Teladoc Health, Inc. (TDOC) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the Teladoc Health Q1 '26 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Michael Minchak. You may begin.

Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our first quarter 2026 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the teladochealth.com website. On this call to discuss the results will be Chuck Divita, Chief Executive Officer. During the call, we will also discuss our outlook, and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating our performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Chuck.

Thanks, Mike. I'm pleased with our performance for the quarter with consolidated revenue and adjusted EBITDA both exceeding the midpoint of our guidance ranges and reflecting solid performance in Integrated Care and progress we're making in scaling insurance of BetterHelp. Let me start with some comments on the market environment as it shapes everything we'll discuss today and the actions we're taking to move the business forward. The U.S. market served by our Integrated Care segment had meaningfully evolved in recent years, creating both challenges and new opportunities to build upon our scale platform. We've established a market-leading position by delivering at a national scale and by expanding services over time to address episodic and longitudinal care needs, improve the health of people living with chronic conditions and to support mental health. We see our ability to provide more comprehensive care at scale, positioning us well for the opportunities ahead. One of the more significant market shifts has been with client preferences moving from subscription-based access towards visit-based arrangements and are more in line with the fee-for-service construct of the U.S. health care system. While this shift has created some near-term changes to our model, we've embraced it as an opportunity to expand our role and the impact we can have through each visit and interaction with Teladoc Health. For example, earlier this year, we significantly enhanced our flagship 24/7 care offering, broadening the conditions we can address, bringing specialist support to our treating clinicians, adding real-time prescription benefit checks and expanding our ability to connect patients to additional in-network care as needed. Multiple health plans have added the enhanced offering already, and we expect more to follow suit. And together with other virtual care services, we expect to see a moderation in the revenue headwinds we've experienced because of the migration of subscriptions to visits and to exit the year with this moving to a net tailwind. The market for chronic care programs has also evolved in recent years, including the proliferation of point solutions that add more fragmentation. Chronic disease affects more than half of American adults and remains a major challenge for patients, health plans and employers and the U.S. health care system. Clients are increasingly looking for a more comprehensive approach supporting people with chronic conditions, a shift that plays well to our strengths. Over the past several quarters, we've taken deliberate actions to strengthen our position, deepen our clinical model and drive innovation in our products and in our capabilities. And we see advancements in artificial intelligence as an important catalyst and opportunity for us to lean into these market changes. While we've been using AI and adjacent technologies for some time, we are excited about the potential to leverage it more extensively in our business and advance how we deliver outcomes and results for our clients and the people we serve. This is why we've invested over the past year in our data infrastructure to power AI through our new Pulse intelligence engine as well as enhancements to our Prism Care delivery platform used by our providers. By doing so, we are turning our extensive data and AI-driven insights into action as we engage with patients and support their needs. Combined with our deep clinical expertise, our range of services and trusted relationships with clients, we can deploy AI responsibly and effectively in a virtual native health care setting. And to bring all of this together for the market, we are actively developing new products for release later this year that leverage the full breadth of our clinical services and our AI-enabled capabilities in a comprehensive solution. We believe this new approach will further build on the strengths of our well-established platform, create clear market differentiation and support sustainable growth. I look forward to providing a further update on this product innovation initiative on our second quarter call. Mental health also represents an important market, and we see strong demand for our services given the extensive unmet need out there. Mental health conditions impact over 60 million adults in the U.S. with half of those not receiving treatment and over 1/3 of the U.S. population living in areas with a shortage of mental health professionals. Because of this, the virtual care modality has become an essential access point and our services an important avenue for people seeking help and support. Within Integrated Care alone, we generated nearly $140 million in annual revenue for mental health services in 2025 and saw further traction and growth in the first quarter of 2026. And our ability to deliver comprehensive services across virtual care, chronic conditions and mental health to support overall health is valued by our clients and strategically important to our Integrated Care business. The mental health market is also important to BetterHelp, which has built a leading global position in direct-to-consumer virtual therapy. Its high brand awareness, scaled platform and large and diverse therapist network come together to deliver an exceptional patient experience and achieve positive clinical outcomes. And having served over 6 million people since inception, BetterHelp also represents an important marketplace for mental health professionals to be matched with patients, over 90% of the time in less than 48 hours. However, with mounting pressure on BetterHelp's U.S. direct-to-consumer cash pay business, we took decisive action to enter the insurance market and move towards a more durable and balanced model. In support, we made the highly strategic acquisition of UpLift last year, securing important capabilities, talent and a baseline of insurance contracts. The integration has gone very well, and the insurance rollout is progressing ahead of our expectations. We are live in 30 states in Washington, D.C. and have credentialed and enrolled over 6,000 providers. We've also grown insurance contracted lives to over 150 million, a 30 million increase since year-end 2025. Early engagement data is also encouraging with insurance covered users averaging approximately 20% more sessions than cash-pay users in their first 90 days, suggesting benefits coverage is helping remove cost barriers. Funnel conversion is also stronger with covered users that enter insurance information during onboarding compared to those moving through a cash pay-only flow. This is particularly important given BetterHelp's large inbound demand funnel and opportunity to convert a greater share of interested users into active ones and resulting in improved customer acquisition efficiency over time. And we're beginning to see some meaningful separation in performance between markets where insurance has been active for an extended period compared to cash-only markets. For example, in states where insurance was live by the third quarter of 2025, we're seeing a nearly 800 basis point improvement in revenue performance compared to cash pay-only markets, an indication that insurance access is improving activation and helping stabilize underlying trends as markets scale. As a result of this momentum, BetterHelp's total insurance covered sessions are now running at over 14,000 per week, representing an annualized revenue run rate of over $75 million, and we now expect to exit 2026 with a run rate of $125 million or more. This further illustrates the real progress we are making in the insurance rollout and in creating a stronger position in the U.S. for BetterHelp. Markets outside the U.S. also represent an important growth opportunity for BetterHelp, contributing to solid growth in user trends and benefiting from more favorable customer acquisition costs on average. Our localized country launches in 2025 are delivering solid end market growth, and we look to target 1 to 2 new markets for launch in the second half of 2026. Finally, operational excellence remains a key area of focus across both business segments, including operating efficiency and effectiveness. We've elevated execution and operating discipline with a clear focus on our cost structure. AI is playing a role here as well as we continue to deploy new capabilities across our business. For example, within BetterHelp, new AI-assisted clinical documentation is reducing administrative burden so therapists can focus more on delivering care. Since launch, we've generated over 300,000 notes with strong therapist satisfaction and more than 2,000 therapists have used it across 30,000 sessions in our insurance workflows alone. This technology is saving about 15 minutes per session and adding up to more than 4 million minutes so