TALK US Equity☆

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, all references in this section as to “Talkspace,” the “Company,” “we,” “us” or “our” refer to the business of Talkspace, Inc. and its consolidated subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes contained in this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those discussed in the “Risk Factors” and “Forward-Looking Statements” sections and elsewhere in this Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results of operations for the years ended December 31, 2025 and 2024. For a discussion of our results of operations, liquidity and capital resources for the year ended December 31, 2023, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Overview

Talkspace is a leading virtual behavioral healthcare company offering its members convenient and affordable access to a fully-credentialed network of highly qualified providers across a wide and growing spectrum of care through virtual psychotherapy and psychiatry. All care offered at Talkspace is delivered through an easy-to-use, fully-encrypted web and mobile platform that meets HIPAA, federal, and state regulatory requirements.

Our customers are comprised of the following:

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Health insurance plans from commercial and government institutions, and employee assistance programs (“Payor”), who offer their members access to our platform at in-network reimbursement rates,

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Direct-to-Enterprise (“DTE”), comprised of enterprises who offer their enterprise members access to our platform while their enterprise is under an active contract with Talkspace, and

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Individual subscribers (“Consumer”) who subscribe directly to our platform.

For the year ended December 31, 2025 our revenues were $228.9 million compared to $187.6 million for the year ended December 31, 2024. For the year ended December 31, 2025, our clinicians completed 1,617,000 sessions related to members covered under our Payor customers compared to 1,229,200 completed sessions for the year ended December 31, 2024. As of December 31, 2025, we had approximately 5,000 Consumer active members compared to 7,200 Consumer active members as of December 31, 2024.

Pending Merger with Universal Health Services, Inc.

On March 9, 2026, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Universal Health Services, Inc., a Delaware corporation (“UHS”), and UHS Merger Subsidiary, Inc., a Delaware corporation and an indirect wholly owned subsidiary of UHS (“Merger Subsidiary”), pursuant to which, among other things, Merger Subsidiary will merge with and into us (the “Merger”), with us continuing as the surviving corporation and a wholly-owned subsidiary of UHS.

Under the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of our common stock (subject to certain exceptions set forth in the Merger Agreement) will be cancelled and converted into the right to receive $5.25 per share in cash. Following completion of the Merger, we will be delisted from the NASDAQ Global Select Market and deregistered under the Securities Exchange Act of 1934.

We have made customary representations and warranties in the Merger Agreement and have agreed to customary covenants regarding the operation of our business prior to the consummation of the Merger.

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Consummation of the Merger is subject to customary closing conditions, including termination or expiration of any waiting periods required under the Hart-Scott-Rodino (“HSR”) Act and certain specified state healthcare laws, approval by our stockholders and other customary closing conditions. The transaction is expected to close in the third quarter of 2026.

We have incurred, and expect to continue to incur, significant transaction-related costs, including financial advisory, legal, and accounting fees, which will be recognized as expense in the periods incurred during fiscal year 2026.

The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed by us on March 9, 2026. For additional information related to the Merger Agreement, please also refer to the other relevant materials in connection with the transaction that we will file with the SEC and that will contain important information about us and the Merger.

Clinical Automation and Artificial Intelligence

Sentia AI, LLC is Talkspace’s wholly-owned subsidiary dedicated to proprietary Artificial Intelligence (“AI”) development. “Sentia” refers to Talkspace’s behavioral-health-focused large language model (“LLM”) that Talkspace intends to utilize in future products, primarily where a member has a conversation with an agent. Sentia currently exists as a beta-tested, user-facing interface product where members engage with our LLM regarding their mental well-being. This model does not replace clinicians but extends their reach, adhering to strict clinical standards while identifying millions of new users who may require human intervention. While we believe this integration will enhance member engagement and reduce clinician burnout, the cost of compute resources associated with LLMs may impact our technology and development expenses. Furthermore, if the AI-generated outputs fail to meet clinical or regulatory standards, it could result in increased liability or decreased user trust, reputational harm, additional regulatory scrutiny, and reduced demand for our services.

Business Acquisition

On October 1, 2025, Talkspace acquired Wisdo Health,a clinically-proven and AI-powered social health and peer support platform. Social health and the presence of supportive human connections are critical components of overall health and the acquisition of Wisdo better positions Talkspace to address loneliness and isolation, conditions that affect nearly half of U.S. adults, drive significant costs, and were declared a public health crisis by the U.S. Surgeon General. Backed by peer-reviewed research, Wisdo has demonstrated significant improvements in health outcomes, including reductions in loneliness and depression. The results of this acquisition is included in the Company’s consolidated financial statements from the date of acquisition. Refer to Note 2, “Summary of Significant Accounting Policies and Estimates” in notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Inflation Risk and Economic Conditions

The demand for our solution is dependent on the general economy, which is in turn affected by geopolitical conditions, the stability of the global credit markets, inflationary pressures, higher interest rates, the industries in which our Payor and DTE customers operate or serve, and other factors. Downturns in the general economy could disproportionately affect the demand for our solution and cause it to decrease.

Our operations could also be impacted by inflation and higher interest rates. Inflation did not have a material effect on our business, financial condition or results of operations for the years ended December 31, 2025 and 2024. However, if our costs were to become subject to significant inflationary pressures (such as Provider cost), we may not be able to fully offset such higher costs through price increases or cost savings. Our inability or failure to do so could harm our business, financial condition or results of operations.

One Big Beautiful Bill Act

In July 2025, the One Big Beautiful Act (“OBBBA”) was enacted, introducing amendments to the U.S. federal income tax code. The OBBBA permanently restores 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, and allows immediate expensing of domestic research and experimental expenditures for tax years beginning after December 31, 2024. Although we continue to maintain a full valuation allowance against our U.S. deferred tax assets as of December 31, 2025, we expect these provisions to increase available deductions and extend the period during which future taxable income may be sheltered, improving liquidity to the extent we generate taxable income.

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Quarterly Fluctuations

Our financial results may fluctuate from period-to-period as a result of a variety of factors, many of which are outside of our control, including, without limitation, the factors described in this section. Most of our revenue in any given quarter is derived from contracts entered into with our customers during previous quarters. Consequently, a decline in new or renewed contracts in any one quarter may not be fully reflected in our revenue for that quarter. Such declines, however, would negatively affect our revenue in future periods and the effect of significant downturns in sales of and market demand for our solution, and potential changes in our renewals or renewal terms, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our total revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable term of the contract. Accordingly, the effect of changes in the industry impacting our business or changes we experience in our new sales may not be reflected in our short-term results of operations. Any fluctuation in our quarterly results may not accurately reflect the underlying performance of our business and could cause a decline in the trading price of our securities.

Operating Segments

The Company operates as a single segment, which is how the chief operating decision maker (“CODM”), who is the Chief Executive Officer, reviews financial performance and allocates resources.

Key Business Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following metrics are useful in evaluating our business:

Year EndedDecember 31,

Number of completed Payor sessions during the year 1,617.0 1,229.2

Number of health plan customers at year end 35 27

Number of enterprise customers at year end 159 188

Number of Consumer active members at year end 5.0 7.2

Three Months EndedDecember 31,

Unique Payor active members during the period 124.1 95.7

Consumer Active Members: We consider consumer members “active” 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.

Unique Payor Active Members: Represents unique users who had a session completed during the period.

