Q4 2021 Teladoc Health Inc Earnings Call
Good afternoon, and thank you for attending today's Teladoc Health's fourth quarter 'twenty. One earnings call. My name is Sam and I will be your moderator for today's call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
If you'd like to ask a question. Please press star one on your telephone keypad at.
At this time I would now like to pass the conference over to our host Patrick Seely head of Investor Relations Patrick.
Patrick Please proceed.
Thank you and good afternoon today after the market closed we issued a press release announcing our fourth quarter and full year 2021 financial results. This press release any accompanying slide presentation are available in the Investor Relations section of the Teladoc health Dot Com website on this call to discuss the results are Jason <unk> Chief Executive Officer.
Sir and Mala Murthy, Chief Financial Officer.
During this call. We will also provide our first quarter and full year 2022 outlook and our prepared remarks will be followed by a question and answer session.
Please note that we will 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.
<unk> as defined by the private Securities Litigation Reform Act of 1095.
Such forward looking statements are subject to 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 statements in our press release and our filings with the SEC all of which are available on our website I'd now like to turn the call over to Jason. Thanks.
Patrick Good afternoon, everyone and thank you for joining us.
2021 marked another record year for Teladoc health in terms of both financial performance as well as the impact we're having on our members' lives. We launched our next generation mental health product my strength complete combining the best of La Bango in Teladoc capabilities and announced significant new deals for our virtual <unk>.
Mary care product primary $3 60.
In the direct to consumer market are better help product posted another year of record growth exceeding $700 million in global revenue.
We exited 2021 with significant sales momentum with fourth quarter bookings showing strong growth both sequentially and over the prior year.
Notably multi product sales represented 80% of full year bookings.
For the fourth quarter Teladoc health posted another strong quarter of financial performance.
As we continue to deepen member relationships and increase the care delivered to consumers there.
The broad based strength across the business drove revenue of $554 million in the fourth quarter, representing an increase of 45% over the prior year, including organic growth of 32%.
Our vision is to become the first stop in the consumer health care journey, regardless of need I delivering whole person care to meet the complex needs of our members from physical to mental acute episodic and chronic to complex.
To advance this vision, we continue to focus on our key strategic priorities that we believe underpin the next phase of significant growth for our company.
Those priorities include expanding adoption of our integrated virtual primary care product primary 360, expanding our mental health services to meet growing demand and enhancing our chronic care capabilities in order to be even more impactful for our clients and members.
Importantly, we will continue to build upon the integrated teladoc experience that unifies, all our products and services, making it easier for patients care providers and clients to realize the full value of our whole person approach.
Primary 360, our virtual primary care product enables teladoc to become the front door to the health care system for our members.
We believe our unmatched depth and breadth of capabilities positions the company as the global leader in whole person virtual care.
While it remains early I am very pleased with the enrollment and engagement, we're seeing in primary $3 60, so far.
I was just reviewing data from one of our partners that recently launched a virtual first plan supported by our primary 360 product.
And the number of people choosing the plan has significantly exceeded our initial forecasts.
And 75% of the members who are enrolled in that plan are entirely new to that insurer.
So primary 360 is clearly proving to be a differentiating factor in the marketplace for our health plan clients.
Virtual first plan offerings are increasingly being viewed as strategic necessities, among insurers and as the leader in this space with the most robust and comprehensive offering we're well positioned to partner with those plans.
We now have over 50 clients live on primary $3 60, including several fortune 500 employers and our pipeline of opportunities continues to build.
Our primary 360 offering is resonating in the employer market due not only to the breadth and depth of our product, but because of our ability to scale and integrate with and employers benefit design.
Large employers need a virtual primary care offering that can both serve an employee base spread across geographies and integrate with multiple insurance plans since large employers typically offer plans for more than one insurance carrier.
We're uniquely positioned to be that partner, given our track record of working across multiple national and regional payers.
We expect to launch primary $3 60, with several new clients over the course of the year across channels, including a newly signed partnership to launch a virtual first health plan with a large provider sponsored organization in the Midwest.
This integrated health system deal is notable as we beat out an incumbent telemedicine provider in the process demonstrating the power of our industry, leading suite of services. It also demonstrates progress against our strategy to bring our entire suite of products across all of our channels, including health systems.
And chronic care the number of individuals enrolled in our suite of solutions grew 22% year over year to 729000 at the end of the fourth quarter.
Over 40% of adults in the U S are living with multiple chronic conditions and as you've heard me say in the past individuals' don't view themselves as just a person with a chronic disease.
View themselves as a person who needs help accessing care and managing their entire health.
Importantly, our approach of focusing on the whole person as opposed to a single condition continues to pay off.
