Teladoc Health, Inc. (TDOC) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for joining us and welcome to the Teladoc Health Q2 26 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Michael Minchak. Michael? Please go ahead.

Thank you, and good afternoon. Today, after the market close, we issued a press release announcing our second quarter 26 financial results. This press release and the accompanying slide presentation is available in the Investor Relations section of the teladoc.com website. On this call to discuss the results will be Charles Divita, our Chief Executive Officer During this 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. During this call, we will make forward looking statements as defined by the Private Securities Litigation Reform Act of 2000. Examples of forward looking statements include without limitation, statements regarding our 2026 financial outlook, the timing, availability and market response of new products and services including Teladoc 1, expected BetterHelp insurance revenue and exit run rate, expected cash pay trends, provider network capacity, advertising and marketing spending and efficiency, the timing and impact of our BetterHelp insurance rollout, and the expected benefits of the actions we are taking. Such statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statement in today's earnings release and the risk factors in our most recent Form 10 ks and Form 10 Q for this quarter including risks relating specifically to each of our reporting segments. I would now like to turn the call over to Charles Divita.

Thanks, Mike. Let's begin with the health care landscape that we operate in. The industry continues to evolve, with changes in client needs and expectations and meaningful shifts in how consumers access care. These changes reinforce our confidence in the strategic priorities we previously outlined, and will continue to shape how we innovate, where we invest, how we allocate resources, and where we focus the organization to drive long term value. Against this backdrop, we have seen continued progress in the second quarter, strengthening our position as the global leader in virtual care while building on this foundation for sustainable financial performance. Our second quarter results were within our guidance ranges on a consolidated basis, and reflected distinct dynamics across our 2 segments. Integrated care, we again delivered a solid performance, with revenue and adjusted EBITDA both above the midpoint of our guidance ranges. And our ongoing focus on innovation was underscored by the recent launch of Teladoc 1, our new connected care model that brings together the full breadth of our clinical and technical capabilities to deliver outcomes for each individual and across populations for our clients. Within BetterHelp, our top priority remains the scaling of insurance and in-network services. And for the quarter, insurance related revenue was near the high end of our expected range. Additionally, we established a baseline national footprint for insurance during the quarter, ahead of our prior expected rollout schedule launching all remaining states in the U.S. Adjusted EBITDA for this segment tracked closely to the midpoint of our guidance range. Although segment revenue came in at the lower end of the range, due to lower cash pay revenue. As I will explain in more detail in a moment, through mid May, operating trends at BetterHelp remain generally consistent with the assumptions in the guidance provided with our first quarter results on April 29. However, as we move through the rest of May and into June, the increasing speed of consumer movement towards insurance provider capacity and network constraints against this increased demand, and a more accelerated decline in cash pay users and other factors became more pronounced and persistent than the assumptions underlying our prior outlook. These developments led us to reassess our plans and priorities, and accordingly revise our BetterHelp revenue outlook. Before spending more time on BetterHelp, let me first make some comments on our integrated care segment. We have established a leading position by providing a broad range of virtual care services to support physical health and mental well-being. Health care continues to be significantly impacted by rising costs, the burden of chronic illness, access issues, and other concerns, and we believe our scale, clinical approach, and extensive platform position us well against this market backdrop. And we have been accelerating innovation in our products, services, and capabilities to further capitalize on our strengths, lean into this market opportunity, and deliver greater value to our clients. We conduct millions of visits annually in this segment, and earlier this year, brought new innovations to our flagship 27 care service. The enhanced offering addresses more conditions, provides specialist support to treating clinicians, and includes other value added features to make these visits more impactful connected engagement points. And we have advanced technology and capability innovations to support our integrated patient care model. This includes Teladoc Health Pulse, our new intelligence engine, which brings together unique, multidimensional data and advanced AI models power clinical insights, guide targeted actions, optimize experiences, and to surface these insights and other actionable information directly at the point of care for appropriate action by our clinical team. We have been building 1 of the most extensive integrated practices in virtual care broadening and deepening our clinical model and investing in purpose built technology to support it. And working to bring this all together in a comprehensive new solution that we believe clearly differentiates us including by orienting around the care and needs of the individual and not a fragmented product category, as is prevalent across the market today. Last week, we introduced this new approach called Teladoc 1, which we view as the most comprehensive offering ever brought to market by the company. It is a new care model that delivers a predictive and adaptive experience designed around an individual's health care journey rather than a specific or singular condition. And for clients, Teladoc 1 provides the ability to address needs across populations, with accountability for both clinical performance and total cost of care impact. At its core, Teladoc 1 leverages the full extent of our clinical capabilities delivered through a unified, multidisciplinary care team spanning clinicians, specialists, therapists, coaches, and dietitians. And complemented by AI enabled capabilities through Pulse, to efficiently support care teams enable timely and effective interventions, enhance engagement, and help people stay on track with their care plans between clinical interactions. The care model is designed to help coordinate care across settings, including with the individual's local care provider when applicable. And to help ensure care needs are addressed timely and consistently. With broad availability beginning January 2027, we will initially apply this care model to populations impacted by cardiometabolic health conditions. A major driver of health care cost and a market focus for us. Over time, we also see opportunities to extend the model across additional populations, further expanding value for clients, and market potential. We believe that the addition of Teladoc 1 to our portfolio, and our continued focus on innovation and delivering differentiated solutions to clients will further leverage the strength and potential of our integrated care segment. Let me turn back to BetterHelp to provide a more detailed update on the business our priorities for the remainder of 2026, and our updated outlook as we continue to focus on rapidly scaling insurance in the U.S. and pivoting the business more towards an in-network model. As we have previously discussed, the U.S. cash pay market has been under continued pressure, which is the principal reason we began building an insurance-covered, in-network offering. The BetterHelp revenue growth outlook provided with our first quarter results assumed we would achieve the dual goals of scaling insurance while at the same time stabilizing and growing overall BetterHelp segment revenues as we progress through the year. We expected that the combination of strong growth of insurance sessions and growth of cash pay users in non US markets would increasingly offset the