Teladoc Health’s third quarter numbers are in, kicking off the earnings season with results that were “mixed” enough to weigh down the broader digital health sector despite an 8% increase to top line revenue.
Here’s Teladoc’s Q3 at a glance:
- Total revenue up 8% to $660.2M
- Net loss of $57.1M (an improvement over -$73.5M in Q3 2022)
- Integrated Care segment revenue of $374.4M (up 9%)
- BetterHelp segment revenue of $285.8M (up 8%)
Everything seemed to be trending in the right direction, especially considering that US Integrated Care membership reached 90.2M (up 10% YoY), driven in part by Chronic Care Complete enrollment hitting 1.1M (up 13% YoY).
So why did TDOC stock continue its multi-year dive despite the positive metrics? Without wading too far into the Wall Street weeds, the headline grabber from the investor call was that CEO Jason Gorevic is “disappointed” with Teladoc’s current valuation, and is initiating a “comprehensive operational review” to boost its bottom line.
- The first component of the two-step overhaul involves a portfolio assessment geared toward sharpening Teladoc’s focus around solutions “prioritized in the direction of our integrated whole-person care strategy.”
- Second, Teladoc is pursuing a comprehensive review of its cost structure, meaning that it’s tightening its purse strings and prioritizing profitability over revenue growth.
While margin improvement and focused offerings seem like they would be music to investors’ ears, more cuts are clearly on the way, especially for service lines outside of “whole-person care.”
One of Teladoc’s biggest advantages over point solution providers is its “whole-person care” bundling capabilities, and two-thirds of last year’s chronic care growth included bundles for multiple products like diabetes, hypertension, or weight management. That approach gives Teladoc a distinct edge with clients looking for an integrated platform, but right-sizing its offerings to fit the strategy means that some investors would rather avoid the short-term revenue pain even with long-term margin gain.
Teladoc Health just released its second quarter earnings, and the results were somewhere between a return-to-form and an absolute home run.
Here’s Teladoc’s Q2 by the numbers:
- Revenue jumped 10% year-over-year to $652M
- Net loss shrank to $65M from $69M in Q1 (last Q2 saw a $3B Livongo writedown)
- Integrated Care revenue up 5% YoY to $360M
- BetterHelp revenue up 18% YoY to $292M
- Full-year revenue guidance raised to $2.6B-$2.67B, up $25M at the low end
Those figures helped push Teladoc’s stock up over 25% on Wednesday, with the narrowing loss and improved guidance both welcomed by investors. The conference call didn’t hurt either, and the four main themes that Teladoc drove home in the analyst Q&A were:
- BetterHelp customer acquisition costs are stabilizing after being a pain point over the last year. CEO Jason Gorevic said that consumer demand “has proven resilient through the first half of the year, even with the financial pressures that many households are facing.” BetterHelp now has 476k users, up 17% YoY.
- The Integrated Care segment saw growth across all chronic condition management programs. Digital diabetes prevention got a special callout, and over a third of Teladoc’s chronic care members are now enrolled in multiple programs. Total chronic care program enrollment was 1.07M at the end of Q2 (up 7% YoY), and CFO Mala Murthy said the 45k new enrollees drove the Q2 revenue increase.
- GLP-1 drug costs landed a major spotlight, with Teladoc’s employer clients clearly scrambling for ways to keep them contained. Teladoc is launching a new weight management program in Q3, giving patients access to GLP-1 drugs and personalized care plans developed with a physician to help manage outcomes and costs.
- AI, AI, AI. It wouldn’t be a 2023 earnings call if they skipped it. Teladoc apparently uses over 60 AI models in its products, ranging from member engagement to its virtual care queuing system. Leadership also drummed up hype for the Microsoft partnership expansion, which will integrate Azure OpenAI and Nuance DAX into the Solo platform.
All-in-all, Teladoc delivered a great second quarter, with every segment contributing to the revenue gains and proving that expanding within existing clients is a solid growth strategy. If there was something to harp on, it was the $200M worth of stock-based compensation that Teladoc is handing out this year, a pretty mind blowing total that’s a primary contributor to the company’s net loss.
Unified experiences are the name of the game in 2023, and Teladoc just made its first play of the year by revamping its mobile app to cater to the whole-person care needs of its users.
The new app integrates Teladoc’s services for primary care, mental health, and chronic condition management, paving the way for more patients to reap the benefits of personalized navigation to all of their treatments with a single login.
- The app includes all of Teladoc’s services that can be covered under employers and health plans (DTC solutions like BetterHelp remain separate), enabling users to view services covered by their health plan and review care plans across all their physicians.
- An engagement component translates real-time data for clinicians and patients into “applied health signals” designed to improve decision making for all parties.
