Q1 2020 Earnings Call
Welcome to Teladoc helps first quarter 2020, <unk> earnings conference call and webcast. At this time all participants have been placed in listen only mode and the floor will be opened for your questions. Following management's prepared remarks.
I'd like to ask a question at that time, Please press star one or your Touchtone phone if at any point. Your question has to answer you may or move yourself in the queue by pressing but how key.
Yes. Thank you please pick up your hands for optimal sound quality.
Lastly, if you should require operator system. Please press Star Star Zero. It. It's now my pleasure to turn the floor over to Patrick Kealey, Vice President of Investor Relations you may begin.
Thank you and good afternoon today after the market close we issued a press release announcing her first quarter 2020 financial results. Just press releases are available in the Investor Relations section of the Teladoc health Dot Com website on this call to discuss the results are Jason Gorevic, Our Chief Executive Officer, Molla Murphy, our Chief Financial Officer.
During this call. We've also provided an update to our forward outlook in her prepared remarks will be followed by a question answer session.
Please note that we'll be discussing certain non-GAAP financial measures that we believe are important in evaluating teladoc helps performance detailed on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations there can be found in the press release that is posted on our website also please note that certain statements made during this call will be forward looking statements.
As defined by the private Securities Litigation Reform Act it might be 95, such forward looking statements are subject to risks uncertainties and other factors that could cause actual results were teladoc health to differ materially from those expressed or implied on this call.
Additional information please refer to our cautionary statement our press release in our filings with the FCC all of which are available on our website I would now like turn the call over to Jason.
Thanks, Patrick and thank you everyone for joining us this afternoon I want to start by taking this opportunity to thank all of our team members and caregivers around the world for the critical role they are playing in supporting enabling and delivering care. During this time of need.
At our Investor Day back on March 15, we spoke of the importance of our shared values.
The last several weeks have demonstrated just how committed are team members are to living those values.
Been consistently impressed by their passion for taking care of people their commitment to quality and their willingness to rise to the challenge on behalf of our clients and members.
Over 90% of our workforce continues to work from home, although our team members in China, and Spain are slowly beginning to return to the office as restrictions in those countries are used.
After the market closed Teladoc health reported strong revenue outperformance in the first quarter of Twentytwenty, driven by broad based momentum across the business and a sharp acceleration and visit volume growth.
Total revenue in the quarter grew 41% over the prior year to approximately $181 million.
As a result of the increased demand for our services from clients and consumers, we're significantly raising forward guidance, including full year revenue guidance of $800 million to $825 million, representing an increase of over $100 million relative to our prior range.
We're playing a critical role during the global outbreak of Cobot, 19, and I've seen a significant increase in inquiries from both existing and new potential clients.
Our clients are turning to us to expand our service offering to new populations and add new products. During this time of need.
Request from new potential clients are increasing as the outbreak of cobot 19 has highlighted the value of access to a comprehensive virtual health care solution.
During the first quarter alone, we onboarded over 6 million new paid members in the U.S. across government and commercial populations and we anticipate onboarding an additional six to 7 million new members during the second quarter, culminating in the strongest first half membership growth in company history.
As discussed on our business update call two weeks ago, the remarkable growth across our platform has been enabled by the tremendous response on the part of our team members and physicians. We responded to the surge in demand by rapidly expanding their capacity of our physician network, including the onboarding of thousands of.
The new providers more than doubling the number of license positions in our network.
The investments and capacity made during the month of March have positioned us to meet the increased demand from existing members as well as the new members we were in the process of Onboarding.
Turning to visits we crossed a new milestone as total visits exceeded 2 million in the first quarter representing growth of nearly 90% as compared to the first quarter of 2019.
This is particularly noteworthy as it comes just 12 months after crossing the 1 million visit per quarter Mark in the first quarter of last year.
Well the first two months of the year were strong visit volume accelerated significantly throughout March and into April as shelter in place orders began zero dollar copays were implemented and brick and mortar facilities closed.
We're experiencing broad based growth and visits across the portfolio as our diverse product offering has enabled us to step up and meet the varied health care needs of patients during the outbreak of cobot 19.
Well general medical visit growth has increased significantly demand for specialist care, including behavioral health in dermatology has accelerated even faster, reflecting the diverse nature of the need for care. During this challenging time.
The increase behavioral health adoption is particularly encouraging as it creates strong longitudinal relationships generating multiple visits over time, which will help drive visit volume through the rest of the year.
We've also seen an increase in new users across the platform with over 60% of visits coming from first time users.
This new user growth will have a lasting effect on utilization since member satisfaction levels are extremely strong and our experience shows that when members use our service once they are much more likely to use it again.