The percentage of chronic care members enrolled in more than one program has doubled over the prior year, resulting in total chronic care program enrollment growth of over 30% last week, we announced the launch of our new chronic care complete product line, which incorporates data driven outreach to connect enroll.
<unk> in our chronic care programs with Teladoc physicians.
This well for example, enable us to leverage the Teladoc physician network based on real time data to better engage with chronic care members, who may be struggling to control their disease and provide services such as adjusting care plans or optimizing medications.
Chronic care complete will allow us to leverage our data capabilities, including the billions of data points. We have collected to date to make intelligent interventions drive better outcomes for our members and lower cost for our clients.
This integration of our telemedicine capabilities, our digital chronic care management programs and a robust data capabilities represents the latest example of our integrated stepped care approach and follows on the heels of the launch of our my strength to complete mental health offering last year.
Mental health remains another key priority for us and an area, where we continue to see tremendous demand for care.
In the direct to consumer channel are better health brand continues to drive significant growth both in the U S and international markets.
In the <unk> channel, our new flagship my strength to complete product, which offers both digital capabilities and virtual interactions is gaining momentum.
We find that since mental health is a longitudinal relationship where members typically have several visits with their therapist or psychiatrist it acts like a gateway for other Teladoc services.
And we also find that our members who utilize mental health combined with another Teladoc service, such as general medical or dermatology generate revenue, that's 20% to 60% higher on average than those who utilize mental health services alone.
So not only does multi service usage enabled better access to care and to drive cost savings for our clients, but it also enables us to efficiently drive higher engagement and revenue growth.
Yeah.
Before I turn the call over to Molla to discuss our results and financial guidance in more detail I want to talk briefly about our outlook for 2022.
For the full year, we expect revenue to be in the range of $2 $5 five to $2 65 billion representing growth of 25% to 30%.
Our expectations for strong growth are a result of the broad based momentum we continue to see across our suite of products and services and across geographies.
We have over $90 million total individuals with access to the Teladoc platform today, and we see a significant opportunity for long term growth by expanding our relationships and going deeper with our existing clients and members as we execute against our key strategic priorities across primary care mental health.
And chronic care solutions.
With that I'll turn the call over to Mala for a review of fourth quarter as well as detailed 'twenty two guidance.
Thank you, Jason and good afternoon, everyone.
During the fourth quarter total revenue increased 45% year over year to $554 million, including 32% organic growth.
Access fee revenue for the fourth quarter increased 15, 1% year over year to $470 million and represented 85% of total revenue up from 81% in the prior year's quarter.
We ended the quarter with U S paid membership of 53.6 million members.
Above the high end of our guidance range and an increase of one 1 million members over the third quarter.
Individuals with visit fee only access was $24 2 million at the end of the fourth quarter, representing an increase of 600000 individuals.
Totally unique members enrolled in one or more of our chronic care programs with 729000 members as of the fourth quarter, an increase of 133000 enrollees over the prior year quarter and in line with our expectations.
Average revenue per member per month was $2.49 in the fourth quarter.
Safety, 2% from $8 63 in the prior year's watch out.
And up 4% sequentially from $2 47 in the third quarter of 2021.
Please note that as of the fourth quarter better health revenue from International markets is now included in the international revenue line item.
And is therefore excluded from our reported U S revenue per member per month.
Please see the schedule at the end of the earnings press release for prior period numbers recast for this change.
Visit fee revenue for the fourth quarter of $69 million increased 21% year over year.
During the fourth quarter, we provided $4 4 million visits to our network of clinicians the visit count in the fourth quarter includes the benefit of approximately 187000 visits in the international markets that were previously excluded from the visit.
<unk>.
Excluding these visits are total visits in the fourth quarter would have been just over $4 2 million above the high end of our prior guidance range.
So please note that the better help visits from individuals located outside the U S have moved from the U S visit count to the international visit count.
This shift impact I reported utilization rate, which is a U S specific metric.
Please see the schedule at the end of the press release for prior period numbers recast for this change.
Fully adjusted total visits grew 41% over the prior year's quarter.
The annualized utilization rate for our members with 22, 7% in the fourth quarter.
A 670 basis point increase over the prior year quarter, and a 170 basis point increase sequentially.
Contributing to this strong growth was persistent strength in mental health utilization as visits more than doubled in each of the direct to consumer <unk> channels in 2021.
After a period of low overall transmission of infectious disease due to social distancing and PPE usage. We have also begun to see infectious disease volumes rebound in the second half of 2021 .
Growing more than 35% in the second half of the year as compared to the first half of the year and contributing to strong fourth quarter, our total visit growth adjust.
Adjusted EBITDA was $77 $1 million in the fourth quarter compared to $54 million in the prior year's quarter.
Net loss per share in the fourth quarter was seven <unk>.
Compared to a net loss per share of $3 seven in the year ago period.
