Q3 2021 Teladoc Health Inc Earnings Call
Good day and thank you for standing by welcome to tell the Doc third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the Speakers' prepared remarks, there will be a question and answer session to ask a question during the session.
You will need to press Star and then the number one on your telephone keypad. Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero. Thank you I would now like to hand, the conference over to your first speaker today, Mr. Patrick Feeley head of Investor Relations. Sir. Please go ahead.
Thank you and good afternoon today after the market closed we issued a press release announcing our third quarter 2021 financial results. This press release and the accompanying slide presentation are available on the Investor Relations section of the Teladoc health Dot Com website on this call to discuss the <unk>.
<unk> are Jason <unk>, our Chief Executive Officer, and Mala Murthy, our Chief Financial Officer. During this call. We will also provide our fourth quarter and full year 2021 outlook and our prepared remarks will be followed by a question and answer session. Please note that we'll be discussing certain non-GAAP financial measures that we believe are important in evaluating teladoc health's performance.
Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof 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 of 1995, such forward looking statements are subject.
The risks uncertainties and other factors that could cause the actual results for teladoc health to differ materially from those expressed or implied on this call for additional information. Please refer to our cautionary statement in the press release and our filings with the SEC all of which are available on our website I would now like to turn the call over to Jason.
Good afternoon, and thank you for joining us. This afternoon I'm pleased to report another strong quarter marked by solid financial performance more care delivered and deeper member relationships today.
Today I also want to highlight two areas, where we've made meaningful high impact progress toward our goal of transforming health care.
One becoming their consumer destination of choice for virtual care and to gaining significant commercial traction for our integrated whole person primary care approach.
Consumers and clients are demanding a single integrated virtual health care solution that seamlessly takes care of all of their health care needs redefines, the care experience and leverages data to improve care at scale.
During the third quarter, we continued to demonstrate our unique ability to meet those demands with our whole person care approach that continues to fuel our sustained growth.
Our broad portfolio of capabilities drove excellent financial results producing revenue of $522 million in the third quarter, an increase of 81% over the prior year, including organic revenue growth of 32%, which excludes revenue from acquisitions completed over the past 12 months.
Yes.
With our third quarter results and increased visibility to Q4 revenue, we're updating our full year revenue guidance range to $2.015 billion to $2.025 billion.
Denting growth of 85% over the prior year.
While these financial results quantify our ability to deliver on our promises and sustain the success of our work to transform health care validation came in a number of forms.
And we're very proud that Teladoc health has once again been named number one in consumer satisfaction by J D power.
We've always viewed our outstanding consumer experience as a key differentiator for us.
But also as one of the unique ways in which we expand our role in an individual's health care journey.
For example, we find that the net promoter score for someone's first visits is a strong leading indicator of future usage and a positive initial experience create stickier relationships with our members.
The recognition by J D power is proof positive that we're delivering on our promise to our members and.
And the strong utilization increases in spite of the waning pandemic are the results.
Our global network of clinicians provided $3 9 million visits in the quarter, an increase of 37% over the third quarter of last year.
Even as pandemic restrictions continue to ease and vaccination rates improve consumers are increasingly relying on teladoc health's virtual care.
We're now on track to provide more than 14 million visits for the year.
As has been the case all year the strengthened utilization has been driven by growth in visits related to non infectious diseases and specialty care as consumers are turning to us for a broader array of conditions.
During the third quarter more than 75% of member visits in the employer and health plan channel were related to non infectious diseases versus approximately 50% and the pre pandemic period.
Growth in mental health visits in particular continue to outperform across the direct to consumer employer and health plan populations and beta be mental health visits remain on pace to double this year as compared to fiscal year 2020.
While we continue to see lower than typical transmission of infectious diseases across the country due to social distancing and PPE usage, our infectious disease volumes have continued to increase throughout the year.
The combination of building momentum in infectious diseases and continued strength in non infectious disease and mental health volumes gives us great confidence in our outlook for 2021.
We have also made substantial commercial progress with our primary 360 product, which represents a key pillar of our whole person care strategy.
Primary $3 60 re imagines primary care by delivering a fully integrated virtual solution of mental and physical health.
Leveraging technology and data, bringing together a full care team for the consumer and connecting into the physical delivery system to get consumers the right care at the right time.
Over the last few months, we've signed several new agreements for primary $3 60, including two notable health plan deals.
First as announced earlier in the quarter by CBS, We signed an agreement to bring primary $3 60 to Aetna self insured employers nationwide beginning next year.
Earlier. This month, we also expanded our relationship with Centene to partner on its new and better virtual first health plans on the health care exchanges, beginning with four states in 2022.
Each of these agreements provides members with access to our virtual care team, including a virtual primary care physician of their choosing and care extenders such as nurses.