- Teladoc is aiming to drive better health outcomes (and revenue) by steering patients toward a combination of its services when appropriate, giving the example of better A1C levels and blood pressure control for those enrolled in both its chronic care and mental health programs.
The other major highlight from the press release was that Teladoc’s full suite of services is now available in Spanish on the mobile app and website, welcome news for the 40M Americans that report speaking Spanish at home.
- Teladoc is clearly going out of its way to improve the Spanish-speaking member experience beyond the new language option, adding over 100 Spanish-speaking providers and expanding its nutrition plans to include cultural preferences.
It was almost surprising to find out that Teladoc didn’t already have a unified experience for its various solutions given the clear benefits of bringing them under the same roof, but apparently it wanted to get the care coordination features dialed before the grand debut. The app is now available in select markets, but it’ll be interesting to hear how dialed the final product really is after the nationwide roll out later this year.
Teladoc’s third quarter earnings report is in, and it’s looking like the company might finally be hitting its stride on its path toward profitability.
On its investor call, Teladoc told the only story that Wall Street wants to hear: cost management efforts and gross margins are both improving. The narrative helped push Teladoc’s stock up over 20% last week, although its $5B market cap still has a ways to go before getting back to its $45B peak.
Teladoc’s third quarter, by the numbers:
- Revenue of $611.4M, up 17% year-over-year
- Net loss of $73.5M, earnings per share of -$0.45
- Gross margin of 69.6%
- Ended the quarter with 57.8M US members, up 10% year-over-year
CEO Jason Gorevic called out four main drivers behind Teladoc’s better than expected Q3 revenue, but its BetterHelp mental health business was definitely a standout.
- BetterHelp grew over 35% compared to Q3 2021 and it’s now hitting a run rate of $1B annually.
- The direct-to-consumer mental health platform was specifically called out for contributing to Teladoc’s gross margin improvement, and its previously reported poor returns on advertising have begun to stabilize.
- The efficiency gains were primarily due to higher utilization of group therapy sessions and the pivot away from a purely contractor model toward a hybrid model with more full-time employees.
- Gorevic noted that next year’s outlook for BetterHelp depends in large part on macroeconomic conditions that could cause consumers to tighten their purse strings.
Other highlights from the quarter included 9% membership growth for Chronic Care Complete (now at 791k members), an expanded partnership with HCSC to bring Teladoc’s solution suite to employer groups, and high satisfaction among Primary360 users.
- It was interesting that Teladoc stuck to NPS scores and some general utilization stats when discussing Primary360, and it’s probably telling that the actual membership count wasn’t deemed noteworthy.
By all accounts Teladoc delivered a solid third quarter, and the margin improvement stemming from BetterHelp was music to shareholders’ ears. Despite the strong report, Teladoc lowered its full-year guidance to ~$2.4B in revenue, but even that was taken as good news by investors who viewed it as setting up an achievable growth target.
Teladoc shareholders can’t seem to catch a break, with the company’s second quarter results sending its shares plummeting 20% on the back of a heavy earnings miss and weak guidance for the second half of the year.
The telehealth services provider reported 18% revenue growth to $592.4M for the period, but the headline grabber from the announcement was a $3B impairment charge on its Livongo acquisition that drove a total loss of $3.1B.
Teladoc CEO Jason Gorevic shared some upbeat growth metrics on the conference call with investors, but also called out a number of headwinds that make it difficult to predict near-term performance.
- Chronic care membership came in higher than expected, while member utilization improved year-over-year.
- Teladoc’s BetterHelp virtual therapy business grew revenue by 40%, but continued to be hindered by competitors sacrificing margin to gain market share
- Primary360 has been “a significant bright spot” for commercial momentum, but heightened economic uncertainty is delaying the decision making process in the employer market.
- Teladoc is taking a look at its cost structure to maintain profitability, and will begin marketing bundles of services to expand its revenue sources.
Although the market didn’t exactly react kindly to the Livongo news, the write down appears to be more of a symptom of wider market trends than the business itself, and Teladoc’s recently launched Chronic Care Complete solution is poised to be a core pillar of its long-term growth strategy. The near-term looks like a different story, as Teladoc now expects its full-year revenue to be at the lower end of its $2.4B to $2.5B guidance.
Yesterday’s competitors are today’s collaborators, with Teladoc and Amazon inking a new partnership to bring voice-activated virtual visits to Alexa-equipped Echo devices.
- “Alexa, I want to talk to a doctor” will now connect Echo users to a Teladoc call center to verify a patient’s medical history and health plan information ($0 if covered, or $75 direct-to-consumer). Within roughly 15 minutes, the patient will then get a call back from a Teladoc physician to treat mild needs such as colds, flus, or allergies.
- The new service will initially be available in an audio-only format for supported devices such as the Echo Dot and Echo Show, but will add video functionality “soon” to make it easier to diagnose certain conditions.