Components of Results of Operations

Revenue

We generate revenues from services provided to individuals who are qualified to receive access to the Company's services through our arrangements with health insurance plans, employee assistance organizations and enterprises. We also generate revenues from the sale of monthly, quarterly, bi-annual and annual membership subscriptions to the Company's therapy platform as well as supplementary a la carte offerings directly to individual consumers through a subscription plan. Revenue growth is generated from a combination of increasing utilization within our Payor members and expanding enterprise customers. See Note 2, “Summary of Significant Accounting Policies and Estimates” in notes to the consolidated financial statements for further details.

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Costs and Operating Expenses

Cost of Revenue, excluding depreciation and amortization

Cost of revenue is comprised primarily of therapist payments. Cost of revenue is largely driven by the number of sessions and the size of our provider network that is required to service the growth of our Payor and DTE customers, in addition to the growth of our customer base.

We designed our business model and our provider network to be scalable and to leverage a hybrid model of both employee providers and independently contracted providers to support multiple growth scenarios. The compensation paid to our independently contracted providers is variable, and the amount paid to a provider is generally based on the amount of time committed by such provider to our members. Our employee providers receive a fixed-salary and discretionary bonuses, where applicable, all of which is included in cost of revenue.

While we expect to make increased investments to support accelerated growth and scale our provider network, we also expect increased efficiencies and economies of scale. Our cost of revenue as a percentage of revenue is expected to fluctuate from period to period depending on the interplay of these factors as well as pricing fluctuations.

Operating Expenses:

Research and Development Expenses

Research and development expenses include personnel and related expenses for software development and engineering, information technology infrastructure, security, privacy compliance and product development (inclusive of stock-based compensation for our research and development employees), third-party services and contractors related to research and development, information technology and software-related costs. Research and development expenses exclude amounts reflected as capitalized internal-use software costs.

Clinical Operations Expenses

Clinical operations expenses are associated with the management of our network of therapists. This item is comprised of costs related to recruiting, onboarding, credentialing, training and ongoing quality assurance activities (inclusive of stock-based compensation for our clinical operations employees), costs of third-party services and contractors related to recruiting and training and software-related costs.

Sales and Marketing Expenses

Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, travel and stock-based compensation costs for our employees engaged in sales and account management.

Marketing expenses consist primarily of advertising and marketing expenses for member acquisition and engagement, as well as personnel costs, including salaries, benefits, bonuses, stock-based compensation expense for marketing employees, third-party services and contractors. Marketing expenses also include third-party software subscription services, participation in trade shows, brand messaging and costs of communications materials that are produced for our customers to generate greater awareness and utilization of our platform among our Payor and DTE customers.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation expense for certain executives, finance, accounting, legal and human resources functions, as well as professional fees.

Depreciation and amortization

Depreciation and amortization expense consist primarily of depreciation expense on computer and equipment, and amortization of capitalized internal use-software costs and intangible assets.

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Financial income, net

Financial income, net includes the impact from (i) interest earned in investments in marketable securities and other highly liquid investments, (ii) non-cash changes in the fair value of our warrant liabilities, and (iii) other financial expenses in connection with bank charges.

Income tax expense

Income tax expense consists of U.S. State income taxes related to income generated by our U.S. subsidiaries and foreign income taxes related to income generated by our subsidiary organized under the laws of Israel.

We have a full valuation allowance for our U.S. deferred tax assets, including federal and state NOLs. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income in the United States.

Results of Operations

The following table presents the results of operations for the years ended December 31, 2025 and 2024 and the dollar and percentage change between the respective years:

Year EndedDecember 31, Variance

(in thousands, except percentages)

Revenue:

Costs and operating expenses:

Year Ended December 31, 2025 compared to December 31, 2024

Revenue

Overall, the increase in revenue for the year ended December 31, 2025 compared to year ended December 31, 2024 was predominantly volume-driven reflecting a shift in revenue mix towards Payor.

Total revenue increased by $41.3 million, or 22.0%, to $228.9 million for the year ended December 31, 2025 from $187.6 million for the year ended December 31, 2024, primarily due to a 37.9% increase in Payor revenue, which was driven by a 31.5% increase in the number of completed Payor sessions, partially offset by a 29.5% decline in Consumer revenue. The increase in Payor sessions is primarily due to a 29.7% increase in active payor members and a 29.6% increase in the number of health plan customers. Consumer subscription revenue decreased by $7.3 million, or 29.5%, to $17.5 million for the year ended December 31, 2025 from $24.8 million for the year ended December 31, 2024, primarily due to a 30.0% decline in Consumer active members due to the Company's intentional and strategic decision to optimize and focus marketing efforts on attracting Payor members.

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Costs and Operating Expenses

Cost of revenue, excluding depreciation and amortization

Cost of revenues, excluding depreciation and amortization, increased by $29.2 million or 28.8%, to $130.5 million for the year ended December 31, 2025 from $101.3 million for the year ended December 31, 2024, primarily due to a 21.7% increase in hours worked by therapists as a result of increased Payor sessions.

Operating Expenses:

Research and development expenses

Research and development expenses decreased by $0.7 million, or 7.2%, to $9.5 million for the year ended December 31, 2025 from $10.3 million for the year ended December 31, 2024, primarily due to a $0.8 million decrease in employee-related costs, as a result of the exclusion of amounts reflected as capitalized internal-use software development costs.

Clinical operations expenses.

Clinical operations expenses increased by $0.7 million, or 10.2%, to $7.2 million for the year ended December 31, 2025 from $6.5 million for the year ended December 31, 2024, primarily due to a $0.6 million increase in employee-related costs.

Sales and marketing expenses

Sales and marketing expenses increased by $3.3 million, or 6.5%, to $53.8 million for the year ended December 31, 2025 from $50.5 million for the year ended December 31, 2024. The increase in sales and marketing expenses was primarily driven by a $4.6 million increase in direct marketing and promotional costs, partially offset by a $1.0 million decrease in employee-related costs.

General and administrative expenses

General and administrative expenses decreased by $0.8 million, or 3.6%, to $21.8 million for the year ended December 31, 2025 from $22.6 million for the year ended December 31, 2024. The decrease in general and administrative expenses was primarily due to a $1.1 million decrease in employee-related costs, partially offset by a $0.4 million increase in software tools and subscriptions.

Depreciation and amortization expenses

Depreciation and amortization expenses increased by $2.0 million to $2.9 million for the year ended December 31, 2025 from $0.9 million for the year ended December 31, 2024. The increase in depreciation and amortization expense was primarily due a $1.8 million increase in amortization expense related to capitalized internal-use software assets.

Financial income, net

Financial income, net decreased by $0.5 million, or 9.1%, to $5.2 million for the year ended December 31, 2025 from $5.7 million for the year ended December 31, 2024. The decrease in financial income, net was primarily due to a $1.6 million decrease in interest income earned on marketable securities and other highly liquid investments due to a reduction in interest rates, partially offset by a $1.3 million unrealized gain on the remeasurement of warrant liabilities.

Income tax expense

Income tax expense increased by $0.5 million, or 510.6%, to $0.6 million for the year ended December 31, 2025 from $0.1 million for the year ended December 31, 2024, mainly due to U.S. State income taxes.

Year Ended December 31, 2024 compared to December 31, 2023

For a detailed discussion of the results for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to the “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed on March 12, 2025.

