Q2 2020 Teladoc Health Inc Earnings Call
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Thank you and good afternoon today after the market close we issued a press release announcing our second quarter 2020 financial results. This press releases are available in the Investor Relations section of the Teladoc help dotcom 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 will also provide or third quarter 2020 outlooks in our prepared remarks will be followed by question answer session. Please note that we'll be discussing certain non-GAAP financial measures that we believe are important and evaluating teladoc health performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures 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 at 1995.
Such forward looking statements are subject to risks uncertainties and other factors that could cause the actual results were teladoc helped to differ materially from those expressed or implied on this call.
For additional information please refer to our cautionary statement in our press release and our filings with the FCC all of which are available on our website I would now like to turn call over to Jason.
Thanks, Patrick and thank you everyone for joining us this afternoon.
After the market closed we reported the results of our second quarter 2020, which was characterized by outperformance across all key financial and operational metrics driven by broad based strength across the entire business.
Particularly strong was our revenue in the quarter, which grew 85% over the prior year to $241 million.
As a result would be increased demand for our services from clients and consumers as well as including the results of Intouch health for the second half a year, we're significantly raising forward guidance, including for your revenue guidance of $980 million to $995 million.
This represents an increase of $170 million to $180 million over our prior range, including an organic increase over $100 million.
There's no doubt that the ongoing pandemic shines a spotlight on these integral role that virtual care plays within the health care system.
I recently shared the virtual stage with U.S. HHS Secretary, Alex days are and when asked about virtual care Secretary is our said I think we'd have a revolution. If anyone tried to go backwards on telemedicine. This is now in embedded part of our health care system.
I don't think I could have said it any better the pandemic has accelerated the widespread adoption of virtual care and I'm confident there is no going back.
To that end well its earlier than usual for us to be looking ahead to the upcoming year due to the significant amount of change experience. This year, we thought it would be helpful to provide you with a preliminary view on how we're thinking about 2021.
Their tremendous momentum in demand were seeing across the business for a comprehensive product offering, including an impressive pipeline of new opportunities gives us confidence and providing a preliminary outlook of 30% to 40% revenue growth for 2021.
As the market leader, we've seen a significant acceleration in demand for our services in the first half of the year, we onboarded nearly 15 million new paid members in the U.S., including 8.5 million new members during the second quarter, all of which have come onboard under their traditional P. M. P M false.
Visit fee model.
The marketplace is taken notice of our performance during the cobot outbreak our execution during the crisis, including the outstanding reliability of our platform and our ability to rapidly onboard physician capacity has enhanced our reputation and further distance teladoc help from the competition.
As a result, we're seeing increased inquiries for new potential client takeaways. For example, we recently signed a contract to provide our entire suite of clinical services to a fortune 50 media company with well over 100000 employees.
This was a competitive takeaway that came to us due to our abroad and comprehensive product portfolio and is scheduled to launch this fall.
Turning to visit volumes, we provided approximately 2.8 million visits in the second quarter representing growth of over 200% compared to the second quarter of 2019.
And a 35% increase sequentially over the first quarter, despite the second quarter, historically being a seasonally slower quarter.
During this period of significant growth, we're extremely proud to see our patient satisfaction metrics climb as consumers benefit from the convenience lower cost and high quality service we provide.
It's important to drill down into the drivers of the accelerating visit growth.
Well, we're certainly seeing pandemic related demand long term sustainable tailwinds are evident through a deeper look at the dynamic within the quarter.
As discussed on last quarters conference call, we experienced a sharp acceleration of visit volume during March and into the month of April as comprehensive national shelter in place orders began.
Zero dollar copays were implemented and brick and mortar facilities closed.
Over the course of April and May volume growth began to either as a cobot curve flattening out across the country and overall infectious disease rates fell due to social dispenser.
Utilization stabilized at a level roughly 40% higher than prior to coated in late may and throughout most of June.
As the state level process of reopening began at the tail end of quarter, we began to see volumes reaccelerate as kobin continues to flare up across various geographies.
At the book of business level. We're currently experiencing visit volumes in the U.S. nearly double the level, we would typically expect to see during these seasonally slower summer months.
When we look at the individual state level. However, it highlights two distinct trends.
On one hand in several southern states, where reopening was more rapid and cobot case volume since accelerated we're likewise experiencing a significant spike in demand and are now seeing visit volumes in these states exceed the initial peak levels of March and April.
