Q1 2023 Teladoc Health Inc Earnings Call

Speaker 1: Hello and welcome to the Tele.health Q1 23 earnings conference call. My name is Alex and I'll be called today from the call today. If you'd like to ask a question at the end of the presentation, you can press start followed by one on your telephone keypad. If you'd like to withdraw your question, you may press start followed by two.

Speaker 1: On our hand over to your host, Patrick Feely, head of the Investor Relations to begin. Please go ahead. Thank you and good afternoon.

Speaker 2: Today, after the market closed, we issued a press release announcing our first quarter 2023 financial results. This press release and the accompanying slide presentation are available in the investor relations section of the TeladocHealth.com website. On this call to discuss the results are Jason Gorevic, Chief Executive Officer, and Mala Murphy, Chief Financial Officer.

Speaker 2: During this call, we will also discuss our second quarter and full year 2023 outlook and our prepared remarks will be followed by a question and answer session.

Speaker 2: 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.

Speaker 2: as defined by the Private Securities Litigation Reform Act of 1995. 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 statement, our press release, and our filings with the FCC.

Speaker 2: all of which are available on our website. I would now like to turn the call over to Jason.

Speaker 3: Thank you, Patrick. Good afternoon and thanks for joining us. I'm pleased to report a strong start to the year across the business, meeting or exceeding all our key financial and operating guidance in the first quarter.

Speaker 3: Today, we're raising the low end of our revenue and adjusted EBITDA guidance, a reflection of the quarter's strong results and will speak to some of the key progress we've made in the first few months of the year.

Speaker 3: First, let's start with a brief recap of the quarter.

Speaker 3: Consolidated revenue in Q1 grew by 11% year over year to $629 million, which was above the high end of our guidance range.

Speaker 3: Our consolidated adjusted EBITDA was $52.8 million, also exceeding the high end of our guidance.

Speaker 3: Our Better Health segment continued to see strong demand in the first quarter as the quality, convenience, and affordability offered by our direct-to-consumer mental health service resonates in the marketplace.

Speaker 3: Segment revenue grew 21% year-over-year in Q1, driven by new member growth and outperforming our expectations. Customer acquisition trends have remained stable year-to-date, resulting in solid margin pull-through in what is typically our seasonally weakest quarter.

Speaker 3: MALA will discuss guidance in more detail shortly, but we feel confident in our expectation for a strong and consistent sequential margin improvement in our Better Health business throughout the course of 2023.

Speaker 3: In the integrated care segment, revenue grew 5% to $350 million.

Speaker 3: Again, at the high end of our expectations.

Speaker 3: Integrated care growth was relatively balanced across our B2B portfolio and we're pleased to see continued strong interest in our Whole Person Care suite of products.

Speaker 3: In particular, chronic care enrollment is off to a solid start to the year.

Speaker 3: with new member recruitment ramping up ahead of schedule.

Speaker 3: This also helped drive its strong segment margin expansion in the quarter.

Speaker 3: Year-to-date trends have increased our level of confidence in the outlook for the rest of the year in both the BetterHelp and Integrated Care segments.

Speaker 3: During the quarter, we've remained focused on expanding our leadership position in whole-person virtual care.

Speaker 3: including advancing Primary 360, our virtual primary care offering, and I'm pleased with the significant progress we've made.

Speaker 3: Allow me to highlight three key examples.

Speaker 3: First, we began rolling out our new integrated app during the quarter. This has been a considerable effort, and I'm pleased that we're already seeing significant positive results for migrated populations.

Speaker 3: including higher engagement and multi-product utilization.

Speaker 3: Well, it's still very early. We're optimistic about the potential impact of this fully integrated experience in helping our members better manage their health across our whole person suite of programs, from primary care to chronic care.

Speaker 3: As the healthcare landscape continues to evolve, we remain committed to investing in innovation and leveraging technology to better drive outcomes for our members.

Speaker 3: The early results demonstrating engagement with our new app are a testament to our ongoing efforts to improve the quality and accessibility of care for our members.

Speaker 3: Next, we announced the results of a new clinical study proving the benefits of whole person chronic care.

Speaker 3: The study shows that individuals who are initially enrolled in one of our standalone diabetes, hypertension, or weight management programs experienced a significant improvement in those underlying conditions when they added one or more of our other chronic care programs.