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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, and our management uses it as a key performance measure 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 also 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.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not necessarily reflect capital commitments to be paid in the future and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these requirements. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments described herein. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Adjusted EBITDA should not be considered as an alternative to income (loss) before income taxes, net income (loss), income (loss) per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results.

A reconciliation is provided below for adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review our financial statements prepared in accordance with GAAP 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. We do not provide a forward-looking reconciliation of adjusted EBITDA guidance as the amount and significance of the reconciling items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These reconciling items could be meaningful.

We calculate adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) stock-based compensation expense, (iii) financial income, net, (iv) income tax expense, and (v) certain non-recurring expenses, where applicable.

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net income for the years ended December 31, 2025 and 2024:

Year EndedDecember 31,

Add:

Depreciation and amortization 2,875 859

(1)

For the year-ended December 31, 2025, non-recurring expenses primarily consisted of acquisition related expenses and severance costs related to the departure of a key executive of the Company. For the year-ended December 31, 2024, non-recurring expenses primarily consisted of severance costs related to the departure of key executives of the Company and other related costs.

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Liquidity and Capital Resources

As of December 31, 2025, we maintained a strong capital position with $92.6 million in cash, cash equivalents, and short-term marketable securities ($117.8 million as of December 31, 2024), which we use to finance our operations and support a variety of growth initiatives and investments. We have no debt as of December 31, 2025 and December 31, 2024.

Our primary cash needs are to fund operating activities and invest in technology development. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, the timing and extent of investments to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced service offerings and the continuing market acceptance of virtual behavioral healthcare services. Additionally, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies.

We currently anticipate to be able to fund our cash needs for at least the next 12 months and thereafter for the foreseeable future using available cash and cash equivalent balances. However, in the future we may require additional capital to respond to technological advancements, competitive dynamics, customer demands, business and investment opportunities, acquisitions or unforeseen circumstances and we may determine to engage in equity or debt financings for other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we cannot raise capital when needed, we may be forced to undertake asset sales or similar measures to ensure adequate liquidity.

Share Repurchase Program

On February 22, 2024, the Company announced that its Board of Directors approved a share repurchase program to authorize the repurchase of up to $15.0 million of the currently outstanding shares of the Company’s common stock over a period of 24 months beginning on March 1, 2024 (the “Share Repurchase Program”). On August 1, 2024, the Company’s Board of Directors amended the Share Repurchase Program to authorize the Company to repurchase up to an additional $25.0 million of its common stock for a total of $40.0 million. The Share Repurchase Program will remain in effect until the earliest: 1) the total authorized dollar amount of shares is repurchased or 2) August 1, 2026. All shares repurchased will be retired. Refer to Note 9, “Capital Stock” in notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Cash Flows from Operating, Investing and Financing Activities

The following table presents the summary consolidated cash flow information for the years ended December 31, 2025 and 2024:

Year EndedDecember 31,

(in thousands)

Net cash provided by operating activities $ 8,534 $ 11,704

Net cash used in investing activities (28,877 ) (46,732 )

Net cash used in financing activities (18,997 ) (12,188 )

Net decrease in cash and cash equivalents $ (39,340 ) $ (47,216 )

Operating Activities

Net cash provided by operating activities was $8.5 million for the year ended December 31, 2025 compared to $11.7 million for the year ended December 31, 2024. The decline in net cash provided by operating activities was primarily due to timing of customer payments which increased accounts receivable, partially offset by higher net income during the year ended December 31, 2025 compared to December 31, 2024.

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Investing Activities

Net cash used in investing activities was $28.9 million for the year ended December 31, 2025 compared to $46.7 million for the year ended December 31, 2024. The decrease in net cash used in investing activities was driven primarily by higher proceeds from maturities of marketable securities, partially offset by purchases of marketable securities, capitalized internal-use software development costs and the acquisition of Wisdo Health.

Financing Activities

Net cash used in financing activities was $19.0 million for the year ended December 31, 2025 compared to $12.2 million for the year ended December 31, 2024. The increase in net cash used in financing activities was driven primarily by an increase in repurchases of common stock for retirement, partially offset by a decrease in proceeds from the exercise of stock options.

Contractual Obligations, Commitments and Contingencies

As of December 31, 2025, we did not have any short-term or long-term debt, or any significant long-term liabilities. As of December 31, 2025, we have a non-material long-term operating lease for our office space in New York, NY.

As of December 31, 2025 there were no material legal proceedings, claims or litigation. We may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of business. We accrue for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability has been incurred and we can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses. Should any of our estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows.

Our commercial contract arrangements generally include certain provisions requiring us to indemnify customers against liabilities if there is a breach of a customer’s data or if our service infringes a third party’s intellectual property rights. To date, we have not incurred any material costs as a result of such indemnifications.

We have also agreed to indemnify our officers and directors for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid. We may also be subject to indemnification obligations by law with respect to the actions of our employees under certain circumstances and in certain jurisdictions.

Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements.

Critical Accounting Policies and Estimates

Our accounting policies are essential to understanding and interpreting the financial results reported on the consolidated financial statements. The significant accounting policies used in the preparation of our consolidated financial statements are summarized in Note 2, “Summary of Significant Accounting Policies and Estimates” in the notes to the consolidated financial statements. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain. The following is a discussion of these estimates:

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Revenue Recognition

We recognize revenues in accordance with ASC 606, “Revenue from Contracts with Customers”. Revenues are recognized when we satisfy our performance obligation to perform our defined contractual obligations to provide virtual behavioral healthcare services. The transaction price is determined based on the consideration to which we will be entitled in exchange for the service rendered. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that is included in the transaction price at contract inception and reassesses this estimate at each reporting date. Variable consideration is included in the transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration estimate is primarily based on actual historical collection experience.

Internal-use Software Costs

We capitalize certain costs related to the development of our proprietary virtual behavioral health platform and clinical automation tools, including those incorporating generative AI. In accordance with ASC 350-40, Internal Use Software, software development activities generally consist of three stages (i) the preliminary project stage, (ii) the application development stage, and (iii) the post-implementation operational stage. Costs incurred during the preliminary project stage and during the post-implementation operational stage are expensed as incurred. Eligible costs incurred during the application development stage of the project are capitalized and are amortized on a straight-line basis over the software’s estimated useful life, generally 3 years. Maintenance costs are expensed as incurred.

Stock-based Compensation

We account for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”. Compensation costs for share-based awards are measured at the fair value on the grant date and recognized as expense using the straight-line method for service-based awards over the requisite service period. The fair value of stock options is determined using the Black-Scholes-Merton option pricing model. The option-pricing model requires a number of assumptions, of which the most significant is the expected stock price volatility and the expected option term. Expected volatility is calculated based upon our historical share price movements as well as similar traded companies’ historical share price movements as adequate historical experience is not available to provide a reasonable estimate based only on our share price. Expected term is calculated based on the simplified method as adequate historical experience is not yet available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies and Estimates” in notes to the consolidated financial statements for information regarding recent accounting developments and their impact on our results.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report on Form 10-K may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth.

The forward-looking statements in this Annual Report on Form 10-K and other such statements we publicly make from time to-time are only predictions. We base these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The forward-looking statements in this Annual Report on Form 10-K are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

This Annual Report on Form 10-K and the documents that we reference herein and have filed as exhibits to this Annual Report on Form 10-K should be read with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Annual Report on Form 10-K or any forward-looking statements we may publicly make from time-to-time, whether as a result of any new information, future events or otherwise.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2025, we had cash and cash equivalents totaling $37.4 million and $55.2 million in marketable securities, which are held for a variety of growth initiatives and investments as well as working capital purposes. We do not have any indebtedness for borrowed money outstanding.