Net loss per share in the fourth quarter included stock based compensation expense of 39 cents per share amortization of acquired intangibles of 28 cents per share.
A noncash income tax benefit of 31 cents per share.
The company generated strong operating cash flow in the quarter of $83 million.
And operating cash flow for the full year was $194 million.
We ended the year with $893 million in cash on the balance sheet.
Now turning to forward guidance.
For the full year 2022 .
We expect revenue to be in the range of $2.55 billion to $2.65 billion, representing growth of 25% to 30% over the prior year.
We expect total membership of 54 to 56 million members representing growth of 125% year over year.
With the remainder with revenue growth driven by expanding revenue per member driven both by increased product penetration and product mix.
We expect adjusted EBITDA in 2022 to be in the range of $330 million to $355 million, representing a 12 nine to 13, 4% adjusted EBITDA margin.
And an expansion of approximately 90 to 140 basis points over 2021 after normalizing for last year's purchase price accounting benefit.
We expect total visits in 2022 to be between 18, five and 20 million visits representing growth of 20% to 30% over the prior year.
For the first quarter of 2022 we expect revenue of $565 million to $571 million.
Representing growth of 25% to 26% over the prior year's quarter.
We expect total paid membership in the range of 54 to $54 5 million in the first quarter.
Total first quarter visits are expected to be between four three and $4 5 million visits representing year over year growth of 29% to 35% driven in part by a surge in COVID-19 related visits CJR in January .
We expect first quarter adjusted EBITDA to be in the range of $51 million to $55 million.
Included in first quarter adjusted EBITDA is an expected $4 million drag from incentive payments made to our network of physicians during the recent omicron spike.
Provider payments have largely normalized by the start of February and we do not expect the increased level of incentive payments to a car.
I would like to talk briefly about the expected cadence of revenue and adjusted EBITDA growth over the course of this year.
On the revenue side, we expect the timing of new chronic care client onboarding to be more heavily weighted towards the second half of this year.
This includes the launch of large new health plan clients signed over the past several months, including HCS C. And then the other regional Blue plan.
Which are scheduled to onboard in the second half of this year.
We therefore expect to see strong sequential growth in revenue over the course of the year.
Specific to the second quarter, we expect an approximate $40 million to $50 million step up in revenue from one Q2 Q.
On the expense side, we normally see higher engagement marketing spend in the first half of the year as we prepare to onboard new clients and members.
Also typical for us to see higher advertising spend early in the year as we take advantage of lower media pricing in the market. Following the conclusion of the more expensive holiday season.
We expect that to be the case again this year.
As we have seen a more advantageous media buying landscape early this year, which has resulted in a slightly lower customer acquisition costs.
This will impact the quarterly cadence of adjusted EBITDA and we expect will result in a significant margin expansion progression over the course of 2022 particularly.
Particularly in the second half due to our expected revenue and enrollment ramp for the chronic care programs launching later this year.
As well as the typical seasonality of advertising spend over the course of the year.
It's important to note that the revenue and EBITDA Ram described is not dependent on significant new sales. The deals mentioned are contracts that have been signed over the past several months, but are disproportionately scheduled to onboard in the second half and we therefore have good.
Ability into the second half revenue and EBITDA progression.
With that I will turn the call back to Jason for closing remarks.
Thanks, Marla, we remain confident in the long term revenue and profitability outlook that we provided at our Investor day in November .
Specifically, our confidence in delivering substantial growth in 'twenty two comes from our proven ability to have impact by improving People's lives. This morning, Teladoc Health published our second annual corporate social responsibility report.
Which highlights how we as a company seek to have an impact beyond our business and live our values in the communities we serve.
The report highlights our commitment to taking care of people building trust operating responsibly and having a positive impact globally.
And I am pleased to just shows tremendous progress in 2021.
Including a new employee volunteerism program that delivered more than 12000 hours of support for employee chosen charities and making meaningful progress in hiring a more diverse workforce.
I encourage you to check it out on our website and learn more about how teladoc health is giving back to our communities and building a sustainable enterprise.
As always thank you for your continued interest in Teladoc health and with that we'll open the call for questions operator.
Thank you Jason we will now begin the Q&A session, if you'd like to ask a question. Please press star one on your telephone keypad and if for any reason you'd like to remove that question. Please press star two we do ask that each participant limit themselves to one question and as a reminder, if youre using a speakerphone. Please remember to pick up your handset before.
Asking your question.
Our first question is from the line of Ryan Daniels with William Blair. Ryan. Your line is connected please proceed.
Yes, Thanks for taking my questions question I guess can.
Can you speak a little bit more to the revenue cadence and kind of the visibility you have there.