impact of expected declines in US cash pay users. Including the movement of potential cash pay users towards insurance and lower planned advertising spending levels compared to the prior year. Operating information available to us through April, including cash pay user trends, advertising and customer acquisition cost factors, insurance session growth, and insurance provider network expansion, were within the assumptions underlying our outlook at the time of our first quarter earnings call. And results continue to be generally consistent and reflective of those assumptions through mid May. Including insurance user gains largely offsetting declines in US cash pay users. After that point, certain changes in the business became more pronounced and persistent than we had anticipated. And as we move through the second half of May and into June, 3 related developments became increasingly clear to us. First, consumer demand for insurance versus cash pay increased faster than expected. And reflective of sustained high levels of consumer preference for insurance. Approximately 70% of potential users indicating a preference for insurance and as much as 80% in certain markets. Second, high preference and demand for insurance caused a greater and faster shift away from cash pay acquisition than we had modeled. Including potential users who previously might have entered through the cash pay pathway increasingly shifting towards insurance, or otherwise converting to paying users at a lower rate. The decline in cash pay users and cash pay revenue, therefore, accelerated beyond the decline incorporated in our prior outlook. Third, while our insurance provider capacity continued to increase, it did not expand at the same pace as the increase in demand. Although we had credentialed thousands of providers for the network, the available capacity also depends on provider availability for the applicable state and payer, as well as clinical need, appointment time, and length. Higher demand, therefore, exceeded the capacity available to convert this into a greater number of paying users, completed sessions, and revenue. As a result, cash pay revenue declined faster than anticipated, while insurance revenue could not increase at a level sufficient to offset the cash pay decline. The insurance business grew well, and revenue was in line with our expected range. However, because the pace and geographic construct of the demand for insurance exceeded available capacity, overall BetterHelp revenue was pressured as the transition away from cash pay accelerated. Business patterns can fluctuate over short periods. Including during the state by state insurance rollout, and factors such as varying indications of consumer behavior, provider network requirements, and payer mix considerations. But as we move through June, we concluded that these developments likely represented sustained changes in the business rather than short term variability and that assumptions supporting our prior full year BetterHelp segment revenue expectations were no longer representing the business outlook as we transition more towards an in-network model. Additionally, seeing sustained high levels of consumer preference for insurance and given the strategic importance of insurance to better help we accelerated national insurance availability during the quarter. And ahead of our earlier expectation to roll out over the remainder of 2026. The additional 20 states launched comprise nearly 1/3 of the U.S. population, and therefore were essential to moving to a national capability for insurance. We believe the national rollout will provide a more representative view of consumer behavior and operating requirements. As well as further enable the evolution of BetterHelp's advertising and marketing approach towards a more insurance oriented model over time. Early indications from this emerging national footprint further demonstrated that insurance preference and market specific capacity requirements developing differently more rapidly across the broader footprint as compared to the earlier state by state rollout approach. The developments I just covered caused us to conclude that our prior revenue assumptions had to be adjusted and we made several strategic decisions in response. Those decisions and resulting actions will place further pressure on cash pay revenue but we believe they are the appropriate actions to strengthen the business and build a durable insurance position over the longer term. First, we are highly focused on expanding insurance network capacity. Including a greater ability to support and adapt capacity on a market by market basis in response to demand dynamics. This includes initiatives to support accelerated provider recruitment, activation, long term retention as well as enhancements to the insurance platform to support productivity, capacity, and user experience. We have made considerable progress in building the insurance offering including establishing a baseline national footprint a year after launching our first state. We have contracted for over 150 million in network lives, and credentialed more than 8 thousand mental health professionals the network at this point. Insurance coverage sessions have grown substantially over the rollout. With over 20 thousand sessions completed last week alone, representing an estimated annualized revenue run rate on that basis of over $110 million up from over $75 million at the time of our first quarter earnings call and more than double the level from the fourth quarter 25 earnings call held in February. Second, we are evolving BetterHelp's historical direct to consumer cash pay advertising and marketing approach. To more prominently reflect insurance objectives. This includes better aligning the expected demand generation of advertising spending levels with available provider capacity as well as moving from state level insurance marketing to more national strategies. We believe these and other changes can improve marketing efficiency and user conversion economics over time, and as insurance becomes a higher mix of our revenue. As a result of these actions, we now expect advertising spending in 2026 to be lower than our prior plans and as we continue to focus on supporting overall margin objectives for the business. While reduced advertising spending will have a negative impact on cash pay user acquisition, we believe this evolving approach better aligns us with the growing part of the U.S. market in-network services, with lesser orientation on the declining US cash pay market. Third, we are reducing near term emphasis on markets outside the U.S., including associated resource allocation, and reduction in advertising levels. This is not expected to be a permanent shift. As we continue to see meaningful opportunities outside the U.S. longer term given the large addressable market and significant unmet need. However, given the importance of the U.S. insurance market to better help, we believe the highest return use of our product, engineering, operational, and marketing resources in the near term is supporting our insurance initiatives in the U.S. We are also reprioritizing certain other previously planned initiatives to support this effort as well. Our updated guidance leads to a BetterHelp segment revenue range of $770 million to $830 million for 2026. Relative to our expectations at the time of the first quarter earnings call, this new range reflects cash pay revenue declining faster than anticipated due to the factors and actions I mentioned. We are reaffirming our expectation for 2026 insurance revenue of $90 million to $105 million. The actions we are taking and planned initiatives to address more insurance demand will take time to implement and drive impact, We remain encouraged by the momentum we are seeing and expect these and other moves to further strengthen the insurance business in 2026 and position it for continued strong insurance revenue growth in 2027. With respect to BetterHelp's adjusted EBITDA margin, we continue to expect a range of 3.0%-4.6% for the full year and have aligned our actions to support our ability to invest in the insurance opportunity ahead. While the business dynamics are different than we previously anticipated, and presenting more challenges as we make this business model transition a better health, We are also encouraged by the progress being made towards building out our insurance position and the opportunity ahead in the insurance market. We believe the actions we are