Conversely over the past several weeks in those states, where reopening has been slower and cobot cases have remained well below the initial outbreak peak, we've seen visit volume stabilize at levels well in excess of pre cobot levels.
In fact, we're seeing visit volumes grow in these states at more than double the rate of growth that we experienced just prior to cogan.
It's worth noting that this is occurring despite the fact that physician office locations are now operating back near pre cobot capacity levels after being down 70% at the April peak.
It's persistence strengthened visit volumes reinforces our confidence in meaningfully higher sustained levels of utilization of virtual care going forward.
Continuing on the theme of sustained levels of higher utilization, our unmatched engagement capabilities have enabled us to fully capitalize on the current macro consumer tailwinds.
Fueling the acceleration of new registration growth, which was up 150% year over year in the second quarter.
Visits from newly registered individuals represented over half of our visit volumes in the quarter pointing to sustained utilization momentum going forward as we benefit from the flywheel dynamic that we discussed at our Investor day earlier this year.
I'm, particularly pleased to see to strengthen adoption and utilization continued to be broad base as our diverse portfolio of services is enabling us to meet the varied needs of our members.
While general medical business continued to exhibit significant growth demand for specialist care, including dermatology and mental health continue to grow even faster.
We're seeing tremendous demand for mental health visits in particular as visit volumes have grown sequentially in every month of the year, both on the B to B and DTC sides of the business.
Better help our direct to consumer mental health offering is exhibiting accelerating traction and continues to significantly outperform our expectations.
Turning now to our hospital and health systems channel. The second quarter saw us continued to experience tremendous growth in demand as provider clients are adopting our technology as a secure effective and efficient way to offer virtual visits at scale.
The prolonged global crisis is highlighting the need for robust virtual care capabilities and according to our recent survey conducted by Mckenzie about 60% of U.S. providers now view Tele health more favorably than prior to the panned out.
And that same analysis Mackenzie estimated that over 250 billion dollars' worth of U.S. healthcare spend could ultimately be virtualized delivering material efficiencies to the system.
Since the outbreak of the pandemic, we've seen a more than 10 fold increase in utilization across our provider platform as our clients shift more apparent counters to virtual.
Of particular note we've seen a tremendous increase in scheduled preadmission and post discharge follow up visits as the number of clinical use cases continues to expand.
As a result of investments we've made in our highly configurable and customizable offerings. We are uniquely equipped to meet the needs an integrated health plans looking to enable their own physician groups on our platform.
Including white labeled solutions to both enabled the practices to see their own patients virtually and to leverage Teladoc shown physician network to supplement these physician practices.
As expected we closed the acquisition of Intouch health on July 1st and I can confidently say this is the strongest in integration we've had today.
I'm extremely excited to welcome Joe Devivo, who is now officially the president of the newly combined hospital and health systems business and the entire in touch team to the Teladoc health family.
Just last week, we were honored to host Intouch health, 14th annual Tele Health Innovation Forum for the first time as a combined company and for the first time it was a fully virtual event.
The innovation Forum is the Premier Tele health of entered the year, attracting clients healthcare leaders and visionaries from around the world.
This year over 3500 registered attendees participated in 55 sessions with more than 70 clients speakers covering topics ranging from virtual care best practices to clinical workflow models.
The engagement within these sessions made it incredibly clear to me that the coming together of these two companies could not have been better timed and I could not be more excited about their tremendous opportunities ahead for the combined business.
When it comes to the performance of the business we're extremely pleased.
The combined offering is resonating in the marketplace and our ability to deliver highly secure interoperable and fully integrated platform backed by our large network of physicians is driving record pipeline growth.
We have recently signed several significant new and expansion contracts with large clients, including new international deals with health systems in Germany, India, and the UK demonstrating the ability of our team to close international deals and outpacing our own expectations for activating are.
I will distribution channels.
With that I will turn the call over Tamala for a review of second quarter financials as well as detailed 2020 got.
Thank you, Jason and good afternoon, everyone.
During the second quarter total revenue increased 85% to $241 million.
Global subscription access fee revenue for the quarter of $182 million grew 64% versus the prior year.
Demonstrating significant momentum.
You asked subscription access fee revenue of $152 million grew 78% in the quarter versus the prior year.
And international subscription revenue $30 million grew 17%.
The strength of the dollar versus foreign currencies resulted in a negative FX impact off $1.3 million in the quarter.
International revenue growth was 22% on a constant currency basis.
Does that fee revenue for the quarter increased to $58.9 million representing growth of 209% over the prior year.
In card aided by the surgeon volume.