Speaker 3: These data points represent another reminder of why we're investing in our whole person offering.

Speaker 3: And they come at a time when the marketplace is increasingly focused on demonstrated outcomes.

Speaker 3: For employers and health plans, these results validate the benefit of expanded access from standalone chronic condition programs to whole person programs.

Speaker 3: Finally, last week we took another step forward in our efforts to provide integrated whole-person care solutions to our clients and members with the introduction of our new provider-based care programs for weight management and prediabetes.

Speaker 3: Distinct from our existing digital programs, enrollees will have access to personalized care plans developed in collaboration with a Teladoc physician.

Speaker 3: who will leverage our broad-based tools and capabilities, such as nutrition counseling, mental health care, behavioral science, health coaching, and prescription drug management.

Speaker 3: These programs will help members with complications related to uncontrolled chronic conditions get back on track.

Speaker 3: improving outcomes and reducing downstream costs.

Speaker 3: This includes the ability for physicians to prescribe medications such as GLP-1s when clinically appropriate.

Speaker 3: We believe that access to key new developments is important for members. However, providing access to medication alone is not enough when it comes to patient outcomes and safety.

Speaker 3: It's also critical that these therapies are provided as part of a broader care model that includes a longitudinal provider relationship and a customized care plan built in conjunction with a care team to help manage the patient through their health journey.

Speaker 3: Teladoc Health's provider-based programs build on the success of our existing digital weight management and pre-diabetes programs.

Speaker 3: and will be offered to clients in our employer and health plan channels starting later this year.

Speaker 3: These programs follow the launch of Integrated Provider-Based Digital Programs in Mental Health, Diabetes, and Hypertension.

Speaker 3: With the addition of these programs for weight management and pre-diabetes, we're now offering integrated virtual and digital programs across all our key chronic condition programs.

Speaker 3: ensuring that our members receive the comprehensive support that addresses the full scope of their needs.

Speaker 3: We understand the importance of delivering high-quality care while reducing costs for our clients.

Speaker 3: and we're proud to be at the forefront of innovation in this space.

Speaker 3: Our provider-based care programs are a testament to our commitment to improving the health of our members and exploring new ways to leverage technology and innovation to achieve better outcomes.

Speaker 3: Let me end by saying that the importance of a strong financial position has never been more evident than over the past few months.

Speaker 3: The disruption in the banking system combined with a strained funding environment has created a lot of uncertainty in the venture-backed digital healthcare space.

Speaker 3: resulting in many companies facing significant financial constraints. In contrast, at Tau-A-Kelfe, we're continuing to invest in innovation while providing high-quality healthcare solutions.

Speaker 3: All while generating positive free cash flow. Over the last 12 months, we've generated over $230 million in operating cash flow and nearly 50 million in free cash flow. We have nearly $900 million of cash on the ballot sheet.

Speaker 3: and expect to deliver over $100 million of free cash flow in 2023.

Speaker 3: Financial strength is emerging as another important advantage as clients are seeking quality in times of uncertainty.

Speaker 3: In conclusion, we remain focused on expanding our competitive advantage, while creating efficiencies in the business to drive margins and generate value.

Speaker 3: We're confident that our strategy and execution will enable us to advance our leadership position while delivering strong results.

Speaker 3: With that, I'll turn the call over to Mala for a review of the first quarter and our forward guidance. Look over at the live stream to see if I can Eleanor, Taylor or line call one and

Speaker 4: Thank you, Jason, and good afternoon, everyone.

Speaker 4: First quarter consolidated revenue increased 11% year-over-year to $629 million.

Speaker 4: While first quarter adjusted EBITDA was $52.8 million, representing a margin of 8.4%. The first quarter financial outperformance was driven primarily by stronger chronic care product revenue.

Speaker 4: Better help membership growth.

Speaker 4: and improved expense control. Turning to segment results.

Speaker 4: Integrated care segment revenue increased 5% year-over-year to $350 million in the quarter with growth relatively balanced across the portfolio.

Speaker 4: First quarter, Integrated Care Adjusted EBITDA was $35.1 million, representing an over 300 basis point expansion in margins to 10%.

Speaker 4: The margin of performance relative to guidance was largely driven by strong chronic care program enrollment during the first quarter, which helped drive stronger growth margins and bottom line results combined with better expense control.