With a new plant starting up are they kind of guaranteed if you will to start in the second half of the year and do you have pretty good visibility on the number of members in P. M. P M et cetera to ensure that that ramp occurs.
Thanks, Ryan for your question.
Yeah. So let me give you a little bit of color on how we see the revenue ramp sort of progressing through the year.
So first is as.
If you think about the guidance range that would be just gave off 25% to 30% growth that is consistent with the overall outlook that we provided back in November at Investor Day.
As we said in our prepared remarks, Ryan we do expect to see a meaningful ramp in revenue over the course of the year, we talked about the ramp that we're seeing in the second quarter. The 40 to 50 million Ram.
And then we see a further ramp from there into the second half.
So it's definitely more back half weighted as are you know as we look at the revenue progression and we've talked about the key drivers of that right.
One is that we have multiple health plan clients that will onboard in the second half as we talked about the the ramp that you're seeing isn't dependent so much on new sales. These are deals that we have already contracted so we have really good visibility into our into the same.
<unk> and the revenue. It is just really a question of timing be onboarding is going to happen in the beginning of the second half and as we start that and as you see the normal enrollments a carve in Iran. Pitches stride you will see the revenue come through.
More in the back half than in the first half.
So that's sort of how we are thinking about our overall revenue cadence for the year.
Thank you Ryan. Our next question is from Lisa Gill of J P. Morgan. Please see your line is connected please proceed.
Thanks, very much good afternoon, Jason Thanks for the comments on better health, a $700 million you talked about.
For better help this year can you maybe just help me to understand just a couple of things one when we think about better health.
I made the comment of a slightly lower acquisition costs is that particular to better help are you talking about in general too. When we think about clinician cost again, you talked about 4 million of incremental incentive payments, but we hear a lot about the ability to attract and retain clinicians in the marketplace right now because we are in a mental health crisis here in the.
So can you talk about you know those things and then thirdly, when we think about better helping and 2022, how do we think about you know how that business is growing and you.
You talked about those that use mental health use other services, but how do we think about retaining that that remember when we think about behavioral health services.
Hi, Lisa Thanks for the questions I think those were three but will cram them into one question.
With respect to the customer acquisition costs and Maldives commentary.
What she was talking about is the overall media landscape in particular about better help our customer acquisition costs are down slightly as we look at this year versus the same period last year. In addition, we're seeing benefit of better helps our brand awareness and really market leading brands.
<unk>, which.
Enables us to see an increase in the number of members who are signing up organically without any acquisition costs. So the combination of those two things have been very favorable and gives us a strong outlook for.
The the better help product specifically, but also across all of our mental health offerings.
With respect to the clinician costs than the $4 million of.
Of incremental spend on top of our expectations in January that was entirely on the physician side and due to the spike in the omicron variant.
And higher than expected visit volume for our general General Medical services, so that actually didn't impact mental health at all we feel very good about the attracts.
Attraction of new therapists onto our platform.
I was just talking to the team where we on boarded over 10000 therapists last year yeah.
And just in January we were over 1200, new therapists are on the platform. So I feel very good about access to additional talent and capacity as we continue to expand that.
The combination of those two things both the continued more effective.
Our customer acquisition spend as well as the access to capacity on the supply side. It gives me a strong outlook. Because we are also seeing the benefit of product enhancements to the better health product, where we rollout things like virtual group sessions that enable us to take.
<unk> of a one to many relationship and also at the same time increase the lifetime value.
And retention of our client base. So all of those things together make me a very bullish on the outlook for 2022.
Yeah.
Thank you Lisa our next question is from the line of Jai lenders Singh of Credit Suisse.
<unk>. Please proceed.
Thank you and thanks for taking my questions first a quick clarification on some of these health plans.
Leading edge CSC youre talking about Onboarding them second half, where they always plan for second half are there any delays for some reasons I'm just trying to make sure that you are you still maintaining your 25% to 35% growth in chronic care business in 2022 and is it possible for you to give some specific color around chronic get enrollment expectations and cadence.
I think historically, you've talked about 70% to 80% additions coming in first half.
It looks like things will be different this year.
Yeah, So Julian dry.
I'll give you I'll answer those questions in order you know in terms of the Onboarding I would say in general that is true. We do have one significant client that had originally planned to launch on one but candidly due to their own internal data delays.
We are now going to be launching with that client in the beginning of the second half, but I would say more broadly for the rest of it is the expectation was going to be launching in the start of the second half.
You know in terms of the chronic care question that you asked.
We have shared in the past that we won't give you very specific sort of outlooks along each of the different tracks that we had talked about on Investor day. As you know every quarter, we planned to do some kind of update you.
You know on occasion like once a year, but I would say just generally.
We had talked about the revenue growth for chronic care back in Investor day.