Zero co pays for virtual visits unlimited messaging.
Integration with our virtual specialties, such as dermatology and mental health and navigation to local and network providers when needed.
We expect these partnerships along with deals signed across our suite of whole person solutions with H C. S C and other blues plans over the past several months too.
To contribute meaningfully to growth over the next few years as we drive adoption of our whole person virtual care solutions.
Another key on ramp to our full set of products and capabilities is teladoc integrated suite of chronic care solutions.
The number of individuals enrolled in our suite of chronic care solutions grew 31% year over year to 725000 at the end of the quarter.
In the third quarter, we continued to drive growth in multi program enrollment.
24% of our chronic care members are now enrolled in more than one program up from 8% in the third quarter of last year.
The growth in chronic care enrollment combined with a greater number of individuals' enrolled in multiple programs such as members enrolled in both our diabetes and hypertension programs resulted in a 45% year over year increase in the total number of chronic care programs in which our members are enrolled.
Before I pass off the call Tomorrow I want to provide some initial perspective on our expectations for 2022.
As you know it is not our typical practice to comment on forward outlook at this point in the year.
But we believe the additional color as appropriate given our insights at this stage of the selling season and our outlook on consolidated revenue growth for next year.
First we are as confident as ever in our multiple levers for growth in 2022 and beyond.
Our unique ability to deliver longitudinal whole person care is a significant competitive advantage and our leading position in all b to b and DTC channels enables us to fuel continued growth.
Given our insights at this stage of the selling season, our preliminary outlook for consolidated revenue next year is approximately $2.6 billion.
We plan to provide additional details around the building blocks to that outlook at our Investor day in three weeks.
Chronic care is just one of those levers for growth and is increasingly converging with others. For example through the integration of our capabilities into new high value products like primary $3 60, and my strength complete.
So far this year chronic care has grown in line with our initial expectations.
However, as we worked through the 2022 planning process, we expect to be more conservative about growth expectations for standalone chronic care.
Our preliminary outlook assumes standalone chronic care revenue will grow approximately 25% to 35%.
And we believe strongly that our chronic care capabilities will also continue to unlock growth across our integrated suite of products and solutions.
Our whole person care approach is clearly resonating with clients and consumers as their expectations for virtual health care delivery continue to move up the value chain and expand from transactional episodic demand towards integrated longitudinal care.
As the only virtual care provider capable of delivering the full credit answer at scale, the breadth and depth of our solutions uniquely positions us to meet the market's evolving expectations and demonstrates why our clients are turning to Teladoc health to satisfy a wider set of consumer health care.
Needs.
We hope this insight provides helpful context, and we look forward to sharing more at our Investor day on November 18th where we plan to provide an update on our progress toward creating the integrated virtual front door to whole person care as well as detail on our long term growth outlook.
With that I'll turn the call over to Mala for a review of the third quarter as well as detailed guidance.
Thank you, Jason and good afternoon, everyone.
During the third quarter total revenue increased 81% to 522 million or 32% excluding acquired revenue.
Total U S revenue for the quarter with $483 million representing growth of 18, 9% over the prior year's quarter.
Total international revenue of $39 million increased 17% over the prior year.
Access fee revenue for the third quarter increased 19, 9% year over year to $452 million and represented 87% of total revenue.
From 78% in the prior year's quarter.
The increase in access fee revenue as a percentage of total revenue is primarily due to the acquisition of <unk> and growth in direct to consumer mental health, which are sold on a subscription basis.
Visit fee revenue for the third quarter of $60 million increased 18% year over year.
Turning to membership and access we ended the quarter with U S paid membership of $52 5 million members, an increase of 500000 members sequentially over the prior quarter.
Individuals with visit fee only access was $23 6 million at the end of the third quarter.
Total unique members enrolled in one or more of our chronic care programs was 725000 members as of the third quarter a third.
31% increase over the 553000 unique members as of the prior year's forecast pro forma for the merger of <unk> and an increase of 16000 members sequentially, which was in line with our expectations.
Average revenue per member per month was $2.57 in the third quarter up from a dollar in 18 cents in the prior year's quarter.
$2.47 in the second quarter of 2021.
The primary driver of the sequential increase in revenue per member was growth in direct to consumer mental health revenue.
Now turning to visits during the third quarter, we provided $3 9 million visits to our network of clinicians representing 37% growth over the prior year's quarter.
Our strong growth in both direct to consumer visits and visits to our enterprise relationships with health plans and employers on a year over year and a sequential basis.
Platform enables sessions, which represents encounters facilitated by a licensed platform and provided by our clients own clinicians were an additional $1 million in the quarter.
The annualized utilization rate for our members was 23, 7% in the third quarter, a 720 basis point increase over the prior years quarter.