- The partnership greatly expands Teladoc’s consumer reach as part of its ongoing strategy to meet patients where they are. Amazon reports over 40M Alexa users in the US alone, and has delivered more than 200M Alexa-equipped devices globally.
- This is the latest in a string of health-focused improvements to Amazon’s Alexa ecosystem, which have included capabilities for elder care coordination through Alexa Together, as well as medication management through the Care Hub… and those are happening outside of even bigger moves with Amazon Care.
Despite the recent launch of Amazon’s own Amazon Care telehealth service, Teladoc’s virtual physician network is significantly larger, and this scale will be absolutely essential to keep up with what could be an insanely high call volume for the new service.
The Teladoc partnership marks Amazon’s first attempt at providing truly on-demand healthcare with Alexa devices, and if well executed, could go a long way towards breaking down barriers to care for many patients. Even though Amazon and Teladoc are now competing in the same arena, the collaboration shows that coordinated efforts are still on the table when there’s a clear benefit for both patients and the companies.
The big are getting bigger with the announcement that virtual care giant Teladoc Health is expanding its services with a “first-of-its kind” Chronic Care Complete solution targeted at the one in three US adults living with multiple chronic conditions.
- Chronic Care Complete is now offered through the Teladoc Health app and provides a comprehensive experience that leverages connected monitoring devices in combination with personal coaches to help patients achieve health goals.
- The program also provides access to physicians who can review medications or order labs as needed, as well as licensed therapists to provide mental health support for those dealing with difficult diagnoses.
- Integrated proactive insights help Chronic Care Complete patients achieve better outcomes by applying personal health data and social determinants toward driving timely outreach.
- According to Teladoc, chronic conditions such as diabetes, hypertension, and obesity account for 90% of all healthcare spending, driven in part by the confounding mental health challenges that are often ignored by other solutions but are a core component of Chronic Care Complete.
Teladoc’s scale gives it unique positioning to address the intertwined physical and mental health challenges faced by polychronic patients. Chronic Care Complete is the latest in a string of new solutions launched following Teladoc’s 2020 merger with Livongo, each aiming to leverage this scale to provide better whole-person care, including the mental health offering MyStrength and the primary care service Primary360.
Teladoc recently announced its financial results for the third quarter of 2021, providing investors with an update on the company’s earnings, as well as giving insight into the future direction of its Primary360 virtual-first primary care offering.
- Financial highlights included year-over-year revenue growth of 81% to $522m, driven by strength in its BetterHealth mental health unit, and a 37% increase in total visits as a result of steady adoption for Teladoc’s direct-to-consumer offerings.
- Teladoc revealed on its investor call that it plans to begin taking on financial risk with its Primary360 solution in the future. The company is aiming to generate savings with its virtual-first program and will take on risk where it can have the most impact.
- CEO Jason Gorevic said that the rollout of risk taking for Primary360 would develop in tiers, “from first clinical measures, to then risk corridors to, ultimately, full capitation.”
- Primary360 was only recently made available to payors nationwide, but Teladoc stated that it is beginning talks with hospitals about white-labeling the service for them to use as their own digital front door.
Since Primary360 integrates a wide range of Teladoc products, the service generates significantly higher revenue per member than the company’s general medical and mental health solutions.
Most health plans lack the network and provider base required to develop a nationwide virtual primary care solution in-house, but as telehealth demand rises and pressures them to begin offering the service, many are turning to options like Primary360 to meet the need.
If Teladoc can successfully meet this demand while taking on risk, it will be able to capture a larger share of any savings it generates, further improving the economics of the service.
Teladoc Health is using its scale to reach the 80% of adults that “do not have a strong relationship with a primary care physician” by making its Primary360 solution available to US commercial health plans, employers, and other benefits sponsors.
Primary360 is a virtual primary care service that Teladoc has been piloting for the past two years. It is already being used by several large companies and will be available to Aetna members early next year.
- Primary360 allows members to select a primary care provider and develop longitudinal relationships with physician-led care teams. Members receive personalized health plans through Teladoc’s virtual care offerings, and can get help navigating to in-person providers.
- Data from the pilot shows that two-thirds of members previously lacked traditional primary care and that Primary360 helped members detect undiagnosed chronic diseases. One in four chronic conditions identified for members of the pilot were new diagnoses of common disorders such as diabetes and hypertension.
- Half of Primary360 members enrolled in the pilot take advantage of at least one other Teladoc product, while nearly 30% use two additional connected services.
Although Teladoc is positioning Primary360 mainly as a way to make primary care more accessible, it also serves as a way to bring in new business following slowing membership growth as the pandemic wanes. Teladoc is establishing Primary360 as a hub for its full suite of virtual solutions, giving more patients the ability to receive primary care while widening the patient funnel for its other offerings.