We are seeing all of the right trends as we think about chronic care revenue growth and if I think about exiting the end run rate exit for 2022 I am comfortable with the you know the growth rates that expectations that we had said back.
Back in November .
Thank you Jay Linda our next question is from Richard close of Canaccord Genuity.
Richard Please proceed.
Alright, great. Thanks for the question given the change in classification and the better help international visits and the impact.
I guess the.
Our adjustment on utilization what would be a good target.
To think about in terms of utilization rates are increasing year over year.
Thank you provided some internal targets before.
So if you look at the guidance that we have talked about in terms of how we see our revenue grow our visit volume growth for the full year right. We gave you guidance for full year.
You look at the strength of visit volume momentum.
In four Q and for the full year.
What Richard that gives you is sort of the key elements and ingredients.
How we get essentially giving you all the ingredients and elements to her on how to think about utilization.
For full year 2022 as compared to 2021, so I feel very comfortable with the progress we are making in terms of the strong visit volume growth and you know just some further color just to sort of segue from the the comments.
That Jason made on mental health overall.
We have talked about the strength that we're seeing.
In specialty visit volume right specialty visit volume in for Q grew 50% year on year.
We've also seen as we talked about in our prepared remarks, we are beginning to see growth again in infectious disease volumes right like that was something that was more muted through COVID-19 with social distancing and P. P et cetera. So these are the inputs that go into the moment.
Tim that we're seeing in our visit volume overall for 'twenty, two and you can see that in the guidance that we put out there.
Thank you for that question. Our next question is from Sean Dodge of RBC capital markets. John Your line is connected please proceed.
Yes. Thanks.
Afternoon.
Maybe going back to a chronic here on the launching of the new chronic care complete program.
Jason can you give us just a quick rundown of how that is going to be commercialized does that.
Get automatically offered are built into our existing chronic condition customers or is this something that's going to have to be sold.
I guess, maybe more from scratch and then the revenue model with its sharing elements of La <unk> and legacy Teladoc is this sometimes prices like a fixed monthly charge per enrollee or is there going to be a variable usage component to it.
As well thanks.
Yeah, Thanks, Sean we're in.
In the market now with our chronic care complete product line. When you think about the full package bundles, our diabetes hypertension and pre diabetes programs into a comprehensive package for clients, which includes physician based care.
The nice thing about that and I think the unique thing is it not only addresses multiple chronic conditions, but also targets individuals who have.
Are having a hard time controlling their a one C or blood pressure and it helps them to get back on track by optimizing their medications.
So only a targeted subset of the members will be engaging with the physician component of that when we when we look at it. It's it's I think the.
Next step in us rolling out our stepped care approach and of course my strengths complete was the prototype for that.
The the chronic care complete.
Offering will also have individual sort of single condition, our offerings into the market. So if you think about it.
Diabetes complete or hypertension complete those will be available with the physician component and we believe that the chronic care complete that's multi condition will be the most popular option.
It ends up being a fixed a per participant per month fee.
That is sort of a composite if you will of the various components, where diabetes is a little bit on the higher side than the composite price hypertension is a little bit on the lower side and pre diabetes is sort of right in line.
But it ends up being a a very healthy revenue stream.
And really incent spires to adopt a multi condition approach. So I feel very optimistic that that will be our lead to chronic chronic care program are in the portfolio as we go through the 2022 selling season.
Thank you Sean our next question is from Charles <unk> of Cowen.
Charles Your line is connected please go ahead.
Yeah. Thanks for taking the question.
I'm al I wanted to talk about the first quarter EBITDA guidance and just trying to understand as we think about maybe.
Costs related to starting up primarily 360.
And in connection complete et cetera.
Well, you know what percent of those costs.
Would you say are sort of nonrecurring in the sense of now that once you get those programs off the ground.
Not necessarily.
Recur going forward and just to clarify I think maybe from Julia's question earlier.
Chronic care management membership like what percent of the chronic gym membership that 25% to 35%.
It's going to be coming from the second half. Thanks.
Yeah. So.
The way I would think about the profit progression the adjusted EBITDA progression.
And how you should think about the investments really is what you're asking Charles.
So.
But the way it is going to unfold as we go through the year is as follows first of all as I said, you will see expansion in adjusted EBITDA margins as we go through the year.
Why is that because it is sort of following the revenue ramping that we are seeing in the second half of the year, especially as you think about chronic care ramping through the second half of the year.
If you think about the operating expense lines into which the investments are folded.
I would say we expect to see.
And spend.
Sort of you know we as we've talked about in the prepared remarks, we are taking there is seasonality in it.
And we are spending in the first half of the year as we take advantage of the low the low media costs and the buying opportunities at our it provides us I would say overall for the year.
I do expect in and to be slightly higher as a percentage of revenue on a full year basis.