The only part of the quarter due to the evolving.
Global kinda manner.
Revenue from individuals, but does it feel on the access was $19.5 million from the quarter, representing nearly 450% growth versus the prior year driven in part by rapidly accelerating utilization among new populations added in the back half of two men.
The 19th.
The P. revenue comprised 24.4% of consolidated revenue up significantly from 14.6% of revenue in the prior years quarter.
As we have experienced considerable increases in utilization year to date.
Turning to membership in Axa U.S. paid membership increased to 51.5 million members up 92% versus the second quarter last year.
Oh, the 8.5 million you paid members added in the quarter approximately 1.5 million had been onboarded on a temporary basis on behalf of our clients.
Individuals that visit see only access was 21.8 million at the end of the first quarter up approximately 12 million versus the prior year and 2.6 million sequentially.
As anticipated visited the only includes access for approximately 2.5 million temporary individual.
We anticipate roll off by yearend.
Total visit volume off approximately 2.8 million visits in the quarter.
Represented over 200% growth versus the prior year.
Visit volume from paid members in the U.S. grew over 225% to nearly 2 million business.
Which represents an annualized utilization rate of 16%.
As compared to 9% in last years second quarter.
Excluding the impact of the new large health plan populations onboarded over the last 12 months.
Annualized utilization during the second quarter would have been 22%.
[noise] PMPM into quarter was a dollar and two cents.
Compared to a dollar and six cents in prior years quarter.
As we have previously discussed we expect to see dampening effect on average PMPM when be onboard large new health plan number population.
Adjusted gross profit increased by $62 million to $151 million or 70% as compared to the prior year second quarter.
Adjusted gross margin adjusted to exclude amortization of intangibles.
Was 62.3 per cent compared to 68% into second quarter of last year and 60% in the first quarter.
The year over year decline in gross margin is attributable to the robust visit growth and increase in visit fee revenue mix in the quarter.
The sequential improvement in gross margin reflect significantly lower investment in physician capacity.
Despite the 35% sequential increase in visit volume.
The investments we made during the first quarter paid off.
[noise] operating expense for the quarter totaled 157 million or 65% of revenue compared to 85% in the second quarter of 29 team.
Excluding noncash charges, such as depreciation and amortization.
Compensation and onetime acquisition and integration related expenses.
Quarterly adjusted operating expenses were 124 million or 51% of revenue compared to 63% into second quarter of last year.
Adjusted EBITDA increased to 26.3 million for the quarter compared to 6.3 million into second quarter of 29 team.
Adjusted EBITDA margin expanded 600 basis points over the prior year second quarter, 210.9%.
[noise], EBITDA, including stock compensation and onetime acquisition related costs.
Was a positive $2.7 million into quarter compared to a $12.2 million EBITDA loss in the same period last year.
Net loss in the quarter was $25.7 million compared to a net loss of $29.3 million in the second quarter of 29 team.
On a per share basis net loss was 34 cents for the second quarter.
Paired to a loss of 41 cents into second quarter of last year.
The net loss per share includes a 10 cents net impact.
Associated with our May 2020 convertible debt offering.
Which includes a charge associated with the loss on extinguishment of a portion of our previously outstanding debt.
That was to mature in 2022.
We ended the quarter with over $1.3 billion and cash and short term investments.
While our total debt outstanding as of June Thirtyth was $1.3 billion.
Now turning to forward guidance.
Note that the guidance now includes the results of in touch hillock, which closed on July 1st.
For the third quarter of Twentytwenty, we expect total revenue of between $275 million to $285 million representing growth of 800, 207% over the prior years quarter.
We expect total U.S. paid membership of 50 to 51 million.
Excluding be approximately 1.5 million temporary members onboarded during the second quarter.
We anticipate total visits during the third quarter of between 2.5 and 2.7 million.
We expect third quarter EBITDA to be in the range of negative three two positive $1 million.
Adjusted EBITDA of between 27 $231 million and net loss per share to be between 35 cents and 30 cents based on 83.4 million shares outstanding.
So different New York Twentytwenty, we now expect revenue to be in the range of $980 million to $995 million as Jason said.
Up from our prior 800 825 million dollar range.
Representing 77% to 80% growth over the prior year, including approximately 65% to 68% organic growth.
We expect total U.S. paid membership at year end of over 50 million members, representing at least 36% membership growth as compared to 2019.
And visit the only access to be available to approximately 19 to 20 million individuals.
We have increased our expectation for visit.