taking are focused on the right areas to make BetterHelp a stronger and more durable business over time. Now let me cover our results for the second quarter. Consolidated revenue was $607 million and adjusted EBITDA was $66 million representing a 10.8% margin on a consolidated basis. Net loss per share was $0.21 includes the following pretax per share amounts. Amortization of intangible assets of $0.49, and stock based compensation of $0.05. Free cash flow for the quarter was $36 million, and we ended the second quarter with $774 million in cash and cash equivalents on the balance sheet. Net debt to trailing adjusted EBITDA was 0.8x, and 3.6x on gross debt basis. Turning to segment results. Second quarter integrated care revenue was $394 million an increase of 0.7% over the prior year and in the upper half of our guidance range. Factors that contributed to the year over year revenue increase included international, which was again up by double digits this quarter boosted by a 30% increase in revenue from hybrid care models, and to a lesser extent, higher chronic care enrollment and visit revenue growth in the segment. In aggregate, these factors more than offset the headwind from lower subscription revenue we have spoken about previously. Approximately 60 basis points of year over year growth came from acquisitions. We finished the quarter with 100.3 million U.S. Integrated care members, slightly above the high end of our guidance range. We have modestly raised our full year outlook by roughly 1 million lives at the midpoint, based on results seen thus far. Our full year range still contemplates some slight moderation, as our health plan clients deal with potential changes to their underlying enrollment levels. Chronic care program enrollment was 1.27 million at quarter end. Up approximately 6% sequentially and 14% higher year over year. Driven largely by continued client adoption of multi condition bundles which in turn expand the potential enrollee population. Second quarter Integrated Care adjusted EBITDA was $65 million up 13.6% over the prior year period. And represented a 16.5% margin. This was above the high end of our guidance range, and up approximately 190 basis points from the second quarter of 25. Adjusted EBITDA performance was driven by the revenue upside versus our midpoint, as well as disciplined cost management, which more than offset mix related gross margin pressure from the shift to visit based arrangements. BetterHelp's second quarter revenue was $213 million, 11.6% lower than the prior year period, and down 2.6% sequentially. Insurance revenue of $22 million near the high end of our expectation. And up approximately $9 million sequentially. This was offset by a greater than expected decline in the cash pay business, including the result of deliberate actions we took during the quarter, including reduced advertising spending as we prioritize the acceleration of the insurance rollout and the achievement of profitability objectives. Average paying users in total declined 11% from the prior year's quarter. 346 thousand and were down 4% sequentially. While insurance users increased by over 70% sequentially and reflecting a growing part of BetterHelp's business. BetterHelp's adjusted EBITDA for the quarter was $500 thousand a 0.2% margin just slightly below the midpoint of the guidance range. This was impacted by lower cash pay revenue, and additional investments to support the scaling of insurance including the accelerated nationwide rollout. These items were somewhat offset by a 17% decline in advertising and marketing expense versus the second quarter of 25. Now turning to guidance. We expect 2026 consolidated revenue of $2.36 billion to $2.45 billion a 5% reduction at the midpoint versus the prior range, primarily attributable to the updated BetterHelp cash pay outlook. We expect adjusted EBITDA of $271 million to $303 million up slightly at the midpoint versus the prior range, and representing approximately 85 basis points of margin expansion versus 2025. Our free cash flow guidance remains unchanged $130 million to $170 million. We now expect full year stock based compensation expense to be below $50 million which would represent a decline of over 35% from 2025 and 75 percent lower than 2023 levels. And we now project net loss per share of $1 to $0.75. Note that our cash flow and net loss per share guidance ranges do not incorporate any potential impact from changes in our current debt structure. For the third quarter, we expect consolidated revenue in the range of $569 million to $609 million and adjusted EBITDA in the range of $62 million to $74 million Moving to the segments. For Integrated Care, we expect 2026 revenue growth of 0.8% to 2.4%. Were several factors that contributed to the updated range. Including the deferral of a previously expected contract implementation in 2026 to 2027 at the client's request. And a lower relative forecast for FX where we now expect the tailwind to be approximately 10 to 15 basis points below our prior expectation. We continue to expect international revenue growth in the high single digits on an organic constant currency basis. Our full year Integrated Care adjusted EBITDA margin guidance of 15.6% to 16.4% is up 40 basis points at the midpoint versus our prior guidance range. And represents an increase of approximately 85 basis points over 2025. We are guiding the third quarter integrated care revenue flat to up 3% year over year, which includes roughly 25 basis points of contribution from prior acquisitions. And adjusted EBITDA margin in the range of 15.7% to 17.2%. Looking at the cadence for the balance of the year for integrated care, we expect the third quarter to fourth quarter ramp to be slightly greater versus 2025. This includes typical seasonality with respect to fluid infectious disease visits, and impact of in year implementations on the fourth quarter. Adjusted EBITDA is expected to benefit from continued execution of cost savings and productivity initiatives. Moving to BetterHelp, Based on the factors and actions described earlier, we now expect 2026 segment revenue to decline 19.0% to 12.7% versus 2025 reflecting a greater decline in cash pay revenue. Expect insurance revenue in the range of $90 million to $105 million. While the total segment revenue range is wider, we believe it is appropriate based on the uncertainties inherent in cash pay and ongoing business model transition. Key swing factors include the timing and progress of insurance network and platform related initiatives, growth and mix of insurance covered sessions, advertising and marketing spend levels, customer acquisition cost trends, and user conversion efficiency and user retention. We are reaffirming our adjusted EBITDA margin guidance of 3.0%-4.6%. This range contemplates mix impacts, investments to support insurance initiatives, and reduction in advertising and marketing expense in the mid to high 20% range more in line with the insurance priorities mentioned earlier. For the third quarter, we are guiding to BetterHelp revenue down 24.2% to down 12.3%, Insurance revenue is expected to be in the range of $25 million to $31 million in the quarter, up 29% sequentially at the midpoint. We expect an adjusted EBITDA margin of 0.5% to 2.5% which is generally consistent with the prior year period at the midpoint. Looking ahead to the fourth quarter, we expect continued sequential growth in insurance revenue. And based on the third quarter insurance revenue range, if fourth quarter results are consistent with the midpoint of the implied fourth quarter range, that would equate to an annualized insurance revenue exit run rate approaching $140 million. Cash pay revenue in the fourth quarter is expected to be impacted by the actions we are taking to align with and support insurance objectives. As well as lower advertising and marketing spending due to holiday ad pricing dynamics. As a result, and similar to prior years, we expect the fourth quarter to see the highest adjusted EBITDA of the year. In closing, we have made meaningful progress on key initiatives that support our strategic priorities. While there is more work ahead, the team remains focused on disciplined execution delivering results with urgency. We remain confident in our strategy. And we are taking deliberate actions that we believe will strengthen the durability of our business, improve long term performance, and create sustainable value for shareholders. With that, we are now ready for questions.