far. We will continue to look for ways to leverage AI and continue to focus on our cost structure more broadly. Our strategic priorities are aimed squarely at building a stronger business, supported by our financial strength and approach to capital allocation. This includes making both organic and inorganic investments that are well aligned with our needs and market opportunities and ensuring a strong balance sheet and financial profile, which is also important to our clients. As I mentioned on the last earnings call, we intend to address our 2027 convertible notes in 2 phases to meaningfully lower our gross debt position. First, by paying down a substantial portion with available cash and securing new traditional term debt, potentially before year-end and then paying off the remainder with cash at maturity in 2027. We believe this appropriately aligns with the cash flow profile and need of the business, and we will continue to evaluate our capital with a focus on financial strength and long-term shareholder value. Now let me cover our results for the first quarter. Consolidated revenue was $614 million and adjusted EBITDA was $58 million, representing a 9.5% margin. Net loss per share was $0.36 and includes the following pretax per share amounts: amortization of intangible assets of $0.50, stock-based compensation of $0.08 and restructuring costs of $0.07 per share. Consistent with historical seasonality, free cash flow for the quarter was a net outflow of $26 million, ending with $751 million in cash and cash equivalents on the balance sheet. Net debt to trailing adjusted EBITDA was under 0.9x and 3.6x on a gross debt basis. Turning to segment results. First quarter Integrated Care revenue was $395 million, an increase of 1.5% over the prior year and came in towards the upper end of our guidance range. Acquisitions contributed approximately 170 basis points to year-over-year growth with a high single-digit increase in visit revenue, largely offset by lower subscription revenues in the quarter. International revenues again grew double digits over the prior year period, including a 30% increase from our hybrid care models that provide virtual services and physical settings. U.S. Integrated Care membership finished the quarter at 101.2 million members, above the high end of our guidance range. We retained our full year outlook, which contemplates moderation over the course of the year as health plans deal with potential changes to their underlying enrollment levels. Chronic Care program enrollment was 1.2 million at quarter end, up approximately 1% sequentially and 4% higher year-over-year, driven largely by an increased adoption of multi-condition bundles by clients seeking a more integrated and comprehensive approach. First quarter Integrated Care adjusted EBITDA was $56 million, up 12% over the prior year period and representing a 14.2% margin, slightly above the high end of our guidance range and up approximately 130 basis points from the first quarter of 2025. Strong adjusted EBITDA performance was driven by the revenue upside I mentioned earlier as well as disciplined cost management, which more than offset mix-related gross margin pressure from the shift to visit-based arrangements. BetterHelp's first quarter revenue was $218 million, 9% lower than the prior year period, reflecting continued pressure on the direct-to-consumer cash pay business. This was offset to some extent by $13 million in insurance-based revenue, which was up $6 million sequentially and at the high end of our expectations. Average paying users declined 9% from the prior year's quarter to 361,000, reflecting a mid-teens decline in the U.S., partially offset by high single-digit growth in non-U.S. markets. BetterHelp's adjusted EBITDA for the quarter was $2 million, a 0.9% margin and down from 3.2% in the prior year. Lower cash pay revenue and the timing of investments to support the stronger insurance rollout drove a lower margin result. These items were somewhat offset by 12% lower advertising and marketing expense versus first quarter 2025, an intentional move as we balance funnel activation and brand awareness to support both cash pay and insurance. Now turning to guidance. We expect 2026 consolidated revenue for the year of $2.48 billion to $2.58 billion, adjusted EBITDA of $267 million to $306 million and free cash flow of $130 million to $170 million, with the midpoint of each of these ranges unchanged from our prior outlook. We now expect full year stock-based compensation expense to be below $55 million, which would represent a decline of over 30% from 2025 and down over 70% since 2023. We project net loss per share of $1.05 to $0.75 per share. Note that our cash flow and net loss per share guidance ranges do not include any potential impact from changes in our current debt structure as our remaining convertible notes don't mature until June 2027, and we are still evaluating options to address the notes. For the second quarter, we expect consolidated revenue in the range of $597 million to $626 million and adjusted EBITDA in the range of $55 million to $67 million. For Integrated Care, we expect revenue to grow 0.8% to 3.5% with the range narrowing slightly and the midpoint unchanged. This range includes roughly 65 basis points of inorganic growth from prior acquisitions and approximately 60 basis points of benefit from FX. We expect International revenue growth in the high single digits on an organic constant currency basis and high single-digit growth in visit revenues to be largely offset by lower subscription revenue. As I mentioned earlier, we expect this dynamic to further moderate in the second half of 2026 and to exit the year being a tailwind to growth. Our full year Integrated Care adjusted EBITDA margin guidance of 15.1% to 16.1% is unchanged, which at the midpoint reflects an increase of approximately 45 basis points over 2025. Margin improvement is expected to be driven by ongoing cost savings and productivity initiatives, largely offsetting mix pressure from the subscription to visit shift. We continue to be highly focused on ensuring our underlying cost base is aligned with our needs and the opportunities ahead. We are guiding to second quarter Integrated Care revenue down 1.75% to up 1.75% year-over-year, which includes roughly 70 basis points of contribution from prior acquisitions. The sequential comparison versus the first quarter 2026 is impacted by timing factors, including client revenue that we expected to recognize in the second quarter that was recognized in the first quarter, the deferral of certain new contract implementations now expected to go live in the second half of 2026 and a reduced FX outlook. Adjusted EBITDA margin is expected to be in the range of 14.7% to 16.0% in the second quarter, representing a year-over-year increase of approximately 65 basis points at the midpoint. Looking out to the second half of the year for the Integrated Care segment, we expect growth to benefit from contract implementations and strong visit revenue growth due in part to our enhanced 24/7 care offering as well as targeted enhancements to our visit funnel conversion. In addition to those factors, adjusted EBITDA is expected to benefit from continued execution on cost savings and productivity initiatives. Moving to BetterHelp. We are narrowing our 2026 revenue guidance range to down 6.5% to down 1.0% versus 2025, with the midpoint unchanged. This now contemplates full year insurance revenue in the range of $90 million to $105 million, a $15 million increase from our prior expectation and an anticipated exit run rate of at least $125 million in the fourth quarter. Cash pay revenue reflects a continued challenging consumer backdrop, together with the impact of continued scaling of insurance and disciplined advertising and marketing spending. Our guidance for adjusted EBITDA margin of 3.0% to 4.6% is unchanged versus our prior range. This reflects mix impacts and investments to support the scaling of insurance, partially offset by the lower level of expected ad spending. For the second quarter, we are guiding to BetterHelp revenue down 11.75% to down 5.25%. At the midpoint, this reflects modest sequential growth, an early milestone reflecting progress towards stabilizing the business. This contemplates insurance revenue in the range of $18 million to $22 million in the quarter, up over 50% sequentially at the midpoint. We expect an adjusted EBITDA margin of minus 0.5% to plus 1.5%, down on a year-over-year basis due to lower cash pay revenue, mix impacts on gross margin and continued investments to scale insurance, partially offset by lower ad spend. Looking at the balance of the year for BetterHelp, we expect continued sequential revenue growth in the third and fourth quarter, driven by higher insurance revenues and growth in non-U.S. markets and similar seasonality with respect to adjusted EBITDA with the fourth quarter being the highest due to lower ad spend as a result of holiday ad pricing dynamics. In closing, we are pleased with our first quarter performance and remain on track with our outlook. We are confident in the actions we are taking and encouraged by the progress across our key priorities. Our team remains highly focused on disciplined execution, and we will continue to prioritize actions to drive long-term shareholder value. With that, let's open it up for questions. Operator?