As we drive the strong grew.
The growth that we have on the mental health side.
I do expect us to get leverage as we go through the year on the rest of operating expense, including G&A.
And selling.
And I would say on our technology and development. So on the R&D investments that we're making.
I think you will see that sort of it.
I expect it to stay almost steady if you will in terms of percentage of revenue. So they're all slightly different and wants in terms of how we're seeing it ramp through the year, but overall I would say all of that is what is getting us to the profit.
Margin expansion as we go through the year.
Thank you Charles our next question is from Jessica Tucson of Piper Sandler.
Please proceed.
Hi, Thank you so much for taking my question.
But I think they were really impressed to hear that better help customer acquisition cost is down and can you maybe help us understand how some of the young consumer privacy initiatives from Apple and Google specifically.
Apple tracking transparency policy might be impacting your DTC advertising costs and productivity and kind of what are you guys doing to mitigate the impact of those policies. Thank you.
Yeah, just thanks for the question, we've actually taken those all into account as we've built our models our team is very closely.
We're monitoring all of the developments there I would say that we're ahead of the curve.
With respect to understanding what's going on there and modeling anything.
That that where they're potentially have any impact on our strategies, but I you know with with the.
The current situation and our insight there are we don't see any significant impact on our outlook.
Okay.
Thank you Jess.
Our next question is from Daniel gross flight of Citi.
Daniel Please proceed.
Yeah. Thanks for taking the question.
Stick with better help here.
Some of your competitors have had difficulties with churn and retention are you seeing any degradation in ltvs for 2022, and the DTC channel and then in the BTB channel I think it's a little less.
But that'll help it's actually growing quite nicely in the EAP channel I noticed that he is now offering better help through our EAP can.
Can you talk about growth.
A better health in the enterprise channel apart from the DTC channel. Thanks.
Sure, we're actually seeing improvement in our L. T V I'm aware of some of the other players in the market.
I would say our team has a tremendous track record.
Continuing to improve L. T V. That's a combination of optimizing pricing and driving product enhancements that increase the longevity of.
Of those those members.
I feel like sometimes having others out there who aren't performing at the same level.
It casts a negative shadow and to be honest, we just outperform in that market and in that regard.
With respect to better help our in the B to B channel, we are finding a fertile environment. Among EAP plans. The the model there is sort of a b to b to b to C. A customer acquisition strategy, where better help gets in.
Bedded in any a P plan.
And a certain set of interactions are included in the EAP.
Expense and then after that there's a warm transition into a direct paying consumer as the consumer exhaust the EAP benefit. We're finding that is inefficient I not only customer acquisition strategy, but one that provides more value than the typical EAP.
Plan of the past and is therefore, a valuable both to the consumer and to the sponsoring employer.
Thank you Daniel our next question is from George Hill of Deutsche Bank. George. Please proceed.
Yeah.
I'm going to come back to better help one more time and I guess smaller I'd ask you used the word persistency in your prepared comments I guess could you provide a little bit more color as it relates to the behavioral product of how much of it is growth of new members and kind of how much of it is growth of revenue per member and kind of what is the right way to think about that as we think about the contribution of the growth of the behavioral product over time.
Yeah.
So George I would say, it's a it's all of those so if you think about the let me address it from both the DTC side as well as the B to B side on.
On the direct to consumer side as we think about the momentum that we're seeing in better health. We are absolutely seeing all of the what I would call the operating metrics make a tremendous amount of healthy progress whether it be.
The number of members whether.
Whether it be a better lower churn and greater attention that is feeding be increasing L. T V. Jason.
Jason just talked about what is fueling that in terms of product innovation itself.
Et cetera.
And whether it be customer acquisition costs right and again, we've talked about why are our customer acquisition costs being managed as tightly and efficiently.
As it is it is about continuously innovating with new media channels.
Things like that that is getting us to really strong execution on the operating metrics. So I would say on the direct to consumer side. Your Shawn to your question. It is.
It is both.
Or membership it is greater L T V.
And all of that is what feeds our.
Growing revenue per member if you will.
The other thing to not underestimate is the fact that if you think about just better help as a direct to consumer business the ability for us to price through in terms of the innovation that we are seeing et cetera is much more dynamic and we use data our data science capabilities.
Et cetera.
<unk> in a very very dynamic way such that we can manage our overall margins and profitability for that business.
I would say very similar dynamic that we are seeing on the b to b side right, whether it be starting with the tremendous visit volume momentum that we're seeing in mental health in sort of our legacy mental health business and.
You know the progress that we're making as I look at the pipeline for our my trend complete product that as you know we launched in the middle of last year. Once again, we are seeing tremendous traction in our in the demand for our B to B mental health product Unsurprisingly, just given the total addressable market that is.