Thank you. We will now begin the question and answer Please limit yourself to 1 question per person. You would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality? If you are muted locally, please remember to unmute your device. Our first question comes from Sarah James from Cantor Fitzgerald. Sarah, your line is open. Please go ahead.

Thank you. So I am hoping to get a better idea of what the pacing to closing the supply gap looks like for the therapists that are taking insurance So you went from 6 thousand to 8 thousand. I think you have a network 30 or so. How big is the supply gap right now? What do you mean by you mentioned accelerating insurance adoption through certain programs that you are doing. Can you be more explicit about that and how do you think about the ramp going forward? Thanks.

Yeah. Thanks, Sarah. Appreciate the question. As you mentioned, we have continued to grow the total number of credentialed therapists pretty significantly over the course of the year, and that continues I think, you know, and that is been able to support the insurance sessions and revenue and things that we had expected. Think this higher level of demand and the strong preference for insurance And now our national rollout, obviously, is why we are making these moves and these changes. There I would say there is a number of initiatives going on, but let me bucket them into 2 areas. First of all, I would say around provider acquisition and retention. This is really things that are aimed at recruitment, both out of the BetterHelp network that you referenced, the CashPay network, as well as therapists that are not in the network that are more traditional in terms of taking insurance. So we got a number of things going on there to look at our recruitment processes, the effectiveness of that, how we can scale those more quickly. We are also continuing to look at ways that we can expand delegated credentialing with payers. We have begun and going through the process to pursue NCQA accreditation as a and delegated to delegated credentialing. So we think that is gonna be a benefit And we have also got some initiatives around the onboarding and engagement of therapists onto the platform and get them using it and serving and serving the patients. The second area is around half of what I would say about improving existing provider capacity in addition to new recruitment. And this is really things like improving the platform, the insurance platform we have, you know, tooling, looking at scheduling, efficiencies. We have done a lot there. I mentioned in the last quarter some of the things that we had done around AI to support efficiency and documentation. And things look looking at the experience of the providers and the user experience. We are also, you know, putting into place and have been, but we are doing more looking at state by state and payer level initiatives to be able to respond to demand and capacity needs on a more dynamic basis you know, as that demand and capacity will change over time. So there is a number of things underneath that and really why we took the actions to you know, refocus resources, and really lean into this, you know, insurance opportunity we have. Thank you.