We do not believe that a hypothetical increase or decrease of 100 basis points in interest rates would have a material effect on our business, financial condition or results of operations. However, our earnings on cash equivalents are subject to market risk due to changes in interest rates.

Foreign Currency Exchange Risk

To date, a substantial majority of our revenue from customer arrangements has been denominated in U.S. dollars. We have limited operations outside the United States. Accordingly, we believe we do not have a material exposure to foreign currency risk. In the future, we may choose to focus on international expansion, which may increase our exposure to foreign currency exchange risk.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm 62

Consolidated Balance Sheets as of December 31, 2025 and 2024 65

Notes to Consolidated Financial Statements 70

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Talkspace, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Talkspace, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated income statements, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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/s/ Kost Forer Gabbay & Kasierer

A Member of EY Global

We have served as the Company’s auditor since 2014.

Tel-Aviv, Israel

March 13, 2026

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Talkspace, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Talkspace, Inc.'s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Talkspace, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated income statements, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated March 13, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Kost Forer Gabbay & Kasierer

A Member of EY Global

Tel-Aviv, Israel

March 13, 2026

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TALKSPACE, INC.

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

December 31,

ASSETS

CURRENT ASSETS:

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accrued expenses and other current liabilities (1) 6,672 8,031

Other long-term liabilities 452 2,259

Commitments and contingencies (Note 8)

STOCKHOLDERS’ EQUITY:

Accumulated other comprehensive income 57 2

Total liabilities and stockholders’ equity $ 134,863 $ 138,677

(1)

Talkspace, Inc's consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Talkspace, Inc. or its affiliates. At December 31, 2025 and December 31, 2024, assets of these consolidated VIEs totaled $13,562 and $6,875, respectively. At December 31, 2025 and December 31, 2024, liabilities of these consolidated VIEs totaled $3,755 and $2,528, respectively. See Note 13, “Variable Interest Entities,” in the notes to the consolidated financial statements for further details.

The accompanying notes are an integral part of the consolidated financial statements.

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TALKSPACE, INC.

CONSOLIDATED INCOME STATEMENTS

U.S. dollars in thousands (except share and per share data)

Year Ended December 31,

Costs and operating expenses:

Net income (loss) per share:

The accompanying notes are an integral part of the consolidated financial statements.

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TALKSPACE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

U.S. dollars in thousands

Year Ended December 31,

Other comprehensive income:

Change in unrealized gains on marketable debt securities 55 2 —

Total other comprehensive income 55 2 —

The accompanying notes are an integral part of the consolidated financial statements.

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TALKSPACE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

U.S. dollars in thousands (except share and per share data)

Common Stock

Restricted stock units vested, net of tax 2,681,631 * (810 ) — — (810 )

Stock-based compensation — — 8,395 — — 8,395

Stock-based compensation — — 9,787 — — 9,787

Other comprehensive income — — — 2 — 2

Stock-based compensation — — 9,367 — — 9,367

Other comprehensive income — — — 55 — 55

* Represents an amount lower than $1

The accompanying notes are an integral part of the consolidated financial statements.

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TALKSPACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

Year Ended December 31,

Cash flows from operating activities:

Accretion of discount on marketable securities, net (856 ) (417 ) —

Remeasurement of warrant liabilities (1,491 ) (152 ) 903

(Increase) decrease in accounts receivable (6,418 ) 531 (534 )

Decrease (increase) in other current assets 405 2,989 (1,346 )

Increase (decrease) in accounts payable 791 1,599 (350 )

(Decrease) increase in deferred revenues (1,182 ) 213 (1,286 )

Net cash provided by (used in) operating activities 8,534 11,287 (16,393 )

Cash flows from investing activities:

Purchases of marketable securities (49,344 ) (40,701 ) —

Proceeds from maturities of marketable securities 36,084 — —

Capitalized internal-use software costs (10,641 ) (5,443 ) —

Acquisition of business, net of cash acquired (4,904 ) — —

Cash flows from financing activities:

Repurchase of common stock for retirement (17,203 ) (11,003 ) —

Net cash (used in) provided by financing activities (18,997 ) (12,188 ) 1,897

Supplemental cash flow data:

Cash paid during the year for income taxes, net $ 417 $ 96 $ 219

Non-cash investing activity:

Lease liabilities arising from obtaining right-of-use assets $ — $ 595 $ —

Non-cash financing activities:

Issuance of common stock as consideration for acquisition $ 1,488 $ — $ —

Excise tax liability incurred for repurchase of common stock $ 86 $ — $ —

The accompanying notes are an integral part of the consolidated financial statements.

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TALKSPACE, INC.

Notes to Consolidated Financial Statements

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Talkspace, Inc. (together with its consolidated subsidiaries, the “Company” or “Talkspace”) is a leading behavioral healthcare company enabled by a purpose-built technology platform. Talkspace provides individuals and licensed therapists, psychologists and psychiatrists with an online platform for one-on-one therapy delivered via messaging, audio and video. Since its founding in 2012, the Company has connected millions of patients with licensed mental health providers across a wide and growing spectrum of care through virtual counseling, psychotherapy and psychiatry.

The Company's principal executive office is located in New York, NY. The Company has wholly-owned subsidiaries and holds a variable interest in professional associations and professional corporations, which have been established pursuant to the requirements of their respective domestic jurisdiction governing the corporate practice of medicine. These entities are considered Variable Interest Entities (“VIEs”). See Note 13, “Variable Interest Entities,” for further details.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Basis of Presentation

The consolidated financial statements and accompanying notes have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). In management’s opinion, the consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the consolidated financial statements. The Company’s significant estimates and assumptions used in these consolidated financial statements include, but are not limited to, the recognition of revenue, stock-based compensation awards and internal-use software costs. The Company bases its estimates on historical factors, current circumstances and the experience and judgment of management. The Company evaluates its assumptions on an ongoing basis. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based on information available at the time they are made. Estimates, by their nature, are based on judgment and available information, therefore, actual results could be materially different from these estimates.

Consolidation

The Company consolidates all subsidiaries in which it has a controlling financial interest, as well as any VIEs where the Company is deemed to be the primary beneficiary. Intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements.

Reclassification

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.

Operating Segments

Talkspace provides virtual behavioral healthcare services through its online platform for one-on-one therapy delivered via messaging, audio and video. The Company's chief operating decision maker ("CODM") is the Chief Executive Officer, who manages the Company by reviewing consolidated results. Accordingly, the Company operates as one operating and reportable segment. The CODM uses the Company’s consolidated net income to assess the financial performance of the Company and allocate resources. Since the Company operates in one operating segment, financial information, including consolidated net income information evaluated by the CODM, can be found in the consolidated income statements.

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The Company's assets are managed on a consolidated basis. For total asset information please refer to the consolidated balance sheets included within the consolidated financial statements. Most of the Company's long-lived tangible assets, as well as the Company's operating lease right-of-use asset, are located in the United States. Other financial information regarding the Company's operating segment is presented elsewhere in the consolidated financial statements.

For the years ended December 31, 2025, 2024 and 2023, all of the Company’s revenue was generated from customers located in the United States. For the types of services from which the reportable segment derives its revenue refer to Note 3, “Revenue Recognition.”