[Operator Instructions] Your first question comes from David Roman with Goldman Sachs.

Maybe I'll just pick up on something where you just -- I think you made in your last remarks there around stabilizing the business here and reflected in your second quarter guidance for Integrated Care. Maybe just talk a little bit more about the return to growth here that you're contemplating? And if you're at a point now where you think that's on a sustainable trajectory? And then maybe just if you could give us a little bit of help here on the BetterHelp side, what you're looking for in calling kind of a turn in growth trajectory in that business?

Yes. Thanks, David. Thanks for the question. I think on the Integrated Care side, and I'll ask Mike to talk a little bit about some of the puts and takes in the first quarter as well as the second quarter guidance. But in terms of how we look at the rest of the year, there's a few things that I think are important to point out. First of all, we've talked about this for a while. I talked about it in my prepared remarks, but this mix shift from subscriptions to visit has been pretty dramatic. Just a few years ago, 70% of the revenues of the company -- or excuse me, the membership that we had of the company was in subscription-based models and 30% in visit-based models. Just a few years later and as we exit 2026, that's going to flip. We'll have about 70% of the memberships in visit-based arrangements versus subscription-based arrangements. So as we see that dynamic play out and including with some of the new product innovations I mentioned earlier, we're going to see that move to a net tailwind. And you'll start to see that a bit in the third quarter and in the fourth quarter. Now in the second quarter, it's still a net tailwind, and you're seeing that in the numbers. Let me ask Mike to comment a little bit on the first quarter and second quarter guidance, and then I'll come back on BetterHelp.