Importantly, new registrations increased 125% over the prior year outpacing member growth as the outbreak of Cobot 19 is driving awareness or virtual care among consumers.
This significant increase in activation is particularly important to us as it feeds into the flywheel dynamic that is at the core of our member engagement efforts.
Once an individual actively registers with us it creates opportunities for our engagement team to reach that member and build a relationship.
These engagement opportunities served as the growth engine that drives visit growth in utilization within our populations and the material growth in new Activations. We're currently experiencing we'll continue to benefit us into the future as consumers turned to Teladoc health for more of their health care needs.
We're also seeing an encouraging demographic expansion in our user base visit growth rates among our younger cohorts in the range of 18 to 30 years old and among males have accelerated faster than the overall growth rates as we increasingly reach populations that have historically been lower utilizers a virtual care.
Demand for our DTC mental health product better help is also rapidly accelerating as conditions, such as anxiety and depression, our amplified by fear isolation and loneliness during the crisis.
This increased utilization will continue to benefit us throughout the year, given the high repeat usage profile of mental health services.
Provider interest in better help is also increasing.
We added a record number of new active mental health providers during a quarter and provider applications to deliver care to better help members have increased over 70% in just the last few months.
This increase provider activity will allow us to meet the growing need for mental health services throughout the rest of the year.
Similar to the impact on the health plan employer and consumer channels. The cobot 19 outbreak is accelerating the adoption of virtual care among hospitals and physician groups.
Teladoc health technology platform is enabling hundreds of hospitals and physician groups across the country to continue serving their patients increasing flexibility in capacity, while dramatically, reducing physical exposure for both patients and physicians.
As virtual care becomes mainstream within the healthcare delivery system, we're seeing increased demand from new partners for our provider platform.
This includes both the Teladoc health technology platform as well as the Intouch health offering, which as you know we have a commercial agreement in place to jointly sell the combined offering ahead of the transaction closing.
We have now signed multiple new cross sales and the pipeline of new opportunities in the provider market for this industry, leading offering continues to grow.
The broad based demand we are seeing across distribution channels for our comprehensive product offering gives us confidence in the long term growth opportunity for our business.
Before I turn the call over Tamala to provide full details on quarterly performance and guidance I'd like to make a few comments on our approach to providing forward guidance. This year.
We know that many companies have withdrawn guidance given the uncertainty of both the expected path of the covert outbreak as well as the broader economic impact of the pandemic. However, we felt it important to provide as much transparency as possible.
Therefore, we are providing updated guidance based on what we know today.
Our guidance ranges assume the significant surge in visit volume that we are currently experiencing uses over the course of the next few months as your dollar Copays begins to expire and shelter in place orders are lifted.
We expect volumes to settle in the second half of the year at a permanently higher level of utilization than pre cobot levels as we benefit from increased consumer awareness and the impact of our engagement engine applied to newly activated and Onboarded members.
As the current path of the virus is unknown our guidance ranges do not include an incremental increase in volume that could result from the virus re emerging in the fall with the same level of intensity. We are currently experiencing.
As such should the virus returned in the fall, particularly if it were in conjunction with the typical flu season. It could result in higher than expected visit volume and revenue growth.
Finally, our guidance ranges attempt to capture the potential impact of unemployment on the number of insured individuals based on the current macro economic outlook, but it remains to be seen how this unfolds.
As this is an emerging situation circumstances are likely to change in the coming weeks and months, but we believe our guidance ranges provide you with a reasonable baseline for 2020 results and with that I'll turn the call ever Tamala for a review of first quarter financials as well as detailed 2020 guidance.
Thank you, Jason and good afternoon, everyone.
I'd like to Echo Jason comments regarding the impressive response on the part of our team members and caregivers around the world.
The collective willingness to step up to serve our clients and members. During this time of need has been remarkable.
During the first quarter total revenue increased 41% to $180.8 million.
Global subscription access fee revenue for the quarter off $137.1 million grew 29% versus the prior year.
Demonstrating accelerating momentum to start there.
You asked subscription access fees revenue off $107.9 million, 32% in the core car versus the prior younger and international subscription revenue of $29.1 billion grew 17%.
The strength of the dollar versus the foreign currencies resulted in a negative FX impact all $1 billion in the quarter International subscription revenue growth was 21% on a constant currency basis.
Visit fee revenue for the quarter increased to $43.7 million representing growth of 93% over the prior year.
In part aided by the surgeon bought him we began to experience in March as the global pandemic evolved.
Revenue from individuals with visit he only access was $12.6 million in the quarter, representing over 200% growth versus the prior year driven in part by rapidly accelerating utilization. Among you population added in the back half of 29.
