Teladoc Health, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Chuck Divita highlighted satisfaction with Q3 results, noting Integrated Care revenue, adjusted EBITDA, and membership above guidance, and BetterHelp revenue in line with prior commentary. He discussed streamlining leadership, rationalizing priorities, and improving execution. Focus areas include customer centricity, leveraging technology, clinical excellence, and a high-performance culture. For U.S. Integrated Care, business structures were integrated, and capabilities were broadened. International Integrated Care continued to gain momentum with geographic expansion. BetterHelp is focused on balancing growth with profitability and evaluating initiatives to enhance value.
• Mala Murthy detailed financial results, including consolidated revenue decline, adjusted EBITDA, net loss per share, and free cash flow. She discussed Integrated Care segment performance with membership and revenue growth, BetterHelp revenue decline, and expense efficiency actions like severance and lease termination costs.

Segment Performance

• Integrated Care Segment: Revenue of $384 million increased 2.5% year-over-year, above guidance range. U.S. Integrated Care segment membership at quarter end was 93.9 million, above guidance, up 4% year-over-year. Chronic Care enrollment ended the quarter at 1.18 million, up ~5% year-over-year. International Integrated Care had high-teens revenue growth on constant currency. Integrated Care adjusted EBITDA was $68 million, up 8% year-over-year, margin 17.7%. Revenue contribution: Integrated Care accounted for approximately 60% of total revenue ($384M out of $641M).
• BetterHelp Segment: Third quarter revenue was $257 million, down 10% year-over-year, consistent with prior commentary. Average paying users declined, but signs of stability in the third quarter were noted.

Guidance

• Integrated Care: Fourth quarter guidance for revenue flat to up 2.5%, adjusted EBITDA margin 12.25%-13.75% due to incremental investments. Full-year integrated care revenue growth in low to mid-single digit, adjusted EBITDA margin 14.9%-15.3%. Raised U.S. Integrated Care member guidance to 93.5-94.5 million.
• BetterHelp: No formal segment guidance, but noted improved stability in third quarter, uncertainty around election and holiday seasons, and expectations of year-over-year revenue decline in fourth quarter, with ad spend modulation in Q4.

Risks

• Declining BetterHelp revenues compared to prior periods.
• Competitive landscape in virtual care with other players disrupting the space.
• Health plan belt tightening impacting bookings in the near term.
• Seasonal ad spend effects on membership counts in Q4.

Question and Answer

• Q: Stephanie Davis of Barclays asked about BetterHelp fee for service transition, payer contracting timeline, and early conversations with payer clients.

A: Chuck Divita responded on maintaining focus on consumer model, progress on payer partnerships with select health plans, and methodical approach to the initiative.

• Q: Lisa Gill of JPMorgan inquired about 2025 selling season, retention, bookings, and land and expand opportunity.

A: Chuck Divita and Mala Murthy discussed health plan headwinds, productive conversations with clients, and levers like enrollment and visit volume for revenue growth.

• Q: Jessica Tassan of Piper Sandler asked about BetterHelp payer coverage competitive landscape, nuances between commercial and Medicare Advantage, and SG&A burden.

A: Chuck Divita and Mala Murthy spoke about consumer focus, methodical payer partnership progress, and SG&A as a marketing spend lever for consumer acquisition.

• Q: Michael Cherny of Leerink Partners asked about measuring success of repositioning investments.

A: Mala Murthy discussed capital allocation alignment with strategic priorities and balancing investments with returns.

• Q: Sean Dodge of RBC Capital Markets questioned BetterHelp user count stabilization, ad spend impact, and seasonal modulation.

A: Mala Murthy explained user count stabilization from international ad spend investments and seasonal ad spend modulation in Q4.

• Q: Jailendra Singh of Truist Securities asked about Integrated Care growth, bookings, and visit revenue.

A: Mala Murthy discussed booking declines, remaining selling season, and visit revenue growth from volume and product enhancements.

• Q: Richard Close of Cannacord asked about product improvements for client retention and new business.

A: Chuck Divita talked about activating existing business, product enhancements, and integrated delivery to improve performance.

• Q: Glen Santangelo of Jefferies asked about differences from predecessor's strategy.

A: Chuck Divita discussed streamlining business structures, cost savings, and capability investments for future growth.

• Q: Charles Rhyee of TD Cowen asked about Integrated Care utilization and value-based arrangements.

A: Mala Murthy talked about visit volume growth, revenue accrual, and continued investment in visit engagement.

• Q: Allen Lutz of Bank of America asked about tech and development spend rationalization.

A: Chuck Divita discussed rationalizing T&D spend to free capacity for future investments.

• Q: Sameer Patel of Evercore ISI asked about G&A step up and normalization.

A: Mala Murthy noted one-off investments in Q4, with focus on managing expense base relative to revenue growth in 2025