Speaker 4: Total chronic care program enrollment was 1.03 million at the end of the first quarter representing growth of 13% Euroveyor. Total integrated care members grew 5.7 million over the prior year representing 7% Euroveyor growth.

Speaker 4: and 1.6 million sequentially to 84.9 million US members.

Speaker 4: Average integrated care revenue per US member of a dollar and 39 cent was down two cents over the previous first quarter due to the mixed impact of large new telemedicine populations added over the last 12 months.

Speaker 4: Excluding the impact of new populations on boardings over the course of the last 12 months, revenue per member would have increased on a year of your basis by low to mid-single million

Speaker 4: First quarter BetterHelp segment revenue increased 21% year-over-year to $279 million, driven by growth in membership and stable customer acquisition costs.

Speaker 4: First Water Better Help Adjusted EBIDA was $17.7 million, representing a margin of 6.3%.

Speaker 4: As discussed over the last several quarters, the first quarter is typically the seasonally weakest quarter as marketing extends ramps up following the fourth quarter holiday season.

Speaker 4: As such, we continue to expect the first quarter to be the low point of the year for better help segment margins.

Speaker 4: And as Jason mentioned, we expect consistent quarter of a quarter margin improvement progression throughout the course of 2023.

Speaker 4: Consolidated net loss per share in the first quarter was 42 cents compared to a net loss per share of $41.58 in the first quarter of 2022.

Speaker 4: Netloss per share in the first quarter includes restructuring charges of $8.1 million or $5 cents per share.

Speaker 4: primarily related to severance, stockpages compensation extends of 28 cents per share.

Speaker 4: An amortization of a quad-intangible of 31 cents per share. During the first quarter, free cash flow was a net outflow of $32 million.

Speaker 4: Compared to a net outflow of $63 million in the first quarter of 2022.

Speaker 4: As a reminder, the first quarter is our seasonally weakest cash flow quarter.

Speaker 4: We ended the quarter with $889 million in cash and short term investments on the balance sheet.

Speaker 4: Now, turning to forward guidance.

Speaker 4: For the full year 2023, we now expect revenue to be in the range of 2.575 to 2.675 billion dollars.

Speaker 4: an increase of $25 million at the low end.

Speaker 4: Representing revenue growth of 7 to 11%.

Speaker 4: This outlook includes mid to high single-digit percentage growth in our integrated care segments and low double-digit to mid-teen percentage growth in our better health segments.

Speaker 4: There is no change to our full year integrated care segment, U.S. membership guidance of 84 to 86 million members.

Speaker 4: We expect consolidated justity for the full year to be in the range of $285 to $325 million.

Speaker 4: or growth of 16 to 32%.

Speaker 4: Consolidated guidance continues to assume year-over-year adjusted EBEDAM margin of flat to up 50 basis points for the integrated care segment.

Speaker 4: and an increase of 100 to 300 basis points for the better health segment.

We expect a full year free cash flow of at least $100 million.

driven by both the growth and agility of a doubt and an expected decline in capitalized software development costs. For the second quarter.

We expect revenue of $635 to $660 million, representing growth of 7 to 11% year-over-year.

We expect adjusted EBIDA of $60 to $68 million for the second quarter. Second quarter consolidated guidance contemplates low to mid-single-to-ged revenue growth for the integrated care segment.

and led to high teams revenue growth for the better health segment.

We expect total integrated care segment U.S. membership of 84.5 to 85.5 million members.

We expect better health segments margin to be slightly higher than integrates care segment margin in the second quarter.

With that, I will turn the call back to Jason. Thanks, Mala. In closing, I'm very pleased with the strong start to 2023. And we look forward to providing continued updates on our progress throughout the year. Thank you.

With that, I will turn the call back to Jason. Thanks, Mala. In closing, I'm very pleased with a strong start to 2023. And we look forward to providing continued updates on our progress throughout the year. With that, we'll open it up for questions.

Operator. Thank you. As a reminder, if you'd like to ask a question you can press star followed by one on your telephone keypad. If you'd like to withdraw your question you may press star two. Please ensure you're unmuted locally when asking your question. Please limit yourselves to one question only. Thank you.

Our first question for today comes from Lisa Gill of JP Morgan. Lisa, your line is now open. Please go ahead.