And now expect total visits to be between 9.8 million and 10.3 million for the year.
Representing total visits broke off approximately 135% to 150% over the prior year.
Our visit outlook does not assume an incremental increase in volume, resulting from a second surgical that 19.
Which many experts are predicting bull occurred later this year.
We expect EBITDA in the range of negative 13 million to negative $6 million.
And adjusted EBITDA in the range up $85 million to $92 million.
Representing growth of approximately 165% to 190% over the prior year.
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.
We expect to continue to invest in future growth opportunities, including increased investments to drive the continued adoption of virtual care.
And in the tremendous opportunity set in front of the newly combined hospital and health system business.
Net loss per share is expected to range from a loss off $1.45 cents to.
To $1.36 cents per share.
Based on 79.6 million weighted shares outstanding.
We expect cash flow from operations to grow consistent with adjusted EBITDA growth.
Similar to the second quarter results. The full year net loss per share includes a 10 cents net impact associated with our May 2020 convertible debt offering.
Which includes a charge associated with a loss on extinguishment of a portion of a previously outstanding debt that's supposed to mature in twentytwenty too.
Today I will also provide you some standalone financial metrics for Intouch just help guide your modeling.
Note that after today, we do not expect to provide standalone and touch financial results.
In the third quarter, we intend to provide operating metrics for the newly combined hospital and health systems business.
For fiscal year, 2019, Intouch health generated $85 million of revenue.
And we expect that to grow over 35% this year.
For the second half of the yard we expect in touch will generate approximately $65 million of revenue, excluding a $2 million to $3 million purchase accounting reduction to deferred revenue.
We expect in touch to approach breakeven adjusted EBITDA in the second half the year.
And deliver positive adjusted EBITDA early 2021.
We expect in touch and the broader hospital and health system channel to deliver revenue growth in line with our long term consolidated 20% to 30% organic revenue growth target.
And expect gross margins in the mid Sixty's.
We see significant opportunities for synergies, including cost synergies in the mid single digits as a percent of revenue and revenue synergies well in excess of that.
With that I'll turn the call back to Jason for closing remarks.
Thanks, Molla before we turn to Q and I I'd like to take a moment to put in context, how we think about the significant financial numbers, we've shared with you today.
Earlier this month I hosted one of our company is regularly scheduled town hall meetings.
These meetings are typical in many ways with business updates and a discussion of critical issues. In this case, we discussed our work on diversity and our approach to returning to the office someday.
But regardless of the topics, we always start with a patient story to ground us and why we do what we do.
Well I'm not going to do that today, it's clear to all of US here at Teladoc health that the numbers, we've talked about today represent millions of people who were sick worried or stress in the face of an uncertain world.
People, who we helped she'll.
These numbers also represent the thousands of hospitals and physicians, who are investing in virtual care to be there for their patients in their time of need today and in the future.
The pride that our team feels for these results today is as much about living our mission as achieving outstanding financial performance and we're grateful to share the success with you today.
As always thank you for your continued interest in the Teladoc health story and with that we'll open the call for questions operator.
Thank you at this time I'd like to remind everyone in order to ask a question. Please press Star then one on your telephone keypad, we'll pause just spoken to couple the Q1 day roster.
Your first question goes for Ryan Daniels with William Blair. Your line is open.
Hey, guys. Thanks for taking the questions.
One for you clearly we've seen tele health move into the mainstream on a very rapid basis and I guess, the only really outstanding question is what's the long term reimbursement outlook, but I'm curious what you guys are doing.
From a marketing or dissynergies sampling to ensure that this momentum continues because it's not near term nature and this is really does become mainstream it's kind of a typical form of utilization for consumers as we look forward over the next few years.
Yeah. Thanks, Ryan I'd say, a couple of things I first of all the momentum that we're seeing is broad based across the entire business.
Which is a really strong indicator and gives me tremendous confidence that this not only has become part of the mainstream but we'll continue to grow at a very strong clip.
We are continuing to use our engagement engine in order to drive first time users right and so you know if you saw or if you heard in the prepared remarks.
First time users were up significantly new registrations up over 150% year over year, as we talked about and our Investor day at the beginning of March once we get them in the top of the funnel then the flywheel takes effect and we're seeing people who used to more.
Then one clinical service.
Increase substantially over the course of this quarter relative to prior quarters. So I think all of those things served to make this part of consumers everyday thought process about how they access care and then lastly, I would say, enabling the providers to do.