And a 210 basis point increase sequentially.
Adjusted gross profit, which excludes depreciation and amortization of intangibles increased to $353 million.
Adjusted gross margin was 67, 6% compared to 63, 7% in the third quarter of 2020.
The 390 basis point improvement in adjusted gross margin is primarily attributable to the increased mix of subscription fee revenue versus the prior year.
Gross profit and adjusted gross profit in the third quarter of 'twenty 'twenty. One include the benefit of approximately $5 $7 million in lower expenses on longer devices.
The beautiful to purchase accounting adjustments related to the merger.
Adjusted EBITDA was 67 $4 million in the third quarter compared to $39 $5 million in prior years quarter.
Adjusted EBITDA in the third quarter of 'twenty 'twenty. One includes a benefit of approximately $5 $7 million attributable to purchase accounting adjustments mentioned previously.
Better than expected adjusted EBITDA in the quarter was driven in part by a slower ramp in technology and development spending versus the plan. We continue to make material investments in technology and data science to deliver on the full promise of whole person care at scale and we are anticipating a material ramp up in investment in the.
Our fourth quarter and into next year.
Net loss in the third quarter was $84 million compared to a net loss of $36 million in the same quarter last year.
The wider net loss was primarily attributable to increased stock based compensation and amortization of acquired intangibles.
On a per share basis net loss was 53 cents for the third quarter compared to a net loss of 43 cents in the prior year's quarter.
Net loss per share includes stock based compensation expense of 45 cents loss on extinguishment of debt of one cent and amortization of acquired intangibles of 28 cents.
We ended the quarter with $826 million in cash and short term investments, while our total recorded debt outstanding as of quarter end was $1 $2 billion.
Operating cash flow in the quarter was $77 million.
Now turning to forward guidance.
For the full year 2021.
We now expect revenue to be in the range of 2.015 to $2.0 billion to $5 billion.
We expect adjusted EBITDA in 2021 in the range of $260 million to $265 million.
As discussed previously we are reinvesting cost synergies back into the business to fuel long term growth, including the rollout of new capabilities and new products, such as my friend complete and primary 360.
Continued integration of the bango enhancements to our integrated data platforms and expansions into new markets.
We now expect total visits in 2021 to be between 14.5, and $14 7 million visits representing growth of 37% to 39% over the prior year.
For the fourth quarter of 2021, we expect revenue of $536 million to $546 million representing growth of 40% to 42% over the prior year's quarter.
We expect total paid membership in the range of 52.5 to $53 5 million.
And anticipate total visits during the fourth quarter of between 3.9 and $4 1 million visits.
This represents year over year growth of 32% to 39%.
We expect fourth quarter adjusted EBITDA to be in the range of $69 million to $74 million.
With that I will turn the call back to Jason for closing remarks.
Thanks, Mala finally, I'd like to add that in the midst of all of the third quarter efforts. We just shared Teladoc health as a combined company earn certification as a great place to work.
As some of you may know this premier organization evaluates a company's cultural health through both objective measures and employee surveys before conferring its designation and we're excited to get this positive report card in the wake of fully integrating our teams.
As always thank you for your continued interest in Teladoc health, we look forward to sharing more at our Investor day on November 18th and with that we'll open the call for questions operator.
Thank you Jason as a reminder to ask a question you will need to press Star and then the number one on your telephone keypad did withdraw your question press the pound key given time constraints. Please limit yourself to one question. Thank you. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Lisa Gill from JP Morgan. Please proceed with your question.
Thanks, very much and good afternoon.
Jason I just wanted to go back to your comments around whole person and that will be meaningful over the next few years. So just to understand this a little bit better can you help me.
Round, how to think about virtual primary care versus traditional when we think about both revenue and profit and when you say meaningful over the next several years is that a meaningful driver in 2022.
Yeah. So thanks, Lisa I'm really excited about our whole person suite of capabilities and let me go sort of first with what we mean by whole person and then lean into.
A deeper discussion of primary $3 60, so when we talk about a whole person. We mean, the philosophy of taking care of the entire person they both their physical health and their mental health their acute episodic needs as well as their chronic and complex needs as well as taking care of it.
I'm on a preventive basis.
Things like making sure that they're getting their screenings, making sure that they are eating properly and have the council of a registered dietitian in our nutrition programs.
And that they have both digital and human interaction so.
Model that brings digital modules to them when that's appropriate as well as a full care team. That's there for them and you know we've we've proven our ability to do that I and the appeal of that with people. The number of people who are now enrolled in multiple.
Chronic care condition programs for us as well as our ability to sell a mental and physical health together.
And you know we continue to see very very strong results in multi product sales into our clients and so what we see is that that whole person approach really resonates with the market both with clients at the purchasing level as well as with consumers at the utilization level.