Stock Repurchases

The Company repurchases its common stock from time to time pursuant to a board-authorized share repurchase program. Stock repurchases are accounted under ASC 505-30, Treasury Stock. The Company's policy is to retire all stock repurchased immediately after the transaction is completed. The Company records the amounts repurchased in excess of par value as a reduction to additional paid in capital. See Note 9, “Capital Stock,” for further details.

Financial Statements in U.S. Dollars

The majority of the Company’s operations are based in the United States. Most of the Company’s revenues and costs are denominated in United States dollars (“dollar”). The Company’s management believes that the dollar is the primary currency of the economic environment in which the Company and each of its subsidiaries operate. Thus, the dollar is the Company’s functional and reporting currency.

Accordingly, non-dollar denominated transactions and balances have been re-measured into the functional currency in accordance with ASC 830, “Foreign Currency Matters”. These transactions were not material for the years ended December 31, 2025, 2024 and 2023.

Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to cash, with original maturities of three months or less at the date acquired. The Company’s cash and cash equivalents generally consist of bank deposits and investments in money market funds, U.S. treasury securities and commercial paper.

The Company’s cash and cash equivalents are invested in major banks in the United States. Generally, these cash and cash equivalents and deposits may be redeemed upon demand. The Company deposits may exceed federally insured limits; however management believes that the financial institutions that hold the Company’s and its subsidiaries’ cash and cash equivalents are institutions with high credit standing, and accordingly, minimal credit risk exists with respect to these assets.

Marketable Securities

The Company invests excess cash primarily in U.S. treasury securities, U.S. government securities, corporate debt securities, certificates of deposit and commercial paper. These investments represent investments of cash which are available to support current operations as such the Company classifies all marketable securities that have effective maturities of three months or less from the date of purchase as cash equivalents and those with effective maturities of greater than three months, including highly liquid securities with maturities beyond twelve months, as marketable securities within current assets on the consolidated balance sheets. As the Company may sell these investments prior to their effective maturities, these investments are classified and accounted for as available for sale securities. The Company determines the appropriate classification of these investments at the time of purchase and reevaluates such designation at each balance sheet date.

The Company carries these at fair value and determines any realized gains or losses on the sale of these investments on a specific identification method, and includes such gains or losses in financial income, net, in the consolidated income statements. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss).

In each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as the ability and intent to hold the investment until a forecasted recovery occurs, in accordance with ASC 326. Allowance for credit losses on available for sale debt securities are recognized as a charge in financial income, net, in the consolidated income statements. See Note 5, “Fair Value Measurements,” for further details.

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Fixed Assets, net

The following table presents the average useful life used for the Company's fixed assets:

Average Useful Life (years)

Computers and software 3

Furniture and equipment 5

Fixed assets are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the average useful lives of the assets. See Note 6, “Fixed Assets, net,” for further details.

Internal-use Software

The Company capitalizes costs related to software acquired, developed, or modified solely to meet its internal requirements with no substantive plans to market such software at the time of development. In accordance with ASC 350-40, Internal Use Software, software development activities generally consist of three stages (i) the preliminary project stage, (ii) the application development stage, and (iii) the post-implementation operational stage. Costs incurred during the preliminary project stage and during the post-implementation operational stage are expensed as incurred. Eligible costs incurred during the application development stage of the project are capitalized and are amortized on a straight-line basis over the software’s estimated useful life, generally 3 years. Maintenance costs are expensed as incurred. Capitalized costs include employee-related costs, inclusive of non-cash stock compensation expense for employees who are directly associated with and who devote time to software projects. See Note 6, “Fixed Assets, net,” for further details.

Leases

The Company accounts for its leases in accordance with ASC 842, “Leases”. The right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and the lease liability represents an obligation to make payments based on the present value of lease payments over the lease term. The Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease term includes options to extend or terminate the lease when it is reasonably certain these will be exercised.

The Company has elected not to record operating lease ROU assets and lease liabilities for leases with an initial term of 12 months or less. The Company also elected the practical expedient to not separate lease and non-lease components for its leases. The Company's lease assets and liabilities were immaterial as of December 31, 2025 and 2024. The Company's ROU lease asset is included within other long-term assets on the consolidated balance sheet. The short-term portion of the lease liability is included within accrued expenses and other current liabilities and the long-term portion of the lease liability is included within other long-term liabilities on the consolidated balance sheets.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting under ASC 805. Under this method, the purchase price (consideration transferred) is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the total consideration over the net fair value of identifiable assets acquired is recognized as Goodwill. All acquisition-related costs (e.g., legal fees, due diligence, advisory fees) are expensed as incurred and are not included in the purchase price. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain obligations assumed.

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On October 1, 2025 (the “Acquisition Date”), Talkspace acquired Wisdo Health, a digital social health and peer support platform, for a total consideration of $4.9 million in cash and $1.5 million in common stock. The Company recognized $3.3 million of goodwill as a result of this acquisition. All acquisition-related costs were expensed as incurred and were not included in the total consideration. The results of this acquisition are included in the Company’s consolidated financial statements from the date of acquisition. Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s consolidated income statements and consolidated statements of comprehensive income (loss).

The following table presents the fair value of the intangible assets and their estimated amortization period, and goodwill recognized as a result of this acquisition:

(in thousands) Fair Value Amortization period (years)

Intangible assets:

Goodwill $ 3,318 infinite

Goodwill

Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration and any non-controlling interest in the acquiree, over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized, instead, it is tested for impairment at least annually on October 1 (or more frequently if a "triggering event" occurs) at the reporting unit level. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in the Company's market capitalization, as indicated by its publicly quoted share price.

When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount. If the Company elects to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, the Company performs a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if the Company’s reporting unit’s carrying amount exceeds its fair value, the Company will record an impairment charge based on that difference.

The Company operates as one reporting unit and the fair value of the reporting unit is estimated using quoted market prices of the Company’s stock in active markets.

Intangible Assets

Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives. The Company routinely reviews the remaining estimated useful lives of finite-lived intangible assets. The Company's intangible assets are included within other long-term assets on the consolidated balance sheets. See Note 4, “Intangible Assets, net” for further details.

Impairment of Long-Lived Assets and Intangible Assets subject to Amortization, including ROU Lease Asset

Fixed assets, internal-use software, intangible assets and ROU lease assets are reviewed for impairment in accordance with ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets”, whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If indicators are present, management performs a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset to its carrying amount. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of the asset, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There are no impairment charges for the years ended December 31, 2025, 2024 and 2023.

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Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, when the Company satisfies its performance obligation to perform its defined contractual obligations to provide virtual behavioral healthcare services. Revenue is recognized in an amount that reflects the consideration that the Company will be entitled in exchange for the service rendered. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that is included in the transaction price. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company's customers are comprised of the following:

•

Health insurance plans from commercial and government institutions, and employee assistance programs (“Payor”), who offer their insured members access to our platform at in-network reimbursement rates,

•

Direct-to-Enterprise (“DTE”) comprised of enterprises who offer their enterprise members access to our platform while their enterprise is under an active contract with Talkspace, and

•

Individual subscribers (“Consumer”) who subscribe directly to our platform.