Was there any.
The fact that we are absolutely the leader in mental health the scale that we have in mental health.
It's something that you know is helpful for us in attracting providers in getting to the economics and the execution that we are demonstrating.
Trading in our numbers.
So it's all of the above.
Thank you for that question. Our next question is from Stephanie Davis of SPV. Stephanie. Please proceed.
Hey, guys. Thank you for taking my question I'm going to go a little bit away from the better health side of the world and actually asked them about primary 360.
As this product scales up a bit more I'd be curious on your thoughts on care navigation, how that ties that or if there is some investments to internal and parent obligation as you you kind of build it out.
Yes, Stephanie Thanks for the question, we're really excited by the progress, we're making with primary $3 60. The market adoption has been very strong consumer experience data is off the charts with 95% member satisfaction.
And I am what we're finding is the clinical impact that we make is very significant identifying a large populations of first diagnosis for chronic conditions.
I, either adding or altering prescriptions.
And to your question about helping consumers find the right care when they need to be seen in person.
You know when people talk about care navigation, they mean a lot of different things.
And so I wanted to explain what we mean by that we mean, helping the consumer get the care they need in the course of their overall health care.
You know that that does not mean administrative navigation to us what it does mean is using the data that we have about the consumer the actual delivery of care and deep interaction, we have with the consumer to make sure that they get to the right side of site of care of the first time.
Given the combination of our digital interactions with them using devices and their interactions with our platform the care.
<unk> interactions, we have driven out of our virtual visits both on the mental and physical side and given our unique capabilities. When it comes to expert medical opinions from our depth of experience. There we feel like we are uniquely positioned because we deeply.
We integrate with the health plan to be able to make the most efficient referral for them when they need to be seen in person and then act as almost a concierge on their behalf. So when we talk about care navigation. That's what we mean, because we think that's the highest value form of care.
Navigation.
Okay.
Thank you Stephanie.
Next question is from Ryan Macdonald of Needham.
Ian Please please proceed.
Hi, Thanks for taking my question I'm primary 360 wanted to touch on the insurer channel and you talked about the the relevance that youre seeing for their offering within the virtual first plan. Just curious if you think that this is the growth of that product is dependent on the proliferation and an addition of additional virtual first plan.
Where do you think that you can actually start to weave this into traditional plans as well thanks.
Yeah, I think the answer is both a virtual first plan designs can be an accelerator.
Because of course, they provide financial incentives to the consumer to engage.
I N a virtual primary care relationship, but I don't think that the success of primary $3 60 is dependent on the proliferation of virtual first plan designs, what we see with the clinical impact that we're having as well as the member experience that we're having is one where.
I believe over time, it will be a sought after relationship and a sought after product I that driven as much by the consumer as by the plan design because of the opportunity to have more frequent interactions to have access to a full care team to have access to digital interactions.
And to get the power of the underlying data science to help drive a more personalized and better health care outcomes.
Yeah.
Thank you Ryan.
Our next question is from Stan Bernstein of Wells Fargo Stand. Please proceed.
Hi, Thanks for taking my questions.
Jason maybe I'll commentary can you give us an update on where you stand in regards to chronic care products that are outside of the diabetic hypertension verticals.
Yeah.
Yeah. So as you know we launched our CK D product for chronic kidney disease, you could make the argument that that's on the same continuum, but it is a different manifestation and obviously.
At a more severe.
Severely ill and higher cost population as well.
You know you've heard us talk.
About continuing on the cardiac cardio metabolic continuum and branching out into other areas I'm not going to sort of pre announce where we're going to go in our next set of chronic conditions.
But what I can say is that our team is actively working on.
Several expansion opportunities as we consistently look to expand the scope of our clinical offerings to be able to take care of the entirety of an individual and access additional populations.
Thank you Stan our next question comes from Steven Valiquette of Barclays. Steven. Please proceed.
Thanks, Good afternoon everybody.
So all of the color on the quarterly progression of the revenues and EBITDA was helpful.
With the <unk> 22, EBITDA margin guide in the 90% to 95% range and then just thinking about what you said about the revenue ramp happening in the back half of the year, just kind of playing out the model. It seems like the EBITDA margin would have to be somewhere in the high teens for the fourth quarter.
Maybe 17% or so which is really the margin that I think consensus wouldn't really reflect the company hitting you on a full year basis for another three or four years or so from the 13% jump off point from last year.
I guess I just want to make sure that we're not missing anything in relation to what it seems like.
But that margin EBITDA margin again in the kind of high teens for the fourth quarter as we kind of just sort of build out all of the everything that you talked about thanks.
Yeah.
So as you think about as we think about the ramp.
You are you are right.
What I would say is you are in the right ballpark.