Visit fee revenue comprised 24.2% of consolidated revenue up notably from 17.6% of revenue in the prior years quarter as utilization increased significantly.
Turning to membership in access.
You asked paid membership increased to 43 million members, 61% versus the first quarter of last year I.
A reflection of the critical role affordable care within the healthcare delivery system, and the accelerating adoption by clients consumers and providers.
As a reminder, the U.S. paid membership includes only members associated with a PMPM and does not include individuals with visits the only access.
Individuals with visit he only access was 19.2 million at the end of the first quarter up approximately 9 million versus the prior year and stable sequentially.
Total visit volume exceeded 2 million visits in the quarter, representing a 92% growth rate versus the prior year.
[noise] visit volume from paid members in the U.S. grew 93% to 1.4 million visits which represents and analyze utilization rate of 13.4%. It 230 basis point increase over last year's first quarter.
Excluding the impact of the large health plan population onboarded over the past 12 months.
Lights utilization during the first quarter would have been 17.9% up 690 basis points over the first quarter of 29 team.
PMPM into quarter was 87 cents compared to a dollar and three cents in the prior years quarter.
As we have previously discussed we expect to see dampening effect on average PMPM when be onboard large new health plan member populations.
Excluding the impact of the large health plan population added over the past 12 months, which include over 2 million Medicaid managed care members Onboarded late in the first quarter.
<unk> P.M. would be a dollar and 23 cents.
Gross profit increased by $24.5 million to $108.4 million or 29% as compared to the prior years first quarter.
Gross margin percentage for the quarter with 60% compared to 65% in the first quarter of last year.
As discussed on our business update call on April 14, the year over year declined <unk> percentage gross margin reflects $4 billion and incremental investments made to rapidly that physician capacity in response to the outbreak of covert 19 during the first quarter as well as the robust.
Good growth and visit fee revenue mix in the quarter.
Operating expense for the quarter totaled $129.4 million or 72% of revenue compared to 83% in the first quarter of 2019.
Excluding non cash charges, such as depreciation and amortization stock compensation and onetime acquisition integration related expenses.
Quarterly adjusted operating expenses, when $97.7 million or 54% of revenue compared to 64% in the first quarter of last year.
Adjusted EBITDA increased to 10.7 million for the quarter compared to $1.2 million into first quarter of 29 team.
Adjusted EBITDA margin expanded 490 basis points over the prior years first quarter two 5.9%.
EBITDA, including stock compensation and onetime acquisition related cost was a loss of 11.3 million for the quarter compared to a 13.3 million law in the same period last year.
Our net loss in the quarter was $29.6 million compared to a net loss of $30.2 million into first quarter of 29 Pete.
On a per share basis, our net loss was 40 cents for the fourth worker compared to a loss of 43 cents in the first quarter of last year.
We ended the quarter with $511 million in cash and short term investments.
Our total debt outstanding as of March 31st was $562 million, which consists of our two convertible note.
Now turning to forward guidance.
Please note that all forward guidance will exclude the impact of the recently announced in touch acquisition until the transaction closes, which we continue to expect near the end of the second quarter.
For the second quarter Twentytwenty, we expect total revenue of $250 million to $225 million representing growth of 65% to 73% over the prior years quarter.
We expect to add an additional six to 7 million paid members in the U.S. during the second quarter.
Quoting and additional large population of Medicaid managed care members to in the quarter with approximately 49 250 million U.S. paid members.
We also anticipate adding because it's the only access on a temporary basis for an additional two to 3 million individuals during the second quarter.
We are providing this temporary access to help certain clients bridge gaps in care. During the current outbreak of cobot 19, and expect those individuals to roll off by the end of VR.
We anticipate total visits during the second quarter of between two point Threemillion and 2.4 million.
We expect second quarter EBITDA to be in the range, if a negative 1 million to a positive $3 million a.
Adjusted EBITDA positive $20 million to $24 million.
Net loss per share to be between 28 cents and 23 cents based on 74.6 million shares outstanding.
As Jason said for the full New York Twentytwenty, We now expect revenue to be in the range of $800 million to $825 million.
From our prior 695 to 710 million dollar range.
Representing 45% to 49% growth over the prior year, which again is substantially all organic.
We expect total U.S. paid members at yearend.
If at least 50 million members, representing over 36% membership growth as compared to 2019 and visit the only access to be available approximately 19 to 20 million individuals.
We expect total visits to be between eight and 9 million representing total visit growth of approximately 90, 215% over the prior year.
As you all dollar coping and shelter in place requirements are lifted.
We anticipate the surgeon visit volume we are currently experiencing to moderate in the back half of the.