Lever virtual care on our platform will serve to make virtual care part of how consumers expect to get health care not a novelty, which it may have been a just a few years ago.
Your next question comes from Lisa Gill with JP Morgan Your line is open.
Thanks, very much Jason congratulations on another outstanding quarter, as we think about 2021 and thank you forgive me that pulmonary outlook I just want understand I just a couple of different components to this I. Appreciate the numbers that you put out there for Intouch, if I were to back out what Molla just talked about.
It looks like you're still anticipating that the organic growth rates gonna be in that 20% to 30% range, even though the company's materially bigger than what it was.
I'm just curious as to what your anticipation is going forward for utilization trends and I think you talk a little bit about this in your prepared remarks that even in places where things have started to open back up you're still seeing strong utilization, but maybe if one you could start there and talk a little bit about that and then to how does the selling season.
To backfill into that I, you talked about a new client coming on in October, but how did things look for one 120 21.
Okay, you got a lot in their Lisa thanks for that for the question on your comments.
So I'll start with ER visit volumes in utilization as I mentioned at the sort of bottom of the U shaped curve.
We were seeing visit volumes at roughly 40% higher than pre co bid even as we were in sort of the slower summer months.
And so you know that gives us good insight into what is what to expect in the back half of the year and looking into next year. We're we're going to stop short of giving long term utilization ranges, but I think.
Again, we mentioned that we're seeing twice the rate of growth that we were seeing prior.
To the cobot onset and.
And so I think you can you can sort of triangulate on where we're going relative to visit volumes and utilization and again that gives us tremendous confidence in next year. The second thing relative to the selling season that also gives us confidence is that our bookings are up about 70 per se.
I had little more than 70% year over year and in every single channel that we look at their up.
At least 50% year over year for the first half of this year.
[noise] two thirds of our bookings are for multi product sales.
Which is up from about 50% last year. So we're seeing that trend continue.
And our average deal size is up 50% year over year on top of what was a 50% increase last year. So all of those things give us tremendous confidence as we look into the growth into the future Yeah, and Lisa a lot a couple of other things as we look into the future Jason talked about you.
Nation, he talked about multi strat up and the robustness of the selling season.
The other dynamics that we are seeing is as we've talked about we see a tremendous expansion in our member base. This year and as you know the utilization on those will ramp overtime.
So that is a dynamic to keep in mind as we think about 2021, we talked about in touch and the momentum that we are seeing in the in touch business and we expect to continue to add to that as we move forward. So there are you know there are many.
He tailwinds that we go into the view that we have it is only and you know there are various other macro factors at play that continue to evolve but be felt that it was important for you all to be have a preliminary place holder on how we.
We are thinking about our growth for next year.
[laughter].
[laughter] again, if you like to ask the question. Please press Star One. Your next question comes with Stephanie Davis with SVP at Leerink. Your line is open.
Hey, guys congrats on another strong quarter and Joe welcome to the team.
[laughter] I tried to American action on the hospital space.
Can you talk a bit your differentiation versus some of the tech pure plays like Zuma, Microsoft teams as we see more might be compliance solutions come but far from.
Yeah, absolutely thanks, Stephanie.
First let me talk a little bit about a in touch and the tremendous momentum that we're seeing there I. We've seen RFP is actually triple from Q1 to Q2.
As hospitals and health systems moved to rapidly embrace virtual care in a changing landscape.
50% more client expansions in the quarter versus the last several quarters.
And over 20% increase in new clients. So it really tremendous momentum I think I mentioned in the call. The success of our international expansion, we activated that channel much faster than I expected to.
And I think all of that points to.
The change that we're seeing and how hospitals or thinking about virtual care and the technology that enables at <unk>.
It's it's much more important than some of them didn't put in sort of band AIDS. If you will stop GAAP measures in order to meet initial demand for single use cases, but what we're seeing is that hospitals are looking for a an enterprise wide solution that is secure that.
It is manage to that is medical grade reliability and that can both bring the doctor to the bed side as well as into the home and in touch and Teladoc health together are uniquely positioned to be able to do that unlike any of the sort of off the shelf video platforms that are.
Really designed for health care and aren't integrated into the health care system.
And we really see that that is going to continue to be are rapidly growing channel at a competitive advantage for us.
One quick follow up on that you've talked about kind of this RFP tripling.
Is there any sense of how penetrated a hostile environment is going to be I'm kind of got 2020 penetration story and then tapered off in 2021 or is there more runway posed to us.
Yeah, there is tremendous runway I mean, together, where now we serve 60 of the top 100 hospitals.