And just any view on the timing of closing the gap of where demand is to where supply is?

Look. We are we are actively working on it and have been. We reaffirmed our revenue range that I that I had mentioned in my prepared remarks. Obviously taking these actions to strengthen our position in 2026 to position for a strong insurance revenue growth in 2027. Do not wanna speak on the timing of that. I would just say that we have got number of things underway and really why we have refocused the resources the way we have. Thank you.

Our next question comes from the line of Lisa Gill from JPMorgan Chase & Co. Lisa, your line is open. Please go ahead.

Thanks very much. And in fact, thank you for all the comments on BetterHelp Just 2 things I wanna try to better understand. 1, is the reimbursement under insurance materially different for the provider where they have a preference for cash pay versus insurance coverage? And then secondly, as we make that conversion over to insurance, can you talk about the profitability to Teladoc? Will that look materially different? I know your advertising costs are gonna materially change over time as you will not have to do it as much direct to consumer advertising, and your customer acquisition cost will not be as high. How do I think about that transition and the impact on your margin as well?

Let me take the first comment. Certainly, in a cash pay environment, the therapists are know, approaching that on a cash pay basis for a number of reasons, including know, flexibility and they do not necessarily have to do all the same documentation requirements that you would have to get, you know, reimbursement from a payer. You know, similar therapy and visit and all that, but different kind of model. In the insurance side of the house, obviously, there is more requirements of the of the therapist in terms of the documentation, administration, Obviously, there is claim submission that happens and all those kinds of things. So it is a bit of a different dynamic, and it is it is not necessarily for everyone. I think the reimbursement really will focus on kinda supply and demand dynamics. And it is market by market basis. And we are we continue to evaluate compensation programs that will make sure that those therapists are supported. But it is a different a little bit of a different animal between the 2 because of the cash pay versus the payer reimbursement. In terms of the margin view, I would say, you know, first of all, we are gonna be very focused on scaling insurance, and we see this in-network move and pivot for BetterHelp as a really important 1 to create a more durable business because the volatility that comes with the cash pay side. From a margin perspective, we are of looking at it this way. You know, we should expect, and I have said this before, lower gross margin percentage in insurance versus cash pay, Cash pay requires a significant level of advertising and marketing as you referenced. And the gross margin profile is different. So we do expect and should expect a lower gross margin percentage in insurance. it is just the dynamic in insurance. We would also expect that the lifetime value for insurance will be more reflective of the patient's need and less around whether the cost is as much of a barrier as it is, obviously, in cash pay fully out of pocket. We do see the ability over time to improve our ad spend efficiency and the spending levels. We had expected that to occur over time, but, obviously, a bit more accelerated now in terms of the advertising spending levels, but we do expect that to create some efficiencies. And we also are you know, we are investing ahead of the opportunity here, so we to see operating leverage kick in as insurance continues to scale further. So beyond that, when the margin profile for BetterHelp will depend on those kinds of factors. The pace of the business transition, how cash pay evolves. But that is how we are looking at, you know, margins under the insurance model. Thank you.

Our next question comes from the line of George Hill from Deutsche Bank. George, your line is open. Please go ahead.

Hey. Good evening, guys. And I forget I for forgive me if I missed this part, but have we addressed, like, what percentage of the capacity that you currently have in BetterHelp can address the capacity needs in the insured segment. And, again, I apologize if I missed this part. Like, is like, do we need to find a bunch of new therapists to serve the insurance business, or is there a licensing issue why the therapist that served the cash pay business cannot serve the insurance business? Or is that more or is it more addressed to, like, Lisa's question which is, like, there is there is a compensation issue as opposed to licensing issue?

Yeah. The therapist network that is part of the cash pay market are experienced and, you know, a very significant part of BetterHelp's value proposition on the cash pay side. And we have continued to know, recruit and offer insurance to the network as we have rolled out these states, and we have seen good solid interest in therapists, you know, looking at the insurance side. But we are not just limiting ourselves to the therapist network and the cash based side. We have been recruiting and going after therapists that are not necessarily in the cash pay network. So it is a combination of both that is occurring It is a significant network in the cash based side that gives us an opportunity to bring insurance to market. I think what we are seeing, though, is the demand really outpacing what our expectations were in terms of the movement from cash to insurance. We have grown the capacity pretty significantly over the last many number of months as was noted. And we it is a market by market payer by payer dynamic, we do not have capacity constraints uniformly. It varies by market. And so we are approaching it that way as well. So I think it is both. it is a cash pay therapist moving to insurance as well as recruiting therapists that are not in the cash pay network today.

Okay. And then maybe just a real quick follow-up. Is there quick way to frame, like, can we put a number on by, like, what order of magnitude are we, like, missing capacity? Like, how much revenue are we missing by not having the capacity to capture the volume?