Although as Jason discussed, we do anticipate visit volumes will persist at a permanently higher level than prior to the cobot 19 outbreak.
Our visit outlook does not assume an incremental increase in body, resulting from a second surge of cobot 19, which some experts are predicting will occur in the fall with the same level of intensity. We are currently experiencing.
We expect an EBITDA loss in the range of 14 million to $4 million and adjusted EBITDA in the range, all positive $70 million to $80 million.
Representing growth of over 130% at that point.
The expected EBITDA improvement reflects the significant growth in revenue in conjunction with our continued focus on operating efficiencies, while still allowing us to continue to make significant investments in growth.
Given the substantial revenue and gross profit outperformance anticipated for the remainder of the yard we expect to increase our level of investment in future growth opportunities, including increased investment to drive the continued adoption of virtual care and capitalize on increased consumer awareness.
Net loss per share is expected to range from a loss of $1.27 cents.
$1.13 cents per share based on 74.7 million weighted shares outstanding.
We expect cash flow from operations to grow consistent with adjusted EBITDA.
With that I will turn the call back to Jason for closing remarks.
Thanks Molla.
The recent events are provided an inflection point for the adoption of virtual care and the opportunities in front of us have never been greater.
I'm proud of how we've responded and our ability to support our clients and members and this crucial time of need.
Our diverse range of product offerings and capabilities combined with our market leadership across all distribution channels uniquely positions us to meet the rapidly increasing demands of the marketplace.
We look forward to continuing to share updates with you throughout the year.
As always thank you all for your continued interest in the Teladoc health story and with that we'll open the call for questions operator.
Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad. We ask that you. Please limit yourself to one question. Thank you. Your first question will come from Lisa Gill from JP Morgan Your line is open.
Thanks, very much faith and for the incremental detail on post last week or so I just I'm really just want to focus on an area that you talked about and it's obviously members have as we think about that members have been talked about a number of the assumptions that you had around that I just wanted to dig in a in two areas. One you talked about six.
To 7 million incremental members coming on your platform can you talk about if those are brand new client or penetration within your existing customer base and then secondly, when you touched on unemployment you said, we have something built into our expectations for the full year guidance I'm, just wondering what you're hearing from your customers today.
I mean, there's been a lot of lay off with this anticipation that perhaps those people are going to be rehired at some points are there more furloughed. Then then laid off how do we think about you know the conversations they that you're having any impact that unemployment could have in the back half of the year as well as as we start thinking about 2021.
Yeah. Thanks, Lisa.
So on the six to 7 million members, we expect to add in the second quarter. It's a mix of existing clients, who are expanding to new populations as well as a new clients who are coming to us for the first time.
We've seen that right as the pipeline has built over the course of the first quarter.
We began to onboard those members in the toward the latter half and really the the last third of the first quarter and that has persisted into the second quarter. So it's a combination of both existing and new.
With respect to unemployment, we think that we are less affected then other industries due to the fact that Cobra kicks in relative to benefits and therefore benefits get extended beyond the employment as you said furloughed employees frequently keep their benefits.
In addition to that we are expanding our footprint in Medicaid as well as it would the exchange businesses. So we think that in some cases that'll be a shift from commercial roles to some of the exchange or managed Medicaid roles.
But we will still be able to ride to retain those members now in other cases that won't be the case.
And we're not completely immune to a unemployment and as a result, we've factored in some.
The unemployment expectations that are that are being circulated by the economists and we've looked on a client by client basis, a cross, especially are managed care clients to try to understand the puts and takes their model I don't know if there's anything you'd add to that.
Beyond the other thing I would add Lisa is that you know we are also significantly more diversified today.
Then in years past. So you don't just keep that in mind in terms of Buffalo context.
Great well, congratulations and Jason it's been phenomenal to watch since the last five years now that everyone is finally and onboard here around tele health. So again, congratulations on what you've been able to do.
Thanks place are really appreciate that.
Your next question comes from Sean Wieland from Piper Sandler Your line is open.
Hi, Thank you and congrats so Jason you said that this is Ben and inflection in the trajectory of virtual care and I just wanted to dig in on that for a minute where do you think that this goes long term what does health care look like in five years.
Because we have had this terrible pandemic, where it wouldn't have changed otherwise.
Yeah, I think I think as I look forward there are three major areas where.
There has been significant changes.
One among consumers awareness and adoption or around virtual care and the willingness to shift how they've done things for generations to a new way of accessing care and you know certainly that's not just for health care, it's true across.
The entire spectrum of how people interact.
Health care, just happens to have been a fairly sticky one second is among physicians in hospital systems in terms of their outlook with respect to embracing virtual care as a delivery methodology and what had been somewhat reluctant.