Payor

The Company contracts with health insurance plans and employee assistance programs to provide therapy and psychiatry services to their eligible members. Revenue is recognized at a point in time, as virtual therapy or psychiatry sessions are rendered. The transaction price is determined based on contracted rates and includes variable consideration in the form of implicit price concessions. The Company determines the total transaction price, including an estimate of variable consideration, at contract inception and reassesses this estimate at each reporting date. The Company estimates the amount of variable consideration that is included in the transaction price primarily based on actual historical collection experience for each Payor. Revenue is presented net of implicit price concessions. Contracts include annual evergreen clauses and generally may be terminated by either party upon advance notice per the terms of the contract.

DTE

The Company contracts with enterprises to provide access to the Company's therapist platform for their enterprise members, primarily based on a per-member-per-month (“PMPM”) or paid-per-use (“PPU”) basis or as a fixed monthly fee. Revenues from access fees is recognized ratably over the contract term, as the customer simultaneously receives and consumes the benefits provided by our performance as we provide access to our platform. To the extent the transaction price includes variable consideration, revenue is recognized using the variable consideration allocation exception, or, if the allocation exception is not met, the Company recognizes revenue ratably over the contract term based on estimates of the variable consideration to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequent resolved. The majority of the contracts typically range in length from one to three years and are generally non-cancelable during the initial contractual term.

Consumer

The Company also generates revenues from the sale of monthly, quarterly, bi-annual and annual membership subscriptions to the Company's therapy platform as well as supplementary a la carte offerings directly to individual consumers through a subscription plan. The Company recognizes consumer revenues ratably over the subscription period (beginning when therapy services commence), as the customer simultaneously receives and consumes the benefits provided by our performance as we provide access to our platform. The Company recognizes revenues from supplementary a la carte offerings at a point in time, as virtual therapy sessions are rendered. Members may cancel their subscription at any time and will receive a pro-rata refund for the subscription price. The transaction price includes variable consideration in the form of refunds. The Company estimates the refund liability for the variable consideration portion of the transaction price primarily based on historical experience. The refund liability is recorded within the “Accrued expenses and other current liabilities” line item in the consolidated balance sheets. The refund liability was immaterial as of December 31, 2025 and 2024. Revenue from Consumer members is presented net of refunds.

See Note 3, “Revenue Recognition,” for further details.

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Accounts Receivable, net

Accounts receivable is stated net of credit losses allowance. The Company’s methodology for estimating expected credit losses is generally based on historical collection experience, customer creditworthiness, and an assessment of current and future economic and market conditions. Additionally, specific allowance amounts are established to for customers with a higher probability of default. Accounts receivable are written off after all reasonable means of collection have been exhausted. See Note 3, “Revenue Recognition,” for further details.

Deferred Revenue

The Company records deferred revenues when cash payments from customers are received in advance of the Company's performance obligations to provide services. As of December 31, 2025 and 2024, deferred revenue related mainly to Consumer subscriptions. The Company expects to satisfy the majority of its performance obligations associated with deferred revenue within one year or less. See Note 3, “Revenue Recognition,” for further details.

Contract Costs

The Company capitalizes incremental costs of obtaining a contract if these costs are determined to be recoverable. Capitalized contract costs are expensed over the life the contract. As of December 31, 2025 and 2024, capitalized contract costs were immaterial.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”. Compensation costs for share-based awards are measured at the fair value on the grant date and recognized as expense using the straight-line method for service-based awards over the requisite service period. The Company recognizes forfeitures of awards as they occur.

The fair value of stock options is determined using the Black-Scholes-Merton option pricing model. The option-pricing model requires a number of assumptions, of which the most significant is the expected stock price volatility and the expected option term. Expected volatility is calculated based upon the Company's historical share price movements as well as similar traded companies’ historical share price movements as adequate historical experience is not available to provide a reasonable estimate based only on the Company's share price. Expected term is calculated based on the simplified method as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term. The risk-free interest rate is calculated based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. The fair value of restricted stock units is measured as the grant-date closing price of the Company’s common stock. See Note 10, “Stock-based Compensation,” for further details.

Advertising Costs

Advertising costs are expensed as incurred and are included within sales and marketing expenses. Advertising costs were $30.5 million, $26.1 million and $25.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Research and Development Costs

Research and development costs are expensed as incurred and include personnel and related expenses for software development and engineering, information technology infrastructure, security, privacy compliance and product development (inclusive of stock-based compensation for our research and development employees), third-party services and contractors related to research and development, information technology and software-related costs. Research and development expenses exclude amounts reflected as capitalized internal-use software costs.

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Employee Benefit Plan

The Company has established a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the Internal Revenue Code. All U.S. employees over the age of 21 are eligible to participate in the plan. The Company contributes 100% of eligible employees’ elective deferral up to 4% of eligible earnings. The Company's matching contributions to participants’ accounts were immaterial for the years ended December 31, 2025, 2024 and 2023.

Fair Value of Financial Instruments

The Company applies ASC 820, “Fair Value Measurements and Disclosures”. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Accounting guidance for the fair value measurement establishes a framework for measuring fair value, establishes a fair value measurement hierarchy, and requires certain fair value measurement disclosures. The fair value hierarchy established by this accounting guidance prioritizes the inputs used in valuation techniques into the following three categories (highest to lowest priority):

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company's marketable securities are recorded at fair value and are generally classified within Level 1 or Level 2 of the fair value hierarchy using quoted market prices or quotes from market makers or broker-dealers. Marketable securities classified within Level 1 are valued based on quoted market prices in active markets and consist of commercial paper. Level 2 marketable securities primarily consist of investment grade and high-yield corporate debt, U.S. Treasury securities, U.S. Government securities, certificates of deposit and commercial paper. Financial instruments classified as Level 2 are valued based on quoted market prices for similar assets of liabilities or quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

In June 2021, the Company assumed Public Warrants, issued equity warrants to certain consultants and issued Private Placement Warrants as a result of a business combination. Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within other current liabilities in the accompanying consolidated balance sheets. The warrants were measured at fair value at inception and thereafter on a recurring, quarterly basis, with changes in fair value presented within financial income, net, in the consolidated income statements. Private Placement Warrants are classified within Level 3 in the fair value hierarchy. These warrants were valued using the Black-Scholes-Merton Model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the implied volatility from trading prices of the Company's Public Warrants. Significant increases (decreases) in this input in isolation would have resulted in a significantly higher (lower) fair value measurement. See Note 5, “Fair Value Measurements,” for further details.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements. Under this method, DTAs and DTLs are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company records a valuation allowance to reduce its DTAs to the amount that is more-likely-than-not to be realized. In making this determination, management evaluates all available evidence, both positive and negative, including projected future taxable income, tax planning strategies, and history of cumulative losses. If the Company determines it is more-likely-than-not that it will not be able to realize all or part of its DTAs in the future, an adjustment is made to the valuation allowance, with a corresponding charge to income tax expense in the period such determination is made.

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The Company follows the provisions in ASC 740 and the guidance related to accounting for uncertainty in income taxes, which prescribe a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination by the taxing authorities, based solely on the technical merits of the position. The second step is to recognize the tax benefit as the largest amount that is greater than 50% likely to be realized upon ultimate settlement for positions meeting the recognition threshold. As of December 31, 2025 and 2024 the Company did not record any provision for uncertain tax positions.

The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense. This classification is applied consistently across all periods presented. No interest or penalties were accrued as of December 31, 2025 and 2024.