Great, thanks very much. Jason, is it too early to start asking about the selling season? So just really two things I just want to understand. One, how you're thinking about the selling season. And two, the recent announcement that you made around the weight loss programs and GLP ones, it's starting in the back half of the year. You made me just talk about what you're seeing for early sign-ups. And you talked about...

the integration with other chronic programs, maybe just what the initial...

Expectation is, as we start to think about things for the back half of 23 and going into 24.

Lisa, it's never too soon to start asking about the selling season. I appreciate the question. I'll give you at least the early indications. First quarter was strong and we're running in line to slightly ahead of our expectations so far for the year. And.

I think a highlight is that multi-product sales represent over 80% of the bookings in the first quarter. And I think that's really a testament to the value of the breadth of our product portfolio, as well as a continued trend in the market to vendor consolidation.

and looking for integrated whole-person solutions and our position really at the lead of that market. If I think about the pipeline, we're in a good position relative to late-stage pipeline. We frequently talk about.

How much how big is the late stage pipeline is obviously those are the most developed deals and that's up materially versus the same stage last year or the same time of year last year. So, overall, we feel good about the selling season, although, of course, I'll make the caveat that it is.

which started with mental health, where we brought provider-based care together with our digital assets, and then to our diabetes and hypertension programs, and now with our weight management and pre-diabetes programs featuring provider-based care, that sort of rounds out the portfolio.

in the back half of this year as we're taking care of our members, but we haven't really gotten into the market or really it's only been a week or two that we've been in the market talking about it. So it's too soon to tell what kind of an impact that will have on the selling season in the back half of the year. What I will say is we don't expect it to have a material impact on revenue for this year.

appreciate the derriteration of the free cash flow guidance this year. I'm looking at the capitalized software that was greater in the first quarter. When I think about that, because you're obviously for free cash flow, it doesn't matter to if you can see more of the capital statement.

Does that mean you're going to end up spending less on R&D and I'm thinking maybe that's coming from you've gotten the integrated platform? I'm just trying to think about the mechanics of what's going on operationally that's going to allow the R&D dollars to come back to start generating that leverage. Thanks very much. Yeah, Sandy, thank you for the question.

What we have been talking about for the past few quarters is that we have been at an elevated level of spend on R&D. We have highlighted some of the important investments in R&D. Jason talked last time about the launch of one app, which is the integrated app that brings…

I would say to you is as I look at our overall R&D spend and therefore CAPEX spend for the year, we have said last time Sandy that we would expect to see absolute levels going down year over year this year. The other thing I would point to is as we think about our efficiency programs, we have

We are being judicious about our hiring both onshore and offshore. That is also something that is contributing to the efficiency of not just our R&D spend, our overall people spend including R&D. So those are the drivers of one of the dynamics of CAPEX within our free cash flow.

see marketing yield for better health and then kind of how that is trended as of late and then just as a quick follow-up do you have any update on the better health competitive competitive environment just given the vast amount of new entrants in the space over the past year both you know within the DTC side and the B2B side I'm just curious you know if you're seeing any any updates on the competitive environment front and you know if you've noticed any consolidation or kind of what what dynamics

you have experienced. Thanks. Sure, I'll start and then Mala can add color if there's anything I missed. With respect to the advertising market and the customer acquisition environment, we're seeing stable trends that are in line with our expectations.

In terms of the competitive environment, we don't see a significant change in the competitive environment overall. We see some competitors pulling back and other new entrants coming in. But I wouldn't say that it's a more competitive environment.

than it has been in the past. And I think you would, if it were, then you might see an impact on the yield to our advertising spend, and specifically in the cost of advertising and customer acquisition. So the fact that those trends in the data there is stable and in line with our expectations.

I think supports our view of the competitive landscape. Yeah, and the only other thing I would add just to add a little bit of color. If you look at our 1Q dynamics and our revenue being ahead of expectations, Jack, we have

The stability, the cost of customer acquisitions remaining stable so far this year, that's actually allowed us to effectively deploy a little bit more capital over the course of the quarter, driving higher member acquisitions as we pointed out, and driving better revenue. And we feel good about where we are ending the first quarter.

we go through the year and that will play out over the course of the year.

Thanks guys. Thank you. Our next question comes from Stephanie Davis of SBB. Stephanie your lights out open. Please go ahead. Hey guys can grab some recording. Thanks for taking my question.