And in some places has moved to vigorously embracing virtual care in some cases it was out of necessity, but what we're seeing is tremendously high.
Satisfaction rates among physicians who are actually.
Engaging in virtual care.
And lastly, health plans and employers are now viewing virtual care very broadly across all specialties.
And we're actually seeing significant increases in multi product sales and among consumers who are using multiple of our clinical products. So I'd say those three factors.
Oh, we'll end up being part of that inflection and so if I look out five years I would say virtual care will be ubiquitous it'll be just another methodology for help people access care there are unlikely to see the difference.
Hey, sort of a bright line between one and another and that opens up tremendous opportunities for us both to deliver that care as well as using our technology to enable that care for providers in the market and obviously, we are a with a global footprint uniquely positioned to benefit from that.
[music].
Our next question comes from Stephanie Davis from SCB. Your line is open.
Hi, guys. Congrats on the quarter. Thank you for taking my question.
Thanks, Stephanie though.
Thinking about Intouch health, you're buying a did have a different asset than what you originally looked at in January both in terms of growth and scale.
Could you walk us through the growth in new wins and your existing hospital business as a proxy to how we should think about acceleration in touch given the demand that market.
Yeah, absolutely I'll talk about our experience we're working closely with the in touch team. So I can speak a little bit about their experience.
And of course will be able to give you more detailed financial.
Hey details.
When we get to the closing of that transaction.
No we immediately saw hospitals, both existing clients as well as new products.
Prospects looking to us for technology that could enable them to treat their patients remotely.
And to do it in a way that is sure to purpose built for health care workflows.
And that enabled us to rapidly respond.
With our technology platform and stand up over 30.
Essentially virtual clinics for hospital systems and providers across the country onboarding thousands of physicians onto the platform and enabling them to treat their patients.
Intouch health has seen a similar set of demand where their technology was used from the very beginning a in fact, the first patient who is being treated in a a Washington State Hospital.
It was treated using in in touch piece of technology to distance the physician from that patient and they've continued to see demand.
And similarly had seen massive increases and the daily number of transactions on their network and so I think well what you'll see when we bring a two companies together is an unmatched solution that is.
Hitting the market at a time, where the market has massively increased its adoption rate and so I think when we look back.
Several years down the road this will have been incredibly fortuitous timing for us.
You have done the acquisition, obviously, when we announced in January we Didnt know that this was coming we were excited about it down and we're ecstatic about it now.
Your next question comes from Ryan Daniels from William Blair. Your line is open.
Yeah. Thanks for taking the question and congratulations on all the business momentum Jason one for you looking beyond the crisis. It seems like one of the other things it's probably occurred as there's a lot of novel players that are entering in the space.
I was watching CNBC and saw Microsoft's commercial from Microsoft just talking about how doctors using this now so the team.
A lot of other kind of non healthcare players getting in this phase.
Uh huh.
Okay.
Thank you.
Yeah. Thanks Ryan.
You know the I think there's no question that the world has changed with respect to the adoption of virtual Karen.
Of course that will bring a there is sort of party.
We're interested in providing technology solutions et cetera, I would say, we differentiate ourselves pretty dramatically.
Among a number of dimensions, one certainly our technology is purpose built for health care it integrates with.
The providers existing systems.
It is designed for health care workflows with you know a poor roughly 100 use cases clinical use cases between teladoc.
Okay, and Intouch health and that is very different than using an off the shelf video conferencing technology.
We have gone up against those for years, So that's not.
New for Us a those technologies have been in the market before a whether that's from Cisco or Verizon or anybody else.
And so I feel good about where we are on a and technology footing.
Second Big difference is that we bring a physician networks and the ability to actually deliver care with our technology solution.
And that is very meaningful to hospitals.
The majority of our hospitals use our physician network.
Either completely or to supplement their physicians a in delivering virtual care and that is a critical success factor for us.
And finally, our global presence gives us the ability to.
Provide these technology solutions all around the world and in fact, one of the areas of strength.
Relative to cross sell that we've seen already with Intouch health is our ability to close international deals.
With with the Intouch technology.
And our international team providing that.
It's sort of selling horsepower, so I feel really good about our market position.
Right and as you think about the convergence of payers and providers, we're uniquely positioned to ER to provide that said that capability.
I would also add our technology platform the type of compliance and has shown the ability to scale up through the crisis with pretty high volume levels.
So Ah that's important as well as a differentiation talking.
Your next question comes from Richard close from Canaccord Genuity. Your line is open.
Yes, thanks for the questions.
On that global fraud.
Jason or <unk> or can you talk a little bit about the global growth opportunity I'm just looking at the quarterly results I would've thought that maybe international would be a little bit higher from its it you just talked about what's going on on that front.
