Company: TALK
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0000950170-25-038107
Chunk: 94

Company: Talkspace, Inc.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1B
Chunk 94
---
 those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

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

     Estimation of transaction price and variable consideration for revenue recognition

    Description of the Matter
    As discussed in Note 2 of the consolidated financial statements, the Company recognizes revenues from contracted insurance payors and employee assistance organizations (“Payor”) at a point in time based on contracted rates, net of implicit price concessions, as virtual therapy or psychiatry session is rendered ("payor revenues"). The Company estimates the amount of variable consideration that is included in the transaction price mainly by estimating claims denials by insurance payor, primarily based on actual historical collection experience by insurance payor. For the year ended December 31, 2024, payor revenues were $124.3 million.Auditing management's determination of transaction price including variable consideration was complex and judgmental due to significant data inputs and subjective assumptions utilized in the process. In determining transaction price, management develops estimates based on actual historical collection experience by insurance payor.

56

    How We Addressed the Matter in Our Audit
    We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for estimating the amount of variable consideration that is included in the transaction price, including management’s review of the assumptions used, results of calculations and assessment of the underlying data.To test the estimate of variable consideration, our audit procedures also included, among others, assessing the methodology used and testing the underlying data used by the Company in its analysis. We compared the collection rates used by management to historical collection trends and evaluated whether changes in the Company’s business model, payors mix, and other factors would affect