Yes. Thanks, Chuck. So if we look at the first quarter, I would say we had a nice beat versus the midpoint of the guidance range. And I would say about 1/3 of that was due to timing and nonrecurring factors. And then the other part was due to good execution across the business. The timing factors, we did have a pull forward from an earlier booking that we -- that benefited the first quarter and is not recurring in the second quarter. So that was pulled forward. The second is we've had a few contract implementations that we were anticipating in the second quarter that are now expected to occur in the second half. And I'd say the third factor is slightly lower FX impact relative to what we had previously assumed in the second quarter. So I would say if you adjust for those factors, the impact of those was, I would say, a few million dollars. The sequential progression from the first to second quarter would look more consistent. And then I would say just we had indicated last quarter that in terms of the first half versus the second half revenue split for Integrated Care in '26, we had expected to be slightly more weighted to the second half relative to 2025, although generally consistent with the average split over the last few years -- over the past few years. We still expect that to be the case. So those are some of the dynamics that are impacting the first and second quarter and then the full year.

Yes. And then one additional thing on Integrated Care. As I mentioned earlier, it's really about driving greater value for our clients, and we've been very focused on product innovation, and you've seen some of that rollout. I'm excited about the work that we've got going on right now for some new comprehensive solutions to roll out later in the year, really to lean into the core strengths we have as a company be able to show up more comprehensively for our clients. And the combination of this change in mix that's occurring as well as these new product innovations is really how we're going to drive growth in Integrated Care, of course, as well as our growing International position. In BetterHelp, the insurance entry point is going very, very well. We're excited about how that is scaling. We think that as we progress through the year, we're going to continue to see that grow as well as start to moderate. And I mentioned in my prepared remarks, some of the moderation we're seeing in some states that have been live really since the third quarter of last year and the lift we're seeing in revenue there as a result. So we're seeing some market stabilization. We're seeing early signs that the availability of insurance is creating -- is taking down that cost barrier. So we're seeing more sessions. So insurance really is a major catalyst for the turnaround and growth of BetterHelp in the U.S. And then, of course, as I mentioned earlier, in my prepared remarks that international growth. So both segments have their story in terms of mix changes and growth outlook, and we feel confident that we've reflected that in our outlook and in our guidance.

Your next question comes from the line of Sarah James with Cantor Fitzgerald.

I was hoping you could unpack a little bit more the Integrated Care revenue guide. What are you assuming for the ACA subsidy-related disenrollment as we go through the year? Was it as big of an impact on 1Q as you had expected? And then as you think about the assumptions made in tightening the guide here, are you assuming any move in visit utilization or retention going forward?

Yes. Thank you for the question. We -- I think the ACA market, as you know, it's still working its way through. And I think the health plans, generally speaking, are expecting to see some continued moderation in their enrollment as payments are due and things like that. And we've reflected that in our guidance. I was surprised to see a little bit higher enrollment in the first quarter, but we kept our guidance moderating down through the year for that reason. As I mentioned in our last earnings call, that we didn't see that having a material impact in terms of our revenues or our visits, just the nature of the mix and how we see that. And so in terms of how we see the rest of the year, as I mentioned before, this mix shift change where we now have -- we're going to end the year with about 70% of membership in visit arrangements and the fact that we continue to grow visit revenues you're really going to start to see that take hold more in the third quarter and even certainly more in the fourth quarter and as we go into 2027.

Your next question comes from the line of Daniel Grosslight with Citi.

I want to go back to the BetterHelp insurance rollout. It seems to be going a bit better than expectations, maybe at the high end of expectations. With a few quarters under your belt now, I'm curious what the biggest drivers of upside have been and maybe some -- what have some surprises on the downside been for you as conversion and cannibalization progressed as you had anticipated really? And then I guess on top of that, given the success of the insurance business and the continued weakness in the DTC business, I'm curious if that changes the calculus at all on retaining the DTC business?