So this one's mainly from now that Jason I've loved to be waiting as well the two keep guiding

the vux effectively stable to slower growth despite a meaningfully easier comp to stretch it out two years back.

Can you help us understand what's the situation that you see guidance and where you may be held off on baking things in thong with one view upside and then from a full year guidance perspective. Are we thinking about any potential impact on the pre-diabetes weight loss product or is that still all outside to the range? Yeah. You know Jason Club.

It will play out over the course of the year, and we will update you guys at the right moment accordingly when it starts accruing to material impact. But I would not expect any impact to that for 2023 revenue, to be clear. In terms of the 2Q guidance and how we are thinking about it, what I would say is if you think about this and think about how we present this as a robotic military wish, where

the beef that we had in one cue, and I decompose it into the dynamics in the integrative care segment as well as the better health segment.

The beat we had on the integrated care segment, think of it as an early start on chronic care enrollment. You know, we have seen some nice outperformance in chronic care enrollment. We've done a nice job of getting to the enrollment curves a little bit faster. We've talked about in the past how...

that early start is essentially a little bit of a pull forward of enrollment than something that will result in higher ultimate enrollment rates in the rest of the quarters. So think of that as an early start. On better health, candidly, as I just pointed out, we are pleased with the Q1 performance. We are incrementally more comfortable.

with the Achievability of our 2023 guidance. Remember when we gave our 23 guidance, we had talked about the impact, you know, the things that drive the bottom end of the guidance and the top end of the guidance. The bottom end of the guidance assumes unfavorable due or a deterioration in yield. The top end assumes that there will be modest.

of feel for what drove the one cubit and then how we are thinking about it in the context of 2p on the rest of the year.

Thank you. Our next question comes from a gel-indressing from TRUS. The line is now open. Please go ahead. Try not to...

Thank you, and thanks for taking my questions. I actually want to follow up on your comment, Mal about chronic care business enrollment, a business coming in better expectations. I know you're not disclosing unique chronic care enrollment anymore, but can you provide any qualitative color around in terms of...

new member enrollment versus further penetration into your existing membership base. Maybe we have talked about this figure in the past, what percentage of chronic care members are utilizing multiple programs and any particular programs or offerings did you see of parable trends in the water?

If I think about the trends that we are seeing in chronic care, the percentage that are utilizing multiple chronic care programs is in the zip code think of it as about 33% plus. And that is a significant improvement both your over your gel-in-dra as well as sequential improvement.

And again, as we have said before, right, that is one of the proof points for the success we have been having for the many past quarters in multi-product bookings. We have consistently, over the last many quarters, stranded over 70 percent.

in multi-product bookings and as Jason just talked about in one Q's over 80%. So, you know, it's a proof positive of the benefit of having multi-product bookings. You know, in terms of the unique enrollees, obviously as we said last time, we won't...

give that out as a specific reported metric. What I will say is we are seeing growth in unique billables. That is something that we track internally. And that is definitely something that we are seeing growth in on a year or a very basis. I won't comment more than that. We've obviously given out the program enrollment increase of 13%.

Thank you. Our next question comes from Daniel Grosslight of CISI. Your line is now open. Please go ahead. Hi, thanks for taking the question. I want to stick with the outperformance and integrated care margin. I'm just curious why you're keeping the full your guidance for that second relatively constant earlier than expected and I chronic care enrollment. I would assume that

Those members have relatively high contribution margin to the overall business. So, earlier than expected, enrollments flow through for the full year. Is it just conservatism or is there something else that I'm missing here?

Yeah, so if you look at the integrated care segment margins, you know, I just let me give you a little bit of color. First, as I said, a few minutes ago, we think of it. The gains we are seeing in the enrollment.

in 1Q and the fact that we are, it is an early start so we are ramping up faster. Therefore, what it means is if you think about the expectations that we have for the rest of the year, we expect those expectations continue. So I would say our expectations for the remaining quarters in terms of enrollment curves are relatively unchanged.

And again, I would say at this moment, given the fact that it is still early in the year, you know, I do believe it is prudent for us to have those assumptions baked in for the rest of the year.