As I go deeper into primary $3 60.
We're very excited to have announced relationships with CBS.
For their Aetna self insured clients AR and virtual first plan designs that will be rolling out in that market nationally.
As well as with Centene in there and better programs on the.
Exchanges again with weather.
With a virtual first plan design.
The economics are greater than our traditional.
Yes general medical programs or the combination of a general medical and mental health program, because we're bringing the full credit answer so to speak to bear for the consumer.
That takes advantage of our entire suite of capabilities when.
When we talk about a meaningful impact we expect to see substantial growth off of a an admittedly small base in 'twenty two.
And in 'twenty, three and beyond we expect that to have a meaningful impact on our overall financials as a company and maybe last before I hand, it tomorrow for any additional commentary.
I'll just preview that we're gonna do a deeper dive into our primary 360 product.
As well as the opportunity for us to enter into more Val.
Value based arrangements to capture a bigger part of the savings that we generate when we are when we host our investor day in three weeks.
I was going to save that question for the analyst day, Jason but my life you want it if you want to comment at all from a value based perspective, just listening to everything that you just said and thinking about value based programs that are out there thinking about competition. This all sounds like this is very well suited as we think about some of those new programs that are coming to the market.
So you know my life, if you can add any commentary around the financial impact, but I'm just curious Jason do you see teladoc, taking risk in this area and maybe that's something you're going to talk about at the analyst day.
I do see us taking risk and I think we'll step into that and I'm thinking of a slide that we're going to show at our Investor day that demonstrates the degrees of risk and the progress that we'll make going from first clinical measures to then risk corridors to.
Ultimately for Capitation I of course, you have to draw a box around that to make sure that there we're taking credit for the savings, we're generating where we're generating it and we're not taking risk outside the scope of where we can have an impact. So I think you'll see a lot more depth on that.
At our analyst day, Yeah, and I would add to the point, Jason just made.
You know the fact that we have.
The data and the data science capabilities that we have and the integrated data that we are hard at work on.
All of those types of capabilities along with the scale of technology that we have is what we will bring to bear as we.
Go on this journey and expanding.
Our primary 360, the only other thing I wanted to see lease and again, we'll talk more about this in other.
<unk> of growth on Investor day.
You know we asby.
As you think about the opportunity for us to penetrate deeper into our member base and think about revenue per member expansion.
Excited about primary 360 as one of the many levers we have to expand our revenue per member.
I still go back to what Jason said, we expect this to be a multiyear journey.
With the meaningful increase in the three to four years ahead.
Thank you. Your next question comes from the line of Sean Wieland from Piper Sandler. Please proceed with your question.
Thanks, very much I wanted to ask about some of the changing privacy landscapes out theyre eliminated our apps ability to track us all over the place.
What impact do you think this will have in your DTC marketing strategy and and marketing costs.
Sean I don't think that that'll have an impact at all a you know one of the things that I'm really proud of relative to our DTC efforts is number one.
Our focus on I'm privacy.
And in compliance.
But number two also our focus on them.
Diversifying the channels.
Through which we are we acquire new members and attract new members.
And you know I know that there are plenty of companies that are very focused.
On one or two channels, we've done an excellent job over the last several years of diversifying into multiple channels.
And always doing it in a way that focuses on sort of the member first so I don't think it'll have an impact at all Sean.
Thank you. Your next question comes from the line of Jay Len dressing from Credit Suisse. Please proceed with your question.
Yes, Thanks, and Hello to one just one I wanted to follow up on your 25% to 35% Standalone chronic care revenue growth commentary for next year I know it is difficult to parse out but is that before any synergies you expect from Teladoc Bango combination and you also mentioned that you are taking a conservative view there can you help.
US understand what is driving that are you, taking a conservative view around enrollment and adoption of flu I'm golfing or is it more around the expectations around my type products enrollment.
Yeah, So I'll.
Comment on the second part I and.
The when we talk about chronic care management.
And our outlook.
We've done a lot of work to make sure that we're very focused on the discipline that we bring in have always brought to our management of the pipeline.
Our forecasting process.
When we look at the chronic care.
Is the pipeline.
Sort of break it into the different customer channels.
We've I would say been very successful in selling into the health plan channel.
Over the course of this year and our pipeline still looks strong with new opportunities many of those opportunities either the existing sales that we've made or the ones in our pipeline.
R.
Are the permission and the partnership with the health plan to go sell to their self insured clients that takes a couple of years to unlock the full value of it because you have to go through the renewal cycle in the selling cycle.
Do those self insured clients and so you know we're trying to be very realistic about the sort of on ramp of those clients in the health plan segment.
With respect to the employer market.
That's a market where our products are extremely attractive and historically.