I do not wanna comment on that. I think, again, we have done well in terms of growing capacity. The insurance sessions are growing well. We are able to be at the, you know, the higher end of our revenue expectations. But because of the size of the cash pay market in the U.S. and the cash pay user base that is out there, it obviously it creates a significant capacity issue when you throttle all that demand. Towards insurance. So that is how we are looking at it and why we have know, taken these actions to refocus, more on insurance as well as take into consideration more in our advertising and marketing, which is intended to create awareness and demand generation, to more increasingly focus on the insurance objectives so that we are not out there spending money to generate demand beyond what we have the capacity to fill as we as we grow the network.

I will hop back in the queue. Thanks.

Our next question comes from the line of Daniel Grosslight from Citigroup. Daniel? Line is open. Please go ahead.

Hi, guys. Thanks for taking the question. I will stick with BetterHelp here. I am really focusing on the international segment here because it is been a pretty consistent area of strength for you. BetterHelp. I get there is a lot to focus on in the U.S. but I am curious why you have chosen to deprioritize international now. And at what point would you consider reaccelerating investment in international markets?

Yeah. I appreciate the question there. It and it has been an important part of BetterHelp and continues to be. We are maintaining our position in the markets that we are in today. And international will continue to be an important area for BetterHelp. We really see this more as a near term prioritization action here. Know, we have got finite resources at BetterHelp, and we feel like the product, the engineering, the operating resources, the marketing resources, that could benefit our insurance scaling that we the best highest use of them is to focus on insurance scaling given the demand and the preference we see. So I would not see it necessarily as a moving away from those non US markets. there is still a large market opportunity there is a lot of unmet need out there. That BetterHelp is leaning into. We are gonna maintain our positions, you know, and presence in those markets And we have the opportunity once we see, you know, these insurance initiatives take hold to revisit, those non US markets in terms of the level of focus we have there. So I would more look at that as a near term prioritization item. And do see that as a longer term opportunity for the company.

Got it. Oh, okay. And as we think about the cash pay part of BetterHelp in 2027, I know you are not giving formal guidance now. But would it be fair to kinda back out what the cash pay is in 4Q and then annualize that as a good run rate for 2027 on just, again, just on the cash pay side, or do you think we will see continued declines in the cash pay business in 2027 from that April run rate.

Yeah. I do not wanna comment on 2027, but I would say that obviously, we are making these moves because we see you know, significant additional opportunity in the insurance market and to position us to grow insurance revenues in 2027. And we had expected and continue to expect pressure on the U.S. cash pay market. Obviously, that is accelerated further than we were thinking. And so as you get to the fourth quarter, you have got a couple things going on. You have got that dynamic. As well as you I know you are aware of this, but we have a typically pullback in ad spending during the holiday season which impacts the cash pay market as well. So I would not necessarily take the fourth quarter and annualize that. I would just say that know, we would expect continued pressure on the cash pay market We would expect to continue to drive insurance revenue growth, including through the actions we are taking And then, to the earlier, question, we will revisit how we are looking at the non US markets and how we look to grow there as well.

Got it. Thank you.

Our next question comes from the line of Jessica Tassan from Piper Sandler & Co. Jessica, your line is open.

Hi, guys. Thanks for taking the question. So I am curious if you can give us a sense of just kind of how many insured lives or what level of run rate revenue your 8 thousand BetterHelp providers can support. And then just how are you thinking about the insurance business growing in 2027 and kind of level of capacity do you need in order to support that growth? And then just my quick follow-up would be, can you comment at all on the behavior that you are observing of within the Better Health insured business? So how many visits? Like, what level of acuity? Just what are you seeing in those members? How long are they staying with the product? Etcetera? Thank you.

Okay. Well, I think so I will try to tick through those. Obviously, the first question, you know, the 8 thousand credential therapists in total, we continue to grow the total number, which is important. it is also important their availability from a state perspective, from a payer perspective, obviously, capacity and availability for the clinical need, the appointment time, and the length of the time. So there is a lot of things that go into it beyond the raw number. So we both are important. Continue to grow the network. Credential network, as well as these actions that I mentioned earlier around provider you know, the provider acquisition and retention and improvements, frankly, that we can make to the insurance platform to drive that. So I do not wanna give a number in terms of what the 8 thousand equate to. it is it is more about the capacity and the any utilization that is there as well. So I think that is how I would how I would answer that. In terms of the revenue run rate, you know, we have re reinstated our guidance there, reinforced our guidance around 90 to 105 million. These actions are being taken so that we can strengthen our position in 2026 and drive a strong insurance revenue growth in 2027, and that is really what we are going out. In terms of how the users are behaving, it is early. Obviously, this national rollout, we think, is gonna give us know, maybe a bit more representative view of the consumer behavior not just the cash pay versus insurance, but how they use the platform, what the ongoing operating requirements are, But we had referenced a few things in the last quarter call, and we are seeing you know, good, user, users in the in a usage in the first 90 days relative to cash pay. We are seeing good session growth As I mentioned before, the 20 thousand So a lot of those factors are coming into play as we think about the outlook moving forward.

Our next question comes from the line of Allen Lutz from Bank of America. Alan, your line is open.