The Company does not provide deferred tax liabilities when it intends to reinvest earnings of a foreign subsidiary indefinitely or if distributed, no tax liability will be imposed. Undistributed earnings of a foreign subsidiary and unrecognized deferred tax liability related to such earnings are immaterial as of December 31, 2025 and 2024.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) contains provisions that subject a U.S. parent of a foreign subsidiary to current U.S. tax on its global intangible low-taxed income (“GILTI”). The Company has elected an accounting policy to report the tax impact of GILTI as a period cost in the year incurred. Accordingly, the Company does not provide deferred taxes for temporary basis differences expected to reverse as GILTI in future years. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. While the Company’s 2025 GILTI calculation continues to reflect the provisions of the Tax Act, the OBBBA introduces significant modifications effective for tax years beginning after December 31, 2025. These include the rebranding of GILTI as Net CFC Tested Income (“NCTI”), an increase in the effective rate through a reduction of the Section 250 deduction to 40%, and the elimination of the QBAI exclusion. The Company has evaluated the impact of this enacted legislation and has determined the impact is not material.

See Note 12, “Income Taxes,” for further details.

Net Income (Loss) Per Share

The Company’s basic net income (loss) per share is calculated by dividing net income (loss) attributable to ordinary shareholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. The diluted net income (loss) per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net income (loss) per share is the same as basic net income (loss) per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive. See Note 11, “Net Income (Loss) per Share,” for further details.

Recently Issued and Recently Adopted Accounting Pronouncements

The following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) have been adopted by the Company:

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amended existing income tax disclosure guidance, primarily requiring more detailed disclosures on the effective tax rate reconciliation and income taxes paid. This guidance became effective for the annual reporting periods beginning the year ended December 31, 2025. The Company adopted this ASU prospectively during the year ended December 31, 2025 and provided required disclosures in Note 12, “Income Taxes”.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that in developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2026, and for interim reporting periods within those annual reporting periods, with early adoption permitted and should be applied prospectively. The Company early adopted this ASU prospectively during the year ended December 31, 2025. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements or related disclosures.

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Recently Issued Accounting Pronouncements Not yet Adopted

The following ASUs issued by the FASB have not yet been adopted by the Company:

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, which requires additional disclosures of specified information about certain costs and expenses. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2027, and interim periods beginning January 1, 2028, with early adoption permitted and can be applied either on either a prospective or retroactive basis. The Company is currently evaluating the impact of adopting this ASU.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software, which provides updates on the criteria for capitalizing internal-use software costs and related disclosure requirements. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2028, and for interim reporting periods within those annual reporting periods, with early adoption permitted and can be applied using either a prospective transition approach, a modified transition approach or a retrospective transition approach. The Company is currently evaluating the impact of adopting this ASU.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim disclosure requirements and the applicability of Topic 270. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2028, and for interim reporting periods within those annual reporting periods, with early adoption permitted and can be applied prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU.

NOTE 3. REVENUE RECOGNITION

The following table presents the Company’s consolidated revenues from sales to unaffiliated customers disaggregated by revenue source:

Year Ended December 31,

(in thousands)

For the year ended December 31, 2025, four customers represented 10% or more of the Company's consolidated revenues and these amounts were approximately $32.1 million, $27.4 million, $24.8 million and $24.0 million. For the year ended December 31, 2024, three customers represented 10% or more of total revenue. For the year ended December 31, 2023, two customers represented 10% or more of total revenue.

Accounts Receivable, net

The Company had accounts receivable, net, related to revenue from DTE customers of $8.8 million and $6.0 million at December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025 and 2024, the balance of accounts receivable, net, related to revenue from Payor customers was $7.3 million and $3.6 million, respectively. Credit losses related to these receivables were immaterial for the years ended December 31, 2025, 2024 and 2023.

Deferred Revenues

For the year ended December 31, 2025 and 2024, the Company recognized revenues of $2.4 million and $2.0 million, respectively, that were included in deferred revenues at the beginning of the year. As of December 31, 2025, deferred revenue mainly related to the Company’s Consumer subscription business.

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NOTE 4. INTANGIBLE ASSETS, NET

Intangible assets are comprised of the following:

As of December 31,

Intangible asset with finite lives:

Customer relationship 2,124 —

Less: accumulated amortization (2,440 ) (1,862 )

Amortization expense was $0.6 million for the year ended December 31, 2025 ($0.4 million and $0.7 million for the years ended December 31, 2024 and 2023, respectively).

Future amortization that will be charged to expense over the remaining life of the intangible asset as of December 31, 2025 is as follows:

December 31, In thousands

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NOTE 5. FAIR VALUE MEASUREMENTS

The carrying value of the Company’s cash, cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses and other current liabilities approximate fair value because of the relatively short-term nature of the underlying assets or liabilities.

Cash, Cash Equivalents and Marketable Securities

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of December 31, 2025 and 2024:

Fair Value Measurements as of December 31, 2025

Level 1:

Level 2:

Fair Value Measurements as of December 31, 2024

Level 1:

Level 2:

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Contractual Maturities

The following table summarizes the remaining contractual maturities of our marketable securities as of December 31, 2025:

(in thousands) Fair Value

Due within one year $ 47,396

Due after one year through two years 7,838

Level 3

The following table presents changes in Level 3 liabilities measured at fair value on a recurring basis for the years ended December 31, 2025 and 2024:

Level 3 Liabilities

(in thousands) Beginning Balance Change in Fair Value Ending Balance

Level 3 Liabilities

(in thousands) Beginning Balance Change in fair Value Ending Balance

The following were the inputs utilized in determining the fair value of the Private Placement Warrants as of December 31, 2025 and 2024:

Year Ended December 31,

Dividend yield (1) 0% 0%

Risk-free interest rate (3) 3.60% 4.20%

Time to maturity (years) 0.47 1.47

(1) No dividends were paid for the years ending December 31, 2025 and 2024.

(2) The expected volatility is based on the volatility implied by backsolving to the Public Warrants' price as of the valuation date.

(3) The risk -free interest rate is based on the yield from U.S. Treasury bonds with an equivalent term to the time to maturity of the warrants.

NOTE 6. FIXED ASSETS, NET

Fixed assets, net as of December 31, 2025 and 2024 consisted of the following:

(in thousands)

Capitalized internal-use software costs $ 17,945 $ 6,488

Computers and equipment 802 755

Less: accumulated depreciation (3,097 ) (1,123 )

During the year ended December 31, 2025, the Company capitalized $11.5 million of qualifying internal-use software development costs ($6.3 million for the year ended December 31, 2024). Depreciation and amortization expense related to the Company's fixed assets was $2.0 million for the year ended December 31, 2025 ($0.3 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively).

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NOTE 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities are comprised of the following:

As of December 31,

Accrued expenses and other current liabilities $ 6,672 $ 8,031

NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES

Litigation

The Company may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of business. The Company accrues for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability has been incurred and the Company can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses. As of December 31, 2025, there were no material pending legal proceedings, claims or litigation.

Warranties and Indemnification

The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if there is a breach of a customer’s data or if the Company’s service infringes a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as a director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer liability insurance coverage that would generally enable it to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

NOTE 9. CAPITAL STOCK

The Company’s authorized capital stock consists of (a) 1,000,000,000 shares of common stock, par value $0.0001 per share; and (b) 100,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2025 there were 12,757,500 Private Placement Warrants and 20,722,500 Public Warrants (12,757,500 Private Placement Warrants and 20,722,500 Public Warrants as of December 31, 2024) to purchase the Company’s common stock at an exercise price of $11.50 per share. No shares of preferred stock were issued or outstanding for any years presented.