Yeah, our international business has continued to perform incredibly well.
And we've never seen a pipeline.
As strong as a as we see right now Molla mentioned in a quarter that we were negatively affected by some FX.
And but for that FX, we would have seen our strongest growth internationally yet.
In fact, we just signed a contract.
Canada life to roll out the full suite of our services in the UK.
It to their membership, which so that includes general medical a behavioral health and nutrition and expert medical services and that pipeline I really but in many markets. We've always been stronger we've historically been strong in the EU.
Yes.
But we're also seeing other markets, especially in South America emerge.
With greater growth rates.
The heels of this pandemic I don't know mile if you'd add anything.
No. So I think that you know we are on a constant currency basis. It grew over 20%, there's a pretty strong pipeline in place Richard that we own the thought of people working through just like in the U.S.. We saw deal to date Oscar request from clients we did.
We had the same sort of phenomenon happening internationally now and so I feel pretty confident about our growth prospects internationally as we look ahead.
Your next question comes from Jamie Stockton from Wells Fargo. Your line is open.
Hey, good evening. Thanks for taking my question I guess quickly on the PMPM. It seemed like a decent amount of the bump and visit volume came from a common to all you can eat models.
You know if you could just talk about the timing of when you expect that to really start to show up and the way that you get paid or we're going to see that in Q2.
And maybe how durable is it you know if we get to step up to get it for the rest of the year. Thanks.
Molly on ticked up yep, so we'd expect to feed the step up happened over the next few quarters.
Jamie.
So it will be in the fairly short time.
And Jamie remember that the ER visits included.
Is both from our medical membership as well as our direct to consumer mental health services better help so those those are both in their together.
Your next question comes from Sean Dodge from RBC capital markets. Your line is open.
Thanks, Good afternoon.
Maybe going back to the outlook.
Longer term utilization, Jason you touched on it a bit earlier.
Pandemics accelerated these until the held some driven by agreeing to showing up in person to offices that a lot to help by <unk>.
The subsidization employers and health plans have been doing a renewed.
Packet capture individuals.
I guess is there risk over the course of this that were conditioning people do expect tele health to be free to them and once we get to the other side of this.
The outbreak.
There longer term implications that can have <unk> and things like pricing and utilization.
I don't think so Sean I think people recognize that a this is an unusual situation.
And that employers health plans and others took a unusual actions in order to address that.
I think I think what's interesting is that we're seeing very strong growth across.
All of our products not just general medical so there is real except and says.
Our b to b or mental health and dermatology visits tripled.
In the quarter.
And I guess I would also point to you know we are right not only reporting essentially doubling our first quarter visit volume, but our outlook calls for us to double our full year visit volume. So our confidence is very very soon.
Strong.
Relative to the post co bid.
Elevation rates and again just to echo what we said on the call.
In the prepared remarks that does not anticipate a sort of fat second wave. If you will have a of cobot cases, a in the fall.
Your next question comes from Charles Rhyee from Cowen Your line is open.
Oh, yeah. Thanks for taking the question I wanted to go back to I think Sean's question about sort of where you think utilization rates are going to be <unk> Malo, you kind of said that.
If we back out sort of the onboarding of the large managed care client.
Underlying utilization was almost 18% of 690 basis points.
When we you kind of talked about you expect it to kind of drift back a little bit, but you know you don't and obviously, we have a lot of new members also coming on which I would assume probably have a lower utilization rate.
Is there kind of same store sales base, what do you what would you expect sort of underlying utilization to look like you think will still be sort of that this 18% range or where do you think we might fall back to sort of a jumping off point as we think about.
21 on beyond.
So I.
I think we I appreciate the question I appreciate why you're asking a Charles.
I think we were.
They do we had a lot of discussion about giving guidance in this unusual and uncertain time, and we felt like we had enough visibility.
To do that through the rest of this year.
I think we're going to stop short of trying to give longer term guidance relative to.
What's the new normal in terms of utilization rates, we feel very strongly that it will be materially higher than it's been in the past.
And the satisfaction rates and the net promoter scores that we see from the new members who are using our service for the first time give us tremendous confidence around that but we're definitely not prepared to give longer term.
Position guidance and I think we'll we'll continue to see things unfold over the rest of the year.
And as we do you know as always we'll we'll continue to update our outlook.
Your next question comes from George Hill from Deutsche Bank. Your line is open.
Good afternoon, guys. Thanks for taking the questions I'd use and I'm going to focusing a little bit on the <unk> continued investment the company you talked about making I guess, where do you see the kind of the biggest bang for your Buck from an investment Oh perspective at this point you know, we talked about kind of high teens utilization rates and I guess.