Good afternoon, and thanks for taking the questions. Chuck, I want to follow-up on the Better Health thread here. So you are still expecting the same EBITDA margin despite the issues in cash pay. And cash pay is going to have higher gross profit dollars, as you talked about. But it seems like you are able to at least somewhat manage this through lower advertising spend. And in response to a prior question, you talked about the trajectory of gross profit margin and the trajectory of advertising spend as you make this shift from cash pay to insurance? I am not asking for any type of guidance here, but just conceptually, over the next couple years or however you wanna frame it, how should we think about the cadence of gross margin and the timing of gross margin degradation versus EBITDA margin expansion? Is it do we need to see EBITDA margins go down before they go up based on the dynamics here around cash pay Thank you.

Yeah. I do not wanna go too far on that last point, but I would say that yes, we have taken into consideration in the EBITDA margin guidance the initiatives that we are planning to take and the things the actions we are taking here, as well as, you know, how we are looking at our advertising spending. So that is a big lever. As you know, the cash pay business, there is a significant expenditure to acquire members. there is a high churn. With cash pay, and so it has its own set of dynamics in terms of the efficiency of that spend and how that plays into to margins. We do believe that over time that this scaling of insurance give us a greater ability to know, impact ad spend efficiency and user acquisition efficiency. And now this is a bit more accelerated given the preference and demand we are seeing. We always expected that we would need to evolve that approach over time. As insurance continue to scale and grow. I think the fourth quarter dynamic that we have seen in terms of adjusted EBITDA being higher for BetterHelp in the fourth quarter tending to be at least than other quarters. That dynamic, I think, is still gonna continue to be there even within the insurance market as well, just given the ad the ad spend dynamics around the holidays. So beyond that, I do not necessarily wanna get into know, cadence of gross margin, but we do believe that insurance will create a more durable position for BetterHelp. And, I think, create a more durable view of how that gross margin and the financial profile of the company is gonna proceed going forward.

Makes sense. Thank you very much.

Our next question comes from the line of Jailendra Singh from Truist Securities. Jailendra? Your line is open. Please go ahead.

Thank you, and thanks for taking my question. I actually want to maybe talk about Integrated Care business. I know we are still in the midst of selling season. Maybe if you can talk about any update how the trends have been compared to last year? How does the pipeline look Are you seeing larger deals, better win rates, more product consolidation? And how is Teladoc 1 affecting selling season conversation? Any update that would be helpful.

Yeah. I appreciate that, Jalendra. I would say, first of all, you know, respect to the selling season, I think the operating environment that we are in is really in line with what I have spoken about previously. I would say in the employer market, looking for solutions that you know, align with their goals. I think they are concerned around fragmentation and driving impact from the programs they have in place. The health plans, as you know, they are working through a number of challenges you know, higher medical costs, regulatory dynamics. And, you know, business decisions they are making around that. So that kinda continues to be a similar environment. We are seeing solid interest across the channels in what we are doing. Through the second quarter. I would say the selling season overall was in line with our expectations. And in line with where we were in the first half of 25. I would say the conversations we are having with clients are productive. They are I would say, more strategic in nature, as they look at their challenges and what they wanna do and what the benefits of programs like ours can have. The innovation focus we have, our capabilities the outcomes we can drive, and our focus on reducing fragmentation. I think all those things resonate with them. We have had some nice wins and expansions so far this year. We have also faced some pressures just because of the competitive nature and the market environment. And there is a lot of the year left to go as you referenced. I think we are seeing really good interest across our solutions in virtual care in chronic care. You know, adoption of bundles continues to be a theme. We have seen good growth in weight and obesity management programs. So I think all of that is in line with where we expected to be. We are really excited about bringing Teladoc 1 to market. This is really the culmination of a lot of work over the last year or so. As you know, the products and services that are brought to market today are, you know, focused on a particular problem or a particular need. Whereas Teladoc 1 is a much more comprehensive approach because it is focused on what the individual need is. And not necessarily 1 condition or a fragmented, product solution that is that is prevalent. Out in the market today. We launched it last week, actually, with our clients. We had a client forum I think there was good excitement about what Teladoc is doing in this renewed innovation. I think they understand why we are going in after it this way in terms of this comprehensive model. And why it can really benefit them and benefit their members. We are so excited to get it in the hands of our sellers and, you know, get it out to clients. it is it is really new. I mean, we just, launched it last week. But very encouraging in terms of the market and awareness of what we are doing least from that client forum, and we are gonna build on it going forward.

that is super helpful. Just 1 quick follow-up, and it is a clarification on I am sorry if I missed this, but did you say if cash pay trends did they stabilize in July? Or are the trends you saw in Q2 have continued in Q3 here in July?

I do not believe I spoke about July, but certainly as we progress through the tail end of the second quarter, had caused us to, you know, to really take the view that these were not short term variations that we were seeing, that these are more sustained business developments and really required us to reassess the assumptions were underlying our prior outlook given the what was evolving in the marketplace as well as the impact of the actions we are taking. So I think all of that factored into how we are setting the, expectations going forward.

Great. Thanks a lot.

Our next question comes from the line of Sean Dodge from BMO Capital Markets. Sean, your line is open.

Great. Thanks for taking our questions here. it is Christopher Charlton on for Sean. Sticking on integrated care, can you share some more color on the competitive dynamics within the chronic care portion and kind of what some of the drivers were behind the big step up in enrollment in the quarter? And I know you mentioned greater adoption of the multi condition bundle and called out weight management, but are there any other areas of strength or demand to clout here and how this is setting your expectations for the rest of the selling season and into 2027? Thanks.