When you when you combine the two organizations, but were barely penetrated in terms of the use cases, the number of physicians who are on the platform and so with each additional clinical use case with each additional physician group and specialty that embraces virtual care that's expansion opportunity for us.
And so you heard me say that we had 50 more 50% more client expense expansions in the quarter than we had previously but the runway is tremendous in front of US. We're really just scratching the surface and a hospital and health system space, Yeah I'd be other the last thing I would add is definitely as.
That expansion in the runway is not just inside the four wall. So the hospital right. If you think about the network impact off what the tool Foss bring together as the new hospital and health system segment, it's sort of an exponential impact of that maybe last thing I'll add there is.
We find that physician groups and large health systems like find significant value in our provider network, because we can bring additional capacity to the health system or the the physician practice.
Your next question comes from Sean Wieland with Piper Sandler Your line is open.
Hi, Thanks, and let me add my congrats to an incredible.
Released here. So I just have a few more questions on the in touch integration and want to get a little bit more detailed Jason you mentioned last quarter. You identified 100 use cases for the combined assets have been touching teladoc. If he can maybe touch on one or two of those that are resonating in the market right now.
And then from a reporting standpoint.
I appreciate the the disclosure on the numbers for in touch, but how is it going to be reported within the context of the existing operating metrics you provide or will there be new operating metrics that we're looking at next quarter.
Yes, Sean let me address the.
Reporting first and then I'll turn to let you do Jason So starting next quarter, we will consolidate and touch into our overall reported revenues.
And what we do expect is that the majority of that revenue will really be an access fee revenue, but we do expect to consolidate it all into our into our revenue.
And then with respect to the use cases, a it was really amazing to go through the that Tele health innovation Forum and listened to clients talk about their use cases and they range from pre admission.
Consultations to post discharge follow ups ranged from oncology you. Nick you used cases of course tell us strokes continues to be a very significant use case and as you might imagine with <unk> with.
People being concerned about going into the hospital you see everything from Orthopedists to cardiologist going virtually into the consumers home to deliver care and make sure that the patients are getting the care that they need.
So it's really an incredibly broad spectrum, what's great about the innovation Forum is you get the sharing of that information and best practices and we frequently see that hospitals and health systems implement some of those use cases and best practices that they learned at the innovation form yeah, Sean why.
Just one quick thing.
Just so that we can provide a measure of transparency into how this business is progressing as we said in our prepared remarks, we will put out some operating metrics starting next quarter.
Your next question comes from Sandy Draper with Suntrust. Your line is open.
Hi, This is a standalone for sandy thanks for taking my questions [laughter]. So last quarter. I believe you commented that you've kind of all of your hiring methods a bit to ensure provider capacity on the platform.
Just curious if you can give us an update on capacity levels, you know you're seeing an influx of utilization so any changes there.
Yeah. So thanks Stan.
Our capacity.
As you know we expanded our capacity dramatically.
In the second half of March in response to a significant increase in visit volume.
That I was a time of tremendous innovation that enabled us to onboard thousands of physicians.
Very efficiently and we benefited from that over the course of this quarter. So in spite of significantly higher than expected visit volume.
You saw the investments that we made in the first quarter pay off in the second quarter.
And that accounts for some of the improvement in our gross margins.
As you'll note we had significantly higher visit volume I in the second quarter. I, then the first quarter and yet our gross margins increased and that's a direct result of all that additional capacity that we added and then lastly, you'll see you'll see or you'll hear a.
Are you heard and our per prepared remarks, the increase in a member satisfaction and that is in part due.
To the tremendously strong response times that we've had in the second quarter, where you know with with that incredibly high volume of visits.
Were down under 10 minute, usually between five and 10 minute response times.
So we feel very very pleased with that.
And we feel like we've made the investments that will pay off into the future.
Your next question comes from Daniel Grossly your line is open.
Hey, guys. Thanks for taking my question I want to go back Jason to that comments you meant that the new win for that media company.
No as they kind of look at the landscape here a lot of your peers have you know there's been a lot of reports about some of your peers kind of falling down and so I'm wondering if you look at the RFP environment for for 2021 and the rest of this year do you think you'll see an increase of.
In our piece from some of the health plans that may have been trench relationships with other vendors and how do you see kind of that competitive takeaways.
Going as we look to mile 2021.
Yeah. Thanks, Daniel we do see significant opportunities to penetrate.
Clients, who have historically worked with someone else.