We've been very successful at selling into the employer market directly when we sell directly to large employers that's a market where the benefits managers have I would say paused over the course of this year more than we've seen it in the past and its really due to Covid and then being focused on the pandemic and returned to <unk>.
Work as I talked to our employer sales team.
We see that picking up substantially as we get to the end of the year and people are starting to get back to the office and the benefits managers are starting to think about a more of a return to normal and so they're optimistic as we look into next year selling cycle.
And then there are two channels that I would say are just moving a little more slowly than we had originally anticipated and again, we want to be conservative in our outlook.
The broker channel, we had high expectations and we're just starting to see that pick up now.
It took a while to educate the brokers we have a large distributed broker network and it took a little while to educate them on a product set that they really didn't have access to before we're now starting to see that pick up substantially and we're excited about next year's selling season for that.
And then lastly international.
I you know I think the international markets, we have to go through some both regulatory hurdles in terms of local certifications and approvals.
But also.
Localizing our products to various international markets and we're doing that in a fairly methodical approach market by market.
So I think we will see growth internationally.
But we don't have really anything in our plan for next year.
On a substantial basis and then maybe the last thing I'll say is that's been I would say positively offset by our growth in the hospital and health system market, where we've we've noted before that we've seen especially risk bearing hospitals really lean into the chronic care.
Our solutions and that's going better than we had expected. So when you put all of that together and we take a I would say critical look at the AR at the pipeline in our forecast and that's where we landed on that 25% to 35% outlook.
Again, that's a contributor to our overall outlook of <unk> of approximately $2 6 billion in revenue next year.
Thank you. The next question comes from the line of Stephanie Davis from SVP Leerink. Please proceed with your question.
Hey, guys. Thank you for taking my question across the quarter.
Hoping you could give us a broader view on the new primary 260, offering and how it ties into the existing health system is it something that we could see a tie in to the existing hospital solution or should we think of it as a standalone.
Play that almost compete with additional health system.
We see our role and this has always been the case, we believe that we can transform the health care experience and and transform how people get care.
By working with the health care system, and the physical delivery system and integrating into it.
You know I've been quoted many times is saying I don't think health care is ripe for disruption, we'd actually don't use that word when we talk about what our role is but rather we think our role is to work with the physical delivery system to improve the care. That's that's ultimately delivered now look we have a certain.
Advantages over the physical delivery system I mean, we have 2 billion data points and in our data platform of chronic care measurements are.
From from our chronic care tools, we're delivering over 25000 personalized health Nudges every day I and that's because we have this depth of data we're providing over 30000 virtual visits on average every day. So when you put all of that together we have this incredibly rich set of.
Data and so we believe that we can really transform the primary care experience and the health outcomes from primary care, but we also recognize that we can't do everything there's carrier that has to be delivered in person and that comes in a number of forms will integrate with certain partners for the last mile delivery.
Whether that's in home lab testing.
Or in home care that can be done in the home, but needs a physical interaction or referring into the most efficient parts of the delivery system and Stephanie to your to your exact question I think the places where that will happen. Most seamlessly is the providers who are using our technology platform because we can make us.
Seamless handoff to them and really act like a concierge for the consumer.
But we also recognize that we have to be responsive to our health plan partners and refer into the most efficient parts of their delivery network. So.
And I'm not looking to compete with it I really think that there's an opportunity for us to improve the overall performance of the health care system.
And work with the health care system and the only thing I'd also add Stephanie is.
You know we are beginning to open the door to conversations with health system leaders.
Around creating virtual front doors, but in their markets. So it's it's health plans as Jason talked about it's also around.
Health systems.
<unk> that primary care plays.
Within their ecosystem and this is where our primary 360 product can also be relevant.
Yeah.
Thank you. The next question comes from the line of Richard close with Canaccord. Please proceed with your question.
Yes. Thank you Jason I was wondering if you could give us an update on my strengths are complete.
Thank you rolled out here recently over the last quarter. So just an update there I didn't hear anything in your comments.
Yeah, we're really excited about my strength complete so Richard you know this but just to recap my strength complete really brings together.
They ask the mental health assets of Levonne go and tell a doc to deliver a true stepped care model, where we bring digital solutions that enable digital modules for the consumer around.
Things like cognitive behavioral therapy, and dialectical behavioral therapy, and mindfulness and other skills.
Combined with the lavage legacy <unk> coaches and the network of <unk>.
Ph D psychologists and master's level social worker therapists.
And psychiatrist from Teladoc into really the full continuum of care on the mental health front.
We're excited about our about how the pipeline is building I think we mentioned that we had made several sales even before the product was launched in the market and the pipeline is showing continued momentum.
Up strong double digits are in terms of a percentage quarter over quarter.
And contributing to our overall outlook.
As we look into our into next year I think the other thing I would just say is I expect my shrink to complete to really complement the rest of our other sort of physical health products.