Yes. I think we've -- I think we've executed pretty well. We had a thesis when we acquired UpLift and when we decided to move BetterHelp and insurance. You may recall when I joined, that was one of the main priorities I laid out there. I felt like we needed that to turn that business around. And I think the team has done a really exceptional job of executing that and rolling out states methodically, but with urgency. I think we understand the importance of turning that business around. So I think we've been -- I wouldn't say overly surprised, but pleasantly surprised that as consumers are able to come through and see that they have insurance coverage available to them, that it's driving more funnel conversion once they're with the program, higher number of sessions that we're seeing with cash pay, and we're seeing the markets that we're live in for an extended period of time, start to make -- move the needle in terms of overall revenues, which speaks to the cannibalization point. So I think that's been a nice surprise, although I think we were intending to execute that well. I think one of the challenges we have in insurance is we've got to make sure that we've got the right therapist capacity to meet the demand. I mean BetterHelp come at this from a pretty large market position. So we want to make sure we've got the therapist coverage. As I mentioned in my prepared remarks, we've now credentialed and enrolled over 6,000 providers, and BetterHelp has a large therapist network of over 30,000 in its consumer cash pay business. So we're just urgently activating that and making sure we've got the right provider network to do it. So that's probably been one of the more significant constraints to your point. When you say retaining our direct-to-consumer business, I do believe, again, our starting point is a little different from others in this space because we have such a substantial market position in consumers, and because there's so much unmet need out there, I don't see necessarily that us turning off that consumer channel. We think it's important. However, I do believe we're going to see this continued growth in insurance, not just in 2026, but as we go into 2027 and ultimately in the U.S., seeing insurance surpass consumer. So we'll revisit that at appropriate time. But for now, we think being able to offer that on a consumer basis, cash pay basis as well as scaling insurance is the right thing for the business right now.

Your next question comes from the line of Jailendra Singh with Truist Securities.

I actually want to ask about the Chronic Care business. Chuck, would you describe that the worst is behind given the momentum you seem to be seeing there, kind of some stabilization? And I know it is early in terms of selling season, but can you share anything in terms of early reads on the selling season? Any color on RFP trends, demand environment, the type of offerings you're seeing most interest?

Yes. I'll touch on the selling season first. I would say, generally speaking, the environment is similar to what I've spoken about previously. Just as a reminder, last year, we saw good overall results in the employer channels really across our solutions and ongoing challenges in the health plan space with all the macro challenges going on there. But we did have some nice wins and some expansions, but some pressure as well. I would say it's early in the year to be definitive around the selling season outlook. But I'm encouraged by some of the things we're seeing. We're about in the same place we were last year, but we're seeing some higher win ratios and things like that. And we're also having good strategic conversations with our clients. Obviously, they're facing a number of challenges with the rising medical costs and other kinds of issues and looking to, frankly, consolidate and reduce the number of point solutions and interested in the scope of services that we can bring to the table. And with respect to Chronic Care, for sure, and the bundled products, which are now about 70% of what we're doing there. So I think the market is similar, although starting to see some encouraging signs. The health plans are -- they're sophisticated organizations. And as I've said previously, they will work through those challenges, and it might take a cycle or 2 to do that. But that -- ultimately, that's going to be a tailwind to companies like Teladoc because they need those type of services to drive impact. Also, I think we're having really good conversations around some of these new product offerings. I mentioned enhanced 24/7 care. We thought that would be an attractive offering because of what it does and the kind of impact it can make as well as the role that it can play with these millions of visits that we have in a broader way in terms of driving engagement and connecting with other services. We're seeing that with 24/7 care and with Catapult. So it's early in the year, but there are some encouraging signs, including the level of conversations we're having. The last thing I would say is as we think about product innovation and really driving an increased level of value, that's ultimately what is going to make a difference here. And I think over time, the scope of our services and the fact that we can come at this as a provider organization resonates, and I think it will continue to resonate with the customers.

Your next question comes from the line of Jessica Tassan with Piper Sandler.

I want to just follow up on Jailendra's. When you all say that we are in the same place as we were last year, is that referring to Chronic Care, so just implying flat revenue year-over-year in that subsegment? And then just if that's the case, how are you guys thinking about product innovation in that category specifically for 2027? And as your posture just on kind of GLP-1 comprehensive prescribing and administration maintenance a product oriented towards that. Has your kind of philosophy changed at all just in light of the extension of the bridge model and just proliferation of the category?

Yes. Thanks for the question. First of all, my comments to Jailendra were really about the selling season and where we are at this point in time. Obviously, it's early and having conversations and building the pipeline. So that's really what I was referring to there. In Chronic Care, we've got some exciting innovations that we're working on and really taking what I would call a more population-oriented view where we can really bring to bear the breadth of the clinical services that we have across our offerings, bring them together leverage the data and AI that we've built, and I could touch a little bit more on that later, but be able to bring that to the market in a way that is going to allow them to consolidate some of the services as well as drive stronger outcome for them. In terms of GLP-1s, that market, as you know, has evolved. And of course, it's on the minds of employers and health plans for sure. And I think many continue to try to figure that out. We've seen a lot of changes in terms of capacity and pricing and different modalities and things like that coming to market. We've come at this throughout that whole time really from a clinical point of view and making sure that we're focused on patient care and outcomes and not on prescribing per se. So we think that's the right place to be for our clients and the wraparound services we have as well as our ability to prescribe, I think, resonates. So Again, this weight and obesity management space is something that we've been in for some time. We continue to look for ways to reach patients. We've got these arrangements we've done with Gifthealth and Lilly and those kinds of things. So I think our product portfolio is pretty well positioned. But ultimately, the product innovation I mentioned, I think, is going to go broader than just weight management.

Your next question comes from Sean Dodge with BMO Capital Markets.