So how does that translate into margins? If I think about integrated care margins in 1Q relative to the rest of the year, two comments. One, it is integrated care margins in 1Q. It has a relatively easy comp.

compared to 1 Q2 022. And the reason for that is one, last year, we did have some significant amount of step up in R&D spend last year. And the second is we also did have...

amount of elevated provider spend in terms of incentives because we did have a spike in respiratory volume in Q1 of last year.

We look at the one-Q margins this year. It's a relatively easy comp Compared to last year's one Q and so I'll be really careful about how we think about that as we go through the rest of the year Having said that what I would remind you all is that if I think about how the margin for integrated care ramp through the year

year and therefore you should be looking at margin progression as we go through the quarters of the year.

you should be looking at margin progression as we go through the quarters of the year. Any sense? Thanks for the color.

Thank you. Our next question comes from Richard Close of Canacord. Richard, your line is now open. Please go ahead.

Great. Thanks for the question. On the provider-based programs, I was wondering if you could talk a little bit how you think about is there a notable revenue uplift in those programs compared to only digital and how do we think...

One, the richer the program, clinically, the more engagement it's going to drive with consumers, and as a result, the greater the clinical outcomes that we can drive for our clients and their four savings. So all of that comes together to translate to...

If we prescribe or one of our physicians prescribes GLP1 for a member in our pre-diabetes program, we're not taking revenue from the actual prescription or the medication itself. Rather, we're driving our revenue.

from greater engagement among the consumers and greater clinical outcomes and therefore greater savings for the member.

and margins of those offerings.

know, we as the sell into the market and we go through the pricing across the different conversations we have. Listen, I, as I have said before, we are very disciplined as we think about the pricing.

As you can tell, the way our gross margins have held up over the past year and even into one queue, you can see the discipline that we are demonstrating in the way we manage, we hold our gross margins. So I would say...

It's a little early for us to talk about gross margins as we sell in market and as we launch. We will definitely provide updates as meaningfully relevant. I think the best sort of proof point behind our confidence in the longer term margins is that we will be in a bit up to this.

We launched provider-based care and mental health last year, middle of last year. We haven't seen any degradation there, for example. So we continue to believe that we'll be able to drive continued strong margins along with the rollout of additional provider-based care.

Okay, thank you very much. Thank you. Our next question comes from Jessica Tessan from Piper Sandler. Jessica, your line is now open. Please get ahead. Hi, thank you guys for taking my question and congrats on the good results. Thank you.

So I just wanted to clarify, Mala, I think you said consistent quarter over quarter margin improvement throughout the course of 2023. So does that mean that we're not expecting to see that fourth quarter marketing pullback in the kind of large margin ramp in the fourth quarter?

And then I was just hoping you might talk a little bit about retention rates in the better health business. Did they improve markedly relative to the second half of 22? And if so, what did you guys do to improve those retention levels? Thanks.

So we are seeing retention levels stable. So I would say if you think about the overall operating metrics for the better health business, Jess, I would say the word that comes to mind is stable, whether it be the dynamics we are seeing in terms of app pricing.

And that is allowing us to essentially deploy our capital more effectively and efficiently towards member acquisitions. The fact that Member Charne is stable, so there is nothing notable that we are seeing in terms of the dynamics of the business that would suggest.

a departure from prior quarters. Just to be very clear, what we said in our prepared remarks is we do expect to see improving margins for better health as we go through the year, sequentially as we go through the year every quarter. And the reason that we have confidence in that is, as we have talked about before, but before. So in those minors. relations with an ambulance, everything in emergency promotion,

The issues that developed in the first quarter of last year are clearly behind us. We've been seeing more stable trends in app pricing since I would say the back half of last year. And so we are also making a choice. So there's that. We are also making a choice this year in terms of balancing revenue growth with profitability.

And Frankie had the scale that we operate in the Better Health Business is over a billion in revenue last year. And with the channel diversity we have, we do have the ability to pull on more than a few levers in response to what we are seeing in the market. So.

To be very clear what we did say in our Marxist we do expect to see Improvement in our margins through the year and that includes by the way You know how we deploy our NM the dollars we deploy in the NM of the dollars we deploy quarter by quarter and what we are seeing in The dynamics of the market

which so then and to answer the last part of your question we would expect to see a lower add spend in the fourth quarter reflecting the more expensive advertising market at that time of year so we I think as we said last year the seasonality last year was more typical.

I, you know, relative to the fourth quarter spend.

be no relative to the fourth quarter spend. Thank you.