So we're we're very excited about it and seeing good momentum in the market.
And it's also a product that we're just beginning the rollout rollout of internationally. So I don't think that that will be limited to the U S.
The next question comes from the line of Ryan Daniels.
From William Blair. Please go ahead.
Yeah, great. Thank you for taking the questions. Jason. This is something you were asked probably every two to three quarters and I want to give you. Another shot at this but im curious what youre seeing more broadly in the competitive environment in particular with some of the on site health clinics, starting to offer more telehealth solutions and a lot of coalescence around digital health care with.
Entities like the patient navigation companies that are integrating things like second opinion services, and telehealth and trying to sell that through brokers directly to employers. So can you provide a little bit of a state of the union. If you will on what youre seeing in the competitive landscape as it sounds like your win rate retention remains very strong.
Yeah. Thanks, Ryan maybe I'll start with the last point, you made and just confirm that our win rates are staying very similar.
Similar to prior years, so as we look at our sort of doing the pipeline review now and where our win rates are we're staying very similar to where we were.
In prior years.
Spite of the fact that everyone knows there's been a lot of investment in this space.
Second our retention rates are extremely strong.
And third we're seeing really good.
Multi product sales so.
70% of our bookings this year.
Were multi product sales.
As compared to about 50% last year, which I think really gets too.
The reason that we're winning right we're winning because.
Of the full suite of our products and services and the truth is that the point solutions I would say are really struggling at this point.
And if you look at our late stage pipeline.
Hey, it's nearly double.
The size of what it was last year.
And you know I I.
I look at all the various players in the market.
I, wouldnt, probably wanna be and onsite sort of worksite.
Clinic provider at this point since a lot of companies are talking about going virtual.
And so you know that has its limitations.
The the similarly, when I look at the navigation companies.
I would say honestly having been.
A health plan President.
The administrative side of that is is fairly low value I really want to.
We have always focused on making a big clinical impact using our data and our clinical expertise to improve the health of consumers.
And really focus on the health care and not the administrative portion.
As I said I do think we will play a big role, especially with our primary $3 60, and helping to get the consumer to the best site of care based on who the most efficient provider is in their local geography, and we can do that in a way that is.
Tethered, because we don't have financial incentive.
To refer to any specific provider in the market, which is not the case for a lot of the sort of hybrid models that are out there. So I think we can be really pure to our mission of improving care and reducing the cost of care and then last thing I'd say is and you know there was a recent conference where the team that.
Came back said that the big sentiment there was pretty anti Payor I in our in the conference.
And a lot of the earlier stage companies, we're very anti pair and we recognize the role of the payer in the market and we really want a partner with the payers and the employers to bring the best care to the consumer it's always been our position in the market.
And again, we think we're uniquely positioned to do that in partnership with the delivery system rather than antagonist antagonistic Lee.
The next question comes from the line of Charles <unk> from Cowen. Please proceed with your question.
Hey, guys when she on for Charles.
Talking about your DTC mental health offering you know, even though we know that.
And average subscription might be say three or four months long.
Often with someone come back and say they start a new substation later on so in other words, you know even if we're seeing higher customer acquisition costs are you seeing a level of customer retention.
Necessarily have to spend the CAC each time to gain that same user back. Thanks.
Yeah, So I'll start I.
I'm incredibly proud of our DTC team and the progress they've made.
First they've done a tremendous job based on some of the comments I made earlier about diversification and optimization around our customer acquisition costs.
And the team is constantly testing new.
More efficient models.
And then rolling out those models on the customer acquisition side. So our cost of customer acquisition has come down very consistently second.
As we look at our revenue to customer acquisition cost ratio that has improved substantially over time and it's because of what I would say the first thing I mentioned of course customer acquisition costs coming down but also that the team has done a phenomenal job with lifetime value of a member and <unk>.
Proving the LTV of a member.
They do that obviously, both there are two levers for that of course one is.
You know pricing optimization and continuing to test different models for that but the other one is to roll out value added services.
And retention strategies, such that one example of those is that a consumer can go to a lower cost lighter version of the product on an interim basis sort of as they are in a better place in their lives or not is not going to lean into as much active.
Therapy over a period of time, but it keeps them engaged with the platform and getting some level.
Mental health care and support such that they can reignite a more intensive therapy.
Period and of course at a higher price at some later date.
We've also rolled out things like group in ours, and worksheets that a consumer can use in order to track their own progress.
And work on things between interactions so.
Your point is an excellent point and I'm glad you asked it because in order to make a business like that continue to improve you have to be pulling a lot of different levers and I would say we are very very good at test learn and lastly, when you get to the kind of scale that we have when you make small improvements.
It can have a big impact yeah, and you know when we say this.
