicare. We are seeing, I would say significant uptake on the military initiatives that we're doing right now. So, all of it is moving at the same.

Almost the same pace, but there's no question that the commercial payer orbit is significantly contributing to the increase in both registration and sessions.

That's helpful. And then as you think about the WisDO health acquisition and starting to integrate that, how can you, what can that do to help sort of open up more of the Medicare opportunity for you or drive more sort of active engagement there? And then is there anything from a marketing perspective you're doing during open enrollment here to really TRY to ramp up those efforts this year? Thanks.

Yeah, that's a great question. So, there's no question that the WisDO integration into our Medicare strategy we think will provide, some significant uptick because of the group coaching that they offer. We have, we are finding that that a significant number of seniors like the idea of group coaching and peer to peer and people who have experienced what they have, particularly around the loneliness issue. So, we do think that as a as a, significant uptick relative to the Medicare population. I'm not, I understand your question relative to open enrollment. I'm not sure what the impact of that would be, it's certainly unknown relative to the Medicare Advantage population, so I don't, I can't answer that. it's to be seen about what happens in open enrollment, but remember our core issue is pitching, directly to patients once they've signed up.

I would also, I just want to reiterate a little bit on the wisDO of the Novo Nordisk announcement that we made as part of it, is really, significant.

Positive issue relative to the WisDO go to market strategy. It was very clear that the people who are taking GLPs relative to weight management are really looking for a group coaching solution to help them get through it by seeing and interacting with other people who are going through the journey.

So just a quick following note, Ryan.

Brian, a quick modeling note on that point, so the wizard revenue will show up for something like the GLP1 program with Novo and their and their we go app that'll show up in DTE revenue.

And then to your earlier question, signing up our existing payers, which I would say to date the receptivity and interest from Talk spaces existing payer partners has really pleasantly surprised us. Their interest in potentially adding on WisDOo as another benefit that will obviously show up in in payer revenue, so it won't be broken out separately per see.

Thanks for clarifying that, I appreciate it.

Next question comes from the line of Richard Close with Cancorgenuity.

Please go ahead.

Yeah, thanks for the question. Congratulations on the results and all the update here. Just maybe to pull the thread on WisDO and the pharma opportunity, can you talk a little bit about how you see that playing out? Is this just a one off, with Novo or how are you thinking about, really penetrating that market?

Yeah, I won't discuss the specifics of the relationship with Novo. I would tell you that as you can imagine that the number of people that are getting Wagobe and what percentage of them are going to are really looking for this kind of application to help them get through their journey. What it does is it really helps people develop the habits to continue to stay on the drug. Well, we are, that's what we will look at other Similar opportunities in the form of space in a general sense, but we need to get this one Honestly right the first time around, so I would say more to come on that.

Okay, and then, just maybe on the AI front appreciate the comments there, and John calling out, I guess some of the downfall of other.

You know LLM models and dealing with mental health, are there, do you see opportunities for talk space as maybe, partnering with some of those other companies in terms of, providing the clinical oversight, that's associated with your offering.

Just any thoughts there in terms of partnership opportunities?

Yeah, so the answer is absolutely yes. We do have a significant, you've heard me talk about it. I think we have a significant differential advantage relative to the other LLM specifically that we have the provider network.

We actually know how to deal with mental health journeys.

And I think what's, nuanced a little bit is if you're in another LLM and you need therapy and you need to see a therapist, we're a network. So, what that means is if we have a continue seamless journey relative to the others, patients who need therapy essentially are going to be probably covered so they don't have to pay more. If you're on one of the other LLMs and you need therapy or need to go outside the network, the question is who's going to who's going to pay for that. So, it's a long-winded answer to, I do think there are licensing and other potential opportunities with other players out there.

Okay, thank you.

The next question comes from the line of Bobby Brooks with Northland Capital Market.

Please go ahead. Hey.

Hey, good morning, guys.

Thank you for taking my question. It was great to see a second straight quarter where all the year over year growth KPIs on utilization for payer accelerated, and I was just curious if we could dive a little bit deeper of the factors that were driving that. I know over the last two quarters you had mentioned you do monthly record signups for new users, and that was sort of a key. Is that still occurring? Just hoping to get a little more colour on that.