Maybe they were an early adopter or they went for a lower cost alternative a in the past and they're not meeting their expectations we have.
Proved our relationships with our existing clients and we have created new relationships.
With prospects as a result of the.
Incredible performance of our team in our platform during this situation.
The media company that I mentioned is a great example.
They were an early adopter of Tele medicine with a with another company and we're very very pleased to provide them our entire suite.
Of clinical services, and we see that as a continuing trend both among employers as well as among health plans you know another trend that we are continuing to see if the strength in our cross sell up sell efforts, we've talked in the past about land and expand.
You know the proof positive of that is the strength that we are seeing in our cross sell up sell.
So again that is another trend and dynamic that we are seeing as we think about this selling season ahead.
Great. Thanks, guys.
Your next question comes from Charles Reheat with Cowen Your line is open.
Yes. Thanks, Thanks for taking the questions and then congrats on the on the quarter on the on the from outlook.
Maybe molla if you just one other follow up.
In early question about how we model and I think you said think up in touch mostly going into the access fee revenue is there a visit component that we should be modeling in or so or should we not really touch.
The visit line is sort of the visit assumptions to incorporate didn't touch into the consolidate done into revenues and then and I guess more broadly to that as we think about.
The pricing model does that it's a religious subscriptions and and as a sole modularly. Maybe if you can just gives us a little bit more.
You know color into sort of how that the pricing model works on the on the in touch side. Thanks.
Yeah. So.
In terms of the composition of the revenue I'm thinking said as primarily access revenue I don't want to go into more specifics send that Sean but I would say primarily visit primarily sorry access revenue.
In terms the off the revenue economic model.
The weighting the a in touch business works is that we get paid bolt on he license user basis.
As well as on a per account location basis. So there are a couple of different ways.
That we do get paid a in terms of the overall economic model I'm going to leave it to that I don't want to get into anymore specific.
Your next question comes from George Ho with Deutsche Bank. Your line is open.
Hey, good evening, guys and thanks for taking the question Jay said I'm going to try to sneak into real quick first is I'd love to ask about how you think of the evolution of the model of telemedicine, what I would call the provider anchored model versus the prior anchored model and I know that you guys. So both like most of your revenue comes from the payer anchored model and I've already.
Comments you'd be willing to make on step ups in utilization by disease State I'm, particularly interested in behavioral thank you.
Yeah. Thanks George.
[noise] look I think I Tele medicine is here to stay and it's going to stay all across the spectrum of how healthcare is delivered and so it's you know as you know it's always been our strategy to be at every front door of the healthcare system.
Enabling that virtual care.
We're very very happy to do it for our providers by providing technology for them and you see the proliferation of that in all the numbers I just saw new numbers come out from.
It's from HHS about Medicare usage of Tele medicine, and it seems to be persistent and that's not surprising to me those are similar to the trends, we're seeing among our provider clients, but you know 50% of consumers don't have a primary care physician and so.
Our service that is delivered.
Through the payer or the employer continues to be a critical access point to ensure that consumers are getting the care that they need on their terms I and we delivered in a way that is incredibly high quality and cost efficient. So I think all of those things.
Very very much embrace our strategy at going after every part of the of the health care system.
And then you asked about utilization and so I'll give a few.
Hey piece of insight there because I think you asked about disease States, which is which is really important.
Mental health.
And dermatology have increased substantially.
Hey, where you know even faster than our general medical visits and of course that has been on just an absolutely torrid pace.
Mental health, 40% of people said it they wouldn't have sought care.
If it work for for having access to our services.
Which is just a tremendous need a in terms of people who.
Don't get the care that they need either because of stigma or access or a or cost or something else.
We're also seeing.
A significant increase in usage for non infectious diseases, and that's actually grown faster than infectious disease or so today.
About 60% of our general medical visits are for non infectious diseases, whereas this time last year. It was only about 40% and I think that really speaks to the proliferation of virtual care across all of those.
Condition states. So for the first time, we're seeing hypertension and lower back pain.
In addition to anxiety climb into our top 10 visits west or top 10 diagnoses list, which is very very interesting I think portends, a very bright future and in terms of the impact that we can have on the overall health care system.
Your next question comes from Matthew Gilmore with Baird. Your line is open.
Hey, Thanks for the question Jason I appreciate the comments on causing a revolution of the system went back on Tele health coverage and reimbursement.
Curious, what you're hearing from employers and payers with respect to co pay levels and you know how long that stays at zero dollar or will that be more of a permanent change as well.