This business is about execution.
Is that is that the things that Jason talked about is what we need right. It is test and learn and scale it.
And that is what we mean and execution in terms of execution and is fueling both the growth that we're seeing as well as the.
The margins that you're seeing.
And we will spend some time on.
Our mental health programs, both b to B as well as direct to consumer I at our at our analyst day on November 18th.
Yes.
Thank you. The next question comes from the line of Sean Dodge from RBC Capital markets. Please proceed with your question.
Yeah. Thanks, good afternoon.
Maybe staying on better health, Jason earlier in the year, you had said that that was expected to grow at least 50% this year and it sounds like you're telling me I think you've instead of directing that DTC has continued to outperform.
Can you give us.
Our progress report or update on how much that business is contributing now or how much it has.
Outperformed that kind of initial 50% great.
Expectation yet.
Yeah.
Sean give us three weeks.
And.
Satisfy all the questions you asked in the curiosity you have around that but the headline I would say is.
We are very pleased with the growth of this business.
And Youre right the the.
The growth expectations. We had set out is is what you just said and I would just say at this point that we are very pleased with how this business has grown again as I said.
You know where the business is in terms of scale and also importantly, how we are thinking about the growth of this.
Business in the future.
When we get to Investor day.
Yeah.
The next question comes from the line of Daniel <unk> from Citigroup. Please proceed with your question.
Hi, guys. Thanks for taking the question. So my question to you to Ryan on the competitive dynamic, but specifically focused on the virtual first primary care plans that have come out. It seems like every large MTO now has announced a virtual first pilot in some some regard so would love to get your thoughts on just the competitive dynamic there with the third.
Party vendors, but in particular like to get your thoughts on the potential for managed care organizations to utilize their own provider networks like what we're seeing with United and what they're doing with their opt in virtual care group rather than partnering with folks like you guys for your for your virtual network. Thanks.
Yeah. So I think there are relatively few.
Health plans in the country.
Who are who have the capability and the owned provider assets.
Is that the United has with its Optum, one optum care owned providers and of course, they're rolling out that product into markets, where they own those substantial number of primary care providers.
We believe a virtual first health plan should be a natural a national product I N be available.
In all geographies.
And we've got a great relationship with United.
In multiple parts of their business.
When it comes to the.
Other health plans quite frankly, we see a benefit too.
To some of the big plans, making announcements about virtual first plans.
Because local plans quite frankly have to respond and so we're seeing that as a catalyst for activity RFP activity with the with our primary 360 product.
New pipeline opportunities and our sense of urgency.
From multiple plans across the country are in response to that we think quite frankly because of the breadth of our product portfolio and the scalability of our platform will win more than our fair share of those opportunities are.
You know and as we've talked about.
Those tend to be a compelling economics.
Because we play a bigger role with the consumer.
Okay.
The next question comes from the line of George Hill with Deutsche Bank. Please proceed with your question.
Hey, good afternoon, guys and thank you for taking the question I guess, Jason just as you think about primary primary $3 60, I guess can you talk about how much of that you think is net new growth versus the ability to grow wallet share with existing clients and then following on that trend I know this is probably going to be one of those questions to preempt the analyst day, but I'd love you to talk for a second about how.
Big you think.
It's all about can be inside of the beneficiary wallet share, particularly inside of that employer sponsored spend.
Yeah. So thanks, George you're right some of that we will cover at our Investor day, specifically around sort.
Sort of the.
Economic opportunity.
For the full stack of our products and services.
When I think about primary $3 60, I think the answer is it will be both a driver of net new growth as well as an expansion within existing clients and obviously when you talk about somebody like an aetna, we've had a long standing relationship with Aetna.
For many years and many products. This is an expansion of our role there.
And you know quite frankly, a bigger economic opportunity for us due to that expansion of our role but.
But I also look at other health plans, where we're seeing opportunities both formal rfps as well as deep strategic discussions about the role of primary $3 60, and virtual first plan designs and their new relationships that we haven't had before.
And then lastly, the opportunity that Mala mentioned about bringing primary $3 60 to wrap around the hospital.
Is a significant opportunity I can think of a conversation I had with the CEO of a large academic medical center.
That is multi site and multi faceted just two weeks ago and the discussion was about how we can stand up a virtual primary care offering that.
That is essentially the front door to their system and takes care of their patients are in a branded way and we do that almost white labeled for them. So I think we're going to see new opportunities for that product and that capability. That's beyond what we what we can even <unk>.
<unk> today.
Yeah.
Your next question comes from the line of Donald Hooker from Keybanc. Please proceed with your question.
Oh, great. Thank you. Thank you. Thank you very much I was curious about the maybe the platform enabled solutions metric that you share and I was sort of thinking about that metric in the context of kind of all that I hear about with regards to labor shortages.