I'm just trying to figure out like it's here it sounds like there's an opportunity here to put money to work on the trade like where you think the most attractive opportunities are to spend money and then kind of what do you get for that from a metrics perspective.
Yeah, Thanks George D.
I guess I would say a few things one obviously, it's a unique moment, where awareness has significantly increased and we have the opportunity.
To invest to.
Drive more engagement drive more new users to the platform.
And we know that we get long term benefits from them because they come back and become repeat users too I think you'll see us invest in those areas that that.
That they.
Hey, lasting dividends and repeat a dividends.
We also see the acceptance for multiple products in an integrated and when we say multiple products are really mean multiple clinical specialties in an integrated fashion.
And we've talked before about virtual primary care I think you'll see us continue to push forward with that and invest in that area.
And then we are seeing very very good strength in some of our specialty businesses and I think you'll see us continue to invest their model I didn't know if you down anything to that.
Yeah I just go back to what we said during Investor day right people are pretty clear example, invested primary care well invest in membership marketing.
And best in our technology platform continue to you know put investments into that up so I would say a lot of the PC that we had on Investor day answer investments still holds a obviously as Jason talked about there is investments we have made in rapidly expanding.
Our provider capacity on network capacity.
But I would say a lot of does he see still hold.
And I guess I would just add one more thing which is as I mentioned, yeah. We were excited about the in touch acquisition I think you'll see us invest heavily in that area because the time is right to capitalize on it.
And we think that D.
Return, we can get for that is even greater than when we when we did the deal.
So you'll see us continue to invest in that area.
Your next question comes from Matthew Gilmore from Baird. Your line is open.
Hey, Thanks, and thanks for all your guys are are doing Jason and I was hoping you could characterize this selling season for employers and health plans I'm sure. It's quite different this year, but could you just sort of talk about activity levels. What types of populations are I'm sort of in the into discussion and then now that we're hopefully over there.
That hump are our most of these discussions for January one start dates or or do some of these.
Buyers want to want to start sooner.
Yeah. Thanks for the question Matt on your comments.
So everything has accelerated it's it's a little early still to talk about this selling season for one 121.
But everything has accelerated which I think is reflected in the fact that will add.
12 to 13 million new members and the first half of the year.
And that broad based demand across all of our products and distribution channels is showing up and the selling season.
Our just to give you a little bit of color our Q1 bookings.
Over half of them more multi product I. So that continues to be very very strong for us and our average deal size in Q1 was up over 50% year over year.
So we continue to see larger opportunities.
Across multiple products.
And that's true across.
All of our distribution channels so.
I think I didn't get it bodes very well for.
How we look forward into the second half a year and a one 121.
Began a little early to start quantifying what a pipeline looks like for them.
Your next question comes from Jay Lender Singh from Credit Suisse. Your line is open.
Hi, thank everyone. So I was actually wondering if you can talk about the implication of this increased awareness and adoption of telemedicine fall to your annual <unk> long term revenue growth target of 20% to 30% and EBITDA margin expansion dive. It up 210 basis point over the next five years and also if you're going to.
Right any color on your expectations with respect to New York Dumb and long dumb gross margin expectations.
[noise] Tamala.
I'll, let you handle the how do you want to characterize our long term outlook now that everything's changed [laughter] Yep.
Yeah.
Do you want to have so let me let me start first so what I would say jail Andrea is.
You know there were several moving pieces into first quarter as you saw in terms of our gross margin.
You know as we think about the rest of the Youre under dynamics on gross margin. There a couple of things to keep in mind. The first is you know we will continue to see a surge in the second quarter as it relates to visit revenue and back a little moderate over the course at the yard as Michelle.
Frankly, a et cetera.
I would also say you know the surgeon visiting couldn't get that we have seen that we've talked about will also you'd expect we expect that to moderate over over that they are I.
I would say for the medium to long term my expectation is that we will oh, we still have confidence in the mid Sixtys gross margin back you have talked about a in the medium to long term.
And I would also say we have talked about our gross profit growth or something but youre looking at <unk> and you can see in the quarter gross profit grew quite healthy the S 99%.
We will continue to focus on driving but gross profit.
When it comes to overall adjusted EBITDA margin and margin expansion. My expectation is that we will continue to invest in marketing keeping pace with revenue growth.
We will continue to drive Opex leverage from all other opex and so my expectation is that the adjusted EBITDA margin expansion of 200 300 basis points that you talked about still holds.
Your next question comes from Matt Hewitt from Craig Hallum Capital. Your line is open.
Good afternoon. Thank you for taking the questions.
Just maybe to take on that a little bit.