<unk> talked about the seasonality of revenue ramping in the second half, especially on the chronic care side.
You know the margins that come with chronic care revenue.
So it's not surprising that we are.
The the the Rab of profit and the expansion of margin is going to be back half weighted so.
Yes, you are in the right ballpark absolutely on seasonality.
Thank you Steven our next question comes from the line of David Larsen of BTG. David. Please proceed with your question.
Hi can you talk about the impact if any that in and to the public health emergency might have on the overall business I think it's scheduled to go through mid April like April 16th So if we actually get through that and it's not extended again, what impact could that have on the business like for example.
Like.
You know reimbursement for telehealth visits at parity with in person visits how could that change if at all and then also plan designs with like Copays and deductibles being waived for Covid patients just any any thoughts there along with expected trends from Covid in 'twenty two would be helpful. Thank you.
Yeah.
I don't think it would have a it will have any real impact on our outlook and you know most of the plan designs that had waived co pays on virtual visits have reverted back to charging co pays for those visits are most of the states, who had waived and licensure requirements.
Fireman's have reverted back to requiring in state licensure.
Almost none of our business is Medicare fee for service.
And therefore.
We're really not sensitive to Medicare reimbursement.
We don't get.
Sure.
Reimbursed at parity.
When we provide visits for our populations, we get reimbursed for our agreed upon fees.
And which are not at parity with the an in person visit and part of the attraction of them quite frankly.
So I actually don't see any real impact.
You know the other part where I think we're beyond any questions about sort of that the national health emergency is reimbursement for chronic care management.
The impact of value based care and value based reimbursement aligns us with both the payer and I as well as the provider.
When they're taking risk so I see really only tailwind going forward and as you probably know there are several movements within Congress to continue to expand.
The support for both from a regulatory as well as reimbursement perspective, the continued expansion of virtual care.
Thank you David Our next question is from Dev Weird, Syria Bahrenburg Dev. Please proceed.
Yeah.
Hey, good evening, thanks for taking my questions.
Well I'll circle back to the operating margins and just margins in general in relation to kind of the customer acquisition cost.
And a related sales and marketing spend required to keep patients engaged.
I'm just trying to get some color around how these different you know we got a lot of color around better help but maybe for pizza.
P 360, as well as chronic care.
Kind of how the cadence news from from let's say the quota that you onboard the clients toward kind of Q4.
You know or the subsequent quarters.
And then the second question in relation to that is so we see this.
Sequential ramp up in margin.
So leverage on I would assume on the sales and marketing side and as well as other operating leverage.
Through the year.
How would that.
What kind of changes out there from an ear to ear basis, instead of within a year as well.
Thanks.
Okay.
So I'll address them in turn.
If you think about the.
Sales and marketing.
As you talked about four primary 360 in chronic care.
Again.
What I would say is that is where we.
We look to the ramping of our B to B engagement marketing spend.
And we have thought about.
The ramping of that as we you know our head off the launches. So that again, we are looking at pacing the timing of our N M spend for visit volumes as we go through the year. This is on the legacy telehealth side, but as we really scale as well as the populations launch for.
Chronic care.
Thank god the spend the marketing spend on that roughly sort of consistent and pacing that right. So we need the we need the program to launch we need the clients to launch and then we will do the you.
The work, we do on engaging with those so that we get the appropriate enrollment.
Ramping up once those clients launch on the chronic care side.
And I'd say similarly on primary 360 so.
Think of the the the client launches and the spend on the B to B marketing side at sort of consistent with that.
The marketing spend but that we do on our.
Although our telehealth normal telehealth visit volumes, whether it be infectious diseases. Our specialty think of that you know consistent with prior years I think we have plenty of history.
He demonstrated history on the spend redo on that and the success, we have on driving the momentum on that.
On your second question in terms of Oh year.
Year over year as I said, a few minutes ago.
There's no question, we are investing in R&M spend as.
As we especially on the on the direct to consumer side and so you know we do expect to see growth in EM spend.
Sort of talked about the relation of that with our revenue.
And I want to be clear that is with the fact that we are seeing you know.
Sort of the customer acquisition costs.
<unk> to be very efficient.
So we continue to see the.
<unk> sees in our marketing spend on that.
We do expect to see G&A leverage we have done that in prior years and I would expect to continue to get operating leverage on the G&A line as our revenue ramps.
As I said, a few minutes ago, we will invest as we have shared on Investor day on our technology roadmap on our product innovation roadmap and therefore in R&D.
So you know that there are sort of hopefully that gives you more color on the different line items within operating expense in 'twenty, two and how that compares to prior year.
Yes.
Thank you Jeff there are currently no further questions waiting at this time, so that concludes the Teladoc fourth quarter 2021 earnings call. Thank you all for your participation you may now disconnect your lines.