And wage pressures with health systems, and I'm wondering if there's any emerging opportunity to kind of work with providers.
In that context center on that metric.
Yeah. It's a good question, we did see a significant shift as as people as office is closed.
And in both consumers and providers.
All of a sudden embraced virtual care in a way that they hadn't previously and I think that that is a sustained opportunity going forward I talk to Ceos, even a tertiary or quaternary facilities.
Who are saying.
Saying that they expect anywhere from 25% to 50% of visits to be virtual over the long term and that's something that nobody would have imagined.
Previously I also think it does have the opportunity to breakdown physical barriers.
And enable more mobility of the workforce to your point about about sort of the labor market.
Market.
However, I just caution that you know there are state regulatory barriers to doing that and you know many of the states have gone back to requiring in state licensure in order to deliver the care. We of course have always operated in that environment. So that's not really a bear.
Area for us, but it is something that I've heard a number of them.
The hospital system.
C E OS lament because it limits the reach of their own workforce. Yeah. I would also add on the positive though I think what is also increasingly clear.
As we come out to some extent from.
The pandemic is the platform we have is purpose built.
And you know that is differentiated from.
You know just having them.
Like a zoom experience for example, so there is a difference in.
The platform, we have and you know that is that is increasingly helping the conversations that we're having.
With the C suite of health system.
You may recall that we announced a partnership with Microsoft to deeply integrate our provider.
Provider platform into a Microsoft teams and we're seeing that drive a substantial growth in our pipeline. So we're excited about that and we think that that will have the desired effect.
Your next question comes from the line of Ravi Misra from <unk> capital markets. Please proceed with your question Hi, Good evening. Thank you for taking the questions. So just two from me both on kind of chronic care are the first one can you just tease out a little bit on the 25% to 35% in chronic care.
Growth, how you think of that in terms of.
Enrollment versus.
Kind of pricing and then secondly.
It's been about almost two years since that long ago decks Com agreement was announced can we get a little bit more color on how that stands today and maybe how how youre looking at to go forward on that thank you.
Yeah, So with respect to the Laval go Dex Com partnership.
We expanded that last year and as I as we moved more into testing C. G M I and being able to apply our data science against the data flow that can come from CGM.
We haven't published a or publicized the results, but we have seen some good early indicators relative to that I think CGM will be just another data source for us and obviously for certain populations C. G. M. I is more effective.
Then for others and more and more cost effective than for others.
So this was really testing the impact.
C. G M on type two diabetics and so I think I think you'll see us continue to test new models are along that path.
With respect to the makeup of the 25% to 35% growth.
We haven't broken that out publicly and I don't think were going to do that here you will get a deeper dive into.
The market for chronic care programs as well as our expectations for chronic care.
At our Investor day.
Yeah.
The next question comes from the line of David Larsen from B P. IV. Please proceed with your question.
Hi visit volume.
Growth was very good in the quarter up 37% year over year can you provide any color around how much of that came from better help visits if any.
And then also within your membership right now what percentage do you think would be eligible for like a primary care virtual primary care physician is it like 25% do you think like the national average thanks very much.
Yeah, so with respect to our growth in visit volume, we're really excited about it and quite frankly, I think there were a lot of naysayers a year ago wondering if we could continue to grow our visit volume after the really astronomical growth that we saw last.
Year, So we're very very proud of it.
We had growth both on direct to consumer and to be to be basis.
So we don't break those out, but I will say that we saw substantial growth.
On both of those fronts I think it's probably you know you can see the data.
Our visit revenue was up 18% year over year and of course, all visit revenue comes really from a b to B channel. So.
We're seeing strong growth on both of those fronts I think the other things that are just sort of worth noting.
<unk> usage.
Is really strong we saw repeat usage of 25% year over year in the third quarter.
Which I think is a good indicator and sort of is supported by the J D power findings.
Thus as the highest consumer satisfaction.
And you know I think the other thing that's that's really nice is we're getting substantial increases in multi service usage from consumers. So I think all of that and of course multi service is really only available to our <unk> clients at this point and we're also seeing them now.
Nice growth very strong growth in specialty visits, including mental health that'd be talked about in our prepared remarks.
We've seen growth.
Been seeing continued strong growth in non infectious diseases.
Also add is in the in recent months. We have also started seeing a pickup in infectious disease visits ammonia. So all of that is fueling our visit volume for us.
Thank you and this concludes our question and answer session I will now turn the call back to Jason.
Please go ahead.
Thanks, everybody I appreciate your attention and all your questions. We look forward to seeing everybody in three weeks on November 18th at our Investor and Analyst day take care.
Thank you ladies and gentlemen, this concludes our conference call. Thank you for participating you may now disconnect.
Okay.
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