Obviously, you've done a phenomenal job adapting to the situation you were able to add physicians.
And capabilities, even despite the search but there were a couple of hiccups as we and you've dealt with those as well as we look out.
And given that the situation has driven faster adoption.
Two telemedicine and to your platform wouldn't it be safe to assume that gross margin should expand baby at <unk> at a faster rate than you previously previously expected or is the expectation that you just take those dollars on your converting some of these other newer markets that you've talked about expandable to thank you.
Yeah. So that's right you know, we well we have a investments.
That are attractive and actually needs to do to initially judiciously make a and so my expectation is that we will just like be proved in the first quarter. We quickly invested in what we needed to to the crisis.
And we you know Jason just talked about the investments that we have we will look at those investments in the medium to longer term and make the right ones whether it be in the U.S. or whether it be internationally. So again my expectation as well make the right methanol.
Well do those that give us an attractive returns.
And support both the topline growth as well as give us the right margin profile.
Your next question comes from Steve Halper from Cantor Your line is open.
Right. Okay. I know you talked about in touch a little bit but can you just update us in terms of your expectations.
Close date, and we are where you're at in the process and.
In terms of integration planning.
There's no change in our expectations of close Dick we talked about the fact that we still expect it to be near the end of the second quarter. The integration process is going well across all the team. There is a you know there a lot of good quality conversation happening around integration and integration planning.
So I have a confidence that we will close by the end of the second quarter and.
You know, we will update our guidance and the middle of the Youre when we do.
Your next question comes from Jonathan Young from Barclays. Your line is open.
Hi, Thanks for taking my question. So it's pretty clear telehealth is becoming a you because this benefit design, but I'm curious in your discussions with customers how they discussed talk discussed.
Moving towards a more virtual first benefit design wins, you know Gary They may provide the first one or two visits for free to try to help push for its off given how much more troubling. It's become I'm. Just curious if you could give you can't call on that thanks.
[noise], Yeah, Jonathan I look I think you're exactly right that I'd tell that virtual care has been become ubiquitous and.
We're seeing it across multiple specialties. So what may have been virtual urgent care years ago is now just virtual care virtual health care.
I think we're going to see many different plan designs coming out.
As employers and health plans realize the benefits of this.
And the positive impact it can have both on cost of care as well as health outcomes.
Hey, you know I think virtual primary care as an example of that I think.
As zero dollar Copays or another example of that I think encouraging virtual visits but it doesn't just stop with general medical I think you'll see a plan designs that encourage a virtual mental health care that include a virtual center of excellence program.
A you know we've seen interest in our virtual center of excellence as people have been unable to physically get two centers of excellence programs for large employers and health plan. So I.
I think you're going to see that across the entire spectrum.
Your next question comes from Kevin Cohen know some you'd be yes. Your line is open.
Hi, Thanks for the question this is Adam noble on for Kevin.
Regulations on the.
Great results and a in guidance I just wanted to ask you about how you're thinking about the regulatory backdrop.
And your guidance, obviously, there were a lot of changes made particularly within Medicare how are you thinking about those changes staying in place or or being <unk> or you may be returning back to normal over the course, the year and then for Medicare fee for service, specifically could you talk about what type of volumes you you've seen and.
And how you're servicing that market you know is it because it's the only or just a little bit more color on how you're capitalizing in that market.
[noise] Yeah, it's an interesting question because there have been obviously a lot of regulatory changes.
In the with the onset of this crisis.
We <unk>, we generally take a conservative view to forecasting and so when we do that we include the regulatory environment in those are those set of conservative assumptions. So we can't assume that all of these regular.
Literary changes persist.
And I think you know some are more likely than others, so our financial outlook.
And forecasts don't assume that they do we will continue to work with regulators to provide them with data on where regulatory changes have had a positive impact.
And we have very very good relationships and good dialogue, there, but you know the regulatory environment.
It's not something that Ah that I can sort of rely on in a set of assumptions. So we don't make those we don't include a sort of positive development there they're in our assumptions.
With respect to the Medicare population, we did add a about a half a million Medicare members.
Met managed Medicare members Medicare advantage.
In the first quarter.
We expect to continue to do that we have a robust pipeline and then for Medicare fee for service most of what we've seen thus far has been providers engaging with us to use our technology platform to serve their Medicare fee for service members we.
Do you think that if that persists there would be an opportunity for some direct to consumer efforts.
But you know there there isn't an aggregate are there other than the providers and we do think that we will be you know our.
Hospital, and health systems business would benefit from continued reimbursement.
For a by Medicare fee for service.
We are at a time for questions. Today. This will conclude today's conference call. Thank you for your participation you may now disconnect.
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