Share Repurchase Program

On February 22, 2024, the Company announced that its Board of Directors approved a share repurchase program to authorize the repurchase of up to $15.0 million of the currently outstanding shares of the Company’s common stock over a period of twenty-four months beginning on March 1, 2024 (the “Share Repurchase Program”). On August 1, 2024, the Company’s Board of Directors amended the Share Repurchase Program to authorize the Company to repurchase up to an additional $25.0 million of its common stock for a total of $40.0 million. The Share Repurchase Program will remain in effect until the earliest: (1) the total authorized dollar amount of shares is repurchased or (2) August 1, 2026. All shares repurchased will be retired.

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During the year ended December 31, 2025, the Company repurchased and retired an aggregate of 6,577,115 shares of its common stock for a total consideration of $17.2 million ($2.62 per share). During the year ended December 31, 2024, the Company repurchased and retired an aggregate of 3,911,259 shares of its common stock for a total consideration of $11.0 million ($2.81 per share). As of December 31, 2025, $11.8 million remained available under the Share Repurchase Program.

The Share Repurchase Program does not obligate the Company to repurchase any dollar amount or number of shares, and may be modified, suspended, or discontinued at any time at the Company’s discretion without prior notice.

NOTE 10.STOCK-BASED COMPENSATION

The Company may grant cash and equity incentive awards to officers, employees, directors, consultants and service providers in order to attract, motivate and retain talent under the Talkspace’s 2021 Incentive Award Plan (the “2021 Plan”). All stock-based awards are measured based on the grant date fair value and are recognized on a straight-line basis in the Company’s consolidated income statements over the requisite service period (generally requiring a four-year vesting period).

The following table sets forth the total stock-based compensation expense related to stock options and RSUs included in the respective components of operating expenses in the consolidated income statements:

Year Ended December 31,

Total stock-based compensation expense $ 8,445 $ 9,173 $ 8,395

(1)

During the year ended December 31, 2024, the Company modified certain equity awards in connection with certain key executives' separation from the Company and recognized $1.2 million of additional stock-based compensation expense as a result of these modifications.

Stock Options

Stock options generally vest over a four-year period and are exercisable a maximum period of ten years. The following table summarizes the activity for stock options for the year ended December 31, 2025:

(1)

The aggregate intrinsic value of stock options outstanding and exercisable at end of year does not include 2,267,953 of stock options that are out of the money.

The weighted average grant-date fair value of stock options granted to employees during the years ended December 31, 2025 was $1.80 per share ($1.48 per share and $0.74 per share for the years ended December 31, 2024 and 2023, respectively).

The total intrinsic value of stock options exercised during the year ended December 31, 2025 was $2.4 million ($3.0 million and $2.5 million for the years ended December 31, 2024 and 2023, respectively).

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The fair value for options granted for the years ended December 31, 2025, 2024 and 2023 was estimated on the date of grant using a Black-Scholes-Merton options pricing model with the following weighted average assumptions:

Year Ended December 31,

Dividend yield 0% 0% 0%

As of December 31, 2025, there was $2.3 million of total unrecognized compensation cost related to non-vested stock options that are expected to be recognized over a weighted average period of 2.3 years.

Restricted Stock Units

Restricted Stock Units (“RSUs”) typically vest over a four-year period. The following table summarizes the activity for RSUs for the year ended December 31, 2025:

Number ofrestricted stockunits Weightedaverage grant-datefair value

The total fair value of RSUs vested during the year ended December 31, 2025 was $7.3 million ($10.4 million and $5.0 million for the years ended December 31, 2024 and 2023, respectively).

As of December 31, 2025, there was $11.1 million of total unrecognized compensation cost related to non-vested RSUs that are expected to be recognized over a weighted average period of 2.5 years.

NOTE 11. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the years ended December 31, 2025, 2024 and 2023:

Year Ended December 31,

(in thousands except share and per share data) 2025 2024 2023

Weighted-average shares used to compute net income (loss) per share:

Net income (loss) per share:

For the year ended December 31, 2025, the following were excluded from the calculation of diluted net income per share since each would have had an anti-dilutive effect: 3,696,456 stock options, 85,688 restricted stock units, 12,757,500 Private Placement Warrants and 20,722,500 Public Warrants to purchase the Company’s common stock.

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For the year ended December 31, 2024, the following were excluded from the calculation of diluted net income per share since each would have had an anti-dilutive effect: 437,694 stock options, 40,149 restricted stock units, 12,757,500 Private Placement Warrants and 20,722,500 Public Warrants to purchase the Company’s common stock.

For the year ended December 31, 2023, the following were excluded from the calculation of diluted loss per share since each would have had an anti-dilutive effect given the Company’s net loss: 11,208,573 stock options, 8,984,827 restricted stock units, 12,780,000 Private Placement Warrants and 20,700,000 Public Warrants to purchase the Company’s common stock.

NOTE 12. INCOME TAXES

In December 2023, the FASB issued a new accounting standard which includes new and updated income tax disclosures, including disaggregation of information in the rate reconciliation and income taxes paid, which we adopted on a prospective basis for the year ended December 31, 2025.

A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the year ended December 31, 2025 is as follows:

(in thousands, except percentages) Amount %

U.S. Federal Statutory Tax Rate $ 1,757 21.0 %

Foreign tax effects:

Statutory tax rate difference between Israel and U.S. (8 ) (0.1 )%

Effects of cross-border tax laws:

Global intangible low-taxed income 400 4.8 %

Changes in valuation allowance (1,351 ) (16.1 )%

Nontaxable or nondeductible items:

Stock-based compensation (317 ) (3.8 )%

Other adjustments:

Reduction in NOL carry-forwards (Section 382 limitation) 301 3.6 %

Income tax expense $ 574 6.9 %

(1)

State taxes in California, New York, Maine, Missouri and Massachusetts made up the majority (greater than 50 percent) of the tax effect in this category.

A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the year ended December 31, 2024 and 2023 is as follows:

Year Ended December 31,

(in thousands, except percentages) 2024 2023

Income (loss) before income tax $ 1,242 $ (18,964 )

Statutory tax rate 21 % 21 %

Increase (decrease) in effective tax rate due to:

State taxes, net of federal effect (164 ) 276

Other adjustments (648 ) (373 )

Valuation allowance (38 ) 3,400

Income tax expense $ 94 $ 218

The main reconciling item between the statutory tax rate and the effective tax rate for the year ended December 31, 2025 is the change in valuation allowance which was impacted by higher net income during the year ended December 31, 2025 and the enactment of the OBBBA in July 2025, which altered the treatment of unamortized Section 174 expenses and impacted the projected realization of deferred tax assets.

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Income (loss) before income taxes is attributable to the following tax jurisdictions:

Year Ended December 31,

Income tax expense applicable to income (loss) before income taxes consists of the following:

Year Ended December 31,

Current income taxes:

Federal $ — $ — $ —

Deferred income taxes:

Federal — — —

State — (121 ) —

Foreign — — —

Total deferred — (121 ) —

The amount of cash paid for income taxes (net of refunds) for the year ended December 31, 2025 is as follows:

(in thousands)

Federal $ —

State

Pennsylvania 30

Maryland 30