Hey Bobby, thanks for the question.

The short answer is yes. So, I think what you're referring to last quarter sequentially.

In terms of quarterly unique active payer members, we saw about a 10,000 user step up from Q1 to Q2 and saw pretty much the same step up Q2 to Q3 and as.

As I mentioned earlier, that's a really good leading indicator for pair revenue. We have very high visibility to sort of the retention of a of a new group adding on to the platform in a month and sort of what those cohort curves look like, so from a supply.

Capacity planning standpoint that's very helpful and yes I mean you'll you saw it again this quarter which obviously.

Putting 2 and 2 together there bodes very well for our visibility to pair revenue for Q4 where again we grew 29% the users this quarter versus a year ago.

The sessions also grew 37% and then you can do the math. You saw a little bit of a benefit year on year, sort of mid-signal digits in terms of sessions per member and again some of that is around the product changes we're doing to engage folks. Some of that is actually in John's remarks he talked about a relaunch of Psy, and as part of that we're doing a much better job, much more concerted effort. In sort of that cross referral between therapy and site that you know a year ago we were we were candidly not very focused on. So sessions per member also going up, price going up, users going up, and that's why you're getting that really that 42% growth in payer it's sort of a function of all that just to double click on the new user piece.

Marketing for us gets, we've touched on and again the efficiency metrics and ROIs we're seeing there are still very good. We're very pleased with it and that's why we had filled the marketing up about a million bucks from a year ago.

We've talked in the past, less so this quarter, but the level of collaboration and candidly.

The sort of effort and resources from our payer partners that they're dedicating to making it a more seamless integration to get to TalkSpace has been also a very big benefit in terms of new users. So, when we talk about the directory integrations and getting more embedded into their payer portals to make it a more seamless transition, that's been, I mean, years and years in the making to get to the point where, all the clinical quality, all the safety, all the outcomes. Data that we're sharing with them and they've been pleased with for multiple years you can imagine these managed care orgs with very.

Long list of priorities to be able to get that dedicated resource and attention from them to go through these sort of technological integrations it's a very high hurdle and I think it's a testament to the job we're performing for them so that leads to significant user growth as well.

Got it, that's super helpful and then just maybe double.

Responding to the directory integrations I know in the past you had talked I think it was like you're integrated with one payer system it seems like maybe that's now expanded to some others just any.

Thoughts on that?

Yeah, we, so the answer is yes. We will be in several other national players, most likely probably in Q4 and rolling into 2026, but those are really close, I'll tell you to the to the finish line, which will, as I said, probably happen in Q4, which will continually have a, significantly positive impact on the ability of people to book sessions without having to leave the payer platform.

So I just I think what you're asking is it that those new additions are on the com, those are not reflected in the Q3 results.

Thank you. That's helpful, Colin. I'm sorry if I missed this if you discussed it earlier, but Could you maybe just discuss, the factors underpinning the guidance range tightening, specifically on EEA, is it, are you just spending a little bit more in anticipation of, more I know you're the gross margins are lower on high on some selective hiring anticipating more demand, is that okay, so that's kind of the driver for the change.

Yeah, exactly. So, on the revenue tightening, we just, as you can see, tighten around the midpoint, I guess the new midpoint's a little bit higher than prior and then a couple million down on the EEA range, which is a couple factors. One is actually a function of the sort of DT commentary John laid out where some of our Q3 launches got delayed to October.

So they're live now and we'll see it in Q4, but you lose up to 25% of revenue and from that and then it's also in assessing sort of our.

Classic sort of growth versus profitability given the returns we're seeing.

And the acceleration in our KPIs, right, payer going from low 30%, beginning of the year, annualized growth to low 40% and wanting to continue that, given the opportunities that is there, we decided, a couple million bucks on EBITA to ensure that we're growing at least 20% in 2026 is a trade-off that makes a ton of sense.

I would agree with that logic. I'll return to the queue. Congrats on the great quarter.