It's Chris Charlton on for Sean here. On the Integrated Care side, there's been a lot of work being done here to increasingly monetize the members added over the past few years. And I know you've talked about some of the dynamics with to visit-based revenues. But where else are you seeing good traction so far on some of the initiatives that you've been rolling out here broadly? And then what are some of the next steps as you kind of get deeper into the year to kind of continue to drive the revenue growth here in the back of the year?

Yes. Thank you. Well, I mean, look, the virtual care part of our business is very important. And in addition to the mix changes I mentioned, the new 24/7 enhanced care offering really broadens the level of the services that we can provide, helps address things in the visit that may be previously required a specialist referral, those kinds of things and using it as a way to connect to other services. For example, making sure that, that care provider is aware that someone is eligible for one of our chronic care programs and if it's appropriate for them, making them aware of it. We've connected that in with Catapult, acquisition we made last year, where we can, in those kinds of moments, make sure that if there's a need that we can connect them to the other services we have. So I think a lot of those kinds of things really we're trying to take this scaled platform that we have, the integrated approach and look for all those activation points where maybe perhaps we weren't connecting all the dots or weren't able to benefit from that or the patients weren't aware. I think the innovation that we're driving beyond 24/7 care, I think, is going to make a real difference here. These chronic care programs that are out there, it's become a highly competitive and crowded space, a lot of point solutions out there. And that there's a lot of point solution fatigue. So the fact that we can show up and do a multiple -- a multitude of things for the patient and then in turn, demonstrate to the client the value of all those things together ultimately is how we're going to drive growth in Chronic Care.

Your next question comes from the line of Charles Rhyee with TD Cowen.

I just wanted to follow up a little bit. Chuck, you were saying that in the states that you have launched the insurance product, you're seeing stabilization of the business. I think one of the things that you guys have talked about in the past was sort of when people are going through the funnel, how many people don't convert because of the cost. And it sounds like maybe that's -- you're starting to see that. I'm just curious, though, to the extent that it's kind of hard to see from this high-level view, are you seeing any type of cannibalization of people that might have gone into -- are you able to tell whether someone who have gone into the -- the cash pay has -- now has insurance has gone that way. Just trying to understand that dynamic a little bit? Or has this all really, would you say, been additive in the states that you've launched so far?

Yes. I appreciate the question. Again, with the caveat that it's still relatively early, but we do have a little bit more maturity in some of the states, as I mentioned before. And what we're seeing is net of -- there is some cannibalization risk, but net of that, we're seeing about 800 basis points of revenue lift improvement relative to states where we don't have cash pay. So what that tells me is not only is insurance helping increase the ability for people to use BetterHelp, but it's -- that's net of any cannibalization. So we do expect to see some of that. I've mentioned that before. But ultimately, since, as you pointed out, a large portion of the people coming through BetterHelp's traditional funnel, over 80% drop off and don't become active users. There's various reasons for that, but the largest reason is we're asking people to pay out of pocket. And now that they can access their insurance, we are seeing higher conversion, funnel conversion, and we are seeing in those states where we have insurance live a net improvement, a net lift in revenue. So I think all of that is pointing to that the strategy is working and on track. Ultimately, we've got to see how that plays out. We will see some cannibalization, but I do also believe we're going to see some net growth as well.

Your next question comes from the line of Brian Tanquilut with Jefferies.

Maybe just to follow up on the BetterHelp discussion. So can you talk to us what the biggest challenge would be in building therapist capacity here as we grow the insurance-focused part of the offering? Or maybe another part of that is, are there any swing factors that could speed up this adoption, whether both on the insurance side, both on the supply side and also on the demand side?

Yes, great question. Look, I think we're doing a lot to make sure we've got therapist access, and I referenced 6,000, that's a significant number if you look at other players out there. And we are -- in addition to the 30,000 therapists that BetterHelp has, which is a high-quality network, not all of them want to do insurance. We also obviously haven't stopped recruiting other therapists to the platform for insurance. So it is a bit of a gating factor from that perspective, but we're on track, and we continue to progress. So I think that really our ability to accelerate through the year, if I look at what we've accomplished so far, gives me confidence that we're going to see that progression through the year. And as I mentioned before, raised the range we think we have for the year as well as our exit. So there are some -- we're scaling something very material. Think about exiting the year at $125 million of revenue when it was 0 at the middle of last year. And between our Integrated Care segment with $140 million of revenue and that $125 million, makes us a major player in mental health. So I think we're going to -- we may face a few challenges here or there, but I've seen the team execute really well, and I'm confident that we'll be able to move it forward.

Your next question comes from the line of Allen Lutz with Bank of America.

Chuck, on the BetterHelp business, can you talk about for the, I guess, the back half or the back quarter of 2025 and the first quarter of 2026, what's the average co-pay that insurance covered patients are paying on the platform? And then how does that compare to cash pay? And then you made a comment responding to Charles' question where you said 800 bps of revenue lift improvement relative to states where you have cash pay. Can you unpack that a little bit? What exactly does that mean?