Yes so.
We're seeing positive signals about that continuing we've seen some large employers and health plans extended the zero co pay.
Hey through this period of time.
Okay and into the future some even into next year are already.
And so we're positive on that I think people have realized the benefits at the virtual care can have.
Hey into the future regardless of what the cobot curve looks like.
And then with respect to to reimbursement at the federal level.
You know you probably saw Matt that the.
Senate Cobrand relief package that was proposed earlier this week I proposes to extend the waivers to the Medicare waivers through the end of 21, I think when you combine that with secretaries ours comments and the fact that there are several bills in Congress to remove the.
Originating site and rural restrictions and I think I think it's really here to stay in.
In terms of Medicare reimbursement.
Your next question comes from Sean Dodge with RBC capital markets. Your line is open.
Thanks, Good afternoon.
Maybe on on virtual primary care, Jason you spent a lot of time talking about that at the Investor Day can you give us an update on the progress there I guess, how far away that you are from having all of the necessary pieces for that in place and standing up commercially and.
What are the those first aeration debate I guess going to look like.
Well, so as we as we.
Promised we launched our VPC pilot virtual primary care pilot in Q2. The initial results have been really strong an incredibly interesting a very broad array of clinical diagnoses in fact, almost 70 clinical diagnoses.
Within the pilot population.
Ranging from chronic to acute too complex.
Ranging from many many preventative screenings have been recommended and then actually Dick the consumer got the the screening that they need a whereas they had no plan to do that before their visit and Ah.
And so all of that is very positive. We're also seeing a a really interesting and broad mix of age groups.
<unk>, who are accessing that care, a and really engaging well with the overall longitudinal nature of that program. We have active a processes going on in the pipeline with several large payers and employers a and I would expect that we will be.
Commercially live.
And certainly the first half of next year I won't be more specific than that since we're still in those discussions and the payment models are broad as you might imagine ranging from discussions about a risk sharing arrangements primary care capitation to fee for service to traditional.
PMPM plus visit fees.
And so I think you're you're going to see us I.
Come out with a number of different models and I think the most important thing is putting all the pieces in place to deliver on the promise of virtual primary care.
Your next question comes from Jaylen draw Singh with Credit Suisse. Your line is open.
Hi, Thanks. So I was wondering if you can you guys can talk about your M&A focus and opportunities you're seeing it more than $1.3 billion gosh and balance sheet do you guys had pretty good financial flexibility. Just wondering if you guys can highlight some of the area as you might be interested in.
Sure July Indra <unk> I think our focus continues to be on expanding the markets that we serve and the clinical breadth of our product portfolio.
With the.
With that vast population that we now have that has access to the platform where in a unique position to be able to.
To put more products through that platform.
Make our clinical impact broader and deeper and to do it in more markets. So you know we continue to look at geographic expansion internationally, we've had some great success internationally.
They do organically this year.
With significant wins.
Among the largest financial services company in the Nordic region, which gives us a foothold there a significant win.
In Brazil that really expands our footprint there by with one of the largest.
Health insurers in the Brazilian market and we continue to look at geographic expansion, both organically and through M&A and we will continue to look to expand our clinical scope and the impact that we can have a across the entire spectrum a of clinical yeah.
Use cases and clinical needs yeah. The thing I would also agile Andrea is and we've said this before when we look at markets outside the U.S., we will be surgical we will be targeted we will look for how bryson favorable the conditions are in those markets for tell.
To help from a regulatory perspective et cetera.
But exactly like Jason said.
It's about adding more products and services as well as expanding our footprint in a disciplined way outside.
[noise] sand or last question comes from David Larsen with a variety of research your line is open.
David Larsen your line is open.
Sorry about that was you can you talk a little bit about your relationship with United Health Group.
And I mean, I imagine it takes a lot of investment in time to build to telehealth capability.
Thanks.
Sure.
I appreciate the question, David we have a great relationship with United.
We continue to expand the products and services or with a United as well as the businesses within United that we serve I you know as you know there a very large organization with multiple businesses and we continue to expand the scope of our offerings.
To facilitate virtual care for their members as well as for their own provider organizations.
And and I would characterize it.
As a very very strong relationship.
[noise] dial tone of the call back to the presenters for any closing remarks.
Well, thanks, everybody for tuning in we're very pleased with the results in the quarter, a and our outlook for the rest of this year and next year.
And we look forward to continuing to keep you up to date on our progress. Thank you.
This concludes today's conference call you may now disconnect.
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