Your next question comes from the line of Steven Vallaett with Mizuo.

Please go ahead.

Yeah, thanks. Let me offer my congrats on the results as well.

I guess my question is just kind of thinking ahead to next year. 2026 is the third year of your three year guidance you gave at the beginning of 2024. Just wondering if there's any plans right now to provide any sort of new long-term guidance, sometime next year or if that's still kind of TBD. Or are you going to just revert back to annual guidance it's just curious as you think about visibility and the business, how you're going to tackle the, kind of the forward look, just any preliminary thoughts around that might be helpful. Thanks.

Yeah, thanks Steve.

I say TBD for now, but yes, to your point, the three year outlook we put out early 2024, what's for 2024, 2025, 2026.

We've largely delivered across that three year plan, right? So, it to remind folks it was a 20% to 25% topline keger which triggered 25% in 2024 year one.

The narrow guidance is for low 20s in this year 2025 and so even to hit that outlook we could have much lower growth in 2026, but I want to make sure you hear, we think 2026 will look a lot like 2025 or potentially better, so at least 20% growth again. In 2026 and then getting to that sort of low double-digit 12.5% to 15% even the margin. So that's also very much the plan for 2026 obviously we will give more detailed annual guidance next quarter or potentially.

At JPMorgan in January.

But in terms of a longer-term outlook, I've I will not make any promises, but I know that's always helpful for you guys, so duly noted.

Okay, I appreciate it thanks.

Your last question comes from the line of Ryan Daniels with William Blair.

Please go ahead.

Hello, this is Matthew Mardula on for Ryan Daniels, and thank you for taking our question. So, regarding Medicare, with there being many different subsectors and just the overall larger market of Medicare, but since you've had a couple of quarters under your belt, when do you believe Medicare will start to meaningfully impact results? Do you think it could be 2026 or later on? I'm just trying to understand the rat that could come from adding patients in Medicare.

Yeah, so, it's, as I talked before continues to be a work in progress, we see increasing, sessions, registrations.

Each quarter we are continuing to refine the strategy around reaching seniors. I think the unknown right now will be the impact of wisdom, which we think will have an impact in addressing the population.

So the short answer is it's still a work in progress as we work through state by state and subpopulation by subpopulation. I think you've heard me talk about before the over 75 engagement is very different than the 65year to 75year old, which is very different than the actual 55year to 65year old that may or may not be, let's say dialysis, etc. So, we continue to work through it, so I would just say it's stay tuned for the Q4 in 2026 as we refine the strategy each quarter.

Got it. Thanks for that. And I understand that over the past couple of quarters, you've been using AI applications on the administrative side and in your prepared, your remarks, you mentioned some. Now, regarding the benefits of AI, have you seen any financial impact on an administrative level? And if so, if you could kind of give us some color into that. And I'm just trying to understand if there will be a certain time where you believe you will see, a meaningful lift up financially in terms of either productivity or savings regarding usage of AI applications on the administrative side.

So, as we reported in the remarks we've already seen significant impact of AI. We've integrated it to almost every part of the patient journey from the top of the funnel through first session, section session, third session, so the impact has actually been significant, and we've talked about 30% more people looking now to book a third session within 30 days, 31% more likely to complete their third session. The talkcast has had a positive impact of 21% of people more likely to book a third session.

All of those are just examples of how AI actually is integrated into the patient journey with whether it's the risk algorithms, smart notes, summary notes that I I've talked about, on the comments. All of that already has had a very remarkable impact on the number of sessions that we're seeing and people rebooking.

And on the on the corporate side, on the corporate side for G&A, I'd say we are already using AI a ton to ensure that operating leverage comes through. So, we grew 25% this quarter. I think this is probably in the adjusted EI bridge when you look at for the OpEx that impacts, excluding SBC that impacts Edot, it's effectively flat here and here, so.

You're the benefits of a lot of what we're doing on a corporate level are definitely embedded in that.

Minimizing OpEx.

Great, thank you for those insights.

There are no more questions at this time, ladies and gentlemen, that concludes today's call.

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