Okay. Great. Well, it's a combination of things, and it depends on someone's insurance coverage, et cetera. We will see -- I think we're going to see stronger lifetime value in the insurance space and maybe a bit lower ARPU initially here as it builds in terms of the level of sessions that grow. So I think that's how I'd answer that. The reference to the 800 basis points is we looked at states that were live before third quarter -- by the end of third quarter 2025 as a measure of states that had some level of maturity to them. And then we looked at states that don't have insurance live. And what we see in terms of the trajectory of the business in cash pay only versus cash pay that has insurance, we're seeing about 800 basis points improvement or lift. So as we roll out states and as those states mature, that's an indicator that we're going to see that level of moderation. And ultimately, as we continue to expand capacity, convert those states into net growers.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

This is Ayush on for Elizabeth. You guys are now at 30 states, and I think you mentioned you have around 6,000 credentialed therapists for insurance. So I guess what do you see as a realistic pace or cadence to get to all 50 states? Is it by the end of 2026, mid-2027? Or is it further out? And I guess, what do you see as the gating factor? Is that payer contracts, therapist credentialing or your own operation capacity?

Yes. I appreciate the question. We expect to be substantially all states, maybe not every state, but substantially all states by the end of the year, and we're progressing quite well against that. In fact, the 30 states is ahead of where we thought we'd be at this point in time. So that's progressing well. There are some gating factors. I mean, there are some states that some of the payer contracts made a little bit more challenging. We're looking at different strategies to make sure we overcome any of those barriers. But to date, we've been able to advance the strategy pretty well. So I think we're going to be substantially nationwide by the end of the year. And in terms of the therapist access, I think, one, BetterHelp continues to invest in its platform and make sure we've got a great experience for those therapists. Obviously, for insurance, we're asking them to do a little bit more administratively. And that's why in my prepared remarks, I referenced some of the things we're doing there that have really made it a much more efficient experience. So I think the combination of the actions we're taking as well as you've got to remember, BetterHelp being as large as it is, these therapists at the end of the day, they need to fill up their calendars, right? This is their patient acquisition funnel. So our ability to, at scale, bring patient flow into their calendar so that their business model as a therapist can be vibrant is a factor as well and why we have so many therapists on the BetterHelp platform to begin with. So again, there's more to execute and more to come through the year, but the results to date demonstrate that we're having good progress there.

Your next question comes from the line of George Hill with Deutsche Bank.

I guess, Chuck, could you revisit your expectations for margin expansion as the BetterHelp business scales beyond 2026. And I'm also wondering -- I'm wondering if there's a positive mix effect because I know you guys have discussed in the past as the business grows, like the net rate is a little bit lower. But are you guys able to mix up from a therapist perspective? And just trying to think about how that business evolves as insurance coverage expands?

Yes, I appreciate the question. There's a few things in that. Obviously, right now, we're in build mode and expansion mode. So that's pressuring the near-term margins as we invest to scale. And because we're ahead of where we thought we'd be, we want to continue to do that. Ultimately, as that matures, we do believe we're going to see a margin profile that certainly expands from where we are right now. And I think that between the consumer channel and the insurance part of the business, will give us an opportunity for margin expansion as we get operating leverage. We're able to make the ad spending more efficient in terms of customer acquisition and so forth. So I think there's a lot of opportunity for margin expansion. And ultimately, we want to scale insurance as quickly but also as smartly as possible. And then ultimately, we'll make decisions around kind of where we go from there. I think the ad spend efficiency is something that we're seeing some early signs of, and I'm looking forward to seeing a business that's got more durability. And I think insurance becoming a much larger part of that is going to be how we get there as well as expand margins.

Your next question comes from the line of Michael Cherny with Leerink Partners.

This is Dan Clark on for Mike. Just wanted to talk a little bit more about the 800 basis point growth differential between insurance and cash pay for BetterHelp. When you think about the back half of the year, are you assuming a similar level of kind of growth divergence? Should that widen as you sort of pick up more best practices on the insurance side? Or like how should we think about that?

Yes. I appreciate that. Well, we do expect to see -- at the midpoint for the second quarter, we do expect to see sequential -- modest sequential revenue growth relative to the first quarter. I think that's a good early milestone, initial milestone and expect to see some revenue -- marginal revenue growth in the third quarter and the fourth quarter. And a lot of that is really driven by insurance and scaling out to more states and the ability to expand the number of sessions that we have per user. I referenced that a little bit in the prepared remarks. So the combination of getting it live, getting the therapist capacity there and being able to treat people and care for people where the cost barrier has come down, all of those things are going to come together in terms of how we see revenue growth. I mentioned the 800 basis points because it's a good indicator of once the market is mature, now obviously, with the caveat that we're still early here, we should start to see and we are seeing some stabilization in the market as well as returning to a net growth. Again, remember, when over 80% of people that come through the funnel drop off because we are asking them to enter their credit card and cash pay, we think we've got fertile ground to grow that book. And candidly, there's a lot of unmet mental health need out there. I referenced that as well. And we're seeing growth in the Integrated Care of mental health, and we should expect to see good underlying growth beyond the expansion in BetterHelp insurance.

Your next question comes from the line of Scott Schoenhaus with KeyBanc.