Yeah. Appreciate the question. Yeah. I think there is a couple things going on, and I referenced those, but I will just I will just maybe give a bit more detail. Certainly, we are seeing and have seen, but strong adoption of bundles by clients. Again, it addresses more needs of the people that they are serving, creates more recruitable population for us, and in turn, the ability to, you know, increase and improve enrollees. And that is important in terms of, you know, meeting more needs, but also you know, stickiness with the program, engagement, all of those things kinda factor into the benefits to us bundled. Weight and obesity programs have seen significant you know, and solid growth. As you mentioned, those carry a different lower PMPM than some of the other programs. So there is a little bit of a mixed thing going on there. And I think that having more enrollees and having these bundled programs you know, also bodes well with respect to how we bring Teladoc 1 to the market. Because it is more comprehensive offering. Terms of the competitive landscape, it is very competitive, and it is and it has been. But I think the actions we are taking to really lean into our strengths bring new capabilities to market, and really differentiate on this clinical care model that is very comprehensive, obviously enabled by the AI investments that we have made think you are gonna create some distance and differentiation relative to point solutions that are out there. So that is how we are looking at it. We I think we are in the right space. You know, cardiometabolic health area is a significant part of health care expenditure. A lot of challenges that face those individuals, and by us bringing the full breadth of our clinical capabilities, we think we can help them, and we think we can drive impact for our clients.

Okay. Thanks again.

Our next question comes from the line of Elizabeth Hammell Anderson with Evercore ISI. Elizabeth, your line is open. Please go ahead. Just a reminder that if you are muted locally to please unmute your device. Our next question comes from the line of Charles Rhyee with TD Cowen. Charles, your line is open.

Yeah. Thanks for thanks for the question. I guess just to kind of I do not know if you explicitly connected these 2 issues, but it is the issue that we are seeing the accelerated demand as people come to BetterHelp, and they, you know, go through the process, they realize they can get insurance coverage and they seek insurance coverage. it is not and then there is a capacity issue where they cannot get access to a therapist quickly, and then they decide, you know what? I cannot get it now, I am gonna hold off and I do not choose the DTC option. Is are these 2 directly linked And as such, does this you know, as you talk about trying to expand capacity in the areas where you are you are having this issue, what does this do in terms of your ability to expand into other regions on the insurance side? Or those kinda 2 still 2 separate things?

Yeah. I think the, you know, the traditional historical advertising and marketing approach for BetterHelp really is about brand awareness and demand generation, you know, for the cash pay environment. And I think the we are seeing, you know, the demand generation occur with the level of advertising we were doing. And to your point, now that BetterHelp, it is becoming more aware that we are, offering insurance. And as we scale and grow more markets and during the quarter, actually, launched all the remaining markets, that we are now we are now have a baseline footprint nationally. there is more awareness and more interest and which we had expected in because of it really underscores why we have got into insurance to begin with, you know, the pressure on the consumer and affordability. And the know, greater acknowledgment, about the need for mental health. By payers and more in network availability. So all of those things have factored in, and, really, what we needed to do was know, as a result of this higher demand and this accelerated cash pay situation, is that we needed to evolve that marketing approach to more and more take into consideration this emerging national footprint. And so that we were not generating you know, demand, both for cash pay but also for insurance that we were not were not able to meet. So that is what is going on there. We think we are evolving that appropriately. And we will be able to, I think, more effectively tailor the advertising to the capacity we have. And, again, as I said earlier, it is not a uniform challenge. I mean, we have capacity that grows and subtracts in different markets. And so think this evolution really is people wanting to use BetterHelp, people wanting to use BetterHelp and use their insurance coverage. And part of that is our demand generation and then, ultimately, our conversion of that demand into insurance users' paying sessions. And revenue. And that is what is going on and why we really felt that it was not a short term variation that we needed to reevaluate not just the assumptions underlying our prior outlook, but what actions we could take to really strengthen and lean into this insurance market opportunity that we have ahead us.

Thank you. And then just to follow-up, I think, from Alan's question earlier. You have maintained the margin guide. How long is this sustainable? Because obviously, you are pulling back on the ad spend in the short term as you are trying to, you know, adjust to this capacity issue. But clearly, you need the advertising for the DTC demand side of the equation. it is kinda like it is sustainable for a certain period, but just curious, how long you think this transition will take you know, is this is this something that we think we can get fixed, you know, within 26, or could this take longer? Thank you

Well, I have touched on before how we are thinking about the margin. I think this, you know, evolving the advertising and marketing approach to more strongly consider our insurance footprint and capacity, I think, is an important part of that answer. We have always, and we will continue to focus on the bottom line of the company and making sure that we are good financial stewards in terms of how we deploy advertising and so forth. And as I mentioned before, we are investing ahead of opportunity. I mean, we are scaling insurance. We have gone from 1 state in less than a year to know, all 50 states and plus DC. So there is some investments that we are making in some operating costs that, you know, we believe that we are gonna be able to get some you know, leverage out of as we continue to scale interest. So I think all of that is in play with the answer to that question. But I think you should you should be aware that we are you know, always looking at the bottom line financial performance of the company.

Appreciate it. Thank you very much.

The q and a session has ended. This concludes today's call. You for attending. You may now disconnect.