Thank you. Our next question comes from a strong dodge of RBC capital markets. Your line is now open. Please go ahead.

Yep, thanks. Maybe just staying on better help. You said you spent a little bit more on marketing Q1 than planned. As we think about the growth gains for better help over the remainder of the year, typically how long is the lead time there between when you spend and when you begin to see some pull through in revenue? I guess did you already begin to capture some of the benefits from this extra spending?

Yeah, with respect to, sorry, the first party or question relative to better health and the lag between ad spend and revenue, it's 30 to 60 days.

We did see some of the benefit of that in the tail end of Q1. That's certainly true. Do you want to take the second half of that question? The dynamic you're seeing is...

because that is typically the less efficient time for us to essentially spend consumers are distracted by other things and it's an at-pricing is typically more expensive.

What we also said when we gave guidance if you recall is that we are ramping our at spend in one queue.

seasonally the lowest point from a margin perspective in the year for better help because of that. So as we have ramped up at spend through the quarter what you are seeing is essentially consumers, members coming onto the platform.

through the quarter, including right until the end of the quarter. And so if you think about the revenue capture from them, that will continue as we go through to end the rest of the year, which is why I made the comment a few minutes ago that

The exit point for 1Q and the member acquisitions that we have had in the quarter that has performed above our expectations gives us incremental confidence about revenue as we go through Q2, et cetera. And that is our thoughts and our style.

Okay, that's great. Thank you.

Thank you. Our next question comes from Alan Lutz of Bank of America. Your line is now open. Please go ahead.

Thanks for taking the questions. I guess one for Mala on Better Health. Does the guidance assume that acquisition costs remain unchanged for the rest of the year? And then I guess one for Jason, just more broadly. You know, the consumer has been through a lot over the past year, so inflation. There's been job cuts sort of around the board. Just curious, are you seeing any changes with the consumer today?

versus three months ago, six months ago, because you've been able to grow nicely through it. I'm just curious if anything has changed over that time period. Thanks. Yeah, thanks, Alan. We'll take it in order. You know, in terms of what we are assuming for Adspend, the range that we have for growth, for revenue growth, for the full year, as we have talked about, it's low to mid teens, essentially assumes at the low end that we will see some deterioration in...

On the one hand, certainly if the consumer is feeling pinched due to job cuts or inflation, then a $300 roughly monthly subscription can be a significant expense. On the other hand, those kinds of situations increase.

the need for therapy and mental health care. And better health is, in many cases, a less extensive alternative. You know, historically, 50% of mental health care has been paid out of pocket by the consumer for all kinds of reasons in the mental health market.

And so the fact that BetterHelp at $300 a month is significantly less expensive than paying out of pocket for traditional therapy actually makes that offering more attractive. So I think those are netting out as essentially neutral.

open please go ahead. Hi this is Lucas on for Charles. On your provider-based care program can you give us a sense of what the PMPM increase?

would be versus the chronic care enrollment product? And then also, can you give us any way to think about primary 360 contribution currently? Thanks.

We're not looking at significant increases in PMPMs for the provider-based care program with respect to weight management and prediabetes. We're early in the market. We're certainly testing that.

We feel very strongly that increased engagement and better results across our entire cardio-metabolic suite drives more value for the buyer and better clinical outcomes for the consumer.

and ultimately we'll be able to share in the improvement of that. Sorry, what was the second part of the question? Just on Primary 360 contribution today and how that is expected to go. You talked about it tripling last quarter. Just kind of want to get an update on that. Yeah, we're very pleased with the progress we're making with Primary 360......

In fact, we're seeing our clients who have primary 360 at the core of their products outperforming the market in the open enrollment periods. And that's a great sign and a great demonstration of our partnership with those clients.

We're also pleased to see the revenue increase this year from P360. Obviously, it's off of a small base, but it's a meaningful step up relative to what we saw in 22.

And we're also seeing great satisfaction from consumers as well as we continue to see that about 60% of the visits from P360 members are from members who haven't seen a provider in the past two years.

So again, we feel very good about that contribution and as we look out into 24 and beyond, we expect that to continue to be a more and more meaningful part of our revenue.

Thank you. Due to time we will take no further questions for today. So that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.

Thank you. Due to time, we will take no further questions for today, so that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.