I wanted to go back to Chronic Care. So it sounds like you have more announcements on the product cycle coming up for us, which is exciting. And it also sounds like you're able to get new customers coming in that want to consolidate from multiple point solutions to one vendor with multiple chronic conditions like you guys. And then it also sounds like you're engaging more with your current customers using the 24/7 platform and leveraging AI. I want to talk more about the margin of this business going forward, given those considerations. Are you able to drive pricing up perhaps maybe by engaging more with the population set, showing ROI with health plans and employers? And then also you're able to leverage costs with this AI-enhanced model?

Well, great question, and you've said a lot in that question that would be my response. I mean, certainly, the Chronic Care programs of today, we've continued to enhance those. And the way those work, there's a significant amount of recruitables that we're able to go after and obviously market to them and enroll them and serve them. And there's a cost to that. And so the more that we -- our products can not only be efficient, but continue to speak to the needs of the patient more comprehensively as well as to the needs of the client, over time, we should be able to be more efficient at what we're doing there. So there is an economic model, and we think there's opportunity for strong margins there as well. I think the point about ROI for our clients, ultimately, over time, our ability to demonstrate that and back it up for our clients is really what is needed. So I think the leverage you mentioned actually in your question is the ones that I would respond to. I think we're going to see new growth opportunities from these products we're working on. And we're going to continue to see advancements in AI benefit both administratively as well as how we engage people. And ultimately, we think that's going to drive growth and margin.

Your next question comes from the line of Peter Warendorf with Barclays.

I noticed that the Integrated Care membership guidance for the full year ticked up slightly. I'm just curious, given the current employment environment, what's driving that? And then maybe there's anything worth noting on the competitive landscape? And then just one quick one other than that is if you had any update on the CFO search and the timing there.

Okay. Great. We did see in the first quarter outperformance relative to our earlier guidance on membership, although we've maintained our full year guide for membership, which we expect to moderate downward for the reasons that I know you're well aware, the Affordable Care Act, the expiration of enhanced subsidies, the changes in Medicaid and some of the pressures on Medicare. So we are expecting that to moderate downward on that. The competitive environment, we operate in very competitive markets. I think the innovations that we're doing really have distinguished our enhance 24/7 care in a way that is very difficult for others to match. We've enhanced our Chronic Care programs in a number of ways this year. And then obviously, I mentioned the additional product innovation. So all that's progressing. On the CFO search, the search is ongoing. We're evaluating several candidates really across a variety of backgrounds, importantly, looking for the right fit, the combination of experiences they have, but also the fit with the organization and being a good strategic partner to the management team and myself really to use their financial acumen and the background to help drive the performance and execution of the business. I will say we have an excellent finance team, and they've done a great job, and they're managing our financial areas very well, and we'll continue to keep you updated as the search progresses.

Your next question comes from the line of Jeff Garro with Stephens.

I want to double-click on a couple of comments and questions around BetterHelp margins. First, I wanted to ask what you're seeing in terms of gross margins in the insurance paid portion versus your internal expectations? And then given your comments on starting to see some ad spend efficiency, I was hoping you could elaborate on how you expect to manage a pullback in DTC-focused ad spend as the insurance portion ramps.

Yes, I appreciate that. The gross margin, as we've mentioned before, the gross margin insurance will be lower than the direct-to-consumer. Now the direct-to-consumer channel has to have high margins because it's got such a high advertising costs and relatively low operating costs, and that's kind of the economic model. Whereas in insurance, there's more documentation, there's the payer rates. And so there is a bit of a lower gross margin. So far, it's right in line with what we would have expected. In terms of ad spend efficiency, and again, it's early, but what we're seeing and what we expect to see that over time, we're not having to reacquire those members. They are aware that BetterHelp takes insurance, and they're able to stay on the platform longer. And we're even right now thinking about some ways to now that we've got some scale in some markets, maybe thinking about our advertising differently in terms of how we go about awareness and activation for people that have insurance, where to date, the advertising has been more consistent with what we've done in the past. So there's a number of things we're doing on the advertising front that I think over time with insurance scaling more and more gives us a more effective way to leverage the ad spend and obviously drive margin enhancements from that.

Your next question comes from the line of Ryan MacDonald with Needham.

Maybe on the Integrated Care segment, can you unpack a little bit more of the implementation delays that you talked about pushing into the second half, whether that was client driven or if there's something internal there? And then on -- you mentioned in the prior answer that obviously, you've seen a flip from more subscription-based to more visit-based sort of revenue models. Given that these implementations are going to hit in sort of the second half of the year, can you talk about sort of the level of visibility you have in terms of the ramp and utilization on those visit-based contracts and whether that poses a risk on the Integrated Care side at all?

They're moving forward. There's no -- we don't have concerns at this point that they're not going to go live. It was more of a timing thing in terms of requirements that they had to get through. So we feel good about that. This move from subscription models to visits, as I mentioned before, a very significant move over the last few years. It really can't be understated. And I've talked about what the -- not only what the impact that's made, but how we see that progressing. And now we believe that we're going to end 2026 it being a net tailwind and 70% of the membership being in a visit arrangement, and we continue to grow visit revenue. So I think that's going to work its way through. With these client delays, we've got good line of sight to the ability to implement those in the second half.

Thank you. That is all the time allotted for today's question-and-answer session. This will conclude today's conference call. You may now disconnect.