Kooth is the only publicly traded mental-health business I know of that prints software margins on a clinical product. The London market does not appear to have noticed. FY24 revenue: £93.7 million. Gross margin: 41%. The customer is, almost entirely, the state — the NHS in the United Kingdom, a growing list of state Medicaid plans in the United States — and the unit cost curve looks like a SaaS business, not a provider.
The interesting question isn't whether Kooth's revenue is good. (It is.) It's whether the model is durable, replicable, and rerateable. My read across the last four annual reports, two trading updates, and the Pennsylvania contract documents is that two of those three are true, and the third — the rerate — is the trade.
What Kooth actually is
Kooth is a digital mental health platform sold to public-sector buyers — NHS commissioners and US state Medicaid plans — and made available, free at the point of use, to a defined population. In the UK, that's typically all 10-to-25-year-olds in a given Integrated Care Board catchment. In the US, it's all Medicaid-eligible 13-to-25-year-olds in the contracted state. The unit they sell isn't a seat. It's a population.
That distinction is the entire thesis. A per-user business has linear COGS; a per-population business has step-function COGS. Kooth's clinical team is sized to peak concurrent users — not to enrolled population — and as the contracted population grows faster than peak concurrency, the gross margin walks up. This is, mechanically, why a 2018-vintage NHS contract still prints a higher margin than a 2024 US state contract: time and density.
This is not a model that BetterHelp, Talkspace or Cerebral can run on their existing balance sheet. Their unit economics are sized for D2C paid acquisition. Kooth's are sized for a procurement cycle. I wrote about that re-orientation at Talkspace four issues ago — the read across is that the consumer operators cannot get here from there.
Annual recurring revenue, 2020–2024
Source · Kooth Plc annual reports, FY20–FY24. UK revenue stated; US revenue derived from segment disclosure and state-by-state contract values.
The procurement moat
State procurement is slow, sequential, and politically expensive. It is also — once won — one of the most durable customer relationships in the economy. The reason Kooth is interesting and not, say, the fifteen US start-ups currently pitching state Medicaid plans is that Kooth already has Pennsylvania. It already has California. It already has a deployment playbook that has been signed off by the procurement legal teams of two of the largest state governments in the United States. The next twelve states will not require Kooth to invent a category. They will require Kooth to copy-paste an existing contract.
There is one obvious counter to the thesis, and it's the one I keep returning to. The state is a customer with a budget, not an objective function. If the budget moves — and US state mental-health budgets are now twelve to fifteen percent of total Medicaid spend in some jurisdictions — the contract moves. Kooth's last earnings call addressed this in two sentences and moved on. I think it deserves more.
The Pennsylvania contract is a fifteen-month signed pilot at a $58 million floor, with a five-year extension structure that escalates with population coverage. The structure is not exactly novel — it borrows the per-member-per-month framing from MCO contracts — but it is the first time we have seen a digital-only mental health operator priced this way at this scale. The implication for the next round of state…